UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended June 30, 1999
---------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number 1-5507
MAGELLAN PETROLEUM CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 06-0842255
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
149 Durham Road, Madison, Connecticut 06443
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (203) 245-7664
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common stock, par value $.01 per share Boston Stock Exchange
Pacific Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act:
(Title of Class)
Common stock, par value $.01 per share NASDAQ SmallCap Market
<PAGE>
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
|X| Yes |_| No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (ss.229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. |X|
The aggregate market value of the voting and non-voting common equity
held by non-affiliates of the registrant was $45,074,000 at September 15, 1999
(based on the last sale price of such stock as quoted on the Pacific Stock
Exchange).
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date:
Common stock, par value $.01 per share, 25,108,226 shares outstanding
as of September 15, 1999.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement related to the Annual Meeting of
Stockholders for the fiscal year ended June 30, 1999, are incorporated by
reference in Part III of this Form 10-K to the extent stated herein.
<PAGE>
TABLE OF CONTENTS
Page
PART I
Item 1. Business 6
Item 2. Properties 18
Item 3. Legal Proceedings 23
Item 4. Submission of Matters to a Vote of Security Holders 27
PART II
Item 5. Market for the Company's Common Stock and Related
Stockholder Matters 28
Item 6. Selected Consolidated Financial Information 29
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 30
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 37
Item 8. Financial Statements and Supplementary Data 38
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 74
PART III
Item 10. Directors and Executive Officers of the Company 74
Item 11. Executive Compensation 74
Item 12. Security Ownership of Certain Beneficial Owners and Management 74
Item 13. Certain Relationships and Related Transactions 74
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 75
--------------------
Unless otherwise indicated, all dollar figures set forth herein are in
United States currency. Amounts expressed in Australian currency are indicated
as "A.$00". The exchange rate at September 15, 1999 was approximately A.$1.00
equaled U.S.$.6491.
<PAGE>
PART I
Item 1. Business
Magellan Petroleum Corporation (the "Company" or "MPC") is engaged,
directly and through its majority-owned subsidiary, in the sale of oil and gas
and the exploration for and development of oil and gas reserves. At June 30,
1999, the Company's principal asset was a 50.9% equity interest in its
subsidiary, Magellan Petroleum Australia Limited ("MPAL"), which has one class
of stock that is publicly held and traded in Australia.
MPAL owns interests in various oil and gas properties in Australia, the
United States and Belize, Central America. MPAL's major Australian assets are
two petroleum production leases covering the Mereenie oil and gas field (35%
working interest) and one petroleum production lease covering the Palm Valley
gas field (50.8% working interest). Both fields are located in the Amadeus Basin
in the Northern Territory of Australia ("Northern Territory"). Santos Ltd.
("Santos"), a publicly owned Australian company, owns a 48% interest in the Palm
Valley field, a 65% interest in the Mereenie field and 18.2% of MPAL's
outstanding stock. Boral Limited, a publicly owned Australian company, owned a
17.1% interest in MPAL's outstanding stock at June 30, 1999.
The Company has a direct 2.67% carried interest in the Kotaneelee gas
field in the Yukon Territory of Canada. The Company has not received any
revenues from this field to date. See Item 3 - Legal Proceedings. In addition,
the Company has a 3% working interest in a Belize project (in which MPAL has a
20% working interest) and a 20% working interest in two wells in Texas.
<PAGE>
The following chart illustrates the various relationships between the
Company and the various companies discussed above.
The following is a tabular presentation of the omitted material:
MPC - MPAL RELATIONSHIPS CHART
MPC owns 50.9% of MPAL.
MPAL owns 50.8% of the Palm Valley Field, Australia.
MPAL owns 35% of the Mereenie Field, Australia.
BORAL owns 17.1% of MPAL.
SANTOS owns 18.2% of MPAL.
SANTOS owns 48% of the Palm Valley Field, Australia.
SANTOS owns 65% of the Mereenie Field, Australia.
<PAGE>
(a) General Development of Business.
Operational Developments Since the Beginning of the Last
Fiscal Year.
AUSTRALIA
Mereenie
MPAL (35%) and Santos (65%), the operator, (together known as the
Mereenie Participants) own the Mereenie field which is located in the Amadeus
Basin of the Northern Territory. MPAL's share of production from the field is
subject to net overriding royalties aggregating 3.0625% and the statutory
government royalty of 10%. MPAL's share of the Mereenie field proved developed
oil reserves was approximately 730,000 barrels at June 30, 1999.
The field was producing about 1,700 (MPAL share - 595) barrels of crude
oil per day ("bpd") at June 30, 1999. During 1999, MPAL's share of oil sales was
236,000 barrels and 3.4 billion cubic feet ("bcf") of gas sold from 41 oil and
gas wells. The oil is transported by means of a 167 mile eight-inch oil pipeline
from the field to the Brewer Estate industrial park near Alice Springs. Most of
the oil is then shipped south approximately 950 miles by rail and road to a
refinery in the Adelaide area. The cost of transporting the oil to the refinery
is being borne by the producers. The Mereenie Participants are also providing
Mereenie gas in the Northern Territory to the Power and Water Authority ("PAWA")
and Gasgo Pty. Ltd., a company it wholly owns, for use in Darwin and other
Northern Territory centers. See "Gas Supply Contracts".
During 1999, the Mereenie Participants had been negotiating for the
sale of Liquid Petroleum Gas from the field to a purchaser but the project was
terminated after it was determined that it was uneconomic.
Palm Valley
MPAL has a 50.8% interest in and is the operator of the Palm Valley gas
field which is located in the Northern Territory. Santos, the operator of the
Mereenie field, owns a 48% interest in Palm Valley. Ten wells have been drilled
in the field, five of which are currently connected to the gas treatment plant
and are flowed at maximum deliverability levels to meet the Alice Springs and
Darwin supply contracts with PAWA. See "Gas Supply Contracts". During fiscal
1999, MPAL's share of gas sales was 3.7 bcf. In order to increase
deliverability, field compression began in November 1996 with two 400 HP
compressors. A third 800 HP compressor was installed during fiscal 1999. MPAL
has recommended that four additional wells be drilled at Palm Valley to improve
the field's production capacity. Under the gas supply agreement with PAWA, the
costs of these wells are reimbursed by PAWA and, consequently, the
recommendation is under review by PAWA's consultants.
<PAGE>
MPAL's share of Palm Valley production revenues is subject to a 10%
statutory government royalty and net overriding royalties aggregating 4.2548%.
Gas Supply Contracts
In 1983, the Palm Valley Participants commenced the sale of gas to
Alice Springs under a 1981 agreement. In 1985, the Palm Valley Participants and
Mereenie Participants signed agreements for the sale of gas to PAWA for use in
PAWA's Darwin generating station and at a number of other generating stations in
the Northern Territory. The gas is being delivered via the 922 mile Amadeus
Basin to Darwin gas pipeline which was built by an Australian consortium. Since
1985, there have been several additional contracts for the sale of Mereenie gas.
The following is a summary of MPAL's interest in the Palm Valley and the
Mereenie gas supply contracts:
<TABLE>
<CAPTION>
Maximum contract
(balance/after royalties) Percentage of
contract completed Contract Period
(bcf)
Palm Valley:
<S> <C> <C> <C>
Alice Springs (1981) 9.6 54 25 years (1983-2008)
Darwin (1985) 43.8 43 25 years (1987-2012)
----
53.4
Mereenie:
Darwin (1985) 8.6 43 25 years (1987-2012)
Darwin (1995) - 100 10 years (1995-2005)
Darwin (1997) 18.4 - 10 years (1999-2009)
Other .7 - Various
----
27.7
Total 81.1
</TABLE>
Under the 1985 contracts, there is a difference in price between Palm
Valley gas and most of the Mereenie gas for the first 20 years of the 25 year
contracts which takes into account the additional cost to the pipeline
consortium to build a spur line to the Mereenie field and increase the size of
the pipeline from Palm Valley to Mataranka.
In consideration for the Palm Valley Participants forgoing 20% of the
Amadeus Basin to Darwin gas supply contract during the first 20 contract years,
Mereenie Participants made a payment to the Palm Valley Participants to
partially compensate the Palm Valley Participants for the reduced net present
value of the future gas sales revenues which were postponed from contract years
1 to 20 to contract years 21 to 26. The agreement also provides that when the
Mereenie Participants sell any additional gas from the Mereenie field, the Palm
Valley Participants are entitled, as additional consideration, to 35% of the
revenues from the first 38 bcf (MPAL share - 19.5 bcf) of gas sold. At June 30,
1999, the balance of the Mereenie Participants gas subject to this entitlement
was 9.7 bcf (MPAL share - 4.8 bcf).
<PAGE>
Dingo Gas Field
MPAL has a 34.3% interest in the Dingo gas field which is held under
Retention License 2 and is subject to renewal in 2003. The Dingo gas field,
which is located in the Amadeus Basin in the Northern Territory, has
approximately 25 bcf of presently proved and recoverable reserves based on four
delineation wells. Dingo 2 and Dingo 3 wells are estimated to have the capacity
of producing a combined rate of 5 million cubic feet ("mmcf") per day. MPAL's
share of potential production from these permit areas is subject to a 10%
statutory government royalty and overriding royalties aggregating 2.5043%.
Ngalia Basin
MPAL had a 40% interest in permit EP-15 in the Ngalia basin in the
Northern Territory which expired during May 1999. During July 1998, the Newhaven
well was plugged and abandoned. MPAL's share of the drilling costs incurred
through June 30, 1998 were included in exploratory and dry hole costs for the
1998 fiscal year. The costs to drill the well subsequent to June 30, 1998 in the
amount of $316,000 are included in exploratory and dry hole costs for fiscal
1999.
Northern Surat Basin
During fiscal 1998, MPAL sold its 15.625% interest in ATP 378P
Queensland, Australia to its partner, Santos. The $636,000 difference between
the carrying cost and the sale price was included in loss on the sale of assets
for the 1998 fiscal year.
Surat Basin
During the 1998 fiscal year, MPAL earned a 17% interest in Block D of
ATP 244P in Queensland by completing a pilot seismic reprocessing program.
During the 1999 fiscal year, MPAL abandoned its interest in the permit.
During fiscal 1998, MPAL earned a 15% interest in ATP 626P in
Queensland. During fiscal 1999, MPAL relinquished its interest in the permit.
Timor Sea
During April 1998, MPAL acquired a 5% interest in Exploration Permit
WA-199-P in the Bonaparte Basin in the Timor Sea offshore Western Australia.
MPAL earned its interest in the permit by funding 10% of the cost of drilling
the Kittiwake-1 well which was a dry hole. MPAL's cost of the well was written
off in the fourth quarter of fiscal 1998 and was included in exploratory and dry
hole costs. MPAL relinquished its interest in the permit during the 1999 fiscal
year.
<PAGE>
Browse Basin
During the 1999 fiscal year, MPAL was granted a 17.5% interest in
exploration permits WA-281-P, WA-282-P and WA-283-P in the Browse Basin offshore
Western Australia. During the 1999 fiscal year, MPAL spent approximately $67,000
toward the Year 1 work obligations. MPAL's share of the work obligations for the
three permits is as follows:
WA-281-P WA-282-P WA-283-P Total
Year 1 $ 368,000 $ 286,000 $ 286,000 $ 940,000
Year 2 713,000 111,000 111,000 935,000
Year 3 1,320,000 23,000 1,203,000 2,546,000
---------- ---------- ---------- ----------
Total Years 1-3 $2,401,000 $ 420,000 $1,600,000 $4,421,000
---------- ---------- ---------- ----------
Year 4 187,000 23,000 187,000 397,000
Year 5 1,437,000 1,308,000 1,437,000 4,182,000
Year 6 35,000 23,000 35,000 93,000
---------- ---------- ---------- ----------
Total Year 4-6 $1,659,000 $1,354,000 $1,659,000 $4,672,000
---------- ---------- ---------- ----------
Total All Years $4,060,000 $1,774,000 $3,259,000 $9,093,000
========== ========== ========== ==========
During January 1999, MPAL was granted exploration blocks WA-287-P and
WA-288-P in the Eastern Browse Basin offshore Western Australia. During the 1999
fiscal year, MPAL spent approximately $54,000 toward the Year 1 work
obligations. The following exploration program was submitted to obtain the
blocks with the exploration expenditures in Years 1-3 obligatory and Years 4-6
discretionary:
Year WA-287-P WA-288-P Total
---- -------- -------- -----
1 $ 67,000 $ 120,000 $ 187,000
2 134,000 334,000 468,000
3 134,000 134,000 268,000
---------- ---------- -----------
Total Years 1-3 335,000 588,000 923,000
---------- ---------- -----------
4 2,336,000 2,336,000 4,672,000
5 167,000 167,000 334,000
6 2,336,000 2,336,000 4,672,000
---------- ---------- -----------
Total Years 4-6 4,839,000 4,839,000 9,678,000
---------- ---------- -----------
Total All Years $5,174,000 $5,427,000 $10,601,000
========== ========== ===========
Carnarvon Basin
MPAL earned a 15% interest in exploration permits TP/12 and EP398 in
the Carnarvon Basin offshore Western Australia by funding 30% of the cost of
drilling the Springbok-1 well. The Springbok-1 well was plugged and abandoned
during August 1998. MPAL's cost of drilling the well was written off during the
first quarter of fiscal 1999.
<PAGE>
During April 1999, MPAL was awarded permit WA-291-P, offshore Western
Australia in the Carnarvon Basin. The minimum expenditure obligations for the
first three year period totals $347,000. The discretionary commitment for years
4-6 totals approximately $4.8 million.
Maryborough Basin
MPAL holds a 98% interest in exploration permit ATP 613P, a 670,000
acre block, in the Maryborough Basin in Queensland, Australia. A third party has
agreed to drill an exploration well in exchange for an approximate 50% interest
in the permit. The well will be drilled during the 2000 fiscal year.
Cooper Basin
During April 1999, MPAL (50%) and its partner Beach Petroleum NL were
successful in bidding for two exploration blocks in South Australia's Cooper
Basin. The formal grant of the permit is pending. MPAL's share of the work
obligations during the five year period of the permit are as follows:
Year CO98I CO98J Total
---- ----- ----- -----
1 $ 534,000 $ 668,000 $1,202,000
2 334,000 401,000 735,000
3 234,000 300,000 534,000
---------- ---------- ----------
Total Years 1-3 1,102,000 1,369,000 2,471,000
---------- ---------- ----------
4 67,000 367,000 434,000
5 234,000 300,000 534,000
---------- ---------- ----------
Total Years 4-5 301,000 667,000 968,000
---------- ---------- ----------
Total All Years $1,403,000 $2,036,000 $3,439,000
========== ========== ==========
UNITED STATES
Baca County, Colorado
MPC (10%) and MPAL (90%) participated in an exploration program in
Colorado. During 1995, MPAL commenced a three well drilling program. All three
wells were dry holes. During fiscal 1995 and 1996, the Company wrote off
$809,000 and $1,691,000 in costs, respectively. During fiscal 1997, the Company
drilled a fourth well which was a dry hole and all of the remaining costs of the
project, which totaled $3,008,000, were written off. During fiscal 1999, MPAL
spent approximately $16,000 on the project and it is allowing most of the leases
to expire.
<PAGE>
Tapia Canyon, California
Effective December 1, 1997, MPC acquired an 18% interest in a heavy oil
recovery project in Tapia Canyon, California. Because the Company was
dissatisfied with the program to develop the field reserves, the Company has
sold its interest for its approximate cost of $101,000 effective August 31,
1999.
Stephens County, Texas
During fiscal 1999, MPC participated (20%) in the drilling of the
Puckett No. 1 well which is presently suspended. There are indications of oil
and additional work will be performed during September 1999. During late June
1999, MPC also participated (21.4%) in the drilling of the Smith No. 1 well
which also has indications of oil. MPC's capitalized costs at June 30, 1999
totaled $71,000.
BELIZE
Southern Offshore Block PSA
During March 1998, MPC (3%), MPAL (20%) and the other joint venture
participants entered into a new Production Sharing Agreement ("PSA") with the
Government of Belize. The new Southern Offshore Block PSA ("SOB PSA") combines
most of the blocks previously included in the Gladden PSA and the Block 13 PSA,
and totals approximately 893,000 acres. The work obligations of the new PSA are
as follows: Year 1 - $100,000, Year 2 - $300,000, Year 3 - $3,000,000 and Year 4
- - $150,000. The participants in the PSA have been seeking partners in the
venture. The first year obligations have been completed and the participants are
negotiating with the Government of Belize to reduce the Year 2 obligations.
Gladden Basin PSA/Block 13 PSA
During 1997, the Gladden No. 1 well was plugged and abandoned and the
Company's cost of the well was written off. During March 1998, this block was
consolidated into the SOB PSA.
MPC and MPAL were also participants in a Production Sharing Agreement
("Block 13 PSA") offshore Belize adjoining the western and southern boundaries
of the Gladden PSA. The Block 13 PSA covered approximately 788,000 acres. During
March 1998, this block was consolidated into the SOB PSA.
<PAGE>
CANADA
The Company owns a 2.67% carried interest in a lease (31,885 gross
acres, 850 net acres) in the southeast Yukon Territory, Canada, which includes
the Kotaneelee gas field. Anderson Oil & Gas, Inc., ("Anderson") is the operator
of this partially developed field which is connected to a major pipeline system.
Two wells are currently producing gas from the field approximately 60-65 mmcfd.
Although production at the Kotaneelee field commenced in 1979,
sustained production from the field did not begin until February 1991. Total
production from the field, according to government reports, has been as follows:
Calendar Year Production (bcf)
1979-1980 1.6
1991 8.1
1992 18.0
1993 17.5
1994 16.7
1995 15.7
1996 15.2
1997 14.4
1998 16.0
1999 (6 mos.) 10.6
-----
Total through June 30, 1999 133.8
=====
In a 1989 application to the National Energy Board, a reserve study by
the then operator estimated gas in place at 1.6 trillion cubic feet with proved
and probable recoverable reserves of 781 bcf.
The operator has not permitted the Company access to detailed pricing
and volume information, citing the litigation regarding the field. See Item 3 -
Legal Proceedings for a discussion of litigation relating to the Kotaneelee
field which may affect the status of the carried interest and the amount of the
carried interest account.
The Company is not entitled to any revenue from the field until the
working interest owners recover their costs. The operator last reported to the
Company unrecovered development costs totaling approximately Cdn.$8,873,000
(Company share - U.S.$159,000) at May 31, 1999. The amount of remaining
recoverable costs is one of the issues being contested in the Kotaneelee
litigation. The Company claims, and the defendants deny, that the defendants
have made improper charges to the carried interest account and one defendant
(Amoco Canada Oil and Gas) maintains that the carried interest account should be
charged additional amounts for gas processing fees. Amoco claims that the
remaining costs to be recovered at February 28, 1999 were Cdn.$77,983,000.
<PAGE>
Projections by the operator indicate that the carried interest account
may reach payout status prior to December 1999. However, there can be no
assurances that payout will occur within that time frame, inasmuch as there are
uncertainties as to production levels, gas pricing, field operating expenses,
additional capital expenditures and the impact of the Kotaneelee litigation.
For financial statement purposes in fiscal 1987 and 1988, the Company
wrote down its Canada cost center which included the Kotaneelee field to a
nominal value because of the uncertainty as to the date when sales of Kotaneelee
gas might begin and the immateriality of the carrying value of the investment.
Although the field is now producing and payout may occur by December 1999, the
Company has not yet classified its share of the Kotaneelee gas reserves as
proved because the gas field is still the subject of litigation. The Company
will reclassify the reserves at the Kotaneelee field as proved when there is
greater assurance as to the timing and assumptions regarding the investment.
(b) Financial Information about Industry Segments.
Since the Company is engaged in only one industry, namely, oil
and gas exploration, development, production and sale, this item is not
applicable to the Company.
(c) (1) Narrative Description of the Business.
The Company was incorporated in 1957 under the laws of Panama
and was reorganized under the laws of Delaware in 1967. The Company is engaged
in the exploration for, and the development and production and sale of oil and
gas reserves in the United States, Canada, and Belize and, through its
subsidiary MPAL, in Australia, the United States and Belize.
(i) Principal Products.
MPAL has an interest in the Palm Valley gas field and in the
Mereenie oil and gas field. See Item 1(a) - Australia - for a discussion of the
oil and gas production from the Mereenie and Palm Valley fields. The Company has
a direct 2.67% carried interest in the Kotaneelee gas field in Canada.
(ii) Status of Product or Segment.
See Item 1(a) - Australia - for a discussion of the current
and future operations of the Mereenie and Palm Valley fields in Australia.
(iii) Raw Materials.
Not applicable.
<PAGE>
(iv) Patents, Licenses, Franchises and Concessions
Held.
In Australia, the Company has interests directly and
indirectly through its subsidiaries in the following permits. Permittees are
required to carry out agreed work and expenditure programs.
Permit Expiration Date Location
Retention License 2 (Dingo) October 2003 Northern Territory
ATP 613P (Maryborough) Renewal pending Queensland
WA-291-P (Carnarvon Basin) August 2005 Offshore Western Australia
WA-281-P (Browse Basin) August 2004 Offshore Western Australia
WA-282-P (Browse Basin) August 2004 Offshore Western Australia
WA-283-P (Browse Basin) August 2004 Offshore Western Australia
TP12 & EP398 (Carnarvon Basin) January 2002 Offshore Western Australia
WA-287-P (Browse Basin) February 2005 Offshore Western Australia
WA-288-P (Browse Basin) February 2005 Offshore Western Australia
CO98I (Cooper Basin) Pending South Australia
CO98J (Cooper Basin) Pending South Australia
In 1981, the Northern Territory issued Petroleum Leases No. 4
and No. 5 which cover the Mereenie oil and gas field to MPAL's subsidiaries. As
part of the lease conditions, MPAL and its Mereenie partners agreed to construct
an oil refinery near Alice Springs, if it were determined that such a refinery
is economically feasible. MPAL believes that the oil refinery would not be
economically viable under current market conditions, and the Northern Territory
has not raised any current objection to this conclusion. In the event that a
refinery becomes economically viable and the MJV does not construct the
refinery, MPAL and its partners will be required to pay the Northern Territory
liquidated damages based on the value of the crude oil produced from the lands
under lease. The amount to be paid to the Territory is an amount per barrel
which is the greater of (a) A.$3.00 per barrel or (b) A.$2.00 per barrel plus
10% of the amount by which the market price of Mereenie crude oil exceeds
A.$27.50. Production is subject to a statutory 10 percent royalty payable to the
Northern Territory.
In 1982 the Northern Territory granted Petroleum Lease No. 3
for the Palm Valley gas field to a MPAL subsidiary. Production is subject to a
statutory 10 percent royalty payable to the Northern Territory.
The above leases are subject to the Petroleum (Prospecting and
Mining) Act of the Northern Territory. Lessees have the exclusive right to
produce petroleum from the land subject to a lease upon payment of a rental and
a royalty at the rate of 10% of the wellhead value of the petroleum produced.
Rental payments may be offset against the royalty paid. The term of a lease is
21 years, and leases may be renewed for successive terms of 25 years each.
<PAGE>
Since 1992, there has been an ongoing controversy regarding
the Aborigines and the ownership of their traditional lands. There has been
legislation aimed at resolving this controversy. The Company does not consider
that this issue will have a material adverse impact on MPAL's properties.
In Belize, Central America, the Company has interests directly
and indirectly through a subsidiary in the following PSA is which issued for
eight years but work and expenditure obligations are calculated in two year
blocks. Application is made ninety days prior to the two year block expiration.
PSA Expiration Date
Southern Offshore Block March 2002
(v) Seasonality of Business.
Although the Company's business is not seasonal, the demand
for oil and especially gas is subject to fluctuations in the Australian weather.
(vi) Working Capital Items.
See Item 7 - Liquidity and Capital Resources for a discussion
of this information.
(vii) Customers.
Although the majority of the Company's producing oil and gas
properties are located in a relatively remote area in central Australia (See
Item 1 - Business and Item 2 - Properties), the completion in January 1987 of
the Amadeus Basin to Darwin gas pipeline has provided access to and expanded the
potential market for the Company's gas production.
Natural Gas Production
MPAL's principal customer and the most likely major customer
for future gas sales is PAWA, a governmental authority of the Northern Territory
Government, which also has substantial regulatory authority over MPAL's oil and
gas operations. The loss of PAWA as a customer would have a material adverse
effect on MPAL's business.
Oil Production
There is presently a small local market for the Mereenie crude
oil in the Alice Springs area. Most of the crude oil production is being shipped
and sold to a refinery in Adelaide.
<PAGE>
(viii) Backlog.
Not applicable.
(ix) Renegotiation of Profits or Termination of
Contracts or Subcontracts at the Election
of the Government.
Not applicable.
(x) Competitive Conditions in the Business.
The exploration for and production of oil and gas are highly
competitive operations. The ability to exploit a discovery of oil or gas is
dependent upon such considerations as the ability to finance development costs,
the availability of equipment, and engineering and construction delays and
difficulties. The Company also must compete with major companies which have
substantially greater resources than the Company.
Furthermore, competitive conditions may be substantially
affected by various forms of energy legislation which have been or may be
proposed in Australia, Canada, the United States and Belize; however, it is not
possible to predict the nature of any such legislation which may ultimately be
adopted or its effects upon the future operations of the Company.
At the present time, the Company's principal income producing
operations are in Australia and for this reason, current competitive conditions
in Australia are material to the Company's future. Currently, most indigenous
crude oil is consumed within Australia. In addition, imports of crude oil are
made by refiners and others to meet the overall demand in Australia. The Palm
Valley Participants and the Mereenie Participants are developing and separately
marketing the production from each field. Because of the relatively remote
location of the Amadeus Basin and the inherent nature of the market for gas, it
would be impractical for each working interest partner to attempt to market its
respective share of production from each field.
(xi) Research and Development.
Not applicable.
<PAGE>
(xii) Environmental Regulation.
The Company is subject to the environmental laws and
regulations of the jurisdictions in which it carries on its business, and
existing or future laws and regulations could have a significant impact on the
exploration for and development of natural resources by the Company. However, to
date, the Company has not been required to spend any unusual material amounts
for environmental control facilities. The federal and state governments in
Australia strictly monitor compliance with these laws but compliance therewith
has not had any adverse impact on the Company's operations or its financial
resources.
(xiii) Number of Persons Employed by Company.
At June 30, 1999, the Company had no full time employees in
the United States and MPAL had 33 employees in Australia. The Company relies to
a great extent on consultants for legal, accounting and administrative services.
(d) Financial Information About Foreign and Domestic
Operations and Export Sales.
(1) Financial Information Relating to Foreign and
Domestic Operations.
See Note 12 to the Consolidated Financial Statements.
(2) Risks Attendant to Foreign Operations.
Most of the properties in which the Company has
interests are located outside the United States and are subject to certain risks
involved in the ownership and development of such foreign property interests.
These risks include but are not limited to those of: nationalization;
expropriation; confiscatory taxation; changes in foreign exchange controls;
currency revaluations; price controls or excessive royalties; export sales
restrictions; limitations on the transfer of interests in exploration licenses;
and other laws and regulations which may adversely affect the Company's
properties, such as those providing for conservation, proration, curtailment,
cessation, or other limitations of controls on the production of or exploration
for hydrocarbons. Thus, an investment in the Company represents a speculation
with risks in addition to those inherent in domestic petroleum exploratory
ventures.
(3) Data Which are Not Indicative of Current or Future
Operations.
MPAL and its co-venturer in the Mereenie field have
been negotiating with PAWA and other parties to sell production out of the
field's uncommitted gas reserves. A new gas supply contract for the uncommitted
reserves in the Mereenie field could increase revenue from gas sales in the
future.
<PAGE>
Item 2. Properties.
(a) The Company has interests in properties in Australia, United
States, Canada and Belize. In Australia, it has interests through its 50.9%
equity interest in MPAL which holds interests in the Northern Territory,
Queensland, South Australia and Western Australia. In Canada, the Company has a
direct interest in one lease. The Company also has direct interests in
properties in the United States and Belize and indirectly through MPAL's
interests in these areas. For additional information regarding the Company's
properties, See Item 1 - Business.
(b) (1) The information regarding reserves, costs of oil and gas
activities, capitalized costs, discounted future net cash flows and results of
operations is contained in Item 8 - Financial Statements and Supplementary Data.
<PAGE>
The following graphic presentation has been omitted, but the following
is a description of the omitted material:
AMADEUS BASIN PROJECTS MAP
The map indicates the location of the Amadeus Basin interests in the
Northern Territory of Australia. The following items are identified:
Palm Valley Gas Field
Mereenie Oil & Gas Field
Dingo Gas Field
Palm Valley - Alice Springs Gas Pipeline
Palm Valley - Darwin Gas Pipeline
Mereenie Spur Gas Pipeline
<PAGE>
The following graphic presentation has been omitted, but the following
is a description of the omitted material:
CANADIAN PROPERTY INTERESTS MAP
The map indicates the location of the Kotaneelee Gas Field in the Yukon
Territories of Canada. The map identifies the following items:
Kotaneelee Gas Field
Wells drilled on the permit
Pointed Mountain Gas Field
Beaver River Gas Field
Westcoast Transmission Pipeline
<PAGE>
(2) Reserves reported to other agencies.
None
(3) Production
The average sales price per unit of production for
the following fiscal years are as follows:
June 30,
1999 1998 1997
Australia:
Gas (per mcf) A.$ 2.32 A.$ 2.32 A.$ 2.30
Crude oil (per bbl) A.$20.20 A.$24.55 A.$27.71
The average production cost per unit of production
for the following fiscal years has been impacted by transportation costs on
Mereenie oil in Australia. During 1999, the cost of remedial work on various
wells in the Mereenie field and lower production increased production costs.
June 30,
1999 1998 1997
Australia:
Gas (per mcf) A.$ .33 A.$ .26 A.$ .28
Crude oil (per bbl) A.$19.35 A.$12.28 A.$8.20
(4) Productive Wells and Acreage.
Productive wells and acreage at June 30, 1999:
Productive Wells
Oil Gas Developed Acreage
--- --- -----------------
Gross Net Gross Net Gross Acres Net Acres
----- --- ----- --- ----------- ---------
Australia 40.0 14.0 27.0 10.5 72,025 30,001
Americas 2.0 .4 2.0 .1 3,350 89
---- ---- ---- ---- ------ ------
42.0 14.4 29.0 10.6 75,375 30,090
==== ==== ==== ==== ====== ======
<PAGE>
(5) Undeveloped Acreage.
The Company's undeveloped acreage (except as
indicated below) is set forth in the table below:
GROSS AND NET ACREAGE AS OF JUNE 30, 1999
(i) MPAL has interests in the following properties (before royalties).
The Company has an interest in these properties through its 50.9% interest in
MPAL.
<TABLE>
<CAPTION>
Properties held by MPAL: MPAL The Company
------------------------------------------ -------------------------
Net Interest Net Interest
Gross Acres Acres % Acres %
----------- --------- -------- --------- --------
Australia
Northern Territory:
Amadeus Basin:
<S> <C> <C> <C> <C> <C>
Mereenie (OL4&5)(1) 69,407 24,292 35.00 12,364 17.81
Palm Valley (OL3)(2) 151,905 77,130 50.78 39,259 25.84
Dingo (RL2) 115,596 39,696 34.34 20,205 17.48
---------- --------- ---------
Total Amadeus Basin 336,908 141,023 71,828
---------- --------- ---------
Queensland:
Maryborough Basin (ATP 613P) 344,318 337,432 98.00 171,753 49.88
---------- --------- ---------
South Australia:
Cooper Basin (CO98I&J) 1,621,802 810,902 50.00 412,750 25.45
---------- --------- ---------
Western Australia:
Browse WA-281-P 1,147,315 200,780 17.50 102,197 8.91
Browse WA-282-P 1,468,662 257,016 17.50 130,821 8.91
Browse WA-283-P 1,060,618 185,608 17.50 94,474 8.91
Carnarvon TP12 & EP398 146,224 21,934 15.00 11,164 7.64
Carnarvon WA-291-P 2,205,710 2,205,710 100.00 1,122,706 50.90
Browse WA-287-P 515,736 515,736 100.00 262,510 50.90
Browse WA-288-P 513,266 513,266 100.00 261,252 50.90
---------- --------- ---------
Total Western Australia 7,057,531 3,900,050 1,985,124
---------- --------- ---------
Total Australia 9,360,559 5,189,502 2,641,455
---------- --------- ---------
Belize, C.A.
Southern Offshore Block 892,543 178,509 20.00 90,861 10.18
---------- --------- ---------
Total MPAL 10,253,102 5,368,011 2,732,316
---------- --------- ---------
Properties held directly by MPC:
United States
Texas 160 32 20.00
---------- ---------
Belize, C.A.
Southern Offshore Block(3) - 26,776 3.00
---------- ---------
Canada
Yukon and Northwest Territories:
Carried interest(4) 35,076 935 2.67
---------- ---------
Total 10,288,338 2,760,059
========== =========
</TABLE>
- ----------------------------
(1) Includes 41,644 gross developed acres and 14,575 net acres.
(2) Includes 30,381 gross developed acres and 15,426 net acres.
(3) Gross acres shown above.
(4) Includes 3,350 gross developed acres and 89 net acres.
<PAGE>
(6) Drilling activity.
Productive and dry net wells drilled during the
following years (data concerning Canada is insignificant):
Australia
Exploration Development
Year ended ----------------------- ------------------------
June 30, Productive Dry Productive Dry
1999 - .15 .70 -
1998 - .55 .70 .35
1997 - - - -
Americas
Exploration Development
Year ended ----------------------- ------------------------
June 30, Productive Dry Productive Dry
1999 .20 .19 - -
1998 - - - -
1997 - 1.23 - -
(7) Present Activities.
There are no wells being drilled at the present time.
(8) Delivery Commitments.
See discussion under Item 1 concerning the Palm
Valley and Mereenie fields.
Item 3. Legal Proceedings.
Kotaneelee Gas Field
The Company's 2.67% carried interest in the Kotaneelee gas field is
held in trust by Canada Southern Petroleum Ltd. ("Canada Southern") which has a
30% carried interest in the field. Canada Southern and the Company (the
"Plaintiffs") believe that the working interest owners in the Kotaneelee gas
field have not adequately pursued the attainment of contracts for the sale of
Kotaneelee gas; accordingly, legal action in the United States was commenced by
Canada Southern in 1987 against AlliedSignal Inc. and Allied Corporation
(collectively, Allied Signal). This suit was ultimately dismissed in December
1988.
<PAGE>
In October 1989 and in March 1990, Canada Southern filed statements of
claim in the Court of Queens Bench of Alberta, Judicial District of Calgary,
Canada, against the working interest partners in the Kotaneelee gas field. The
named defendants were Amoco Canada Petroleum Corporation, Ltd., Dome Petroleum
Limited (now Amoco Canada Resources Ltd.), and Amoco Production Company
(collectively the "Amoco Dome Group"), Columbia Gas Development of Canada Ltd.
("Columbia"), Mobil Oil Canada Ltd. ("Mobil") and Esso Resource of Canada Ltd.
("Esso") (collectively the "Defendants").
The Plaintiffs claim that the Defendants breached either a contract
obligation or a fiduciary duty owed to the Plaintiffs to market gas from the
Kotaneelee gas field when it was possible to so do. The Plaintiffs assert that
marketing the Kotaneelee gas was possible in 1984 and that the Defendants
deliberately failed to do so. The Company seeks monetary damages and the
forfeiture of the Kotaneelee gas field. The Plaintiffs presented evidence at
trial that the monetary damages sustained by the Plaintiffs were approximately
Cdn.$110 million (Company share-U.S.$5.8 million).
In addition, the Plaintiffs have claimed that the Plaintiff's carried
interest account should be reduced because of the negligent operation of the
field and improper charges to the carried interest account by the Defendants.
The Plaintiffs claim that when the Defendants in 1980 suspended production from
the field's gas wells, they failed to take precautionary measures necessary to
protect and maintain the wells in good operating condition. The wells thereafter
deteriorated, which caused unnecessary expenditures to be incurred, including
expenditures to redrill one well. In addition, the Plaintiffs claim that
expenditures made to repair and rebuild the field's dehydration plant would not
have been necessary had the facilities been properly constructed and maintained
by the Defendants. The expenditures, the Plaintiffs claim, were inappropriately
charged to the field's carried interest account. The effect of an increased
carried interest account is to extend the period before payout begins to the
carried interest account owners.
The Plaintiffs claim that production from the field should have
commenced in 1984. At that time the field's carried interest account was
approximately Cdn.$63 million. The Company claims that by 1993 at least Cdn.$34
million of unnecessary expenses had been wrongfully charged to the carried
interest account. The Company's 2.6% share of these expenses would be
approximately Cdn.$.9 million. The Plaintiffs further claim that, if production
had commenced in 1984, the carried interest account would have been paid off in
approximately two years and the Company would have begun to receive revenues
from the field in 1986. Projections by the operator indicate that the carried
interest account may reach payout status prior to the end of 1999. However,
there can be no assurances that payout will occur within that timeframe,
inasmuch as there are uncertainties as to production levels, gas pricing, field
operating expenses, additional capital expenditures and the impact of the
Kotaneelee litigation.
<PAGE>
Columbia has filed a counterclaim against the Plaintiffs seeking, if
the Plaintiffs are successful in its claim for the forfeiture of the field,
repayment from the Plaintiffs of all sums Columbia has expended on the
Kotaneelee lands before the Plaintiffs are entitled to their interest.
The parties to the litigation have conducted extensive discovery since
the filing of the claims. The trial, which started on September 3, 1996, is
still in progress. The trial was adjourned during the period December 1996-April
1997, July-August 1997, and July-August 1998. The trial resumed on September 8,
1998 and the Plaintiff's case was completed on September 16, 1998. The
Defendants began their case on September 16, 1998 and the trial was adjourned
for the July-August 1999 period and resumed on September 7, 1999.
Matters Ancillary to Kotaneelee Litigation
In its 1989 statement of claim, the Plaintiffs sought a declaratory
judgment regarding two issues:
(1) whether interest accrued on the carried interest account; and
(2) whether expenditures for gathering lines and dehydration
equipment are expenditures chargeable to the carried interest
account or whether the Plaintiff will be assessed a processing
fee on gas throughput.
With respect to the first issue, the Plaintiffs maintain that no
interest should accrue on the account and the Defendants have not contested this
position. With regard to the second issue, the Plaintiffs maintain that the
expenditures are chargeable to the carried interest account. Mobil, Esso and
Columbia have essentially agreed to the Company's position while the Amoco Dome
Group continues to contest this issue and claims that the remaining costs to be
recovered at February 28, 1999 were Cdn.$78 million (U.S.$52 million) as
compared to the other party's amount of Cdn.$13.5 million (U.S.$9 million) at
such date.
On January 22, 1996, the Plaintiffs settled two claims outstanding
against the Company in the Court of Queens Bench, Calgary, Alberta, which
related to a suit brought against AlliedSignal in Florida which was dismissed on
the basis that Canada was the appropriate forum for the litigation. AlliedSignal
had sought additional relief against the Company in Canada to preclude other
types of suits by the Company and to recover the costs of the defense of the
initial action. The settlement bars AlliedSignal from making a claim against the
Plaintiffs for any costs in connection with the Kotaneelee Litigation. The
Plaintiffs agreed not to bring any action against AlliedSignal in connection
with the Kotaneelee gas field. Neither party made any monetary payment to the
other party.
<PAGE>
In 1991, Anderson Exploration Ltd. acquired Columbia and changed its
name to Anderson Oil & Gas Inc. ("Anderson"). Anderson is now the sole operator
of the field and is a direct defendant in the Canada Court lawsuits. Columbia's
previous parent, The Columbia Gas System, Inc., which was reorganized in a
bankruptcy proceeding in the United States, is contractually liable to Anderson
in the legal proceeding described above.
The working interest owners have reported that they have been selling
Kotaneelee gas since February 1991. The Company is uncertain as to what impact,
if any, these sales may have on the status of the litigation.
Under Canadian law, certain costs (known as "taxable costs") of the
litigation may be assessed against the non-prevailing party. Previously, the
Company had reported that while such costs were not determinable, Canada
Southern had estimated that taxable costs, assuming a twelve month trial, could
be approximately Cdn.$1.5 million and noted that the judge in complex and length
trials has the discretion to increase an award. MPC has not agreed to share any
costs that might be assessed against Canada Southern, however, MPC's potential
share would not have exceeded U.S.$80,000.
Effective September 1, 1998, the Alberta Rules of Court were amended to
provide for a material increase in the costs which may be awarded to the
prevailing party in matter before the Court. In addition, the trial has extended
well beyond its original time estimates and, therefore, potential assessable
costs would increase accordingly.
The trial has been lengthy, complicated and costly to all parties and
the Company believes that the prevailing party or parties in the litigation will
argue for a substantial assessment of costs against the non-prevailing party or
parties. The Court has very broad discretion as to whether to award costs and
disbursements and as to the calculation of the amount to be awarded.
Accordingly, the Company is unable to determine whether, in the event that
Canada Southern does not prevail on its claims in the litigation, costs will be
assessed against it or in what amount. However, since the costs incurred by the
Defendants have been substantial, and since the Court has broad discretion in
the awarding of costs, an award to the Defendants potentially could be material,
if such costs were to be directly assessed against the Company.
There is no assurance whatever that Canada Southern and the Company
will be successful on the merits of their claims, which have been vigorously
defended by the Defendants. There is also no assurance that Canada Southern or
the Company will be awarded any damages, or that, if damages are awarded, the
Court will apply the measure of damages that Canada Southern and the Company
claim should be applied.
<PAGE>
Canada Southern has been advancing and paying all the legal and other
expenses of the Kotaneelee litigation. The Company has not received an
accounting of the amounts spent to date and understands that Canada Southern
expects to recover its costs only from any judgment in favor of the Plaintiffs.
The Company believes that the outcome of the Kotaneelee litigation is not
reasonably likely to have a material adverse effect on the Company's future
consolidated financial condition or results of operations.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Executive Officers of the Registrant
The following information with respect to the executive officers of the
Company is furnished pursuant to Instruction 3 to Item 401(b) of Regulation S-K.
<TABLE>
<CAPTION>
Length of Service Other Positions Held
Name Age Office Held as an Officer with Company
<S> <C> <C> <C> <C>
James R. Joyce 58 President and Chief Financial President since Director
Officer July 1, 1993
Dennis D. Benbow* 60 General Manager - MPAL Since 1993 Director
</TABLE>
* Effective August 13, 1999, Mr. Benbow retired as an officer and director of
MPAL, and as a director of MPC.
All officers of MPC are elected annually by the Board of Directors and
serve at the pleasure of the Board of Directors.
The Company is not aware of any arrangements or understandings between
any of the individuals named above and any other person pursuant to which any
individual named above was selected as an officer.
<PAGE>
PART II
Item 5. Market for the Company's Common Stock and Related Stockholder
Matters.
(a) Principal Market
The principal markets for the Company's common stock is the Pacific
Exchange, Inc. [MPC] and the NASDAQ SmallCap market [MPET]. The stock is also
traded on the Boston Stock Exchange. The quarterly high and low prices on the
most active market, NASDAQ, during the calendar quarterly periods indicated were
as follows:
1999 1st quarter 2nd quarter 3rd quarter*
- ---- ----------- ----------- ------------
High......... 1.81 2.50 2.81
Low.......... 1.27 1.19 1.63
1998 1st quarter 2nd quarter 3rd quarter 4th quarter
- ---- ----------- ----------- ----------- -----------
High......... 3.16 3.00 2.44 2.00
Low.......... 2.50 2.19 1.13 1.13
1997 1st quarter 2nd quarter 3rd quarter 4th quarter
- ---- ----------- ----------- ----------- -----------
High......... 4.13 2.81 4.00 3.81
Low.......... 2.38 2.09 2.25 2.50
- ---------------------------------
* Through September 15, 1999, on which date the closing price was $1.81.
(b) Approximate Number of Holders of Common Stock at
September 15, 1999
Title of Class Number of Record Holders
Common stock, par
value $.01 per share 9,100
(c) Frequency and Amount of Dividends
The Company has never paid a cash dividend on its common stock. The
Company will consider the payment of dividends when it has the ability to make
such payments.
<PAGE>
(d) Recent Sales of Unregistered Securities
None.
Item 6. Selected Consolidated Financial Information.
The following table sets forth selected data (in thousands) of the
Company insofar as it relates to each of the five fiscal years in the period
ended June 30, 1999. This data should be read in conjunction with Item 7 -
Management's Discussion and Analysis of Financial Condition and Results of
Operations and Item 8 - Financial Statements and Supplementary Data.
<TABLE>
<CAPTION>
Year ended June 30,
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Financial Data $ $ $ $ $
<S> <C> <C> <C> <C> <C>
Operating revenues 13,398 15,235 19,936 17,027 14,154
====== ====== ====== ====== ======
Total revenues 14,115 15,340 20,758 18,073 15,424
====== ====== ====== ====== ======
Net income 945 1,037 694 1,411 684
====== ====== ====== ====== ======
Net income per share (Basic and Diluted) .04 .04 .03 .06 .03
====== ====== ====== ====== ======
Working capital 12,772 13,452 14,219 9,858 8,806
====== ====== ====== ====== ======
Cash provided by operating activities 4,993 6,737 11,181 9,185 8,587
====== ====== ====== ====== ======
Property and equipment (net) 26,725 23,019 28,623 32,912 37,361
====== ====== ====== ====== ======
Total assets 44,234 39,779 46,230 47,816 39,575
====== ====== ====== ====== ======
Long-term liabilities 6,910 6,512 7,738 6,981 6,312
====== ====== ====== ====== ======
Minority interests 15,318 13,123 16,147 16,682 14,366
====== ====== ====== ====== ======
Stockholders' equity:
Capital 43,838 43,782 43,659 43,492 43,358
Accumulated deficit (18,405) (19,350) (20,387) (21,080) (22,491)
Accumulated other comprehensive loss (5,699) (7,013) (3,729) (2,785) (4,833)
-------- -------- -------- -------- --------
Total stockholders' equity 19,734 17,419 19,543 19,627 16,034
====== ====== ====== ====== ======
Exchange rate A.$=U.S. at end of period .6675 .6194 .7538 .7875 .7097
====== ====== ====== ====== ======
Common stock outstanding shares 25,108 24,982 24,851 24,691 24,544
====== ====== ====== ====== ======
Book value per share .79 .70 .78 .79 .65
====== ====== ====== ====== ======
Quoted market value per share 2.50 2.28 2.38 2.50 1.94
====== ====== ====== ====== ======
Operating Data
Annual production (Net of royalties)
Gas (BCF) 5.898 5.844 5.673 5.422 5.066
====== ====== ====== ====== ======
Oil (BBLS) (In thousands) (net of royalties 205 248 307 318 369
====== ====== ====== ====== ======
Standard measure of discounted future cash
flow relating to proved oil and gas reserves.
(approximately 49% attributable to minority interests) 53,000 48,000 68,000 44,000 38,000
====== ====== ====== ====== ======
</TABLE>
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
(1) Liquidity and Capital Resources - June 30, 1999
Consolidated
At June 30, 1999, the Company on a consolidated basis had approximately
$15.5 million of cash and securities.
A summary of the major changes in cash and cash equivalents during the
period is as follows:
Cash and cash equivalents at beginning of period $12,436,000
Cash provided by operations 4,993,000
Dividends to MPAL minority shareholders (687,000)
Additions to property and equipment (4,679,000)
Effect of exchange rate changes 897,000
Other 421,000
-----------
Cash and cash equivalents at end of period $13,381,000
===========
As to the Company (unconsolidated)
At June 30, 1999, Magellan Petroleum Corporation ("MPC"), on an
unconsolidated basis, had working capital of approximately $3.6 million. MPC's
annual operating budget is approximately $700,000 and its current cash position
and annual MPAL dividend should be adequate to meet its current cash
requirements. During the fiscal year 2000, MPC has budgeted approximately
$200,000 for oil and gas exploration compared to the $92,000 expended during
1999. MPC has in the past invested and may in the future invest substantial
portions of its cash to maintain its majority interest in its subsidiary
company, MPAL. During fiscal 1999, MPC purchased 113,000 shares of MPAL at a
cost of approximately $112,000.
During December 1998, MPC received a dividend from MPAL of $599,000
(after the $106,000 Australian withholding tax) which was added to MPC's working
capital.
As to MPAL
At June 30, 1999, MPAL had working capital of approximately $11
million. MPAL has budgeted approximately $2.5 million for specific exploration
projects in the fiscal year 2000 and allocated $1.3 million for potential new
projects as compared to the $2 million expended during fiscal 1999. The current
composition of MPAL's oil and gas reserves are such that MPAL's future revenues
in the long term are expected to be derived from the sale of gas in Australia.
<PAGE>
The following is a summary of MPAL's required and contingent
commitments for exploration expenditures for the five year period ended June 30,
2004. The contingent amounts will be dependent on such factors as the results of
the current program to evaluate the exploration permits, drilling results and
the Company's financial position.
Fiscal Year Expenditures Required Contingent Expenditures Total
2000 $2,557,000 $ 214,000 $ 2,771,000
2001 4,495,000 521,000 5,016,000
2002 1,035,000 1,025,000 2,060,000
2003 584,000 14,003,000 14,587,000
2004 - 1,705,000 1,705,000
---------- ----------- -----------
$8,671,000 $17,468,000 $26,139,000
========== =========== ===========
MPAL expects to fund its exploration costs through its cash flow from
Australian operations and any balance from its A.$10 million bank line of
credit.
The Company has assessed that its Year 2000 readiness is compliant at
June 30, 1999. The Year 2000 change had no material impact on the Company's
internal operations or financial results. The Company will be dependent on its
suppliers, partners and customers to make their systems year 2000 compliant, but
this reliance should not have a material effect on the Company's financial
results.
(2) Results of Operations
1999 vs. 1998
The Company had consolidated net income of $945,212 for fiscal 1999
compared to net income of $1,036,513 for fiscal 1998. The components of
consolidated net income for the comparable periods were as follows:
Year ended June 30,
------------------------------
1999 1998
MPC unconsolidated pretax loss $ (688,814) $ (688,596)
MPC income tax expense (105,370) (1,000)
Share of MPAL pretax income 1,659,185 1,798,595
Share of MPAL income (tax) benefit 80,211 (72,486)
---------- -----------
Consolidated net income $ 945,212 $1,036,513
========== ==========
Net income per share (basic & diluted) $.04 $.04
==== ====
<PAGE>
Revenues
Oil sales decreased 37% in fiscal 1999. Oil sales in Australia
decreased in 1999 to $2,573,000 from $4,098,000 in 1998 because of an 18%
decrease in oil prices, the 8% Australian foreign exchange rate decrease
discussed below and a 17% decrease in the number of units produced. Because of
low oil prices, it has not been economic to drill additional wells to increase
production. Oil unit sales (before deducting royalties) in barrels ("bbls") and
the average price per barrel sold during the periods indicated were as follows:
Fiscal 1999 Sales Fiscal 1998 Sales
----------------------- -------------------------
Average Price Average Price
bbls per bbl bbls per bbl
------- ------------- ------- -------------
Australia - Mereenie 235,806 A.$20.20 284,757 A.$24.55
Gas sales in Australia decreased 8% in fiscal 1999. Gas sales decreased from
$10,485,000 in 1998 to $9,640,000 in 1999 because of the 8% Australian foreign
exchange rate decrease discussed below. The volumes in billion cubic feet
("bcf") (before deducting royalties) and the average price of gas per thousand
cubic feet ("mcf") sold during the periods indicated were as follows:
<PAGE>
Fiscal 1999 Sales Fiscal 1998 Sales
--------------------- ---------------------
Average Price Average Price
bcf per mcf bcf per mcf
----- ------------- ----- -------------
Australia: (A.$) (A.$)
Palm Valley
Alice Springs contract 1.232 2.95 1.147 2.96
Darwin contract 2.507 2.02 2.395 2.02
Mereenie
Darwin contract 2.289 2.08 2.171 2.02
Other 1.138 2.77 1.416 2.74
----- -----
Total 7.166 7.129
===== =====
Other production income increased 82% to $1,185,000 in 1999 compared to
$652,000 in 1998. The primary reason for this increase was that MPAL's share of
gas pipeline tariffs increased to $1,061,000 in 1999 compared to $531,000 in
1998. In the 4th quarter of fiscal 1999 the amount increased because of an
anticipated resolution of a dispute regarding the producers' share of the
tariffs.
Interest income decreased 3% to $717,000 in 1999 from $741,000 in 1998.
Although additional funds were available for investment, substantially lower
interest rates and the 8% Australian foreign exchange rate decrease discussed
below offset the increase.
<PAGE>
Costs and Expenses
Production costs increased 20% to $4,372,000 in 1999 from $3,647,000 in
1998. The increase relates to the costs at Mereenie where substantial remedial
work was performed on 8 wells and the costs associated with the proposed LPG
plant. During the 4th quarter of fiscal year 1999, the loss attributable to the
LPG plant was reduced by $300,000 to $190,000.
Salaries and employee benefits decreased 10% from $1,435,000 in 1998 to
$1,297,000 in 1999. Compensation costs decreased in Australia together with the
8% Australian foreign exchange rate decrease discussed below.
Depreciation, depletion and amortization increased 7% in 1999 to
$2,357,000 from $2,205,000 in 1998. The increase was the result of the
additional costs from the Mereenie Central Treatment Plant upgrade added to the
depletion calculation which was partially offset by the 8% Australian foreign
exchange rate decrease discussed below.
Exploratory and dry hole costs totaled $2,059,000 during 1999 compared
to $3,346,000 in 1998. The costs in 1999 related primarily to the Springbok-1
well offshore Western Australia which was plugged and abandoned during the first
quarter and the Belize project which was written off in the third quarter of the
fiscal year. In 1998, the Schilling-1 well and the Kittiwake-1 well which were
drilled offshore Western Australia were also abandoned. The costs (in thousands)
in fiscal 1999 and fiscal 1998 for MPC and MPAL were as follows:
1999 1998
------------------------- -------------------------
Location MPAL MPC Total MPAL MPC Total
- -------------------- ------ --- ------ ------ --- ------
United States/Belize $ 361 $50 $ 411 $ 118 $32 $ 150
Australia 1,648 - 1,648 3,196 - 3,196
------ --- ------ ------ --- ------
$2,009 $50 $2,059 $3,314 $32 $3,346
====== === ====== ====== === ======
Auditing, accounting and legal expenses increased 6% from $480,000 in
1998 to $510,000 in 1999. The increase in the 1999 period relates to the legal
and tax advice sought in connection with an unsuccessful bid to acquire certain
oil and gas properties in Australia.
Shareholder communications increased 9% to $185,000 in 1999 compared to
$169,000 in 1998 because of increased exchange listing fees.
Other administrative expenses decreased 20% from $957,000 in 1998 to
$765,000 in 1999. Rent and travel expenses decreased and there was an 8%
Australian foreign exchange rate decrease as discussed below.
<PAGE>
Income Taxes
Income tax expense decreased from $144,000 in 1998 to a credit of
$52,000 in 1999. The effective income tax rate for 1999 was -2% compared to 5%
in 1998. The components of income tax expense between MPC and MPAL were as
follows:
1999 1998
MPC $105,000 $ 1,000
MPAL (157,000) 143,000
--------- --------
Consolidated tax (credit) $(52,000) $144,000
========= ========
In 1998, there was no 15% Australian withholding tax on the dividend
paid by MPAL to MPC compared to a withholding tax of $105,000 in 1999. In
addition, MPAL's income tax expense in 1999 (recognized during the 4th quarter)
and 1998 was lower due to the effect of permanent tax benefits under Australian
tax law and the utilization of prior year losses not previously taken into
account.
Exchange Effect
The value of the Australian dollar relative to the U.S. dollar
increased to $.6675 at June 30, 1999 compared to the value of $.6194 at June 30,
1998. This resulted in a $1,314,000 credit to accumulated translation
adjustments for fiscal 1999. The 8% increase in the value of the Australian
dollar increased the reported asset and liability amounts in the balance sheet
at June 30, 1999 from the June 30, 1998 amounts. The annual average exchange
rate used to translate MPAL's operations in Australia for fiscal 1999 was
$.6281, which is a 8% decrease compared to a $.6810 rate for the comparable 1998
period.
1998 vs. 1997
The Company had consolidated net income of $1,036,513 for fiscal 1998
compared to net income of $693,987 for fiscal 1997. The components of
consolidated net income for the comparable periods were as follows:
Year ended June 30,
------------------------------
1998 1997
MPC unconsolidated pretax loss $ (688,596) $(1,254,223)
MPC income tax expense (1,000) (276,117)
Share of MPAL pretax income 1,798,595 2,815,193
Share of MPAL income tax (72,486) (590,866)
----------- ------------
Consolidated net income $1,036,513 $ 693,987
========== ===========
Net income per share (basic & diluted) $.04 $.03
==== ====
<PAGE>
Revenues
Oil sales decreased 39% in fiscal 1998. Oil sales in Australia
decreased in 1998 to $4,098,000 from $6,740,000 in 1997 because of a 11%
decrease in oil prices, the 13% Australian foreign exchange rate decrease
discussed below and a 19% decrease in the number of units produced. Oil unit
sales (before deducting royalties) in barrels ("bbls") and the average price per
barrel sold during the periods indicated were as follows:
Fiscal 1998 Sales Fiscal 1997 Sales
------------------------ ------------------------
Average Price Average Price
bbls per bbl bbls per bbl
------- ------------- ------- -------------
Australia - Mereenie 284,757 A.$24.55 352,783 A.$27.71
Gas sales in Australia decreased 9% in fiscal 1998. Gas sales
decreased from $11,552,000 in 1997 to $10,485,000 in 1998 because of the 13%
Australian foreign exchange rate decrease discussed below which was partially
offset by a 3% increase in the volume of gas sold. The volumes in billion cubic
feet ("bcf") (before deducting royalties) and the average price of gas per
thousand cubic feet ("mcf") sold during the periods indicated were as follows:
Fiscal 1998 Sales Fiscal 1997 Sales
--------------------- ---------------------
Average Price Average Price
bcf per mcf bcf per mcf
----- ------------- ----- -------------
Australia: (A.$) (A.$)
Palm Valley
Alice Springs contract 1.147 2.96 1.072 2.95
Darwin contract 2.395 2.02 2.496 2.02
Mereenie
Darwin contract 2.171 2.02 1.963 1.99
Other 1.416 2.74 1.373 2.76
----- -----
Total 7.129 6.904
===== =====
Other production income decreased 60% to $652,000 in 1998 compared to
$1,644,000 in 1997. The primary reason for this decrease was that MPAL's share
of gas pipeline tariffs decreased to $531,000 in 1998 compared to $1,498,000 in
1997. The 1998 amount decreased because of a dispute regarding the producers'
share of the tariffs.
Interest income decreased 10% to $741,000 in 1998 from $822,000 in
1997. Although additional funds were available for investment, substantially
lower interest rates and the 13% Australian foreign exchange rate decrease
discussed below offset the increase.
<PAGE>
Loss on sale of assets. During March 1998, MPAL agreed to sell its
15.625% interest in ATP 378P Queensland, Australia to its partner, Santos,
Limited. The $636,000 difference between the carrying cost and the sale price is
included in loss on the sale of assets.
Costs and Expenses
Production costs decreased 24% to $3,647,000 in 1998 from $4,811,000 in
1997. The decrease relates to a decrease in costs at Mereenie and Palm Valley
and the 13% Australian foreign exchange rate decrease discussed below.
Depreciation, depletion and amortization increased 3% in 1998 to
$2,205,000 from $2,140,000 in 1997. The increase was the result of the
additional costs added to the depletion calculation which was partially offset
by the 13% Australian foreign exchange rate decrease discussed below.
Exploratory and dry hole costs totaled $3,346,000 during 1998 compared
to $6,243,000 in 1997. In 1998, the Schilling-1 and the Kittiwake-1 well which
were drilled offshore Western Australia were abandoned. In 1997, the Baca
County, Colorado project was abandoned. In Belize, the Gladden No. 1 well was
also plugged and abandoned in 1997. The costs (in thousands) in 1998 and 1997
for MPC and MPAL are as follows:
1998 1997
------------------------- -------------------------
Location MPAL MPC Total MPAL MPC Total
- -------------------- ------ --- ------ ------ --- ------
Baca County, Colorado $ 46 $ - $ 46 $2,693 $315 $3,008
Belize, C.A. 72 32 104 2,372 283 2,655
Australia 3,196 - 3,196 580 - 580
------ --- ------ ------ ---- ------
$3,314 $32 $3,346 $5,645 $598 $6,243
====== === ====== ====== ==== ======
Bad debts increased to $239,000 during the 1998 period. MPAL
established a reserve for the amount due from Pegasus Gold Australian Pty. Ltd.
because of its bankruptcy filing.
Income Taxes
Income tax expense decreased from $1,442,000 in 1997 to $144,000 in
1998. The effective income tax rate for 1998 was 5% compared to 34% in 1997. The
components of income tax expense between MPC and MPAL were as follows:
1998 1997
MPC $ 1,000 $ 276,000
MPAL 143,000 1,166,000
-------- ----------
Consolidated $144,000 $1,442,000
======== ==========
<PAGE>
In 1998, there was no 15% Australian withholding tax on the dividend
paid by MPAL to MPC. In addition, MPAL's income tax expense in 1998 was lower
due to the effect of permanent tax benefits under Australian tax law.
Exchange Effect
The value of the Australian dollar relative to the U.S. dollar
decreased to $.6194 at June 30, 1998 compared to the value of $.7538 at June 30,
1997. This resulted in a $3,284,000 charge to accumulated translation
adjustments for fiscal 1998. The 18% decrease in the value of the Australian
dollar decreased the reported asset and liability amounts in the balance sheet
at June 30, 1998 from the June 30, 1997 amounts. The annual average exchange
rate used to translate MPAL's operations in Australia for fiscal 1998 was
$.6810, which is a 13% decrease compared to a $.7830 rate for the comparable
1997 period.
Item 7A. Quantitative and Qualitative Disclosure About Market Risk.
The Company does not have any significant exposure to market risk as
the only market risk sensitive instruments are its investments in marketable
securities. At June 30, 1999, the carrying value of such investments was
approximately $2.10 million, the fair value was $2.06 million and the face value
was $2.09 million. Since the Company expects to hold the investment to maturity,
the maturity value should be realized. During the year 1999, the value of the
Australian dollar relative to the U.S. dollar increased 8% and increased the
reported asset amounts at June 30, 1999 from the June 30, 1998 amounts.
<PAGE>
Item 8. Financial Statements and Supplementary Data.
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Magellan Petroleum Corporation
We have audited the accompanying consolidated balance sheets of Magellan
Petroleum Corporation as of June 30, 1999 and 1998 and the related consolidated
statements of income, changes in stockholders' equity and cash flows for each of
the three years in the period ended June 30, 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 significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Magellan Petroleum Corporation at June 30, 1999 and 1998, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended June 30, 1999, in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
Stamford, Connecticut
September 15, 1999
<PAGE>
MAGELLAN PETROLEUM CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30,
-----------------------------------
1999 1998
----------- -----------
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $13,380,699 $12,436,297
Accounts receivable 676,710 567,175
Marketable securities 392,973 1,265,495
Reimbursable development costs 95,743 191,266
Inventories 215,953 218,359
Other assets 282,900 296,933
----------- -----------
Total current assets 15,044,978 14,975,525
----------- -----------
Marketable securities 1,709,455 1,201,890
----------- -----------
Property and equipment:
Oil and gas properties (successful efforts method) 46,430,741 39,196,101
Land, buildings and equipment 1,822,094 1,510,666
Field equipment 1,373,326 1,262,464
----------- -----------
49,626,161 41,969,231
Less accumulated depletion, depreciation and amortization (22,901,263) (18,949,917)
----------- -----------
Total property and equipment 26,724,898 23,019,314
----------- -----------
Other assets 754,639 582,251
----------- -----------
$44,233,970 $39,778,980
=========== ===========
LIABILITIES, MINORITY INTERESTS
AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,372,043 $ 1,918,880
Accrued liabilities 780,570 806,150
Income taxes payable 120,150 -
----------- -----------
Total current liabilities 2,272,763 2,725,030
----------- -----------
Long term liabilities:
Deferred income taxes 6,060,402 5,854,261
Reserve for future site restoration costs 849,311 657,288
----------- -----------
Total long term liabilities 6,909,713 6,511,549
----------- -----------
Minority interests 15,317,698 13,123,313
----------- -----------
Commitments (Note 2) - -
Stockholders' equity:
Common stock, par value $.01 per share:
Authorized 50,000,000 shares
Outstanding 25,108,226 (1999), 24,982,495 (1998) shares 251,082 249,825
Capital in excess of par value 43,586,606 43,532,238
----------- -----------
Total capital 43,837,688 43,782,063
Accumulated deficit (18,404,824) (19,350,036)
Accumulated other comprehensive loss (5,699,068) (7,012,939)
----------- -----------
Total Stockholders' equity 19,733,796 17,419,088
----------- -----------
$44,233,970 $39,778,980
=========== ===========
</TABLE>
See accompanying notes.
<PAGE>
MAGELLAN PETROLEUM CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year ended June 30,
1999 1998 1997
----------- ----------- -----------
Revenues:
<S> <C> <C> <C>
Oil sales $ 2,572,966 $ 4,097,570 $ 6,739,663
Gas sales 9,639,657 10,485,380 11,551,546
Other production related revenues 1,185,020 651,706 1,644,457
Interest income 717,118 741,011 821,941
Gain (loss) on sale of assets - (635,882) -
----------- ----------- -----------
14,114,761 15,339,785 20,757,607
----------- ----------- -----------
Costs and expenses:
Production costs 4,372,253 3,647,135 4,810,931
Exploratory and dry hole costs 2,058,977 3,346,329 6,243,211
Salaries and employee benefits 1,297,036 1,434,868 1,667,678
Depletion, depreciation and amortization 2,356,582 2,205,127 2,140,066
Auditing, accounting and legal services 509,891 479,623 446,336
Bad debts - 239,201 -
Shareholder communications 184,721 168,715 179,111
Other administrative expenses 764,503 956,932 967,267
----------- ----------- -----------
11,543,963 12,477,930 16,454,600
----------- ----------- -----------
Income before income taxes and minority interests 2,570,798 2,861,855 4,303,007
Income taxes provision (benefit) (52,211) 144,087 1,442,495
----------- ----------- -----------
Income before minority interests 2,623,009 2,717,768 2,860,512
Minority interests 1,677,797 1,681,255 2,166,525
----------- ----------- -----------
Net income $ 945,212 $ 1,036,513 $ 693,987
=========== =========== ===========
Average number of shares
Basic 25,040,300 24,949,322 24,782,360
========== ========== ==========
Diluted 25,040,300 25,126,523 25,029,561
========== ========== ==========
Per share, based on average number of shares
outstanding during the period:
Net income (Basic and Diluted) $.04 $.04 $.03
==== ==== ====
</TABLE>
See accompanying notes.
<PAGE>
MAGELLAN PETROLEUM CORPORATION
CONSOLIDATED STATEMENTS OF
CHANGES IN STOCKHOLDERS' EQUITY
Three years ended June 30, 1999
<TABLE>
<CAPTION>
Accumulated
Capital in other Comprehensive
Number Common excess of Accumulated comprehensive income
of shares stock par value deficit loss Total (loss)
---------- -------- ----------- ------------ ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
July 1, 1996 24,691,245 $246,912 $43,244,901 $(21,080,536) $(2,784,596) $19,626,681
Net income - - - 693,987 - 693,987 693,987
Currency translation
adjustments - - - - (944,609) (944,609) (944,609)
Exercise of stock
options 160,000 1,600 165,275 - - 166,875 -
---------- -------- ----------- ------------ ----------- ----------- ----------
Comprehensive loss (250,622)
==========
June 30, 1997 24,851,245 248,512 43,410,176 (20,386,549) (3,729,205) 19,542,934
Net income - - - 1,036,513 - 1,036,513 1,036,513
Currency translation
Adjustments - - - - (3,283,734) (3,283,734) (3,283,734)
Exercise of stock
Options 131,250 1,313 122,062 - - 123,375 -
---------- -------- ----------- ------------ ----------- ----------- ----------
Comprehensive loss (2,247,221)
==========
June 30, 1998 24,982,495 249,825 43,532,238 (19,350,036) (7,012,939) 17,419,088
Net income - - - 945,212 - 945,212 945,212
Currency translation
Adjustments - - - - 1,313,871 1,313,871 1,313,871
Exercise of stock
Options 125,731 1,257 54,368 - - 55,625 -
---------- -------- ----------- ------------ ----------- ----------- ----------
Comprehensive income 2,259,083
==========
June 30, 1999 25,108,226 $251,082 $43,586,606 $(18,404,824) $(5,699,068) $19,733,796
========== ======== =========== ============= ============ ===========
</TABLE>
See accompanying notes.
<PAGE>
MAGELLAN PETROLEUM CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended June 30,
1999 1998 1997
----------- ----------- -----------
Operating Activities:
<S> <C> <C> <C>
Net income $ 945,212 $ 1,036,513 $ 693,987
Adjustments to reconcile net income to
net cash provided by operating activities:
Exploratory and dry hole costs 420,748 775,150 6,243,211
Depletion, depreciation and amortization 2,356,582 2,205,127 2,140,066
Deferred income taxes 206,141 (1,232,963) 637,130
Minority interests 1,677,797 1,681,255 2,166,525
Increase (decrease) in operating assets
and liabilities:
Accounts receivable (78,785) 1,058,967 1,082,939
Reimbursable development costs 103,461 145,024 (31,784)
Other assets (330,742) (97,483) (84,665)
Inventories 14,367 109,923 111,429
Accounts payable and accrued liabilities (442,159) 829,314 169,687
Income taxes payable 120,150 - (1,947,610)
----------- ----------- -----------
Net cash provided by operating activities 4,992,772 6,510,827 11,180,915
----------- ----------- -----------
Investing Activities:
Additions to property and equipment (4,679,109) (2,997,791) (5,305,699)
Marketable securities purchased (sold) 364,957 (256,180) (2,211,205)
----------- ----------- -----------
Net cash used in investing activities (4,314,152) (3,253,971) (7,516,904)
----------- ----------- -----------
Financing Activities:
Dividends to MPAL minority shareholders (686,567) (1,506,103) (1,778,622)
Exercise of stock options 55,625 123,375 166,875
----------- ----------- -----------
Net cash used in financing activities (630,942) (1,382,728) (1,611,747)
----------- ----------- -----------
Effect of exchange rate changes on cash
and cash equivalents 896,724 (2,380,693) (388,359)
----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents 944,402 (506,565) 1,663,905
Cash and cash equivalents at beginning of year 12,436,297 12,942,862 11,278,957
----------- ----------- -----------
Cash and cash equivalents at end of year $13,380,699 $12,436,297 $12,942,862
=========== =========== ===========
</TABLE>
See accompanying notes.
<PAGE>
MAGELLAN PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999
1. Summary of significant accounting policies
Principles of consolidation
The accompanying consolidated financial statements include the accounts
of Magellan Petroleum Corporation ("MPC") and its subsidiaries, hereafter
referred to collectively as the "Company". All intercompany transactions have
been eliminated. At June 30, 1999 and 1998, MPC owned a 50.9% and 50.7%
interest, respectively, in Magellan Petroleum Australia Limited ("MPAL"). During
fiscal 1999, MPC increased its interest in MPAL by purchasing additional MPAL
shares for $112,000.
Revenue Recognition
The Company recognizes oil and gas revenue from its interests in
producing wells as oil and gas is produced and sold from those wells. Oil and
gas sold is not significantly different from the Company's share of production.
Revenues from the purchase, sale and transportation of natural gas are
recognized upon completion of the sale and when transported volumes are
delivered.
Oil and Gas Properties
Oil and gas properties are located in Australia, Canada, Belize and the
United States. The Company follows the successful efforts method of accounting
for its oil and gas operations. Under this method, the costs of successful
wells, development dry holes and productive leases are capitalized and amortized
on a unit-of-production basis over the life of the related reserves. Cost
centers for amortization purposes are determined on a field-by-field basis.
Estimated future abandonment and site restoration costs, net of anticipated
salvage values, are accrued based on units of production. Unproved properties
with significant acquisition costs are periodically assessed for impairment in
value, with any impairment charged to expense. The successful efforts method
also imposes limitations on the carrying or book value of proved oil and gas
properties and requires an impairment provision or noncash charge against
earnings for any quarter in which their carrying value exceeds the standardized
measure of undiscounted future net cash flows from proved oil and gas reserves
based on prices received for oil and gas production as of the end of that
quarter or a subsequent date prior to publication of financial results for the
quarter.
<PAGE>
MAGELLAN PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999
1. Summary of significant accounting policies (Cont'd)
Exploratory drilling costs are initially capitalized pending
determination of proved reserves but are charged to expense if no proved
reserves are found. Other exploration costs, including geological and
geophysical expenses, leasehold expiration costs and delay rentals, are expensed
as incurred.
Use of Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Land, buildings and equipment and field equipment
Land, buildings and equipment and field equipment are carried at cost.
Depreciation and amortization are provided on a straight-line basis over their
estimated useful lives. The estimated useful lives are: buildings - 40 years,
equipment and field equipment - 3 to 15 years.
Inventories
Inventories consist of crude oil in various stages of transit to the
point of sale and are valued at the lower of cost (determined on an average cost
basis) or market.
Foreign currency translations
The accounts of the Company's Australian subsidiaries are translated
into U.S. dollars in accordance with Statement of Financial Accounting Standards
No. 52. The translation adjustment is included as a component of stockholders'
equity and comprehensive income (loss), whereas gain or loss on foreign currency
transactions is included in the determination of income. All assets and
liabilities are translated at the rates in effect at the balance sheet dates.
Revenues, expenses, gains and losses are translated using a quarterly weighted
average exchange rate for the period. At June 30, 1999 and 1998, the Australian
dollar was equivalent to U.S.$.6675, and $.6194, respectively.
<PAGE>
1. Summary of significant accounting policies (Cont'd)
Recently issued accounting standards
As of July 1, 1998, the Company adopted Statement 130, Reporting
Comprehensive Income. Statement 130 establishes new rules for the reporting and
display of comprehensive income and its components; however, the adoption of
this Statement had no impact on the Company's net income or shareholders'
equity. Statement 130 requires unrealized gains or losses on the Company's
available-for-sale securities and foreign currency translation adjustments to be
included in other comprehensive income. Prior to the adoption of Statement 130,
these items were reported separately in stockholders' equity. Prior year
financial statements have been reclassified to confirm to the requirements of
Statement 130.
For the year ended June 30, 1999, the Company adopted SFAS No. 132,
Employers' Disclosures about Pension and Other Postretirement Benefits. This
Statement revises employers' disclosures about pension plans, but does not
result in any financial impact. SFAS No. 132 standardizes the disclosure
requirements for pensions benefits to the extent practicable, requires
additional information on changes in the benefits obligations and fair values of
plan assets that will facilitate financial analysis, and eliminates certain
disclosures (see Note 10 of Notes to Financial Statements).
In June 1998, FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities ("SFAS No. 133"). SFAS No. 133 provides a
comprehensive and consistent standard for the recognition and measurement of
derivatives and hedging activities. The statement requires all derivatives to be
recognized on the balance sheet at fair value and establishes standards for the
recognition of changes in such fair value. SFAS No. 133 is effective for the
Company's 2001 fiscal year. Because the Company does not currently use
derivatives, the adoption of SFAS No. 133 will not have a significant effect on
earnings or the financial condition of the Company.
Accounting for income taxes
The Company follows FASB Statement 109, the liability method in
accounting for income taxes. Under this method, deferred tax assets and
liabilities are determined based on differences between the financial reporting
and tax bases of assets and liabilities and are measured using the enacted tax
rates and laws that will be in effect when the differences are expected to
reverse.
<PAGE>
1. Summary of significant accounting policies (Cont'd)
Cash and cash equivalents
The Company considers all highly liquid short term investments with
maturities of three months or less at the date of acquisition to be cash
equivalents. Cash and cash equivalents are carried at cost which approximates
market value. The components of cash and cash equivalents are as follows:
June 30,
-----------------------------
1999 1998
----------- -----------
Cash $ 132,589 $ 23,460
U.S. marketable securities 1,087,601 1,085,137
Australian money market accounts and short
term commercial paper 12,160,509 11,327,700
----------- -----------
$13,380,699 $12,436,297
=========== ===========
Marketable securities
At June 30, 1999 and 1998, the Company has the following marketable
securities which are expected to be held until maturity:
<TABLE>
<CAPTION>
Amortized
June 30, 1999 Par value Maturity Date Cost Fair value
Short-term securities
<S> <C> <C> <C> <C>
Federal National Mortgage Association $ 400,000 Jul. 15, 1999 $ 392,973 $ 399,258
========== ========== ==========
Long-term securities
Federal National Mortgage Association $ 400,000 Feb. 16, 2001 $ 400,000 $ 395,560
New Britain Connecticut Bond 335,000 May 1, 2001 335,417 330,578
State of Connecticut Bond 550,000 Jan. 15, 2003 557,747 540,337
State of Connecticut Bond 400,000 Jul.1, 2003 416,291 396,224
---------- ---------- ----------
$1,685,000 $1,709,455 $1,662,699
========== ========== ==========
June 30, 1998
Short-term securities
Federal Home Loan Bank $1,300,000 Nov. 10, 1998 $1,265,495 $1,265,496
========== ========== ==========
Long-term securities
Federal National Mortgage Association $ 375,000 May 3, 2000 $ 375,000 $ 374,063
Federal National Mortgage Association 465,000 Aug. 25, 2000 465,000 463,256
Federal Home Loan Mortgage Corporation 360,000 Apr. 2, 2001 361,890 361,688
---------- ---------- ----------
$1,200,000 $1,201,890 $1,199,007
========== ========== ==========
</TABLE>
<PAGE>
1. Summary of significant accounting policies (Cont'd)
Earnings per share
Earnings per common share is based upon the weighted average number of
common and common equivalent shares outstanding during the period. The only
reconciling item in the calculation of diluted EPS is the dilutive effect of
stock options which was computed using the treasury stock method. The Company's
basic and diluted calculations of EPS are the same.
Financial instruments
The carrying value for cash and cash equivalents, accounts receivable,
marketable securities and accounts payable approximates fair value based on
anticipated cash flows and current market conditions.
Segment Disclosure
FASB Statement No. 131 requires the disclosure of certain financial
data based on an entity's operating segments. The Company's two operating
segments are MPC and MPAL. Condensed financial statements of these segments are
included in Notes 3 and 4 and additional segment data are included in Note 11.
2. Oil and gas properties
(a) Australia
Mereenie
MPAL (35%) and Santos (65%), the operator, (together known as the
Mereenie Participants) own the Mereenie field which is located in the Amadeus
Basin of the Northern Territory. MPAL's share of production from the field is
subject to net overriding royalties aggregating 3.0625% and the statutory
government royalty of 10%. MPAL's share of the Mereenie field proved developed
oil reserves was approximately 730,000 barrels at June 30, 1999.
<PAGE>
2. Oil and gas properties (Cont'd)
The field was producing about 1,700 (MPAL share - 595) barrels of crude
oil per day ("bpd") at June 30, 1999. During 1999, MPAL's share of oil sales was
236,000 barrels and 3.4 billion cubic feet ("bcf") of gas sold from 41 oil and
gas wells. The oil is transported by means of a 167 mile eight-inch oil pipeline
from the field to the Brewer Estate industrial park near Alice Springs. Most of
the oil is then shipped south approximately 950 miles by rail and road to a
refinery in the Adelaide area. The cost of transporting the oil to the refinery
is being borne by the producers. The Mereenie Participants are also providing
Mereenie gas in the Northern Territory to the Power and Water Authority ("PAWA")
and Gasgo Pty. Ltd., a company it wholly owns, for use in Darwin and other
Northern Territory centers. See "Gas Supply Contracts".
During 1999, the Mereenie Participants had been negotiating for the
sale of Liquid Petroleum Gas from the field to a purchaser but the project was
terminated after it was determined that it was uneconomic.
Palm Valley
MPAL has a 50.8% interest in and is the operator of the Palm Valley gas
field which is located in the Northern Territory. Santos, the operator of the
Mereenie field, owns a 48% interest in Palm Valley. Ten wells have been drilled
in the field, five of which are currently connected to the gas treatment plant
and are flowed at maximum deliverability levels to meet the Alice Springs and
Darwin supply contracts with PAWA. See "Gas Supply Contracts". During fiscal
1999, MPAL's share of gas sales was 3.7 bcf. In order to increase
deliverability, field compression began in November 1996 with two 400 HP
compressors. A third 800 HP compressor was installed during fiscal 1999. MPAL
has recommended that four additional wells be drilled at Palm Valley to improve
the field's production capacity. Under the gas supply agreement with PAWA, the
costs of these wells are reimbursed by PAWA and, consequently, the
recommendation is under review by PAWA's consultants.
MPAL's share of Palm Valley production revenues is subject to a 10%
statutory government royalty and net overriding royalties aggregating 4.2548%.
<PAGE>
2. Oil and gas properties (Cont'd)
Gas Supply Contracts
In 1983, the Palm Valley Participants commenced the sale of gas to
Alice Springs under a 1981 agreement. In 1985, the Palm Valley Participants and
Mereenie Participants signed agreements for the sale of gas to PAWA for use in
PAWA's Darwin generating station and at a number of other generating stations in
the Northern Territory. The gas is being delivered via the 922 mile Amadeus
Basin to Darwin gas pipeline which was built by an Australian consortium. Since
1985, there have been several additional contracts for the sale of Mereenie gas.
The following is a summary of MPAL's interest in the Palm Valley and the
Mereenie gas supply contracts:
<TABLE>
<CAPTION>
Maximum contract
(balance/after royalties) Percentage of
contract completed Contract Period
(bcf)
Palm Valley:
<S> <C> <C> <C>
Alice Springs (1981) 9.6 54 25 years (1983-2008)
Darwin (1985) 43.8 43 25 years (1987-2012)
----
53.4
Mereenie:
Darwin (1985) 8.6 43 25 years (1987-2012)
Darwin (1995) - 100 10 years (1995-2005)
Darwin (1997) 18.4 - 10 years (1999-2009)
Other .7 - Various
------
27.7
Total 81.1
</TABLE>
Under the 1985 contracts, there is a difference in price between Palm
Valley gas and most of the Mereenie gas for the first 20 years of the 25 year
contracts which takes into account the additional cost to the pipeline
consortium to build a spur line to the Mereenie field and increase the size of
the pipeline from Palm Valley to Mataranka.
In consideration for the Palm Valley Participants forgoing 20% of the
Amadeus Basin to Darwin gas supply contract during the first 20 contract years,
Mereenie Participants made a payment to the Palm Valley Participants to
partially compensate the Palm Valley Participants for the reduced net present
value of the future gas sales revenues which were postponed from contract years
1 to 20 to contract years 21 to 26. The agreement also provides that when the
Mereenie Participants sell any additional gas from the Mereenie field, the Palm
Valley Participants are entitled, as additional consideration, to 35% of the
revenues from the first 38 bcf (MPAL share - 19.5 bcf) of gas sold. At June 30,
1999, the balance of the Mereenie Participants gas subject to this entitlement
was 9.7 bcf (MPAL share - 4.8 bcf).
<PAGE>
2. Oil and gas properties (Cont'd)
At June 30, 1999, the Company had accrued $849,000 for future site
restoration costs for the Mereenie and Palm Valley fields. The balance of the
estimated liability is $3,246,000 at June 30, 1999 which will be accrued over
the remaining life of the related reserves based on units of production.
Dingo Gas Field
MPAL has a 34.3% interest in the Dingo gas field which is held under
Retention License 2 and is subject to renewal in 2003. The Dingo gas field,
which is located in the Amadeus Basin in the Northern Territory, has
approximately 25 bcf of presently proved and recoverable reserves based on four
delineation wells. Dingo 2 and Dingo 3 wells are estimated to have the capacity
of producing a combined rate of 5 million cubic feet ("mmcf") per day. MPAL's
share of potential production from these permit areas is subject to a 10%
statutory government royalty and overriding royalties aggregating 2.5043%.
Ngalia Basin
MPAL had a 40% interest in permit EP-15 in the Ngalia basin in the
Northern Territory which expired during May 1999. During July 1998, the Newhaven
well was plugged and abandoned. MPAL's share of the drilling costs incurred
through June 30, 1998 were included in exploratory and dry hole costs for the
1998 fiscal year. The costs to drill the well subsequent to June 30, 1998 in the
amount of $316,000 are included in exploratory and dry hole costs for fiscal
1999.
Northern Surat Basin
During fiscal 1998, MPAL sold its 15.625% interest in ATP 378P
Queensland, Australia to its partner, Santos. The $636,000 difference between
the carrying cost and the sale price was included in loss on the sale of assets
for the 1998 fiscal year.
Surat Basin
During the 1998 fiscal year, MPAL earned a 17% interest in Block D of
ATP 244P in Queensland by completing a pilot seismic reprocessing program.
During the 1999 fiscal year, MPAL abandoned its interest in the permit.
During fiscal 1998, MPAL earned a 15% interest in ATP 626P in
Queensland. During fiscal 1999, MPAL relinquished its interest in the permit.
<PAGE>
2. Oil and gas properties (Cont'd)
Timor Sea
During April 1998, MPAL acquired a 5% interest in Exploration Permit
WA-199-P in the Bonaparte Basin in the Timor Sea offshore Western Australia.
MPAL earned its interest in the permit by funding 10% of the cost of drilling
the Kittiwake-1 well which was a dry hole. MPAL's cost of the well was written
off in the fourth quarter of fiscal 1998 and was included in exploratory and dry
hole costs. MPAL relinquished its interest in the permit during the 1999 fiscal
year.
Browse Basin
During the 1999 fiscal year, MPAL was granted a 17.5% interest in
exploration permits WA-281-P, WA-282-P and WA-283-P in the Browse Basin offshore
Western Australia. During the 1999 fiscal year, MPAL spent approximately $67,000
toward the Year 1 work obligations. MPAL's share of the work obligations for the
three permits is as follows:
WA-281-P WA-282-P WA-283-P Total
Year 1 $ 368,000 $ 286,000 $ 286,000 $ 940,000
Year 2 713,000 111,000 111,000 935,000
Year 3 1,320,000 23,000 1,203,000 2,546,000
---------- ---------- ---------- ----------
Total Years 1-3 $2,401,000 $ 420,000 $1,600,000 $4,421,000
========== ========== ========== ==========
Year 4 187,000 23,000 187,000 397,000
======= ====== ======= =======
Year 5 1,437,000 1,308,000 1,437,000 4,182,000
========= ========= ========= =========
Year 6 35,000 23,000 35,000 93,000
========== ========== ========== ==========
Total Year 4-6 $1,659,000 $1,354,000 $1,659,000 $4,672,000
========== ========== ========== ==========
Total All Years $4,060,000 $1,774,000 $3,259,000 $9,093,000
========== ========== ========== ==========
During January 1999, MPAL was granted exploration blocks WA-287-P and
WA-288-P in the Eastern Browse Basin offshore Western Australia. During the 1999
fiscal year, MPAL spent approximately $54,000 toward the Year 1 work
obligations. The following exploration program was submitted to obtain the
blocks with the exploration expenditures in Years 1-3 obligatory and Years 4-6
discretionary:
Year WA-287-P WA-288-P Total
---- -------- -------- -----
1 $ 67,000 $ 120,000 $ 187,000
2 134,000 334,000 468,000
3 134,000 134,000 268,000
---------- ---------- -----------
Total Years 1-3 335,000 588,000 923,000
---------- ---------- -----------
4 2,336,000 2,336,000 4,672,000
5 167,000 167,000 334,000
6 2,336,000 2,336,000 4,672,000
---------- ---------- -----------
Total Years 4-6 4,839,000 4,839,000 9,678,000
---------- ---------- -----------
Total All Years $5,174,000 $5,427,000 $10,601,000
========== ========== ===========
<PAGE>
2. Oil and gas properties (Cont'd)
Carnarvon Basin
MPAL earned a 15% interest in exploration permits TP/12 and EP398 in
the Carnarvon Basin offshore Western Australia by funding 30% of the cost of
drilling the Springbok-1 well. The Springbok-1 well was plugged and abandoned
during August 1998. MPAL's cost of drilling the well was written off during the
first quarter of fiscal 1999.
During April 1999, MPAL was awarded permit WA-291-P, offshore Western
Australia in the Carnarvon Basin. The minimum expenditure obligations for the
first three year period totals $347,000. The discretionary commitment for years
4-6 totals approximately $4.8 million.
Maryborough Basin
MPAL holds a 98% interest in exploration permit ATP 613P, a 670,000
acre block, in the Maryborough Basin in Queensland, Australia.
Cooper Basin
During April 1999, MPAL (50%) and its partner Beach Petroleum NL were
successful in bidding for two exploration blocks in South Australia's Cooper
Basin. The formal grant of the permit is pending. MPAL's share of the work
obligations during the five year period of the permit are as follows:
Year CO98I CO98J Total
---- ----- ----- -----
1 $ 534,000 $ 668,000 $1,202,000
2 334,000 401,000 735,000
3 234,000 300,000 534,000
---------- ---------- ----------
Total Years 1-3 1,102,000 1,369,000 2,471,000
---------- ---------- ----------
4 67,000 367,000 434,000
5 234,000 300,000 534,000
---------- ---------- ----------
Total Years 4-5 301,000 667,000 968,000
---------- ---------- ----------
Total All Years $1,403,000 $2,036,000 $3,439,000
========== ========== ==========
<PAGE>
2. Oil and gas properties (Cont'd)
(b) Canada
The Company has a 2.67% carried interest in the Kotaneelee gas field
in the Yukon Territory which has been on production since February 1991. There
are two wells capable of production in the field which is part of a permit
covering 31,885 gross acres. For financial statement purposes in fiscal 1987 and
1988, the Company wrote down its Canada cost center, which included the
Kotaneelee field to a nominal value because of the uncertainty as to the date
when sales of Kotaneelee gas might begin and the immateriality of the carrying
value of the investment. Although the field is now producing, the Company has
not yet classified its share of the Kotaneelee gas reserves as proved because
the gas field is still the subject of litigation. The Company will reclassify
the reserves at the Kotaneelee field as proved when there is greater assurance
as to the timing and assumptions regarding the investment. Projections by the
operator of the field, indicate that the carried interest account may reach
payout status prior to December 1999.
(c) United States
Baca County, Colorado
MPC (10%) and MPAL (90%) participated in an exploration program in
Colorado. During 1995, MPAL commenced a three well drilling program. All three
wells were dry holes. During fiscal 1995 and 1996, the Company wrote off
$809,000 and $1,691,000 in costs, respectively. During fiscal 1997, the Company
drilled a fourth well which was a dry hole and all of the remaining costs of the
project, which totaled $3,008,000, were written off. During fiscal 1999, MPAL
spent approximately $16,000 on the project and it is allowing most of the leases
to expire.
Tapia Canyon, California
Effective December 1, 1997, MPC acquired a 20% interest in a heavy oil
recovery project in Tapia Canyon, California. Because the Company was
dissatisfied with the program to develop the field reserves, the Company has
sold its interest for its approximate cost of $101,000 effective August 31,
1999.
<PAGE>
2. Oil and gas properties (Cont'd)
Stephens County, Texas
During fiscal 1999, MPC participated (20%) in the drilling of the
Puckett No. 1 well which is presently suspended. There are indications of oil
and additional work will be performed during September 1999. During late June
1999, MPC also participated (21.4%) in the drilling of the Smith No. 1 well
which also has indications of oil. MPC's capitalized costs at June 30, 1999
totaled $71,000.
(d) Belize
Southern Offshore Block PSA
During March 1998, MPC (3%), MPAL (20%) and the other joint venture
participants entered into a new Production Sharing Agreement ("PSA") with the
Government of Belize. The new Southern Offshore Block PSA ("SOB PSA") combines
most of the blocks previously included in the Gladden PSA and the Block 13 PSA,
and totals approximately 893,000 acres. The work obligations of the new PSA are
as follows: Year 1 - $100,000, Year 2 - $300,000, Year 3 - $3,000,000 and Year 4
- - $150,000. The participants in the PSA have been seeking partners in the
venture. The first year obligations have been completed and the participants are
negotiating with the Government of Belize to reduce the Year 2 obligations.
Gladden Basin PSA/Block 13 PSA
During 1997, the Gladden No. 1 well was plugged and abandoned and the
Company's cost of the well was written off. During March 1998, this block was
consolidated into the SOB PSA.
MPC and MPAL were also participants in a Production Sharing Agreement
("Block 13 PSA") offshore Belize adjoining the western and southern boundaries
of the Gladden PSA. The Block 13 PSA covered approximately 788,000 acres. During
March 1998, this block was consolidated into the SOB PSA.
<PAGE>
3. MPC condensed financial statements
The following are unconsolidated condensed balance sheets and
statements of income and cash flows of MPC (in thousands).
MAGELLAN PETROLEUM CORPORATION
BALANCE SHEETS
June 30,
1999 1998
-------- --------
ASSETS
Current assets $ 1,684 $ 2,691
Other assets 1,992 1,202
Oil and gas properties - net 171 126
Investment in MPAL 15,957 13,497
------- -------
Total assets $19,804 $17,516
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 70 $ 97
------- -------
Stockholders' equity:
Capital 43,838 43,782
Accumulated deficit (18,405) (19,350)
Accumulated other comprehensive loss (5,699) (7,013)
-------- --------
Total stockholders' equity 19,734 17,419
------- -------
Total liabilities and stockholders' equity $19,804 $17,516
======= =======
MAGELLAN PETROLEUM CORPORATION
STATEMENTS OF INCOME
Year ended June 30,
------------------------------------
1999 1998 1997
------- ------- --------
Revenues $ 190 $ 175 $ 122
Costs and expenses (879) (863) (1,376)
------- ------- --------
Loss before income taxes (689) (688) (1,254)
Income tax provision 105 1 276
------ ------ -------
Loss before equity in MPAL (794) (689) (1,530)
Equity in MPAL net income 1,739 1,726 2,224
------ ------ -------
Net income $ 945 $1,037 $ 694
====== ====== =======
<PAGE>
3. MPC condensed financial statements (Cont'd)
MAGELLAN PETROLEUM CORPORATION
STATEMENTS OF CASH FLOWS
Year ended June 30,
----------------------------
1999 1998 1997
------ ------ ------
Operating Activities:
Net income $ 945 $1,037 $ 694
Adjustments to reconcile net income
to net cash used in operating activities:
Abandonments 47 - 598
Equity in MPAL income (1,739) (1,726) (2,224)
Change in operating assets and liabilities:
Accounts receivable (37) (59) (57)
Accounts payable and accrued liabilities (27) 79 (73)
------ ------ ------
Net cash used in operating activities (811) (669) (1,062)
------ ------ ------
Investing Activities:
Additions to property and equipment (92) (79) (363)
Marketable securities purchased (sold) 365 (256) (2,211)
Purchase of MPAL shares (112) - -
------ ------ ------
161 (335) (2,574)
------ ------ ------
Financing Activities:
Dividends from MPAL 705 1,546 1,826
Exercise of stock options 56 122 167
------ ------ ------
761 1,668 1,993
------ ------ ------
Net increase (decrease) in cash and
cash equivalents 111 664 (1,643)
Cash and cash equivalents at beginning of year 1,088 424 2,067
------ ------ ------
Cash and cash equivalents at end of year $1,199 $1,088 $ 424
====== ====== ======
4. MPAL transactions and condensed financial statements
The following are the condensed consolidated balance sheets and
consolidated statements of income of MPAL (in thousands). At June 30, 1999,
Santos Ltd. held 18.2% of MPAL and Boral Limited held 17.1% with the balance of
13.8% held by approximately 2,000 shareholders in Australia.
<PAGE>
4. MPAL transactions and condensed financial statements (Cont'd)
The condensed consolidated financial statements have been prepared in
accordance with U.S. generally accepted accounting principles and include all of
MPAL's subsidiaries.
Magellan Petroleum Australia Limited
Consolidated Balance Sheets
June 30,
------------------------
1999 1998
------- -------
ASSETS
Current assets $13,832 $12,866
Oil and gas properties - net 25,313 21,887
Land, building and equipment - net 1,073 885
------- -------
Total $40,218 $35,638
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 2,202 $ 2,628
------- -------
Long term liabilities 7,005 6,606
------- -------
Stockholders' equity:
Capital 34,408 34,408
Retained earnings 6,890 4,865
Accumulated other comprehensive loss (10,287) (12,869)
------- -------
31,011 26,404
------- -------
Total $40,218 $35,638
======= =======
<PAGE>
4. MPAL transactions and condensed financial statements (Cont'd)
Magellan Petroleum Australia Limited
Consolidated Statements of Income
Year ended June 30,
--------------------------------
1999 1998 1997
-------- -------- --------
Revenues $13,925 $15,165 $20,636
Costs and expenses 10,666 11,615 15,079
-------- -------- --------
Income before income taxes 3,259 3,550 5,557
Income tax provision (benefit) (158) 143 1,166
-------- -------- --------
Net income $ 3,417 $ 3,407 $ 4,391
======== ======== ========
Magellan and Minority Equity in MPAL
Magellan equity interest in MPAL:
Magellan equity in net income $ 1,739 $ 1,726 $ 2,224
======== ======== ========
Minority equity interest in MPAL:
Minority interest in net income $ 1,678 $ 1,681 $ 2,166
Other comprehensive income (loss) 1,203 (3,198) (922)
Dividends paid (687) (1,506) (1,779)
-------- -------- --------
Total minority interest increase (decrease) $ 2,194 $ (3,023) $ (535)
======== ========= =========
<PAGE>
5. Capital and stock options
The Company's Certificate of Incorporation provides that any matter to
be voted upon must be approved not only by a majority of the shares voted, but
also by a majority of the stockholders casting votes present in person or by
proxy and entitled to vote thereon.
On October 5, 1989, the Company adopted a Stock Option Plan covering
one million shares of the Company's common stock. The plan provides for options
to be granted at a price of not less than fair value on the date of grant and
for a term of not greater than ten years. On December 3, 1997, the Board of
Directors approved a new stock option plan for an additional one million shares
which was approved at the 1998 Annual Meeting of Stockholders.
At June 30, 1999, all of the stock options outstanding were vested and
exercisable. Options to purchase 146,000 shares expire on October 20, 2003 and
options to purchase 50,000 (which were repriced from $2.75 to $1.57, the fair
value on the date of repricing) shares expire on September 25, 2001. During
fiscal 1999, options to purchase 175,000 shares of common stock were exercised
in a cashless exchange which resulted in the issuance of 75,731 shares.
Following is a summary of option transactions for the three years ended June 30,
1999:
Options outstanding Number of shares Exercise Prices ($)
July 1, 1996 516,250 .75 - 1.0625
Granted 50,000 2.75
Exercised (150,000) 1.0625
Exercised (10,000) .75
----------
June 30, 1997 406,250 .8125-2.75
Exercised (131,250) .94
June 30, 1998 275,000 .8125 - 2.75
--------
Granted 146,000 1.57
Exercised (225,000) .8125
---------
June 30, 1999 196,000 1.57
========
($1.57 weighted average)
Options reserved for future grants 1,000,000
The Company has elected to follow Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" (APB No. 25) and related
interpretations in accounting for its stock options because the alternative fair
value accounting provided under FASB Statement No. 123, "Accounting for Stock
Based Compensation," requires use of option valuation models that were not
developed for use in valuing stock options. Under APB No. 25, because the
exercise price of the Company's stock options equals the market price of the
underlying stock on the date of grant, no compensation expense is recognized.
<PAGE>
5. Capital and stock options (Cont'd)
Upon exercise of options, the excess of the proceeds over the par value
of the shares issued is credited to capital in excess of par value. No charges
have been made against income in accounting for options during the three year
period ended June 30, 1999.
Pro forma information regarding net income and earnings per share is
required by Statement 123, and has been determined as if the Company had
accounted for its stock options under the fair value method of that Statement.
The fair value for these options was estimated at the date of grant using a
Black-Scholes option pricing model.
Option valuation models require the input of highly subjective
assumptions including the expected stock price volatility. The assumptions used
in the 1997 valuation model were: risk free interest rate - 6.55%, expected life
- - 5 years, expected volatility - .579, expected dividend - 0. The assumptions
used in the 1999 valuation model were: risk free interest rate - 4.45%, expected
life - 5 years, expected volatility - 1.0, expected dividend - 0. Because the
Company's stock options have characteristics significantly different from those
of traded options, and because changes in the subjective input assumptions can
materially affect the fair value estimate, in management's opinion, the existing
models do not necessarily provide a reliable single measure of the fair value of
its stock options.
For the purpose of pro forma disclosures, the estimated fair value of
the stock options is expensed in the year of grant since the options are
immediately exercisable. The Company's pro forma information follows:
Amount Per Share
Net income as reported - June 30, 1997 $ 694,000 $ .03
Stock option expense (78,000) -
---------- ------
Pro forma net income - June 30, 1997 $ 616,000 $ .03
========= ======
Net income as reported - June 30, 1999 $ 945,000 $ .04
Stock option expense (200,000) (.01)
---------- -------
Pro forma net income - June 30, 1999 $ 745,000 $ .03
========= ======
<PAGE>
6. Income taxes
(a) Components of pretax income (loss) by geographic area (in thousands)
are as follows:
Year ended June 30,
-------------------------------
1999 1998 1997
------- ------- --------
United States $ (743) $ (850) $(4,547)
Foreign 3,314 3,712 8,850
------ ------ -------
Total $2,571 $2,862 $ 4,303
====== ====== =======
(b) Reconciliation of the provision for income taxes (in thousands)
computed at the Australian statutory rate to the reported provision for
income taxes is as follows:
Year ended June 30,
----------------------------
1999 1998 1997
------- ------- -------
Pretax consolidated income $2,571 $2,862 $4,303
Losses not recognized:
MPC's operations 689 689 1,254
MPAL's nonAustralian operations - - (145)
Permanent differences (1,231) (2,443) (2,040)
------- ------- -------
Book taxable income - Australia $2,029 $1,108 $3,372
====== ====== ======
Australian tax rate 36% 36% 36%
=== === ===
Australian income tax $ 722 $ 399 $1,214
Tax (benefit) attributable to reconciliation of
Year end deferred tax liability (879) (256) (48)
------- ------- -------
MPAL Australian tax (benefit) $ (157) $ 143 $1,166
MPC income tax 105 1 276
------- ------ ------
Consolidated income tax (benefit) $ (52) $ 144 $1,442
======= ====== ======
Current income tax $ 225 $ 1 $ 276
Deferred income tax (277) 143 1,166
------- ------ ------
Consolidated income tax (benefit) $ (52) $ 144 $1,442
======= ====== ======
Effective tax rate (2%) 5% 34%
==== == ===
The amount of $6,060,000 and $5,854,000 in deferred income tax
liability at June 30, 1999 and June 30, 1998, respectively, relates primarily to
the deduction of acquisition and development costs which are capitalized for
financial statement purposes. The 1999 and 1998 credits of $879,000 and $255,000
represent the tax benefit of prior years' losses previously not taken into
account.
<PAGE>
6. Income taxes (Cont'd)
(c) United States
On June 30, 1999, the Company had approximately $16,408,000 and
$3,538,000 of net operating loss carryforwards for federal and state income tax
purposes, respectively, which are scheduled to expire periodically between the
years 2000 and 2019. The Company also has approximately $887,000 of foreign tax
credit carryovers, which are scheduled to expire periodically between the years
2000 and 2004. For financial reporting purposes, a valuation allowance has been
recognized to offset the deferred tax assets related to those carryforwards and
other temporary differences. Significant components of the Company's deferred
tax assets were as follows:
June 30, June 30,
1999 1998
------------ ------------
Net operating losses $ 4,223,000 $ 4,075,000
Foreign tax credits 887,000 1,004,000
Interest 214,000 214,000
Intangible drilling costs - 7,000
------------ ------------
Total deferred tax assets 5,324,000 5,300,000
Valuation allowance (5,324,000) (5,300,000)
------------ ------------
Net deferred tax assets $ - $ -
============ ============
7. Bank loan
MPAL has a $6.7 million line of credit with an Australian bank at the
bank's prime rate of interest (4.9% at June 30, 1999, and 5.2% at June 30, 1998)
plus .5%. This line of credit is unsecured and expires December 31, 1999. In
addition, there is an annual fee of A.$30,000 payable with respect to the line
of credit. At June 30, 1999 and 1998, the line of credit was not being utilized.
<PAGE>
8. Related party and other transactions
G&O'D INC, a firm that provides accounting and administrative services,
office facilities and support staff to the Company, was paid $235,028, $248,174
and $211,088 in fees for fiscal years 1999, 1998 and 1997, respectively. James
R. Joyce, the President and Chief Financial Officer, is the owner of G&O'D INC.
Mr. Timothy L. Largay, a director of the Company since February 1996, is a
member of the law firm of Murtha, Cullina, Richter and Pinney LLP, which firm
was paid fees of $44,860, $36,366 and $29,004 for fiscal years 1999, 1998 and
1997, respectively. In addition, Mr. Heath, a director, has overriding royalty
interests which were granted between 1957 and 1968 on certain of the Company's
oil and gas properties prior to any discoveries. The following gross royalty
amounts represent payments by all of the owners of the fields, not just the
Company's share. The payments to Mr. Heath with respect to these royalties in
fiscal 1999 were $44,469, in fiscal 1998 were $46,044 and in fiscal 1997 were
$54,252.
9. Leases
At June 30, 1999, future minimum rental payments applicable to MPAL's
noncancelable operating (office) lease were as follows:
Fiscal Year Amount
2000 $100,000
2001 105,000
2002 110,000
2003 130,000
2004 136,000
--------
Total $581,000
The information regarding the rental expense for all operating leases
is included in Note 13.
<PAGE>
10. Pension Plan
MPAL maintains a defined benefit pension plan and contributes to the
plan at rates which (based on actuarial determination) are sufficient to meet
the cost of employees' retirement benefits. No employee contributions are
required. MPAL is committed to make up any shortfall in the plan's assets to
meet payments to employees as they become due. Plan participants are entitled to
defined benefits on normal retirement, death or disability.
The following table sets forth the actuarial present value of benefit
obligations and funded status for the MPAL pension plan:
June 30,
1999 1998
---------- ----------
Change in Benefit Obligation
Benefit obligation at beginning of year $2,412,353 $2,639,716
Service cost 207,386 186,819
Interest cost 137,739 135,945
Actuarial gains and losses 61,692 124,542
Benefits paid (87,691) (142,208)
Taxes on contributions (43,022) (27,566)
Expenses (41,707) (34,242)
Foreign currency effect 187,334 (470,653)
---------- ----------
Benefit obligation at end of year $2,834,084 $2,412,353
========== ==========
Change in Plan Assets
Fair value of plan assets at beginning of year $2,974,283 $3,311,309
Actual return on plan assets 232,262 253,429
Contributions by employer 233,566 203,956
Benefits paid (87,691) (142,208)
Foreign currency effect 230,970 (590,395)
Other (expenses) (84,729) (61,808)
---------- ----------
Fair value of plan assets at end of year $3,498,661 $2,974,283
========== ==========
Reconciliation of Funded Status
Funded Status $ 664,577 $ 561,930
Unrecognized actuarial loss (gain) (148,469) (165,324)
Unrecognized prior service cost 238,530 185,646
---------- ----------
Prepaid benefit costs $ 754,638 $ 582,252
========== ==========
<PAGE>
10. Pension Plan (Cont'd)
The net pension expense for the MPAL pension plan was as follows:
Year ended June 30,
-------------------------------------
1999 1998 1997
--------- --------- ---------
Service cost $217,154 $186,819 $242,014
Interest cost 140,517 135,945 200,995
Actual return on plan assets (186,932) (192,079) (246,904)
Net amortization and deferred items (29,694) (27,554) (18,472)
--------- --------- ---------
Net pension cost $141,045 $103,131 $177,633
======== ======== ========
Plan contributions by MPAL $220,000 $224,000 $275,000
======== ======== ========
Significant assumptions used in determining pension cost and the
related obligations were as follows:
1999 1998 1997
------ ------ ------
Assumed discount rate 6.0% 5.5% 6.5%
Rate of increase in future compensation levels 4.5% 4.0% 5.0%
Expected long term rate of return on plan assets 6.0% 6.5% 7.0%
Australian exchange rate $.6675 $.6194 $.7538
11. Segment information
The Company has two reportable segments, MPC and its 50.9% subsidiary,
MPAL. Although each company is in the same business, MPAL is also a publicly
held company with its shares traded on the Australian Stock Exchange. MPAL
issues separate audited consolidated financial statements and operates
independently of MPC.
Segment information (in thousands) for the Company's two operating
segments is as follows:
Year ended June 30,
----------------------------------
1999 1998 1997
-------- -------- --------
Revenues:
MPC $ 895 $ 1,721 $ 1,948
MPAL 13,925 15,165 20,636
Elimination of intersegment dividend (705) (1,546) (1,826)
-------- -------- --------
Total consolidated revenues $14,115 $15,340 $20,758
======= ======= =======
<PAGE>
11. Segment information (Cont'd)
Year ended June 30,
------------------------------
1999 1998 1997
-------- -------- --------
Interest income:
MPC $ 183 $ 171 $ 122
MPAL 534 570 700
-------- -------- --------
Total consolidated $ 717 $ 741 $ 822
======== ======== ========
Net income:
MPC $ (89) $ 857 $ 296
MPAL 1,739 1,726 2,224
Elimination of intersegment dividend (705) (1,546) (1,826)
-------- -------- --------
Consolidated income $ 945 $ 1,037 $ 694
======== ======== ========
Assets:
MPC $ 19,804 $ 17,516 $ 19,561
MPAL 40,218 35,638 43,149
Equity elimination (15,788) (13,375) (16,480)
-------- -------- --------
Total consolidated assets $ 44,234 $ 39,779 $ 46,230
======== ======== ========
Other significant items:
Depletion, depreciation and amortization:
MPC $ - $ - $ -
MPAL 2,357 2,205 2,140
-------- -------- --------
Total consolidated $ 2,357 $ 2,205 $ 2,140
======== ======== ========
Exploratory and dry hole costs:
MPC 50 $ 32 $ 598
MPAL 2,009 3,314 5,645
-------- -------- --------
Total consolidated $ 2,059 $ 3,346 $ 6,243
======== ======== ========
Income tax expense (credit):
MPC $ 105 $ 1 $ 276
MPAL 157 143 1,166
-------- -------- --------
Total consolidated $ (52) $ 144 $ 1,442
========= ======== ========
<PAGE>
12. Geographic information
As of each of the stated dates, the Company's revenue, operating
income, net income or loss and identifiable assets (in thousands) were
geographically attributable as follows:
Year ended June 30,
---------------------------------
1999 1998 1997
------- ------- -------
Revenue:
Australia $13,924 $15,148 $20,618
United States 191 192 140
------- ------- -------
$14,115 $15,340 $20,758
======= ======= =======
Operating income (loss):
Australia $ 3,144 $ 3,979 $10,195
Belize (351) (195) (2,584)
United States (46) (163) (2,862)
------- ------- -------
2,747 3,621 4,749
Corporate overhead and interest
net of other income (176) (759) (446)
------- ------- -------
Consolidated operating income before
income taxes and minority interests $ 2,571 $ 2,862 $ 4,303
======= ======= =======
Net income (loss):
Australia $ 1,945 $ 1,911 $ 5,212
Belize (178) (103) (1,320)
United States (822) (771) (3,198)
------- ------- -------
945 $ 1,037 $ 694
======= ======= =======
Identifiable assets:
Australia $40,218 $35,236 $42,516
Belize - 433 563
United States 169 17 70
------- ------- -------
40,387 35,686 43,149
Corporate assets 3,847 4,093 3,081
------- ------- -------
$44,234 $39,779 $46,230
======= ======= =======
Substantially all of MPAL's gas sales were to the Power and Water
Authority ("PAWA") of the Northern Territory of Australia ("NTA"). Most of
MPAL's crude oil production was sold to the Mobil Port Stanvac Refinery near
Adelaide.
<PAGE>
13. Other financial information
Year ended June 30,
------------------------------------
1999 1998 1997
---------- ---------- ----------
Costs and expenses - Other
Consultants $ 160,684 $ 52,741 $ 108,552
Directors' fees and expense 200,373 181,466 173,832
Insurance 189,765 217,503 284,532
Interest expense 19,259 24,468 32,005
Rent 167,947 271,241 326,665
Taxes 158,925 218,467 234,960
Travel 145,046 219,172 233,044
Other (net of overhead reimbursements) (277,496) (228,126) (426,323)
---------- ---------- ----------
$ 764,503 $ 956,932 $ 967,267
========== ========== ==========
Royalty payments $1,224,149 $1,464,478 $1,930,011
========== ========== ==========
Interest payments $ 19,259 $ 24,468 $ 32,005
========== ========== ==========
Income tax payments $ 105,370 $ 1,000 $2,256,934
========== ========== ==========
14. Selected quarterly financial data (unaudited)
The following is a summary (in thousands) of the quarterly results of
operations for the years ended June 30, 1999 and 1998:
1999 QTR 1 QTR 2 QTR 3 QTR 4*
------- ------- ------- -------
($) ($) ($) ($)
Total revenues 3,200 3,570 3,319 4,026
Costs and expenses (3,398) (2,781) (3,332) (2,033)
Income tax (provision) benefit 53 (372) (98) 469
Minority interests (28) (358) (38) (1,254)
------- ------- ------- -------
Net income (loss) (173) 59 (149) 1,208
======= ======= ======= =======
Per share (basic & diluted) .01 - (.01) .05
=== === ===== ===
1998 QTR 1 QTR 2 QTR 3 QTR 4
------- ------- ------- -------
($) ($) ($) ($)
Total revenues 4,552 4,497 3,184 3,107
Costs and expenses (3,943) (2,858) (2,442) (3,235)
Income tax (provision) benefit (251) (520) (246) 873
Minority interests (288) (653) (324) (417)
------- ------- ------- -------
Net income 70 466 172 328
======= ======= ======= =======
Per share (basic & diluted) - .02 .01 .01
=== === === ===
*See Management's Discussion and Analysis of Financial Condition and Results of
Operations.
<PAGE>
MAGELLAN PETROLEUM CORPORATION
SUPPLEMENTARY OIL AND GAS INFORMATION
(unaudited)
June 30, 1999
The consolidated data presented herein include estimates which should
not be construed as being exact and verifiable quantities. The reserves may or
may not be recovered, and if recovered, the cash flows therefrom, and the costs
related thereto, could be more or less than the amounts used in estimating
future net cash flows. Moreover, estimates of proved reserves may increase or
decrease as a result of future operations and economic conditions, and any
production from these properties may commence earlier or later than anticipated.
Estimated net quantities of proved developed and proved oil and gas reserves:
Natural Gas Oil
(Bcf) (Thousand Bbls)
Proved Reserves: Australia Australia
(*)
June 30, 1996 79.670 1,201
Revision of previous estimates (.861) 65
Extensions and discoveries 22.946 -
Production (5.673) (307)
-------- -----
June 30, 1997 96.082 959
Revision of previous estimates (5.071) 204
Extensions and discoveries - -
Production (5.844) (248)
-------- -----
June 30, 1998 85.167 915
Revision of previous estimates .011 20
Extensions and discoveries 1.258 -
Production (5.898) (205)
------- -----
June 30, 1999 80.538 730
====== ===
Proved Developed Reserves:
June 30, 1996 79.670 1,201
====== =====
June 30, 1997 96.082 959
====== ===
June 30, 1998 85.167 915
====== ===
June 30, 1999 80.538 730
====== ===
- -------------------
(*) The amount of proved reserves applicable to the Palm Valley and Mereenie
fields only reflects the amount of gas committed to specific contracts.
Approximately 49.1% of reserves are attributable to minority interests at June
30, 1999 (49.3% for 1998 and 1997).
<PAGE>
Costs of oil and gas activities (in thousands):
Australia
Exploration Development
Fiscal Year Costs Costs
1999 $1,648 $3,757
1998 3,196 3,474
1997 580 678
Americas
Exploration Acquisition
Fiscal Year Costs Costs
1999 $ 81 $ --
1998 150 79
1997 3,138 47
Capitalized costs subject to depletion, depreciation and amortization ("DD&A")
(in thousands):
June 30, 1999
Australia Americas Total
Costs subject to DD&A $49,456 $ - $49,456
Costs not subject to DD&A - 171 171
Less accumulated DD&A (22,902) - (22,902)
-------- ---- --------
Net capitalized costs $26,554 $171 $26,725
======= ==== =======
June 30, 1998
Australia Americas Total
Costs subject to DD&A $41,470 $ - $41,470
Costs not subject to DD&A - 499 499
Less accumulated DD&A (18,950) - (18,950)
-------- ---- --------
Net capitalized costs $22,520 $499 $23,019
======= ==== =======
<PAGE>
Discounted future net cash flows:
The following is the standardized measure of discounted (at 10%) future
net cash flows (in thousands) relating to proved oil and gas reserves during the
three years ended June 30, 1999. Australia was the only cost center with proved
reserves. At June 30, 1999, approximately 49.1% (49.3% for 1998 and 1997) of the
reserves and the respective discounted future net cash flows are attributable to
minority interests.
Total
---------------------------------
1999 1998 1997
--------- --------- ---------
Future cash inflows $144,116 $136,828 $198,406
Future production costs (17,917) (17,441) (22,204)
Future development costs - (893) -
Future income tax expense (42,288) (40,429) (60,926)
--------- --------- ---------
Future net cash flows 83,911 78,065 115,276
10% annual discount for estimating timing
of cash flows (30,590) (29,813) (46,963)
--------- --------- ---------
Standardized measures of discounted future
net cash flows $ 53,321 $ 48,252 $ 68,313
======== ======== ========
The following are the principal sources of changes in the above
standardized measure of discounted future net cash flows (in thousands):
1999 1998 1997
-------- --------- --------
Net change in prices and production costs $ 952 $ (4,318) $18,300
Extensions and discoveries 1,123 - 29,530
Revision of previous quantity estimates (62) (6,675) (341)
Changes in estimated future development costs - (1,087) -
Sales and transfers of oil and gas produced (6,033) (8,849) (11,264)
Previously estimated development cost
incurred during the period 893 - -
Accretion of discount 3,966 5,623 3,535
Net change in income taxes 386 5,716 (12,604)
Net change in exchange rate 3,844 (10,471) (3,056)
------- --------- --------
$ 5,069 $(20,061) $24,100
======= ========= =======
<PAGE>
Additional information regarding discounted future net cash flows:
Australia
Reserves - Natural Gas
Future net cash flows from net proved gas reserves in Australia were
based on MPAL's share of reserves in the Palm Valley and Mereenie fields which
have been limited to the quantities of gas committed to specific contracts.
Reserves and Costs - Oil
At June 30, 1999, future net cash flows from the net proved oil
reserves in Australia were calculated by the Company. Estimated future
production and development costs were based on current costs and rates for each
of the three years ended at June 30, 1999. All of the crude oil reserves are
developed reserves. Undeveloped proved reserves have not been estimated since
there are only tentative plans to drill additional wells.
Income taxes
Future Australian income tax expense applicable to the future net cash
flows has been reduced by the tax effect of approximately A.$13,081,000,
A.$9,995,000 and A.$9,236,000 in unrecouped capital expenditures at 1999, 1998
and 1997, respectively. The tax rate in computing Australian future income tax
expense was 36%.
For financial statements purposes in fiscal 1987 and 1988, MPC wrote
down its Canada cost center which included the Kotaneelee gas field to a nominal
value because of the uncertainty as to the date when sales of Kotaneelee gas
might begin and the immateriality of the carrying value of the investment.
Although the field is now producing, the Company has not yet classified its
share of the Kotaneelee gas reserves as proved because the gas field is still
the subject of litigation. The Company will reclassify the reserves at the
Kotaneelee field as proved when there is greater assurance as to the timing and
assumptions of the investment.
<PAGE>
Results of Operations
The following are the Company's results of operations (in thousands)
for the oil and gas producing activities during the three years ended June 30,
1999:
<TABLE>
<CAPTION>
Americas Australia
------------------------------------ ------------------------------------
1999 1998 1997 1999 1998 1997
-------- -------- -------- -------- -------- --------
Revenues:
<S> <C> <C> <C> <C> <C> <C>
Oil sales $ 7 $ 3 $ - $ 2,566 $ 4,095 $ 6,740
Gas sales - - - 9,640 10,485 11,552
Other production income - - - 1,180 632 1,512
-------- -------- -------- -------- -------- --------
Total revenues 7 3 - 13,386 15,212 19,804
-------- -------- -------- -------- -------- --------
Costs:
Production costs 14 5 - 4,358 3,642 4,811
Depletion, exploratory
and dry hole costs 410 151 3,008 3,905 5,937 2,605
-------- -------- -------- -------- -------- --------
Total costs 424 156 3,008 8,263 9,579 7,416
-------- -------- -------- -------- -------- --------
Income (loss) before taxes and
minority interest (417) (153) (3,008) 5,123 5,633 12,388
Income tax provision (36%) - - - (1,844) (2,028) (4,460)
-------- -------- -------- -------- -------- --------
Income before minority interests (417) (153) (3,008) 3,279 3,605 7,928
Minority interests* 177 74 1,327 (1,610) (1,779) (3,909)
-------- -------- -------- -------- -------- --------
Net income (loss) from
Operations $ 240 $ (79) $(1,681) $ 1,669 $ 1,826 $ 4,019
======== ======== ======== ======= ======= =======
Depletion per unit of
Production - - - A.$2.73 A.$2.30 A.$1.86
======== ======== ======== ======= ======= =======
</TABLE>
* Minority interests 49.1% in 1999, 49.3 % in 1998 and 1997
<PAGE>
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
None.
PART III
For information concerning Item 10 - Directors and Executive Officers
of the Company, Item 11 Executive Compensation, Item 12 - Security Ownership of
Certain Beneficial Owners and Management and Item 13 Certain Relationships and
Related Transactions, see the Proxy Statement of Magellan Petroleum Corporation
relative to the Annual Meeting of Stockholders for the fiscal year ended June
30, 1999, which will be filed with the Securities and Exchange Commission, which
information is incorporated herein by reference. For information concerning Item
10 - Executive Officers of the Company, see Part I.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) (1) Financial Statements.
The financial statements listed below and included
under Item 8 are filed as part of this report. Page
reference
Report of Independent Auditors 38
Consolidated balance sheets as of June 30, 1999 and 1998 39
Consolidated statements of income for each of the three years
in the period ended June 30, 1999 40
Consolidated statements of changes in stockholders' equity for each
of the three years in the period ended June 30, 1999 41
Consolidated statements of cash flows for each of the three years
in the period ended June 30, 1999 42
Notes to consolidated financial statements 43-68
Supplementary oil and gas information (unaudited) 69-73
(2) Financial Statement Schedules.
All schedules have been omitted since the required
information is not present or not present in amounts sufficient to require
submission of the schedule, or because the information required is included in
the consolidated financial statements and the notes thereto.
(3) Exhibits.
List of each management contract or compensatory or
arrangement required to be filed as an exhibit pursuant to Item 14(c).
(b) Reports on Form 8-K.
None.
<PAGE>
(c) Exhibits.
The following exhibits are filed as part of this report:
Item Number
2. Plan of acquisition, reorganization, arrangement,
liquidation or succession.
None.
3. Articles of Incorporation and By-Laws.
(a) Restated Certificate of Incorporation as filed on
May 4, 1987 with the State of Delaware and Amendment
of Article Twelfth as filed on February 12, 1988 with
the State of Delaware filed as exhibit 4(b) to Form
S-8 Registration Statement, filed on January 14,
1999, are incorporated herein by reference.
(b) Copy of the By-Laws, as amended filed as exhibit
4(c) to Form S-8 Registration Statement, filed on
January 14, 1999 is incorporated herein by reference.
4. Instruments defining the rights of security holders,
including indentures.
None.
9. Voting Trust Agreement.
None.
10. Material contracts.
(a) Petroleum Lease No. 4 dated November 18, 1981
granted by the Northern Territory of Australia to
United Canso Oil & Gas Co. (N.T.) Pty Ltd. is filed
herein.
(b) Petroleum Lease No. 5 dated November 18, 1981
granted by the Northern Territory of Australia to
Magellan Petroleum (N.T.) Pty. Ltd. is filed herein.
<PAGE>
(c) Gas Sales Agreement between The Palm Valley
Producers and The Northern Territory Electricity
Commission dated November 11, 1981 is filed herein.
(d) Palm Valley Petroleum Lease (OL3) dated November
9, 1982 is filed herein.
(e) Agreements relating to Kotaneelee.
(1) Copy of Agreement dated May 28, 1959
between the Company et al and Home Oil
Company Limited et al and Signal Oil and Gas
Company is filed herein.
(2) Copies of Supplementary Documents to May
28, 1959 Agreement (see (e)(1) above), dated
June 24, 1959, consisting of Guarantee by
Home Oil Company Limited and Pipeline
Promotion Agreement is filed herein.
(3) Copy of Modification to Agreement dated
May 28, 1959 (see (e)(1) above), made as of
January 31, 1961, is filed herein.
(4) Copy of Letter Agreement dated February 1,
1977 between the Company and Columbia Gas
Development of Canada, Ltd. for operation of
the Kotaneelee gas field is filed herein.
(f) Palm Valley Operating Agreement dated April 2,
1985 between Magellan Petroleum (N.T.) Pty. Ltd., C.
D. Resources Pty. Ltd., Farmout Drillers N.L., Canso
Resources Limited, International Oil Proprietary,
Pancontinental Petroleum Limited, I.E.D.C. Australia
Pty. Ltd., Southern Alloys Ventures Pty. Limited and
Amadeus Oil N.L. is filed herein.
(g) Mereenie Operating Agreement dated April 27, 1984
between Magellan Petroleum (N.T.) Pty., United Oil &
Gas Co. (N.T.) Pty. Ltd., Canso Resources Limited,
Oilmin (N.T.) Pty. Ltd., Krewliff Investments Pty.
Ltd., Transoil (N.T.) Pty. Ltd. and Farmout Drillers
NL and Amendment of October 3, 1984 to the above
agreement are filed herein.
<PAGE>
(h) Palm Valley Gas Purchase Agreement dated June 28,
1985 between Magellan Petroleum (N.T.) Pty. Ltd., C.
D. Resources Pty. Ltd., Farmout Drillers N.L., Canso
Resources Limited, International Oil Proprietary,
Pancontinental Petroleum Limited, IEDC Australia Pty
Limited, Amadeus Oil N.L., Southern Alloy Venture
Pty. Limited and Gasgo Pty. Limited. Also included
are the Guarantee of the Northern Territory of
Australia dated June 28, 1985 and Certification
letter dated June 28, 1985 that the Guarantee is
binding. All of the above are filed herein.
(i) Mereenie Gas Purchase Agreement dated June 28,
1985 between Magellan Petroleum (N.T.) Pty. Ltd.,
United Oil & Gas Co. (N.T.) Pty. Ltd., Canso
Resources Limited, Moonie Oil N.L., Petromin No
Liability, Transoil No Liability, Farmout Drillers
N.L., Gasgo Pty. Limited, The Moonie Oil Company
Limited, Magellan Petroleum Australia Limited and
Flinders Petroleum N.L. Also included is the
Guarantee of the Northern Territory of Australia
dated June 28, 1985. All of the above are filed
herein.
(j) Agreements dated June 28, 1985 relating to
Amadeus Basin -Darwin Pipeline which include Deed of
Trust Amadeus Gas Trust, Undertaking by the Northern
Territory Electric Commission and Undertaking from
the Northern Territory Gas Pty Ltd. are filed herein.
(k) Agreement between the Mereenie Producers and the
Palm Valley Producers dated June 28, 1985 is filed
herein.
(l) Form of Agreement pursuant to Article SIXTEENTH
of the Company's Certificate of Incorporation and the
applicable By-Law to indemnify the Company's
directors and officers is filed herein.
(m) 1998 Stock Option Plan, filed as exhibit 4(a) to
Form S-8 Registration Statement on January 14, 1999,
is incorporated herein by reference.
11. Statement re computation of per share earnings.
Not applicable.
12. Statement re computation of ratios.
None.
<PAGE>
13. Annual report to security holders, Form 10-Q or
quarterly report to security holders.
Not applicable.
16. Letter re change in certifying accountant.
None.
18. Letter re change in accounting principles.
None.
21. Subsidiaries of the registrant.
Filed herein.
22. Published report regarding matters submitted to vote
of security holders.
Not applicable.
23. Consent of experts and counsel.
Consent of Ernst & Young LLP filed herein.
24. Power of attorney.
None.
27. Financial Data Schedule.
Filed herein (EDGAR filing only).
99. Additional Exhibits.
None.
(d) Financial Statement Schedules.
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
MAGELLAN PETROLEUM CORPORATION
/s/ James R. Joyce
James R. Joyce, President
Dated: September 15, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
/s/ Benjamin W. Heath /s/ James R. Joyce
Benjamin W. Heath James R. Joyce
Director Director, President and Chief Executive
Officer, Chief Financial and Accounting
Officer
Dated: September 15, 1999 Dated: September 15, 1999
------------------------- ------------------------
/s/ Hedley Howard /s/ Walter McCann
Hedley Howard Walter McCann
Director Director
Dated: September 15, 1999 Dated: September 15, 1999
------------------------- ------------------------
/s/ Timothy L. Largay /s/ Ronald P. Pettirossi
Timothy L. Largay Ronald P. Pettirossi
Director Director
Dated: September 15, 1999 Dated: September 15, 1999
------------------------- ------------------------
<PAGE>
INDEX TO EXHIBITS
Exhibit No.
10. (a) Petroleum Lease No. 4 dated November 18, 1981 granted
by the Northern Territory of Australia to United Canso Oil
& Gas Co. (N.T.) Pty Ltd.
(b) Petroleum Lease No. 5 dated November 18, 1981 granted
by the Northern Territory of Australia to Magellan
Petroleum (N.T.) Pty. Ltd.
(c) Gas Sales Agreement between The Palm Valley Producers and
The Northern Territory Electricity Commission dated
November 11, 1981
(d) Palm Valley Petroleum Lease (OL3) dated November 9, 1982
(e) Agreements relating to Kotaneelee
(1) Copy of Agreement dated May 28, 1959 between the
Company et al. and Home Oil Company Limited
et al. and Signal Oil and Gas Company
(2) Copies of Supplementary Documents to May 28, 1959
Agreement (see (1) above), dated June 24, 1959,
consisting of Guarantee by Home Oil Company
Limited and Pipeline Promotion Agreement
(3) Copy of Modification to Agreement dated May 28,
1959 (see (1) above), made as of January 31, 1961
(4) Copy of Letter Agreement dated February 1, 1977
between the Company and Columbia Gas Development
of Canada, Ltd. for operation of the Kotaneelee
gas field
(f) Palm Valley Operating Agreement dated April 2, 1985
between Magellan Petroleum (N.T.) Pty. Ltd., C. D.
Resources Pty. Ltd., Farmout Drillers N.L., Canso
Resources Limited, International Oil Proprietary,
Pancontinental Petroleum Limited, I.E.D.C. Australia Pty.
Ltd., Southern Alloys Ventures Pty. Limited and Amadeus
Oil N.L.
<PAGE>
INDEX TO EXHIBITS (Cont'd)
Exhibit No.
(g) Mereenie Operating Agreement dated April 27, 1984 between
Magellan Petroleum (N.T.) Pty., United Oil & Gas Co.
(N.T.) Pty. Ltd., Canso Resources Limited, Oilmin (N.T.)
Pty. Ltd., Krewliff Investments Pty. Ltd., Transoil (N.T.)
Pty. Ltd. and Farmout Drillers NL and Amendment of
October 3, 1984 to the above agreement
(h) Palm Valley Gas Purchase Agreement dated June 28, 1985
between Magellan Petroleum (N.T.) Pty. Ltd., C. D.
Resources Pty. Ltd., Farmout Drillers N.L., Canso
Resources Limited, International Oil Proprietary,
Pancontinental Petroleum Limited, IEDC Australia Pty
Limited, Amadeus Oil N.L., Southern Alloy Venture Pty.
Limited and Gasgo Pty., Limited. Also included are the
Guarantee of the Northern Territory of Australia dated
June 28, 1985 and Certification letter dated June 28, 1985
that the Guarantee is binding.
(i) Mereenie Gas Purchase Agreement dated June 28, 1985
between Magellan Petroleum (N.T.) Pty. Ltd., United Oil
& Gas Co. (N.T.) Pty. Ltd., Canso Resources Limited,
Moonie Oil N.L., Petromin No Liability, Transoil No
Liability, Farmout Drillers N.L., Gasgo Pty. Limited, The
Moonie Oil Company Limited, Magellan Petroleum Australia
Limited and Flinders Petroleum N.L. Also included is the
Guarantee of the Northern Territory of Australia dated
June 28, 1985.
(j) Agreements dated June 28, 1985 relating to Amadeus Basin -
Darwin Pipeline which include Deed of Trust Amadeus Gas
Trust, Undertaking by the Northern Territory Electric
Commission and Undertaking from the Northern Territory Gas
Pty Ltd.
(k) Agreement between the Mereenie Producers and the Palm
Valley Producers dated June 28, 1985
(l) Form of Agreement pursuant to Article SIXTEENTH of the
Company's Certificate of Incorporation and the applicable
By-Law to indemnify the Company's directors and officers
21. Subsidiaries of the Registrant
23. Consent of Independent Auditors
27. Financial Data Schedule (EDGAR filing only)
Dated this 18th day of November, 1981
THE NORTHERN TERRITORY OF AUSTRALIA
Petroleum (Prospecting and Mining) Act
PETROLEUM LEASE NO. 4
UNITED CANSO OIL & GAS (N.T.) PTY LTD.
A.S.G. Hook
Crown Solicitor
Wells Building
Mitchell Street
Darwin
<PAGE>
THIS LEASE made the 18th day of November One thousand nine hundred and
eighty-one BETWEEN the NORTHERN TERRITORY OF AUSTRALIA (in this lease called
"the Territory") of the one part and UNITED CANSO OIL & GAS CO. (N.T.) PTY LTD a
company incorporated under the Companies Act of the State of Queensland and
having its registered office in the Territory care of Veritatem & C Nominees
(N.T.) Pty Ltd, 5th Floor, City Mutual Building, 62 Cavenagh Street Darwin in
the Territory (in this lease called "the lessee" which expression shall, where
the context so admits, includes its successors in title and permitted assigns)
of the other part WHEREAS the lessee is the holder of a permit issued in
pursuance of section 21 of the Petroleum (Prospecting and Mining) Act (in this
lease called "the Act") AND WHEREAS the lessee has applied to the Minister for
Mines and Energy for the issue of a lease under section 43 of the Act AND
WHEREAS the Territory is desirous of leasing to the lessee in pursuance of the
Act and in consideration of the rent, royalties and covenants hereinafter
reserved and provided and on the part of the lessee to be paid and observed ALL
THAT piece or parcel of land (in this lease called "the land") containing by
admeasurement 12,340 hectares or thereabouts and more particularly described and
delineated in Schedule 1 to this lease for the purpose of mining for petroleum
TOGETHER WITH the rights, liberties, easements, advantages and appurtenances
thereto belonging or appertaining NOW THEREFORE I, IAN LINDSAY TUXWORTH, the
Minister for Mines and Energy for and on behalf of the Territory, in pursuance
of the Act, hereby grant to the lessee a lease over the land in accordance with
and under the terms of the Act EXCEPTING and RESERVING out of this lease -
(a) the right of the Territory to grant, upon such terms and
conditions as the Minister thinks fit, for joint or several
use, such rights of way or easements through, upon, over or in
the whole of or any portion of the land to which this lease
applies as are necessary for or appropriate to -
(i) the development or working of the land or of other
land containing petroleum deposits;
(ii) the treatment or transportation of the products from
those petroleum deposits by or under the authority of
the Minister, his permittees or lessees;
<PAGE>
(iii) the development or working of agricultural land or
land in respect of which a miner's right, mining
lease or a prospecting authority has been issued or a
reservation has been made under the Mining Act; or
(iv) any other public purpose;
(b) the right to all helium found in association with petroleum
and the right to erect on the land a plant for the extraction
of helium from any gases produced by the lessee, together with
such incidental rights as are necessary for the purpose of
removing the helium;
(c) the right to authorize mining on the land, in respect of which
a lease is in force, under the provisions of the Mining Act;
(d) the right to any substance in or on the land to which the
lease applies which is a prescribed substance within the
meaning of the Atomic Energy Act 1953 of the Commonwealth;
(e) the right to enter the land for the purpose of making a
reconnaissance survey, detailed survey or a scientific or
technical investigation; and
(f) the right to grant authority to a person under section 28 of
the Act to enter the land for the purpose of making a
geological investigation and for that purpose to carry out
geological surveys on that land.
<PAGE>
TO HOLD the same UNTO THE LESSEE for the term of 21 years commencing on the date
of this lease with the right as provided for in section 50 of the Act to renew
the same for a further period of 21 years and such further renewals or
extensions permitted under the Act for the purpose of mining for petroleum on
the land and for all purposes necessary to carry on the lessee's overall mining
operations under the Act on or in the land including, subject to compliance with
any law with respect to water or timber and subject to such conditions with
respect to payment or otherwise as are prescribed by the Act or the Regulations
made under the Act -
(a) for the drilling and taking of water that is or may be under
the surface of the land and to take and divert water from any
natural spring, lake, pool or watercourse situated on or
flowing through any land (including private land and improved
land) to which the lease applies and use the water for any
purpose for prospecting or mining operations under the lease;
and
(b) for the cutting and using of timber on the land (other than
private land or improved land) to which the lease applies for
building or construction work, firewood or other necessary
purposes but the lessee shall not cut timber on such lands as
are specified by the Minister by notice in the Government
Gazette of the Territory nor on land which is -
(i) within a distance of 3 kilometres from a homestead or
outstation; or
(ii) within a distance of 3 kilometres from a watering
point,
on land held under a pastoral lease, pastoral homestead lease
or grazing licence granted under the Crown Lands Act,
but upon and subject to the Act YIELDING AND PAYING thereto the yearly rent
hereinafter provided AND FURTHER YIELDING AND PAYING therefor royalties at the
rates and in the manner hereinafter provided:
<PAGE>
1. THE LESSEE for itself and for its successors and permitted assigns
covenants with the Territory -
(a) to pay, during the period of this lease, the rent and
royalties prescribed by the Act clear of all deductions at the
respective rates and times and in the manner provided in the
Act;
(b) unless authorized to do so by the Minister not to bore or sink
for, pump or raise water, nor to erect any dam or other
facility on existing rivers or water-ways for the purpose of
the supply of water;
(c) to operate in accordance with good oilfield practice and in
accordance with the Technical Report, and to take all steps
necessary to restore and leave the surface of the land in a
condition satisfactory to the Minister so that -
(i) there shall be no abnormal batters or contours;
(ii) the surface soil (if any) existing prior to the
mining operations shall, where possible, be preserved
and subsequently spread to maximum advantage over the
mined area;
(iii) there shall be a minimum interference with the
natural drainage system except where it is found
expedient to use any mined area for the storage of
water;
(iv) there shall not arise any pollution of any drainage
system that is dangerous or injurious to public
health; and
(v) the provisions of sub-paragraph (ii) of this
paragraph shall be carried out progressively within 3
months of the cessation of mining on that mined area
in order to allow for the regeneration of vegetation;
<PAGE>
(d) not to use or work the land nor permit it to be used or worked
except for the purposes for which it is leased;
(e) to observe, perform and carry out the provisions of the Act
and the Regulations and of the Mines Safety Control Act and
the Regulations for the time being in force under that Act or
any other Act so far as those provisions affect or have
reference to a lease granted under the Act;
(f) during the whole of the period in which any well is being
drilled in the land and thereafter until the well is plugged
and abandoned at the sole expense or cost of the lessee to
maintain with an insurance company approved by the Minister a
policy of insurance covering the control of well redrilling
and well recompletion expenses in the sum of not less than
$5,000,000 in respect of any one loss arising out of any one
event indemnified and insurance covering seepage, pollution
and general liability in the sum of not less than $5,000,000
in respect of any one loss arising out of any one event
indemnified (or such other form of insurance in either case as
is acceptable to the Minister) naming the Territory as Lessor
and upon request by the Minister to produce evidence of the
currency of such insurance;
(g) to treat the petroleum in accordance with good oilfield
practice and considering the circumstances to make the best
use of the petroleum reserves;
(h) to take competent advice in association with experts nominated
by the Minister as to what steps are reasonably possible to
progressively encourage and promote regeneration and
development of vegetation on mined areas;
(j) to erect such fences or to take such other steps as may be
reasonably necessary for security or safety purposes;
(k) to permit access to any part of the land, not being a part or
parts designated a restricted area under paragraph (j) of this
clause, by the officers, employees and agents of the Minister
or the Territory;
<PAGE>
(m) not to interfere with or mine on any public road on the land
unless the lessee has provided an alternative road approved by
the Minister;
(n) not to interfere with or mine in an area constituting a public
airstrip unless and until the lessee has first constructed an
alternative comparable airstrip on other land specified for
that purpose by the Minister and the alternative airstrip is
licensed for the same purpose as the existing public airstrip;
and
(p) to allow free public access to and along any public road and
the airstrip or the alternative airstrip constructed in
accordance with paragraph (n) of this clause.
2. AND THE LESSEE for itself and its successors and permitted assigns
further covenants with the Territory -
(1) For the purpose of calculating the value at the well-head of all
substances upon which a royalty is payable as provided by the Act, the lessee
shall measure the quantity of such substances by a measuring device approved by
the Minister and installed at the wellhead, or at such other place as the
Minister approves, by the lessee.
(2) The lessee shall, from time to time, permit any person authorized
by the Minister, at such times as the Minister may require, to test and examine
any measuring device used or to be used by the lessee to measure the quantity of
petroleum recovered from the land.
(3) The lessee shall, at all times during the continuance of the lease,
comply with the Act and Regulations and all other laws from time to time in
force so far as they are applicable to or in relation to the land and the use of
the land by the lessee.
(4) The lessee shall comply promptly with the requirements of all
notices relating to the land and the use of the land by the lessee lawfully
given to the lessee in pursuance of any law in force in the Territory.
<PAGE>
(5) When and as often as the lessee intends to construct on the land
any permanent building, plant, water-way, road or other improvement or structure
permitted to be constructed by the Act or Regulations, the lessee shall give to
the Minister written notice of the proposed location thereof and shall obtain
the Minister's written consent before commencing any such construction work,
which consent may be given on such terms and conditions as the Minister thinks
fit, and the lessee shall give to the Minister such further information as the
Minister may, from time to time, require in respect of any such construction.
(6) The lessee shall, from time to time when so required in writing by
the Minister during the continuance of the lease, make provision to the
satisfaction of the Minister for the continued conservation and protection of
the natural resources of the land, including fauna and flora, and for minimizing
damage to or pollution or degradation of the natural environment.
(7) If the Minister so directs in writing, the lessee shall, within 3
months next following the expiration or earlier determination of the lease,
remove from the land all plant, buildings, equipment and other property of the
lessee reasonably capable of being so removed.
(8) The lessee shall take all reasonable steps to ensure that -
(a) topsoil from all disturbed areas of the land is stockpiled
and, within the 3 months next following the expiration or
earlier determination of the lease, is to the satisfaction of
the Minister respread to maximum advantage for rehabilitation
and revegetation purposes; and
(b) wherever vegetation on the land has been removed, damaged or
interfered with, within 3 months next following the expiration
or earlier determination of the lease, all areas from or on
which vegetation has been so removed, damaged or interfered
with is revegetated in the manner and to the extent required
by the Minister.
<PAGE>
(9) The waiver by the Minister of any default by the lessee shall not
prevent the Minister from cancelling the lease pursuant to the Act or the
exercise by the Minister of any other remedy he may have by reason of any other
cause or for the same cause arising at any other time.
(10) The lessee shall inform all employees, agents and contractors of
the lessee from time to time working on the land of the principal obligations of
the lessee under any agreement between the lessee and a Land Council established
by or under the Aboriginal Land Rights (Northern Territory) Act 1976 of the
Commonwealth and shall take all reasonable steps to ensure that such employees,
agents and contractors comply with and observe such obligations.
(11) The lessee shall, at all times, indemnify and keep the Territory
and the Minister, and all servants thereof, indemnified against all actions,
proceedings, costs, charges, claims and demands whatsoever which may be made or
brought against the Territory or the Minister or any such servant by any person
whomsoever in relation to or in connection with the lease or any matter or thing
done or purported to have been done in pursuance thereof.
(12) The lessee shall, from time to time, deliver to the Minister or
his duly authorized representative copies of or extracts from such records of
the lessee relating to the land or the operations of the lessee thereon as the
Minister may, from time to time in writing, require.
(13) The lessee shall, at all times, permit a person duly authorized in
writing by the Minister to inspect any of the records of the lessee relating to
the land or the operations of the lessee thereon and that person may take such
copies of or extracts from such records as he requires.
3. AND IT IS expressly agreed and declared between the parties hereto that
the lessee will pay to the Territory the reasonable costs incurred by the
Territory in engaging, after consultation with the lessee, a consultant or
consultants to advise it in respect of any proposal by the lessee for the
variation of the programme contained in the Technical Report.
4. (1) AND IT IS further expressly agreed and declared between the
parties hereto -
<PAGE>
(a) that the lessee shall conduct all operations on the land in
accordance with good oilfield practice and in a diligent,
careful and workmanlike manner and in accordance with the law
applicable to such operations and in accordance with the
Technical Report;
(b) that the lessee shall, prior to the signing of this lease,
procure the execution of and deliver to the Territory a copy
of the Agreement set out in Schedule 2 to this lease;
(c) that the lessee shall, prior to the signing of this lease,
execute and deliver to the Minister a bond in a form approved
by the Minister; and
(d) that the lessee shall, if requested so to do by the Minister,
give to the Territory to the extent permitted by compliance
with the crude oil pricing policy and the crude oil allocation
absorption policy of the Commonwealth of Australia the option
to purchase at market value all petroleum and petroleum
products produced from the land by the lessee and that has not
been sold by the lessee.
(2) For the purposes of paragraph (d) of sub-clause (1) of this clause,
the market value of petroleum and petroleum products is the prevailing market
price for such petroleum and petroleum products in the region in which they are
located as agreed between the lessee and the Minister or, in default of
agreement, as determined pursuant to clause 5 of this lease.
5. (1) ANY DISPUTE or difference between the parties arising out of or in
connection with the market value of the petroleum or petroleum products referred
to in clause 4, which the parties have been unable to settle by negotiation and
agreement shall, at the request of either party made to the other in writing and
stating the matter in dispute, be submitted to the arbitration of 3 arbitrators,
one to be appointed by the Minister, one to be appointed by the lessee and the
third to be chosen by the 2 arbitrators so appointed.
<PAGE>
(2) Any such arbitration shall be held in Darwin and shall be conducted
in accordance with the Arbitration Rules of the International Chamber of
Commerce as in force on the first day of June 1955, and it is expressly agreed
that notwithstanding anything to the contrary contained in the aforesaid
Arbitration Rules, adoption by the parties of such rules shall not constitute or
operate as a waiver by either party of its right of appeal from any award on a
point of law nor operate so as to exclude the jurisdiction of any court
competent to decide such point of law.
(3) Each party shall bear its own costs in connection with such
arbitration and the expenses of the arbitrators shall be borne as the
arbitrators may direct. The majority decision of the arbitrators shall prevail
and shall constitute an award. Any award made in respect of a dispute or
difference submitted to arbitration pursuant to this clause shall, except on a
point of law, be final and binding upon the parties.
(4) The making of an award upon any dispute or difference capable of
being submitted to arbitration pursuant to this clause shall be a condition
precedent to any action upon such dispute or difference, it being expressly
agreed that no cause of action shall arise upon such dispute or difference until
the making of an award as aforesaid.
6. (1) IN THIS LEASE, unless the contrary intention appears -
"Minister" means the Minister for Mines and Energy, or such other
Minister for the Territory as may be charged with the
administration of the Act;
"Technical Report" means the Technical Report - Mereenie Field Project
- Appraisal Programme approved by the Minister on the 16th day
of November 1981 together with such modifications or
amendments that are approved by the Minister from time to
time.
<PAGE>
(2) For the purposes of this lease, the expression "good oilfield
practice", wherever occurring in this lease, shall include the requirement that
the land will be developed in accordance with the technology which, from time to
time, is determined in writing by the Minister to be the most appropriate
technology and which causes the least damage to the natural resources of the
land, including the fauna and flora, and the least damage to or pollution or
degradation of the natural environment.
SIGNED by IAN LINDSAY TUXWORTH, )
)
Minister for Mines and Energy, for )
)
and on behalf of the Northern )
)
Territory of Australia in the )
)
presence of )
/s/ Ian Lindsay Tuxworth
............................................
THE COMMON SEAL of UNITED CANSO )
)
OIL & GAS CO. (N.T.) PTY LTD was )
)
hereunto affixed by authority of )
)
the Directors in the presence of )
)
/s/ Roy M. Hopkins
Director ..........................
/s/ Hedley Howard
Secretary ..........................
<PAGE>
SCHEDULE 1
ALL THAT piece or parcel of land in the Territory containing an area of 12,340
hectares, more or less, the boundaries of which are delineated on plans of
survey No. S73/101A and S73/101B, which plans are deposited with the
Surveyor-General of the Territory. The said boundaries are described as follows:
Commencing at an original concrete block marked "3" which is shown on plan of
survey No. O.P. 1334 and which is situated at the intersection of latitude
24(degree)0'0" with longitude 131(degree)32'40" thence by a line bearing
90(degree)0'0" for a distance of 4,377.4 metres to the intersection of latitude
24(degree)0'0" with longitude 131(degree)35'15", thence by a line bearing
90(degree)0'30" for a distance of 4,107.85 metres to the intersection of
latitude 24(degree)0'0" with longitude 131(degree)37'40", thence by a line
bearing 296(degree)14'30" for a distance of 13,714.4 metres to the intersection
of latitude 23(degree)56'43" with longitude 131(degree)30'25" thence by a line
bearing 294(degree)59'30" for a distance of 4,925.78 metres to the intersection
of latitude 23(degree)55'35" with longitude 131(degree)27'47", thence by a line
293(degree)36'30" for a distance of 8,126.72 metres to the intersection of
latitude 23(degree)53'49" with longitude 131(degree)23'24", thence by a line
bearing 223(degree)57'0" for a distance of 3,418.78 metres to the intersection
of latitude 23(degree)55'9" with longitude 13l(degree)22'0", thence by a line
bearing 144(degree)21'30" for a distance of 5,382.61 metres to the intersection
of latitude 23(degree)57'32" with longitude 131(degree)23'51", thence by a line
bearing 117(degree)30'30" for a distance of 6,287.89 metres to the intersection
of latitude 23(degree)59'6" with longitude 131(degree)27'8", thence by a line
bearing 109(degree)22'30" for a distance of 4,974.49 metres to the intersection
of latitude 24(degree)0'0" with longitude 131(degree)29'54", thence by a line
bearing 89(degree)59'30" for a distance of 1,020.37 metres to the intersection
of latitude 24(degree)0'0" with longitude 131(degree)30'30", thence by a line
bearing 90(degree)0'0" for a distance of 3,669.32 metres to the point of
commencement.
<PAGE>
SCHEDULE 2
THIS AGREEMENT made the 18th day of November One thousand nine hundred and
eighty-one BETWEEN the NORTHERN TERRITORY OF AUSTRALIA (hereinafter called "the
Territory") of the one part and MAGELLAN PETROLEUM (N.T.) PTY LTD, UNITED CANSO
OIL & GAS CO. (N.T.) PTY LTD, OILMIN (N.T.) PTY LTD and TRANSOIL (N.T.) PTY LTD
being companies incorporated under the Companies Act of the State of Queensland
and having their registered offices in the Territory care of Veritatem Nominees
(N.T.) Pty Ltd, 5th Floor, City Mutual Building, 62 Cavenagh Street, KREWLIFF
INVESTMENTS PTY LTD a company incorporated under the Companies Act of the State
of New South Wales and having its registered office in the Territory care of
Veritatem Nominees (N.T.) Pty Ltd, 5th Floor, City Mutual Building, 62 Cavenagh
Street, Darwin and FARMOUT DRILLERS N.L. a company incorporated under the
Companies Ordinance of the Australian Capital Territory and having its
registered office in the Territory care of Wilson, Bishop, Bowes & Craig, City
Mutual Building, 62 Cavenagh Street, Darwin (hereinafter called "the Joint
Companies" which expression shall, where the context so admits, include their
successors and permitted assigns) of the other part WHEREAS the Joint Companies
are desirous that petroleum leases be granted in respect of the land described
in Schedule 1 to the lease and transferred into the names of the Joint Companies
AND WHEREAS the Joint Companies are prepared in return for the granting of such
leases, and subject to certain conditions, to undertake the construction of an
oil refinery and otherwise the development of an oil refinery in the Territory.
NOW THIS AGREEMENT WITNESSETH as follows:
INTERPRETATION
l. (1) In this Agreement, unless the contrary intention appears -
"Minister" means the Minister for Mines and Energy, or such other
Minister for the Territory as may be charged with the
administration of the Act;
"the Act" means the Petroleum (Prospecting and Mining) Act of the
Territory;
<PAGE>
"the petroleum leases" means the petroleum leases to be granted in
respect of the lands described in Schedule 1 to the lease;
"the Territory" means, according to the context, the body politic
established by the Northern Territory (Self-Government) Act
1978 of the Commonwealth as the Northern Territory of
Australia or the geographical area constituting the Northern
Territory of Australia.
(2) Any reference to an Act means that Act as amended from time to time
or any Act in substitution for that Act.
(3) In this Agreement, unless the contrary intention appears, words in
the singular include the plural and words in the plural include the singular.
(4) For the purposes of this Agreement, the expression "good oilfield
practice" wherever occurring in this Agreement shall include the requirement
that the land will be developed in accordance with the technology which, from
time to time, is determined in writing by the Minister to be the most
appropriate technology and which causes the least damage to natural resources of
the land, including fauna and flora, and the least damage to or pollution or
degradation of the natural environment.
OPERATION OF AGREEMENT
2. (l) This Agreement shall have no force or effect and shall not be
binding on either party unless and until it is approved by an Act of the
Territory.
(2) Acts or things which have been done or carried out by or on behalf
of a party to this agreement prior to the coming into force of this Agreement
but which were done or carried out in contemplation of this Agreement and in
accordance with its provisions shall, so far as is appropriate and practicable,
be deemed to have been done or carried out under and for the purposes of this
Agreement.
<PAGE>
INVESTIGATIONS AND CONSTRUCTION BY JOINT COMPANIES
3. (1) On the ratification of this Agreement in the manner provided in
clause 2, the Joint Companies will actively continue their investigations
into the feasibility and economics of constructing the oil refinery the subject
of this Agreement and shall, subject to sub-clause (4) of this clause, if
requested so to do from time to time by the Minister on 3 years notice,
construct an oil refinery in accordance with the terms of this Agreement.
(2) Where the Joint Companies notify the Territory that they desire to
proceed with the construction of the oil refinery, then from the date such
notification is received by the Territory the whole of the provisions of this
Agreement which are not already in operation shall come into operation and be
binding on the parties.
(3) In the event of the Joint Companies notifying the Territory of
their intention to proceed to construct the oil refinery under sub-clause (2) of
this clause, the Joint Companies shall undertake and complete within 3 years (or
such extended period as the Minister shall agree to) of the Joint Companies so
notifying the Territory, the construction of an oil refinery of such capacity
and at such place as is agreed between the Joint Companies and the Minister.
(4) If the Joint Companies, within the 3 years referred to in
sub-clause (1) of this clause, notify the Territory that, in their judgment, the
construction of the oil refinery is not justified (the reasons for which
decision they shall notify the Territory and shall support such notification
with reasonably detailed data as to such technical or economic factors involved
as are relevant and pertain to the lease area) then from the date of such
notification, upon the Minister being satisfied in respect of the reasons
advanced by the Joint Companies the request of the Minister referred to in
sub-clause (1) of this clause shall lapse and upon such lapsing of any such
request by the Minister no further request shall be made by the Minister
pursuant to sub-clause (1) of this clause until the expiration of 2 years after
such lapsing of the prior request.
(5) In determining the economic viability of the oil refinery, regard
shall be had to the economic viability of the oil refinery, its associated
pipeline and the production of petroleum and petroleum products from the
petroleum leases.
<PAGE>
(6) The Joint Companies shall not be required to construct a refinery
of a greater capacity than that which is necessary to refine the crude oil
capable of being produced from the lands comprised in the said petroleum leases
provided however that the Joint Companies shall be entitled to construct an oil
refinery of such greater capacity as they may elect.
(7) Upon the Minister making a request pursuant to sub-clause (1) of
this clause or upon the Joint Companies notifying the Territory pursuant to
sub-clause (2) of this clause, no increase shall thereafter be made in the rate
of royalty payable pursuant to the Act in respect of the petroleum leases unless
the request of the Minister shall have lapsed pursuant to sub-clause (4) of this
clause or the Joint Companies shall have made default in respect of their
obligation to construct an oil refinery pursuant to this Agreement.
PIPELINE
4. (1) If the Joint Companies are requested under sub-clause (1) of
clause 3 or give notice pursuant to sub-clause (2) of clause 3 of their desire
to construct the oil refinery, then the Joint Companies shall be entitled to a
licence for transport of petroleum between the lease area and the oil refinery.
(2) The Joint Companies may, by notice in writing to the Minister,
elect to construct the pipeline and, on making such election, shall provide to
the Minister full and detailed plans and specifications for the construction of
the pipeline.
(3) The Joint Companies shall apply for the necessary pipeline licence
or other authorization necessary to construct and operate the pipeline, whether
under the Petroleum (Prospecting and Mining) Act or another law of the
Territory.
(4) The Joint Companies shall comply with all relevant laws,
regulations and statutory provisions governing the construction of the pipeline.
<PAGE>
INVESTIGATIONS BY THE JOINT COMPANIES
5. (l) The Joint Companies shall diligently pursue such matters as are
necessary to enable them to submit proposals to the Territory under clauses 6
and 7 of this Agreement.
(2) The Joint Companies shall, from time to time and upon request by
the Territory, advise the Territory in reasonable detail as to the progress of
matters referred to in clauses 6 and 7 of this Agreement.
(3) If the Territory concurrently carries out its own investigations
and reconnaissances in regard to all or any of the matters referred to in
sub-clause (1) of this clause, the Joint Companies shall co-operate with the
Territory and, so far as reasonably practicable, shall consult with the
representatives or officers of the Territory and make full disclosures and
expressions of opinion regarding matters referred to in this clause.
(4) When submitting to the Minister the proposals referred to in
clauses 6 and 7 of this Agreement the Joint Companies shall, so far as is
reasonably practicable, ensure that such proposals -
(a) provide for the best overall development of the oil refinery
area; and
(b) disclose any conditions of use then in contemplation and where
alternative proposals are submitted the Joint Companies'
preferences in relation to such matters.
REFINERY LOCATION PROPOSAL
6. (1) As soon as the Joint Companies are ready to do so and in any event
not later than the thirty-first day of December 1982, the Joint Companies shall
submit to the Minister their proposal for the location of an oil refinery and
the sites for and general design of the road and railway terminal including
areas for installations, stockpiling, railways and other purposes in the oil
refinery area.
<PAGE>
(2) At any time prior to the thirty-first day of December 1982, the
Joint Companies may give notice to the Territory that they reasonably require
the reservation until the thirty-first day of December 1987, of an area or areas
of Crown land and land at or near Alice Springs for possible development by the
Joint Companies for an oil refinery site and road and rail access to and from
that area.
(3) Immediately upon and after the giving of a notice pursuant to
sub-clause (2) of this clause the Territory (unless the Joint Companies
otherwise agree) shall take all practicable administrative steps to prevent any
development at Alice Springs or elsewhere which would be likely to interfere
with the development by the Joint Companies of the oil refinery site and road
and rail access thereto under the terms of this Agreement.
DETAILED PROPOSALS BY JOINT COMPANIES
7. Upon agreement being reached or a determination being made as to the
Joint Companies' proposal under clause 6 of this Agreement, the Joint Companies
shall proceed with the implementation of the proposal so agreed or determined
and shall, from time to time, submit to the Minister to the fullest extent
reasonably practicable their detailed proposals (including plans and
specifications) with respect to the following:
(a) the road between the lease area and the oil refinery area and
ancillary works;
(b) town sites on or near the lease area and near the oil refinery
and the development of services and facilities in relation
thereto;
(c) housing;
(d) water supply; and
(e) any other infrastructure works, services or facilities
proposed by the Joint Companies.
<PAGE>
CONSIDERATION OF DETAILED PROPOSALS
8. (1) Within 2 months after receipt of the detailed proposals of the
Joint Companies in regard to any of the matters referred to in clause 7 of this
Agreement, the Minister shall give to the Joint Companies notice either of his
approval of the proposals or of alterations desired and, in the latter case,
shall afford to the Joint Companies opportunity to consult with and submit new
proposals to the Minister. The Minister may make such reasonable alterations to
or impose such reasonable conditions on the proposals or new proposals, as the
case may be, as he thinks fit, but the Minister shall, in any notice to the
Joint Companies, disclose his reasons for any such alteration and condition AND
PROVIDED THAT the Minister shall not make alterations to or impose conditions on
the proposals or new proposals in so far as they relate to the location of the
oil refinery site as previously determined.
(2) Any dispute or difference between the Joint Companies and the
Minister in respect of alterations made by the Minister to, or conditions
imposed by the Minister on, proposals or new proposals, as the case may be,
referred to in sub-clause (1) of this clause, shall be settled in accordance
with the manner set out in clause 19 of this Agreement.
OPERATION OF FACILITIES
9. (l) Throughout the continuance or this Agreement the Joint
Companies shall -
(a) except to the extent that the Joint Companies' proposals as
finally approved or determined as herein provided otherwise
provide allow the general public to use any roads (to the
extent that it is reasonable and practicable so to do)
constructed or upgraded by the Joint Companies PROVIDED THAT
such use shall not unduly prejudice or interfere with the
Joint Companies' operations;
(b) in the construction, operation, maintenance and use of any
work, installation, plant, machinery, equipment, service or
facility provided or controlled by the Joint Companies comply
with and observe the provisions of this Agreement and the laws
for the time being in force in the Territory;
<PAGE>
(c) at all times keep and maintain in good repair and working
order and condition and, where necessary, replace all such
work, installation, plant, machinery and equipment and the
roads and water and electrical supplies for the time being the
subject of this Agreement;
(d) use its best endeavours to obtain the best price possible in
relation to petroleum and petroleum products and condensate
sold; and
(e) so far as reasonably and economically practicable, use labour,
materials, plant, equipment and supplies available within the
Territory where it is not prejudicial to the interests of the
Joint Companies so to do.
MUTUAL COVENANTS
10. The parties hereto COVENANT AND AGREE with each other as follows:
(a) that subject to and in accordance with the proposals approved
or determined as hereinbefore provided the Joint Companies for
their purposes and for domestic and other purposes in relation
to the oil refinery may, to the extent determined by the
Minister but notwithstanding any Act, bore for water,
construct catchment areas, store (by dams or otherwise) take
and charge for water from any Crown lands available for the
purpose and generate, transmit, supply and charge for
electrical energy and the Joint Companies shall have all such
powers and authorities with respect to water and electrical
energy as are determined by the Minister (and as are accepted
by the Joint Companies) for the purposes of this Agreement;
<PAGE>
(b) that the Joint Companies may use any public roads which may,
from time to time, exist in the area of its operations for the
purpose of transportation of goods and materials in connection
with such operations PROVIDED NEVERTHELESS that the Joint
Companies shall on demand pay to the Territory the cost of
making good any damage to such roads occasioned by the Joint
Companies' use;
(c) that the Territory will at the request and cost of the Joint
Companies widen, upgrade or re-align any public road over
which the Territory has control;
(d) that on the cessation or determination of any lease, licence
or easement granted hereunder by the Territory to the Joint
Companies or (except as otherwise agreed by the Minister) to
an associated company or other assignee of the Joint Companies
under this Agreement of land for the Joint Companies' oil
refinery the improvements and things other than plant,
machinery, equipment and installations erected on the relevant
land and provided in connection with the oil refinery shall
remain or become the absolute property of the Territory
without compensation and freed and discharged from all
mortgages and encumbrances and the Joint Companies shall do
and execute such documents and things (including surrenders)
as the Territory may reasonably require to give effect to this
provision. In the event of the Joint Companies, immediately
prior to such expiration or determination or subsequent
thereto, deciding to remove its plant, machinery, equipment
and installations or any of them from any land it shall not do
so without first notifying the Territory of its decision and
thereby granting to the Territory the right or option
exercisable within 3 months thereafter to purchase at
valuation in situ the said plant, machinery, equipment and
installations or any of them. Such valuation shall be mutually
agreed or in default of agreement shall be made by such
competent valuer as the parties may appoint or failing
agreement as to such appointment then by 2 competent valuers
one to be appointed by each party or by an umpire appointed by
such valuers should they fail to agree;
<PAGE>
(e) that without affecting the liabilities of the parties under
this Agreement either party shall have the right from time to
time to entrust to third parties the carrying out of any
portions of the operations which it is authorized or obligated
to carry out hereunder;
(f) that notwithstanding the provisions of any Act or any thing
done or purported to be done under any Act the valuation of
all lands (whether of a freehold or leasehold nature) the
subject of this Agreement (except as to any part upon which a
permanent residence shall be erected or which is occupied in
connection therewith) for rating purposes shall be deemed to
be on the unimproved capital value thereof and no such lands
shall be subject to any discriminatory rate;
(g) that in any of the following events, namely, if the Joint
Companies shall make default in the due performance or
observance of any of the covenants or obligations to the
Territory herein or in any lease, sublease, licence or other
title or document granted or assigned under this Agreement on
their part to be performed or observed and shall fail to
remedy that default within reasonable time after notice
specifying the default is given to them by the Territory (or -
if the alleged default is contested by the Joint Companies and
promptly submitted to arbitration - within a reasonable time
fixed by the arbitration award where the question is decided
against the Joint Companies the arbitrator finding that there
was a bona fide dispute and that the Joint Companies had not
been dilatory in pursuing the arbitration) or if the Joint
Companies shall abandon or repudiate their operations under
this Agreement or if the Joint Companies shall go into
liquidation (other than a voluntary liquidation for the
purpose of reconstruction) then and in any of such events the
Territory may, by notice to the Joint Companies, determine
this Agreement and thereupon or if the Joint Companies shall
surrender the entire oil refinery area the rights of the Joint
Companies under any lease, licence, easement or right granted
hereunder or pursuant hereto shall thereupon determine
PROVIDED HOWEVER that if the Joint Companies shall fail to
remedy any default (not being a default in respect of their
obligation to construct an oil refinery pursuant to clause 3
of this Agreement) after such notice or within the time fixed
<PAGE>
by the arbitration award as aforesaid the Territory, instead
of determining this Agreement as aforesaid because of such
default may itself remedy such default or cause the same to be
remedied (for which purpose the Territory by agents workmen or
otherwise shall have full power to enter upon lands occupied
by the Joint Companies and to make use of all plant,
machinery, equipment and installations thereon) and the costs
and expenses incurred by the Territory in remedying or causing
to be remedied such default shall be a debt payable by the
Joint Companies to the Territory on demand; and
(h) that -
(i) for the purposes of determining whether and the
extent to which -
(A) the Joint Companies are liable to any person
or body corporate (other than the
Territory); or
(B) an action is maintainable by any such person
or body corporate in respect of the death or
injury of any person or damage to any
property arising out of the use of any of
the roads for the maintenance of which the
Joint Companies are responsible hereunder
and for no other purpose the Joint Companies
shall be deemed to be a municipality and the
said roads shall be deemed to be streets
under the care control and management of the
Joint Companies; and
(ii) for the purposes of this paragraph the terms
"municipality" and "road" shall have the meanings
which they respectively have in the Local Government
Act.
<PAGE>
TERRITORY'S OBLIGATIONS
11. The Territory shall, in accordance with the Joint Companies' proposals as
finally approved or determined as hereinbefore provided and as otherwise
required by the Joint Companies to enable them to meet their obligations
hereunder, grant to the Joint Companies in fee simple or for such terms or
periods and on such terms and conditions (including renewal rights) as subject
to the proposals (as finally approved or determined as aforesaid) and other
obligations of the Joint Companies hereunder shall be reasonable having regard
to the requirements of the Joint Companies hereunder and obligations of the
Joint Companies hereunder, lands, leases, rights or easements whether under the
Petroleum (Prospecting and Mining) Act or under the provisions of the Crown
Lands Act or any other Act (as the case may require) as the Joint Companies
reasonably require for their works and operations hereunder including the
construction or provision of the roads, water supplies and stone and soil for
construction purposes.
ALTERATION OF INSTALLATIONS
12. If, at any time, the Territory finds it necessary to request the Joint
Companies to alter the situation of any of the installations or other works
erected, constructed or provided pursuant to the Joint Companies' detailed
proposals and gives to the Joint Companies notice of the request the Joint
Companies shall, within a reasonable time after receipt of the notice but at the
expense in all things (Including increased operating costs) of the Territory
(unless the alteration is rendered necessary by reason of a breach by the Joint
Companies of any of its obligations hereunder), alter the situation accordingly.
<PAGE>
DEFAULT
13. (1) In the event that the Joint Companies shall make default of their
obligation to construct an oil refinery (whether jointly or severally) pursuant
to the provisions of clause 3 of this Agreement then as and from the date of
such default as is determined by the Minister (or if the default is contested by
the Joint Companies then as and from the date such default is confirmed by the
arbitration award) the Joint Companies covenant (jointly and severally) that
they shall upon demand pay to the Territory by way of liquidated damages an
amount equal in value to an amount per barrel determined pursuant to sub-clause
(2) of this clause on all crude oil produced from the lands comprised in the
said petroleum leases during the term of the said leases and any renewals or
extensions thereof or during the period which may elapse until the Joint
Companies shall have remedied their default pursuant to this clause (whichever
is the shorter period).
(2) The amount per barrel from time to time payable pursuant to sub-
clause (1) of this clause shall be the amount which is the greater of -
(a) $3.00 per barrel; and
(b) $2.00 per barrel plus 10% of the amount per barrel by which
the import parity price of crude oil determined by the
Commonwealth of Australia from time to time less the amount of
the levy or other similar impost of the Commonwealth of
Australia in respect of the Mereenie Field exceeds from time
to time the sum of $27.50 (comprising the present estimated
import parity price of $30.50 less the levy applicable to the
Mereenie Field of $3.00).
(3) In the event such default as is referred to in sub-clause (1) of
this clause being contested the amount payable by way of liquidated damages
shall be paid, notwithstanding any arbitration proceedings, by the Joint
Companies into a trust account approved by the Minister.
<PAGE>
(4) If it is finally determined by such arbitration proceedings that
the Joint Companies have not made such default all moneys paid to the said trust
account by the Joint Companies shall be refunded to them together with interest
thereon computed at the then Commonwealth long term bond rate.
INDEMNITY TO TERRITORY
14. The Joint Companies will indemnify and keep indemnified the Territory and
its servants, agents and contractors in respect of all actions, suits, claims,
demands or costs of third parties arising out of or in connection with the
construction, maintenance or use by the Joint Companies or their servants,
agents, contractors or assignees of the Joint Companies' oil refinery or other
works or services the subject of this Agreement or the plant, apparatus or
equipment installed in connection therewith and shall, if requested so to do by
the Minister, insure in the name of themselves and the Territory against any
liability that may arise under this Agreement.
ASSIGNMENT
15. (1) The Joint Companies or any one or more of the Joint Companies
may, at any time with the consent in writing of the Minister -
(a) assign, mortgage, charge, sublet or otherwise dispose of as of
right all or any right under this Agreement;
(b) assign, mortgage, charge, sublet or otherwise dispose of as of
right to any other associated company all or any right under
this Agreement;
(c) assign, mortgage, charge, sublet or otherwise dispose of to
any other company or person all or any right under this
Agreement (including a right to or as the holder of any lease,
licence, easement, grant or other title) and of the
obligations of the Joint Companies under this Agreement; and
<PAGE>
(d) appoint any other company or person to exercise all or any of
the powers, functions and authorities which are or may be
conferred on the Joint Companies under this Agreement,
subject however to the assignee or (as the case may be) the appointee executing
in favour of the Territory a deed of covenant in a form to be approved by the
Minister to comply with observe and perform the provisions hereof on the part of
the Joint Companies to be complied with observed or performed in regard to the
matter or matters so assigned or (as the case may be) the subject of the
appointment.
(2) Notwithstanding anything contained in or anything done under or
pursuant to sub-clause (1) of this clause the Joint Companies shall at all times
during the currency of this Agreement be and remain liable for the due and
punctual performance and observance of all the covenants and agreements on their
part contained herein and in any lease, licence, easement, grant or other title
the subject of an assignment under sub-clause (1) of this clause PROVIDED
HOWEVER that the Minister may agree to release the Joint Companies or any one or
more of them from such liability where having regard to all the circumstances of
any such assignment, mortgaging, charging, subletting, disposition or
appointment as referred to in sub-clause (1) of this clause he considers such
release will not be contrary to the interest of the Territory under this
Agreement.
<PAGE>
VARIATION OF AGREEMENT
16. The parties hereto may from time to time by mutual agreement in writing add
to, cancel or vary all or any of the provisions of this Agreement or of any
lease, licence, easement or right granted hereunder or pursuant hereto for the
purpose of implementing or facilitating the carrying out of such provisions or
for the purpose of facilitating the carrying out of some separate part or parts
of the Joint Companies' operations hereunder by any other company with which the
Joint Companies may have entered into association as a separate and distinct
operation or for the establishment or development of any industry making use of
the petroleum within the lease area or such of the Joint Companies' works,
installations, services or facilities the subject of this Agreement as shall
have been provided by the Joint Companies in the course of work done under this
Agreement.
DELAYS
17. This Agreement shall be deemed to be made subject to any delays in the
performance of obligations under this Agreement and to the temporary suspension
of continuing obligations hereunder which may be occasioned by or arise from
circumstances beyond the power and control of the party responsible for the
performance of such obligations including delays or such temporary suspension as
aforesaid caused by or arising from an act of God, force majeure, floods,
storms, tempests, washaways, fire (unless caused by the actual fault or privity
of the Joint Companies), act of war, act of public enemies, riots, civil
commotions, strikes, lockouts, stoppages, restraint of labour or other similar
acts (whether partial or general), shortages of labour or essential materials,
reasonable failure to secure contractors, delays of contractors, an inability
(common in the petroleum industry) to profitably sell petroleum or factors due
to Australian or overall work economic conditions or factors which could not
reasonably have been foreseen PROVIDED ALWAYS that the party whose performance
of obligations is affected by any of the said causes shall use its best
endeavours to minimize the effect of the said causes as soon as possible after
their occurrence and that no party shall be required to settle or compromise any
strike or labour dispute or similar occurrence to its disadvantage.
<PAGE>
EXTENSION OF TIME
18. (1) Notwithstanding any provision hereof the Minister may at the
request of the Joint Companies from time to time extend any period or date
referred to in this Agreement for such period or to such later date as the
Minister thinks fit and the extended period or later date when advised to the
Joint Companies by notice from the Minister shall be deemed for all purposes
hereof substituted for the period or date so extended.
(2) The Territory acknowledges that the 3 year period respectively
referred to in sub-clauses (1) and (3) of clause 3 of this Agreement for the
commencement and completion of the project covered by proposals referred to in
clauses 6 and 7 of this Agreement have been agreed on the basis that each of
such proposals would be determined within 2 months of its submission. If such is
not the case the Joint Companies shall be entitled to extend the periods for
commencement and completion by such period as they shall demonstrate to be
reasonable under the circumstances.
ARBITRATION
19. (l) Any dispute or difference between the parties arising out of or in
connection with this Agreement or any agreed amendment or variation thereof or
agreed addition thereto or as to the construction of this Agreement or any such
amendment variation or addition or as to any of the rights duties or liabilities
of either party thereunder or as to any matter to be agreed upon between the
parties under this Agreement shall in default of agreement between the parties
and in the absence of any provision in this Agreement to the contrary be
referred to and settled by arbitration under the provisions of the Arbitration
Act of the State of South Australia in its application to the Territory or such
other Act in relation to the law of arbitration that has general application in
the Territory.
(2) Without limiting the generality of this clause there may be
referred to arbitration under this clause any dispute or difference concerning
the oil refinery including the following:
(a) the location and capacity of the oil refinery;
<PAGE>
(b) whether the construction of an oil refinery is not
economically viable and the Minister's request referred to in
sub-clause (4) of clause 3 of this Agreement should lapse;
(c) whether the Joint Companies have satisfied the oil refinery
obligation pursuant to this Agreement; and
(d) whether the Joint Companies are in default in their obligation
with respect to the construction of an oil refinery pursuant
to this Agreement.
(3) The arbitrator, arbitrators or umpire (as the case may be) of any
submission to arbitration hereunder is hereby empowered upon application by
either party hereto to grant any interim extension of time or date referred to
herein which, having regard to the circumstances, may reasonably be required in
order to preserve the rights of either or both parties hereunder and an award in
favour of the Joint Companies may, in the name of the Minister, grant any
further extension of time for that purpose.
NEW PROCESSES
20. Nothing in this Agreement shall in any way prevent or limit the Joint
Companies at their sole discretion from adopting for the discharge of their
obligations hereunder new processes or equipment incorporating the latest
technical developments from time to time available whether or not used by the
Joint Companies elsewhere in their operations.
<PAGE>
NOTICES
21. A notice, consent or other writing authorized or required by this Agreement
to be given or sent shall be deemed to have been duly given or sent by the
Territory if signed by the Minister or by a senior officer of the Public Service
of the Territory acting on the direction of the Minister and forwarded by
prepaid post to each of the Joint Companies at their respective registered
offices for the time being in the Territory or other offices in the Territory
nominated in writing by the respective Companies by the Joint Companies if
signed on their behalf by a managing director or a secretary or by any other
person or persons authorized by the Joint Companies in that behalf or by their
solicitors as notified to the Territory from time to time and forwarded by
prepaid post to the Minister and any such notice, consent or writing shall be
deemed to have been duly given or sent on the day on which it would be delivered
in the ordinary course of post.
LAW OF AGREEMENT
22. This Agreement shall be interpreted according to the law for the time being
in force in the Territory.
IN WITNESS WHEREOF the Minister for Mines and Energy has for and on behalf of
the Territory hereunto set his hand and the Joint Companies have hereunto
affixed their common seals the day and year first above written.
SIGNED SEALED AND DELIVERED )
)
by IAN LINDSAY TUXWORTH, the )
)
Minister for Mines and Energy, for )
)
and on behalf of the Northern )
)
Territory of Australia )
/s/ Ian Lindsay Tuxworth
............................................
<PAGE>
THE COMMON SEAL of MAGELLAN )
)
PETROLEUM (N.T.) PTY LTD was )
)
hereunto affixed by authority of )
)
the Directors in the presence of )
/s/ Roy M. Hopkins
Director ..........................
/s/ Hedley Howard
Secretary ..........................
THE COMMON SEAL of UNITED CANSO )
)
OIL & GAS CO. (N.T.) PTY LTD )
)
was hereunto affixed by authority )
)
of the Directors in the presence of )
/s/ Roy M. Hopkins
Director ..........................
/s/ Hedley Howard
Secretary ..........................
THE COMMON SEAL of OILMIN (N.T.) )
)
PTY LTD was hereunto affixed by )
)
authority of the Directors in the )
)
presence of )
/s/
Director ..........................
/s/
Secretary ..........................
<PAGE>
THE COMMON SEAL of TRANSOIL )
)
(N.T.) PTY LTD was hereunto )
)
affixed by authority of the Directors )
)
in the presence of )
/s/
Director ..........................
/s/
Secretary ..........................
THE COMMON SEAL of KREWLIFF )
)
INVESTMENTS PTY LTD was hereunto )
)
affixed by authority of the Directors )
)
in the presence of )
/s/
Director ..........................
/s/
Secretary ..........................
THE COMMON SEAL of FARMOUT )
)
DRILLERS N.L. was hereunto )
)
affixed by authority of the Directors )
)
in the presence of )
/s/
Director ..........................
/s/
Secretary ..........................
Dated this 18th day of November, 1981
THE NORTHERN TERRITORY OF AUSTRALIA
Petroleum (Prospecting and Mining) Act
PETROLEUM LEASE NO. 5
UNITED CANSO OIL & GAS (N.T.) PTY LTD.
A.S.G. Hook
Crown Solicitor
Wells Building
Mitchell Street
Darwin
<PAGE>
THIS LEASE made the 18th day of November One thousand nine hundred and
eighty-one BETWEEN the NORTHERN TERRITORY OF AUSTRALIA (in this lease called
"the Territory") of the one part and MAGELLAN PETROLEUM (N.T.) PTY LTD a company
incorporated under the Companies Act of the State of Queensland and having its
registered office in the Territory care of Veritatem Nominees (N.T.) Pty Ltd,
5th Floor, City Mutual Building, 62 Cavenagh Street, Darwin in the Territory (in
this lease called "the lessee" which expression shall, where the context so
admits, includes its successors in title and permitted assigns) of the other
part WHEREAS the lessee is the holder of a permit issued in pursuance of section
21 of the Petroleum (Prospecting and Mining) Act (in this lease called "the
Act") AND WHEREAS the lessee has applied to the Minister for Mines and Energy
for the issue of a lease under section 43 of the Act AND WHEREAS the Territory
is desirous of leasing to the lessee in pursuance of the Act and in
consideration of the rent, royalties and covenants hereinafter reserved and
provided and on the part of the lessee to be paid and observed ALL THAT piece or
parcel of land (in this lease called "the land") containing by admeasurement
15,780 hectares or thereabouts and more particularly described and delineated in
Schedule 1 to this lease for the purpose of mining for petroleum TOGETHER WITH
the rights, liberties, easements, advantages and appurtenances thereto belonging
or appertaining NOW THEREFORE I, IAN LINDSAY TUXWORTH, the Minister for Mines
and Energy for and on behalf of the Territory, in pursuance of the Act, hereby
grant to the lessee a lease over the land in accordance with and under the terms
of the Act EXCEPTING and RESERVING out of this lease -
(a) the right of the Territory to grant, upon such terms and
conditions as the Minister thinks fit, for joint or several
use, such rights of way or easements through, upon, over or in
the whole of or any portion of the land to which this lease
applies as are necessary for or appropriate to -
(i) the development or working of the land or of other
land containing petroleum deposits;
(ii) the treatment or transportation of the products from
those petroleum deposits by or under the authority of
the Minister, his permittees or lessees;
<PAGE>
(iii) the development or working of agricultural land or
land in respect of which a miner's right, mining
lease or a prospecting authority has been issued or a
reservation has been made under the Mining Act; or
(iv) any other public purpose;
(b) the right to all helium found in association with petroleum
and the right to erect on the land a plant for the extraction
of helium from any gases produced by the lessee, together with
such incidental rights as are necessary for the purpose of
removing the helium;
(c) the right to authorize mining on the land, in respect of which
a lease is in force, under the provisions of the Mining Act;
(d) the right to any substance in or on the land to which the
lease applies which is a prescribed substance within the
meaning of the Atomic Energy Act 1953 of the Commonwealth;
(e) the right to enter the land for the purpose of making a
reconnaissance survey, detailed survey or a scientific or
technical investigation; and
(f) the right to grant authority to a person under section 28 of
the Act to enter the land for the purpose of making a
geological investigation and for that purpose to carry out
geological surveys on that land.
<PAGE>
TO HOLD the same UNTO THE LESSEE for the term of 21 years commencing on the date
of this lease with the right as provided for in section 50 of the Act to renew
the same for a further period of 21 years and such further renewals or
extensions permitted under the Act for the purpose of mining for petroleum on
the land and for all purposes necessary to carry on the lessee's overall mining
operations under the Act on or in the land including, subject to compliance with
any law with respect to water or timber and subject to such conditions with
respect to payment or otherwise as are prescribed by the Act or the Regulations
made under the Act -
(a) for the drilling and taking of water that is or may be under
the surface of the land and to take and divert water from any
natural spring, lake, pool or watercourse situated on or
flowing through any land (including private land and improved
land) to which the lease applies and use the water for any
purpose for prospecting or mining operations under the lease;
and
(b) for the cutting and using of timber on the land (other than
private land or improved land) to which the lease applies for
building or construction work, firewood or other necessary
purposes but the lessee shall not cut timber on such lands as
are specified by the Minister by notice in the Government
Gazette of the Territory nor on land which is -
(i) within a distance of 3 kilometres from a homestead or
outstation; or
(ii) within a distance of 3 kilometres from a watering
point,
on land held under a pastoral lease, pastoral homestead lease
or grazing licence granted under the Crown Lands Act,
but upon and subject to the Act YIELDING AND PAYING thereto the yearly rent
hereinafter provided AND FURTHER YIELDING AND PAYING therefor royalties at the
rates and in the manner hereinafter provided:
<PAGE>
1. THE LESSEE for itself and for its successors and permitted assigns
covenants with the Territory -
(a) to pay, during the period of this lease, the rent and
royalties prescribed by the Act clear of all deductions at the
respective rates and times and in the manner provided in the
Act;
(b) unless authorized to do so by the Minister not to bore or sink
for, pump or raise water, nor to erect any dam or other
facility on existing rivers or water-ways for the purpose of
the supply of water;
(c) to operate in accordance with good oilfield practice and in
accordance with the Technical Report, and to take all steps
necessary to restore and leave the surface of the land in a
condition satisfactory to the Minister so that -
(i) there shall be no abnormal batters or contours;
(ii) the surface soil (if any) existing prior to the
mining operations shall, where possible, be preserved
and subsequently spread to maximum advantage over the
mined area;
(iii) there shall be a minimum interference with the
natural drainage system except where it is found
expedient to use any mined area for the storage of
water;
(iv) there shall not arise any pollution of any drainage
system that is dangerous or injurious to public
health; and
(v) the provisions of sub-paragraph (ii) of this
paragraph shall be carried out progressively within 3
months of the cessation of mining on that mined area
in order to allow for the regeneration of vegetation;
<PAGE>
(d) not to use or work the land nor permit it to be used or worked
except for the purposes for which it is leased;
(e) to observe, perform and carry out the provisions of the Act
and the Regulations and of the Mines Safety Control Act and
the Regulations for the time being in force under that Act or
any other Act so far as those provisions affect or have
reference to a lease granted under the Act;
(f) during the whole of the period in which any well is being
drilled in the land and thereafter until the well is plugged
and abandoned at the sole expense or cost of the lessee to
maintain with an insurance company approved by the Minister a
policy of insurance covering the control of well redrilling
and well recompletion expenses in the sum of not less than
$5,000,000 in respect of any one loss arising out of any one
event indemnified and insurance covering seepage, pollution
and general liability in the sum of not less than $5,000,000
in respect of any one loss arising out of any one event
indemnified (or such other form of insurance in either case as
is acceptable to the Minister) naming the Territory as Lessor
and upon request by the Minister to produce evidence of the
currency of such insurance;
(g) to treat the petroleum in accordance with good oilfield
practice and considering the circumstances to make the best
use of the petroleum reserves;
(h) to take competent advice in association with experts nominated
by the Minister as to what steps are reasonably possible to
progressively encourage and promote regeneration and
development of vegetation on mined areas;
(j) to erect such fences or to take such other steps as may be
reasonably necessary for security or safety purposes;
(k) to permit access to any part of the land, not being a part or
parts designated a restricted area under paragraph (j) of this
clause, by the officers, employees and agents of the Minister
or the Territory;
<PAGE>
(m) not to interfere with or mine on any public road on the land
unless the lessee has provided an alternative road approved by
the Minister;
(n) not to interfere with or mine in an area constituting a public
airstrip unless and until the lessee has first constructed an
alternative comparable airstrip on other land specified for
that purpose by the Minister and the alternative airstrip is
licensed for the same purpose as the existing public airstrip;
and
(p) to allow free public access to and along any public road and
the airstrip or the alternative airstrip constructed in
accordance with paragraph (n) of this clause.
2. AND THE LESSEE for itself and its successors and permitted assigns
further covenants with the Territory -
(1) For the purpose of calculating the value at the well-head of all
substances upon which a royalty is payable as provided by the Act, the lessee
shall measure the quantity of such substances by a measuring device approved by
the Minister and installed at the well-head, or at such other place as the
Minister approves, by the lessee.
(2) The lessee shall, from time to time, permit any person authorized
by the Minister, at such times as the Minister may require, to test and examine
any measuring device used or to be used by the lessee to measure the quantity of
petroleum recovered from the land.
(3) The lessee shall, at all times during the continuance of the lease,
comply with the Act and Regulations and all other laws from time to time in
force so far as they are applicable to or in relation to the land and the use of
the land by the lessee.
(4) The lessee shall comply promptly with the requirements of all
notices relating to the land and the use of the land by the lessee lawfully
given to the lessee in pursuance of any law in force in the Territory.
<PAGE>
(5) When and as often as the lessee intends to construct on the land
any permanent building, plant, water-way, road or other improvement or structure
permitted to be constructed by the Act or Regulations, the lessee shall give to
the Minister written notice of the proposed location thereof and shall obtain
the Minister's written consent before commencing any such construction work,
which consent may be given on such terms and conditions as the Minister thinks
fit, and the lessee shall give to the Minister such further information as the
Minister may, from time to time, require in respect of any such construction.
(6) The lessee shall, from time to time when so required in writing by
the Minister during the continuance of the lease, make provision to the
satisfaction of the Minister for the continued conservation and protection of
the natural resources of the land, including fauna and flora, and for minimizing
damage to or pollution or degradation of the natural environment.
(7) If the Minister so directs in writing, the lessee shall, within 3
months next following the expiration or earlier determination of the lease,
remove from the land all plant, buildings, equipment and other property of the
lessee reasonably capable of being so removed.
(8) The lessee shall take all reasonable steps to ensure that -
(a) topsoil from all disturbed areas of the land is stockpiled
and, within the 3 months next following the expiration or
earlier determination of the lease, is to the satisfaction of
the Minister respread to maximum advantage for rehabilitation
and revegetation purposes; and
(b) wherever vegetation on the land has been removed, damaged or
interfered with, within 3 months next following the expiration
or earlier determination of the lease, all areas from or on
which vegetation has been so removed, damaged or interfered
with is revegetated in the manner and to the extent required
by the Minister.
<PAGE>
(9) The waiver by the Minister of any default by the lessee shall not
prevent the Minister from cancelling the lease pursuant to the Act or the
exercise by the Minister of any other remedy he may have by reason of any other
cause or for the same cause arising at any other time.
(10) The lessee shall inform all employees, agents and contractors of
the lessee from time to time working on the land of the principal obligations of
the lessee under any agreement between the lessee and a Land Council established
by or under the Aboriginal Land Rights (Northern Territory) Act 1976 of the
Commonwealth and shall take all reasonable steps to ensure that such employees,
agents and contractors comply with and observe such obligations.
(11) The lessee shall, at all times, indemnify and keep the Territory
and the Minister, and all servants thereof, indemnified against all actions,
proceedings, costs, charges, claims and demands whatsoever which may be made or
brought against the Territory or the Minister or any such servant by any person
whomsoever in relation to or in connection with the lease or any matter or thing
done or purported to have been done in pursuance thereof.
(12) The lessee shall, from time to time, deliver to the Minister or
his duly authorized representative copies of or extracts from such records of
the lessee relating to the land or the operations of the lessee thereon as the
Minister may, from time to time in writing, require.
(13) The lessee shall, at all times, permit a person duly authorized in
writing by the Minister to inspect any of the records of the lessee relating to
the land or the operations of the lessee thereon and that person may take such
copies of or extracts from such records as he requires.
3. AND IT IS expressly agreed and declared between the parties hereto that
the lessee shall pay to the Territory the reasonable costs incurred by the
Territory in engaging, after consultation with the lessee, a consultant or
consultants to advise it in respect of any proposal by the lessee for the
variation of the programme contained in the Technical Report.
<PAGE>
4. (1) AND IT IS further expressly agreed and declared between the parties
hereto -
(a) that the lessee shall conduct all operations on the land in
accordance with good oilfield practice and in a diligent,
careful and workmanlike manner and in accordance with the law
applicable to such operations and in accordance with the
Technical Report;
(b) that the lessee shall, prior to the signing of this lease,
procure the execution of and deliver to the Territory a copy
of the Agreement set out in Schedule 2 to this lease;
(c) that the lessee shall, prior to the signing of this lease,
execute and deliver to the Minister a bond in a form approved
by the Minister; and
(d) that the lessee shall, if requested so to do by the Minister,
give to the Territory, to the extent permitted by compliance
with the crude oil pricing policy and the crude oil allocation
absorption policy of the Commonwealth of Australia, the option
to purchase at market value all petroleum and petroleum
products produced from the land by the lessee and that has not
been sold by the lessee.
(2) For the purposes of paragraph (d) of sub-clause (1) of this clause,
the market value of petroleum and petroleum products is the prevailing market
price for such petroleum and petroleum products in the region in which they are
located as agreed between the lessee and the Minister or, in default of
agreement, as determined pursuant to clause 5 of this lease.
5. (l) ANY DISPUTE or difference between the parties arising out of or in
connection with the market value of the petroleum or petroleum products referred
to in clause 4, which the parties have been unable to settle by negotiation and
agreement shall, at the request of either party made to the other in writing and
stating the matter in dispute, be submitted to the arbitration of 3 arbitrators,
one to be appointed by the Minister, one to be appointed by the lessee and the
third to be chosen by the 2 arbitrators so appointed.
<PAGE>
(2) Any such arbitration shall be held in Darwin and shall be conducted
in accordance with the Arbitration Rules of the International Chamber of
Commerce as in force on the first day of June 1955, and it is expressly agreed
that notwithstanding anything to the contrary contained in the aforesaid
Arbitration Rules, adoption by the parties of such rules shall not constitute or
operate as a waiver by either party of its right of appeal from any award on a
point of law nor operate so as to exclude the jurisdiction of any court
competent to decide such point of law.
(3) Each party shall bear its own costs in connection with such
arbitration and the expenses of the arbitrators shall be borne as the
arbitrators may direct. The majority decision of the arbitrators shall prevail
and shall constitute an award. Any award made in respect of a dispute or
difference submitted to arbitration pursuant to this clause shall, except on a
point of law, be final and binding upon the parties.
(4) The making of an award upon any dispute or difference capable of
being submitted to arbitration pursuant to this clause shall be a condition
precedent to any action upon such dispute or difference, it being expressly
agreed that no cause of action shall arise upon such dispute or difference until
the making of an award as aforesaid.
6. (l) IN THIS LEASE, unless the contrary intention appears -
"Minister" means the Minister for Mines and Energy, or such other
Minister for the Territory as may be charged with the
administration of the Act;
"Technical Report" means the Technical Report - Mereenie Field Project
- Appraisal Programme approved by the Minister on the 16th day
of November 1981 together with such modifications or
amendments that are approved by the Minister from time to
time.
<PAGE>
(2) For the purposes of this lease, the expression "good oilfield
practice", wherever occurring in this lease, shall include the requirement that
the land will be developed in accordance with the technology which, from time to
time, is determined in writing by the Minister to be the most appropriate
technology and which causes the least damage to the natural resources of the
land, including the fauna and flora, and the least damage to or pollution or
degradation of the natural environment.
SIGNED by IAN LINDSAY TUXWORTH, )
)
Minister for Mines and Energy, for )
)
and on behalf of the Northern )
)
Territory of Australia in the )
)
presence of )
/s/ Ian Lindsay Tuxworth
............................................
THE COMMON SEAL of MAGELLAN )
)
PETROLEUM (N.T.) PTY LTD was )
)
hereunto affixed by authority of )
)
the Directors in the presence of )
/s/ Roy M. Hopkins
Director ..........................
/s/ Hedley Howard
Secretary ..........................
<PAGE>
SCHEDULE 1
ALL THAT piece or parcel of land in the Territory containing an area of 15,780
hectares, more or less, the boundaries of which are delineated on plans of
survey No. S73/102A and S73/102B, which plans are deposited with the
Surveyor-General of the Territory. The said boundaries are described as follows:
Commencing at an original concrete block marked "3" which is shown on plan of
survey No. O.P. 1334 and which is situated at the intersection of latitude
24(degree)0'0" with longitude 131(degree)32'40" thence proceeding by a line
bearing 90(degree)0'0" for a distance of 4,377.4 metres to the intersection of
latitude 24(degree)0'0" with longitude 131(degree)35'15", thence proceeding by a
line bearing 90(degree)0'30" for a distance of 4,754.43 metres to the
intersection of latitude 24(degree)0'0" with longitude 131(degree)38'3", thence
proceeding by a line bearing 118(degree)8'30" for a distance of 14,665.34 metres
to the intersection of latitude 24(degree)3'45" with longitude 131(degree)45'41"
thence proceeding by a line bearing 208(degree)30'0" for a distance of 7,440.82
metres to the intersection of latitude 24(degree)7'17" with longitude
131(degree)43'35", thence proceeding by a line bearing 298(degree)33'30" for a
distance of 28,140.1 metres to the intersection of latitude 24(degree)0'0" with
longitude 131(degree)29'0", thence proceeding by a line bearing 89(degree)59'30"
for a distance of 2,544.42 metres to the intersection of latitude 24(degree)0'0"
with longitude 131(degree)30'30", thence proceeding by a line bearing
90(degree)0'0" for a distance of 3,669.32 metres to the point of commencement.
<PAGE>
SCHEDULE 2
THIS AGREEMENT made the 18th day of November One thousand nine hundred and
eighty-one BETWEEN the NORTHERN TERRITORY OF AUSTRALIA (hereinafter called "the
Territory") of the one part and MAGELLAN PETROLEUM (N.T.) PTY LTD, UNITED CANSO
OIL & GAS CO. (N.T.) PTY LTD, OILMIN (N.T.) PTY LTD and TRANSOIL (N.T.) PTY LTD
being companies incorporated under the Companies Act of the State of Queensland
and having their registered offices in the Territory care of Veritatem Nominees
(N.T.) Pty Ltd, 5th Floor, City Mutual Building, 62 Cavenagh Street, Darwin in
the Territory, KREWLIFF INVESTMENTS PTY LTD a company incorporated under the
Companies Act of the State of New South Wales and having its registered office
in the Territory care of Veritatem Nominees (N.T.) Pty Ltd, 5th Floor, City
Mutual Building, 62 Cavenagh Street, Darwin, and FARMOUT DRILLERS N.L. a company
incorporated under the Companies Ordinance of the Australian Capital Territory
and having its registered office in the Territory care of Wilson, Bishop, Bowes
& Craig, City Mutual Building, 62 Cavenagh Street, Darwin (hereinafter called
"the Joint Companies" which expression shall, where the context so admits,
include their successors and permitted assigns) of the other part WHEREAS the
Joint Companies are desirous that petroleum leases be granted in respect of the
land described in Schedule 1 to the lease and transferred into the names of the
Joint Companies AND WHEREAS the Joint Companies are prepared in return for the
granting of such leases, and subject to certain conditions, to undertake the
construction of an oil refinery and otherwise the development of an oil refinery
in the Territory.
NOW THIS AGREEMENT WITNESSETH as follows:
INTERPRETATION
1. (l) In this Agreement, unless the contrary intention appears -
"Minister" means the Minister for Mines and Energy, or such other
Minister for the Territory as may be charged with the
administration of the Act;
"the Act" means the Petroleum (Prospecting and Mining) Act of the
Territory;
<PAGE>
"the petroleum leases" means the petroleum leases to be granted in
respect of the lands described in Schedule 1 to the lease;
"the Territory" means, according to the context, the body politic
established by the Northern Territory (Self-Government) Act
1978 of the Commonwealth as the Northern Territory of
Australia or the geographical area constituting the Northern
Territory of Australia.
(2) Any reference to an Act means that Act as amended from time to time
or any Act in substitution for that Act.
(3) In this Agreement, unless the contrary intention appears, words in
the singular include the plural and words in the plural include the singular.
(4) For the purposes of this Agreement, the expression "good oilfield
practice" wherever occurring in this Agreement shall include the requirement
that the land shall be developed in accordance with the technology which, from
time to time, is determined in writing by the Minister to be the most
appropriate technology and which causes the least damage to natural resources of
the land, including fauna and flora, and the least damage to or pollution or
degradation of the natural environment.
OPERATION OF AGREEMENT
2. (1) This Agreement shall have no force or effect and shall not be
binding on either party unless and until it is approved by an Act of the
Territory.
(2) Acts or things which have been done or carried out by or on behalf
of a party to this Agreement prior to the coming into force of this Agreement
but which were done or carried out in contemplation of this Agreement and in
accordance with its provisions shall, so far as is appropriate and practicable,
be deemed to have been done or carried out under and for the purposes of this
Agreement.
<PAGE>
INVESTIGATIONS AND CONSTRUCTION BY JOINT COMPANIES
3. (1) On the ratification of this Agreement in the manner provided in
clause 2, the Joint Companies shall actively continue their investigations into
the feasibility and economics of constructing the oil refinery the subject of
this Agreement and shall, subject to sub-clause (4) of this clause, if requested
so to do from time to time by the Minister on 3 years notice, construct an oil
refinery in accordance with the terms of this Agreement.
(2) Where the Joint Companies notify the Territory that they desire to
proceed with the construction of the oil refinery, then from the date such
notification is received by the Territory the whole of the provisions of this
Agreement which are not already in operation shall come into operation and be
binding on the parties.
(3) In the event of the Joint Companies notifying the Territory of
their intention to proceed to construct the oil refinery under sub-clause (2) of
this clause, the Joint Companies shall undertake and complete within 3 years (or
such extended period as the Minister shall agree to) of the Joint Companies so
notifying the Territory, the construction of an oil refinery of such capacity
and at such place as is agreed between the Joint Companies and the Minister.
(4) If the Joint Companies, within the 3 years referred to in
sub-clause (1) of this clause, notify the Territory that, in their judgment, the
construction of the oil refinery is not justified (the reasons for which
decision they shall notify the Territory and shall support such notification
with reasonably detailed data as to such technical or economic factors involved
as are relevant and pertain to the lease area) then from the date of such
notification, upon the Minister being satisfied in respect of the reasons
advanced by the Joint Companies the request of the Minister referred to in
sub-clause (1) of this clause shall lapse and upon such lapsing of any such
request by the Minister no further request shall be made by the Minister
pursuant to sub-clause (1) of this clause until the expiration of 2 years after
such lapsing of the prior request.
<PAGE>
(5) In determining the economic viability of the oil refinery, regard
shall be had to the economic viability of the oil refinery, its associated
pipeline and the production of petroleum and petroleum products from the
petroleum leases.
(6) The Joint Companies shall not be required to construct a refinery
of a greater capacity than that which is necessary to refine the crude oil
capable of being produced from the lands comprised in the said petroleum leases
provided however that the Joint Companies shall be entitled to construct an oil
refinery of such greater capacity as they may elect.
(7) Upon the Minister making a request pursuant to sub-clause (1) of
this clause or upon the Joint Companies notifying the Territory pursuant to
sub-clause (2) of this clause, no increase shall thereafter be made in the rate
of royalty payable pursuant to the Act in respect of the petroleum leases unless
the request of the Minister shall have lapsed pursuant to sub-clause (4) of this
clause or the Joint Companies shall have made default in respect of their
obligation to construct an oil refinery pursuant to this Agreement.
PIPELINE
4. (1) If the Joint Companies are requested under sub-clause (1) of clause
3 or give notice pursuant to sub-clause (2) of clause 3 of their desire to
construct the oil refinery, then the Joint Companies shall be entitled to a
licence for transport of petroleum between the lease area and the oil refinery.
(2) The Joint Companies may, by notice in writing to the Minister,
elect to construct the pipeline and, on making such election, shall provide to
the Minister full and detailed plans and specifications for the construction of
the pipeline.
(3) The Joint Companies shall apply for the necessary pipeline licence
or other authorization necessary to construct and operate the pipeline, whether
under the Petroleum (Prospecting and Mining) Act or another law of the
Territory.
<PAGE>
(4) The Joint Companies shall comply with all relevant laws,
regulations and statutory provisions governing the construction of the pipeline.
INVESTIGATIONS BY THE JOINT COMPANIES
5. (1) The Joint Companies shall diligently pursue such matters as are
necessary to enable them to submit proposals to the Territory under clauses 6
and 7 of this Agreement.
(2) The Joint Companies shall, from time to time and upon request by
the Territory, advise the Territory in reasonable detail as to the progress of
matters referred to in clauses 6 and 7 of this Agreement.
(3) If the Territory concurrently carries out its own investigations
and reconnaissances in regard to all or any of the matters referred to in
sub-clause (1) of this clause, the Joint Companies shall co-operate with the
Territory and, so far as reasonably practicable, shall consult with the
representatives or officers of the Territory and make full disclosures and
expressions of opinion regarding matters referred to in this clause.
(4) When submitting to the Minister the proposals referred to in
clauses 6 and 7 of this Agreement the Joint Companies shall, so far as is
reasonably practicable, ensure that such proposals -
(a) provide for the best overall development of the oil refinery
area; and
(b) disclose any conditions of use then in contemplation and where
alternative proposals are submitted the Joint Companies'
preferences in relation to such matters.
<PAGE>
REFINERY LOCATION PROPOSAL
6. (1) As soon as the Joint Companies are ready to do so and in any event
not later than the thirty-first day of December 1982, the Joint Companies shall
submit to the Minister their proposal for the location of an oil refinery and
the sites for and general design of the road and railway terminal including
areas for installations, stockpiling, railways and other purposes in the oil
refinery area.
(2) At any time prior to the thirty-first day of December 1982, the
Joint Companies may give notice to the Territory that they reasonably require
the reservation until the thirty-first day of December 1987, of an area or areas
of Crown land and land at or near Alice Springs for possible development by the
Joint Companies for an oil refinery site and road and rail access to and from
that area.
(3) Immediately upon and after the giving of a notice pursuant to
sub-clause (2) of this clause the Territory (unless the Joint Companies
otherwise agree) shall take all practicable administrative steps to prevent any
development at Alice Springs or elsewhere which would be likely to interfere
with the development by the Joint Companies of the oil refinery site and road
and rail access thereto under the terms of this Agreement.
DETAILED PROPOSALS BY JOINT COMPANIES
7. Upon agreement being reached or a determination being made as to the Joint
Companies' proposal under clause 6 of this Agreement, the Joint Companies shall
proceed with the implementation of the proposal so agreed or determined and
shall, from time to time, submit to the Minister to the fullest extent
reasonably practicable their detailed proposals (including plans and
specifications) with respect to the following:
(a) the road between the lease area and the oil refinery area and
ancillary works;
(b) town sites on or near the lease area and near the oil refinery
and the development of services and facilities in relation
thereto;
<PAGE>
(c) housing;
(d) water supply; and
(e) any other infrastructure works, services or facilities
proposed by the Joint Companies.
CONSIDERATION OF DETAILED PROPOSALS
8. (1) Within 2 months after receipt of the detailed proposals of the
Joint Companies in regard to any of the matters referred to in clause 7 of this
Agreement, the Minister shall give to the Joint Companies notice either of his
approval of the proposals or of alterations desired and, in the latter case,
shall afford to the Joint Companies opportunity to consult with and submit new
proposals to the Minister. The Minister may make such reasonable alterations to
or impose such reasonable conditions on the proposals or new proposals, as the
case may be, as he thinks fit, but the Minister shall, in any notice to the
Joint Companies, disclose his reasons for any such alteration and condition AND
PROVIDED THAT the Minister shall not make alterations to or impose conditions on
the proposals or new proposals in so far as they relate to the location of the
oil refinery site as previously determined.
(2) Any dispute or difference between the Joint Companies and the
Minister in respect of alterations made by the Minister to, or conditions
imposed by the Minister on, proposals or new proposals, as the case may be,
referred to in sub-clause (1) of this clause, shall be settled in accordance
with the manner set out in clause 19 of this Agreement.
OPERATION OF FACILITIES
9. (1) Throughout the continuance of this Agreement the Joint
Companies shall -
<PAGE>
(a) except to the extent that the Joint Companies' proposals as
finally approved or determined as herein provided otherwise
provide allow the general public to use any roads (to the
extent that it is reasonable and practicable so to do)
constructed or upgraded by the Joint Companies PROVIDED THAT
such use shall not unduly prejudice or interfere with the
Joint Companies' operations;
(b) in the construction, operation, maintenance and use of any
work, installation, plant, machinery, equipment, service or
facility provided or controlled by the Joint Companies comply
with and observe the provisions of this Agreement and the laws
for the time being in force in the Territory;
(c) at all times keep and maintain in good repair and working
order and condition and, where necessary, replace all such
work, installation, plant, machinery and equipment and the
roads and water and electrical supplies for the time being the
subject of this Agreement;
(d) use its best endeavours to obtain the best price possible in
relation to petroleum and petroleum products and condensate
sold; and
(e) so far as reasonably and economically practicable, use labour,
materials, plant, equipment and supplies available within the
Territory where it is not prejudicial to the interests of the
Joint Companies so to do.
MUTUAL COVENANTS
10. The parties hereto COVENANT AND AGREE with each other as follows:
<PAGE>
(a) that subject to and in accordance with the proposals approved
or determined as hereinbefore provided the Joint Companies for
their purposes and for domestic and other purposes in relation
to the oil refinery may, to the extent determined by the
Minister but notwithstanding any Act, bore for water,
construct catchment areas, store (by dams or otherwise) take
and charge for water from any Crown lands available for the
purpose and generate, transmit, supply and charge for
electrical energy and the Joint Companies shall have all such
powers and authorities with respect to water and electrical
energy as are determined by the Minister (and as are accepted
by the Joint Companies) for the purposes of this Agreement;
(b) that the Joint Companies may use any public roads which may,
from time to time, exist in the area of its operations for the
purpose of transportation of goods and materials in connection
with such operations PROVIDED NEVERTHELESS that the Joint
Companies shall on demand pay to the Territory the cost of
making good any damage to such roads occasioned by the Joint
Companies' use;
(c) that the Territory will at the request and cost of the Joint
Companies widen, upgrade or re-align any public road over
which the Territory has control;
(d) that on the cessation or determination of any lease, licence
or easement granted hereunder by the Territory to the Joint
Companies or (except as otherwise agreed by the Minister) to
an associated company or other assignee of the Joint Companies
under this Agreement of land for the Joint Companies' oil
refinery the improvements and things other than plant,
machinery, equipment and installations erected on the relevant
land and provided in connection with the oil refinery shall
remain or become the absolute property of the Territory
without compensation and freed and discharged from all
mortgages and encumbrances and the Joint Companies shall do
and execute such documents and things (including surrenders)
as the Territory may reasonably require to give effect to this
provision. In the event of the Joint Companies, immediately
prior to such expiration or determination or subsequent
thereto, deciding to remove its plant, machinery, equipment
<PAGE>
and installations or any of them from any land it shall not do
so without first notifying the Territory of its decision and
thereby granting to the Territory the right or option
exercisable within 3 months thereafter to purchase at
valuation in situ the said plant, machinery, equipment and
installations or any of them. Such valuation shall be mutually
agreed or in default of agreement shall be made by such
competent valuer as the parties may appoint or falling
agreement as to such appointment then by 2 competent valuers
one to be appointed by each party or by an umpire appointed by
such valuers should they fail to agree;
(e) that without affecting the liabilities of the parties under
this Agreement either party shall have the right from time to
time to entrust to third parties the carrying out of any
portions of the operations which it is authorized or obligated
to carry out hereunder;
(f) that notwithstanding the provisions of any Act or any thing
done or purported to be done under any Act the valuation of
all lands (whether of a freehold or leasehold nature) the
subject of this Agreement (except as to any part upon which a
permanent residence shall be erected or which is occupied in
connection therewith) for rating purposes shall be deemed to
be on the unimproved capital value thereof and no such lands
shall be subject to any discriminatory rate;
(g) that in any of the following events, namely, if the Joint
Companies shall make default in the due performance or
observance of any of the covenants or obligations to the
Territory herein or in any lease, sublease, licence or other
title or document granted or assigned under this Agreement on
their part to be performed or observed and shall fail to
remedy that default within reasonable time after notice
specifying the default is given to them by the Territory (or -
if the alleged default is contested by the Joint Companies
and promptly submitted to arbitration - within a reasonable
time fixed by the arbitration award where the question is
decided against the Joint Companies the arbitrator finding
that there was a bona fide dispute and that the Joint
Companies had not been dilatory in pursuing the arbitration)
or if the Joint Companies shall abandon or repudiate their
<PAGE>
operations under this Agreement or if the Joint Companies
shall go into liquidation (other than a voluntary liquidation
for the purpose of reconstruction) then and in any of such
events the Territory may, by notice to the Joint Companies,
determine this Agreement and thereupon or if the Joint
Companies shall surrender the entire oil refinery area the
rights of the Joint Companies under any lease, licence,
easement or right granted hereunder or pursuant hereto shall
thereupon determine PROVIDED HOWEVER that if the Joint
Companies shall fail to remedy any default (not being a
default in respect of their obligation to construct an oil
refinery pursuant to clause 3 of this Agreement) after such
notice or within the time fixed by the arbitration award as
aforesaid the Territory, instead of determining this Agreement
as aforesaid because of such default may itself remedy such
default or cause the same to be remedied (for which purpose
the Territory by agents workmen or otherwise shall have full
power to enter upon lands occupied by the Joint Companies and
to make use of all plant, machinery, equipment and
installations thereon) and the costs and expenses incurred by
the Territory in remedying or causing to be remedied such
default shall be a debt payable by the Joint Companies to the
Territory on demand; and
(h) that -
(i) for the purposes of determining whether and the
extent to which -
(A) the Joint Companies are liable to any person
or body corporate (other than the
Territory); or
<PAGE>
(B) an action is maintainable by any such person
or body corporate in respect of the death or
injury of any person or damage to any
property arising out of the use of any of
the roads for the maintenance of which the
Joint Companies are responsible hereunder
and for no other purpose the Joint Companies
shall be deemed to be a municipality and the
said roads shall be deemed to be streets
under the care control and management of the
Joint Companies; and
(ii) for the purposes of this paragraph the terms
"municipality" and "road" shall have the meanings
which they respectively have in the Local Government
Act.
TERRITORY'S OBLIGATIONS
11. The Territory shall, in accordance with the Joint Companies' proposals as
finally approved or determined as hereinbefore provided and as otherwise
required by the Joint Companies to enable them to meet their obligations
hereunder, grant to the Joint Companies in fee simple or for such terms or
periods and on such terms and conditions (including renewal rights) as subject
to the proposals (as finally approved or determined as aforesaid) and other
obligations of the Joint Companies hereunder shall be reasonable having regard
to the requirements of the Joint Companies hereunder and obligations of the
Joint Companies hereunder, lands, leases, rights or easements whether under the
Petroleum (Prospecting and Mining) Act or under the provisions of the Crown
Lands Act or any other Act (as the case may require) as the Joint Companies
reasonably require for their works and operations hereunder including the
construction or provision of the roads, water supplies and stone and soil for
construction purposes.
<PAGE>
ALTERATION OF INSTALLATIONS
12. If, at any time, the Territory finds it necessary to request the Joint
Companies to alter the situation of any of the installations or other works
erected, constructed or provided pursuant to the Joint Companies' detailed
proposals and gives to the Joint Companies notice of the request the Joint
Companies shall, within a reasonable time after receipt of the notice but at the
expense in all things (including increased operating costs) of the Territory
(unless the alteration is rendered necessary by reason of a breach by the Joint
Companies of any of its obligations hereunder), alter the situation accordingly.
DEFAULT
13. (1) In the event that the Joint Companies shall make default of their
obligation to construct an oil refinery (whether jointly or severally) pursuant
to the provisions of clause 3 of this Agreement then as and from the date of
such default as is determined by the Minister (or if the default is contested by
the Joint Companies then as and from the date such default is confirmed by the
arbitration award) the Joint Companies covenant (jointly and severally) that
they shall upon demand pay to the Territory by way of liquidated damages an
amount equal in value to an amount per barrel determined pursuant to sub-clause
(2) of this clause on all crude oil produced from the lands comprised in the
said petroleum leases during the term of the said leases and any renewals or
extensions thereof or during the period which may elapse until the Joint
Companies shall have remedied their default pursuant to this clause 13
(whichever is the shorter period).
(2) The amount per barrel from time to time payable pursuant to
sub-clause (1) of this clause shall be the amount which is the greater of -
(a) $3.00 per barrel; and
<PAGE>
(b) $2.00 per barrel plus 10% of the amount per barrel by which
the import parity price of crude oil determined by the
Commonwealth of Australia from time to time less the amount of
the levy or other similar impost of the Commonwealth of
Australia in respect of the Mereenie Field exceeds from time
to time the sum of $27.50 (comprising the present estimated
import parity price of $30.50 less the levy applicable to the
Mereenie Field of $3.00).
(3) In the event such default as is referred to in sub-clause (1) of
this clause being contested the amount payable by way of liquidated damages
shall be paid, notwithstanding any arbitration proceedings, by the Joint
Companies into a trust account approved by the Minister.
(4) If it is finally determined by such arbitration proceedings that
the Joint Companies have not made such default all moneys paid to the said trust
account by the Joint Companies shall be refunded to them together with interest
thereon computed at the then Commonwealth long term bond rate.
INDEMNITY TO TERRITORY
14. The Joint Companies shall indemnify and keep indemnified the Territory and
its servants, agents and contractors in respect of all actions, suits, claims,
demands or costs of third parties arising out of or in connection with the
construction, maintenance or use by the Joint Companies or their servants,
agents, contractors or assignees of the Joint Companies' oil refinery or other
works or services the subject of this Agreement or the plant, apparatus or
equipment installed in connection therewith and shall, if requested so to do by
the Minister, insure in the name of themselves and the Territory against any
liability that may arise under this Agreement.
ASSIGNMENT
15. (1) The Joint Companies or any one or more of the Joint Companies
may, at any time with the consent in writing of the Minister -
<PAGE>
(a) assign, mortgage, charge, sublet or otherwise dispose of as of
right all or any right under this Agreement;
(b) assign, mortgage, charge, sublet or otherwise dispose of as of
right to any other associated company all or any right under
this Agreement;
(c) assign, mortgage, charge, sublet or otherwise dispose of to
any other company or person all or any right under this
Agreement (including a right to or as the holder of any lease,
licence, easement, grant or other title) and of the
obligations of the Joint Companies under this Agreement; and
(d) appoint any other company or person to exercise all or any of
the powers, functions and authorities which are or may be
conferred on the Joint Companies under this Agreement,
subject however to the assignee or (as the case may be) the appointee executing
in favour of the Territory a deed of covenant in a form to be approved by the
Minister to comply with observe and perform the provisions hereof on the part of
the Joint Companies to be complied with observed or performed in regard to the
matter or matters so assigned or (as the case may be) the subject of the
appointment.
(2) Notwithstanding anything contained in or anything done under or
pursuant to sub-clause (1) of this clause the Joint Companies shall at all times
during the currency of this Agreement be and remain liable for the due and
punctual performance and observance of all the covenants and agreements on their
part contained herein and in any lease, licence, easement, grant or other title
the subject of an assignment under sub-clause (1) of this clause PROVIDED
HOWEVER that the Minister may agree to release the Joint Companies or any one or
more of them from such liability where having regard to all the circumstances of
any such assignment, mortgaging, charging, subletting, disposition or
appointment as referred to in sub-clause (1) of this clause he considers such
release will not be contrary to the interest of the Territory under this
Agreement.
<PAGE>
VARIATION OF AGREEMENT
16. The parties hereto may from time to time by mutual agreement in writing add
to, cancel or vary all or any of the provisions of this Agreement or of any
lease, licence, easement or right granted hereunder or pursuant hereto for the
purpose of implementing or facilitating the carrying out of such provisions or
for the purpose of facilitating the carrying out of some separate part or parts
of the Joint Companies' operations hereunder by any other company with which the
Joint Companies may have entered into association as a separate and distinct
operation or for the establishment or development of any industry making use of
the petroleum within the lease area or such of the Joint Companies' works,
installations, services or facilities the subject of this Agreement as shall
have been provided by the Joint Companies in the course of work done under this
Agreement.
DELAYS
17. This Agreement shall be deemed to be made subject to any delays in the
performance of obligations under this Agreement and to the temporary suspension
of continuing obligations hereunder which may be occasioned by or arise from
circumstances beyond the power and control of the party responsible for the
performance of such obligations including delays or such temporary suspension as
aforesaid caused by or arising from an act of God, force majeure, floods,
storms, tempests, washaways, fire (unless caused by the actual fault or privity
of the Joint Companies), act of war, act of public enemies, riots, civil
commotions, strikes, lockouts, stoppages, restraint of labour or other similar
acts (whether partial or general), shortages of labour or essential materials,
reasonable failure to secure contractors, delays of contractors, an inability
(common in the petroleum industry) to profitably sell petroleum or factors due
to Australian or overall work economic conditions or factors which could not
reasonably have been foreseen PROVIDED ALWAYS that the party whose performance
of obligations is affected by any of the said causes shall use its best
endeavours to minimize the effect of the said causes as soon as possible after
their occurrence and that no party shall be required to settle or compromise any
strike or labour dispute or similar occurrence to its disadvantage.
<PAGE>
EXTENSION OF TIME
18. (1) Notwithstanding any provision hereof the Minister may at the
request of the Joint Companies from time to time extend any period or date
referred to in this Agreement for such period or to such later date as the
Minister thinks fit and the extended period or later date when advised to the
Joint Companies by notice from the Minister shall be deemed for all purposes
hereof substituted for the period or date so extended.
(2) The Territory acknowledges that the 3 year period respectively
referred to in sub-clauses (1) and (3) of clause 3 of this Agreement for the
commencement and completion of the project covered by proposals referred to in
clauses 6 and 7 of this Agreement have been agreed on the basis that each of
such proposals would be determined within 2 months of its submission. If such is
not the case the Joint Companies shall be entitled to extend the periods for
commencement and completion by such period as they shall demonstrate to be
reasonable under the circumstances.
ARBITRATION
19. (1) Any dispute or difference between the parties arising out of or in
connection with this Agreement or any agreed amendment or variation thereof or
agreed addition thereto or as to the construction of this Agreement or any such
amendment variation or addition or as to any of the rights duties or liabilities
of either party thereunder or as to any matter to be agreed upon between the
parties under this Agreement shall in default of agreement between the parties
and in the absence of any provision in this Agreement to the contrary be
referred to and settled by arbitration under the provisions of the Arbitration
Act of the State of South Australia in its application to the Territory or such
other Act in relation to the law of arbitration that has general application in
the Territory.
(2) Without limiting the generality of this clause there may be
referred to arbitration under this clause any dispute or difference concerning
the oil refinery including the following:
(a) the location and capacity of the oil refinery;
<PAGE>
(b) whether the construction of an oil refinery is not
economically viable and the Minister's request referred to in
sub-clause (1) of clause 3 of this Agreement should lapse;
(c) whether the Joint Companies have satisfied the oil refinery
obligation pursuant to this Agreement; and
(d) whether the Joint Companies are in default in their obligation
with respect to the construction of an oil refinery pursuant
to this Agreement.
(3) The arbitrator, arbitrators or umpire (as the case may be) of any
submission to arbitration hereunder is hereby empowered upon application by
either party hereto to grant any interim extension of time or date referred to
herein which, having regard to the circumstances, may reasonably be required in
order to preserve the rights of either or both parties hereunder and an award in
favour of the Joint Companies may, in the name of the Minister, grant any
further extension of time for that purpose.
NEW PROCESSES
20. Nothing in this Agreement shall in any way prevent or limit the Joint
Companies at their sole discretion from adopting for the discharge of their
obligations hereunder new processes or equipment incorporating the latest
technical developments from time to time available whether or not used by the
Joint Companies elsewhere in their operations.
NOTICES
21. A notice, consent or other writing authorized or required by this Agreement
to be given or sent shall be deemed to have been duly given or sent by the
Territory if signed by the Minister or by a senior officer of the Public Service
of the Territory acting on the direction of the Minister and forwarded by
prepaid post to each of the Joint Companies at their respective registered
offices for the time being in the Territory or other offices in the Territory
nominated in writing by the respective Companies by the Joint Companies if
<PAGE>
signed on their behalf by a managing director or a secretary or by any other
person or persons authorized by the Joint Companies in that behalf or by their
solicitors as notified to the Territory from time to time and forwarded by
prepaid post to the Minister and any such notice, consent or writing shall be
deemed to have been duly given or sent on the day on which it would be delivered
in the ordinary course of post.
LAW OF AGREEMENT
22. This Agreement shall be interpreted according to the law for the time being
in force in the Territory.
IN WITNESS WHEREOF the Minister for Mines and Energy has for and on behalf of
the Territory hereunto set his hand and the Joint Companies have hereunto
affixed their common seals the day and year first above written.
SIGNED SEALED AND DELIVERED )
)
by IAN LINDSAY TUXWORTH, the )
)
Minister for Mines and Energy, for )
)
and on behalf of the Northern )
)
Territory of Australia )
/s/ Ian Lindsay Tuxworth
............................................
THE COMMON SEAL of MAGELLAN )
)
PETROLEUM (N.T.) PTY LTD was )
)
hereunto affixed by authority of )
)
the Directors in the presence of )
/s/ Roy M. Hopkins
Director ..........................
/s/ Hedley Howard
Secretary ..........................
<PAGE>
THE COMMON SEAL of UNITED CANSO )
)
OIL & GAS CO. (N.T.) PTY LTD )
)
was hereunto affixed by authority )
)
of the Directors in the presence of )
/s/ Roy M. Hopkins
Director ..........................
/s/ Hedley Howard
Secretary ..........................
THE COMMON SEAL of OILMIN )
)
(N.T.) PTY LTD was hereunto )
)
affixed by authority of the Directors )
)
in the presence of )
/s/
Director ..........................
/s/
Secretary ..........................
THE COMMON SEAL of TRANSOIL )
)
(N.T.) PTY LTD was hereunto )
)
affixed by authority of the Directors )
)
in the presence of )
/s/
Director ..........................
/s/
Secretary ..........................
<PAGE>
THE COMMON SEAL of KREWLIFF )
)
INVESTMENTS PTY LTD was hereunto )
)
affixed by authority of the Directors )
)
in the presence of )
/s/
Director ..........................
/s/
Secretary ..........................
THE COMMON SEAL of FARMOUT )
)
DRILLERS N.L. was hereunto )
)
affixed by authority of the Directors )
)
in the presence of )
/s/
Director ..........................
/s/
Secretary ..........................
G A S S A L E S A G R E E M E N T B E T W E E N
THE PALM VALLEY PRODUCERS
AND
THE NORTHERN TERRITORY ELECTRICITY COMMISSION
DATED NOVEMBER 11, 1981
<PAGE>
INDEX
Page
3-5 Article I - Definitions
5-7 Article II - Preliminary
8 Article III - Purchase and Sale of Gas
9 Article IV Term of Agreement
9-12 Article V - Price
12-13 Article VI - Adjustment of Gas to Specification
13-17 Article VII - Measurement
17-19 Article VIII - Billing and Payment
19-20 Article IX - Possession of Gas
20-21 Article X - Indemnification and Warranties
21-22 Article XI - Force Majeure
22-23 Article XII - Arbitration
24 Article XIII - Miscellaneous Provisions
25 Article XIV - Assignment
26 Article XV - Stamp Duty
26 Article XVI - Notices
27 Article XVII - Confidentiality
27-28 Article XVIII - Approvals and Consents
28 Article XIX - Severability of Clauses
29-30 Schedule I - Specification Natural Gas
31-32 Schedule II - Annual Minimum and Maximum Aggregate
Quantities of Specification Natural Gas
33 Schedule III - Price Review Formula
34-35 Schedule IV - Typical Monthly Gas Computation Sheet
<PAGE>
T H I S A G R E E M E N T made the eleventh day of November One thousand nine
hundred and eighty one (1981).
BETWEEN: MAGELLAN PETROLEUM (NT) PTY. LTD. a Company duly incorporated
in the State of Queensland and having its registered office in
the Northern Territory care of Veritatem Nominees Pty. Ltd.,
5th floor, City Mutual Building, 62 Cavenagh Street, Darwin
(hereinafter referred to as "Magellan" which expression shall,
where the context so admits, include its successors and
permitted assigns) of the first part.
FARMOUT DRILLERS N.L. a Company duly incorporated in the
Australian Capital Territory and having its registered office
in the Northern Territory care of Wilson, Bishop, Bowes &
Craig, City Mutual Building, 62 Cavenagh Street, Darwin
(hereinafter referred to as "Farmout" which expression shall,
where the context so admits, include its successors and
permitted assigns) of the second part.
C.D. RESOURCES PTY. LTD. a Company duly incorporated in the
State of South Australia and having its registered office in
the Northern Territory care of Coopers & Lybrand, Civic
Centre, Harry Chan Avenue, Darwin (hereinafter referred to as
"CDR" which expression shall, where the context so admits,
include its successors and permitted assigns) of the third
part (each of Magellan, Farmout and CDR being sometimes
referred to herein as "a Producer" and all of them
collectively being sometimes referred to as "the Producers").
AND: The NORTHERN TERRITORY ELECTRICITY COMMISSION having its
office at 59 Smith Street, Darwin (hereinafter referred to as
"the Purchaser") of the fourth part.
<PAGE>
WHEREAS: (a) Magellan is the holder of Oil Permit 175 issued on
the twenty-seventh day of May 1970 pursuant to the
Petroleum (Prospecting and Mining) Act, of the
Northern Territory (hereinafter referred to as "the
Petroleum Act").
(b) By application dated the fifteenth day of October
1976 Magellan duly applied pursuant to the Petroleum
Act for the grant of a petroleum lease (hereinafter
referred to as "the Petroleum Lease") over an area in
Oil Permit 175 which includes the Palm Valley gas
field.
(c) Upon the grant of the Petroleum Lease Magellan
intends pursuant to agreements approved by the
Minister under the Petroleum Act to transfer to each
of Farmout and CDR an undivided working interest of
9.375 percent in the Petroleum Lease and to register
those interests against the lease.
(d) The Producers intend to develop existing and
potential reserves of recoverable natural gas at Palm
Valley Gas Field (hereinafter referred to as "the Gas
Field") which upon the grant of the said Petroleum
Lease will be separately owned by each of the
Producers in the following percentages:
Magellan 81.250
Farmout 9.375
CDR 9.375
(e) The Purchaser wishes to purchase and each of the
Producers in the aforesaid percentages agree to sell
such quantities of Specification Natural Gas on such
terms and conditions as are contained in the body,
articles and attachments herein.
<PAGE>
NOW THIS AGREEMENT WITNESSETH:
ARTICLE I - DEFINITIONS
As used herein, the following words and terms shall have the meanings set forth
below:
1.1 "Cubic Metre of Gas" shall mean the amount of gas which will occupy a
space of one (1) cubic metre when such gas is at a temperature of
fifteen degrees (15(degree)) Celsius and at a pressure of 101.325
kilopascals absolute.
1.2 "Gross Heating Value" shall mean the quantity of heat produced in
megajoules, by the complete combustion at constant pressure, of one (1)
Cubic Metre of Gas when saturated with water vapour, (at a temperature
of fifteen degrees (15(degree)) Celsius and at a pressure of 101.325
kilopascals with air of the same temperature and pressure as the gas,
when the products of combustion are cooled to the initial temperature
of the gas and air and when the water formed by combustion is condensed
to the liquid state.
1.3 "Specification Natural Gas" is natural gas meeting those specifications
stated in Schedule I attached.
1.4 "Gas Field" is a gas reservoir or series of reservoirs within the
Petroleum Lease which contain underground reserves of natural gas.
1.5 "Gas Delivery System" includes all gas wells, equipment, easements,
permits and licences necessary to gather safely gas from the Gas Field,
separate liquids, dry, compress, pipe to the Field Delivery Station,
meter, and record the Specification Natural Gas.
1.6 "Field Delivery Station" means those facilities located adjacent to the
Producers' gas treatment plant and connecting the Gas Delivery System
to the start of the Trunk Pipeline.
<PAGE>
1.7 "Trunk Pipeline" means the single high pressure gas pipeline which
commences at or near the Field Delivery Station and terminates at Alice
Springs.
1.8 "Contract Year" means a period of twelve (12) consecutive months
beginning on the date on which deliveries of gas commence PROVIDED
HOWEVER that if such deliveries or take and/or pay obligations commence
on a date other than 1st July, then the first Contract Year shall be
apportioned to end at 8.00 am on the 1st of July next following and
thereafter each Contract Year shall begin and end at 8.00 am (Central
Standard Time) on the 1st of July each year.
1.9 "Quarter" means a period of three (3) calendar months commencing at
8.00 am on 1st of July or 1st of October or 1st of January or 1st of
April in each Contract Year.
1.10 "Review Date" for price adjustment means the first day of the quarter
in which deliveries of gas first commence or take and/or pay provisions
become effective hereunder and the first day of each Quarter
thereafter.
1.11 "Billing Period" means the period commencing at 8.00 am on the first
day of the month and concluding at 8.00 am on the first day of the next
succeeding month.
1.12 "Consumer Price Index" means the Consumer Price Index (All Groups)
Weighted Average of Seven Capital Cities published for each Quarter by
the Australian Bureau of Statistics.
1.13 Terminology used to describe units shall be, unless otherwise stated,
in accordance with Australian Standard AS1000-1979 "The International
System of Units (SI) And Its Application", the Commonwealth "Weights
and Measures (National Standards) Act 1960-1966" and Regulations
thereunder and the Australian Gas Association booklet titled "Metric
Units And Conversion Factors For Use In The Australian Gas Industry".
<PAGE>
1.14 "Well" means a hole in the ground made by drilling, boring or in any
other manner through which is recovered natural gas from or deemed to
be from any part of the Gas Field and "wells" means two or more of such
holes.
ARTICLE II - PRELIMINARY
2.1 GAS RESERVES
The Purchaser accepts and the Producer warrants that natural gas having
an equivalent energy value (based on Gross Heating Value) of 40
petajoules (approximately 1,000 million cubic metres) is in existence
within the fractures in the Gas Field. However, should subsequent
investigations demonstrate the existence of additional quantities of
Specification Natural Gas which can be delivered without the need for
additional capital investment by the Producers, this Agreement shall
apply to such additional quantities up to an equivalent energy value
(based on Gross Heating Value) of 15 petajoules.
2.2 ROUTINE PRODUCTION AND INSTALLATION OF GAS DELIVERY SYSTEM
As soon as practicable after the execution of this Agreement and the
granting of the Petroleum Lease and the receipt of the notification
from the Purchaser provided for under Clause 2.4 hereof the Producers
will at their own expense proceed with due diligence to render the Gas
Field suitable for routine production and install the Gas Delivery
System with sufficient supply provisions to enable the continuous
supply of Specification Natural Gas to the Purchaser at the Field
Delivery Station pursuant to Clause 2.3.
2.3 CONTINUITY OF SUPPLY
The Producers, except by reasons of force majeure, and their right to
suspend deliveries of gas in accordance with Clause 8.4 hereof, warrant
a sufficient supply of Specification Natural Gas to the Field Delivery
Station to maintain continuity of supply to the Purchaser.
Notwithstanding this warranty, it is recognised that the Producers
must, on occasion, shut in production facilities in the Gas Field to
perform reservoir tests and evaluations. Provided such testing periods
do not exceed the following durations and frequencies, no damages due
to loss of Specification Natural Gas supply shall become due to the
Purchaser under this provision.
<PAGE>
Years following Initial
Delivery into Trunk Permissible duration
Pipeline of Shut in Frequency
----------------------- -------------------- ---------
1 and 2 120 hours Quarterly
3 and 4 and 5 96 hours Quarterly
6 and 7 and 8 72 hours Quarterly
9 until contract 48 hours Annually
expiration
The time chosen for field testing shall be arranged with the Purchaser
to correspond with periods of low electrical demand. In addition, the
Producers shall be allowed additional shut in periods for unscheduled
events not exceeding a total of forty-eight (48) hours in each year.
Should loss of field production availability exceed the limits defined
above, or such other limits as may otherwise be agreed between the
Purchaser and the Producers, and any such loss of field production
availability in excess of the agreed limits results in an interruption
of supply to Alice Springs Power Station, the Producers shall, unless
otherwise agreed between the Purchaser and Producers, become liable for
fuel supply damages for the excess duration. Such damages shall be
computed on the differential costs of fuel for generation at Alice
Springs caused by the need, arising from the excess supply
interruption, to substitute distillate for natural gas in the Power
Station. Distillate used in such circumstances shall be costed on a
L.I.F.O. basis from the Purchaser's inventory at Alice Springs, or the
actual cost of acquisition at the power station, whichever is the
greater, and Specification Natural Gas shall also be costed at its
delivered cost to the Purchaser at the Alice Springs Power Station and
any claims under this provision may be subject to audit by the
Producers.
<PAGE>
2.4 GAS TRANSMISSION
The Purchaser shall complete necessary arrangements with
Owner/Operators of the Trunk Pipeline for the transmission at no
expense to the Producers of all quantities of Specification Natural Gas
sold under this Agreement from the Field Delivery Station to Alice
Springs. The Purchaser shall notify the Producer when it has completed
the necessary arrangements with Owner/Operators of the Trunk Pipeline
at least nine (9) months prior to anticipated commissioning date of the
Trunk Pipeline and the Purchaser shall have no right to terminate or
withdraw from this agreement if it does not complete such necessary
arrangements.
2.5 NO ENTITLEMENT TO PIPELINE LICENCE
Nothing in this agreement is to be construed either directly or by
implication, to entitle or to prohibit any or all or any combination of
the parties to this agreement, to an entitlement to a pipeline licence
under the Energy Pipelines Act in respect of an "energy pipeline"
outside the boundaries of the Lease area.
2.6 OBLIGATION TO TRUNK PIPELINE OPERATOR
Force majeure and the Producers' right to suspend delivery in
accordance with Clause 8.4 hereof excepted, if the Producers fail to
offer for delivery, quantities of Specification Natural Gas required
under the minimum take and or pay obligation of Schedule II Column A,
and if, as a result, the Purchaser becomes liable for payments to the
Trunk Pipeline Operator, at the end of any Contract Year, which
payments are in excess of Specification Natural Gas actually
transported up to that time, any excess payments for Specification
Natural Gas not actually transported up to the minimum take and/or pay
quantities of Schedule II Column A shall become the obligations of the
Producers.
<PAGE>
ARTICLE III - PURCHASE AND SALE OF GAS
3.1 QUANTITY OF GAS
Each of the Producers in the percentages of the separate ownership of
each as set out in Recital (d) hereof agree to sell the Specification
Natural Gas having an aggregate equivalent energy value (based on Gross
Heating Value) of not less than 40 petajoules (approximately 1,000
million cubic metres) and such additional Specification Natural Gas as
can be made available without the need for additional capital
investment by the Producers up to an equivalent energy value (based on
Gross Heating Value) of 15 petajoules. Prior to the sale of Natural Gas
or natural gas liquids from the Palm Valley field to other than the
Purchaser under the terms of this agreement, the Producers will warrant
the supply at the Field Delivery Station of Specification Natural Gas
having an aggregate energy equivalent value (based on Gross Heating
Value) of 55 petajoules over the term of this Agreement. Furthermore,
as provided in Clause 5.3 hereof, the Purchaser agrees to buy on take
and/or pay basis, Specification Natural Gas having an aggregate
equivalent energy value (based on Gross Heating Value) of not less than
32.2 petajoules (approximately 805 million cubic metres) during the
twenty (20) years following initial delivery into the Field Delivery
Station.
3.2 SCHEDULE OF QUANTITIES
Each of the Producers shall deliver at the flange connecting the Gas
Delivery System to the Trunk Pipeline and the Purchaser shall buy at
that point the quantity of Specification Natural Gas stated in Clause
3.1 in accordance with SCHEDULES II and III attached.
<PAGE>
ARTICLE IV - TERM OF AGREEMENT
4.1 TERM OF AGREEMENT
This Agreement shall become effective upon the date of execution and
shall continue in effect for at least twenty (20) years from the date
of initial delivery into the Field Delivery Station or until
Specification Natural Gas having an aggregate equivalent energy value
(based on Gross Heating Value) of 40 petajoules (approximately 1,000
million cubic metres) and such additional quantities of Specification
Natural Gas as may be available pursuant to Clauses 2.1 and 3.1 hereof
shall have been delivered whichever later occurs but in any event until
not later than twenty-five (25) years from the date of initial delivery
at the Field Delivery Station.
ARTICLE V - PRICE
5.1 BASE PRICE
The agreed base price for Specification Natural Gas under this
Agreement is $1.12 per gigajoule (based on Gross Heating Value) at 1st
October 1981. It is further agreed that the price will be adjusted at
each Review Date as defined in Clause 1.10 in accordance with Clause
5.2 and the Price Review Formula specified in SCHEDULE III attached.
5.2 PRICE REVIEW
The price per gigajoule (based on Gross Heating Value) to be paid by
the Purchaser to each of the Producers for each gigajoule of
Specification Natural Gas under this Agreement shall be fixed for each
Quarter in accordance with the Price Review Formula specified in
SCHEDULE III attached.
<PAGE>
5.3 TAKE AND/OR PAY PROVISIONS
During a maximum period of twenty (20) years after the date upon which
the Producers commence to deliver Specification Natural Gas hereunder
or 1st December 1984 whichever first occurs the Purchaser shall be
bound to take and/or pay for Specification Natural Gas having an
aggregate equivalent energy value (based on Gross Heating Value) of
32.2 petajoules (approximately 805 million cubic metres) in accordance
with SCHEDULES II and III attached PROVIDED ALWAYS that any of this
said gas paid for but not actually taken by the Purchaser may be taken
by the Purchaser without further payment in any subsequent Contract
Year, (without counting as part of the Specification Natural Gas which
the Purchaser is otherwise bound to take in such subsequent year) and
any such adjustments may be credited forward within the term of this
Agreement. If deliveries of Specification Natural Gas commence on other
than the 1st July, the amount of gas to be taken and/or paid for in the
first Contract Year shall be calculated pro rata and the difference
between that figure and the figure in Column A of Schedule II will be
applied to reduce the total take and/or pay requirement of 32.2
petajoules. Such adjustments shall be performed at the end of each
Contract Year and payments billed in the first month of the following
Contract Year.
5.4 CONSUMER PRICE INDEX
In the event that the Consumer Price Index as defined in Clause 1.12
shall be discontinued or modified the parties shall request the
Commonwealth Statistician to provide figures or indices which shall
give an equivalent comparison to that contemplated by the Consumer
Price Index. If the parties are unable to obtain from the Commonwealth
Statistician figures or indices which give an equivalent comparison to
that provided by the said index and are unable to agree between
themselves as to such figures or indices either the Producers or the
Purchaser may request the President for the time being of the Economics
Society of Australia and New Zealand or his nominee to provide at each
review date figures or indices which give an equivalent comparison to
that contemplated by the Consumer Price Index and such figures or
indices shall then for the purposes of this Agreement be deemed to be
the Consumer Price Index.
<PAGE>
5.5 PRICE ADJUSTMENT
If at any time during the term of the Agreement additional royalties or
severance or sales tax or taxes of a similar nature or equivalent in
effect shall be validly imposed or increased by any lawful Governmental
Authority of the Northern Territory on the gas delivered to the
Purchaser pursuant to this Agreement, or on or in respect of the
production thereof or on the sale thereof, so that each of the
Producers shall be required to pay such new or additional or increased
rate of taxes either directly or indirectly, the price per gigajoule to
be paid by the Purchaser to each of the Producers shall, subject to the
condition hereinafter set forth, be increased to include any such new
or additional or increased rate of tax PROVIDED HOWEVER that in
computing any such new or additional or increased rate of tax there
shall not be included increases in income taxes.
5.6 NEW ADDITIONAL LEVY ROYALTY TAX
If at any time during the term of this Agreement any new, additional or
increased levy, royalty, severance tax or sales tax shall be lawfully
imposed by any Government other than the Northern Territory Government
or its agencies on the Producers in respect of Specification Natural
Gas sold hereunder the payment of which shall required the Producers
thereafter to produce and sell gas hereunder on a continuing basis at a
loss, the Producers may thereupon give a notice to the Purchaser
containing the calculations which result in such loss and the
additional price per gigajoule which it would be necessary for the
Purchaser to pay to enable the Producers to produce and sell gas to the
Purchaser without loss. If within ninety (90) days of the giving of
such notice the Purchaser fails to enter into an undertaking to the
Producers to pay such additional price per gigajoule for Specification
Natural Gas thereafter sold and delivered to the Purchaser the
Producers may at any time within ninety (90) days thereafter rescind
this Agreement. If the Purchaser disputes any of the calculations of
the Producers including the additional price per gigajoule contained in
the first notice from the Producers the Purchaser may refer the matters
in dispute to arbitration pursuant to Article XII. Any right of the
Producers to rescind shall be postponed until twenty-one (21) days
after the final determination of the arbitration. If during such period
the Purchaser shall undertake to the Producers to pay the additional
amount per gigajoule found necessary to enable the Producers to produce
and sell gas to the Purchaser without loss the Producers shall have no
right to rescind consequent thereupon.
<PAGE>
Profit or loss for the purpose of this clause shall bring to account
all capital costs and all expenses and outgoings incurred or paid by
the Producers subsequent to the date of this Agreement and in the
course of the performance thereof and shall be determined in accordance
with generally accepted accounting standards.
ARTICLE VI - ADJUSTMENT OF GAS TO SPECIFICATION
6.1 RIGHTS OF PURCHASER
Should the natural gas tendered for delivery hereunder fail to meet all
of the specifications set forth in SCHEDULE I attached the Purchaser
shall have the right, after written notification to the Producers
showing evidence of the gas specification deficiency, to refuse to
accept further deliveries of such gas until such failure is rectified,
and the Producer shall become liable for fuel supply damages incurred
as defined in Clause 2.4 and if such failure continues for a period of
not less than seven (7) days or such further period as may be
reasonably necessary in the circumstances bearing in mind the cause of
such failure after the Purchaser shall have notified the Producers in
writing thereof, the Purchaser at its option may accept such gas and
install, operate and maintain such facilities as may be required to
cause such gas to meet such specifications. The Purchaser shall have
the right to recover from each of the Producers in the percentages set
out in Recital (d) hereof all costs incidental thereto, including fuel
supply damages, depreciation, overhead and costs of capital by way of
deduction from sums payable for gas delivered hereunder. In the event
that the gas supplied fails to achieve a minimum Gross Heating Value of
36MJ/m3, the Producer shall compensate the Purchaser for the pipeline
tariff costs associated with the movement of the additional volumes of
gas through the Trunk Pipeline required to achieve the energy
equivalence of gas rated at 36MJ/m3 over the period of delivery of the
specification breach.
<PAGE>
6.2 REMOVAL OF CONSTITUENTS
So long as the Specification Natural Gas remains within specification,
the Producers may, prior to delivery thereof, submit such gas to any
process the Producers desire for the removal of constituents or
elements therein other than for the removal of methane (except where
methane removal is an unavoidable consequence of the removal of other
constituents). Such separate constituents or elements will remain the
property of the Producers in the percentages of separate ownership of
each as set out in Recital (d) hereof.
ARTICLE VII - MEASUREMENT
7.1 UNITS OF MEASUREMENT
The unit of measurement for gas delivered hereunder shall be one
gigajoule (109 joules) based on Gross Heating Value. Volumetric
measurement for computation purposes shall be in units of cubic metres
(volumetric measurements made in other units will be converted as
appropriate).
7.2 MEASUREMENT FACTORS
Unless otherwise specifically set out, the volume of gas delivered
hereunder shall be computed in accordance with the instructions
contained in the Gas Measurement Committee Report Number 3 of the
American Gas Association, dated April 1955, together with all presently
existing supplements, amendments and appendices to the said Report.
Such instructions to be converted where necessary for compliance with
Australian Standard AS1000-1979 "The International System of Units (SI)
and Its Application", the Commonwealth "Weights and Measures (National
Standards) Act 1960-1966" and Regulations thereunder and the Australian
Gas Association publication "Metric Units and Conversion Factors For
Use In The Australian Gas Industry". Factors required in the
computations to be made in accordance with the said Report No. 3 shall
be determined in the following manner using equipment installed,
maintained and operated by the Producers:
<PAGE>
(a) The temperature of gas flowing through the meter shall be
continuously measured by a recording thermometer so as to
record properly the temperature of the flowing gas.
(b) The pressure of gas at the meter shall be continuously
measured by a recording pressure device so as to record
properly the pressure of the gas at the meter.
(c) A composite sample of gas shall be collected monthly (over the
Billing Period) by means of a gas sampler at the point of
measurement of the gas at the Field Delivery Station.
(d) The Gross Heating Value of the gas shall be measured by
passing the composite sample referred to in (c) through an
approved calorimeter.
(e) The gravity of the gas shall be measured by passing the
composite sample referred to in (c) through an approved
gravitometer.
(f) The correction for deviation of the gas from Boyle's Law shall
be made in accordance with the said Report No. 3 on a monthly
basis.
7.3 BAROMETRIC PRESSURE
The average atmospheric pressure at the point for the purpose of
calculation hereunder shall be accurately measured by a method
acceptable to both parties at the Field Delivery Station or if the
parties are unable to agree upon an acceptable method then by a method
nominated by the Bureau of Meteorology.
<PAGE>
7.4 METERS
All gas delivered at the Field Delivery Station shall be measured by
means of meters of standard type selected by the Producers and approved
by all parties to the Agreement (such approval not to be unreasonably
withheld) which shall be installed, operated and maintained by the
Producers together with all appurtenant field equipment necessary to
measure accurately and record the volumes of gas delivered. Such meters
shall at all reasonable times be subject to check, test and inspection
by the Purchaser of its agent but the reading, calibrating and
adjusting thereof and the changing of charts shall be done only by the
Producers being witnessed by the Purchaser or its agent should it see
fit. The records from such measuring equipment shall remain the
property of the Producers, but they shall submit to the Purchaser or
its agent, as may from time to time be reasonably requested, copies of
the records and charts together with the calculations therefrom for
inspection and verification. All such charts and other similar records
(or microfilm copies thereof) shall be preserved by the Producers for a
period of at least seven (7) years.
7.5 CHECK METERS
The Purchaser or its agent at its option and expense, may install and
operate adjacent to the Producers' meters check meters of the same type
installed and operated by the Producers to check the Producers' meters,
but measurements of gas shall be by the Producers' meters only, except
in cases herein specifically provided to the contrary. Check meters
shall be subject at all reasonable times to inspections or examinations
by the Producers, but the reading, calibrating and adjusting thereof
and the changing of charts shall be done only by the Purchaser or its
agent being witnessed by the Producers should they see fit.
<PAGE>
7.6 TEST AND CORRECTION OF ERRORS
The accuracy of the Producers measuring equipment (including where used
but not limited to orifice meters, temperature and pressure recorders,
calorimeter, and gravitometer) shall be verified, at intervals no
longer than 33 days by the Producers and, if requested, in the presence
of the Purchaser or its agent. If any party at any time desires a
special test of any measuring equipment, it will promptly notify the
other parties and the parties will then co-operate to secure a prompt
calibration test. If, upon test any error in measuring equipment is
found to affect volumes being measured by not more than two percent,
previous recording of such equipment shall be considered as being
correct in measuring deliveries of gas; but such equipment shall be
adjusted at once to record accurately. If, upon test, any error in
measuring equipment is found to affect volumes being measured by more
than two percent, previous recordings of such equipment shall be
corrected to zero error for any period during which the error is known
definitely or agreed to have existed, but in case such period is not
known definitely or agreed upon, such correction shall be for a period
extending over one-half of the time elapsed since the date of last
test, not exceeding a correction period of sixteen (16) days. Such
equipment shall be adjusted at once to record accurately. If, for any
reason, any measuring equipment is out of service or out of repair so
that the amount of gas delivered cannot be ascertained or computed from
the reading thereof, the amount of gas delivered during the period such
equipment is out of service or out of repair shall be estimated upon
the basis of the best data available, using the first of the following
methods which is feasible:
(a) By using the registration ofany check meter or meters, if
installed and accurately registering.
(b) By using the wellhead meters.
(c) By estimating the quantity of gas delivered by comparison with
gas deliveries during preceding periods under similar
conditions when the equipment was registering accurately.
<PAGE>
7.7 SEPARATE OWNERSHIP
All gas measured by meters and delivered to the Purchaser pursuant to
this Agreement shall be and be deemed to be separately owned by each of
the Producers in the percentages set out in Recital (d) hereof.
ARTICLE VII - BILLING AND PAYMENT
8.1 BILLING PERIODS
Charges for Specification Natural Gas sold by each of the Producers to
the Purchaser under this Agreement shall be made in respect of each
Billing Period as hereinafter provided. Such charges shall take into
account all price adjustments applicable under Clauses 5.2, 5.5 and
5.6. In the event that the price increase applicable under Clause 5.5
cannot immediately be accurately calculated an estimate of the new
price will be made and used until such time as the new price can be
accurately calculated PROVIDED HOWEVER that an adjustment between the
parties to compensate for any over or under charge will be effected
within thirty (30) days of ascertainment of the extent thereof.
8.2 MONTHLY STATEMENTS
On or before the 12th day of each month each of the Producers shall
furnish to the Purchaser a monthly statement showing the gas delivered
calculated in accordance with SCHEDULE IV during the Billing Period
last concluded or (in the case of the first delivery) during the first
period and the amount due to the Producers, according to measurement,
terms, conditions and prices herein provided.
8.3 ANNUAL RECONCILIATION STATEMENT
On or before the 12th day of the month following the end of each
Contract Year each of the Producers shall furnish to the Purchaser an
annual reconciliation statement showing the amount of gas delivered
during the previous Contract Year and the additional amount of gas if
any to be billed as provided for in Clause 5.3 at the then current
price and under the terms and conditions herein provided.
<PAGE>
8.4 DATES OF PAYMENT
On or before the 30th day of each month, or within fifteen (15) days
after receipt of the monthly statement specified in Clause 8.2,
whichever is later, and on or before the 30th day of the month
following the end of each Contract Year, or within fifteen (15) days
after receipt of the annual reconciliation statements specified in
Clause 8.3, whichever is later, the Purchaser shall pay to each of the
Producers the amounts due as shown by the said statements. If the
Purchaser fails to make any such payment, or any portion thereof, when
same is due, interest thereon shall accrue at the rate of 1 1/2 percent
per month or 2 percent per annum above the Australian Merchant Bankers
prime rate for 180 day commercial bills whichever is the greater from
the date when such payment is due until the same is paid and if such
failure to pay continues for fourteen (14) days, the Producers in
addition to all other remedies, thereafter may suspend deliveries of
gas hereunder and if such default continues for fourteen (14)
additional days, the Producers thereafter may, in addition to any other
rights the Producers may have, terminate this Agreement PROVIDED
HOWEVER in order for the Producers to have the right to suspend
deliveries or terminate this Agreement the Producers must first have
notified the Purchaser in writing seven (7) days prior to exercising
either or both of such rights of its intent to do so and give the
Purchaser the right to pay the amount so due to the Producers within
such seven (7) day period.
8.5 DISPUTED MONTHLY STATEMENTS
In the event of disputes arising from differences in measurement
between the Producers' meters and the Purchaser's or its agent's check
meters, the Producer shall waive the suspending and termination rights
contained in Clause 8.4, provided the Purchaser makes payments within
the required dates, the amounts due according to the check meter
quantities. Monies withheld, and subsequently found to be payable,
shall accrue the interest penalty of Clause 8.4, and shall be due and
payable fifteen (15) days after reconciliation of metering differences.
<PAGE>
8.6 RECORDS
The Producers upon request, shall furnish to the Purchaser or its agent
copies of all records upon which the Producers have based the statement
referred to in Clause 8.2 hereof. The Purchaser or its agent shall have
access to the Producers records and books at all reasonable hours so
far as they affect measurement of and the price due for the gas sold
hereunder. All such records (or microfilm copies thereof) shall be
preserved by the Producers for a period of at least seven (7) years.
8.7 ADJUSTMENT OF ERRORS
In the event an error is discovered in the amount shown due in any
statement rendered by any of the Producers, adjustment between the
parties to compensate for such error shall be effected within thirty
(30) days of ascertainment of the extent thereof PROVIDED HOWEVER that
claim therefore shall have been made within sixty (60) days from the
date of discovery of such error, and, in any event, within two (2)
years from the date of such statement.
ARTICLE IX - POSSESSION OF GAS
9.1 POSSESSION OF GAS
Upon the grant of the Petroleum Lease the Producers shall be deemed to
be in control and possession of the gas deliverable to the Purchaser
until it shall have been delivered to the Purchaser at the flange
connecting the Field Delivery Station to the Trunk Pipeline after which
the Purchaser shall be deemed to be in control and possession thereof.
The Purchaser shall have no responsibility with respect to any gas
until it is delivered to the Purchaser or on account of anything which
may be done, happen or arise with respect to the said gas before such
delivery, and the Producers shall have no responsibility with respect
to such gas after its delivery to Purchaser or on account of anything
which may be done, happen or arise with respect to the said gas after
such delivery, and the Purchaser indemnifies the Producers in respect
of any claims which may be made against the Producers arising out of
anything which may be done, happen or arise with respect to the said
gas after such delivery.
<PAGE>
9.2 LIABILITY FOR TAXES
Subject to the rights of each Producer under Clause 5.5 and 5.6 the
Producers shall pay or be responsible for the payment of all taxes,
levies, assessments or like charges which may be charged or imposed in
respect of the gas until possession thereof passes to the Purchaser and
the Purchaser shall pay all taxes, levies, assessments or like charges
which may be charged or imposed in respect of the gas after possession
thereof has passed to the Purchaser.
9.3 PAYMENT OF ROYALTIES
Subject to Clause 9.2 each of the Producers shall be responsible for
the proper accounting for and payment to the persons entitled thereto
of all royalties payable on all gas including all components thereof,
delivered to the Purchaser hereunder and the making of settlement with
all other persons having any interest therein (other than payment of
royalties and making of settlement properly payable by or the
responsibility of the Purchaser by operation of law or otherwise).
ARTICLE X - INDEMNIFICATION AND WARRANTIES
10.1 This Agreement shall not be deemed to vest in the Purchaser any
interest in the said Gas Field.
10.2 Other than specifically defined in Clauses 2.3, 2.6 and 6.1, neither
the Producers nor the Purchaser shall be held responsible or liable for
damages for the acts or conduct of the other, and each hereby agrees to
indemnify and hold harmless the other from claims or demands on account
thereof.
10.3 None of the Producers shall be obliged by this Agreement to supply and
deliver quantities of natural gas in excess of their respective
percentage interests as set out in Recital (d) hereof of the
Specification Natural Gas sold hereunder.
<PAGE>
10.4 With the exception of the matters otherwise set out in this Agreement
the Producers do not give any and exclude all warranties of any kind in
relation to the sale of gas and its quality or fitness for use for any
purpose.
ARTICLE XI - FORCE MAJEURE
11.1 SUSPENSION OF OBLIGATIONS
In the event either the Producers or the Purchaser is rendered unable,
wholly or in part, by force majeure to carry out its obligations under
this Agreement, other than to pay for gas delivered hereunder, then
upon such party giving notice and full particulars of such force
majeure in writing or by telegraph (or orally and subsequently
confirmed in writing or by telegraph) to the other party as soon as
possible after the occurrence of the force majeure relied on, the
obligations of the party giving such notice, so far as they are
affected by such force majeure, shall be suspended during the
continuance of any inability so caused but for no longer period, and
such force majeure so far as possible, shall be remedied with all
reasonable despatch. The term "force majeure" as employed in this
Agreement shall mean Acts of God, strikes, lockouts or other industrial
disturbances, acts of the public enemy, wars, blockades, insurrections,
riots, epidemics, landslides, lightning, earthquakes, storms, floods,
washouts, arrests and restraints of governments and people, civil
disturbances, explosions, temporary failure of gas supply because of
breakages or accidents to machinery or lines of pipe, the necessity for
making repairs to or alterations of lines of pipe or production
facilities beyond that required for normal maintenance, hydrate
obstructions in wells lines of pipe or production facilities, any other
unusual event reasonably unforeseeable causing interruption of supply
from a well, and any other event or circumstances whether of the kind
herein mentioned, or otherwise, not within the reasonable control and
without the fault or negligence of the party claiming suspension and
which by the exercise of due diligence such party is unable to prevent
or overcome. It is understood and agreed that the settlement of
strikes, lockouts and other labour difficulties shall be entirely
within the discretion of the party having the difficulty, and that the
above requirements that any force majeure shall be remedied with all
reasonable despatch shall not require the settlement of strikes or
lockouts by acceding to the demands of the opposing party when such
course is inadvisable in the discretion of the party having the
difficulty.
<PAGE>
11.2 TERMINATION FOR PROLONGED FORCE MAJEURE
If the inability of either the Producer or the Purchaser to carry out
its obligations after initial delivery and acceptance by the Purchaser
by reason of force majeure as aforesaid shall continue for a period of
one (1) year the other party may by thirty (30) days notice in writing
given at any time within a period of six (6) months after the
expiration of such year terminate this Agreement. Any such termination
shall be without prejudice to any of the rights of the parties accrued
prior to the date of such termination.
11.3 TERMINATION FOLLOWING UNDUE DELAY
If for any reason beyond the control of the Purchaser, it is unable to
accept delivery of the gas at Alice Springs by the 1st December 1984
then the remaining rights and obligations of the Producers and the
Purchaser under this Agreement shall be at an end provided that the
Purchaser reimburses the Producers for sums expended in fulfillment of
their obligations under this Agreement since notification of the
anticipated commissioning date of the Trunk Pipeline as required under
Clause 2.4. Any such claims may be subject to audit by the Purchaser
and shall apply only to field facility improvements and additions
specific to this Agreement.
ARTICLE XII - ARBITRATION
12.1 ARBITRATION
Any controversy with respect to provisions of this Agreement in any
case where arbitration is expressly required under the provisions of
this Agreement and in any other case if the Producers and the Purchaser
agree, shall be submitted to arbitration in Darwin or elsewhere as the
parties agree upon and the following principles shall apply to such
arbitration.
<PAGE>
Upon written demand of either the Producers or the Purchaser the
parties shall meet and attempt to appoint a single arbitrator. If the
parties are unable to agree on a single arbitrator then upon written
demand of either the Producers or the Purchaser and within ten (10)
days of such demand the Producers and the Purchaser shall each name an
arbitrator and the two arbitrators so named shall promptly thereafter
choose a third. If either the Producer or the Purchaser shall fail to
name an arbitrator within ten (10) days from such demand, then the
second arbitrator shall be appointed by the President for the time
being of the Northern Territory Law Society Incorporated. If the two
arbitrators shall fail within ten (10) days from their appointment to
agree upon and appoint the third arbitrator, then upon written
application by either the Producers or the Purchaser such third
arbitrator shall be appointed by the President for the time being of
the Northern Territory Law Society Incorporated. The arbitrator or
arbitrators selected to act hereunder shall be qualified by education
and training to pass judgement upon the particular question in dispute.
The single arbitrator or the arbitrators so chosen shall proceed
immediately to hear and determine the question or questions in dispute.
The decision of the single arbitrator shall be made within forty-five
(45) days after his appointment, subject to any reasonable delay due to
unforeseen circumstances. The decision of the arbitrators, or a
majority of them shall be made within forty-five (45) days after the
appointment of the third arbitrator, subject to any reasonable delay
due to unforeseen circumstances. In the event the single arbitrator
fails to make a decision within sixty (60) days after his appointment
or if the arbitrators, or a majority of them fail to make a decision
within sixty (60) days after the appointment of the third arbitrator
then either the Producers or the Purchaser may elect to have a new
arbitrator or arbitrators chosen in like manner as if none had
previously been selected. The decision of the single arbitrator or the
decision of the arbitrators, or a majority of them, shall be drawn up
in writing and signed by the single arbitrator or by the arbitrators or
a majority of them and shall be final and binding upon the parties
hereto as to any question or questions so submitted to arbitration and
the parties shall be bound by such decision and perform the terms and
conditions thereof. The compensation and expenses of the single
arbitrator or the arbitrators (unless otherwise determined by the
arbitrators) shall be paid as to one-half by the Purchaser and as to
one-half by the Producers in the percentages of separate ownership of
each as set out in Recital (d) hereof.
<PAGE>
ARTICLE XIII - MISCELLANEOUS PROVISIONS
13.1 TERMINATION FOR DEFAULT
Subject to Clause 8.4 or Article XI hereof if either the Producers or
the Purchaser shall be in default in the observance or performance of
any of the covenants or obligations imposed on either the Producers or
the Purchaser under this Agreement and such default shall continue for
a period of sixty (60) days after written notice specifying the default
shall have been given to either the Producers or the Purchaser by the
other party then the non defaulting party may at its option terminate
this Agreement at the expiration of such period. Any termination of
this Agreement pursuant to the provisions of this Article XIII shall be
without prejudice to any of the rights of the parties accrued prior to
the date of such termination.
13.2 EFFECT OF WAIVERS
No waivers by either the Producers or the Purchaser of any one or more
defaults by the other in the performance of any provisions shall
operate or be construed as a waiver of any other default or defaults
whether of a like or of a different character, and whether occurring
before or after such waiver.
13.3 GOVERNING LAW
This Agreement shall be governed by the law of the Northern Territory.
13.4 HEADINGS AND NOTATIONS
The headings and notations in this Agreement shall not be taken into
account in the construction thereof.
13.5 AGREEMENT NOT TO CONSTITUTE A PARTNERSHIP
Nothing in this Agreement shall constitute or be deemed to constitute a
Partnership between the Producers.
<PAGE>
ARTICLE XIV - ASSIGNMENT
14.1 WHEN CONSENT REQUIRED
No assignment by either the Producers or the Purchaser of this
Agreement or of any rights hereunder shall be of any effect whatsoever
unless with the written consent of the other party which consent shall
not be unreasonably withheld in the case of a financially and
technically competent assignee.
14.2 WHEN CONSENT NOT REQUIRED
Notwithstanding the provisions of Clause 14.1 either the Producers or
the Purchaser may without any consent of the other party charge,
mortgage, or pledge or assign by way of charge, mortgage, or pledge
this Agreement or any of its rights hereunder if such charge, mortgage
or pledge or assignment is for the purpose of securing the repayment of
monies borrowed or guaranteed or the payment of monies borrowed or
guaranteed or the payment of monies payment whereof is deferred.
14.3 MERGER OR RECONSTRUCTION
The consent of the Purchaser shall not be unreasonably withheld in any
case where the proposed assignment is required as a result of any
amalgamation, merger or reconstruction of the Producer seeking such
consent but the Purchaser may require as a condition of such consent
that the assignee covenant in writing with the Purchaser to be bound by
all the terms and conditions of this Agreement so far as they apply to
the assignor.
14.4 OBLIGATIONS
This Agreement shall bind and enure to the respective successors and
assigns of the parties hereto but no assignment shall release any party
from such party's obligations hereunder without written consent of the
other party to such release which consent shall not be unreasonably
withheld in case of a financially and technically competent assignee.
<PAGE>
ARTICLE XV - STAMP DUTY
15.1 STAMP DUTY
Any stamp duty on this Agreement shall be paid as to one-half by the
Purchaser and one-half by the Producers in the percentages of separate
ownership of each as set out in Recital (d) hereof.
ARTICLE XVI - NOTICES
16.1 NOTICES
Any notice or advice required to be given or sent pursuant to this
Agreement shall be deemed to have been given if delivered to the party
to whom it is to be given or sent or sent by prepaid post or telex or
telegram to the following addresses or such other address as may be
notified from time to time by a party to the other parties:
Magellan Petroleum (N.T.) Pty. Ltd.
8th floor, National Bank Building
420 George Street
Brisbane, Queensland 4000
Farmout Drillers N.L.
c/o Court & Company
28 O'Connell Street
Sydney, New South Wales 2000
C.D. Resources Pty. Ltd.
10th floor, Swann House
22 William Street
Melbourne, Victoria 3000
Northern Territory Electricity Commission
59 Smith Street
Darwin, Northern Territory 5790
16.2 RECEIPT OF NOTICE
If a notice is sent by prepaid post as aforesaid it shall be deemed to
have been given or sent seventy-two (72) hours after being placed in
the mail and if sent by telex or telegram forty-eight (48) hours after
having been transmitted.
<PAGE>
ARTICLE XVII - CONFIDENTIALITY
17.1 CONFIDENTIALITY
The Producers and the Purchaser covenant with each other that they will
treat as confidential information disclosed by the other party pursuant
to this Agreement and which prior to such disclosure is notified by the
disclosing party as being confidential and each party will not disclose
such confidential information to third parties without the prior
written consent of the other and it will take all reasonable
precautions to ensure that its employees will maintain the
confidentiality of such confidential information PROVIDED HOWEVER that
each party shall be entitled to disclose such confidential information
to any related corporation and PROVIDED FURTHER that the provisions of
this Article XVII shall not apply to information which is or becomes
part of the public knowledge or literature or which is lawfully
obtained by one party from sources other than this Agreement or the
other party PROVIDED HOWEVER that the parties shall be entitled to make
such disclosures as are required by law or by the provisions of the
Australian Associated Stock Exchanges.
ARTICLE XVIII - APPROVALS AND CONSENTS
18.1 APPROVALS AND CONSENTS
The obligations of the Producers hereunder are subject always to the
Producers obtaining not later than twelve (12) months from the date
hereof or such longer period as the Purchaser may agree all consents
leases and authorities which both parties regard as necessary to enable
the Producers to fulfil their obligations under this Agreement
including (without limiting in any way the generality of the foregoing)
all consents leases and authorities (including the Petroleum Lease and
pipeline licences) required from the Minister for Mines and Energy and
by the Petroleum Act and other relevant Acts in connection herein. If
at any time consents leases and authorities are not obtained and
maintained or if any consent lease or authority is at any time
withdrawn so that the Producers are not able to fulfil their
obligations hereunder then the Producers may by notice in writing to
the Purchaser terminate this Agreement and neither party shall have any
claim against the other but such termination shall be without prejudice
to any of the rights of the parties accrued prior to the date of
termination.
<PAGE>
18.2 CANCELLATION OF THE LEASE
Should the Producers be unable to fulfil their obligation to deliver
Specification Natural Gas under the terms of this agreement due to
cancellation of the lease by the Minister under the provisions of the
Petroleum Act, the right to dismantle and remove field facilities
associated with supply to the Trunk Pipeline is waived for a period of
six (6) months following such cancellation, during which time the
Producers will negotiate in good faith for the sale of such facilities
to the future operators of the lease. During this period the Producers
will permit others access to the field and its equipment in order to
maintain supply of gas to the Field Delivery Station.
ARTICLE XIX - SEVERABILITY OF CLAUSES
19.1 SEVERABILITY OF CLAUSES
If any provision of this Agreement shall be construed as illegal or
invalid or void the legality or validity or enforceability of any of
the other provisions hereof shall not be affected and the illegal or
invalid or void provisions shall be deemed deleted herefrom to the same
extent and effect as if they were never incorporated herein but all
other provisions herein shall continue in force.
<PAGE>
SCHEDULE I
SPECIFICATION NATURAL GAS
QUALITY
The gas delivered by the Producer to the Purchaser at the Field Delivery
Station:
(a) Shall be commercially free from sand, dust, gums, gum forming
constituents, free water, crude oil, impurities and any other
objectionable substance which may be injurious to pipelines or control
equipment.
(b) Shall contain not more than 10 milligrams of hydrogen sulphide per
cubic metre.
(c) Shall not contain total sulphur in concentration greater than 50
milligrams per cubic metre.
(d) Shall contain not more than 5 milligrams of mercaptans per cubic
metre expressed as sulphur.
(e) Shall not contain sodium plus potasium in concentration greater than
one part per million by weight.
(f) Shall contain not more than three per centum (3%) by volume of carbon
dioxide.
(g) Shall have a Gross Heating Value of not less than 36MJ/M3 and not more
than 44MJ/M3.
(h) Shall contain not more than two tenths of one per centum (.2%) by
volume of oxygen.
<PAGE>
(i) For the initial 40 petajoules Specification Natural Gas supplied under
this Agreement shall have a controlled delivery pressure of not less
than 4,000 kPa absolute and not more than 7,000 kPa absolute at the
delivery flange. Should natural gas in excess of 40 petajoules become
available in accordance with Clause 3.1 the Purchaser shall have the
discretion of accepting such natural gas at a controlled delivery
pressure of less than 4,000 kPa absolute.
(j) Shall have a dew point of not more than nought degrees Celsius at a
pressure of 7,000 kPa absolute. In no event shall the gas contain more
than 120 milligrams of water per cubic metre.
(k) Shall have a maximum temperature of 75 degrees Celsius and a minimum
temperature which is at least 20 degrees Celsius above the saturated
vapour temperature (dew point) of the gas at the delivered pressure and
in any case the Hydrocarbon dew point of the gas shall be such that
Hydrocarbon will not condense under Pipeline operating conditions.
Note: It shall be the responsibility of the Purchaser to provide facilities
for odorising the delivered gas if such action is required for safety
or other reasons.
<PAGE>
SCHEDULE II
ANNUAL MINIMUM AND MAXIMUM AGGREGATE QUANTITIES
OF SPECIFICATION NATURAL GAS
Set out in Column A below is the minimum aggregate quantity of Specification
Natural Gas which the Purchaser shall be bound to take and/or pay for in each
Contract Year in accordance with Clause 5.3 hereof commencing on the date upon
which the Producers commence to deliver Specification Natural Gas to the Field
Delivery Station or 1 December, 1984, whichever first occurs.
Set out in Column B below is the maximum aggregate quantity of Specification
Natural Gas which the Producers may be required to deliver in the percentages of
the separate ownership of each as set out in Recital (d) hereof in each Contract
Year commencing on the date upon which the Producers commence to deliver
Specification Natural Gas to the Field Delivery Station or 1 December, 1984,
whichever first occurs.
- -------- -------------------- ------------------------ ----------------------
Contract Column A Column B Column C
Year Take And/Or Pay Min. Max. Delivery Obligation Possible Max. Delivery
Obligations
--------- ---------- ---------- ------------- ---------- -----------
PJ m3 x 106 PJ m3 x 106 PJ m3 x 106
- -------- --------- ---------- ---------- ------------- ---------- -----------
1 1.0 25.0 1.2 30.0 1.2 30.0
2 1.0 25.0 1.3 32.5 1.3 32.5
3 1.1 27.5 1.5 37.5 1.7 42.5
4 1.2 30.0 1.6 40.0 2.0 50.0
5 1.3 32.5 1.8 45.0 2.4 60.0
6 1.4 35.0 2.0 50.0 2.8 70.0
7 1.4 35.0 2.2 55.0 3.2 80.0
8 1.6 40.0 2.4 60.0 3.6 90.0
9 1.6 40.0 2.6 65.0 4.1 102.5
10 1.6 40.0 3.0 75.0 4.6 115.0
11 1.6 40.0 3.3 82.5 4.8 120.0
12 1.8 45.0 3.8 95.0 6.2 155.0
13 1.8 45.0 4.4 110.0 6.9 172.5
14 1.9 47.5 5.3 132.5 8.1 202.5
15 1.9 47.5 3.6 90.0 2.1 52.5
16 2.0 50.0
17 2.0 50.0
18 2.0 50.0
19 2.0 50.0
20 2.0 50.0
- -------- --------- ---------- ---------- ------------- ---------- -----------
<PAGE>
SCHEDULE II (Cont'd)
The figures in Columns A do not include any quantities of Specification Natural
Gas which may be taken by the Purchaser in accordance with Clause 5.3 hereof in
any Contract Year within the term of this Agreement subsequent to the Contract
Year in which it is paid for.
The maximum daily quantity of Specification Natural Gas which the Producers may
be required to deliver in the percentages of the separate ownership of each as
set out in Recital (d) hereof in each Contract Year shall not be more than
thirty (30) percent above the daily average for that Contract Year.
Provided additional Specification Natural Gas with an energy equivalent value
based on Gross Heating Value of 15 petajoules can be made available without the
need for additional capital investment by the Producers, the Producers are
prepared to deliver in the percentages of the separate ownership of each as set
out in Recital (d) hereof in each Contract Year commencing on the date upon
which the Producers commence to deliver Specification Natural Gas to the Field
Delivery Station or 1 December, 1984, whichever first occurs, the annual
quantities of Specification Natural Gas set out in Column C.
<PAGE>
SCHEDULE III
PRICE REVIEW FORMULA
The price per gigajoule based on Gross Heating Value to be paid by the Purchaser
to each of the Producers for each gigajoule of Specification Natural Gas shall
be fixed for each Quarter as at the Review Date at the commencement of each
Quarter in accordance with the following formula:
New price per gigajoule for the Quarter commencing on the
Review Date = Base Price x CPIx
----
CPI1
Where the Base Price is $1.12
Where CPIx is the Consumer Price Index (All Groups) Weighted Average of Seven
Capital Cities for the Quarter immediately preceding the Review Date.
Where CPI1 is the Consumer Price Index (All Groups) Weighted Average of Seven
Capital Cities for the Quarter ended September 30, 1981 (i.e. the Quarter
immediately preceding October 1, 1981).
<PAGE>
SCHEDULE IV
TYPICAL MONTHLY GAS COMPUTATION SHEET
Following are the factors to be used in accordance with Gas Measurement
Committee Report No. 3 of the American Gas Association to determine monthly gas
computations.
SECTION 1 - Factors to be measured in field
Line Size D = ______________ Orifice Size d = _________________
Static Pressure Pf = _____________ PSIA = ________ Pb = _________ PSIG
Differential Pressure hw = ________________ = _____________ Inches Wg.
Temperature Tf = _____________ = ___________ (degree)F.
Specific Gravity G = _____________
SECTION 2 - Calculation of Orifice Flow Constant C' - cubic ft per hr.
Basic orifice factor Fb = _________________
Reynolds number factor Fr = _________________
Expansion factor Y = _________________
Pressure base factor Fpb = _________________
Temperature base factor Ftb = _________________
Flowing temperature factor Ftf = _________________
Specific gravity factor Fg = _________________
Supercompressibility factor Fpv = _________________
Manometer factor Fm = _________________
Gauge location factor Fe = _________________
Orifice thermal expansion
factor Fa = _________________
C' = _____ x _____ x _____ x _____ x _____
_____ x _____ x _____ x _____ x _____
C' =
==================
<PAGE>
SCHEDULE IV (Cont'd)
SECTION 3 - Volume of gas in Standard Cubic Feet (SCF) per hour.
Volume Qh = C' square foot of (hw x Pf)
= ________ x ________ x _______
= ____________ SCF per Hr.
SECTION 4 - Calculation of volume of gas measured by individual chart.
Volume Qh by Flow Time (hrs.)
= ________ SCF x ________ hrs = _______ SCF
TOTAL MONTHLY VOLUME = the figure obtained in Standard Cubic Feet by adding the
volumes calculated in Section 4 for each of the charts used in a particular
month.
SECTION 5 - Calculation of Monthly quantity of energy delivered.
Monthly volume of gas x monthly average Gross Heating Value x 1.05506 x 10-6
= gigajoules
===================
Note: Appropriate factors will be used to convert imperial calculations to
metric.
<PAGE>
IN WITNESS WHEREOF This Agreement has been executed on the day and year first
hereinbefore written:
EXECUTED by MAGELLAN PETROLEUM (N.T.) )
PTY. LTD. by authority of the Board )
of Directors and in the presence of: )
/s/ Roy M. Hopkins
Director
/s/ _________________________
/s/ _______________________
Director
EXECUTED by FARMOUT DRILLERS NL by )
authority of the Board of Directors )
and in the presence of: )
/s/ _______________________
Director
/s/ _________________________
/s/ _______________________
Director
EXECUTED by C.D. RESOURCES PTY. LTD )
by its ATTORNEY PETER JAMES in the )
presence of: )
/s/ Peter James
Attorney
/s/ _________________________
<PAGE>
THE COMMON SEAL of the NORTHERN )
TERRITORY ELECTRICITY COMMISSION was )
hereunto affixed by authority of the )
Commission in the presence of: )
/s/ _______________________
Chairman
/s/ _________________________
General Manager
<PAGE>
IN WITNESS WHEREOF This Agreement has been executed on the day and year first
hereinbefore written
THE COMMON SEAL of MAGELLAN PETROLEUM )
(N.T.) PTY. LTD. was hereunto affixed )
by authority of the Board of Directors )
given in the presence of: )
/s/ Roy M. Hopkins
Director
/s/ Hedley Howard
Secretary
THE COMMON SEAL of FARMOUT DRILLERS NL )
was hereunto affixed by authority of )
the Board of Directors given in the )
presence of: )
/s/ _______________________
Director
/s/ _________________________
Secretary
THE COMMON SEAL of C.D. RESOURCES )
PTY. LTD. was hereunto affixed by )
authority of the Board of Directors )
given in the presence of: )
/s/ _______________________
Director
/s/ _________________________
Director
Dated this 9th day of November, 1982
THE NORTHERN TERRITORY OF AUSTRALIA
Petroleum (Prospecting and Mining) Act
PALM VALLEY PRODUCTION LEASE (OL3)
MAGELLAN PETROLEUM (N.T.) PTY LTD.
<PAGE>
THIS LEASE made the 9th day of November One thousand nine hundred and eighty-two
BETWEEN the NORTHERN TERRITORY OF AUSTRALIA (in this lease called "the
Territory") of the one part and MAGELLAN PETROLEUM (N.T.) PTY LTD a company
incorporated under the Companies Act of the State of Queensland and having its
registered office in the Territory care of Veritatem Nominees (N.T.) Pty Ltd,
5th Floor, City Mutual Building, 62 Cavenagh Street, Darwin in the Territory (in
this lease called "the lessee" which expression shall, where the context so
admits, include its successors in title and permitted assigns) of the other part
WHEREAS the lessee is the holder of a permit issued in pursuance of section 21
of the Petroleum (Prospecting and Mining) Act (in this lease called "the Act")
AND WHEREAS the lessee has applied to the Minister for Mines and Energy for the
issue of a lease under section 43 of the Act AND WHEREAS the Territory is
desirous of leasing to the lessee in pursuance of the Act and in consideration
of the rent, royalties and covenants hereinafter reserved and provided and on
the part of the lessee to be paid and observed ALL THAT piece or parcel of land
(in this lease called "the land") containing by admeasurement 615.70 square
kilometres or thereabouts and more particularly described and delineated in the
Schedule to this lease for the purpose of mining for petroleum TOGETHER WITH the
rights, liberties, easements, advantages and appurtenances thereto belonging or
appertaining NOW THEREFORE I, IAN LINDSAY TUXWORTH, the Minister for Mines and
Energy for and on behalf of the Territory, in pursuance of the Act, hereby grant
to the lessee a lease over the land in accordance with and under the terms of
the Act EXCEPTING and RESERVING out of this lease -
(a) the right of the Territory to grant, upon such terms and
conditions as the Minister thinks fit, for joint or several
use, such rights of way or easements through, upon, over or in
the whole of or any portion of the land to which this lease
applies as are necessary for or appropriate to -
(i) the development or working of the land or of other
land containing petroleum deposits;
<PAGE>
(ii) the treatment or transportation of the products from
those petroleum deposits by or under the authority of
the Minister, his permittees or lessees;
(iii) the development or working of agricultural land or
land in respect of which a miner's right, mining
lease or a prospecting authority has been issued or a
reservation has been made under the Mining Act; or
(iv) any other public purpose;
(b) the right to all helium found in association with petroleum
and the right to erect on the land a plant for the extraction
of helium from any gases produced by the lessee, together with
such incidental rights as are necessary for the purpose of
removing the helium;
(c) the right to authorize mining on the land, in respect of which
a lease is in force, under the provisions of the Mining Act;
(d) the right to any substance in or on the land to which the
lease applies which is a prescribed substance within the
meaning of the Atomic Energy Act 1953 of the Commonwealth;
(e) the right to enter the land for the purpose of making a
reconnaissance survey, detailed survey or a scientific or
technical investigation; and
(f) the right to grant authority to a person under section 28 of
the Act to enter the land for the purpose of making a
geological investigation and for that purpose to carry out
geological surveys on that land.
<PAGE>
TO HOLD the same UNTO THE LESSEE for the term of 21 years commencing on the date
of this lease with the right as provided for in section 50 of the Act to renew
the same for a further period of 21 years and such further renewals or
extensions permitted under the Act for the purpose of mining for petroleum on
the land and for all purposes necessary to carry on the lessee's overall mining
operations under the Act on or in the land including, subject to compliance with
any law with respect to water or timber and subject to such conditions with
respect to payment or otherwise as are prescribed by the Act or the Regulations
made under the Act -
(a) for the drilling and taking of water that is or may be under
the surface of the land and to take and divert water from any
natural spring, lake, pool or watercourse situated on or
flowing through any land (including private land and improved
land) to which the lease applies and use the water for any
purpose for prospecting or mining operations under the lease;
and
(b) for the cutting and using of timber on the land (other than
private land or improved land) to which the lease applies for
building or construction work, firewood or other necessary
purposes but the lessee shall not cut timber on such lands as
are specified by the Minister by notice in the Government
Gazette of the Territory nor on land which is -
(i) within a distance of 3 kilometres from a homestead or
outstation; or
(ii) within a distance of 3 kilometres from a watering
point,
on land held under a pastoral lease, pastoral homestead lease
or grazing licence granted under the Crown Lands Act,
but upon and subject to the Act YIELDING AND PAYING thereto the yearly rent
hereinafter provided AND FURTHER YIELDING AND PAYING therefor royalties at the
rates and in the manner hereinafter provided:
<PAGE>
1. THE LESSEE for itself and for its successors and permitted assigns
covenants with the Territory -
(a) to pay, during the period of this lease, the rent and
royalties prescribed by the Act clear of all deductions at the
respective rates and times and in the manner provided in the
Act;
(b) unless authorized to do so by the Minister not to bore or sink
for, pump or raise water, nor to erect any dam or other
facility on existing rivers or water-ways for the purpose of
the supply of water;
(c) to operate in accordance with good oilfield practice and in
accordance with the Technical Report, and to take all steps
necessary to restore and leave the surface of the land in a
condition satisfactory to the Minister so that -
(i) there shall be no abnormal batters or contours;
(ii) the surface soil (if any) existing prior to the
mining operations shall, where possible, be preserved
and subsequently spread to maximum advantage over the
mined area;
(iii) there shall be a minimum interference with the
natural drainage system except where it is found
expedient to use any mined area for the storage of
water;
(iv) there shall not arise any pollution of any drainage
system that is dangerous or injurious to public
health; and
<PAGE>
(v) the provisions of sub-paragraph (ii) of this
paragraph shall be carried out progressively within 3
months of the cessation of mining on that mined area
in order to allow for the regeneration of vegetation;
(d) not to use or work the land nor permit it to be used or worked
except for the purposes for which it is leased;
(e) to observe, perform and carry out the provisions of the Act
and the Regulations and of the Mines Safety Control Act and
the Regulations for the time being in force under that Act or
any other Act so far as those provisions affect or have
reference to a lease granted under the Act;
(f) during the whole of the period in which any well is being
drilled in the land and thereafter until the well is plugged
and abandoned at the sole expense or cost of the lessee to
maintain with an insurance company approved by the Minister a
policy of insurance covering the control of well redrilling
and well recompletion expenses seepage, pollution and general
liability in the sum of not less than seven million dollars in
respect of any one loss arising out of any one event
indemnified (or such other form of insurance as is acceptable
to the Minister) naming the Territory as Lessor and upon
request by the Minister to produce evidence of the currency of
such insurance;
(g) to treat the petroleum in accordance with good oilfield
practice and considering the circumstances to make the best
use of the petroleum reserves;
(h) to take competent advice in association with experts nominated
by the Minister as to what steps are reasonably possible to
progressively encourage and promote regeneration and
development of vegetation on mined areas;
(j) to erect such fences or to take such other steps as may be
reasonably necessary for security or safety purposes;
<PAGE>
(k) to permit access to any part of the land, not being a part or
parts designated a restricted area under paragraph (j) of this
clause, by the officers, employees and agents of the Minister
or the Territory;
(m) not to interfere with or mine on any public road on the land
unless the lessee has provided an alternative road approved by
the Minister;
(n) not to interfere with or mine in an area constituting a public
airstrip unless and until the lessee has first constructed an
alternative comparable airstrip on other land specified for
that purpose by the Minister and the alternative airstrip is
licensed for the same purpose as the existing public airstrip;
and
(p) to allow free public access to and along any public road and
the airstrip or the alternative airstrip constructed in
accordance with paragraph (n) of this clause.
2. AND THE LESSEE for itself and its successors and permitted assigns
further covenants with the Territory -
(1) For the purpose of calculating the value at the well-head of all
substances upon which a royalty is payable as provided by the Act, the lessee
shall measure the quantity of such substances by a measuring device approved by
the Minister and installed at the well-head, or at such other place as the
Minister approves, by the lessee.
(2) The lessee shall, from time to time, permit any person authorized
by the Minister, at such times as the Minister may require, to test and examine
any measuring device used or to be used by the lessee to measure the quantity of
petroleum recovered from the land.
(3) The lessee shall, at all times during the continuance of the lease,
comply with the Act and Regulations and all other laws from time to time in
force so far as they are applicable to or in relation to the land and the use of
the land by the lessee.
<PAGE>
(4) The lessee shall comply promptly with the requirements of all
notices relating to the land and the use of the land by the lessee lawfully
given to the lessee in pursuance of any law in force in the Territory.
(5) When and as often as the lessee intends to construct on the land
any permanent building, plant, water-way, road or other improvement or structure
permitted to be constructed by the Act or Regulations, the lessee shall give to
the Minister written notice of the proposed location thereof and shall obtain
the Minister's written consent before commencing any such construction work,
which consent may be given on such terms and conditions as the Minister thinks
fit, and the lessee shall give to the Minister such further information as the
Minister may, from time to time, require in respect of any such construction.
(6) The lessee shall, from time to time when so required in writing by
the Minister during the continuance of the lease, make provision to the
satisfaction of the Minister for the continued conservation and protection of
the natural resources of the land, including fauna and flora, and for minimizing
damage to or pollution or degradation of the natural environment and in
accordance with the Environmental Report.
(7) If the Minister so directs in writing, the lessee shall, within 3
months next following the expiration or earlier determination of the lease,
remove from the land all plant, buildings, equipment and other property of the
lessee reasonably capable of being so removed.
(8) The lessee shall take all reasonable steps to ensure that -
(a) topsoil from all disturbed areas of the land is stockpiled
and, within the 3 months next following the expiration or
earlier determination of the lease, is to the satisfaction of
the Minister respread to maximum advantage for rehabilitation
and revegetation purposes; and
<PAGE>
(b) wherever vegetation on the land has been removed, damaged or
interfered with, within 3 months next following the expiration
or earlier determination of the lease, all areas from or on
which vegetation has been so removed, damaged or interfered
with is revegetated in the manner and to the extent required
by the Minister.
(9) The waiver by the Minister of any default by the lessee shall not
prevent the Minister from cancelling the lease pursuant to the Act or the
exercise by the Minister of any other remedy he may have by reason of any other
cause or for the same cause arising at any other time.
(10) The lessee shall inform all employees, agents and contractors of
the lessee from time to time working on the land of the principal obligations of
the lessee under any agreement between the lessee and a Land Council established
by or under the Aboriginal Land Rights (Northern Territory) Act 1976 of the
Commonwealth and shall take all reasonable steps to ensure that such employees,
agents and contractors comply with and observe such obligations.
(11) The lessee shall, at all times, indemnify and keep the Territory
and the Minister, and all servants thereof, indemnified against all actions,
proceedings, costs, charges, claims and demands whatsoever which may be made or
brought against the Territory or the Minister or any such servant by any person
whomsoever in relation to or in connection with the lease or any matter or thing
done or purported to have been done in pursuance thereof.
(12) The lessee shall, from time to time, deliver to the Minister or
his duly authorized representative copies of or extracts from such records of
the lessee relating to the land or the operations of the lessee thereon as the
Minister may, from time to time in writing, require.
(13) The lessee shall, at all times, permit a person duly authorized in
writing by the Minister to inspect any of the records of the lessee relating to
the land or the operations of the lessee thereon and that person may take such
copies of or extracts from such records as he requires.
<PAGE>
3. AND IT IS further expressly agreed and declared between the parties
hereto -
(a) that the lessee shall conduct all operations on the land in
accordance with good oilfield practice and in a diligent,
careful and workmanlike manner and in accordance with the law
applicable to such operations and in accordance with the
Technical Report;
(b) that the lessee shall, prior to the signing of this lease,
execute and deliver to the Minister a bond in a form approved
by the Minister;
(c) that in accordance with the Technical Report, the lessee will
attempt to determine the deliverability of the field within
two years from the date of commencement of production and
transmission of gas from the field, and at the end of that
period or such longer period as the Minister allows, will
provide a written assessment of the reserves in the field and
a further Technical Report on the subsequent development of
the field for the Minister's approval; and
(d) that pursuant to section 55(4) of the Act, the Minister
directs that no well be drilled in the lease area, as required
by 55(l)(a)(ii) of the Act, until he has considered the
written assessment of reserves and Technical Report referred
to in 3(c), or until the drilling of the said well or wells
becomes necessary for the proper appraisal of the gas field or
the continued production of gas from such field, whichever is
the earlier, or unless the lessee elects to drill at any
earlier date, consistent with the objectives of the Technical
Report.
4. (1) ANY DISPUTE or difference between the parties arising out of or in
connection with this lease, which the parties have been unable to settle by
negotiation and agreement shall, at the request of either party made to the
other in writing and stating the matter in dispute, be submitted to the
arbitration of 3 arbitrators, one to be appointed by the Minister, one to be
appointed by the lessee and the third to be chosen by the 2 arbitrators so
appointed.
<PAGE>
(2) Any such arbitration shall be held in Darwin and shall be conducted
in accordance with the Arbitration Rules of the International Chamber of
Commerce as in force on the first day of June 1955, and it is expressly agreed
that notwithstanding anything to the contrary contained in the aforesaid
Arbitration Rules, adoption by the parties of such rules shall not constitute or
operate as a waiver by either party of its right of appeal from any award on a
point of law nor operate so as to exclude the jurisdiction of any court
competent to decide such point of law.
(3) Each party shall bear its own costs in connection with such
arbitration and the expenses of the arbitrators shall be borne as the
arbitrators may direct. The majority decision of the arbitrators shall prevail
and shall constitute an award. Any award made in respect of a dispute or
difference submitted to arbitration pursuant to this clause shall, except on a
point of law, be final and binding upon the parties.
(4) The making of an award upon any dispute or difference capable of
being submitted to arbitration pursuant to this clause shall be a condition
precedent to any action upon such dispute or difference, it being expressly
agreed that no cause of action shall arise upon such dispute or difference until
the making of an award as aforesaid.
5. (1) IN THIS LEASE, unless the contrary intention appears -
"Environment Report" means the Environment Assessment and Management
Report - Palm Valley Gas Project dated March 8, 1982 and
approved by the Minister on the 25th day of October, 1982;
"Minister" means the Minister for Mines and Energy, or such other
Minister for the Territory as may be charged with the
administration of the Act;
<PAGE>
"Technical Report" means the Technical Report - Palm Valley Project and
the Supplemental Testing Programme approved by the Minister on
the 8th day of November 1982 together with such modifications
or amendments that are approved by the Minister from time to
time.
(2) For the purposes of this lease, the expression "good oilfield
practice", wherever occurring in this lease, shall include the requirement that
the land will be developed in accordance with the technology which, from time to
time, is determined in writing by the Minister to be the most appropriate
technology and which causes the least damage to the natural resources of the
land, including the fauna and flora, and the least damage to or pollution or
degradation of the natural environment.
SIGNED by IAN LINDSAY TUXWORTH, )
)
Minister for Mines and Energy, for )
)
and on behalf of the Northern )
)
Territory of Australia in the )
)
presence of )
/s/ Ian Lindsay Tuxworth
.................................
/s/ _________________________
<PAGE>
THE COMMON SEAL of MAGELLAN )
)
PETROLEUM (N.T.) PTY LTD was )
)
hereunto affixed by authority of )
)
the Directors in the presence of )
/s/ Roy M. Hopkins
Director .................................
/s/ Hedley Howard
Secretary .................................
-------------------------------
SCHEDULE
ALL THAT piece or parcel of land in the Northern Territory of Australia
containing an area of 237.72 square miles (615.70 square kilometres) more or
less, the boundary of which is described as follows:
Commencing at the intersection of latitude 23(degree)57' with longitude
132(degree)25' thence proceeding to the intersection of latitude 23(degree)57'
with longitude 132(degree)45' thence proceeding to the intersection of latitude
24(degree)01'35" with longitude 132(degree)55'02" thence proceeding to the
intersection of 24(degree)06' with longitude 132(degree)55'02" thence proceeding
to the intersection of latitude 24(degree)06' with longitude 132(degree)49'57"
thence proceeding to the intersection of latitude 24(degree)03'45" with
longitude 132(degree)45'02" thence proceeding to the intersection of latitude
24(degree)03'45" with longitude 132(degree)25' thence proceeding to the
intersection of latitude 23(degree)57' with longitude 132(degree)25'.
Agreement
Between
CANADA SOUTHERN PETROLEUM LTD.
and
MAGELLAN PETROLEUM CORPORATION
and
OIL INVESTMENTS, INC.
and
HOME OIL COMPANY LIMITED
and
KERN COUNTY LAND COMPANY
and
ALMINEX LIMITED
and
UNITED OILS, LIMITED
and
SIGNAL OIL AND GAS COMPANY
Dated as of May 28, 1959
<PAGE>
TABLE OF CONTENTS
Agreement dated as of May 28, 1959.
Article Page
Definitions............................................. I 2
Assignment.............................................. II 2
Payment and Exploratory Program......................... III 3
Option.................................................. IV 5
Division of Lands....................................... V 6
Information to be Delivered to Home..................... VI 7
Incorporation of Operating Procedure.................... VII 7
SCHEDULE "A"-Description of Lands....................... 9
Clause Page
SCHEDULE "B"-Operating Procedure:
Definitions.................................... A 21
Status of Manager Operator..................... B 23
Change of Manager Operator..................... C 23
Meetings....................................... D 24
Budget......................................... E 24
Duties of the Manager Operator................. F 25
Rights of Joint Operators...................... G 26
Competitive Operating Basis.................... H 27
Insurance...................................... I 27
Advances....................................... J 28
Lien........................................... K 28
Division of Production......................... L 29
Obligatory Operations.......................... M 30
Independent Operations......................... N 30
Selection of Leases............................ O 32
Surrender...................................... P 32
<PAGE>
Clause Page
Assignment..................................... Q 33
Assignments Among Parties...................... R 33
Relationship of Parties........................ S 33
Liability of Manager Operator.................. T 34
Force Majeure.................................. U 34
Waiver......................................... V 35
Conflict with Laws............................. W 35
Notices........................................ X 35
Further Assurances............................. Y 36
Entire Agreement............................... Z 36
Division of Expenses........................... AA 36
Term........................................... BB 37
Interpretation................................. CC 37
SCHEDULE "C"-Accounting Procedure....................... 38
<PAGE>
THIS AGREEMENT made as of this Twenty-eighth day of May, A. D. 1959.
Between:
CANADA SOUTHERN PETROLEUM LTD., a corporation incorporated under the laws
of Canada (hereinafter referred to as "Canada Southern")
and
MAGELLAN PETROLEUM CORPORATION, a Panama Corporation (hereinafter referred
to as "Magellan")
and
OIL INVESTMENTS, INC., a Panama corporation (hereinafter referred to as
"Oil Investments")
(which aforesaid three corporations are hereinafter collectively
referred to as "C-M-O" and individually as a member of the C-M-O group)
and
HOME OIL COMPANY LIMITED, a corporation incorporated under the laws of
Canada, (hereinafter referred to as "Home")
and
KERN COUNTY LAND COMPANY, a company incorporated under the laws of
California (hereinafter referred to as "Kern")
and
ALMINEX LIMITED, a company incorporated under the laws of Canada
(hereinafter referred to as "Alminex")
and
UNITED OILS, LIMITED, a corporation incorporated under the laws of Canada
(hereinafter referred to as "United")
and
SIGNAL OIL AND GAS COMPANY, a company incorporated under the laws of
Delaware (hereinafter referred to as "Signal")
(the said Home, Kern County, Alminex, United and Signal being
hereinafter collectively referred to as "H-S" and individually as a
member of the H-S group)
WHEREAS C-M-O own jointly certain oil and gas permits in the Northwest
Territories and the Yukon Territory, Canada, described in Schedule "A" hereto;
and
WHEREAS H-S and C-M-O are desirous that H-S acquire one-half of C-M-O`s
ownership in certain areas covered by those permits.
Now THEREFORE IN CONSIDERATION of the mutual covenants and agreements
hereinafter set forth, the parties agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings, unless the context otherwise requires:
1.1 "Properties" shall mean the lands described in Schedule "A" hereto
other than the optioned lands.
1.2 "Execution of this Agreement" shall mean the date when it has been
signed by all the parties thereto.
1.3 "First Drilling Season" shall mean the winter season of 1959-1960.
1.4 "Known producing horizons" shall mean all known producing horizons
down to and including the Devonian.
1.5 "North Petitot" shall mean the known seismic structure which has
been heretofore mapped by Canada Southern and submitted to H-S under
all or portions of Permits Numbers 1136, 1137, 2301, 2713, 2302,
1134, 1154, 1153 and 1152.
1.6 "Discovery well" shall mean a well which establishes production in a
new reservoir.
1.7 "Exploratory well" shall mean an exploratory well as defined in the
Operating Procedure.
1.8 "Delineation or development wells" shall mean any and all wells
(whether dry or not) which are not discovery wells.
1.9 "Net acre acquirable" shall mean one-half the amount of acreage
which may be securable in gas license or oil and/or gas lease form
from the Dominion Government, recognizing that the Owners of the
North halves of Permits Numbers 1137 and 2301 are entitled to
one-half of the total acreage acquirable under the said Permits in
the absence of agreement to the contrary.
1.10 "Dollars" shall mean Canadian Dollars.
ARTICLE II
2.1 C-M-O hereby transfers, assigns and vests in the members of the H-S
group the undivided interests set out hereunder in and to the oil and gas
permits described in Schedule "A" except for the South one-half of Permits
Numbers 1137 and 2301 comprising 31,966 acres, and subject to the payment of
Fifty (50%) percent of the royalties described in Schedule "A".
To Home........................................ 12 1/2%
To Kern........................................ 5%
To Alminex..................................... 5%
To United...................................... 2 1/2%
To Signal...................................... 25%
<PAGE>
2.2 Home shall thereafter become the Manager Operator of the properties in
accordance with the terms of the Operating Procedure hereto attached and marked
as Schedule "B" except as hereinafter otherwise provided.
2.3 C-M-O agree they will deliver to Messrs. Gowling, MacTavish, Osborne &
Henderson registrable transfers of the said Permits in form sufficient to enable
Messrs. Gowling, MacTavish, Osborne & Henderson to have such Permits registered
with the Chief of the Mining and Lands Division of the Northern Administration
and Lands Branch of the Department of Northern Affairs and Natural Resources,
Ottawa, Canada, in the following undivided interests:
Canada Southern................................. 50%
Signal.......................................... 25%
Home............................................ 20%
Kern County..................................... 5%
it being understood that Canada Southern shall hold the interests of Magellan
and Oil Investments in trust and that Home shall hold the interests of Alminex
and United in trust.
2.4 The parties hereto agree that the monies to be paid pursuant to
Article 3.1(A) (a) shall be paid by certified cheques delivered to Messrs.
Gowling, MacTavish, Osborne & Henderson, 88 Metcalfe Street, Ottawa, Canada, to
be held by Messrs. Gowling, MacTavish, Osborne & Henderson until such time as
the said Permits with the assignments thereof had been delivered to the said
Chief and registered in the said Department and thereupon the said cheques shall
be delivered to C-M-O.
2.5 C-M-O hereby agree that the said Permits are in good standing, that
they have good title to the said Permits and good right, full power and absolute
authority (except for the consent of the said Chief) to transfer the said
Permits as herein provided, and that the properties are free and clear of any
claims, liens or encumbrances except the royalties described in Schedule "A".
ARTICLE III
3.1 H-S shall pay C-M-O for the interests acquired hereunder the following
considerations:
(A) In cash not chargeable to or recoupable from C-M-O:
(a) Upon the execution of this Agreement, $1,500,000, in
accordance with the provisions of Article 2.4 above.
(b) One year after the execution of this Agreement $666,666.
(c) Two years after the execution of this Agreement $666,667.
(d) Three years after the execution of this Agreement $666,667.
<PAGE>
(B) In work not chargeable or recoupable from C-M-O:
(a) H-S shall commence in 1959 a program of exploration on the
properties or on the optioned acreage which shall include the
drilling of a minimum of five exploratory wells, irrespective of
cost, to at least a depth to test the known producing horizons, or
igneous or other impenetrable formations, or a depth of 12,000 feet,
whichever is the least, of which at least one such well shall be
drilled into the Pre Cambrian and one such well shall be located on
the Western block of the properties, consisting of Permits Nos.
1006, 1007, 1132, 1133 and 1135. The first such exploratory well
shall be located on the North Petitot structure and shall be drilled
during the first drilling season and one well may be on the optioned
acreage but such well shall not be in lieu of the well required to
be drilled on the North Petitot structure.
(b) In the event the total cost of the exploratory program
described in (a) above should be less than $3,000,000, then H-S are
obligated to spend the difference between such total cost and
$3,000,000, in exploration and development work on the properties
and costs incidental or ancillary thereto.
(c) The work and expenditures described in (a) and (b) above
shall be completed within five years from the date of the execution
of this Agreement.
(d) H-S will be obligated to reconvey the properties to C-M-O in
the event they should fail to meet the obligations described in this
paragraph (B). Such reconveyance shall not serve in any way to
constitute partial or liquidated damages or to cancel any obligation
undertaken by H-S under the terms of this Agreement.
(C) Subsequent to the completion of both (A) and (B) above, H-S
shall permit C-M-O to enjoy the following preferential position with
respect to further work done on the properties so long as the work is
performed prior to the time when any particular or potential oil or gas
field is producing into a trunk pipe line, or, in the case of oil, prior
to the time oil moves to market in quantities that permit C-M-O to
finance its share of further reasonable development pursuant to normal
commercial banking arrangements.
(1) Should H-S drill, deepen or complete a discovery well in
accordance with the provisions of Clause N of the Operating
Procedure, in the cost of which C-M-O does not participate, the
rights of H-S to recoup therefrom under the terms of Clause N of the
Operating Procedure shall be limited to 300%; that is, H-S may
recoup from C-M-O's interest in such discovery well three times what
would have been C-M-O's cost of participating in the said well.
(2) Should H-S drill, deepen or complete a delineation or
development well in accordance with the provisions of Clause N of
the Operating Procedure, in the cost of which C-M-O does not
participate, the rights of H-S to recoup therefrom under the terms
of Clause N of the Operating Procedure shall be limited to 105%;
that is, H-S may recoup from C-M-O's interest in such delineation or
development well 100% of what would have been C-M-O's cost of
participating in the said well plus 5%.
<PAGE>
(D) H-S will assure the earliest feasible development and marketing
of oil and/or gas found on the properties.
ARTICLE IV
4.1 H-S shall have an exclusive option to buy from C-M-O, for the price
and during the period hereinafter stated, an undivided one-half interest in and
to the South one-half of Permits Numbers 1137 and 2301 comprising approximately
31,966 acres, subject to the payment of 50% of the royalty described in Schedule
"A". If, as and when the option is exercised, the optioned acreage will
thereafter become subject to this Agreement as a part of the properties as
defined. No amounts paid, in connection with the option as hereinafter provided,
shall be chargeable to or recoupable from C-M-O.
4.2 The prices at which and periods within which the option may be
exercised are as follows:
Before August 1, 1960, $400. per net acre acquirable;
Before August 1, 1961, $600. per net acre acquirable;
Before August 1, 1962, $800. per net acre acquirable;
Before August 1, 1963, $1,000. per net acre acquirable.
4.3 Payment shall be made upon exercise of the option in accordance with
the then existing law or regulations governing oil and gas permits in the
Northwest Territories. In the event that modification of the law or regulations
subsequent to the exercise of the option permits greater acreage acquirement by
the permittees within the boundary of the optioned acreage then H-S may elect to
purchase a 50% interest in such additional acquirable acreage and additional
payment shall promptly be made accordingly determined by the price pertaining
when the original option was exercised.
4.4 Once payment has been made for acquirable oil and/or gas rights under
any surface acre and if other oil or gas rights are acquirable under the same
surface acre, no additional payment shall be required to be made to C-M-O for
such other rights under such surface acre.
4.5 Prior to the exercise of the option or its expiration C-M-O will give
H-S thirty (30) days' prior written notice of any well to be drilled on the
optioned acreage. H-S may participate 50% with C-M-O in the cost of drilling any
such well or wells on the optioned acreage. Failure to participate, however,
will serve to terminate the option unless within thirty (30) days H-S agrees to
drill and does thereafter diligently commence and drill a well thereon to the
known producing horizons or to igneous or other impenetrable formations or to a
depth of 12,000 feet, whichever is the least.
4.6 Prior to the exercise of the option or its expiration, H-S may have
access to the area under option and any information in C-M-O's possession
pertaining thereto. H-S may, upon prior written notice, commence and drill an
exploratory test well on the option area at the sole cost and expense of H-S,
none of which shall be chargeable to or recoupable from C-M-O.
<PAGE>
4.7 Any well drilled under the provisions of Clauses 4.5 or 4.6 above
shall, after its completion, be operated by the then operator of the optioned
acreage.
4.8 Prior to the expiration of the option described in Article IV, neither
C-M-O nor H-S shall make application for oil and/or gas leases and/or licenses
under any permit which includes any part of the optioned acreage except by
mutual agreement, provided that, if during this period, any rules or regulations
governing oil and gas in the Northwest Territories shall require or render it
advantageous to apply for oil and/or gas leases and/or licenses on any of the
optioned acreage, then C-M-O and H-S shall meet promptly for the purpose of
agreeing upon such application. Consent by H-S to the areas to be covered by
such application with respect to any permit which includes any part of the
optioned acreage shall not be unreasonably withheld.
4.9 Any exploratory well drilled by H-S under this Article IV shall be
considered one of the wells required to be drilled under Article III and the
cost of any well drilled by H-S whether exploratory or not, and the cost of any
well in which H-S participates on the optioned lands shall be considered part of
the expenditures required to be made under Article 3.1(B) (b).
4.10 Participation in a well or any work done on the optioned lands shall
not be deemed an exercise of the option by H-S.
ARTICLE V
5.1 At any time after a period of five (5) years following the execution
of this Agreement, C-M-O shall have the right to call for a division of all or
any of the areas which have gone to lease or license and which are jointly owned
by H-S and C-M-O and the termination of this Agreement to the extent that it
affects the areas to be subdivided. The subdivision shall in no case affect the
obligation of H-S to assure the earliest feasible marketing of oil or gas found
on the areas jointly owned by H-S and C-M-O, including those which may become
subdivided. The procedure for such division of said area or areas and the
termination of such agreement shall be as follows:
C-M-O shall advise H-S in writing of its desire.
Upon receipt of this notice there shall ensue a period of thirty
(30) days within which the parties shall endeavour by agreement to work
out a division of the area or areas.
If by the expiration of the said thirty (30) days no agreement has
been reached, C-M-O may within fifteen (15) days thereafter prepare and
present to H-S a division into two parts of all areas to be divided and
other assets jointly owned in connection therewith under this Agreement.
Such plan of division shall be in a checkerboard pattern in which the
units shall be a maximum size calculated to avoid forcible unitization if
possible and a minimum of one section except in the case of lands
producing oil the maximum shall be a maximum size calculated to avoid
forcible unitization if possible and a minimum of one-quarter section. H-S
shall have a period of thirty (30) days from receipt of the proposed
division to elect which of the two parts it desires to receive. If H-S
does not make its election within the said thirty (30) days by notice in
writing to C-M-O, the latter shall, within ten (10) days thereafter, elect
which of the two parts it desires and so notify H-S.
<PAGE>
5.2 At all times mentioned in this Article existing contracts between the
parties shall remain in full force and effect and normal operations thereunder
shall continue. Thirty (30) days after the final election is made by either
party in accordance with the above established procedure, all existing contracts
shall terminate with respect to the divided properties except as provided in
this Article. All joint operations in respect of the divided properties shall
then cease and all obligations except the liquidation of current accounts of
either party to the other and obligations to third parties shall be at an end
except as provided in this Article but during such final thirty (80) days and
thereafter the parties will individually and together take whatever action is
necessary to conserve the area or areas and assets jointly owned by H-S and
C-M-O and to expedite final transfer of titles and liquidation of any accounts
and other matters pending as of the date of the termination.
ARTICLE VI
6.1 C-M-O shall promptly deliver to Home, C-M-O's files or copies thereof
relating to the areas covered by this Agreement, retaining copies thereof for
C-M-O's own use. C-M-O shall give to Home original or duplicate copies of all
data obtained by C-M-O or available to C-M-O with respect to the geology of the
areas covered by this Agreement and all other information which C-M-O may have
on hand or is presently entitled to acquire with respect to exploration and
development of the areas covered by this Agreement.
ARTICLE VII
INCORPORATION OF OPERATING PROCEDURE
7.1 The parties agree that the provisions contained in the Operating
Procedure attached hereto as Schedule "B" shall apply to the same extent and in
the same manner as though such provisions were contained in this Agreement.
Where there is any conflict between the provisions of this Agreement and the
Operating Procedure or the Accounting Procedure the provisions of this Agreement
shall prevail and in the case of any conflict between the Operating Procedure
and the Accounting Procedure the provisions of the Operating Procedure shall
prevail.
IN WITNESS WHEREOF the parties hereto have executed this Agreement this
Twenty-fourth day of June, 1959.
(SEAL) CANADA SOUTHERN PETROLEUM LTD.
per: JOHN W. BUCKLEY
President
per: M. A. REASONER
Vice-President
<PAGE>
(SEAL) MAGELLAN PETROLEUM CORPORATION
per: JOHN W. BUCKLEY
Vice-President
per: C. DEAN REASONER
Assistant Secretary
(SEAL) OIL INVESTMENTS, INC.
per: JOHN W. BUCKLEY
Vice-President
per: C. DEAN REASONER
Assistant Secretary
(SEAL) HOME OIL COMPANY LTD.
per: ALEX CLARK
Vice-President
per: J. W. HAMILTON
Assistant Secretary
(SEAL) KERN COUNTY LAND COMPANY
per: JOHN H. MATKIN
Vice-President
per: JAMES A. WALKER
Assistant Secretary
(SEAL) ALMINEX LIMITED
per: J. B. WEBB
Vice-President
per: P. H. POWERS
A./Sec. Treas.
(SEAL) UNITED OILS, LIMITED
per: ROBERT CAMPBELL
Director
per: J. W. HAMILTON
Assistant Secretary
(SEAL) SIGNAL OIL AND GAS COMPANY
per: J. HOWARD MARSHALL
Vice-President
per: JAMES K. WOOTAN
Director
<PAGE>
SCHEDULE "A"
To an Agreement made as of May 28, 1959, between Canada Southern Petroleum
Ltd., Magellan Petroleum Corporation, Oil Investments, Inc., Home Oil
Company Limited, Kern County Land Company, Alminex Limited,
United Oils Limited, Signal Oil and Gas Company.
Permit No. Areas Described in Permit Date of Permit
1132 All that certain tract of land in the April 29th, 1957
Mackenzie Mining District, in the Northwest
Territories, containing sixty-three thousand
two hundred and twelve acres, more or less,
said tract being more particularly described
as follows:
Commencing at a point at latitude sixty
degrees thirty minutes no seconds and
longitude one hundred and twenty-three
degrees fifteen minutes no seconds; thence
westerly on a right line to a point at
latitude sixty degrees thirty minutes no
seconds and longitude one hundred and
twenty-three degrees thirty minutes no
seconds; thence southerly on a right line to
a point at latitude sixty degrees twenty
minutes no seconds and longitude one hundred
and twenty-three degrees thirty minutes no
seconds; thence easterly on a right line to
a point at latitude sixty degrees twenty
minutes no seconds and longitude one hundred
and twenty-three degrees fifteen minutes no
seconds; thence northerly on a right line to
the point of commencement; said latitudes
and longitudes being as determined by
astronomic means, in situ.
1133 The whole of that parcel in the Mackenzie April 29th, 1957
Mining District, in the Northwest
Territories, said parcel being more
particularly described as follows:
Commencing at a point at latitude sixty
degrees twenty minutes no seconds and
longitude one hundred and twenty-three
degrees thirty minutes no seconds; thence
westerly on a right line to a point at
latitude sixty degrees twenty minutes no
seconds and longitude one hundred and
twenty- three degrees forty-five minutes no
seconds; thence southerly on a right line to
a point at latitude sixty degrees ten
minutes no seconds and longitude one hundred
and twenty-three degrees forty-five minutes
no seconds; thence easterly on a right line
to a point at latitude sixty degrees ten
minutes no seconds and longitude one hundred
and twenty-three degrees thirty minutes no
seconds; thence northerly on a right line to
the point of commencement; said latitudes
and longitudes being as determined by
astronomic means, in situ.
Saving and excepting thereout and therefrom
said parcel all that part lying within the
limits of Petroleum and Natural Gas Permit
numbered four hundred and seventy-nine, the
remainder containing fifty-eight thousand
and sixty-eight acres, more or less; also
excepting any part thereof which may be
affected by the rights of other persons
acquired through prior staking.
<PAGE>
1134 The south half of that parcel in the Mackenzie April 29th, 1957
Mining District, in the Northwest
Territories, said parcel being more
particularly described as follows:
Commencing at a point at latitude sixty
degrees twenty minutes no seconds and
longitude one hundred and twenty-two degrees
fifteen minutes no seconds; thence westerly
on a right line to a point at latitude sixty
degrees twenty minutes no seconds and
longitude one hundred and twenty-two degrees
thirty minutes no seconds; thence southerly
on a right line to a point at latitude sixty
degrees ten minutes no seconds and longitude
one hundred and twenty-two degrees thirty
minutes no seconds; thence easterly on a
right line to a point at latitude sixty
degrees ten minutes no seconds and longitude
one hundred and twenty-two degrees fifteen
minutes no seconds; thence northerly on a
right line to the point of commencement;
said latitudes and longitudes being as
determined by astronomic means, in situ.
Saving and excepting thereout and therefrom
said parcel all that part lying within the
limits of Petroleum and Natural Gas Permit
numbered two hundred and ninety-nine, the
remainder containing twenty-five thousand
two hundred and seventy-nine acres, more or
less; also excepting any part thereof which
may be affected by the rights of other
persons acquired through prior staking.
1135 The whole of that parcel in the Mackenzie April 29th, 1957
Mining District, in the Northwest
Territories said parcel being more
particularly described as follows:
Commencing at a point at latitude sixty
degrees ten minutes no seconds and longitude
one hundred and twenty-three degrees thirty
minutes no seconds; thence westerly on a
right line to a point at latitude sixty
degrees ten minutes no seconds and longitude
one hundred and twenty-three degrees forty-
five minutes no seconds; thence southerly on
a right line to a point at latitude sixty
degrees no minutes no seconds and longitude
one hundred and twenty-three degrees forty-
five minutes no seconds; thence easterly on
a right line to a point at latitude sixty
degrees no minutes no seconds and longitude
one hundred and twenty-three degrees thirty
minutes no seconds; thence northerly on a
right line to the point of commencement;
said latitudes and longitudes being as
determined by astronomic means, in situ.
Saving and excepting thereout and therefrom
said parcel all that part lying within the
limits of Petroleum and Natural Gas Permit
numbered four hundred and seventy-nine, the
remainder containing thirty thousand six
hundred and seventy acres, more or less,
also excepting any part thereof which may be
affected by the rights of other persons
acquired through prior staking.
1136 All that certain tract of land in the April 29th, 1957
Mackenzie Mining District, in the Northwest
Territories containing sixty-three thousand
eight hundred and fifty-four acres, more or
less, said tract being more particularly
described as follows:
<PAGE>
Commencing at a point at latitude sixty
degrees ten minutes no seconds and longitude
one hundred and twenty-two degrees thirty
minutes no seconds; thence westerly on a
right line to a point at latitude sixty
degrees ten minutes no seconds and longitude
one hundred and twenty-two degrees forty-
five minutes no seconds; then southerly on a
right line to a point at latitude sixty
degrees no minutes no seconds and longitude
one hundred and twenty-two degrees forty-
five minutes no seconds; thence easterly on
a right line to a point at latitude sixty
degrees no minutes no seconds and longitude
one hundred and twenty-two degrees thirty
minutes no seconds; thence northerly on a
right line to the point of commencement;
said latitudes and longitudes being as
determined by astronomic means, in situ.
1137 The whole of that parcel in the Mackenzie April 29th, 1957
Mining District, in the Northwest
Territories, said parcel being more
particularly described as follows:
Commencing at a point at latitude sixty
degrees ten minutes no seconds and longitude
one hundred and twenty-two degrees fifteen
minutes no seconds; thence westerly on a
right line to a point at latitude sixty
degrees ten minutes no seconds and longitude
one hundred and twenty-two degrees thirty
minutes no seconds; thence southerly on a
right line to a point at latitude sixty
degrees no minutes no seconds and longitude
one hundred and twenty-two degrees thirty
minutes no seconds; thence easterly on a
right line to a point at latitude sixty
degrees no minutes no seconds and longitude
one hundred and twenty-two degrees fifteen
minutes no seconds; thence northerly on a
right line to the point of commencement;
said latitudes and longitudes being as
determined by astronomic means, in situ.
Saving and excepting thereout and therefrom
said parcel all that part lying within the
limits of Petroleum and Natural Gas Permit
numbered two hundred and ninety-nine, the
remainder containing forty-one thousand
seven hundred and seventy-four acres, more
or less; also excepting any part thereof
which may be affected by the rights of other
persons acquired through prior staking.
2301 All that portion of the grid area designated September 18th, 1958
60 degrees 10 minutes, 122 degrees 15
minutes, said portion lying within the
limits of surrendered Petroleum and Natural
Gas Permit numbered two hundred and ninety-
nine, in the Mackenzie Mining District, in
the Northwest Territories, said portion
containing twenty-two thousand and eighty
acres, more or less; saving and excepting
thereout and therefrom any part of said
permit which may be affected by the rights
of other persons acquired through prior
staking.
<PAGE>
2302 All that portion of the south half of the grid September 18th, 1958
area designated 60 degrees 20 minutes, 122
degrees 15 minutes, said portion lying
within the limits of surrendered Petroleum
and Natural Gas Permi numbered two hundred
and ninety-nine, in the Mackenzie Mining
District, in the Northwest Territories, said
portion containing six thousand five hundred
and twenty-eight acres, more or less; saving
and excepting thereout and therefrom any
part of said Permit which may be affected by
the rights of other persons acquired through
prior staking.
2713 A rectilinear quadrilateral in the Mackenzie March 9th, 1959
Mining District, in the Northwest
Territories, the whole of the grid area
designated 60 degrees 10 minutes, 122
degrees 00 minutes, containing approximately
63,854 acres for a period of three years
from the date hereof, subject to the
Territorial Oil and Gas Regulations.
1006 All that certain tract of land in the June 14th, 1956
Mackenzie Mining District, in the Northwest
Territories, containing thirty one thousand
eight hundred and seven acres, more or less,
lying to the south of a right line joining
the mid points of the easterly and westerly
limits of the area particularly described as
follows:
Commencing at a point at latitude sixty
degrees twenty minutes no seconds and
longitude one hundred and twenty-three
degrees forty-five minutes no seconds thence
westerly on a right line to a point at
latitude sixty degrees twenty minutes no
seconds and longitude one hundred and
twenty-four degrees no minutes no seconds;
thence southerly on a right line to a point
at latitude sixty degrees ten minutes no
seconds and longitude one hundred and
twenty-four degrees no minutes no seconds;
thence easterly on a right line to a point
at latitude sixty degrees ten minutes no
seconds and longitude one hundred and
twenty-three degrees forty-five minutes no
seconds; thence northerly on a right line to
the point of commencement; said latitudes
and longitudes being as determined by
astronomic means, in situ.
1007 All that certain tract of land in the
Whitehorse Mining District, in the June
14th, 1956 Yukon Territory, and in the
Mackenzie Mining District in the Northwest
Territories containing thirty-one thousand
eight hundred and eighty-eight acres, more
or less, lying to the north of a right line
joining the mid points of the easterly and
westerly limits of the area particularly
described as follows:
<PAGE>
Commencing at a point at latitude sixty
degrees ten minutes no seconds and longitude
one hundred and twenty-four degrees no
minutes no seconds; thence westerly on a
right line to a point at latitude sixty
degrees ten minutes no seconds and longitude
one hundred and twenty-four degrees fifteen
minutes no seconds; thence southerly on a
right line to a point at latitude sixty
degrees no minutes no seconds and longitude
one hundred and twenty-four degrees fifteen
minutes no seconds; thence easterly on a
right line to a point at latitude sixty
degrees no minutes no seconds and longitude
one hundred and twenty-four degrees no
minutes no seconds; thence northerly on a
right line to the point of commencement;
said latitudes and longitudes being as
determined by astronomic means, in situ.
1173 All that certain tract of land in the May 23rd, 1957
Mackenzie Mining District, in the Northwest
Territories, containing thirty-one thousand
five hundred and sixty-six acres, more or
less, lying to the north of a right line
joining the mid points of the easterly and
westerly limits of the area particularly
described as follows:
Commencing at a point at latitude sixty
degrees thirty minutes no seconds and
longitude one hundred and twenty-one degrees
fifteen minutes no seconds; thence westerly
on a right line to a point at latitude sixty
degrees thirty minutes no seconds and
longitude one hundred and twenty-one degrees
thirty minutes no seconds; thence southerly
on a right line to a point at latitude sixty
degrees twenty minutes no seconds and
longitude one hundred and twenty-one degrees
thirty minutes no seconds; thence easterly
on a right line to a point at latitude sixty
degrees twenty minutes no seconds and
longitude one hundred and twenty-one degrees
fifteen minutes no seconds; thence northerly
on a right line to the point of
commencement; said latitudes and longitudes
being as determined by astronomic means, in
situ.
1174 All that certain tract of land in the May 23rd, 1957
Mackenzie Mining District, in the Northwest
Territories, containing thirty-one thousand
five hundred and sixty-six acres, more or
less, lying to the north of a right line
joining the mid points of the easterly and
westerly limits of the area particularly
described as follows:
Commencing at a point at latitude sixty
degrees thirty minutes no seconds and
longitude one hundred and twenty-one degrees
no minutes no seconds; thence westerly on a
right line to a point at latitude sixty
degrees thirty minutes no seconds and
longitude one hundred and twenty-one degrees
fifteen minutes no seconds; thence southerly
on a right line to a point at latitude sixty
degrees twenty minutes no seconds and
longitude one hundred and twenty-one degrees
fifteen minutes no seconds; thence easterly
on a right line to a point at latitude sixty
degrees twenty minutes no seconds and
longitude one hundred and twenty-one degrees
no minutes no seconds; thence northerly on a
right line to the point of commencement;
said latitudes and longitudes being
determined by astronomic means, in situ.
<PAGE>
1175 All that certain tract of land in the May 23rd, 1957
Mackenzie Mining District, in the Northwest
Territories, containing sixty two thousand
eight hundred and ninety acres, more or
less, said tract being more particularly
described as follows:
Commencing at a point at latitude sixty
degrees forty minutes no seconds and
longitude one hundred and twenty-one
degrees fifteen minutes no seconds; thence
westerly on a right line to a point at
latitude sixty degrees forty minutes no
seconds and longitude one hundred and
twenty-one degrees thirty minutes no
seconds; thence southerly on a right line to
a point at latitude sixty degrees thirty
minutes no seconds and longitude one hundred
and twenty-one degrees thirty minutes no
seconds; thence easterly on a right line to
a point at latitude sixty degrees thirty
minutes no seconds and longitude one hundred
and twenty-one degrees fifteen minutes no
seconds; thence northerly on a right line to
the point of commencement; said latitudes
and longitudes being as determined by
astronomic means, in situ.
1176 All that certain tract of land in the May 23rd, 1957
Mackenzie Mining District, in the Northwest
Territories, containing sixty-two thousand
five hundred and sixty-eight acres, more or
less, said tract being more particularly
described as follows:
Commencing at a point at latitude sixty
degrees fifty minutes no seconds and
longitude one hundred and twenty-one degrees
fifteen minutes no seconds; thence westerly
on a right line to a point at latitude sixty
degrees fifty minutes no seconds and
longitude one hundred and twenty-one degrees
thirty minutes no seconds; thence southerly
on a right line to a point at latitude sixty
degrees forty minutes no seconds and
longitude one hundred and twenty-one degrees
thirty minutes no seconds; thence easterly
on a right line to a point at latitude sixty
degrees forty minutes no seconds and
longitude one hundred and twenty-one degrees
fifteen minutes no seconds; thence northerly
on a right line to the point of
commencement; said latitudes and longitudes
being as determined by astronomic means, in
situ.
1177 All that certain tract of land in the May 23rd, 1957
Mackenzie Mining District, in the Northwest
Territories, containing sixty-two thousand
five hundred and sixty-eight acres, more or
less, said tract being more particularly
described as follows:
<PAGE>
Commencing at a point at latitude sixty
degrees fifty minutes no seconds and
longitude one hundred and twenty-one degrees
thirty minutes no seconds; thence westerly
on a right line to a point at latitude sixty
degrees fifty minutes no seconds and
longitude one hundred and twenty-one degrees
forty-five minutes no seconds; thence
southerly on a right line to a point at
latitude sixty degrees forty minutes no
seconds and longitude one hundred and
twenty-one degrees forty-five minutes no
seconds; thence easterly on a right line to
a point at latitude sixty degrees forty
minutes no seconds and longitude one hundred
and twenty-one degrees thirty minutes no
seconds; thence northerly on a right line to
the point of commencement; said latitudes
and longitudes being as determined by
astronomic means, in situ.
1178 All that certain tract of land in the May 23rd, 1957
Mackenzie Mining District, in the Northwest
Territories, containing sixty-two thousand
five hundred and sixty-eight acres, more or
less, said tract being more particularly
described as follows:
Commencing at a point at latitude sixty
degrees fifty minutes no seconds and
longitude one hundred and twenty-one degrees
forty-five minutes no seconds; thence
westerly on a right line to a point at
latitude sixty degrees fifty minutes no
seconds and longitude one hundred and
twenty-two degrees no minutes no seconds;
thence southerly on a right line to a point
at latitude sixty degrees forty minutes no
seconds and longitude one hundred and
twenty-two degrees no minutes no seconds;
thence easterly on a right line to a point
at latitude sixty degrees forty-minutes no
seconds and longitude one hundred and
twenty-one degrees forty-five minutes no
seconds; thence northerly on a right line to
the point of commencement; said latitudes
and longitudes being as determined by
astronomic means, in situ.
1179 All that certain tract of land in the May 23rd, 1957
Mackenzie Mining District, in the Northwest
Territories, containing sixty-two thousand
two hundred and forty-four acres, more or
less, said tract being more particularly
described as follows:
Commencing at a point at latitude sixty-one
degrees no minutes no seconds and longitude
one hundred and twenty-one degrees fifteen
minutes no seconds; thence westerly on a
right line to a point at latitude sixty-one
degrees no minutes no seconds and longitude
one hundred and twenty-one degrees thirty
minutes no seconds; thence southerly on a
right line to a point at latitude sixty
degrees fifty minutes no seconds and
longitude one hundred and twenty-one degrees
thirty minutes no seconds; thence easterly
on a right line to a point at latitude sixty
degrees fifty minutes no seconds and
longitude one hundred and twenty-one degrees
fifteen minutes no seconds; thence northerly
on a right line to the point of
commencement; said latitudes and longitudes
being as determined by astronomic means, in
situ.
<PAGE>
1180 All that certain tract of land in the May 23rd, 1957
Mackenzie Mining District, in the Northwest
Territories, containing sixty-two thousand
two hundred and forty-four acres, more or
less, said tract being more particularly
described as follows:
Commencing at a point at latitude sixty-one
degrees no minutes no seconds and longitude
one hundred and twenty-one degrees thirty
minutes no seconds; thence westerly on a
right line to a point at latitude sixty-one
degrees no minutes no seconds and longitude
one hundred and twenty-one degrees forty-
five minutes no seconds; thence southerly on
a right line to a point at latitude sixty
degrees fifty minutes no seconds and
longitude one hundred and twenty-one
degrees forty-five minutes no seconds;
thence easterly on a right line to a point
at latitude sixty degrees fifty minutes no
seconds and longitude one hundred and
twenty-one degrees thirty minutes no
seconds; thence northerly on a right line
to the point of commencement; said
latitudes and longitudes being as determined
by astronomic means, in situ.
1181 All that certain tract of land in the May 23rd, 1957
Mackenzie Mining District, in the Northwest
Territories, containing sixty-two thousand
two hundred and forty-four acres, more or
less, said tract being more particularly
described as follows:
Commencing at a point at latitude sixty-one
degrees no minutes no seconds and longitude
one hundred and twenty-one degrees forty-
five minutes no seconds; thence westerly
on a right line to a point at latitude
sixty-one degrees no minutes no seconds and
longitude one hundred and twenty-two degrees
no minutes no seconds; thence southerly on a
right line to a point at latitude sixty
degrees fifty minutes no seconds and
longitude one hundred and twenty-two degrees
no minutes no seconds; thence easterly on a
right line to a point at latitude sixty
degrees fifty minutes no seconds and
longitude one hundred and twenty-one degrees
forty-five minutes no seconds; thence
northerly on a right line to the point of
commencement; said latitudes and longitudes
being as determined by astronomic means, in
situ.
1149 All that certain tract of land in the May 23rd, 1957
Mackenzie Mining District, in the Northwest
Territories, containing thirty-one thousand
seven hundred and twenty-seven acres, more
or less, lying to the North of a right line
joining the mid points of the Easterly and
Westerly limits of the area particularly
described as follows:
<PAGE>
Commencing at a point at latitude sixty
degrees twenty minutes no seconds and
longitude one hundred and twenty-one degrees
no minutes no seconds; thence westerly on a
right line to a point at latitude sixty
degrees twenty minutes no seconds and
longitude one hundred and twenty-one degrees
fifteen minutes no seconds; thence southerly
on a right line to a point at latitude sixty
degrees ten minutes no seconds and longitude
one hundred and twenty-one degrees fifteen
minutes no seconds; thence easterly on a
right line to a point at latitude sixty
degrees ten minutes no seconds and longitude
one hundred and twenty-one degrees no
minutes no seconds; thence northerly on a
right line to the point of commencement;
said latitudes and longitudes being as
determined by astronomic means, in situ.
1150 All that certain tract of land in the May 23rd, 1957
Mackenzie Mining District, in the Northwest
Territories, containing thirty-one thousand
seven hundred and twenty-seven acres, more
or less, lying to the North of a right line
joining the mid points of the Easterly and
Westerly limits of the area particularly
described as follows:
Commencing at a point at latitude sixty
degrees twenty minutes no seconds and
longitude one hundred and twenty-one degrees
fifteen minutes no seconds; thence westerly
on a right line to a point at latitude sixty
degrees twenty minutes no seconds and
longitude one hundred and twenty-one degrees
thirty minutes no seconds; thence southerly
on a right line to a point at latitude sixty
degrees ten minutes no seconds and longitude
one hundred and twenty-one degrees thirty
minutes no seconds; thence easterly on a
right line to a point at latitude sixty
degrees ten minutes no seconds and longitude
one hundred and twenty-one degrees fifteen
minutes no seconds; thence northerly on a
right line to the point of commencement;
said latitudes and longitudes being as
determined by astronomic means, in situ.
1151 All that certain tract of land in the May 23rd, 1957
Mackenzie Mining District, in the Northwest
Territories, containing thirty-one thousand
seven hundred and twenty-seven acres, more
or less, lying to the North of a right line
joining the mid points of the Easterly and
Westerly limits of the area particularly
described as follows:
Commencing at a point at latitude sixty
degrees twenty minutes no seconds and
longitude one hundred and twenty-one degrees
thirty minutes no seconds; thence westerly
on a right line to a point at latitude sixty
degrees twenty minutes no seconds and
longitude one hundred and twenty-one degrees
forty-five minutes no seconds; thence
southerly on a right line to a point at
latitude sixty degrees ten minutes no
seconds and longitude one hundred and
twenty-one degrees forty-five minutes no
seconds; thence easterly on a right line to
a point at latitude sixty degrees ten
minutes no seconds and longitude one hundred
and twenty-one degrees thirty minutes no
seconds; thence northerly on a right line
to the point of commencement; said latitudes
and longitudes being as determined by
astronomic means, in situ.
<PAGE>
1152 All that certain tract of land in the May 23rd, 1957
Mackenzie Mining District, in the Northwest
Territories, containing thirty-one thousand
seven hundred and twenty-seven acres, more
or less, lying to the North of a right line
joining the mid points of the Easterly and
Westerly limits of the area particularly
described as follows:
Commencing at a point at latitude sixty
degrees twenty minutes no seconds and
longitude one hundred and twenty-one degrees
forty-five minutes no seconds; thence
westerly on a right line to a point at
latitude sixty degrees twenty minutes no
seconds and longitude one hundred and
twenty-two degrees no minutes no seconds;
thence southerly on a right line to a point
at latitude sixty degrees ten minutes no
seconds and longitude one hundred and
twenty-two degrees no minutes no seconds;
thence easterly on a right line to a point
at latitude sixty degrees ten minutes no
seconds and longitude one hundred and
twenty-one degrees forty-five minutes no
seconds; thence northerly on a right line to
the point of commencement; said latitudes
and longitudes being as determined by
astronomic means, in situ.
1153 All that certain tract of land in the May 23rd, 1957
Mackenzie Mining District, in the Northwest
Territories, containing thirty-one thousand
seven hundred and twenty-seven acres, more
or less, lying to the North of a right line
joining the mid points of the Easterly and
Westerly limits of the area particularly
described as follows:
Commencing at a point at latitude sixty
degrees twenty minutes no seconds and
longitude one hundred and twenty-two degrees
no minutes no seconds; thence westerly on a
right line to a point at latitude sixty
degrees twenty minutes no seconds and
longitude one hundred and twenty-two degrees
fifteen minutes no seconds; thence southerly
on a right line to a point at latitude sixty
degrees ten minutes no seconds and longitude
one hundred and twenty-two degrees fifteen
minutes no seconds; thence easterly on a
right line to a point at latitude sixty
degrees ten minutes no seconds and longitude
one hundred and twenty-two degrees no
minutes no seconds; thence northerly on a
right line to the point of commencement;
said latitudes and longitudes being as
determined by astronomic means, in situ.
1154 All that certain tract of land in the May 23rd, 1957
Mackenzie Mining District, in the Northwest
Territories, containing thirty-one thousand
seven hundred and twenty-seven acres, more
or less, lying to the North of a right line
joining the mid points of the Easterly and
Westerly limits of the area particularly
described as follows:
<PAGE>
Commencing at a point at latitude sixty
degrees twenty minutes no seconds and
longitude one hundred and twenty-two degrees
fifteen minutes no seconds; thence westerly
on a right line to a point at latitude sixty
degrees twenty minutes no seconds and
longitude one hundred and twenty-two degrees
thirty minutes no seconds; thence southerly
on a right line to a point at latitude sixty
degrees ten minutes no seconds; and
longitude one hundred and twenty-two degrees
thirty minutes no seconds; thence easterly
on a right line to a point at latitude sixty
degrees ten minutes no seconds and longitude
one hundred and twenty-two degrees fifteen
minutes no seconds; thence northerly on a
right line to the point of commencement;
said latitudes and longitudes being as
determined by astronomic means, in situ.
1155 All that certain tract of land in the May 23rd, 1957
Mackenzie Mining District, in the Northwest
Territories, containing thirty-one thousand
six hundred and forty-six acres, more or
less, lying to the South of a right line
joining the mid points of the Easterly and
Westerly limits of the area particularly
described as follows:
Commencing at a point at latitude sixty
degrees thirty minutes no seconds and
longitude one hundred and twenty-one degrees
fifteen minutes no seconds; thence westerly
on a right line to a point at latitude sixty
degrees thirty minutes no seconds and
longitude one hundred and twenty-one degrees
thirty minutes no seconds; thence southerly
on a right line to a point at latitude sixty
degrees twenty minutes no seconds and
longitude one hundred and twenty-one degrees
thirty minutes no seconds; thence easterly
on a right line to a point at latitude sixty
degrees twenty minutes no seconds and
longitude one hundred and twenty-one degrees
fifteen minutes no seconds; thence northerly
on a right line to the point of
commencement; said latitudes and longitudes
being as determined by astronomic means, in
situ.
1156 All that certain tract of land in the May 23rd, 1957
Mackenzie Mining District, in the Northwest
Territories, containing thirty-one thousand
six hundred and forty-six acres, more or
less, lying to the South of a right line
joining the mid points of the Easterly and
Westerly limits of the area particularly
described as follows:
<PAGE>
Commencing at a point at latitude sixty
degrees thirty minutes no seconds and
longitude one hundred and twenty-one degrees
no minutes no seconds; thence westerly on a
right line to a point at latitude sixty
degrees thirty minutes no seconds and
longitude one hundred and twenty-one degrees
fifteen minutes no seconds; thence southerly
on a right line to a point at latitude sixty
degrees twenty minutes no seconds and
longitude one hundred and twenty-one degrees
fifteen minutes no seconds; thence easterly
on a right line to a point at latitude sixty
degrees twenty minutes no seconds and
longitude one hundred and twenty-one
degrees no minutes no seconds; thence
northerly on a right line to the point of
commencement; said latitudes and longitudes
being as determined by astronomic means, in
situ.
1157 All that certain tract of land in the May 23rd, 1957
Mackenzie Mining District, in the Northwest
Territories, containing sixty-two thousand
eight hundred and ninety acres, more or
less, said tract being more particularly
described as follows:
Commencing at a point at latitude sixty
degrees forty minutes no seconds and
longitude one hundred and twenty-two degrees
fifteen minutes no seconds; thence westerly
on a right line to a point at latitude sixty
degrees forty minutes no seconds and
longitude one hundred and twenty-two degrees
thirty minutes no seconds; thence southerly
on a right line to a point at latitude sixty
degrees thirty minutes no seconds and
longitude one hundred and twenty-two degrees
thirty minutes no seconds; thence easterly
on a right line to a point at latitude sixty
degrees thirty minutes no seconds and
longitude one hundred and twenty-two degrees
fifteen minutes no seconds; thence northerly
on a right line to the point of
commencement; said latitudes and longitudes
being as determined by astronomic means, in
situ.
The Permits herein described as number 1006 and number 1007 are subject to
a gross overriding royalty of 1.5625% to The Catawba Corporation and a gross
overriding royalty of 2.1/2% to Neil W. Tracy. All other Permits herein
described are subject to a gross overriding royalty of 1.5625% to The Catawba
Corporation.
<PAGE>
SCHEDULE "B"
OPERATING PROCEDURE attached to the Agreement dated as of May 28th, 1959,
between Canada Southern Petroleum Ltd., Magellan Petroleum Corporation, Oil
Investments, Inc., Home Oil Company Limited, Kern County Land Company, Alminex
Limited, United Oils, Limited and Signal Oil and Gas Company.
CLAUSE A
DEFINITIONS
A.1 In this Schedule, including this Clause, unless the context otherwise
requires, the expressions following shall have the following meanings, namely:
(a) "accounting procedure" shall mean the procedure set out in Schedule
"C" hereto;
(b) "Agreement" or "the Agreement" shall mean the Agreement dated as of
May 28, 1959, and the schedules thereto;
(c) "commercial production" or "production in commercial quantities" or
similar wording, shall mean the output from a well of petroleum
substances in such quantities as, considering the cost of drilling,
completing and producing operations, the probable life of the well,
the available (or potentially available) market and the price, kind
and quality of such production would, after a reasonable production
test, or, where the well has been completed, after a reasonable
period of production, warrant the drilling of a like well in the
vicinity thereof;
(d) "complete", "completing" or "completion" with respect to a well
shall mean proper abandonment of the well if production in paying
quantities be not encountered or, if production in paying quantities
is encountered, completing the well for the purpose of taking
production, including the supplying and setting of production casing
and the supplying and installing of tubing, wellhead and pumping
equipment, if initially required to produce the well, storage tanks
and such other equipment, material and services necessary for
preparing a well for the taking of production of petroleum
substances therefrom;
(e) "development well" shall mean any well other than an exploratory
well;
(f) "dollars" shall mean Canadian dollars;
(g) "document of title" shall mean any permit, license, lease, sublease
or similar document concerning petroleum substances which is subject
to the Agreement at any given time;
(h) "exploratory well" shall mean a well which at the time of spudding
in is located at least two (2) miles from the nearest well capable
of production in commercial quantities;
<PAGE>
(i) "Manager Operator" shall mean any person appointed to act as Manager
Operator for the Joint Operators under the Agreement;
(j) "paying production" or "production in paying quantities" or similar
wording shall mean an output from a well of petroleum substances
that
(i) in the case of a well not yet completed, considering the
cost of completing and producing operations, the probable life
of the well, the available (or potentially available) market
and the price, kind and quality of such production, would,
after a reasonable production test, warrant the taking of such
production, and
(ii) in the case of a completed well, considering the cost of
producing operations, the probable life of the well, the
available or potentially available market and the price, kind
and quality of such production, would, after a reasonable
period of production (or after a reasonable production test
where the well has not been placed on regular production)
warrant the taking of such production;
(k) "Joint Operator" shall mean any party to the Agreement;
(l) "petroleum substances" shall mean petroleum and/or any other
substance which the parties have the right to recover from any part
of the said lands;
(m) "participating equity" shall mean the undivided share from time to
time of a Joint Operator in that part of the said lands referred to
and the production of petroleum substances therefrom and any jointly
owned property relating thereto;
(n) "re-work" or "re-working" shall mean any operation other than
drilling or pumping necessary to obtain production and without
restricting the generality of the foregoing may include one or more
of the running of production casing, perforating, acidizing, sand
fracing, squeeze cementing or swabbing into production;
(o) "said lands" shall mean the rights to petroleum substances in the
lands described in Schedule "A", which at any given time, are
subject to the Agreement;
(p) "spacing unit" shall mean the area allocated to a well for the
purpose of drilling for or producing petroleum substances and,
except as herein otherwise expressly provided, the subsurface
regions vertically beneath such area comprising the spacing unit for
such well prescribed by and under the laws of Canada now or
hereafter in effect governing the spacing of oil or gas wells,
whichever the well may be and if no area be so allocated shall be
one-quarter Northwest Territory section for oil and one Northwest
Territory section for a gas well.
<PAGE>
CLAUSE B
STATUS OF MANAGER OPERATOR
B.1 Subject to the provisions of the Agreement, the Manager Operator shall
have the sole and exclusive management and control of the exploration,
development and operation of the said lands.
B.2 The Manager Operator may perform any act or do anything which it is
required to do by having it performed or done by an independent contractor but
the Manager Operator shall not make a general delegation of its powers of
management and control.
B.3 If and when a Joint Operator is Manager Operator, such Joint Operator
shall not thereby be deprived of any of the rights or relieved of any of the
duties or liabilities of a Joint Operator but shall have all such rights, duties
and liabilities in addition to those of Manager Operator, including the right to
vote on his removal or appointment as Manager Operator.
CLAUSE C
CHANGE OF MANAGER OPERATOR
C.1 The Manager Operator shall be entitled to retire from its position as
Manager Operator at any time upon giving written notice to the Joint Operators
at least six (6) months in advance of the effective date of its retirement
whereupon the Joint Operators shall appoint a successor Manager Operator.
C.2 The Manager Operator from time to time shall forthwith cease to be the
Manager Operator:
(i) if the Manager Operator purports to make a general delegation
of its powers of management and control,
(ii) in respect of any lands in which it and its parent and
subsidiaries ceases to hold at least a Ten (10%) percent participating
equity,
(iii) if the Manager Operator shall become bankrupt or insolvent, or
shall make any general assignment for the benefit of creditors, or should
any execution or attachment issue against it whereby all or part of its
participating equity shall be taken by any custodian, receiver, trustee or
other legal authority or an effective resolution shall have been passed
for the winding up or liquidation of the business and affairs of the
Manager Operator, whereupon the Joint Operators shall appoint a successor
Manager Operator to take office immediately.
C.3 A meeting may remove a Manager Operator and appoint a successor, but
if such Manager Operator be a person who is not a Joint Operator or a person
owning less than a Ten (10%) percent equity in the lands concerned it shall
require the unanimous consent of the Joint Operators.
<PAGE>
C.4 When the Manager Operator resigns or otherwise ceases to act in that
capacity it shall deliver to its successor Manager Operator exclusive possession
of all jointly owned property including all pertinent books of account and
records of the joint operations and all documents, agreements and other papers
relating thereto.
C.5 A Manager Operator who is removed shall not be released from its
obligations hereunder for a period of three (3) months after its discharge
unless a successor Manager Operator shall have taken over the options hereunder.
CLAUSE D
MEETINGS
D.1 Any Joint Operator may call a meeting of the Joint Operators at any
time upon not less than seven (7) days' written notice (or three (3) days'
notice) if given by telegram) to each other Joint Operator of the time and place
of such meeting. Meetings shall be held in the City of Calgary, Alberta, unless
all of the Joint Operators agree to holding a meeting at some other place. Any
decision of any meeting shall require the affirmative vote of the Joint
Operators owning in the aggregate more than Sixty-six and two-thirds (66 2/3%)
percent of the participating equities in that part of the said lands being the
subject of such decision and any decision so made shall, except as herein
otherwise provided, be binding upon all of the Joint Operators and shall be
carried out by the Manager Operator.
D.2 No decision of a meeting shall be binding on the parties insofar as it
concerns the drilling of a new well, the deepening or reworking of a well, or
any action which would increase or decrease the interest of any or all of the
Joint Operators in the said lands other than as expressly provided herein and
PROVIDED FURTHER Canada Southern, Magellan and Oil Investments shall not have
any vote concerning the program referred to in Article III.
CLAUSE E
BUDGET
E.1 The Manager Operator shall at intervals of six (6) months furnish each
Joint Operator with a budget outlining its program respecting the operations for
the period of six (6) months next ensuing and estimating all expenditures in
connection therewith for such period. Unless any Joint Operator shall disapprove
such budget within ten (10) days after it is submitted, it shall be deemed to
have been approved and it shall not be necessary to hold a meeting, but if
disapproved by the Joint Operators, a new budget shall be submitted to a
meeting.
E.2 Any budget may be revised at any time or from time to time by the
Joint Operators.
E.3 Upon any such budget or revised budget being approved, the Manager
Operator shall thereby be authorized to carry on the operations outlined therein
for the period covered by such budget and to expend the amounts estimated
therefor.
<PAGE>
E.4 The Manager Operator shall make no expenditures in excess of those
authorized by any budget or unless such expenditure is required by any emergency
or to keep any part of the said lands in good standing or to comply with any
law, rule, order or regulation and in any such event the Manager Operator may
make such expenditure and shall forthwith advise the other Joint Operators in
writing thereof.
E.5 Any budget approved at a meeting by Joint Operators owning in the
aggregate more than Sixty-six and two-thirds (66 2/3%) percent of the
participating equities in the said lands to which such budget relates shall be
binding on all Joint Operators; PROVIDED that any budget relating to the program
referred to in Article III shall require the unanimous approval of the H-S group
and shall not require any approval of the C-M-O group.
The items in any budget which provides for the drilling, deepening or
reworking of any wells shall not be binding unless unanimously approved.
CLAUSE F
DUTIES OF THE MANAGER OPERATOR
F.1 The Manager Operator shall, in the conduct of the operations
hereunder:
(a) conduct the same in a good and workmanlike manner and in
accordance with prevailing field practice, conforming to all applicable
laws, rules, orders and regulations,
(b) furnish all material, labour and services. Upon the written
request of the Manager Operator each Joint Operator shall secure and
furnish its proportionate part of any such material in kind or by
satisfactory assignment of priorities or allocations (governmental or
voluntary),
(c) pay and discharge promptly all costs and expenses actually
incurred in connection with the joint operations,
(d) keep the accounts of the joint operations in accordance with
the accounting procedure,
(e) arrange and negotiate for and acquire all surface rights and
rights-of-way required for the joint operations,
(f) make a good faith effort to keep the said lands and any jointly
owned facilities free and clear of any liens or encumbrances and to
maintain in force and effect and protect any title affecting the said
lands,
(g) keep an accurate and itemized record of all production secured
and of the disposition thereof,
(h) regulate the production of petroleum and natural gas in
accordance with market demands and rates allowed by governmental
regulations or the respective maximum efficient rates of flow of the
wells.
<PAGE>
CLAUSE G
G.1 Each Joint Operator shall have the following specific rights in
respect to any lands in which it owns a participating equity, which shall not be
in limitation of any other rights under this Agreement:
(a) The right to receive all information pertaining to exploratory
operations, development work and wells drilled on the said lands. This
information shall include, but not be limited to, copies of all types of
logs, reports, geological maps, geophysical maps and basic data relating
to the exploratory and development work on the lands; the same to be
furnished promptly upon completion of each such log, report, map and other
data. Final reports shall be furnished upon the completion of each job.
(b) The right to receive progress reports and maps from time to time
or immediately upon request. Such reports shall include, but not be
limited to, all facts and data obtained on a drilling well on a daily
basis and the progress, location and data obtained by any other
exploratory operation, including seismic parties, surface geological
parties and core hole programs on a weekly basis.
(c) Access to the said lands and the wells thereon and the right at
all times to inspect and observe the operations being conducted thereon
and therein.
(d) The right to examine the books and records of the Manager
Operator relating to all wells drilled on the said lands and of sales of
production.
(e) Upon request made to the Manager Operator therefor, to be
furnished with copies of driller's reports of wells drilled upon the said
lands, samples of cores and cuttings taken therefrom and copies of all
seismograms obtained upon the properties.
G.2 Each Joint Operator hereto shall treat geological and other
exploratory data obtained in connection with the said lands as confidential
information and will reveal no part of it to any third person, except with prior
written approval of the other Joint Operators; provided that this clause shall
not prevent disclosure to the Government of information required by the
Government in order to establish credit for work requirements, or prevent
disclosure of information relating to the geology and reserves data of known
producing structures to the extent such disclosures may be required in
connection with financing by any Joint Operator, or prevent disclosure of any
information to any experts in order that such Joint Operator may obtain the
opinions of such experts, or disclosure of information relating to its reserves
relating to known producing structures in a report to its shareholders; and
provided further that information obtained from the wells themselves may be
disclosed at the discretion of any Joint Operator, and that purchasers or
prospective purchasers of gas produced from the said lands may, at the
discretion of any Joint Operator, for use in connection with purchases or
prospective purchases, be given all information, whether obtained from wells or
otherwise, of a kind that is reasonably or customarily given to purchasers or
prospective purchasers of gas in like circumstances. Appropriate precautions
will be taken by each Joint Operator to prevent inadvertent disclosures of
confidential information.
<PAGE>
CLAUSE H
COMPETITIVE OPERATING BASIS
H.1 All operations hereunder shall be performed on a competitive basis at
the usual rates prevailing in the area. The Manager Operator, if it so desires,
may employ its own tools and equipment in any such operation but in such event
the charge therefor shall not exceed the prevailing rate in the area and such
work shall be performed by the Manager Operator under the same terms and
conditions as shall be customary and usual in the area in the contracts of
independent contractors who are doing work of a similar nature.
CLAUSE I
INSURANCE
I.1 Any Joint Operator from time to time conducting any operation
hereunder shall comply with the requirements of all Unemployment Insurance and
Workmen's Compensation legislation and shall, if it not already has, prior to
the commencement of such operation, take out, initially pay, and thereafter
maintain and continue to pay for during the period of such operation, at least
the following insurance in a reputable insurance company or companies at the
expense of and on behalf of all the Joint Operators:
(i) employer's liability insurance covering each employee engaged
in the operations hereunder to the extent of $100,000. where such employee
is not covered by Workmen's Compensation;
(ii) comprehensive public liability insurance covering all
operations hereunder, except motor vehicles, to the extent of $150,000.
for any one person injured or killed and $300,000. for two or more persons
injured or killed in any one accident;
(iii) comprehensive property damage insurance covering all
operations hereunder to the extent of $100,000. for damages resulting from
any one accident; including damages resulting from fire or blowouts but
excluding underground damages;
(iv) blanket all risk insurance covering all above ground physical
property engaged in the operations hereunder except motor vehicles, to the
extent of the value of all such property;
(v) automobile public liability insurance covering all automotive
units engaged in the operations hereunder to the extent of $150,000. for
any one person injured or killed and $300,000. for two or more persons
injured or killed in any one accident;
(vi) automobile property damage insurance covering all automotive
units engaged in the operations hereunder to the extent of $100,000. for
damages resulting from any one accident;
which insurance may not be terminated without prior notice to each other Joint
Operator.
<PAGE>
I.2 If so requested by any other Joint Operator, the Joint Operator
conducting the operation hereunder shall deliver to such other Joint Operator
evidence of full compliance with the insurance provisions contained herein, to
be retained in the custody of such other Joint Operator during the continuance
of such operation.
CLAUSE J
ADVANCES
J.1 The Manager Operator at its election from time to time may require any
Joint Operator to advance its proportionate share of authorized expenditures by
furnishing such Joint Operator with an estimate of such expenditures required to
cover operations for a period not in excess of sixty (60) days. Within fifteen
(15) days after receipt of such estimate or within ten (10) days before
commencement of the period covered by the estimate, whichever is the later, such
Joint Operator shall pay its proportionate part thereof.
The accounts between the Joint Operators in respect of any such advance
shall be adjusted at the end of each calendar month in accordance with actual
expenditures. Any amount not paid within the time hereinbefore limited shall
bear interest at the rate of Six (6%) percent per annum.
J.2 In the event that any Joint Operator fails to advance such money as
required or make any other payment required under this Agreement, the other
Joint Operators participating in the operation concerned shall, upon request by
the Manager Operator, pay the share of such defaulting Joint Operator in the
proportions of their respective participating equities, and upon the payment by
the defaulting Joint Operator to the Manager Operator of all or any part of such
sum, or upon the Manager Operator otherwise recovering all or any part of such
sum, the Manager Operator shall immediately pay the amount received or recovered
to the Joint Operators making the advancement in like proportions and such
amount shall be applied first in reduction of interest and second in reduction
of capital. Provided, however, that the members of C-M-O shall not be obligated
in respect of any expenditures to be incurred in respect of the program referred
to in Article III or the payments referred to in Article IV.
CLAUSE K
LIEN
K.1 The Manager Operator shall have a lien on the participating equity of
each other Joint Operator to secure payment of such Joint Operator's share of
all costs and expenses hereunder, but such lien shall not attach to any portion
of such Joint Operator's share of production at any time prior to the
enforcement of the same by the Manager Operator as hereinafter provided.
<PAGE>
K.2 In the event that any Joint Operator shall fail to pay its share of
any costs or expenses hereunder (and such default shall continue for thirty (30)
days after the Manager Operator shall have served written notice upon such Joint
Operator specifying such default and requiring the same to be remedied) the
Manager Operator may enforce such lien by taking possession of all or any part
of the participating equity of such Joint Operator and the Manager Operator may
sell and dispose of all or any part of such participating equity either in whole
or in separate parcels at public auction or by private tender at such time and
on such terms as it shall appoint, having first given notice to such Joint
Operator of the time and place of such sale, and the Manager Operator is hereby
constituted irrevocably the attorney of such Joint Operator for the purpose of
making any such sale and executing such deeds and agreements in the name of such
Joint Operator as may be necessary to carry out the same. The proceeds of any
such sale shall be first applied by the Manager Operator in payment of any costs
or expenses to be paid by such Joint Operator and not paid by it, and any
balance remaining shall be paid to such Joint Operator after deducting the
reasonable costs of such sale. Any such sale shall be a perpetual bar in law and
equity against such Joint Operator and any person claiming all or any part of
the property sold, by, from, through or under such Joint Operator.
K.3 If any Joint Operator advances any money under the preceding clause in
respect of the default of another Joint Operator it shall have the same lien
rights in respect thereto as has the Manager Operator under this clause.
CLAUSE L
DIVISION OF PRODUCTION
L.1 Each Joint Operator shall own its participating equity in the
petroleum substances produced hereunder exclusive of any quantity thereof that
may be delivered in kind as royalty or production which may be used by the
Manager Operator in developing and producing operations hereunder and in
preparing and treating production for marketing purposes and production
unavoidably lost. Each Joint Operator shall, upon payment of or securing the
payment of any royalty with respect thereto, be entitled to take delivery of its
share of production at the point of production. Each Joint Operator electing to
take delivery of its participating equity in the petroleum substances shall
provide at its own risk and expense adequate facilities for receiving its
production and shall bear any additional expense to which the Manager Operator
may be subject in delivering such production separately. In the event any Joint
Operator fails to make arrangements to take delivery of its participating equity
in the petroleum substances the Manager Operator may sell the same upon the same
terms and conditions that it is selling its share of production and such Joint
Operator shall be entitled to receive from the Manager Operator not later than
the last day of the month following such sale, the net proceeds received from
the sale of its participating equity in the petroleum substances so sold. Any
market available to a Joint Operator shall be shared by it with the other Joint
Operators to the intent and purpose that no Joint Operator shall be obligated to
store its participating equity in production except to the proportionate extent
that the production owned by the other Joint Operators is so stored for lack of
market.
<PAGE>
CLAUSE M
OBLIGATORY OPERATIONS
M.1 Upon the completion of the program provided for in Article III of this
Agreement, each Joint Operator shall be obligated, provided that the Manager
Operator has made a bona fide but unsuccessful attempt to obtain a waiver of
such obligations, to join in the renewal of any document of title and to pay a
share equivalent to its participating equity in that part of the said lands
concerned of any rental and of the cost of any operation, including the drilling
of any well, necessary to maintain all or any part of the said lands in good
standing except the drilling obligations contained in any document of title when
the person entitled to enforce the performance thereof is not enforcing the
same, unless such Joint Operator has surrendered or disposed of all of its
participating equity in that part of the said lands to which such obligation
applies at least thirty (30) days prior to the date on which such rental becomes
payable or on which such operation must be commenced in order to maintain such
part of the said lands in good standing. Provided that C-M-O shall not be
obligated to participate in any obligatory well while it enjoys the preferential
rights granted to it by Article 3.1 (C) but if it does not so participate the
applicable penalty under the said Article shall apply.
CLAUSE N
INDEPENDENT OPERATIONS
N.1 Except as hereinbefore provided in Clause M hereof and Article III, no
Joint Operator shall be required to participate in the cost of drilling,
deepening, or reworking any well hereunder.
N.2 Upon completion of the program provided for in Article III, and
provided no well is then being drilled or deepened on the said lands for the
joint account, and provided no drilling or deepening operation on the said lands
has then been approved in any budget, the following provisions shall apply:
(a) Should any Joint Operator desire to deepen or re-work any well
which is incapable of producing petroleum substances in paying quantities
or to drill any new well, such Joint Operator shall notify the other Joint
Operators in writing of its intention to perform the proposed operation at
its own cost and risk. Such notice (hereinafter called "the first notice")
shall contain information as to the location, depth and estimated cost of
the operation. In such event each Joint Operator shall be deemed to be a
participant in such operation unless it has given written notice to the
other Joint Operators within thirty (30) days after receipt by it of the
first notice, of its intention not to participate; PROVIDED that if the
operation is the deepening of a well on which the drilling rig to be
utilized in such operation is then located, the time herein-before limited
for giving written notice of intention not to participate shall be reduced
to three (3) days exclusive of Sundays and statutory holidays, and any rig
time for such three (3) day period shall be paid for by the Joint
Operators participating in the operation.
<PAGE>
(b) The Joint Operator giving first notice shall, together with the
Joint Operators participating, be entitled to have the Manager Operator
commence such operation within sixty (60) days from the receipt by the
other Joint Operators of the first notice and thereafter prosecute the
operation to completion at the sole cost and risk of the participating
Joint Operators in the proportions that their respective participating
equities in the spacing unit concerned are of the sum of such
participating equities.
(c) If the Joint Operators participating in such operation commence
the same within the said period of sixty (60) days and carry it on
diligently and continuously to the depth proposed in the first notice
(i) if the operation is the drilling of an exploratory well,
each non-participating Joint Operator shall forthwith assign to the
participating Joint Operators in the proportions that their
respective participating equities are of the sum of such
participating equities, all of its participating equity in all
formations in:
A. six (6) Northwest Territory sections of the said lands if
such well is drilled to a depth of more than six thousand (6,000)
feet and provided commercial production has not been obtained
above the depth of six thousand (6,000) feet, and
B. four (4) Northwest Territory sections of the said lands
in the case of any other well, such sections to include the
section on which such well is located and the other sections to
be selected by the participating Joint Operators from those
sections laterally or diagonally adjoining the section on which
such well is located.
(ii) if the operation is a deepening or reworking operation or
the drilling of a development well, each non-participating Joint
Operator shall have the right, until the elapse of a period of
thirty (30) days after the participating Joint Operators have served
on each of the non-participating Joint Operators written notice of
the results of all tests carried out on the well concerned (or in
the case of a dry hole, written notice to that effect) and have made
available to such nonparticipating Joint Operators all information
concerning such well which is in the possession of the participating
Joint Operators, to pay to the participating Joint Operators in the
proportions that their respective participating equities are of the
sum of such participating equities, a sum equal to three (3) times
the amount it would have been called upon to pay had all Joint
Operators being entitled to participate originally participated in
the operation, and upon such payment being made, such Joint Operator
shall participate in such well and the production therefrom ab
initio to the extent that it would have been entitled to participate
had all Joint Operators entitled to participate so participated, and
in the event that it does not pay such sum within the time
hereinbefore limited, such Joint Operator shall assign its
participating equity in such well, in the spacing unit on which the
same is located and in the surface location, to the participating
Joint Operators in the proportions that their respective
participating equities are of the sum of such participating
equities, in which case the Joint Operators receiving the assignment
shall have the right to produce the well concerned and to market the
production of petroleum substances therefrom and the Joint Operators
making the assignment shall not be entitled to any share of such
production.
<PAGE>
N.3 Notwithstanding anything hereinbefore contained, if the lands to be
assigned under this clause contain any other well then capable of production of
petroleum substances, such well and any zone or formation, whichever the case
may be, underlying the spacing unit of such other well and from which it is then
capable of obtaining production shall be excluded from the lands to be assigned.
CLAUSE O
SELECTION OF LEASES
O.1 The Joint Operators shall meet to determine the lands to be contained
in an application for petroleum and natural gas leases. The meeting may be
called by any Joint Operator on the same notice as is provided in Clause D. All
decisions relating to any such application and the selection of lands to be
included therein shall be made by mutual agreement and failing such agreement
shall be made by the Joint Operators owning in the aggregate more than Sixty-six
and two-thirds (66 2/3%) percent of the participating equities in such permit
provided that in making such selection leases of sections must be chosen so that
any Joint Operator who is entitled to any section or sections by virtue of an
independent operation may obtain such section or sections.
CLAUSE P
SURRENDER
Upon completion of the program provided for in Article III the following
provisions shall apply:
P.1 Any Joint Operator may, from time to time and at any time, provided
that the Crown must or will accept the same, surrender all of its interest in
all or any part of the said lands except that no such surrender shall be made:
(a) within thirty (30) days before the accrual of the rental or any
other obligation, excepting any drilling obligation contained in any
document of title when the person entitled to enforce the performance
thereof is not enforcing the same, in respect to that part of the said
lands to be surrendered,
(b) respecting an area of less than a spacing unit,
(c) until the Joint Operator desiring to surrender (hereinafter
called "the offeror") shall notify in writing the other Joint Operators
(hereinafter called "the recipients") of the interest it desires to
surrender. The recipients shall have the right for a period of fifteen
(15) days after the receipt of such notice to advise the offeror by notice
in writing that it will accept an assignment of such interest. In the
event any recipient does not notify within the time herein limited the
offeror that it will accept an assignment of such interest, such recipient
shall join in the surrender of such part of the said lands. If any
recipient agrees to accept such assignment, such interest shall be
assigned to such recipient. If more than one recipient agrees to accept
such assignment such interest shall be assigned to such recipients in the
proportions that their respective participating interests bear to the sum
of such participating interests.
<PAGE>
CLAUSE Q
Q.1 No Joint Operator shall dispose of any interest hereunder unless the
person receiving the same agrees with the other Joint Operators to be bound by
all of the terms and provisions of this Agreement. If such disposition imposes
greater obligations or expenses on the Manager Operator or other Joint Operators
then such person shall agree to pay all costs and expenses in connection
therewith.
CLAUSE R
ASSIGNMENTS AMONG PARTIES
R.1 Upon the assignment of any interest hereunder by one Joint Operator to
any other or others:
(a) the Joint Operator agreeing to receive such assignment shall pay all
costs and taxes incurred or levied in connection with such assignment;
(b) the Joint Operator agreeing to receive such assignment shall indemnify
and hold harmless the Joint Operator agreeing to make such assignment from
and against all liabilities in connection with such interest to be
assigned except liabilities which arose prior to the agreement to make
such assignment;
(c) the Joint Operator agreeing to make such assignment shall not be
released from any obligation which arose prior to the date of the
agreement to accept such assignment;
(d) such assignment shall be without warranty of title of the interest of
the assigning party;
(e) all the terms of this Agreement shall continue to apply to such
interest as among the Joint Operators who have not assigned their
interest;
(f) where it is necessary to obtain the consent of any person other than a
Joint Operator to such assignment and such consent cannot be obtained,
such interest shall be held in trust by the Joint Operator required to
make the assignment for the Joint Operators entitled to receive the same.
CLAUSE S
RELATIONSHIP OF PARTIES
S.1 This Agreement shall not be construed to create a partnership.
S.2 Except as otherwise provided in Clause T hereof, where the parties
hereto or any of them incur a liability in connection with any operation
hereunder either to a party hereto or to any third party, such liability shall
not be joint or several but each party shall be separately liable only for a
portion of the total liability calculated in accordance with its participating
equity in that part of the lands to which the liability can be reasonably
allocated.
<PAGE>
S.3 Each Joint Operator agrees to indemnify each other Joint Operator
against any claim of or liability to any third party incurred in connection with
any operation hereunder to the extent but only to the extent that the claim or
liability is asserted against the other Joint Operator in an amount in excess of
the other Joint Operator's share of the liability calculated in accordance with
this clause; PROVIDED that a Joint Operator shall not be required to indemnify
any other Joint Operator for any amount in excess of its own share of the
liability calculated in accordance with this clause.
S.4 The Joint Operators hereby elect that the operations conducted under
this Agreement, and the Joint Operators themselves with respect to such
operations, be excluded from the application of all of the provisions of
Subchapter K of Chapter 1 of Subtitle A of the United States Internal Revenue
Code of 1954, or any amendments thereof, or of such portion or portions thereof
as may be permitted by the Secretary of the Treasury or his delegate, insofar as
such Subchapter or any portion or portions thereof may otherwise be applicable
to such operations or to the Joint Operators with respect to such operations.
CLAUSE T
LIABILITY OF MANAGER OPERATOR
T.1 Except as hereinbefore provided the Manager Operator shall not be
liable to any Joint Operator in damages or otherwise howsoever for anything done
by the Manager Operator hereunder or for the Manager Operator's failure to do
anything hereunder, except for:
(i) acts of fraud, dishonesty or gross neglect on the part of any
officer of the Manager Operator in carrying out the duties of the Manager
Operator under this Agreement,
(ii) the failure of the Manager Operator to remedy any default
hereunder as soon as reasonably possible after the receipt by it from any
Joint Operator of written notice of such default.
CLAUSE U
FORCE MAJEURE
U.1 Any Joint Operator shall be excused from the performance of any of its
obligations hereunder from time to time and at any time, but only so long as it
is prevented from performance by act of God, the Queen's enemies, inclement
weather, accident, breakdown, fire, strike, lock-out, labour shortage, inability
to obtain equipment, materials or supplies in the open market at reasonable
prices, compliance with any law, rule, order or regulation which has not been
declared by a court of competent jurisdiction to be invalid, or any other cause
beyond the reasonable control of such Joint Operator whether similar or
dissimilar, provided that lack of funds shall not be considered a cause beyond
the control of a party.
<PAGE>
CLAUSE V
WAIVER
V.1 No waiver on behalf of any party of any breach of any of the
covenants, conditions and provisos herein contained shall be effective or be
binding upon such party unless the same be expressed in writing and any waiver
so expressed shall not limit or affect such party's rights with respect to any
other or future breach.
CLAUSE W
CONFLICT WITH LAWS
W.1 If any provision herein contained is in conflict with any law, rule,
order or regulation heretofore or hereafter made by any competent governmental
authority or any document of title by virtue of which the parties hereto hold
any interest, this Agreement shall be deemed to be amended so as to conform to
such law, rule, order or regulation or document of title for so long as the same
remains in force.
CLAUSE X
NOTICES
X.1 All notices required to be given under this Agreement shall either be
personally delivered or mailed by prepaid registered mail addressed as
hereinafter set forth or to such other address as may be designated from time to
time by such Joint Operator in writing, and any notice mailed as aforesaid shall
be deemed to have been received by the addressee on the next normal business day
following the day of mailing:
Canada Southern 505-8th Avenue West,
Calgary, Alberta
Magellan 505-8th Avenue West,
Calgary, Alberta
Oil Investments 505-8th Avenue West,
Calgary, Alberta
Alminex 609 Hudson's Bay Oil & Gas Building,
320-7th Avenue West,
Calgary, Alberta
Signal P.O. Box 17126,
Foy Station,
Los Angeles 17, California, U.S. A.
with a copy to 4th Floor, North Canadian Oil Bldg.,
Calgary, Alberta
<PAGE>
Kern 640-7th Avenue West,
Calgary, Alberta
with a copy to 600 California Street,
San Francisco 8, California, U.S.A.
United 304-6th Avenue West,
Calgary, Alberta
Home 304-6th Avenue West,
Calgary, Alberta
CLAUSE Y
FURTHER ASSURANCES
Y.1 Each of the Joint Operators shall from time to time and at all times
do all such further acts and execute and deliver all such further documents and
assurances as shall be reasonably required in order fully to perform and carry
out the terms of this Agreement.
CLAUSE Z
ENTIRE AGREEMENT
Z.1 The Joint Operators agree that they have expressed herein their entire
understanding and agreement concerning the subject matter of this Agreement and
it is expressly agreed that no implied covenant, condition, term or reservation
shall be read into this Agreement relating to or concerning such subject matter.
CLAUSE AA
DIVISION OF EXPENSES
AA.1 The costs and expenses of the program referred to in Article III
shall be borne as to Fifty (50%) percent by Signal, Twenty-five (25%) percent by
Home, Ten (10%) percent by Alminex, Ten (10%) percent by Kern and Five (5%)
percent by United and C-M-O shall not bear any of the said costs or expenses nor
shall the same be recoupable from C-M-O.
AA.2 Except as herein otherwise provided all costs and expenses shall be
allocated equitably by the Manager Operator to the parts of the said lands to
which they apply and each Joint Operator shall bear and pay in accordance with
the accounting procedure a share of the same equivalent to its participating
equity in that part of the said lands to which the same are allocated.
<PAGE>
AA.3 The participating equities of the Joint Operators in the said lands
at the date hereof are as follows:
Canada Southern....................... 37 1/2%
Magellan.............................. 6 1/4%
Oil Investments....................... 6 1/4%
Home.................................. 12 1/2%
Alminex............................... 5%
Kern.................................. 5%
United................................ 2 1/2%
Signal................................ 25%
AA.4 H-S agrees that during the term of the option it will allocate such
part of any excess credits in any year not required by them in connection with
the said lands to the optioned lands in order to keep the option in good
standing for such year.
CLAUSE BB
TERM
BB.1 Subject to the other provisions hereof, including Article V, this
Agreement shall remain in full force and effect and the said lands shall not be
subject to partition so long as any jointly owned document of title to any part
of the said lands, or any renewal or extension thereof pursuant to the
provisions of such document of title, remains in force and effect and thereafter
until all joint facilities have been salvaged and disposed of and final
settlement and accounting had among the Joint Operators.
CLAUSE CC
INTERPRETATION
CC.1 Wherever in this Agreement the singular number or masculine gender
occurs, the same shall be respectively construed as the plural or neuter, and
vice versa, as the context or reference may require.
CC.2 Notwithstanding anything herein elsewhere to the contrary contained,
any right of any party to acquire any interest from any other party hereunder
shall cease, determine and be at an end not later than the expiration of
twenty-one (21) years after the death of the last surviving lawful descendant
now living of His Late Majesty King George VI.
CC.3 The headings of all clauses in this Agreement are inserted for
convenience of reference only and shall not affect the construction hereof.
CC.4 Time shall be of the essence hereof.
CC.5 This Agreement shall, subject to the provisions of Clause Q hereof,
be binding upon and enure to the benefit of the Joint Operators and their
respective successors and assigns.
CC.6 All terms, covenants, provisions and conditions of this Agreement
shall run with and be binding upon the said lands during the term hereof.
<PAGE>
SCHEDULE "C"
Attached to and made a part of an agreement made as of May 28, 1959
between Canada Southern Petroleum Ltd., Magellan Petroleum
Corporation, Oil Investments, Inc.9 Home Oil Company
Limited, Kern County Land Company, Alminex
Limited, United Oils Limited, Signal Oil
and Gas Company.
ACCOUNTING PROCEDURE
(Unit and Joint Lease Operations)
I. GENERAL PROVISIONS
1. DEFINITIONS
The term "joint property" as herein used shall be construed to mean the
subject area covered by the agreement to which this "Accounting Procedure"
is attached.
The term "Operator" as herein used shall be construed to mean the party
designated to conduct the development and operation of the subject area
for the joint account.
The term "Non-Operator" as herein used shall be construed to mean any one
or more of the non-operating parties.
The term "rentals" shall, in addition to its ordinary meaning, be
construed to include delay rentals, renewal fees and generally all
periodical payments of monies required to be made in order to maintain the
rights of the parties in and to the joint property in force and effect.
2. STATEMENTS AND BILLINGS
The Operator shall bill Non-Operator on or before the last day of each
month for its proportionate share of costs and expenditures during the
preceding month. Such bills will be accompanied by statements, reflecting
the total cost and charges as set forth under sub-paragraph A below:
A. Statement in detail of all charges and credits to the joint account.
B. Statement of all charges and credits to the joint account,
summarized by appropriate classifications indicative of the nature
thereof.
C. Statements, as follows:
(1) Detailed statement of material ordinarily considered
controllable by operators of oil and gas properties;
<PAGE>
(2) Statement of all other charges and credits to the joint account
summarized by appropriate classifications indicative of the
nature thereof; and
(3) Statement of any other receipts and credits.
3. PAYMENTS BY NON-OPERATOR
Each party shall pay all such bills within fifteen (15) days after receipt
thereof. If payment is not made within such time, the unpaid balance may
bear interest at the rate of six per cent (6%) per annum until paid.
Operator shall have and be entitled to a prior lien on all the rights and
interests of Non-Operator in said joint properties, the production
therefrom, and the material and equipment thereon, to secure the payment
by Non-Operator of Non-Operator's portion of cost, purchases, and expenses
of developing and operating the joint property as herein provided. Upon
request Operator may require Non-Operator to advance his share of
estimated cash outlay for the current month's operations.
4. AUDITS
Payment of any such bills shall not prejudice the right of Non-Operator to
protest or question the correctness thereof. All statements rendered to
Non-Operator by Operator during any calendar year shall be conclusively
presumed to be true and correct after eighteen months following the close
of any such calendar year, unless within said eighteen months Non-Operator
takes written exception thereto and makes claim on Operator for adjustment
or commences an audit of Operator's accounts and records relating to the
accounting hereunder. Failure on the part of Non-Operator to make claim on
Operator for adjustment, or to commence an audit within such period shall
establish the correctness thereof and preclude the filing of exceptions
thereto or the making of claims for adjustment thereon. A Non-Operator,
upon notice in writing to Operator and all other Non-Operators, shall have
the right to audit Operator's accounts and records relating to the
accounting hereunder, within eighteen months next following the close of
any calendar year. Non-Operator shall have six months next following the
examination of the Operator's records within which to take written
exception to and make any and all claims on Operator. The provisions of
this paragraph shall not prevent adjustments resulting from the physical
inventory of property as provided for in Section VI, Inventories, hereof.
II. DEVELOPMENT AND OPERATING CHARGES
Subject to limitations hereinafter prescribed, Operator shall charge the
joint account with the cost of the following items:
1. RENTALS AND ROYALTIES
Rentals, when such rentals are paid by Operator for the joint account;
royalties, when not paid direct to royalty owners by the purchaser of the
oil, gas, casing-head gas, or other products.
<PAGE>
2. LABOUR, TRANSPORTATION AND SERVICES
Labour, transportation, and other services necessary for the development,
maintenance, and operation of the joint property. Labour shall include
salaries and wages of Operator's employees, other than employees
compensated for under paragraphs (11), (12) and (13) of this Section II,
directly engaged in operations of the joint property and (A) Operator's
cost of vacation, sickness and disability benefits of employees, and
expenditures or contributions imposed or assessed by Governmental
authority applicable to such salaries and wages, and (B) Operator's
current cost of established plans for employees' group life insurance,
hospitalization, pension, retirement, stock purchase, thrift, bonus, and
other benefit plans of like nature, applicable to Operator's payroll;
provided that the charges under part (B) of this paragraph shall not
exceed twelve percent (12%) of the total of such salaries and wages
charged to the joint account.
3. MATERIAL
Material, equipment, and supplies purchased or furnished by Operator, for
use of the joint property. So far as it is reasonably practical and
consistent with efficient and economical operation, only such material
shall be purchased for or transferred to the joint property as required
for immediate use, and the accumulation of surplus stocks shall be avoided
wherever possible.
4. MOVING MATERIAL TO JOINT PROPERTY
Moving material to the joint property from vendors or from Operator's
warehouse in district or from the other properties of Operator, but in
either of the last two events no charge shall be made to the joint account
for a distance greater than the distance from the nearest reliable supply
store or railway receiving point where such material is available, except
by special agreement with Non-Operator.
5. MOVING SURPLUS MATERIAL FROM JOINT PROPERTY
Moving surplus material from the joint property to outside venders, if
sold f.o.b. destination, or minor returns to Operator's warehouse or other
storage point. No charge shall be made to the joint account for moving
major surplus material to Operator's warehouse or other storage point for
a distance greater than the distance to the nearest reliable supply store
or railway receiving point, except by special agreement with Non-Operator;
and no charge shall be made to the joint account for moving material to
other properties belonging to Operator, except by special agreement with
Non-Operator.
6. USE OF OPERATOR'S EQUIPMENT AND FACILITIES
Use of and service by Operator's exclusively owned equipment and
facilities as provided in paragraph 4, of Section III, "Basis of Charges
to Joint Account".
<PAGE>
7. DAMAGES AND LOSSES
Damages or losses incurred by fire, flood, storm or any other causes not
controllable by Operator through the exercise of reasonable diligence.
Operator shall furnish Non-Operator written notice of damage or losses
incurred by fire, storm, flood or other natural or accidental causes as
soon as practicable after report of the same has been received by
Operator.
8. LITIGATION, JUDGMENTS, AND CLAIMS
All costs and expenses of litigation, or legal services otherwise
necessary or expedient for the protection of the joint interest, including
attorneys fees and expenses as hereinafter provided, together with all
judgments obtained against the parties or any of them insofar as the same
relate to the joint account or the subject matter of this agreement;
actual expenses incurred by any party or parties hereto in securing
evidence for the purpose of defending against any action or claim
prosecuted or urged against the joint account or the subject matter of
this agreement.
A. If a majority of the interests hereunder shall so agree, actions or
claims affecting the joint interests hereunder may be handled by the
legal staff of one or more of the parties hereto, and a charge
commensurate with the services rendered may be made against the
joint account, but no such charge shall be made until approved by
the legal department of or attorneys for the respective parties
hereto.
B. Fees and expenses of outside attorneys shall not be charged to the
joint account unless authorized by the majority of the interests
hereunder.
9. TAXES
All taxes, rates, levies and assessments of every kind and nature levied,
assessed or imposed upon or in connection with the joint property or any
part thereof, the production therefrom or the operation thereof, which
shall have been paid by the Operator for the benefit of the parties
hereto.
10. INSURANCE
A. Premiums paid for insurance carried for the benefit of the joint
account together with all expenditures incurred and paid in
settlement of any and all losses, claims, damages, judgments, and
other expenses, including legal services, not recovered from
insurance carrier.
B. If no insurance is required to be carried, all actual expenditures
incurred and paid by Operator in settlement of any and all losses,
claims, damages, judgments, and any other expenses, including legal
services, shall be charged to the joint account.
<PAGE>
11. DISTRICT AND CAMP EXPENSE
A proportionate share of the salaries and expenses of Operator's district
superintendent and other general district or field employees serving the
joint property, whose time is not allocated direct to the joint property
and a proportionate share of the cost of maintaining and operating a
district office and all necessary camps, including housing facilities for
employees if necessary, incurred in conducting the operations on the joint
property and other leases owned and operated by Operator in the same
locality. The expense of, less any revenue from, these facilities shall
include depreciation or a fair monthly rental in lieu of depreciation on
the investment. Such charges shall be apportioned to all leases served on
some equitable basis consistent with Operator's accounting practice.
12. OVERHEAD
Overhead charges, which shall be in lieu of any charges for any part of
the expenses, including salaries or compensation paid to managing officers
and employees, of the division office and/or principal office of the
Operator, but which are not in lieu of district or field office expenses
incurred in developing and operating any joint property; or any other
expenses of Operator, including but not limited to expenses chargeable
under paragraph (2) of this Section II, incurred in the development and
operation of joint property and Operator shall have the right to assess
against the joint property on one of the following overhead bases:
Per Well Basis:
A. (1) $15 per day for each drilling well, beginning on the date the well
is spudded and terminating when it is on production or is plugged,
as the case may be, except that no charge shall be made during the
suspension of drilling operations for fifteen (15) or more
consecutive days.
(2) $100 per well per month for the first five (5) producing wells.
(3) $75 per well per month for the second five (5) producing wells.
(4) $50 per well per month for all producing wells over ten (10).
B. $60.00 per day for each shallow core hole party.
$30.00 per day for each seismograph reflection party.
$30.00 per day for each seismograph refraction party.
$15.00 per day for each gravity meter test party.
$15.00 per day for each magnetometer test party beginning on the date the
party enters the said areas and terminating when the party leaves
the said areas. A charge shall also be made for non-working shifts
for the reason of repairs or other causes beyond the control of
operation.
<PAGE>
In connection with overhead charges, the status of wells shall be as
follows:
(1) In-put or key wells shall be included in overhead schedule the same
as producing oil wells.
(2) Producing gas wells shall be included in overhead schedule the same
as producing oil wells.
(3) Wells permanently shut down but on which plugging-operations are
deferred, shall be dropped from overhead schedule at the time
shutdown is effective. When such wells are plugged, overhead shall
be charged at the producing well rate during the time required for
the plugging operations.
(4) Wells being plugged back or drilled deeper shall be included in
overhead schedule the same as drilling wells.
(5) Various wells may be shut down temporarily and later replaced on
production. If and when a well is shut down (other than for
proration) and not produced or worked upon for a period of a full
calendar month, it shall not be included in the overhead schedule
for such month.
(6) Salt water disposal wells shall not be included in overhead schedule
as producing wells.
The above specific overhead rates may be amended from time to time by
agreement between Operator and Non-Operator if, in practice, they are
found to be insufficient or excessive.
It is specifically understood that the above Overhead rates apply only to
Drilling and Producing Operations and are not intended to cover the
construction or operations of additional facilities such as, but not
limited to, gasoline plants, compressor plants, repressuring projects,
salt water disposal facilities, major road construction projects, and
similar installations. If at any time any or all of these become necessary
to the operation a separate agreement will be reached relative to an
overhead charge and allocation of District Expense.
13. WAREHOUSE HANDLING CHARGES
A handling charge to cover the cost of handling material into and in the
warehouse shall be assessed on new and used material and equipment
furnished from the Operator's warehouse on the following basis:
(A) Five percent (5%) of the cost of tubular goods (2" and over) and
major equipment such as tanks, separators, engines, etc.
(B) Ten percent (10%) of the cost of all other material.
<PAGE>
14. OTHER EXPENDITURES
Any other expenditures incurred by Operator for the necessary and proper
development, maintenance, operation and abandonment of the joint property.
Notwithstanding anything herein contained, no charge shall be made for any
interest or financing charges incurred by the Operator, except where
incurred with the consent of Non-Operator.
III. BASIS OF CHARGES TO JOINT ACCOUNT
1. PURCHASES
Material and equipment purchased and all services procured shall be
charged at their invoiced cost to Operator, after deduction of all
discounts actually received.
2. MATERIAL FURNISHED BY OPERATOR
Material required for operations shall be purchased for direct charge to
joint account whenever practicable, except that Operator may furnish such
material from Operator's stocks under the following conditions:
A. New Material (Condition "A")
(1) New material transferred from Operator's warehouse or other
properties shall be priced f.o.b. the nearest reputable supply
store or railway receiving point, where such material is
available, at current replacement cost of the same kind of
material. This will include material such as tanks, rigs,
pumps, sucker rods, boilers, and engines. Tubular goods (2" and
over) shall be charged on the basis of carload price effective
at date of transfer and f.o.b. railway receiving point nearest
the joint property, regardless of quantity transferred.
(2) Other material shall be priced on basis of a reputable supply
company's preferential price list effective at date of transfer
and f.o.b. the store or railway receiving point nearest the
joint property where such material is available.
B. Used Material (Condition "B" and "C")
(1) Material which is in sound and serviceable condition and is
suitable for re-use without reconditioning shall be classed as
Condition "B" and priced at 75% of current new price.
(2) Material which cannot be classified as Condition "B" but which,
(a) After reconditioning will be further serviceable for
original function as good secondhand material (Condition
"B"), or
(b) Is serviceable for original function but substantially not
suitable for reconditioning, shall be classed as Condition
"C" and priced at 50% of current new price.
<PAGE>
(3) Tanks, derricks, buildings, and other equipment involving
erection costs shall be charged at applicable percentage of
dismantled current new price for similar materials.
(4) There may also be cases where some items of equipment, due to
their unusual condition, should be fairly and equitably priced
by Operator, subject to approval of Non-Operator.
(5) Current new price, wherever used in this sub-paragraph 2B of
this Section III shall have the same meaning and be determined
in accordance with sub-paragraph 2A of this Section III.
3. WARRANTY OF MATERIAL FURNISHED BY OPERATOR
Operator does not warrant the material furnished beyond or back of the
dealer's or manufacturer's guaranty; and, in case of defective material,
credit shall not be passed until adjustment has been received by Operator
from the manufacturers or their agents.
4. OPERATOR'S EXCLUSIVELY OWNED FACILITIES
The following rates shall apply to services rendered by facilities and
equipment owned exclusively by Operator, provided such rates are not in
excess of current prevailing rates of like service and equipment available
in the area:
A. Water service, gas and power, booster and compressor services, etc.,
cost of such services including operation, maintenance, insurance,
taxes and allowance for depreciation.
B. Automotive equipment, at rates commensurate with cost of ownership
and operation and in line with schedule adopted by Operator for use
in his operations. Charges will be based on use in actual service
on, or in connection with the development and operation of the joint
property.
C. Aircraft equipment, at rates commensurate with cost of ownership and
operation. Charges will be made on a flight hour basis, based on use
and actual service in connection with the development and operation
of the joint property.
D. A fair rate shall be charged for the use of drilling and other
machinery and equipment exclusively owned by Operator while used
hereunder to cover maintenance, repairs, depreciation, for the
service furnished the joint property. Drilling equipment lost in the
hole or damaged beyond repair shall be charged to the joint account
at a fair depreciated value.
Whenever requested Operator shall inform Non-Operator in advance of
the rates it proposes to charge.
<PAGE>
Rates shall be revised from time to time when found to be either
excessive or insufficient.
IV. DISPOSAL OF LEASE EQUIPMENT AND MATERIAL
The Operator shall be under no obligation to purchase interest of
Non-Operator in surplus new or secondhand material. Derricks, tanks,
buildings, and other major items shall not be removed by Operator from the
joint property without the approval of Non-Operator. Operator shall not
sell major items of material to an outside party without giving
Non-Operator an opportunity either to purchase same at the price offered
or to take Non-Operator's share in kind.
1. MATERIAL PURCHASED BY OPERATOR
Material purchased by Operator shall be credited to the joint account and
included in the monthly statement of operations for the month in which the
material is removed from the joint property.
2. MATERIAL PURCHASED BY NON-OPERATOR
Material purchased by Non-Operator shall be invoiced by Operator and paid
for by Non-Operator to Operator immediately following receipt of invoice.
The Operator shall pass credit to the joint account and include the same
in the monthly statement of operations.
3. DIVISION IN KIND
Division of material in kind, if made between Operator and Non-Operator,
shall be in proportion to their respective interests in such material.
Each party will thereupon be charged individually with the value of the
material received or receivable by each party and corresponding credits
will be made by the Operator to the joint account, and such credits shall
appear in the monthly statement of operations.
4. SALES TO OUTSIDERS
Sales to outsiders of material from the joint property shall be credited
by Operator to the joint account at the net amount collected by Operator
from vendee. Any claims by vendee for defective material etc., shall be
charged back to the joint account, if and when paid by Operator.
V. BASIS OF PRICING MATERIAL TRANSFERRED FROM PROPERTY
Jointly-owned material and equipment sold to either Operator or
Non-Operator or divided in kind between them, unless otherwise agreed
shall be valued on the following basis of condition and price: (new price
as used in the following sub-divisions shall have the same meaning and be
computed on the same basis as the price for new material in sub-paragraph
2A of Section III hereof).
<PAGE>
1. NEW MATERIAL
New material (Condition "A"), being new equipment or supplies purchased or
procured for the property but never used thereon, at one hundred percent
(100%) of current new price.
2. GOOD USED MATERIAL
Good used material (Condition "B"), being good serviceable material which
is further usable without reconditioning:
(a) At 75% of current new price if material was charged to joint account
as new, or
(b) At 75% of current new price less depreciation consistent with its
usage on and service to the joint property if material was
originally charged to the joint property as secondhand at 75% of new
price.
3. OTHER USED MATERIAL
Other used material (Condition "C"), being material which:
(a) After reconditioning will be further serviceable for original
function as good secondhand material (Condition "B"), or
(b) Is serviceable for original function but substantially not suitable
for reconditioning at 50% of current new price.
4. BAD ORDER MATERIAL
Bad order material (Condition "D"), being material not further usable for
its original function but for possible other service, at a value
commensurate with its use.
5. JUNK
Junk (Condition "E"), being obsolete and unserviceable material, at
prevailing junk prices in the district.
6. There may also be cases where some items of equipment due to their unusual
condition should be fairly and equitably priced by Operator subject to
approval of Non-Operator.
VI. INVENTORIES
1. PERIODIC INVENTORIES
Periodic inventories shall be taken by Operator of the joint account
material at reasonable intervals but at least once in every five years
which shall include all such material as is ordinarily considered
controllable by operators of oil and gas properties.
<PAGE>
2. NOTICE
Notice of intention to take inventory shall be given by Operator at least
ten (10) days before any inventory is to begin, so that Non-Operator may
be represented when any inventory is taken.
3. FAILURE TO BE REPRESENTED
Failure of Non-Operator to be represented at the physical inventory shall
bind Non-Operator to accept the inventory taken by Operator, who shall in
that event furnish Non-Operator with a copy thereof.
4. RECONCILIATION OF INVENTORY
Reconciliation of inventory with charges to the joint account shall be
made by each party at interest, and a list of overages and shortages shall
be jointly determined by said parties.
5. ADJUSTMENT OF INVENTORY
Inventory adjustments shall be made by Operator with the joint account for
overages and shortages, but Operator shall only be held accountable to
Non-Operator for shortages due to lack of reasonable diligence.
6. INVENTORY EXPENSES
The expense of Operator's and Non-Operator's representatives present at
the taking of regular inventory shall not be charged to the joint account.
7. SPECIAL INVENTORIES
Any party shall have the right at any time to request in writing the
taking of a special inventory. The taking of such special inventory shall
be commenced within fifteen (15) days after the receipt of notice thereof.
The expense of Operator's representative in conducting any special
inventory so requested shall be charged to the separate account of the
requesting party.
Home Oil Company Limited
304 Sixth Avenue West
Calgary, Alberta
Telephone
Amherst 6-7041
June 24, 1959
Canada Southern Petroleum Ltd.,
Magellan Petroleum Corporation,
Oil Investments, Inc.,
505 Eighth Avenue West,
Calgary, Alberta
Dear Sirs:
This is to advise you that as further consideration for you entering
into that certain Agreement dated as of May 28, 1959, between the C-M-O group
and the H-S group, this company has agreed with you that they will guarantee the
performance by Kern County Land Company, Alminex Limited and United Oils Limited
of the respective covenants of those said companies contained in Article 3.1 (A)
and Article 3.l (B)(a) and (b).
Yours very truly,
HOME OIL COMPANY LIMITED
Per: _________________________
Per: _________________________
<PAGE>
June 24, 1959
Canada Southern Petroleum Ltd.
505 - 6th Avenue West
Calgary, Alberta
Gentlemen:
This letter will serve as a memorandum confirming our further agreement
with respect to the contract which we have executed with you and certain other
parties today wherein you have agreed to assign a 50 percent interest in certain
Northwest Territories and Yukon Territory properties to us and the others to the
agreement, as follows:
1. We will cooperate with you in your efforts to promote oil and gas
pipe lines from Northeast British Columbia and the Northwest Territories to
market.
2. For purposes of financing we will furnish to you, Magellan and Oil
Investments, or to such third person banking institutions from time to time upon
your request confirmation that the payments provided for under paragraph 3.1 of
the said agreement constitute unconditional obligations.
Yours very truly,
HOME OIL COMPANY LIMITED
Per: _________________________
Per: _________________________
SIGNAL OIL AND GAS COMPANY
Per: _________________________
Per: _________________________
MODIFICATION TO AGREEMENT
THIS MODIFICATION TO AGREEMENT, made as of this 31st day of January,
l96l, by and between
CANADA SOUTHERN PETROLEUM LTD., a corporation incorporated
under the laws of Canada (hereinafter sometimes referred
to as "Canada Southern"),
- and -
MAGELLAN PETROLEUM CORPORATION, a Panama corporation
(hereinafter sometimes referred to as "Magellan"),
- and -
OIL INVESTMENTS, INC., a Panama corporation (hereinafter
sometimes referred to as "Oil Investments"),
(which aforesaid three corporations are hereinafter
collectively referred to as "C-M-O" and individually as a
member of the C-M-O Group)
AND
HOME OIL COMPANY LIMITED, a corporation incorporated under the
laws of Canada (hereinafter sometimes referred to as "Home")
- and -
KERN COUNTY LAND COMPANY, a company incorporated under the
laws of California (hereinafter sometimes referred to as
"Kern"),
- and -
ALMINEX LIMITED, a company incorporated under the laws of
Canada (hereinafter sometimes referred to as "Alminex")
- and -
UNITED OILS, LIMITED, a corporation incorporated under the
laws of Canada (hereinafter sometimes referred to as "United")
<PAGE>
- and -
SIGNAL OIL AND GAS COMPANY, a company incorporated under the
laws of Delaware (hereinafter sometimes referred to as
"Signal")
(the said Home, Kern, Alminex, United and Signal being
hereinafter collectively referred to as "H-S" and individually
as a member of the H-S Group),
WITNESSETH THAT WHEREAS:
A. By Agreement dated May 28, 1959, the parties hereto agreed on a
program for the exploration and development for oil, gas and other hydrocarbons
of certain lands situated in the Northwest Territories and in the Yukon
Territory of Canada, all as more particularly described in said Agreement and
all subject to the terms, conditions and provisions as therein contained.
B. Pursuant to paragraph 3.1 (B)(a) of Article III of said Agreement,
H-S is to drill a minimum of five (5) exploratory wells on the lands subject to
said Agreement, of which at least one such well shall be located on the Western
Block of the properties (as that term is defined in said Agreement), consisting
of Permits Nos. 1006, 1007, 1132, 1133 and 1135.
C. As a result of present information, it now appears that a required
well drilled on said Western Block would not be to the mutual advantages of the
parties hereto.
NOW, THEREFORE, for and in consideration of the sum of Ten Dollars
($10.00) paid by H-S to each member of the C-M-O Group and of the mutual
benefits to be obtained and of other good and valuable consideration, the
receipt and sufficiency of all of which are hereby acknowledged, the parties
hereto hereby agree that said Agreement shall be modified and supplemented as
follows:
1. H-S shall have no obligation under said Agreement dated May 28, 1959,
to C-M-O, or otherwise, to drill any of the five (5) exploratory wells referred
to in paragraph 3.1 (B)(a) of Article III of said Agreement on said Western
Block.
<PAGE>
2. H-S shall in respect of any operations required to be carried out by it
pursuant to Article III of the said Agreement dated May 28, 1959, carry blow out
insurance with a reputable insurance company or companies in the minimum amount
of $1,000,000.00 and with a maximum deductible of $25,000.00 in respect of any
one claim.
3. Expenditures incurred by H-S in respect of any blow out which occurs in
operations conducted by H-S pursuant to Article III of the said Agreement dated
May 28, 1959, whether incurred before or after the date of this agreement, shall
be included in the total cost of the exploratory program referred to in
paragraph 3.1 (B)(b) of the said Agreement, after deduction from such
expenditures of any amount received by H-S pursuant to the insurance required to
be carried by H-S pursuant to clause 2 of this amending agreement. For greater
clarity it is acknowledged that any deductible up to the maximum specified in
clause 2 of this amending agreement which H-S is required to pay on the occasion
of any claim pursuant to such insurance shall be included in the cost of the
said exploratory program. In addition, the cost of premiums in respect of such
insurance shall also be included in the cost of the said exploratory program.
4. The well known as Home Signal C.S.P. Celibeta No. 2 well shall be
deemed to be a well not capable of production in commercial quantities within
the meaning of the said Agreement dated May 28, 1959.
5. Except as expressly provided herein, nothing herein contained shall be
deemed to amend, modify, enlarge or reduce the obligation of H-S to drill a
minimum of five (5) exploratory wells as otherwise provided in the said
Agreement dated May 28, 1959, nor the obligation to incur the total cost of the
exploratory program referred to in paragraph 3.1 (B)(b) of Article III of said
Agreement.
6. Except as herein modified and supplemented, the said Agreement dated
May 28, 1959, is hereby ratified and confirmed and shall remain in full force
and effect.
<PAGE>
7. This agreement shall enure to the benefit of and be binding upon the
parties hereto and their respective successors and assigns.
IN WITNESS WHEREOF the parties hereto have caused this instrument to be
executed as of the date first above written.
CANADA SOUTHERN PETROLEUM LTD. HOME OIL COMPANY LIMITED
per: ______________________________ per: ______________________________
VICE-PRESIDENT
per: ______________________________
per: ______________________________
ASSISTANT SECRETARY
MAGELLAN PETROLEUM CORPORATION
KERN COUNTY LAND COMPANY
per: ______________________________
per: ______________________________
per: ______________________________ VICE-PRESIDENT
per: ______________________________
OIL INVESTMENTS, INC. ASSISTANT SECRETARY
per: ______________________________ ALMINEX LIMITED
per: ______________________________ per: ______________________________
VICE-PRESIDENT
per: ______________________________
ASSISTANT SECRETARY
UNITED OILS, LIMITED
per: ______________________________
VICE-PRESIDENT
per: ______________________________
DIRECTOR
SIGNAL OIL AND GAS COMPANY
per: ______________________________
VICE-PRESIDENT
per: ______________________________
SECRETARY
H-S Group
COLUMBIA GAS DEVELOPMENT OF CANADA LTD.
1420 STANDARD LIFE BUILDING
639 - 5TH AVENUE S.W.
CALGARY, ALBERTA, CANADA T2P 0M9
(403) 261-8680
February 1, 1977
Canada Southern Petroleum Ltd. Dome Petroleum Limited
505 - 8th Avenue S.W. P.O. Box 200
Calgary, Alberta Calgary, Alberta
T2P 1G2 T2P 2H8
Attention: Mr. M. A. Reasoner Attention: Mr. D. Alan Espey
Amoco Canada Petroleum Company Ltd. Alminex Limited
444 - 7th Avenue S.W #300, 407 - 8th Avenue S.W.
Calgary, Alberta Calgary, Alberta
T2P 0Y2 T2P 1E5
Attention: Mr. Jack Lee Attention: Mr. Jim McDonald
Gentlemen:
Re: North Beaver River Prospect
The following is a summary of the basic terms and conditions under
which Columbia Gas Development of Canada Ltd. (Columbia) will acquire an
interest in the Block A lands (as hereinafter defined) from Canada Southern
Petroleum Ltd. (Canada Southern), Dome Petroleum Limited (Dome), Amoco Canada
Petroleum Company Ltd. (Amoco), and Alminex Limited (Alminex), collectively
referred to as the Farmors.
I. DEFINITIONS
In this agreement:
a) Block A lands shall mean the Block I lands and the Block II
lands.
b) Block I lands shall mean the lands so described in Schedule A
attached hereto.
c) Block II lands shall mean the lands so described in Schedule A
attached hereto.
<PAGE>
d) Leases shall mean the documents of title under which the Block
A lands are held which Leases are more particularly described
in Schedule A attached hereto.
e) HS-CMO Agreement shall mean that agreement dated May 28, 1959
and entered into by Canada Southern Petroleum Ltd., Magellan
Petroleum Corporation, Oil Investments, Inc., Home Oil Company
Limited, Kern County Land Company, Alminex Limited and Signal
Oil and Gas Company.
f) ADP-CMO Agreement shall mean that agreement dated April 1,
1966 and entered into by Canada Southern Petroleum Ltd.,
Magellan Petroleum Corporation, Oil Investments, Inc., Alminex
Limited, Pan American Petroleum Corporation, Dome Petroleum
Limited, and Provo Gas Producers Limited.
g) Existing Agreements shall mean the HS-CMO and the ADP-CMO
Agreements.
h) Carried Interest Provisions shall mean those provisions
contained within Schedule D attached to and forming part of
the HS-CMO Agreement as added by the ADP-CMO Agreement.
i) Carried Interest Account shall mean the amount by which the
operational costs relating to the Block A lands exceed the
operational receipts relating to the Block A lands as those
costs and receipts are defined in the Carried Interest
Provisions.
j) "spacing unit" shall have the meaning given to it in the
HS-CMO Agreement.
II. BLOCK A LANDS
It is Columbia's understanding and the Farmors represent that:
a) The Block A lands are held by the parties hereto in the
percentages of working interest (WI) and carried interest (CI)
as shown in Schedule A attached hereto.
b) The Block A lands are in good standing and are unencumbered
with the exception of:
(1) applicable lessor's royalties.
(2) a 1.5625% Gross Overriding Royalty payable to the
Catawba Corporation.
(3) a 2.5% Gross Overriding Royalty payable to Neil Tracy
by virtue of an agreement dated May 28, 1957 between
Canada Southern Petroleum Ltd. and Neil Tracy.
<PAGE>
c) The Carried Interest Account presently stands at approximately
$360,000.00.
d) Operations on the Block A lands are governed by the Existing
Agreements.
III. RENTALS
Columbia will reimburse the Farmors on a per diem basis for
all rentals attributable to the Block I lands from the date hereof
until Columbia has earned its interest in the Block I lands as herein
provided. Columbia will also reimburse the Farmors for its
proportionate share of the rentals attributable to the Block II lands
on a per diem basis from and after the date hereof. After Columbia has
earned its interest hereunder rentals shall be shared by the parties in
accordance with the Existing Agreements.
IV. TEST WELL
Columbia undertakes, during the 1976-77 winter drilling season
to make its best efforts to commence a well (Test Well) at a location
of its choice, but in proximity to the North Beaver River YT I-27 well,
and will thereafter, at its sole cost, risk and expense, drill the same
to a depth sufficient to test the Nahanni Formation or to a depth of
10,000 feet sub-sea, whichever occurs first (hereinafter called
Contract Depth), and upon reaching Contract Depth will test and
complete or abandon the same in accordance with generally accepted
oilfield practice and applicable government regulations. If due to
circumstances beyond its control Columbia is unable to commence the
Test Well during the 1976-77 winter drilling season, Columbia
undertakes to drill the Test Well in the 1977-78 winter drilling
season.
V. SUBSTITUTIONAL WELL
If in the drilling and/or completing of the Test Well Columbia
encounters severe operating difficulties of a mechanical nature or
impenetrable formations which render further drilling or completion
impractical or impossible Columbia shall give notice thereof to the
Farmors and may then abandon the well. Upon abandonment Columbia shall
have the right, but not the obligation, to commence within 60 days the
drilling of a like well in close proximity to the Test Well and in this
event the substitute well shall be deemed to be the Test Well.
<PAGE>
VI. ABANDONMENT
If Columbia wishes at any time to abandon the Test Well
Columbia shall give notice thereof to the Farmors. The Farmors shall
have the right, jointly or severally, within 48 hours of receipt of the
notice to elect to take over and attempt to complete the Test Well. If
the Farmor(s) successfully completes the well for the production of
petroleum substances, Columbia shall assign to the Farmor(s) all of its
right, title and interest in the Test Well and the spacing unit on
which the same is located. Concurrently, the Farmor(s) shall reimburse
Columbia for the estimated salvage value of the salvagable material and
equipment assigned to the Farmor(s) and Columbia shall not be
responsible for any subsequent abandonment or completion costs.
VII. DATA
In the drilling of the Test Well Columbia shall furnish to the
Farmors on a current basis all pertinent data relating to the drilling
and/or completion of the Test Well. All information acquired by the
parties hereto relating to the Test Well shall be held confidential by
the parties and shall not be divulged to any third party unless agreed
to in writing by each of the Farmors and Columbia.
VIII. COMPLETION
In the event the Test Well is capable of producing natural gas
in paying quantities, Columbia undertakes at its sole cost, risk and
expense, to provide and install the necessary facilities to place the
Test Well on production.
IX. INTEREST EARNED FROM DOME, AMOCO AND ALMINEX
Upon drilling the Test Well to Contract Depth and completing
or abandoning same as herein provided, Columbia will have earned and
Dome, Amoco and Alminex will assign to Columbia, an undivided one-half
of each of such parties beneficial interest (working interest) in and
to the Block I lands.
<PAGE>
X. INTEREST EARNED FROM CANADA SOUTHERN
Upon drilling the Test Well to Contract Depth and completing
or abandoning the same as herein provided, Canada Southern will reduce
its 50% carried interest in and to the Block A lands (excepting
therefrom Sections 27 and 50 contained within Lease No. 411-68) to a
33.33% carried interest and convert the remaining 16.66% carried
interest to a 16.66% working interest which will thereupon be assigned
to Columbia. In addition, Canada Southern will assign to Columbia an
undivided 16.66% working interest in and to Sections 27 and 50
contained within Lease No. 411-68.
XI. CARRIED INTEREST
Upon Columbia earning its interest as herein provided,
Sections 27 and 50 contained within Lease No. 411-68 shall thereupon
also be subject to the Carried Interest Provisions so that Canada
Southern's resultant interest in all of the Block A lands will be in
the nature of a 33.33% carried interest and be subject to the Carried
Interest Provisions.
For greater certainty, each of the working interest owners,
including Columbia, will thereafter bear its proportionate share of the
obligation to advance the operational costs on Canada Southern's behalf
so that the obligations and beneficial interest of each party would be
as follows:
(a) Section 27 contained within Lease No. 411-68:
Company Obligation Beneficial Interest
Dome 34.69% 23.13% working interest
Columbia 65.31% 43.54% working interest
Canada Southern 0.00% 33.33% carried interest
(b) Balance of the Block I lands:
Company Obligation Beneficial Interest
Dome 15.61% 10.41% working interest
Columbia 63.77% 42.51% working interest
Amoco 18.75% 12.50% working interest
Alminex 1.87% 1.25% working interest
Canada Southern 0.00% 33.33% carried interest
<PAGE>
(c) Block II lands:
Company Obligation Beneficial Interest
Dome 33.75% 22.50% working interest
Columbia 25.00% 16.67% working interest
Amoco 37.50% 25.00% working interest
Alminex 3.75% 2.50% working interest
Canada Southern 0.00% 33.33% carried interest
XII. ALLOCATION OF REVENUE
Notwithstanding anything herein contained to the contrary, the
parties agree that all revenue generated from the Block I lands (after
deducting all royalties and operating costs) shall accrue concurrently
and proportionately to:
(1) Columbia until Columbia has recovered the total cost incurred
by Columbia related to the drilling, completing and placing on
production of the Test Well and,
(2) the Farmors (excluding Canada Southern) until such time as
they have recovered an amount equal to that portion of the
Carried Interest Account which is attributable to the Block I
lands. Columbia shall be entitled to conduct an audit of those
amounts which have been included in the Carried Interest
Account.
For greater certainty it is intended that the Carried Interest
Account (as the same relates to the Block I lands) shall be recovered
by the parties advancing the same concurrently and proportionately with
Columbia recovering its costs as herein stated. Thereafter, all revenue
generated from the Block I lands (after deducting all royalties and
operating costs), shall accrue to Columbia in an amount equal to
Columbia's beneficial interest in the spacing unit from which the
revenue is obtained and the balance shall accrue to the Farmors
(excepting Canada Southern) until such time as the Farmors have
recovered the balance of the Carried Interest Account. Thereafter,
revenue shall be shared by the parties in accordance with their working
or carried interest, whichever the case may be, in the spacing unit
from which such revenue is obtained.
<PAGE>
XIII. OPERATIONS
After Columbia has earned its interest hereunder, operations
on the Block I lands shall be conducted in accordance with the Existing
Agreements as hereby amended, and Columbia shall act as Operator. It is
proposed that the overhead rates in the existing accounting procedure
be revised to more accurately reflect current rates. Notwithstanding
the above, the parties undertake to enter into a more formal agreement
which would incorporate the terms hereof and incorporate also those
provisions of the Existing Agreements which remain in effect.
With respect to the Block II lands the Existing Agreements as
hereby amended shall continue in full force and effect.
XIV. PRIOR AGREEMENTS TERMINATED
That Agreement entered into by Canada Southern Petroleum Ltd.,
Dome Petroleum Limited and Provo Gas Producers Ltd. dated January 10,
1963 is hereby terminated. Furthermore, that Letter Agreement dated
June 24, 1959 entered into by Canada Southern, Home Oil Company Limited
and Signal Oil and Gas Company is hereby also terminated.
XV. ALLOCATION OF CREDITS
Any grouping or work credits generated by the drilling of the
Test Well shall be shared equally between Columbia and the Farmors.
XVI. INDEMNITY
Columbia undertakes to indemnify and hold harmless the Farmors
from and against any or all claims, demands, suits or actions arising
out of Columbia's operations hereunder.
XVII. INSURANCE
Columbia will comply with the requirements contained in Clause
I of the HS-CMO Agreement relating to insurance and workman's
compensation. The limits of insurance required therein will be
increased to reflect current costs.
<PAGE>
XVIII. ALLOCATION OF COSTS
The parties agree that all items of cost under this agreement
(including without limitation intangible drilling and development
expenses, depletion, lease rentals, dry hole costs and depreciation)
shall be allocated to the party which contributed the funds therefore.
If the above sets out your understanding of the terms of our agreement
please so indicate by signing and returning the attached copy hereof to the
writer at your earliest convenience.
When accepted by all parties this letter will form a binding agreement
and continue in effect until replaced by more formal documentation.
It is our understanding that in executing this Letter Agreement Canada
Southern is acting on its own behalf and is authorized also to act on behalf of
its partners, Magellan Petroleum Corporation and Oil Investments, Inc.
Yours very truly,
COLUMBIA GAS DEVELOPMENT OF CANADA LTD.
R. W. Prather
CANADA SOUTHERN PETROLEUM LTD. DOME PETROLEUM LIMITED
Per: ____________________________ Per: ____________________________
AMOCO CANADA PETROLEUM COMPANY ALMINEX LIMITED
LIMITED
Per: ____________________________ Per: ____________________________
Enc.
<PAGE>
Page 1 of 2
SCHEDULE A attached to and forming part of
Letter Agreement Dated January 27, 1977
Between Canada Southern Petroleum Ltd.,
Dome Petroleum Limited, Amoco Canada Petroleum
Company Ltd. and Alminex Limited and Columbia
Gas Development of Canada Ltd.
----------------------------------------------
In the attached Letter Agreement "Block A lands" shall mean Block I lands and
Block II lands as hereinafter described, and "leases" shall mean the leases
hereinafter stated.
BLOCK I LANDS
<TABLE>
<CAPTION>
Lease Date Description Ownership
----- ---- ----------- ---------
<S> <C> <C> <C> <C>
DIAND Oil & Gas Jan. 7/69 60(degree)10' N - 124(degree)00' W: Dome 20.81% WI
Lease #442-R-68 Sec's 6-10 & 16-20 Columbia 1.69% WI
Amoco 25.00% WI
Alminex 2.50% WI
Can Southern 50.00% CI
DIAND Oil & Gas Jan. 7/69 60(degree)10' N - 124(degree)00' W: Section 50
----------
Lease #411-68 Sec's 26-30, 36-40 and Dome 20.81% WI
46-50. Columbia 1.69% WI
Amoco 25.00% WI
Alminex 2.50% WI
Can Southern 50.00% WI
Section 27
----------
Dome 46.25% WI
Columbia 3.75% WI
Can Southern 50.00% WI
Sections 26, 28-30, 36-40
and 46-49
-------------------------
Dome 20.81% WI
Columbia 1.69% WI
Amoco 25.00% WI
Alminex 2.50% WI
Can Southern 50.00% CI
DIAND Oil & Gas Jan. 7/69 60(degree)10' N - 124(degree)00' W: Dome 20.81% WI
Lease #443-R-68 Sec's 56-60 Columbia 1.69% WI
Amoco 25.00% WI
Alminex 2.50% WI
Can Southern 50.00% CI
</TABLE>
<PAGE>
Page 2 of 2
BLOCK I LANDS (Cont'd)
<TABLE>
<CAPTION>
Lease Date Description Ownership
----- ---- ----------- ---------
<S> <C> <C> <C> <C>
DIAND Oil & Gas Jan. 7/69 60(degree)10' N - 124(degree)00' W: Dome 20.81% WI
Lease #412-68 Sec's 66-70 Columbia 1.69% WI
Anioco 25.00% WI
Alminex 2.50% WI
Can Southern 50.00% CI
DIAND Oil & Gas Jan. 7/69 60(degree)10' N - 124(degree)00' W: Dome 20.81% WI
Lease #444-R-68 Sec's 76-80 Columbia 1.69% WI
Amoco 25.00% WI
Alminex 2.50% WI
Can Southern 50.00% CI
BLOCK II LANDS
Lease Date Description Ownership
----- ---- ----------- ---------
DIAND Oil & Gas Apr. 18/68 60(degree)20' N - 123(degree)30' W: Dome 22.50% WI
Lease #210-67 Sec's 5-10, 15-20, Amoco 25.00% WI
25-30. Alminex 2.50% WI
Can Southern 50.00% CI
DIAND Oil & Gas Jan. 7/69 60(degree)30' N - 123(degree)15' W: Dome 22.50% WI
Lease #414-68 Sec's 6-10, 16-20, Amoco 25.00% WI
16-30. Alminex 2.50% WI
Can Southern 50.00% CI
DIAND Oil & Gas Jan. 7/69 60(degree)30' N - 123(degree)15' W: Dome 22.50% WI
Lease #413-68 Sec's 13, 14, 23 & 24. Amoco 25.00% WI
Alminex 2.50% WI
Can Southern 50.00% CI
DIAND Oil & Gas Apr. 18/68 60(degree)30' N - 123(degree)15' W: Dome 22.50% WI
Lease #208-67 Sec's 41-45, 51-55, Amoco 25.00% WI
61-65. Alminex 2.50% WI
Can Southern 50.00% CI
</TABLE>
-----------------------------------------
PALM VALLEY OPERATING AGREEMENT
1985
-----------------------------------------
CHAMBERS McNAB TULLY & WILSON
Solicitors
12 Creek Street
BRISBANE
<PAGE>
PALM VALLEY OPERATING AGREEMENT
TABLE OF CONTENTS
Clause Heading Page
1. DEFINITIONS: INTERPRETATION 3
1.1 Definitions 3
1.2 Interpretation 7
1.3 Headings 7
2. APPLICATION AND OBJECTS OF AGREEMENT 7
2.1 Operating Agreement 7
2.2 Joint Venture of Parties 7
2.3 Duration of Joint Venture 7
2.4 Covenants by the Parties 8
3. OWNERSHIP OF CONCESSION AND OTHER INTERESTS 8
3.1 Ownership on Application of Agreement 8
3.2 Ownership Following Transfers 8
3.3 Liability for Royalties and CLC Agreement 8
4. OWNERSHIP OF PRODUCTION 9
4.1 Ownership 9
4.2 The First Pacific Entitlement 9
4.3 The Second Pacific Entitlement 9
5. OPERATOR 9
5.1 Initial Operator 9
5.2 Removal of Operator for Cause 9
5.3 Removal of Operator by Vote 10
5.4 Resignation of Operator 10
5.5 Appointment of New Operator 10
5.6 Transfer of Property on Change of Operator 11
5.7 Audit on Change of Operator 11
6. GENERAL DUTIES OF OPERATOR 11
6.1 Operator to Have Charge 11
6.2 Competitive Contracts: Use of Own Equipment 11
6.3 Contracts with Affiliates 11
6.4 Various Duties of Operator 12
6.5 Handling of Claims 13
6.6 Preparation of Reports 13
6.7 Standard of Care 13
6.8 Indemnification of Operator 13
<PAGE>
Clause Heading Page
7. NON-OPERATORS RIGHTS TO ACCESS AND INFORMATION 13
7.1 General Right to Access and Information 13
7.2 Right of Access 14
7.3 Information from Surveys 14
7.4 Notices as to Well Drilling 14
7.5 Operator's Duties during Exploratory Drilling 15
7.6 Information During Drilling 15
7.7 Information After Completion of Drilling 16
7.8 Periodic Reports 16
7.9 Copies of Reports to Government 17
7.10 Non-Operator in Default 17
8. THE OPERATING COMMITTEE 17
8.1 Establishment of Operating Committee 17
8.2 Notification of Representatives 17
8.3 Powers of Operating Committee 18
8.4 Any Party May Submit Matters 18
9. MEETINGS AND VOTING OF OPERATING COMMITTEE 18
9.1 Times and Agenda for Meetings 18
9.2 When No Notice Necessary 18
9.3 Minutes of Meeting 19
9.4 Place for Meetings 19
9.5 Advisers May Attend 19
9.6 Rules Relating to Voting 19
9.7 Votes for Committee Decisions 19
9.8 Other Forms of Voting 20
9.9 Decisions Binding on All Parties 20
9.10 Quorum for Meetings 20
9.11 Rules for Meetings 21
10. PROGRAMMES AND BUDGETS 21
10.1 Operator to Prepare Programmes and Budgets 21
10.2 Times for Submission 21
10.3 Contents of Programmes and Budgets 21
10.4 Approval of Programmes and Budgets 21
10.5 Operator to Act in Absence of Approval 23
10.6 Notice of Excess Expenditures 23
10.7 Approved Programme to Continue Unless Modified 23
11. CHARGING OF COSTS 24
11.1 Authorised Costs and Expenses 24
11.2 Maintenance of Joint Account 24
11.3 Liability of Parties 24
11.4 Treatment of Any Subsidy or Contribution 24
<PAGE>
Clause Heading Page
12. CONTRIBUTIONS BY THE PARTIES 24
12.1 Payment by Operator and Reimbursement 24
12.2 Call by Operator 24
12.3 Adjustment 25
12.4 Defaulting Party Liable for Interest 26
12.5 Banking and Investment of Funds 26
13. INSURANCE 26
13.1 Operator to Maintain Insurance 26
13.2 Advice to Non-Operators of Current Insurance 27
13.3 Party's Right to Increase Insurance 27
13.4 Cost of Insurance to Joint Account 27
14. INDEPENDENT OPERATIONS
GEOLOGICAL AND GEOPHYSICAL SURVEYS 27
14.1 Application of Part 27
14.2 Notice of Operations 28
14.3 Consent by Other Parties 28
14.4 Operator for Independent Operations 28
14.5 Non-Consenting Party 28
14.6 Right to Information on Well Drilling 28
14.7 Right to Information in Other Cases 29
15. INDEPENDENT OPERATIONS
DRILLING OF WELLS 29
15.1 Application of Part 29
15.2 Definition of Terms 29
15.3 Notice of Drilling 30
15.4 Notice of Participation 30
15.5 Unanimous Participation 30
15.6 Non-Desiring Party 30
15.7 Operator for Independent Drilling 30
15.8 Time for Commencement 31
15.9 Obligation of Desiring Parties 31
15.10 Conformity to Spacing Patterns 31
15.11 Penalties Payable by Non-Desiring Parties 32
15.12 Further Work on Wells 33
16. DISPOSITION OF PRODUCTION 34
16.1 Separate Ownership of Petroleum 34
16.2 Right to Separate Facilities 34
16.3 Underlifting Procedure 34
16.4 Payments Direct to Each Party 35
16.5 Extra Expenditure 35
<PAGE>
Clause Heading Page
17. DEFAULTS IN PAYMENT 35
17.1A Notice of Default 35
17.1B Payment by Operator 35
17.2 Defaulting Party May Be Sued 36
17.3 Non-Defaulting Parties to Contribute 36
17.4 Rights of Contributing Parties 36
17.5 Cross Charge 36
17.6 Suspension of Rights of Defaulting Party 37
17.7 Default of Operator in Payment 37
17.8 Application of Defaulting Party's Funds 37
17.9 Option to Purchase Defaulting Party's Interest 37
18. WITHDRAWAL 39
18.1 Any Party May Withdraw 39
18.2 Notice of Withdrawal 40
18.3 Other Parties May Accept Assignment 40
18.4 Prompt Execution of Documents 40
18.5 Withdrawing Party's Obligations 40
18.6 Costs of Assignment 41
18.7 Assignment to All Parties 41
19. ASSIGNMENT - MORTGAGES 41
19.1 Right to Assign 41
19.2 Assumption by Assignee 41
19.3 Assignment to a Crown Corporation 42
19.3A Consequences of Assignment 42
19.4 Charge of Working Interest 42
20. AUSTRALIANISATION 44
20.1 Australianisation 44
21. RELEASE OF INFORMATION 44
21.1 Information Confidential Subject to Exceptions 44
21.2 Disclosure to Listed Companies 45
21.3 Copy Notice to Other Parties 45
21.4 Joint Announcements 45
22. RELATIONSHIP OF PARTIES 45
22.1 Rights and Obligations Several 45
22.2 No Joint Liability 45
23. FORCE MAJEURE 46
23.1 Obligations Suspended by Force Majeure 46
23.2 Certain Actions Not Required 46
23.3 Meaning of Force Majeure 46
<PAGE>
Clause Heading Page
24. LAWS AND REGULATIONS 46
24.1 Subject to Minister's Consent 46
24.2 Subject to Applicable Laws 46
24.3 Proper Law 46
24.4 Submission to Jurisdiction 47
25. ABORIGINAL LANDS 47
25.1 Aboriginal Lands 47
26. DEALINGS WITH THE GOVERNMENT AND LAND COUNCIL 47
26.1 Dealings by Concession Holder 47
26.2 Consultation with Operator 47
26.3 Operator May Attend Meetings 47
27. NOTICES 48
27.1 Addresses for Notices 48
27.2 How Notices Given 49
27.3 Australian Representative and Address 49
28. GENERAL 49
28.1 Remedies Not Exclusive 49
28.2 Mutual Indemnity 49
28.3 Limited Invalidity 49
28.4 Waiver 49
28.5 How Monies Paid 50
28.6 Successors Bound 50
28.7 Further Assurance 50
28.8 Entire Agreement 50
28.9 Amendment 50
28.10 No Partition 50
28.11 Counterparts 50
- --------------------------------------------------------------------------------
THE FIRST SCHEDULE
The Working Interests of the Parties
ANNEXURE "A"
Accounting Procedure
ANNEXURE "B"
Clause 17 Cross Charge
ANNEXURE "C"
Form of Priority Deed
<PAGE>
PALM VALLEY OPERATING AGREEMENT
THIS AGREEMENT made the 2nd day of April l985 between
MAGELLAN PETROLEUM (NT) PTY. LTD. a Company incorporated in the State of
Queensland and having its registered office in the Northern Territory at 5th
Floor, City Mutual Building, 62 Cavenagh Street, Darwin (hereinafter called
"Magellan") of the First Part
C.D. RESOURCES PTY. LTD. a Company incorporated in the State of South Australia
and having its registered office in the Northern Territory at C/- Coopers &
Lybrand, Civic Centre, Harry Chan Avenue, Darwin (hereinafter called "CDR") of
the Second Part
FARMOUT DRILLERS NL a Company incorporated in the State of New South Wales and
having its registered office in the Northern Territory at C/- Wilson Bishop
Bowes & Craig, City Mutual Building, 62 Cavenagh Street, Darwin (hereinafter
called "Farmout") of the Third Part
CANSO RESOURCES LIMITED a Company incorporated in the State of New South Wales
and having its registered office in the Northern Territory at C/- Wardell
Nominees Pty. Ltd., First Floor, 19 The Mall, Darwin (hereinafter called
"Canso") of the Fourth Part
INTERNATIONAL OIL PROPRIETARY an unlimited Company incorporated in the State of
Victoria and having its registered office in the Northern Territory at 5th
Floor, City Mutual Building, 62 Cavenagh Street, Darwin (hereinafter called
"International") of the Fifth Part
PANCONTINENTAL PETROLEUM LIMITED a Company incorporated in the State of
Queensland and having its registered office in the Northern Territory at C/-
Wardell Nominees Pty. Ltd., 19 The Mall, Darwin (hereinafter called
"Pancontinental") of the Sixth Part
IEDC AUSTRALIA PTY. LIMITED a Company incorporated in the State of New South
Wales and having its registered office in the Northern Territory at C/- W. & B.
Pty. LTD., First Floor, The Vic, Lot 2310 Smith Street, Darwin (hereinafter
called "IEDC") of the Seventh Part
and
AMADEUS OIL NL a Company incorporated in the State of Queensland and having its
registered office in the Northern Territory at 5th Floor, City Mutual Building,
62 Cavenagh Street, Darwin (hereinafter called "Amadeus") of the Eighth Part
<PAGE>
W H E R E A S:
A. On the 9th November, 1982 Petroleum Lease No. 3 (hereinafter called
"the Petroleum Lease") in respect of the area of land more fully
described therein (hereinafter called "the Lease Area") containing the
Palm Valley gas field was duly granted to Magellan pursuant to the
provisions of the Petroleum (Prospecting and Mining) Act 1954-82.
B. On the 21st December, 1982 Magellan transferred to Farmout and CDR
certain interests in the Petroleum Lease pursuant to its obligations in
respect thereof.
C. The whole of the Lease Area is part of lands vested in Aboriginal Land
Trusts pursuant to the Aboriginal Land Rights (Northern Territory) Act
1976. In consequence thereof Magellan, Farmout and CDR on the 9th
November, 1982 executed an Agreement with the Central Land Council
(hereinafter called "the CLC Agreement") which was the Agreement which,
pursuant to Section 43(2) of the said Act, was a pre-requisite to the
grant of the Petroleum Lease.
D. On the 11th November, 1981 Magellan, Farmout and CDR in anticipation of
the grant of the Petroleum Lease entered into an Agreement with the
Northern Territory Electricity Commission (hereinafter called "the NTEC
(Alice Springs) Sales Agreement") for the sale to the Northern
Territory Electricity Commission of their respective shares of gas from
the Palm Valley gas field.
E. On the 24th December, 1982 Magellan transferred to Canso a portion of
its interest in the Petroleum Lease and in the NTEC (Alice Springs)
Sales Agreement.
F. On the 13th day of July, 1983 Canso transferred to International
Pancontinental IEDC and Amadeus respectively portions of its interest
in the Petroleum Lease and in the NTEC (Alice Springs) Sales Agreement.
G. Pursuant to an Agreement dated the 29th June, 1972 made by Magellan and
Farmout with Pacific Lighting Gas Development Company (hereinafter
called "Pacific") as amended by an Agreement dated 17th July, 1984
(which Agreements are hereinafter called "the First Pacific Entitlement
Agreements") Pacific is entitled to receive from certain of the
proceeds of production from the Palm Valley gas field the repayment of
loan moneys and the payment of interest in the manner set out therein.
The entitlement of Pacific pursuant to the First Pacific Entitlement
Agreements is hereinafter called "the First Pacific Entitlement".
<PAGE>
H. Pursuant to an Agreement dated the 20th March, 1973 made by Freeport of
Australia, Incorporated (a predecessor in title of CDR) with Pacific as
amended by an Agreement made by CDR with Pacific dated the ____________
1984 (which Agreements are hereinafter called "the Second Pacific
Entitlement Agreements) Pacific is entitled to receive from certain of
the proceeds of production from the Palm Valley gas field the repayment
of loan moneys and the payment of interest in the manner set out
therein. The entitlement of Pacific pursuant to the Second Pacific
Entitlement Agreements is hereinafter called "the Second Pacific
Entitlement".
I. Set forth in Part A of the First Schedule are the percentage interests
to which the Parties are presently entitled in the Concession and the
Joint Facilities as hereinafter defined. Set forth in Part B of the
First Schedule are the royalties to which holders of the Petroleum
Lease are subject.
J. The Parties have hitherto held their interests in the Concession and
the Joint Facilities subject to an Operating Agreement between
Magellan, Farmout and Freeport of Australia, Incorporated dated the
Twenty-fourth day of August, 1965 and the Parties have agreed that this
Operating Agreement shall replace the said earlier Operating Agreement
and that their said interests in the Concession and the Joint
Facilities shall henceforward be held subject to this Operating
Agreement.
NOW THEREFORE THE PARTIES AGREE as follows:-
1. DEFINITIONS: INTERPRETATION
1.1 Definitions. The following terms used in this Agreement have the
following meanings assigned to them:-
(i) "Accounting Procedure" shall mean the Accounting Procedure
which is annexed hereto marked "A".
(ii) "Affiliate" in relation to a corporation shall mean a
corporation which is related to that corporation within the
meaning of the Companies Act as in force at the date hereof of
the Northern Territory of Australia.
(iii) "Agreement" shall mean this Operating Agreement, its annexures
and its schedules as any of the same may from time to time be
amended.
(iv) "CLC Agreement" shall mean the Agreement referred to in
Recital C hereof as the same may from time to time be amended.
<PAGE>
(v) "Concession" shall mean the Petroleum Lease and the Lease Area
and shall include all permits leases or other instruments
conferring rights to the exploration for or production of
Petroleum from the Lease Area or any extensions or renewals
therefor or any such instruments issued in substitution
therefor which may from time to time be granted pursuant to
the Petroleum Act or otherwise to the extent that such permits
leases or other instruments are in respect of the Lease Area
or any part thereof.
(vi) "Concession Year" shall mean a year which commences on the
date or the anniversary date of the commencement of the
Concession, or such other date as the Operating Committee may
determine.
(vii) "Default Interest Rate" shall mean the rate of interest five
per cent (5%) in excess of the rate from time to time charged
by the Operator's principal bankers in Australia from time to
time on overdrafts below ONE HUNDRED THOUSAND DOLLARS
($100,000.00) as certified by the manager of the Bank at which
the Operator's principal account is maintained, or such other
rate as the Operating Committee may determine by the unanimous
vote of representatives of the Parties present and entitled to
vote.
(viii) "Delivery Point" shall mean the point or points determined by
the Operating Committee from time to time as the point or
points at which the Parties shall take delivery of their
respective shares of Petroleum produced from the Concession
being a point or points within the Concession or not more than
5 kilometres from the external boundaries of the Concession.
(ix) "First Pacific Entitlement" shall mean the entitlement which
is described in Recital G hereof.
(x) "Joint Account" shall mean the account and records maintained
by the Operator to cover and record the expenditure and other
accounting transactions of the Joint Venture (including
receipts and debits for Work) and "for the Joint Account"
shall mean for the benefit, interest, ownership, risk, cost,
expense and obligation of the Parties in proportion to their
respective Working Interests.
(xi) "Joint Venture" shall mean the Joint Venture governed by this
Agreement.
(xii) "Joint Venture Documents' shall mean:
(a) the Concession;
(b) this Operating Agreement;
(c) any Deeds of Cross Charge executed pursuant to Clause
17 hereof;
(d) the CLC Agreement;
<PAGE>
(e) the royalty Agreements in respect of the Concession,
namely: -
A. the Royalty Agreement dated the 28th day
of September, 1984 made with the Minister
for Mines and Energy;
B. the Royalty in favour of M.M. & E.A. Hembdt
for a 1.5625% royalty pursuant to an
Overriding Royalty Deed dated the 28th day
of December, 1961;
C. the Royalty in favour of Jarl Pty. Ltd. for
a 3.25% royalty pursuant to an Overriding
Royalty Deed dated the 25th day of
September, 1964;
D. a 1.5% Royalty in favour of the Central Land
Council pursuant to the CLC Agreement;
(f) the First Pacific Entitlement Agreements namely the
Agreement dated 29th June 1972 made by Magellan and
Farmout with Pacific Lighting Gas Development Company
and the amending Agreement dated 17th July 1984;
(g) the Second Pacific Entitlement Agreements namely the
Agreement dated 20th March 1973 made by Freeport of
Australia, Incorporated and Pacific Lighting Gas
Development Company and the amending Agreement dated
1984;
(h) any Deed of Assumption executed pursuant to Clause
19.2 hereof;
(i) any other document unanimously agreed by the
Operating Committee to be a Joint Venture Document;
For the purposes of Clause 19 hereof only the Joint Venture
Documents shall also include the NTEC (Alice Springs) Sales
Agreement and any other Agreement for the sale by a Party of
its share of any Petroleum produced from the Concession.
Copies of the Joint Venture Documents numbered (a) to (g) of
this paragraph and the NTEC (Alice Springs) Sales Agreement
are exhibited hereto and marked "X".
(xiii) "Joint Facilities" shall mean all equipment, machinery, plant
and other facilities and all other property real or personal
(including contractual rights) now or hereafter held or
acquired by or on behalf of the Parties for the Joint Account.
Notwithstanding the foregoing, Joint Facilities shall not
include the Concession the NTEC (Alice Springs) Sales
Agreement or any other agreement for the sale of Petroleum
produced from the Concession.
(xiv) "Lease Area" shall mean the area for the time being the
subject of the Concession.
(xv) "Non-Operator" shall mean any Party excluding the Operator in
its capacity as Operator but including the Operator in its
capacity as the holder of a Working Interest.
<PAGE>
(xvi) "The NTEC (Alice Springs) Sales Agreement" shall mean the
Sales Agreement referred to in Recital D hereof as the same
may from time to time be amended.
(xvii) "Operator" shall mean the Party from time to time appointed as
such under this Agreement.
(xviii) "Operating Committee" shall mean the Operating Committee
established under this Agreement.
(xix) "Parties" means the Parties hereto and their respective
successors and assigns which become bound by the terms of this
Agreement.
(xx) "Petroleum" shall mean naturally occurring hydrocarbons in a
free state whether gaseous liquid or solid but does not
include coal, shale or a substance which may be extracted from
coal, shale or other rock by the application of heat or by a
chemical process.
(xxi) "Petroleum Act" shall mean the Petroleum (Prospecting and
Mining) Act l954-1982 of the Northern Territory of Australia
and any regulations or rules made thereunder and any statutory
amendment or replacement thereof.
(xxii) "Petroleum Lease" shall mean the Petroleum Lease referred to
in Recital A hereof and includes any renewals or extensions
thereof.
(xxiii) "Second Pacific Entitlement" shall mean the entitlement which
is described in Recital H hereof.
(xxiv) "Sole Risk Operator" shall mean the Sole Risk Operator
appointed under Clauses 14.4 or 15.7 hereof.
(xxv) "Work" shall mean all exploration, development, processing,
reporting, analysing, studying or any other operations or
actions of whatsoever kind which are appropriate to the
exploration of the Concession, the assessing of the Petroleum
content of the Concession, the investigation of the
feasibility of carrying out Petroleum production operations on
the Concession and the carrying out of Petroleum production
operations on the Concession and all other undertakings
activities and operations whatsoever undertaken under this
Agreement for the Joint Account.
(xxvi) "Working Interest" shall mean a Non-Operator's interest from
time to time as tenant-in-common in the Concession and in the
Joint Facilities and its rights and obligations under this
Agreement and the other Joint Venture Documents.
<PAGE>
1.2 Interpretation. In this Agreement, unless the context requires
otherwise:-
(i) monetary references are references to Australian currency;
(ii) words importing the singular include the plural and vice versa
and any word or expression defined in the singular shall have
the corresponding meaning if used in the plural and vice
versa;
(iii) reference to a person includes a corporation and vice versa.
1.3 Headings. The headings to any clauses or sub-clauses do not affect the
interpretation thereof.
2. APPLICATION AND OBJECTS OF AGREEMENT
2.1 OPERATING AGREEMENT The Parties hereby agree that this Agreement is the
Operating Agreement which will apply to the Joint Venture as from the date
hereof in substitution for the Operating Agreement referred to in Recital J.
2.2 JOINT VENTURE OF PARTIES Pursuant to this Agreement the Parties are
associated in an unincorporated Joint Venture (not being a partnership) to:-
(i) produce and treat Petroleum from the Concession in sufficient
quantities to enable the Parties to satisfy their respective
obligations pursuant to the NTEC (Alice Springs) Sales
Agreement and pursuant to any other agreements for the sale of
such Petroleum;
(ii) deliver such Petroleum to the Parties at the Delivery Point;
and
(iii) explore for and/or to develop further reserves of Petroleum
from the Concession; and
(iv) maintain apply for and renew all appropriate titles necessary
or desirable for the purposes of Work under this Agreement.
2.3 DURATION OF JOINT VENTURE The Joint Venture shall continue until the
Parties cease to hold the Concession or any part thereof (and the Parties have
unanimously agreed not to renew the Concession) or until one Party only remains
as the sole holder of the Concession whichever shall first occur and thereafter
until there has been a final accounting between the Parties.
<PAGE>
2.4 COVENANTS BY THE PARTIES Each of the Parties covenant with each of the
other Parties as follows:-
(a) to do all things on its part necessary to ensure that: -
(i) the obligations under the Concession are diligently
observed and performed;
(ii) the Concession is kept in good standing and the
Joint Facilities in a safe and operable condition;
(iii) sufficient Petroleum is produced from the Concession
to enable the Parties to meet their respective
obligations for the sale of their respective shares
thereof;
(iv) the Concession and all other titles necessary for
Work are duly renewed unless the Parties shall
unanimously agree otherwise;
(b) to be just and faithful to each other Party in all things
relating to this Agreement and except as provided hereunder
not to undertake any action as a Party to this Agreement which
might cause detriment to any other Party;
(c) not to engage (either alone or in association with others) in
any activity in relation to the Concession or the Joint
Facilities other than in accordance with this Agreement.
3. OWNERSHIP OF CONCESSION AND OTHER INTERESTS
3.1 OWNERSHIP ON APPLICATION OF AGREEMENT The Concession the Joint
Facilities and the benefit of Work shall as at the commencement of application
(pursuant to Clause 2.1 hereof) of this Operating Agreement belong to and be
owned by the Parties as tenants-in-common in the respective percentages set
forth in the First Schedule hereto.
3.2 OWNERSHIP FOLLOWING TRANSFERS From and after the commencement of this
Operating Agreement the Concession the Joint Facilities and the benefit of all
Work shall continue to be owned by the Parties as aforesaid subject to such
transfers or other changes in Working Interest as may from time to time be made
pursuant to the provisions of this Operating Agreement.
3.3 LIABILITY FOR ROYALTIES AND CLC AGREEMENT The Parties shall have the
obligation to, and shall, bear and pay or otherwise satisfy in proportion to
their respective Working Interests the royalties described in the Joint Venture
Documents exhibited hereto and marked "X" (being pursuant to the royalty
agreements referred to in paragraph (e) of the definition of Joint Venture
Documents in Clause 1.l(xi) hereof) and in like proportions shall satisfy their
other obligations pursuant to the CLC Agreement.
<PAGE>
4. OWNERSHIP OF PRODUCTION
4.1 OWNERSHIP All Petroleum produced for the Joint Account from the
Concession and delivered to the Parties in accordance with Clause 16 hereof
shall belong separately to the Parties in proportion to their respective Working
Interests from time to time.
4.2 THE FIRST PACIFIC ENTITLEMENT Out of the proceeds of sale of their
respective shares of Petroleum produced from the Concession, Magellan, Farmout,
Canso, International, Pancontinental, IEDC and Amadeus or their respective
assigns shall pay and discharge the First Pacific Entitlement in accordance with
the requirements of the First Pacific Entitlement Agreements in the proportions
in which each such Party's Working Interest bears to the aggregate of their
Working Interests until such time as the First Pacific Entitlement is fully
discharged.
4.3 THE SECOND PACIFIC ENTITLEMENT Out of the proceeds of sale of its share
of Petroleum produced from the Concession, CDR or its assigns shall pay and
discharge the Second Pacific Entitlement in accordance with the requirements of
the Second Pacific Entitlement Agreements until such time as the Second Pacific
Entitlement is fully discharged.
5. OPERATOR
5.1 INITIAL OPERATOR The Operator at the date of commencement of this
Operating Agreement is Magellan.
5.2 REMOVAL OF OPERATOR FOR CAUSE
(i) The Operator shall be removed immediately and another Operator
appointed pursuant to Clause 5.5 in any of the following
circumstances:
(a) If the Operator passes a resolution that it be wound
up or commits or suffers any act of bankruptcy or
insolvency, or enters into a scheme of arrangement
with its creditors or any class thereof, or goes into
liquidation (other than for the purpose of
reconstruction previously approved by the Operating
Committee) or has a receiver appointed of the whole
or any part of its undertaking or assets;
(b) If the Operator assigns or purports or attempts to
assign its powers and responsibilities as Operator
hereunder.
(ii) The Operator may be removed by a simple majority vote of the
Operating Committee and another Operator appointed pursuant to
Clause 5.5, in any one of the following circumstances:
<PAGE>
(a) If the Operator in its capacity as a Non-Operator
ceases to hold at least a ten percent (10%) Working
Interest;
(b) If the Operator in its capacity as Operator or
Non-Operator defaults in its duties or obligations or
any of them hereunder and does not as soon as
reasonably practicable and in any event within thirty
(30) days commence and diligently proceed to rectify
the default after written notice signed by Parties
whose Working Interests aggregate more than fifty
percent (50%) of the total Working Interests of the
Parties other than the Operator, specifying the
default and requiring the Operator to remedy the
same.
5.3 REMOVAL OF OPERATOR BY VOTE The Operator shall be removed upon a vote
of the Operating Committee for the removal of the Operator passed by the
affirmative vote of representatives of Parties whose Working Interests aggregate
not less than sixty-five percent (65%) of the total of all Working Interests.
Following such replacement another Operator shall be appointed pursuant to
Clause 5.5 hereof.
5.4 RESIGNATION OF OPERATOR The Operator may resign as Operator on giving
each of the Non-Operators at least six (6) months (or such lesser period as the
Operating Committee may determine) notice of its intention to do so.
5.5 APPOINTMENT OF NEW OPERATOR
(i) If an Operator resigns or is removed, a Party holding a
Working Interest of at least ten percent (l0%) (or such lesser
percentage as the Operating Committee shall unanimously
determine) shall be appointed Operator by a simple majority
vote of the Operating Committee in accordance with Clause
9.7(1) hereof.
(ii) No Party shall be appointed Operator hereunder unless it has
given its written consent to the appointment.
(iii) No provision of this Article shall be construed to re-appoint
as next-succeeding Operator an Operator who has been removed
under Clause 5.2 except with the unanimous approval of the
Parties.
(iv) Except as provided in subclause (i) of Clause 5.2 (in which
case the Operator shall be removed immediately), every removal
of Operator shall take effect at eight (8:00) o'clock a.m. on
the first (1) day of the calendar month following the
expiration of any period of notice effecting a change of
Operator, or otherwise as determined by the Operating
Committee.
<PAGE>
5.6 TRANSFER OF PROPERTY ON CHANGE OF OPERATOR At the effective date of the
resignation or replacement of an Operator as hereinbefore provided, the Operator
being replaced ("the Retiring Operator") shall subject to the provisions of
Clause 15.7 hereof deliver to the successor Operator possession of the
Concession the Joint Facilities and all Work being conducted by the Operator and
all funds held for the Joint Account, together with all production, if any,
which has not previously been delivered in kind, and the books of account and
records kept for the Joint Account and all documents, agreements and other
papers relating to Work. The Retiring Operator shall, to the full extent to
which it is able so to do, assign to the New Operator all contracts entered into
by the Retiring Operator for the Joint Account. Upon delivery of the said
property, books and records, the Retiring Operator shall be released and
discharged as Operator except in respect of its liability for any antecedent
breach of this Agreement.
5.7 AUDIT ON CHANGE OF OPERATOR Upon every change of Operator and by not
later than sixty (60) days after the new Operator commences to act as Operator
the Parties shall cause an audit to be made up to the date of commencement of
the new Operator of the books of account and records kept for the Joint Account.
The cost of the audit shall be charged to the Joint Account.
6. GENERAL DUTIES OF OPERATOR
6.1 OPERATOR TO HAVE CHARGE Subject to the terms of this Agreement and to
the directions and control of the Operating Committee the Operator shall conduct
Work on behalf of the Parties in accordance with programmes and budgets approved
by the Operating Committee. The Operator shall have the custody charge
management and control of Work, including the right to acquire for the Joint
Account all properties, both real and personal, required for such purposes and
when acquired such items shall be included in the Joint Facilities. In carrying
out Work, the Operator shall act for and on behalf of the Parties in the
capacity of an independent contractor and shall have no authority to and shall
not represent itself as being the agent of any Party except with the prior
authority of the Operating Committee.
6.2 COMPETITIVE CONTRACTS: USE OF OWN EQUIPMENT Unless the Operating
Committee shall otherwise determine, all Work shall be carried out under
competitive contract unless carried out by the Operator itself. The Operator may
employ its or a Party's own tools and equipment in the conduct of Work but in
such event the charge therefor shall be on competitive contract basis. Such
tools and equipment shall be provided under such terms and conditions as are
customary and usual in contracts with independent contractors with similar
equipment doing work of a similar nature in similiar circumstances.
6.3 CONTRACTS WITH AFFILIATES Any contract entered into by the Operator
with either an Affiliate of the Operator or a party or an Affiliate of a Party
must be approved by the Operating Committee.
<PAGE>
6.4 VARIOUS DUTIES OF OPERATOR Subject to the direction and control of the
Operating Committee, the Operator shall, except as herein elsewhere specifically
provided; for the Joint Account do all things necessary for the purpose of
implementing programmes and budgets approved by the Operating Committee
including but not limited to:-
(a) pay when due all costs and expenses authorised and chargeable
hereunder and all fixed payments, charges, levies, expenses
and other payments required by law or incurred or arising out
of Work and keep the Concession and the Joint Facilities free
from liens and encumbrances in respect thereof created by or
likely to be created by actions of the Operator while acting
as such;
(b) promptly commence and diligently prosecute all Work and make
all payments necessary to keep the Concession and the Joint
Facilities free from forfeiture or cancellation under the
Petroleum Act or otherwise;
(c) do all other acts and things necessary or advisable in the
Operator's judgment to comply with the terms and conditions of
the Concession in order to protect it from default and
forfeiture;
(d) provide, hire, direct and discharge all contractors,
consultants, staff and employees and furnish all materials,
supplies and equipment for Work, all the staff and employees
to be and remain the separate staff and employees of the
Operator and to be carried on its payroll and subject to its
sole direction;
(e) comply with all applicable laws and regulations of any
governmental authority having jurisdiction concerning the
Concession and with the terms of the CLC Agreement insofar as
it relates to the duties of Operator hereunder;
(f) keep an accurate record of all Work including a log of all
wells drilled hereunder and accurate and itemised records of
all Petroleum produced from the Concession;
(g) keep the Joint Facilities in a safe and operable condition or
some better condition approved by the Operating Committee; and
(h) maintain the insurances to be taken out by the Operator in
accordance with this Agreement.
<PAGE>
6.5 HANDLING OF CLAIMS Any claim or suit arising out of Work or touching
the subject matter of this Agreement (other than a claim or suit between the
Parties inter se) for any amount shall be promptly reported to the Parties by
the Operator. Any and all such claims and suits may be compromised and settled
or shall be defended by the Operator provided however that the Operator shall
not pay or agree to pay more than the equivalent of $25,000.00 in the settlement
of any claim or suit without first obtaining the approval of the Operating
Committee. For those claims and suits for an amount in excess of the equivalent
of $25,000.00 the Operator shall comply with any directions given by the
Operating Committee with respect hereto. Each Party shall have the right to be
represented by its own counsel and at its expense in the settlement, compromise
or defence of claims and suits in amounts in excess of the equivalent of
$25,000.00 or which, in the opinion of the Party in question, involve an issue
of principle and notwithstanding any provision to the contrary, each Party may,
to the extent of that part of the claim or suit for which it may be liable,
settle, compromise or defend such claim or suit.
6.6 PREPARATION OF REPORTS The Operator shall prepare for signature by the
required Parties or persons and lodging by the Operator with the proper
authorities all returns or reports required by the applicable laws and
regulations together with all related material required to be submitted.
6.7 STANDARD OF CARE The Operator shall conduct all Work in a good
workmanlike and efficient manner in accordance with good exploration and
oilfield practice and shall ensure that the terms and conditions of the
Concession are met. The Operator shall act in good faith in the performance of
its duties hereunder and where it acts as aforesaid shall not be liable for the
result of any error in judgment or for the loss of or damage to any property
held for the Joint Account occurring in the course of its operations or for any
loss occasioned by defects in equipment or for any other loss or damage except
in each case aforesaid such loss as may result from negligence wilful misconduct
or wilful failure or from the breach of the provisions of this Agreement by the
Operator.
6.8 INDEMNIFICATION OF OPERATOR The Operator shall not be liable to the
Non-Operators for any act or omission in the conduct of Work hereunder so long
as such act or omission is not due to negligence wilful misconduct or wilful
failure or from the breach of the provisions of this Agreement on the part of
the Operator. All liabilities incurred by the Operator in carrying out duly
authorised operations hereunder except those resulting from such negligence,
wilful misconduct or wilful failure or from the breach of the provisions of this
Agreement shall be charged to the Joint Account and borne by the Parties as
provided in Clause 11.2 hereof.
7. NON-OPERATORS RIGHTS TO ACCESS AND INFORMATION
7.1 GENERAL RIGHT TO ACCESS AND INFORMATION Unless and to the extent that
the provisions of this Clause 7 shall otherwise specifically provide, the
Operator shall:-
<PAGE>
(a) give timely notice to each Non-Operator of all information
under the control of the Operator in its capacity as Operator
which in the reasonable opinion of the Operator is material to
the Joint Venture;
(b) give the fullest response available from information under the
control of the Operator in its capacity as Operator to any
question from a Non-Operator concerning any aspect of the
Joint Venture;
(c) supply to a Non-Operator upon request a copy of any document,
communication or other writing under the control of the
Operator in its capacity as Operator with respect to the Joint
Venture whether it is material or not; and
(d) permit a Non-Operator upon reasonable notice to inspect during
normal business hours any records of the Operator with respect
to the Joint Venture at the office or location where such
records are normally kept (being a place approved by the
Operating Committee) PROVIDED THAT such inspection shall be
carried out with a minimum of inconvenience to the Operator.
7.2 RIGHT OF ACCESS Each Non-Operator shall at the Non-Operator's sole risk
and expense at all times have the right through its authorised representatives
to have access to and to observe and inspect Work and all geological,
geophysical, drilling and production records and interpretations and otherwise
to be fully informed as to progress and results of all Work, provided that in
exercising such rights a Non-Operator shall not act in such a manner as to
hinder the progress of or jeopardise the safety of Work. Each Non-Operator shall
be entitled on request made prior to the taking of samples and cores from the
well concerned and subject to the availability to receive core and formation
samples from the intervals in each well drilled and to make copies of all
documents of any kind relating to Work or proposed Work hereunder.
7.3 INFORMATION FROM SURVEYS The Operator as a cost to the Joint Account
shall furnish to each Non-Operator requesting them both during and upon
conclusion of any geological geophysical or other survey conducted on the
Concession full and complete details of the survey and of the information, data
and results obtained therefrom. Such information shall include clear film
transparencies and all seismic profiles and other base data and maps and other
interpretative information and one copy of the final report of each seismic
programme. The Operator shall at the request and cost of a Non-Operator and at a
time which will not impede the conduct of Work make available to the
Non-Operator for copying the Operator's field records and magnetic tapes.
7.4 NOTICES AS TO WELL DRILLING The Operator shall promptly notify the
Non-Operators in writing of
(i) the date of intended commencement and the date of actual
commencement of the drilling of any well drilled hereunder;
and
<PAGE>
(ii) the location of any well fixed by giving the distances and
directions thereof from at least two recognized geographical
locations or the location of the well in terms of latitude and
longitude and shall provide a copy of a location survey plan
for such well.
7.5 OPERATOR'S DUTIES DURING EXPLORATORY DRILLING In respect of the
drilling of each exploratory well drilled on the Concession the Operator shall -
(a) Save representative formation samples at approximately three
(3) metre intervals in the said test well and keep the
drilling mud or other drilling medium in appropriate condition
to bring representative samples to the surface.
(b) Have a suite of logs as approved by the Operating Committee
duly carried out.
(c) In a good and workmanlike manner core and test promptly all
prospective oil and/or gas formations which may be encountered
in the drilling of the exploratory well and to permit each
Non-Operator to inspect any cores so taken.
(d) In the event that any show of oil and/or gas is encountered
forthwith notify each Non-Operator to such effect.
(e) Upon the making of any drill stem test in the test well
immediately furnish each Non-Operator with details and results
of any such test.
(f) Permit the authorised representatives of each Non-Operator at
all times (subject to safety requirements) to have access to
the derrick floor, the log books, the cores and samples and
any information about the well.
(g) At the request of any Non-Operator (and provided that in the
case of a well capable of being completed for production of
Petroleum there is no objection on the part of the Operator
and any other Non-Operator) at the sole cost risk and expense
of the Non-Operator conduct additional testing and/or logging
and/or coring and/or deepening of any test well before the
drilling rig and other equipment used to drill test and core
the said well has been removed from the location. The
provisions of Clause 15.12 hereof shall apply to such Work.
7.6 INFORMATION DURING DRILLING During the drilling of any well hereunder
the Operator shall as a cost to the Joint Account promptly furnish to each
Non-Operator requesting them the following reports, information and data:
<PAGE>
(a) Daily drilling reports showing the nature of all work done and
depth and formations penetrated;
(b) One copy of drilling time record on a weekly basis;
(c) Two copies of any mechanical or electrical survey that is run
in the course of the well;
(d) One copy of the Lithologic Log on a weekly basis;
(e) One set of ditch samples;
(f) The results of any drill stem test carried out. Preliminary
reports of drill stem tests will be advised by telephone and
confirmed by telex or telegram.
7.7 INFORMATION AFTER COMPLETION OF DRILLING As soon as practicable after
completion of the drilling of any well hereunder the Operator at a cost to the
Joint Account shall deliver to each Non-Operator requesting them a clear film
transparency of all wireline surveys conducted and a copy of the final well
completion report. Each copy of the well completion report shall include the
following:
(a) a copy of all wireline surveys conducted;
(b) a copy of the mud logging survey;
(c) a copy of the velocity survey, if run;
(d) a copy of the well site geologist's description of the ditch
samples;
(e) a copy of the well site geologist's description of the
sidewall cores or conventional cores, if taken;
(f) a copy of the commercial core analyses (sidewall or
conventional) if cores are taken;
(g) a copy of the commercial analyses of the water, gas or oil, if
test and recovery are made;
(h) a copy of the analyses made in dating a sample radioactively
or palaentologically;
(i) a copy of the geological reports;
(j) a copy of the well location map;
(k) a copy of the well history;
(l) a copy of the well records;
(m) a copy of the drilling report;
(n) a copy of the mud record;
(o) a copy of the bit record;
(p) a copy of the formation test data, if test is made;
(q) a copy of all other data relative to the well.
7.8 PERIODIC REPORTS The Operator shall prepare and forward to each Non-
Operator a copy of the following periodic reports:-
(a) An annual report within two calendar months of the end of each
and every Concession Year during the term of this Agreement
setting out in reasonable detail work done, results achieved
and expenditure made during the preceding Concession Year.
<PAGE>
(b) A quarterly report within one month after the end of each
quarter during a Concession Year during the term of this
Agreement during which exploration work is carried out in the
Concession setting out briefly work done results achieved and
an estimate of expenditures during the preceding quarter.
(c) A monthly report within fourteen (14) days after the end of
each month during which commercial production of Petroleum
takes place in the Concession setting out the quantity of
Petroleum produced from the Concession and such information as
comes into the possession of the Operator concerning the
quantity of such Petroleum sold and the price obtained
therefor and an estimate of the expenses of such production
and sale of Petroleum during the preceding month.
7.9 COPIES OF REPORTS TO GOVERNMENT The Operator shall promptly forward to
each Non-Operator a copy of each report notice or other communication which the
Operator shall at any time be required or may elect to give or deliver to or may
receive from any Government with respect to the Concession the Joint Facilities
or Work.
7.10 NON-OPERATOR IN DEFAULT A Non-Operator in default in payment pursuant
to Part 17 hereof shall not be entitled to any information, access copies of
reports or documents or any other material or information pursuant to this Part.
8. THE OPERATING COMMITTEE
8.1 ESTABLISHMENT OF OPERATING COMMITTEE
(a) There shall be an Operating Committee with the functions and powers set
out in Clause 8.3 hereof;
(b) The Operating Committee shall consist of:
(i) one representative of each Party whose Working Interest for
the time being is not less than 2 1/2%;
(ii) one representative of each group of two or more Parties (none
of which is otherwise represented) whose Working Interest for
the time being aggregates not less than 2 1/2% and which
elect to appoint a representative to represent them jointly
and vote uniformly on their behalf.
Notwithstanding the foregoing, each of IEDC and Amadeus shall be
entitled to appoint its own representative to the Operating Committee
for so long as its Working Interest is not less than 1.248%.
(c) The representative of the Operator shall, if present, be Chairman of
meetings of the Operating Committee.
8.2 NOTIFICATION OF REPRESENTATIVES Each Party shall notify the others of
the name and address of its representative to the Operating Committee and from
time to time by notice to the others each Party may replace its representative
and/or may designate an alternative representative to act in the absence of its
representative.
<PAGE>
8.3 POWERS OF OPERATING COMMITTEE The function of the Operating Committee
shall be, and it is hereby empowered, to supervise the Operator and to make all
policy decisions binding on all Parties in relation to matters within the scope
of the Joint Venture including without limiting the generality of the foregoing,
the following:-
(a) the Work necessary to satisfy the work and expenditure obligations of
the Concession and any other requirements necessary to maintain the
Concession in good standing and the Joint Facilities in a safe and
operable condition;
(b) the production of Petroleum from the Concession to enable the Parties
to meet their respective obligations for the sale of the respective
shares thereof;
(c) any other Work which is unanimously approved by the Operating
Committee;
(d) the review adoption and revision of detailed programmes and budgets to
give effect to decisions made pursuant to the preceding paragraphs (a)
(b) and (c) of this Clause;
(e) the establishing of policies from time to time governing or relating to
all Work or the conduct thereof.
(f) applications for the renewal of the Concession and for other titles
necessary for the purposes of the Joint Venture.
8.4 ANY PARTY MAY SUBMIT MATTERS Any of the Parties including the Operator
may submit to the Operating Committee for its consideration any matters
pertaining to Work or the Joint Venture.
9. MEETINGS AND VOTING OF OPERATING COMMITTEE
9.1 TIMES AND AGENDA FOR MEETINGS The Operating Committee shall meet
whenever requested by any Non-Operator or the Operator by the giving to all
Parties (whether separately represented on the Operating Committee or not) of at
least fourteen (14) days notice (or such shorter reasonable period of notice as
may be agreed by all Parties entitled to appoint a representative to the
Operating Committee). The said notice shall specify the matter or matters to be
considered at the meeting provided that the agenda may be furnished by telex or
cable up to but not less than five (5) clear working days prior to such meeting.
9.2 WHEN NO NOTICE NECESSARY No notice of meeting shall be necessary when
persons representing all Parties to the Operating Committee are present and
agree upon the meeting being held and the agenda for such meeting. A matter not
included in the agenda for a meeting shall not be voted upon at any such meeting
except by the unanimous agreement of the representatives entitled to vote on
that matter.
<PAGE>
9.3 MINUTES OF MEETING The Operator shall provide such secretarial services
as are required for each meeting of the Operating Committee and shall keep a
record of decisions made at each meeting of the Operating Committee and shall
distribute copies thereof to each Party (whether represented on the Operating
Committee or not) as soon as practicable following each meeting of the Operating
Committee for endorsement by the representative of such Party as a true record
of decisions made at such meeting of the Operating Committee. Each Party shall
be bound by the minutes so received unless such Party makes an objection thereto
within thirty (30) days of the receipt thereof. Any such objection shall be
resolved by the next meeting of the Operating Committee.
9.4 PLACE FOR MEETINGS All meetings of the Operating Committee shall be
held at the principal office of the Operator in Brisbane or at such other place
within Australia as is agreed by the Operating Committee.
9.5 ADVISERS MAY ATTEND Each representative shall be entitled to have
present at any Operating Committee meeting such reasonable number of advisers as
he or they may desire and which are appropriate to the matters under
consideration.
9.6 RULES RELATING TO VOTING
(a) A Party which is in default for a period of fourteen (14) days or more
in the making of a payment due under this Agreement or any of the other
Joint Venture Documents shall not (except as provided in Clause 9.7(3)
hereof) be entitled to attend or vote at a meeting of the Operating
Committee. A decision made by the Operating Committee in the absence of
such a Party shall be binding on that Party.
(b) Upon a vote of the Operating Committee each representative shall have
the number of votes equal to the Working Interest or Working Interests
of the Party or Parties which he represents.
(c) In the event of an equality of votes the decision shall be in the
negative.
9.7 VOTES FOR COMMITTEE DECISIONS
(1) Decisions of the Operating Committee in respect of:-
(a) the Work necessary to satisfy the work and expenditure obligations of
the Concession and any other requirements necessary to maintain the
Concession in good standing and the Joint Facilities in a safe and
operable condition;
(b) the production of Petroleum from the Concession to enable the Parties
to meet their respective obligations for the sale of the respective
shares thereof;
(c) the review adoption and revision of detailed programmes and budgets to
give effect to decisions made pursuant to the preceding paragraphs (a)
and (b) of this Clause;
(d) applications for or for the renewal of the Concession and for any other
title necessary for the purposes of the Joint Venture;
<PAGE>
(e) the supervision of and the giving of instructions to the Operator;
(f) dealings with all Governmental authorities in relation to the Joint
Venture;
(g) dealings with the Central Land Council in relation to the CLC Agreement
or the Joint Venture;
(h) all matters referred to in this Agreement as being the subject of
decision or determination by the Operating Committee other than matters
in respect of which unanimity or a particular majority is specified;
(i) all other matters necessarily incidental to any of the foregoing
matters shall be made by a simple majority vote of the representatives
of the Parties present and voting which majority shall comprise the
representatives of not less than two Parties.
(2) Decisions of the Operating Committee as to the replacement and
appointment of the Operator shall be made by the majorities provided
for in Clause 5 of this Agreement.
(3) All other decisions of the Operating Committee shall be made by a
unanimous vote of all representatives for the time being appointed to
the Operating Committee, including the representatives of a Party which
has failed to make a payment under this Agreement or any of the Joint
Venture Documents.
9.8 OTHER FORMS OF VOTING Decisions as to matters under consideration at
any meeting may as appropriate be made at that meeting or may be made subsequent
to the meeting by each representative entitled to vote submitting his vote in
writing to the other representatives and to the Operator. Decisions requiring a
simple majority vote in accordance with Clause 9.7(1) hereof may in the absence
of a meeting be made by affirmative vote by telex cable or telegram by
representatives of Parties holding an aggregate of at least 90 percent of the
Working Interests. Decisions made pursuant to this Clause shall be minuted
pursuant to Clause 9.3 hereof as if made at a meeting of the Operating
Committee.
9.9 DECISIONS BINDING ON ALL PARTIES Decisions of the Operating Committee
made pursuant to the preceding paragraphs 9.7 and 9.8 shall be binding on all
Parties including the Operator.
9.10 QUORUM FOR MEETINGS A quorum for meetings of the Operating Committee
shall be representatives of Parties entitled to vote with Working Interests
aggregating not less than seventy-five (75) percent of the Working Interests of
all Parties entitled to vote. If such a quorum is not present within two hours
of the time and at the place for which the meeting in question is called such
meeting shall be adjourned for a period of seven (7) days to the same place and
time of day (and notice of such adjourned meeting shall be given to all Parties
by the Operator no later than the day following the day on which such meeting
was adjourned) and at such adjourned meeting the business of the meeting shall
proceed with whatever numbers are present even if they do not constitute a
quorum as required by this Clause.
<PAGE>
9.11 RULES FOR MEETINGS Subject to the provisions of the Agreement the
Operating Committee may make such rules as it thinks fit for the regulation of
its meetings.
10. PROGRAMMES AND BUDGETS
10.1 OPERATOR TO PREPARE PROGRAMMES AND BUDGETS The Operator shall prepare
and submit to the Operating Committee from time to time programmes and budgets:-
(a) necessary to keep the Concession free from any forfeiture or
cancellation under the Petroleum Act and to maintain the Joint
Facilities in a safe and operable condition;
(b) necessary to produce sufficient Petroleum from the Concession
to enable the Parties to meet their respective obligations for
the sale of their respective shares thereof; and
(c) in respect of any other Work approved by the Operating
Committee in accordance with the provisions of this Agreement.
10.2 TIMES FOR SUBMISSION The Operator shall prepare and submit to the
Operating Committee a programme and budget for the Work required pursuant to
Clauses 10.1(a) or (b) hereof at least two (2) calendar months before the
commencement of each Concession Year, and shall when requested by the Operating
Committee prepare and submit programmes and budgets pursuant to Clause 10.1(c)
from time to time. The programme and budget for a Concession Year shall be
divided into four segments each of three calendar months each. Each such segment
is hereinafter referred to as a Quarterly Segment.
10.3 CONTENTS OF PROGRAMMES AND BUDGETS Each programme and the related
budget recommended by the Operator shall contain details and descriptions of
objectives, cost estimates and estimated period of time required to perform each
item of Work, itemised equipment or property to be purchased and the costs
thereof and such other details as the Operating Committee may require. Where a
programme and budget is prepared for a Concession Year, then it shall contain
detailed cost estimates and descriptions of Work to be performed for the first
Quarterly Segment thereof at least, and shall contain at least general estimates
of costs and general descriptions of Work to be performed in following Quarterly
Segments. A programme and budget may include estimates for Quarterly Segments
other than those in the Concession Year to which it is intended to relate.
10.4 APPROVAL OF PROGRAMMES AND BUDGETS
(a) The Parties shall use their best endeavours to ensure that the
Operating Committee adopts a programme and budget for each
Quarterly Segment prior to the commencement of each such
Quarterly Segment.
<PAGE>
(b) The Operating Committee may at any subsequent meeting review
and revise any programme and budget for a Concession Year or
any Quarterly Segment thereof which has previously been
adopted by the Operating Committee, by the same majority which
was required for its adoption.
(c) The Operating Committee may approve any programme and budget
or revised programme and budget (whether for a Concession Year
or Quarterly Segment or Quarterly Segments) subject to the
provision by the Operator to the Non-Operators in respect of
any item (such as the drilling of a well or a geological or
geophysical survey) contained in such programme of a Detailed
Estimate of Expenditure (hereinafter called "Detailed Estimate
of Expenditure") in respect of that item and the satisfaction
of the provisions of this Clause 10.4.
(d) Any Non-Operator ("the Notifying Party") may within fourteen
(14) days of the receipt of such Detailed Estimate of
Expenditure from the Operator give to the Operator a notice
requiring the Operator to call a meeting of the Operating
Committee to consider the variation of the Detailed Estimate
of Expenditure in the respects particularised in such notice.
(e) Upon receipt of such notice the Operator shall forthwith call
a meeting of the Operating Committee and give to all other
Non-Operators a copy of the Notifying Party's notice. At such
meeting of the Operating Committee such Detailed Estimate of
Expenditure shall be approved in such form or amended form as
shall be resolved by the same majority as was necessary for
the approval of the programme in which such item was
contained.
(f) A Detailed Estimate of Expenditure shall become binding on all
Parties required to contribute to the cost thereof in the form
given by the Operator if within fourteen (14) days after
receipt thereof no Non-Operator shall have given the Operator
a notice pursuant to Sub-Clause (d) hereof or in the form or
amended form approved by the Operating Committee upon the
approval made pursuant to Sub-Clause (e) hereof.
(g) The approval of the Operating Committee to a programme and
budget and the satisfaction of the provisions of this Clause
10.4 in respect of such Detailed Estimates of Expenditure as
are required pursuant to Sub-Clause (b) hereof shall
constitute approval for the Operator to carry out that
programme and incur expenditures as approved and the Operator
shall not be required to obtain any other approvals to require
the Parties to reimburse the Operator for their respective
shares of such expenditures pursuant to Clause 12.1 hereof or
to pay a call made by the Operator pursuant to Clause 12.2
hereof.
<PAGE>
10.5 OPERATOR TO ACT IN ABSENCE OF APPROVAL
(a) If the Operating Committee is unable to adopt a programme and budget
for a Concession year by the commencement of that Concession year then
the Operator may for the Joint Account carry out such Work and make
such payments as is necessary to keep the Concession in good standing
and free from forfeiture or cancellation under the Petroleum Act and to
maintain the Joint Facilities in a safe and operable condition and to
produce sufficient Petroleum from the Concession to enable the Parties
to meet the respective obligations for the sale of their respective
shares thereof. The Operator shall carry out such Work and make such
payments if it has pursuant to Clause 12.2 hereof called the costs
thereof and such calls have been paid or satisfied.
(b) The Operator shall not commence such Work any earlier than is
reasonably necessary and in the event that at any time during the
Concession Year the Operating Committee adopts a programme and budget
for the balance of the Concession Year the Operator shall carry out
such programme and budget.
10.6 NOTICE OF EXCESS EXPENDITURES If while carrying out an approved
programme it becomes apparent either that expenditures on such programme will or
are likely to exceed the budget or the Detailed Estimate of Expenditure approved
or deemed approved therefor by more than FIFTEEN PERCENT (15%) of such budget or
that expenditures on any item in such approved programme will or are likely to
exceed the budget or the Detailed Estimate of Expenditure approved or deemed
approved for such item by more than FIFTEEN PERCENT (15%) thereof the Operator
shall forthwith notify all Non-Operators giving as much details as possible of
the Work and activities and the costs thereof which will or are likely to cause
such excess expenditure.
10.7 APPROVED PROGRAMME TO CONTINUE UNLESS MODIFIED Notwithstanding the
giving of a notice by the Operator pursuant to Clause 10.6 hereof the Operator
shall continue with the conduct of the programme approved unless and until the
Operating Committee modifies the approved programme so as to avoid or reduce
such excess expenditure. The Operator shall be entitled to recover any
expenditures duly incurred by it under Clause 10.6 hereof or this Clause 10.7
(including without limiting the generality thereof amounts payable by the
Operator to third Parties as the result of modification or termination of a
previously approved programme under this Clause 10.7 hereof) from the Parties as
though such excess expenditures had been approved by the Operating Committee.
<PAGE>
11. CHARGING OF COSTS
11.1 AUTHORISED COSTS AND EXPENSES Except as specified herein, all costs and
expenses liabilities and charges of the Joint Venture pursuant to this Agreement
including those specified in the Accounting Procedure and whether in contract or
in tort or incurred or to be incurred by the Operator in conducting Work
hereunder in accordance with the terms of this Agreement shall be deemed
"authorised" or "properly authorised" costs expenses and liabilities as those
terms are used herein.
11.2 MAINTENANCE OF JOINT ACCOUNT The Operator shall set up and maintain
adequate accounting records for the Joint Account. All properly authorised costs
and expenses shall be charged to the Joint Account in accordance with the
principles (where applicable) set out in the Accounting Procedure. In the event
of there being any conflict between the provisions of the Accounting Procedure
and this Agreement the provisions of this Agreement shall prevail.
11.3 LIABILITY OF PARTIES All authorised costs expenses and liabilities
which have been charged to the Joint Account shall be borne and paid by the
Parties in proportion to their respective Working Interests at the time at which
the invoice or call was sent by or made by the Operator.
11.4 TREATMENT OF ANY SUBSIDY OR CONTRIBUTION In the event that any subsidy,
rebate or other contribution is paid to the Operator or to any of the other
Parties as a result of Work all such sums shall be credited to the Joint
Account.
12. CONTRIBUTIONS BY THE PARTIES
12.1 PAYMENT BY OPERATOR AND REIMBURSEMENT The Operator shall initially pay
all properly authorised costs expenses and liabilities incurred by it in
connection with Work and shall debit the Parties for their respective shares of
all such authorised costs. Unless the Operator shall have received advances for
such purposes as hereinafter provided each Non-Operator shall forthwith
reimburse the Operator for its share of such costs and expenses in accordance
with the provisions hereof and the Operator shall forthwith contribute its share
of such costs and expenses.
12.2 CALL BY OPERATOR The Operator shall have the option of requiring the
Non-Operators to advance their respective proportions of costs and expenses for
a period of three (3) calendar months consisting of a Quarterly Segment or parts
of two Quarterly Segments but in the case of Operating Costs for the
transportation of Petroleum from the Concession and Operating Costs for Work
carried on outside the Concession for a period of one (I) calendar month instead
of three (3) calendar months (and whether or not a Detailed Estimate of
Expenditure is binding on the Parties with respect thereto) in accordance with
the following: -
<PAGE>
(a) On or before the last day of any calendar month during the
term hereof, the Operator may debit the Parties for their
estimated respective shares of the authorised costs and
expenses anticipated for the ensuing three (3) calendar months
or one (1) calendar month (as the case may be) period and in
making such debit the Operator shall show a credit for any
amounts previously called relating to anticipated costs for
any part of the three (3) calendar months or one (1) calendar
month (as the case may be) period concerned.
(b) Before the Operator shall be obliged to execute any contract
or undertake any commitment for the carrying out of Work or
the acquisition of any property (whether real or personal) for
the Joint Account the Operator may debit the Parties for their
respective shares of the liability estimated to be incurred
pursuant to any such contract or commitment notwithstanding
that the Work or liability concerned may extend beyond the
period of the three (3) calendar months or one (1) calendar
month (as the case may be) referred to in sub-clause (a) of
this Clause 12.2.
(c) Each Non-Operator shall pay to the Operator such estimated
shares of such authorised costs and expenses referred to in
the preceding sub-clauses (a) and (b) within fifteen (15) days
after the receipt of the debit note or invoice, and the
Operator shall contribute its share of such authorised costs
and expenses within the same time.
(d) Notwithstanding any provision in this Agreement to the
contrary the Operator shall not be obliged to execute any
contract or undertake any commitment referred to in the
preceding sub-clause (b) until the Operator has received
payment of all the amounts debited to the Non-Operators
pursuant to such sub-clause.
(e) Notwithstanding that the Parties are obliged to make payment
of a call by the Operator as aforesaid relating to a period
for which a Detailed Cost Estimate is not then binding on the
Parties, the Operator shall not be entitled to expend funds
paid in respect thereof until a Detailed Cost Estimate with
respect thereto is binding on the Parties or the Operator is
otherwise authorised to do so.
12.3 ADJUSTMENT Adjustments between estimated and actual authorised costs
and expenses for any month shall be made by the Operator within forty-five (45)
days of the end of that month and the accounts of the Parties shall be adjusted
accordingly and any excess amount advanced by a Party shall be at the request of
that Party refunded or credited against its future liabilities hereunder.
<PAGE>
12.4 DEFAULTING PARTY LIABLE FOR INTEREST Should any Party fail or refuse to
pay or contribute its said estimated share of such authorised costs and expenses
within the said fifteen (15) day period or fail or refuse to pay or contribute
on its due date any other moneys payable under this Agreement the same shall
bear interest at the Default Interest Rate from the due date of payment until
paid. Such interest shall accrue to the Joint Account.
12.5 (1) BANKING AND INVESTMENT OF FUNDS All funds received by the
Operator under the provisions of this Agreement (other than Clause 12.1 hereof)
shall be lodged by the Operator in a separate bank account in Australia
maintained by the Operator and styled "Palm Valley Trust Account". The Operator
shall deposit to such account its own share of such funds as are due by it
within the same time limits within which the Non-Operators are required to pay
their shares to the Operator. Pending the expenditure thereof the funds advanced
by any Party shall be held by the Operator in trust for that Party, subject to
the terms hereof.
(2) Each Party hereby authorises the Operator to invest its funds
deposited to such account from time to time in interest bearing deposits with
such bank or with the prior unanimous approval of the Operating Committee in
such other forms of investment as are from time to time approved by the
unanimous resolution of the representatives on the Operating Committee. Each
Party shall be entitled to receive or be credited with the interest earned upon
the investment of its funds.
(3) The Operator is hereby authorised to withdraw funds from such
bank account or interest bearing term deposit as they are required by the
Operator to pay authorised costs and expenses hereunder.
13. INSURANCE
13.1 OPERATOR TO MAINTAIN INSURANCE
(a) The Operator shall at all times while conducting Work purchase and
maintain as a cost to the Joint Account for the protection and
indemnification of the Parties:-
(i) All such insurances as are required by terms of the
Concession;
(ii) Workmen's compensation (including unlimited common law risk)
employer's liability and other insurance of a similar or
dissimilar nature as may be required by law;
(iii) Public Liability Insurance for such amount as the Operating
Committee may from time to time determine;
(iv) Industrial Special Risks Insurance in respect of all plant for
such amount as the Operating Committee may from time to time
determine; and
<PAGE>
(v) Such other insurances or indemnities as the Operating
Committee may from time to time determine.
(b) The Operating Committee may from time to time on such conditions, if
any, as the Operating Committee thinks fit excuse any Party from
participation in any such insurance or indemnity for the Joint Account
during such time as such Party provides evidence to the reasonable
satisfaction of the Operating Committee that it maintains for itself
cover in respect of that insurance or indemnity at least equivalent in
all respects to that determined to be maintained by the Operating
Committee on behalf of the other Parties.
13.2 ADVICE TO NON-OPERATORS OF CURRENT INSURANCE The Operator will furnish
the Non-Operators with a list of all current insurances effected by the Operator
pursuant to this Agreement and having relation to operations hereunder or on the
Concession and shall advise the Non-Operators promptly of any additional
insurance effected or of any insurances cancelled or lapsed.
13.3 PARTY'S RIGHT TO INCREASE INSURANCE Any Party ("the requesting Party")
may at any time request the Operating Committee in writing to direct the
Operator to increase the amount of insurance actually carried in respect of any
occurrence or to effect insurance against any occurrence the risk or loss from
which is not covered by any insurance effected by the Operator. If the Operating
Committee resolves not to so direct the Operator the requesting Party shall then
be at liberty at the cost of such Party to effect or increase any such insurance
as the case may require so far as relates to the interest of such Party
hereunder.
13.4 COST OF INSURANCE TO JOINT ACCOUNT Subject to the provisions of Clause
13.3 hereof the actual costs of the insurance effected by the Operator shall be
Charged to the Joint Account and any liability loss damage claim or expense
suffered by or charged to the Joint Account and resulting from occurrences not
covered by or which are in excess of the insurance actually carried shall be
borne by the Parties in proportion to their working Interests at the time of the
loss PROVIDED HOWEVER that if the Operator shall not have exercised the degree
of care provided by Clause 6.6 hereof then the amount of such loss shall be
chargeable to the Operator and no part of it shall be borne by the
Non-Operators.
14. INDEPENDENT OPERATIONS
GEOLOGICAL AND GEOPHYSICAL SURVEYS
14.1 APPLICATION OF PART The provisions of this Part 14 relate to geological
and geophysical exploration operations on the Concession which are not, or which
are in excess of, operations necessary to satisfy the work and expenditure
obligations of the Concession and which are not agreed to by all Parties. Any
Party or Parties may carry out such operations upon complying with the
requirements of this Part.
<PAGE>
14.2 NOTICE OF OPERATIONS A Party proposing to carry out operations pursuant
to this Part ("the Notifying Party") shall give to all other Parties not less
than thirty (30) days notice of such operations ("Notified Operations"). Such
notice shall contain a detailed statement of the Notified Operations including a
description of the area to be surveyed the type of survey to be conducted and
the estimated cost thereof.
14.3 CONSENT BY OTHER PARTIES Any Party ("a Consenting Party") may within
fifteen (15) days of the receipt of a notice pursuant to Clause 14.2 hereof give
notice to the Notifying Party of its consent to the Notified Operations. The
Notifying Party and all Consenting Parties shall be entitled to participate in
the Notified Operations in the proportions that their respective Working
Interests bear to the total of Working Interests of all Parties participating in
Notified Operations.
14.4 OPERATOR FOR INDEPENDENT OPERATIONS In the event that the Notifying
Party and the Consenting Parties do not include the Party who is the Operator
then the Notifying Party and the Consenting Parties voting in proportion to
their respective Working Interests may by majority vote elect a Party to be the
Operator for the purpose of the conduct of the Notified Operations. A Party
acting as Sole Risk Operator in respect of Notified Operations shall be bound by
all the provisions mutatis mutandis of this Agreement applying to the Operator
and shall co-operate with the Operator for the purpose of satisfying all
reporting and other obligations of the Concession in relation to the Notified
Operations.
14.5 NON-CONSENTING PARTY A Party not consenting to such operations (a
"Non-Consenting Party") shall not be entitled to receive any of the information
obtained in conducting operations pursuant to this Part except to the extent and
under the conditions hereinafter specified.
14.6 RIGHT TO INFORMATION ON WELL DRILLING In the event that after the
conduct of operations on the Concession pursuant to this Part the Notifying
Party or a Consenting Party shall bona fide propose the drilling of a well on
the Concession a Non-Consenting Party shall immediately have the right to
inspect and copy information obtained from operations pursuant to this Part
which were conducted in as large a contiguous area around the said proposed well
as a Non-Consenting Party may select provided that such Non-Consenting Party
must select a minimum area of forty (40) square kilometres around the said
proposed well location in the form of a square or rectangular figure whose
length does not exceed twice its width with the well location in the centre
thereof. Before receiving such information the Non-Consenting Party must pay to
the consenting Parties five (5) times what such Non-Consenting Party's share of
the cost of conducting the operations in the said selected area would have been
had such Non-Consenting Party participated therein as a Consenting Party.
<PAGE>
14.7 RIGHT TO INFORMATION IN OTHER CASES Subject to Clause 14.6 hereof a
Non-Consenting Party in respect of geological and/or geophysical exploration
operations hereafter conducted on the Concession may at any time receive
information obtained in conducting all such operations in which it did not
participate by paying to the Party or Parties conducting such operations two
hundred percent (200%) of the proportionate part of the cost of conducting all
such operations in which it did not participate on the Concession (regardless of
whether all or a portion of the lands comprising the Concession have been
surrendered) which would have been charged to such Party had it participated in
all such operations theretofore conducted on the Concession.
15. INDEPENDENT OPERATIONS
DRILLING OF WELLS
15.1 APPLICATION OF PART The provisions of this Part 15 relate to the
drilling or deepening of wells on the Concession which are not, or which are in
excess of, operations necessary to keep the Concession in good standing free
from forfeiture or cancellation under the Petroleum Act and which are not agreed
to by all Parties. Any Party or Parties nay carry out such operations upon
complying with the requirements of this Part.
15.2 DEFINITION OF TERMS In this Part 15 the following words shall have the
meanings hereinafter assigned: -
(i) "PRODUCER OF PETROLEUM IN PAYABLE QUANTITIES" means a well
which would considering the cost of production operations, the
probable life of the well, the available market for production
therefrom and the price, nature and quality of the petroleum
produced, commercially and economically warrants the continued
taking of production from such well.
(ii) "DEVELOPMENT WELL" means a well which at the time of spudding
in is located at a distance of less than eight (8) kilometres
from any well (whether located on the concession or not) being
or capable of being a Producer of Petroleum in Payable
Quantities from the same zone to which it is intended to drill
the proposed well or from any shallower zone whether or not
such other well is completed as a Producer of Petroleum in
Payable Quantities.
(iii) "EXPLORATORY WELL" means either -
(a) a well which at the time of spudding in is located at
a distance of eight (8) kilometres or more from any
other well (whether located on the Concession or not)
being or capable of being a Producer of Petroleum in
Payable Quantities from the same zone or from any
shallower zone than the zone to which it is intended
to drill the proposed well whether such other well is
a Producer of Petroleum in Payable Quantities or not;
or
<PAGE>
(b) a well which at the time of spudding in is located at
a distance of less than eight (8) kilometres from
such other well but which it is proposed to drill to
a deeper formation than that from which the said
other well is Producing or is capable of Producing
Petroleum in payable quantities.
15.3 NOTICE OF DRILLING If any Party or Parties desire that a well be
drilled at any particular location on the Concession then such Party or Parties
(in this Part 15 together with any Party or Parties electing to participate
pursuant to Part 15 hereof referred to as "the Desiring Party or Parties") may
give to the other Parties written notice of the desire to drill such well
specifying the location the proposed depth or geological target and the
estimated cost thereof and whether the proposed well is an Exploratory Well or a
Development Well.
15.4 NOTICE OF PARTICIPATION The Parties receiving such notice shall have
thirty (30) clear days after the receipt of such notice within which to notify
the Desiring Party or Parties whether they elect to participate in the drilling
of the said well at the said location. Failure of any Party receiving such
notice to notify whether or not it elects to participate within the said period
of thirty (30) clear days shall be deemed a refusal on its part of its right to
participate in the drilling of the proposed well.
15.5 UNANIMOUS PARTICIPATION If all Parties receiving such notice elect to
participate in the said well and so advise the Desiring Party of such election
then the said well shall be drilled by the Operator under the terms of this
Agreement for the Joint Account.
15.6 NON-DESIRING PARTY If any Party receiving the aforesaid notice shall
refuse or shall be deemed to have refused to participate in the drilling of the
proposed well (any such Party being hereinafter referred to as a "Non-Desiring
Party") the provisions hereinafter provided shall apply.
15.7 OPERATOR FOR INDEPENDENT DRILLING In the event that the Desiring
Parties do not include the Party who is the Operator then the Desiring Parties
by simple majority voting in proportion to their respective Working Interests
may elect a Party to be the Sole Risk Operator for the purpose of the drilling
of the proposed well. A Party acting as the Sole Risk Operator in respect of the
drilling of the proposed well shall be bound by all the provisions mutatis
mutandis of this Agreement applying to an Operator and shall co-operate with the
Operator for the purpose of satisfying all reporting and other obligations of
the Concession in relation to such drilling.
<PAGE>
15.8 TIME FOR COMMENCEMENT The Desiring Party or Parties shall have one
hundred and twenty (120) clear days after the end of the thirty (30) days period
referred to in Clause 15.4 in which to commence the drilling of the proposed
well at the location specified in the said notice and unless an extension of
this period is agreed to by the Non-Desiring Party or Parties if the actual
drilling of the well is not commenced within the said period or within any
extension thereof so agreed to, the right of the Desiring Party or Parties to
commence drilling will be lost and all rights flowing from the giving of the
notice and the election to participate in the drilling of the well shall be
terminated.
15.9 OBLIGATION OF DESIRING PARTIES If the Sole Risk Operator shall commence
the actual drilling of the proposed well at the location set out in the said
notice within the said period referred to in Clause 15.8 then:-
(i) it shall proceed with diligence to drill such well to the
depth or geological target specified in the notice (or such
lesser depth as may be dictated by operational hazard) in a
bona fide attempt to find and produce petroleum;
(ii) the entire cost and risk of the operations connected with the
drilling of the well shall be borne by the Desiring Party or
Parties (and if more than one then pro rata in the proportion
that their respective Working Interests bears to the aggregate
of their Working Interests) and the Desiring Party or Parties
shall keep the Concession free and clear of all liens and
encumbrances of every kind and character created by or
arising from the operations thereon of the Desiring Party or
Parties and the Desiring Party or Parties shall indemnify and
keep indemnified the Non-Desiring Party or Parties against
each and every liability arising from such operations;
(iii) in the event that such well is not completed as a Producer of
Petroleum in Payable Quantities after the Desiring Party or
Parties shall have terminated the well then the Desiring Party
or Parties shall plug and abandon the well pursuant to the
terms and provisions of all the applicable laws rules and
regulations and the environmental standards currently
prevailing in the region and shall restore the premises by
filling and levelling the rig cellar and all slush pits and by
removing all equipment material and debris placed thereon by
the Desiring Party or Parties; all being at the sole cost risk
and expense of the Desiring Party or Parties.
15.10 CONFORMITY TO SPACING PATTERNS Without the mutual consent of all
Parties no well shall be produced from a source of supply from which a well
located elsewhere on the Concession is producing or scheduled to produce unless
such well conforms to the then existing well spacing pattern laid down by a
governmental authority or by the Operating Committee for such source of supply.
<PAGE>
15.11 PENALTIES PAYABLE BY NON-DESIRING PARTIES If pursuant to Clause 15.9
hereof any well is drilled and completed (whether or not as a Producer of
Petroleum in Payable Quantities) by the Desiring Party or Parties or if the said
well is plugged and abandoned then the following provisions shall apply:-
(i) The Desiring Party or Parties shall be entitled in proportion
to their Working Interests to receive as their own property
and to sell all of the Non-Desiring Party's or Parties' share
of production of such well and to retain the net proceeds of
sale thereof for the use of the Desiring Party or Parties pro
rata as hereinabove provided until such proceeds (after
deducting all royalties payable thereon all taxes on
production thereof (except income taxes) and all operating
expenses applicable to the Non-Desiring Party's or Parties'
interest in production) (all hereinafter called "deductible
expenses") shall equal:-
(a) 200% in the case of a Development Well; or
(b) 1000% in the case of an Exploratory Well;
of the amount which would have been the Non-Desiring Party's
or Parties' share of the cost of drilling testing completing
and equipping such well if such well had been carried out by
the Desiring Party or Parties for the Joint Account (which
share of costs is hereinafter in the whole of this clause
called "the Non-Desiring share of cost").
(ii) When the Desiring Party or Parties shall have received the
payments provided for in sub-paragraph (i) hereof all of the
production from such well shall thereafter be owned as other
jointly owned wells drilled pursuant to this Agreement and
shall thereafter be operated by the Operator constituted under
Clause 5 hereof in like manner as other jointly owned wells
under this Agreement.
(iii) In determining the costs and expenses incurred by the Desiring
Party or Parties in the drilling testing completing and
equipping of the said well the said Annexure "A" shall be
followed.
(iv) Within one hundred and twenty (120) clear days after the said
well is completed as a producer of petroleum the Desiring
Party or Parties shall furnish to the Non-Desiring Party or
Parties complete and detailed statements setting out the cost
of drilling testing completing and equipping the said well
together with an inventory of the material and equipment in
and on the said well for use in connection therewith.
<PAGE>
(v) During the time the Desiring Party or Parties are being
reimbursed as above provided the Desiring Party or Parties
shall render monthly statements to the Non-Desiring Party or
Parties reflecting for each calendar month the costs and
expenses incurred in operating the well the petroleum produced
and saved the proceeds derived from the sale thereof and the
quantity of petroleum in storage at the end of the said month.
Such statement covering the previous month's operating shall
be rendered within thirty (30) clear days following the close
of such calendar month.
(vi) The Non-Desiring Party or Parties shall have the right at all
reasonable times to inspect and audit the Desiring Party's or
Parties' books and records including run tickets meter charts
and invoices pertaining to any matter of account hereunder.
(vii) In the event that the Desiring Party or Parties are unable to
recover from the Non-Desiring Party or Parties its or their
share of cost the Desiring Party or Parties shall own pro rata
as hereinabove provided all the material equipment and
supplies placed or installed by the Desiring Party or Parties
on the said well or on the Concession in connection therewith
PROVIDED HOWEVER that if such material equipment and supplies
have a salvage value in excess of the unrecovered amounts to
which the Desiring Party and any such other participating
Party are entitled as hereinbefore provided such excess shall
be owned by the Parties hereto in proportion to their interest
in the wells drilled by mutual agreement on the Concession.
15.12 FURTHER WORK ON WELLS The prior provisions of this Clause 15 having
regard to a proposal to drill a well shall apply mutatis mutandis to a proposal
to deepen stimulate test or further test a well which has been drilled on the
Concession (as a dry hole or without encountering petroleum or which has failed
or ceased to produce Petroleum in Payable Quantities) except that:-
(a) (i) If the rig with which the well was drilled or any
other rig capable of carrying out the deepening
stimulation testing or further testing is on location
at the time a notice is given the time within which
the Party to which the notice is given by the
Desiring Party or Parties must agree to participate
in such further Work without being deemed a
Non-Desiring Party shall be reduced to forty-eight
(48) hours;
(ii) If the Desiring Party or Parties shall not commence
the actual deepening stimulation testing or further
testing of the said well within thirty (30) days of
the election of the Non-Desiring Party not to
participate in such further Work then the
consequences provided by Clause 15.8 shall follow as
if such further Work was a drilling operation dealt
with by that Clause;
<PAGE>
(b) In the event that as a result of the further Work the
well is drilled and completed by the Desiring Party
or Parties as a Producer of Petroleum in Payable
Quantities then the provisions of Clause 15.11 are
subject to the modification that the Non-Desiring
share of cost defined in Clause 15.11(i) shall be
calculated with regard to the cost of the further
Work in respect of the said well and any testing
completing and equipping thereof.
16. DISPOSITION OF PRODUCTION
16.1 SEPARATE OWNERSHIP OF PETROLEUM Each Party shall have the right and
obligation to receive and take in kind as its own property at the Delivery Point
and separately dispose of its share of all Petroleum produced from the
Concession except such Petroleum as may be used in drilling, development,
testing, producing, processing, compression and other operations on the
Concession and in preparing, treating and transporting Petroleum for marketing
and except such Petroleum as may be unavoidable lost. A Non-Operator may confer
upon the Operator authority to deliver to the buyer thereof all or part of that
Non-Operator's share of Petroleum produced from the Concession.
16.2 RIGHT TO SEPARATE FACILITIES A Party shall have the right to construct,
maintain and operate within the Concession all necessary facilities for the
purpose of taking in kind and separately disposing of its share of Petroleum
produced from the Concession provided they are so constructed, maintained and
operated as not to interfere with other operations able to be carried out under
this Agreement. Any extra expenditure or costs incurred by the Operator by
reason of the delivery in kind of any portion of such Petroleum to such
facilities shall be borne by the owner of such portion.
16.3 UNDERLIFTING PROCEDURE If any Party fails to take in kind or separately
dispose of any and all of such Party's share of Petroleum produced from the
Concession, the Operator, subject to any restrictions imposed by law, may: -
(a) dispose of the quantity of Petroleum concerned by sale to the
purchasers of the share of the Petroleum produced from the
Concession of the other Parties and pro rata to such
purchasers in proportion to the quantity of such Petroleum
being purchased by them. Any such quantity of Petroleum
involved shall be so sold at the same point or points and at
the same arms length price or prices at which such other
Petroleum is being sold. Any such purchase or sale shall be
subject to revocation at will by the Party owning the share
involved (without however affecting any contract of sale
already entered into with respect to such Petroleum). Any
contract of sale relating to such share and entered into with
a third party or third Parties shall be for a term not
exceeding such reasonable period of time as is consistent with
the minimum needs of the industry under the circumstances but
in no event shall any such contract be for a term in excess of
one (1) year. The price or proceeds of sale of the Petroleum
concerned (less all costs and expenses of and incidental to
such sale not incurred for the Joint Account) shall promptly
be paid over to the owner of such Petroleum; or
<PAGE>
(b) store such Petroleum on the Concession in existing storage
facilities or in storage facilities established for such
purpose and the cost of such storage and of establishing any
such storage facilities shall be borne by the Party owning the
Petroleum so stored;
or
(c) otherwise deal with such Petroleum as the Operating Committee
may determine.
16.4 PAYMENTS DIRECT TO EACH PARTY Subject to Clause 17 hereof, where a
Party enters into a contract of sale for all or part of its share of Petroleum
produced from the Concession, that Party shall be entitled to receive direct
from the purchaser thereof all sale proceeds due under such contract of sale.
Each Party shall pay or cause to be paid all royalties and other like payments
attributable to its interest or share of Petroleum produced.
16.5 EXTRA EXPENDITURE Any extra expenditure incurred by a Party in
receiving or separately disposing of its share of the Petroleum from the
Concession shall be borne by such Party.
17. DEFAULTS IN PAYMENT
17.lA NOTICE OF DEFAULT If any Party including the Operator (herein called
the "Defaulting Party") fails to make any payment as required by this Agreement
or by any of the other Joint Venture Documents on or before the due date
thereof, the Operator shall upon becoming aware of such failure give notice by
telex cable or telegram of such failure to the Defaulting Party. If at the
expiration of two (2) days after the receipt or deemed receipt of such notice by
the Defaulting Party payment of the amount due by the Defaulting Party remains
unpaid the Operator shall thereupon give a notice of the default to all Parties.
Such notice ("the Default Notice") shall contain a statement of the amount owing
by the Defaulting Party and for the purpose of this Clause 17 all Parties other
than the Defaulting Party are herein referred to as "the Non-Defaulting
Parties".
17.1B PAYMENT BY OPERATOR In the event that the payment which the Defaulting
Party has failed to make is a payment due under any of the Joint Venture
Documents to a person who is not a Party, the Operator shall if so directed by
the Operating Committee pay the same to such person. Any amount so paid shall
constitute a debt immediately due and payable by the Defaulting Party to the
Operator. Notwithstanding the foregoing, the Operator may make any such payment
without the prior approval of the Operating Committee where such action is
necessary to preserve the Concession or to save it from forfeiture.
<PAGE>
17.2 DEFAULTING PARTY MAY BE SUED Without prejudice to any other remedy for
or consequence of default provided for in this Agreement, the Operator shall if
so directed by the Operating Committee in any Court of competent jurisdiction
sue a Defaulting Party (including without limiting the generality of the
foregoing, any Party removed from the position of Operator for failing to pay or
contribute, its proportionate share of the costs and expenses herein mentioned)
for the recovery of any moneys payable to the Operator by that Defaulting Party
under any of the Joint Venture Documents remaining unpaid by the Defaulting
Party at the expiration of fourteen (14) days after the delivery of the Default
Notice to the Defaulting Party.
17.3 NON-DEFAULTING PARTIES TO CONTRIBUTE If at the end of the fourteen (14)
day period referred to in Clause 17.2 hereof the Operator shall not have
received from the Defaulting Party the amount due ("the Unpaid Amount") plus
interest at the Default Interest Rate the Operator may and shall if so directed
by the Operating Committee require the Non-Defaulting Parties to pay the
Operator the Unpaid Amount. The amount to be reimbursed by each Non-Defaulting
Party shall bear the same ratio to the Unpaid Amount as does such Non-Defaulting
Party's Working Interest bear to the aggregate of the Working Interests of all
the Non-Defaulting Parties. A Party which does not pay all amounts due by it
under Clause 17.3 hereof shall be regarded as a Defaulting Party and all the
provisions of this Clause 17 shall apply to such Party in respect of any amount
not so paid.
17.4 RIGHTS OF CONTRIBUTING PARTIES A Non-Defaulting Party (including the
Operator in its capacity as a Party) which pays to the Operator or bears any
amount payable by it under Clause 17.3 hereof is hereinafter called "a Paying
Party" and shall be deemed to have advanced such amount to the Defaulting Party
on the terms that it is immediately repayable and may sue the Defaulting Party
to recover the same but without prejudice to any other rights and remedies. The
amount owing by a Defaulting Party to a Paying Party shall bear interest at the
Default Interest Rate from the date the Paying Party made the payment under
Clause 17.3 to the date it has recovered the same in full.
17.5 CROSS CHARGE For the purposes of better securing the payment:-
(a) to the Operator of any amount due and payable to it pursuant
to any of the Joint Venture Documents;
(b) to each of the Paying Parties of any amount due and payable to
it pursuant to Clause 17.4 hereof;
each of the Parties shall forthwith execute and deliver a Deed in substantially
the form and to the effect of the form of Deed set out in Annexure "B" hereto
("Clause 17 Cross Charge") and shall obtain all necessary consents and approvals
in relation thereto and shall duly register the same and shall file or record
such other documents or notices relating thereto, in such jurisdictions as may
be required by law to perfect the security given thereby.
<PAGE>
17.6 SUSPENSION OF RIGHTS OF DEFAULTING PARTY Subject to the provisions of
Clause 9.7(3) hereof a Defaulting Party shall not be entitled either to attend
or vote through its representative at any meeting of the Operating Committee or
the Parties or otherwise be consulted with respect to Work unless and until any
amount payable by that Defaulting Party in accordance with the terms of any of
the Joint Venture Documents shall have been received in full or the default is
otherwise rectified or waived.
17.7 DEFAULT OF OPERATOR IN PAYMENT In the event that the Operator is in
default in payment of any amount payable by it under any of the Joint Venture
Documents in its capacity as a Non-Operator and for any reason the Operator is
not removed from that position, then the rights prescribed for the Operator
under this Clause 17 and elsewhere herein shall be exercised for and on behalf
of the Non-Defaulting Parties by such person as the Operating Committee shall
determine and such person shall be deemed to be the Operator for such purpose.
17.8 APPLICATION OF DEFAULTING PARTY'S FUNDS Upon default by any Party in
the payment of any moneys payable under any of the Joint Venture Documents, the
Operator shall (notwithstanding anything contained herein or in any Clause 17
Cross Charge to the contrary, and without prejudice to other rights and
remedies), retain any moneys which may be held for such Defaulting Party or
which come to the hands of the Operator on behalf of such Defaulting Party, and
apply such moneys until the amount owed by such Defaulting Party as aforesaid
has been paid in full.
17.9 OPTION TO PURCHASE DEFAULTING PARTY'S INTEREST If at the end of sixty
(60) days from the due date on which moneys were to have been paid by a
Defaulting Party to the Operator or any Non-Defaulting Party such moneys and
interest thereon remain unpaid by such Defaulting Party, then each of the
Non-Defaulting Parties shall have the option and each Party which may become a
Defaulting Party hereby grants to each of the Non-Defaulting Parties the option
to purchase the Working Interest of the Defaulting Party at the date of the
exercise of the option (and if more than one Non-Defaulting Party exercise such
option) in the proportions which the respective Working Interests of the
Non-Defaulting Parties exercising the option bear to the total of their Working
Interests (or in such other proportions as such Non-Defaulting Parties shall
agree) upon and upon the following terms and conditions:-
(a) The option shall be exercisable for so long as a default
giving rise to the option has not been cured and may be
exercised by notice in writing to the Defaulting Party signed
by those Non-Defaulting Parties which wish to exercise the
option.
<PAGE>
(b) The purchase price shall be a sum equal to eighty percent
(80%) of the value of the Working Interest of the Defaulting
Party at the date of the exercise of the option. Each Party
hereby agrees that the difference between the full value of
the Working Interest of the Defaulting Party and the selling
price under this Clause constitutes a pre-estimate of the
liquidated damages which will be sustained by the
Non-Defaulting Parties by reason of breach of this Agreement
by the Defaulting Party.
(c) If within thirty (30) days of the exercise of the option the
Defaulting Party and the purchasers have not agreed upon the
purchase price for the Working Interest of the Defaulting
Party, the value of the Working Interest of the Defaulting
Party at the date of the exercise of option shall be
determined by the nominee of the Chairman for the time being
of the Australian Petroleum Exploration Association Limited on
the application of either the Defaulting Party or the Non-
Defaulting Parties exercising the option. In making such
determination the said nominee shall be acting as an expert
and not an arbitrator and his decision shall be final and
binding upon all Parties. For the purposes hereof, the value
of the Defaulting Party's Working Interest shall be determined
on the basis that the Joint Venture is a going concern and the
price payable is that which would be paid by a willing but not
anxious buyer to a willing but not anxious seller dealing at
arm's length.
(d) The completion of the purchase shall be effected as soon as
reasonably practicable after the determination of the purchase
price pursuant to paragraphs (b) and (c) hereof. Upon such
completion the purchasers shall be at liberty to deduct from
the purchase price the amount required to discharge or satisfy
liabilities secured by any charge or encumbrance over the
Working Interest of the Defaulting Party and the several
liabilities at the date of completion of the Defaulting Party
under this Agreement or other Joint Venture Documents. Any of
the purchasers shall also be entitled to deduct from the
purchase price the amount of any stamp duty payable on any
transfer or other instrument arising from the exercise of
option.
(e) Upon and in exchange for the payment to it of the balance (if
any) of the purchase price pursuant to the preceding paragraph
(d) hereof, the Defaulting Party shall forthwith do all such
acts and things and execute and deliver to the purchasers all
such transfers deeds and other documents as are necessary to
give effect to and complete the sale pursuant to this Clause
17.9.
(f) If the Defaulting Party fails to act in the manner provided
for in the preceding paragraph (e), then a person nominated
for the purpose by the Non-Defaulting Parties exercising the
option shall be and be deemed to be the agent and attorney of
the Defaulting Party for all purposes necessary to give effect
to the sale pursuant to this Clause 17.9.
<PAGE>
(g) In the event that a Court of competent jurisdiction shall
determine that the method of determination of the purchase
price pursuant to paragraph (b) of this Clause 17.9 would
constitute a penalty or for any other reason would have the
consequence of rendering void or voidable the option in this
Clause 17.9 contained then the purchase price, pursuant to
this Clause 17.9, shall be and be deemed to be the value of
the Working Interest of the Defaulting Party at the date of
the exercise of the option less the damages sustained by the
Non-Defaulting Parties by reason of the breach of contract by
the Defaulting Party such damages being such amount as shall
be agreed between the Defaulting Party and the Non-Defaulting
Parties or in the absence of agreement, as shall be determined
by a Court of competent jurisdiction.
(h) If the purchase price is determined pursuant to the preceding
paragraph (g) hereof and differs from the purchase price
determined pursuant to paragraphs (b) and (c) hereof and if
completion has already taken place, then the balance (if any)
of the purchase price payable to the Purchaser pursuant to
paragraphs (d) and (e) hereof shall be re-calculated and
appropriate adjustments (if any) of the amount payable
pursuant to paragraph (e) hereof as between the Defaulting
Party and the Purchasers shall be forthwith paid and received.
(i) Any sale pursuant to this Clause shall be subject to all
Governmental consents and approvals required by law. If any
such consent or approval is refused any contract constituted
by an exercise of option hereunder shall cease to have further
force or effect.
(j) For the purpose of this Clause 17.9 a Non-Defaulting Party
which has not notified the other Non-Defaulting Parties within
thirty (30) days after the option becoming exercisable that it
wishes to exercise the option shall not thereafter be entitled
to join in the exercise of the option without the consent of
the Non-Defaulting Party or Parties which have as aforesaid
indicated their wish to exercise the option.
18. WITHDRAWAL
18.1 ANY PARTY MAY WITHDRAW Any of the Parties hereto may withdraw from
the Joint Venture constituted hereby in accordance with the provisions of this
Part 18.
<PAGE>
18.2 NOTICE OF WITHDRAWAL The Party desiring to withdraw (herein called "the
Withdrawing Party") shall give to the other Parties not less than one hundred
and eighty (180) days and not more than five hundred and fifty (550) days' prior
notice of its intention to withdraw. Such notice shall designate the effective
date of withdrawal which date shall be the last day of a Concession Year and
shall offer assignment for a consideration of ONE DOLLAR ($1.00) to the other
parties of the whole of the Withdrawing Party's Working Interest. Such
assignment shall be conditional on the other Parties' assumption subject to this
Part of the whole of the Withdrawing Party's Working Interest. The Notice of
Withdrawal shall not be revocable except with the unanimous consent of all other
Parties.
18.3 OTHER PARTIES MAY ACCEPT ASSIGNMENT The other Parties shall have sixty
(60) days from the date of receipt of such notice to notify the Withdrawing
Party whether they accept the offer and elect to receive the assignment provided
for in Clause 18.2 hereof in the proportion that their respective Working
Interests bear to the aggregate of their Working Interests. If some only of such
Parties accept such offer or if the acceptance of any accepting Party is limited
in percentage, then the interest of the Withdrawing Party or the portion of such
interest remaining after the allocation of any limited percentages accepted
shall be distributed amongst the other accepting Parties in the proportion that
their respective Working Interests bear to the aggregate of their Working
Interests of such Parties or in such other proportions as such Parties agree
between themselves.
18.4 PROMPT EXECUTION OF DOCUMENTS If some or all of the other Parties give
notice pursuant to Clause 18.3 hereof of acceptance and election to receive such
assignment all Parties concerned shall promptly execute and deliver all
documents and do and perform all acts and things necessary and appropriate to
validly effect such assignment.
18.5 WITHDRAWING PARTY'S OBLIGATIONS In the event of an assignment under
this Part the Withdrawing Party shall remain liable to meet its proportionate
share of:-
(i) all authorised costs, expenses and liabilities incurred or accrued by
the Operator on or before the effective date of the withdrawal;
(ii) all other liabilities of the Parties for anything done or omitted to be
done in the course of Work on or before the effective date of its
withdrawal; and
(iii) the royalties mentioned in Clause 3.3 hereof.
The Withdrawing Party shall remain responsible for such obligations
(including payments of amounts to the Operator) although the extent of such
obligations may not be ascertainable until after the date of withdrawal PROVIDED
THAT the Withdrawing Party shall not be liable for any obligation accruing after
the date of Notice given pursuant to Clause 18.2 in consequence of a decision by
the Operating Committee after such date to renew the Concession or any other
title of the Joint Venture.
<PAGE>
18.6 COSTS OF ASSIGNMENT All costs incurred by a Party in connection with
any assignment under this Clause including stamp duty, registration fees and
legal fees shall be paid by the Withdrawing Party.
18.7 ASSIGNMENT TO ALL PARTIES In the event that by the expiration of sixty
(60) days after the notice from the Withdrawing Party pursuant to Clause 18.2
hereof the interest of the Withdrawing Party or any portion of such interest
remains unallocated or undistributed to other Parties pursuant to Clause 18.3
hereof then the Withdrawing Party shall assign its interest or the portion
thereof remaining unallocated or undistributed to all of the other Parties in
the proportions that their respective Working Interests bear to the total of
such Working Interests or to such of the other Parties and/or to such one or
more outside Parties and in such proportions as all of the other Parties shall
so direct.
19. ASSIGNMENT - MORTGAGES
19.1 RIGHT TO ASSIGN Subject to the provisions of this part any Party which
is not in default under any of the Joint Venture Documents may at any time sell
transfer or assign to any other Party or to an Affiliate or to any person or
entity not a party to this Agreement, its Working Interest in the whole or in
part PROVIDED HOWEVER THAT: -
(a) No assignment of a part of a Party's Working Interest shall be made
unless it is a uniform assignment of the whole of that part of the
Working Interest which is being assigned and unless it is also
effective to assign the equivalent part of the rights and obligations
of the assignor under the Joint Venture Documents.
(b) No assignment shall be made which would result in the Joint Venture
having more than twenty (20) members.
(c) No assignment shall be made if the effect thereof would be to increase
the level of foreign or non-Australian equity participation in the
Joint Venture beyond that permitted by any law or policy of the
Commonwealth or Northern Territory Governments unless such increase
shall have been approved in writing by the relevant authority of the
Government concerned; and
(d) No assignment of a Working Interest or part thereof shall be made to
any person or corporation which is bankrupt, insolvent or liable to be
wound up.
19.2 ASSUMPTION BY ASSIGNEE
(a) An assignment by a Party of the whole or any part of its Working
Interest or by any person exercising power of sale pursuant to any
mortgage or charge, shall be made expressly subject to the terms and
provisions of this Agreement and shall not be effective until the
happening of the last of the following events:
(i) the obtaining of all necessary consents and approvals to the
assignment;
<PAGE>
(ii) the execution and delivery by the assignee to the Operator as
agent for the Parties of Deeds of Assumption or Covenant in
such form or forms as the Operating Committee shall approve
(which approval shall not be unreasonably withheld) whereby
the assignee assumes the obligations and is conferred with
the rights of a Party under the Joint Venture Documents to the
extent of the Working Interest assigned; and
(iii) subject to Clause 19.3 hereof, the execution and delivery by
the assignee to the Operator as agent for the Parties of a
Clause 17 Cross Charge (modified to constitute a charge from
the assignee only) and an undertaking in writing to comply
forthwith with Clause 17.3 hereof regarding the registration
or filing of such charge;
(b) The Deeds of Assumption or Covenant provided for in the preceding
paragraph (a)(ii) of this clause shall upon their delivery to the
Operator after execution by the assignee be promptly executed by the
Parties and an executed counterpart shall be delivered to the assignee
promptly thereafter.
19.3 ASSIGNMENT TO A CROWN CORPORATION Notwithstanding the provisions of
Clause 19.2 hereof an assignee being a subsidiary of Australian Industry
Development Corporation shall not be required to execute a Clause 17 Cross
Charge PROVIDED THAT in lieu of the Clause 17 Cross Charge Australian Industry
Development Corporation shall execute and deliver to the Operator as agent for
the Parties a guarantee in such form as the Operating Committee shall approve
(such approval not to be unreasonably withheld).
19.3A CONSEQUENCES OF ASSIGNMENT
(a) Upon an assignment of a Working Interest or part thereof becoming
effective as provided in Clause 19.2 hereof, without any further
agreement or act on the part of any Party, the assignee shall, to the
extent of the sale or assignment, become a Party in the place of the
Party whose Working Interest or part thereof has been sold or assigned
and such Party shall to such extent be relieved and discharged from all
further performance of its obligations and duties under any and all of
the Joint Venture Documents.
(b) Each Party shall, if requested by any such assignee, perform, execute,
acknowledge and deliver all such further acts, deeds and assurances in
relation to any and all of the Joint Venture Documents as may be
reasonably required to perfect the sale or assignment of a Working
Interest or part thereof to, or the assumption of rights or obligations
thereunder by, such assignee.
19.4 CHARGE OF WORKING INTEREST Without prejudice to its right to charge any
of its property or assets other than its Working Interest any Party (hereinafter
called the "Chargor") may, without the consent of the other Parties (but subject
to all other necessary consents and approvals), charge in favour of any
recognised financial institution or Affiliate thereof (hereinafter called "the
Chargee") the whole of its Working Interest PROVIDED THAT:
<PAGE>
19.4.1 (a) any such charge made by the Chargor shall expressly be made
subject to the provisions of the Joint Venture Documents and
all of the rights and remedies of the other Parties under the
Joint Venture Documents; and
(b) contemporaneously with the execution of any such charge the
Chargee shall execute and deliver to each of the Parties
holding a Working Interest a Deed in substantially the form
and to the effect of the Deed set out in Annexure "C" hereto
and upon such execution and delivery each of such Parties
shall execute and deliver to the Chargee and each of the other
Parties the said Deed;
19.4.2 it shall be a term of any such charge:-
(a) that the person exercising or enforcing any power of sale
thereunder or conferred by law shall ensure that as a
condition of such sale the purchaser of the whole or part of
the Working Interest the subject of the charge: -
(i) shall execute and deliver the Deeds of Assumption or
Covenant and a Clause 17 Cross Charge required under
Clause 19.2 hereof; and
(ii) shall forthwith after the completion of such
assignment duly register or record the Clause 17
Cross Charge in those jurisdictions as may be
required by law to perfect the security thereby
given;
(b) that neither the Chargee nor any person claiming through or
under such Chargee shall seek to partition whether by order of
court or otherwise of either or both the Concession or the
Joint Facilities.
(c) that neither the Chargee nor any person claiming through or
under such Chargee shall without the prior consent of all
Parties (other than the Chargor) waive, release, surrender or
forfeit the whole or any fractional or constituent part of the
Working Interest so charged; and
(d) that such charge shall be and shall be expressed to be subject
to and shall rank for all purposes after any Clause 17 Cross
Charge given by the Chargor.
19.4.3 such charge shall be limited to a floating charge except that, as
regards the present and future interest of the Chargor in:-
(i) the Concession;
<PAGE>
and
(ii) any single item of plant or equipment being Joint Facilities
the current replacement price thereof exceeds $50,000
such charge may be fixed.
19.4.4 references in this Clause 19.4 to "charge" shall include a reference to
mortgage, encumber or assign by way of charge and any such assignment
shall not be subject to the provisions of Clauses 19.1, 19.2 and 19.3
hereof and references in this Clause 19.4 to "charging" or "charged"
shall be read accordingly.
20. AUSTRALIANISATION
20.1 AUSTRALIANISATION In the event that the Australian or Northern
Territory Government requires an increase in the Australian equity participation
in the Joint Venture before any proposed activity of the Joint Venture is
permitted to proceed then it shall be the responsibility of those Parties who
are regarded by such Governments as having less than 100% Australian ownership
or equity to determine and carry out on an equitable basis such steps as may be
necessary to achieve the level of Australian ownership or equity required by
such Governments.
21. RELEASE OF INFORMATION
21.1 INFORMATION CONFIDENTIAL SUBJECT TO EXCEPTIONS Except with the prior
consent of all Parties each Party shall keep confidential any reports records
and data studies made opinions furnished and other information obtained in the
course of operations on the Concession (other than information already within
the public domain) and shall not disclose the same except:-
(i) To its respective employees and consultants for the purposes
of the operations on the Concession subject to each such Party
taking reasonable precautions to ensure that they keep such
records data studies opinions and other information
confidential.
(ii) As may be reasonably necessary for it to comply with any
statutory or regulatory obligation including but not limited
to disclosure obligations under the Companies Code or Stock
Exchange Listing Requirements.
(iii) As may in the opinion of any Solicitor or Counsel acting for
it or for any Affiliate be required by law or for the
reasonable protection of it or such Affiliate.
<PAGE>
(iv) As may be necessary in connection with any bona fide proposal
to assign a Party's Working Interest or part thereof or to
raise funds.
21.2 DISCLOSURE TO LISTED COMPANIES To ensure compliance by any Party or
Affiliate of a Party which is a listed public company in Australia with the
listing regulations of the Australian Associated Stock Exchanges the Operator
shall disclose immediately to all Parties any significant discovery of
hydrocarbons or mineralisation within the Concession and if so required shall
give to those Parties a full report on that discovery and information necessary
to avoid establishment of a false market in the securities of such listed
companies. Any of such listed public companies shall have the right to make all
or part of that report available to the Home Exchange on which it is listed.
21.3 COPY NOTICE TO OTHER PARTIES Any Party required or wishing to make such
material public in accordance with Clauses 21.1 and 21.2 shall notify the other
Parties of the proposed announcement as far in advance as reasonably possible.
21.4 JOINT ANNOUNCEMENTS Notwithstanding the provisions of Clause 21.1 it is
the intent of the Parties hereto that public announcements of information
concerning operations on the Concession shall be made by the Operator on behalf
of the Parties.
22. RELATIONSHIP OF THE PARTIES
22.1 RIGHTS AND OBLIGATIONS SEVERAL The rights duties obligations and
liabilities of the Parties shall be several and not joint or joint and several.
It is the express purpose and intention of the Parties that their ownership of
the Concession and the Joint Facilities shall be as tenants-in-common. Nothing
contained in this Agreement or any of the Joint Venture Documents shall be
construed as creating a partnership between the Parties or any of them.
22.2 NO JOINT LIABILITY Whenever in this Agreement reference is made to
operations for the Joint Account or to charges or credits to the Joint Account
or whenever a similar language is used, the Parties use language merely as a
convenient method of referring to the accounting necessary between them and no
such phraseology shall ever be construed as creating any joint liability upon
the part of the parties for any obligation incurred under this Agreement.
<PAGE>
23. FORCE MAJEURE
23.1 OBLIGATIONS SUSPENDED BY FORCE MAJEURE If any party is rendered unable
wholly or in part by force majeure to carry out its obligations under this
Agreement (other than any obligation to make money payments) that Party shall
give to all other Parties prompt written notice of the force majeure with
reasonably full particulars concerning it; thereupon the obligations of the
Party giving the notice so far as they are affected by the force majeure shall
be suspended during but not longer than the continuance of the force majeure.
The affected Party shall use all possible diligence to remove the force majeure
as quickly as possible.
23.2 CERTAIN ACTIONS NOT REQUIRED The requirement that any force majeure
shall be remedied with all reasonable dispatch shall not require the settlement
of strikes lockouts or other labor difficulty by the Party involved contrary to
its wishes. How all such difficulties shall be handled shall be entirely within
the discretion of the Party concerned unless such Party is the Operator in which
case the Operator shall comply with any direction given to it by the Operating
Committee with regard thereto.
23.3 MEANING OF FORCE MAJEURE The term "force majeure" as here employed
shall mean an act of God blowout strike lockout or other industrial disturbance
act of the public enemy war blockade public riot lightning fire storm flood
explosion governmental restraint unavailability of equipment and any other cause
whether of the kind specifically enumerated above or otherwise which is not
reasonably within the control of the Party claiming suspension.
24. LAWS AND REGULATIONS
24.1 SUBJECT TO MINISTER'S CONSENT This Agreement is subject to the consent
of the Minister for Mines and Energy pursuant to Section 72 of the Petroleum
Act. Each of the parties will use its best endeavours to procure the giving of
such consent.
24.2 SUBJECT TO APPLICABLE LAWS This Agreement and the respective rights and
obligations of the Parties hereto shall be subject to all valid and applicable
laws rules ordinances regulations and orders of the Northern Territory and the
Commonwealth of Australia, and in the event that this Agreement or any provision
thereof is or the operations contemplated hereunder are found to be inconsistent
with or contrary to any such law rule ordinance regulation or order the latter
shall be deemed to control the former and this Agreement shall be regarded as
modified accordingly and as so modified shall continue in full force and effect.
The Operator shall prepare and furnish to any duly constituted authority through
its proper agency or department any and all reports records statements and
information that may be furnished by the Operator.
24.3 PROPER LAW This Agreement shall be governed by and construed in
accordance with the laws of the Northern Territory of Australia.
<PAGE>
24.4 SUBMISSION TO JURISDICTION Each of the Parties hereby submits
unconditionally but not exclusively to the jurisdictions of the Courts of the
Northern Territory and of the State of Queensland.
25. ABORIGINAL LANDS
25.1 ABORIGINAL LANDS The Operator and each of the Parties hereto hereby
agree that insofar as any exploration development or operating programme or any
other activities may be conducted on Aboriginal lands or affect Aboriginal
people within the Concession all Parties will use their best endeavours to
ensure that all operations comply with all lawful requirements in regard thereto
and pay due regard to the welfare of the traditional Aboriginal owners of any
lands affected by such operations and of any Aboriginal communities which may be
affected by such operations and accord proper respect to Aboriginal culture.
26. DEALINGS WITH THE GOVERNMENT AND LAND COUNCIL
26.1 DEALINGS BY CONCESSION HOLDER If at any time the Operator is not the
holder of a working Interest then the holder or holders of a Working Interest
nominated by the others of them ("the nominated Concession holder") shall be the
Party to deal with Governmental Authorities and the Central Land Council with
respect to the Concession and the maintenance and good standing thereof provided
that prior to any such dealing whether by meeting or in writing the nominated
Concession holder shall consult with the Operator to the intent that the
nominated Concession holder and the Operator shall agree on the conduct of such
dealings and such dealings shall be in conformity with any directions given by
the Operating Committee.
26.2 CONSULTATION WITH OPERATOR The nominated Concession holder and the
Operator may establish such consultative committees as they deem appropriate to
meet as required or on a regular basis for the discussion of matters relevant to
prospective dealings in relation to the Concession and the maintenance thereof.
The nominated Concession holder shall submit all reports and other information
required for the purpose of maintenance of the Concession.
26.3 OPERATOR MAY ATTEND MEETINGS The Operator shall have the right to
attend any meetings with the Government or the Central Land Council in respect
of the dealings referred to in this Part. All other matters incidental thereto
which are part of any activity carried out on the Concession shall be dealt with
by the Operator in accordance with this Agreement.
<PAGE>
27. NOTICES
27.1 ADDRESSES FOR NOTICES Each Party shall keep the other Parties advised
of its current address in Australia to which any notice communication offer
request consent payment demand or information required to be given or furnished
under this Agreement is to be addressed. Until advised otherwise the addresses
of the respective Parties shall be as follows:-
MAGELLAN PETROLEUM (N.T.) PTY. LTD.
8th Floor,
National Bank Building,
420 George Street, Telex: AA40392
BRISBANE, QUEENSLAND
AUSTRALIA Telephone: (07) 221 7505
C.D. RESOURCES PTY. LTD.
10th Floor,
22 William Street, Telex: 31916
MELBOURNE, VICTORIA
AUSTRALIA Telephone: (03) 614 1233
FARMOUT DRILLERS NL
13 O'Connell Street, Telex: AA70517
SYDNEY, NEW SOUTH WALES
AUSTRALIA Telephone: (02) 231 1844
CANSO RESOURCES LIMITED
169 Miller Street, Telex: AA72287
SYDNEY, NEW SOUTH WALES
AUSTRALIA Telephone: (02) 436 3022
INTERNATIONAL OIL PROPRIETARY
33rd Floor,
B.H.P. House,
140 William Street, Telex: AA32985
MELBOURNE, VICTORIA
AUSTRALIA Telephone: (03) 6024033
PANCONTINENTAL PETROLEUM LTD.
50 Margaret Street, Telex: AA71111
SYDNEY, NEW SOUTH WALES
AUSTRALIA Telephone: (02) 290 2422
IEDC AUSTRALIA PTY. LIMITED
7th Floor,
FAI Building,
231 Adelaide Terrace, Telex: AA95902
PERTH, WESTERN AUSTRALIA
AUSTRALIA Telephone: 325 1244
<PAGE>
AMADEUS OIL NL
4th Floor,
Bank of New Zealand Building,
410 Queen Street, Telex: AA43927
BRISBANE, QUEENSLAND
AUSTRALIA Telephone: (07) 221 6022
27.2 HOW NOTICES GIVEN All notices required or authorised to be given
hereunder shall be given in writing by airmail cablegram telex or telegram
postage or other charges prepaid and addressed to the Party at its notified
address. Any notice sent by telex or telegram shall have been deemed to have
been received on the next business day in the place where such notice is
intended to be received after the telex or telegram is sent whether or not the
telex or telegram is subsequently confirmed by letter and any notice sent by
airmail postage prepaid in registered or certified cover shall be deemed to have
been received on the expiration of five (5) days from the date of posting.
27.3 AUSTRALIAN REPRESENTATIVE AND ADDRESS Each Party hereto shall appoint
and keep appointed a representative who shall be resident in the Commonwealth of
Australia and whose address shall from time to time be advised in writing to the
other Parties hereto.
28. GENERAL
28.1 REMEDIES NOT EXCLUSIVE Each and every power and remedy hereby
specifically given to Non-Defaulting Parties shall be in addition to every other
power and remedy now or hereafter existing at law or in equity, and each and
every power and remedy may be exercised from time to time and simultaneously and
as often and in such order as may be deemed expedient. All such powers and
remedies shall be cumulative and the exercise of one shall not be deemed a
waiver of the right to exercise any other or others.
28.2 MUTUAL INDEMNITY Each Party will indemnify and keep indemnified each of
the other Parties from every claim demand action or liability or loss resulting
from each and every breach or default by the indemnifying Party of any of its
obligations under any of the Joint Venture Documents or otherwise in respect of
the Joint Venture.
28.3 LIMITED INVALIDITY If any term clause or provision of this Agreement
shall be or shall be deemed to be invalid for any reason whatsoever such
invalidity shall not affect the validity or operation of any other term clause
or provision of this Agreement except only so far as may be necessary to give
effect to such invalidity.
28.4 WAIVER No waiver by any Party of a right or a default hereunder or any
delay or omission in the exercise of any right remedy or power shall be deemed a
waiver by such Party of any subsequent right power remedy or default whether of
a like nature or otherwise.
<PAGE>
28.5 HOW MONIES PAID Any sum of money paid or tendered by the Parties hereto
shall be validly and effectually paid or tendered if such payment is given
delivered or made in legal currency or by bank cheque or by the party's own
cheque after presentment and clearance. All references to currencies shall mean
Australian currency unless otherwise specifically indicated.
28.6 SUCCESSORS BOUND This Agreement shall enure for the benefit of and bind
the Parties and their assigns and successors in title.
28.7 FURTHER ASSURANCE Each Party agrees that it will perform, execute,
acknowledge and deliver all such further acts, deeds, assurances and instruments
as shall be reasonably required for the purposes of this Agreement or otherwise
to carry out the agreements made herein.
28.8 ENTIRE AGREEMENT This Agreement is the entire agreement between the
Parties hereto in relation to its subject matter and each Party convenants that
it has full right title and power to enter into this Agreement.
28.9 AMENDMENT This Agreement may not be amended except by one or more
written instruments executed by all the Parties hereto.
28.10 NO PARTITION No party shall institute any action or proceedings for
partition or sale in lieu of partition of either or both of the Concession or
the Joint Venture Facilities.
28.11 COUNTERPARTS This Agreement may be executed in any number of
counterparts each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
<PAGE>
THE FIRST SCHEDULE
The Working Interests of the Parties
%
Magellan Petroleum (NT) Pty. Ltd. 56.875
C.D. Resources Pty. Ltd. 9.375
Farmout Drillers N.L. 9.375
Canso Resources Limited 15.375
International Oil Proprietary 3.504
Pancontinental Petroleum Limited 3.00
IEDC Australia Pty. Limited 1.248
Amadeus Oil NL 1.248
<PAGE>
IN WITNESS WHEREOF the parties have executed this Operating
Agreement as at the date and year first herein set out.
THE COMMON SEAL of MAGELLAN )
PETROLEUM (N.T.) PTY. LTD. was )
hereunto affixed by authority )
of the Board of Directors in )
the presence of ROY MARSHALL ) /s/ Roy M. Hopkins
HOPKINS a Director and HEDLEY ) Director
HOWARD the Secretary thereof )
/s/ Hedley Howard
Secretary
EXECUTED by C.D. RESOURCES PTY. )
LTD. by being signed sealed and )
delivered by SIR RUPERT HAMER )
its duly constituted Attorney )
in the presence of: )
/s/ Sir Rupert Hamer
Attorney
/s/ P. Simpson
EXECUTED by FARMOUT DRILLERS )
by being signed sealed and )
delivered by DONALD BRIAN )
JOHNSTON its duly constituted Attorney )
in the presence of: )
/s/ Donald B. Johnston
Attorney
/s/ P. Simpson
EXECUTED by CANSO RESOURCES )
LIMITED by being signed sealed )
and delivered by DONALD BRIAN )
JOHNSTON its duly constituted )
Attorney in the presence of: )
/s/ Donald B. Johnston
Attorney
/s/ P. Simpson
EXECUTED by INTERNATIONAL OIL )
PROPRIETARY by being signed )
sealed and delivered by KEVIN )
VICTOR HISCOX its duly constituted )
Attorney in the presence of: )
/s/ Kevin V. Hiscox
Attorney
/s/ P. Simpson
<PAGE>
EXECUTED by PANCONTINENTAL )
PETROLEUM LTD. by being signed )
sealed and delivered by GEOFFREY JOHN KERR )
its duly constituted Attorney )
in the presence of: )
/s/ Geoffrey J. Kerr
Attorney
/s/ _________________________
THE COMMON SEAL of IEDC )
AUSTRALIA PTY. LTD. was hereunto )
affixed by authority of )
the Board of Directors in the )
presence of BRIAN JAMES BARKER )
and BRIAN JON LEUCKE two )
Officers authorised to affix )
the Seal )
/s/ Brian J. Barker
/s/ Brian J. Leucke
EXECUTED by AMADEUS OIL NL by )
being signed sealed and )
delivered by ALAN SURREY BOGG )
its duly constituted Attorney )
in the presence of: )
/s/ Alan S. Bogg
Attorney
/s/ P. Simpson
<PAGE>
ANNEXURE "A"
- --------------------------------------------------------------------------------
ACCOUNTING PROCEDURE
1. GENERAL PROVISIONS
1. DEFINITIONS
Any term used herein shall have the meaning assigned to it by the
Operating Agreement to which this Accounting Procedure is attached.
2. STATEMENTS AND ACCOUNTS
The Operator shall on or before the last day of a month debit each
Non-Operator for its proportionate share of costs and expenditures
during such preceding month and forward to each Non-Operator an
accounting statement showing the details of all charges and credits for
the Joint Account.
3. PAYMENTS BY NON-OPERATOR
Each Party shall pay its proportion of all such accounts within fifteen
(15) days after receipt of such accounting statement. If payment is not
made within such time the unpaid balance shall bear interest from the
end of the said period at the Default Interest Rate until paid.
4. ADJUSTMENTS
Payments of any such accounts shall not prejudice the right of any
Non-Operator to protest or question the correctness thereof. Subject to
the exception noted in Clause 5 of this Section 1 all statements
rendered to any Non-Operator by the Operator during any calendar year
shall conclusively be presumed to be true and correct after twenty-four
(24) months following the end of any such calendar year unless within
the said twenty-four (24) month period such Non-Operator takes written
exception thereto and makes a claim on the Operator for adjustment. The
failure on the part of such Non-Operator to make a claim on the
Operator for adjustment within such period shall establish the
correctness thereof and preclude it from filing objections thereto or
making claims for adjustment thereon. The provisions of this Clause
shall not prevent adjustments resulting from physical inventory of
property as provided for in Section 6 "Inventories" hereof.
5. AUDITS
(i) A Non-Operator upon not less than thirty (30) days notice in
writing to the Operator and all the other Non-Operators shall
have the right to audit the Operator's accounts and records
relating to the accounting hereunder for any calendar year
within the twenty-four (24) month period following the end of
such calendar year provided however that the Non-Operator must
take written exception to and make a claim upon the Operator
for all discrepancies disclosed by the said audit within the
said twenty-four (24) month period. Where there are two or
more Non-Operators the Non-Operators shall make every
reasonable effort to conduct joint or simultaneous audits in a
manner which will result in a minimum of inconvenience to the
Operator.
(ii) The Operator shall cause its external auditors to carry out an
audit of the accounts and records of the Joint Venture and
records relating to the accounting hereunder for each period
of twelve calendar months ending on each 30th June. Such audit
shall be carried out as soon as is reasonably possible and the
Operator shall forward a copy of the audit report given by
such auditors to each Non-Operator. The costs of such audit
shall be for the Joint Account.
<PAGE>
2. OPERATING AND DEVELOPMENT CHARGES
Subject to limitations hereinafter prescribed the following items shall be
charges for the Joint Account to the extent that provision has been made
therefor in a programme or budget approved by the Operating Committee for the
Work or expenditure is otherwise authorised by the Operating Agreement.
1. RENTALS
Rentals and like payments for the Concession, the Joint Facilities or
the Joint Account.
2. LABOR
(a) Salaries and wages of the Operator's employees in Australia
and fees of the Operator's consultants in Australia engaged
for the benefit of the Concession or the Joint Facilities or
part thereof in the exploration development maintenance and
operation thereof including salaries or wages paid to
geologists and other employees in Australia who are
temporarily assigned to and directly employed for the benefit
of the Concession or the Joint Facilities or part thereof.
(b) Salaries and wages and fees of the Operator's employees and
consultants located outside Australia who are temporarily
assigned to and directly employed for the benefit of the
Concession or the Joint Facilities or part thereof when prior
approval of the use of such employee is given by the Operating
Committee.
(c) The Operator's cost of holidays vacation sickness disability
benefits living and housing allowances travel time bonuses and
other customary allowances applicable to the salaries and
wages chargeable under sub-clauses (a) and (b) of this Clause
and Clause 11 of this Section 2. Costs under this sub-clause
(c) may be charged on a "when and as paid" basis.
(d) Expenditures or contributions made pursuant to assessments
imposed by any Governmental authority which are applicable to
the Operator's labor cost of salaries and wages as provided
under sub-clauses (a) and (b) of this Clause and Clause 11 of
this Section 2.
(e) Termination payments made by the Operator to employees who
were directly engaged for the benefit of the Concession or the
Joint Facilities or part thereof but who are no longer
required for such purpose and as a result thereof whose
employment by the Operator is terminated.
(f) For the purpose of this Clause, the expression "Operator"
shall include an Affiliate of the Operator and the provisions
of this Clause 2 shall extend and apply to employees of such
Affiliate as though they were employees of the Operator.
(g) Where the Operator's employees geologists or consultants are
not engaged full time in the service of the Joint Venture
salaries wages or fees and any other costs in respect thereof
charged pursuant to this Clause shall be in proportion to the
time devoted to the service of the Joint Venture.
3. EMPLOYEE BENEFITS
The Operator's current cost of established plans for group life
insurance hospitalisation pension retirement stock purchase bonus and
other benefit plans of a like nature for its employees shall be
applicable to the Operator's labor cost provided that where an employee
is not engaged full time on the Concession or the Joint Facilities or
part thereof a pro-rata proportion thereof only shall be charged.
<PAGE>
4. MATERIAL
The material equipment and supplies purchased or furnished by the
Operator for the Joint Account. So far as it is reasonably practical
and consistent with efficient and economical operation only such
material shall be purchased for or transferred to the Concession or the
Joint Facilities or part thereof as may be required for immediate use
and the accumulation of surplus stocks shall be avoided.
5. TRANSPORTATION
Transportation of employees consultants equipment material and supplies
necessary for Work subject to the following limitations:-
(a) If material is moved to the Concession or the Joint Facilities
or part thereof from the vendor's or from the Operator's
warehouse or other place no charge shall be made to the Joint
Account for a distance greater than the distance from the
nearest reliable supply store or railway receiving point where
such material is available except with the approval of the
Operating Committee.
(b) If surplus material is moved to the Operator's warehouse or
other storage point no charge shall be made to the Joint
Account for a distance greater than the distance from the
nearest reliable supply store or railway receiving point
except with the approval of the Operating Committee.
6. SERVICE
(a) Outside services:
The cost of contract services and utilities procured from
outside sources.
(b) Use of Operator's equipment and facilities as provided in
Clause 5 of Section 3 entitled "Operator's exclusively owned
facilities".
7. DAMAGES AND LOSSES TO CONCESSION AND EQUIPMENT
All costs or expenses necessary to replace or repair damages or losses
to any of the Joint Facilities not recovered by insurance or not borne
by the Operator or a Non-Operator pursuant to the Agreement. The
Operator shall furnish to the Non-Operators written notice of damages
or losses incurred as soon as practicable after report of the same has
been received by the Operator.
8. LITIGATION EXPENSE
All costs and expenses of litigation and arbitration or legal services
otherwise necessary or expedient for the protection of the Concession
and the Joint Facilities including legal fees and expenses as
hereinafter provided together with the amount of all judgments and
awards obtained against the parties or any of them on account of Work
and actual expenses incurred by any Party or Parties hereto in securing
evidence for the purpose of defending against any action or claim
prosecuted against the Parties or the subject matter of the Agreement.
(a) If all the Parties shall so agree actions or claims affecting
all the Parties may be handled by the legal staff of one or
more of the Parties; and a charge commensurate with cost of
providing and furnishing such services rendered may be
rendered for the Joint Account but no such charge may be made
until approved by the legal advisers for the respective
Parties.
(b) Fees and expenses of legal advisers not on the legal staff of
one or more of the Parties shall not be charged for the Joint
Account unless authorised by the Operating Committee which
authorisation shall not be unreasonably withheld.
<PAGE>
9. TAXES
All taxes of every kind and nature (except taxes measured by the income
of the Parties and charges measured by a Party's share of Petroleum
produced from the Concession or Petroleum Products) assessed or levied
upon or in connection with the Concession or the Joint Facilities, the
production therefrom or the operation thereof, and which taxes have
been paid by the Operator for the benefit of the Parties.
10. INSURANCE AND CLAIMS
(a) Premiums paid for insurance required to be carried for the
benefit of the Parties together with all expenditures incurred
and paid in settlement of any and all losses claims damages
judgments and other expenses including legal services not
recovered from insurance carrier.
(b) If no insurance is required to be carried all the actual
expenditures incurred and paid by the Operator in settlement
of any and all losses claims damages judgments and any other
expenses including legal services shall be charged to the
Joint Account.
11. FIELD OFFICE CAMP EXPENSE
A pro rata portion of the salaries and expenses of the Operator's
supervisory personnel and other employees (serving the Concession or
the Joint Facilities and other properties in the same operating area)
whose time is not allocated directly to the Concession or the Joint
Facilities, and a pro rata portion of the cost of maintaining and
operating a field office and necessary sub-offices (if any) maintained
for the convenience of the above described office and all necessary
camps including housing facilities for employees (if required used in
the conduct of the operations on the Concession or the Joint Facilities
and other properties operated in the same locality). The expense of,
less any revenue from, these facilities shall be inclusive of
depreciation on the investment. Such charges shall be apportioned to
all properties served on some equitable basis consistent with the
Operator's accounting practice. If the facilities contemplated by this
Clause shall serve the Concession or the Joint Facilities only, then
all costs will be charged direct to the Joint Account.
12. ADMINISTRATIVE OVERHEAD
All indirect costs including management and administrative overhead
(whether in Australia or elsewhere) not included in provisions of
Section 2 hereof other than this Clause 12 shall be charged as a
percentage of costs in accordance with the following:-
(i) for each well drilled, 5% of the first One Million Dollars
expended thereon and 2% of all moneys thereafter expended
thereon;
(ii) for geological geophysical and other exploration or appraisal
or activity or operations (not being well drilling) 5% of all
moneys expended thereon;
(iii) for production facilities and pipelines:-
(a) with respective capital budgets not exceeding
$5,000,000.00 5% of the first One Million Dollars and
2% of all costs thereafter incurred while carrying
out an approved programme on such activities;
(b) with respective capital budgets in excess of
$5,000,000.00, such amounts or percentages of costs
as may be proposed by the Operator and approved by
the Operating Committee;
(iv) for all activity or operations for the production treatment
and delivery of petroleum 5% of all costs incurred therein;
<PAGE>
(v) where the aggregate of the charges made pursuant to
sub-paragraphs (i) and (ii) hereof is less than $1,000.00 in
any month such additional amount as is necessary to bring the
aggregate charges for such month to $1,000.00.
The said amounts of $5,000,000.00 and $1,000.00 referred to in
sub-paragraphs (iii) and (v) hereof shall be increased for each year of
operations beginning with the year commencing on 1st January, 1986 in
proportion to the rise (if any) in the All Groups Consumer Price Index
for the City of Brisbane for the immediately preceding quarter ending
on the 31st day of December over the same index for the quarter ending
on the 31st day of December, 1984.
13. OPERATOR'S FULLY OWNED WAREHOUSE OPERATING AND MAINTENANCE EXPENSE
Any charges for the Operator's fully owned warehouse operating and
maintenance expenses are to be approved by the Operating Committee.
14. OTHER EXPENDITURES
Any expenditure, other than expenditures which are covered and dealt
with by the foregoing provisions of this Section 2, incurred by the
Operator for the necessary and proper development, maintenance, and
operation of the Concession.
3. BASIS OF CHARGES FOR THE JOINT ACCOUNT
1. PURCHASES
Material and equipment purchased and service procured shall be charged
at the price paid by the Operator after deduction of all subsidies
rebates commissions or discounts actually received.
2. MATERIAL FURNISHED BY THE OPERATOR
Material required for Work shall be purchased for direct charge for the
Joint Account whenever practicable, except that the Operator may
furnish such material from the Operator's stocks under the following
conditions:-
(a) New Material (Condition "A").
(i) New material transferred from the Operator's
warehouse or other properties shall be priced f.o.b.
the nearest reputable supply store or railway
receiving point, where such material is available, at
current replacement cost of the same kind of
material. This will include material such as tanks,
pumping units, sucker rods, engines, and other major
equipment. Tubular goods; two inch (2") and over,
shall be priced on car-load basis effective at date
of transfer and f.o.b. railway receiving point
nearest the Concession, regardless of quantity
transferred.
(ii) Other material shall be priced on basis of a
reputable supply company's preferential price list
effective at date of transfer and f.o.b. the store or
railway receiving point nearest the joint account
operation where such material is available.
(iii) Cash discount shall not be allowed.
(b) Used material (Conditions "B" and "C").
(i) Material which is in sound and serviceable condition
and is suitable for re-use without reconditioning
shall be classed as Condition "B" and priced at
seventy-five percent (75%) of new price.
<PAGE>
(ii) Material which cannot be classified as Condition "B"
but which -
(a) after reconditioning will be further
serviceable for original function as good
secondhand material (Condition "B") or
(b) is serviceable for original function
but substantially not suitable for
reconditioning,
shall be classed as Condition "C" and priced at fifty
percent (50%) of new price.
(iii) Material which cannot be classified as Condition "B"
or Condition "C" shall be priced at a value
commensurate with its use.
(iv) Tanks, buildings, and other equipment involving
erection costs shall be charged at applicable
percentage of knocked down new price.
3. PREMIUM PRICES
Whenever materials and equipment are not readily obtainable at the
customary supply point and at prices specified in Clauses 1 and 2 of
this Section 3, because of national emergencies, strikes or other
unusual causes over which the Operator has no control the Operator may
charge the Parties for the required materials on the basis of the
Operator's direct cost and expense incurred in procuring such
materials, in making it suitable for use, and in moving it to the
location, provided, however, that notice in writing is furnished to the
Non-Operators of the proposed charge prior to debiting the
Non-Operators for the material and/or equipment acquired pursuant to
this provision, whereupon any Non-Operator shall have the right by so
electing and notifying the Operator within ten (10) days after
receiving notice from the Operator, to furnish in kind, or in tonnage
as the Parties may agree, at the location nearest railway receiving
point, or the Operator's storage point within a comparable distance,
all or part of his share of material and/or equipment suitable for use
and acceptable to the Operator.
Transportation costs on any such material furnished by the
Non-Operators, at any point other than at the location, shall be borne
by such Non-Operators. If, pursuant to the provision of this Clause,
and the Non-Operators furnish material and/or equipment in kind the
Operator shall make appropriate credits therefor to the account of the
said Non-Operators.
4. WARRANTY OF MATERIAL FURNISHED BY THE OPERATOR
The Operator does not warrant the material furnished beyond the
dealer's or the manufacturer's warranty or guarantee and the Operator
will hold the benefit of any such warranty or guarantee for the
Parties; and in case of defective material, credit shall not be passed
until adjustment has been received by the Operator from the
manufacturers or their agents.
5. THE OPERATOR'S EXCLUSIVELY OWNED FACILITIES
The following rates shall apply to service rendered by facilities owned
exclusively by the Operator:-
(a) Water, fuel, power, compressor and other auxiliary services at
rates commensurate with cost of providing and furnishing such
service to the Concession or the Joint Facilities but not
exceeding rates currently prevailing in the field where the
Concession or the Joint Facilities is or are located.
<PAGE>
(b) Automotive equipment at rates commensurate with cost of
ownership and operation. Such rates should generally be in
line with the schedule of rates adopted by recognised
organisations as recommended uniform charges for the Joint
Account and revised from time to time. Automotive rates shall
include cost of oil, gas, repairs, insurance and other
operating expense and depreciation; and charges shall be based
on use in actual service on, or in connection with, operations
on the Concession or the Joint Facilities. Truck and tractor
rates may include wages and expenses of the driver.
(c) A fair rate shall be charged for the use of drilling and
cleaning out tools and any other items of the Operator's fully
owned machinery or equipment which shall be ample to cover
maintenance, repairs, depreciation, and the service furnished
the Concession or the Joint Facilities; provided that such
charges shall not exceed those currently prevailing in the
field where the Concession or the Joint Facilities is or are
located. Pulling units shall be charged at hourly rates
commensurate with the cost of ownership and operation, which
shall include repairs and maintenance, operating supplies,
insurance, depreciation and taxes. Pulling unit rates may
include wages and expenses of the Operator.
(d) A fair rate shall be charged for laboratory services performed
by the Operator for the benefit of the Parties, such as gas,
water core, and any other analyses and tests; provided such
charges shall not exceed those currently prevailing if
performed by outside service laboratories.
(e) Whenever requested, the Operator shall inform the Operating
Committee in advance of the rates it proposes to charge.
(f) Rates shall be revised and adjusted from time to time when
found to be either excessive or insufficient.
4. DISPOSAL OF LEASE EQUIPMENT AND MATERIAL
The operator shall be under no obligation to purchase the interest of the
Non-Operators in surplus new or secondhand material. The disposition of major
items of surplus material, such as derricks, tanks, engines, pumping units, and
tubular goods, shall be subject to approval of the Operating Committee; provided
the Operator shall have the right to dispose of normal accumulations of junk and
scrap material either by transfer or sale from the Concession or the Joint
Facilities. The nett proceeds of any disposal of items owned by the Joint
Account shall be credited to the Joint Account
1. MATERIAL PURCHASED BY THE OPERATOR OR THE NON-OPERATORS
Material purchased by either the Operator or any Non-Operator shall be
credited by the Operator to the Joint Account for the month in which
the material is removed by the purchaser.
2. DIVISION IN KIND
Division of material in kind, if made between the Operator and the
Non-Operators shall be in proportion to their respective interests in
such material. Each Party will thereupon be charged individually with
the value of the material received or receivable by each Party, and the
corresponding credits will be made by the Operator to the Joint
Account. Such credits shall appear in the monthly statement of
operations.
3. SALES TO OUTSIDERS
Sales to outsiders of material from the Concession or the Joint
Facilities shall be credited by the Operator to the Joint Account of
the net amount collected by the Operator from the purchaser. Any claims
by the purchaser for defective material or otherwise shall be charged
back for the Joint Account if and when paid by the Operator.
<PAGE>
5. BASIS OF PRICING MATERIAL TRANSFERRED
Material purchased by either the Operator or any Non-Operator or divided in
kind, unless otherwise agreed, shall be valued on the following basis.
1. NEW PRICE DEFINED
New price as used in the following clauses shall have the same meaning
and application as that used above in Section 3 "Basis of charges for
the Joint Account."
2. NEW MATERIAL
New materials (Condition "A"), being new material procured for the
Joint Account but never used thereon at one hundred percent (100%) of
current new price (plus sales tax, if any).
3. GOOD USED MATERIAL
Good used material (Condition "B"), being used material in sound and
serviceable condition suitable for re-use without reconditioning:-
(a) At seventy-five percent (75%) of current new price if material
was charged for the Joint Account as new, or
(b) At sixty-five percent (65%) of current new price if material
was originally charged for the Joint Account as secondhand at
seventy-five percent (75%) of the new price.
4. OTHER USED MATERIAL
Used material (Condition "C") at fifty percent (50%) of current new
price, being used material which:-
(a) After reconditioning will be further serviceable for original
function as good secondhand material (Condition "B"), or
(b) Is serviceable for original function but substantially not
suitable for reconditioning.
5. BAD ORDER MATERIAL
Material and equipment (Condition "D") which is no longer usable for
its original purpose without excessive repair cost but is further
usable for some other purpose shall be priced on a basis comparable
with that of items normally used for that purpose.
6. JUNK
Junk (Condition "E"), being obsolete and scrap material at prevailing
prices.
7. TEMPORARILY USED MATERIAL
When the use of material is temporary and its service does not justify
the reduction in price as provided in Clause 3(b) above, such material
shall be priced on a basis that will leave a net charge for the Joint
Account consistent with the value of the service rendered.
<PAGE>
6. INVENTORIES
1. PERIODIC INVENTORIES, NOTICE AND REPRESENTATION
At least annually all equipment plant machinery and supplies forming
part of the Joint Facilities inventories shall be taken by the
Operator, subject to the Agreement which shall include all such
material as is ordinarily considered controllable by Operators of oil
and gas properties. Written notice of intention to take inventory shall
be given by the Operator at least thirty (30) days before any inventory
is to begin so that the Non-Operators may be represented when any
inventory is taken.
Failure of any Non-Operator to be represented at an inventory shall
bind such Non-Operator to accept the inventory taken by the Operator,
who shall in that event furnish such Non-Operator with a copy thereof.
2. RECONCILIATION AND ADJUSTMENT OF INVENTORIES
A reconciliation of inventory shall be made by the Operator and
approved by the Operating Committee. Inventory adjustments shall be
made by the Operator for averages and shortages, but the Operator shall
be held accountable to the Non-Operators only for shortages due to
negligence on its part.
3. SPECIAL INVENTORIES
Special inventories may be taken at the expense of a Non-Operator
whenever there is any sale or change of interest in the Concession and
the Joint Facilities. In such cases, both the seller and the purchaser
shall be represented and shall be governed by the inventory so taken,
which shall be taken at the cost of the purchaser.
<PAGE>
"B"
CLAUSE 17 CROSS CHARGE
(Clause 17.5)
THIS DEED is made the _____________ day of ______________ 198___ Between
MAGELLAN PETROLEUM (N.T.) PTY. LTD. a Company incorporated in the State of
Queensland and having its registered office in the Northern Territory at 5th
Floor, City Mutual Building, 62 Cavenagh Street, Darwin of the First Part
C.D. RESOURCES PTY. LTD. a Company incorporated in the State of South Australia
and having its registered office in the Northern Territory at C/- Coopers &
Lybrand, Civic Centre, Harry Chan Avenue, Darwin aforesaid of the Second Part
FARM OUT DRILLERS NL a Company incorporated in the State of New South Wales and
having its registered office in the Northern Territory at C/- Wilson, Bishop,
Bowes & Craig, City Mutual Building, 62 Cavenagh Street, Darwin aforesaid of the
Third Part
CANSO RESOURCES LIMITED a Company incorporated in the State of New South Wales
and having its registered office in the Northern Territory at C/- Wardell
Nominees Pty. Ltd., First Floor, 19 The Mall, Darwin aforesaid of the Fourth
Part
INTERNATIONAL OIL PROPRIETARY an unlimited Company incorporated in the State of
Victoria and having its registered office in the Northern Territory at 5th
Floor, City Mutual Building, 62 Cavenagh Street, Darwin aforesaid of the Fifth
Part
PANCONTINENTAL PETROLEUM LTD a Company incorporated in the State of Queensland
and having its registered office in the Northern Territory at C/- Wardell
Nominees Pty. Ltd., 19 The Mall, Darwin aforesaid of the Sixth Part
IEDC AUSTRALIA PTY. LIMITED a Company incorporated in the State of New South
Wales and having its registered office in the Northern Territory at C/- W. & B.
Pty. Ltd., First Floor, The Vic, Lot 2310 Smith Street, Darwin aforesaid of the
Seventh Part
AMADEUS OIL NL a Company incorporated in the State of Queensland and having its
registered office in the Northern Territory at 5th Floor, City Mutual Building,
62 Cavenagh Street, Darwin aforesaid of the Eighth Part.
AND
MAGELLAN PETROLEUM (N.T.) PTY. LTD. aforesaid in its capacity as Operator
under the Palm Valley Operating Agreement as hereinafter defined (hereinafter
called "the Operator") of the Ninth Part
<PAGE>
W H E R E A S:
A. Pursuant to an agreement made the ______________ day of ______________
1985 between the Parties hereto (hereinafter called "the Palm Valley
Operating Agreement"), the Parties hereto provided for their respective
rights and obligations with respect to Petroleum Lease No. 3 granted
under the Petroleum (Prospecting & Mining) Act 1954-1982 of the
Northern Territory of Australia.
B. Certain payments are to be made from time to time by each of the
Participants pursuant to the Joint Venture Documents.
C. The Participants have agreed to enter into this Deed for the purpose of
securing their respective obligations to make the payments referred to
in Recital B hereof.
NOW THIS DEED WITNESSES that the Participants hereby covenant and agree as
follows:-
1. In this Deed, the following terms shall have the following meanings: -
1.1 "Concession" has the meaning given to it by Clause 1.1(v) of the Palm
Valley Operating Agreement.
1.2 "Defaulting Participant" means a Participant which is in default in
the payment of any Indebtedness.
1.3 "Due Date" means the date on which any sum becomes properly due and
payable by a Participant pursuant to the terms of any of the Joint
Venture Documents.
1.4 "Indebtedness" means a payment which a Participant is liable to make
under any of the Joint Venture Documents and which remains unpaid on
its Due Date.
1.5 "Joint Venture Documents" has the meaning given to it by Clause 1.1(xi)
of the Palm Valley Operating Agreement.
1.6 "Joint Facilities" has the meaning given to it by Clause 1.1(xii) of
the Palm Valley Operating Agreement.
1.7 "Operator" means any person from time to time holding the appointment
of Operator under the Palm Valley Operating Agreement.
1.8 "Participating Interest" with respect to a Participant means its
Working Interest, its share of Petroleum recovered from the Concession,
its interest in any present or future Sales Contracts and the proceeds
of sale thereunder.
1.9 "Participants" means the Parties to this Deed of the First to the
Eighth Parts (inclusive) and their respective successors and assigns
who execute the Deeds of Assumption or Covenant provided for in Clauses
19.2(b)(ii) or Clause 19.4.2.(a)(i) of the Palm Valley Operating
Agreement.
1.10 "Petroleum" has the meaning given to it in the Palm Valley Operating
Agreement.
1.11 "Sales Contracts" means any contract for the sale of products from the
Concession in which a Participant is the seller or one of the sellers
thereunder and whether or not executed before or after the Palm Valley
Operating Agreement or this Deed.
1.12 "Special Charge" means a charge held by any Special Chargee.
1.13 "Special Chargee" means any chargee who holds a charge from a
Participant over its Working Interest, which charge complies
substantially with Clause 19.4 of the Palm Valley Operating Agreement
and to the extent it charges the Working Interest of that Participant
ranks in point of security immediately after this Deed and who has
given notice of the creation of such charge to all other Participants
within 21 days of the date of this Deed or from the date of the
creation of such charge, whichever is the later.
<PAGE>
1.14 In this Deed, unless the context otherwise requires, the singular
includes the plural and vice versa.
2. For the purpose of securing the rights of the Participants and Operator
with respect to the payment of the Indebtedness of a Defaulting Participant,
each Participant:-
(a) hereby covenants with each of the other Participants and the Operator
to pay all Indebtedness; and
(b) for the purposes of securing such covenant hereby by way of first
charge charges as beneficial owner its Participating Interest in favour
of each of the other Participants and the Operator jointly. Such charge
shall be a first floating charge except that as regards the present and
future interest of such Participant in:-
(i) the Concession;
(ii) any Sales Contracts to which it is a party;
(iii) any freehold and leasehold land included amongst the Joint
Facilities; and
(iv) any single item of plant or equipment included within the
Joint Facilities the current replacement cost whereof is in
excess of $50,000;
such charge shall be a first fixed charge. Such first floating charge
and first fixed charge shall rank ahead of and in priority to any and
all other mortgages, charges, security interests or other encumbrances
given, entered into or incurred by such Participant over or in respect
of its Participating Interest or any part thereof. Such Participant
hereby covenants with each of the other Participants and the Operator
that any such other mortgage, charge, security interest or other
encumbrance which may be given or entered into by it shall acknowledge
the priority of and be subject to the charge in favour of the other
Participants and the Operator hereby created and shall contain a
provision that any such other mortgage, charge, security interest or
other encumbrance is thereby postponed to the rights of each of the
other Participants and the Operator hereunder.
3. If any Indebtedness of a Defaulting Participant shall remain unpaid at
the expiration of:-
(a) fifteen (15) days from the Due Date of that Indebtedness; and
(b) twenty-one (21) days from the date written notice has been given by any
Non-Defaulting Participant or the Operator to any Special Chargee who
has the benefit of any outstanding Special Charges from the Defaulting
Participant notifying that Special Chargee of the Defaulting
Participant's Indebtedness,
then, unless and until such Indebtedness is paid in full, any non-defaulting
Participant, or the Operator as agent for the Non-Defaulting Participants, may
exercise each and every power and remedy provided herein to enforce the charge
herein granted by the Defaulting Participant and use and apply any moneys
realised from the exercise of any such power or remedy as hereinafter provided.
Notwithstanding the foregoing, the Operator shall not take any such
action unless, but shall take such action if, it is directed to do so by
Non-Defaulting Participants whose Working Interests aggregate a simple majority
of the total Working Interests of the Non-Defaulting Participants.
4. The floating charge created by this Deed shall not hinder any sale or
other dealings by any Participant or the Operator in the ordinary course of or
for the purpose of carrying on the business of the Joint Venture or with the
property and assets charged thereby prior to the commencement of proceedings to
enforce the charge. The property and assets charged by this Deed as a fixed
charge shall not be sold or otherwise disposed of prior to the commencement of
proceedings to enforce the charge except as permitted under the Palm Valley
Operating Agreement. None of the property or assets charged by this Deed,
whether by way of floating charge or fixed charge, shall be subject to any
charge mortgage pledge lien security interest or other encumbrance ranking
either in priority to or pari passu with the charge created by this Deed, except
as provided in Clause 6(b) of this Deed.
<PAGE>
5. The Operator or any other Participant entitled pursuant to Clause 3
hereof to take action to enforce the said charge may at any time after its
entitlement to enforce the said charge arises appoint a Receiver or a Receiver
and Manager (hereinafter referred to as "the Receiver") of the property and
assets of the Defaulting Participant charged hereunder (hereinafter called "the
Charged Property") and may in like manner from time to time remove any Receiver
so appointed and appoint another in his stead. Any such appointment or removal
shall be in writing. A Receiver so appointed shall be deemed the agent of the
Defaulting Participant which shall be solely responsible for his acts and
defaults and for his remuneration.
6. The Receiver or Operator or any other party to this Deed entitled
pursuant to Clause 3 hereof to take action to enforce the said charge
(hereinafter referred to as "the Enforcing Party" which expression shall include
the Receiver) may exercise any or all of the following powers, authorities and
discretions (which shall be interpreted separately and not be reference to one
another) in addition to all other powers, authorities and discretions conferred
on him by law and subject always to the terms and conditions of the Palm Valley
Operating Agreement:-
(a) to take possession of, collect and get in the Charged Property and for
that purpose to take any proceedings in the name of the Defaulting
Participant or otherwise as seem expedient and to give effectual
receipts accordingly for the same;
(b) to cause the Defaulting Participant to continue to be associated with
the other Participants pursuant to the Palm Valley Operating Agreement
as a party thereto and to fulfil its several obligations thereunder or
under the Sales Contracts or concur in the continuance of the same and
for that purpose to use any of the funds of such Participant and for
that purpose to raise and use money on the Charged Property in priority
to this charge;
(c) to direct any buyer under a Sales Contract to which the Defaulting
Participant is a party to pay direct to the Enforcing Party any
proceeds of sale due to that Participant;
(d) to receive store and/or sell what otherwise would have been the
Defaulting Participant's share of products derived from or produced
from the Concession (provided such products are not the subject of a
Sales Contract) on terms and conditions similar to those which may have
been obtained by any other Participant and the exercise of such powers
by the Receiver shall not be prevented or hindered by the terms hereof;
(e) to let or lease any or all of the Charged Property;
(f) to sell or concur in selling the Charged Property or any part thereof
or any interest therein either at public auction or by private treaty
and either for a lump sum or a sum payable by instalments or for a sum
on account and a mortgage or charge for the balance, in each case after
giving to the Defaulting Participant and each Special Chargee at least
seven (7) days' notice of his intention to sell and to carry any such
sale into effect by conveying and transferring in the name and on
behalf of the Defaulting Participant or otherwise;
(g) to execute all such contracts, deeds, transfers and other assurances in
the name and on behalf of the Defaulting Participant for the purpose of
carrying into effect any of the powers and authorities conferred on the
Enforcing Party as he may see fit;
(h) to make any arrangement or compromise which he thinks expedient; and
(i) generally to do or cause to be done such acts and things with respect
to the Charged Property (without being responsible for any loss or
damage which happens thereby) as he may think necessary and which could
have been done or caused to be done by any Receiver if he had the
absolute ownership of the Charged Property.
<PAGE>
Any person paying money to or otherwise dealing with the Enforcing Party shall
not be concerned to enquire whether any event has occurred to authorise the
Enforcing Party to act and the receipt of any such Enforcing Party for any
moneys arising under any of the powers aforesaid shall be a sufficient discharge
without obliging the persons paying the same to see to the application thereof.
7. The proceeds realised from the exercise of the powers referred to in
Clause 6 hereof for the sale thereof shall be applied:-
FIRSTLY: in payment of any obligations having priority to the charge
hereby created;
SECONDLY: in payment of all costs, charges and expenses of and
incidental to the appointment of the Receiver and the exercise
by the Enforcing Party of all or any of the powers aforesaid
including the reasonable remuneration of the Enforcing Party;
THIRDLY: to the Operator the amount of any Indebtedness to the extent
that the same has not been paid by other Participants in
accordance with the provisions of Clause 17.3 of the Palm
Valley Operating Agreement, and to the Participants who have
paid their full proportionate share of any Indebtedness on
behalf of the Defaulting Participant in accordance with the
provisions of Clause 17.3 of the Palm Valley Operating
Agreement such proportionate share of any Indebtedness so paid
and not otherwise recovered;
FOURTHLY: in payment of any outstanding obligation; or liability of the
Defaulting Participant under any of the Joint Venture
Documents; and then
FIFTHLY: all amounts (if any) recovered in excess of the sum required
to discharge the Indebtedness shall subject to proper claims
enforceable under other encumbrances be paid to the Defaulting
Participant.
Save as aforesaid neither the Non-Defaulting Participants nor the Operator
(unless it be a Participant in default) shall be under any liability to the
Enforcing Party for his remuneration costs, charges or expenses or otherwise.
8. Claims arising from the priority described within the paragraph
"THIRDLY" of Clause 7 hereof shall as between such claims rank pari passu with
the result that if the amount realised in any such action shall be insufficient
to discharge all Indebtedness described in such clause the amount available
therefor shall be apportioned among the claimants in proportion to their
respective claims.
9. The charge created by this Deed shall be deemed a running and
continuing security notwithstanding any settlement on account of particular
amounts or any other matter or thing whatsoever and shall remain in full force
until a final discharge thereof has been executed by the Operator and the
Non-Defaulting Participants.
10. Insofar as this charge pertains to the Participating Interest of the
Defaulting Participant enforcement hereof shall also be subject to the
provisions of Clauses 19.4.2(a), 19.4.2(b), 19.4.2(c), 18 and 28.10 of the Palm
Valley Operating Agreement and in the event of any conflict between this Deed
and a Deed in the form of Annexure "C" to the Palm Valley Operating Agreement on
the one hand and the said Clauses of the Palm Valley Operating Agreement on the
other hand the latter shall prevail.
11. Each Participant shall from time to time execute and deliver such
further charges and other documents (including without limiting the generality
of the foregoing, mortgages or charges collateral hereto of its interest in all
or some of the titles constituting the Concession in a form registrable as a
legal mortgage or charge under the laws pursuant to which such titles are
granted) as may be reasonably requested by any chargee in order to confirm or
effectuate the intent and purposes of this Deed. Each of the Parties granting a
charge hereunder shall forthwith duly register or record this Deed and shall
file or record such other notice or documents relating thereto in such
jurisdictions as may be required by law to perfect the security hereby given.
12. Each Participant and the Operator hereby covenants with each of the
other Participants that it has full power to enter into this Deed and to charge
the Charged Property as provided herein.
<PAGE>
13. Each Participant hereby covenants with each of the other Participants
and the Operator to execute and deliver all such assurances, deeds and
instruments and do all such acts and things whatsoever as may be necessary to
release and discharge the charge hereby created to enable a Participant to sell
and transfer its Participating Interest where such sale and transfer is in
accordance with the Palm valley Operating Agreement and to duly register, file
or record all such notices or documents relating thereto in such jurisdictions
as may be required by law to perfect such release, discharge or substitution as
aforesaid.
14. Each and every power and remedy herein specifically given to a
non-defaulting Participant or the Operator shall be in addition to every other
power and remedy now or hereafter existing at law or in equity, and each and
every power and remedy may be exercised from time to time and simultaneously as
often and in such order as may be deemed expedient. All such powers and remedies
shall be cumulative, and the exercise of one shall not be deemed a waiver of the
right to exercise any other power or remedy and no renewal or extension of any
Indebtedness shall impair any such power or remedy or shall be construed to be a
waiver of any default or an acquiescence therein.
15. It is acknowledged and agreed that no covenant or charge is given or
created under Clause 2 of this Deed by any subsidiary of Australian Industry
Development Corporation which becomes a Participant, although such subsidiary on
becoming a Participant shall have the benefit of this Deed and as a
non-defaulting Participant shall be entitled to enforce the rights and remedies
of a Non-Defaulting Participant hereunder.
16. All notices required to be given by or pursuant to this Deed shall
unless otherwise provided in this Deed be given in accordance with the
provisions of Clause 27 of the Palm Valley Operating Agreement.
17. This Deed shall take effect as of the date first above set forth when
one or more counterparts thereof shall have been signed by each of the Parties
hereto and such signed counterparts shall have been delivered by each of such
Parties to each of the other such Parties. Upon termination of the Palm Valley
Operating Agreement each of the Parties to whom a charge is granted hereunder
shall promptly execute and deliver a release and discharge of such charge
provided that there be in fact no Indebtedness then owing under such charge.
18. This Deed shall be governed by and be construed in accordance with the
laws of the Northern Territory of Australia and for the purposes of this Deed
the Parties hereby consent and submit to the jurisdiction of the Courts of such
Territory.
<PAGE>
"C"
FORM OF PRIORITY DEED
(Clause 19.4)
THIS DEED is made the _____________ day of ______________ 198___ between
MAGELLAN PETROLEUM (N.T.) PTY. LTD. a Company incorporated in the State of
Queensland and having its registered office in the Northern Territory at C/-
Veritatem Nominees (N.T.) Pty. Ltd., 5th Floor, City Mutual Building, 62
Cavenagh Street, Darwin (hereinafter called "Magellan") of the First Part
C.D. RESOURCES PTY. LTD. a Company incorporated in the State of South Australia
and having its registered office in the Northern Territory at C/- Coopers &
Lybrand, Civic Centre, Harry Chan Avenue, Darwin aforesaid (hereinafter called
"CDR") of the Second Part
FARMOUT DRILLERS NL a Company incorporated in the Australian Capital Territory
and having its registered office in the Northern Territory at C/- Wilson,
Bishop, Bowes & Craig, City Mutual Building, 62 Cavenagh Street, Darwin
aforesaid (hereinafter called "Farmout") of the Third Part
CANSO RESOURCES LIMITED a Company incorporated in the State of New South Wales
and having its registered office in the Northern Territory at C/- Wardell
Nominees Pty. Ltd., First Floor, 19 The Mall, Darwin aforesaid (hereinafter
called "Canso") of the Fourth Part
INTERNATIONAL OIL PROPRIETARY an unlimited Company incorporated in the State of
Victoria and having its registered office in the Northern Territory at 5th
Floor, City Mutual Building, 62 Cavenagh Street, Darwin aforesaid (hereinafter
called "International") of the Fifth Part
PANCONTINENTAL PETROLEUM LTD a Company incorporated in the State of Queensland
and having its registered office in the Northern Territory at C/- Wardell
Nominees Pty. Ltd., 19 The Mall, Darwin (hereinafter called "Pancontinental") of
the Sixth Part
INTERNATIONAL ENERGY DEVELOPMENT CORPORATION OF AUSTRALIA PTY LTD a Company
incorporated in the State of New South Wales and having its registered office in
the Northern Territory at C/- W. & B. Pty. Ltd., First Floor, The Vic, Lot 2310
Smith Street, Darwin (hereinafter called "IEDC") of the Seventh Part
and
AMADEUS OIL NL a Company incorporated in the State of Queensland and having its
registered office in the Northern Territory at 5th Floor, City Mutual Building,
62 Cavenagh Street, Darwin (hereinafter called "Amadeus") of the Eighth Part
AND
[Here insert Chargee referred to in Clause 19.4 of Palm Valley Operating
Agreement] (hereinafter called "the Special Lender") of the Ninth Part
<PAGE>
W H E R E A S:
A. Pursuant to an agreement made the _______________ day of ______________
1984 between the parties of the first to eighth parts inclusive
(hereinafter called "the Palm Valley Operating Agreement"), the parties
thereto provided for their respective rights and obligations with
respect to Petroleum Lease No. 3 granted under the Petroleum
(Prospecting & Mining) Act 1954-1982 of the Northern Territory of
Australia.
B. The Palm Valley Operating Agreement contains provisions relating to the
form and substance of any charge to be given by a Participant over its
Participating Interest and in particular specifies that such a charge
will be subject to a Clause 17 Cross Charge and requires that any
Chargee (referred to in Clause 19.4 of the Palm Valley Operating
Agreement) shall contemporaneously with the creation of any charge over
the Participating Interest of a Participant execute and deliver to each
of the Participants a Deed substantially in the form of this Deed.
C. Each of the parties of the first to eighth parts hereof have executed a
Clause 17 Cross Charge in favour of all of the other parties.
D. [Here insert Chargor referred to in Clause 19.4 of Palm Valley
Operating Agreement] (hereinafter referred to as "the Company")
proposes to charge in favour of the Special Lender the whole of its
Participating Interest.
NOW THIS DEED WITNESSES that the Parties hereby covenant and agree as follows:-
1. In this Deed the following terms shall have the following meanings:-
1.1 "Clause 17 Cross Charge" means any one or more of the charges to be
entered into by the parties to the Palm Valley Operating Agreement in
accordance with the provisions of Clause 17.5 thereof.
1.2 "Concession" has the meaning given to it by Clause 1.1(v) of the Palm
Valley Operating Agreement.
1.3 "Indebtedness" means any payment which the Company is liable to make
under any of the Joint Venture Documents (as defined in the Palm Valley
Operating Agreement) and which is not paid on the date on which it is
due.
1.4 "Joint Facilities" has the meaning given to it by Clause 1.1(xi) of the
Palm Valley Operating Agreement.
1.5 "Operator" has the meaning given to it by Clause 1.1(xiv) of the Palm
Valley Operating Agreement.
1.6 "Participant" means the parties hereto of the first to the eighth
parts.
1.7 "Participating Interest" shall mean the share or interest of the
Participant concerned in the Concession, the Joint Facilities, the
products derived from or produced from the Concession and whether or
not taken in kind, its rights and obligations under the Sales Contracts
(and any of them), and its rights and obligations under any other
agreements or instruments relative to or for the implementation of the
Palm Valley Operating Agreement.
1.8 "Project Charge" means any Clause 17 Cross Charge given by the Company.
1.9 "Project Chargee" means the Participants (including the Operator) from
time to time which have the benefit as Chargee under the Project
Charge.
1.10 "Sales Contracts" means any contract for the sale of products from the
Concession in which one or more of the Participants (including the
Operator) is a seller, and whether or not executed before or after the
Palm Valley Operating Agreement or this Deed.
<PAGE>
1.11 "Special Charges" means [here insert details of charge referred to in
Clause 19.4 of the Palm Valley Operating Agreement] and any charge or
encumbrance granted by the Company to Special Lender over the whole or
any part of the Participating Interest of the Company as amended from
time to time and whether or not such charge or encumbrance also
includes any other property of the Company.
1.12 "Special Lender" means [here insert Chargee referred to in Clause 19.4
of the Palm Valley Operating Agreement] which includes its successors
and assigns.
1.13 In this Deed, unless the context otherwise requires, the singular shall
include the plural and vice versa.
2. The Special Lender hereby acknowledges to each of the Project Chargees
that as between the Project Chargees and the Special Lender:-
(a) the order of priorities in point of security shall be:-
First: the security constituted by the Project Charge; and
Secondly: the security constituted by the Special Charges,
and such priority shall extend at all times and for all purposes to
moneys expressed to be secured by such securities, whenever the
liability to pay such moneys arose and whether or not at any time such
liability was a present liability or a prospective liability (within
the meaning of those expressions for the purpose of the Companies Act
1974 of the Northern Territory of Australia).
(b) the Special Charges shall be subject to all the rights and remedies of
the Project Chargees under the Palm Valley Operating Agreement and the
Project Charge.
NOTWITHSTANDING:
(i) the respective dates or order of execution or registration of
the Project Charge and the Special Charges;
(ii) anything contained in any of the Project Charge or the Special
Charges or the order in which any moneys secured by the said
documents or any of them are advanced or become payable; or
(iii) any other matter or thing whatsoever or any rule of law or
equity to the contrary.
3. As soon as it is aware of the same each Project Chargee shall give
written notice to the Special Lender of the incurrence of any Indebtedness by
the Company.
4. The Special Lender hereby covenants with each of the Project Chargees
that so long as the Company shall be a party to the Palm Valley Operating
Agreement:-
(a) the Special Charges are subject to all of the rights and remedies of
the Parties under the Palm Valley Operating Agreement and the Project
Charge;
(b) that a person exercising or enforcing any power of sale under the
Special Charge or conferred by law shall not sell a constituent part or
parts of the Company's Participating Interest but only the whole or a
fractional part of that Participating Interest, and that it shall be a
condition of that sale that the purchaser:-
(i) shall execute and deliver the Deeds of Assumption or Covenant
and a Clause 17 Cross Charge as required by Clause 19.2 of the
Palm valley Operating Agreement; and
(ii) shall forthwith after the completion of such assignment duly
register or record the Clause 17 Cross Charge in those
jurisdictions as may be required by law to perfect the
security thereby given;
<PAGE>
(c) that neither the Special Lender nor any person claiming through or
under the Special Lender shall not seek to partition whether by order
of court or otherwise either of both of the Concession or the Joint
Facilities;
(d) that neither the Special Lender nor any person claiming through or
under the Special Lender shall not without the prior consent of all
Parties (other than the Company) waive, release, surrender or forfeit
the whole or any fractional or constituent part of the Participating
Interest so charged;
(e) that each of the Special Charges shall be subject to and shall rank for
all purposes after the Project Charge given by the Company.
5. The Special Lender hereby covenants with the Parties to execute and
deliver all such assurances, deeds and instruments and do all such acts and
things whatsoever as may be necessary to release and discharge or to substitute
by way of additional security (as appropriate) in respect to any fixed charge
created by any of the Special Charges over the present and future interest of
the Company in any items subject to a first fixed charge referred to in Clause
2(b) of each Clause 17 Cross Charge and to duly register, file or record all
such notices or documents relating thereto in such jurisdictions as may be
required by law to perfect such release, discharge or substitution as aforesaid.
6. Each of the Project Chargees covenants with the Special Lender that it
will not enforce or seek to enforce the Project Charge until twenty-one (21)
days after the Special Lender has received the notice referred to in Clause 3
thereof.
7. Each of the Project Chargees acknowledges that the Special Charges in
their form as at the date hereof comply with the Palm Valley Operating
Agreement.
8. The Special Lender covenants with the Project Chargees that it will not
assign or transfer or otherwise deal with any of its rights to the security
constituted by the Special Charges unless the assignment, transfer or dealing is
made expressly subject to the terms of this Deed and the assignee or transferee
binds itself to the satisfaction of each of the other Project Chargees and the
Special Lender in substantially the same manner as the assignor or transferor
under this Deed is bound.
9. Each of the Project Chargees covenants with each other and with the
Special Lender that it will not assign or transfer or otherwise deal with any of
its rights to the security constituted by the Project Charge unless the
assignment, transfer or dealing is made expressly subject to the terms of this
Deed and the assignee or transferee binds itself to the satisfaction of each of
the other Project Chargees and the Special Lender in substantially the same
manner as the assignor or transferor under this Deed is bound.
10. Each party hereby covenants with each of the other parties as a
separate covenant that for the purposes of this Deed it submits itself to the
jurisdiction of the courts of the Northern Territory of Australia.
----------------------------------------------------------------
------------------------------------------------------------
BETWEEN
MAGELLAN PETROLEUM (N.T.) PTY. LTD.
UNITED OIL & GAS CO. (N.T.) PTY. LTD.
CANSO RESOURCES LIMITED
OILMIN (N.T.) PTY. LTD.
KREWLIFF INVESTMENTS PTY. LTD.
TRANSOIL (N.T.) PTY. LTD.
FARMOUT DRILLERS N.L.
INTERNATIONAL OIL PROPRIETARY
MEREENIE OPERATING AGREEMENT
------------------------------------------------------------
----------------------------------------------------------------
CHAMBERS McNAB TULLY & WILSON
SOLICITORS & NOTARIES
324 QUEEN STREET
BRISBANE
TELEPHONE 228 9333
(RAN)
<PAGE>
M E R E E N I E O P E R A T I N G A G R E E M E N T
TABLE OF CONTENTS
Clause Heading Page
1. DEFINITIONS: INTERPRETATIONS 3
1.1 Definitions 3
1.2 Interpretation 6
2. APPLICATION AND OBJECTIVES OF AGREEMENT:
COVENANTS 7
2.1 Operating Agreement 7
2.2 Venture of Parties 7
2.3 Duration of Venture 7
2.4 Covenants by the Parties 7
3. OWNERSHIP OF CONCESSION AND OTHER INTERESTS -
APPLICABLE ROYALTIES 8
3.1 Deemed Ownership of Concession 8
3.2 Royalties on Production 8
4. OWNERSHIP OF PRODUCTION 8
4.1 Ownership of Production 8
5. OPERATOR 8
5.1 Initial Operator 8
5.2 Automatic Removal of Operator 9
5.3 Removal of Operator 9
5.4 Challenge of Operator 9
5.5 Resignation of Operator 10
5.6 Appointment of New Operator 10
5.7 Transfer of Property on Change of Operator 11
5.8 Assumption of Liability 11
5.9 Audit on Change of Operator 11
6. GENERAL DUTIES OF OPERATOR 11
6.1 Operator to have Charge 11
6.2 Competitive Contracts: Use of Own Equipment 12
6.3 Various Duties of Operator 12
6.4 Handling of Claims 13
6.5 Preparation of Reports 13
6.6 Standard of Care 14
6.7 Indemnification of Operator 14
<PAGE>
Clause Heading Page
7. NON-OPERATORS RIGHTS TO ACCESS AND INFORMATION 14
7.1 General Right to Access and Information 14
7.2 Right of Access 15
7.3 Information from Surveys 15
7.4 Notices as to Drilling 15
7.5 Operator's Duties During Drilling 16
7.6 Information During Drilling 16
7.7 Information after Completion of Drilling 17
7.8 Periodic Reports 18
7.9 Copies of Reports to Government 18
7.10 Information to Non-Operator 18
7.11 Non-Operator in Default 18
8. THE OPERATING COMMITTEE 19
8.1 Establishment of Operating Committee 19
8.2 Notification of Representatives 19
8.3 Powers of Operating Committee 19
8.4 Any Non-Operator May Submit Matters 20
9. MEETINGS AND VOTING OF OPERATING COMMITTEE 20
9.1 Times and Agenda for Meetings 20
9.2 When No Notice Necessary 20
9.3 Minutes of Meeting 20
9.4 Place for Meetings 20
9.5 Advisers May Attend 21
9.6 Votes Required for Committee Decisions 21
9.7 Other Forms of Voting 21
9.8 Decisions Binding On All Parties 21
9.9 Quorum For Meetings 21
9.10 Voting at Adjourned Meetings 22
10. PROGRAMMES AND BUDGETS 22
10.1 Operator to Prepare Programmes and Budgets 22
10.2 Times for Submission 22
10.3 Contents of Programmes and Budgets 22
10.4 Approval of Programmes and Budgets 23
10.5 Operator to Act in Absence of Approval 24
10.6 Notice of Excess Expenditures 24
10.7 Approved Programme to Continue Unless Modified 25
11. CHARGING OF COSTS 25
11.1 Authorised Costs and Expenses 25
11.2 To Be Charged for the Joint Account 25
11.3 Establishment of Records 25
11.4 Treatment of Any Subsidy or Contribution 25
<PAGE>
Clause Heading Page
12. CONTRIBUTIONS BY THE PARTIES 26
12.1 Payment by Operator and Reimbursement 26
12.2 Call By Operator 26
12.3 Adjustment 27
12.4 Defaulting Party Liable for Interest 27
12.5 Banking and Investment of Funds 27
13. INSURANCE 28
13.1 Operator to Maintain Insurance 28
13.2 Advice to Non-Operators of Current Insurance 28
13.3 Increase in Insurance 29
13.4 Right to Carry Own Insurance 29
13.5 Cost of Insurance for the Joint Account 29
14. SOLE RISK OPERATIONS - GEOLOGICAL AND GEOPHYSICAL
SURVEYS 29
14.1 Application 29
14.2 Notice of Operations 29
14.3 Consent by Others 30
14.4 Operator for Sole Risk Operations 30
14.5 Non-Consenting Party 30
14.6 Right to Information 30
15. SOLE RISK OPERATIONS DRILLING OF WELLS 31
15.1 Application 31
15.2 Definition of Terms 31
15.3 Notice of Drilling 32
15.4 Notice of Participation 32
15.5 Unanimous Participation 32
15.6 Non-Desiring Party 32
15.7 Operator for Sole Risk Drilling 33
15.8 Time for Commencement 33
15.9 Obligation of Desiring Parties 33
15.10 Conformity to Spacing Patterns 34
15.11 Penalties Payable by Non-Desiring Parties 34
15.12 Deepening of Wells 36
16. DISPOSITION OF PRODUCTION 37
16.1 Separate Ownership of Petroleum 37
16.2 Right to Separate Facilities 37
16.3 Underlifting Procedure 37
16.4 Payments Direct to Each Party 38
16.5 Extra Expenditure 38
<PAGE>
Clause Heading Page
17. DEFAULTS IN PAYMENT 38
17.1 Notice of Default 38
17.2 Defaulting Party May Be Sued 38
17.3 Certain Non-Defaulting Parties to Contribute 39
17.4 Rights of Contributing Parties 39
17.5 Cross Charge 39
17.6 Suspension of Rights of Defaulting Party 40
17.7 Default of Operator in Payment 40
17.8 Application of Defaulting Party's Funds 40
17.9 Option to Dilute Interest of Defaulting Party 41
17.10 Dilution Formation 41
17.11 Distribution of Working Interest Available on Dilution 42
17.12 Extinguishment of Amount Due 42
17.13 Repayment of Loan Funds 42
17.14 Interest Distributed Clearof Charges 43
18. WITHDRAWAL 43
18.1 Any Party May Withdraw 43
18.2 Notice of Withdrawal 43
18.3 Other Parties May Accept Assignment 43
18.4 Prompt Execution of Documents 44
10.5 Withdrawing Party's Obligations 44
18.6 Costs of Assignment 44
18.7 Assignment to All Parties 44
19. ASSIGNMENT - MORTGAGES 44
19.1 Right to Assign 44
19.2 Assumption by Transferee 45
19.3 Covenant by International 45
19.4 Charge of Working Interest 45
20. AUSTRALIANISATION 47
20.1 Australianisation 47
21. RELEASE OF INFORMATION 48
21.1 Information Confidential 48
21.2 Disclosure to Listed Companies 48
21.3 Copy Notice to Other Parties 49
21.4 Announcements 49
22. RELATIONSHIP OF THE PARTIES 49
22.1 Rights and Obligations Several 49
22.2 No Joint Liability 49
22.3 Ratio of Working Interest 49
<PAGE>
Clause Heading Page
23. FORCE MAJEURE 50
23.1 Obligations Suspended By Force Majeure 50
23.2 Certain Actions Not Required 50
23.3 Meaning of Force Majeure 50
24. LAWS AND REGULATIONS 50
24.1 Subject to Minister's Consent 50
24.2 Subject to Applicable Laws 50
24.3 Proper Law 51
24.4 Submission to Jurisdiction 51
25. ABORIGINAL LANDS 51
25.1 Aboriginal Lands 51
26. DEALINGS WITH THE GOVERNMENT AND LAND COUNCIL 51
26.1 Dealings by Title Ho1der 51
26.2 Consultation with Operator 51
26.3 Operator May Attend Meetings 52
27. NOTICES 52
27.1 Addresses for Notices 52
27.2 How Notices Given 53
27.3 Australian Representative and Address 53
28. GENERAL 53
28.1 Mutual Indemnity 53
28.2 Limited Invalidity 54
28.3 Waiver 54
28.4 Low Monies Paid 54
28.5 Successors Bound 54
28.6 Further Assurances 54
28.7 Amendment 54
28.8 No Partition 54
28.9 Counterparts 54
<PAGE>
MEREENIE OPERATING AGREEMENT
THIS OPERATING AGREEMENT made the 27th day of April 1984 between
MAGELLAN PETROLEUM (N.T. ) PTY. LTD. a Company incorporated in the State of
Queensland and having its registered office in the Northern Territory at C/-
Veritatem Nominees (N.T.) Pty. Ltd., 5th Floor, City Mutual Building, 62
Cavenagh Street, Darwin (hereinafter called "Magellan") of the First Part
UNITED OIL & GAS CO. (N.T.) PTY. LTD. a Company incorporated in the State of
Queensland and having its registered office in the Northern Territory at C/-
Veritatem Nominees (N.T.) Pty. Ltd., 5th Floor, City Mutual Building, 62
Cavenagh Street, Darwin aforesaid (hereinafter called "United") of the Second
Part
CANSO RESOURCES LIMITED a Company incorporated in the State of New South Wales
and having its registered office in the Northern Territory at C/- Wardell
Nominees Pty. Ltd., First Floor, 19 The Mall, Darwin aforesaid (hereinafter
called "Canso") of the Third Part
OILMIN (N.T.) PTY. LTD. a Company incorporated in the State of Queensland and
having its registered office in the Northern Territory at C/- Veritatem Nominees
(N.T.) Pty. Ltd., 5th Floor, City Mutual Building, 62 Cavenagh Street, Darwin
aforesaid (hereinafter called "Oilmin") of the Third Part
KREWLIFF INVESTMENTS PTY. LTD. a Company incorporated in the State of New
South Wales and having its registered office in the Northern Territory at C/-
Veritatem Nominees (N.T.) Pty. Ltd., 5th Floor, City Mutual Building, 62
Cavenagh Street, Darwin aforesaid (hereinafter called "Krewliff") of the Fourth
Part
TRANSOIL (N.T.) PTY. LTD. a Company incorporated in the State of Queensland and
having its registered office in the Northern Territory at C/- Veritatem Nominees
(N.T.) Pty. Ltd., 5th Floor, City Mutual Building, 62 Cavenagh Street, Darwin
aforesaid (hereinafter called "Transoil") of the Fifth Part
FARMOUT DRILLERS NL a Company incorporated in the Australian Capital Territory
and having its registered office in the Northern Territory at C/- Wilson,
Bishop, Bowes & Craig, City Mutual Building, 62 Cavenagh Street, Darwin
aforesaid (hereinafter called "Farmout") of the Sixth Part
INTERNATIONAL OIL PROPRIETARY a Company incorporated in the State of Victoria
having its registered office at 33rd Floor, BHP House, 140 William Street,
Melbourne in the said State (hereinafter called "International") of the Seventh
Part
<PAGE>
W H E R E A S:
A. Magellan is the holder of Extension No. 1 of O.P. 175 in the Northern
Territory issued pursuant to the Petroleum Acts and O.P. 175 contains
the O.P. 175 Mereenie Area.
B. United is the holder of O.P. 178 in the Northern Territory issued
pursuant to the Petroleum Acts and O.P. 178 contains the O.P. 178
Mereenie Area.
C. On the 18th day of November, 1981 Magellan was granted the East
Mereenie Lease.
D. On the 18th day of November, 1981 United was granted the West Mereenie
Lease.
E. On the 18th day of November, 1981 and prior to the grant of the East
Mereenie Lease and the West Mereenie Lease the CLC Agreement was
entered into, the CLC Agreement being a necessary pre-requisite under
Section 43(2) of the Aboriginal Land Rights (Northern Territory) Act
1976-1980 to the grant of the East Mereenie Lease and the West Mereenie
Lease.
F. On the 18th day of December, 1981 Magellan executed transfers of
interests in the East Mereenie Lease aggregating 50% therein to Oilmin,
Krewliff, Transoil, and Farmout.
G. On the 18th day of December, 1981 United executed transfers of
interests in the West Mereenie Lease aggregating 50% therein to Oilmin,
Krewliff, Transoil, and Farmout.
H. On the 24th day of December, 1982 Magellan transferred to Canso 15%
interests in the East Mereenie Lease and in the O.P. 175 Mereenie Area.
I. On the 24th day of December, 1982 United transferred to Canso 20%
interests in the West Mereenie Lease and in the O.P. 178 Mereenie Area.
J. Set forth in Part A of the First Schedule hereto are the Working
Interests presently held by the Parties in the East Mereenie Block and
in Part B of the First Schedule hereto certain agreements which are
binding on the Parties hereto and which provide for the payment of
certain royalties (in addition to the Statutory Royalty) with respect
to the East Mereenie Block are described.
<PAGE>
K. Set forth in Part A of the Second Schedule hereto are the Working
Interests presently held by the Parties in the West Mereenie Block and
in Part B of the Second Schedule hereto certain agreements which are
binding on the Parties hereto and which provide for the payment of
certain royalties (in addition to the Statutory Royalty) with respect
to the West Mereenie Block are described.
L. By Agreement dated the 7th day of September, 1979 between Austram Oil
Pty. Ltd. and International (as amended by Adendum made 7th September,
1979 and a Deed dated 27th day of March, 1980 between Krewliff, Austram
Oil Ltd. and International), International acquired all the rights of
Austram Oil Ltd. under an Agreement dated 26th June, 1964 between
Austram Oil Ltd. and Krewliff and in the circumstances described
therein International could be entitled to a 6.25% Working Interest out
of the interest of Krewliff.
M. The Parties desire to operate the East Mereenie Block and the West
Mereenie Block as one unit.
N. The Parties have agreed that the respective Working Interests of the
Parties in the Concession shall be as set forth in the Third Schedule
hereto and that this Agreement shall apply to the Concession in
replacement of the agreements described in the Fourth Schedule hereto.
NOW THEREFORE THE PARTIES AGREE AS FOLLOWS:-
1. DEFINITIONS: INTERPRETATION
1.1 Definitions. Certain terms used in this Agreement have the
fol1owing meanings assigned to them:-
1.1.1 "Accounting Procedure" means the Accounting Procedure which is
annexed hereto marked "A".
1.1.2 "Affiliate" in relation to a corporation shall mean a
corporation which is related to that corporation within the
meaning of the Companies Act of the Northern Territory of
Australia.
1.1.3. "Agreement" means this operating agreement, its recitals, its
annexures and its schedules.
<PAGE>
1.1.4 "CLC Agreement" means the agreement dated 18th November, 1991
between Magellan, United, Oilmin, Krewliff, Transoil, Farmout
and the Central Land Council.
1.1.5 "Concession" shall mean the aggregate of the East Mereenie
Block and the West Mereenie Block and shall include all
permits, leases or other instruments conferring rights to the
exploration for and production of Petroleum from the areas or
any of them presently contained within the Concession or any
extensions or renewals thereof or any such instruments issued
in substitution therefor which may from time to time be
granted pursuant to the Petroleum Act to the extent that such
permits, leases or other instruments are in respect of the
present area of the Concession or any part thereof.
1.l.6 "Concession Year" shall mean a period of twelve calendar
months commencing on each first day of July during the term of
this Agreement, or such other date as the Working Interest
holders may unanimously agree.
1.1.7 "Default Interest Rate" shall mean the rate of interest five
percent (5%) in excess of the rate from time to time charged
by the Operator's principal bankers in Australia from time to
time on overdrafts below of ONE HUNDRED THOUSAND DOLLARS
($100,000.00) as certified by the manager of the Bank at which
the Operator's principal account is maintained, or such other
rate as the Working Interest holders may unanimously agree.
1.1.8 "East Mereenie Block" shall mean the aggregate of the O.P. 175
Mereenie Area and the area the subject of the East Mereenie
Lease.
1.1.9 "East Mereenie Lease" shall mean Petroleum Lease No. 5 granted
under the Petroleum Act the area of which is outlined in green
on the map which is the Fifth Schedule hereto together with
all other titles conferring rights to explore for or produce
Petroleum arising from, out of, or in substitution for the
said Petroleum Lease No. 5.
1.1.10 "Joint Account" shall mean the account and records maintained
by the Operator to cover and record the expenditure and other
accounting effects including receipts and debits for Work
conducted under this Agreement and "for the Joint Account"
shall mean for the benefit, interest, ownership, risk, cost,
expense and obligation of the Parties hereto in proportion to
their respective Working Interests.
<PAGE>
1.1.11 "Joint Facilities" save as hereinafter excepted, shall mean
all real and personal property, wells, equipment, machinery,
plants and other facilities now held by or on behalf of the
Parties hereto, or any of them, on or with respect to the
Concession or hereinafter acquired for the Joint Account for
present or contingent use or to be held for such use in
operations conducted for the Joint Account, except the
Concession, and except the OIME SL750 drilling rig and
ancillary equipment currently used for drilling operations on
the Concession.
1.1.12 "Non-Operator" shall mean a Party other than the Operator
which holds a Working Interest.
1.1.13 "Operator" shall mean the Party from time to time appointed as
such under this Agreement.
1.1.14 "Operating Committee" shall mean the Operating Committee
established under this Agreement.
1.1.15 "OP175" shall mean Extension No. 1 of Oil Permit 175 granted
under the Petroleum Act and all other titles conferring rights
to explore for or produce Petroleum arising from, out of, or
in substitution for the said Extension No. 1 of Oil Permit
175.
1.1.16 "OP175 Mereenie Area" shall mean that part of OP175 outlined
in blue on the map which is the Fifth Schedule hereto.
1.1.17 "OP178" shall mean Oil Permit 178 granted under the Petroleum
Act and all other titles conferring rights to explore for or
produce Petroleum arising from, out of, or in substitution for
the said Oil Permit 178.
1.1.18 "OP178 Mereenie Area" shall mean that part of OP178 outlined
in red on the map which is the Fifth Schedule hereto.
1.1.19 "Petroleum" shall mean naturally occurring hydrocarbons in a
free state whether gaseous liquid or solid but does not
include coal shale or a substance which may be extracted from
coal shale or other rock by the application of heat or by a
chemical process.
<PAGE>
1.1.20 "Petroleum Act" shall mean the Petroleum (Prospecting &
Mining) Act 1954-1982 of the Northern Territory of Australia
and any regulations or rules made thereunder and any statutory
amendment or replacement thereof.
1.1.21 "Sole Risk Operator" shall mean the Sole Risk Operator
appointed under Clauses 14.4 or 15.7 hereof.
1.1.22 "West Mereenie Block" shall mean the aggregate of the OP178
Mereenie Area and the area the subject of the West Mereenie
Lease.
1.1.23 "West Mereenie Lease" shall mean Petroleum Lease No. 4 granted
under the Petroleum Act the area of which is outlined in
yellow on the map which is the Fifth Schedule hereto together
with all other titles conferring rights to explore for or
produce Petroleum arising from, out of, or in substitution for
the said Petroleum Lease No. 4.
1.1.24 "Work" shall mean all exploration, development, processing,
reporting, analysing, studying or any other operations or
actions of whatsoever kind which are appropriate to the
exploration of the Concession, the assessing of the Petroleum
content of the Concession, the investigation of the
feasibility of carrying out Petroleum production operations on
the Concession and the carrying out of Petroleum production
operations on the Concession when the foregoing are authorised
or required under the terms of this Agreement.
1.1.25 "Working Interest" shall mean the ratio expressed as a
percentage in which a Party at any given time shares in the
Concession (unless the context indicates that the term is used
with respect to some other right or title other than the
Concession) and the Joint Facilities and the full benefit and
advantage of all Work done on or with respect to the
Concession and in all other rights and obligations of the
Parties under this Agreement.
1.2 Interpretation. In this Agreement, unless the context requires
otherwise: -
1.2.1 monetary references are references to Australian currency;
1.2.2 the headings to any clauses or sub-clauses do not affect the
interpretation thereof;
<PAGE>
1.2.3 words importing the singular include the plural and vice
versa;
1.2.4 reference to a person includes a corporation and vice versa.
2. APPLICATION AND OBJECTIVES OF AGREEMENT:
COVENANTS
2.1 Operating Agreement. The Parties hereby agree as from the date
hereof that this Agreement shall be the Operating Agreement applying as a single
Operating Agreement to the Concession and that at the date hereof this Agreement
is the sole agreement between the Parties with respect to its object matter. As
from the date hereof the documents described in the Fourth Schedule shall be of
no further effect with respect to the Concession but notwithstanding the
foregoing, no Party shall be relieved of any liability or obligation in
existence as at the date hereof with respect to the Concession and such
documents or agreements shall remain in effect for the purpose of final
settlement of such liabilities or obligations between the Parties and shall also
remain in effect with respect to any areas titles or rights (other than the
Concession) which are subject to the terms thereof.
2.2 Venture of Parties. Pursuant to this Agreement the parties
shall be associated in a venture to appraise reserves of Petroleum in and to
develop and produce Petroleum in payable quantities from the Concession and to
do all things reasonably conducive thereto.
2.3 Duration of Venture. The venture constituted hereby ("the
Venture") shall continue while the Parties hold the Concession or any part
thereof or until one Party only remains the sole holder of the Concession
whichever shall first occur and thereafter until there has been a final
accounting between the parties pursuant to this Agreement.
2.4 Covenants by the Parties. The Parties covenant with each other
as follows:-
(a) to diligently observe and perform all of their respective
specific obligations under the Concession;
(b) generally to keep the Concession in good standing;
<PAGE>
(c) to be just and faithful to each other in all things relating
to this Agreement and to the Work and all other operations
hereunder and except as provided hereunder not to undertake
any action which might cause detriment to any other party;
(d) not to engage (either alone or in association with others) in
any activity in relation to the Concession and the Joint
Facilities other than in accordance with this Agreement.
3. OWNERSHIP OF CONCESSION AND OTHER INTERESTS -
APPLICABLE ROYALTIES
3.1 Deemed Ownership of Concession. Notwithstanding the differing
interests of the Parties in the East Mereenie Block and the West Mereenie Block,
the Parties agree that for all the purposes of this Agreement, the Concession,
the Joint Facilities and the full benefit and advantage of all Work done or with
respect to the Concession and all other benefits of the Concession shall
beneficially be owned at the date hereof by the Parties in the Working Interests
set forth in the Third Schedule hereto.
3.2. Royalties on Production. The Parties acknowledge that they are
bound by the terms and obligations entered into by the grantors under the
agreements described in Part B of the First Schedule and Part B of the Second
Schedule and that the Parties will pay the royalties thereunder and meet the
obligations thereunder severally in the proportion of their Working Interests in
the Concession from time to time.
4. OWNERSHIP OF PRODUCTION
4.1 Ownership of Production. All Petroleum produced from the
Concession shall be owned by the Parties as tenants in common in proportion to
their Working Interests from time to time.
5. OPERATOR
5.1 Initial Operator. The Operator of the Concession at the date
of commencement of this Operating Agreement is Oilmin. If Oilmin ceases for any
reason to be the initial Operator Magellan shall be entitled to elect to be
Operator by delivering to all Working Interest holders notice to that effect
prior to the holding of a meeting of the Operating Committee to appoint a
successor to Oilmin as initial Operator but such right shall not be
transferrable or assignable by Magellan.
<PAGE>
5.2 Automatic Removal of Operator If the Operator becomes bankrupt
or insolvent or commits or suffers any act of bankruptcy or insolvency, or makes
any assignment for the benefit of creditors, or goes into liquidation (other
than for the purpose of reconstruction) or has a receiver appointed of the whole
or any part of its undertaking or assets, then the Operator shall automatically
without any further action or notice cease to be Operator as from the date of
the act concerned.
5.3 Removal of Operator. If the Operator:-
(a) is served by a Party with a notice specifying a failure by the
Operator to carry out its duties as Operator and the Operator
fails to proceed diligently to rectify such default or fails
to commence and thereafter proceed diligently to rectify such
default within thirty (30) days of receiving such notice; or
(b) permits its Working Interest to fall below 10%; or
(c) fails to pay its proportionate part of a debit or call made on
the Parties in accordance with Clause 12 hereof,
then notwithstanding anything else herein contained the Operator may be
replaced by a resolution of the Operating Committee passed by a
majority in Working Interests of the Non-Operators.
5.4 Challenge of Operator
5.4.1 If at any time during the term of this Agreement, a
Non-Operator considers that the Operator is not conducting its
operations as economically or as efficiently as other
Operators under like conditions, the Non-Operator may, if it
so desires, notify the Operator to that effect (with copy
thereof to all Non-Operators), specifying the ground or
grounds for complaint.
<PAGE>
5.4.2 After such notice the Operator shall have ninety (90) days
within which to correct the cause or causes of such complaint
and if, at the expiration of the said ninety (90) day period,
such condition or conditions have not been corrected to the
satisfaction of seventy-five percent (75%) in Working
Interests of the total Working Interests of the Non-Operators,
then the Non-Operator may subject to Clause 5.1, after having
first given the Operator ninety (90) days' notice in writing
to that effect, take over from the Operator the position of
Operator hereunder.
5.5. Resignation of Operator. Notwithstanding anything else herein
contained to the contrary, the Operator may resign as Operator on giving each of
the Non-Operators not less than ninety (90) days' notice in writing of its
intention so to do.
5.6 Appointment of New Operator
5.6.1 If an Operator resigns or is removed from the position of
Operator then subject to Clauses 5.1 and 5.4.2, the
replacement Operator shall be appointed by resolution of the
Operating Committee passed by not less than a majority vote of
the Working Interests of all Parties.
5.6.2 No Party shall be appointed Operator hereunder unless it has
given its written consent to the appointment and is the holder
of not less than a 10% Working Interest.
5.6.3 An Operator who has been removed under Clause 5.3 shall not be
re-appointed Operator for a period of twelve (12) calendar
months from the date of its removal except with the unanimous
consent of the Parties holding Working Interests.
5.6.4 Except as provided in Clause 5.2 hereof (in which case the
Operator shall be replaced immediately), every replacement of
Operator shall take effect at eight (8.00) o'clock a.m. on the
first (1) day of the calendar month following the expiration
of any period of notice effecting a change of Operator,
notwithstanding anything hereinbefore contained.
5.6.5 Each Operator shall be deemed appointed on the terms and
conditions of this Agreement.
<PAGE>
5.7 Transfer of Property on Change of Operator. At the effective
date of the resignation removal or replacement of an Operator as hereinbefore
provided, the Operator being replaced shall deliver to the successor Operator
possession and control of all Work being conducted by the Operator hereunder
including any wells being drilled or operated by the Operator (except any Work
being conducted under Clauses 14 and 15 for which the previous Operator was not
Operator) and of all other facilities and all funds held for the Joint Account,
together with all Petroleum, if any, which has not theretofore been delivered in
kind, and books of account and records kept for the Joint Account and all
documents, agreements and other papers relating thereto. Upon delivery of the
said property, books and records, the Operator shall be released and discharged
from its duties as Operator and the successor Operator shall assume all duties
and obligations of the Operator, except the unsatisfied duties and obligations
of the Operator accrued prior to the effective date of the change of Operator
and for which the former Operator shall, notwithstanding its release or
discharge or any term herein to the contrary, continue to remain liable.
5.8 Assumption of Liability The successor Operator and the former
Operator shall use their best endeavours to have any person with whom the former
Operator has contracted in its capacity as Operator to recognise the assumption
of liability under any such contract by the former Operator and the Parties
shall indemnify and hold harmless the former Operator from any liability
properly incurred by the former Operator pursuant to its duties as Operator
under any such contract prior to the effective date of its replacement removal
or resignation as Operator.
5.9 Audit on Change of Operator Upon every change of Operator and
by not later than sixty (60) days after the new Operator commences to act as
Operator the Parties shall cause an audit to be made of the books of account and
records of the Joint Venture. The cost of the audit shall be charged to the
Joint Account.
6. GENERAL DUTIES OF OPERATOR
6.1 Operator to Have Charge Subject to the terms of this Agreement
and to the directions and control of the Operating Committee
the Operator shall have the custody charge management and
control of Work, including the right to acquire for the Joint
Account all properties, both real and personal, required for
such purposes and when acquired such items shall be included
in the Joint Facilities. In carrying out Work and other
activities authorised by this Agreement, the Operator shall
act in a capacity of an independent contractor and shall have
no authority to and shall not represent itself as being the
agent of any Party hereto.
<PAGE>
6.2 Competitive Contracts: Use of Own Equipment Unless the
Operating Committee shall otherwise agree, all geological and geophysical
surveys, all wells drilled and all other Work on the Concession shall be carried
out by competitive contract unless carried out by the Operator itself. The
Operator may employ its or a Party's own tools and equipment in the drilling of
wells but in such event the charge therefor shall be on competitive contract
basis and such work shall be performed by the Operator under the same terms and
conditions as shall be customary and usual in contracts with independent
contractors with similar equipment doing work of a similar nature in the area.
6.3 Various Duties of Operator Subject to the direction and
control of the Operating Committee, the Operator shall, except as herein
elsewhere specifically provided, for the Joint Account do all things necessary
for the purpose of implementing approved programmes and budgets including but
not limited to:-
(a) pay when due all costs and expenses authorised and chargeable
hereunder and all fixed payments, charges, levies, expenses
and other payments required by law and incurred and arising
out of Work and keep the Concession and the Joint Facilities
free from liens and encumbrances in respect thereof created by
or likely to be created by actions of the Operator while
acting as such;
(b) promptly commence and diligently prosecute all Work and make
all payments necessary to keep the Concession and the Joint
Facilities free from forfeiture or cancellation under the
Petroleum Act or otherwise;
(c) do all other acts and things necessary and advisable in the
Operator's judgment to comply with the terms and conditions of
the Concession in order to protect it from default and
forfeiture;
(d) provide, hire, direct and discharge all contracts,
consultants, staff and employees and furnish all materials,
supplies and equipment for the operation required hereunder,
all the staff and employees to be and remain the separate
staff and employees of the Operator and to be carried on its
payroll and subject to its sole direction;
<PAGE>
(e) comply with all applicable laws and regulations of any
governmental authority having jurisdiction concerning the
Concession and with the terms of the CLC Agreement insofar as
it relates to the duties of Operator hereunder;
(f) keep an accurate record of all Work including a log of all
wells drilled hereunder and accurate and itemised records of
all Petroleum produced from the Concession;
(g) keep the Joint Facilities in a safe and operable condition or
some other condition approved by the Operating Committee; and
(h) maintain the insurance to be taken out by the Operator in
accordance with this Agreement.
6.4 Handling of Claims Any claim or suit touching the subject
matter of this Agreement (other than a claim or suit between the Parties inter
se) for any amount shall be promptly reported to the parties. Any and all such
claims and suits to the extent not covered by insurance arising out of Work may
be compromised and settled or shall be defended by the Operator provided however
that the Operator shall not pay more than the equivalent of $25,000.00 in the
settlement of any claim or suit without first obtaining the approval of the
Operating Committee. For those claims and suits for an amount in excess of the
equivalent of $25,000.00 the Operator shall comply with any directions given by
the Operating Committee with respect hereto. Each Party hereto shall have the
right to be represented by its own counsel and at its expense in the settlement,
compromise or defence of claims and suits in amounts in excess of the equivalent
of $25,000.00 or which, in the opinion of the Party in question, involve an
issue of principle and notwithstanding any provision to the contrary, each Party
may, to the extent of that part of the claim or suit for which it may be liable
to settle, compromise or defend such claim or suit.
6.5 Preparation of Reports The Operator shall prepare for
signature by the required parties or persons and lodging by the Operator (in
conjunction with the holders of the Concession) with the proper authorities all
returns or reports required by the applicable laws and regulations together with
all related material required to be submitted.
<PAGE>
6.6 Standard of Care The Operator shall conduct all Work in a
good and workmanlike manner in accordance with good exploration and oilfield
practice and shall ensure that the terms and conditions of the Concession are
met. The Operator shall exercise good faith in its operations hereunder and
where it acts as aforesaid shall not be liable for the result of any error in
judgment or for the loss of or damage to any jointly owned property occurring in
the course of its operations or for any loss occasioned by defects in equipment
or for any other loss or damage except in each case aforesaid such loss as may
result from negligence wilful misconduct or wilful failure or from the breach of
the provisions of this Agreement by the Operator.
6.7 Indemnification of Operator The Operator shall not be liable
to the Non-Operators for any act or omission in the conduct of Work hereunder so
long as such act or omission is not due to negligence wilful misconduct or
wilful failure or from the breach of the provisions of this Agreement on the
part of the Operator. All liabilities incurred by the Operator in carrying out
duly authorised operations hereunder except those resulting from such
negligence, wilful misconduct or wilful failure or from the breach of the
provisions of this Agreement shall be charged for the Joint Account and borne by
the parties hereto as provided in Clause 11.2 hereof.
7. NON-OPERATORS RIGHTS TO ACCESS AND INFORMATION
7.1 General Right to Access and Information Unless and to the
extent that the provisions of this Clause 7 shall otherwise specifically
provide, the Operator shall:-
(a) give timely notice to each Non-Operator of all information
under the control of the Operator in its capacity as Operator
which in the reasonable opinion of the Operator is material to
the Venture;
(b) give the fullest response available from information under the
control of the Operator in its capacity as Operator to any
question from a Non-Operator concerning any aspect of the
Venture;
(c) supply to a Non-Operator upon request a copy of any document,
communication or other writing under the control of the
Operator in its capacity as Operator with respect to the
Venture whether it is material or not; and
<PAGE>
(d) permit a Non-Operator upon reasonable notice to inspect during
normal business hours any records of the Operator with respect
to the Venture at the office or location where such records
are normally kept PROVIDED THAT such inspection shall be
carried out with a minimum of inconvenience to the Operator.
7.2 Right of Access Each Non-Operator shall at the Non-Operator's
sole risk and expense at all times have the right through its authorised
representatives to have access to and to observe and inspect Work and all
geological, geophysical, drilling and production records and interpretations and
otherwise to be fully informed as to progress and results of all operations
hereunder, provided that in exercising such rights a Non-Operator shall not act
in such a manner as to hinder the progress of or jeopardise the safety of Work.
Each Non-Operator shall be entitled on request made prior to the taking of
sample and cores from the well concerned and subject to the availability to
receive core and formation samples from the intervals in each well drilled and
to make copies of all documents of any kind relating to Work or proposed Work
hereunder.
7.3 Information from Surveys Subject to Clause 14.6 hereof the
Operator for the Joint Account shall furnish to each Non-Operator requesting
them both during and upon conclusion of any geological geophysical or other
survey conducted on the Concession full and complete details of the survey and
of the information, data and results obtained therefrom. Such information shall
include clear film transparencies and all seismic profiles and other base data
and maps and other interpretative information and one copy of the final report
of each seismic programme. The Operator shall at the request and cost of a
non-Operator and at a time which will not impede the conduct of operations make
available to the Non-Operator for copying the Operator's field records and
magnetic tapes.
7.4 Notices as to Drilling The Operator shall promptly notify the
Non-Operators in writing of -
(a) the date of intended commencement and the date of actual
commencement of the drilling of any well drilled hereunder;
and
(b) the location of any well fixed by giving the distances and
directions thereof from at least two recognized geographical
locations or the location of the well in terms of latitude and
longitude and shall provide a copy of a location survey plan
for such well.
<PAGE>
7.5 Operator's Duties During Drilling In respect of the drilling
of each well drilled on the Concession the Operator shall -
(a) Save representative formation samples at approximately three
(3) metre intervals in the said test well and keep the
drilling mud or other drilling medium in appropriate condition
to bring representative samples to the surface.
(b) Have a suite of logs as approved by the Operating Committee
duly carried out.
(c) In a good and workmanlike manner core and test promptly all
prospective oil and/or gas formations which may be encountered
in the drilling of the well unless otherwise directed by the
Operating Committee and to permit each Non-Operator to inspect
any cores so taken.
(d) In the event that any show of oil and/or gas is encountered
forthwith notify each Non-Operator to such effect.
(e) Upon the making of any drill stem test in the well immediately
furnish each Non-Operator with details and results of any such
test.
(f) Permit the authorised representatives of each Non-Operator at
all times (subject to safety requirements) to have access to
the derrick floor, the log books, the cores and samples and
any information about the well.
(g) At the request of any Non-Operator (and provided that there is
no objection on the part of the Operator and any other
Non-Operator) at the sole cost risks and expense of the
Non-Operator conduct additional testing and/or logging and/or
coring and/or deepening of any well before the drilling rig
and other equipment used to drill test and core the said well
has been removed from the location.
7.6 Information During Drilling During the drilling of any well
hereunder the Operator shall for the Joint Account promptly furnish to each
Non-Operator requesting them the following reports, information and data:
<PAGE>
(a) Daily drilling reports showing the nature of all work done and
depth and formations penetrated;
(b) One copy of drilling time record on a weekly basis;
(c) Two copies of any mechanical wireline or electrical survey or
the equivalent thereto that is run in the course of the well;
(d) One copy of the Lithologic Log on a weekly basis;
(e) One set of ditch samples;
(f) The results of any drill stem test carried out. Preliminary
reports of drill stem tests will be advised by telephone and
confirmed by telex or telegram.
7.7 Information after Completion of Drilling As soon as
practicable after completion of the drilling of any well hereunder the Operator
for the Joint Account shall deliver to each Non-Operator requesting them a clear
film transparency of all wireline surveys conducted and a copy of the final well
completion report. Each copy of the well completion report shall include the
following:-
(a) a copy of all wireline surveys conducted;
(b) a copy of the mud logging survey;
(c) a copy of the velocity survey, or the equivalent thereto, if
run;
(d) a copy of the well site geologist's description of the ditch
samples;
(e) a copy of the well site geologist's description of the
sidewall cores or conventional cores, if taken;
(f) a copy of the commercial core analyses (sidewall or
conventional) if cores are taken;
(g) a copy of the commercial analyses of the water, gas or oil, if
test and recovery are made;
(h) a copy of the analyses made in dating a sample radioactively
or palaentologically;
(i) a copy of the geological reports;
(j) a copy of the well location map;
(k) a copy of the well history;
(1) a copy of the well records;
(m) a copy of the drilling report;
(n) a copy of the mud record;
(o) a copy of the bit record;
(p) a copy of the formation test data, if test is made;
(q) a copy of all other data relative to the well.
<PAGE>
7.8 Periodic Reports The Operator shall prepare and forward to
each Non-Operator a copy of the following periodic reports: -
(a) An annual report within two calendar months of the end of each
and every Concession Year setting out in reasonable detail
Work done, results achieved and expenditure made during the
preceding Concession Year.
(b) A quarterly report within one month after the end of each
quarter during a Concession Year during which Work is being
carried out setting out briefly work done results achieved and
an estimate of expenditures during the preceding quarter.
(c) A monthly report within fourteen (14) days after the end of
each month during which commercial production of Petroleum
takes place in the Concession setting out the quantity of
Petroleum produced in the Concession, such information as
comes into the possession of the Operator concerning the
quantity of such Petroleum sold and the price obtained
therefor and an estimate of the expenses of such production
and sale of Petroleum during the preceding month.
7.9 Copies of Reports to Government The Operator shall forward
to each Non-Operator a copy of each report notice or other communication which
the Operator shall at any time be required or may elect to give or deliver to
any Government with respect to the Concession such copy to be posted to each
Non-Operator concurrently with the delivering thereof to that Government.
7.10 Information to Non-Operator. The Operator shall at the expense
of the Joint Account provide a Non-Operator with such information as it shall
request as to the allocation of expenditures production and reserves as between
the East Meerenie Block and the West Mereenie Block.
7.11 Non-Operator in Default A Non-Operator in default in payment
pursuant to the terms hereof shall not be entitled to any information, access to
Work, copies of reports or documents or any other material or information
pursuant to this Clause 7.
<PAGE>
8. THE OPERATING COMMITTEE
8.1 Establishment of Operating Committee To provide for the
orderly selection of Work and the control and direction thereof there shall be
established an Operating Committee. Each Party holding a Working Interest shall
appoint one representative of the Operating Committee. The representative of the
Operator shall be the Chairman of meetings of the Operating Committee.
8.2 Notification of Representatives Operator and each Non-Operator
shall notify the others of the name and address of its representative to the
Operating Committee and from time to time by notice to the others each may
replace its representative and/or may designate an alternative representative to
act in the absence of its representative.
8.3 Powers of Operating Committee The Operating Committee shall
be the coordinating committee between the parties having an interest in the
Concession and shall be empowered to make decisions binding on all Parties with
respect to the following: -
(a) the programme of Work or expenditures necessary to keep the
Concession in good standing free from loss or cancellation
whether under the Petroleum Act or otherwise and the actions
necessary to maintain the Joint Facilities in a safe and
operable condition;
(b) any programme of Work or expenditures in addition to that
referred to in the preceding sub-clause (a) which is
unanimously agreed to by the Parties;
(c) the review adoption and revision of detailed programmes and
budgets to give effect to decisions made pursuant to the
preceding paragraphs (a) and (b) of this Clause;
(d) in the case of a permit held under the Petroleum Act (after
consultation with others not a Party to this Agreement but
having an interest in the permit) the proposals to be made for
a renewal or extension of the permit including that portion of
the permit area which it is necessary to delete or excise in
order to obtain a renewal or extension of the permit;
(e) the establishing of policies from time to time governing or
relating to all Work or other activities under this Agreement;
<PAGE>
(f) to exercise all powers in relation to the operation of the
Concession not specifically delegated to the Operator
hereunder.
8.4 Any Non-Operator May Submit Matters Either the Operator or any
of the Non-Operators may submit to the Operating Committee for consideration any
matters pertaining to the exploration development and production of the
Concession action on which is not required to be determined in any other manner
set out in this Agreement and the Operating Committee is hereby authorised to
resolve all such matters and take such actions as are not herein allocated to
the Operator.
9. MEETINGS AND VOTING OF OPERATING COMMITTEE
9.1 Times and Agenda for Meetings The Operating Committee shall
meet whenever requested by any Non-Operator or the Operator by the giving to the
Operator and all Non-Operators of at least twenty-one (21) days notice (or such
shorter reasonable period of notice as may be agreed by all Parties entitled to
appoint a representative to the Operating Committee). The agenda for such
meeting shall be given with such notice and any additions to or deletions from
such agenda advised to each Party entitled to such notice not less than seven
(7) days prior to the date of meeting or such shorter time as all such Parties
or their representatives on the Operating Committee may agree.
9.2 When No Notice Necessary No notice of meeting shall be
necessary when persons representing all Non-Operators and the Operator are
present and agree upon the meeting being held and the agenda for such meeting. A
matter not included in the agenda for a meeting shal1 not be voted upon at any
such meeting except by the unanimous agreement of all Parties entitled to vote
on that matter.
9.3 Minutes of Meeting The Operator shall provide such secretarial
services as are required for each meeting of the Operating Committee and shall
keep a record of decisions made at each meeting of the Operating Committee and
shall distribute copies thereof to each Non-Operator as soon as practicable
following each meeting of the Operating Committee for endorsement by the
representative of such Party as a true record of decisions made at such meeting
of the Operating Committee.
9.4 Place For Meetings All meetings of the Operating Committee
shall be held at the principal office of the Operator in Australia or at such
other place as is agreed by the Operator and the Non-Operators.
<PAGE>
9.5 Advisers May Attend Each representative shall be entitled to
have present at any Operating Committee meeting such reasonable number of
advisers as he or they may desire and which are appropriate to the matters under
consideration.
9.6 Votes Required For Committee Decisions Decisions of the
Operating Committee with respect to any programme of Work or expenditures and
any revision thereof in addition to that which is necessary to keep the
Concession in good standing free from loss or cancellation whether under the
Petroleum Act or otherwise and the actions necessary to maintain the Joint
Facilities in a safe and operable condition shall be made by a unanimous vote of
the representatives of the Operator and the Non-Operators. All other decisions
of the Operating Committee (except as provided in Clause 9.7 hereof) shall be
made by a majority vote of the representatives present and voting in proportion
to the respective Working Interests from time to time of the Parties represented
by such representatives except that a Party which has failed to make a payment
hereunder to the Operator when due shall not be entitled to vote until such
payment is made and a binding decision may be made by the Operating Committee in
the absence of its vote. In the event of an equality of voting the decision
shall be in the negative.
9.7 Other Forms of Voting Decisions as to matters under
consideration at any meeting may as appropriate be made at that meeting or may
be made subsequent to the meeting by each representative qualified to vote
submitting his vote in writing to the other representatives and to the Operator.
Decisions requiring a majority vote only at meetings of the Operating Committee
may in the absence of a meeting be made by affirmative vote by telex cable or
telegram by representatives of Parties holding an aggregate of at least 95
percent of the Working Interests. Decisions made pursuant to this Clause shall
be minuted pursuant to Clause 9.3 hereof as if made at a meeting of the
Operating Committee.
9.8 Decisions Binding on All Parties Decisions of the Operating
Committee made pursuant to the preceding paragraphs 9.6 and 9.7 shall be binding
on all Parties including the Operator.
9.9 Quorum For Meetings A quorum for meetings of the Operating
Committee shall be representatives of Parties with Working Interests in the
Concession aggregating not less than 75%. If such a quorum is not present within
two hours of the time and at the place for which the meeting in question is
called such meeting shall be adjourned for a period of seven (7) days to the
same place and time of day (and notice of such adjourned meeting shall be given
to all parties no later than the day following the day on which such meeting was
adjourned) and at such adjourned meeting the representatives present and
entitled to vote shall constitute a quorum and the business of the meeting shall
proceed with whatever numbers are present.
<PAGE>
9.10 Voting at Adjourned Meetings Decisions which require a
majority vote of Working Interests under Clause 9.6 may be made at such
adjourned meeting by a majority vote of the representatives present and voting
in proportion to the respective Working Interests from time to time of the
Parties represented by such representatives. A Party which has failed to make a
payment hereunder to the Operator when due shall not be entitled to vote until
such payment is made. A representative unable to attend an adjourned meeting
shall be entitled to vote at such meeting by sending its vote in writing or by
telex to the Operator prior to the commencement of an adjourned meeting and such
vote shall be taken into account in deciding whether resolutions proposed at
such meeting are passed.
10. PROGRAMMES AND BUDGETS
10.1 Operator to Prepare Programmes and Budgets The Operator shall
prepare and submit to the Operating Committee from time to time such programmes
and budgets:-
(a) as are required to keep the Concession free from any
forfeiture or cancellation under the Petroleum Act and to
maintain the Joint Facilities in a safe and operable
condition; and
(b) in respect of any additional programme of Work to be
unanimously approved by the Operating Committee.
10.2 Times for Submission The Operator shall prepare and submit to
the Operating Committee a programme and budget for the work required pursuant to
Clause 10.1(a) hereof at least two (2) calendar months before the commencement
of each Concession Year, and shall prepare and submit programmes pursuant to
Clause 10.1(b) from time to time. The programme and budget for a Concession Year
shall be divided into four segments each of three calendar months commencing on
1st January, 1st April, 1st July and 1st October. Each such segment is
hereinafter referred to as a Quarterly Segment.
10.3 Contents of Programmes and Budgets Each programme and the
related budget recommended by the Operator shall contain details and
descriptions of objectives, cost estimates and estimated period of time required
to perform each item of Work, itemised equipment or property to be purchased and
the costs thereof. Where a programme and budget is prepared for a Concession
Year, then it shall contain detailed cost estimates and descriptions of Work to
be performed for the first Quarterly Segment thereof at least, and shall contain
at least general estimates of costs and general descriptions of Work to be
performed in following Quarterly Segments. A programme and budget may include
estimates for Quarterly Segments other than those in the Concession Year to
which it is intended to relate.
<PAGE>
10.4 Approval of Programmes and Budgets
(a) The Parties shall use their best endeavours to adopt a
programme and budget for each Quarterly Segment prior to the
commencement of each such Quarterly Segment.
(b) The Operating Committee may at any subsequent meeting review
and revise any programme and budget for a Concession Year or
any Quarterly Segment thereof which has previously been
adopted by the Operating Committee, by the same majority which
was required for its adoption.
(c) The Operating Committee may approve any programme and budget
or revised programme and budget (whether for a Concession Year
or Quarterly Segment or Quarterly Segments) subject to the
provision by the Operator to the Non-Operators in respect of
any item (such as the drilling of a well or a geological or
geophysical survey) contained in such programme of a Detailed
Estimate of Expenditure in respect of that item and the
satisfaction of the provisions of this Clause 10.4.
(d) Any Non-Operator ("the Notifying Party") may within fourteen
(14) days of the receipt of such Detailed Estimate of
Expenditure from the Operator give to the Operator a notice
requiring the Operator to call a meeting of the Operating
Committee to consider the variation of the Detailed Estimate
of Expenditure in the respects particularised in such notice.
(e) Upon receipt of such notice the Operator shall forthwith call
a meeting of the Operating Committee and give to all other
Non-Operators a copy of the Notifying Party's notice. At such
meeting of the Operating Committee such Detailed Estimate of
Expenditure shall be approved in such form or amended form as
shall be resolved by the same majority as was necessary for
the approval of the programme in which such item was
contained.
(f) A Detailed Estimate of Expenditure shall become binding on all
Parties required to contribute to the cost thereof in the form
given by the Operator if within fourteen (14) days after
receipt thereof no Non-Operator shall have given the Operator
a notice pursuant to Sub-Clause (d) hereof or in the form or
amended form approved by the Operating Committee upon the
approval made pursuant to Sub-Clause (e) hereof.
<PAGE>
(g) The approval of the Operating Committee to a programme and
budget and the satisfaction of the provisions of this Clause
10.4 in respect of such Detailed Estimates of Expenditure as
are required pursuant to Sub-Clause (b) hereof shall
constitute approval for the Operator to carry out that
programme and incur expenditures as approved and the Operator
shall not be required to obtain any other approvals to require
the Parties to reimburse the Operator for their respective
shares of such expenditures pursuant to Clause 12.1 hereof or
to pay a call by the Operator pursuant to Clause 12.2 hereof.
10.5 Operator to Act in Absence of Approval If the Operating
Committee is unable to adopt a programme and budget for a Concession Year by the
commencement of that Concession Year then the Operator may for the Joint Account
carry out such Work and make such payments as is necessary to keep the
Concession in good standing and free from forfeiture or cancellation under the
Petroleum Act and to maintain the Joint Facilities in a safe and operable
condition. The Operator shall not commence such Work any earlier than is
reasonably necessary to maintain the Concession in such good standing during and
at the end of the Concession Year and in the event that at any time during the
Concession Year the Operating Committee adopts a programme and budget for the
balance of the Concession Year the Operator shall carry out such programme and
budget. The Operator shall carry out such Work and make such payments if it has
pursuant to Clause 12.2 hereof called the costs thereof and such calls have been
paid.
10.6 Notice of Excess Expenditures If while carrying out an
approved programme it becomes apparent either that expenditures on such
programme will or are likely to exceed the budget or the Detailed Estimate of
Expenditure approved or deemed approved therefor by more than TEN PERCENT (10%)
of such budget or that expenditures on any item in such approved programme will
or are likely to exceed the budget or the Detailed Estimate of Expenditure
approved or deemed approved for such item by more than TEN PERCENT (10%) thereof
the Operator shall forthwith notify all Non-Operators giving as much details as
possible of the Work and activities and the costs thereof which will or are
likely to cause such excess expenditure.
<PAGE>
10.7 Approved Programme to Continue Unless Modified Notwithstanding
the giving of a notice by the Operator pursuant to Clause 10.6 hereof the
Operator shall continue with the conduct of the programme approved unless and
until the Operating Committee modifies the approved programme so as to avoid or
reduce such excess expenditure. The Operator shall be entitled to recover any
expenditures duly incurred by it under Clause 10.6 hereof or this Clause 10.7
(including without limiting the generality thereof amounts payable by the
Operator to third parties as the result of modification or termination of a
previously approved programme under this Clause 10.7 hereof) from the Parties as
though such excess expenditures had been approved by the Operating Committee.
11. CHARGING OF COSTS
11.1 Authorised Costs and Expenses Except as specified herein,
all costs and expenses liabilities and charges including those specified in the
Accounting Procedure and whether in contract or in tort incurred or to be
incurred by the Operator in conducting Work hereunder in accordance with the
terms of this Agreement shall be deemed "authorised" or "properly authorised"
costs expenses and liabilities as those terms are used herein.
11.2 To Be Charged For the Joint Account All authorised costs
expenses and liabilities shall be charged to and borne by each of the Parties
hereto in accordance with its Working Interest at the time at which the invoice
or call was sent by or made by the Operator.
11.3 Establishment of Records The Operator shall set up and
maintain adequate accounting records for all properly authorised costs and
expenses which shall be charged to the Parties hereto on the basis set out in
the said Accounting Procedure.
11.4 Treatment of Any Subsidy or Contribution In the event that
any subsidy or other contribution is paid to the Operator or to any of the other
Parties hereto as a result of any event relating to the Concession all such sums
shall be credited to the Party or Parties contributing thereto in proportion to
their contributions.
<PAGE>
12. CONTRIBUTIONS BY THE PARTIES
12.1 Payment by Operator and Reimbursement The Operator shall
initially pay all properly authorised costs expenses and liabilities incurred by
it in connection with Work and shall debit the Parties hereto for their
respective shares of all such authorised costs. Unless the Operator shall have
received advances for such purposes as hereinafter provided each Non-Operator
shall forthwith reimburse the Operator for its share of such costs and expenses
in accordance with the provisions hereof and the Operator shall forthwith
contribute its share of such costs and expenses.
12.2 Call By Operator The Operator shall have the option of
requiring the Non-Operators to advance their respective proportions of costs and
expenses for a period of three (3) calendar months consisting of a Quarterly
Segment or parts of two Quarterly Segments (and whether or not a Detailed
Estimate of Expenditure is binding on the Parties with respect thereto) in
accordance with the following: -
(a) On or before the last day of any calendar month during the
term hereof, the Operator will debit the Parties for their
estimated respective shares of the authorised costs and
expenses anticipated for the ensuing three (3) calendar month
period and in making such debit the Operator shall show a
credit for any amounts previously called relating to
anticipated costs for any part of the three (3) calendar month
period concerned.
(b) Before the Operator shall be obliged to execute any contract
or undertake any commitment for the carrying out of Work under
this Agreement the Operator will debit the Parties for their
respective shares of the liability estimated to be incurred
pursuant to any such contract or commitment to the extent to
which it is not already included in debits made pursuant to
the preceding sub-clause (a).
(c) Each Non-Operator shall pay to the Operator such estimated
shares of such authorised costs and expenses referred to in
the preceding sub-clauses (a) and (b) within fifteen (15) days
after the receipt of the debit note or invoice, and the
Operator shall contribute its share of such authorised costs
and expenses within the same time.
(d) Notwithstanding any provision in this Agreement to the
contrary the Operator shall not be obliged to execute any
contract or undertake any commitment referred to in the
preceding sub-clause (b) until the Operator has received
payment of all the amounts debited to the Non-Operators
pursuant to such sub-clause.
<PAGE>
(e) Notwithstanding that the Parties are obliged to make payment
of a call by the Operator as aforesaid relating to a period
for which a Detailed Cost Estimate is not then binding on
Parties, the Operator shall not be entitled to expend funds
paid in respect thereof until a Detailed Cost Estimate with
respect thereto is binding on the Parties or the Operator is
otherwise authorised to do so.
12.3 Adjustment Adjustments between estimated and actual authorised
costs and expenses shall be made by the Operator within forty-five (45) days of
the end of the month and the accounts of the Parties hereto shall be adjusted
accordingly and any excess amount advanced shall be at the direction of each
Party refunded or credited against its future liabilities hereunder.
12.4 Defaulting Party Liable for Interest Should any Party fail or
refuse to pay or contribute its said estimated share of such authorised costs
and expenses within the said fifteen (15) days period or fail or refuse to pay
or contribute on its due date any other moneys payable the same shall bear
interest at the Default Interest Rate from the due date of payment until paid.
12.5 Banking and Investment of Funds All funds received by the
Operator under the provisions of this Agreement (other than Clause 12.1 hereof)
shall be lodged by the Operator in a separate bank account in Australia
maintained by the Operator with a major trading Bank chosen by the Operator. The
Operator shall deposit to such account its own share as party of such funds as
are due by it within the same time limits within which the Non-Operators are
required to pay their shares to the Operator. Each Party hereby authorises the
Operator to invest its funds deposited to such account from time to time in
interest bearing deposits with such bank or with the prior unanimous approval of
the Operating Committee in such other forms of investment as are from time to
time approved by the unanimous resolution of the representatives on the
Operating Committee. Any interest so obtained shall be credited by the Operator
to the Joint Account for the benefit of the Parties in proportion to their
contributions to the funds invested. The Operator is hereby authorised to
withdraw funds from such bank account or interest bearing term deposit as they
are required by the Operator to pay authorised costs and expenses hereunder.
<PAGE>
13. INSURANCE
13.1 Operator to Maintain Insurance The Operator shall at all
times while conducting Work purchase and maintain for the protection of the
Parties holding Working Interests:-
(a) All insurance as may be required by law including workers
compensation and other similar insurances and motor vehicle
insurance; and
(b) Third party property damage insurance covering all motor
vehicles engaged in Work and within the control of the
Operator up to the extent of $5,000,000 for damages resulting
from any one occurrence; and
(c) Public liability insurance including property damage insurance
covering all activities under this Agreement with a limit of
not less than $10,000,000 per occurrence; and
(d) Control of well insurance up to the extent of $10,000, 000;
or such higher amounts as may be determined from time to time by the Operating
Committee.
In taking out such insurance the Operator and each Non-Operator shall be
included as an insured under such insurance except where such action is
prevented by applicable laws or is contrary to the terms of this Agreement or
except in the case of third party motor vehicle insurance. Where the Operator
engages the services of a contractor or sub-contractor the Operator shall ensure
that such contractor or sub-contractor or the Operator carries such insurances
as are required by law and such other additional insurances which the Operator
is of the opinion are appropriate in the particular case.
13.2 Advice to Non-Operators of Current Insurance The Operator will
furnish the Non-Operators within one calendar month after each 31st day of
March, 30th day of June, 30th day of September and 31st day of December during
the term hereof with a list of all current insurances effected by the Operator
pursuant to this Agreement and having relation to Work and shall advise the
Non-Operators at least once each calendar month of any additional insurance
effected or of any insurances cancelled or lapsed.
<PAGE>
13.3 Increase in Insurance Any Non-Operator may at any time request
the Operating Committee in writing to direct the Operator to increase the amount
of insurance actually carried in respect of any occurrence or to effect
insurance against any occurrence the risk or loss from which is not covered by
any insurance effected by the Operator.
13.4 Right to Carry Own Insurance Notwithstanding any provision
herein to the contrary, each Party shall be entitled to take out at its own cost
such additional or alternative insurance as it wishes.
13.5 Cost of Insurance For the Joint Account Subject to the
provisions of Clauses 13.3 and 13.4 hereof the actual costs of the insurance
effected by the Operator shall be charged for the Joint Account and any
liability loss damage claim or expense suffered by or charged for the Joint
Account and resulting from occurrences not covered by or which are in excess of
the insurance actually carried shall be borne by the Parties hereto in the
proportion of their Working Interests at the time of the loss PROVIDED HOWEVER
that if the Operator shall not have exercised the degree of care provided by
Clause 6.7 hereof then the amount of such loss shall be chargeable to the
Operator and no part of it shall be borne by the Non-Operators.
14. SOLE RISK OPERATIONS - GEOLOGICAL AND GEOPHYSICAL
SURVEYS
14.1 Application The provisions of this Clause 14 relate to
geological and geophysical exploration operations on the Concession which are
not, or which are in excess of, operations necessary to keep the Concession in
good standing and free from forfeiture or cancellation under the Petroleum Act
and which are not agreed to by all Parties holding a Working Interest. Any Party
or Parties holding a Working Interest may carry out such operations upon
complying with the requirements of this Clause 14.
14.2 Notice of Operations A party proposing to carry out operations
pursuant to this Clause 14 ("the Notifying Party") shall give to all other
Parties holding a Working Interest not less than thirty (30) days notice of such
operations ("Notified Operations"). Such notice shall contain a detailed
statement of the Notified Operations including a description of the area to be
surveyed the type of survey to be conducted and the estimated cost thereof.
<PAGE>
14.3 Consent by Others Any Party holding a Working Interest ("a
Consenting Party") may within fifteen (15) days of the receipt of a notice
pursuant to Clause 14.2 hereof give notice to the Notifying Party of its consent
to the Notified Operations. The Notifying Party and all Consenting Parties shall
be entitled to participate in the Notified Operations in the proportions that
their respective Working Interests bear to the total of the Working Interests of
all Parties participating in the Notified Operations, expressed as a percentage.
14.4 Operator for Sole Risk Operations In the event that the
Notifying Party and the Consenting Parties do not include the Party who is the
Operator of the Concession then the Notifying Party and the Consenting Parties
voting in proportion to their respective Working Interests shall by majority
vote elect a Party to be the Sole Risk Operator for the purpose of the conduct
of the Notified Operations. This Agreement shall bind the Parties participating
in Notified Operations and the Party acting as Sole Risk Operator in respect of
such Notified Operations as though it was a separate Operating Agreement
applying to such Notified Operations. Such Sole Risk Operator shall co-operate
with the Operator of the Concession for the purpose of satisfying all recording
and other obligations of the Concession in relation to the Notified Operations.
14.5 Non-Consenting Party A Party not consenting to such operations
(a "Non-Consenting Party") shall not be entitled to receive any of the
information obtained in conducting operations pursuant to this Clause 14 except
to the extent and under the conditions hereinafter specified.
14.6 Right to Information A Non-Consenting Party in respect of
geological and/or geophysical exploration Notified Operations may at any time
receive information obtained in conducting any such Notified Operation in which
it did not participate by paying to the Party or Parties who paid the costs
thereof three hundred percent (300%) of the proportionate part of the cost of
conducting any such Notified Operation in which it did not participate
(regardless of whether all or a portion of the lands comprising the Concession
have been surrendered) which would have been charged to such Party had it
participated in such Notified Operation.
<PAGE>
15. SOLE RISK OPERATIONS
DRILLING OF WELLS
15.1 Application The provisions of this Clause 15 relate to the
drilling or deepening of wells on the Concession which are not, or which are in
excess of, operations necessary to keep the Concession in good standing free
from forfeiture or cancellation under the Petroleum Act and which are not agreed
to by all Parties holding a Working Interest. Any Party or Parties holding a
Working Interest may carry out such operations upon complying with the
requirements of this Clause 15.
15.2 Definition of Terms In this Clause 15 the following words
shall have the meanings hereinafter assigned: -
(a) "Producer of Petroleum in Payable Quantities" means a well
which considering the cost of Petroleum production operations,
the probable life of the well, the available market for
Petroleum production therefrom and the price, nature and
quality of the Petroleum produced, commercially and
economically warrants the continued taking of Petroleum from
such well.
(b) "Appraisal Well" means a well which at the time of spudding in
is located at a distance of less than eight (8) kilometres
from any well (whether located on the Concession or not) being
or capable of being a Producer of Petroleum in Payable
Quantities from the same zone to which it is intended to drill
the proposed well or from any shallower zone whether or not
such other well is completed as a Producer of Petroleum in
Payable Quantities.
(c) "Exploration Well" means either -
(i) a well which at the time of spudding in is located at
a distance of eight (8) kilometres or more from any
other well (whether located on the Concession or not)
being or capable of being a Producer of Petroleum in
Payable Quantities from the same zone or from any
shallower zone than the zone to which it is intended
to drill the proposed well whether such other well is
a Producer of Petroleum in Payable Quantities or not;
or
<PAGE>
(ii) a well which at the time of spudding in is located at
a distance of less than eight (8) kilometres from
such other well but which it is proposed to drill to
a deeper formation than that from which the said
other well is a Producer of Petroleum in Payable
Quantities or is capable of being a Producer of
Petroleum in Payable Quantities.
15.3 Notice of Drilling If any Party or Parties holding a Working
Interest desire that an Appraisal Well or an Exploration Well be drilled at any
particular location on the Concession then such Party or Parties (in this Clause
15 together with any Party or Parties electing to participate pursuant to Clause
15 hereof referred to as "the Desiring Party or Parties") may give to the other
Parties holding a Working Interest written notice of the desire to drill such
well specifying the location, the proposed depth or geological target and the
estimated cost thereof and whether the proposed well is an Appraisal Well or an
Exploration Well. Notwithstanding anything herein to the contrary, no notice may
be given under the provisions of this Clause 15.3 where the activity proposed in
such notice (in this Clause 15 called "Notified Operations") would interfere
with any Work being carried out or approved to be carried out.
15.4 Notice of Participation The Parties receiving such notice
shall have thirty (30) clear days after the receipt of such notice within which
to notify the Desiring Party or Parties whether they elect to participate in the
drilling of the said well at the said location. Failure of any Party receiving
such notice to notify whether or not it elects to participate within the said
period of thirty (30) clear days shall be deemed a refusal on its part of its
right to participate in the drilling of the proposed well.
15.5 Unanimous Participation If all Parties receiving such notice
elect to participate in the said well and so advise the Desiring Party or
Parties of such election then the said well shall be drilled by the Operator
under the terms of this Agreement with the costs thereof being for the Joint
Account.
15.6 Non-Desiring Party If any Party receiving the aforesaid notice
shall refuse expressly or impliedly to participate in the drilling of the
proposed well (any such party being hereinafter referred to as a "Non-Desiring
Party") the provisions hereinafter provided shall apply.
<PAGE>
15.7 Operator For Sole Risk Drilling The Operator for the purpose
of Notified Operations shall if the Operator of the Concession is a Desiring
Party be such Operator. In the event that the Desiring Party or Parties do not
include such Operator then the Desiring Party or Parties voting in proportion to
their respective Working Interests in the Concession shall by majority vote
elect a Party to be the Sole Risk Operator for the purpose of the Notified
Operations. This Agreement shall bind the parties participating in Notified
Operations and the Party acting as Sole Risk Operator in respect of such
Notified Operations as though it was a separate Operating Agreement applying to
such Notified Operations. Such Sole Risk Operator shall if appropriate
co-operate with the Operator of the Concession for the purpose of satisfying all
recording and other obligations of the Concession in relation to the Notified
Operations.
15.8 Time For Commencement The Desiring Party or Parties shall have
one hundred and twenty (120) clear days after the end of the thirty (30) days'
period referred to in Clause 15.4 in which to commence the Notified Operations
at the location specified in the said notice and unless an extension of this
period is agreed to by the Non-Desiring Party or Parties if the actual drilling
of the well is not commenced within the said period or within any extension
thereof so agreed, the right of the Desiring Party or Parties to commence
drilling will be lost and all rights flowing from the giving of the notice and
the election to participate in the Notified Operations of the well shall be
terminated.
15.9 Obligation of Desiring Parties If the Sole Risk Operator shall
commence the Notified Operations at the location set out in the said notice
within the said period referred to in Clause 15.8 then:-
(a) it shall proceed with diligence to drill such well to the
depth or geological target specified in the notice (or such
lesser depth as may be dictated by operational hazard) in an
attempt to find and produce Petroleum;
(b) the entire cost and risk of the Notified Operations shall be
borne by the Desiring Party or Parties (and if more than one
then pro rata in proportion to their respective Working
Interests) and the Desiring Party or Parties shall keep the
Concession free and clear of all liens and encumbrances of
every kind and character created by or arising from the
Notified Operations and the Desiring Party or Parties shall
indemnify and keep indemnified the Non-Desiring Party or
Parties against each and every liability arising from such
operations;
<PAGE>
(c) in the event that such well is not completed after the
Desiring Party or Parties shall have terminated the drilling
of the well then the Desiring Party or Parties shall plug and
abandon the well pursuant to the terms and provisions of all
the applicable laws rules and regulations and the
environmental standards currently prevailing in the region and
shall restore the location by filling and levelling the rig
cellar and all slush pits and by removing all leasehold
equipment material and debris placed thereon by the Desiring
Party or Parties; all being at the sole cost risk and expense
of the Desiring Party or Parties.
15.10 Conformity to Spacing Patterns Without the mutual consent of
all Parties holding a Working Interest no Petroleum shall be produced from a
source of supply from which a well located elsewhere on the Concession is
producing or scheduled to produce unless such well conforms to the then existing
well spacing pattern for such source of supply laid down by a governmental
authority or by the Operating Committee.
15.11 Penalties Payable By Non-Desiring Parties If pursuant to
Clause 15.9 hereof any well is drilled and completed by the Desiring Party or
Parties then the following provisions shall apply:-
(a) The Desiring Party or Parties shall be entitled to sell all of
the Non-Desiring Party's or Parties' share of Petroleum
production of such well and to retain the proceeds of sale
thereof for the use of the Desiring Party or Parties pro rata
as hereinabove provided until such proceeds (after deducting
all royalties payable thereon all taxes on production thereof
except income taxes and all operating expenses applicable to
the Non-Desiring Party's or Parties' interest in production
all hereinafter called "Deductible Expenses") shall equal:-
(a) 200% in the case of an Appraisal Well; or
(b) 1000% in the case of an Exploration Well;
of the amount which would have been the Non-Desiring Party's
or Parties' share of the cost of drilling testing completing
and equipping such well for production if such well had been
carried out by the Desiring Party or Parties for the Joint
Account of the Parties (which share of costs is hereinafter in
the whole of this clause called "the Non-Desiring Share of
Cost").
<PAGE>
(b) When the Desiring Party or Parties shall have received:-
(a) 200% in the case of an Appraisal Well; or
(b) 1000% in the case of an Exploration Well;
of the Non-Desiring Share of Cost the said well together with
all equipment therein or used in connection therewith and all
of the Petroleum production therefrom shall thereafter be
owned in the same manner as Petroleum production from wells
drilled pursuant to this Agreement (other than wells drilled
under Clause 15 hereof) and shall thereafter be operated by
the Operator constituted under Clause 5 hereof in like manner
as other wells (other than wells drilled under Clause 15
hereof) under this Agreement.
(c) In determining the costs and expenses incurred by the Desiring
Party or Parties in the drilling testing completing and
equipping of the said well the Accounting Procedure shall be
followed.
(d) Within 120 clear days after the said well is completed as a
producer of Petroleum the Desiring Party or Parties shall
furnish to the Non-Desiring Party or Parties complete and
detailed statements setting out the cost of drilling testing
completing and equipping such well for production the said
well together with an inventory of the material and equipment
in and on the said well for use in connection therewith.
(e) During the time the Desiring Party or Parties are being
reimbursed as above provided, the Desiring Party or Parties
shall render monthly statements to the Non-Desiring Party or
Parties reflecting for each calendar month the costs and
expenses incurred in operating the well, the Petroleum
produced and saved therefrom, the proceeds derived from the
sale thereof and the quantity of Petroleum in storage at the
end of the said month. Such statement covering the previous
month's operating shall be rendered within thirty (30) clear
days following the close of such calendar month.
(f) The Non-Desiring Party or Parties shall have the right at all
reasonable times to inspect and audit the Desiring Party's or
Parties' books and records including run tickets meter charts
and invoices pertaining to any matter of account hereunder.
<PAGE>
(g) In the event that the Desiring Party or Parties are unable to
recover from the Non-Desiring Party or Parties its or their
share of cost the Desiring Party or Parties shall own pro rata
all the material equipment and supplies placed or installed by
the Desiring Party or Parties on the said well or on the
Concession in connection therewith PROVIDED HOWEVER that if
such material equipment and supplies have a salvage value in
excess of the unrecovered amounts to which the Desiring Party
or Parties are entitled as hereinbefore provided, such excess
shall be owned by the Parties hereto in proportion to their
Working Interests at the time.
15.12 Deepening of Wells Every prior provision of this Clause 15
having regard to a proposal to drill a well shall apply equally to a proposal to
deepen a well which has been drilled on the Concession (as a dry hole or without
encountering Petroleum in Payable Quantities or which has ceased to produce
Petroleum) except that:-
(a) (i) If the rig with which the well was drilled or any
other rig capable of carrying out the deepening
operation is on location at the time a notice is
given the time within which the Party to which the
notice is given by the Desiring Party or Parties must
agree to participate in the drilling of the well
without being deemed a Non-Desiring Party shall be
reduced to forty-eight (48) hours;
(ii) If the Desiring Party or Parties shall not commence
the actual deepening of the said well within thirty
(30) days of the election of the Non-Desiring Party
not to participate in such deepening then the
consequences provided by Clause 15.8 shall follow as
if the deepening operation were a drilling operation
dealt with by that Clause;
(b) In the event that as a result of the deepening operations the
well is drilled and completed by the Desiring Party or Parties
as a Producer of Petroleum in Payable Quantities then the
provisions of Clause 15.11 shall apply subject to the
modification that the Non-Desiring Party's share of cost
defined in Clause 15.11(a) shall be calculated with regard to
the cost of deepening testing completing and equipping the
said well from the depth to which it has been previously
drilled.
<PAGE>
16. DISPOSITION OF PRODUCTION
16.1 Separate Ownership of Petroleum Each Party hereto shall have
the right to take in kind or separately dispose of its share of all Petroleum
produced from the Concession except such Petroleum as may be used in drilling,
development, testing, producing, processing, compression and other operations on
the Concession and in preparing, treating and transporting Petroleum for
marketing and except such Petroleum as may be unavoidable lost. A Non-Operator
may confer upon the Operator authority to deliver to the buyer thereof all or
part of that Non-Operator's share of Petroleum produced from the Concession and
a Party shall be deemed to have exercised its rights to take in kind or
separately dispose of Petroleum hereunder upon the making of such a contract for
the sale of such Petroleum to the extent of the quantities sold.
16.2 Right to Separate Facilities The Parties holding a Working
Interest shall have the right to construct, maintain and operate within the
Concession all necessary facilities for the purpose of taking in kind or
separately disposing of their respective shares of Petroleum produced from the
Concession provided they are so constructed, maintained and operated as not to
interfere with other operations able to be carried out under this Agreement. Any
extra expenditure or costs incurred by the Operator by reason of the delivery in
kind of any portion of such Petroleum to such facilities shall be borne by the
owner of such portion.
16.3 Underlifting Procedure If any Party hereto fails to take in
kind or separately dispose of any and all of such Party's share of Petroleum
produced from the Concession, the Operator, subject to any restrictions imposed
by law, may either:-
(a) dispose of the quantity of Petroleum concerned by sale to the
purchasers of the share of the Petroleum produced from the
Concession of the other Parties and pro rata to such
purchasers in proportion to the quantity of such Petroleum
being purchased by them. Any such quantity of Petroleum
involved shall be so sold at the same point or points and at
the same arms length price or prices at which such other
Petroleum is being sold. Any such purchase or sale shall be
subject to revocation at will by the Party owning the share
involved (without however affecting any contract of sale
already entered into with respect to such Petroleum). Any
contract of sale relating to such share and entered into with
a third Party or third Parties shall be for a term not
exceeding such reasonable period of time as is consistent with
the minimum needs of the industry under the circumstances but
in no event shall any such contract be for a term in excess of
one (1) year. The price or proceeds of sale of the Petroleum
concerned (less all costs and expenses of and incidental to
such sale not incurred for the Joint Account) shall promptly
be paid over to the owner of such Petroleum; or
<PAGE>
(b) store such Petroleum on the Concession in existing storage
facilities or in storage facilities established for such
purpose and the cost of such storage and of establishing any
such storage facilities shall be borne by the Party owning the
Petroleum so stored.
16.4 Payments Direct to Each Party Subject to Clause 17 hereof,
where a Party enters into a contract of sale for all or part of its share of
Petroleum produced from the Concession, that Party shall be entitled to receive
direct from the purchaser thereof all sale proceeds due under such contract of
sale. Each Party shall pay or cause to be paid all royalties and other like
payments attributable to its interest or share of Petroleum produced.
16.5 Extra Expenditure Any extra expenditure incurred in the
taking in kind or separate disposition by a Party hereunder of such Party's
share of the Petroleum from the Concession shall be borne by such party.
17. DEFAULTS IN PAYMENT
17.1 Notice of Default If any Party including the Operator (herein
called the "Defaulting Party") fails to make any payment to the Operator as
required by this Agreement on or before the due date thereof, the Operator shall
give notice thereof to all Parties. Such notice shall contain a statement of the
amount owing by the Defaulting Party and for the purpose of this Clause 17 all
Parties other than the Defaulting Party are herein referred to as "the
Non-Defaulting Party".
17.2 Defaulting Party May be Sued Without prejudice to any other
remedy for or consequence of default provided for in this Agreement, the
Operator may in its own name in any Court of competent jurisdiction sue any
Party (including without limiting the generality of the foregoing, any Party
removed from the position of Operator for failing to pay or contribute its
proportionate share of the costs and expenses herein mentioned) for the recovery
of any share of authorised costs and expenses and interest remaining unpaid by
the Defaulting Party at the expiration of fourteen (14) days after the delivery
of the notice referred to in Clause 17.1 hereof to the Defaulting Party.
<PAGE>
17.3 Certain Non-Defaulting Parties to Contribute If at the end of
the fourteen (14) day period referred to in Clause 17.2 hereof the Operator
shall not have received from the Defaulting Party the amount due plus interest
at the Default Interest Rate the Operator may request the Non-Defaulting Parties
to reimburse the Operator such amount due plus interest as aforesaid. The amount
to be reimbursed by each Non-Defaulting Party (if it is bound to do so or elects
to do so) shall bear the same ratio to the total amount not paid by the
Defaulting Party as does such Non-Defaulting Party's Working Interest bear to
the aggregate of the Working Interests of all the Non-Defaulting Parties who
contributed or were liable to contribute to the cost of the Work to which the
payment which is in default refers. Except as hereinafter provided, the
Non-Defaulting Parties shall not be compelled to contribute the amounts so
requested by the Operator but while either Oilmin, Krewliff, Transoil or
International is Operator then Oilmin, Krewliff, Transoil, and International
shall each contribute or bear the amount so requested from it by the Operator
within fifteen (15) days of such request by the Operator. If at the end of the
said fifteen (15) day period a Non-Defaulting Party other than Oilmin, Krewliff,
Transoil and International has not contributed or borne the amount so requested
from it by the Operator, and either Oilmin, Krewliff, Transoil or International
is Operator then the Operator may require Oilmin, Krewliff, Transoil and
International to contribute or bear the amounts not so contributed (plus
interest) within twenty-one (21) days of such request and the amount to be
contributed or borne by each shall be in the same ratio to the total to be
contributed by them as the Working Interests of each is to the total of their
Working Interests. Notwithstanding any provision herein to the contrary, the
Operator may relieve Oilmin, Krewliff, Transoil or International of their
respective obligations under this Clause 17.3 hereof.
17.4 Rights of Contributing Parties A Non-Defaulting Party
(including the Operator in its capacity as a Party) which pays to the Operator
or bears all of the amounts due by it under Clause 17.3 hereof is hereinafter
called "a Paying Party" and may to recover the same but without prejudice to any
other rights and remedies, invoke the provisions of this Clause 17. A Party
which does not pay all amounts due by it under Clause 17.3 hereof or which it
has elected to pay under Clause 17.3 but does not pay when due, shall be
regarded as a Defaulting Party and the provisions of this Clause 17 shall apply
in respect to the amount not so paid and the Party not paying the share in full
shall for all purposes of this Clause 17 and the Cross Charge referred to in
Clause 17.5, be a Defaulting Party.
17.5 Cross Charge For the purposes of the better securing of
payment:-
(a) to the Operator of any amount in default and interest accrued
thereon pursuant to the terms hereof;
<PAGE>
(b) to the Paying Parties of any debt due and payable to them or
any of them pursuant to Clause 17.3 hereof;
each of the Parties holding a Working Interest shall forthwith execute and duly
register a Deed in substantially the form and to the effect of the form of Deed
set out in Annexure "B" hereto ("Clause 17 Cross Charge") and shall obtain all
necessary consents and approvals in relation thereto and shall file or record
the same and such other documents or notices relating thereto in such
jurisdiction as may be required by law to perfect the security given thereby.
17.6 Suspension of Rights of Defaulting Party Notwithstanding any
provision hereof to the contrary, a Defaulting Party shall not be entitled
either to attend vote at any meeting of the Operating Committee or the Parties
or otherwise be consulted with respect to Work unless and until the amount in
default of such Party plus interest in accordance with the terms hereof shall
have been received in full or the default is otherwise rectified or waived and
for voting purposes only the Working Interest of a Defaulting Party shall be
proportionately distributed amongst the Paying Parties.
17.7 Default of Operator In Payment In the event that the Operator
is in default in payment of any amount due from the Operator to meet authorised
costs and expenses hereunder and for any reason the Operator is not removed from
that position, then the rights prescribed for the Operator under this Clause 17
and elsewhere herein shall be exercised for and on behalf of the Non-Defaulting
Parties by such person as they unanimously nominate and such person shall be
deemed to be the Operator for such purpose.
17.8 Application of Defaulting Party's Funds Upon default by any
Party in the payment to the Operator or upon default by the Operator as a Party
in making a payment due hereunder, the Operator shall (notwithstanding anything
contained herein or in any Clause 17 Cross Charge to the contrary, and without
prejudice to other rights and remedies), retain any moneys which may be held for
such Defaulting Party or which come to the hands of the Operator on behalf of
such Defaulting Party, and apply such moneys until the amount owed by such
Defaulting Party, plus interest in accordance with the terms hereof, has been
thus paid to the Operator.
<PAGE>
17.9 Option to Dilute Interest of Defaulting Party If at the end of
forty-five (45) days from the due date on which moneys were to have been paid by
a Defaulting Party to the Operator such moneys and interest thereon remain
unpaid by such Defaulting Party, then provided no action has been taken under a
Cross Charge referred to in Clause 17.5 hereof to appoint a Receiver thereunder
of the interest of the Defaulting Party and provided all the Non-Defaulting
Parties have contributed to the Operator pursuant to Clause 17.3 hereof their
respective shares of such amount and interest due but unpaid, each Party which
may become a Defaulting Party hereby grants to the Paying Parties an option to
dilute the Working Interest of the Defaulting Party concerned in accordance with
Clauses 17.10 to 17.14 hereof inclusive. Such option to dilute shall be
exercised by the unanimous resolution of the Paying Parties. The Operator shall
serve notice of such resolution on the Defaulting Party and such dilution shall
become effective on the service of such notice.
17.10 Dilution Formula If the Paying Parties exercise the option
under Clause 17.9 hereof to dilute the interest of the Defaulting Party, the new
Working Interest of the Defaulting Party at the time of such dilution shall be
calculated in accordance with the following formula:-
New Working Interest = C x 100%;
TC
Where C = the total of all contributions made
by the Defaulting Party to Work
since the date of this Agreement
together with the Deemed Expenditure
and the Acquired Expenditure of the
Defaulting Party; and
Where TC = the total of all contributions
male by all Parties (who are Parties
at that time) including the
Defaulting Party to Work (including
amounts contributed to the Operator
under Clause 17. 3 hereof) since the
date of this Agreement together with
the Acquired Expenditure of all
Parties (who are Parties at the
time) the Deemed Expenditure.
<PAGE>
For the purpose of this Clause 17.10, the Deemed Expenditure
shall be TWENTY MILLION DOLLARS ($20,000,000.00) and the Deemed Expenditure of a
Defaulting Party shall be determined by multiplying TWENTY MILLION DOLLARS
($20,000,000.00) by the Working Interest of the Defaulting Party in existence
immediately prior to such dilution.
For the purpose of this Clause 17.10, where a Party
("Acquiring Party") has acquired a Working Interest from another Party ("Selling
Party") the Acquiring Party shall have an Acquired Expenditure which shall be an
amount equal to the product of the proportion of the then Working Interest of
the Selling Party so acquired multiplied by the contributions of the Selling
Party to Work since the date of this Agreement up to the date of such
acquisition, and the contributions of the Selling Party to Work shall be reduced
by such Acquired Expenditure.
17.11 Distribution of Working Interest Available on Dilution The
difference between the new Working Interest of the Defaulting Party determined
in accordance with Clause 17.10 hereof and its Working Interest prior to such
dilution shall be distributed to the Paying Parties in the proportion of the
payments made by each to the Operator under such Clause 17.3 without any payment
or consideration except as stated herein being made by such Parties to the
Defaulting Party.
17.12 Extinguishment of Amount Due Upon such a dilution and
distribution being made, the liability of the Defaulting Party to pay the amount
plus interest which had been due and owing to the Operator shall be deemed
extinguished and such amount deemed to be paid.
17.13 Repayment of Loan Funds Where a Defaulting Party had mortgaged
or charged its Working Interest to secure the repayment by it of moneys borrowed
for expenditure by it on Work, and at the date of distribution of part of such
Working Interest under Clause 17.10 hereof to a Non-Defaulting Party moneys
remain to be repaid by the Defaulting Party under such mortgage or charge, the
Non-Defaulting Party shall be bound to repay a proportionate part of such moneys
remaining to be repaid with such proportionate part being in the same ratio to
the total to be repaid at the date of distribution as is the ratio of the
Working Interest distributed to such Non-Defaulting Party to the total Working
Interest of the Defaulting Party immediately prior to such distribution.
<PAGE>
17.14 Interest Distributed Clear of Charges Except as provided in
Clause 17. 13 hereof, any Working Interest so distributed to a Non-Defaulting
Party shall be distributed free of any mortgage or encumbrance granted by the
Defaulting Party and except as stated in Clause 17.13 hereof the Non-Defaulting
Parties shall not become responsible for the repayment of any loans or the
satisfaction of any obligations owed by the Defaulting Party.
18. WITHDRAWAL
18.1 Any Party May Withdraw Any of the Parties hereto holding a
Working Interest may withdraw from this Agreement in accordance with the
provisions of this Part 18.
18.2 Notice of Withdrawal The party desiring to withdraw (herein
called "the Withdrawing Party") shall give notice of its intention to withdraw
to the other parties at least one hundred and twenty (120) days prior to any
obligation date in advance of the date of withdrawal. Such notice shall
designate the effective date of withdrawal which date shall be the last day of
the calendar month and shall offer assignment without compensation to the other
parties of all of the withdrawing parties' right title and interest in the
Concession the Joint Facilities and any other asset subject to this Agreement.
Such assignment shall be conditional on the other parties' assumption subject to
this Part of all obligations relating to the right title and interest offered
and accruing after the date of withdrawal.
18.3 Other Parties May Accept Assignment The other Parties holding
Working Interests shall have sixty (60) days from the date of receipt of such
notice to notify the Withdrawing Party whether they accept the offer and elect
to receive the assignment provided for in Clause 18.2 hereof in proportion to
their respective Working Interests. If some only of such Parties accept such
offer or if the acceptance of any accepting Party is limited in percentage then
the interest of the Withdrawing Party or the portion of such interest remaining
after the allocation of any limited percentages accepted shall be distributed
amongst the other accepting Parties in the proportion that their respective
Working Interests bear to the aggregate Working Interests of such Parties or in
such other proportions as such Parties agree between themselves.
<PAGE>
18.4 Prompt Execution of Documents If some or all of the other
Parties give notice pursuant to Clause 18.3 hereof of acceptance and election to
receive such assignment all Parties concerned shall promptly execute and deliver
all documents and do and perform all acts and things necessary and appropriate
to validly effect such assignment.
18.5 Withdrawing Party's Obligations In the event of an assignment
under this Clause 18 the Withdrawing Party shall be responsible for the
obligations in respect of the interest to be assigned up to the date of
withdrawal and where the Withdrawing Party is contributing to a programme and
budget of Work hereunder, the Withdrawing Party shall remain responsible for its
proportionate share of the costs thereof up to the conclusion of such programme
and budget notwithstanding that such conclusion may take place after the date of
withdrawal. The Withdrawing Party shall remain responsible for such obligations
(including payments of amounts to the Operator) although the extent of such
obligations may not be ascertainable until after the date of withdrawal.
18.6 Costs of Assignment All costs of any assignment under this
Clause 18 incurred by any Party including stamp duty registration fees and legal
fees shall be paid by the assigning Party.
18.7 Assignment to All Parties In the event that by the expiration
of sixty (60) days after the notice from the Withdrawing Party pursuant to
Clause 18.2 hereof the interest of the Withdrawing Party or any portion of such
interest remains unallocated or undistributed to other Parties pursuant to
Clause 18.3 hereof then the Withdrawing Party shall assign its interest or the
portion thereof remaining unallocated or undistributed to all of the other
Parties in the proportions that their respective Working Interests bear to the
total of such Working Interests or to such of the other Parties and/or to such
one or more outside parties and in such proportions as all of the other Parties
holding Working Interests shall so direct.
19. ASSIGNMENT - MORTGAGES
19.1 Right to Assign Subject to the provisions hereinafter set
forth, any Party may at any time transfer or assign all or part of its Working
Interest and interests under this Agreement to any other Party, to an Affiliate
or to any person or entity not then a party to this Agreement provided the
interest concerned is a uniform interest in all the right title and obligations
of the Party concerned under this Agreement including its Working Interest, its
interest in the Concession and the Joint Facilities.
<PAGE>
19.2 Assumption By Transferee Any assignment or interest by a Party
hereto of all or any part of its interests hereunder or by any person exercising
power of sale pursuant to any mortgage or charge, shall be made expressly
subject to the terms and provisions of this Agreement and shall require the
assignee to assume and agree to perform all of the obligations of the assignor
under the terms of this Agreement with respect to the interest assigned. Any
such disposal of interest shall be effective only when the disposing party has
procured from such disponee the execution and delivery of a covenant between it,
the disponee and all other Parties hereto by which the disponee agrees to be so
bound, and the disponee has executed a Clause 17 Cross Charge, has obtained all
necessary consents and approvals thereto, and shall have filed or recorded such
other documents or notices relating thereto in such jurisdictions as may be
required by law to perfect the security given thereby.
19.3 Covenant By International International hereby covenants with
each of the Parties hereto that upon International having an interest
transferred to it pursuant to the Agreements referred to in Recital L hereof,
International will be bound by the terms and conditions of this Agreement with
respect to the interest so assigned and on request at the time of any such
transfer will execute a further covenant to that effect and further
International will execute and perfect a Clause 17 Cross Charge in the manner
provided in Clause 19.2 hereof. International will not dispose of any of its
rights under the Austram Agreement where the rights disposed of may include the
right to take up or acquire a Working Interest without causing the transferee
thereof to covenant with the Parties hereto to be bound by the terms of this
Agreement.
19.4 Charge of Working Interest Without prejudice to its right to
charge any of its property or assets other than its Working Interest any Party
(hereinafter called the "Chargor") may, without the consent of the other Parties
(but subject to all other necessary consents and approvals), charge in favour of
any recognised financial institution or Affiliate (hereinafter called "the
Chargee") the whole of its Working Interest PROVIDED THAT:
19.4.1 (a) any such charge made by the Chargor shall expressly
be made subject to all of the rights and remedies of
the other Parties under this Agreement, and a Clause
17 Cross Charge; and
<PAGE>
(b) contemporaneously with the execution of any such
charge the Chargee shall execute and deliver to each
of the Parties holding a Working Interest a Deed in
substantially the form and to the effect of the Deed
set out in Annexure "C" hereto and upon such
execution and delivery each of such Parties shall
execute and deliver to the Chargee and each of the
other Parties the said Deed;
19.4.2 it shall be a term of any such charge: -
(a) that in exercise of its rights under such charge the
Chargee or any receiver or receiver and manager under
such charge or any person claiming through or under
the Chargee or any receiver or receiver and manager
shall ensure that as a condition of such sale the
purchaser:-
(i) shall first enter into an agreement with the
other Parties in the same terms (mutatis
mutandis) as are specified in Clause 19.5
hereof in relation to an agreement to be
entered into by a proposed assignee from one
of the Parties; and
(ii) shall within ten (10) days after the
completion of such assignment duly register
or record a Clause 17 Cross Charge in those
jurisdictions as may be required by law to
perfect the security thereby given;
(b) that the Chargee or any receiver or receiver and
manager under such charge or any person claiming
through or under such Chargee or any receiver or
receiver and manager shall not partition or seek to
partition whether by order of court or otherwise the
Concession the Joint Facilities or any other property
acquired or held by or on behalf of the Parties,
under, pursuant to or subject to this Agreement.
(c) that the Chargee or any receiver or receiver and
manager under such charge or any person claiming
through or under such Chargee or any receiver or
receiver and manager shall not without the prior
consent of all Parties holding a Working Interest
waive, release, surrender or forfeit the whole or any
fractional or constituent part of the Working
Interest so charged; and
<PAGE>
(d) that such charge shall be and shall be expressed to
be subject to and shall rank subsequent in priority
for all purposes to any Clause 17 Cross Charge given
by the Chargor in respect to all assets of the
Chargor charged from time to time under such Clause
17 Cross Charge.
19.4.3 (a) such charge shall be limited to a floating charge
except that, as regards the present and future
interest of the Chargor in:-
(i) the Concession;
(ii) any single item of plant or equipment being
Joint Facilities the current new price
thereof being in excess of $50,000;
such charge may be fixed;
(b) such floating and fixed charge shall rank for all
purposes after the charge represented by the Clause
17 Cross Charge over that Individual Interest of the
Chargor from time to time.
19.4.4 references in this Clause 19.4 to "charge" shall include a
reference to mortgage, encumber or assign by way of security only and any such
assignment shall not be subject to the provisions of Clauses 19.1, 19.2 and 19.3
hereof and references in this Clause 19.4 to "charging" or "charged" shall be
read accordingly.
20. AUSTRALIANISATION
20.1 Australianisation In the event that the Australian Government
or any other lawful governmental authority requires an increase in the
Australian ownership or equity of the Concession before any proposed development
of the Concession is permitted to proceed then those of the Parties who are
regarded by such government or governmental authority as having less than 100%
Australian ownership or equity will confer with a view to determining and
carrying out on an equitable basis steps to achieve the level of Australian
ownership or equity required by such government or governmental authority.
<PAGE>
21. RELEASE OF INFORMATION
21.1 Information Confidential Except with the prior consent of all
Parties holding a Working Interest each Party shall keep confidential any
reports records and data studies made opinions furnished and other information
obtained in the course of operations on the Concession (other than information
already made public) and shall not disclose the same except:-
(a) To its respective Affiliates, employees and consultants for
the purposes of Work subject to each such Party obtaining an
assurance from the Affiliate, employee or consultant concerned
to ensure that the Affiliate, employee or consultant concerned
will keep such records, data, studies, opinions and other
information confidential.
(b) As may be reasonably necessary to comply with any statutory or
regulatory obligation including but not limited to disclosure
obligations under applicable laws or Stock Exchange Listing
Requirements.
(c) As may in the opinion of any Solicitor or Counsel for the
Party wishing to disclose the information concerned, be
required by law or for the reasonable protection of such Party
or any Affiliate thereof or the directors of any such Party or
Affiliate;
(d) As may be necessary in connection with the proposed assignment
of a Party's Working Interest or as may be necessary in
connection with any loan document or any efforts to obtain
funds PROVIDED the Party wishing to disclose such information
shall obtain appropriate assurances from the entity to which
the information is to be disclosed that it will keep such
information confidential.
21.2 Disclosure to Listed Companies To ensure compliance by any
Party holding a Working Interest or Affiliate of a Party holding a Working
Interest which is a listed public company in Australia with the listing
regulations of the Australian Associated Stock Exchanges the Operator shall
disclose immediately to all Parties holding a Working Interest any significant
discovery of Petroleum and if so required shall give to those Parties a full
report on that discovery and information necessary to avoid establishment of a
false market in the securities of such listed companies. Any of such listed
public companies shall have the right to make all or part of that report
available to the Home Exchange on which it is listed.
<PAGE>
21.3 Copy Notice to Other Parties Any Party required or wishing
to make such material public in accordance with Clauses 21.1 and 21.2 hereof
shall notify the other Parties of the proposed announcement as far in advance as
reasonably possible.
21.4 Announcements Notwithstanding the provisions of Clauses 21.1
to 21.3 hereof inclusive, it is the intention of the Parties that reports to any
Australian Associated Stock Exchanges or to comply with any statutory or
regulatory obligation affecting all Parties shall be prepared by the Operator
listing all Parties with their respective Working Interests and lodged by the
Operator with the appropriate body after approval by all Parties holding a
Working Interest but nothing herein contained shall prevent any Party from
making its own report or announcement.
22. RELATIONSHIP OF THE PARTIES
22.1 Rights and Obligations Several The rights duties obligations
and liabilities of the Parties hereto shall be several and not joint or
collective it being the express purpose and intention of the Parties hereto that
their ownership of the Concession shall be as tenants-in-common and nothing
herein contained shall be construed as creating a partnership duty, partnership
obligation or partnership liability each Party hereto being individually
responsible only for its obligations as set out in this Agreement.
22.2 No Joint Liability Whenever in this Agreement reference is
made to operations for the Joint Account of the Parties hereto or to charges or
credits to the joint account or whenever a similar language is used the Parties
use such language merely as a convenient method of referring to the accounting
necessary between them and no such phraseology shall ever be construed as
creating any joint liability upon the part of the parties hereto for any
obligation incurred under this Agreement or as setting apart or creating any
fund or jointly owned property for the satisfaction of any obligation or as
creating a common fund for any purpose.
22.3 Ratio of Working Interests If under any provision of this
Agreement more than one Party has either the obligation to participate in costs
expenses or risks or otherwise to pay money or to assign an interest in a well
or Working Interest or has the right to receive the payment of money or an
assignment of any interest in a well or Working Interest the Parties
participating therein shall pay the said money make such assignment and receive
and divide such payment or take the interest so assigned as the case may be
(unless otherwise specifically agreed by the Parties hereto) in the ratio of
their respective Working Interests at the time the said obligations or rights
came into being.
<PAGE>
23. FORCE MAJEURE
23.1 Obligations Suspended By Force Majeure If any Party is
rendered unable wholly or in part by force majeure to carry out its obligations
under this Agreement other than the obligations to make money payments that
Party shall give to all other parties prompt written notice of the force majeure
with reasonably full particulars concerning it. Thereupon the obligations of the
Party giving the notice so far as they are affected by the force majeure shall
be suspended during but not longer than the continuance of the force majeure.
The affected Party shall use possible diligence to remove the force majeure as
quickly as possible.
23.2 Certain Actions Not Required The requirement that any force
majeure shall be remedied with all reasonable dispatch shall not require the
settlement of strikes lockouts or other labor difficulty by the Party involved
contrary to its wishes. How all such difficulties shall be handled shall be
entirely within the discretion of the Party concerned.
23.3 Meaning of Force Majeure The term "force majeure" as here
employed shall mean an act of God blowout strike lockout or other industrial
disturbance act of the public enemy war blockade public riot lightning fire
storm flood explosion governmental restraint unavailability of equipment and any
other cause whether of the kind specifically enumerated above or otherwise which
is not reasonably within the control of the Party claiming suspension.
24. LAWS AND REGULATIONS
24.1 Subject to Minister's Consent This Agreement is subject to
any necessary consent of the Minister for Mines and Energy pursuant to the
Petroleum Act.
24.2 Subject to Applicable Laws This Agreement and the respective
rights and obligations of the Parties hereto shall be subject to all valid and
applicable laws rules ordinances regulations and orders and in the event that
this Agreement or any provision thereof is or the operations contemplated
hereunder are found to be inconsistent with or contrary to any such law rule
ordinance regulation or order the latter shall be deemed to control the former
and this Agreement shall be regarded as modified accordingly and as so modified
to continue in full force and effect. The Operator shall prepare and furnish to
any duly constituted authority through its proper agency or department any and
all reports records statements and information that may be furnished by the
Operator.
<PAGE>
24.3 Proper Law Questions arising among and between the parties
involving their respective rights duties or obligations under this Agreement
shall be determined in accordance with the laws of the Northern Territory of
Australia.
24.4 Submission to Jurisdiction All parties hereto submit to the
non-exclusive jurisdiction of the Courts of the Northern Territory of Australia
and the State of Queensland.
25. ABORIGINAL LANDS
25.1 Aboriginal Lands The Operator and all other Parties hereto
hereby agree that insofar as any exploration or development programme or any
subsequent activities may be conducted on Aboriginal lands or affect Aboriginal
people within the Concession all Parties will use their best endeavours to
ensure that all operations comply with all lawful requirements in regard thereto
and pay due regard to the welfare of the traditional Aboriginal owners of any
lands affected by such operations and of any Aboriginal communities which may be
affected by such operations and accord proper respect to Aboriginal culture.
26. DEALINGS WITH THE GOVERNMENT AND LAND COUNCIL
26.1 Dealings by Title Holder If the Operator is not the holder of
an interest in a title conferring rights to prospect for or produce Petroleum
and which forms part of the Concession then the holders of such title or one of
such holders nominated by the others of them ("the Nominated Holder") shall be
the party to deal with Governmental Authorities and the Central Land Council
with respect to that title and the maintenance and good standing thereof
provided that prior to any such dealing, whether by meeting or in writing, the
Nominated Holder shall consult with the Operator to the intent that the
Nominated Holder and the Operator shall agree on the conduct of such dealings
and such dealings shall be in conformity with any directions given by the
Operating Committee.
26.2 Consultation with Operator The Nominated Holder and the
Operator may establish such consultative committees as they deem appropriate to
meet as required or on a regular basis for the discussion of matters relevant to
prospective dealings in relation to that title and the maintenance thereof. The
Nominated Holder shall submit all reports and other information required for the
purpose of maintenance of the Concession.
<PAGE>
26.3 Operator May Attend Meetings The Operator shall have the
right to attend any meetings with the Government or the Central Land Council in
respect of the dealings referred to in this Clause 26. All other matters
incidental thereto which are part of any activity carried out on the Concession
shall be dealt with by the Operator in accordance with this Agreement.
27. NOTICES
27.1 Addresses for Notices Each Party shall keep the other Parties
advised of its current address in Australia to which any notice communication
offer request consent payment demand or information required to be given or
furnished under this Agreement is to be addressed. Until advised otherwise the
addresses of the respective Parties shall be as follows:-
MAGELLAN PETROLEUM (N.T.) PTY. LTD.
8th Floor,
National Bank Building,
420 George Street, Telex: AA40392
BRISBANE, QUEENSLAND
Telephone: (07) 221 7505
UNITED OIL & GAS CO. (N.T. ) PTY. LTD.
8th Floor,
National Bank Building,
420 George Street, Telex: AA40392
BRISBANE, QUEENSLAND
Telephone: (07) 221 7505
CANSO RESOURCES LIMITED
4th Floor,
169 Miller Street,
NORTH SYDNEY Telex: AA72287
NEW SOUTH WALES
Telephone: (02) 4363022
OILMIN (N.T.) PTY. LTD.
7th Floor
27-35 Turbot Street, Telex: AA41040
BRISBANE, QUEENSLAND
Telephone: (07) 221 8288
KREWLIFF INVESTMENTS PTY. LTD.
7th Floor,
27-35 Turbot Street, Telex: AA41040
BRISBANE, QUEENSLAND
Telephone: (07) 221 8288
<PAGE>
With Copy to: -
INTERNATIONAL OIL PROPRIETARY
33rd Floor,
BHP House,
140 William Street, Telex: AA32985
MELBOURNE, VICTORIA
Telephone: (03) 602 4033
TRANSOIL (N.T.) PTY. LTD.
7th Floor,
27-35 Turbot Street, Telex: AA41040
BRISBANE, QUEENSLAND
Telephone: (07) 221 8288
FARMOUT DRILLERS NL
13 O'Connell Street, Telex: AA70517
SYDNEY, NEW SOUTH WALES
AUSTRALIA Telephone: (02) 231 1844
27.2 How Notices Given All notices required or authorised to be
given hereunder shall be given in writing by airmail cablegram telex or telegram
postage or other charges prepaid and addressed to the Party concerned at its
notified address. Any notice sent by telex or telegram shall be deemed to have
been received on the next business day in the place of receipt following the day
on which the telex or telegram is sent whether or not the telex or telegram is
subsequently confirmed by letter and any notice sent by airmail postage prepaid
in registered or certified cover shall be deemed to have been received on the
expiration of five (5) business days (in the place of receipt) from the date of
posting.
27.3 Australian Representative and Address Each Party hereto shall
appoint and keep appointed a representative who shal1 be resident in the
Commonwealth of Australia and whose address shall from time to time be advised
in writing to the other Parties hereto.
28. GENERAL
28.1 Mutual Indemnity Each Party which is the holder of a Working
Interest will indemnify and keep indemnified all other Parties who are the
holders of Working Interests from every claim demand action or liability
resulting from any act of the indemnifying Party which is negligent unlawful or
unauthorised by this Agreement.
<PAGE>
28.2 Limited Invalidity If any term clause or provision of this
Agreement shall be or shall be deemed to be invalid for any reason whatsoever
such invalidity shall not affect the validity or operation of any other term
clause or provision of this Agreement except only so far as may be necessary to
give effect to such invalidity.
28.3 Waiver No waiver by any Party of a right or a default
hereunder shall be deemed a waiver by such Party of any subsequent right to
default whether of a like nature or otherwise.
28.4 How Monies Paid Any sum of money paid or tendered by the
Parties hereto shall be validly and effectually paid or tendered if such payment
is given delivered or made in legal currency or by bank cheque or by the Party's
own cheque after presentment and clearance. All references to currencies shall
mean Australian currency unless otherwise specifically indicated.
28.5 Successors Bound This Agreement shall enure for the benefit of
and bind the Parties hereto and their assigns and successors in title. In this
Agreement the singular shall include the plural and vice versa.
28.6 Further Assurances The Parties agree to execute such further
instruments and do such further acts as may be necessary or desirable to carry
out the agreements made herein.
28.7 Amendment This Agreement may not be amended except by one or
more written instruments executed by all the Parties hereto.
28.8 No Partition No Party hereto shall resort to any action for
partition or sale in lieu of partition of the Concession the Joint Facilities or
any other property subject to this Agreement.
28.9 Counterparts This Agreement may be executed in any number of
counterparts each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
<PAGE>
THE FIRST SCHEDULE
THE EAST MEREENIE BLOCK
PART A
Names of Party Percentage of
Working Interest
Magellan 35%
Canso 15%
Oilmin 21%
Krewliff 13.75%
Transoi1 9%
Farmout 6.25%
PART B
1. Deed of overriding royalty
dated 28th December 1961
creating 1/64th royalty in favour
of Mildred M. and
Ethel A. Hembdt
2. Deed dated 1st December, 1964
creating overriding royalties
aggregating 3.25% in favour of
Jarl Pty. Ltd. and others
3. The C.L.C. Agreement creating
a 1.5% royalty in favour of the
Central Land Council
<PAGE>
THE SECOND SCHEDULE
THE WEST MEREENIE BLOCK
PART A
Names of Party Percentage of
Working Interest
United 30%
Canso 20%
Oilmin 21%
Krewliff 13.75%
Transoi1 9%
Farmout 6.25%
PART B
1. Deed of overriding royalty
dated 27th April 1962 creating
1/64th royalty in favour of
Mildred M. and
Ethel A. Hembdt
2. Deed dated 1st December, 1964
creating overriding royalties
aggregating 3.25% in favour of
Jarl Pty. Ltd. and others
3. The C.L.C. Agreement creating
a 1.5% royalty in favour of the
Central Land Council
<PAGE>
THE THIRD SCHEDULE
THE CONCESSION
Names of Party Percentage of
Working Interest
Magellan 20%
United 15%
Canso 15%
Oilmin 21%
Krewliff 13.75%
Transoil 9%
Farmout 6.25%
<PAGE>
THE FOURTH SCHEDULE
Operating Agreement dated 23rd day of August, 1962 between Magellan Petroleum
Corporation and Exoil (N.T.) Pty. Ltd. (as amended) relating inter alia to an
area identified thereon as "Area D".
Operating Agreement dated 23rd day of August, 1962 between United Canso Oil &
Gas Ltd. and Exoil (N.T.) Pty. Ltd. (as amended) relating inter alia to an area
identified therein as "Area F".
<PAGE>
THE FIFTH SCHEDULE
Diagram of Petroleum Lease 4 and Petroleum Lease 5
<PAGE>
IN WITNESS WHEREOF the Parties hereto have executed this
Agreement on the date hereinbefore written.
THE COMMON SEAL of MAGELLAN )
PETROLEUM (N.T.) PTY. LTD. )
was hereunto affixed in )
accordance with its Articles )
of Association in the ) /s/ Roy M. Hopkins
presence of: )
/s/ Hedley Howard
THE COMMON SEAL of UNITED )
OIL & GAS CO. (N.T.) PTY. )
LTD. was hereunto affixed in )
accordance with its Articles )
of Association in the ) /s/ Roy M. Hopkins
presence of: )
/s/ Hedley Howard
THE COMMON SEAL of CANSO )
RESOURCES LIMITED was hereunto )
affixed in accordance with its Articles )
of Association in the ) /s/ __________________
presence of: )
/s/ __________________
THE COMMON SEAL of OILMIN )
(N.T.) PTY. LTD. was hereunto )
affixed in accordance with its Articles )
of Association in the ) /s/ __________________
presence of: )
/s/ __________________
THE COMMON SEAL of KREWLIFF )
INVESTMENTS PTY. LTD. )
was hereunto affixed in )
accordance with its Articles )
of Association in the ) /s/ __________________
presence of: )
/s/ __________________
<PAGE>
THE COMMON SEAL of TRANSOIL )
(N.T.) PTY. LTD. was hereunto )
affixed in accordance with its Articles )
of Association in the ) /s/ __________________
presence of: )
/s/ __________________
THE COMMON SEAL of FARMOUT )
DRILLERS N.L. was hereunto affixed )
in accordance with its Articles )
of Association in the ) /s/ __________________
presence of: )
/s/ __________________
THE COMMON SEAL of INTERNATIONAL )
OIL PROPRIETARY was hereunto affixed )
in accordance with its Articles )
of Association in the ) /s/ __________________
presence of: )
/s/ __________________
<PAGE>
ANNEXURE "A"
- --------------------------------------------------------------------------------
ACCOUNTING PROCEDURE
1. GENERAL PROVISIONS
1. DEFINITIONS
Any term used herein shall have the meaning assigned to it by the
Operating Agreement to which this Accounting Procedure is attached.
2. STATEMENTS AND ACCOUNTS
The Operator shall debit each Non-Operator on or before the last day of
a month for its proportionate share of costs and expenditures during
such preceding month. Such accounts will show the details of all
charges and credits for the Joint Account.
3. PAYMENTS BY NON-OPERATOR
Each Party shall pay its proportion of all such accounts within fifteen
(15) days after receipt thereof. If payment is not made within such
time the unpaid balance shall bear interest from the end of the said
period at the Default Interest Rate until paid.
4. ADJUSTMENTS
Payments of any such accounts shall not prejudice the right of any
Non-Operator to protest or question the correctness thereof. Subject to
the exception noted in Clause 5 of this Section 1 all statements
rendered to any Non-Operator by the Operator during any calendar year
shall conclusively be presumed to be true and correct after twenty-four
(24) months following the end of any such calendar year unless within
the said twenty-four (24) month period such Non-Operator takes written
exception thereto and makes a claim on the Operator for adjustment. The
failure on the part of such Non-Operator to make a claim on the
Operator for adjustment within such period shall establish the
correctness thereof and preclude it from filing objections thereto or
making claims for adjustment thereon. The provisions of this Clause
shall not prevent adjustments resulting from physical inventory of
property as provided for in Section 6 "Inventories" hereof.
5. AUDITS
(i) A Non-Operator upon not less than thirty (30) days notice in
writing to the Operator and all the other Non-Operators shall
have the right to audit the Operator's accounts and records
relating to the accounting hereunder for any calendar year
within the twenty-four (24) month period following the end of
such calendar year provided however that the Non-Operator must
take written exception to and make a claim upon the Operator
for all discrepancies disclosed by the said audit within the
said twenty-four (24) month period. Where there are two or
more Non-Operators the Non-Operators shall make every
reasonable effort to conduct joint or simultaneous audits in a
manner which will result in a minimum of inconvenience to the
Operator.
<PAGE>
(ii) The Operator shall cause its external auditors to carry out an
audit of the Operator's accounts and records relating to the
accounting hereunder for each period of twelve calendar months
ending on each 30th June. Such audit shall be carried out as
soon as is reasonably possible and the Operator shall forward
a copy of the audit report given by such auditors to each
Non-Operator. The costs of such audit shall be for the Joint
Account.
2. OPERATING AND DEVELOPMENT CHARGES
Subject to limitations hereinafter prescribed the following items shall be
charges for the Joint Account.
1. RENTALS
Rentals and like payments when such rentals are paid by the Operator
for the Concession, the Joint Facilities or the Joint Account.
2. LABOR
(a) Salaries and wages of the Operator's employees in Australia
and fees of the Operator's consultants in Australia directly
engaged for the benefit of the Concession in the exploration
development maintenance and operation thereof including
salaries or wages paid to geologists and other employees in
Australia who are temporarily assigned to and directly
employed for the benefit of the Concession.
(b) Salaries and wages and fees of the Operator's employees and
consultants located outside Australia who are temporarily
assigned to and directly employed for the benefit of the
Concession when prior approval of the use of such employee is
obtained by the Operator from the Non-Operators.
(c) The Operator's cost of holidays vacation sickness disability
benefits living and housing allowances travel time bonuses and
other customary allowances applicable to the salaries and
wages chargeable under sub-clauses (a) and (b) of this Clause
and Clause 11 of this Section 2. Costs under this sub-clause
(c) may be charged on a "when and as paid" basis.
(d) Costs of expenditures or contributions made pursuant to
assessments imposed by Governmental Authority which are
applicable to the Operator's labor cost of salaries and wages
as provided under sub-clauses (a) and (b) of this Clause and
Clause 11 of this Section 2.
(e) Termination payments made by the Operator to employees who
were directly engaged for the benefit of the Concession but
who are no longer required for such purpose and as a result
thereof whose employment by the Operator is terminated.
(f) For the purpose of this Clause, the expression "Operator"
shall include an Affiliate of the Operator and the provisions
of this Clause 2 shall extend and apply to employees of such
Affiliate as though they were employees of the Operator.
<PAGE>
3. EMPLOYEE BENEFITS
The Operator's current cost of established plans for group life
insurance hospitalisation pension retirement stock purchase bonus and
other benefit plans of a like nature for its employees shall be
applicable to the Operator's labor cost provided that where an employee
is not engaged full time on the Concession a pro-rata proportion
thereof only shall be charged.
4. MATERIAL
The material equipment and supplies purchased or furnished by the
Operator for use on the Concession. So far as it is reasonably
practical and consistent with efficient and economical operation only
such material shall be purchased for or transferred to the Concession
as may be required for immediate use and the accumulation of surplus
stocks shall be avoided.
5. TRANSPORTATION
Transportation of employees consultants equipment material and supplies
necessary for the development maintenance and operation of the
Concession subject to the following limitations:-
(a) If material is moved to the Concession from the vendor's or
from the Operator's warehouse or other place no charge shall
be made to the Joint Account for a distance greater than the
distance from the nearest reliable supply store or railway
receiving point where such material is available except by
special agreement with the Non-Operators.
(b) If surplus material is moved to the Operator's warehouse or
other storage point no charge shall be made to the Joint
Account for a distance greater than the distance from the
nearest reliable supply store or railway receiving point
except by special agreement with the Non-Operators.
6. SERVICE
(a) Outside services:
The cost of contract services and utilities procured from
outside sources.
(b) Use of Operator's equipment and facilities as provided in
Clause 5 of Section 3 entitled "Operator's exclusively owned
facilities".
7. DAMAGES AND LOSSES TO CONCESSION AND EQUIPMENT
All costs or expenses necessary to replace or repair damages or losses
not recovered by insurance or not borne by the Operator or a
Non-Operator pursuant to the Agreement. The Operator shall furnish to
the Non-Operators written notice of damages or losses incurred as soon
as practicable after report of the same has been received by the
Operator.
8. LITIGATION EXPENSE
All costs and expenses of litigation and arbitration or legal services
otherwise necessary or expedient for the protection of the Concession
and the Joint Facilities including legal fees and expenses as
hereinafter provided together with the amount of all judgments and
awards obtained against the parties or any of them on account of Work
under the Agreement and actual expenses incurred by any Party or
Parties hereto in securing evidence for the purpose of defending
against any action or claim prosecuted against the Parties or the
subject matter of the Agreement.
<PAGE>
(a) If all the Parties hereto shall so agree actions or claims
affecting all the Parties may be handled by the legal staff of
one or more of the Parties hereto; and a charge commensurate
with cost of providing and furnishing such services rendered
may be rendered for the Joint Account but no such charge may
be made until approved by the legal advisers for the
respective Parties.
(b) Fees and expenses of legal advisers not on the legal staff of
one or more of the Parties hereto shall not be charged for the
Joint Account unless authorised by the Operating Committee
which authorisation shall not be unreasonably withheld.
9. TAXES
All taxes of every kind and nature (except taxes measured by the income
of the Parties and charges measured by a Party's share of Petroleum
produced from the Concession) assessed or levied upon or in connection
with the Concession which is the subject of the Agreement, the
production therefrom or the operation thereof, and which taxes have
been paid by the Operator for the benefit of the Parties hereto.
10. INSURANCE AND CLAIMS
(a) Premiums paid for insurance required to be carried for the
benefit of the Parties together with all expenditures incurred
and paid in settlement of any and all losses claims damages
judgments and other expenses including legal services not
recovered from insurance carrier.
(b) If no insurance is required to be carried all the actual
expenditures incurred and paid by the Operator in settlement
of any and all losses claims damages judgments and any other
expenses including legal services shall be charged to the
Joint Account.
11. DISTRICT AND CAMP EXPENSE (FIELD SUPERVISION AND CAMP EXPENSE)
A pro rata portion of the salaries and expenses of the Operator's
supervisory personnel and other employees serving the Concession and
other properties in the same operating area, whose time is not
allocated directly to the Concession, and a pro rata portion of the
cost of maintaining and operating a field office and necessary
sub-offices (if any) maintained for the convenience of the above
described office and all necessary camps including housing facilities
for employees if required used in the conduct of the operations on the
Concession and other properties operated in the same locality. The
expense of, less any revenue from, these facilities shall be inclusive
of depreciation on the investment. Such charges shall be apportioned to
all properties served on some equitable basis consistent with the
Operator's accounting practice. When exploration operations are not
being conducted these charges shall be allocated on a well basis to all
properties served with each drilling well considered equivalent to six
producing wells. If the facilities contemplated by this Clause, where
they are owned by the Parties shall serve the Concession only, then all
costs will be charged direct for the Joint Account. These charges shall
be allocated to exploration development and production operations.
12. ADMINISTRATIVE OVERHEAD
(a) All indirect costs including management and administrative overhead
(whether in Australia or elsewhere) not included in provisions of
Section 2 hereof other than this Clause 12 shall be charged as a
percentage of costs in accordance with the following:-
<PAGE>
(i) for each well drilled, 5% of the first One Million Dollars
expended thereon and 2% of all moneys thereafter expended
thereon;
(ii) for production facilities and pipelines, 5% of the first One
Million Dollars and 3% thereafter of all costs incurred while
carrying out an approved programme on such activities;
(iii) for all other work, 5% of all costs incurred while carrying
out an approved programme.
The intention of the charges referred to in Clause 12.1 of this Section
2 is that the Operator shall neither gain nor lose from the carrying
out of the functions of Operator hereunder and therefore the purpose of
the foregoing administrative overhead charges is to reimburse the
Operator fully for all indirect costs incurred suffered or borne by the
Operator in carrying out such functions.
13. OPERATOR'S FULLY OWNED WAREHOUSE OPERATING AND MAINTENANCE EXPENSE
Any charges for the Operator's fully owned warehouse operating and
maintenance expenses are to be agreed to in writing by the Operating
Committee.
14. OTHER EXPENDITURES
Any expenditure, other than expenditures which are covered and dealt
with by the foregoing provisions of this Section 2, incurred by the
Operator for the necessary and proper development, maintenance, and
operation of the Concession.
3. BASIS OF CHARGES FOR THE JOINT ACCOUNT
1. PURCHASES
Material and equipment purchased and service procured shall be charged
at the price paid by the Operator after deduction of all discounts
actually received.
2. MATERIAL FURNISHED BY THE OPERATOR
Material required for operations shall be purchased for direct charge
for the Joint Account whenever practicable, except that the Operator
may furnish such material from the Operator's stocks under the
following conditions:-
(a) New Material (Condition "A").
(i) New material transferred from the Operator's
warehouse or other properties shall be priced f.o.b.
the nearest reputable supply store or railway
receiving point, where such material is available, at
current replacement cost of the same kind of
material. This will include material such as tanks,
pumping units, sucker rods, engines, and other major
equipment. Tubular goods; two inch (2") and over,
shall be priced on car-load basis effective at date
of transfer and f.o.b. railway receiving point
nearest the Concession, regardless of quantity
transferred.
(ii) Other material shall be priced on basis of a
reputable supply company's preferential price list
effective at date of transfer and f.o.b. the store or
railway receiving point nearest the joint account
operation where such material is available.
<PAGE>
(iii) Cash discount shall not be allowed.
(b) Used material (Conditions "B" and "C").
(i) Material which is in sound and serviceable condition
and is suitable for re-use without reconditioning
shall be classed as Condition "B" and priced at
seventy-five percent (75%) of new price.
(ii) Material which cannot be classified as Condition "B"
but which -
(a) after reconditioning will be further
serviceable for original function as good
secondhand material (Condition "B") or
(b) is serviceable for original function
but substantially not suitable for
reconditioning,
shall be classed as Condition "C" and priced at fifty
percent (50%) of new price.
(iii) Material which cannot be classified as Condition "B"
or Condition "C" shall be priced at a value
commensurate with its use.
(iv) Tanks, buildings, and other equipment involving
erection costs shall be charged at applicable
percentage of knocked down new price.
3. PREMIUM PRICES
Whenever materials and equipment are not readily obtainable at the
customary supply point and at prices specified in Clauses 1 and 2 of
this Section 3, because of national emergencies, strikes or other
unusual causes over which the Operator has no control the Operator may
charge the Parties for the required materials on the basis of the
Operator's direct cost and expense incurred in procuring such
materials, in making it suitable for use, and in moving it to the
location, provided, however, that notice in writing is furnished to the
Non-Operators of the proposed charge prior to debiting the
Non-Operators for the material and/or equipment acquired pursuant to
this provision, whereupon any Non-Operator shall have the right by so
electing and notifying the Operator within ten (10) days after
receiving notice from the Operator, to furnish in kind, or in tonnage
as the Parties may agree, at the location nearest railway receiving
point, or the Operator's storage point within a comparable distance,
all or part of his share of material and/or equipment suitable for use
and acceptable to the Operator.
Transportation costs on any such material furnished by the
Non-Operators, at any point other than at the location, shall be borne
by such Non-Operators. If, pursuant to the provision of this Clause,
and the Non-Operators furnish material and/or equipment in kind the
Operator shall make appropriate credits therefor to the account of the
said Non-Operators.
4. WARRANTY OF MATERIAL FURNISHED BY THE OPERATOR
The Operator does not warrant the material furnished beyond or back of
the dealer's manufacturer's guarantee; and in case of defective
material, credit shall not be passed until adjustment has been received
by the Operator from the manufacturers or their agents.
<PAGE>
5. THE OPERATOR'S EXCLUSIVELY OWNED FACILITIES
The following rates shall apply to service rendered by facilities owned
exclusively by the Operator:-
(a) Water, fuel, power, compressor and other auxiliary services at
rates commensurate with cost of providing and furnishing such
service to the Concession but not exceeding rates currently
prevailing in the field where the Concession is located.
(b) Automotive equipment at rates commensurate with cost of
ownership and operation. Such rates should generally be in
line with the schedule of rates adopted by recognised
organisations as recommended uniform charges for the Joint
Account and revised from time to time. Automotive rates shall
include cost of oil, gas, repairs, insurance and other
operating expense and depreciation; and charges shall be based
on use in actual service on, or in connection with, operations
on the Concession. Truck and tractor rates may include wages
and expenses of the driver.
(c) A fair rate shall be charged for the use of drilling and
cleaning out tools and any other items of the Operator's fully
owned machinery or equipment which shall be ample to cover
maintenance, repairs, depreciation, and the service furnished
the Concession; provided that such charges shall not exceed
those currently prevailing in the field where the Concession
is located. Pulling units shall be charged at hourly rates
commensurate with the cost of ownership and operation, which
shall include repairs and maintenance, operating supplies,
insurance, depreciation and taxes. Pulling unit rates may
include wages and expenses of the Operator.
(d) A fair rate shall be charged for laboratory services performed
by the Operator for the benefit of the Parties, such as gas,
water core, and any other analyses and tests; provided such
charges shall not exceed those currently prevailing if
performed by outside service laboratories.
(e) Whenever requested, the Operator shall inform the Non-
Operators in advance of the rates it proposes to charge.
(f) Rates shall be revised and adjusted from time to time when
found to be either excessive or insufficient.
4. DISPOSAL OF LEASE EQUIPMENT AND MATERIAL
The operator shall be under no obligation to purchase the interest of the
Non-Operators in surplus new or secondhand material. The disposition of major
items of surplus material, such as derricks, tanks, engines, pumping units, and
tubular goods, shall be subject to mutual determination by the Parties hereto;
provided the Operator shall have the right to dispose of normal accumulations of
junk and scrap material either by transfer or sale from the Concession.
1. MATERIAL PURCHASED BY THE OPERATOR OR THE NON-OPERATORS
Material purchased by either the Operator or any Non-Operator shall be
credited by the Operator to the Joint Account for the month in which
the material is removed by the purchaser.
<PAGE>
2. DIVISION IN KIND
Division of material in kind, if made between the Operator and the
Non-Operators shall be in proportion to their respective interests in
such material. Each Party will thereupon be charged individually with
the value of the material received or receivable by each Party, and the
corresponding credits will be made by the Operator to the Joint
Account. Such credits shall appear in the monthly statement of
operations.
3. SALES TO OUTSIDERS
Sales to outsiders of material from the Concession shall be credited by
the Operator to the Joint Account of the net amount collected by the
Operator from the purchaser. Any claims by the purchaser for defective
material or otherwise shall be charged back for the Joint Account if
and when paid by the Operator.
5. BASIS OF PRICING MATERIAL TRANSFERRED
Material purchased by either the Operator or any Non-Operator or divided in
kind, unless otherwise agreed, shall be valued on the following basis.
1. NEW PRICE DEFINED
New price as used in the following clauses shall have the same meaning
and application as that used above in Section 3 "Basis of charges for
the Joint Account."
2. NEW MATERIAL
New materials (Condition "A"), being new material procured for the
Joint Account but never used thereon at one hundred percent (100%) of
current new price (plus sales tax, if any).
3. GOOD USED MATERIAL
Good used material (Condition "B"), being used material in sound and
serviceable condition suitable for re-use without reconditioning:-
(a) At seventy-five percent (75%) of current new price if material
was charged for the Joint Account as new, or
(b) At sixty-five percent (65%) of current new price if material
was originally charged for the Joint Account as secondhand at
seventy-five percent (75%) of the new price.
4. OTHER USED MATERIAL
Used material (Condition "C") at fifty percent (50%) of current new
price, being used material which:-
(a) After reconditioning will be further serviceable for original
function as good secondhand material (Condition "B"), or
(b) Is serviceable for original function but substantially not
suitable for reconditioning.
<PAGE>
5. BAD ORDER MATERIAL
Material and equipment (Condition "D") which is no longer usable for
its original purpose without excessive repair cost but is further
usable for some other purpose shall be priced on a basis comparable
with that of items normally used for that purpose.
6. JUNK
Junk (Condition "E"), being obsolete and scrap material at prevailing
prices.
7. TEMPORARILY USED MATERIAL
When the use of material is temporary and its service does not justify
the reduction in price as provided in Clause 3(b) above, such material
shall be priced on a basis that will leave a net charge for the Joint
Account consistent with the value of the service rendered.
6. INVENTORIES
1. PERIODIC INVENTORIES, NOTICE AND REPRESENTATION
At least annually inventories shall be taken by the Operator of
material, subject to the Agreement which shall include all such
material as is ordinarily considered controllable by Operators of oil
and gas properties. Written notice of intention to take inventory shall
be given by the Operator at least thirty (30) days before any inventory
is to begin so that the Non-Operators may be represented when any
inventory is taken.
Failure of any Non-Operator to be represented at an inventory shall
bind such Non-Operator to accept the inventory taken by the Operator,
who shall in that event furnish such Non-Operator with a copy thereof.
2. RECONCILIATION AND ADJUSTMENT OF INVENTORIES
The reconciliation of inventory with charges for the Joint Account
shall be made by each Party at interest, and a list of averages and
shortages shall be jointly determined by the Operator and the
Non-Operators. Inventory adjustments shall be made by the Operator for
averages and shortages, but the Operator shall be held accountable to
the Non-Operators only for shortages due to lack of reasonable
diligence.
3. SPECIAL INVENTORIES
Special inventories may be taken at the expense of the purchaser,
whenever there is any sale or change of interest in the Concession; and
it shall be the duty of the Party selling to notify all other Parties
hereto as quickly as possible after the transfer of interest takes
place. In such cases, both the seller and the purchaser shall be
represented and shall be governed by the inventory so taken, which
shall be taken at the cost of the purchaser.
<PAGE>
"B"
FORM OF CROSS CHARGE
THIS DEED is made the _____________ day of ______________ 198___ Between
[Here insert details of participant granting this Cross Charge - each
Participant will execute a separate Cross Charge] (hereinafter called "the
Mortgagor") of the First Part
MAGELLAN PETROLEUM (N.T.) PTY. LTD. a Company incorporated in the State of
Queensland and having its registered office in the Northern Territory at C/-
Veritatem Nominees (N.T.) Pty. Ltd., 5th Floor, City Mutual Building, 62
Cavenagh Street, Darwin (hereinafter called "Magellan"),
UNITED OIL & GAS CO. (N.T.) PTY. LTD. a Company incorporated in the State of
Queensland and having its registered office in the Northern Territory at C/-
Veritatem Nominees (N.T.) Pty. Ltd., 5th Floor, City Mutual Building, 62
Cavenagh Street, Darwin aforesaid (hereinafter called "United"),
CANSO RESOURCES LIMITED a Company incorporated in the State of New South Wales
and having its registered office in the Northern Territory at
(hereinafter called "Canso"),
OILMIN (N.T.) PTY. LTD. a Company incorporated in the State of Queensland and
having its registered office in the Northern Territory at C/- Veritatem Nominees
(N.T.) Pty. Ltd., 5th Floor, City Mutual Building, 62 Cavenagh Street, Darwin
aforesaid (hereinafter called "Oilmin"),
KREWLIFF INVESTMENTS PTY. LTD. a Company incorporated in the State of New South
Wales and having its registered office in the Northern Territory at C/-
Veritatem Nominees (N.T.) Pty. Ltd., 5th Floor, City Mutual Building, 62
Cavenagh Street, Darwin aforesaid (hereinafter called "Krewliff"),
TRANSOIL (N.T.) PTY. LTD. a Company incorporated in the State of Queensland and
having its registered office in the Northern Territory at C/- Veritatem Nominees
(N.T.) Pty. Ltd., 5th Floor, City Mutual Building, 62 Cavenagh Street, Darwin
aforesaid (hereinafter called "Transoil"),
FARMOUT DRILLERS NL a Company incorporated in the Australian Capital Territory
and having its registered office in the Northern Territory at C/- Wilson,
Bishop, Bowes & Craig, City Mutual Building, 62 Cavenagh Street, Darwin
aforesaid (hereinafter called "Farmout"),
all of which are the Parties hereto of the Second Part
AND
OILMIN (N.T.) PTY. LTD. a Company incorporated in the State of Queensland and
having its registered office in the Northern Territory at C/- Veritatem Nominees
(N.T.) Pty. Ltd., 5th Floor, City Mutual Building, 62 Cavenagh Street, Darwin
aforesaid and its respective successors as Operator under the Mereenie Operating
Agreement as hereinafter defined (hereinafter called "the Operator") of the
Third Part
<PAGE>
W H E R E A S:
A. Pursuant to an agreement made the ______________ day of ______________
1983 between the Parties hereto and INTERNATIONAL OIL PROPRIETARY
(hereinafter called "the Mereenie Operating Agreement"), the Parties
hereto provided for their respective rights and obligations with
respect to Petroleum Leases 4 and 5, and parts of Extension No. 1 of
Oil Permit 175 and Oil Permit 178 all granted under the Petroleum
(Prospecting & Mining) Act 1954-1982 of the Northern Territory of
Australia.
B. By the terms of the Mereenie Operating Agreement certain payments are
to be made from time to time to the Operator by each of the
Participants and by the Operator in its capacity as a Participant to
meet such Participant's obligations under the Mereenie Operating
Agreement.
C. The Participants have agreed to enter into this Deed for the purpose of
securing the obligations of the Mortgagor to make the payments referred
to in Recital B hereof.
NOW THIS DEED WITNESSES that the Participants hereby covenant and agree as
follows:-
1. In this Deed, the following terms shall have the following meanings: -
1.1 "Concession" shall have the meaning given to it by Clause 1.1.5 of the
Mereenie Operating Agreement.
1.2 "Defaulting Participant" means the Mortgagor when it is in default
in the payment of any Indebtedness payable by such Participant or
Operator.
1.3 "Due Date" means the date on which any sum becomes properly due and
payable from the Mortgagor to the Operator or to any other Participant
pursuant to the Mereenie Operating Agreement.
1.4 "Indebtedness" means any sum referred to in the definition of Due Date
plus interest as referred to in the Mereenie Operating Agreement,
properly due and unpaid.
1.5 "Joint Facilities" shall have the meaning given to it by Clause 1.1.11
of the Mereenie Operating Agreement.
1.6 "Operator" means any person from time to time holding the appointment
of Operator under the Mereenie Operating Agreement.
1.7 "Participating Interest" shall mean the share or interest of the
Mortgagor in the Concession, the Joint Facilities, the products derived
from or produced from the Concession and whether or not taken in kind,
its rights and obligations under the Sales Contracts (and any of them),
and its rights and obligations under any other agreements or
instruments relative to or for the implementation of the Mereenie
Operating Agreement.
1.8 "Participants" means the Parties to this Deed of the Second Part and
their successors and permitted assigns.
<PAGE>
1.9 "Sales Contracts" means any contract for the sale of products from the
Concession in which the Mortgagor is the seller or one of the sellers
thereunder and whether or not executed before or after the Mereenie
Operating Agreement or this Deed.
1.10 "Special Charge" means a charge held by any Special Chargee.
1.11 "Special Chargee" means any chargee who holds a charge from the
Mortgagor over its Working Interest, which charge complies
substantially with Clause 19.4 of the Mereenie Operating Agreement and
to the extent it charges the Working Interest of the Mortgagor ranks in
point of security immediately after this Deed and who has given notice
of the creation of such charge to all Participants within 21 days of
the date of this Deed or from the date of the creation of such charge,
whichever is the later.
1.12 In this Deed, unless the context otherwise requires, the singular
includes the plural and vice versa.
2. For the purpose of securing the rights of the Participants and Operator
who are not in default for the recovery of Indebtedness of the Mortgagor, the
Mortgagor as such:-
(a) hereby covenants with each of the other Participants and the Operator
as such to pay to them jointly all Indebtedness owing by it (but
without in any way restricting their rights to enforce any other remedy
for the recovery of such Indebtedness); and
(b) for the purposes of securing such covenants hereby by way of first
charge charges as beneficial owner its Participating Interest in favour
of the other Participants and the Operator (as such) jointly to secure
the payment of any and all of its Indebtedness to the extent that such
charge shall be a first floating charge except that as regards the
present and future interest of the Mortgagor in:-
(i) the Concession;
(ii) the Sales Contracts and the sale proceeds thereunder;
(iii) any freehold and leasehold land included amongst the Joint
Facilities; and
(iv) any single item of plant or equipment being Joint Facilities
the current new price thereof being in excess of $50,000;
such charge shall be a first fixed charge but shall be subject to the
exercise by a Participant of its rights under Clause 17 of the Mereenie
Operating Agreement. Such first floating charge and first fixed charge
shall rank ahead of and in priority to any and all other mortgages,
charges, security interests or other encumbrances given, entered into
or incurred by the Mortgagor in respect to its Participating Interest
and the Mortgagor hereby covenants with each of the other Participants
and the Operator (as such) that any such other mortgage, charge,
security interest or other encumbrance which may be given or entered
into by it shall acknowledge the priority of and be subject to the
charge in favour of the other Participants and the Operator (as such)
hereby created and shall contain a provision that any such other
mortgage, charge, security interest or other encumbrance is thereby
postponed to the rights of the other Participants and the Operator (as
such) hereunder.
<PAGE>
3.1 If on the expiration of:-
(a) fifteen (15) days from the Due Date of any Indebtedness of the
Mortgagor; and
(b) twenty-one (21) days from the date of receipt by all Special Chargees
who took a Special Charge from the Mortgagor of a notice which notice
may be given at any time after the Due Date from another Participant
informing the Special Chargee that the Mortgagor had incurred
Indebtedness,
the Indebtedness of the Mortgagor has not been paid by Mortgagor or by
or at the direction of any Special Chargee of the Mortgagor, the
Operator may take action pursuant to this Deed in its own name to
enforce the charge granted hereby and exercise the powers herein
contained in respect of all Indebtedness owing by the Mortgagor and
shall take such action if requested to do so by any Non-Defaulting
Participant.
3.2 If the Operator shall have been requested to take action pursuant to
the preceding provisions and shall have refused or neglected to do so
for a period of seven (7) days after the date of such request then (and
only then) the Party or Parties who made such request may subject to
the rights of the other Parties hereunder take action pursuant to this
Deed in the name of the Operator or in the name or names of the Party
or Parties who made such request to enforce the charge granted hereby
in respect of all Indebtedness owing by the Mortgagor to all Chargees
hereunder.
3.3 Notwithstanding anything hereinbefore in Clauses 3.1 to 3.4 inclusive
and 7 hereof to the contrary the Operator shall not take any such
action in respect of any Indebtedness (other than Indebtedness owing to
the Operator as such) if directed in writing by all the Non-Defaulting
Participants to refrain from taking such action.
3.4 The Mortgagor hereby irrevocably appoints the Operator (provided it is
not a Defaulting Participant) (and, to the extent empowered by Clauses
3.1 to 3.3 hereof inclusive to take action hereunder, each
Non-Defaulting Participant), as its attorney to take action on behalf
of such Party to enforce the charge granted hereby in respect of
Indebtedness owing to such Party including the making of any
declaration in respect to the stamping of this Deed and the payment of
any stamp duty payable thereon.
4. The first floating charge created by this Deed shall not of itself
(subject always to the provisions of the Mereenie Operating Agreement) hinder
any sale or other dealings of the Mortgagor in the ordinary course of or for the
purpose of carrying on its business of or with the property and assets charged
thereby prior to any Indebtedness arising. Except as provided in Clause 6(b) of
this Deed none of the property or assets charged by this Deed, whether by way of
first floating charge or first fixed charge, shall be subject to any charge,
mortgage, security, interest or other encumbrance ranking either in priority to
or pari passu with the charge created by this Deed.
5. The Operator or any other Participant entitled pursuant to Clause 3
hereof to take action to enforce the said charge may at any time after its
entitlement to enforce the said charge arises appoint a Receiver or a Receiver
and Manager (hereinafter referred to as "the Receiver") of the property and
assets of the Mortgagor charged hereunder (hereinafter called "the Charged
Property") and may in like manner from time to time remove any Receiver so
appointed and appoint another in his stead. Any such appointment or removal
shall be in writing.
<PAGE>
6. A Receiver so appointed shall be deemed the agent of the Mortgagor
which shall be solely responsible for his acts and defaults and for his
remuneration. The Receiver or Operator or any other party to this Deed entitled
pursuant to Clauses 3.1 to 3.4 inclusive hereof to take action to enforce the
said charge (hereinafter referred to as "the Enforcing Party" which expression
shall include the Receiver) may exercise any or all of the following powers,
authorities and discretions (which shall be interpreted separately and not be
reference to one another) in addition to all other powers, authorities and
discretions conferred on him by law and subject always to the terms and
conditions of the Mereenie Operating Agreement:-
(a) to take possession of, collect and get in the Charged Property and for
that purpose to take any proceedings in the name of the Mortgagor or
otherwise as seem expedient and to give effectual receipts accordingly
for the same;
(b) to cause the Mortgagor to continue to be associated with the other
Participants pursuant to the Mereenie Operating Agreement as a party
thereto and to fulfil its several obligations thereunder or under the
Sales Contracts or concur in the continuance of the same and for that
purpose to use any of the funds of such Participant and for that
purpose to raise and use money on the Charged Property in priority to
this charge;
(c) to receive store and/or sell what otherwise would have been the
Mortgagor's share of products derived from or produced from the
Concession (provided such products are not the subject of a Sales
Contract) on terms and conditions similar to those which may have been
obtained by any other Participant and the exercise of such powers by
the Receiver shall not be prevented or hindered by the terms hereof;
(d) to let or lease any or all of the Charged Property;
(e) to sell or concur in selling any of the Charged Property either at
public auction or by private treaty and either for a lump sum or a sum
payable by instalments or for a sum on account and a mortgage or charge
for the balance, in each case after giving to the Mortgagor and each
Special Chargee at least seven (7) days' notice of his intention to
sell and to carry any such sale into effect by conveying and
transferring in the name and on behalf of the Mortgagor or otherwise
and the Mortgagor shall execute all such assurances, deeds and
instruments and do all such acts and things whatsoever as may be
necessary to vest the Charged Property in the person or persons who
purchase the same;
(f) to execute all such contracts, deeds, transfers and other assurances in
the name and on behalf of the Mortgagor for the purpose of carrying
into effect any of the powers and authorities conferred on the
Enforcing Party as he may see fit;
(g) to make any arrangement or compromise which he thinks expedient; and
(h) generally to do or cause to be done such acts and things representing
the Charged Property (without being responsible for any loss or damage
which happens thereby) as he may think necessary and which could have
been done or caused to be done by any Receiver if he had the absolute
ownership of the Charged Property.
Any person paying money to or otherwise dealing with the Enforcing Party shall
not be concerned to enquire whether any event has occurred to authorise the
Enforcing Party to act and the receipt of any such Enforcing Party for any
moneys arising under any of the powers aforesaid shall be a sufficient discharge
without obliging the persons paying the same to see to the application thereof.
<PAGE>
7. The proceeds in respect of the Charged Property of the Mortgagor
derived from the exercise of the powers referred to in Clause 6 hereof for the
sale thereof shall be applied:-
FIRSTLY: in payment of any moneys having priority to the charge hereby
created;
SECONDLY: in payment of all costs, charges and expenses of and
incidental to the appointment of the Receiver and the exercise
by the Enforcing Party of all or any of the powers aforesaid
including the reasonable remuneration of the Enforcing Party;
THIRDLY: to the Operator the amount of any Indebtedness to the extent
that the same has not been paid by other Participants in
accordance with the provisions of Clause 17.3 of the Mereenie
Operating Agreement, and to the Participants who have paid
their full proportionate share of any Indebtedness on behalf
of the Mortgagor in accordance with the provisions of Clause
17.3 of the Mereenie Operating Agreement such proportionate
share of any Indebtedness so paid and not otherwise recovered;
and then
FOURTHLY: all amounts (if any) recovered in excess of the sum required
to discharge the Indebtedness shall subject to proper claims
enforceable under other encumbrances be paid to the Mortgagor.
Save as aforesaid neither the Non-Defaulting Participants nor the Operator
(unless it be a Participant in default) shall be under any liability to the
Enforcing Party for his remuneration costs, charges or expenses or otherwise.
8. Claims arising from the priority described within the paragraph
"THIRDLY" of Clause 7 hereof shall as between such claims rank pari passu with
the result that if the amount realised in any such action shall be insufficient
to discharge all Indebtedness described in such clause the amount available
therefor shall be apportioned among the claimants in proportion to their
respective claims.
9. The charge created by this Deed shall be deemed a running and
continuing security notwithstanding any settlement on account of particular
Indebtedness or any other matter or thing whatsoever and shall remain in full
force until a final discharge thereof has been executed by the Operator and the
Non-Defaulting Participants.
10. Insofar as this charge pertains to the Participating Interest of the
Mortgagor enforcement hereof shall also be subject to the provisions of Clauses
19.4.2(a), 19.4.2(b), 19.4.2(c), 18 and 28.8 of the Mereenie Operating Agreement
and in the event of any conflict between this Deed and a Deed in the form of
Annexure "D" to the Mereenie Operating Agreement on the one hand and the said
Clauses of the Mereenie Operating Agreement on the other hand the latter shall
prevail.
11. The Mortgagor and each Participant shall from time to time execute and
deliver such further charges and other documents (including without limiting the
generality of the foregoing, mortgages or charges collateral hereto of its
interest in all or some of the titles constituting the Concession in a form
registrable as a legal mortgage or charge under the laws pursuant to which such
titles are granted) as may be reasonably requested by any chargee in order to
confirm or effectuate the intent and purposes of this Deed. The Mortgagor shall
forthwith duly register or record this Deed and shall file or record such other
notice or documents relating thereto in such jurisdictions as may be required by
law to perfect the security hereby given.
<PAGE>
12. The Mortgagor hereby covenants with each of the other Participants that
it has full power to charge the Charged Property as provided herein and also
that, if default is made in payment of the Indebtedness or any part thereof, it
shall be lawful for the Operator or other party or parties (as applicable having
regard to the provisions of Clauses 3.1 to 3.4 inclusive and 7 hereof), to enter
into and upon or receive and thenceforth quietly hold, occupy, and enjoy, or
take, and have the Charged Property or any part thereof, without any lawful
interruption or disturbance by the Mortgagor and that, freed and discharged from
or otherwise by the Mortgagor sufficiently indemnified against, all estates,
encumbrances, claims and demands whatever, other than those subject whereto the
Charge is expressly made.
13. The Mortgagor and each Participant hereby covenants with each of the
other Participants to execute and deliver all such assurances, deeds and
instruments and do all such acts and things whatsoever as may be necessary to
release and discharge or to substitute by way of additional security (as
appropriate) in respect to the first fixed charge hereby created the present and
future interest of the Mortgagor in:-
(a) each Sales Contract to the extent necessary to accord with the interest
of the Mortgagor from time to time under each such Sales Contract as
notified pursuant to the provisions thereof; and
(b) the Concession to the extent necessary to give effect to the Mereenie
Operating Agreement;
and to duly register, file or record all such notices or documents relating
thereto in such jurisdictions as may be required by law to perfect such release,
discharge or substitution as aforesaid.
14. All notices required to be given by or pursuant to this Deed shall
unless otherwise provided in this Deed be given in accordance with the
provisions of Clause 27 of the Mereenie Operating Agreement.
15. This Deed shall take effect as of the date first above set forth when
one or more counterparts thereof shall have been signed by each of the Parties
listed on the first page hereto and such signed counterparts shall have been
delivered by each of such Parties to each of the other such Parties. Upon
termination of the Mereenie Operating Agreement each of the Parties to whom a
charge is granted hereunder shall promptly execute and deliver a release and
discharge of such charge provided that there be in fact no Indebtedness then
owing under such charge.
16. This Deed shall be governed by and be construed in accordance with the
laws of the Northern Territory of Australia and for the purposes of this Deed
the Parties hereby consent and submit to the jurisdiction of the Courts of such
Territory.
IN WITNESS WHEREOF the Parties hereto have executed this Deed on the day and the
year first hereinbefore written.
<PAGE>
"C"
FORM OF PRIORITY DEED
THIS DEED is made the _____________ day of ______________ 198___ between
MAGELLAN PETROLEUM (N.T.) PTY. LTD. a Company incorporated in the State of
Queensland and having its registered office in the Northern Territory at C/-
Veritatem Nominees (N.T.) Pty. Ltd., 5th Floor, City Mutual Building, 62
Cavenagh Street, Darwin (hereinafter called "Magellan") of the First Part
UNITED OIL & GAS CO. (N.T.) PTY. LTD. a Company incorporated in the State of
Queensland and having its registered office in the Northern Territory at C/-
Veritatem Nominees (N.T.) Pty. Ltd., 5th Floor, City Mutual Building, 62
Cavenagh Street, Darwin aforesaid (hereinafter called "United") of the Second
Part
CANSO RESOURCES LIMITED a Company incorporated in the State of New South Wales
and having its registered office in the Northern Territory at
(hereinafter called "Canso") of the Third Part
OILMIN (N.T.) PTY. LTD. a Company incorporated in the State of Queensland and
having its registered office in the Northern Territory at C/- Veritatem Nominees
(N.T.) Pty. Ltd., 5th Floor, City Mutual Building, 62 Cavenagh Street, Darwin
aforesaid (hereinafter called "Oilmin") of the Fourth Part
KREWLIFF INVESTMENTS PTY. LTD a Company incorporated in the State of New South
Wales and having its registered office in the Northern Territory at C/-
Veritatem Nominees (N.T.) Pty. Ltd., 5th Floor, City Mutual Building, 62
Cavenagh Street, Darwin aforesaid (hereinafter called "Petromin") of the Fifth
Part
TRANSOIL (N.T.) PTY. LTD. a Company incorporated in the State of Queensland
and having its registered office in the Northern Territory at C/- Veritatem
Nominees (N.T.) Pty. Ltd., 5th Floor, City Mutual Building, 62 Cavenagh Street,
Darwin aforesaid (hereinafter called "Transoil") of the Sixth Part
FARMOUT DRILLERS NL a Company incorporated in the Australian Capital Territory
and having its registered office in the Northern Territory at C/- Wilson,
Bishop, Bowes & Craig, City Mutual Building, 62 Cavenagh Street, Darwin
aforesaid (hereinafter called "Farmout") of the Seventh Part
AND
[Here insert Chargee referred to in Clause 19.4 of Mereenie Operating Agreement]
(hereinafter called "the Special Lender") of the Eighth Part
<PAGE>
W H E R E A S:
A. Pursuant to an agreement made the _______________ day of ______________
1983 between the parties of the first to seventh parts inclusive and
INTERNATIONAL OIL PROPRIETARY (hereinafter called "the Mereenie
Operating Agreement"), the parties thereto provided for their
respective rights and obligations with respect to Petroleum Leases 4
and 5 and parts of Extension No. 1 of Oil Permit 175 and Oil Permit 178
all granted under the Petroleum (Prospecting & Mining) Act 1954-1982 of
the Northern Territory of Australia.
B. The Mereenie Operating Agreement contains provisions relating to the
form and substance of any charge to be given by a Participant over its
Participating Interest and in particular specifies that such a charge
will be subject to a Clause 17 Cross Charge and requires that any
Chargee (referred to in Clause 19.4 of the Mereenie Operating
Agreement) shall contemporaneously with the creation of any charge over
the Participating Interest of a Participant execute and deliver to each
of the Participants a Deed substantially in the form of this Deed.
C. Each of the parties of the first to seventh parts hereof have executed
a Clause 17 Cross Charge in favour of all of the other parties.
D. [Here insert Chargor referred to in Clause 19.4 of Mereenie Operating
Agreement] (hereinafter referred to as "the Company") proposes to
charge in favour of the Special Lender the whole of its Participating
Interest.
NOW THIS DEED WITNESSES that the Parties hereby covenant and agree as follows:-
1. In this Deed the following terms shall have the following meanings:-
1.1 "Clause 17 Cross Charge" means any one or more of the charges to be
entered into by the parties to the Mereenie Operating Agreement in
accordance with the provisions of Clause 17.5 thereof.
1.2 "Concession" shall have the meaning given to it by Clause 1.1.5 of the
Mereenie Operating Agreement.
1.3 "Indebtedness" means the date on which any sum becomes properly due and
payable from the Participant (including the Operator) to the Operator
or to any other Participant or from the Operator as such to any
Participant from the Operator in its capacity as a Participant, all
pursuant to the Mereenie Operating Agreement.
1.4 "Joint Facilities" shall have the meaning given to it by Clause 1.1.11
of the Mereenie Operating Agreement.
1.5 "Operator" shall have the meaning given to it by Clause 1.1.13 of the
Mereenie Operating Agreement.
1.6 "Participant" means the parties hereto of the first to the seventh
parts.
1.7 "Participating Interest" shall mean the share or interest of the
Participant concerned in the Concession, the Joint Facilities, the
products derived from or produced from the Concession and whether or
not taken in kind, its rights and obligations under the Sales Contracts
(and any of them), and its rights and obligations under any other
agreements or instruments relative to or for the implementation of the
Mereenie Operating Agreement.
<PAGE>
1.8 "Project Charge" means any Clause 17 Cross Charge given by the Company.
1.9 "Project Chargee" means the Participants (including the Operator) from
time to time which have the benefit as Chargee under the Project
Charge.
1.10 "Sales Contracts" means any contract for the sale of products from the
Concession in which one or more of the Participants (including the
Operator) is a seller, and whether or not executed before or after the
Mereenie Operating Agreement or this Deed.
1.11 "Special Charges" means [here insert details of charge referred to in
Clause 19.4 of the Mereenie Operating Agreement] and any charge or
encumbrance granted by the Company to Special Lender over the whole or
any part of the Participating Interest of the Company as amended from
time to time and whether or not such charge or encumbrance also
includes any other property of the Company.
1.12 "Special Lender" means [here insert Chargee referred to in Clause 19.4
of the Mereenie Operating Agreement] which includes its successors and
assigns.
1.13 In this Deed, unless the context otherwise requires, the singular shall
include the plural and vice versa.
2. The Special Lender hereby acknowledges to each of the Project Chargees that
as between the Project Chargees and the Special Lender:-
(a) the order of priorities in point of security shall be:-
First: the security constituted by the Project Charge; and
Secondly: the security constituted by the Special Charges,
and such priority shall extend at all times and for all purposes to
moneys expressed to be secured by such securities, whenever the
liability to pay such moneys arose and whether or not at any time such
liability was a present liability or a prospective liability (within
the meaning of those expressions for the purpose of the Companies Act
1974 of the Northern Territory of Australia).
(b) the Special Charges shall be subject to all the rights and remedies of
the Project Chargees under the Mereenie Operating Agreement and the
Project Charge.
NOTWITHSTANDING:
(i) the respective dates or order of execution or registration of
the Project Charge and the Special Charges;
(ii) anything contained in any of the Project Charge or the Special
Charges or the order in which any moneys secured by the said
documents or any of them are advanced or become payable; or
(iii) any other matter or thing whatsoever or any rule of law or
equity to the contrary.
<PAGE>
3. As soon as it is aware of the same each Project Chargee shall give
written notice to the Special Lender of the incurrence of any
Indebtedness by the Company.
4. The Special Lender hereby covenants with each of the Project Chargees
that so long as the Company shall be a party to the Mereenie Operating
Agreement:-
(a) the Special Charges are subject to all of the rights and remedies of
the Parties under the Mereenie Operating Agreement and the Project
Charge;
(b) that in exercise of its rights under the Special Charges the Special
Lender or any receiver or receiver and manager appointed under any of
the Special Charges or any person claiming through or under the Special
Lender or any receiver or receiver and manager shall not (except as
provided in Clause 19.5 of the Mereenie Operating Agreement) sell a
constituent part or parts of the Company's Participating Interest but
only the whole or a fractional part of that Participating Interest, it
shall be a condition of that sale that the purchaser:-
(i) shall first enter into an agreement with the other
Participants in the same terms (mutatis mutandis) as are
specified in Clause 19.3.3 of the Mereenie Operating Agreement
in relation to an agreement to be entered into by a proposed
assignee from one of the Participants; and
(ii) shall within ten (10) days after the completion of such
assignment duly register or record a Clause 17 Cross Charge in
those jurisdictions as may be required by law to perfect the
security thereby given;
(c) that the Special Lender or any receiver or receiver and manager
appointed under any of the Special Charges or any person claiming
through or under the Special Lender or any receiver or receiver and
manager shall not partition or seek to partition whether by order of
court or otherwise the Concession or any Joint Facilities whether real
or personal or any other rights acquired or held by or on behalf of the
Parties, under, pursuant to or subject to the Mereenie Operating
Agreement;
(d) that the Special Lender or any receiver or receiver and manager
appointed under any of the Special Charges or any person claiming
through or under the Special Lender or any receiver or receiver and
manager shall not without the prior consent of all Parties, waive,
release, surrender or forfeit the whole or any part of the Individual
Interest so charged;
(e) that each of the Special Charges shall be subject to and shall rank
subsequent in priority for all purposes to the Project Charge in
respect to all assets of the Company charged from time to time under
the Project Charge and is hereby postponed to the rights of the Project
Charges under the Project Charge in respect to all assets of the
Company charged from time to time under the Project Charge.
5. The Special Lender hereby covenants with the Parties to execute and
deliver all such assurances, deeds and instruments and do all such acts and
things whatsoever as may be necessary to release and discharge or to substitute
by way of additional security (as appropriate) in respect to any fixed charge
created by any of the Special Charges over the present and future interest of
the Company in any items subject to a first fixed charge referred to in Clause
2(b) of each Clause 17 Cross Charge and to duly register, file or record all
such notices or documents relating thereto in such jurisdictions as may be
required by law to perfect such release, discharge or substitution as aforesaid.
<PAGE>
6. Each of the Project Chargees covenants with the Special Lender that it
will not enforce or seek to enforce the Project Charge until twenty-one (21)
days after the Special Lender has received the notice referred to in Clause 3
thereof.
7. Each of the Project Chargees acknowledges that the Special Charges in
their form as at the date hereof comply with the Mereenie Operating Agreement.
8. The Special Lender covenants with the Project Chargees that it will not
assign or transfer or otherwise deal with any of its rights to the security
constituted by the Special Charges unless the assignment, transfer or dealing is
made expressly subject to the terms of this Deed and the assignee or transferee
binds itself to the satisfaction of each of the other Project Chargees and the
Special Lender in substantially the same manner as the assignor or transferor
under this Deed is bound.
9. Each of the Project Chargees covenants with each other and with the
Special Lender that it will not assign or transfer or otherwise deal with any of
its rights to the security constituted by the Project Charge unless the
assignment, transfer or dealing is made expressly subject to the terms of this
Deed and the assignee or transferee binds itself to the satisfaction of each of
the other Project Chargees and the Special Lender in substantially the same
manner as the assignor or transferor under this Deed is bound.
10. Each party hereby covenants with each of the other parties as a
separate covenant that for the purposes of this Deed it submits itself to the
jurisdiction of the courts of the Northern Territory of Australia.
<PAGE>
BETWEEN:
MAGELLAN PETROLEUM (N.T.) PTY. LTD.
UNITED OIL & GAS CO. (N.T.) PTY. LTD.
CANSO RESOURCES LIMITED
OILMIN N.L.
PETROMIN NO LIABILITY
TRANSOIL NO LIABILITY
FARMOUT DRILLERS NL
INTERNATIONAL OIL PROPRIETARY
MEREENIE OPERATING AGREEMENT
AMENDMENT 3RD OCTOBER, 1984
Chambers McNab Tully & Wilson
Solicitors & Notaries
324 Queen Street
BRISBANE 4000
Telephone: 228 9333 (RAN)
------------------------------
<PAGE>
M E R E E N I E O P E R A T I N G A G R E E M E N T
A M E N D M E N T
TABLE OF CONTENTS
Clause Heading Page
1. DEFINITIONS: INTERPRETATION 2
1.1 Definitions 2
1.2 Interpretation 3
2. AMENDMENT: CLAUSE 1.1 MEREENIE
OPERATING AGREEMENT 4
2.1 Amendment Clause 1.1.11 4
2.2 Amendment Clause 1.1.24 5
3. AMENDMENT: CLAUSE 2 MEREENIE
OPERATING AGREEMENT 5
3.1 Amendment Clause 2.1 5
3.2 Amendment Clause 2.2 6
3.3 Amendment Clause 2.3 7
3.4 Amendment Clause 2.4(b) 7
4. AMENDMENT: CLAUSE 5.1 MEREENIE
OPERATING AGREEMENT 7
4.1 Amendment Clause 5.1 7
5. AMENDMENT: CLAUSE 9.6 MEREENIE
OPERATING AGREEMENT 8
5.1 Amendment Clause 9.6 8
6. AMENDMENT: CLAUSE 11.4 MEREENIE
OPERATING AGREEMENT 10
6.1 Amendment Clause 11.4 10
<PAGE>
Clause Heading Page
7. AMENDMENT: CLAUSE 12 MEREENIE
OPERATING AGREEMENT 10
7.1 Amendment Clause 12.2 10
7.2 Amendment Clause 12.2(a) 11
7.3 Amendment Clause 12.2(b) 11
7.4 New Clause 12.6 12
8. AMENDMENT: CLAUSE 17.4 MEREENIE
OPERATING AGREEMENT 12
8.1 Amendment Clause 17.4 12
9. AMENDMENT: CLAUSE 17.5 MEREENIE
OPERATING AGREEMENT 13
9.1 Amendment Clause 17.5(b) 13
10. AMENDMENT: CLAUSE 19.4 MEREENIE
OPERATING AGREEMENT 13
10.1 Amendment Clause 19.4.2(i) 13
10.2 Amendment Clause 19.4.3(b) 13
11. COUNTERPARTS 13
11.1 Counterparts 13
<PAGE>
MEREENIE OPERATING AGREEMENT
AMENDMENT
THIS AGREEMENT made as of the Third day of October, 1984 BETWEEN
MAGELLAN PETROLEUM (N.T.) PTY. LTD. a Company incorporated in the State of
Queensland and having its registered office in the Northern Territory at c/-
Veritatem Nominees (N.T.) Pty. Ltd., 5th Floor, City Mutual Building, 62
Cavenagh Street, Darwin (hereinafter called "Magellan") of the First Part
UNITED OIL & GAS CO. (N.T.) PTY. LTD. a Company incorporated in the State of
Queensland and having registered office in the Northern Territory at c/-
Veritatem Nominees (N.T.) Pty. Ltd., 5th Floor, City Mutual Building, 62
Cavenagh Street, Darwin aforesaid (hereinafter called "United") of the Second
Part
CANSO RESOURCES LIMITED a Company incorporated in the State of New South Wales
and having its registered office in the Northern Territory at c/- Wardell
Nominees Pty. Ltd., First Floor, 19 The Mall, Darwin aforesaid (hereinafter
called "Canso") of the Third Part
OILMIN N.L. a Company incorporated in the State of Queensland and having its
registered office in the Northern Territory at c/- Veritatem Nominees (N.T.)
Pty. Ltd., 5th Floor, City Mutual Building, 62 Cavenagh Street, Darwin aforesaid
(hereinafter called "OILMIN") of the Fourth Part
PETROMIN NO LIABILITY a Company incorporated in the State of New South Wales
and having its registered office in the Northern Territory at c/- Veritatem
Nominees (N.T.) Pty. Ltd., 5th Floor, City Mutual Building, 62 Cavenagh Street,
Darwin aforesaid (hereinafter called "Petromin") of the Fifth Part
TRANSOIL NO LIABILITY a Company incorporated in the State of Queensland and
having its registered office in the Northern Territory at c/- Veritatem Nominees
(N.T.) Pty. Ltd., 5th Floor, City Mutual Building, 62 Cavenagh Street, Darwin
aforesaid (hereinafter called "Transoil") of the Sixth Part
FARMOUT DRILLERS NL a Company incorporated in the State of New South Wales and
having its registered office in the Northern Territory at c/- Wilson, Bishop,
Bowes & Craig, City Mutual Building, 62 Cavenagh Street, Darwin aforesaid
(hereinafter called "Farmout") of the Seventh Part
AND
INTERNATIONAL OIL PROPRIETARY a Company incorporated in the State of Victoria
having its registered office at 33rd Floor, BHP House, 140 William Street,
Melbourne in the said State (hereinafter called "International") of the Eighth
Part
<PAGE>
W H E R E A S:
A. By the Mereenie Operating Agreement Magellan, United, Canso, Oilmin
(N.T.) Pty. Ltd., Krewliff Investments Pty. Ltd., Transoil (N.T.) Pty.
Ltd., Farmout and International agreed as to the manner in which they
would own and operate their interests in the Concession.
B. By the Transfer Agreement Oilmin (N.T.) Pty. Ltd., Krewliff Investments
Pty. Ltd. and Transoil (N.T.) Pty. Ltd. assigned all their rights
titles and obligations under the Mereenie Operating Agreement to
Oilmin, Petromin and Transoil respectively.
C. The Parties now wish to amend the Mereenie Operating Agreement on the
terms and conditions herein contained.
NOW THEREFORE THE PARTIES AGREE AS FOLLOWS:
1. DEFINITIONS: INTERPRETATION
1.1 Definitions. Certain terms used in this Agreement have the following
meanings assigned to them:
1.1.1 "Agreement" means this agreement, its recitals, its annexures
and its schedule.
1.1.2 "Brewer Facility" means the lands outlined in red in the First
Schedule hereto, the facilities being or to be established
thereon for the handling and storage of Petroleum produced
from the Concession together with the simplified refiner
(consisting of and limited to the two Val Verde distillation
units owned by the Parties andassociated facilities for the
handling and storage of the products from such units) being
or to be established thereon for the purpose of refining
Petroleum produced from the Concession but the expression
shall not include any other facilities for the refining of
Petroleum produced from the Concession whether such facilities
are an expansion or extension of the said Val Verde units, a
refinery to be established pursuant to a study to be carried
out under the agreement which is Schedule 2 to the said
Petroleum Leases 4 and 5 or otherwise.
<PAGE>
1.1.3 "Ghan Road Facility" means the temporary facilities
established at Ghan Road, Alice Springs in the Northern
Territory of Australia for the handling and storage of
Petroleum produced from the Concession.
1.1.4 "Mereenie Operating Agreement" means the operating agreement
dated 27th April 1984 entered into by Magellan, United, Canso,
Oilmin (N.T.) Pty. Ltd., Krewliff Investments Pty. Ltd.,
Transoil (N.T.) Pty. Ltd., Farmout and International relating
to Petroleum Leases 4 and 5, and parts of Extension No. 1 of
Oil Permit 175 and Oil Permit 178 in the Northern Territory of
Australia.
1.1.5 "Project Finance" shall mean any moneys borrowed by all the
Working Interest holders at the same time either with or
without security for expenditure on Work or the acquisition
for the Joint Account of plant, equipment or other property
(whether real or personal) which will be part of the
Concession or the Joint Facilities together with such other
finance as the Operating Committee unanimously decides shall
fall within the definition of Project Finance.
1.1.6 "Transfer Agreement" means an agreement made 22nd June 1984
between Magellan, United, Canso, Oilmin (N.T.) Pty. Ltd.,
Krewliff Investments Pty. Ltd., Transoil (N.T.) Pty. Ltd.,
Farmout Drillers NL, Oilmin, Transoil, Petromin and
International Oil Proprietary and the transfer documents
referred to therein by which Oilmin (N.T.) Pty. Ltd., Krewliff
Investments Pty. Ltd. and Transoil (N.T.) Pty. Ltd.
transferred all their right title and interest in and under
the Mereenie Operating Agreement to Oilmin, Petromin and
Transoil respectively.
1.2 Interpretation. In this Agreement, unless the context requires
otherwise:-
1.2.1 words, phrases and expressions ascribed a meaning by the
Mereenie Operating Agreement shall bear that meaning when used
herein unless the context requires otherwise;
<PAGE>
1.2.2 monetary references are references to Australian currency;
1.2.3. the headings to any clauses or sub-clauses do not affect the
interpretation thereof;
1.2.4 words importing the singular include the plural and vice
versa;
1.2.5 reference to a person includes a corporation and vice versa.
2. AMENDMENT: CLAUSE 1.1 MEREENIE OPERATING AGREEMENT
2.1 Amendment Clause 1.1.11. Clause 1.1.11 of the Mereenie Operating
Agreement is amended by in line six after "Concession" inserting ", the
Ghan Road Facility or the Brewer Facility", and by adding "and except
any pipeline facilities for the transport of Petroleum or Petroleum
products from the Concession which facilities are to be owned and
operated by the Parties under a separate joint operating agreement" to
the end thereof so that the said Clause 1.1.11 as amended is as
follows:-
"1.1.11 "Joint Facilities" save as hereinafter excepted, shall mean all
real and personal property, wells, equipment, machinery, plants and
other facilities now held by or on behalf of the Parties hereto, or any
of them, on or with respect to the Concession, or hereinafter acquired
for the Joint Account for present or contingent use or to be held for
such use in operations conducted for the Joint Account, including
without limiting the generality thereof the Ghan Road Facility and the
Brewer Facility except the Concession, and except the OIME SL750
drilling rig and ancillary equipment currently used for drilling
operations on the Concession and except any pipeline facilities for the
transport of Petroleum or Petroleum products from the Concession which
facilities are to be owned and operated by the Parties under a separate
joint operating agreement."
<PAGE>
2.2 Amendment Clause 1.1.24. Clause 1.1.24 of the Mereenie Operating
Agreement is amended by in line ten after "Concession" inserting ", the
establishment and operation of the Ghan Road Facility, the
establishment and operation of the Brewer Facility, the transport of
Petroleum by road to the Ghan Road Facility or the Brewer Facility, the
despatch of Petroleum by rail or road transport from the Ghan Road
Facility or the Brewer Facility to buyers or refiners thereof, the
despatch of Petroleum products by road or rail transport from the
Brewer Facility to buyers thereof but excluding any pipeline facilities
for the transport of Petroleum or Petroleum products from the
Concession which facilities are to be owned and operated by the Parties
under a separate joint operating agreement, and to do all things
reasonably conducive thereto" so that the said clause 1.1.24 as amended
is as follows:-
"1.1.24 "Work" shall mean all exploration, development, processing,
reporting, analysing, studying or any other operations or actions of
whatsoever kind which are appropriate to the exploration of the
Concession, the assessing of the Petroleum content of the Concession,
the investigation of the feasibility of carrying out Petroleum
production operations on the Concession and the carrying out of
Petroleum production operations on the Concession, the establishment
and operation of the Ghan Road Facility, the establishment and
operation of the Brewer Facility, the transport of Petroleum by road to
the Ghan Road Facility or the Brewer Facility, the despatch of
Petroleum by rail or road transport from the Ghan Road Facility or the
Brewer Facility to buyers or refiners thereof, the despatch of
Petroleum products by road or rail transport from the Brewer Facility
to buyers thereof but excluding any pipeline facilities for the
transport of Petroleum or Petroleum products from the Concession which
facilities are to be owned and operated by the Parties under a separate
joint operating agreement, and to do all things reasonably conducive
thereto when the foregoing are authorised or required under the terms
of this Agreement."
3. AMENDMENT: CLAUSE 2 MEREENIE OPERATING AGREEMENT
3.1 Amendment Clause 2.1. Clause 2.1 of the Mereenie Operating Agreement is
deleted and replaced with the following:-
<PAGE>
"2.1 Operating Agreement. The Parties hereby agree as from the date
hereof that this Agreement shall be the Operating Agreement applying as
a single Operating Agreement to the Concession and the Joint Facilities
and that at the date hereof this Agreement is the sole agreement
between the Parties with respect to its subject matter. As from the
date hereof the documents described in the Fourth Schedule shall be of
no further effect with respect to the Concession but notwithstanding
the foregoing, no Party shall be relieved of any liability or
obligation in existence as at the date hereof with respect to the
Concession and such documents or agreements shall remain in effect for
the purpose of final settlement of such liabilities or obligations
between the Parties and shall also remain in effect with respect to any
areas titles or rights (other than the Concession) which are subject to
the terms thereof. Notwithstanding the foregoing if the Parties agree
to install or establish on the lands which are included in the Brewer
Facility, facilities for refining Petroleum produced from the
Concession which are an expansion of or are additional to the
simplified refiner consisting of the two Val Verde units referred to in
the Brewer Facility then the Brewer Facility shall cease to be subject
to the Mereenie Operating Agreement and the Brewer Facility and such
further refining facilities shall be owned and operated by the Parties
under a separate joint operating agreement and not under the Mereenie
Operating Agreement."
3.2 Amendment Clause 2.2. Clause 2.2 of the Mereenie Operating Agreement is
amended by in line four after "Concession" inserting "and establishing
and operating the Joint Facilities" so that the said Clause 2.2 as
amended is as follows:-
"2.2 Venture of Parties. Pursuant to this Agreement the Parties shall
be associated in a venture to appraise reserves of Petroleum in and to
develop and produce Petroleum in payable quantities from the Concession
and establishing and operating the Joint Facilities and to do all
things reasonably conducive thereto."
<PAGE>
3.3 Amendment Clause 2.3. Clause 2.3 of the Mereenie Operating Agreement is
amended by in the third line after "Concession" inserting "or the Joint
Facilities" and in line four after "Concession" inserting "and the
Joint Facilities" so that the said Clause 2.3 as amended is as
follows:-
"2.3 Duration of Venture. The venture constituted hereby ("the
Venture") shall continue while the Parties hold the Concession or the
Joint Facilities or any part thereof or until one Party only remains
the sole holder of the Concession and the Joint Facilities whichever
shall first occur and thereafter until there has been a final
accounting between the Parties pursuant to this Agreement."
3.4 Amendment Clause 2.4(b). Clause 2.4(b) of the Mereenie Operating
Agreement is amended by after "Concession" insert "the Brewer Facility"
so that the said Clause 2.4(b) as amended is as follows:-
"(b) Generally to keep the Concession and the Brewer Facility in
good standing;"
4. AMENDMENT: CLAUSE 5.1 MEREENIE OPERATING AGREEMENT
4.1 Amendment Clause 5.1. Clause 5.1 of the Mereenie Operating Agreement is
amended by in line one after "Concession" insert "and the Joint
Facilities" so that the said Clause 5.1 as amended is as follows:-
"5.1 Initial Operator. The Operator of the Concession and the Joint
Facilities at the date of commencement of this Operating Agreement is
Oilmin. If Oilmin ceases for any reason to be the initial Operator
Magellan shall be entitled to elect to be the Operator by delivering to
all Working Interest holders notice to that effect prior to the holding
of a meeting of the Operating Committee to appoint a successor to
Oilmin as initial Operator but such right shall not be transferrable or
assignable by Magellan."
<PAGE>
5. AMENDMENT: CLAUSE 9.6 MEREENIE OPERATING AGREEMENT
5.1 Amendment Clause 9.6. Clause 9.6 of the Mereenie Operating Agreement is
deleted and replaced with the following:-
"9.6 Votes Required For Committee Decisions.
(a) The Party which is in default in the making of a
payment due under this Agreement shall not (except as
provided in Clause 9.6(d) hereof) be entitled to
attend or vote at a meeting of the Operating
Committee. A decision made by the Operating Committee
in the absence of such a Party shall be binding on
that Party. Upon a vote of the Operating Committee
each representative shall have the number of votes
equal to the Working Interest or Working Interests of
the Party or Parties which he represents. In the
event of an equality of votes the decision shall be
in the negative.
(b) Decisions of the Operating Committee in respect of:-
(i) the Work necessary to satisfy the work and
expenditure obligations of the Concession
and any other requirements necessary to
maintain the Concession in good standing and
the Joint Facilities in a safe and operable
condition;
(ii) the production of Petroleum from the
Concession to enable the Parties to meet
their respective obligations for the sale of
the respective shares thereof;
(iii) during the currency of any Project Finance,
decisions reasonably necessary to avoid any
breach of any obligations by any of the
Parties in relation to such Project Finance,
and decisions reasonably necessary to
maintain production, transportation and
refining of Petroleum and products therefrom
at levels which will enable each Party to
meet its obligations under any Project
Finance;
<PAGE>
(iv) the review adoption and revision of detailed
programmes and budgets to give effect to
decisions made pursuant to the preceding
paragraphs (i) to (iii) inclusive of this
clause;
(v) applications for or for the renewal of all
appropriate titles necessary for the
purposes of this Agreement;
(vi) dealings with all governmental authorities
in relation to the Venture;
(vii) dealings with the Central Land Council in
relation to the CLC Agreement or the Joint
Venture;
(viii) all matters referred to in this Agreement as
being the subject of decision or
determination by the Operating Committee
other than matters in respect of which
unanimity or a particular majority is
specified;
(ix) all other matters necessarily incidental to
any of the foregoing matters,
shall be made by a simple majority vote of the
representatives of the Parties present and voting
which majority shall comprise the representatives of
not less than two Parties,
(c) Decisions of the Operating Committee as to the
replacement and appointment of the Operator shall be
made by the majorities provided for in Clause 5 of
this Agreement.
<PAGE>
(d) All other decisions of the Operating Committee (other
than those which are to be made by a specified
majority) shall be made by a unanimous vote of the
representatives of all Parties (including the
representatives of a Party which has failed to make a
payment under this Agreement)."
6. AMENDMENT: CLAUSE 11.4 MEREENIE OPERATING AGREEMENT
6.1 Amendment Clause 11.4. Clause 11.4 of the Mereenie Operating Agreement
is amended by in line four after "Concession" inserting "or the Joint
Facilities" so that the said Clause 11.4 as amended is as follows:-
"11.4 Treatment of Any Subsidy or Contribution. In the event that any
subsidy or other contribution is paid to the Operator or to any of the
other Parties hereto as a result of any event relating to the
Concession or the Joint Facilities all such sums shall be credited to
the Party or Parties contributing thereto in proportion to their
contributions."
7. AMENDMENT: CLAUSE 12 MEREENIE OPERATING AGREEMENT
7.1 Amendment Clause 12.2. The first paragraph of Clause 12.2 is amended by
in line five inserting after "Segments" the words "but in the case of
operating costs for the transportation of Petroleum from the Concession
and operating costs for all Work other than that carried out on the
Concession for a period of one (1) calendar month instead of the said
period of three (3) calendar months," so that the said first paragraph
of Clause 12.2 as amended is as follows:-
"12.2 Call By Operator. The Operator shall have the option of requiring
the Non-Operators to advance their respective portions of costs and
expenses for a period of three (3) calendar months consisting of a
Quarterly Segment or parts of two Quarterly Segments, but in the case
of operating costs for the transportation of Petroleum from the
Concession and operating costs for all Work other than that carried out
on the Concession for a period of one (1) calendar month instead of the
said period of three (3) calendar months, (and whether or not a
Detailed Estimate of Expenditure is binding on the Parties with respect
thereto) in accordance with the following:-"
<PAGE>
7.2 Amendment Clause 12.2(a). Clause 12.2(a) of the Mereenie Operating
Agreement is amended by in the second line changing "will" to "may", in
the fifth line after "month" inserting "or one (1) calendar month (as
the case may be)" and in the final line thereof after "month" inserting
"or one (1) calendar month (as the case may be)" so that the said
Clause 12.2(a) as amended is as follows:-
"(a) On or before the last day of any calendar month during the
term hereof, the Operator may debit the Parties for their
estimated respective shares of the authorised costs and
expenses anticipated for the ensuing three (3) calendar months
or one (1) calendar month (as the case may be) period and in
making such debit the Operator shall show a credit for any
amounts previously called relating to anticipated costs for
any part of the three (3) calendar months or one (1) calendar
month (as the case may be) period concerned."
7.3 Amendment Clause 12.2(b). Clause 12.2(b) is deleted and the following
substituted in its place:-
"(b) Before the Operator shall be obliged to execute any contract
or undertake any commitment for the carrying out of Work or
the acquisition of any property (whether real or personal) for
the Joint Account the Operator may debit the Parties for their
respective shares of the liability estimated to be incurred
pursuant to any such contract or commitment notwithstanding
that the Work or liability concerned may extend beyond the
period of three (3) months or one (1) month (as the case may
be) referred to in sub-clause (a) of this Clause 12.2."
<PAGE>
7.4 New Clause 12.6. A new Clause 12.6 shall be inserted to read as
follows:-
"12.6 Use of Project Finance. The Parties agree that subject to any
unanimous qualifying direction from the Operating Committee it
is their intention that Project Finance will be drawn down to
the fullest extent possible to meet calls and invoices from
the Operator pursuant to this Clause 12 before the Parties are
required to use funds from their own sources to meet such
calls or invoices but lack of such Project Finance shall not
excuse or relieve a Party from paying any call or invoice made
in accordance with the terms of this Agreement."
8. AMENDMENT: CLAUSE 17.4 MEREENIE OPERATING AGREEMENT
8.1 Amendment Clause 17.4. Clause 17.4 of the Mereenie Operating Agreement
is amended by in the fifth line after "Party" " inserting "and shall be
deemed to have advanced such amounts to the Defaulting Party", in the
fifth line after "may" inserting "sue" and in the seventh line after
"Clause 17." inserting the sentence "The amount owing by a Defaulting
Party to a Paying Party shall bear interest at the Default Interest
Rate until the Paying Party has recovered the same in full." so that
the said Clause 17.4 as amended is as follows:-
"17.4 Rights of Contributing Party. A Non-Defaulting Party (including
the Operator in its capacity as a Party) which pays to the Operator or
bears all of the amounts due by it under Clause 17.3 hereof is
hereinafter called "a Paying Party" and shall be deemed to have
advanced such amounts to the Defaulting Party and may sue to recover
the same but without prejudice to any other rights and remedies, invoke
the provisions of this Clause 17. The amount owing by a Defaulting
Party to a Paying Party shall bear interest at the Default Interest
Rate until the Paying Party has recovered the same in full."
<PAGE>
9. AMENDMENT: CLAUSE 17.5 MEREENIE OPERATING AGREEMENT
9.1 Amendment Clause 17.5(b). Clause 17.5(b) of the Mereenie Operating
Agreement is deleted and the following substituted in its place:-
"(b) to the Paying Parties of any debt due and interest payable to
them or any of them pursuant to Clause 17.4 hereof;"
10. AMENDMENT: CLAUSE 19.4 MEREENIE OPERATING AGREEMENT
10.1 Amendment Clause 19.4.2(i). Clause 19.4.2(i) of the Mereenie Operating
Agreement is amended by in line four deleting "19.5" and substituting
"19.2".
10.2 Amendment Clause 19.4.3.(b). Clause 19.4.3(b) of the Mereenie Operating
Agreement is amended by in line four deleting "Individual" and
substituting "Working".
11. COUNTERPARTS
11.1 Counterparts. This Agreement may be executed in any number of
counterparts each of which shall be deemed an original but all of which
shall constitute one and the same instrument.
IN WITNESS WHEREOF the Parties hereto have executed this Agreement on the date
hereinbefore written.
SIGNED by MAGELLAN PETROLEUM )
(N.T.) PTY. LTD. by its duly constituted )
Attorney HEDLEY HOWARD pursuant to ) MAGELLAN PETROLEUM (N.T.)
Power of Attorney dated 25th October 1984 ) PTY. LTD.
who hereby certifies that he has no notice ) by its Attorney:
of revocation of such Power of Attorney )
in the presence of: ) /s/ Hedley Howard
...........................
/s/ _________________________
<PAGE>
SIGNED by UNITED OIL & GAS CO. )
(N.T.) PTY. LTD. by its duly constituted )
Attorney HEDLEY HOWARD pursuant to ) UNITED OIL & GAS CO. (N.T.)
Power of Attorney dated 25th October 1984 ) PTY. LTD.
who hereby certifies that he has no notice ) by its Attorney:
of revocation of such Power of Attorney )
in the presence of: ) /s/ Hedley Howard
...........................
/s/ _________________________
SIGNED by CANSO RESOURCES )
LIMITED by its duly constituted Attorney )
JOHN PATRICK KELLY pursuant to )
Power of Attorney dated 23rd October 1984 ) CANSO RESOURCES LIMITED
who hereby certifies that he has no notice ) by its Attorney:
of revocation of such Power of Attorney )
in the presence of: ) /s/ John P. Kelly
...........................
/s/ William Singley
SIGNED by OILMIN N.L. by its duly )
constituted Attorney WILLIAM SINGLEY )
pursuant to Power of Attorney )
dated 25th October 1984 who hereby ) OILMIN N.L.
certifies that he has no notice of ) by its Attorney:
revocation of such Power of Attorney )
in the presence of: ) /s/ William Singley
...........................
/s/ John P. Kelly
SIGNED by PETROMIN NO LIABILITY )
by its duly constituted Attorney )
WILLIAM SINGLEY pursuant to Power )
of Attorney dated 25th October 1984 ) PETROMIN NO LIABILITY
who hereby certifies that he has no notice ) by its Attorney:
of revocation of such Power of Attorney )
in the presence of: ) /s/ William Singley
...........................
/s/ John P. Kelly
<PAGE>
SIGNED by TRANSOIL NO LIABILITY )
by its duly constituted Attorney )
WILLIAM SINGLEY pursuant to Power )
of Attorney dated 25th October 1984 ) TRANSOIL NO LIABILITY
who hereby certifies that he has no notice ) by its Attorney:
of revocation of such Power of Attorney )
in the presence of: ) /s/ William Singley
...........................
/s/ John P. Kelly
SIGNED by FARMOUT DRILLERS )
NL by its duly constituted Attorney )
JOHN PATRICK KELLY pursuant to )
Power of Attorney dated 23rd October 1984 ) FARMOUT DRILLERS NL
who hereby certifies that he has no notice ) by its Attorney:
of revocation of such Power of Attorney )
in the presence of: ) /s/ John P. Kelly
...........................
/s/ William Singley
SIGNED by INTERNATIONAL OIL )
PROPRIETARY by its duly constituted )
Attorney JOHN MORTON VAUGHAN ) INTERNATIONAL OIL
pursuant to Power of Attorney dated ) PROPRIETARY
25th October 1984 who hereby certifies ) by its Attorney:
that he has no notice of revocation of )
such Power of Attorney in the presence of: ) /s/ John M. Vaughan
...........................
/s/ _________________________
DATED 28 JUNE, 1985
BETWEEN:
MAGELLAN PETROLEUM (N.T.) PTY. LTD.
of the first part
C.D. RESOURCES PTY. LTD.
of the second part
FARMOUT DRILLERS N.L.
of the third part
CANSO RESOURCES LIMITED
of the fourth part
INTERNATIONAL OIL PROPRIETARY
of the fifth part
PANCONTINENTAL PETROLEUM LIMITED
of the sixth part
IEDC AUSTRALIA PTY. LIMITED
of the seventh part
AMADEUS OIL N.L.
of the eighth part
SOUTHERN ALLOYS VENTURE PTY. LIMITED
of the ninth part
AND
GASGO PTY. LIMITED
of the tenth part
---------------------------------------------
PALM VALLEY GAS PURCHASE AGREEMENT
---------------------------------------------
------------------------------------------
CLAYTON UTZ
with Pritchards
SOLICITORS AND ATTORNEYS
SYDNEY OFFICE: MELBOURNE OFFICE: FOR AND IN CONJUNCTION WITH
TOWER BUILDING COLLINS TOWER
AUSTRALIA SQUARE 35 COLLINS STREET J.B. O'Rourke
SYDNEY, NSW MELBOURNE, VIC Crown Solicitor for the
AUSTRALIA AUSTRALIA Northern Territory of Australia,
2nd Floor,
POSTAL ADDRESS: POSTAL ADDRESS: Darwin Plaza Building,
PO BOX H3 31ST LEVEL 41 The Mall,
AUSTRALIA SQUARE 35 COLLINS STREET DARWIN. N.T. 5790.
NSW 2000 MELBOURNE, VIC 3000
AUSTRALIA AUSTRALIA
TELEPHONE: 02 20527 TELEPHONE: 03 63 7971
INTERNATIONAL: INTERNATIONAL:
+61 2 20527 +61 3 63 7971
TELEX: 24033 TELEX: 39326
FAX: G3 2213286 FAX: G2-G3 654 2714
DX 370 SYDNEY DX 30826 MELBOURNE
ELECTRONIC MAIL: ELECTRONIC MAIL:
MINERVA ID58 UTZ002 MINERVA ID 58 UTZ003
<PAGE>
PALM VALLEY GAS PURCHASE AGREEMENT
THIS AGREEMENT made the 28th day of June 1985 BETWEEN MAGELLAN PETROLEUM (N.T.)
PTY. LTD. of the first part, C.D. RESOURCES PTY. LTD. of the second part,
FARMOUT DRILLERS N.L. of the third part, CANSO RESOURCES LIMITED of the fourth
part, INTERNATIONAL OIL PROPRIETARY of the fifth part, PANCONTINENTAL PETROLEUM
LIMITED of the sixth part, IEDC AUSTRALIA PTY. LIMITED of the seventh part,
AMADEUS OIL N.L. of the eighth part, SOUTHERN ALLOYS VENTURE PTY. LIMITED of the
ninth part AND GASGO PTY. LIMITED of the tenth part
WHEREAS:
A. The Producers have formed an unincorporated joint venture to develop
existing and potential reserves of recoverable natural gas from the Gas
Field and each Producer is entitled to receive as its own property and
dispose of a share of natural gas produced from the Gas Field equal to
its Ownership Percentage.
B. The Purchaser is a company the whole of whose share capital is owned by
or on behalf of the Territory.
C. The Purchaser proposes to ensure the construction of a pipeline to
transport Gas to Darwin and to other delivery points in the Territory.
D. The Purchaser proposes to sell Gas to the Pipeline Operator for
transportation through the Pipeline and for re-sale to the Consumers at
the various delivery points for use in the generation of electric power
in gas-fired power stations and for other uses.
E. The Purchaser has accordingly agreed to purchase and each of the
Producers has severally agreed to sell Gas on the terms and conditions
contained herein.
F. The Purchaser also proposes contemporaneously herewith to enter into a
separate agreement for the purchase of natural gas from the Mereenie
Producers.
NOW THIS AGREEMENT WITNESSES THAT IT IS HEREBY AGREED as follows:
1.00 DEFINITIONS
1.10 In this Agreement, unless the contrary intention appears:-
"Additional Wells" means Wells to be drilled by the Producers as
provided in clause 2.50 which shall be additional to those drilled
prior to the date of this Agreement and includes (except where the
context otherwise requires) associated components of the Gas Delivery
System.
"Alice Springs Contract" means the contract dated 11th November, 1981
pursuant to which the Producers are supplying gas to NTEC for
consumption at Alice Springs.
<PAGE>
"Annual Minimum Quantity" means the quantity set out in Schedule A for
the relevant Contract Year varied from time to time in accordance with
clauses 2.21, 2.28, 2.55, 3.53 or 3.63 hereof.
"Base Price" means $l.50 per GJ based on Gross Heating Value as at the
Development Date escalated or de-escalated on a Quarterly basis
thereafter as follows:-
(a) As to 37.5 cents thereof in accordance with CPI Escalation;
(b) As to $l.125 thereof in accordance with Mega CPI Escalation;
(c) As to the whole thereof (as CPI Escalated and Mega CPI
Escalated) in accordance with Fuel Escalation.
(An illustration of the application of such escalation or de-escalation
is contained in Schedule D hereto.)
"Commonwealth Imposts" means any Impost of the Commonwealth of
Australia or any authority thereof.
"Consumers" means any of the following:-
(i) NTEC;
(ii) Any agency of the Territory or entity owned or controlled
directly or indirectly by the Territory but not any such
agency or entity whose function is to sell or reticulate gas
to the public;
(iii) Any party to whom the Purchaser may have sold Gas pursuant to
clause 2.28; and
(iv) Such other party as shall be approved by the Producers.
"Contract Price" means the aggregate of the Base Price and the Imposts
Price.
"Contract Year" means a period of twelve (12) consecutive months
beginning and ending at 8.00 am on the 1st of July each year PROVIDED
HOWEVER that if the Date of Initial Delivery is other than 1st July,
then the first Contract Year shall be reduced proportionately so as to
end at 8.00 am on the 1st of July next following the date of Initial
Delivery.
"CPI" means the Consumer Price Index (All Groups) Weighted Average of
Eight Capital Cities published for each Quarter by the Australian
Bureau of Statistics or such alternative index as may be adopted
pursuant to clause 4.40 hereof.
<PAGE>
"CPI Escalation" means escalation or de-escalation by a percentage
equal to the whole of the percentage movement in the CPI where such
percentage shall be 2 percent or more above or below the CPI at the end
of the corresponding Quarter in the previous year taking the CPI for
the Quarter ending as at the Development Date as the base and "CPI
Escalated" has a corresponding meaning.
"Cubic Metre of Gas" or "m3" means the amount of Gas which will occupy
a space of one (1) cubic metre when such Gas is at a temperature of
fifteen degrees Celsius and at a pressure of 101.325 kilopascals
absolute.
"Custody Transfer Area" means the area to be established and fenced by
the Pipeline Operator adjoining the Field Delivery Station and which
shall contain the measuring equipment referred to in clause 6.10.
"Daily Maximum Quantity" means 155% of the Daily Minimum Quantity.
"Daily Minimum Quantity" means the Annual Minimum Quantity for the
relevant Contract Year divided by the number of days in that Contract
Year.
"Daily Peak Demand Quantity" means 176% of the Daily Minimum Quantity.
"Date of Initial Delivery" means the earlier of the following dates:
(a) The date after commissioning of the Pipeline on which the
Producers make the initial delivery of Gas into the inlet
flange of the Pipeline and after which maintain for seven Days
continuously delivery of the Daily Minimum Quantity or such
lesser quantity (if any) as the Purchaser may require during
that time; or
(b) The date of the expiration of 90 Days after the Producers make
the initial delivery of Gas as required by the Purchaser for
commissioning purposes unless at such date the Purchaser can
establish that the Producers are unable to maintain continuous
delivery of the Daily Minimum Quantity.
"Day" means a period of 24 hours commencing and ending at 8.00 am.
"Dedicated Quantity" means natural gas of 200 PJ, subject to variation
pursuant to clauses 2.21(b), 2.28(b), 3.25(c) and 3.50.
"Development Date" means 31st March, 1985.
"Development Expenditure" means all expenditure incurred by the
Producers in carrying out Development Work paid after 12th October,
1984 exceeding $6.5 million (the unexpended portion of which is to be
escalated or de-escalated quarterly from the Development Date in
accordance with any increase or decrease in the CPI) but subject to
clause 2.57.
"Development Work" means development work carried out by the Producers
within the Gas Field as defined in clause 2.51.
<PAGE>
"Excess Proven Reserves" means subject to clause 2.25(c) the total
Proven Reserves remaining in the Gas Field after deducting the
aggregate of:
(i) 200% of the Annual Minimum Quantities still to be supplied
pursuant to this Agreement; and
(ii) the Maximum Delivery Obligations as set out in Column B of
Schedule II of the Alice Springs Contract still to be
delivered pursuant to that Contract.
For the purpose of this definition it is acknowledged that it is
paramount that there be no jeopardy to the future supply entitlements
of the Purchaser under this Agreement.
"Field Delivery Station" means those facilities proposed to be
constructed by the Producers in or adjacent to the area of the
Petroleum Lease for delivering Gas into the inlet flange of the
Pipeline.
"Final Contract Years" means the Contract Years numbered 21 to 26
inclusive.
"Force Majeure" means any event or circumstance not within the control
of a party and which by exercise of due diligence such party is not
reasonably able to prevent or overcome including without limiting the
generality hereof:
(a) Acts of God, including but not limited to epidemics,
landslides, earthquakes, floods and washouts;
(b) Strikes or other industrial disturbances which could not
reasonably be prevented;
(c) Acts of the enemy including but not limited to wars, blockades
or insurrections;
(d) Riots and civil disturbance;
(e) Any direct legislative or administrative interference by the
Government of the Territory or the Government of the
Commonwealth of Australia but in the case of any such
interference by the Territory only insofar as it affects the
Producers;
(f) Hydrate obstructions of wells, lines of pipe or production
facilities; and
(g) Cessation or reduction of production from the Gas Field due to
depletion or exhaustion of Proven Reserves by reason of
recovery of Gas therefrom by the Producers after the date
hereof where that cessation or reduction occurs after delivery
of 153 PJ reduced by the amount (if any) by which the Annual
Minimum Quantities have been reduced pursuant to clause
2.21(b) provided that in the case of a reduction of production
the Producers are not at that time supplying natural gas from
the Gas Field to a party other than the Purchaser or pursuant
to the Alice Springs Contract.
<PAGE>
"Fuel Escalation" means an escalation (but not de-escalation) in
accordance with the formula specified in Schedule E, and "Fuel
Escalated" has a corresponding meaning.
"Gas" means natural gas meeting the quality specifications stated in
Schedule B.
"Gas Delivery System" includes all wells, meters, equipment, facilities
(including the Field Delivery Station), easements, permits and licences
necessary to gather natural gas safely from the Gas Field, separate
liquids therefrom for the purpose of producing Gas, compress and pipe
Gas to the Field Delivery Station, and to test, measure and deliver
such Gas.
"Gas Field" means the natural gas reservoir or series of reservoirs
within the Petroleum Lease.
"Gas Supply Agreements" means the agreements proposed to be entered
into for the purpose of implementing Recital D of this Agreement.
"GJ" means one gigajoule and is equal to one thousand MJ.
"Gross Heating Value" means the gross or higher heating value expressed
in MJ/m3 produced by the complete combustion of one Cubic Metre of Gas
with air, at a temperature of 15 degrees Celsius and at an absolute
pressure of 101.325 kPa, with the Gas free of all water vapour, the
products of combustion cooled to a temperature of 15 degrees celsius
and the water vapour formed by combustion condensed to the liquid
state.
"Impost" means any impost deduction or charge which is a cost to a
Producer in respect of the production supply or sale of Gas, and
computed for all purposes hereof on a "per GJ" basis. Without limiting
the generality thereof the term shall include (insofar as they relate
to the production supply or sale of Gas) any rents, royalty, resources
rent tax and similar taxes (notwithstanding that such taxes may be
levied on all or part of the income of a Producer or of income derived
from the Gas Field and from the sale of Gas or be expressed to be
income taxes), levy, excise, severance tax, petroleum lease rental or
pipeline licence fee but does not include any income tax (except to the
extent provided above), sales tax on consumables or equipment or
payroll tax.
"Imposts Price" means any increases in Imposts per GJ recoverable by a
Producer pursuant to clauses 4.50 or 4.60.
"Independent Expert" means an independent expert appointed and acting
in accordance with clause 2.60.
"Joule" or "J" means the amount of work done when the point of
application of a force of one newton is displaced a distance of one
metre in the direction of the force.
"kPa" means one kilopascal and is equal to one thousand pascals
absolute.
"Make-up Gas" means the quantity of Gas determined as set out in clause
4.20.
<PAGE>
"103m3" means one thousand Cubic Metres of Gas.
"Mega CPI Escalation" means escalation or de-escalation by a percentage
equal to the part of the percentage movement in the CPI which is
greater than 10 percent above or below the CPI at the end of the
corresponding quarter in the previous year taking the CPI for the
quarter ending as at the Development Date as the base and "Mega CPI
Escalated" has a corresponding meaning PROVIDED ALWAYS that if within 2
years from the date of this Agreement any new general Commonwealth
consumption tax is introduced then in the quarter in which such tax
shall first be charged and in the immediately succeeding quarter, the
figure of 12 percent shall be substituted for the figure of 10 percent
in this definition, and in the next 3 succeeding quarters the CPI at
the end of the corresponding quarter in the previous year shall be
deemed to be increased by 2 percent thereof.
"Mereenie Agreement" means the Gas Purchase Agreement executed
contemporaneously herewith between the Purchaser (as Purchaser) and
(inter alia) the Mereenie Producers (as the same may be amended from
time to time) pursuant to which the Mereenie Producers have agreed to
supply Gas to the Purchaser for transportation through the Pipeline.
"Mereenie Gas" means natural gas the subject of the Mereenie Agreement.
"Mereenie Producers" means Magellan Petroleum (N.T.) Pty. Ltd., United
Oil & Gas Co. (N.T.) Pty. Ltd., Canso Resources Limited, Moonie Oil
N.L., Petromin No Liability, Transoil No Liability and Farmout Drillers
N.L., and includes their respective successors and assigns under the
Mereenie Agreement.
"MJ" means one megajoule and is equal to one million joules.
"Month" means a period commencing at 8.00 am on the first day of a
calendar month and ending at 8.00 am on the first day of the next
succeeding calendar month.
"Monthly Minimum Quantity" for a Month means the Daily Minimum Quantity
multiplied by the number of Days in that Month.
"NT Imposts" means any Impost of the Territory or any authority
thereof.
"NTEC" means the Northern Territory Electricity Commission or its
successors or permitted assigns.
"Obligation Gas" means the quantity of gas nominated by the Purchaser
for supply during any one Day in accordance with clause 3.23.
"Ownership Percentages" means the respective ownership percentages of
the Producers as set out in Schedule C, as amended from time to time
pursuant to any assignment in accordance with clause 12.00.
"Petroleum Act" means the Petroleum (Prospecting and Mining) Act of the
Territory as amended from time to time and includes any replacement or
re-enactment thereof.
<PAGE>
"Petroleum Lease" means Petroleum Lease Number 3 held by the Producers
under the Petroleum Act and any substitute or renewal lease or other
rights permitting the production of natural gas from the area the
subject of the Petroleum Lease.
"Pipeline" means the pipeline forming part of the pipeline reticulation
system from the Field Delivery Station to Darwin and all of its
associated apparatus and works which the Purchaser proposes to cause to
be constructed.
"Pipeline Force Majeure" means inability of the Pipeline to transmit
Gas where such inability is not within the control of the Purchaser,
and which the Purchaser by exercise of due diligence is unable to
prevent. It is acknowledged for the purpose of this definition that any
inability of the Consumers to take delivery of Gas from the Pipeline
outlets shall not constitute Pipeline Force Majeure.
"Pipeline Operator" means such company as shall from time to time
contract with the Purchaser for the purchase of Gas for transmission
through the Pipeline.
"PJ" means one petajoule and is equal to one million GJ.
"Producer" means any one of the Producers.
"Producers" means the parties of the first to the ninth parts inclusive
and includes their respective successors and permitted assigns under
this Agreement.
"Proven Reserves" means the estimated quantity of natural gas which
geological and engineering data demonstrate with reasonable certainty
are recoverable in the future under the economic conditions for the
time being prevailing.
"Purchaser" means the party of the tenth part and includes its
successors and permitted assigns under this Agreement.
"Representative" means Magellan Petroleum (N.T.) Pty. Ltd. or such
other company appointed in its stead pursuant to clause 13.32.
"Quarter" means a period of three (3) calendar months commencing on 1st
of July or 1st of October or 1st of January or 1st of April and
"Quarterly" has a corresponding meaning.
"Recovery Payments" means the payments to be made pursuant to clause
7.10.
"Recovery Interest Rate" means a rate of 2% above the arithmetic mean
of the daily authorised dealers published discount rate expressed as a
yield to maturity on 180 day bank endorsed bills of exchange in
Australia over the quarter in respect of which each quarterly
instalment of interest is payable pursuant to clause 7.10.
"Schedule A Variation Notice" means a notice given pursuant to clause
3.62.
<PAGE>
"Shortfall Gas", "Shortfall Notice" and "Shortfall Period" have the
respective meanings given in clause 3.64.
"Territory" means the Northern Territory of Australia.
"Warranted Quantities" at any time means the Proven Reserves then
warranted by the Producers pursuant to clause 2.21.
"Well" means any well through which natural gas is recovered or deemed
to be recovered from any part of the Gas Field.
1.20 Terminology used to describe units shall be, unless otherwise stated,
in accordance with Australian Standard AS1000-1979 "The International
System of Units (SI) And Its Application", the Commonwealth "Weights
and Measures (National Standards) Act 1960-1966" and Regulations
thereunder and the Australian Gas Association booklet titled "Metric
Units And Conversion Factors For Use In The Australian Gas Industry".
1.30 The singular number shall include the plural and vice-versa.
1.40 Any reference to time shall be to Central Standard Time.
1.50 The headings in this Agreement are for convenience only and shall not
affect its construction.
<PAGE>
2.00 PRELIMINARY
2.10 Separate Agreements with Each Producer
2.11 This Agreement shall be construed as a separate agreement between the
Purchaser and each Producer for the sale of its Ownership Percentage of
the Gas to be delivered to the Purchaser hereunder.
2.12 The liability and obligations of each Producer under this Agreement
are, except where expressly otherwise stated, several. In the event of
any breach of any joint obligation or warranty on the part of the
Producers hereunder each Producer's liability shall be limited to its
Ownership Percentage of the liability which but for this provision such
Producer would have incurred.
2.13 Failure of a Producer to carry out its obligations under this Agreement
shall not release any other Producer, or the Purchaser in respect of
its obligations to any such other Producer, from any of their
respective obligations under this Agreement. No Producer shall be
responsible for the obligations of any other Producer under this
Agreement.
2.20 Gas Reserves
2.21 (a) Subject to paragraphs (b) and (d) and to clause 3.67 the
Producers jointly warrant to the Purchaser that at any given
time during the continuance of this Agreement there will exist
Proven Resources within the Gas Field (in addition to the
reserves warranted for the Alice Springs Contract) of not less
than the aggregate of the Annual Minimum Quantities remaining
at that time to be delivered under this Agreement.
(b) By notice to the Purchaser given not later than two years
after the Date of Initial Delivery the Producers jointly may
vary the warranty provided for in Clause 2.21(a) by reducing
for all purposes of this Agreement the amount of the Annual
Minimum Quantity specified in Schedule A in respect of any one
or more of the Contract Years numbers 20 to 26 in which event
the Dedicated Quantity shall be reduced by an amount equal to
l50% of such reduction and the warranty provided for in clause
2.21(a) shall on and from the date of such notice become and
be deemed to be a warranty by the Producers jointly to the
Purchaser of the then present existence within the Gas Field
of Proven Reserves (in addition to the reserves warranted for
the Alice Springs Contract) of not less than the aggregate of:
(i) the Annual Minimum Quantity for the first 19 years of
the term of this Agreement; and
(ii) the Annual Minimum Quantity (if any) as varied by the
Producers for the Contract Years 20 to 26;
and still to be delivered during the term of this Agreement.
<PAGE>
(c) The remedies of the Purchaser for any breach of this warranty
by the Producers shall be limited to those provided by clauses
3.40 and 10.20 respectively.
(d) The Producers shall not be liable for breach of warranty under
this clause where reserves of natural gas within the Gas Field
are lost destroyed or cease to be recoverable by reason of
Force Majeure.
2.22 The Producers jointly undertake that so long as this Agreement
continues there shall be furnished to the Purchaser at annual intervals
a report by an independent reservoir engineer estimating the Proven
Reserves in the Gas Field and the annual production capacity of the Gas
Field over its life from the then existing Wells.
2.23 So long as this Agreement continues each Producer:
(a) Dedicates and commits exclusively to the fulfilment of its
obligations under this Agreement its interest in that quantity
of natural gas within the Gas Field which is equal to its
Ownership Percentage of the Dedicated Quantity (in addition to
its percentage of the Maximum Delivery Obligations as defined
in the Alice Springs Contract still to be delivered pursuant
to that Contract).
(b) Will not supply sell or use any of the natural gas from the
Gas Field otherwise than for the purposes of performing its
future supply obligations under this Agreement and the Alice
Springs Contract except as provided in clauses 2.24, 2.25,
2.26 and 2.26A hereof and except for such gas as may be used
or lost in drilling development, testing, producing,
processing, compression and other similar operations on the
Petroleum Lease and/or in preparing treating or transporting
Gas for the purposes of this Agreement and except for gas
which may be unavoidably lost in operations conducted in
accordance with good oilfield practice.
2.24 In the event that from time to time all or any of the Producers
establish to the reasonable satisfaction of the Purchaser that the
reserves in the Gas Field exceed the quantity sufficient to enable each
Producer to perform its future supply obligations under this Agreement
in Contract Years 1 to 20 inclusive (including contingent obligations
under clause 3.60 unless and until the Purchaser has agreed, or an
Independent Expert has certified pursuant to clause 2.25(c) , that the
Mereenie Producers have proven their ability to maintain future
supplies of Mereenie Gas on a continuous basis) then:-
(a) the Producers jointly shall have the right to increase their
rate of production from the Gas Field beyond the level
required for the Purchaser's purposes to a level which is
unlikely in the reasonable opinion of the Purchaser to
jeopardise the Purchaser's supply entitlements hereunder; and
(b) each Producer shall have the right to sell its interest in
such increased production other than under this Agreement.
<PAGE>
2.25 (a) In the event that any Excess Proven Reserves are established
from time to time by the report of the independent reservoir
engineer required pursuant to clause 2.22 any Producer subject
to paragraph (b) of this clause shall be at liberty to sell
its interest in such Excess Proven Reserves from time to time
other than under this Agreement.
(b) In the event that the Purchaser disputes the report of the
said independent reservoir engineer, the Purchaser shall have
the right of access to all relevant information for the
purpose of reviewing the said report and failing agreement
after such review the dispute shall be determined by an
Independent Expert.
(c) (i) In the event that at any time during the term of this
Agreement any Producer is of the opinion that the
Mereenie Producers have established their ability to
supply Mereenie Gas in the contracted quantities on
a continuous basis then it may request the Purchaser
to review its requirements in respect of Excess
Proven Reserves and the Purchaser shall thereupon
review the production record of the Mereenie
Producers and also its said requirements and may
agree to reduce the quantity of Proven Reserves which
constitutes Excess Proven Reserves.
(ii) In the event that the Purchaser fails to agree to
reduce the quantity of Proven Reserves which
constitutes Excess Proven Reserves, either to the
Producer's satisfaction or at all, the Producer may
refer the question to an Independent Expert, who
shall review the production record of the Mereenie
Producers, reach a determination as to the ability of
the Mereenie Producers to maintain future continuous
supply of Mereenie Gas in the contracted quantities,
and (if appropriate) require the Purchaser to agree
to a new basis for the calculation of Excess Proven
Reserves.
(iii) No request made by a Producer under paragraph (i) of
this sub-clause, nor any determination by an
Independent Expert under paragraph (ii) of this
sub-clause, shall require the Purchaser to agree to
reduce the amount to be deducted from total Proven
Reserves in calculating Excess Proven Reserves below
the aggregate of:
(A) 200% of the Annual Minimum Quantities still
to be supplied pursuant to this Agreement;
and
(B) the Maximum Delivery Obligations as set out
in Column B of Schedule II of the Alice
Springs Contract still to be delivered
pursuant to that Contract.
2.26 (a) No Producer shall without the prior written consent of the
Purchaser sell or offer to sell any quantity of natural gas
from the Gas Field until it shall have for a period of 30 days
offered that quantity for sale to the Purchaser at the same
price (including provisions for escalation as to price) as it
would be prepared to sell the same to any other party.
<PAGE>
(b) If the Purchaser fails or declines to accept the offer within
such 30 days, the Producer shall be at liberty for a period of
180 days thereafter to sell that quantity to another party at
a price not less than that price or on terms or conditions
conferring economic benefits on the Producer over the life of
the contract at least equivalent to that price.
(c) In the event of the Purchaser accepting the offer in respect
of price the Purchaser and the Producer shall negotiate in
good faith the terms and conditions of a purchase contract.
(d) In the event that a contract is not executed by the expiration
of 60 days after acceptance of price (or such longer period as
the parties shall agree upon) further negotiations shall be
abandoned and the Producer shall be at liberty for a period of
180 days thereafter to sell that quantity to another party at
a price not less than that price or on terms or conditions
conferring economic benefits on the Producer over the life of
the contract at least equivalent to that price.
(e) The Purchaser covenants to keep confidential any offer made by
any Producer.
2.26A. (a) Notwithstanding the provisions of clauses 2.23, 2.24, 2.25 and
2.26 hereof in the event that the Mereenie Producers shall
have given notice to the Purchaser as contemplated in clause
3.64 hereof of an anticipated failure in delivery of
contracted quantities pursuant to the Mereenie Agreement then
in the absence of receipt of a Shortfall Notice from the
Purchaser each of the Producers shall be at liberty to supply
to the Purchaser on behalf of the Mereenie Producers its
Ownership Percentage of the Gas which the Mereenie Producers
would otherwise fail to deliver; and in so doing a Producer
shall not be in breach of any of the provisions of the said
clauses 2.23, 2.24, 2.25 and 2.26 hereof.
(b) Any such supply of Gas by a Producer on behalf of the Mereenie
Producers shall be deemed to have been made pursuant to clause
3.41 (b) of the Mereenie Agreement and the Producer shall not
be entitled to any payment from the Purchaser in respect
thereof (the intention being that the Producers will seek
payment of an agreed amount from the Mereenie Producers).
2.27 (a) The Purchaser shall not sell or offer to sell Gas delivered to
it pursuant to this Agreement except to the Consumers or the
Pipeline Operator or as provided for in clause 2.28.
(b) The Purchaser shall so far as it lies within its reasonable
capacity ensure that Gas delivered to it pursuant to this
Agreement is not sold by the Pipeline Operator to any party
other than a Consumer, or as provided for in clause 2.28, and
is not sold by any Consumer to any party for the purpose of
resale or reticulation to the public.
<PAGE>
2.28 (a) The Purchaser may advise the Producers jointly by notice in
writing:
(i) If the Annual Minimum Quantity for the Contract Years
remaining under this Agreement is in excess of the
quantity of Gas required by the Purchaser in those
Contract Years ("the Excess Take or Pay Quantity");
and
(ii) The price at which and the material terms upon which
the Purchaser would be prepared to sell the Excess
Take or Pay Quantity ("the Offered Price and Terms").
(b) The Producers jointly may at their option by notice in writing
to the Purchaser given not later than 90 days after receipt of
a notice provided for in clause 2.28(a) elect to either:
(i) Purchase in their respective Ownership Percentages
the Excess Take or Pay Quantity from the Purchaser
upon the Offered Price and Terms; or
(ii) Reduce the Annual Minimum Quantity in the relevant
Contract Years by the amount of the Excess Take or
Pay Quantity and reduce the amount of the Dedicated
Quantity by 125% of that reduction.
(c) In the event that the Producers do not jointly exercise either
of the options provided for in clause 2.28 (b) within the time
therein provided the Purchaser shall be at liberty for a
period of 180 days thereafter to sell the Excess Take or Pay
Quantity to another party upon the Offered Price and Terms or
on terms having not less than equivalent economic benefits for
the Purchaser.
(d) If the Purchaser has made a confirmation pursuant to clause
3.52 then the provisions of this clause 2.28 shall not apply
in respect of that Gas.
2.30 Pipeline
2.31 The Purchaser shall at no cost to the Producers complete all necessary
arrangements to cause to be constructed and commissioned the Pipeline
and the gas fired power station at Darwin by 31st December 1987 in
order to take delivery of all Gas to be purchased under this Agreement
PROVIDED THAT the Purchaser shall have no further obligation under this
clause 2.31 if this Agreement is terminated pursuant to clause 9.30.
2.32 The Purchaser shall give not less than one year's notice to the
Producers jointly of the anticipated date of commencement of
commissioning of the Pipeline.
2.33 The Purchaser shall give further notice thereof to the Producers
jointly at quarterly intervals thereafter until commissioning actually
commences.
<PAGE>
2.34 At or prior to the giving of the notice provided for in clause 2.32 the
Purchaser shall give notice to the Producers jointly of the precise
location at the existing plant or some other appropriate point in or
adjacent to the Petroleum Lease at which the inlet flange of the
Pipeline will be constructed.
2.40 Gas Delivery System
2.41 Forthwith upon receipt of the notice from the Purchaser provided for in
clause 2.32 the Producers jointly undertake that they will proceed with
due diligence to render the Gas Field suitable for routine production
and install the Gas Delivery System in such manner as to ensure the
continuous supply of Gas in accordance with this Agreement.
2.42 The Purchaser shall have the right to inspect the working drawings of
any aspect of the Gas Delivery System and to inspect the said system
during and after construction.
2.43 The Producers jointly undertake that they will insure or cause to be
insured the Gas Delivery System in adequate amounts for all usual
insurable risks and conditions in accordance with good oil field
practice both during and after construction and shall on demand produce
such policies for inspection by the Purchaser.
2.44 From the date of commencement of commissioning of the Pipeline each of
the Producers shall sell to the Purchaser its Ownership Percentage of,
and the Purchaser shall purchase, Gas required by the Purchaser for
commissioning purposes.
2.50 Development Work
2.51 (a) Subject to the provisions of this clause the Producers jointly
undertake that they will from time to time during the term of
this Agreement duly carry out in accordance with good oil
field practice and in a cost-effective manner such work
("Development Work") as is necessary for the development of
the Gas Field to ensure that the Gas Delivery System will have
the delivery capacity and will be able to deliver to the
Purchaser on any Day during the term of this Agreement the
maximum quantity of Gas which the Purchaser is entitled
pursuant to clause 3.23 to nominate for delivery on any Day,
namely the Daily Peak Demand Quantity but ignoring in the
absence of a Schedule A Variation Notice any possible increase
in such Daily Peak Demand Quantity which may result from such
a Notice.
(b) Development Work for the purpose of the definition in
paragraph (a) shall subject however to the provisions of
clauses 2.53 and 2.54 include but not be limited to the
following:
(i) rendering the Gas Field suitable for routine
production,
(ii) installing the Gas Delivery System and any
modifications and expansions thereof,
(iii) drilling of Additional Wells;
<PAGE>
(iv) completing all successful Additional Wells and
connecting same to the Gas Delivery System; and
(v) further work as may be required by the Purchaser
pursuant to clause 2.56.
(c) Without prejudice to the provisions of clause 2.53 the
Producers jointly undertake that they will from time to time
prepare and deliver to the Purchaser plans and revisions
thereof for the carrying out of Development Work ("Development
Plans") together with budgets and cost estimates in respect
thereof itemised in reasonable detail so as to permit the
Purchaser to review the same PROVIDED ALWAYS that neither the
opportunity for such review nor a failure by the Purchaser to
respond to the Producers in respect thereof shall be deemed to
estop the Purchaser from exercising its rights under clause
2.57.
2.52 (a) The Gas Delivery System shall have sufficient capacity in
accordance with good oil field practice to deliver to the
Purchaser the Daily Peak Demand Quantity on any Day but
subject always to clause 3.22(a) and ignoring in the absence
of a Schedule A Variation Notice any possible increase in such
Daily Peak Demand Quantity which may result from such a
Notice.
(b) The Purchaser, having particular regard to the fact that Gas
is to be supplied under this Agreement for the purpose of
generating electric power for public consumption, acknowledges
the need for the Gas Delivery System to have excess or
redundant capacity.
(c) The type, size, location and all other matters relevant to the
Gas Delivery System shall be as determined by the Producers
jointly after consultation with the Purchaser.
2.53 (a) The Producers jointly shall notify the Purchaser of the
proposed location, depth and cost of each Additional Well
proposed by them as Development Work.
(b) With respect to not more than nine (9) Additional Wells
proposed by the Producers the same shall constitute
Development Work to the extent only to which they are in each
case planned, drilled and, if appropriate, completed and
connected to the Gas Delivery System in accordance with good
oil field practice and in a cost-effective manner and subject
to such other paragraphs of this clause as shall be
applicable.
(c) In the case of each of the first four (4) Additional Wells
proposed by the Producers (or such lesser number as they
propose):
(i) Each Well shall constitute Development Work unless
the Purchaser notifies the Producers jointly within
30 days of receipt of the Producers' proposal that it
does not accept the proposal in respect of that Well
as Development Work based on expert opinion and
provides details of the reasons for that opinion.
<PAGE>
(ii) If the Purchaser so notifies them the Producers
jointly may either:
(A) before proceeding with the proposal have the
question determined by an Independent
Expert, who shall, if supplied with
sufficient data for that purpose, propose an
alternative location for any proposed Well
which he rejects as Development Work, or
(B) proceed with the proposal without first
having the question determined but without
prejudice to their right to claim the same
as Development Work pursuant to clause 2.51
and without prejudice to the Purchaser's
right to dispute that such Additional Well
constituted Development Work and in such
case to have the question referred ex post
facto to an Independent Expert and (if such
Independent Expert confirms that such
Additional Well did constitute Development
Work) without prejudice to clause 2.57.
(d) In the case of each of the next five (5) Additional Wells (if
any) so proposed by the Producers:
(i) No Additional Well shall constitute Development Work
unless the Purchaser accepts the proposal for that
Well as Development Work or unless an Independent
Expert determines that the proposal (or an
alternative location if appropriate) constitutes
Development Work.
(ii) If the Purchaser does not accept a proposal by the
Producers within 30 days of receipt of the proposal
under paragraph (a) an Independent Expert shall
determine the question subject to the following
provisos:
(A) in the case of all five (5) Additional
Wells, he shall not determine the question
in favour of the Producers unless he first
satisfies himself that the Proven Reserves
remaining in the Gas Field exceed the
Warranted Quantities,
(B) in the case of each of the 7th to 9th
Additional Wells, he shall not determine the
question in favour of the Producers unless
he also first satisfies himself that further
Development Work is economically justifiable
to the Purchaser, and
(C) where the Independent Expert is satisfied on
each of the matters referred to in
subparagraphs (A) and (B) above he shall, if
supplied with sufficient data for that
purpose, propose an alternative location for
any proposed Well which he nevertheless
rejects as Development Work.
<PAGE>
(iii) For the purpose of determining whether further
Development Work is economically justifiable to the
Purchaser it is agreed that:-
A. further Development Work shall not be deemed
economically justifiable if at the relevant
time the delivered cost of Gas in Darwin
(comprising the prevailing Contract Price
for Gas, plus Recovery Payments calculated
as if the costs of the proposed Development
Work had been incurred, plus the cost of
transportation of Gas to Darwin through the
Pipeline) would exceed the deemed delivered
cost of diesel fuel in Darwin (as provided
in paragraph (iii) below) having an
equivalent energy content; and
B. further Development Work shall be deemed
economically justifiable if at the relevant
time the aforesaid delivered cost of Gas in
Darwin is equal to or less than the deemed
delivered cost of diesel fuel in Darwin
having an equivalent energy content.
(iv) For the purpose of the preceding subparagraph (iii) the deemed
delivered cost of diesel fuel in Darwin shall be whichever is
the higher of:-
(a) the then prevailing delivered cost of diesel fuel in
Darwin and
(b) $460 per tonne (being the current delivered cost of
diesel fuel in Darwin), escalated since the
Development Date to the relevant time in proportion
to movements in the CPI.
2.54 (a) The Producers jointly shall from time to time notify the
Purchaser of Additional Wells, in addition to the Additional
Wells referred to in clause 2.53, which the Producers jointly
and reasonably determine are required to be drilled to ensure
that the Gas Delivery System has and will continue to have the
delivery capacity and will be able to deliver to the Purchaser
on any Day the Daily Peak Demand Quantity.
(b) The drilling of such Additional Wells shall form part of
Development Work if the Producers and the Purchaser shall
mutually agree upon the location and other matters relevant to
the drilling of such Additional Wells.
(c) In the event that the Purchaser fails within 60 days to agree
to the drilling of any Additional Well in accordance with
paragraph (b) the Producers shall not be obliged to drill any
such Additional Well or carry out such work and the provisions
of clause 2.55 shall at the request of the Producers apply.
<PAGE>
2.55 After the expiration of one (1) month after any proposed Additional
Well has been rejected as Development Work under clause 2.53 or any
disagreement occurring as referred to in clause 2.54 and at intervals
of not less than two years thereafter the Producers jointly may from
time to time by notice to the Purchaser elect to vary either downwards
or upwards the Annual Minimum Quantity by a percentage specified by the
Producers jointly any such variation to take effect from the
commencement of the next Contract Year PROVIDED HOWEVER as follows:
(a) No increase under this clause shall have the effect of
increasing the relevant quantities above the quantities
applying for the relevant Contract Year at the date of
execution of this Agreement;
(b) No decrease under this clause shall have effect to the extent
that it shall diminish the Purchaser's entitlement to be
supplied with the Warranted Quantities or such lesser quantity
as may be determined under paragraph (c);
(c) In the event that an Independent Expert certifies that the
failure of the Purchaser to agree to the drilling of any
Additional Well under clause 2.53 or clause 2.54 is the cause
of the reduction in a Producer's ability to supply its
Ownership Percentage of the Warranted Quantities then a
decrease under this clause may take effect to the extent of
such reduction.
2.56 (a) Without diminishing the extent of the Producers' obligations
under clause 2.51, in the event that the Purchaser is of the
opinion that the Proven Reserves and production capacity are
insufficient for the purpose of ensuring that each Producer
can perform its future supply obligations under this Agreement
(including contingent obligations under clause 3.60) then the
Purchaser may by notice to the Producers jointly require them
to carry out as provided in this clause 2.50 such further
Development Work as may in the opinion of the Purchaser be
necessary.
(b) In the event that the Producers jointly dispute the opinion of
the Purchaser referred to in paragraph (a) the Producers will
not be required to carry out as provided in this clause 2.50
any such further Development Work unless and until an
Independent Expert certifies that such further Development
Work as he specifies in the certificate is necessary.
(c) Upon receipt of a certificate by an Independent Expert as
provided in paragraph (b) the Producers shall promptly carry
out as provided in this clause 2.50 the further Development
Work certified therein.
2.57 (a) Following completion of each item of Development Work the
Producers jointly shall promptly provide to the Purchaser a
full accounting (supported by relevant technical information
and copies of or access to invoices, orders, contracts and the
like) of the costs thereof in order to permit the Purchaser to
review and/or audit the same.
<PAGE>
(b) If the Purchaser is of the bona fide opinion, having regard to
inspections under clause 2.42 and to the information provided
under paragraph (a) of this clause, that any Development Work
has not been carried out in accordance with good oilfield
practise or in a cost-effective manner having regard to
circumstances prevailing at the time then it shall within
sixty (60) days of receipt of the said information communicate
such opinion to the Producers jointly and, in the absence of
agreement being reached between the parties, may refer the
question to an Independent Expert.
(c) To the extent, if any, to which the Producers jointly shall
agree or an Independent Expert shall determine that any costs
of Development Work have been incurred as a result of failure
to observe good oilfield practise or failure to cause
Development Work to be carried out in a cost-effective manner
having regard to the circumstances prevailing at the time,
such costs shall not constitute Development Expenditure.
2.58 Nothing herein contained shall be deemed to prevent the Producers at
their own risk and expense undertaking any work on the Gas Field.
2.60 Independent Expert
(a) For the purposes of this Agreement an Independent Expert shall
be an expert in the field in question agreed by the parties or
in the absence of agreement determined by the Chairman for the
time being of the Australian Petroleum Exploration Association
(or its successor) or his nominee on the application of either
party with notice to the other.
(b) An Independent Expert shall act as an expert and not as an
arbitrator.
(c) An Independent Expert shall furnish with all reasonable
expedition a certificate as to his decision on any matter in
dispute between the parties and such decision shall be final
and binding.
(d) Each party shall have the right to make written submissions to
an Independent Expert, to receive copies of each other's
submissions and to reply thereto, such right to be exercised
promptly.
(e) The costs of an Independent Expert shall be borne as to one
half by the Purchaser and as to the remaining half by the
Producers in proportion to their respective Ownership
Percentages.
<PAGE>
3.00 PURCHASE AND SALE OF GAS
3.10 Term of Agreement
This Agreement shall continue in effect until the expiration of
Twenty-five (25) years from the Date of Initial Delivery (but subject
to clause 4.20(b)) or until the Dedicated Quantity of Gas shall have
been delivered to the Purchaser whichever shall be the earlier.
3.20 Quantity of Gas
3.21 (a) Upon and subject to the terms and conditions contained in this
Agreement each of the Producers severally agrees to sell and
deliver in each Month of each Contract Year:
(i) its Ownership Percentage of the Monthly Minimum
Quantity of Gas;
(ii) its Ownership Percentage of such additional Gas (not
being Gas committed to other contracts in any manner
permitted by the terms hereof) as the Purchaser may
require under clauses 3.22 and 3.24, and
(iii) its share of Default Gas due under clause 3.47,
and upon and subject to the terms and conditions contained in
this Agreement the Purchaser agrees to purchase and take
delivery of the same.
(b) In each Month of each Contract Year the Purchaser's obligation
to purchase the Monthly Minimum Quantity for that Month shall
be reduced by the aggregate of:
(i) any portion of the Monthly Minimum Quantity not
tendered for delivery in that Month whether by reason
of permitted interruption pursuant to clause 3.33 or
pursuant to clause 3.66 or otherwise;
(ii) any portion of the Monthly Minimum Quantity which the
Purchaser has been excused from accepting:
(A) by Force Majeure affecting the Producers; or
(B) by Pipeline Force Majeure.
(iii) all excess quantities which the Purchaser is entitled
to credit against the Monthly Minimum Quantity for
that Month pursuant to clause 3.25 (that is, not
exceeding one half of the Monthly Minimum Quantity).
(c) If in any Month the Purchaser fails to take the Monthly
Minimum Quantity reduced if applicable pursuant to paragraph
(b) the Purchaser shall pay the Contract Price for the
quantity not so taken as if the same had been delivered during
that Month subject always to refund if the Gas Field becomes
depleted in accordance with clause 4.30.
<PAGE>
3.22 Subject to clause 3.24 and to any interruptions under clause 3.33,
throughout the term of this Agreement from the Date of Initial Delivery
Gas shall be delivered to the Purchaser on each Day at the rate
required by the Purchaser up to:
(a) the Daily Peak Demand Quantity on not more than 50 Days in any
Contract Year; and
(b) the Daily Maximum Quantity on other Days.
3.23 The following nomination procedures shall be followed:
(a) The Purchaser may on not more than two occasions during a Day
nominate:
(i) the rate at which delivery of Gas is required (not
exceeding the quantities provided for in clause 3.22)
and not in any event exceeding the quantity which on
that Day the Purchaser is entitled to have accepted
for transmission through the Pipeline and which the
Pipeline is capable of accepting on that Day; and
(ii) the Day and hour when such nomination shall take
effect not being less than four hours from the time
of nomination,
the parties shall agree on more frequent nomination procedures
and shorter nomination times under paragraph (ii) in the event
that the Gas Delivery System is automated or for any other
reason is able to accommodate such changes.
(b) The total quantity of Gas which would be delivered by all
Producers during any Day if delivery was to occur at the
nominated rate or rates shall constitute Obligation Gas.
(c) All nominations may be made by telephone but shall be
confirmed by written notification within 24 hours.
(d) Delivery shall be maintained at the rate specified in the
Purchaser's most recent nomination until superseded by a later
nomination.
(e) The Purchaser shall prior to the commencement of every
Contract Year give notice to the Producers jointly of:
(i) Its likely annual requirements of Gas for the next
five Contract Years;
(ii) Its likely Monthly requirements of Gas for the next
twelve Months.
(f) The Purchaser shall prior to the commencement of each Month
give notice to the Producers jointly of its likely daily
requirements of Gas for that Month.
<PAGE>
3.24 If on any Day or Days the Purchaser requires amounts of Gas at a rate
in excess of the Daily Peak Demand Quantity or (if the number of Days
upon which the Daily Peak Demand Quantity has been nominated in any
Contract Year is equal to or more than 50) the Daily Maximum Quantity
it may request by notice given to the Producers jointly that deliveries
be made at such rate and each Producer will deliver its Ownership
Percentage of Gas at such rate PROVIDED HOWEVER that if a Producer is
unable to do so having regard to the capacity of the then existing Gas
Delivery System it shall notify such inability to the Purchaser and
shall not be obliged to deliver Gas in excess of its Ownership
Percentage of the Daily Peak Demand Quantity or the Daily Maximum
Quantity as the case may be.
3.25 (a) In the event that in any Month of any Contract Year the
Purchaser purchases and takes Gas in excess of the Monthly
Minimum Quantity less any increase therein effected pursuant
to a Shortfall Notice plus all Make-up Gas accumulated up to
and including that Month, such excess shall be carried forward
and credited against the Purchaser's subsequent commitments to
purchase and take the Monthly Minimum Quantity.
(b) No credit pursuant to paragraph (a) shall reduce the
Purchaser's commitments to purchase and take below one half of
the Monthly Minimum Quantity in any Month. Any credit
remaining after any reduction to such level shall be carried
forward as a credit in a subsequent month or months.
(c) If by the application of a credit pursuant to paragraph (a)
the Purchaser in any Month shall purchase and take less than
the Monthly Minimum Quantity in that Month then the quantity
of Gas equivalent to the difference between the Monthly
Minimum Quantity in that Month and the quantity actually
purchased and taken by the Purchaser in that Month shall at
the option of the Producers jointly be debited against the
Dedicated Quantity.
3.26 The Purchaser shall use reasonable endeavours to ensure that on each
Day during the term of this Agreement it purchases from each Producer
that Producer's Ownership Percentage of 80% of the Purchaser's Excess
Requirements of Gas on that Day.
For purposes of this clause the Purchaser's Excess Requirement of Gas
means in respect of any Day so much of the Purchaser's requirements of
Gas on that Day as exceeds the aggregate of the Daily Minimum Quantity
and the Daily Minimum Quantity as applicable for that Day under the
Mereenie Agreement, but does not exceed 125% of that aggregate.
3.30 Continuity of Supply
3.31 It is an essential term of this Agreement that supply of Gas in
accordance with this Agreement shall commence at the time of
commissioning of the Pipeline as notified pursuant to clause 2.30.
<PAGE>
3.32 Subject to the terms of this Agreement each Producer undertakes that it
will throughout the term of this Agreement maintain continuity of
supply to the Purchaser at the inlet flange of the Pipeline of its
Ownership Percentage of the Purchaser's requirements of Gas in
accordance with this Agreement.
3.33 The Producers jointly may nevertheless interrupt supply to perform
reservoir tests and evaluations in accordance with and subject to the
following limitations and procedures:
(a) Each interruption shall not exceed the following durations and
frequencies:
Contract Years Maximum Maximum
Years Duration Frequency
--------------------------------------------------------------------
1 to 5 inclusive 120 hours Quarterly
6 until contract 120 hours Half Yearly
expiration
(b) The dates and times chosen for testing shall be arranged with
the Purchaser and with the Pipeline Operator and with the
Mereenie Producers as far as possible in advance and shall
always unless otherwise agreed correspond with periods of low
demand for electricity and shall not unless otherwise agreed
correspond with periods of interruption under the Mereenie
Agreement.
(c) The Producers jointly shall be allowed additional
interruptions for unforeseen and unscheduled events (not
constituting Force Majeure) not exceeding a total of
forty-eight (48) hours in each year.
(d) In the event of any interruption in transmission through the
Pipeline or cessation of electricity production at any of the
power stations the Purchaser may notify the Producers jointly
and the Producers jointly undertake to use their best
endeavours to carry out testing during such interruptions in
lieu of those provided for in this clause.
3.34 Whenever a Producer becomes aware that it cannot or may become unable
to maintain continuity of supply in accordance with this Agreement it
shall forthwith advise the Purchaser and the Mereenie Producers of that
fact so as to enable the Purchaser at the earliest possible time to
make arrangements for purchase of Gas from the Mereenie Producers.
<PAGE>
3.40 Failure to Supply
3.41 In the event that for any reason other than Force Majeure or permitted
interruptions under clause 3.33 a Producer fails to deliver its
Ownership Percentage of Obligation Gas on any Day then that Producer
("the Defaulting Producer") shall be deemed to have made default in
delivery of the quantity of Gas equivalent to its Ownership Percentage
of the quantity of Obligation Gas on that Day minus the quantity of Gas
actually delivered on that Day by the Defaulting Producer ("Default
Gas") and the following provisions of this clause 3.40 shall apply
PROVIDED THAT the Defaulting Producer shall be deemed not to have made
default in delivery as aforesaid if:
(a) (i) such failure does not exceed two continuous Days;
(ii) the Defaulting Producer delivers not less than its
Ownership Percentage of the Daily Minimum Quantity on
that Day; and
(iii) the Defaulting Producer delivers within the following
two days an additional quantity of Gas equivalent to
the quantity of Default Gas.
or
(b) the Defaulting Producer delivers or procures the delivery of
Gas or natural gas with specifications to which the Purchaser
has agreed from a source other than from the Petroleum Lease
to the Field Delivery Station or any other field delivery
station linked to the Pipeline and the Defaulting Producer
shall be duly paid the Contract Price for any such gas.
or
(c) clause 3.66 operates to relieve the Defaulting Producer of a
default.
3.42 Upon a Defaulting Producer making default in delivery as aforesaid the
Defaulting Producer shall have the opportunity to supply to the
Consumers at their various points of consumption other energy in a form
compatible with the power generation equipment of NTEC and having an
energy content in whole or in part equivalent to the Default Gas. Any
such other energy shall be supplied at the cost and risk of the
Defaulting Producer without charge to the Consumers, and the Purchaser
shall duly pay for such other energy so supplied the Contract Price for
Gas having an energy content equivalent thereto.
3.43 If the Defaulting Producer shall have made default in delivery as
aforesaid and if that Producer shall not have delivered other energy in
exercise of its right under clause 3.42 then the Defaulting Producer
shall subject to clause 3.43A promptly pay and reimburse to the
Purchaser by way of liquidated damages the amount (if any) by which the
Delivered Cost of Substitute Energy exceeds what would have been the
Contract Price of an amount of Obligation Gas deliverable by the
Defaulting Producer having an energy value equivalent to the Substitute
Energy but not exceeding the energy value of the Default Gas provided
that such Substitute Energy shall be obtained as far as practicable in
the circumstances at the least cost.
<PAGE>
For the purpose of this clause:
(a) The term "Delivered Cost" shall mean the unit cost actually
incurred by NTEC or which would have been incurred by NTEC had
it been the Consumer in relation to the relevant Substitute
Energy; the cost actually incurred by any other Consumer
(whether greater or smaller) shall be irrelevant;
(b) The term "Substitute Energy" shall mean the total quantity of
energy actually consumed by all Consumers at their various
points of consumption for the purpose of maintaining their
power generation or other operations as a result of the
Defaulting Producer having made default in delivery as
aforesaid.
(c) If any Substitute Energy is held in stock by the Consumers it
shall be costed on a replacement basis from the Consumers'
inventory at the relevant point of consumption.
3.43A Where on any Day the amount of Obligation Gas exceeds the Daily Maximum
Quantity (the difference being hereinafter called "the Excess Amount")
then the Defaulting Producer's obligation to pay liquidated damages in
regard to such Excess Amount under clause 3.43 shall be reduced by 90%.
3.44 The Purchaser shall at the request of any Producer permit a registered
company auditor nominated by that Producer to have access to such of
the books and records of the Purchaser as may be necessary to check any
claims by the Purchaser pursuant to clause 3.43.
3.45 Save as provided in this clause 3.40 no Producer shall be liable to the
Purchaser or any of the Consumers (and the Purchaser shall indemnify
and keep indemnified each Producer against any such liability) for any
other or consequential loss or damage resulting from the failure of a
Producer to supply its Ownership Percentage of any Obligation Gas
during the term of the agreement including inability to generate
electricity loss of electricity supply or loss of profits. No Producer
shall in any event be liable for any liability incurred by the
Purchaser under the Gas Supply Agreements.
3.46 It shall be no defence to any action by the Purchaser for recovery of
damages pursuant to clause 3.43 that the Purchaser shall not have
personally incurred the cost of the Substitute Energy where such
Substitute Energy has been acquired by the Consumers or any of them.
3.47 If a Producer becomes a Defaulting Producer under this clause each
other Producer shall be obliged to deliver each Day on the terms and
conditions herein contained a quantity of Gas equal to the proportion
of Default Gas which its Ownership Percentage bears to the aggregate
Ownership Percentages of all Producers other than the Defaulting
Producer.
<PAGE>
3.50 The Final Contract Years
3.51 A Producer ("the Notifying Producer") may at any time prior to 1st
January in the 20th Contract Year give notice to the Purchaser that it
desires to sell to a third party natural gas from the Gas Field which
but for this clause it would be required to sell in the Contract Years
numbered 21 to 26 inclusive ("the Final Contract Years").
3.52 Except in Contract Years 1 to 10 inclusive (during which period this
clause 3.52 shall not apply) the Purchaser may after receipt of such
notice give notice to the Notifying Producer affirming this Agreement
in respect of the Final Contract Years, in which case this Agreement
(so far as it is a separate agreement with the Notifying Producer)
shall continue in full force and effect according to its terms and the
notice given pursuant to Clause 3.51 shall be of no force or effect.
3.53 Forthwith upon receipt of any notice from a Notifying Producer given in
Contract Years 1 to 10 pursuant to clause 3.51, or in any subsequent
Contract Year if the Purchaser fails to give notice to a Notifying
Producer pursuant to Clause 3.52 within sixty (60) days after receipt
of that Producer's notice under Clause 3.51, then:-
(a) The Notifying Producer shall have no obligation to deliver any
Gas in the Final Contract Years and all references in this
Agreement to Annual Minimum Quantities, Monthly Minimum
Quantities and the like shall in respect of the Notifying
Producer be read down accordingly
(b) the Notifying Producer may sell to a third party the Gas which
it is no longer obliged to deliver to the Purchaser in the
Final Contract Years
(c) the Dedicated Quantity shall be reduced by the Notifying
Producer's Ownership Percentage of 50 PJ, and
(d) in all other respects this Agreement shall continue in full
force and effect.
(e) The Purchaser may by notice to each Producer other than the
Notifying Producer amend this Agreement (so far as it relates
to each such other Producer) in the same respects (mutatis
mutandis) as provided in paragraphs (a) and (c) above, and
paragraphs (b) and (d) above shall also apply (mutatis
mutandis) in respect of each such other Producer.
3.60 Failure of Delivery under the Mereenie Agreement
3.61 The Producers, having regard to the fact that natural gas is to be
supplied under both this Agreement and the Mereenie Agreement for the
purpose of generating electric power for public consumption, jointly
acknowledge that the Purchaser requires continuous delivery of the Gas
the subject of each such Agreement according to their respective terms.
<PAGE>
3.62 If the Mereenie Agreement shall at any time be terminated by either the
Purchaser or the Mereenie Producers then the Purchaser may give notice
to the Producers jointly of such termination (a "Schedule A Variation
Notice") which shall specify that the Purchaser requires each Producer
to supply to the Purchaser upon and subject to the terms and conditions
contained in this Agreement its Ownership Percentage of the whole or
any part of the natural gas to which the Purchaser would have become
entitled to delivery under the Mereenie Agreement, and in particular
shall specify:-
(a) in Part A thereof in respect of each whole remaining Contract
Year an amended Annual Minimum Quantity being the Annual
Minimum Quantity specified in Schedule A increased by the
whole or any part of the relevant Annual Minimum Quantity
specified in Schedule A to the Mereenie Agreement for that
Contract Year and;
(b) in Part B thereof in respect of each remaining whole Month of
the Contract Year current at the time of such notice, an
amended Monthly Minimum Quantity being the Monthly Minimum
Quantity applicable under this Agreement increased by the
whole or any part of the relevant Monthly Minimum Quantity
applicable under the Mereenie Agreement; and
(c) in Part C thereof, in respect of the period to the end of the
then current Month, the amount of additional Gas which the
Purchaser requires to be delivered on a daily basis until the
end of such Month.
3.63 As from the date of receipt by the Producers of a Schedule A Variation
Notice:-
(a) Schedule A shall forthwith be varied in the manner specified
in Part A of such Notice with effect from the commencement of
the next succeeding Contract Year;
(b) the Monthly Minimum Quantity applicable for each succeeding
Month of the current Contract Year shall be forthwith varied
in the manner specified in Part B of such Notice with effect
from the commencement of the next succeeding Month, and
(c) the Daily Minimum Quantity of Gas for each remaining Day of
the current Month shall be increased in the manner specified
in Part C of the said Notice with effect from the next
succeeding day
but subject always to clauses 3.66 and 3.67.
3.64 If from time to time or at any time during the term of the Mereenie
Agreement the Mereenie Producers fail to deliver contracted quantities
of Mereenie Gas or give notice to the Purchaser of an anticipated
failure in delivery of contracted quantities, then provided the
Purchaser has not in respect of such failure delivered a Schedule A
Variation Notice the Purchaser may give notice to the Producers jointly
under this Clause ("a Shortfall Notice") which shall specify:
<PAGE>
(a) the nature of the delivery failure or anticipated failure
under the Mereenie Agreement;
(b) the aggregate quantity of Gas which the Purchaser requires
each Day to be delivered by the Producers upon and subject to
the terms and conditions contained in this Agreement in
substitution for Mereenie Gas ("Shortfall Gas") and
(c) the period during which Shortfall Gas is likely to be required
by the Purchaser ("Shortfall Period").
3.65 Upon receipt of a Shortfall Notice the Daily Minimum Quantity for each
Day of the Shortfall Period shall be ipso facto increased by the daily
quantity of Shortfall Gas specified as aforesaid, but subject always to
clause 3.66.
3.66 (a) If the Producers are or will be unable despite their best
endeavours but having regard to good oil field practice to
supply upon and subject to the terms and conditions herein
contained any quantity of the additional Gas required to be
delivered by a Schedule A Variation Notice or a Shortfall
Notice then they shall forthwith jointly give notice thereof
to the Purchaser and shall specify therein the extent to which
and period during which they expect to be unable to supply the
required quantities, the reasons therefor, and the additional
Development Work which in their opinion would be necessary in
order to meet the Purchaser's requirements.
(b) Upon receipt by the Purchaser of a notice given pursuant to
paragraph (a) of this clause the Purchaser may either:
(i) accept the Producers' inability to supply the
additional Gas specified in which case paragraph (f)
of this clause shall apply, or
(ii) require the Producers jointly to proceed with the
additional Development Work specified in the said
notice, in which case paragraph (e) of this clause
shall apply, or
(iii) refer to an Independent Expert the question of the
Producers' inability to supply or the extent (if any)
of the Development Work necessary to meet the
Purchaser's requirements.
(c) Upon any reference pursuant to paragraph (b) of this clause
the Independent Expert shall certify as to:
(i) whether the Producers ought in all the circumstances
(including without limiting the generality thereof
the capacity of the existing Gas Delivery System) be
excused from their respective liabilities for such
non-delivery or any part thereof and
(ii) the nature and extent of the additional Development
Work (if any) which would be necessary to meet the
Purchaser's requirements.
<PAGE>
(d) Where the Independent Expert certifies that additional
Development Work is necessary to meet the Purchaser's
requirements the Purchaser may either
(i) require the Producers jointly to proceed with such
additional Development Work in which case paragraph
(e) of this clause shall apply, or
(ii) accept the Producers' inability to supply in which
case paragraph (f) of this clause shall apply.
(e) Where pursuant to this clause the Purchaser requires the
Producers jointly to proceed with additional Development Work
then the Producers jointly undertake that they will proceed
with all expedition to carry out the same and the provisions
of clause 2.50 shall (mutatis mutandis) apply thereto.
(f) Where and to the extent that pursuant to this clause the
Purchaser accepts or an Independent Expert certifies that the
Producers are unable to supply any part of the additional Gas
requested then no Producer shall be deemed to have made
default in delivery of such Gas and the Daily Minimum Quantity
and Monthly Minimum Quantity for the period in question shall
be reduced accordingly.
3.67 Notwithstanding the foregoing provisions of this clause 3.60 no
Producer shall be obliged to supply Gas pursuant to clauses 3.62 and
3.63 to the extent that such supply would reduce the Proven Reserves of
the Gas Field below the Warranted Quantities unless and until the
Purchaser shall first agree in writing that the Warranted Quantities
shall be reduced to the resulting Proven Reserves.
<PAGE>
4.00 PRICE
Contract Price
4.10 The price payable by the Purchaser to each Producer for Gas delivered
under this Agreement by that Producer shall be the Contract Price.
4.20 Make-Up Gas
(a) If the Purchaser has paid for a quantity not taken in a Month
("the Debit Month") the Purchaser may in any subsequent Month
("Credit Months") after it has taken the Monthly Minimum
Quantity as reduced in accordance with clause 3.21(b) for the
relevant Month take free of charge except for payment of the
difference if any in the Contract Price in the relevant Credit
Month and Debit Month a quantity of Gas (hereinafter called
"Make-up Gas") up to the quantity so paid for in the Debit
Month PROVIDED always that Make-up Gas in respect of any one
Debit Month shall not be taken before available balances in
all previous Debit Months have been taken.
(b) Notwithstanding clause 3.10 but subject to clauses 10.20 and
10.30, this Agreement shall for purposes of this clause remain
on foot beyond 25 years for a period of not more than 5 years
but not beyond delivery of the Dedicated Quantity, until such
time as the Purchaser shall have taken delivery of all Make-up
Gas to which it is entitled, and where (but for this sub-
clause) this Agreement would otherwise be at an end paragraph
(a) shall apply on the basis that the Purchaser shall in any
Month be entitled to take Make-up Gas notwithstanding that
no Minimum Monthly Quantity applies for the Month, PROVIDED
ALWAYS that the Purchaser's rights under this sub-clause shall
be suspended for any period during which natural gas from the
Gas Field is not being supplied either to the Purchaser
(pursuant to a renewal or replacement agreement) or any other
party but the period of 5 years referred to in this paragraph
(b) shall be extended by the period of any such suspension.
4.30 Refund if Gas Field Depleted
If at any time the report of the independent reservoir engineer
pursuant to clause 2.22 or any other report of a reservoir engineer
acceptable to the Purchaser and the Producers establishes that Proven
Reserves in the Gas Field together with Proven Reserves in an Alternate
Gas Field (if any) are less than those necessary for the delivery of
the remaining Gas which is required to be delivered under this
Agreement (that is, less than the lesser of:-
(a) the balance of the Dedicated Quantity remaining to be
delivered or
(b) the aggregate of the remaining Annual Minimum Quantities plus
Make-up Gas)
<PAGE>
then the Purchaser shall be entitled to have delivered to it to the
extent to the deficiency of Proven Reserves Make-up Gas in priority to
any Annual Minimum Quantities. To the extent that it appears that the
Purchaser will not thereby receive any quantity of Make-up Gas a
Producer shall forthwith upon demand repay to the Purchaser in cash all
payments made to it in accordance with paragraph (c) of clause 3.21 in
respect of such amount plus interest on all such payments from the
respective dates of payment at the same rate as Recovery Interest.
For the purposes of this clause:
(i) "Alternate Gas Field" means a gas field (other than the Gas
Field) from which the Producers shall be entitled and are
capable of supplying Gas for the purposes of this Agreement.
(ii) "Proven Reserves in an Alternate Gas Field" means the quantity
of Proven Reserves in an Alternate Gas Field which are at that
time dedicated and committed for the exclusive purpose of
supplying Gas under this Agreement.
4.40 Consumer Price Index
4.41 In the event that the CPI shall be discontinued or modified the parties
shall request the Australian Bureau of Statistics to provide figures or
indices which shall give an equivalent comparison to that provided by
the CPI.
4.42 If the parties are unable to obtain from the Australian Bureau of
Statistics figures or indices which given an equivalent comparison to
that provided by the said index and are unable to agree between
themselves as to such figures or indices either the Producers jointly
or the Purchaser may request the President for the time being of the
Institute of Chartered Accountants in Australia or his nominee to
provide at each review date figures or indices which give an equivalent
comparison to that contemplated by the CPI and such figures or indices
shall then for the purposes of this Agreement be deemed to be the CPI.
4.50 Increase in Commonwealth Imposts
(a) For the purpose of this Clause the Base Level of Imposts means
the aggregate of N.T. Imposts and Commonwealth Imposts as at
the Development Date.
(b) If any increase of Commonwealth Imposts has the effect of
increasing the aggregate of N.T. Imposts and Commonwealth
Imposts to 150% or more of the Base Level of Imposts then each
of the Producers shall be entitled to recover as Imposts Price
in respect of Gas delivered by it any part of that increase
and the amount of any subsequent increase of Commonwealth
Imposts which has the effect of increasing the aggregate of
N.T. Imposts and Commonwealth Imposts beyond 150% of the Base
Level of Imposts.
<PAGE>
4.60 Increase in N.T. Imposts
4.61 (a) For the purpose of this clause the Base Level of Imposts means
the aggregate of N.T. Imposts and Commonwealth Imposts as at
the later of the Development Date or the Date of Last Review.
(b) If any increase or increases of N.T. Imposts has the effect of
increasing the aggregate of N.T. Imposts and Commonwealth
Imposts to 110% or more of the Base Level of Imposts then each
of the Producers shall be entitled to recover as Imposts Price
in respect of Gas delivered by it the whole of such increase
or increases of N.T. Imposts which since the Development Date
or the Date of Last Review (whichever is applicable) together
shall have had the effect of so increasing the aggregate of
the N.T. Imposts and the Commonwealth imposts. The "Date of
Last Review" shall mean the date on which a Producer last
became entitled to recover increases in imposts pursuant to
this clause.
<PAGE>
5.00 ADJUSTMENT OF GAS TO SPECIFICATION
5.10 Rights of Purchaser
5.11 Without prejudice to any other rights or remedies of the
Purchaser against a Producer for losses incurred, in the event
that Gas tendered for delivery hereunder by any Producer (a
"defaulting Producer") fails to meet any of the specifications
set forth in Schedule B:-
(a) The Purchaser shall have the right to refuse to
accept further deliveries from the defaulting
Producer until such failure is rectified, and that
Producer shall become liable for the cost of
alternative fuel supply in accordance with clause
3.40. The Purchaser shall forthwith notify such
refusal by telephone to the Producers jointly and
shall confirm the same by written notification within
24 hours specifying the nature of the deficiency.
(b) The Purchaser may knowingly or unknowingly accept
such Gas and may install, operate and maintain such
facilities as may be required to cause such Gas to
meet such specifications in which case the Purchaser
shall have the right to recover from the defaulting
Producer all costs incidental thereto, including fuel
supply damages, depreciation, overhead and costs of
capital all of which may be deducted from sums
payable by the Purchaser to the defaulting Producer
hereunder.
5.12 Without prejudice to any other rights or remedies of the
Purchaser against the defaulting Producer for losses incurred
in the event that Gas supplied fails to achieve a minimum
Gross Heating Value of 36MJ/m3, the defaulting Producer shall
compensate the Purchaser for all additional costs payable by
the Purchaser associated with the movement of the additional
volumes of Gas through the Pipeline required to achieve the
energy equivalence of Gas rated at 36MJ/m3 over the period of
delivery of the specification breach. Any statement or
calculation of such costs by the Purchaser shall be prima
facie evidence thereof.
5.13 It shall be no defence to any action by the Purchaser for
recovery of costs pursuant to clauses 5.11 and 5.12 that the
Purchaser shall not have personally incurred such costs or
shall be entitled to recoup such costs from the Consumers.
5.20 Removal of Constituents
So long as the Gas remains within specification, the Producers jointly
may, prior to delivery thereof or otherwise as the Purchaser may agree,
submit such Gas to any process the Producers jointly desire for the
removal of constituents or elements therein other than for the removal
of methane (except where methane removal is an unavoidable consequence
of the removal of other constituents). Such separate constituents or
elements will remain the property of the Producers in their Ownership
Percentages.
<PAGE>
5.30 Quality Tests
The Purchaser and the Producers jointly shall agree upon reasonable
methods and procedures and determine the instruments to be used for
making tests to determine whether Gas conforms to the specifications
set forth in Schedule B.
If the parties are unable to agree upon such procedures any party may
refer the question for determination by an Independent Expert.
<PAGE>
6.00 MEASUREMENT
6.10 Measuring Equipment
6.11 Installation
The Purchaser shall ensure that the Pipeline Operator shall furnish,
install, maintain and operate at the Custody Transfer Area all
measuring equipment.
6.12 Compliance with Standards
All measuring equipment shall be of a type approved for the intended
use under the provisions of the appropriate authority where such
approvals are required, or of a type approved by the Producers jointly
where such approvals are not required (such approval not to be
unreasonably withheld).
6.13 Check Measuring Equipment
The Producers jointly may install and operate check measuring equipment
within the Custody Transfer Area (as part of Development Work) provided
the same does not interfere with the operation of the Pipeline.
6.14 Pulsation Dampening
If there are any compression facilities upstream of the Field Delivery
Station, the Producers jointly undertake that they will provide or
cause to be provided sufficient pulsation dampening equipment (as part
of Development Work) to ensure that the compression facilities do not
interfere with the operation of the Pipeline.
6.15 Calibration
(a) The accuracy of the measuring equipment shall be tested and
verified by the Purchaser once each month or at such other
intervals as may be required by the type of equipment.
(b) Reasonable notice of the time and nature of each test shall be
given to the Producers jointly to permit them to arrange for a
representative to observe the test and any adjustments
resulting from such test. If, after notice, the Producers fail
to have a representative present, the results of the test
shall nevertheless be considered accurate.
<PAGE>
6.16 Correction
If at any time, any of the measuring equipment is found to be out of
service or registering inaccurately, it shall be adjusted at once to
read as accurately as possible and the readings of such equipment shall
be adjusted to zero error for a period definitely known or agreed upon,
or if not known or agreed upon, for period of sixteen (16) days or
one-half (1/2) of the elapsed time since the last test, whichever is
shorter. The measurement during the appropriate period shall be
determined by the Pipeline Operator on the basis of the best data
available using the first of the following methods which is feasible:
(a) by using the data recorded by any check measuring equipment if
installed and accurately registering; or
(b) by making the appropriate correction if the deviation from the
accurate reading is ascertainable by calibration test or
mathematical calculation; or
(c) by estimating based upon receipts or deliveries under similar
conditions during a period when the equipment was registering
accurately.
6.17 Additional Tests
(a) The Producers jointly may require additional tests at
reasonable intervals.
(b) If upon testing, the deviation from the accurate reading is
found to be less than two percent (2%), each Producer shall
bear its Ownership Percentage of the expense of the additional
test.
6.18 Inspection of Equipment and Records
(a) Each party shall have the right at all times to have access to
the Custody Transfer Area and to inspect measuring equipment
installed or furnished by the other.
(b) Each party shall have the right to inspect the charts and
other measurement or test data of the other at all times
during normal business hours.
(c) The reading, calibration and adjustment of such equipment and
changing of the charts shall be done only by the person
installing or furnishing the same and each Producer shall be
entitled to be present at such time but shall be subject to
all reasonable requirements of the Pipeline Operator with
regard to the security of the Custody Transfer Area and the
equipment.
6.19 Purchaser's Agent and the Producer's Representative
For the purposes of clause 6.00 the Purchaser may appoint the Pipeline
Operator or any other person as its agent to perform or act in its
stead and any Producer may appoint the Representative as its agent to
perform or act in its stead.
<PAGE>
6.20 Method of Measurement
All measurements, calculations and procedures used in determining
volume, except for the correction for deviation from Boyle's Law, shall
be made in accordance with the instructions contained in the Gas
Measurement Committee Report Number 3 of the American Gas Association,
dated April 1955, together with all presently existing supplements,
amendments and appendices to the said Report. Such instructions to be
converted where necessary for compliance with Australian Standard
AS1000-1979 "The International System of Units (SI) and Its
Application", the Commonwealth "Weights and Measures (National
Standards) Act 1960-1966" and Regulations thereunder and the Australian
Gas Association publication "Metric Units and Conversion Factors For
Use In the Australian Gas Industry". The correction for deviation from
Boyle's Law shall be determined from the data contained in "PAR
Research Project NX-19" as published by the American Gas Association in
1962, or any revision thereof acceptable to the Purchaser and the
Producers jointly.
6.30 Unit of Measurement
The unit of volume for purposes of measurement hereunder, shall be one
103m3 of Gas and be expressed to the nearest one-tenth 103m3 or such
other unit of volume agreed to by Purchaser and the Producers jointly.
6.40 Atmospheric Pressure
For the purpose of measurement atmospheric pressure shall be determined
by a recognised formula applied to the nearest one hundredth of a
kilopascal absolute (.01 kPa) and deemed to be a constant.
6.50 Flowing Temperature
The flowing temperature of Gas shall be determined by means of an
approved recording thermometer of standard make. The arithmetic mean of
all readings each day shall be deemed to be the Gas temperature and
shall be used in computing volume.
6.60 Determination of Gas Characteristics
The gas characteristics including, without limiting the generality of
the foregoing, Gross Heating Value, relative density, nitrogen and
carbon dioxide content of gas shall be determined by continuous
recording equipment or by laboratory equipment. If continuous recording
equipment is used the arithmetic mean of all recordings for each day
will be used to determine gas characteristics. If spot samples are
taken or a spot sampler is used, gas characteristics will be determined
from the analysis of the samples using laboratory equipment and
recognised analytical methods.
<PAGE>
6.70 Exchange of Metering Information
(a) The Purchaser shall send to the Producers jointly copies of
all measuring and testing charts, measuring data and measuring
information promptly after receipt thereof from the Pipeline
Operator.
(b) The Producers jointly shall cause to be sent to the Purchaser
promptly upon request copies of the information kept or
obtained by them.
6.80 Preservation of Measurement Records
The parties shall preserve all measurement test data, measurement
charts and other similar records for the greater of a period of seven
(7) years or the minimum period required by record retention rules of
any governmental agencies having jurisdiction or the currency of this
Agreement.
<PAGE>
7.00 BILLING AND PAYMENT
7.10 Recovery Payments and Recovery Interest
(a) Each item of Development Expenditure shall be recouped by the
Producers over a period of ten years from the end of the
Quarter which is the later of the Quarter in which the Date of
Initial Delivery occurs or the Quarter after the Quarter in
which payment for the relevant item of Development Expenditure
was made (which end of Quarter is herein called "the
Commencement Date") and as more particularly provided for
herein.
(b) The Purchaser shall pay to each Producer equal successive
Quarterly instalments each being equivalent to its Ownership
Percentage of the aggregate of 2.5% of each item of
Development Expenditure until the whole of such items of
Development Expenditure shall have been recouped by the
Producers, such instalments being herein called "Recovery
Payments". The first of such instalments shall be payable on
the Commencement Date.
(c) The Purchaser shall pay to each Producer interest on its
Ownership Percentage of the unrecouped balance of Development
Expenditure calculated at the Recovery Interest Rate and
charged and payable at the end of each Quarter by reference to
the amount of the unrecouped Development Expenditure at the
end of that Quarter.
(d) Recovery Payments and Recovery Interest shall be paid within
14 days after receipt by the Purchaser of a statement showing
the calculation thereof as at the end of each Quarter the
first such statement to be furnished by or on behalf of each
Producer and in relation to Recovery Payments to be in respect
of the Quarter ending on the Commencement Date and in relation
to Recovery Interest to be in respect of the Quarter after the
Quarter in which the first Development Expenditure is
incurred.
(e) Subject to clauses 9.30 and 10.30 hereof and notwithstanding
the provisions of paragraph (a) hereof, in the event that this
Agreement expires or is terminated without each of the
Producers having recouped its Ownership Percentage of all
Development Expenditure:
(i) The Purchaser shall nevertheless continue to pay any
such Producer the quarterly instalments referred to
in paragraph (b) and (c) hereof in any of the
following circumstances:
(A) if the termination occurs following upon
Force Majeure when that arises under
paragraph (g) of the definition of Force
Majeure contained herein;
(B) if the Producer continues to supply Gas to
the Purchaser whether under a new Agreement
or otherwise; or
<PAGE>
(C) if at the expiration of one year from the
date of expiry or termination the Producer
is not supplying Gas to any other party.
(ii) In any other case the Purchaser shall pay to the
Producer its Ownership Percentage of such proportion
of any Development Expenditure then remaining
unrecouped as shall be agreed to be fair and
reasonable in all the circumstances and failing
agreement as shall be determined by an Independent
Expert on the reference of any party.
(f) Notwithstanding anything hereinbefore provided the Purchaser
shall have the right at any time upon six (6) months written
notice to a Producer to repay to that Producer its Ownership
Percentage of the unrecouped amount of Development Expenditure
together with Recovery Interest thereon to the date of payment
and otherwise without penalty.
7.20 Payment for Gas
7.21 The Contract Price for Gas delivered in each Month (including Gas
delivered in accordance with Clause 2.44) shall be charged to the
Purchaser as hereinafter provided. Such charges shall take into account
all adjustments to the Contract Price applicable hereunder.
7.22 In the event that any escalation in the Base Price cannot immediately
be accurately calculated a bona fide estimate of the new Base Price
will be made by the Producers jointly and used until such time as the
new Base Price can be accurately calculated PROVIDED HOWEVER that an
adjustment between the parties to compensate for any over or under
charge will be effected within thirty (30) days of ascertainment of the
extent thereof.
7.23 Monthly Statements
On or before the 12th day of each Month each of the Producers shall
furnish to the Purchaser a monthly statement showing the following
information:
(i) Gas delivered by it during the Month last concluded or (in the
case of the first delivery) during the first period;
(ii) A schedule of the Purchaser's outstanding entitlements for
Make-up Gas for all prior Debit Months.
(iii) The accumulated credits to which the Purchaser is entitled
under clause 3.25 (i.e., credits for Purchases in excess of
the Monthly Minimum Quantity).
(iv) A schedule showing each item of Development Expenditure paid
for the preceding Month.
(v) The outstanding balance of unrecouped Development Expenditure
as at the end of the preceding Quarter.
<PAGE>
(vi) (if applicable in that month) calculations of the amount of
Recovery Interest for the last Quarter.
(vii) The amount due to the Producer according to measurement,
terms, conditions and prices as provided in this Agreement.
7.24 Annual Reconciliation Statement
On or before the 12th day of the second Month following the end of each
Contract Year the Producers jointly shall furnish to the Purchaser an
annual reconciliation statement showing the aggregate amount of Gas
delivered during the previous Contract Year and the amount of any
payment due to any Producer or to be refunded to the Purchaser by any
Producer under the terms and conditions herein provided.
7.25 Dates of Payment
On or before the 30th day of each Month, or within ten (10) days after
receipt of the monthly statement whichever is later, and on or before
the 30th day of the second Month following the end of each Contract
Year, or within ten (10) days after receipt of the annual
reconciliation statement whichever is later, the Purchaser or a
Producer as the case may require shall pay the other the amounts due as
shown by the said statements.
7.30 Default in Payment
7.31 If the Purchaser fails to make to a Producer any such payment, or any
portion thereof, when same is due, that Producer shall subject to
clause 10.30 not have any rights to damages on that account but the
Purchaser shall be liable for interest thereon at the Recovery Interest
Rate from the date when such payment is due until the same is paid.
Such interest shall be calculated from day to day.
7.32 A Producer may sue for and recover the payment of any amount remaining
unpaid by the Purchaser to that Producer together with interest thereon
as provided in clause 7.31 in any Court of competent jurisdiction.
7.40 Disputed Monthly Statements
7.41 In the event of bona fide disputes arising from differences in
measurement a Producer shall waive its suspension and termination
rights contained herein provided the Purchaser makes payments to that
Producer of the amount not in dispute. Monies withheld, and
subsequently found to be payable, shall be due and payable fifteen (15)
days after reconciliation of metering differences together with
interest thereon calculated from the original due date for payment at
the rate and in the manner provided in clause 7.31.
<PAGE>
7.42 A Producer upon request, shall furnish to the Purchaser or its agent
copies of all records upon which the Producer has based the statement
referred to in clause 7.23. The Purchaser or its agent shall have
access to the records and books of each Producer at all reasonable
hours so far as they affect measurement of and the price due for the
Gas sold hereunder.
7.43 In the event an error is discovered in the amount shown due in any
statement rendered by any of the Producers, adjustment between the
parties to compensate for such error shall be effected within thirty
(30) days of ascertainment of the extent thereof PROVIDED HOWEVER that
the claim therefor shall have been made within two (2) years from the
date of such statement.
7.50 Set Off
(a) Each Producer and the Purchaser shall be entitled to set off
against and deduct from any amounts due and payable to the
other of them under this Agreement any amounts due and payable
to it by the other of them pursuant to the provisions of or
otherwise in respect of the Mereenie Agreement.
(b) If any Producer who is also a Mereenie Producer at the time of
execution of this Agreement shall at any time have assigned or
purported to assign its ownership interest in the Mereenie Gas
Field (being the Gas Field the subject of the Mereenie
Agreement) or its rights and/or obligations under the Mereenie
Agreement, in either case without first having obtained the
prior consent of the Purchaser as provided in the Mereenie
Agreement, then the Purchaser shall also be entitled to set
off against and to deduct from any amounts due and payable to
that Producer under this Agreement any amounts due and payable
to that Producer by such assignee or purported assignee.
<PAGE>
8.00 RESPONSIBILITY FOR GAS
8.10 Passing of Title
Ownership and possession of Gas shall pass from a Producer to the
Purchaser on delivery to the Purchaser as described in clause 8.21.
8.20 Possession of Gas
8.21 A Producer shall be in control and possession of Gas deliverable by it
to the Purchaser until such Gas shall have been delivered to the
Purchaser at the flange connecting the Field Delivery Station to the
Pipeline.
8.22 The Purchaser shall have no responsibility with respect to any Gas
until it is delivered or on account of anything which may be done,
happen or arise with respect to the same before such delivery. After
its delivery of any Gas a Producer shall have no responsibility
therefor but without prejudice to the rights of the Purchaser under
clause 5.10.
8.30 Liability for Taxes
8.31 A Producer shall subject to clauses 4.50 and 4.60 pay or be responsible
for the payment of all taxes, levies, assessments or like charges which
may be charged or imposed in respect of Gas delivered or to be
delivered by it until possession thereof passes to the Purchaser.
8.32 Subject to clause 8.40 the Purchaser shall pay all taxes, levies,
assessments or like charges which may be charged or imposed in respect
of Gas after possession thereof has passed to the Purchaser.
8.40 Liability for Royalties
A Producer shall subject to clauses 4.50 and 4.60 be responsible for
the proper accounting for and payment to the persons entitled thereto
of all royalties payable on all Gas delivered by it to the Purchaser
hereunder including all components thereof and the making of settlement
with all other persons having any interest therein.
<PAGE>
9.00 FORCE MAJEURE
9.10 Suspension of Obligations
(a) A party affected by Force Majeure or Pipeline Force Majeure
shall promptly notify each other party of the occurrence and
details of any event or circumstances giving rise thereto and
the estimated delay in performance resulting therefrom.
(b) Subject as herein provided:
(i) the obligations of such affected party under this
Agreement shall thereafter be suspended to the extent
that performance thereof is prevented thereby during
the continuance thereof; and
(ii) where a Producer's obligation to supply Gas in
accordance with this Agreement is suspended under
this clause the obligations of that Producer to sell
and the Purchaser to purchase Gas from that Producer
shall be excused forever by that Producer's Ownership
Percentage of the Daily Minimum Quantity for every
Day or part of a Day in which such suspension
continues.
(c) A Producer shall be excused from its obligation to deliver Gas
under this Agreement to the extent that the Producers are
unable to recover and treat Gas from the Gas Field on account
of Force Majeure.
(d) An obligation to pay money shall not however be suspended or
excused by Force Majeure except as provided in paragraph (e).
(e) In the case of Pipeline Force Majeure the Purchaser shall be
excused from payment in respect of the Monthly Minimum
Quantity for the second to sixth Months thereafter but shall
in respect of such Months continue to pay to the Producers 15%
of the Base Price based on Monthly Minimum Quantities for
those Months by way of reimbursement of their estimated
out-of-pocket expenses. Such payments shall not create any
entitlement to Make-up Gas pursuant to clause 4.20.
(f) The obligation of the Purchaser to pay the Contract Price for
the Monthly Minimum Quantity shall not be suspended by any
Force Majeure affecting the Purchaser other than Pipeline
Force Majeure.
(g) The party affected shall use all possible diligence to
overcome the effect of the Force Majeure or Pipeline Force
Majeure as quickly as possible but this shall not require the
settlement of strikes or labour disputes on terms contrary to
the reasonable wishes of the party affected.
<PAGE>
9.20 Termination for Prolonged Force Majeure
If the inability of a Producer to carry out its obligations (after
initial delivery and acceptance by the Purchaser) by reason of Force
Majeure as aforesaid shall continue for one (1) year or more then the
Purchaser may by thirty (30) days notice in writing given at any time
within six (6) months after the expiration of such year, if Force
Majeure is still subsisting at the expiration of the notice period,
terminate this Agreement so far as it is an agreement between the
Purchaser and that Producer without prejudice to any of the rights of
the parties accrued prior to the date of such termination.
9.30 Termination Following Undue Delay in Commencement
If for any reason beyond the control of the Purchaser, it is unable to
accept delivery of Gas by the 31st December, 1987 or if the
construction of the Pipeline is abandoned or becomes incapable of
completion by 31st December 1987:
(a) The remaining rights and obligations of the parties under this
Agreement shall at the option of the Purchaser or the
Producers jointly by notice in writing to the other be at an
end provided that within 30 days after termination the
Purchaser shall reimburse the Producers for all of their
respective shares of Development Expenditure together with the
sum of $6.5 million excluded from the definition of
Development Expenditure to the extent expended by the
Producers and together with interest on both sums at the
Recovery Interest Rate and other costs and expenses
necessarily and reasonably incurred in fulfilment of their
respective obligations under this Agreement since the 12th day
of October, 1984.
(b) Pending such reimbursement the Purchaser shall pay each
Producer its Ownership Percentage of 15% of the Base Price
computed on the first Contract Year's Monthly Minimum
Quantities as from 1st July, 1987 by way of reimbursement of
its estimated out-of-pocket expenses.
<PAGE>
10.00 DEFAULT
10.10 Negative Pledges
10.11 Each of the Producers hereby gives to the Purchaser a negative pledge
namely a pledge that it will not without the consent of the Purchaser
charge its interest in the Petroleum Lease other than in respect of:
(i) a charge which it shall be entitled to give to a financier for
the purpose of securing finance of any kind for the
development of the Petroleum Lease and limited to the amount
of such finance; or
(ii) the cross charge dated 2nd April, 1985 and any other cross
charges given pursuant to the Palm Valley Joint Venture
Operating Agreement.
10.12 Each of the Producers shall be entitled to be released from the
negative pledge given pursuant to clause 10.11 hereof:
(a) at any time upon the Producers establishing and jointly
covenanting to maintain during the balance of the term of this
agreement Proven Reserves of not less than 250% of the
aggregate of:
(i) Annual Minimum Quantities still to be delivered
pursuant to this Agreement in Contact Years 1 to 20
inclusive; and
(ii) the Maximum Delivery Obligations as defined in the
Alice Springs Contract still to be delivered pursuant
to that Contract; or
(b) at any time after the expiration of two years from the Date of
Initial Delivery upon the Producers establishing and jointly
covenanting to maintain during the balance of the term of this
agreement Proven Reserves of not less than the aggregate of:
(i) 240% of the Annual Minimum Quantities still to be
delivered pursuant to this Agreement in Contact Years
1 to 20 inclusive; and
(ii) the Maximum Delivery Obligations as defined in the
Alice Springs Contract still to be delivered pursuant
to that Contract; or
(c) at any time upon the Producer giving to the Purchaser a
performance bond in respect of its Ownership Percentage of 20
million dollars escalated in accordance with movements in the
CPI from the 31st March, 1985 to the date on which the
performance bond is given.
<PAGE>
The Purchaser agrees that the requirements of paragraph (a), (b) and
(c) above are interchangeable at the option of any Producer at any time
and from time to time to the intent that if, by way of example, a
Producer shall have secured a release from the negative pledge given by
it by satisfying the requirements of paragraph (a) it may thereafter be
discharged from its obligations pursuant to paragraph (a) by satisfying
the requirements of paragraph (b) or paragraph (c) and upon doing so
the Purchaser shall release and discharge that Producer from its
obligations pursuant to paragraph (a). If, as aforesaid, that Producer
shall have elected to satisfy the requirements of paragraph (c), that
Producer may thereafter be discharged from its obligations pursuant to
paragraph (c) and the Purchaser shall return to that Producer its
performance bond upon satisfying the requirements of paragraph (b) and
so on.
10.13 (a) A Producer may at any time request the Purchaser to review its
need for a continuing negative pledge from that Producer.
(b) The Purchaser shall in good faith conduct such review in
response to a request made on or after five years after the
Date of Initial Delivery and at intervals of not less than two
years thereafter.
(c) In the event that the Purchaser determines at any time that it
has no reasonable need for a continuing negative pledge from
that Producer it shall release the Producer from its negative
pledge.
10.20 Default by Producers
If any one or more of the following events occurs, namely:
(a) if any order is made for the liquidation of a Producer or a
Producer institutes any proceedings or arrangements for its
liquidation in whole or in part or for the appointment of a
receiver or any receiver is appointed of any of its assets or
a Producer is unable to pay its debts within the meaning of
that expression in the Companies legislation of the Territory
and as a result of any of the foregoing the Purchaser
reasonably believes that the supply of Gas by that Producer to
the Purchaser is placed in jeopardy or that the Purchaser may
be unable to obtain a good discharge in respect of its
obligations;
(b) if a Producer make default in the due performance of any of
its substantial covenants or obligations under this Agreement
(not being a covenant or obligation of the kind referred to in
sub-clause (c) of this clause) and if a Producer fails to
remedy or to commence and diligently continue in good faith to
remedy that default within a reasonable time after notice
specifying the default is given to the Producer; or
(c) if a Producer makes default in the due payment of any moneys
payable hereunder and any such default remains unremedied for
a period exceeding thirty days after notice specifying the
default is given to the Producer;
<PAGE>
then and in any such events the Purchaser may by notice in writing to
the relevant Producer (so far as the separate Agreement with that
Producer is concerned):-
(i) Suspend its obligations to make payments under this
Agreement other than payments under clause 7.10 until
the default is remedied; or
(ii) Terminate such separate Agreement whereupon the
Purchaser shall have no further liability to that
Producer hereunder and shall be entitled to recover
from that Producer as and by way of liquidated
damages the net present value (determined as
hereinafter provided) of the liquidated damages which
would be recoverable from that Producer pursuant to
clause 3.43 if that Producer made default in delivery
of that quantity of Obligation Gas required to be
delivered by that Producer from the date of
termination by the Purchaser as aforesaid to the date
on which this Agreement would otherwise have
terminated ("Date of Expiry"). The net present value
of such damages shall be determined by:
(A) ascertaining the amount of the liquidated
damages which would be recoverable from that
Producer in respect of the Month immediately
preceding the date of termination if that
Producer had made default in delivery of
133% of its Ownership Percentage of the
Monthly Minimum Quantity during that month;
(B) assuming that the same amount of liquidated
damages as in paragraph (A) above would
apply in respect of each Month from the date
of termination to the Date of Expiry;
(C) discounting the amounts referred to in
paragraph (B) above to present value at the
rate of 8 percent per annum.
Termination of this Agreement with respect to any
Producer shall be without prejudice to the rights of
any party accruing prior to termination, but subject
thereto and to the provisions of this clause the
Purchaser shall not have and shall not make any
further or other claims upon the relevant Producer
arising out of or in any way in connection with any
default by the Producer or termination of this
Agreement as aforesaid. Upon the termination of this
Agreement as aforesaid no further liquidated damages
under clause 3.43 shall accrue.
10.30 Default by Purchaser
If the Purchaser in relation to any Producer is in default in the
observance or performance of any substantial covenant or obligation
under this Agreement and such default shall continue for a period of 90
days after written notice specifying the default shall have been given
to the Purchaser by such Producer then that Producer may by notice in
writing to the Purchaser (so far as the separate Agreement between the
Purchaser and that Producer is concerned):
<PAGE>
(i) Suspend deliveries of Gas hereunder provided that the
Purchaser shall remain liable to pay that Producer the amount
due to it for Monthly Minimum Quantities which will not give
any entitlement to Make-up Gas; and/or
(ii) Terminate such separate Agreement.
In the event that a Producer terminates such separate Agreement as
aforesaid the Purchaser shall pay to that Producer as and by way of
liquidated damages its Ownership Percentage of:
(i) the unrecouped balance of Development Expenditure and in
addition such part of the sum of $6.5 million referred to in
the definition of Development Expenditure as has been expended
to the date of termination; and
(ii) the net present value of the Base Price for the aggregate
Annual Minimum Quantities remaining to be delivered under this
Agreement as at the date of termination. The net present value
as aforesaid shall be determined by:
(A) Ascertaining the Base Price which applied or would
have applied under this Agreement using the
assumptions set out in (B) below in each Quarter from
the start of the Contract Year in which termination
occurs until the aggregate Annual Minimum Quantities
remaining to be delivered under this Agreement would
have been delivered;
(B) The actual impact on the Base Price of CPI
Escalation, Mega CPI Escalation and Fuel Escalation
is to be averaged on an annual basis over whichever
of the following periods prior to termination is the
longer namely:
(I) three years; and
(II) the period since the Date of Initial
Delivery.
(C) Assuming the Base Price ascertained in paragraph (A)
above for the four Quarters in each of the relevant
Contract Years and dividing the sum thereof by four
to derive the average Base Price applicable to the
respective Contract Years.
(D) Multiplying the Annual Minimum Quantities remaining
to be delivered under this Agreement from the date of
termination by the average Base Price for each
relevant Contract Year to derive the price payable by
the Purchaser in respect of each such Contract Year.
(E) Discounting each of the amounts referred to in
paragraph (D) above to present value as a mid year
stream at the rate of 7 percent per annum above the
CPI for the relevant Contract Year, and aggregating
the resulting amounts.
<PAGE>
10.40 Waivers not to affect other defaults
No waivers by any party of any one or more defaults by any other in the
performance of any provisions shall operate or be construed as a waiver
of any other default whether of a like or of a different character, and
whether occurring before or after such waiver.
<PAGE>
11.00 MISCELLANEOUS
11.10 Governing Law
This Agreement shall be governed by the law of the Territory.
11.20 Disputes
11.21 All disputes arising under this Agreement shall be decided by the
courts of the Territory and the parties hereby unconditionally submit
to the jurisdiction thereof.
11.22 In the event of disputes arising concerning matters of a technical
nature the parties may agree to engage such technical experts to
determine such matters but such experts shall be deemed to be acting as
experts and not as arbitrators.
11.23 Nothing herein contained shall restrict the ability of the parties to
have their disputes determined by arbitration should they so agree.
11.30 Headings and Notations
The headings and notations in this Agreement shall not be taken into
account in the construction thereof.
11.40 Severability of Clauses
If any provision of this Agreement shall be construed as illegal or
invalid or void the legality or validity or enforceability of any of
the other provisions hereof shall not be affected and the illegal or
invalid or void provisions shall be deemed deleted herefrom to the same
exent and effect as if they were never incorporated herein but all
other provisions herein shall continue in force unless such deletion
shall have substantially altered the commercial efficacy of this
Agreement.
11.50 Agreement Not to Constitute a Partnership
Nothing in or arising out of this Agreement shall constitute or be
deemed to constitute a partnership between the Producers for any
purpose.
11.60 Entire Agreement
This Agreement contains the entire Agreement between the parties. All
warranties and conditions implied by law or otherwise to the extent to
which they may lawfully be negatived are hereby negatived. Except for
the obligation to deliver natural gas meeting the quality
specifications stated in Schedule B each Producer gives no warranty or
undertaking as to the quality or fitness for any purpose of any natural
gas sold and delivered hereunder. No representations, warranties or
undertakings are made or given by any or all of the Producers save and
except for those expressly provided for herein.
<PAGE>
12.00 ASSIGNMENT
12.10 When Consent Required
(a) No assignment by a Producer of this Agreement or of its rights
hereunder shall be of any effect whatsoever unless with the
written consent of the Purchaser which consent shall not be
unreasonably withheld in the case of a financially and
technically competent assignee PROVIDED ALWAYS that the
assignee shall covenant in writing with the Purchaser to be
bound by all the terms and conditions of this Agreement so far
as they apply to the assignor.
(b) No assignment by the Purchaser of this Agreement or of its
rights hereunder shall be of any effect whatsoever unless with
the written consent of each of the Producers which consent
shall not be unreasonably withheld in the case of a
financially and technically competent assignee PROVIDED ALWAYS
that the assignee shall covenant in writing with each
Purchaser to be bound by all the terms and conditions of this
Agreement so far as they apply to the assignor.
(c) The Purchaser's consent to any proposed assignment by a
Producer which is also a Mereenie Producer shall not be
deemed unreasonably withheld where that Producer has failed
to satisfy the Purchaser that the resulting loss of the
Purchaser's right of set off under clause 7.50 hereof will not
adversely affect the Purchaser's interests to a material
degree, or unless that Producer's interests in the Gas Field
the subject of the Mereenie Agreement and its rights under the
Mereenie Agreement, are to be assigned to the same assignee.
The Purchaser's right of set off as aforesaid shall not be
deemed to have been adversely affected to a material degree
where a Producer who is a Mereenie Producer provides to the
Purchaser a letter of credit or other acceptable security in
an amount equal to the net present value (calculated using a
discount rate of 12% per annum) of $2.7 million per annum for
each unexpired year of this Agreement up to Contract Year 20.
12.20 When Consent Not Required
Notwithstanding the foregoing but subject to clause 10.11 any party may
without any consent of any other party charge, mortgage, or pledge or
assign by way of charge, mortgage, or pledge this Agreement or any of
its rights hereunder if such charge, mortgage or pledge or assignment
is for the purpose of securing the repayment of moneys borrowed or
guaranteed or the payment of moneys borrowed or guaranteed or the
payment of moneys payment whereof is deferred.
12.30 Merger or Reconstruction
The consent of the Purchaser shall not be unreasonably withheld in any
case where the proposed assignment is required as a result of any
amalgamation, merger or reconstruction of any Producer seeking such
consent.
<PAGE>
12.40 Obligations
This Agreement shall bind and enure to the respective successors and
assigns of the parties hereto but no assignment shall release any party
from such party's obligations hereunder without written consent of each
other party which consent shall not be unreasonably withheld in case of
an assignment to a financially and technically competent assignee.
<PAGE>
13.00 NOTICES
13.10 Notices
13.11 Subject to this clause any notice or advice required to be given or
sent pursuant to this Agreement shall be deemed to have been given if
delivered to the party to whom it is to be given or sent or sent by
prepaid certified post or telex or telegram or facsimile message to the
following addresses or such other address as may be notified from time
to time by a party to the other parties:
MAGELLAN PETROLEUM (N.T.) PTY LTD IEDC AUSTRALIA PTY. LIMITED
8th Floor, 7th Floor,
National Australia Bank Building, FAI Building,
420 George Street, 231 Adelaide Terrace,
BRISBANE QLD. 4000 PERTH W.A. 6000
Telex: AA40392 Telex: AA95902
C.D. RESOURCES PTY LTD AMADEUS OIL N.L.
10th Floor, 4th Floor,
22 William Street, Bank of New Zealand Building,
MELBOURNE VIC. 3000 410 Queen Street,
BRISBANE QLD. 4000
Telex: AA31916
Telex: AA43927
FARMOUT DRILLERS N.L.
C/- Latec Investments, SOUTHERN ALLOYS VENTURE
Level 24, PTY. LIMITED
CBA Building, C/- Australian Industry
60 Margaret Street, Development Corporation,
SYDNEY N.S.W. 2000 24th Floor,
Qantas International Centre,
Telex: AA70517 18-30 Jamieson Street,
SYDNEY NSW 2000
CANSO RESOURCES LIMITED
C/- Latec Investments, Telex: AA23107
International House,
26 St. George's Terrace, INTERNATIONAL OIL
PERTH WA 6000 PROPRIETARY
Level 23,
Telex: AA72287 12 Creek Street,
BRISBANE QLD 4000
PANCONTINENTAL PETROLEUM LIMITED
9th Level, Telex: AA41040
FCA Building
50 Margaret Street, GASGO PTY. LIMITED
SYDNEY N.S.W. 2000 The Chairman,
Pipeline Executive,
Telex: AA71111 5th Floor,
NTEC House,
18/20 Cavenagh Street,
DARWIN N.T. 5790
Telex: AA85395
<PAGE>
13.12 Any notice given by a Producer pursuant to clause 10.30 shall be served
personally:
(a) during the hours of business of the Purchaser; and
(b) on any person apparently in the employ of the Purchaser who
shall sign a receipt therefor.
13.13 Any notice, request, demand, consent, approval or other communication
(hereinafter "a notice") required or permitted under this Agreement to
be given to or served on the Producers jointly by the Purchaser, may be
given to or served on the Representative and shall be deemed to have
been thereby given or served on each of the Producers.
13.14 Any notice required or permitted to be given to or served on the
Purchaser by the Producers jointly under this Agreement, shall be given
only by the Representative on behalf of the Producers. No Producer
shall itself give or purport to give a notice required or permitted by
this clause to be given by the Representative, and the Purchaser shall
disregard and treat as null and void any such purported notice.
13.20 Receipt of Notice
If a notice is sent by prepaid post as aforesaid it shall be deemed to
have been given or sent upon actual delivery and if sent by telex or
telegram or facsimile message on the next business day after having
been transmitted.
13.30 Representative
13.31 For the purposes only of administrative convenience in respect of this
Agreement, and notwithstanding clause 2.10 hereof or any provisions of
the Palm Valley Joint Operating Agreement or any other agreement
between the Producers, it is hereby acknowledged that Magellan
Petroleum (N.T.) Pty. Ltd. is at the date hereof the Representative for
the purposes of clause 13.10 and shall remain as Representative for
such purposes unless and until the Purchaser is served with a notice
under clause 13.32.
13.32 The Producers may appoint a replacement Representative for purposes of
this Agreement only by delivering to the Purchaser a notice signed by
two or more Producers having for the time being Ownership Percentages
aggregating in excess of 50%, which notice specifies as Representative
an alternative Producer and his address for service, and the change
specified in such notice shall take effect forthwith upon receipt.
13.33 Except as provided in Clause 13.32 the Purchaser shall disregard and
treat as null and void any purported revocation of the Representative's
authority by any Producer.
<PAGE>
14.00 CONFIDENTIALITY
Each party will treat as confidential information disclosed by any
other party pursuant to this Agreement and which prior to such
disclosure is notified by the disclosing party as being confidential
and each party will not disclose such confidential information to third
parties without the prior written consent of the others and it will
take all reasonable precautions to ensure that its employees will
maintain the confidentiality of such confidential information PROVIDED
HOWEVER as follows:-
(a) that each party shall be entitled to disclose such
confidential information to any related corporation; and
(b) that the provisions of this Clause shall not apply to
information which is or becomes part of the public knowledge
or literature or which is lawfully obtained by one party from
sources other than this Agreement or another party; and
(c) that each party shall be entitled to make such disclosures as
are required by law or by the rules of any Stock Exchange or
regulatory agency having jurisdiction over such party or its
ultimate holding company; and
(d) that each party shall be entitled to disclose such
confidential information to any of the undermentioned persons
who have first executed an undertaking in substantially
identical terms to this clause:-
(i) any chargee or prospective chargee;
(ii) any professional adviser; or
(iii) any employee of the foregoing.
(iv) any assignee or prospective assignee.
(e) that the Purchaser shall be entitled to disclose such
confidential information to any department or agency of the
Territory.
<PAGE>
15.00 APPROVALS AND CONSENTS
15.10 Approvals and Consents
The respective obligations of the Producers hereunder are subject
always to the Producers obtaining not later than six (6) months from
the date hereof or such longer period as the Purchaser may agree and
thereafter from time to time all consents leases and authorities (if
any) which the Purchaser and the Producers jointly regard as necessary
to enable the Producers to fulfil their obligations under this
Agreement including (without limiting in any way the generality of the
foregoing) all consents leases and authorities required by the Minister
for Mines and Energy of the Territory and by the Petroleum Act and
other relevant Acts in connection herewith.
15.20 Cancellation of the Petroleum Lease
Should the Producers be unable to fulfil their respective obligations
to deliver Gas under the terms of this agreement due to cancellation of
the Petroleum Lease by the Minister under the provisions of the
Petroleum Act, they hereby waive any right to dismantle and remove the
Gas Delivery System for a period of six (6) months following such
cancellation, during which time the Producers will negotiate in good
faith for the sale of such facilities to the Purchaser or to the future
operators of the area the subject of the Petroleum Lease. During this
period the Producers will permit the Purchaser or its agents access to
the Gas Field and the Gas Delivery System in order to maintain supply
of Gas to the Receiving Station.
<PAGE>
In witness whereof the parties hereto have executed this Agreement in Darwin,
Northern Territory the day and year first hereinbefore written.
Signed by MAGELLAN PETROLEUM )
(NT.) PTY. LTD. by John McGregor Florence )
its duly appointed Attorney under )
Power of Attorney dated 26th June ) /s/ John M. Florence
who states that he has no notice )
of revocation of the said Power, )
in the presence of: )
/s/ Hedley Howard
Signed by C.D. RESOURCES PTY. )
LIMITED by Rupert James Hamer )
its duly appointed Attorney under )
Power of Attorney dated 26th June 1985 ) /s/ Rupert J. Hamer
who states that he has no notice )
of revocation of the said Power, )
in the presence of: )
/s/ Hedley Howard
Signed by FARMOUT DRILLERS N.L. )
by _____________________________ )
its duly appointed Attorney under )
Power of Attorney dated 26th June 1985 ) /s/ _________________________
who states that he has no notice )
of revocation of the said Power, )
in the presence of: )
/s/ Hedley Howard
Signed by CANSO RESOURCES )
LIMITED by __________________ )
its duly appointed Attorney under )
Power of Attorney dated 26th June 1985 ) /s/ _________________________
who states that he has no notice )
of revocation of the said Power, )
in the presence of: )
/s/ Hedley Howard
<PAGE>
Signed by INTERNATIONAL OIL )
PROPRIETARY by K. V. Hiscox )
its duly appointed Attorney under )
Power of Attorney dated 27th June 1985 ) /s/ K. V. Hiscox
who states that he has no notice )
of revocation of the said Power, )
in the presence of: )
/s/ Hedley Howard
Signed by PANCONTINENTAL )
PETROLEUM LIMITED by Paul John Fuller )
its duly appointed Attorney under )
Power of Attorney dated 25th June 1985 ) /s/ Paul J. Fuller
who states that he has no notice )
of revocation of the said Power, )
in the presence of: )
/s/ Hedley Howard
Signed by IEDC AUSTRALIA PTY )
LIMITED by Brian James Barker )
its duly appointed Attorney under )
Power of Attorney dated June 26, 1985 ) /s/ Brian J. Barker
who states that he has no notice )
of revocation of the said Power, )
in the presence of: )
/s/ Hedley Howard
Signed by AMADEUS OIL N.L. )
by Alan Surrey Bogg )
its duly appointed Attorney under )
Power of Attorney dated June 26, 1985 ) /s/ Alan S. Bogg
who states that he has no notice )
of revocation of the said Power, )
in the presence of: )
/s/ Hedley Howard
<PAGE>
Signed by SOUTHERN ALLOYS VENTURE )
PTY. LIMITED by Kerry Josephine Adby )
its duly appointed Attorney under )
Power of Attorney dated 27 June 1985 ) /s/ Kerry J. Adby
who states that he has no notice )
of revocation of the said Power, )
in the presence of: )
/s/ Hedley Howard
Signed by GASGO PTY. LIMITED )
By Richard Cawley Madden )
its duly appointed Attorney under )
Power of Attorney dated 27 June 1985 ) /s/ Richard C. Madden
who states that he has no notice )
of revocation of the said Power, )
in the presence of: )
/s/ Hedley Howard
<PAGE>
SCHEDULE A
ANNUAL MINIMUM QUANTITIES
Column 1 Column 2 Column 3
- ------------------------- ------------------------ ---------------------------
Anticipated Contract Year Years Annual Minimum Quantity
(PJ)
No. (commencing 1 July
and ending 1 July)
- ------------------------- ------------------------ ---------------------------
1 1986-1987 2.42
2 1987-1988 4.95
3 1988-1989 4.99
4 1989-1990 5.07
5 1990-1991 5.15
6 1991-1992 5.30
7 1992-1993 5.39
8 1993-1994 5.54
9 1994-1995 5.55
10 1995-1996 5.74
11 1996-1997 5.94
12 1997-1998 6.19
13 1998-1999 6.38
14 1999-2000 6.59
15 2000-2001 6.84
16 2001-2002 7.09
17 2002-2003 7.34
18 2003-2004 7.57
19 2004-2005 7.82
20 2005-2006 8.10
21 2006-2007 7.15
22 2007-2008 6.50
23 2008-2009 5.85
24 2009-2010 5.20
25 2010-2011 5.20
26 2011-2012 3.08
------
152.94
======
<PAGE>
For the purpose of this Schedule and this Agreement:
(i) The first Contract Year shall be whichever of the years (1 July/1 July)
listed in Column 2 above is the year in which the Date of Initial
Delivery occurs and Column 1 shall be adjusted accordingly.
(ii) If the Date of Initial Delivery is other than 1st July in the first
Contract Year then the Annual Minimum Quantity for that first Contract
Year shall be the quantity specified in Column 3 in respect of the year
in which the Date of Initial Delivery occurs divided by 182 if the Date
of Initial Delivery is prior to 30 June 1987, and 365 in any other case
and then multiplied by the number of days from the Date of Initial
Delivery to the end of that first Contract Year.
(iii) The Daily Minimum Quantity for that first Contract Year shall be the
Annual Minimum Quantity for that first Contract Year determined as
aforesaid divided by the number of days from the date of Initial
Delivery to the end of that first Contract Year.
(iv) If the Date of Initial Delivery is later than 1 July 1986 then the
aggregate Annual Minimum Quantities shown in Column 3 remaining
undelivered on 1 July 2012 shall be taken by the Purchaser in the
Contract Years commencing 1 July 2012 and 1 July 2013 in such
respective Annual Minimum Quantities as the Purchaser may notify to the
Producers.
(v) The intent of the foregoing is that the nexus between the Annual
Minimum Quantities specified in Column 3 and the years specified in
Column 2, should not be broken except in the year in which the Date of
Initial Delivery Year occurs or in any preceding year (the Annual
Minimum Quantities for which shall be added to the last anticipated
Contract Years).
<PAGE>
SCHEDULE B
GAS SPECIFICATION
The quality of gas supplied hereunder at the Field Delivery Station shall on
delivery conform to the following. These Specifications can be changed by
written agreement signed by all parties.
1.0 FUEL COMPONENTS
1.1 Methane and Ethane
The gas will contain more than seventy percentum (70%) by volume of
methane. In any case, the gas will contain not less than eighty-five
percentum (85%) by volume of methane and ethane.
Test method: ASTM D 1945 Chemical analysis of natural gas by gas
chromatography.
1.2 Propane
The gas will contain less than five percentum (5%) by volume of
propane.
Test method: ASTM D 1945 Chemical analysis of natural gas by gas
chromatography.
1.3 Butane
The gas will contain less than two percentum (2%) by volume of butane.
Test method: ASTM D 1945 Chemical analysis of natural gas by gas
chromatography.
1.4 Pentane plus
The gas will contain less than one half of one percentum (0.5%) by
volume of pentanes and other higher hydrocarbons.
Test method: ASTM D 1945 Chemical analysis of natural gas by gas
chromatography.
1.5 Hydrogen
The gas will contain less than one half of one percentum (0.5%) by
volume of hydrogen.
Test method: ASTM D 1945 Chemical analysis of natural gas by gas
chromatography.
<PAGE>
1.6 Carbon Monoxide
The gas will contain less than one percentum (1%) by volume of carbon
monoxide.
Test method: ASTM D 1945 Chemical analysis of natural gas by gas
chromatography.
1.7 Oxygen
The gas will contain less than two tenth of one percentum (0.2%) by
volume of oxygen.
Test method: ASTM D 1945 Chemical analysis of natural gas by gas
chromatography.
1.8 Relaxation of Propane, Butane, Pentane and Pentane Plus
To allow the transportation of "rich" gas these limits may by agreement
between all parties be relaxed at the Field Delivery Station as
follows:-
Propane 2% - 8%
Butane 1% - 2.5%
Pentane and higher hydrocarbons 0.75%
<PAGE>
2.0 GAS CONTAMINANTS
2.1 Total Sulphur
The gas will not contain total sulphur including hydrogen sulphide and
mercaptans in concentration greater than 50 milligrams per cubic metre
(50 mg/m3).
Test method: ASTM D 1072 Test method for total sulphur in fuel gases.
2.2 Hydrogen Sulphide
The gas will not contain hydrogen sulphide in concentration greater
than 10 milligrams per cubic metre (10mg/m3).
Test method: ASTM D 2725 Hydrogen sulphide content by methylene blue
method.
2.3 Mercaptans
The gas will not contain more than 5 milligrams per cubic metre
(5mg/m3) of mercaptans expressed as sulphur.
Test method: To be agreed between NTEC and the Transporter.
2.4 Water
The water content will not exceed 80 milligrams per cubic metre
(80mg/m3).
Test method: ASTM D 1142 Water vapour content of gas fuel by
measurement of dew point temperatures.
2.5 Trace Metals
The gas will not contain total trace metals (including sodium,
potassium, calcium, lead, vanadium, aluminium, copper, mercury etc.) in
concentration greater than two parts per million by weight (2mg/kg).
Test method: To be agreed between NTEC and the Transporter.
2.6 Carbon Dioxide
The gas will contain less than three percentum (3%) by volume of carbon
dioxide.
Teat method: ASTM D 1945 Chemical analysis of natural gas by gas
chromatography.
<PAGE>
2.7 Solid Material
The gas will not contain solid material exceeding 10 microns in size
and in concentration greater than three parts per million by weight
(3mg/kg).
Test method: To be agreed between NTEC and the Transporter.
2.8 General
The gas will be free from sand, dust, gum, gum forming constituents,
free water, crude oil, other oils and lubricants including compressor
lubricant, impurities and any other substance which is injurious to
pipelines, control equipment, gas turbine or reciprocating engines and
associated auxiliaries and equipment.
<PAGE>
3.0 ADDITIVES
3.1 Glycols
The gas will not contain glycols in concentration detectable by the
test method.
Test method: Thermal desorption Perkin-Elmer Model ATD-50.
3.2 Methanol
The gas will not contain methanol in concentration detectable by the
test method, unless agreed by NTEC.
Test method: Limits and test method to be agreed between parties where
use of methanol is agreed.
<PAGE>
4.0 PROPERTIES
4.1 (a) Gross Heating Value
The gas will have a gross heating value of not less than
36.0MJ/m3.
Test method: GPA 2172 Calculation method of natural gas
parameters from compositional data using gas analysis obtained
by ASTM D 1945.
(b) Gross Heating Value Variation
The gross heating value of the gas shall not vary greater than
+ 10.0% of the value nominated in the Operating Manual.
-
Test method: GPA 2172 Calculation method of natural gas
parameters from compositional data using gas analysis obtained
by ASTM D 1945.
4.2 Net Heating Value
The gas will have a net heating value of not less than 33.0MJ/m3.
Test method: GPA 2172 Calculation method of natural gas parameters from
compositional data using gas analysis obtained by ASTM D 1945.
4.3 Temperature and Pressure
The gas will have a daily average temperature not exceeding 7(degree)C
above the mean daily ambient temperature at the Field Delivery Station.
The gas will have a maximum temperature of 60 degrees Celcius
(60(degree)C).
The pressure at the Field Delivery Station is to be in the range
9500kPa to 10,000kPa.
4.4 Wobbe Index
The Wobbe Index of the gas shall not vary greater than 10.0% of the
value agreed to by all parties and nominated in the Operating Manual.
The Wobbe Index is defined as the gross heating value of the gas
(MJ/m3) divided by the square root of the specific gravity of the gas.
The specific gravity of the gas is relative to air and is to be
determined at a temperature of 15(degree)C and a pressure of 101.325
kPa absolute.
Test method: ASTM D 1070 Test methods for specific gravity. Gross
heating value is to be calculated using the method specified in Clause
4.1(a) of this Schedule.
<PAGE>
4.5 Flammability Limit
The ratio of higher flammability limit to lower flammability limit
shall exceed 2.2:1 for the gas.
Flammability limits are the upper and lower extremes of fuel air ratio
that will permit ignition and sustain combustion of the fuel air
mixture at a temperature of 15(degree)C and a pressure of 101.325 kPa
absolute.
Test Method: GPA 2172 Calculation method of natural gas parameters from
compositional data using gas analysis obtained by ASTM D 1945.
4.6 Hydrocarbon Dewpoint
The gas will have a minimum hydrocarbon dewpoint lower than minus
30(degree)C at 10,000 kPa absolute. In any case the hydrocarbon
dewpoint of the gas shall be such that hydrocarbons will not condense
under pipeline operating conditions.
<PAGE>
SCHEDULE C
OWNERSHIP PERCENTAGES OF THE PRODUCERS
THE PALM VALLEY JOINT VENTURE
The Producers Ownership Percentages
Magellan Petroleum (N.T.) Pty. Ltd. 50.775%
C.D. Resources Pty. Ltd. 9.375%
Farmout Drillers N.L. 9.375%
Canso Resources Limited 15.375%
International Oil Proprietary 3.504%
Pancontinental Petroleum Limited 3.00%
IEDC Australia Pty. Limited 1.248%
Amadeus Oil N.L. 1.248%
Southern Alloys Venture Pty. Limited 6.100%
<PAGE>
SCHEDULE D
PRICE ESCALATION AND PRICE DETERMINATION
THIS SCHEDULE PROVIDES AN EXAMPLE OF THE CALCULATION OF THE
QUARTERLY GAS PRICE. THE NUMBER OF DECIMAL PLACES USED IN THE
EXAMPLE SHOULD NOT BE CONSTRUED AS INDICATING THE APPROPRIATE
LEVEL OF ACCURACY AT ANY TIME.
<PAGE>
TABLE I
CPI AND MEGA ESCALATORS
- --------------------------------------------------------------------------------
(1) (2) (3) (4)1 (5)2 (6)3
YEAR QUARTER INDICATIVE ANNUAL QUARTERLY MEGA
ENDING CPI CPI CPI ESCALATION
ESCALATION ESCALATION
[FABRICATED
FOR ILLUSTRATIVE % % %
PURPOSES]
- --------------------------------------------------------------------------------
1984 1 JUNE 132.0
2 SEPT 134.0
3 DEC 135.9
4 MARCH 137.8
1985 5 JUNE 139.9 6.0 1.5
6 SEPT 141.8 5.8 1.4
7 DEC 143.0 5.2 0.8
8 MARCH 142.2 3.2 (0.5)
1986 9 JUNE 140.1 0.1 0.0
10 SEPT 139.0 (2.0) (0.8)
11 DEC 138.5 (3.1) (0.4)
12 MARCH 138.9 (2.3) 0.3
1987 13 JUNE 140.1 0.0 0.0
14 SEPT 142.2 2.3 1.5
15 DEC 145.6 4.8 2.4
16 MARCH 151.5 9.1 4.0
1988 17 JUNE 158.4 13.1 4.6 3.1
18 SEPT 164.0 15.3 3.5 5.3
19 DEC 165.6 13.7 1.0 3.7
20 MARCH 166.8 10.1 0.7 0.1
1989 21 JUNE 167.9 6.0 0.7
<PAGE>
NOTES
TABLE I
1. EXAMPLE:
ROW 5 = [139.9 - 132.0] / 132.0 = 6.0
(i.e. The CPI at the end of the current June quarter less
the CPI at the end of the preceeding June quarter.
The result being divided by the CPI for the said
preceeding June quarter and expressed as a
percentage).
2. EXAMPLE:
ROW 5 = [139.9 - 137.8] / 137.8 = 1.5
(i.e. The CPI at the end of the current June quarter less
the CPI at the end of the preceeding March quarter.
The result being divided by the CPI for the said
March quarter and expressed as a percentage).
N.B. If Coln (3) is less than 2 and greater than -2 then Coln (5)
is set to zero regardless of the result of the calculation set
out above.
3. EXAMPLE:
ROW 17 = Coln (4) - 10 = 3.1
N.B. If Coln (4) is less than 10 and greater than -10, Coln (6) is
set to zero.
<PAGE>
TABLE II
FUEL: ESCALATOR: FABRICATED FOR ILLUSTRATIVE PURPOSES
- --------------------------------------------------------------------------------
(1) (2) (3)1 (4)2
ESAA ESAA DATA INDICATIVE QUARTERLY
DATA APPLIED TO ANNUAL PERCENTAGE
FOR YEAR ENDING PERCENTAGE MOVEMENT
YEAR ENDING 30 JUNE MOVEMENT APPLICABLE TO
30 JUNE WHOLE YEAR
- --------------------------------------------------------------------------------
1984 1986 4.370 1.075
1985 1987 2.501 0.620
1986 1988 (1.802) -
1987 1989 3.419 0.844
1988 1990 (2.352) -
NOTES:
1. Coln 3: Derived pursuant to Schedule E.
2. Coln 4: The fourth root of (Coln 3 + 100) x 106 less (after
the fourth root has been taken) 100 = Coln 4.
eg. The fourth root of (4.37 + 100) x 106 less (after the
fourth root has been taken) 100 = 1.075.
<PAGE>
TABLE III
BASE PRICE CALCULATION
<TABLE>
<CAPTION>
(1) (2) (3)2 (4)3 (5)2 (6)3 (7)3 (8)4 (9)2 (10)5
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR QUARTER ANNUAL CUMULATIVE ANNUAL CUMULATIVE CUMULATIVE SUM BASE PRICE FUEL BASE PRICE
ENDING CPI CPI ESCALATION MEGA MEGA OF PREVIOUS EXCLUDING ESCALATION INCL. CURRENT
ESCALATION ON BASE PRICE ESCALATION ESCALATION QUARTER FUEL CURRENT QUARTER CURRENT QUARTER FUEL
INCREMENT INCREMENT ON BASE PRICE ESCALATION FUEL ESCALATION QUARTERLY ESCALATION
INCREMENTS INCREMENT INCREMENT INCREMENT
$ $ $ $ $ $ $ $
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1984 1 JUNE
2 SEPT
3 DEC
4 MARCH
1985 5 JUNE NA 0.375 - 1.125 NA 1.500 NA 1.500
6 SEPT 0.0056 0.381 - 1.125 NA 1.506 0.016 1.522
7 DEC 0.0049 0.386 - 1.125 0.016 1.527 0.016 1.543
8 MARCH 0.0031 0.389 - 1.125 0.032 1.546 0.017 1.563
1986 9 JUNE (0.0023) 0.387 - 1.125 0.049 1.561 0.017 1.578
10 SEPT 0.0000 0.387 - 1.125 0.066 1.578 0.010 1.588
11 DEC (0.0031) 0.384 - 1.125 0.076 1.585 0.010 1.595
12 MARCH (0.0015) 0.382 - 1.125 0.086 1.593 0.010 1.603
1987 13 JUNE 0.0011 0.384 - 1.125 0.096 1.605 0.010 1.615
14 SEPT 0.0000 0.384 - 1.125 0.106 1.615 - 1.615
15 DEC 0.0057 0.389 - 1.125 0.106 1.620 - 1.620
16 MARCH 0.0093 0.399 - 1.125 0.106 1.630 - 1.630
1988 17 JUNE 0.0159 0.415 - 1.125 0.106 1.646 - 1.646
18 SEPT 0.0191 0.434 0.035 1.160 0.106 1.700 0.014 1.714
19 DEC 0.0152 0.449 0.061 1.221 0.120 1.790 0.015 1.805
20 MARCH 0.0045 0.453 0.045 1.266 0.135 1.854 0.015 1.869
1989 21 JUNE 0.0032 0.457 0.001 1.267 0.150 1.874 0.016 1.890
22 SEPT 0.0032 0.480 - 1.267 0.166 1.893 - 1.893
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
TABLE III
NOTES
1. This table is derived in the case of:
(a) Coln 3 to Coln 6 from Table I; and
(b) Coln's 7 and 9 from Table II.
2. Coln's 3, 5 and 9, respectively, are derived by applying the
Quarterly CPI (Coln 5 Table I), MEGA (Coln 6 Table I) and Fuel
(Coln 4 Table II) escalators to that portion of the Base Price
(including any previous such escalations) as apply to that
escalator. The result being the annual increment in the Base
Price attributable to that escalator. For the purpose of this
calculation the respective portions are:
(a) in the June Quarter 1985:
(i) $0.375 for CPI Escalation
(ii) $1.125 for Mega Escalation
(iii) $1.500 for Fuel Escalation
(b) In latter quarters the June 1985 Base plus escalation
to the quarter of concern.
3. Coln's 4, 6 and 7 are derived for any quarter by adding the
respective cummulative total in the previous quarter to the
increment in the current quarter.
Example
Coln 4, Row 17 = [0.395 + 0.0158] = 0.411
4. Coln 8 = sum of Coln's 4, 6 and 7.
5. Coln 10 = sum of Coln's 8 and 9.
<PAGE>
SCHEDULE E
FUEL ESCALATION FORMULA
1. DATA SOURCE
The following data can be obtained from the Electricity Supply
Association of Australia (ESAA) publication "The Electricity Supply
Industry in Australia" issued in about April each year with data
relating to the previous financial year. This data is available to all
ESAA members, of which NTEC is one, and will be made available to the
producers when it becomes available to NTEC. In the event of the
intended source of data becoming unavailable or any of the bases
therefor being materially altered then in the absence of agreement
between the Purchaser and the Producers jointly the matter shall be
referred to an Independent Expert for determination.
2. EXTENT OF DATA
Data is required to be totalled for each Utility (as the term is used
by ESAA) for each of:
(1) NSW;
(2) QUEENSLAND; and
(3) WESTERN AUSTRALIA
provided that should complete data sets become available for Victora,
and or, South Australia these States should also be incorporated.
3. DATA REQUIRED
The following data is required:-
(a) Income from all sales for each Utility for the relevant
financial year in $M (Table 7, Item 7.7 of ESAA document).
(b) Consumption of electricity for each Utility for the relevant
financial year in million of kWh (Table 6, Item 6.7, of ESAA
document).
(c) The CPI (as herein defined) for the relevant financial year
expressed as a percentage.
4. DERIVATIONS FROM DATA
Step 1: Aggregation
Add each of (a) and (b) in 3 above to produce a three State total
(hereinafter A and B respectively).
<PAGE>
Step 2: Fuel Cost Ratio
The Fuel Cost Ratio (F) for the purpose of calculating the fuel price
escalator shall be 0.24.
Step 3: Average Sale Price
Derive the average sale price of electricity during the year in
cents/kWh by dividing total income from all sales (See 3(a) above) by
consumption (see 3(b) above).
G = A
-
B
Step 4: Annual Percentage Sales Price Movement
Derive the annual percentage change in the sale price of (H)
electricity.
(Gt -G t-1)
H = _________ x 100
Gt-1
where subscript: t refers to the present year
t-1 refers to the previous year
Step 5: CPI - Sale Price Differential
Derive the difference in the annual percentage movement in the sale
price of electricity (see Step 4 above) and the CPI (K) (see 3(c)
above).
K = H - J
where J is the Annual Percentage Movement in the CPI
CPIt - CPIt-1
J = _____________ x 100
CPIt-1
Step 6: Fuel Escalation
Fuel Escalation (X) can now be derived in annual percentage terms as
follows:-
X = K x F
<PAGE>
Step 7: Quarterly Application
Take the 4th root of X (as outlined in Schedule D Table II) to obtain
the quarterly Fuel Escalation - and apply to each quarter of the whole
Contract Year following the date of publication.
<PAGE>
THIS GUARANTEE made the 28th day of June 1985
BETWEEN: NORTHERN TERRITORY OF AUSTRALIA (hereinafter called "the
Territory") of the first part MAGELLAN PETROLEUM (N.T.) PTY.
LTD. of the second part C.D. RESOURCES PTY. LTD. of the third
part FARMOUT DRILLERS N.L. of the fourth part CANSO RESOURCES
LIMITED of the fifth part INTERNATIONAL OIL PROPRIETARY of the
sixth part PANCONTINENTAL PETROLEUM LIMITED of the seventh
part IEDC AUSTRALIA PTY. LIMITED of the eighth part AMADEUS
OIL N.L. of the ninth part AND SOUTHERN ALLOYS VENTURE PTY.
LIMITED of the tenth part (the parties of the second to tenth
parts inclusive hereto are collectively referred to as "the
Producers")
WHEREAS:
A. Each Producer and Gasgo Pty. Limited have contemporaneously herewith
entered into an agreement of even date herewith entitled "Palm Valley
Gas Purchase Agreement". Pursuant to the said Agreement Gasgo Pty.
Limited has agreed to purchase natural gas from each Producer upon and
subject to the terms and conditions therein contained.
B. Each Producer has entered into the said Agreement at the request of the
Territory (which request is testified by the Territory's execution of
this Guarantee) but subject to and in reliance on the Territory's
execution of this Guarantee.
NOW THIS GUARANTEE WITNESSES that in consideration of each Producer entering
into the Gas Purchase Agreement at the request of the Territory and in
consideration of the premises the Territory hereby covenants with each Producer
and it is agreed and declared as follows:
1. DEFINITIONS AND INTERPRETATION
1.1 In this Guarantee, unless contrary intention appears:
(a) "Gas Purchase Agreement" means the Agreement referred to in
Recital A hereof, as the same may from time to time be
amended;
(b) "Purchaser" means Gasgo Pty. Limited and includes its
successors and assigns under the Gas Purchase Agreement;
(c) "Producers" means the parties of the second to tenth parts
inclusive hereto and includes their respective successors and
assigns;
(d) "Producer" means one Producer;
(e) "Territory" means the party of the first part hereto and
includes its successors and assigns;
<PAGE>
(f) "Moneys Hereby Secured" includes any part thereof;
(g) the singular includes the plural and vice versa and a
reference to any gender includes each other gender.
2. GUARANTEE
2.1 The Territory hereby unconditionally and irrevocably guarantees to each
Producer the due and punctual payment of all moneys now or hereafter
owing or payable or to become owing or payable by the Purchaser to the
Producers or to any one or more of them on any account whatsoever under
or by reason of the Gas Purchase Agreement including any moneys that
may become owing or payable to the Producers or to any one or more of
them by the Purchaser by reason of any default on the part of the
Purchaser under the Gas Purchase Agreement, all of which moneys are
intended to be secured by these presents and are hereinafter referred
to as "the Moneys Hereby Secured".
2.2 As a separate and additional obligation hereunder, the Territory hereby
covenants with each Producer that it will at all times procure the due
and punctual performance observance and fulfilment by the Purchaser of
each and all of the duties and obligations of the Purchaser arising now
or hereafter under the Gas Purchase Agreement.
2.3 This Guarantee shall:
(a) be a continuing guarantee and shall not be considered as
discharged by the payment at any time hereafter of any of the
Moneys Hereby Secured or by any settlement of account or by
any other matter or thing whatsoever and shall apply to the
present and any future balance of the Moneys Hereby Secured;
(b) not be adversely affected in any way or discharged by:
(i) the granting to the Purchaser or any other person
of any time, credit, forbearance, indulgence,
consideration or other concession;
(ii) by reason of any transaction or arrangement that may
take place between the Producers or any one or more
of them and the Purchaser or any other person;
(iii) any act omission laches acquiescence delay or mistake
on the part of the Producers or any one or more of
them;
(iv) the liquidation of the Purchaser;
(v) the Producers or any one or more of them becoming a
party to or bound by any compromise, assignment of
property, scheme of arrangement, composition of debts
or scheme of reconstruction by or relating to the
Purchaser or any other person;
<PAGE>
(vi) any default, failure or delay in the performance by
any party to the Gas Purchase Agreement of any of its
obligations under or arising out of the Gas Purchase
Agreement;
(vii) illegality of performance on the part of the
Purchaser;
(viii) any amendment modification or other variation of or
to the Gas Purchase Agreement;
(ix) the Producers or any one or more of them failing or
neglecting to recover by the realisation of any
collateral or other security or otherwise any of the
Moneys Hereby Secured;
(x) the release discharge abandonment or transfer
(whether wholly or partially and with or without
consideration) of any security or judgment now or
hereafter held or recovered by the Producers or any
one or more of them from or against the Purchaser or
any other person;
(xi) any other act event matter or thing whereby the
liability of either the Territory under this
Guarantee or the Purchaser under the Gas Purchase
Agreement would but for this provision have been
affected or discharged; and
(c) shall not be treated as ancillary or collateral to or with any
other obligation howsoever created or arising and in
particular shall not be affected by any other security or
right which the Producers or any one or more of them now
obtain or hold or may hereafter obtain or hold for any
obligation or liability (whether present or future direct or
contingent matured or unmatured joint or several) of the
Purchaser of the Territory to the intent that this Guarantee
shall be enforceable (unless the same shall have been
satisfied according to the terms hereof) notwithstanding that
any other obligation whatsoever arising under any other
security is in any way extinguished or unenforceable for any
reason whatsoever.
2.4 (a) All moneys received by the Producers or any one or more of
them in reduction or satisfaction of the Moneys Hereby Secured
from or on account of the Purchaser (including any dividends
upon the liquidation of the Purchaser) or from the Territory
or from any other person shall be deemed to be payments in
gross and until the whole of the Moneys Hereby Secured have
been satisfied in full, the Territory shall not be entitled on
any grounds whatsoever:
(i) to claim the benefit of any security now or hereafter
held by the Producers or any one or more of them for
the payment of the Moneys Hereby Secured;
<PAGE>
(ii) either directly or indirectly to claim or receive the
benefit of any distribution dividend or payment
arising out of or relating to the liquidation (which
word where used in this Guarantee includes official
management, compromise, arrangement, amalgamation,
reconstruction, winding up and dissolution) of the
Purchaser or of any person liable jointly or
severally with the Purchaser to the Producers or any
one or more of them or liable under any security now
or hereafter held by the Producers or any one or more
of them as security for the Moneys Hereby Secured; or
(iii) in the event of the liquidation of the Purchaser or
any such other person whosoever, to prove or claim in
competition with the Producers or any one or more of
them so as to diminish any distribution dividend or
payment which but for such proof the Producers or any
one or more of them would be entitled to receive
arising out of or relating to such liquidation;
AND the receipt of any distribution dividend or other payment
which a Producer may receive out of or relating to such
liquidation shall not prejudice the rights of that Producer
against the Territory under this Guarantee.
(b) In the event of the liquidation of the Purchaser the Territory
authorises each Producer to prove for all moneys which the
Territory has paid hereunder and to retain and to carry into a
suspense account and appropriate at the discretion of the
Producer any dividends received until the Producer has with
the aid thereof been paid in full in respect of that part of
the Moneys Hereby Secured payable to it PROVIDED THAT any
amount so received by the Producer in excess of such part of
the Moneys Hereby Secured shall be repaid to the Territory.
2.5 Notwithstanding anything contained in this Guarantee and
notwithstanding that the whole or any part of the moneys hereinbefore
described as "the Moneys Hereby Secured" are or may be irrecoverable
from the Purchaser by any Producer (whether by reason of any legal
limitation disability or incapacity of or affecting the Purchaser or by
reason of any other fact or circumstance whatsoever and whether the
transactions or any of them relating to such moneys have been void ab
initio or have been subsequently avoided and whether or not any other
matters or facts relating thereto have been or ought to have been
within the knowledge Producer or any one or more of them) and thereby
such moneys or any part thereof are not recoverable from the Territory
as a surety, then in any such case the Territory hereby as a separate
and additional obligation under this Guarantee indemnifies each such
Producer in resect of such moneys and as a principal debtor agrees with
each such Producer to pay to it a sum equal to the amount of such
moneys as and when the same may become due and payable or would but for
their irrecoverability have become due and payable and the terms of
this Guarantee shall mutatis mutandis apply as far as possible to this
indemnity and the sum of money covered by this indemnity shall be
deemed to part of the Moneys Hereby Secured.
<PAGE>
2.6 A certificate signed by or on behalf of any director or secretary for
the time being of a Producer stating the amount owing to that Producer
under this Guarantee at the date mentioned in such certificate shall
prima facie evidence thereof.
2.7 The Producers or any one or more of them may from time to time at the
request or with the consent of the Purchaser and without any consent by
or notice to the Territory being necessary:
(a) amend or vary or agree to any amendment or variation of the
Gas Purchase Agreement or any other contract or arrangement
now or from time to time hereafter in force between the
Producers or any one or more of them and the Purchaser; and
(b) transact any business with, for or on account of the Purchaser
at the absolute discretion of such Producers.
2.8 As a separate and independent covenant, the Territory will upon demand
by any Producer pay to that Producer ("the Claimant"):
(a) all reasonable costs and expenses of or incidental to the
enforcement of this Guarantee by the Claimant (including legal
costs on a solicitor client basis and all fees charged by
counsel); and
(b) interest on so much of the amount payable hereunder to the
Claimant as becomes merged in any judgment or order at the
rate therein specified or at the Recovery Interest Rate (as
that term is defined in the Gas Purchase Agreement), whichever
shall be the higher.
2.9 The Territory acknowledges that it has not executed this Guarantee as a
result of or by reason of any promise, representation, statement or
information of any nature or kind whatsoever given or offered to it by
or on behalf of the Producers or any one or more of them.
2.10 Notwithstanding any other provision of this Guarantee, nothing herein
shall obligate or be deemed to obligate the Territory to do any act or
pay any monies beyond the extent to which the Purchaser is or may
become obligated under the Gas Purchase Agreement or would have been
obligated under the Gas Purchase Agreement if that Agreement had been
enforceable against the Purchaser in accordance with its terms.
3. FURTHER COVENANTS
3.1 The Territory hereby covenants with each Producer that:
(a) the Purchaser is a corporation duly incorporated and validly
existing under the laws of the Northern Territory of
Australia;
<PAGE>
(b) as at the date of this Guarantee, the Purchaser is wholly
beneficially owned and controlled by the Northern Territory
Electricity Commission, a statutory corporation of the
Territory and or the Territory;
(c) this Guarantee constitutes legally valid and binding
obligations of the Territory enforceable in accordance with
its terms; and
(d) the Gas Purchase Agreement constitutes legally valid and
binding obligations of the Purchaser enforceable in accordance
with its terms.
4. MISCELLANEOUS
4.1 This Guarantee shall be governed by and construed in accordance with
the law for the time being in force in the Northern Territory of
Australia.
4.2 All moneys payable to a Producer under this Guarantee shall be paid to
that Producer at its address for service specified in Clause 4.4 of
this Guarantee or to such other person or corporation and/or at such
other address as the Producer may from time to time notify to the
Territory and shall be paid by bank cheque in the lawful currency of
the Commonwealth of Australia for the time being.
4.3 Any notice demand consent or other communication required to be served
or given in terms of or arising out of this Guarantee:
(a) shall, in order to be valid, be in writing or by telex and in
the case of any such notice demand consent or other
communication to be served on or given to the Territory be
marked "For the urgent attention of the Under-Treasurer,
Northern Territory Treasury" or to such other addressee as may
be notified in writing or by telex by the Territory to each
Producer from time to time;
(b) Shall be deemed to have been duly served on or given to a
party if it is:
(i) left at the address of that party mentioned in Clause
4.4 hereof (or at such other address as may be
notified in writing or by telex by that party to each
other party from time to time); or
(ii) posted by prepaid post in an envelope addressed to
that party at such address; or
(iii) sent by telex to the telex number of that party
mentioned in Clause 4.4 hereof (or such other number
as may be notified by that party as aforesaid);
(c) shall be sufficient if:
(i) executed under the common seal of the party giving or
serving the same; or
<PAGE>
(ii) signed on behalf of the party giving or serving the
same by any attorney director secretary agent or
other duly authorised officer of such party;
(d) shall:
(i) if sent by prepaid post, be received on the date of
its actual receipt;
(ii) if sent by telex, be deemed to be received upon
receipt by the sender of the answerback code and
number of the recipient at the conclusion of the
transmission;
(iii) if delivered by hand, be deemed to be received on the
date of delivery.
4.4 The address of the Territory shall, until otherwise notified pursuant
to the preceding sub-clause, be:
Northern Territory Treasury,
7th Floor,
AMP Building,
Cnr Cavenagh & Knuckey Streets,
DARWIN. NT 5790
Telex: AA85541 NTRES
The address of each Producer shall, until otherwise notified pursuant
to the preceding sub-clause be:
C/- Magellan Petroleum (N.T.) Pty. Ltd.,
8th Floor,
National Australia Bank Building,
420 George Street,
BRISBANE, Qld. 4000
Telex: AA40392
4.5 The Territory shall be responsible for the payment of all stamp duty
payable on this Guarantee. Each party shall bear its own legal costs in
connection with the preparation of this Guarantee.
4.6 This Guarantee shall inure to the benefit of each Producer and its
successors and assigns and shall be binding upon the successors and
assigns of the Territory PROVIDED HOWEVER no assignment by the
Territory of its obligations hereunder or any assumption of such
obligations by another person shall be made without the prior written
consent of each Producer.
<PAGE>
IN WITNESS WHEREOF the parties hereto have executed this Guarantee as a Deed on
the day first abovementioned.
SIGNED SEALED AND DELIVERED by )
THE HONOURABLE IAN LINDSAY )
TUXWORTH Treasurer of the Northern )
Territory of Australia in the presence of: ) /s/ Ian L. Tuxworth
.............................
/s/
.............................
SIGNED SEALED AND DELIVERED by )
MAGELLAN PETROLEUM (N.T.) PTY. LTD. )
by ___________________________ )
its duly appointed Attorney under )
Power of Attorney dated 26th June )
who states that he has no notice )
of revocation of the said power )
in the presence of: ) /s/
.............................
/s/ Hedley Howard
.............................
SIGNED SEALED AND DELIVERED by )
C.D. RESOURCES PTY. LTD. )
by ___________________________ )
its duly appointed Attorney under )
Power of Attorney dated 26th June 1985 )
who states that he has no notice )
of revocation of the said power )
in the presence of: ) /s/
.............................
/s/
.............................
SIGNED SEALED AND DELIVERED by )
FARMOUT DRILLERS N.L. )
by ___________________________ )
its duly appointed Attorney under )
Power of Attorney dated 26/6/85 )
who states that he has no notice )
of revocation of the said power )
in the presence of: ) /s/
.............................
/s/
.............................
<PAGE>
SIGNED SEALED AND DELIVERED by )
CANSO RESOURCES LIMITED )
by ___________________________ )
its duly appointed Attorney under )
Power of Attorney dated 26/6/85 )
who states that he has no notice )
of revocation of the said power )
in the presence of: ) /s/
.............................
/s/
.............................
SIGNED SEALED AND DELIVERED by )
INTERNATIONAL OIL PROPRIETARY )
by K. V. Hiscox )
its duly appointed Attorney under )
Power of Attorney dated 27/6/85 )
who states that he has no notice )
of revocation of the said power )
in the presence of: ) /s/ K. V. Hiscox
.............................
/s/
.............................
SIGNED SEALED AND DELIVERED by )
PANCONTINENTAL PETROLEUM LIMITED )
by Paul John Fuller )
its duly appointed Attorney under )
Power of Attorney dated 25th June 1985 )
who states that he has no notice )
of revocation of the said power )
in the presence of: ) /s/ Paul J. Fuller
.............................
/s/
.............................
SIGNED SEALED AND DELIVERED by )
IEDC AUSTRALIA PTY. LIMITED )
by Brian James Barker )
its duly appointed Attorney under )
Power of Attorney dated 26/6/85 )
who states that he has no notice )
of revocation of the said power )
in the presence of: ) /s/ Brian J. Barker
.............................
/s/
.............................
<PAGE>
SIGNED SEALED AND DELIVERED by )
AMADEUS OIL N.L. )
by Alan Surrey Bogg )
its duly appointed Attorney under )
Power of Attorney dated 24/6/85 )
who states that he has no notice )
of revocation of the said power )
in the presence of: ) /s/ Alan S. Bogg
.............................
/s/
.............................
SIGNED SEALED AND DELIVERED by )
SOUTHERN ALLOYS VENTURE PTY. )
LIMITED by Kerry Josephine Adby )
its duly appointed Attorney under )
Power of Attorney dated 27 June 1985 )
who states that he has no notice )
of revocation of the said power )
in the presence of: ) /s/ Kerry J. Adby
.............................
/s/
.............................
<PAGE>
DEPARTMENT OF LAW
TELEPHONE: CROWN SOLICITOR FOR THE NORTHERN TERRITORY
G.P.O. Box 1722,
TELEX: NTLAW AA 85807 DARWIN, N.T. 5790
TO: Dr. R.C. Madden AND Dr. E.K. Campbell
Under-Treasurer Chairman
Northern Territory Northern Territory
Treasury Electricity Commission
GPO Box 1974 GPO Box 1921
DARWIN NT 5794 DARWIN NT 5794
RE: AMADEUS BASIN GAS - PALM VALLEY GAS PURCHASE
I certify that when executed this day by the Chief Minister of the Northern
Territory the Guarantee by the Northern Territory in respect of obligations of
Gasgo Pty. Limited under the Palm Valley Gas Purchase Agreement will be binding
upon the Northern Territory.
Dated this twenty-eighth day of June 1985
/s/ J.B. O'Rourke
J.B. O'ROURKE
Crown Solicitor
DATED 28TH JUNE, 1985
BETWEEN:
MAGELLAN PETROLEUM (N.T.) PTY. LTD.
of the first part
UNITED OIL & GAS CO. (N.T.) PTY. LTD.
of the second part
CANSO RESOURCES LIMITED
of the third part
MOONIE OIL N.L.
of the fourth part
PETROMIN NO LIABILITY
of the fifth part
TRANSOIL NO LIABILITY
of the sixth part
FARMOUT DRILLERS N.L.
of the seventh part
AND
GASGO PTY. LIMITED
of the eighth part
AND
THE MOONIE OIL COMPANY LIMITED
of the ninth part
MAGELLAN PETROLEUM AUSTRALIA LIMITED
of the tenth part
FLINDERS PETROLEUM N.L.
of the eleventh part
---------------------------------------------
MEREENIE GAS PURCHASE AGREEMENT
---------------------------------------------
--------------------------------------------
CLAYTON UTZ
with Pritchards
SOLICITORS AND ATTORNEYS
SYDNEY OFFICE: MELBOURNE OFFICE: FOR AND IN CONJUNCTION WITH
TOWER BUILDING COLLINS TOWER
AUSTRALIA SQUARE 35 COLLINS STREET J.B. O'Rourke
SYDNEY, NSW MELBOURNE, VIC Crown Solicitor for the
AUSTRALIA AUSTRALIA Northern Territory of Australia,
2nd Floor,
POSTAL ADDRESS: POSTAL ADDRESS: Darwin Plaza Building,
PO BOX H3 31ST LEVEL 41 The Mall,
AUSTRALIA SQUARE 35 COLLINS STREET DARWIN. N.T. 5790.
NSW 2000 MELBOURNE, VIC 3000
AUSTRALIA AUSTRALIA
TELEPHONE: 02 20527 TELEPHONE: 03 63 7971
INTERNATIONAL: INTERNATIONAL:
+61 2 20527 +61 3 63 7971
TELEX: 24033 TELEX: 39326
FAX: G3 2213286 FAX: G2-G3 654 2714
DX 370 SYDNEY DX 30826 MELBOURNE
ELECTRONIC MAIL: ELECTRONIC MAIL:
MINERVA ID58 UTZ002 MINERVA ID 58 UTZ003
<PAGE>
MEREENIE GAS PURCHASE AGREEMENT
THIS AGREEMENT made the 28th day of June 1985 BETWEEN MAGELLAN PETROLEUM (N.T.)
PTY. LTD. of the first part, UNITED OIL & GAS CO. (N.T.) PTY. LTD. of the second
part, CANSO RESOURCES LIMITED of the third part, MOONIE OIL N.L. of the fourth
part, PETROMIN NO LIABILITY of the fifth part, TRANSOIL NO LIABILITY of the
sixth part, FARMOUT DRILLERS N.L. of the seventh part, GASGO PTY. LIMITED of the
eighth part, THE MOONIE OIL COMPANY LIMITED of the ninth part, MAGELLAN
PETROLEUM AUSTRALIA LIMITED of the tenth part and FLINDERS PETROLEUM N.L. of the
eleventh part
WHEREAS:
A. The Producers have formed an unincorporated joint venture to develop
existing and potential reserves of recoverable natural gas from the Gas
Field and each Producer is entitled to receive as its own property and
dispose of a share of natural gas produced from the Gas Field equal to
its Ownership Percentage.
B. The Purchaser is a company the whole of whose share capital is owned by
or on behalf of the Territory.
C. The Purchaser proposes to ensure arrangements for the construction of a
pipeline to transport Gas to Darwin and to other delivery points in the
Territory.
D. The Purchaser proposes to sell Gas to the Pipeline Operator for
transportation through the Pipeline and for re-sale to the Consumers at
the various delivery points for use in the generation of electric power
in gas-fired power stations and for other uses.
E. The Purchaser has accordingly agreed to purchase and each of the
Producers in their Ownership Percentages has severally agreed to sell
Gas on the terms and conditions contained herein.
F. The Purchaser also proposes contemporaneously herewith to enter into a
separate agreement for the purchase of natural gas from the Palm Valley
Producers.
G. Each of the Guarantors has agreed that in consideration of the
Purchaser entering into this Agreement at its request it will guarantee
the obligations under this Agreement of certain of the Producers who
comprise its Associates.
NOW THIS AGREEMENT WITNESSES THAT IT IS HEREBY AGREED as follows:
1.00 DEFINITIONS
1.10 In this Agreement, unless the contrary intention appears:-
"Annual Minimum Quantity" means the quantity set out in Schedule A for
the relevant Contract Year in each case as varied from time to time in
accordance with clauses 2.28, 3.53 or 3.63.
<PAGE>
"Associates" means: (a) in respect of The Moonie Oil Company
Limited - Moonie Oil N.L., Petromin No Liability and Transoil No
Liability, and their respective successors and assigns;
(b) in respect of Magellan Petroleum
Australia Limited - Magellan Petroleum (N.T.) Pty. Ltd. and United Oil
& Gas Co. (N.T.) Pty. Ltd. and their respective successors and assigns,
and
(c) in respect of Flinders Petroleum N.L. -
Canso Resources Limited and Farmout Drillers N.L. and their respective
successors and assigns
"Base Price" means the price calculated in accordance with Schedule D
hereto.
"Commonwealth Imposts" means any Impost of the Commonwealth of
Australia or any authority thereof.
"Consumers" means any of the following:-
(i) NTEC;
(ii) Any agency of the Territory or entity owned or controlled
directly or indirectly by the Territory but not any such
agency or entity whose function is to sell or reticulate gas
to the public;
(iii) Any party to whom the Purchaser may have sold Gas pursuant to
clause 2.28; and
(iv) Such other party as shall be approved by the Producers.
"Contract Price" means the aggregate of the Base Price and the Imposts
Price.
"Contract Year" means a period of twelve (12) consecutive months
beginning and ending at 8.00 am on the 1st of July each year PROVIDED
HOWEVER that if the Date of Initial Delivery is other than 1st July,
then the first Contract Year shall be reduced proportionately so as to
end at 8.00 am on the 1st of July next following the date of Initial
Delivery.
"CPI" means the Consumer Price Index (All Groups) Weighted Average of
Eight Capital Cities published for each Quarter by the Australian
Bureau of Statistics or such alternative index as may be adopted
pursuant to clause 4.40 hereof.
"CPI Escalation" means escalation or de-escalation by a percentage
equal to the whole of the percentage movement in the CPI where such
percentage shall be 2 percent or more above or below the CPI at the end
of the corresponding Quarter in the previous year taking the CPI for
the Quarter ending as at the Development Date as the base and "CPI
Escalated" has a corresponding meaning.
"Cubic Metre of Gas" or "m3" means the amount of Gas which will occupy
a space of one (1) cubic metre when such Gas is at a temperature of
fifteen degrees Celsius and at a pressure of 101.325 kilopascals
absolute.
<PAGE>
"Custody Transfer Area" means the area to be established and fenced by
the Pipeline Operator adjoining the Field Delivery Station and which
shall contain the measuring equipment referred to in clause 6.10.
"Daily Maximum Quantity" means 155% of the Daily Minimum Quantity.
"Daily Minimum Quantity" means the Annual Minimum Quantity for the
relevant Contract Year divided by the number of days in that Contract
Year.
"Daily Peak Demand Quantity" means 176% of the Daily Minimum Quantity.
"Date of Initial Delivery" means the earlier of the following dates:
(a) The date after commissioning of the Pipeline on which the
Producers make the initial delivery of Gas into the inlet
flange of the Pipeline and after which maintain for seven Days
continuously delivery of the Daily Minimum Quantity or such
lesser quantity (if any) as the Purchaser may require during
that time; or
(b) The date of the expiration of 90 Days after the Producers make
the initial delivery of Gas as required by the Purchaser for
commissioning purposes unless at such date the Purchaser can
establish that the Producers are unable to maintain continuous
delivery of the Daily Minimum Quantity.
"Day" means a period of 24 hours commencing and ending at 8.00 am.
"Dedicated Quantity" means natural gas of 66 PJ, subject to variation
pursuant to clauses 3.25(c) and 3.50.
"Development Date" means 31st March, 1985.
"Development Work" means development work carried out by the Producers
within the Gas Field as defined in clause 2.51.
"Excess Gas" has the meaning specified in Schedule D hereto.
"Excess Proven Reserves" means subject to clause 2.25(c) the total
Proven Reserves remaining in the Gas Field after deducting 200% of the
Annual Minimum Quantities still to be supplied pursuant to this
Agreement.
For the purpose of this definition it is acknowledged that it is
paramount that there be no jeopardy to the future supply entitlements
of the Purchaser under this Agreement.
"Field Delivery Station" means those facilities proposed to be
constructed by the Producers in or adjacent to the area of the
Petroleum Lease for delivering Gas into the inlet flange of the
Pipeline.
"Final Contract Years" means the Contract Years numbered 21 to 26
inclusive.
<PAGE>
"Force Majeure" means any event or circumstance not within the control
of a party and which by exercise of due diligence such party is not
reasonably able to prevent or overcome including without limiting the
generality hereof:
(a) Acts of God, including but not limited to epidemics,
landslides, earthquakes, floods and washouts;
(b) Strikes or other industrial disturbances which could not
reasonably be prevented;
(c) Acts of the enemy including but not limited to wars, blockades
or insurrections;
(d) Riots and civil disturbance;
(e) Any direct legislative or administrative interference by the
Government of the Territory or the Government of the
Commonwealth of Australia but in the case of any such
interference by the Territory only insofar as it affects the
Producers;
(f) Hydrate obstructions of wells, lines of pipe or production
facilities; and
(g) Cessation or reduction of production from the Gas Field due to
depletion or exhaustion of Proven Reserves by reason of
recovery of Gas therefrom by the Producers after the date
hereof where that cessation or reduction occurs after delivery
of 47.06 PJ provided that in the case of a reduction of
production the Producers are not at that time supplying
natural gas from the Gas Field to a party other than the
Purchaser.
"Fuel Escalation" means an escalation (but not de-escalation) in
accordance with the formula specified in Schedule E, and "Fuel
Escalated" has a corresponding meaning.
"Gas" means natural gas meeting the quality specifications stated in
Schedule B.
"Gas Delivery System" includes all wells, meters, equipment, facilities
(including the Field Delivery Station), easements, permits and licences
necessary to gather natural gas safely from the Gas Field, separate
liquids therefrom for the purpose of producing Gas, compress and pipe
Gas to the Field Delivery Station, and to test, measure and deliver
such Gas.
"Gas Field" means the natural gas reservoir or series of reservoirs
within the Petroleum Lease.
"Gas Supply Agreements" means the agreements proposed to be entered
into for the purpose of implementing Recital D of this Agreement.
"GJ" means one gigajoule and is equal to one thousand MJ.
<PAGE>
"Gross Heating Value" means the gross or higher heating value expressed
in MJ/m3 produced by the complete combustion of one Cubic Metre of Gas
with air, at a temperature of 15 degrees Celsius and at an absolute
pressure of 101.325 kPa, with the Gas free of all water vapour, the
products of combustion cooled to a temperature of 15 degrees celsius
and the water vapour formed by combustion condensed to the liquid
state.
"Guarantor" means each of The Moonie Oil Company Limited, Magellan
Petroleum Limited and Flinders Petroleum N.L.
"Impost" means any impost deduction or charge which is a cost to a
Producer in respect of the production supply or sale of Gas, and
computed for all purposes hereof on a "per GJ" basis. Without limiting
the generality thereof the term shall include (insofar as they relate
to the production supply or sale of Gas) any rents, royalty, resources
rent tax and similar taxes (notwithstanding that such taxes may be
levied on all or part of the income of a Producer or of income derived
from the Gas Field and from the sale of Gas or be expressed to be
income taxes), levy, excise, severance tax, petroleum lease rental or
pipeline licence fee but does not include any income tax (except to the
extent provided above), sales tax on consumables or equipment or
payroll tax.
"Imposts Price" means any increases in Imposts per GJ recoverable by a
Producer pursuant to clauses 4.50 or 4.60.
"Independent Expert" means an independent expert appointed and acting
in accordance with clause 2.60.
"Joule" or "J" means the amount of work done when the point of
application of a force of one newton is displaced a distance of one
metre in the direction of the force.
"kPa" means one kilopascal and is equal to one thousand pascals
absolute.
"Make-up Gas" means the quantity of Gas determined as set out in clause
4.20.
"103m3" means one thousand Cubic Metres of Gas.
"Mega CPI Escalation" means escalation or de-escalation by a percentage
equal to the part of the percentage movement in the CPI which is
greater than 10 percent above or below the CPI at the end of the
corresponding quarter in the previous year taking the CPI for the
quarter ending as at the Development Date as the base and "Mega CPI
Escalated" has a corresponding meaning PROVIDED ALWAYS that if within 2
years from the date of this Agreement any new general Commonwealth
consumption tax is introduced then in the quarter in which such tax
shall first be charged and in the immediately succeeding quarter, the
figure of 12 percent shall be substituted for the figure of 10 percent
in this definition, and in the next 3 succeeding quarters the CPI at
the end of the corresponding quarter in the previous year shall be
deemed to be increased by 2 percent thereof.
"MJ" means one megajoule and is equal to one million joules.
<PAGE>
"Month" means a period commencing at 8.00 am on the first day of a
calendar month and ending at 8.00 am on the first day of the next
succeeding calendar month.
"Monthly Minimum Quantity" for a Month means the Daily Minimum Quantity
multiplied by the number of Days in that Month.
"NT Imposts" means any Impost of the Territory or any authority
thereof.
"NTEC" means the Northern Territory Electricity Commission or its
successors or permitted assigns.
"Obligation Gas" means the quantity of gas nominated by the Purchaser
for supply during any one Day in accordance with clause 3.23.
"Ownership Percentages" means the respective ownership percentages of
the Producers as set out in Schedule C, as amended from time to time
pursuant to any assignment in accordance with clause 12.00.
"Palm Valley Agreement" means the Gas Purchase Agreement executed
contemporaneously herewith between the Purchaser (as Purchaser) and the
Palm Valley Producers (as the same may be amended from time to time)
pursuant to which the Palm Valley Producers have agreed to supply Gas
to the Purchaser for transportation through the Pipeline.
"Palm Valley Gas" means natural gas the subject of the Palm Valley
Agreement.
"Palm Valley Producers" means Magellan Petroleum (N.T.) Pty. Ltd.,
C.D. Resources Pty. Ltd., Farmout Drillers N.L., Canso Resources
Limited, International Oil Proprietary, Pancontinental Petroleum
Limited, IEDC Australia Pty. Limited, Amadeus Oil N.L. and Southern
Alloys Venture Pty. Limited and includes their respective successors
and assigns under the Palm Valley Agreement.
"Petroleum Act" means the Petroleum (Prospecting and Mining) Act of the
Territory as amended from time to time and includes any replacement or
re-enactment thereof.
"Petroleum Lease" means Petroleum Leases Numbers O.L.4 and O.L.5 held
by the Producers under the Petroleum Act and any substitute or renewal
lease or other rights permitting the production of natural gas from the
area the subject of the Petroleum Lease.
"Pipeline" means the pipeline forming part of the pipeline reticulation
system from the Field Delivery Station to Darwin and all of its
associated apparatus and works which the Purchaser proposes to cause to
be constructed.
"Pipeline Force Majeure" means inability of the Pipeline to transmit
Gas where such inability is not within the control of the Purchaser,
and which the Purchaser by exercise of due diligence is unable to
prevent. It is acknowledged for the purpose of this definition that any
inability of the Consumers to take delivery of Gas from the Pipeline
outlets shall not constitute Pipeline Force Majeure.
<PAGE>
"Pipeline Operator" means such company as shall from time to time
contract with the Purchaser for the purchase of Gas for transmission
through the Pipeline.
"PJ" means one petajoule and is equal to one million GJ.
"Probable Gas" has the meaning specified in Schedule D hereto.
"Producer" means any one of the Producers.
"Producers" means the parties of the first to the seventh parts
inclusive and includes their respective successors and assigns under
this Agreement.
"Proven Reserves" means the estimated quantity of natural gas which
geological and engineering data demonstrate with reasonable certainty
are recoverable in the future under the economic conditions for the
time being prevailing.
"Purchaser" means the party of the eighth part and includes its
successors and permitted assigns under this Agreement.
"Quarter" means a period of three (3) calendar months commencing on 1st
of July or 1st of October or 1st of January or 1st of April and
"Quarterly" has a corresponding meaning.
"Recovery Interest Rate" means a rate of 2% above the arithmetic mean
of the daily authorised dealers published discount rate expressed as a
yield to maturity on 180 day bank endorsed bills of exchange in
Australia over the period of default in respect of which interest is
payable pursuant to clause 7.20.
"Representative" means Moonie Oil or such other company appointed in
its stead pursuant to clause 13.32.
"Schedule A Variation Notice" means a notice given pursuant to clause
3.62.
"Shortfall Gas", "Shortfall Notice" and "Shortfall Period" have the
respective meanings given in clause 3.64.
"Territory" means the Northern Territory of Australia.
"Warranted Quantities" at any time means the Proven Reserves then
warranted by the Producers pursuant to clause 2.21.
"Well" means any well through which natural gas is recovered or deemed
to be recovered from any part of the Gas Field.
<PAGE>
1.20 Terminology used to describe units shall be, unless otherwise stated,
in accordance with Australian Standard AS1000-1979 "The International
System of Units (SI) And Its Application", the Commonwealth "Weights
and Measures (National Standards) Act 1960-1966" and Regulations
thereunder and the Australian Gas Association booklet titled "Metric
Units And Conversion Factors For Use In The Australian Gas Industry".
1.30 The singular number shall include the plural and vice-versa.
1.40 Any reference to time shall be to Central Standard Time.
1.50 The headings in this Agreement are for convenience only and shall not
affect its construction.
1.60 References in this Agreement to "a party", "the parties", "any party"
and the like, shall not be taken to include a reference to a Guarantor
except in clauses 10.10, 11.21, 11.60, 12.40, 13 and 14.
<PAGE>
2.00 PRELIMINARY
2.10 Separate Agreements with Each Producer
2.11 This Agreement shall be construed as a separate agreement between the
Purchaser and each of the Producers for their respective Ownership
Percentages.
2.12 The rights liability and obligations of the Producers hereunder
(including their liability and obligations in respect of any warranty
covenant or undertaking) shall be several and shall be in the
proportions of their respective Ownership Percentages.
2.13 Failure of a Producer to carry out its obligations under this Agreement
shall not release any other Producer, or the Purchaser in respect of
its obligations to any such other Producer, from any of their
respective obligations under this Agreement. No Producer shall be
responsible for the obligations of any other Producer under this
Agreement.
2.20 Gas Reserves
2.21 (a) Subject to paragraph (c) and to clause 3.67 the Producers
warrant to the Purchaser the present existence within the Gas
Field of Proven Reserves of not less than the aggregate of the
Annual Minimum Quantity still to be delivered during the term
of this Agreement.
(b) The remedies of the Purchaser for any breach of this warranty
by the Producers shall be limited to those provided by clauses
3.40 and 10.20 respectively.
(c) The Producers shall not be liable for breach of warranty under
this clause where reserves of natural gas within the Gas Field
are lost destroyed or cease to be recoverable by reason of
Force Majeure.
2.22 The Producers jointly undertake that so long as this Agreement
continues there shall be furnished to the Purchaser at annual intervals
a report by an independent reservoir engineer estimating the Proven
Reserves in the Gas Field and the annual production capacity of the Gas
Field over its life from the then existing Wells.
2.23 So long as this Agreement continues each Producer:
(a) Dedicates and commits exclusively to the fulfilment of its
obligations under this Agreement its interest in that quantity
of natural gas within the Gas Field which is equal to its
Ownership Percentage of the Dedicated Quantity.
<PAGE>
(b) Will not supply sell or use any of the natural gas from the
Gas Field otherwise than for the purposes of performing its
future supply obligations under this Agreement except as
provided in clauses 2.24, 2.25, 2.26 and 2.26A hereof and
except for such gas as may be used or lost in drilling
development, testing, producing, processing, compression and
other similar operations on the Petroleum Lease and/or in
preparing treating or transporting Gas for the purposes of
this Agreement and except for gas which may be unavoidably
lost in operations conducted in accordance with good oilfield
practice.
2.24 In the event that from time to time all or any of the Producers
establish to the reasonable satisfaction of the Purchaser that the
reserves in the Gas Field exceed the quantity sufficient to enable each
Producer to perform its future supply obligations under this Agreement
then:-
(a) the Producers jointly shall have the right to increase their
rate of production from the Gas Field beyond the level
required for the Purchaser's purposes to a level which is
unlikely in the reasonable opinion of the Purchaser to
jeopardise the Purchaser's supply entitlements hereunder; and
(b) each Producer shall have the right to sell its interest in
such increased production other than under this Agreement.
2.25 (a) In the event that any Excess Proven Reserves are established
from time to time by the report of the independent reservoir
engineer required pursuant to clause 2.22 any Producer
subject to paragraph (b) of this clause shall be at liberty to
sell its interest in such Excess Proven Reserves from time to
time other than under this Agreement.
(b) In the event that the Purchaser disputes the report of the
said independent reservoir engineer, the Purchaser shall have
the right of access to all relevant information for the
purpose of reviewing the said report and failing agreement
after such review the dispute shall be determined by an
Independent Expert.
(c) (i) In the event that at any time during the term of this
Agreement any Producer is of the opinion that the
Producers have established their ability to supply
Gas in the contracted quantities on a continuous
basis then it may request the Purchaser to review its
requirements in respect of Excess Proven Reserves and
the Purchaser shall thereupon review the production
record of the Producers and also its said
requirements and may agree to reduce the quantity of
Proven Reserves which constitutes Excess Proven
Reserves.
<PAGE>
(ii) In the event that the Purchaser fails to agree to
reduce the quantity of Proven Reserves which
constitutes Excess Proven Reserves, either to the
Producer's satisfaction or at all, the Producer may
refer the question to an Independent Expert, who
shall review the production record of the Producers,
reach a determination as to the ability of the
Producers to maintain future continuous supply of Gas
in the contracted quantities, and (if appropriate)
require the Purchaser to agree to a new basis for the
calculation of Excess Proven Reserves.
(iii) No request made by a Producer under paragraph (i) of
this sub-clause, nor any determination by an
Independent Expert under paragraph (ii) of this
sub-clause, shall require the Purchaser to agree to
reduce the amount to be deducted from total Proven
Reserves in calculating Excess Proven Reserves below
200% of the Annual Minimum Quantities still to be
supplied pursuant to this Agreement.
2.26 (a) No Producer shall without the prior written consent of the
Purchaser sell or offer to sell any quantity of natural gas
from the Gas Field until it shall have for a period of 30 days
offered that quantity for sale to the Purchaser at the same
price (including provisions for escalation as to price) as it
would be prepared to sell the same to any other party.
(b) If the Purchaser fails or declines to accept the offer within
such 30 days, the Producer shall be at liberty for a period of
180 days thereafter to sell that quantity to another party at
a price not less than that price or on terms or conditions
conferring economic benefits on the Producer over the life of
the contract at least equivalent to that price.
(c) In the event of the Purchaser accepting the offer in respect
of price the Purchaser and the Producer shall negotiate in
good faith the terms and conditions of a purchase contract.
(d) In the event that a contract is not executed by the expiration
of 60 days after acceptance of price (or such longer period as
the parties shall agree upon) further negotiations shall be
abandoned and the Producer shall be at liberty for a period of
180 days thereafter to sell that quantity to another party at
a price not less than that price or on terms or conditions
conferring economic benefits on the Producer over the life of
the contract at least equivalent to that price.
(e) The Purchaser covenants to keep confidential any offer made by
any Producer.
<PAGE>
2.26A. (a) Notwithstanding the provisions of clauses 2.23, 2.24, 2.25 and
2.26 hereof in the event that the Palm Valley Producers shall
have given notice to the Purchaser as contemplated in clause
3.64 hereof of an anticipated failure in delivery of
contracted quantities pursuant to the Palm Valley Agreement
then in the absence of receipt of a Shortfall Notice from the
Purchaser each of the Producers shall be at liberty to supply
to the Purchaser on behalf of the Palm Valley Producers its
Ownership Percentage of the Gas which the Palm Valley
Producers would otherwise fail to deliver; and in so doing a
Producer shall not be in breach of any of the provisions of
the said clauses 2.23, 2.24, 2.25 and 2.26 hereof.
(b) Any such supply of Gas by a Producer on behalf of the Palm
Valley Producers shall be deemed to have been made pursuant to
clause 3.41 (b) of the Palm Valley Agreement and the Producer
shall not be entitled to any payment from the Purchaser in
respect thereof (the intention being that the Producers will
seek payment of an agreed amount from the Palm Valley
Producers).
2.27 (a) The Purchaser shall not sell or offer to sell Gas delivered to
it pursuant to this Agreement except to the Consumers or the
Pipeline Operator or as provided for in clause 2.28.
(b) The Purchaser shall so far as it lies within its reasonable
capacity ensure that Gas delivered to it pursuant to this
Agreement is not sold by the Pipeline Operator to any party
other than a Consumer, or as provided for in clause 2.28, and
is not sold by any Consumer to any party for the purpose of
resale or reticulation to the public.
2.28 (a) The Purchaser may advise the Producers jointly by notice in
writing:
(i) If the Annual Minimum Quantity for the Contract Years
remaining under this Agreement is in excess of the
quantity of Gas required by the Purchaser in those
Contract Years ("the Excess Take or Pay Quantity");
and
(ii) The price at which and the material terms upon which
the Purchaser would be prepared to sell the Excess
Take or Pay Quantity ("the Offered Price and Terms").
(b) The Producers jointly may at their option by notice in writing
to the Purchaser given not later than 90 days after receipt of
a notice provided for in clause 2.28(a) elect to purchase in
their respective Ownership Percentages the Excess Take or Pay
Quantity from the Purchaser upon the Offered Price and Terms.
(c) In the event that the Producers do not jointly exercise the
option provided for in clause 2.28 (b) within the time therein
provided the Purchaser shall be at liberty for a period of 180
days thereafter to sell the Excess Take or Pay Quantity to
another party upon the Offered Price and Terms or on terms
having not less than equivalent economic benefits for the
Purchaser.
<PAGE>
(d) If the Purchaser has made a confirmation pursuant to clause
3.52 then the provisions of this clause 2.28 shall not apply
in respect of that Gas.
2.30 Pipeline
2.31 The Purchaser shall at no cost to the Producers complete all necessary
arrangements to cause to be constructed and commissioned the Pipeline
and the gas fired power station at Darwin by 31st December 1987 in
order to take delivery of all Gas to be purchased under this Agreement
PROVIDED THAT the Purchaser shall have no further obligation under this
clause 2.31 if this Agreement is terminated pursuant to clause 9.30.
2.32 The Purchaser shall give not less than one year's notice to the
Producers jointly of the anticipated date of commencement of
commissioning of the Pipeline.
2.33 The Purchaser shall give further notice thereof to the Producers
jointly at quarterly intervals thereafter until commissioning actually
commences.
2.34 At or prior to the giving of the notice provided for in clause 2.32 the
Purchaser shall give notice to the Producers jointly of the precise
location at the existing plant or some other appropriate point in or
adjacent to the Petroleum Lease at which the inlet flange of the
Pipeline will be constructed.
2.40 Gas Delivery System
2.41 Forthwith upon receipt of the notice from the Purchaser provided for in
clause 2.32 the Producers jointly undertake that they will proceed with
due diligence to render the Gas Field suitable for routine production
and install the Gas Delivery System in such manner as to ensure the
continuous supply of Gas in accordance with this Agreement.
2.42 The Purchaser shall have the right to inspect the working drawings of
any aspect of the Gas Delivery System and to inspect the said system
during and after construction.
2.43 The Producers jointly undertake that they will insure or cause to be
insured the Gas Delivery System in adequate amounts for all usual
insurable risks and conditions in accordance with good oil field
practice both during and after construction and shall on demand produce
such policies for inspection by the Purchaser.
2.44 From the date of commencement of commissioning of the Pipeline each of
the Producers shall sell to the Purchaser its Ownership Percentage of,
and the Purchaser shall purchase, Gas required by the Purchaser for
commissioning purposes.
<PAGE>
2.50 Development Work
2.51 (a) Subject to the provisions of this clause the Producers jointly
undertake that they will from time to time during the term of
this Agreement duly carry out in accordance with good oil
field practice such work ("Development Work") as is necessary
for the development of the Gas Field to ensure that the Gas
Delivery System will have the delivery capacity and will be
able to deliver to the Purchaser on any Day during the term of
this Agreement the maximum quantity of Gas which the Purchaser
is entitled pursuant to clause 3.23 to nominate for delivery
on any Day, namely the Daily Peak Demand Quantity but ignoring
in the absence of a Schedule A Variation Notice any possible
increase in such Daily Peak Demand Quantity which may result
from such a Notice.
(b) The Gas Delivery System shall have sufficient capacity in
accordance with good oil field practice to deliver to the
Purchaser the Daily Peak Demand Quantity on any Day but
ignoring in the absence of a Schedule A Variation Notice any
possible increase in such Daily Peak Demand Quantity which may
result from such a Notice.
(c) The Purchaser, having particular regard to the fact that Gas
is to be supplied under this Agreement for the purpose of
generating electric power for public consumption, acknowledges
the need for the Gas Delivery System to have excess or
redundant capacity.
(d) The type, size, location and all other matters relevant to the
Gas Delivery System shall be as determined by the Producers
jointly after consultation with the Purchaser.
2.60 Independent Expert
(a) For the purposes of this Agreement an Independent Expert shall
be an expert in the field in question agreed by the parties or
in the absence of agreement determined by the Chairman for the
time being of the Australian Petroleum Exploration Association
(or its successor) or his nominee on the application of either
party with notice to the other.
(b) An Independent Expert shall act as an expert and not as an
arbitrator.
(c) An Independent Expert shall furnish with all reasonable
expedition a certificate as to his decision on any matter in
dispute between the parties and such decision shall be final
and binding.
(d) Each party shall have the right to make written submissions to
an Independent Expert, to receive copies of each other's
submissions and to reply thereto, such right to be exercised
promptly.
(e) The costs of an Independent Expert shall be borne as to one
half by the Purchaser and as to the remaining half by the
Producers in proportion to their respective Ownership
Percentages.
<PAGE>
3.00 PURCHASE AND SALE OF GAS
3.10 Term of Agreement
This Agreement shall continue in effect until the expiration of
Twenty-five (25) years from the Date of Initial Delivery (but subject
to clause 4.20(b)) or until the Dedicated Quantity of Gas shall have
been delivered to the Purchaser whichever shall be the earlier.
3.20 Quantity of Gas
3.21 (a) Upon and subject to the terms and conditions contained in this
Agreement in each Month of each Contract Year each of the
Producers severally agrees to sell and deliver in each Month
of each Contract Year:
(i) its Ownership Percentage of the Monthly Minimum
Quantity of Gas;
(ii) its Ownership Percentage of such additional Gas (not
being Gas committed to other contracts in any manner
permitted by the terms hereof) as the Purchaser may
require under clauses 3.22 and 3.24, and
(iii) its share of Default Gas due under clause 3.47,
and upon and subject to the terms and conditions contained in
this Agreement the Purchaser agrees to purchase and take
delivery of the same.
(b) In each Month of each Contract Year the Purchaser's obligation
to purchase the Monthly Minimum Quantity for that Month shall
be reduced by the aggregate of:
(i) any portion of the Monthly Minimum Quantity not
tendered for delivery in that Month whether by reason
of permitted interruption pursuant to clause 3.33 or
pursuant to clause 3.66 or otherwise;
(ii) any portion of the Monthly Minimum Quantity which the
Purchaser has been excused from accepting:
(A) by Force Majeure affecting the Producers; or
(B) by Pipeline Force Majeure.
(iii) all excess quantities which the Purchaser is entitled
to credit against the Monthly Minimum Quantity for
that Month pursuant to clause 3.25 (that is, not
exceeding one half of the Monthly Minimum Quantity).
(c) If in any Month the Purchaser fails to take the Monthly
Minimum Quantity reduced if applicable pursuant to paragraph
(b) the Purchaser shall pay the Contract Price for the
quantity not so taken as if the same had been delivered during
that Month subject always to refund if the Gas Field becomes
depleted in accordance with clause 4.30.
<PAGE>
3.22 Subject to clause 3.24 and to any interruptions under clause 3.33,
throughout the term of this Agreement from the Date of Initial Delivery
Gas shall be delivered to the Purchaser on each Day at the rate
required by the Purchaser up the Daily Peak Demand Quantity.
3.23 The following nomination procedures shall be followed:
(a) The Purchaser may on not more than two occasions during a Day
nominate:
(i) the rate at which delivery of Gas is required (not
exceeding the quantities provided for in clause 3.22)
and not in any event exceeding the quantity which on
that Day the Purchaser is entitled to have accepted
for transmission through the Pipeline and which the
Pipeline is capable of accepting on that Day; and
(ii) the Day and hour when such nomination shall take
effect not being less than four hours from the time
of nomination,
the parties shall agree on more frequent nomination procedures
and shorter nomination times under paragraph (ii) in the event
that the Gas Delivery System is automated or for any other
reason is able to accommodate such changes.
(b) The total quantity of Gas which would be delivered by all
Producers during any Day if delivery was to occur at the
nominated rate or rates shall constitute Obligation Gas.
(c) All nominations may be made by telephone but shall be
confirmed by written notification within 24 hours.
(d) Delivery shall be maintained at the rate specified in the
Purchaser's most recent nomination until superseded by a later
nomination.
(e) The Purchaser shall prior to the commencement of every
Contract Year give notice to the Producers jointly of:
(i) Its likely annual requirements of Gas for the next
five Contract Years;
(ii) Its likely Monthly requirements of Gas for the next
twelve Months.
(f) The Purchaser shall prior to the commencement of each Month
give notice to the Producers jointly of its likely daily
requirements of Gas for that Month.
<PAGE>
3.24 If on any Day or Days the Purchaser requires amounts of Gas at a rate
in excess of the Daily Peak Demand Quantity it may request by notice
given to the Producers jointly that deliveries be made at such rate and
each Producer will deliver its Ownership Percentage of Gas at such rate
PROVIDED HOWEVER that if the Producers are unable to do so having
regard to the capacity of the then existing Gas Delivery System and
their obligations under other gas sales contracts entered into in
accordance with this Agreement it shall notify such inability to the
Purchaser and shall not be obliged to deliver Gas in excess of its
Ownership Percentage of the Daily Peak Demand Quantity.
3.25 (a) In the event that in any Month of any Contract Year the
Purchaser purchases and takes Gas in excess of the Monthly
Minimum Quantity less any increase therein effected pursuant
to a Shortfall Notice plus all Make-up Gas accumulated up to
and including that Month, such excess shall be carried forward
and credited against the Purchaser's subsequent commitments to
purchase and take the Monthly Minimum Quantity.
(b) No credit pursuant to paragraph (a) shall reduce the
Purchaser's commitments to purchase and take below one half of
the Monthly Minimum Quantity in any Month. Any credit
remaining after any reduction to such level shall be carried
forward as a credit in a subsequent month or months.
(c) If by the application of a credit pursuant to paragraph (a)
the Purchaser in any Month shall purchase and take less than
the Monthly Minimum Quantity in that Month then the quantity
of Gas equivalent to the difference between the Monthly
Minimum Quantity in that Month and the quantity actually
purchased and taken by the Purchaser in that Month shall at
the option of the Producers jointly be debited against the
Dedicated Quantity.
3.30 Continuity of Supply
3.31 It is an essential term of this Agreement that supply of Gas in
accordance with this Agreement shall commence at the time of
commissioning of the Pipeline as notified pursuant to clause 2.30.
3.32 Subject to the terms of this Agreement each Producer undertakes that it
will throughout the term of this Agreement maintain continuity of
supply to the Purchaser at the inlet flange of the Pipeline of its
Ownership Percentage of the Purchaser's requirements of Gas in
accordance with this Agreement.
3.33 The Producers jointly may nevertheless interrupt supply to perform
reservoir tests and evaluations in accordance with and subject to the
following limitations and procedures:
(a) There shall be not more than 6 occasions of interruption in
any Contract Year and the total duration of such interruptions
shall not exceed 144 hours in any Contract Year.
<PAGE>
(b) The dates and times chosen for testing shall be arranged with
the Purchaser and with the Pipeline Operator and with the Palm
Valley Producers as far as possible in advance and shall
always unless otherwise agreed correspond with periods of low
demand for electricity and shall not unless otherwise agreed
correspond with periods of interruption under the Palm Valley
Agreement.
(c) The Producers jointly shall be allowed additional
interruptions for unforeseen and unscheduled events (not
constituting Force Majeure) not exceeding a total of
forty-eight (48) hours in each year.
(d) In the event of any interruption in transmission through the
Pipeline or cessation of electricity production at any of the
power stations the Purchaser may notify the Producers jointly
and the Producers jointly undertake to use their best
endeavours to carry out testing during such interruptions in
lieu of those provided for in this clause.
3.34 Whenever a Producer becomes aware that it cannot or may become unable
to maintain continuity of supply in accordance with this Agreement it
shall forthwith advise the Purchaser and the Palm Valley Producers of
that fact so as to enable the Purchaser at the earliest possible time
to make arrangements for purchase of Gas from the Palm Valley
Producers.
3.40 Failure to Supply
3.41 In the event that for any reason other than Force Majeure or permitted
interruptions under clause 3.33 a Producer fails to deliver its
Ownership Percentage of the full amount of Obligation Gas on any Day
then that Producer shall be deemed to have made default in delivery of
the quantity of Gas equivalent to its Ownership Percentage of the
quantity of Obligation Gas on that Day minus the quantity of Gas
actually delivered on that Day by the Defaulting Producer ("Default
Gas") and the following provisions of this clause 3.40 shall apply
PROVIDED THAT the Defaulting Producer shall be deemed not to have made
default in delivery as aforesaid if:
(a) (i) such failure does not exceed two continuous Days;
(ii) the Defaulting Producer delivers not less than its
Ownership Percentage of the Daily Minimum Quantity on
that Day; and
(iii) the Defaulting Producer delivers within the following
two days an additional quantity of Gas equivalent to
the quantity of Default Gas.
or
(b) the Defaulting Producer delivers or procures the delivery of
Gas or natural gas with specifications to which the Purchaser
has agreed from a source other than from the Petroleum Lease
to the Field Delivery Station or any other field delivery
station linked to the Pipeline and the Defaulting Producer
shall be duly paid the Contract Price for any such gas.
<PAGE>
or
(c) clause 3.66 operates to relieve the Defaulting Producer of a
default.
3.42 Upon a Defaulting Producer making default in delivery as aforesaid the
Defaulting Producer shall have the opportunity to supply to the
Consumers at their various points of consumption other energy in a form
compatible with the power generation equipment of NTEC and having an
energy content in whole or in part equivalent to the Default Gas. Any
such other energy shall be supplied at the cost and risk of the
Defaulting Producer without charge to the Consumers, and the Purchaser
shall duly pay for such other energy so supplied the Contract Price for
Gas having an energy content equivalent thereto.
3.43 If the Defaulting Producer shall have made default in delivery as
aforesaid and if that Producer shall not have delivered other energy in
exercise of its right under clause 3.42 then the Defaulting Producer
shall subject to clause 3.43A promptly pay and reimburse to the
Purchaser by way of liquidated damages the amount (if any) by which the
Delivered Cost of Substitute Energy exceeds what would have been the
Contract Price of an amount of Obligation Gas deliverable by the
Defaulting Producer having an energy value equivalent to the Substitute
Energy but not exceeding the energy value of the Default Gas provided
that such Substitute Energy shall be obtained as far as practicable in
the circumstances at the least cost.
For the purpose of this clause:
(a) The term "Delivered Cost" shall mean the unit cost actually
incurred by NTEC or which would have been incurred by NTEC had
it been the Consumer in relation to the relevant Substitute
Energy; the cost actually incurred by any other Consumer
(whether greater or smaller) shall be irrelevant;
(b) The term "Substitute Energy" shall mean the total quantity of
energy actually consumed by all Consumers at their various
points of consumption for the purpose of maintaining their
power generation or other operations as a result of the
Defaulting Producer having made default in delivery as
aforesaid.
(c) If any Substitute Energy is held in stock by the Consumers it
shall be costed on a replacement basis from the Consumers'
inventory at the relevant point of consumption.
3.43A Where on any Day the amount of Obligation Gas exceeds the Daily Maximum
Quantity (the difference being hereinafter called "the Excess Amount")
then the Defaulting Producer's obligation to pay liquidated damages in
regard to such Excess Amount under clause 3.43 shall be reduced by 90%.
3.44 The Purchaser shall at the request of any Producer permit a registered
company auditor nominated by that Producer to have access to such of
the books and records of the Purchaser as may be necessary to check any
claims by the Purchaser pursuant to clause 3.43.
<PAGE>
3.45 Save as provided in this clause 3.40 no Producer shall be liable to the
Purchaser or any of the Consumers (and the Purchaser shall indemnify
and keep indemnified each Producer against any such liability) for any
other or consequential loss or damage resulting from the failure of a
Producer to supply its Ownership Percentage of any Obligation Gas
during the term of the agreement including inability to generate
electricity loss of electricity supply or loss of profits. No Producer
shall in any event be liable for any liability incurred by the
Purchaser under the Gas Supply Agreements.
3.46 It shall be no defence to any action by the Purchaser for recovery of
damages pursuant to clause 3.43 that the Purchaser shall not have
personally incurred the cost of the Substitute Energy where such
Substitute Energy has been acquired by the Consumers or any of them.
3.47 If a Producer becomes a Defaulting Producer under this clause each
other Producer shall be obliged to deliver each Day on the terms and
conditions herein contained a quantity of Gas equal to the proportion
of Default Gas which its Ownership Percentage bears to the aggregate
Ownership Percentages of all Producers other than the Defaulting
Producer.
3.50 The Final Contract Years
3.51 A Producer ("the Notifying Producer") may at any time prior to 1st
January in the 20th Contract Year give notice to the Purchaser that it
desires to sell to a third party natural gas from the Gas Field which
but for this clause it would be required to sell and the Purchaser
would be obliged to purchase in the Contract Years numbered 21 to 26
inclusive ("the Final Contract Years").
3.52 Except in Contract Years 1 to 10 inclusive (during which period this
clause 3.52 shall not apply) the Purchaser may after receipt of such
notice give notice to the Notifying Producer affirming this Agreement
in respect of the Final Contract Years, in which case this Agreement
(so far as it is a separate agreement with the Notifying Producer)
shall continue in full force and effect according to its terms and the
notice given pursuant to Clause 3.51 shall be of no force or effect.
3.53 Forthwith upon receipt of any notice from a Notifying Producer given in
Contract Years 1 to 10 pursuant to clause 3.51, or in any subsequent
Contract Year if the Purchaser fails to give notice to a Notifying
Producer pursuant to Clause 3.52 within sixty (60) days after receipt
of that Producer's notice under Clause 3.51, then:-
(a) The Notifying Producer shall have no obligation to deliver any
Gas in the Final Contract Years and Schedule A hereto shall
ipso facto be deemed to be amended by deleting all references
to the Final Contract Years and all references in this
Agreement to Annual Minimum Quantities, Monthly Minimum
Quantities and the like shall in respect of the Notifying
Producer be read down accordingly
(b) the Notifying Producer may sell to a third party the Gas which
it is no longer obliged to deliver to the Purchaser in the
Final Contract Years
<PAGE>
(c) the Dedicated Quantity shall be reduced by the Notifying
Producer's Ownership Percentage of 37.5 PJ, and
(d) in all other respects this Agreement shall continue in full
force and effect.
(e) The Purchaser may by notice to each Producer other than the
Notifying Producer amend this Agreement (so far as it relates
to each such other Producer) in the same respects (mutatis
mutandis) as provided in paragraphs (a) and (c) above, and
paragraphs (b) and (d) above shall also apply (mutatis
mutandis) in respect of each such other Producer.
3.60 Failure of Delivery under the Palm Valley Agreement
3.61 The Producers, having regard to the fact that natural gas is to be
supplied under both this Agreement and the Palm Valley Agreement for
the purpose of generating electric power for public consumption,
jointly acknowledge that the Purchaser requires continuous delivery of
the Gas the subject of each such Agreement according to their
respective terms.
3.62 If the Palm Valley Agreement shall at any time be terminated by either
the Purchaser or the Palm Valley Producers then the Purchaser may give
notice to the Producers jointly of such termination (a "Schedule A
Variation Notice") which shall specify that the Purchaser requires each
Producer to supply to the Purchaser upon and subject to the terms and
conditions contained in this Agreement its Ownership Percentage of the
whole or any part of the natural gas to which the Purchaser would have
become entitled to delivery under the Palm Valley Agreement, and in
particular shall specify:-
(a) in Part A thereof in respect of each whole remaining Contract
Year an amended Annual Minimum Quantity being the Annual
Minimum Quantity specified in Schedule A increased by the
whole or any part of the relevant Annual Minimum Quantity
specified in Schedule A to the Palm Valley Agreement for that
Contract Year and;
(b) in Part B thereof in respect of each remaining whole Month of
the Contract Year current at the time of such notice, an
amended Monthly Minimum Quantity being the Monthly Minimum
Quantity applicable under this Agreement increased by the
whole or any part of the relevant Monthly Minimum Quantity
applicable under the Palm Valley Agreement; and
(c) in Part C thereof, in respect of the period to the end of the
then current Month, the amount of additional Gas which the
Purchaser requires to be delivered on a daily basis until the
end of such Month.
3.63 As from the date of receipt by the Producers of a Schedule A Variation
Notice:-
(a) Schedule A shall forthwith be varied in the manner specified
in Part A of such Notice with effect from the commencement of
the next succeeding Contract Year;
<PAGE>
(b) the Monthly Minimum Quantity applicable for each succeeding
Month of the current Contract Year shall be forthwith varied
in the manner specified in Part B of such Notice with effect
from the commencement of the next succeeding Month, and
(c) the Daily Minimum Quantity of Gas for each remaining Day of
the current Month shall be increased in the manner specified
in Part C of the said Notice with effect from the next
succeeding day
but subject always to clauses 3.66 and 3.67.
3.64 If from time to time or at any time during the term of the Palm Valley
Agreement the Palm Valley Producers fail to deliver contracted
quantities of Palm Valley Gas or give notice to the Purchaser of an
anticipated failure in delivery of contracted quantities, then provided
the Purchaser has not in respect of such failure delivered a Schedule A
Variation Notice the Purchaser may give notice to the Producers jointly
under this Clause ("a Shortfall Notice") which shall specify:
(a) the nature of the delivery failure or anticipated failure
under the Palm Valley Agreement;
(b) the aggregate quantity of Gas which the Purchaser requires
each Day to be delivered by the Producers upon and subject to
the terms and conditions contained in this Agreement in
substitution for Palm Valley Gas ("Shortfall Gas") and
(c) the period during which Shortfall Gas is likely to be required
by the Purchaser ("Shortfall Period").
3.65 Upon receipt of a Shortfall Notice the Daily Minimum Quantity for each
Day of the Shortfall Period shall be ipso facto increased by the daily
quantity of Shortfall Gas specified as aforesaid, but subject always to
clause 3.66 hereof.
3.66 (a) If the Producers are or will be unable despite their best
endeavours but having regard to good oil field practice to
supply upon and subject to the terms and conditions herein
contained any quantity of the additional Gas required to be
delivered by a Schedule A Variation Notice or a Shortfall
Notice then they shall forthwith jointly give notice thereof
to the Purchaser and shall specify therein the extent to which
and period during which they expect to be unable to supply the
required quantities, the reasons therefor, and the additional
Development Work which in their opinion would be necessary in
order to meet the Purchaser's requirements.
(b) Upon receipt by the Purchaser of a notice given pursuant to
paragraph (a) of this clause the Purchaser may either:
(i) accept the Producers' inability to supply the
additional Gas specified in which case paragraph (f)
of this clause shall apply, or
<PAGE>
(ii) require the Producers jointly to proceed with the
additional Development Work specified in the said
notice, in which case paragraph (e) of this clause
shall apply, or
(iii) refer to an Independent Expert the question of the
Producers' inability to supply or the extent (if any)
of the Development Work necessary to meet the
Purchaser's requirements.
(c) Upon any reference pursuant to paragraph (b) of this clause
the Independent Expert shall certify as to:
(i) whether the Producers ought in all the circumstances
(including without limiting the generality thereof
the capacity of the existing Gas Delivery System and
their obligations under other gas sales contracts
entered into in accordance with this Agreement) be
excused from their respective liabilities for such
non-delivery or any part thereof and
(ii) the nature and extent of the additional Development
Work (if any) which would be necessary to meet the
Purchaser's requirements.
(d) Where the Independent Expert certifies that additional
Development Work is necessary to meet the Purchaser's
requirements the Purchaser may either
(i) require the Producers jointly to proceed with such
additional Development Work in which case paragraph
(e) of this clause shall apply, or
(ii) accept the Producers' inability to supply in which
case paragraph (f) of this clause shall apply.
(e) Where pursuant to this clause the Purchaser requires the
Producers jointly to proceed with additional Development Work
then PROVIDED the parties first agree on arrangements for the
recoupment by each Producer of some or all of the costs
thereof, and upon and subject to the terms so agreed, the
Producers jointly undertake that they will proceed with all
expedition to carry out the same but in absence of such
agreement as aforesaid paragraph (f) of this clause shall
apply.
(f) Where and to the extent that pursuant to this clause the
Purchaser accepts or an Independent Expert certifies that the
Producers are unable to supply any part of the additional Gas
requested then no Producer shall be deemed to have made
default in delivery of such Gas and the Daily Minimum Quantity
and Monthly Minimum Quantity for the period in question shall
be reduced accordingly.
3.67 Notwithstanding the foregoing provisions of this clause 3.60 no
Producer shall be obliged to supply Gas pursuant to clauses 3.62 and
3.63 to the extent that such supply would reduce the Proven Reserves of
the Gas Field below the Warranted Quantities unless and until the
Purchaser shall first agree in writing that the Warranted Quantities
shall be reduced to the resulting Proven Reserves.
<PAGE>
4.00 PRICE
Contract Price
4.10 The price payable by the Purchaser to each Producer for Gas delivered
under this Agreement by that Producer shall be the Contract Price.
4.20 Make-Up Gas
(a) If the Purchaser has paid for a quantity not taken in a Month
("the Debit Month") the Purchaser may in any subsequent Month
("Credit Months") after it has taken the Monthly Minimum
Quantity as reduced in accordance with clause 3.21(b) for the
relevant Month take free of charge except for payment of the
difference if any in the Contract Price in the relevant Credit
Month and Debit Month a quantity of Gas (hereinafter called
"Make-up Gas") up to the quantity so paid for in the Debit
Month PROVIDED always that Make-up Gas in respect of any one
Debit Month shall not be taken before available balances in
all previous Debit Months have been made taken.
(b) Notwithstanding clause 3.10 but subject to clauses 10.20 and
10.30, this Agreement shall for purposes of this clause remain
on foot beyond 25 years for a period of not more than 5 years
but not beyond delivery of the Dedicated Quantity, until such
time as the Purchaser shall have taken delivery of all Make-up
Gas to which it is entitled, and where (but for this sub-
clause) this Agreement would otherwise be at an end paragraph
(a) shall apply on the basis that the Purchaser shall in any
Month be entitled to take Make-up Gas notwithstanding that no
Minimum Monthly Quantity applies for the Month, PROVIDED
ALWAYS that the Purchaser's rights under this sub-clause shall
be suspended for any period during which natural gas from the
Gas Field is not being supplied either to the Purchaser
(pursuant to a renewal or replacement agreement) or any other
party but the period of 5 years referred to in this paragraph
(b) shall be extended by the period of any such suspension.
(c) To the extent, if any, to which the Contract Price in a Credit
Month is to be taken into account under this clause then such
Contract Price shall be the price applicable in that Month for
Probable Gas, or which would have been applicable in that
Month if the differential prices for Probably Gas and Excess
Gas continued to apply after Contract Year 21.
4.30 Refund if Gas Field Depleted
If at any time the report of the independent reservoir engineer
pursuant to clause 2.22 or any other report of a reservoir engineer
acceptable to the Purchaser and the Producers establishes that Proven
Reserves in the Gas Field together with Proven Reserves in an Alternate
Gas Field (if any) are less than those necessary for the delivery of
the remaining Gas which is required to be delivered under this
Agreement (that is, less than the lesser of:-
<PAGE>
(a) the balance of the Dedicated Quantity remaining to be
delivered or
(b) the aggregate of the remaining Annual Minimum Quantities plus
Make-up Gas)
then the Purchaser shall be entitled to have delivered to it to the
extent to the deficiency of Proven Reserves Make-up Gas in priority to
any Annual Minimum Quantities. To the extent that it appears that the
Purchaser will not thereby receive any quantity of Make-up Gas a
Producer shall forthwith upon demand repay to the Purchaser in cash all
payments made to it in accordance with paragraph (c) of clause 3.21 in
respect of such amount plus interest on all such payments from the
respective dates of payment at the same rate as Recovery Interest.
For the purposes of this clause:
(i) "Alternate Gas Field" means a gas field (other than the Gas
Field) from which the Producers shall be entitled and are
capable of supplying Gas for the purposes of this Agreement.
(ii) "Proven Reserves in an Alternate Gas Field" means the quantity
of Proven Reserves in an Alternate Gas Field which are at that
time dedicated and committed for the exclusive purpose of
supplying Gas under this Agreement.
(iii) To the extent that any payments by the Purchaser under clause
3.21(c) have been made at the Contract Price applicable to
Probable Gas all repayments by a Producer under this clause
shall be calculated as if the Purchaser had made such payments
at the Contract Price applicable to Excess Gas.
4.40 Consumer Price Index
4.41 In the event that the CPI shall be discontinued or modified the parties
shall request the Australian Bureau of Statistics to provide figures or
indices which shall give an equivalent comparison to that provided by
the CPI.
4.42 If the parties are unable to obtain from the Australian Bureau of
Statistics figures or indices which given an equivalent comparison to
that provided by the said index and are unable to agree between
themselves as to such figures or indices either the Producers jointly
or the Purchaser may request the President for the time being of the
Institute of Chartered Accountants in Australia or his nominee to
provide at each review date figures or indices which give an equivalent
comparison to that contemplated by the CPI and such figures or indices
shall then for the purposes of this Agreement be deemed to be the CPI.
4.50 Increase in Commonwealth Imposts
(a) For the purpose of this Clause the Base Level of Imposts means
the aggregate of N. T. Imposts and Commonwealth Imposts as at
the Development Date.
<PAGE>
(b) If any increase of Commonwealth Imposts has the effect of
increasing the aggregate of N.T. Imposts and Commonwealth
Imposts to 150% or more of the Base Level of Imposts then each
of the Producers shall be entitled to recover as Imposts Price
in respect of Gas delivered by it any part of that increase
and the amount of any subsequent increase of Commonwealth
Imposts which has the effect of increasing the aggregate of
N.T. Imposts and Commonwealth Imposts beyond 150% of the Base
Level of Imposts.
4.60 Increase in N.T. Imposts
4.61 (a) For the purpose of this clause the Base Level of Imposts means
the aggregate of N.T. Imposts and Commonwealth Imposts as at
the later of the Development Date or the Date of Last Review.
(b) If any increase or increases of N.T. Imposts has the effect of
increasing the aggregate of N.T. Imposts and Commonwealth
Imposts to 110% or more of the Base Level of Imposts then each
of the Producers shall be entitled to recover as Imposts Price
in respect of Gas delivered by it the whole of such increase
or increases of N.T. Imposts which since the Development Date
or the Date of Last Review (whichever is applicable) together
shall have had the effect of so increasing the aggregate of
the N.T. Imposts and the Commonwealth imposts. The "Date of
Last Review" shall mean the date on which a Producer last
became entitled to recover increases in imposts pursuant to
this clause.
<PAGE>
5.00 ADJUSTMENT OF GAS TO SPECIFICATION
5.10 Rights of Purchaser
5.11 Without prejudice to any other rights or remedies of the
Purchaser against a Producer for losses incurred, in the event
that Gas tendered for delivery hereunder by any Producer (a
"defaulting Producer") fails to meet any of the specifications
set forth in Schedule B:-
(a) The Purchaser shall have the right to refuse to
accept further deliveries from the defaulting
Producer until such failure is rectified, and that
Producer shall become liable for the cost of
alternative fuel supply in accordance with clause
3.40. The Purchaser shall forthwith notify such
refusal by telephone to the Producers jointly and
shall confirm the same by written notification within
24 hours, specifying the nature of the deficiency.
(b) The Purchaser may knowingly or unknowingly accept
such Gas and may install, operate and maintain such
facilities as may be required to cause such Gas to
meet such specifications in which case the Purchaser
shall have the right to recover from the defaulting
Producer all costs incidental thereto, including fuel
supply damages, depreciation, overhead and costs of
capital all of which may be deducted from sums
payable by the Purchaser to the defaulting Producer
hereunder.
5.12 Without prejudice to any other rights or remedies of the
Purchaser against the defaulting Producer for losses incurred
in the event that Gas supplied fails to achieve a minimum
Gross Heating Value of 36MJ/m3, the defaulting Producer shall
compensate the Purchaser for all additional costs payable by
the Purchaser associated with the movement of the additional
volumes of Gas through the Pipeline required to achieve the
energy equivalence of Gas rated at 36MJ/m3 over the period of
delivery of the specification breach. Any statement or
calculation of such costs by the Purchaser shall be prima
facie evidence thereof.
5.13 It shall be no defence to any action by the Purchaser for
recovery of costs pursuant to clauses 5.11 and 5.12 that the
Purchaser shall not have personally incurred such costs or
shall be entitled to recoup such costs from the Consumers.
5.20 Removal of Constituents
So long as the Gas remains within specification, the Producers jointly
may, prior to delivery thereof or otherwise as the Purchaser may agree,
submit such Gas to any process the Producers jointly desire for the
removal of constituents or elements therein other than for the removal
of methane (except where methane removal is an unavoidable consequence
of the removal of other constituents). Such separate constituents or
elements will remain the property of the Producers in their Ownership
Percentages.
<PAGE>
5.30 Quality Tests
The Purchaser and the Producers jointly shall agree upon reasonable
methods and procedures and determine the instruments to be used for
making tests to determine whether Gas conforms to the specifications
set forth in Schedule B.
If the parties are unable to agree upon such procedures any party may
refer the question for determination by an Independent Expert.
<PAGE>
6.00 MEASUREMENT
6.10 Measuring Equipment
6.11 Installation
The Purchaser shall ensure that the Pipeline Operator shall furnish,
install, maintain and operate at the Custody Transfer Area all
measuring equipment.
6.12 Compliance with Standards
All measuring equipment shall be of a type approved for the intended
use under the provisions of the appropriate authority where such
approvals are required, or of a type approved by the Producers jointly
where such approvals are not required (such approval not to be
unreasonably withheld).
6.13 Check Measuring Equipment
The Producers jointly may install and operate check measuring equipment
within the Custody Transfer Area (as part of Development Work) provided
the same does not interfere with the operation of the Pipeline.
6.14 Pulsation Dampening
If there are any compression facilities upstream of the Field Delivery
Station, the Producers jointly undertake that they will provide or
cause to be provided sufficient pulsation dampening equipment (as part
of Development Work) to ensure that the compression facilities do not
interfere with the operation of the Pipeline.
6.15 Calibration
(a) The accuracy of the measuring equipment shall be tested and
verified by the Purchaser once each month or at such other
intervals as may be required by the type of equipment.
(b) Reasonable notice of the time and nature of each test shall be
given to the Producers jointly to permit them to arrange for a
representative to observe the test and any adjustments
resulting from such test. If, after notice, the Producers fail
to have a representative present, the results of the test
shall nevertheless be considered accurate.
<PAGE>
6.16 Correction
If at any time, any of the measuring equipment is found to be out of
service or registering inaccurately, it shall be adjusted at once to
read as accurately as possible and the readings of such equipment shall
be adjusted to zero error for a period definitely known or agreed upon,
or if not known or agreed upon, for period of sixteen (16) days or
one-half (1/2) of the elapsed time since the last test, whichever is
shorter. The measurement during the appropriate period shall be
determined by the Pipeline Operator on the basis of the best data
available using the first of the following methods which is feasible:
(a) by using the data recorded by any check measuring equipment if
installed and accurately registering; or
(b) by making the appropriate correction if the deviation from the
accurate reading is ascertainable by calibration test or
mathematical calculation; or
(c) by estimating based upon receipts or deliveries under similar
conditions during a period when the equipment was registering
accurately.
6.17 Additional Tests
(a) The Producers jointly may require additional tests at
reasonable intervals.
(b) If upon testing, the deviation from the accurate reading is
found to be less than two percent (2%), each Producer shall
bear its Ownership Percentage of the expense of the additional
test.
6.18 Inspection of Equipment and Records
(a) Each party shall have the right at all times to have access to
the Custody Transfer Area and to inspect measuring equipment
installed or furnished by the other.
(b) Each party shall have the right to inspect the charts and
other measurement or test data of the other at all times
during normal business hours.
(c) The reading, calibration and adjustment of such equipment and
changing of the charts shall be done only by the person
installing or furnishing the same and each Producer shall be
entitled to be present at such time but shall be subject to
all reasonable requirements of the Pipeline Operator with
regard to the security of the Custody Transfer Area and the
equipment.
6.19 Purchaser's Agent and the Producer's Representative
For the purposes of clause 6.00 the Purchaser may appoint the Pipeline
Operator or any other person as its agent to perform or act in its
stead and any Producer may appoint the Representative as its agent to
perform or act in its stead.
<PAGE>
6.20 Method of Measurement
All measurements, calculations and procedures used in determining
volume, except for the correction for deviation from Boyle's Law, shall
be made in accordance with the instructions contained in the Gas
Measurement Committee Report Number 3 of the American Gas Association,
dated April 1955, together with all presently existing supplements,
amendments and appendices to the said Report. Such instructions to be
converted where necessary for compliance with Australian Standard
AS1000-1979 "The International System of Units (SI) and Its
Application", the Commonwealth "Weights and Measures (National
Standards) Act 1960-1966" and Regulations thereunder and the Australian
Gas Association publication "Metric Units and Conversion Factors For
Use In the Australian Gas Industry". The correction for deviation from
Boyle's Law shall be determined from the data contained in "PAR
Research Project NX-19" as published by the American Gas Association in
1962, or any revision thereof acceptable to the Purchaser and the
Producers jointly.
6.30 Unit of Measurement
The unit of volume for purposes of measurement hereunder, shall be one
103m3 of Gas and be expressed to the nearest one-tenth 103m3 or such
other unit of volume agreed to by Purchaser and the Producers jointly.
6.40 Atmospheric Pressure
For the purpose of measurement atmospheric pressure shall be determined
by a recognised formula applied to the nearest one hundredth of a
kilopascal absolute (.01 kPa) and deemed to be a constant.
6.50 Flowing Temperature
The flowing temperature of Gas shall be determined by means of an
approved recording thermometer of standard make. The arithmetic mean of
all readings each day shall be deemed to be the Gas temperature and
shall be used in computing volume.
6.60 Determination of Gas Characteristics
The gas characteristics including, without limiting the generality of
the foregoing, Gross Heating Value, relative density, nitrogen and
carbon dioxide content of gas shall be determined by continuous
recording equipment or by laboratory equipment. If continuous recording
equipment is used the arithmetic mean of all recordings for each day
will be used to determine gas characteristics. If spot samples are
taken or a spot sampler is used, gas characteristics will be determined
from the analysis of the samples using laboratory equipment and
recognised analytical methods.
<PAGE>
6.70 Exchange of Metering Information
(a) The Purchaser shall send to the Producers jointly copies of
all measuring and testing charts, measuring data and measuring
information promptly after receipt thereof from the Pipeline
Operator.
(b) The Producers jointly shall cause to be sent to the Purchaser
promptly upon request copies of the information kept or
obtained by them.
6.80 Preservation of Measurement Records
The parties shall preserve all measurement test data, measurement
charts and other similar records for the greater of a period of seven
(7) years or the minimum period required by record retention rules of
any governmental agencies having jurisdiction or the currency of this
Agreement.
<PAGE>
7.00 BILLING AND PAYMENT
7.10 Payment for Gas
7.11 The Contract Price for Gas delivered in each Month (including Gas
delivered in accordance with Clause 2.44) shall be charged to the
Purchaser as hereinafter provided. Such charges shall take into account
all adjustments to the Contract Price applicable hereunder.
7.12 In the event that any escalation in the Base Price cannot immediately
be accurately calculated a bona fide estimate of the new Base Price
will be made by the Producers jointly and used until such time as the
new Base Price can be accurately calculated PROVIDED HOWEVER that an
adjustment between the parties to compensate for any over or under
charge will be effected within thirty (30) days of ascertainment of the
extent thereof.
7.13 Monthly Statements
On or before the 12th day of each Month each of the Producers shall
furnish to the Purchaser a monthly statement showing the following
information:
(i) Gas (apportioned between Probable Gas and Excess Gas)
delivered by it during the Month last concluded or (in the
case of the first delivery) during the first period;
(ii) A schedule of the Purchaser's outstanding entitlements for
Make-up Gas for all prior Debit Months.
(iii) The accumulated credits to which the Purchaser is entitled
under clause 3.25 (i.e., credits for Purchases in excess of
the Monthly Minimum Quantity).
(iv) The amount due to the Producer according to measurement,
terms, conditions and prices as provided in this Agreement.
7.14 Annual Reconciliation Statement
On or before the 12th day of the second Month following the end of each
Contract Year the Producers jointly shall furnish to the Purchaser an
annual reconciliation statement showing the aggregate amount of Gas
(apportioned between Probable Gas and Excess Gas) delivered during the
previous Contract Year and the amount of any payment due to any
Producer or to be refunded to the Purchaser by any Producer under the
terms and conditions herein provided.
<PAGE>
7.15 Dates of Payment
On or before the 30th day of each Month, or within ten (10) days after
receipt of the monthly statement whichever is later, and on or before
the 30th day of the second Month following the end of each Contract
Year, or within ten (10) days after receipt of the annual
reconciliation statement whichever is later, the Purchaser or a
Producer as the case may require shall pay the other the amounts due as
shown by the said statements.
7.20 Default in Payment
7.21 If the Purchaser fails to make to a Producer any such payment, or any
portion thereof, when same is due, that Producer shall subject to
clause 10.30 not have any rights to damages on that account but the
Purchaser shall be liable for interest thereon at the Recovery Interest
Rate from the date when such payment is due until the same is paid.
Such interest shall be calculated from day to day.
7.22 A Producer may sue for and recover the payment of any amount remaining
unpaid by the Purchaser to that Producer together with interest thereon
as provided in clause 7.21 in any Court of competent jurisdiction.
7.30 Disputed Monthly Statements
7.31 In the event of bona fide disputes arising from differences in
measurement a Producer shall waive its suspension and termination
rights contained herein provided the Purchaser makes payments to that
Producer of the amount not in dispute. Monies withheld, and
subsequently found to be payable, shall be due and payable fifteen (15)
days after reconciliation of metering differences together with
interest thereon calculated from the original due date for payment at
the rate and in the manner provided in clause 7.21.
7.32 A Producer upon request, shall furnish to the Purchaser or its agent
copies of all records upon which the Producer has based the statement
referred to in clause 7.13. The Purchaser or its agent shall have
access to each Producer's records and books at all reasonable hours so
far as they affect measurement of and the price due for the Gas sold
hereunder.
7.33 In the event an error is discovered in the amount shown due in any
statement rendered by any of the Producers, adjustment between the
parties to compensate for such error shall be effected within thirty
(30) days of ascertainment of the extent thereof PROVIDED HOWEVER that
the claim therefor shall have been made within two (2) years from the
date of such statement.
7.50 Set Off
(a) Each Producer and the Purchaser shall be entitled to set off
against and deduct from any amounts due and payable to the
other of them under this Agreement any amounts due and payable
to it by the other of them pursuant to the provisions of or
otherwise in respect of the Palm Valley Agreement.
<PAGE>
(b) If any Producer who is also a Palm Valley Producer at the time
of execution of this Agreement shall at any time have assigned
or purported to assign its ownership interest in the Palm
Valley Gas Field (being the Gas Field the subject of the Palm
Valley Agreement) or its rights and/or obligations under the
Palm Valley Agreement, in either case without first having
obtained the prior consent of the Purchaser as provided in the
Palm Valley Agreement, then the Purchaser shall also be
entitled to set off against and to deduct from any amounts due
and payable to that Producer under this Agreement any amounts
due and payable to that Producer by such assignee or purported
assignee.
<PAGE>
8.00 RESPONSIBILITY FOR GAS
8.10 Passing of Title
Ownership and possession of Gas shall pass from a Producer to the
Purchaser on delivery to the Purchaser as described in clause 8.21.
8.20 Possession of Gas
8.21 A Producer shall be in control and possession of Gas deliverable by it
to the Purchaser until such Gas shall have been delivered to the
Purchaser at the flange connecting the Field Delivery Station to the
Pipeline.
8.22 The Purchaser shall have no responsibility with respect to any Gas
until it is delivered or on account of anything which may be done,
happen or arise with respect to the same before such delivery. After
its delivery of any Gas a Producer shall have no responsibility
therefor but without prejudice to the rights of the Purchaser under
clause 5.10.
8.30 Liability for Taxes
8.31 A Producer shall subject to clauses 4.50 and 4.60 pay or be responsible
for the payment of all taxes, levies, assessments or like charges which
may be charged or imposed in respect of Gas delivered or to be
delivered by it until possession thereof passes to the Purchaser.
8.32 Subject to clause 8.40 the Purchaser shall pay all taxes, levies,
assessments or like charges which may be charged or imposed in respect
of Gas after possession thereof has passed to the Purchaser.
8.40 Liability for Royalties
A Producer shall subject to clauses 4.50 and 4.60 be responsible for
the proper accounting for and payment to the persons entitled thereto
of all royalties payable on all Gas delivered by it including all
components thereof delivered to the Purchaser hereunder and the making
of settlement with all other persons having any interest therein.
<PAGE>
9.00 FORCE MAJEURE
9.10 Suspension of Obligations
(a) A party affected by Force Majeure or Pipeline Force Majeure
shall promptly notify each other party of the occurrence and
details of any event or circumstances giving rise thereto and
the estimated delay in performance resulting therefrom.
(b) Subject as herein provided:
(i) the obligations of such affected party under this
Agreement shall thereafter be suspended to the extent
that performance thereof is prevented thereby during
the continuance thereof; and
(ii) where a Producer's obligation to supply Gas in
accordance with this Agreement is suspended under
this clause the obligations of that Producer to sell
and the Purchaser to purchase Gas shall be excused
forever by that Producer's Ownership Percentage of
the Daily Minimum Quantity for every Day or part of a
Day in which such suspension continues.
(c) A Producer shall be excused from its obligation to deliver Gas
under this Agreement to the extent that the Producers are
unable to recover and treat Gas from the Gas Field on account
of Force Majeure.
(d) An obligation to pay money shall not however be suspended or
excused by Force Majeure except as provided in paragraph (e).
(e) In the case of Pipeline Force Majeure the Purchaser shall be
excused from payment in respect of the Monthly Minimum
Quantity for the second to sixth Months thereafter but shall
in respect of such Months continue to pay to the Producers 15%
of the Base Price based on Monthly Minimum Quantities for
those Months by way of reimbursement of their estimated
out-of-pocket expenses. Such payments shall not create any
entitlement to Make-up Gas pursuant to clause 4.20.
(f) The obligation of the Purchaser to pay the Contract Price for
the Monthly Minimum Quantity shall not be suspended by any
Force Majeure affecting the Purchaser other than Pipeline
Force Majeure.
(g) The party affected shall use all possible diligence to
overcome the effect of the Force Majeure or Pipeline Force
Majeure as quickly as possible but this shall not require the
settlement of strikes or labour disputes on terms contrary to
the reasonable wishes of the party affected.
<PAGE>
9.20 Termination for Prolonged Force Majeure
If the inability of a Producer to carry out its obligations (after
initial delivery and acceptance by the Purchaser) by reason of Force
Majeure as aforesaid shall continue for one (1) year or more then the
Purchaser may by thirty (30) days notice in writing given at any time
within six (6) months after the expiration of such year, if Force
Majeure is still subsisting at the expiration of the notice period,
terminate this Agreement so far as it is an agreement between the
Purchaser and that Producer without prejudice to any of the rights of
the parties accrued prior to the date of such termination.
9.30 Termination Following Undue Delay in Commencement
If for any reason beyond the control of the Purchaser, it is unable to
accept delivery of Gas by the 31st December, 1987 or if the
construction of the Pipeline is abandoned or becomes incapable of
completion by 31st December 1987 then the remaining rights and
obligations of the parties under this Agreement shall at the option of
the Purchaser or the Producers jointly by notice in writing to the
other party be at an end provided that within 30 days after termination
the Purchaser shall reimburse the Producers for all costs and expenses
necessarily and reasonably incurred in fulfilment of their obligations
under this Agreement subsequent to the notice issued under clause 2.32.
<PAGE>
10.00 GUARANTEES/DEFAULT
10.10 Guarantees
10.11 In this clause "Subject Obligations" means each and every one of the
obligations of an Associate arising under this Agreement except and
excluding obligations which have arisen as the direct result of the
Purchaser giving a Schedule A Variation Notice.
10.12 In consideration of the Purchaser entering into this Agreement at the
request of the Guarantors and waiving the provision of any security by
the Producers, each Guarantor hereby irrevocably guarantees for the
entire term of this Agreement the due and punctual performance and
observance of all and each and every one of the Subject Obligations of
each of its Associates.
10.13 The payment by a Guarantor within ten (10) Business Days of a demand of
an amount then due and payable by any one or more of its Associates,
but unpaid, to the place of payment nominated in such demand shall
discharge any and all obligations of that Guarantor in respect of such
amount.
10.14 The guarantee provided by each Guarantor under this Agreement shall be
a continuing guarantee and shall not be discharged until each of its
Associates have paid all amounts which are or may become due under
Subject Obligations of this Agreement.
10.15 The granting of any time concession or any indulgence to or the making
of any composition with any Producer or any forbearance of the
Purchaser to enforce the terms covenants and conditions contained in
this Agreement or any moratorium or other period staying or suspending
by statute or the order of any court or other authority all or any of
the Purchaser's rights remedies or recourse will not stay suspend avoid
release or discharge this guarantee.
10.16 This guarantee and the liability of each Guarantor in respect of its
Associates hereunder shall not be affected by:
(a) reason of any transaction or arrangement that may take place
between the Purchaser and any Producer;
(b) the release, discharge, abandonment or transfer either in
whole or in part and either with or without consideration of
any security now or hereafter held from any Producer; or
(c) any other acts, omissions, laches, mistakes or defaults on the
part of the Purchaser whereby the whole or part of the
liability of any Producer to the Purchaser would but for this
provision have been affected or discharged.
10.17 Nothing in this Agreement shall be construed as a requirement that any
Guarantor consent to or should be made aware of any transaction between
the Purchaser and any Producer including any variation release or
compromise of this Agreement.
<PAGE>
10.18 No Guarantor shall be responsible hereunder in any manner whatsoever
for the obligations of any Producer which is not one of its Associates.
10.20 Default by Producers
If any one or more of the following events occurs, namely:
(a) if any order is made for the liquidation of a Producer or a
Producer institutes any proceedings or arrangements for its
liquidation in whole or in part or for the appointment of a
receiver or any receiver is appointed of any of its assets or
a Producer is unable to pay its debts within the meaning of
that expression in the Companies legislation of the Territory
and as a result of any of the foregoing the Purchaser
reasonably believes that the supply of Gas by that Producer to
the Purchaser is placed in jeopardy or that the Purchaser may
be unable to obtain a good discharge in respect of its
obligations;
(b) if a Producer make default in the due performance of any of
its substantial covenants or obligations under this Agreement
(not being a covenant or obligation of the kind referred to in
sub-clause (c) of this clause) and if a Producer fails to
remedy or to commence and diligently continue in good faith to
remedy that default within a reasonable time after notice
specifying the default is given to the Producer; or
(c) if a Producer makes default in the due payment of any moneys
payable hereunder and any such default remains unremedied for
a period exceeding thirty days after notice specifying the
default is given to the Producer;
then and in any such events the Purchaser may by notice in writing to
the relevant Producer (so far as the separate Agreement with that
Producer is concerned):-
(i) Suspend its obligations to make payments under this
Agreement until the default is remedied; or
(ii) Terminate such separate Agreement whereupon the
Purchaser shall have no further liability to that
Producer hereunder and shall be entitled to recover
from that Producer as and by way of liquidated
damages the net present value (determined as
hereinafter provided) of the liquidated damages which
would be recoverable from that Producer pursuant to
clause 3.43 if that Producer made default in delivery
of that quantity of Obligation Gas required to be
delivered by that Producer from the date of
termination by the Purchaser as aforesaid to the date
on which this Agreement would otherwise have
terminated ("Date of Expiry"). The net present value
of such damages shall be determined by:
<PAGE>
(A) ascertaining the amount of the liquidated
damages which would be recoverable from that
Producer in respect of the Month immediately
preceding the date of termination if that
Producer had made default in delivery of
133% of its Ownership Percentage of the
Monthly Minimum Quantity during that month;
(B) assuming that the same amount of liquidated
damages as in paragraph (A) above would
apply in respect of each Month from the date
of termination to the Date of Expiry;
(C) discounting the amounts referred to in
paragraph (B) above to present value at the
rate of 8 percent per annum.
Termination of this Agreement with respect to any
Producer shall be without prejudice to the rights of
any party accruing prior to termination, but subject
thereto and to the provisions of this clause, the
Purchaser shall not have and shall not make any
further or other claims upon the relevant Producer
arising out of or in any way in connection with any
default by the Producer or termination of this
Agreement as aforesaid. Upon the termination of this
Agreement as aforesaid no further liquidated damages
under clause 3.43 shall accrue.
10.30 Default by Purchaser
If the Purchaser in relation to any Producer is in default in the
observance or performance of any substantial covenant or obligation
under this Agreement and such default shall continue for a period of 90
days after written notice specifying the default shall have been given
to the Purchaser by such Producer then that Producer may by notice in
writing to the Purchaser (so far as the separate Agreement between the
Purchaser and that Producer is concerned):
(i) Suspend deliveries of Gas hereunder provided that the
Purchaser shall remain liable to pay that Producer the amount
due to it for Monthly Minimum Quantities which will not give
any entitlement to Make-up Gas; and/or
(ii) Terminate such separate Agreement.
In the event that a Producer terminates such separate Agreement as
aforesaid the Purchaser shall pay to that Producer as and by way of
liquidated damages its Ownership Percentage of the net present value of
the Base Price for the aggregate Annual Minimum Quantities remaining to
be delivered under this Agreement as at the date of termination. The
net present value as aforesaid shall be determined by:
(A) Ascertaining the Base Price which applied or would
have applied under this Agreement using the
assumptions set out in (B) below in each Quarter from
the start of the Contract Year in which termination
occurs until the aggregate Annual Minimum Quantities
remaining to be delivered under this Agreement would
have been delivered;
<PAGE>
(B) The actual impact on the Base Price of CPI
Escalation, Mega CPI Escalation and Fuel Escalation
is to be averaged on an annual basis over whichever
of the following periods prior to termination is the
longer namely:
(I) three years; and
(II) the period since the Date of Initial Delivery.
(C) Assuming the Base Price ascertained in paragraph (A)
above for the four Quarters in each of the relevant
Contract Years and dividing the sum thereof by four
to derive the average Base Price applicable to the
respective Contract Years.
(D) Multiplying the Annual Minimum Quantities remaining
to be delivered under this Agreement from the date of
termination by the average Base Price for each
relevant Contract Year to derive the price payable by
the Purchaser in respect of each such Contract Year.
(E) Discounting each of the amounts referred to in
paragraph (D) above to present value as a mid year
stream at the rate of 7 percent per annum above the
CPI for the relevant Contract Year, and aggregating
the resulting amounts.
10.40 Waivers not to affect other defaults
No waivers by any party of any one or more defaults by any other in the
performance of any provisions shall operate or be construed as a waiver
of any other default whether of a like or of a different character, and
whether occurring before or after such waiver.
<PAGE>
11.00 MISCELLANEOUS
11.10 Governing Law
This Agreement shall be governed by the law of the Territory.
11.20 Disputes
11.21 All disputes arising under this Agreement shall be decided by the
courts of the Territory and the parties hereby unconditionally submit
to the jurisdiction thereof.
11.22 In the event of disputes arising concerning matters of a technical
nature the parties may agree to engage such technical experts to
determine such matters but such experts shall be deemed to be acting as
experts and not as arbitrators.
11.23 Nothing herein contained shall restrict the ability of the parties to
have their disputes determined by arbitration should they so agree.
11.30 Headings and Notations
The headings and notations in this Agreement shall not be taken into
account in the construction thereof.
11.40 Severability of Clauses
If any provision of this Agreement shall be construed as illegal or
invalid or void the legality or validity or enforceability of any of
the other provisions hereof shall not be affected and the illegal or
invalid or void provisions shall be deemed deleted herefrom to the same
exent and effect as if they were never incorporated herein but all
other provisions herein shall continue in force unless such deletion
shall have substantially altered the commercial efficacy of this
Agreement.
11.50 Agreement Not to Constitute a Partnership
Nothing in or arising out of this Agreement shall constitute or be
deemed to constitute a partnership between the Producers for any
purpose.
11.60 Entire Agreement
This Agreement contains the entire Agreement between the parties. All
warranties and conditions implied by law or otherwise to the extent to
which they may lawfully be negatived are hereby negatived. Except for
the obligation to deliver natural gas meeting the quality
specifications stated in Schedule B each Producer gives no warranty or
undertaking as to the quality or fitness for any purpose of any natural
gas sold and delivered hereunder. No representations, warranties or
undertakings are made or given by any or all of the Producers save and
except for those expressly provided for herein.
<PAGE>
12.00 ASSIGNMENT
12.10 When Consent Required
(a) No assignment by a Producer of this Agreement or of its rights
hereunder shall be of any effect whatsoever unless with the
written consent of the Purchaser which consent shall not be
unreasonably withheld in the case of a financially and
technically competent assignee PROVIDED ALWAYS that the
assignee shall covenant in writing with the Purchaser to be
bound by all the terms and conditions of this Agreement so far
as they apply to the assignor.
(b) No assignment by the Purchaser of this Agreement or of its
rights hereunder shall be of any effect whatsoever unless with
the written consent of each of the Producers which consent
shall not be unreasonably withheld in the case of a
financially and technically competent assignee PROVIDED ALWAYS
that the assignee shall covenant in writing with each
Purchaser to be bound by all the terms and conditions of this
Agreement so far as they apply to the assignor.
(c) The Purchaser's consent to any proposed assignment by a
Producer which is also a Palm Valley Producer shall not be
deemed unreasonably withheld where that Producer has failed to
satisfy the Purchaser that the resulting loss of the
Purchaser's right of set off under clause 7.50 hereof will not
adversely affect the Purchaser's interests to a material
degree, or unless that Producer's interests in the Gas Field
the subject of the Palm Valley Agreement and its rights under
the Palm Valley Agreement, are to be assigned to the same
assignee. The Purchaser's right of set off as aforesaid shall
not be deemed to have been adversely affected to a material
degree where a Producer who is a Palm Valley Producer provides
to the Purchaser a letter of credit or other acceptable
security in an amount equal to the net present value
(calculated using a discount rate of 12% per annum) of $2.7
million per annum for each unexpired year of this Agreement to
year 20.
12.20 When Consent Not Required
Notwithstanding the foregoing any party may without any consent of any
other party charge, mortgage, or pledge or assign by way of charge,
mortgage, or pledge this Agreement or any of its rights hereunder if
such charge, mortgage or pledge or assignment is for the purpose of
securing the repayment of moneys borrowed or guaranteed or the payment
of moneys borrowed or guaranteed or the payment of moneys payment
whereof is deferred.
12.30 Merger or Reconstruction
The consent of the Purchaser shall not be unreasonably withheld in any
case where the proposed assignment is required as a result of any
amalgamation, merger or reconstruction of any Producer seeking such
consent.
<PAGE>
12.40 Obligations
This Agreement shall bind and enure to the respective successors and
assigns of the parties hereto but no assignment shall release any party
from such party's obligations hereunder without written consent of each
other party which consent shall not be unreasonably withheld in case of
an assignment to a financially and technically competent assignee.
<PAGE>
13.00 NOTICES
13.10 Notices
13.11 Subject to this clause any notice or advice required to be given or
sent pursuant to this Agreement shall be deemed to have been given if
delivered to the party to whom it is to be given or sent or sent by
prepaid certified post or telex or telegram or facsimile message to the
following addresses or such other address as may be notified from time
to time by a party to the other parties:
MAGELLAN PETROLEUM (N.T.) PTY LTD MOONIE OIL N.L.
8th Floor, Level 23,
National Australia Bank Building, 12 Creek Street,
420 George Street, BRISBANE QLD. 4000
BRISBANE QLD. 4000
Telex: AA41040
Telex: AA40392
PETROMIN NO LIABILITY
UNITED OIL & GAS CO. (N.T.) PTY. LTD. Level 23,
8th Floor, 12 Creek Street,
National Bank Building, BRISBANE QLD. 4000
420 George Street,
BRISBANE QLD. 4000 Telex: AA41040
Telex: AA40392 TRANSOIL NO LIABILITY
Level 23,
FARMOUT DRILLERS N.L. 12 Creek Street
C/- Latec Investments, BRISBANE QLD. 4000
Level 24,
CBA Building, Telex: AA41040
60 Margaret Street,
SYDNEY N.S.W. 2000 THE MOONIE OIL COMPANY LIMITED
Level 23,
Telex: A74943 12 Creek Street,
BRISBANE QLD. 4000
CANSO RESOURCES LIMITED
C/- Latec Investments, Telex: AA41040
Level 24,
CBA Building, FLINDERS PETROLEUM N.L.
60 Margaret Street, 9th Floor,
SYDNEY N.S.W. 2000 28 O'Connell Street,
SYDNEY N.S.W. 2000
Telex: AA94598
Telex: 74943
MAGELLAN PETROLEUM AUSTRALIA LIMITED
8th Floor, GASGO PTY. LIMITED
National Bank Building, The Chairman,
420 George Street, Pipeline Executive,
BRISBANE QLD. 4000 5th Floor,
NTEC House,
Telex: AA40392 18/20 Cavenagh Street,
DARWIN N.T. 5790
Telex: AA85395
<PAGE>
13.12 Any notice given by a Producer pursuant to clause 10.30 shall be served
personally:
(a) during the hours of business of the Purchaser; and
(b) on any person apparently in the employ of the Purchaser who
shall sign a receipt therefor.
13.13 Any notice, request, demand, consent, approval or other communication
(hereinafter "a notice") required or permitted to be given to or served
on the Producers jointly by the Purchaser, may be given to or served on
the Representative and shall be deemed to have been thereby given or
served on each of the Producers.
13.14 Any notice required or permitted to be given to or served on the
Purchaser by the Producers jointly under this Agreement, shall be given
only by the Representative on behalf of the Producers. No Producer
shall itself give or purport to give a notice required or permitted by
this clause to be given by the Representative, and the Purchaser shall
disregard and treat as null and void any such purported notice.
13.15 The Purchaser shall disregard and treat as null and void any attempt by
any Producer to exercise his rights or powers or take any other step in
relation to this Agreement except in the manner specified in clause
13.14.
13.20 Receipt of Notice
If a notice is sent by prepaid post as aforesaid it shall be deemed to
have been given or sent upon actual delivery and if sent by telex or
telegram or facsimile message on the next business day after having
been transmitted.
13.30 Representative
13.31 For the purposes only of administrative convenience in respect of this
Agreement, and notwithstanding clause 2.10 hereof or any provisions of
the Mereenie Joint Operating Agreement or any other agreement between
the Producers, it is hereby acknowledged that Moonie Oil N.L. is at the
date hereof the Representative for the purposes of clause 13.10 and
shall remain as Representative for such purposes unless and until the
Purchaser is served with a notice under clause 13.32.
13.32 The Producers may appoint a replacement Representative for purposes of
this Agreement only by delivering to the Purchaser a notice signed by
two or more Producers having for the time being Ownership Percentages
aggregating in excess of 50%, which notice specifies as Representative
an alternative Producer and his address for service, and the change
specified in such notice shall take effect forthwith upon receipt.
13.33 Except as provided in Clause 13.32 the Purchaser shall disregard and
treat as null and void any purported revocation of the Representative's
authority by any Producer.
<PAGE>
14.00 CONFIDENTIALITY
Each party will treat as confidential information disclosed by the
other party pursuant to this Agreement and which prior to such
disclosure is notified by the disclosing party as being confidential
and each party will not disclose such confidential information to third
parties without the prior written consent of the others and it will
take all reasonable precautions to ensure that its employees will
maintain the confidentiality of such confidential information PROVIDED
HOWEVER as follows:-
(a) that each party shall be entitled to disclose such
confidential information to any related corporation; and
(b) that the provisions of this Clause shall not apply to
information which is or becomes part of the public knowledge
or literature or which is lawfully obtained by one party from
sources other than this Agreement or another party; and
(c) that each party shall be entitled to make such disclosures as
are required by law or by the rules of any Stock Exchange or
regulatory agency having jurisdiction over such party or its
ultimate holding company; and
(d) that each party shall be entitled to disclose such
confidential information to any of the undermentioned persons
who have first executed an undertaking in substantially
identical terms to this clause:-
(i) any chargee or prospective chargee;
(ii) any professional adviser; or
(iii) any employee of the foregoing.
(iv) any assignee or prospective assignee.
(e) that the Purchaser shall be entitled to disclose such
confidential information to any department or agency of the
Territory.
<PAGE>
15.00 APPROVALS AND CONSENTS
15.10 Approvals and Consents
(a) The respective obligations of the Producers hereunder are
subject always to the Producers obtaining not later than six
(6) months from the date hereof or such longer period as the
Purchaser may agree and thereafter from time to time all
consents leases and authorities (if any) which the Purchaser
and the Producers jointly regard as necessary to enable the
Producers to fulfil their obligations under this Agreement
including (without limiting in any way the generality of the
foregoing) all consents leases and authorities required by the
Minister for Mines and Energy of the Territory and by the
Petroleum Act and other relevant Acts in connection herewith.
(b) Each Producer covenants that it will within thirty (30) days
after the date hereof procure from the National Australia Bank
Limited in favour of the Purchaser an acknowledgement in terms
satisfactory to the Purchaser that the Purchaser's rights
under this Agreement, including without limiting the
generality thereof clause 7.50 hereof, are not and will not be
affected by the Bank's existing charge from the Producer dated
26th October, 1984. The Purchaser may at any time after expiry
of the said thirty (30) days terminate this Agreement by
notice to the Producers jointly where any Producer fails to
procure such an acknowledgement as aforesaid but subject
thereto shall no other rights arising out of this sub-clause.
(c) Flinders Petroleum N.L., Canso Resources Limited and Farmout
Drillers N.L. each covenant to the Purchaser that they will
procure within 30 days after the date hereof from Latec
Investments Limited a form of undertaking in form satisfactory
to the Purchaser relating to the exercise by Latec Investments
Limited of its controlling interests in each of Flinders
Petroleum N.L., Canso Resources Limited and Farmout Drillers
N.L. The Purchaser may at any time after expiry of the said 30
days terminate this Agreement (so far as the separate
Agreement with each of Canso Resources Limited and Farmout
Drillers N.L. is concerned) if the said Undertaking has not
been so procured but subject thereto shall have no other
rights arising out of this sub-clause.
15.20 Cancellation of the Petroleum Lease
Should the Producers be unable to fulfil their respective obligations
to deliver Gas under the terms of this agreement due to cancellation of
the Petroleum Lease by the Minister under the provisions of the
Petroleum Act, they hereby waive any right to dismantle and remove the
Gas Delivery System for a period of six (6) months following such
cancellation, during which time the Producers will negotiate in good
faith for the sale of such facilities to the Purchaser or to the future
operators of the area the subject of the Petroleum Lease. During this
period the Producers will permit the Purchaser or its agents access to
the Gas Field and the Gas Delivery System in order to maintain supply
of Gas to the Receiving Station.
<PAGE>
IN WITNESS WHEREOF the parties hereto have executed this Agreement in Darwin,
Northern Territory the day and year first hereinbefore written.
Signed by MAGELLAN PETROLEUM )
(NT.) PTY. LTD. by Roy Marshall Hopkins )
its duly appointed Attorney under )
Power of Attorney dated 26th June 1985 ) /s/ Roy M. Hopkins
who states that he has no notice )
of revocation of the said Power, )
in the presence of: )
/s/ Hedley Howard
Signed by UNITED OIL & GAS CO. )
(N.T.) PTY. LTD. by Roy Marshall Hopkins )
its duly appointed Attorney under )
Power of Attorney dated 26th June 1985 ) /s/ Roy M. Hopkins
who states that he has no notice )
of revocation of the said Power, )
in the presence of: )
/s/ Hedley Howard
Signed by CANSO RESOURCES )
LIMITED by _____________________ )
its duly appointed Attorney under )
Power of Attorney dated 26th June 1985 ) /s/ _________________________
who states that he has no notice )
of revocation of the said Power, )
in the presence of: )
/s/ Hedley Howard
Signed by MOONIE OIL N.L.
by K. V. Hiscox )
its duly appointed Attorney under )
Power of Attorney dated 27th June 1985 ) /s/ K. V. Hiscox
who states that he has no notice )
of revocation of the said Power, )
in the presence of: )
/s/ Hedley Howard
<PAGE>
Signed by PETROMIN NO LIABILITY )
by K. V. Hiscox )
its duly appointed Attorney under )
Power of Attorney dated 27th June 1985 ) /s/ K. V. Hiscox
who states that he has no notice )
of revocation of the said Power, )
in the presence of: )
/s/ Hedley Howard
Signed by TRANSOIL NO LIABILITY )
by K. V. Hiscox )
its duly appointed Attorney under )
Power of Attorney dated 27th June 1985 ) /s/ K. V. Hiscox
who states that he has no notice )
of revocation of the said Power, )
in the presence of: )
/s/ Hedley Howard
Signed by FARMOUT DRILLERS N.L. )
by _____________________________ )
its duly appointed Attorney under )
Power of Attorney dated 26th June 1985 ) /s/ _________________________
who states that he has no notice )
of revocation of the said Power, )
in the presence of: )
/s/ Hedley Howard
Signed by GASGO PTY. LIMITED )
by Richard Cawley Madden )
its duly appointed Attorney under )
Power of Attorney dated 27th June 1985 ) /s/ Richard C. Madden
and states that he has no notice )
of revocation of the said Power, )
in the presence of: )
/s/ _________________________
<PAGE>
Signed by MOONIE OIL COMPANY )
LIMITED by Geoffrey Raymond Phillips )
its duly appointed Attorney under )
Power of Attorney dated ) /s/ Geoffrey R. Phillips
and states that he has no notice )
of revocation of the said Power, )
in the presence of: )
/s/ Hedley Howard
Signed by MAGELLAN PETROLEUM )
AUSTRALIA LIMITED by Roy Marshall )
Hopkins its duly appointed Attorney under )
Power of Attorney dated 26th June 1985 ) /s/ Roy M. Hopkins
and states that he has no notice )
of revocation of the said Power, )
in the presence of: )
/s/ Hedley Howard
Signed by FLINDERS PETROLEUM N.L. )
by _____________________________ )
its duly appointed Attorney under )
Power of Attorney dated 28th June 1985 ) /s/ _________________________
and states that he has no notice )
of revocation of the said Power, )
in the presence of: )
/s/ Hedley Howard
<PAGE>
SCHEDULE A
ANNUAL MINIMUM QUANTITIES
(MEREENIE)
Column 1 Column 2 Column 3
- ------------------------- ------------------------ ---------------------------
Anticipated Contract Year Years Annual Minimum Quantity
(PJ)
No. (commencing 1 July
and ending 1 July)
- ------------------------- ------------------------ ---------------------------
1 1986-1987 0.61
2 1987-1988 1.24
3 1988-1989 1.25
4 1989-1990 1.27
5 1990-1991 1.29
6 1991-1992 1.33
7 1992-1993 1.35
8 1993-1994 1.39
9 1994-1995 1.39
10 1995-1996 1.44
11 1996-1997 1.48
12 1997-1998 1.55
13 1998-1999 1.60
14 1999-2000 1.64
15 2000-2001 1.71
16 2001-2002 1.77
17 2002-2003 1.83
18 2003-2004 1.89
19 2004-2005 1.95
20 2005-2006 2.02
21 2006-2007 1.25
22 2007-2008 2.16
23 2008-2009 3.02
24 2009-2010 3.90
25 2010-2011 4.20
26 2011-2012 2.53
-----
47.06
=====
<PAGE>
For the purpose of this Schedule and this Agreement:
(i) The first Contract Year shall be whichever of the years (1 July/1 July)
listed in Column 2 above is the year in which the Date of Initial
Delivery occurs and Column 1 shall be adjusted accordingly.
(ii) If the Date of Initial Delivery is other than 1st July in the first
Contract Year then the Annual Minimum Quantity for that first Contract
Year shall be the quantity specified in Column 3 in respect of the year
in which the Date of Initial Delivery occurs divided by 182 if the Date
of Initial Delivery is prior to 30 June 1987, and 365 in any other case
and then multiplied by the number of days from the Date of Initial
Delivery to the end of that first Contract Year.
(iii) The Daily Minimum Quantity for that first Contract Year shall be the
Annual Minimum Quantity for that first Contract Year determined as
aforesaid divided by the number of days from the date of Initial
Delivery to the end of that first Contract Year.
(iv) If the Date of Initial Delivery is later than 1 July 1986 then the
aggregate Annual Minimum Quantities shown in Column 3 remaining
undelivered on 1 July 2012 shall be taken by the Purchaser in the
Contract Years commencing 1 July 2012 and 1 July 2013 in such
respective Annual Minimum Quantities as the Purchaser may notify to the
Producers.
(v) The intent of the foregoing is that the nexus between the Annual
Minimum Quantities specified in Column 3 and the years specified in
Column 2, should not be broken except in the year in which the Date of
Initial Delivery occurs or in any preceding year (the Annual Minimum
Quantities for which shall be added to the last anticipated Contract
Years).
<PAGE>
SCHEDULE B
GAS SPECIFICATION
The quality of gas supplied hereunder at the Field Delivery Station shall on
delivery conform to the following. These Specifications can be changed by
written agreement signed by all parties.
1.0 FUEL COMPONENTS
1.1 Methane and Ethane
The gas will contain more than seventy percentum (70%) by volume of
methane. In any case, the gas will contain not less than eighty-five
percentum (85%) by volume of methane and ethane.
Test method: ASTM D 1945 Chemical analysis of natural gas by gas
chromatography.
1.2 Propane
The gas will contain less than five percentum (5%) by volume of
propane.
Test method: ASTM D 1945 Chemical analysis of natural gas by gas
chromatography.
1.3 Butane
The gas will contain less than two percentum (2%) by volume of butane.
Test method: ASTM D 1945 Chemical analysis of natural gas by gas
chromatography.
1.4 Pentane plus
The gas will contain less than one half of one percentum (0.5%) by
volume of pentanes and other higher hydrocarbons.
Test method: ASTM D 1945 Chemical analysis of natural gas by gas
chromatography.
1.5 Hydrogen
The gas will contain less than one half of one percentum (0.5%) by
volume of hydrogen.
Test method: ASTM D 1945 Chemical analysis of natural gas by gas
chromatography.
<PAGE>
1.6 Carbon Monoxide
The gas will contain less than one percentum (1%) by volume of carbon
monoxide.
Test method: ASTM D 1945 Chemical analysis of natural gas by gas
chromatography.
1.7 Oxygen
The gas will contain less than twenty-two one hundredth of one
percentum (0.22%) by volume of oxygen.
Test method: ASTM D 1945 Chemical analysis of natural gas by gas
chromatography.
1.8 Relaxation of Propane, Butane, Pentane and Pentane Plus
To allow the transportation of "rich" gas these limits may by agreement
between all parties be relaxed at the Field Delivery Station as
follows:-
Propane 2% - 8%
Butane 1% - 2.5%
Pentane and higher hydrocarbons 0.75%
<PAGE>
2.0 GAS CONTAMINANTS
2.1 Total Sulphur
The gas will not contain total sulphur including hydrogen sulphide and
mercaptans in concentration greater than 50 milligrams per cubic metre
(50 mg/m3).
Test method: ASTM D 1072 Test method for total sulphur in fuel gases.
2.2 Hydrogen Sulphide
The gas will not contain hydrogen sulphide in concentration greater
than 10 milligrams per cubic metre (10mg/m3).
Test method: ASTM D 2725 Hydrogen sulphide content by methylene blue
method.
2.3 Mercaptans
The gas will not contain more than 5 milligrams per cubic metre
(5mg/m3) of mercaptans expressed as sulphur.
Test method: To be agreed between NTEC and the Transporter.
2.4 Water
The water content will not exceed 80 milligrams per cubic metre
(80mg/m3).
Test method: ASTM D 1142 Water vapour content of gas fuel by
measurement of dew point temperatures.
2.5 Trace Metals
The gas will not contain total trace metals (including sodium,
potassium, calcium, lead, vanadium, aluminium, copper, mercury etc.) in
concentration greater than two parts per million by weight (2mg/kg).
Test method: To be agreed between NTEC and the Transporter.
2.6 Carbon Dioxide
The gas will contain less than three percentum (3%) by volume of carbon
dioxide.
Teat method: ASTM D 1945 Chemical analysis of natural gas by gas
chromatography.
<PAGE>
2.7 Solid Material
The gas will not contain solid material exceeding 10 microns in size
and in concentration greater than three parts per million by weight
(3mg/kg).
Test method: To be agreed between NTEC and the Transporter.
2.8 General
The gas will be free from sand, dust, gum, gum forming constituents,
free water, crude oil, other oils and lubricants including compressor
lubricant, impurities and any other substance which is injurious to
pipelines, control equipment, gas turbine or reciprocating engines and
associated auxiliaries and equipment.
<PAGE>
3.0 ADDITIVES
3.1 Glycols
The gas will not contain glycols in concentration detectable by the
test method.
Test method: Thermal desorption Perkin-Elmer Model ATD-50.
3.2 Methanol
The gas will not contain methanol in concentration detectable by the
test method, unless agreed by NTEC.
Test method: Limits and test method to be agreed between parties where
use of methanol is agreed.
<PAGE>
4.0 PROPERTIES
4.1 (a) Gross Heating Value
The gas will have a gross heating value of not less than
36.0MJ/m3.
Test method: GPA 2172 Calculation method of natural gas
parameters from compositional data using gas analysis obtained
by ASTM D 1945.
(b) Gross Heating Value Variation
The gross heating value of the gas shall not vary greater than
+ 10.0% of the value nominated in the Operating Manual.
-
Test method: GPA 2172 Calculation method of natural gas
parameters from compositional data using gas analysis obtained
by ASTM D 1945.
4.2 Net Heating Value
The gas will have a net heating value of not less than 33.0MJ/m3.
Test method: GPA 2172 Calculation method of natural gas parameters from
compositional data using gas analysis obtained by ASTM D 1945.
4.3 Temperature and Pressure
The gas will have a daily average temperature not exceeding 7(degree)C
above the mean daily ambient temperature at the Field Delivery Station.
The gas will have a maximum temperature of 60 degrees Celcius
(60(degree)C).
The pressure at the Field Delivery Station is to be in the range
9500kPa to 10,000kPa.
4.4 Wobbe Index
The Wobbe Index of the gas shall not vary greater than 10.0% of the
value agreed to by all parties and nominated in the Operating Manual.
The Wobbe Index is defined as the gross heating value of the gas
(MJ/m3) divided by the square root of the specific gravity of the gas.
The specific gravity of the gas is relative to air and is to be
determined at a temperature of 15(degree)C and a pressure of 101.325
kPa absolute.
Test method: ASTM D 1070 Test methods for specific gravity. Gross
heating value is to be calculated using the method specified in Clause
4.1(a) of this Schedule.
<PAGE>
4.5 Flammability Limit
The ratio of higher flammability limit to lower flammability limit
shall exceed 2.2:1 for the gas.
Flammability limits are the upper and lower extremes of fuel air ratio
that will permit ignition and sustain combustion of the fuel air
mixture at a temperature of 15(degree)C and a pressure of 101.325 kPa
absolute.
Test Method: GPA 2172 Calculation method of natural gas parameters from
compositional data using gas analysis obtained by ASTM D 1945.
4.6 Hydrocarbon Dewpoint
The gas will have a minimum hydrocarbon dewpoint lower than minus
30(degree)C at 10,000 kPa absolute. In any case the hydrocarbon
dewpoint of the gas shall be such that hydrocarbons will not condense
under pipeline operating conditions.
<PAGE>
SCHEDULE C
OWNERSHIP PERCENTAGES OF THE PRODUCERS
THE MEREENIE JOINT VENTURE
The Producers Ownership Percentages
Magellan Petroleum (N.T.) Pty. Ltd. 20%)
United Oil & Gas Co. (N.T.) Pty. Ltd. 15%) 35%
Canso Resources Limited 15%
Moonie Oil N.L. 21%
Petromin No Liability 13.75%
Transoil No Liability 9%
Farmout Drillers NL 6.25%
<PAGE>
SCHEDULE D
BASE PRICE
1. The Base Price for Gas delivered (or to be paid for pursuant to clause
3.21(c)) each Month in each of Contract Years 1 to 21 inclusive shall
be calculated on a different basis depending on whether such Gas
comprises part of the Probable Quantity for that Month ("Probable
Gas"), or is in excess of the Probable Quantity for that Month ("Excess
Gas").
2. The quantity of Probable Gas for each Month in each Contract Year may
be ascertained by:
(a) Multiplying the relevant Annual Minimum Quantity for that
Contract Year by 1.25.
(b) Multiplying the resultant quantity by the factor specified in
the table below:
July .068
August .077
Sept .083
Oct .095
Nov .096
Dec .087
Jan .083
Feb .080
March .087
April .082
May .088
June .074
PROVIDED that the Purchaser may from time to time prior to the
commencement of any Contract Year by notice in writing to the Producers
jointly vary the factors shown for each Month in such manner as it
shall see fit having regard to anticipated fluctuations in demand for
Gas PROVIDED FURTHER that the aggregate of such factors over a Contract
Year shall always be 1.000.
3. For Probable Gas the Base Price means:
A. For Contract Years 1 - 5:
$0.20 per GJ based on Gross Heating Value as at the
Development Date escalated or de-escalated on a Quarterly
basis thereafter as follows:
(a) As to 5 cents thereof in accordance with CPI
Escalation;
(b) As to 15 cents thereof in accordance with Mega CPI
Escalation;
<PAGE>
(c) As to the whole thereof (as CPI Escalated and Mega
CPI Escalated) in accordance with Fuel Escalation.
B. For Contract Years 6 - 21:
35 cents per GJ based on Gross Heating Value as at the
Development Date escalated or de-escalated on a Quarterly
basis thereafter as follows:
(a) As to 8.75 cents thereof in accordance with CPI
Escalation;
(b) As to 26.25 cents thereof in accordance with Mega CPI
Escalation;
(c) As to the whole thereof (as CPI Escalated and Mega
CPI Escalated) in accordance with Fuel Escalation.
4. For Excess Gas and for all Gas delivered after the expiry of Contract
Year 21 the Base Price means $1.50 per GJ bases on Gross Heating Value
as at the Development Date escalated or de-escalated on a Quarterly
basis thereafter as follows:
(a) As to 37.5 cents thereof in accordance with CPI
Escalation;
(b) As to $1.125 thereof in accordance with Mega CPI
Escalation;
(c) As to the whole thereof (as CPI Escalated and Mega
CPI Escalated) in accordance with Fuel Escalation.
ESCALATION AND PRICE DETERMINATION
(Note: The following tables illustrate the method by which the
price for excess Gas is calculated. In the case of Probable
Gas the same method is applied with the appropriate amendments
to the base price as outlined above. The number of decimal
places used in this example should not be construed as
indicating the appropriate level of accuracy at any time).
<PAGE>
SCHEDULE D (continued)
PRICE ESCALATION AND PRICE DETERMINATION
THIS PART SCHEDULE D PROVIDES AN EXAMPLE OF THE CALCULATION OF THE
QUARTERLY GAS PRICE. THE NUMBER OF DECIMAL PLACES USED IN THE EXAMPLE
SHOULD NOT BE CONSTRUED AS INDICATING THE APPROPRIATE LEVEL OF ACCURACY
AT ANY TIME.
<PAGE>
TABLE I
CPI AND MEGA ESCALATORS
- --------------------------------------------------------------------------------
(1) (2) (3) (4)1 (5)2 (6)3
YEAR QUARTER INDICATIVE ANNUAL QUARTERLY MEGA
ENDING CPI CPI CPI ESCALATION
ESCALATION ESCALATION
[FABRICATED
FOR ILLUSTRATIVE % % %
PURPOSES]
- --------------------------------------------------------------------------------
1984 1 JUNE 132.0
2 SEPT 134.0
3 DEC 135.9
4 MARCH 137.8
1985 5 JUNE 139.9 6.0 1.5
6 SEPT 141.8 5.8 1.4
7 DEC 143.0 5.2 0.8
8 MARCH 142.2 3.2 (0.5)
1986 9 JUNE 140.1 0.1 0.0
10 SEPT 139.0 (2.0) (0.8)
11 DEC 138.5 (3.1) (0.4)
12 MARCH 138.9 (2.3) 0.3
1987 13 JUNE 140.1 0.0 0.0
14 SEPT 142.2 2.3 1.5
15 DEC 145.6 4.8 2.4
16 MARCH 151.5 9.1 4.0
1988 17 JUNE 158.4 13.1 4.6 3.1
18 SEPT 164.0 15.3 3.5 5.3
19 DEC 165.6 13.7 1.0 3.7
20 MARCH 166.8 10.1 0.7 0.1
1989 21 JUNE 167.9 6.0 0.7
<PAGE>
NOTES
TABLE I
1. EXAMPLE:
ROW 5 = [139.9 - 132.0] / 132.0 = 6.0
(i.e. The CPI at the end of the current June quarter less
the CPI at the end of the preceeding June quarter.
The result being divided by the CPI for the said
preceeding June quarter and expressed as a
percentage).
2. EXAMPLE:
ROW 5 = [139.9 - 137.8] / 137.8 = 1.5
(i.e. The CPI at the end of the current June quarter less
the CPI at the end of the preceeding March quarter.
The result being divided by the CPI for the said
March quarter and expressed as a percentage).
N.B. If Coln (4) is less than 2 and greater than -2 then Coln (5)
is set to zero regardless of the result of the calculation set
out above.
3. EXAMPLE:
ROW 17 = Coln (4) - 10 = 3.1
N.B. If Coln (4) is less than 10 and greater than -10, Coln (6) is
set to zero.
<PAGE>
TABLE II
FUEL: ESCALATOR: FABRICATED FOR ILLUSTRATIVE PURPOSES
- --------------------------------------------------------------------------------
(1) (2) (3)1 (4)2
ESAA ESAA DATA INDICATIVE QUARTERLY
DATA APPLIED TO ANNUAL PERCENTAGE
FOR YEAR ENDING PERCENTAGE MOVEMENT
YEAR ENDING 30 JUNE MOVEMENT APPLICABLE TO
30 JUNE WHOLE YEAR
- --------------------------------------------------------------------------------
1984 1986 4.370 1.075
1985 1987 2.501 0.620
1986 1988 (1.802) -
1987 1989 3.419 0.844
1988 1990 (2.352) -
NOTES:
1. Coln 3: Derived pursuant to Schedule E.
2. Coln 4: The fourth root of (Coln 3 + 100) x 106 less (after
the fourth root has been taken) 100 = Coln 4.
eg. The fourth root of (4.37 + 100) x 106 less (after the
fourth root has been taken) 100 = 1.075.
<PAGE>
TABLE III
BASE PRICE CALCULATION
<TABLE>
<CAPTION>
(1) (2) (3)2 (4)3 (5)2 (6)3 (7)3 (8)4 (9)2 (10)5
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR QUARTER ANNUAL CUMULATIVE ANNUAL CUMULATIVE CUMULATIVE SUM BASE PRICE FUEL BASE PRICE
ENDING CPI CPI ESCALATION MEGA MEGA OF PREVIOUS EXCLUDING ESCALATION INCL. CURRENT
ESCALATION ON BASE PRICE ESCALATION ESCALATION QUARTER FUEL CURRENT QUARTER CURRENT QUARTER FUEL
INCREMENT INCREMENT ON BASE PRICE ESCALATION FUEL ESCALATION QUARTERLY ESCALATION
INCREMENTS INCREMENT INCREMENT INCREMENT
$ $ $ $ $ $ $ $
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1984 1 JUNE
2 SEPT
3 DEC
4 MARCH
1985 5 JUNE NA 0.375 - 1.125 NA 1.500 NA 1.500
6 SEPT 0.0056 0.381 - 1.125 NA 1.506 0.016 1.522
7 DEC 0.0049 0.386 - 1.125 0.016 1.527 0.016 1.543
8 MARCH 0.0031 0.389 - 1.125 0.032 1.546 0.017 1.563
1986 9 JUNE (0.0023) 0.387 - 1.125 0.049 1.561 0.017 1.578
10 SEPT 0.0000 0.387 - 1.125 0.066 1.578 0.010 1.588
11 DEC (0.0031) 0.384 - 1.125 0.076 1.585 0.010 1.595
12 MARCH (0.0015) 0.382 - 1.125 0.086 1.593 0.010 1.603
1987 13 JUNE 0.0011 0.384 - 1.125 0.096 1.605 0.010 1.615
14 SEPT 0.0000 0.384 - 1.125 0.106 1.615 - 1.615
15 DEC 0.0057 0.389 - 1.125 0.106 1.620 - 1.620
16 MARCH 0.0093 0.399 - 1.125 0.106 1.630 - 1.630
1988 17 JUNE 0.0159 0.415 - 1.125 0.106 1.646 - 1.646
18 SEPT 0.0191 0.434 0.035 1.160 0.106 1.700 0.014 1.714
19 DEC 0.0152 0.449 0.061 1.221 0.120 1.790 0.015 1.805
20 MARCH 0.0045 0.453 0.045 1.266 0.135 1.854 0.015 1.869
1989 21 JUNE 0.0032 0.457 0.001 1.267 0.150 1.874 0.016 1.890
22 SEPT 0.0032 0.480 - 1.267 0.166 1.893 - 1.893
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
TABLE III
NOTES
1. This table is derived in the case of:
(a) Coln 3 to Coln 6 from Table I; and
(b) Coln's 7 and 9 from Table II.
2. Coln's 3, 5 and 9, respectively, are derived by applying the
Quarterly CPI (Coln 5 Table I), MEGA (Coln 6 Table I) and Fuel
(Coln 4 Table II) escalators to that portion of the Base Price
(including any previous such escalations) as apply to that
escalator. The result being the annual increment in the Base
Price attributable to that escalator. For the purpose of this
calculation the respective portions are:
(a) in the June Quarter 1985:
(i) $0.375 for CPI Escalation
(ii) $1.125 for Mega Escalation
(iii) $1.500 for Fuel Escalation
(b) In latter quarters the June 1985 Base plus escalation
to the quarter of concern.
3. Coln's 4, 6 and 7 are derived for any quarter by adding the
respective cummulative total in the previous quarter to the
increment in the current quarter.
Example
Coln 4, Row 17 = [0.395 + 0.0158] = 0.411
4. Coln 8 = sum of Coln's 4, 6 and 7.
5. Coln 10 = sum of Coln's 8 and 9.
<PAGE>
SCHEDULE E
1. DATA SOURCE
The following data can be obtained from the Electricity Supply
Association of Australia (ESAA) publication "The Electricity Supply
Industry in Australia" issued in about April each year with data
relating to the previous financial year. This data is available to all
ESAA members, of which NTEC is one, and will be made available to the
producers when it becomes available to NTEC. In the event of the
intended source of data becoming unavailable or any of the bases
therefor being materially altered then in the absence of agreement
between the Purchaser and the Producers jointly the matter shall be
referred to an Independent Expert for determination.
2. EXTENT OF DATA
Data is required to be totalled for each Utility (as the term is used
by ESAA) for each of:
(1) NSW;
(2) QUEENSLAND; and
(3) WESTERN AUSTRALIA
provided that should complete data sets become available for Victora,
and or, South Australia these States should also be incorporated.
3. DATA REQUIRED
The following data is required:-
(a) Income from all sales for each Utility for the relevant
financial year in $M (Table 7, Item 7.7 of ESAA document).
(b) Consumption of electricity for each Utility for the relevant
financial year in million of kWh (Table 6, Item 6.7, of ESAA
document).
(c) The CPI (as herein defined) for the relevant financial year
expressed as a percentage.
4. DERIVATIONS FROM DATA
Step 1: Aggregation
Add each of (a) and (b) in 3 above to produce a three State total
(hereinafter A and B respectively).
<PAGE>
Step 2: Fuel Cost Ratio
The Fuel Cost Ratio (F) for the purpose of calculating the fuel price
escalator shall be 0.24.
Step 3: Average Sale Price
Derive the average sale price of electricity during the year in
cents/kWh by dividing total income from all sales (See 3(a) above) by
consumption (see 3(b) above).
G = A
-
B
Step 4: Annual Percentage Sales Price Movement
Derive the annual percentage change in the sale price of (H)
electricity.
(Gt -G t-1)
H = __________ x 100
Gt-1
where subscript: t refers to the present year
t-1 refers to the previous year
Step 5: CPI - Sale Price Differential
Derive the difference in the annual percentage movement in the sale
price of electricity (see Step 4 above) and the CPI (K) (see 3(c)
above).
K = H - J
where J is the Annual Percentage Movement in the CPI
CPIt - CPIt-1
J = ____________ x 100
CPIt-1
Step 6: Fuel Escalation
Fuel Escalation (X) can now be derived in annual percentage terms as
follows:-
X = K x F
<PAGE>
Step 7: Quarterly Application
Take the 4th root of X (as outlined in Schedule D Table II) to obtain
the quarterly Fuel Escalation - and apply to each quarter of the whole
Contract Year following the date of publication.
<PAGE>
THIS GUARANTEE made the 28th day of June 1985
BETWEEN: NORTHERN TERRITORY OF AUSTRALIA (hereinafter called "the
Territory") of the first part MAGELLAN PETROLEUM (N.T.) PTY.
LTD. of the second part UNITED OIL & GAS CO. (N.T.) PTY. LTD.
of the third part CANSO RESOURCES LIMITED of the fourth part
MOONIE OIL N.L. of the fifth part PETROMIN NO LIABILITY of the
sixth part TRANSOIL NO LIABILITY of the seventh part AND
FARMOUT DRILLERS N.L. of the eighth part (the parties of the
second to eighth parts inclusive hereto are hereinafter
collectively referred to as "the Producers")
WHEREAS:
A. Each Producer and Gasgo Pty. Limited have contemporaneously herewith
entered into an agreement of even date herewith entitled "Mereenie Gas
Purchase Agreement". Pursuant to the said Agreement Gasgo Pty. Limited
has agreed to purchase natural gas from each Producer upon and subject
to the terms and conditions therein contained.
B. Each Producer has entered into the said Agreement at the request of the
Territory (which request is testified by the Territory's execution of
this Guarantee) but subject to and in reliance on the Territory's
execution of this Guarantee.
NOW THIS GUARANTEE WITNESSES that in consideration of each Producer entering
into the Gas Purchase Agreement at the request of the Territory and in
consideration of the premises the Territory hereby covenants with each Producer
and it is agreed and declared as follows:
1. DEFINITIONS AND INTERPRETATION
1.1 In this Guarantee, unless contrary intention appears:
(a) "Gas Purchase Agreement" means the Agreement referred to in
Recital A hereof, as the same may from time to time be
amended;
(b) "Purchaser" means Gasgo Pty. Limited and includes its
successors and assigns under the Gas Purchase Agreement;
(c) "Producers" means the parties of the second to tenth parts
inclusive hereto and includes their respective successors and
assigns;
(d) "Producer" means one Producer;
(e) "Territory" means the party of the first part hereto and
includes its successors and assigns;
(f) "Moneys Hereby Secured" includes any part thereof;
<PAGE>
(g) the singular includes the plural and vice versa and a
reference to any gender includes each other gender.
2. GUARANTEE
2.1 The Territory hereby unconditionally and irrevocably guarantees to each
Producer the due and punctual payment of all moneys now or hereafter
owing or payable or to become owing or payable by the Purchaser to the
Producers or to any one or more of them on any account whatsoever under
or by reason of the Gas Purchase Agreement including any moneys that
may become owing or payable to the Producers or to any one or more of
them by the Purchaser by reason of any default on the part of the
Purchaser under the Gas Purchase Agreement, all of which moneys are
intended to be secured by these presents and are hereinafter referred
to as "the Moneys Hereby Secured".
2.2 As a separate and additional obligation hereunder, the Territory hereby
covenants with each Producer that it will at all times procure the due
and punctual performance observance and fulfilment by the Purchaser of
each and all of the duties and obligations of the Purchaser arising now
or hereafter under the Gas Purchase Agreement.
2.3 This Guarantee shall:
(a) be a continuing guarantee and shall not be considered as
discharged by the payment at any time hereafter of any of the
Moneys Hereby Secured or by any settlement of account or by
any other matter or thing whatsoever and shall apply to the
present and any future balance of the Moneys Hereby Secured;
(b) not be adversely affected in any way or discharged by:
(i) the granting to the Purchaser or any other person
of any time, credit, forbearance, indulgence,
consideration or other concession;
(ii) by reason of any transaction or arrangement that may
take place between the Producers or any one or more
of them and the Purchaser or any other person;
(iii) any act omission laches acquiescence delay or mistake
on the part of the Producers or any one or more of
them;
(iv) the liquidation of the Purchaser;
(v) the Producers or any one or more of them becoming a
party to or bound by any compromise, assignment of
property, scheme of arrangement, composition of debts
or scheme of reconstruction by or relating to the
Purchaser or any other person;
<PAGE>
(vi) any default, failure or delay in the performance by
any party to the Gas Purchase Agreement of any of its
obligations under or arising out of the Gas Purchase
Agreement;
(vii) illegality of performance on the part of the
Purchaser;
(viii) any amendment modification or other variation of or
to the Gas Purchase Agreement;
(ix) the Producers or any one or more of them failing or
neglecting to recover by the realisation of any
collateral or other security or otherwise any of the
Moneys Hereby Secured;
(x) the release discharge abandonment or transfer
(whether wholly or partially and with or without
consideration) of any security or judgment now or
hereafter held or recovered by the Producers or any
one or more of them from or against the Purchaser or
any other person;
(xi) any other act event matter or thing whereby the
liability of either the Territory under this
Guarantee or the Purchaser under the Gas Purchase
Agreement would but for this provision have been
affected or discharged; and
(c) shall not be treated as ancillary or collateral to or with any
other obligation howsoever created or arising and in
particular shall not be affected by any other security or
right which the Producers or any one or more of them now
obtain or hold or may hereafter obtain or hold for any
obligation or liability (whether present or future direct or
contingent matured or unmatured joint or several) of the
Purchaser of the Territory to the intent that this Guarantee
shall be enforceable (unless the same shall have been
satisfied according to the terms hereof) notwithstanding that
any other obligation whatsoever arising under any other
security is in any way extinguished or unenforceable for any
reason whatsoever.
2.4 (a) All moneys received by the Producers or any one or more of
them in reduction or satisfaction of the Moneys Hereby Secured
from or on account of the Purchaser (including any dividends
upon the liquidation of the Purchaser) or from the Territory
or from any other person shall be deemed to be payments in
gross and until the whole of the Moneys Hereby Secured have
been satisfied in full, the Territory shall not be entitled on
any grounds whatsoever:
(i) to claim the benefit of any security now or hereafter
held by the Producers or any one or more of them for
the payment of the Moneys Hereby Secured;
<PAGE>
(ii) either directly or indirectly to claim or receive the
benefit of any distribution dividend or payment
arising out of or relating to the liquidation (which
word where used in this Guarantee includes official
management, compromise, arrangement, amalgamation,
reconstruction, winding up and dissolution) of the
Purchaser or of any person liable jointly or
severally with the Purchaser to the Producers or any
one or more of them or liable under any security now
or hereafter held by the Producers or any one or more
of them as security for the Moneys Hereby Secured; or
(iii) in the event of the liquidation of the Purchaser or
any such other person whosoever, to prove or claim in
competition with the Producers or any one or more of
them so as to diminish any distribution dividend or
payment which but for such proof the Producers or any
one or more of them would be entitled to receive
arising out of or relating to such liquidation;
AND the receipt of any distribution dividend or other payment
which a Producer may receive out of or relating to such
liquidation shall not prejudice the rights of that Producer
against the Territory under this Guarantee.
(b) In the event of the liquidation of the Purchaser the Territory
authorises each Producer to prove for all moneys which the
Territory has paid hereunder and to retain and to carry into a
suspense account and appropriate at the discretion of the
Producer any dividends received until the Producer has with
the aid thereof been paid in full in respect of that part of
the Moneys Hereby Secured payable to it PROVIDED THAT any
amount so received by the Producer in excess of such part of
the Moneys Hereby Secured shall be repaid to the Territory.
2.5 Notwithstanding anything contained in this Guarantee and
notwithstanding that the whole or any part of the moneys hereinbefore
described as "the Moneys Hereby Secured" are or may be irrecoverable
from the Purchaser by any Producer (whether by reason of any legal
limitation disability or incapacity of or affecting the Purchaser or by
reason of any other fact or circumstance whatsoever and whether the
transactions or any of them relating to such moneys have been void ab
initio or have been subsequently avoided and whether or not any other
matters or facts relating thereto have been or ought to have been
within the knowledge Producer or any one or more of them) and thereby
such moneys or any part thereof are not recoverable from the Territory
as a surety, then in any such case the Territory hereby as a separate
and additional obligation under this Guarantee indemnifies each such
Producer in resect of such moneys and as a principal debtor agrees with
each such Producer to pay to it a sum equal to the amount of such
moneys as and when the same may become due and payable or would but for
their irrecoverability have become due and payable and the terms of
this Guarantee shall mutatis mutandis apply as far as possible to this
indemnity and the sum of money covered by this indemnity shall be
deemed to part of the Moneys Hereby Secured.
<PAGE>
2.6 A certificate signed by or on behalf of any director or secretary for
the time being of a Producer stating the amount owing to that Producer
under this Guarantee at the date mentioned in such certificate shall
prima facie evidence thereof.
2.7 The Producers or any one or more of them may from time to time at the
request or with the consent of the Purchaser and without any consent by
or notice to the Territory being necessary:
(a) amend or vary or agree to any amendment or variation of the
Gas Purchase Agreement or any other contract or arrangement
now or from time to time hereafter in force between the
Producers or any one or more of them and the Purchaser; and
(b) transact any business with, for or on account of the Purchaser
at the absolute discretion of such Producers.
2.8 As a separate and independent covenant, the Territory will upon demand
by any Producer pay to that Producer ("the Claimant"):
(a) all reasonable costs and expenses of or incidental to the
enforcement of this Guarantee by the Claimant (including legal
costs on a solicitor client basis and all fees charged by
counsel); and
(b) interest on so much of the amount payable hereunder to the
Claimant as becomes merged in any judgment or order at the
rate therein specified or at the Recovery Interest Rate (as
that term is defined in the Gas Purchase Agreement), whichever
shall be the higher.
2.9 The Territory acknowledges that it has not executed this Guarantee as a
result of or by reason of any promise, representation, statement or
information of any nature or kind whatsoever given or offered to it by
or on behalf of the Producers or any one or more of them.
2.10 Notwithstanding any other provision of this Guarantee, nothing herein
shall obligate or be deemed to obligate the Territory to do any act or
pay any monies beyond the extent to which the Purchaser is or may
become obligated under the Gas Purchase Agreement or would have been
obligated under the Gas Purchase Agreement if that Agreement had been
enforceable against the Purchaser in accordance with its terms.
3. FURTHER COVENANTS
3.1 The Territory hereby covenants with each Producer that:
(a) the Purchaser is a corporation duly incorporated and validly
existing under the laws of the Northern Territory of
Australia;
<PAGE>
(b) as at the date of this Guarantee, the Purchaser is wholly
beneficially owned and controlled by the Northern Territory
Electricity Commission, a statutory corporation of the
Territory and or the Territory;
(c) this Guarantee constitutes legally valid and binding
obligations of the Territory enforceable in accordance with
its terms; and
(d) the Gas Purchase Agreement constitutes legally valid and
binding obligations of the Purchaser enforceable in accordance
with its terms.
4. MISCELLANEOUS
4.1 This Guarantee shall be governed by and construed in accordance with
the law for the time being in force in the Northern Territory of
Australia.
4.2 All moneys payable to a Producer under this Guarantee shall be paid to
that Producer at its address for service specified in Clause 4.4 of
this Guarantee or to such other person or corporation and/or at such
other address as the Producer may from time to time notify to the
Territory and shall be paid by bank cheque in the lawful currency of
the Commonwealth of Australia for the time being.
4.3 Any notice demand consent or other communication required to be served
or given in terms of or arising out of this Guarantee:
(a) shall, in order to be valid, be in writing or by telex and in
the case of any such notice demand consent or other
communication to be served on or given to the Territory be
marked "For the urgent attention of the Under-Treasurer,
Northern Territory Treasury" or to such other addressee as may
be notified in writing or by telex by the Territory to each
Producer from time to time;
(b) Shall be deemed to have been duly served on or given to a
party if it is:
(i) left at the address of that party mentioned in Clause
4.4 hereof (or at such other address as may be
notified in writing or by telex by that party to each
other party from time to time); or
(ii) posted by prepaid post in an envelope addressed to
that party at such address; or
(iii) sent by telex to the telex number of that party
mentioned in Clause 4.4 hereof (or such other number
as may be notified by that party as aforesaid);
(c) shall be sufficient if:
(i) executed under the common seal of the party giving or
serving the same; or
<PAGE>
(ii) signed on behalf of the party giving or serving the
same by any attorney director secretary agent or
other duly authorised officer of such party;
(d) shall:
(i) if sent by prepaid post, be received on the date of
its actual receipt;
(ii) if sent by telex, be deemed to be received upon
receipt by the sender of the answerback code and
number of the recipient at the conclusion of the
transmission;
(iii) if delivered by hand, be deemed to be received on the
date of delivery.
4.4 The address of the Territory shall, until otherwise notified pursuant
to the preceding sub-clause, be:
Northern Territory Treasury,
7th Floor,
AMP Building,
Cnr Cavenagh & Knuckey Streets,
DARWIN. NT 5790
Telex: AA85541 NTRES
The address of each Producer shall, until otherwise notified pursuant
to the preceding sub-clause be:
C/- The Moonie Oil Company Limited,
Level 23,
12 Creek Street,
BRISBANE, Qld. 4000
Telex: AA41040
4.5 The Territory shall be responsible for the payment of all stamp duty
payable on this Guarantee. Each party shall bear its own legal costs
in connection with the preparation of this Guarantee.
4.6 This Guarantee shall inure to the benefit of each Producer and its
successors and assigns and shall be binding upon the successors and
assigns of the Territory PROVIDED HOWEVER no assignment by the
Territory of its obligations hereunder or any assumption of such
obligations by another person shall be made without the prior written
consent of each Producer.
<PAGE>
IN WITNESS WHEREOF the parties hereto have executed this Guarantee as a Deed on
the day first abovementioned.
SIGNED SEALED AND DELIVERED by )
THE HONOURABLE IAN LINDSAY )
TUXWORTH Treasurer of the Northern )
Territory of Australia in the presence of: ) /s/ Ian L. Tuxworth
.............................
/s/
.............................
SIGNED SEALED AND DELIVERED by )
MAGELLAN PETROLEUM (N.T.) PTY. LTD. )
by Roy Marshall Hopkins )
its duly appointed Attorney under )
Power of Attorney dated 26th June 1985 )
who states that he has no notice )
of revocation of the said power )
in the presence of: ) /s/ Roy M. Hopkins
.............................
/s/ Hedley Howard
.............................
SIGNED SEALED AND DELIVERED by )
UNITED OIL & GAS CO. (N.T.) PTY. )
LTD. by Roy Marshall Hopkins )
its duly appointed Attorney under )
Power of Attorney dated 26th June 1985 )
who states that he has no notice )
of revocation of the said power )
in the presence of: ) /s/ Roy M. Hopkins
.............................
/s/ Hedley Howard
.............................
SIGNED SEALED AND DELIVERED by )
CANSO RESOURCES LIMITED )
by ___________________________ )
its duly appointed Attorney under )
Power of Attorney dated 26/6/85 )
who states that he has no notice )
of revocation of the said power )
in the presence of: ) /s/
.............................
/s/
.............................
<PAGE>
SIGNED SEALED AND DELIVERED by )
MOONIE OIL N.L. )
by K. V. Hiscox )
its duly appointed Attorney under )
Power of Attorney dated 27/6/85 )
who states that he has no notice )
of revocation of the said power )
in the presence of: ) /s/ K. V. Hiscox
.............................
/s/
.............................
SIGNED SEALED AND DELIVERED by )
PETROMIN NO LIABILITY )
by K. V. Hiscox )
its duly appointed Attorney under )
Power of Attorney dated 27/6/85 )
who states that he has no notice )
of revocation of the said power )
in the presence of: ) /s/ K. V. Hiscox
.............................
/s/
.............................
SIGNED SEALED AND DELIVERED by )
TRANSOIL NO LIABILITY )
by K. V. Hiscox )
its duly appointed Attorney under )
Power of Attorney dated 27/6/85 )
who states that he has no notice )
of revocation of the said power )
in the presence of: ) /s/ K. V. Hiscox
.............................
/s/
.............................
SIGNED SEALED AND DELIVERED by )
FARMOUT DRILLERS N.L. )
by ___________________________ )
its duly appointed Attorney under )
Power of Attorney dated 26/6/85 )
who states that he has no notice )
of revocation of the said power )
in the presence of: ) /s/
.............................
/s/
.............................
AMADEUS BASIN TO DARWIN GAS PIPELINE
------------------------------------------
DEED OF TRUST
AMADEUS GAS TRUST
------------------------------------------
FREEHILL, HOLLINGDALE & PAGE,
SOLICITORS,
LEVEL 30, MLC CENTRE,
19-29 MARTIN PLACE,
SYDNEY. NSW. 2000
DX 361 SYDNEY
<PAGE>
INDEX
Part Subject Page
I Interpretation 2
II Establishment of the Trust 9
III Units 10
IV Creation and Issue of Units 11
V Register of Unit Holders and Certificates 14
VI Transfer, Mortgage and Redemption of Units 16
VII Period of the Trust, Income of the Fund and 18
Termination of the Trust
VIII Powers and Discretions of the Trustee 23
IX Accounts and Audit 32
X Amendment and Variation 35
XI Determinations of Trustee 35
XII The Trustee 36
XIII Notices 39
XIV Governing Law 41
Schedule
First First Unit Holders 42
Second Unit Certificate 43
Third Form of Transfer 44
Fourth Rights and Obligations Attaching to Special Unit 45
Fifth Special Distribution Rights Attaching to Units 52
held by Darnor Pty. Limited
<PAGE>
AMADEUS GAS TRUST
THIS TRUST DEED is made the ______ day of June BETWEEN
DAVID KEMPTHORNE STONE of 21 Myilly Terrace, Larrakeyah, The Northern Territory
of Australia (the "Settlor") of the one part and
N.T. GAS PTY. LIMITED a company incorporated in The Northern Territory of
Australia and having its registered office at C/- Wardell Nominees Pty. Limited,
1st Floor, 19 The Mall, Darwin in that Territory (the "Trustee") of the other
part.
WHEREAS
A. The Settlor intends to establish trusts for the benefit of the persons
referred to in the First Schedule hereto and other persons who become
beneficiaries of the trusts on and subject to the provisions of this
deed.
B. The Trustee has agreed to be the trustee of the trusts and to hold on
trust on and subject to the provisions of this deed the money, rights,
property and assets that are from time to time the subject of the
trusts.
<PAGE>
C. Before the execution of this deed the Settlor paid the sum of $101.00
to the Trustee upon the trusts and subject to the terms and conditions
herein declared and contained.
NOW THIS DEED WITNESSES AS FOLLOWS -
Part I
Interpretation
1.1 In this deed and in all documents issued hereunder, unless the contrary
intention appears -
"assessable income" means the total assessable income of the Fund
calculated in accordance with the provisions of the Income Tax
Assessment Act 1936 of the Commonwealth;
"Auditors" means the auditors of the Fund appointed under Part IX of
this deed;
"Act" means the Companies Act (Northern Territory);
"CA" means the agreement entitled "Construction Agreement" between the
Trustee and NTEC proposed to be dated 28 June 1985;
"Darnor" means Darnor Pty. Limited;
<PAGE>
"distribute" includes pay or transfer;
"financial year" means the period from the date of execution of this
deed until midnight on 30th June 1985, each subsequent period of 12
months ending at midnight on the 30th day of June preceding the vesting
date, or the period from midnight on the 30th day of June immediately
preceding the vesting date until the vesting date;
"Fund" means -
(a) the sum of $101.00 paid by the Settlor to the Trustee before
the execution of this deed;
(b) the other money, rights, property and assets from time to time
paid or transferred to and taken by, or otherwise acquired by,
the Trustee and held by the Trustee under the Trust including
money borrowed or raised by the Trustee and such rights as are
expected to be obtained by the Trustee under the GSA, CA, GAA
and Lease;
(c) all other additions and all accretions to that money and those
rights, property and assets;
<PAGE>
(d) the income produced by that money and those rights, property
and assets or earned or derived by the Trustee in its capacity
as trustee for the time being held by the Trustee (other than
net income in respect of any financial year that has been
transferred under clause 7.6 to accounts in the accounting
records of the Fund in the names of the persons who have the
right to receive and to be paid the net income);
"GAA" means the agreement entitled "Gas Acquisition Agreement" between
the Trustee and Gasgo Pty. Limited proposed to be dated 28 June 1985;
"GSA" means the agreement entitled "Gas Sale Agreement" between the
Trustee and NTEC proposed to be dated 28 June 1985 and includes any
renewal thereof;
"holder", in relation to a unit or units means the person at the time
recorded in the Register as the holder of that unit or those units;
"Lease" means the lease between the Trustee as Lessee and ANZ Leasing
(NT) Pty. Limited as Lessor proposed to be dated 28 June 1985;
"month" means a calendar month;
"net income" means net income of the Fund as determined in accordance
with the terms and provisions of Division 6 of Part III of the Income
Tax Assessment Act 1936 in respect of the relevant period;
<PAGE>
"NTEC" means the Northern Territory Electricity Commission;
"pay" includes tender cash or a bank cheque in favour of the payee that
has not been endorsed by a person other than the issuing bank;
"perpetuity period" means the period from the date of execution of this
deed until the earlier of the day immediately preceding the 21st
anniversary of the date of the death of the last survivor of the lineal
descendants living at the date of execution of this deed of His Late
Majesty King George VI and the day immediately preceding the 80th
anniversary of the date hereof;
"person" includes a body corporate;
"Pipeline" shall have the meaning ascribed thereto in the GSA;
"proper officer", in relation to the Trustee or a unit holder
(including in this paragraph the Special Unit holder) where the Trustee
or the unit holder is a corporation, means a director or the secretary
of the Trustee or the unit holder, as the case may be, or another
officer of the Trustee or the unit holder, as the case may be, of whose
authority the others of the Trustee and the unit holders have been
given notice by the Trustee or the unit holder, respectively;
<PAGE>
"Register" means the register of unit holders (including the Special
Unit holder) established and maintained under this deed;
"Special Unit" means the unit to which is attached the rights and
obligations described in the Fourth Schedule;
"Special Unit holder" means the person who is at the time the holder of
the Special Unit and includes the joint holders of the Special Unit;
"this deed" means this deed as amended from time to time, and a
reference to a provision of this deed shall be construed as a reference
to the provision as amended from time to time;
"transfer" includes assign, convey or otherwise assure;
"Trust" means the trusts established by this deed;
"Trustee" means N.T. Gas Pty. Limited or the other person or persons
who from time to time are the trustee or trustees of the Trust;
"unit" means an undivided part of the Fund created and issued under
this deed;
<PAGE>
"unit holder" means a person who is at the time the holder of a unit or
units and includes the joint holders of a unit or units, and at the
date of execution of this deed includes the persons referred to in the
First Schedule hereto and, unless expressly otherwise provided, does
not include the Special Unit holder;
vesting date" means the earliest to occur of -
(a) the date of expiration of the perpetuity period;
(b) the date of expiration of a period of 30 days immediately
succeeding the retirement or removal of the Trustee during
which a new Trustee is not appointed; and
(c) the date that the Trustee and all the unit holders agree shall
be the vesting date.
a corporation shall be taken to be related to another corporation if
the corporation is deemed to be related to another corporation for the
purposes of the Act;
words in the singular include the plural, and words in the plural
include the singular;
words importing one gender include the other genders; and
where a word or phrase is given a particular meaning, other parts of
speech and grammatical forms of that word or phrase have corresponding
meanings.
<PAGE>
1.2 For the purposes of this deed -
(a) the total value of the Fund will be calculated by
subtracting:-
(A) the sum of any debts, liabilities and obligations
(whether contingent or otherwise) of the Trustee in
its capacity as trustee (including all outgoings,
losses, expenses, costs, charges, fees, taxes,
duties, imposts and other amounts payable out of the
Fund or the income of the Fund or against which the
Trustee is entitled to be indemnified under this deed
outstanding at the time) from
(B) the value of the money, rights, property and assets
comprising the Fund at the time.
(b) the value of the money, rights, property and assets comprising
the Fund at any time and the amount of the debts, liabilities
and obligations referred to in paragraph (a) shall be agreed
by the Trustee and the unit holders or, failing agreement,
shall be determined by the Auditors whose certificate shall in
the absence of manifest error be binding on the Trustee and on
the unit holders.
1.3 No heading to a part of this deed shall be taken to be part of this
deed.
1.4 The Schedules form part of this deed.
<PAGE>
1.5 A reference in this deed to an Act, or a provision of an Act, shall be
construed as a reference to that Act, or provision, as originally
enacted and as amended from time to time and, in relation to an Act,
where that Act has been repealed and re-enacted, with or without
modifications, the reference shall be construed as including a
reference to the re-enacted Act as originally enacted and as amended
from time to time.
1.6 Notwithstanding anything contained herein (other than this clause 1.6)
to the contrary, each and every provision herein set out shall operate
and take effect subject to any rights, privileges, benefits,
restrictions, limitations, duties or obligations from time to time
arising pursuant to the terms of any agreement (whether now in
existence or entered into after the date hereof) between all of the
unit holders and the Trustee PROVIDED THAT no such agreement shall have
such operation and effect insofar as the rights and obligations
attaching to the Special Unit are concerned.
Part II
Establishment of the Trust
2.1 The Settlor directs the Trustee to take and hold the Fund, and the
Trustee shall take and hold the Fund, on trust for unit holders
(including the Special Unit holder) on and subject to the provisions of
this deed.
2.2 The Trust shall be called the "Amadeus Gas Trust".
<PAGE>
2.3 This deed, and each deed or other instrument, and each determination of
the Trustee, amending this deed, shall not operate or have effect to
establish or create trusts or powers which operate or have effect or
may be enforced or exercised after the expiration of the perpetuity
period, other than trusts for the immediate distribution of the Fund at
the expiration of the perpetuity period among the unit holders at the
time.
2.4 This deed shall not operate or have effect to constitute the
relationship of principal and agent, or of partners, between the
Trustee and any unit holder (including the Special Unit holder) or the
unit holders (including the Special Unit holder) or between the unit
holders (including the Special Unit holder) inter se.
2.5 Each person who has a right to receive and to be paid a part of the net
income in respect of a financial year shall be separately entitled to
receive and to be paid that part of the net income in relation to that
financial year, and those persons shall not be or be deemed to be
jointly entitled to receive or to be paid the net income in respect of
that financial year unless such entitlement results from the person
holding a unit jointly with another person.
Part III
Units
3.1 The whole of the beneficial interest in the Fund shall be divided into
units. Except as otherwise stated in this deed, the units shall confer
on their holders the same rights.
<PAGE>
3.2 A unit shall not confer on the holder an interest in any particular
part of the Fund or in any specific money, right, property or asset
included in the Fund, and a unit holder (including the Special Unit
holder) shall except where this deed expressly provides otherwise have
no right to direct the Trustee in relation to the performance or
exercise of any obligation, power or discretion of the Trustee under
this deed.
3.3 Each unit shall be taken and held by the unit holder (including the
Special Unit holder) on and subject to the provisions of this deed.
3.4 The holder of a unit shall hold its interest in the Fund in respect of
that unit as a tenant in common in relation to the interest in the Fund
of the other holders of units.
Part IV
Creation and Issue of Units
4.1 The beneficial interest in the sum of $101.00 comprising the Fund on
the execution of this deed shall be divided into 101 units (including
the Special Unit). The persons named in the First Schedule shall as at
and from the execution of this deed be the holders of the units set out
opposite their respective names in that Schedule.
4.2 Additional units shall be created and issued only in accordance with
this Part and the provisions of the Fourth Schedule.
<PAGE>
4.3 Subject to clause 6.3 and the provisions of the Fourth Schedule, where
at any time -
(a) the Trustee determines to acquire from any person (including a
unit holder) any sum of money or any rights, property or
assets as an addition to the Fund;
(b) that person -
(i) tenders to the Trustee an application in writing for
additional units signed by or on behalf of that
person stating that the person agrees to hold the
additional units on and subject to the provisions of
this deed and authorises the Trustee to enter that
person's name and the other particulars required
under this deed in the Register; and
(ii) pays the sum of money to the Trustee or executes a
transfer in favour of the Trustee of the rights,
property or assets and delivers the transfer to the
Trustee; and
(iii) the Trustee accepts such sum of money or transfer;
and
(c) each person who is at that time a unit holder has by notice
given to the Trustee consented to the creation and issue of
the additional units under this clause,
<PAGE>
additional units applied for by the applicant shall be created at the
time of such acceptance by the Trustee on the basis of one additional
unit for each prescribed amount of the sum of money or of the value of
the rights, property or assets paid or transferred to the Trustee and
shall be issued to that person.
4.4 For the purposes of clause 4.3 -
(a) the prescribed amount shall be the value of a unit or such
other amount as determined by the Trustee immediately before
the tendering of the application for the additional units
under clause 4.3; and
(b) the value of any rights, property or assets to be acquired by
the Trustee as an addition to the Fund shall be agreed by the
Trustee and the person from whom the Trustee determines to
acquire such rights, property or assets.
4.5 Units may be issued by the Trustee at a premium in which case a sum
equal to the amount or sum of the premium shall not be taken into
account in determining the number of additional units created and
issued in accordance with clause 4.3 but shall be transferred to an
account called the "unit premium account". Such account shall be
applied in such manner as the Trustee may from time to time determine.
4.6 Notwithstanding any other provision in this deed no person who is or
has been at any time the Trustee shall be issued units or be entitled
to apply for units.
<PAGE>
Part V
Register of Unit Holders and Certificates
5.1 The Trustee shall establish and maintain the Register and shall record
in the Register in respect of each unit holder (including for the
purposes of this clause 5.1 the Special Unit holder) particulars of -
(a) the name of each unit holder;
(b) the address and telex number, including particulars of a
change of address or telex number under Part XIII, for notices
to each unit holder;
(c) the number of units held by the unit holder, the distinctive
numbers of the units and the number of the certificate for the
units issued to the unit holder;
(d) the date on which the name of the unit holder was recorded in
the Register;
(e) the number of units acquired or disposed of by the unit
holder;
(f) the date of each acquisition or disposal of units by the unit
holder; and
(g) such other particulars as the Trustee thinks fit.
<PAGE>
5.2 The Register shall be kept in Darwin, The Northern Territory of
Australia or at any other place determined by the Trustee.
5.3 (a) The Trustee shall make out and issue to each unit holder
(including the Special Unit holder) a certificate or
certificates for the units held by the unit holder (including
the Special Unit holder) in the form set out in the Second
Schedule hereto and signed by or on behalf of the Trustee.
(b) In respect of a unit or units held jointly by several persons,
the Trustee shall not be bound to issue more than one
certificate. Delivery of a certificate for a unit or units to
one of several joint holders shall be sufficient delivery to
all such holders.
5.4 If the Trustee is satisfied that a certificate for a unit or units has
been worn out, defaced, lost or destroyed and has received from the
holder of the unit or units to which the certificate relates an
indemnity in a form and on and subject to conditions satisfactory to
the Trustee, the Trustee shall make out and issue to the holder a
replacement certificate.
5.5 Except as required by law, the Trustee shall not recognise a person as
holding a unit upon any trust. The Trustee shall not be bound by or
compelled in any way to recognise (whether or not the Trustee has
notice of the interest or right concerned) any equitable, contingent,
future or partial interest in any unit or any other right in respect of
a unit except an absolute right of ownership in the registered holder.
<PAGE>
Part VI
Transfer, Mortgage and Redemption of Units
6.1 (a) Subject to the provisions of this Part and, in respect of the
Special Unit, of the Fourth Schedule and the provisions of any
written agreement between the Trustee and all the unit holders
from time to time, a unit holder may transfer all or any of
his units by instrument in writing in the form set out in the
Third Schedule hereto or in any other form that the Trustee
approves.
(b) An instrument of transfer referred to in paragraph (a) shall
be executed by or on behalf of both the transferor and the
transferee.
(c) A transferor of units shall remain the holder of the units
transferred until the transfer is registered and the name and
other particulars required by this deed of the transferee are
recorded in the Register in respect of the units.
(d) The instrument of transfer shall be left for registration at
the registered office of the Trustee in The Northern Territory
of Australia or such other place acceptable to the Trustee
accompanied by the certificate for the units to which it
relates and such other information as the Trustee properly
requires to show the right of the transferor to make the
transfer and that the transfer has been duly stamped, if
required to be stamped, and thereupon the Trustee shall
register the transferee as a unit holder.
<PAGE>
6.2 Subject to any written agreement between the Trustee and all the unit
holders from time to time, a unit holder may not dispose, alienate or
deal with its units (or any of them or any interest therein) in the
Trust.
6.3 Notwithstanding any other provision in this deed no person who is or
has been at any time the Trustee shall be registered as a unit holder
or the Special Unit holder or otherwise have any beneficial interest in
the Fund.
6.4 (a) Should any unit holder desire to surrender any units for
redemption, such unit holder shall (not later than 28 days
before the date that he desires that his units shall be
redeemed (hereinafter called "the redemption date")) give
written notice to the Trustee (hereinafter called a
"redemption notice") specifying the units to be redeemed in
accordance with this clause.
(b) Upon the Trustee being furnished with a redemption notice in
accordance with the provisions of this clause, the Trustee may
(but shall not be obliged or bound to do so) on the redemption
date redeem the units referred to in the redemption notice and
shall redeem each such unit by paying to the unit holder in
respect of each unit to be redeemed an amount equal to the
prevailing value of the units as at the redemption date
determined under paragraph (e) and notified in writing to the
unit holder prior to the giving of the redemption notice.
<PAGE>
(c) The amount payable by the Trustee to the unit holder for the
redemption of his units in accordance with clause 6.4(b) shall
be paid by the Trustee to the unit holder on the redemption
date.
(d) Units redeemed in accordance with the provisions of this
clause 6.4 shall upon payment by the Trustee of the money due
to the unit holder in accordance with the provision of this
clause 6.4 cease to exist and be deemed to be cancelled on the
redemption date and the unit holder concerned shall have no
further claims whatsoever in respect of the units redeemed.
(e) The Trustee may at any time revalue the money, rights,
property and assets comprising the Fund and the amount of
debts, liabilities and obligations referred to in clause
1.2(a)(A) and (B) so as to determine the prevailing value of a
unit from time to time.
Part VII
Period of the Trust, Income of the Fund,
and Termination of the Trust
7.1 The Trust shall begin on the date of execution of this deed and shall
continue until the vesting date.
<PAGE>
7.2 The assessable income of the Fund shall include all income from the
carrying on of any business or undertaking, or the engaging in of any
transaction, by the Trustee under this deed and all dividends,
interest, rent and other income of any nature produced by the Fund or
earned or derived by the Trustee in its capacity as trustee of the
Trust.
7.3 Where a unit was created and issued after the beginning of a financial
year, the unit shall subject to clause 7.4, clause 7.6 and the
provisions of the Fourth Schedule in respect of the rights and
obligations attaching to the Special Unit confer on the holder the
right to receive and to be paid an equal share of the net income in
respect of the whole of the financial year as a unit (which was in
existence during the entire financial year) would receive in respect of
that financial year.
7.4 Where a unit was held by different persons during a financial year, or
a part of a financial year the persons who were holders of the unit at
the end of the financial year shall, except to the extent of interim
payments made in relation to the unit in accordance with clause 7.6,
have the right to receive and to be paid the share of the net income in
respect of the financial year conferred by the unit. For the purposes
of this clause the joint holders of a unit at any time shall be taken
to be a single holder.
<PAGE>
7.5 Within 7 days of the profit and loss account for each financial year
being made out and audited, the Trustee shall transfer to accounts in
the accounting records of the Fund in the names of each person who has
the right to receive a proportion of the net income in respect of the
financial year the appropriate proportion of the net income in respect
of the financial year and shall as soon as reasonably practicable after
the transfer pay to each person his proportion of the net income.
7.6 The Trustee may from time to time make payments to unit holders
(including the Special Unit holder) on account of the net income in
respect of any financial year and in that event the appropriate
adjustments shall be made to the amounts transferred and paid under
clause 7.5 or, in the case of the Special Unit holder and Darnor, under
the Fourth Schedule and Fifth Schedule respectively. The holder of a
unit at the time of making such interim payment shall be entitled to
the exclusion of any prior or subsequent holder of the unit to the
proceeds of the interim payment.
7.7 The Trust shall terminate on the vesting date and on that date the
Trustee shall hold the Fund on trust for the unit holders to distribute
the Fund to the unit holders in accordance with their rights under
clauses 3.2 and 3.3 hereof.
7.8 On termination of the Trust the Trustee shall forthwith give notice of
termination of the Trust to each unit holder (including the Special
Unit holder) and, unless all the unit holders (other than the Special
Unit holder) by notice given to the Trustee require otherwise, not less
than 7 days after the Trustee gives the notice -
<PAGE>
(a) the Trustee shall as soon as possible sell, call in and
convert into money the rights, property and assets included in
the Fund and shall distribute the Fund, less the costs,
charges and expenses of selling, calling in and converting
into money those rights, property and assets, among the unit
holders;
(b) the Trustee may sell to any unit holder the whole or any part
of the rights, property and assets included in the Fund and
any business or undertaking carried on by the Trustee in its
capacity as trustee of the Trust or any part of any such
business or undertaking in such manner, for such consideration
(including in consideration of the unit holder undertaking the
whole or any part of the debts, liabilities and obligations of
the Trustee in its capacity as trustee carrying on any such
business or undertaking), and on and subject to such terms and
conditions (including terms of deferred payment), as the
Trustee thinks fit;
(c) the Trustee may postpone the sale, calling in or conversion
into money of the whole or any part of the rights, property
and assets included in the Fund for such time as the Trustee
thinks fit in the interests of the unit holders and shall not
be obliged or liable to compensate the unit holders for any
loss or depreciation of those rights, property or assets
attributable to the postponement; and
<PAGE>
(d) the Trustee may set aside, appropriate or provide out of or
from the Fund and retain any part of the moneys, rights,
property or assets necessary to pay or discharge any debt,
liability or obligation, actual or contingent, in respect of
the Fund or incurred by the Trustee under this deed, but no
part of the Fund shall be retained under this paragraph longer
than the limitation period applicable to the debt, liability
or obligation and any part of the Fund retained under this
paragraph that is subsequently proved not to be required shall
be distributed among the unit holders in accordance with this
Part.
7.9 The Trustee may make distributions of capital to unit holders during
the term of the Trust provided that:
(a) any such distributions are only made with the prior consent of
all of the unit holders; and
(b) any such distribution recognizes the interests of the unit
holders hereunder.
<PAGE>
Part VIII
Powers and Discretions of the Trustee
8.1 The Trustee may apply, invest and deal with the whole or any part of
the Fund in such manner, in such places, and on and subject to such
terms and conditions, as the Trustee thinks fit. The Trustee shall have
the same powers and discretions in so applying, investing and dealing
with the whole or any part of the Fund as it would have if it were a
natural person and the absolute beneficial owner of the Fund and shall
not be limited to the investments which by law may be made by trustees.
8.2 The Trustee may apply the whole or any part of the Fund in carrying on,
whether as a sole trader or in partnership or otherwise, any business
or undertaking, or in engaging in any transaction, and in particular
but without limiting the power or discretion of the Trustee so to apply
the whole or any part of the Fund and to carry on any business or
undertaking or engage in any transaction, the Trustee may -
(a) acquire the whole or any part of the rights, property, assets,
business and undertaking, and undertake the whole or any part
of the debts, liabilities and obligations, of any person
carrying on any business or undertaking;
<PAGE>
(b) apply for, purchase or otherwise acquire patents, patent
rights, copyrights, trade marks, formulas, licences,
concessions and the like conferring an exclusive or
non-exclusive or limited right to use, or secret or other
information as to, an invention, and use, exercise, develop or
grant licences in respect of, or otherwise turn to account,
the property, rights, or information so acquired;
(c) enter into partnership or into an arrangement for sharing of
profits, union of interest, co-operation, joint venture,
reciprocal concession or otherwise, with any person carrying
on or engaged in, or about to carry on or engage in, any
business or undertaking or transaction;
(d) purchase or subscribe for shares, stock, debentures or
debenture stock (secured or unsecured), notes, bonds or other
securities, or rights or options in respect of such
securities, issued or proposed to be issued by any corporation
wherever incorporated or domiciled and whether statutory,
proprietary or public;
(e) enter into arrangements with any Government or authority,
supreme, municipal, local or otherwise, obtain from any such
Government or authority any rights, privileges and concessions
that the Trustee thinks it desirable to obtain and carry out,
exercise, and comply with, such arrangements, rights,
privileges and concessions;
<PAGE>
(f) establish and support, or aid in the establishment and support
of, associations, institutions, funds, trusts and conveniences
calculated to benefit employees or past employees of the
Trustee as trustee of the Trust or of its predecessors in
business, or the dependants or connections of such persons,
grant pensions and allowances, make payments towards insurance
and subscribe or guarantee money for charitable or benevolent
objects, for any exhibition or for any public, general or
useful object;
(g) promote any other corporation or corporations, or establish
and support, or aid in the establishment and support of any
trust or trusts, for the purpose of acquiring or taking over
the whole or any part of the rights, property or assets of the
Fund or of the business, undertaking, debts, liabilities or
obligations of the Trustee as trustee of the Trust;
(h) purchase, take on lease or licence or in exchange, hire or
otherwise acquire real or personal property or rights or
privileges that the Trustee thinks necessary or convenient for
the purposes of any such business or undertaking and, in
particular, land, buildings, easements, machinery, plant or
stock in trade;
<PAGE>
(i) construct, improve, maintain, develop, work, manage, carry
out, or control any buildings, works, factories, mills, roads,
ways, tramways, railways, branches or sidings, bridges,
reservoirs, watercourses, wharves, warehouses, electric works,
shops, stores or other works and conveniences that seem
calculated directly or indirectly to advance the interests of
any such business or undertaking and contribute to, subsidise
or otherwise assist or take part in the construction,
improvement, maintenance, development, working, management,
carrying out or control of the works or conveniences;
(j) invest and deal with the money of the Fund applied in any such
business or undertaking and not immediately required in such
manner as the Trustee from time to time thinks fit;
(k) lend and advance money or give credit or financial
accommodation to, and deposit money with, any person including
a unit holder, at interest or without interest, with or
without security, and on and subject to such terms and
conditions as the Trustee thinks fit;
<PAGE>
(l) guarantee and give guarantees and indemnities for the payment
of money or the performance of contracts or obligations by,
and secure or undertake the repayment of moneys lent or
advanced to, or the liabilities incurred by, any person
including a unit holder in any way and, in particular, by
giving, executing, or agreeing to give or execute, or by
permitting to subsist, any mortgage, encumbrance, charge, lien
or other security interest (including a security interest
arising by operation of law) of or on the whole or any part of
the Fund, and purchase, redeem or pay off such securities and
otherwise assist any person including a unit holder;
(m) borrow or raise or secure the payment of money or financial
accommodation in such manner, in such places, and on and
subject to such terms and conditions, as the Trustee thinks
fit, and secure any such borrowing, raising or payment of
money or financial accommodation or the repayment, discharge
or performance of any debt, liability, contract, guarantee or
other engagement incurred or to be entered into by the Trustee
in carrying on any business or undertaking in any way and, in
particular, by giving, executing, or agreeing to give
or execute, or by permitting to subsist, any mortgage,
encumbrance, charge, lien or other security interest
(including a security interest arising by operation of law) of
or on the whole or any part of the Fund, and purchase, redeem
or pay off such securities ANDIT IS HEREBY ACKNOWLEDGED that
the Trustee may borrow or raise or secure the payment of
money or financial accommodation for the purpose of meeting
any obligation in respect of the distribution of any moneys to
the Special Unit holder;
<PAGE>
(n) draw, make, accept, indorse, discount, negotiate, execute and
issue promissory notes, bills of exchange, bills of lading and
other negotiable or transferable instruments;
(o) sell or dispose of any such business or undertaking or any
part of any such business or undertaking for such
consideration as the Trustee thinks fit and, in particular,
for shares, debentures or securities of another corporation;
(p) adopt such means of making known and advertising any such
business or undertaking and the products of any such business
as seem expedient;
(q) apply for, secure or acquire by grant, legislative enactment,
assignment, transfer, purchase or otherwise, exercise, carry
out and enjoy, and pay for, aid in and contribute towards
carrying into effect, any charter, licence, power, authority,
franchise, concession, right or privilege that a Government or
authority or corporation or other public body is empowered to
grant, and appropriate any part of the Fund to defray the
necessary costs, charges and expenses;
(r) apply for, promote and obtain any statute, order, regulation
or other authorisation or enactment that seems calculated
directly or indirectly to benefit any such business or
undertaking and oppose any bill, proceedings or applications
that seem calculated directly or indirectly to prejudice any
such business or undertaking; and
<PAGE>
(s) retain any part of a distribution made to a unit holder
(including the Special Unit holder) who has an address outside
of Australia for the purposes of making payments of
withholding taxes and the like.
(t) make commodity futures contracts, currency futures contracts,
financial futures contracts and any other futures contracts,
at a futures market or otherwise, and whether or not any such
contract is a contract by way of gaming or wagering; or
(u) set aside, appropriate or provide out of or from the Fund any
money or other part of the Fund to pay or discharge any debt
or liability due or to become due.
8.3 The Trustee may purchase, take on lease or licence or in exchange, hire
or otherwise acquire, and improve, manage, develop, turn to account or
otherwise hold or deal with, any real or personal property, whether of
an income producing, appreciating, depreciating, wasting or speculative
nature or otherwise and including investments which by law may be made
by trustees, and may vary any investment, in such manner, in such
places, and on and subject to such terms and conditions, as the Trustee
thinks fit, and may apply, invest and deal with the whole or any part
of the Fund for the purpose.
8.4 The Trustee may sell, exchange, lease or license or grant rights to use
or occupy, or otherwise dispose of, any rights, property or assets
included in the Fund in such manner, in such places, and on and subject
to such terms and conditions (including, where the Trustee sells, terms
of deferred payment), as the Trustee thinks fit.
<PAGE>
8.5 The Trustee may pay out of the Fund any stamp, gift or settlement duty
or tax or similar duty, tax or impost, and the legal, accounting and
other professional fees payable in respect of this deed, the
establishment of the Trust, the payment or transfer of any money,
rights, property or assets to the Trustee as an addition to the Fund,
or the creation or issue of any units, and any income tax payable in
respect of any income of the Fund and for which no unit holder
(including the Special Unit holder) is liable to pay.
8.6 The Trustee may employ, appoint or engage, and may instead of acting
personally delegate in whole or in part the performance or exercise of
any of its obligations, powers and discretions under this deed to,
employees, directors of the Trustee, managers, agents, attorneys,
contractors, consultants and professional advisers including
solicitors, accountants, brokers and merchant banks and may pay their
wages, salary, emoluments, fees and expenses out of the income of the
Fund. Any delegation by the Trustee may be subject to limitations or
restrictions and may be revoked by the Trustee at any time.
8.7 (a) No person entering into any contract or engaging in any
transaction with the Trustee or otherwise dealing with the
Trustee need be concerned to see whether the entering into the
contract, the engaging in the transaction or the other dealing
is a proper exercise by the Trustee of its powers or
discretions under this deed, or to see to the application or
use of any money, rights, property or assets paid or
transferred to the Trustee whether as a capital or other
addition to the Fund or otherwise, and no such person shall be
affected by notice, actual, constructive or imputed, of the
provisions of this deed.
<PAGE>
(b) In particular but without limiting the generality of
sub-clause (a), no person lending or advancing money or giving
credit or financial accommodation to the Trustee need be
concerned to see that the money, credit or financial
accommodation is required or that no more money than is
required is borrowed or raised or to see to the application or
use of the money borrowed or raised.
8.8 Each power and discretion conferred on the Trustee under this Part
shall be an independent head of power or discretion and shall not be
limited or read down by reference to any other head of power or
discretion under this Part, and may be exercised as the Trustee thinks
fit in its absolute and uncontrolled discretion as if it were the
absolute beneficial owner of the Fund, and the Trustee shall have power
to do all things incidental to the effective exercise of any power or
discretion conferred on the Trustee under this deed and in addition
shall have all powers and discretions conferred on Trustees by statute
or otherwise by law.
8.9 (a) A director of the Trustee may be or become a director or other
officer of or otherwise interested in any corporation promoted
by the Trustee or the securities of which are included in the
Fund, and a director of the Trustee may be or become a
director or other officer of or otherwise interested in any
unit holder (including the Special Unit holder) that is a
corporation. Any such director shall not be accountable to
the Fund or to the unit holders (including the Special Unit
holder) for any remuneration or other benefits received by him
as a director or officer of or from his interest in the
corporation or the unit holder (including the Special Unit
holder) that is a corporation.
<PAGE>
(b) No contract entered into or other transaction engaged in by or
on behalf of the Trustee in which a director of the Trustee is
in any way, whether directly or indirectly, interested shall
be avoided nor shall a director of the Trustee be liable, by
reason of holding his office or the fiduciary relationship
thereby established, to account to the Fund or to the unit
holders (including the Special Unit holder) for any profit
arising from such contracts or other transactions.
(c) A director of the Trustee may vote in respect of any contract
or other transaction or proposed contract or other transaction
in which he is in any way, whether directly or indirectly,
interested or in respect of any matter arising out of such a
contract or other transaction or proposed contract or other
transaction, and he may sign or countersign a contract or
other documents to which the seal of the Trustee is affixed
notwithstanding that he is in any way, whether directly or
indirectly, interested in that contract or other document or
in the matter to which that contract or other document
relates.
Part IX
Accounts and Audit
9.1 The Trustee shall -
(a) keep such accounting records as correctly record and explain
the transactions of the Trustee as trustee of the Trust and
the financial position of the Fund; and
<PAGE>
(b) keep the accounting records in such a manner as will enable -
(i) the preparation from time to time of true and fair
accounts of the Fund; and
(ii) the accounts of the Fund to be conveniently and
properly audited in accordance with this deed.
9.2 The Trustee shall retain the accounting records kept under this Part
for a period of not less than seven years after the completion of the
transactions to which they relate. The Trustee shall keep the
accounting records in Darwin, The Northern Territory of Australia or in
such other place as may be agreed between all of the unit holders and
the Trustee from time to time.
9.3 The Trustee shall make the accounting records available at all
reasonable times for inspection without charge by each unit holder.
9.4 The Trustee shall, not more than 4 months after the end of each
financial year, cause to be made out -
(a) a profit and loss account for the financial year, being a
profit and loss account that gives a true and fair view of the
profit or loss of the Fund for the financial year and that
shows the net profit in respect of the financial year;
<PAGE>
(b) a balance sheet as at the end of the financial year, being a
balance sheet that gives a true and fair view of the state of
affairs of the Fund as at the end of the financial year; and
(c) a statement, and a report in respect of the financial year,
made in accordance with a resolution of the directors of the
Trustee and signed by not less than 2 of the directors,
stating the matters that would be required under sections 162
and 162A, respectively, of the Act if the Trustee were the
absolute beneficial owner of the Fund.
9.5 The Trustee shall ensure that the annual accounts of the Fund including
the profit and loss account and the balance sheet are audited.
9.6 Within one month after the date of execution of this deed, the Trustee
shall appoint a firm of auditors as Auditors of the Fund. The Trustee
shall pay the fees and expenses of the Auditors out of the income of
the Fund.
9.7 The Trustee may from time to time remove the Auditors and, if the
Auditors are so removed or retire, the Trustee shall appoint another
firm as Auditors in their place.
9.8 The accounting records of the Fund shall be kept, and the profit and
loss accounts and balance sheet shall be made out and audited, in
accordance with generally accepted accounting principles consistently
applied.
<PAGE>
Part X
Amendment and Variation
10.1 Subject always to the provisions of the Fourth Schedule and the Fifth
Schedule, this deed, except for clauses 4.6, 6.2 and 6.3 and this Part
X, may be amended, and subject to clause 10.3 the Trust may be varied,
by a determination of the Trustee made and recorded in accordance with
Part XI.
10.2 Each such amendment or variation shall operate and have effect from the
date of the determination of the Trustee.
10.3 The Trust shall not be varied in any way so as to confer upon any
person who is or has been at any time the Trustee any beneficial
interest in the Fund.
Part XI
Determinations of Trustee
11.1 Each determination of or by the Trustee in relation to any matter under
this deed shall -
(a) where the Trustee is a corporation, be made by a resolution of
its directors (passed at a meeting of its directors or in any
other manner permitted under its articles of association or
constituent documents) and recorded in the minutes of
proceedings of its directors; and
<PAGE>
(b) in any other case, be made by resolution of the Trustee
reduced to writing and signed by the Trustee,
and the minutes of proceedings of directors of the Trustee or the
resolutions of the Trustee reduced to writing and signed by the
Trustee, as the case may be, shall be maintained and kept with, and
form part of, the accounting records of the Fund.
Part XII
The Trustee
12.1 The Trustee shall be indemnified out of the Fund against liabilities
incurred by the Trustee in its capacity as trustee or in performing or
exercising its obligations, powers and discretions under this deed
including debts, liabilities and obligations incurred or undertaken by
the Trustee in carrying on any business or undertaking, or in engaging
in any transaction, under this deed.
12.2 The Trustee shall be indemnified out of the Fund against all costs,
charges and expenses including legal, accounting and other professional
fees and expenses paid or incurred by the Trustee in performing or
exercising its obligations, powers and discretions, under this deed.
<PAGE>
12.3 Except where the same is due to some fraud, breach of trust, wilful
default, gross negligence or recklessness, the Trustee shall not be
liable to compensate the Fund or the unit holders (including the
Special Unit holder) for any loss incurred in carrying on any business
or undertaking or in engaging in any transaction under this deed.
12.4 (a) The Trustee may by giving not less than 3 months' notice (or
such lesser notice as may be acceptable to the unit holders)
to each unit holder retire from the office of Trustee, and
the unit holders may by notice given to the Trustee by each
unit holder remove the Trustee from the office of Trustee
forthwith or on the expiration of any period set out in the
notice.
(b) Where the Trustee (the old Trustee) retires or is removed, the
unit holders shall within 30 days by an instrument signed by
or on behalf of unit holders holding between them at least 75%
of the units issued in the Fund at the relevant time appoint
any person or persons other than a unit holder (the "new
Trustee") to be Trustee in place of the old Trustee, and the
old Trustee shall pay or transfer the Fund to the new Trustee
and shall for the purpose execute and deliver to the new
Trustee all deeds, transfers, conveyances, assignments and
other assurances in favour of the new Trustee of the rights,
property and assets comprising the Fund necessary to transfer
to and vest in the new Trustee the legal interest in the Fund.
<PAGE>
(c) The new Trustee shall execute and deliver to the unit holders
(including the Special Unit holder) a deed and declaration of
trust in which the new Trustee undertakes for the benefit of
the unit holders (including the Special Unit holder) to take
the office of Trustee and perform or discharge the obligations
and liabilities of the Trustee under this deed.
12.5 Notwithstanding any other provision of this deed or any provision
included or deemed to be included therein (whether expressly or by
implication), the entire liability of each unit holder (including the
Special Unit holder) will be limited to the subscription price (if any)
payable by that unit holder in respect of any units subscribed for by
it hereunder and no unit holder (including the Special Unit holder)
shall have any liability to make any further contribution to the Fund
or payment to the Trustee in respect thereof. No unit holder (including
the Special Unit holder) shall be under any obligation personally to
indemnify the Trustee or any creditor of the Trustee in respect of any
of the liabilities (actual, contingent or otherwise and whether due to
any deficiency or not) of the Trustee in relation to, arising from or
in connection with the Fund, whether arising from or by reason of the
holding of any unit or any relationship with the Trustee arising from
any such holding. Any such liabilities are hereby expressly excluded.
The only rights, if any, of indemnity of the Trustee and the respective
creditors shall be limited to having recourse to the Fund. Nothing in
this deed shall constitute either the Trustee as the agent of any unit
holder (including the Special Unit holder) nor create any relationship
between any unit holder (including the Special Unit holder) on the one
hand and the Trustee (other than as trustee) on the other. Creditors
and other persons having any dealing with the Trustee hereby expressly
disclaim any right or entitlement to have recourse to any unit holder
<PAGE>
(including the Special Unit holder) in respect of any liabilities of
the Trust or the Trustee. Without limiting the generality of the
provisions of this clause, it is recorded that the unit holders
(including the Special Unit holder) shall be entitled to rely on the
provisions of this clause also in cases where any liabilities are
incurred as a result of any direction or request of unit holders
(including the Special Unit holder).
12.6 The Trustee shall be paid such remuneration for performing its services
and functions under this deed as is from time to time determined by an
instrument signed by or on behalf of unit holders holding between them
at least 75% of the units issued in the Fund at the relevant time but
until otherwise determined as aforesaid no remuneration will be paid to
the Trustee.
Part XIII
Notices
13.1 All notices, consents, requests and other documents authorised or
required to be given by or pursuant to this Deed shall be given in
writing and either delivered personally to an officer of the intended
recipient or mailed by pre-paid post or sent by telegram, telex or
cable addressed to the secretary of the intended recipient at its
address which is:
(a) in the case of the Trustee - its registered office from time
to time and telex number ____________, and
<PAGE>
(b) in the case of a unit holder (including the Special Unit
holder) - its address telex number as recorded in the
Register.
13.2 All notices and other communications addressed in accordance with
Clause 13.1 above and delivered or sent by pre-paid post, telegram,
telex or cable shall be effected when received and any such notice or
communication shall be deemed to be received:
(a) if sent by mail, when actually received;
(b) if sent by telex, on receipt by the sender of the answerback
code at the end of transmission;
(c) if sent by telegram or cable, 24 hours after sending; and
(d) if delivered, upon receipt by any employee of the intended
recipient or any other party authorised by the intended
recipient to receive such notice or communication or if at the
time of delivery there are no such persons present at the
address of the intended recipient then upon deposit of such
notice or communication in any receptacle provided at such
address for such purpose.
13.3 A notice may be given by the Trustee or by a unit holder (including the
Special Unit holder) to the joint holders of another unit by giving the
notice to the joint holder first named in the Register in respect of
the unit or the Special Unit (as the case may be).
<PAGE>
Part XIV
Governing Law
14.1 This deed shall be governed by and construed in accordance with the law
of or applicable in The Northern Territory of Australia, and the
Trustee submits to the jurisdiction of the courts of that Territory and
of all courts having jurisdiction in appeal from the courts of that
Territory.
<PAGE>
FIRST SCHEDULE
(Clause 4.1)
First Unit Holders
Number of
Units/
Name Address Special Unit
CSR Limited Knox House, 32
1-7 O'Connell Street,
Sydney, New South Wales
Agex Pty. Limited Level 21, 32
111 Pacific Highway,
North Sydney, New South Wales
The Moonie Oil Company Limited 33rd Floor, BHP House, 32
140 William Street,
Melbourne, Victoria
Darnor Pty. Limited C/- The Northern Territory 4
Electricity Commission,
5th Floor, NTEC House,
18-20 Cavanagh Street,
Darwin, The Northern Territory
of Australia
Lohengrin Pty. Ltd. proposed C/- Messrs. Chambers 1 Special Unit
to be named "Amadeus Gas McNab Tully & Wilson
Producers Pty. Limited" 324 Queen Street,
Brisbane, Queensland
<PAGE>
SECOND SCHEDULE
(Clause 5.3(a))
Unit Certificate
Principal Register,
#
Certificate No. # *No. of
Units:
THIS IS TO CERTIFY that # is the registered holder of the above number of units
in the Amadeus Gas Trust as constituted and regulated by Trust Deed dated 27
June, 1985 made between N.T. Gas Pty. Limited as the Trustee and David
Kempthorne Stone as the settlor.
Given under the Common Seal of N.T. Gas Pty. Limited this ____ day of __________
One thousand nine hundred and #.
. . . . . . . . . . . . . . .
Director
. . . . . . . . . . . . . . .
Director/Secretary
* Indicate if Special Unit.
<PAGE>
THIRD SCHEDULE
(Clause 6.1(a))
Form of Transfer
I/We _________________________________________________________________________
______________________________________ of _____________________________________
___________________ (The Transferor) in consideration of the sum of ____________
_____________________________________ dollars ($_______________) paid to me
by _______________________________________ of __________________________________
(hereinafter called "the Transferee") do hereby transfer to the said Transferee
____________________ Units in the Trust Fund known as the Amadeus Gas Trust such
Trust being constituted by Trust Deed dated the 27th day of June, 1985 made
between David Kempthorne Stone (as Settlor) and N.T. Gas Pty. Limited (as
Trustee). The Transferee hereby agrees to accept the abovementioned Units
subject to and on terms and conditions contained in the said Trust Deed and
agrees to be bound by the terms of the said Trust Deed as a Unit Holder.
If this Transfer is signed by an Attorney, the Attorney hereby states that he
has no notice of the revocation of the Power of Attorney under authority of
which this Transfer Form is signed.
DATED the __________________ day of _______________________, 198#.
SIGNED by the Transferor in )
the presence of: ) _______________________________
SIGNED by the Transferee in )
the presence of: ) _______________________________
Note: If the Transferor or Transferee is a company this Transfer Form must be
executed under common seal.
<PAGE>
FOURTH SCHEDULE
Rights and Obligations Attaching to Special Unit
1. Interpretation
1.1 In this Schedule unless the contrary intention appears:
"Acquisition Cost" means the amount of dollars payable in respect of
the acquisition by the Special Unit holder of the equity interest in
the Fund pursuant to paragraph 5.3;
"Acquisition Date" means the 20th anniversary of the Contract
Commencement Date;
"Acquire Equity" means acquire the equity interest in the Fund pursuant
to paragraph 5.3 on the Acquisition Date;
"Additional Sales" means the sales and/or transport of gas Transmitted
through the Pipeline:
(i) to any customer or recipient pursuant to any contract or
arrangement other than the GSA; or
(ii) to NTEC in excess of the quantities of gas which Gasgo Pty.
Limited and NTEC respectively have contracted to buy as at the
date of the GSA where such sales and/or transport are or is
made pursuant to any additional contract or arrangement for
the purchase of gas;
"Agreed Investment Payout" means in any financial year the sum of the
relevant half-Yearly net investment contributions and the compounded
return thereon (the net contribution in any financial year being the
difference between the relevant contribution, being thirty-one (31)
consecutive half-Yearly payments of $1,350,000 in respect of the period
commencing on the Contract Commencement Date and thereafter nine (9)
consecutive half-Yearly payments of $2,365,000, and the annual
distribution in respect of the Special Unit in that financial year and
the compounding being at the rate of 25% per annum from the date on
which the relevant contribution (or any part thereof) is made);
"Election Date" means the day immediately following the day on which
the Election Period elapses;
"Election Period" means the period of fifteen years and six months from
the Contract Commencement Date;
"Excluded Assets" means the Pipeline, any additional assets of the Fund
acquired to facilitate Additional Sales any goodwill included in the
Fund;
"NTEC Certificate" means the certificate described in paragraph 11.1;
<PAGE>
"Option A" means the option described as such in paragraph 4.1.2(i);
"Option B" means the option described as such in paragraph 4.1.2(ii);
"Pipeline Tariff Margin" means the margin on sales of gas calculated
according to the following formula:
N = R - (F + (P x O))
where, in respect of any Contract Year:
N = Pipeline Tariff Margin;
R = total receipts of the Trustee from the relevant Additional Sales
less the price paid (if any) by the Trustee to the supplier of
that gas for that gas. (For the purpose of Additional Sales to
NTEC, "R" shall be deemed for the purposes only of this Fourth
Schedule to be calculated on the basis of a Transmission charge
of $3.00 for each GJ.);
F = financing charges incurred in the supply of gas in respect of the
relevant Additional Sales;
P = the proportion of that additional customer's or recipient's
throughput compared to total throughput (adjusted to reflect the
distance of main trunk line used); and
O = Operating Tariff components (i), (ii) and (iii) of Part 3 of
Schedule C to the GSA;
"Relevant Assets of the Fund" means the total value of the assets of
the Fund (other than the Excluded Assets) LESS the total value of the
debts, liabilities and obligations described in clause 1.2(a)(A) of
this deed other than such debts, liabilities and obligations as have
been incurred for the purpose of acquiring additional assets to
facilitate Additional Sales;
"Relevant Proportion" (expressed as a decimal), unless otherwise agreed
in writing between the Special Unit holder and all of the other unit
holders, shall be 0.11;
"Relevant Share" means the share (expressed as a per centum) of the
Pipeline Tariff Margin as specified in paragraph 4.1;
"Trigger" means the first occasion of the entering into a contract or
arrangement for Additional Sales to any one customer or recipient where
such Additional Sales are of not less than 25 PJ of gas over any period
of 5 consecutive Years; and
"Year" means any period of 365 consecutive days.
The following words and terms shall have the meanings ascribed thereto
respectively in the GSA:
<PAGE>
"Contract Commencement Date";
"Contract Year";
"GJ";
"month";
"Operating Tariff";
"PJ";
"Transmission"; and
"Transmitted".
1.2 References to paragraphs are to paragraphs of this Schedule
2. Special Unit
2.1 As at the Contract Commencement Date (but not before), the Special Unit
shall have the rights described in this Schedule PROVIDED THAT if the
Contract Commencement Date has not occurred on or before 1 January 1988
the Trustee shall forthwith redeem the Special Unit and the amount
payable to the holder of the Special Unit for the redemption of the
Special Unit shall be $1.00. Upon payment by the Trustee of the money
due under this clause 2.1 for the redemption of the Special Unit the
Special Unit shall cease to exist and be deemed to be cancelled on the
redemption date and the Special Unit holder shall have no further
claims whatsoever in respect of the Special Unit.
3. Income Distribution in Respect of the Special Unit
3.1 The Special Unit shall carry the right to a preferential annual
distribution in respect of a financial year equal to the Relevant Share
for that financial year.
4. Relevant Share
4.1 The Relevant Share shall be the share of the Pipeline Tariff Margin
calculated in accordance with the following provisions of this
paragraph 4:
<PAGE>
4.1.1 As from the date hereof (UNTIL in the case where an election to Acquire
Equity has been made pursuant to paragraph 4.l.3 or 5.1 the day on
which the Special Unit is converted pursuant to paragraph 5.5 and in
any other case the later of the Acquisition Date and the day on which
the Special Unit holder's Agreed Investment Payout reaches zero) the
share of the Pipeline Tariff Margin shall be:
(i) in respect of Additional Sales in the relevant financial year
each of which is less than 5 PJ where the aggregate of those
Additional Sales does not exceed 1 PJ: 0%;
(ii) in respect of Additional Sales in the relevant financial year
each of which is less than 5 PJ where the aggregate of those
Additional Sales exceeds 1 PJ: 25%.
4.1.2 Within one month of the occurrence of the Trigger the Special Unit
holder shall without prejudice to Clause 4.1.1 give notice to the
Trustee of its election of either Option A or Option B and in default
of the giving of such notice within one month of the occurrence of the
Trigger the Special Unit holder shall be deemed to have given to the
Trustee a notice electing Option A.
(i) Option A
Under Option A the share of the Pipeline Tariff Margin shall
be as from the occurrence of the Trigger and until the
Election Date:
(a) in the case of Additional Sales in the relevant
financial year to individual customers or recipients
other than NTEC of greater than 5 PJ: 15%;
(b) in the case of Additional Sales to NTEC in the
relevant financial year: 10%;
(ii) Option B
Under Option B the share of the Pipeline Tariff Margin shall
be as from the occurrence of the Trigger and until the later
of the Acquisition Date and the day on which the Special Unit
holder's Agreed Investment Payout reaches zero:
(a) in the case of Additional Sales in the relevant
financial year to individual customers or recipients
other than NTEC of greater than 5 PJ: 25%;
(b) in the case of Additional Sales to NTEC in the
relevant financial year: 25%.
4.1.3 Where Option A has been elected or deemed to have been elected on or
before the Election Date then on the Election Date the Special Unit
holder shall give notice to the Trustee of its election either to
Acquire Equity or not to Acquire Equity and in default of the giving of
such notice within one month of the Election Date the Special Unit
holder shall be deemed to have given to the Trustee a notice electing
not to Acquire Equity, the shares of Pipeline Tariff Margin shall
without prejudice to Clause 4.1.1 CONTINUE to be the shares specified
in paragraph 4.1.2(i) above:
(i) in the case of the Special Unit holder electing or being
deemed to have elected not to Acquire Equity - UNTIL the later
of the Acquisition Date and the day on which the Special Unit
holder's Agreed Investment Payout reaches zero;
<PAGE>
(ii) in the case of the Special Unit holder electing to Acquire
Equity - UNTIL the Acquisition Date.
5. Acquisition of Equity
5.1 Where the Trigger has not occurred on or before the expiration of the
Election Period, the Special Unit holder shall give notice to the
Trustee of its election either to Acquire Equity or not to Acquire
Equity and in default of the giving of such notice within one month of
the Election Date (the Trigger not having occurred prior to that day)
the Special Unit holder shall be deemed to have given to the Trustee a
notice electing not to Acquire Equity.
5.2 Where the notice of election to Acquire Equity is given pursuant to
paragraph 4.1.3 or 5.1, the Special Unit holder shall on the
Acquisition Date acquire an equity interest in the Fund by paying to
the Trustee on the Acquisition Date the Acquisition Cost as calculated
below.
5.3 The Acquisition Cost payable by the Special Unit holder shall be
calculated according to the following formula:
$X = P x S
1 - S
where:
X = the Acquisition Cost;
P = the value of the Relevant Assets of the Fund; and
S = the Relevant Proportion.
5.4 Where the notice of election to Acquire Equity is given pursuant to
paragraph 4.1.3 or 5.1, then on the Acquisition Date the Special Unit
holder shall pay the Acquisition Cost to the Trustee (in cash).
5.5 On payment to the Trustee of the Acquisition Cost all of the rights and
obligations described in this Schedule attaching to the Special Unit
shall cease to exist and the Special Unit shall convert into such
number of units as shall give to the Special Unit Holder a holding of
units equal to the Relevant Proportion of the units issued in the Fund
as at the Acquisition Date including the units created as a result of
the conversion of the Special Unit (those units ranking pari passu in
all respects with the other units issued under this deed).
<PAGE>
5.6 The Special Unit Holder, by giving its notice to the Trustee of its
election to Acquire Equity pursuant to paragraph 4.1.3 or 5.1, shall be
deemed to have agreed to hold the units into which the Special Unit is
converted (pursuant to Clause 5.5) on and subject to the provisions of
this Deed and to have authorised the Trustee to enter the name of the
Special Unit Holder and the other particulars required under this deed
in the Register in respect of the said units.
5.7 The valuation of any assets required to be made pursuant to any
provision of this Schedule shall be made on an arm's length basis by
the Auditors. The costs and expenses associated with any such valuation
shall be paid by the Trustee out of the Fund.
6. Transfer
6.1 Neither the Special Unit nor any interest therein shall be transferred,
disposed of, alienated or otherwise dealt with without the prior
consent of the Trustee.
7. No Other Rights or Obligations
7.1 Save as provided in this Schedule, there are no rights or obligations
which attach, or are liable to be attached, to the Special Unit.
7.2 Save as provided in this Schedule, the Special Unit shall not confer on
its holder the right to participate in any distribution of:
(i) the assessable income of the Fund; or
(ii) any assets of the Fund whether such distribution occurs in the
course of a winding up of the Trust or otherwise.
8. Amendments of Rights and Obligations
8.1 No provision of this Schedule which deals with, touches upon or the
alteration of which may have a material adverse effect upon the rights
and obligations attaching to the Special Unit may be amended or varied
otherwise than with the prior consent of the Special Unit holder.
9. Supply of Information; Keeping of Accounts
9.1 The Trustee shall comply with any reasonable request from the Special
Unit holder for information as to the basis of, and any figures used
in, the calculation of any sum, amount, figure or value required or
contemplated to be calculated under this Schedule including, without
limiting the foregoing, information concerning Additional Sales and
calculations of distributions of income.
<PAGE>
9.2 The Trustee shall keep such accounting records as correctly record and
explain the transactions which form the basis of any calculations
required or contemplated to be made under this Schedule and shall
retain such accounting records for a period of not less than seven
years after the completion of the transactions to which they relate.
The Trustee shall keep the accounting records at such place or places
in Darwin, The Northern Territory of Australia as the Trustee thinks
fit.
10. Return Ceiling
10.1 Notwithstanding anything contained elsewhere in this Schedule, it is
acknowledged that the Special Unit holder shall not be entitled to any
further distributions in respect of the Special Unit where the Special
Unit holder has elected Option B pursuant to paragraph 4.1.2 and the
Special Unit holder's Agreed Investment Payout has reached zero.
11. NTEC Certificate
11.1 The Trustee shall serve upon the Special Unit holder a certificate in
respect of the preceding six month period (ending on either 30 June or
31 December, as the case may be) which certificate shall specify the
relevant half-Yearly investment contribution of the Special Unit holder
and such details in respect of the Additional Sales during such
preceding six month period as shall be sufficient to permit the
calculation of the Pipeline Tariff Margin for that period. Such
certificate shall be served upon the Special Unit holder by the Trustee
as soon as reasonably practicable after the receipt by the Trustee from
NTEC of such information as shall permit the Trustee to prepare the
certificate.
11.2 The contents of any certificate shall be superseded by the contents of
a later certificate as and when served upon the Special Unit holder.
12. Additional Sales to NTEC
12.1 Without prejudice to paragraph 10.1 and notwithstanding any other
provision of this Schedule, the Special Unit holder shall only be
entitled to its Relevant Share of the Pipeline Tariff Margin on
Additional Shares to NTEC in any Contract Year (such share expressed in
A$ being hereinafter referred to as "the Relevant Amount") if the
Trustee has received from NTEC in respect of those Additional Sales an
amount equal to the Relevant Amount.
<PAGE>
FIFTH SCHEDULE
Special Distribution Rights Attaching to Units held by
Darnor Pty. Limited
1. Interpretation
1.1 In this Schedule unless the contrary intention appears:
"Darnor" means Darnor Pty. Limited; and
"Darnor's Relevant Share" means the share (expressed as a per centum)
of the Pipeline Tariff Margin as specified in paragraph 3.1.
The following words and terms shall have the meanings ascribed thereto
respectively in the Fourth Schedule:
"Acquisition Date";
"Acquire Equity";
"Additional Sales";
"Agreed Investment Payout";
"Election Date";
"Option A";
"Option B";
"Pipeline Tariff Margin"; and
"Trigger".
1.2 Unless the contrary intention appears, references to paragraphs are to
paragraphs of this Schedule.
2. Distribution in Respect of Units Held by Darnor
2.1 The units held by Darnor from time to time shall carry the additional
right to an aggregate preferential annual distribution in respect of a
financial year equal to Darnor's Relevant Share for that financial
year.
<PAGE>
3. Relevant Share
3.1 Darnor's Relevant Share shall be the share of Pipeline Tariff Margin
calculated in accordance with the following provisions of this
paragraph 3:
3.1.1 As from the date of this deed (UNTIL in the case where an election to
Acquire Equity has been made by the Special Unit holder pursuant to
paragraph 4.1.3 or 5.1 of the Fourth Schedule the day on which the
Special Unit is converted pursuant to paragraph 5.5 of the Fourth
Schedule and in any other case the later of the Acquisition Date and
the day on which the Special Unit holder's Agreed Investment Payout
reaches zero) the share of the Pipeline Tariff Margin shall be:
(i) in respect of Additional Sales in the relevant financial year
each of which is less than 5 PJ where the aggregate of those
Additional Sales does not exceed 1 PJ: 50%;
(ii) in respect of Additional Sales in the relevant financial year
each of which is less than 5 PJ where the aggregate of those
Additional Sales exceeds 1 PJ: 50%.
3.1.2 Where the Special Unit Holder has given notice or is deemed to have
given notice (as the case may be) to the Trustee pursuant to paragraph
4.1.2 of the Fourth Schedule of its election of:
(i) Option A, then:
(a) as from the occurrence of the Trigger the share of
the Pipeline Tariff Margin shall be in the case of
Additional Sales in the relevant financial year to
individual customers or recipients other than NTEC of
greater than 5 PJ: 75%;
(b) if Option A has been elected or deemed to have been
elected (as the case may be) on or before the
Election Date and the Special Unit holder has elected
or been deemed to have elected not to Acquire Equity
pursuant to paragraph 4.1.3 of the Fourth Schedule,
then the share of Pipeline Tariff Margin specified in
paragraph 3.1.3 (i) above shall CONTINUE UNTIL the
later of the Acquisition Date and the day on which
the Special Unit holder's Agreed Investment Payout
reaches zero;
(ii) Option B, then:
(a) as from the occurrence of the Trigger and until the
later of the Acquisition Date and the day on which
the Special Unit holder's Agreed Investment Payout
reaches zero the share of the Pipeline Tariff Margin
shall be in the case of Additional Sales in the
relevant financial year to individual customers or
recipients other than NTEC: 75%;
<PAGE>
(b) if at any time the Special Unit holder's Agreed
Investment Payout reaches zero the share of the
Pipeline Tariff Margin shall be in the case of
Additional Sales in the relevant financial year to
individual customers or recipients other than NTEC:
85%.
4. Existence of Rights
4.1 The rights which are described in this Schedule shall attach to any
unit or units held by Darnor only for so long as Darnor holds any such
unit or units.
5. Rights Additional; Pari Passu
5.1 The right of distribution provided in this Schedule to Darnor shall
rank pari passu with the right of distribution provided to the Special
Unit holder under the Fourth Schedule and shall be in addition to the
right of Darnor to participate in any distribution pursuant to Part VII
of this deed in respect of the units held by it from time to time.
5.2 Save for the additional rights attached under this Schedule, the units
held by Darnor from time to time shall rank pari passu in all respects
with the other units in the Trust.
6. Amendment of Rights
6.1 No provision of this Schedule which deals with, touches upon or the
alteration of which may have a material adverse effect upon the rights
attaching to the units held by Darnor from time to time (which rights
are pursuant to this Schedule) may be amended or varied otherwise than
with the prior consent of Darnor.
7. Supply of Information; Keeping of Accounts
7.1 The Trustee shall comply with any reasonable request from Darnor for
information as to the basis of, and any figures used in, the
calculation of any sum, amount, figure or value required or
contemplated to be calculated under this Schedule including, without
limiting the foregoing, information concerning Additional Sales and
calculations of distributions.
7.2 The Trustee shall keep such accounting records as shall correctly
record and explain the transactions which form the basis of any
calculations required or contemplated to be made under this Schedule
and shall retain such accounting records for a period of not less than
7 years after the completion of the transactions to which they relate.
The Trustee shall keep the accounting records at such place or places
in Darwin, The Northern Territory of Australia as the Trustee thinks
fit.
<PAGE>
8. NTEC Certificate
8.1 The Trustee shall serve upon Darnor a certificate in respect of the
preceding six month period (ending on either 30 June or 31 December, as
the case may be) which certificate shall specify such details in
respect of the Additional Sales during such preceding six month period
as shall be sufficient to permit the calculation of the Pipeline Tariff
Margin for that period. Such certificate shall be served upon Darnor by
the Trustee as soon as reasonably practicable after the receipt by the
Trustee from NTEC of such information as shall permit the Trustee to
prepare the certificate.
8.2 The contents of any certificate shall be superseded by the contents of
a later certificate as and when served upon Darnor.
9. Payment of Distributions in Respect of Units Held by Darnor
9.1 The distributions in respect of the units held by Darnor from time to
time shall be paid into such bank account or otherwise as shall be
notified to the Trustee by Darnor on or before 31 August 1986.
10. Failure to make Investment Contribution
10.1 In the event of a failure to make an investment contribution (or any
part thereof) (as contemplated in the Fourth Schedule) as and when due,
Darnor shall be entitled to a distribution of that amount which would
have been distributed to the Special Unit holder had that investment
contribution (or the part thereof) been so made.
<PAGE>
IN WITNESS WHEREOF the parties have hereunto set their hands and seals on the
day and year first hereinbefore mentioned.
SIGNED, SEALED AND DELIVERED )
by DAVID KEMPTHORNE STONE )
in the presence of: ) /s/ David K. Stone
/s/ ______________________
THE COMMON SEAL of )
N.T. GAS PTY. LIMITED )
was hereunto affixed by )
authority of the directors and )
in the presence of: ) /s/ ______________________
Director
/s/ ______________________
Secretary
<PAGE>
NORTHERN TERRITORY ELECTRICITY COMMISSION
NTEC House, 18-20 Cavenagh Street, o G.P.O. Box 1921, Darwin, NT. 5794.
Head Office (and Darwin Commercial) 82 7111
Darwin Operations (SHPS, System Control, Workshops) 82 7700
ENQUIRIES: ............................ TELEGRAPH: DELCOM DARWIN
FILE No. .............................. TELEX: AA85395
N.T. Gas Pty Limited Lohengrin Pty Limited
c/- Wardell Nominees Pty Limited (proposed to be named
19 The Mall "Amadeus Gas Producers
DARWIN N.T. 5790 Pty Limited")
(hereinafter referred to as "N.T. Gas") (hereinafter referred to as "AGPL")
c/- Messrs Chambers McNab
Tully & Wilson
12 Creek Street
BRISBANE QUEENSLAND
28th June, 1985.
Dear Sirs,
Trust Deed in respect of the Amadeus Gas Trust
dated 27th June, 1985 between D.K. Stone
as Settlor and N.T. Gas as Trustee ("the Trust Deed")
- --------------------------------------------------------------------------------
We refer to the Trust Deed and acknowledge that AGPL is the Special Unit holder
therein with the rights set out in the Fourth Schedule to the Trust Deed.
Words and expressions defined in the Fourth Schedule to the Trust Deed where
used herein shall have the same meanings as in that Schedule.
We hereby undertake with each of N.T. Gas and AGPL to pay to N.T. Gas (in its
capacity as Trustee of the Amadeus Trust) a sum equal to the Relevant Amount (as
defined in paragraph 12.1 of the Fourth Schedule to the Trust Deed) in each
Contract Year.
- ------------------------
The Common Seal of
The Northern Territory
Electricity Commission
was hereto affixed in
the presence of
/s/ ____________________
<PAGE>
N.T. GAS PTY LIMITED
(Incorporated in the Northern Territory)
Registered Office: Sydney Office:
C/- Wardell Nominees Pty Limited C/- CSR Limited
1st Floor 1 O'Connell Street
19 The Mall SYDNEY N.S.W. 2000
DARWIN N.T. 5790 Telephone: 02 235833
To: Lohengrin Pty Limited
(proposed to be named
"Amadeus Gas Producers
Pty Limited")
(hereinafter referred to as "AGPL")
C/- Messrs Chambers McNab
Tully & Wilson
12 Creek Street
BRISBANE QUEENSLAND
Dear Sirs,
Allotment of Shares on Conversion of Special Unit
We refer to the Deed of Trust between David Kempthorne Stone as Settlor and N.T.
Gas Pty. Limited ("NTG") as Trustee dated 27 June, 1985 whereby the Amadeus Gas
Trust was constituted (the "Trust Deed") and, in particular, to paragraph 5.5 of
the Fourth Schedule to the Trust Deed.
NTG hereby undertakes that, on the conversion of the Special Unit (as defined in
the Trust Deed) into the units ranking pari passu in all respects with the other
units issued under the Trust Deed, NTG shall allot (on receipt of the
application moneys therefor) such number of ordinary shares of $l.00 each in the
share capital of NTG as shall after allotment provide to AGPL a shareholding of
11% of the issued share capital of NTG.
Yours faithfully,
/s/________________________
for N.T. GAS PTY. LIMITED
---------------------------------------------------
---------------------------------------------
AGREEMENT BETWEEN
THE MEREENIE PRODUCERS
and
THE PALM VALLEY PRODUCERS
---------------------------------------------
---------------------------------------------------
CHAMBERS McNAB TULLY & WILSON
SOLICITORS & NOTARIES
324 QUEEN STREET
BRISBANE
<PAGE>
AGREEMENT BETWEEN
THE MEREENIE PRODUCERS
and
THE PALM VALLEY PRODUCERS
AGREEMENT made the 28th day of June, 1985
BETWEEN:
MAGELLAN PETROLEUM (N.T.) PTY. LTD.
the Party of the First Part
UNITED OIL & GAS CO. (N.T.) PTY. LTD.
the Party of the Second Part
CANSO RESOURCES LIMITED
the Party of the Third Part
OILMIN NL
the Party of the Fourth Part
PETROMIN NO LIABILITY
the Party of the Fifth Part
TRANSOIL NO LIABILITY
the Party of the Sixth Part
FARMOUT DRILLERS NL
the Party of the Seventh Part
C.D. RESOURCES PTY. LTD.
the Party of the Eighth Part
INTERNATIONAL OIL PROPRIETARY
the Party of the Ninth Part
PANCONTINENTAL PETROLEUM LIMITED
the Party of the Tenth Part
IEDC AUSTRALIA PTY. LIMITED
the Party of the Eleventh Part
AMADEUS OIL NL
the Party of the Twelfth Part
SOUTHERN ALLOYS VENTURE PTY. LIMITED
the Party of the Thirteenth Part
<PAGE>
W H E R E A S:
A. The Palm Valley Producers have negotiated the terms of an agreement for
the sale by them severally to Gasgo Pty. Limited ("the Purchaser") of a
quantity of Gas from the Palm Valley Field for transmission through the
Trunk Pipeline leased by the Pipeline Trust for consumption primarily
by NTEC in electricity generation in Darwin.
B. The Purchaser has requested the Palm Valley Producers to relinquish
part of their entitlement to sell Gas to the Purchaser with a view to
permitting the Mereenie Producers to enter into an agreement with the
Purchaser for the sale of Gas and in the circumstances the Palm Valley
Producers felt compelled to agree with that request and the agreement
between the Palm Valley Producers and the Purchaser for the sale of Gas
("the Palm Valley Gas Purchase Agreement") reflects that agreement.
C. In consideration of the Palm Valley Producers agreeing to relinquish
part of their entitlement to sell Gas to the Purchaser, the respective
Mereenie Producers have agreed with the respective Palm Valley
Producers as provided in Clause 2 hereof and to participate in the
Pipeline Benefits in the manner provided in Clause 3 hereof.
D. In consequence of the agreement by the Palm Valley Producers referred
to in Recital B hereof, the Purchaser has entered into an agreement
("the Mereenie Gas Purchase Agreement") with the Mereenie Producers for
the purchase of certain quantities of Gas from the Mereenie Field.
E. The Northern Territory Government has agreed with the Producers to
sponsor the oversizing of the Trunk Pipeline between Palm Valley and
Matarauka and the construction of the Mereenie Spur Line.
<PAGE>
F. The Pipeline Trust in return for the said oversizing and said
construction has offered to issue to a trustee on behalf of all the
Producers (for such beneficial interests as the Producers may agree
between themselves) a Special Unit in the Pipeline Trust ("the Pipeline
Benefits") which by the holding thereof will confer the right to
participate in certain pipeline tariff margins deriving from the
transmission through the Pipeline System of additional gas and also in
certain circumstances in the ownership of the Pipeline System in the
event of it being acquired by the Pipeline Trust.
G. The Palm Valley Producers and the Mereenie Producers have further
agreed that they will make mutual provision for the security of supply
of Gas in the manner provided in Clause 4 hereof.
H. Contemporaneously herewith there are being executed the following
documents:
(i) the Palm Valley Gas Purchase Agreement;
(ii) the Mereenie Gas Purchase Agreement.
NOW THIS AGREEMENT WITNESSES that the Parties hereto mutually covenant and agree
as follows:-
CLAUSE 1
DEFINITIONS
1.1 In this Agreement the following terms have the meanings ascribed to
them hereunder:
(a) Excluded Gas means natural gas from the Mereenie Field (other
than pursuant to the Mereenie Gas Purchase Agreement and the
proposed twenty year contract for the supply of natural gas to
Yulara) and from the Palm Valley Field (other than pursuant to
the NTEC (Alice Springs) Agreement and the Palm Valley Gas
Purchase Agreement).
<PAGE>
(b) Gas means for the purposes of Clause 4 hereof, natural gas
meeting the specifications contained in either the Palm Valley
Gas Purchase Agreement and the Mereenie Gas Purchase
Agreement.
(c) Incremental Gas means the first 45 petajoules of natural gas
(other than Excluded Gas) which is hereafter sold and
delivered into the Pipeline System pursuant to a contract or
contracts made with any one or more of the Producers or a
corporate vehicle controlled by any one or more of the
Producers as vendor or vendors and the gas specifications of
which contract or contracts gas from the Mereenie Field is
reasonably capable of meeting.
(d) Mereenie Field means the oil and gas field contained within
Petroleum Leases Numbers 4 and 5 in the Northern Territory.
(e) Mereenie Joint Venture means the joint venture which relates
inter alia to the Mereenie Field constituted pursuant to the
Mereenie Operating Agreement dated the Twenty-seventh day of
April, 1984 as amended by the amending agreement dated the
Third day of October, 1984.
(f) Mereenie Producers mean the Parties hereto whose names are
listed in the first column of the First Schedule hereto (being
all the current members of the Mereenie Joint Venture) and
their respective successors and assigns who become bound by
the terms of this Agreement.
(g) Mereenie Ownership Percentages mean the percentages set beside
the names of the respective Mereenie Producers in the second
column of the First Schedule hereto.
(h) Mereenie Gas Purchase Agreement means the agreement for the
sale of Gas from the Mereenie Field in the form and for the
quantities proposed to be entered into between the Mereenie
Producers and the Purchaser as recited herein.
<PAGE>
(i) Mereenie Spur Line means the gas pipeline proposed to be
constructed in order to connect the Mereenie Field with the
Trunk Pipeline at Stokes Pass.
(j) NTEC means the Northern Territory Electricity Commission.
(k) Palm Valley Field means the gas field contained within
Petroleum Lease No. 3 in the Northern Territory.
(l) Palm Valley Joint Venture means the joint venture which
relates to the Palm Valley Field constituted pursuant to the
Palm Valley Operating Agreement dated the Second day of April,
1985.
(m) Palm Valley Producers mean the Parties hereto whose names are
listed in the first column of the Second Schedule hereto
(being all the current members of the Palm Valley Joint
Venture) and their respective successors and assigns who
become bound by the terms of this Agreement.
(n) Palm Valley Ownership Percentages mean the percentages set
beside the names of the respective Palm Valley Producers in
the second column of the Second Schedule hereto.
(o) Palm Valley Gas Purchase Agreement means the agreement for the
sale of Gas from the Palm Valley Field in the manner and for
the quantities proposed to be entered into between the Palm
Valley Producers and the Purchaser as recited herein.
(p) Pipeline Benefits means the rights interests and benefits
accruing from the holding of the Special Unit which benefits
include those set forth in the Fourth Schedule of the trust
deed for the Pipeline Trust.
<PAGE>
(q) Pipeline Benefit Percentage means in relation to each Producer
the sum of the Palm Valley Ownership Percentage (if any) and
the Mereenie Ownership Percentage (if any) of that Producer
divided by two; and Pipeline Benefit Percentages has a
corresponding meaning.
(r) Pipeline System means the Trunk Pipeline and the Mereenie Spur
Line.
(s) Pipeline Trust means the Unit Trust of which NT Gas Pty. Ltd.
is the Trustee formed for the purpose of transporting natural
gas through the Trunk Pipeline.
(t) Producer means a Party who is a Mereenie Producer and/or a
Palm Valley Producer.
(u) Purchaser means Gasgo Pty. Ltd. (a nominee of the Northern
Territory Government) who is to be the purchaser pursuant to
the Palm Valley Gas Purchase Agreement and the Mereenie Gas
Purchase Agreement.
(v) Special Unit means the Special Unit in the Pipeline Trust to
be issued to a trustee for the Producers as provided in
Recital D hereof.
(w) Trunk Pipeline means the gas pipeline proposed to be
constructed from the Palm Valley Field to Darwin.
<PAGE>
CLAUSE 2
CONSIDERATION FOR THE PALM VALLEY PRODUCERS
2.1 Lump Sum Payment
Each Mereenie Producer hereby severally undertakes and agrees with each
Palm Valley Producer that on the 30th June, 1987 it will pay its Mereenie
Ownership Percentage of the sum of FIVE MILLION NINE HUNDRED THOUSAND DOLLARS
($5,900,000.00) to the respective Palm Valley Producers in proportion to their
Palm Valley Ownership Percentages PROVIDED HOWEVER that each Mereenie Producer
may discharge its obligation aforesaid prior to the 30th day of June, 1987 by
paying in the manner aforesaid its Mereenie Ownership Percentage of the said
$5,900,000.00 discounted back from the 30th day of June, 1987 to the date of
payment at a discount rate of 15 percent per annum.
2.2 Sales of Incremental Gas
(a) With respect to sales of Incremental Gas each Producer
undertakes and agrees with each other Producer as follows:-
(i) Any sale of Incremental Gas shall be negotiated in
good faith and on an arm's length basis. Without the
approval of each of the Palm Valley Producers no sale
of Incremental Gas shall be made except upon such
basis.
(ii) All gas required for sales of Incremental Gas shall
be produced treated and delivered into the Pipeline
System from the Mereenie Field.
<PAGE>
(iii) Upon the production and treatment of any Incremental
Gas the Palm Valley Producers shall be deemed to have
acquired in proportion to their respective Palm
Valley Ownership Percentages thirty five percent
(35%) thereof ("the Palm Valley Producers'
Percentage") and in like Ownership Percentages shall
be deemed for the purposes only of this Agreement to
have sold the Palm Valley Producers' Percentage of
Incremental Gas to the buyer or buyers thereof.
(iv) Promptly upon the making of a contract which provides
for the sale in whole or in part of Incremental Gas
each Palm Valley Producer shall be supplied with a
copy thereof.
(b) Each Mereenie Producer undertakes and agrees with each of the
Palm Valley Producers that it will do all that is required on
its part to ensure that the Proceeds of Sale (as hereinafter
defined) of the Palm Valley Producers' Percentage of any
Incremental Gas sold will be paid promptly to the respective
Palm Valley Producers in proportion to their Palm Valley
Ownership Percentages.
(c) Proceeds of Sale in relation to any Incremental Gas means the
gross selling price thereof determined on the basis that such
Incremental Gas is sold at the delivery point into the
Pipeline System and delivered into the Pipeline System free of
prior charge.
2.3 Appointment of Agent
A Producer may agree upon the appointment of an agent or agents for the
purpose of receiving and distributing the payments required to be made pursuant
to Clauses 2.1 and 2.2 hereof.
<PAGE>
CLAUSE 3
PIPELINE BENEFITS
3.1 Trustee for Producers
The Producers hereby acknowledge that Lohengrin Pty. Ltd. (a company
whose name is to be changed to Gas Producers Pty. Ltd. and whose shares are to
be owned by the Producers in proportion to their Pipeline Benefit Percentages
and is hereinafter referred to as "the Producers' Trustee") is and will be a
trustee for the Producers holding the Special Unit and the Pipeline Benefits for
the Producers as tenants in common in proportion to their Pipeline Benefit
Percentages.
3.2 Decisions by Trustee
(a) Any decision of the Producers' Trustee:-
(i) with respect to the election of Option A or Option B
pursuant to Clause 4.1.2 of the Fourth Schedule to
the trust deed for the Pipeline Trust; or
(ii) with respect to the election to acquire equity
pursuant to Clause 4.1.3 or Clause 5 of the said
Fourth Schedule,
shall be made by a simple majority of the Mereenie Producers
only voting in proportion to their respective Mereenie
Ownership Percentages but after consultation with the
respective Palm Valley Producers.
(b) Any other decisions with respect to the rights and obligations
or the actions of the Producers' Trustee with respect to the
Pipeline Benefits shall be made by a simple majority of the
Producers voting in proportion to their Pipeline Benefits
Percentages.
<PAGE>
(c) Any decision made pursuant to the provisions of this Clause
3.2 shall be binding upon the Producers' Trustee and each
Producer.
3.3 Distribution of Pipeline Tariff Margin
Any payment including any distribution of the share of pipeline tariff
margins or other distribution or payment of profits received by the Producers'
Trustee in respect of the Special Unit shall be distributed without delay to the
Producers in proportion to their Pipeline Benefits Percentages.
CLAUSE 4
SUPPLY SECURITY FOR EACH GAS FIELD
4. In the event that at any time or from time to time:
(a) any event in relation to one of the Palm Valley Field or the
Mereenie Field ("the Deficiency Field") results or is likely
to result in a deficiency ("the Deficiency") in the delivery
to the Purchaser of any quantity of Gas which is required to
be delivered to the Purchaser pursuant to the relevant Gas
Purchase Agreement; and
(b) there are then proven deliverable and uncommitted reserves of
natural gas in the other Field ("the Available Reserves
Field"),
the respective Producers of the Available Reserves Field shall negotiate in good
faith with the respective Producers of the Deficiency Field an arrangement to
supply Gas on equitable terms and to the extent permitted by good oil field
practice in order to make up or as far as possible reduce the Deficiency.
Failure to agree upon any such arrangement shall not prejudice any other rights
and obligations of the parties hereunder.
<PAGE>
CLAUSE 5
ASSIGNMENT
5.1 Assignments by Mereenie Producers
Each Mereenie Producer covenants with each of the other Parties hereto
that:-
(a) it will not assign in whole or in part its rights or
obligations hereunder except as part of an assignment of an
equivalent interest in the Mereenie Joint Venture, the
Mereenie Field and the Mereenie Gas Purchase Agreement;
(b) it will use its best endeavours (whether by seeking an
amendment of the Mereenie Operating Agreement or otherwise) to
ensure that no Party will assign an interest in the Mereenie
Joint Venture, the Mereenie Field or the Mereenie Gas Purchase
Agreement without at the same time assigning an equivalent
interest in its rights and obligations under this Agreement;
(c) it will procure the assignee of the whole or any part of its
interest under this Agreement to enter into a Deed of Covenant
with the other Mereenie Producers in a form satisfactory to
them assuming all the obligations of the assignor in respect
of the interest assigned.
5.2 Assignments by Palm Valley Producers
Each Palm Valley Producer covenants with each of the other Parties
hereto that: -
(a) it will not assign in whole or in part its rights or
obligations hereunder except as part of an assignment of an
equivalent interest in the Palm Valley Joint Venture, the Palm
Valley Field and the Palm Valley Gas Purchase Agreement;
<PAGE>
(b) it will use its best endeavours (whether by seeking an
amendment of the Palm Valley Operating Agreement or otherwise)
to ensure that no Party will assign an interest in the Palm
Valley Joint Venture, the Palm Valley Field or the Palm Valley
Gas Purchase Agreement without at the same time assigning an
equivalent interest in its rights and obligations under this
Agreement;
(c) it will procure the assignee of the whole or any part of its
interest under this Agreement to enter into a Deed of Covenant
with the other Palm Valley Producers in a form satisfactory to
them assuming all the obligations of the assignor in respect
of the interest assigned.
CLAUSE 6
MISCELLANEOUS
6.1 Default Interest
In the event that any Producer ("the Defaulting Producer") shall make
default in the payment on its due date of any amount payable to another Producer
("the Creditor") the Defaulting Producer shall pay to the Creditor interest on
the amount in default computed from its due date until the actual date of
payment thereof at the then Westpac Lending Indicator rate from time to time
plus two percent (2%) which interest shall accrue from day to day.
6.2 No Partnership
Nothing contained in this Agreement or arising out of this Agreement is
intended to or does create a partnership between any two or more of the
Producers.
<PAGE>
6.3 Notices
(a) Each Party shall keep the other Parties advised of its current
address in Australia to which any notice communication request
consent payment demand or information required to be given or
furnished under this Agreement is to be addressed.
(b) Such address for service of each Party shall be the same
address as is advised from time to time pursuant to the Palm
Valley Operating and/or Mereenie Operating Agreement. Notices
shall be given in the same manner as provided in the said
Operating Agreements.
6.4 Stamp Duties
Any stamp duty payable on this Agreement shall be borne and paid by the
Producers in proportion to their respective Pipeline Benefit Percentages.
6.5 Governing Law
This Agreement shall be deemed to have been made in the Northern
Territory and shall be governed by the law of the Northern Territory.
6.6 Jurisdiction
Each Party hereto submits to the non-exclusive jurisdiction of the
Courts of the Northern Territory and the State of Queensland.
6.7 Successors Bound
This Agreement shall enure for the benefit of and bind the Parties and
their assigns and successors in title.
<PAGE>
6.8 Further Assurance
Each Party agrees that it will perform execute acknowledge and deliver
all such further acts deeds assurances and instruments as shall be reasonably
required for the purposes of this Agreement or otherwise to carry out the
agreements made herein.
6.9 Agreement Conditional
This Agreement is conditional upon the execution of the other
agreements whose contemporaneous execution is referred to in Recital H hereof.
This Agreement shall not come into effect unless and until such other agreements
also come into effect.
6.10 No Partnership
Nothing contained in this Agreement or arising out of this Agreement is
intended to or does create a partnership between any two or more of the
Producers.
<PAGE>
THE FIRST SCHEDULE
THE MEREENIE PRODUCERS
NAME MEREENIE OWNERSHIP
PERCENTAGES
Magellan Petroleum (N.T.) Pty. Ltd. 20%)*
)* 35.00%*
United Oil & Gas Co. (N.T.) Pty. Ltd. 15%)
Canso Resources Limited 15.00%*
Oilmin NL 21.00%
Petromin No Liability 13.75%
Transoil No Liability 9.00%
Farmout Drillers NL 6.25%
-------
100.00%
=======
* These percentages are subject to variation in consequence of the unitisation
agreement between Magellan Petroleum (N.T.) Pty. Ltd., United Oil & Gas (N.T.)
Pty. Ltd. and Canso Resources Limited.
<PAGE>
THE SECOND SCHEDULE
THE PALM VALLEY PRODUCERS
NAME PALM VALLEY
OWNERSHIP
PERCENTAGES
Magellan Petroleum (N.T.) Pty. Ltd. 50.775%
C.D. Resources Pty. Ltd. 9.375%
Farmout Drillers N.L. 9.375%
Canso Resources Limited 15.375%
International Oil Proprietary 3.504%
Pancontinental Petroleum Limited 3.000%
IEDC Australia Pty. Limited 1.248%
Amadeus Oil NL 1.248%
Southern Alloys Venture Pty. Limited (AIDC) 6.100%
--------
100.00%
=======
<PAGE>
IN WITNESS WHEREOF the Parties have executed this Agreement on the day and year
first herein set out.
EXECUTED by MAGELLAN PETROLEUM ) MAGELLAN PETROLEUM (N.T.)
(N.T.) PTY. LTD. by ) PTY. LTD.
John McGregor Florence )
its duly constituted Attorney )
in the presence of: ) /s/ John M. Florence
/s/ Hedley Howard
EXECUTED by UNITED OIL & GAS ) UNITED OIL & GAS CO.
CO. (N.T.) PTY. LTD. by ) (N.T.) PTY. LTD.
John McGregor Florence )
its duly constituted Attorney )
in the presence of: ) /s/ John M. Florence
/s/ Hedley Howard
EXECUTED by CANSO RESOURCES ) CANSO RESOURCES LIMITED
LIMITED by _____________________ )
its duly constituted Attorney )
in the presence of: ) /s/ ____________________
/s/ Hedley Howard
EXECUTED by OILMIN NL by ) OILMIN NL
K. V. Hiscox )
its duly constituted Attorney )
in the presence of: ) /s/ K. V. Hiscox
/s/ Hedley Howard
<PAGE>
EXECUTED by PETROMIN NO ) PETROMIN NO LIABILITY
LIABILITY by )
K. V. Hiscox )
its duly constituted Attorney )
in the presence of: ) /s/ K. V. Hiscox
/s/ Hedley Howard
EXECUTED by TRANSOIL NO ) TRANSOIL NO LIABILITY
LIABILITY by )
K. V. Hiscox )
its duly constituted Attorney )
in the presence of: ) /s/ K. V. Hiscox
/s/ Hedley Howard
EXECUTED by FARMOUT DRILLERS ) FARMOUT DRILLERS NL
NL by ___________________________ )
its duly constituted Attorney )
in the presence of: ) /s/ ____________________
/s/ Hedley Howard
EXECUTED by C.D. RESOURCES PTY. ) C.D. RESOURCES PTY.
LTD. by Rupert James Hamer ) LTD.
its duly constituted Attorney )
in the presence of: ) /s/ Rupert J. Hamer
/s/ Hedley Howard
EXECUTED by INTERNATIONAL OIL ) INTERNATIONAL OIL
PROPRIETARY by ) PROPRIETARY
K. V. Hiscox )
its duly constituted Attorney )
in the presence of: ) /s/ K. V. Hiscox
/s/ Hedley Howard
<PAGE>
EXECUTED by PANCONTINENTAL ) PANCONTINENTAL
PETROLEUM LIMITED by Paul John Fuller ) PETROLEUM LIMITED
its duly constituted Attorney )
in the presence of: ) /s/ Paul J. Fuller
/s/ Hedley Howard
EXECUTED by IEDC AUSTRALIA PTY. ) IEDC AUSTRALIA PTY.
LIMITED by Brian James Barker ) LIMITED
its duly constituted Attorney )
in the presence of: ) /s/ Brian J. Barker
/s/ Hedley Howard
EXECUTED by AMADEUS OIL NL by ) AMADEUS OIL NL
Alan Surrey Bogg )
its duly constituted Attorney )
in the presence of: ) /s/ Alan S. Bogg
/s/ Hedley Howard
EXECUTED by SOUTHERN ALLOYS ) SOUTHERN ALLOYS VENTURE
VENTURE PTY. LIMITED by ) LIMITED
Kerry Josephine Adby )
its duly constituted Attorney )
in the presence of: ) /s/ Kerry J. Adby
/s/ Hedley Howard
INDEMNIFICATION AGREEMENT
THIS AGREEMENT is made on this ____ day of ____________, ____ between
Magellan Petroleum Corporation, a Delaware corporation ("Corporation") and
_______________ ("Agent").
W I T N E S S E T H:
WHEREAS, Agent is a director and/or officer of Corporation and in such
capacity is performing a valuable service for Corporation; and
WHEREAS, Corporation's Certificate of Incorporation provides for the
indemnification of the officers, directors, agents and employees of Corporation
to the maximum extent authorized by the Delaware General Corporation Laws, as
amended to date (the "State Statutes"); and
WHEREAS, the Certificate of Incorporation contemplates and requires
that contracts be entered into between Corporation and its directors and
officers with respect to the advance of expenses and indemnification; and
WHEREAS, Corporation has purchased and presently maintains a policy or
policies of Directors and Officers Liability Insurance ("D & O Insurance"),
covering certain liabilities which may be incurred by its directors and officers
in the performance of their services for Corporation; and
WHEREAS, Corporation desires to hold harmless and indemnify Agent to
the full extent authorized or permitted by the provisions of the State Statutes,
or by any amendment thereof or other statutory provisions authorizing or
permitting such indemnification which may be adopted hereafter; and
WHEREAS, Corporation has entered into this Agreement and assumed the
obligations imposed on Corporation hereby in order to induce Agent to continue
as a director of Corporation, and acknowledges that Agent is relying upon this
Agreement in continuing in such capacity; and
WHEREAS, on August 19, 1987, Corporation's Board of Directors first
authorized Corporation to enter into this Indemnification Agreement with
Corporation's directors and/or officers; and
WHEREAS, on ________ ___, ____, this agreement was entered into between
Corporation and Agent; and
WHEREAS, since the execution of this Indemnification Agreement,
Corporation has purchased additional D & O Insurance coverage and other events
in the development of Corporation have occurred, and
<PAGE>
WHEREAS, Corporation now seeks to confirm, update and restate this
Indemnification Agreement.
NOW, THEREFORE, in consideration of Agent's continued service as a
director and/or officer after the date hereof the parties hereto agree as
follows:
1. Maintenance of Insurance and Self Insurance.
(a) Corporation represents that it presently has in force and
effect policies of D & O Insurance in insurance companies and amounts as follows
(the "Insurance Policies").
Insurer Policy No. Amount Deductible
Subject only to the provisions of Section l(b) hereof, Corporation hereby agrees
that, so long as Agent shall continue to serve as a director or officer of
Corporation (or shall continue at the request of Corporation to serve as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise) and thereafter so long as Agent shall be
subject to any possible claim or threatened, pending or completed action, suit
or proceeding, whether civil, criminal or investigative by reason of the fact
that Agent was a director of Corporation (or served in any of said other
capacities), Corporation will purchase and maintain in effect for the benefit of
Agent one or more valid, binding and enforceable policy or policies of D & O
Insurance providing, in all respects, coverage at least comparable to that
presently provided pursuant to the Insurance Policies.
(b) Corporation shall not be required to maintain said policy
or policies of D & O Insurance in effect if said insurance is not reasonably
available or if, in the reasonable business judgment of the then directors of
Corporation, either (i) the premium cost for such insurance is substantially
disproportionate to the amount of coverage or (ii) the coverage provided by such
insurance is so limited by exclusions that there is insufficient benefit from
such insurance.
(c) In the event Corporation does not purchase and maintain in
effect said policy or policies of D & O Insurance pursuant to the provisions of
Section 1(b) hereof, Corporation agrees to hold harmless and indemnify Agent to
the full extent of the coverage which would otherwise have been provided for the
benefit of Agent pursuant to the Insurance Policies.
<PAGE>
2. Additional Indemnity. Subject only to the exclusions set forth in
Section 3 hereof, Corporation hereby further agrees to hold harmless and
indemnify Agent:
(a) Against any and all expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by Agent in connection with any threatened, pending or completed action, suit,
claim, counterclaim or proceeding, whether civil, criminal, administrative or
investigative (including an action by or in the right of Corporation) to which
Agent is, was or at any time becomes a party, or is threatened to be made a
party, by reason of the fact that Agent is, was or at any time becomes a
director or officer of Corporation, or is or was serving or at any time serves
at the request of Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
(collectively, "other entity" or "another entity"). Each such indemnifiable
event, subject to the limitations of Section 3 hereof, shall be hereinafter
referred to as a "Claim."
(b) Otherwise to the fullest extent as may be provided to
Agent by Corporation under the provisions of the Certificate of Incorporation
and the By-Laws of Corporation and the State Statutes, as they now or hereafter
may exist.
3. Limitations on Additional Indemnity. No indemnity pursuant to
Section 2 hereof shall be paid by Corporation:
(a) except to the extent the aggregate of losses to be
indemnified thereunder exceed the sum of $1,000 plus the amount of such losses
for which the Agent is indemnified either pursuant to Sections 1 or 2 hereof or
pursuant to any D & O Insurance purchased and maintained by Corporation;
(b) when Agent's claim for indemnification hereunder is by
reason of the fact that Agent is or was serving or at any time serves at the
request of Corporation as a director, officer, employee or agent of another
entity, except to the extent Agent is not indemnified by such other entity, and
to that extent only after Agent has used his best efforts to obtain
indemnification from the other entity.
(c) in respect to remuneration paid to Agent if it shall be
determined by a final judgment or other final adjudication that such
remuneration was in violation of law;
(d) on account of any suit in which judgment is rendered
against Agent for an accounting of profits made from the purchase or sale by
Agent of securities of Corporation pursuant to the provisions of Section 16(b)
of the Securities Exchange Act of 1934 and amendments thereto or similar
provision of any federal, State or local law;
<PAGE>
(e) on account of Agent's conduct which is finally adjudged to
have been knowingly fraudulent, deliberately dishonest or willful misconduct;
(f) if a final decision by a court having jurisdiction in the
matter shall determine that such indemnification is not lawful.
4. Continuation of Indemnity. All agreements and obligations of
Corporation contained herein shall continue during the period Agent is a
director or officer of Corporation (or is or was serving at the request of
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise) and shall continue
thereafter so long as Agent shall be subject to any possible Claim.
5. Notification and Defense of Claim. Promptly after receipt by Agent
of notice of the commencement of any Claim, Agent shall, if indemnification or
advance of expenses in respect thereof is to be sought from Corporation pursuant
to this Agreement, give prompt and timely notification to Corporation of the
commencement thereof; but the omission so to notify Corporation will not relieve
it from any liability which it may have to Agent otherwise than under this
Agreement. With respect to any such Claim as to which Agent promptly and timely
notifies Corporation of the commencement thereof:
(a) Corporation shall be entitled to participate therein at
its own expense; and
(b) Except as otherwise provided below, to the extent that it
may wish, Corporation jointly with any other indemnifying party similarly
notified shall be entitled to assume the defense thereof, with counsel
satisfactory to Agent. After notice from Corporation to Agent of its election so
to assume the defense thereof, Corporation shall not be liable to Agent under
this Agreement for any legal or other expenses subsequently incurred by Agent in
connection with the defense thereof other than reasonable costs of investigation
or as otherwise provided below. Agent shall have the right to employ counsel in
such Claim but the fees and expenses of such counsel incurred after notice from
Corporation of its assumption of the defense thereof shall be at the expense of
Agent unless (i) the employment of counsel by Agent has been authorized by
Corporation, (ii) Agent shall have reasonably concluded that there may be a
conflict of interest between Corporation and Agent in the conduct of the defense
of such Claim or (iii) Corporation shall not in fact have employed counsel to
assume the defense of such Claim, in each of which cases the reasonable fees and
expenses of Agent's counsel shall be at the expense of Corporation. Corporation
shall not be entitled to assume the defense of any Claim brought by or on behalf
of Corporation or as to which Agent shall have reached the conclusion provided
for in (ii) above.
<PAGE>
(c) Corporation shall not be liable to indemnify Agent under
this Agreement for any amounts paid in settlement of any Claim effected without
its written consent. Corporation shall not settle any Claim in any manner which
would impose any penalty or limitation on Agent without Agent's written consent.
Neither Corporation nor Agent shall unreasonably withhold their consent to any
proposed settlement.
6. Advancement of Expenses. If Corporation does not assume Agent's
defense pursuant to the provisions of Section 5(b) hereof, then Corporation
shall advance the expenses of Agent in accordance with the following terms and
conditions:
Within 10 days after the receipt by Corporation from Agent of an
invoice from his legal counsel representing a retainer or legal fees
and expenses, or from another person or entity for expenses, actually
incurred or expected to be actually incurred by Agent in connection
with the defense or disposition of any Claim, including any appeals in
connection therewith, Corporation shall promptly pay to Agent, or to
such other person as Agent may instruct, the amount shown to be due on
such invoice as an advance in advance of the disposition of such Claim.
Any such invoice submitted by Agent shall be accompanied by a
certificate signed by Agent to the effect that (i) he reasonably
believes that the retainer or legal fees and expenses for which payment
is sought are or would be indemnifiable pursuant to applicable laws and
(ii) he will immediately use the funds so advanced by Corporation to
pay such invoice.
7. Obligation to Repay. Agent shall repay to Corporation promptly any
amounts paid by Corporation to Agent pursuant to this Agreement to the extent
that it shall be ultimately determined that Agent is not entitled to be
indemnified by Corporation pursuant to applicable law.
8. Separability. Each of the provisions of this Agreement is a separate
and distinct agreement and independent of the others, so that if any provision
hereof shall be held to be invalid or unenforceable for any reason: (i) such
invalidity or unenforceability shall not affect the validity or enforceability
of the other provisions hereof, and (ii) such provision shall be deemed to be
restated to the extent necessary so that it is valid and enforceable to the
fullest extent permitted under applicable laws.
9. Governing Law; Binding Effect; Amendment and Termination.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to contracts made
and to be performed entirely within such State.
<PAGE>
(b) This Agreement shall be binding upon Agent and upon
Corporation, its successors and assigns, and shall inure to the benefit of
Agent, his heirs and personal representatives and to the benefit of Corporation,
its successors and assigns.
(c) No amendment, modification, termination or cancellation of
this Agreement shall be effective unless in writing signed by both parties
hereto.
10. Specific Performance. The parties hereto agree and acknowledge that
money damages payable after the termination of any Claim would not be adequate
compensation in the event of a breach by either party of its obligations under
Section 6 hereof, and agree that the non-breaching party shall be entitled, in
addition to any other remedy which such party may otherwise have at law or in
equity, to injunctive or other equitable relief, including an order directing
the other party to make such payments as may be required, in the event of the
nonperformance of any of the obligations by the other party contained in Section
6 hereof. In the event that Corporation fails to perform any of its obligations
under Section 6 hereof, Corporation shall pay in advance, in accordance with the
procedures set forth in Section 6 hereof and subject to Agent's obligations set
forth in Section 7 hereof, the expenses of Agent incurred in connection with
seeking equitable or other relief from such failure by Corporation.
11. Notices. Notices or demands authorized by this Agreement to be
given or made to or by Agent or Corporation shall be sufficiently given or made
if delivered or if sent by first-class mail, postage prepaid, to such party at
the respective address set forth below or, in each such case, to such other
address as the addressee shall have given notice of in accordance with this
Section 11:
If to Corporation: Magellan Petroleum Corporation
149 Durham Road
Oak Park - Unit 31
Madison, CT 06443
Attn: President
with a copy to: Timothy L. Largay, Esq.
Murtha, Cullina, Richter and Pinney LLP
CityPlace I, 185 Asylum Street
Hartford, Connecticut 06103
<PAGE>
If to Agent:
12. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
13. Section Headings. The Section headings contained in this Agreement
are inserted for convenience only and shall not control or affect the meaning or
construction of any of the provisions hereof.
14. Construction. In this Agreement, where the context so requires,
words importing the singular shall include the plural, words importing the
plural shall include the singular, and words importing a particular gender or
the neuter shall include the other gender and/or the neuter.
15. Entire Agreement. This Agreement represents the entire agreement
between the parties relating to the subject matter hereof and supersedes all
prior written or oral agreements between them in respect thereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
and as of the day and year first above written.
MAGELLAN PETROLEUM CORPORATION
By ___________________________________
Its
--------------------------------------
Agent
Subsidiaries of the Registrant
Subsidiary State of Incorporation Ownership
Magellan Petroleum Australia Limited Queensland, Australia 50.9%
The following subsidiaries are owned directly or indirectly by Magellan
Petroleum Australia Limited:
Magellan Petroleum (N.T.) Pty. Ltd. Queensland, Australia 100%
Paroo Petroleum Pty. Ltd. Queensland, Australia 100%
Paroo Petroleum (Holdings), Inc. Delaware, U.S.A. 100%
Paroo Petroleum (USA), Inc. Delaware, U.S.A. 100%
Magellan Petroleum (W.A.) Pty. Ltd. Queensland, Australia 100%
Magellan Petroleum (Belize) Limited Belize, C.A. 100%
Magellan Petroleum (Eastern) Pty. Ltd. Queensland, Australia 100%
Magellan Petroleum (Southern) Pty. Ltd. Queensland, Australia 100%
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 33-38429) pertaining to the Stock Option Plan of Magellan Petroleum
Corporation of our report dated September 15, 1999 with respect to the
consolidated financial statements of Magellan Petroleum Corporation included in
this Annual Report (Form 10-K) for the year ended June 30, 1999.
/s/ Ernst & Young LLP
Stamford, Connecticut
September 20, 1999
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