SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) March 10, 1997
PEASE OIL AND GAS COMPANY
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada 0-6580 84-0285520
--------------------------- ------------------- ------------------
(State or other jurisdiction (Commission File No.) (I.R.S. Employer
of incorporation) Identification No.)
751 Horizon Court, Suite 203, Grand Junction, Colorado 81506-8718
- ------------------------------------------------------ ----------
(Address of principal executive offices) (Zip Code)
Registrant telephone number including area code: (970) 245-5917
<PAGE>
Item 2. ACQUISITION OR DISPOSITION OF ASSETS.
On March 10, 1997, the Registrant completed the acquisition, under a
Purchase and Sale Agreement dated February 27, 1997, of a 10% Working Interest
("WI") in a producing oil and gas field designated as the East Bayou Sorrel
Field in Iberville Parish, Louisiana. The oil and gas field is an approximately
4,500 acre property operated by a nonaffiliated independent oil and gas
producer, National Energy Group, Inc. ("NEGX"). An initial exploratory oil and
gas well, drilled to approximately 13,550 feet, was placed on production by the
operator of the prospect in late December 1996. The Registrant acquired the
undivided WI from an unrelated entity, Transworld Exploration & Production, Inc.
There is no material relationship between the seller and the Registrant or any
of its affiliates, directors, officers or any associate of any such director or
officer. The purchase price for the acquisition of the WI was $2.5 million cash.
The source of the cash used by Registrant to complete the purchase was
Registrant's working capital and corporate funds.
The sellers of the WI held the interest in the property for exploration and
development of the oil and gas resources. The Registrant intends to continue to
hold the asset acquired in connection with Registrant's oil and gas business and
to participate in the development of oil and gas production from the field. A
development well which is an offset to the discovery well commenced drilling in
early March. The discovery well is currently producing in excess of 1,400
barrels of oil per day and 1,300 MCF of natural gas per day with a flowing
tubing pressure of 6,300 PSI on a 12/64" choke from a perforated interval of
13,208 feet to 13,226 feet. There are an five additional geologic zones behind
the well casing which have the potential of production in the future development
of the field. The discovery well was put on production in December 1996 and has
maintained flow rates similar to the present experience. The interest acquired
by the Registrant is a working interest in the field which obligates the Company
to pay 10% of all costs of acquisition and development of the property, drilling
of the discovery well and drilling, production and other expenses incurred in
connection with development and operation of the field and entitles the
Registrant to receive 10% of the net production of oil and natural gas from the
field after payment of royalties from the date of initial production of the
discovery well.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of businesses acquired.
Registrant is a Small Business Issuer. Under Item 310(c)(3)(i) of
Regulation S-B, financial statements relating to the assets acquired are
not required.
(b) Pro forma financial information.
Registrant is a Small Business Issuer. Under Item 310(d) of Regulation
S-B, pro forma information relating to the acquisition of the assets is not
required.
(c) Exhibits.
Exhibit 10.29 Purchase and Sale Agreement with Transworld Exploration
& Production, Inc. dated February 27, 1997.
2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: March 10, 1997
PEASE OIL AND GAS COMPANY
By /s/ Willard H. Pease, Jr.
-----------------------------------
Willard H. Pease, Jr. President
3
<PAGE>
EXHIBIT INDEX
Exhibit Description Page No.
- -------- ------------- ----------
10.29 Purchase and Sale Agreement with Transworld 5
Exploration & Production, Inc. dated February 27, 1997.
4
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (this "Agreement") is entered into
effective as of the "Agreement Date," as that term is hereinafter defined,
between TRANSWORLD EXPLORATION & PRODUCTION, INC., a Delaware corporation, Bank
One Center, 910 Travis Street, Suite 800, Houston, Texas 77002, as Seller
("Seller"), and PEASE OIL AND GAS COMPANY, a Nevada corporation, 751 Horizon
Court, Suite 203, Grand Junction, Colorado 81506-8718 ("Pease"), and FORTUNE
PETROLEUM CORPORATION, a Delaware corporation, One Commerce Green, 515 W. Greens
Road, Suite 720, Houston, Texas 77067 ("Fortune"), as Buyers, ("Buyers") (Seller
and Buyers, when referred to collectively, are hereinafter referred to as the
"Parties").
ARTICLE I
PURCHASE AND SALE
Subject to the terms and conditions of, and for the consideration set forth
in, this Agreement, Seller agrees to sell and convey and Buyers agree to
purchase and pay for, effective as of 12:01 a.m., Central Standard Time, October
16, 1996 (the "Effective Time"), all of Seller's right, title and interest in
and to the following (the "Properties")
1 Oil and Gas Properties. All properties described on Exhibit "A," whether
such properties are in the nature of servitudes, fee interests, leasehold
interests, licenses, concessions, working interests, farmout rights, other
contractual rights, royalty, overriding royalty, other non-working or carried
interests, operating rights or other mineral rights of every nature, and any
rights that arise by operation of law or otherwise, in all properties and lands
pooled, unitized, communitized or consolidated with such properties (the "Oil
and Gas Properties").
2 Well. That certain oil, condensate or natural gas well, named the C.E.
Schwing et al #1, together with the attendant piping and wellhead equipment
associated with such well at the Effective Time, as well as Seller's rights, if
any, in any other oil, condensate or natural gas well, water source wells, and
water and other types of injection wells, either located on the Oil and Gas
Properties or held for use in connection with the Oil and Gas Properties under a
Surface Contract (as hereinafter defined), whether producing, operating, shut-in
or temporarily abandoned (the "Well").
3 Severed Substances. Seller's interest, if any, in any severed crude oil,
natural gas, condensate or other hydrocarbons produced from the Oil and Gas
Properties.
4 Surface Contracts. All leases, easements, privileges, right-of-way
agreements, licenses or other agreements relating to the use or ownership of
surface or subsurface properties and structures that are used or held for use in
connection with the exploration and production from the Oil and Gas Properties
(the "Surface Contracts").
5 Equipment. Seller's interest, if any, in any additional equipment
associated or used in connection with the Oil and Gas Properties, other than
that described in Section 1.2 above (the "Equipment"). 1.6 Information and Data.
Any (a) abstracts, title opinions, title reports, title policies, lease and land
files, surveys, analyses, compilations, correspondence, filings with regulatory
agencies, and other documents and instruments that relate to the properties
described above; (b) geological, engineering, exploration, production and other
technical data, magnetic field recordings, digital processing tapes, field
prints, summaries, reports, maps, interpretations, studies and other analyses,
whether written or in electronically reproducible form, that are in the
<PAGE>
possession of Seller and in any manner relate to the properties described in
Section 1.1; and (c) all other books, records, files and magnetic tapes
containing, title or other information that are in the possession of Seller and
relate to the properties described above (the "Data").
7 Contracts. The contracts, commitments, agreements, and arrangements that
relate to the Properties which are described on Exhibit "A" hereto, together
with all rights, privileges, and benefits of Seller thereunder arising on or
after the Effective Time (the "Contracts").
ARTICLE II
PURCHASE PRICE
1 Purchase Price. The purchase price for the Properties shall be Two
Million Eight Hundred Fifty-Seven Thousand One Hundred Forty-two and 50/100
($2,857,142.50) Dollars (the "Base Purchase Price"), which shall be adjusted as
provided in Article 2.2 hereof to arrive at the "Final Purchase Price."
2 Final Purchase Price. Notwithstanding the foregoing the Base Purchase
Price shall be adjusted to arrive at the final purchase price (the "Final
Purchase Price") as follows:
1 Expenses to Be Reimbursed by Buyers. The Purchase Price shall be
increased by, if Seller shall furnish at Closing its cancelled checks or
other reasonable evidence of payment (i) the amount of National Energy
Group, Inc.'s joint interest billing dated November 30, 1996 #3095493 for
costs and expenses of Seller related to the Properties, as identified in
Exhibit "D," if Seller shall have paid such expenses; and (ii) Seller's
cash call for the next well to be drilled on the Properties, which has been
identified as the C. E. Schwing, et al., No. 2, if Seller shall have paid
such cash call identified on Exhibit "D."
ARTICLE III
REPRESENTATIONS AND WARRANTIES
1 Representations and Warranties of Seller. Seller represents and warrants
to Buyers the following:
1 Organization. Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and
is duly qualified to carry on its business in the State of Louisiana.
2 Corporate Power. Seller has full corporate power and authority under
the laws of its state of incorporation to conduct its business as presently
conducted, to perform its obligations under this Agreement, and to own the
Properties.
3 Conflicts. The consummation of the transactions contemplated by this
Agreement will not at Closing violate, be in conflict with, or constitute a
default under any provision of the articles of incorporation, bylaws or
governing documents of Seller, any provision of any agreement or instrument
to which or by which Seller is a party or by which it is bound, or any
judgment, decree, judicial or administrative order, award, writ,
injunction, statute, rule or regulation applicable to Seller or the
Properties.
2
<PAGE>
4 Authorization. The execution, delivery and performance of this
Agreement and the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action, including any
necessary board or shareholder approval, by Seller.
5 Enforceability. This Agreement has been duly executed and delivered
on behalf of Seller, and at the "Closing," as that term is hereinafter
defined, all documents and instruments required to be executed and
delivered by Seller in order to consummate the purchase and sale provided
for in this Agreement shall be executed and delivered. This Agreement does,
and such documents and instruments shall, constitute legal, valid and
binding obligations of Seller enforceable in accordance with their terms.
6 Broker's Fees. Seller has incurred no liability, contingent or
otherwise, for broker's or finder's fees relating to the transactions
contemplated by this Agreement for which Buyers shall have any
responsibility whatsoever.
7 Litigation and Claims. Save and except for the effect of those
proceedings at the Office of Conservation which relate to the unitization
of the CIB. HAZ. 3 Sand, Reservoir A Unit and the CIB. HAZ. 2 Zone,
Reservoir B. Unit described on page B-3 of Exhibit "B," no lawsuit, action,
claim, demand, administrative proceeding or other litigation or proceeding
is pending before any court or governmental agency as of the date of this
Agreement against Seller, or to Seller's knowledge, with respect to the
Properties, that might result in impairment, loss or diminution of Seller's
title to the Properties or hinder or impede their ownership or operation.
No written or oral notice from any governmental body or any other entity
has been received by Seller (i) claiming any violation of any law or any
environmental, conservation or other ordinance, code, rule or regulation
relating to the Properties, or (ii) requiring any affirmative action on or
in connection with the Properties with which Seller has not complied.
8 Default. To the best of its knowledge Seller is not in default or
violation of (a) any law, order, writ, injunction, ordinance, code, rule,
regulation or decree of any governmental body, agency or court or of any
commission or other administrative agency relating to the Properties or (b)
any agreement or obligation to which it is a party, by which it is bound or
to which it or the Properties may be subject. With respect to the ownership
of the Properties Seller has complied with all laws, rules and regulations
applicable thereto.
9 Tax Compliance. To the best of its knowledge Seller has timely filed
or caused to be filed all federal, state, and local tax and information
returns relating to the Properties required under all applicable statutes,
rules and regulations and has paid or caused to be paid all taxes related
to the Properties shown on said returns to be due.
10 Defensible Title. Seller has Defensible Title to the Properties.
"Defensible Title" shall mean such title as is free and clear of all
Encumbrances other than Permitted Encumbrances and which entitles Seller to
(i) a Net Revenue Interest in each lease no less than the relevant
percentages set forth in Exhibit "A," and (ii) a Working Interest in each
lease no greater than the percentages set forth in Exhibit "A." The
foregoing provisions of this paragraph notwithstanding, the Assignment, as
attached hereto, shall warrant title by, through, and under Seller, but not
otherwise. "Encumbrance" shall mean any mortgage, lien, security interest,
pledge, charge, encumbrance, claim, limitation, burden or defect.
"Permitted Encumbrances" shall mean any or all of the following:
3
<PAGE>
(a) Encumbrances that arise under operating agreements to secure
payment of amounts not yet delinquent and are of a type and nature
customary in the oil and gas industry;
(b) Encumbrances that arise as a result of pooling and unitization
agreements, declarations, orders or laws to secure payment of amounts not
yet delinquent;
(c) Encumbrances securing payments to mechanics and materialmen and
Encumbrances securing payment of taxes or assessments that are, in either
case, not yet delinquent or, if delinquent, are being contested in good
faith in the normal course of business;
(d) royalties, overriding royalties, division orders (to the extent
that any existed as of the Effective Time), reversionary interests and
other similar burdens that do not operate to reduce the Net Revenue
Interest of Seller in and to the Properties to less than the amount set
forth in Exhibit "A";
(e) consents by governmental authorities to assignment which are
obtained subsequent to the Closing Date;
(f) conventional rights of reassignment obligating Seller to reassign
its interests in any portion of the Properties to a third party in the
event it intends to release or abandon such interest prior to the
expiration of the primary term or other termination of such interest;
(g) easements, rights-of-way, servitudes, permits, surface leases,
surface use restrictions and other surface uses and impediments on, over or
in respect of any of the Properties that, as of the Effective Time, were
obtained, granted or agreed to by the operator of the Properties; and
(h) rights reserved to or vested in any municipality or governmental,
tribal, statutory or public authority to control or regulate any of the
Properties in any manner, and all applicable laws, rules and order of any
municipality or governmental or tribal authority.
11 Seller's Interest. The interests described in Exhibit "A"
constitute all of Seller's interest in the Oil and Gas Properties, it being
Seller's intent to sell to Buyers all of Seller's right, title and interest
in the Properties.
12 Status of the Leases. To the best of Seller's knowledge with
respect to the Leases described in Exhibit "A" (the "Leases"):
(a) The Leases have been maintained according to their terms, in
compliance with the agreements to which the Leases are subject;
(b) The Leases are presently in full force and effect; and
(c) Seller has made or caused to be made all payments, including
royalties, delay rentals and shut-in royalties provided for in the Leases.
(d) There has not occurred any event, fact or circumstance which with
the lapse of time or the giving of notice, or both, would constitute a
breach or default on behalf of Seller; and
(e) Neither Seller, any other party with an interest in any of the
Leases, nor any of the Lessors have given or threatened to give notice of
any action to terminate, cancel, rescind or procure a judicial reformation
of any of the Leases or any provisions thereof.
13 Contracts and Agreements. All material contracts or agreements
which have been entered into prior to the Effective Time and will burden or
encumber the Properties or to which the Properties will be subject after
Closing and to which Seller is a signatory (the "Contracts") are set forth
on Exhibit "A." To Seller's knowledge all of the Contracts are in full
force and effect.
4
<PAGE>
14 Operations. To Seller's knowledge the Well has been drilled and
completed within the boundaries of the Leases or within the limits
otherwise permitted by contract, pooling or unit agreement, and by law, and
all drilling of the Well and all operations on the Properties have been
conducted in compliance with all applicable laws, ordinances, rules,
regulations and permits, judgments, orders and decrees of any court or
governmental body or agency.
15 AFE's and Commitments. Except as otherwise set forth in Exhibit
"C," there are no authorizations for expenditure ("AFE's") or other oral or
written commitments to drill or rework the Well, for capital expenditures
for facilities installation and hook up of the Well, or for the drilling of
any additional well or wells on the Oil and Gas Properties.
16 Approvals and Preferential Rights. To Seller's knowledge there are
no approvals required to be obtained by Seller as a result of this
Agreement or the transactions provided for herein, except those listed on
Exhibit "E" hereto and there are no preferential purchase rights that
affect the Properties, except those for which Seller shall provide waivers
at or prior to Closing. The consents listed on Exhibit "E" shall be
obtained and delivered to Buyers as promptly as possible following receipt.
17 Production Burdens, Taxes, Expenses and Revenues. To Seller's
knowledge, all rentals, royalties, excess royalty, overriding royalties and
other payments due under or with respect to the Properties have been
properly and timely paid through the Effective Time. All ad valorem taxes,
property taxes, production taxes, severance taxes and other taxes based on
or measured by the ownership of the Properties have been properly and
timely paid through the Effective Time. All expenses payable under the
terms of the Contracts and attributable to the Properties through the
Effective Time have been properly and timely paid except for such expenses
as are being currently paid prior to delinquency in the ordinary course of
business.
18 C. E. Schwing No. 1 Drilling and Completion Costs. All joint
interest billings received by Seller for the drilling of the C. E. Schwing
No. 1 Well prior to the Effective Time have been paid for by Seller.
19 Environmental Matters. To Seller's knowledge as a nonoperating
working interest owner, through the Effective Time, none of the Properties
are subject to, or in a condition which could subject them to, any claims
or demands, whether for injury or death to persons or damages to property,
any claim, injury, action, loss, cost, expense, liability, penalty, charge
or damage, including without limitation reasonable attorney fees, and all
costs and expenses of all actions, suits, proceedings, demands,
assessments, claims and judgments, whether direct, pending, threatened,
contingent or otherwise, related to the generation, treatment, storage,
transportation, discharge, emission or disposal of hydrocarbons and of
hazardous materials, pollutants, contaminants or wastes on or from the
Properties, as such terms are defined and used by, and any other substances
affected by, the Comprehensive Environmental Response Compensation and
Liability Act, the Resource Conservation and Recovery Act, the Toxic
Substances Control Act, the Emergency Planning and Right-To-Know Act, the
Hazardous Materials Transportation Act, the Oil Pollution Act, the Clean
Water Act, the Safe Drinking Water Act, or the Clean Air Act, all as have
been or may be amended from time to time, or any other applicable federal,
state or local statute, rule, regulation or ordinance.
5
<PAGE>
20 Accuracy of Representations and Warranties. Seller has no knowledge
of any matter which materially and adversely affects the condition of the
Properties, which has not been set forth in this Agreement or the Exhibits
hereto.
2 Representations and Warranties of Pease. Pease represents and warrants to
Seller the following:
1 Organization. Pease is a corporation duly organized, validly
existing and in good standing under the laws of the State of Nevada and is
qualified to do business in Louisiana.
2 Corporate Power. Pease has all requisite power and authority to
carry on its business as presently conducted, to enter into this Agreement,
to purchase the Properties on the terms described in this Agreement, and to
perform its other obligations under this Agreement.
3 Conflicts. The consummation of the transactions contemplated by this
Agreement will not violate, be in conflict with, or constitute a default
under any provision of the articles of incorporation, bylaws or governing
documents of Pease, any provision of any agreement or instrument to which
or by which Pease is a party or by which it is bound, or any judgment,
decree, judicial or administrative order, award, writ, injunction statute,
rule or regulation applicable to Pease or the Properties.
4 Authorization. The execution, delivery and performance of this
Agreement and the transactions contemplated hereby shall have by Closing
been duly and validly authorized by all necessary corporate action,
including any necessary board or shareholder approval, by Pease.
5 Enforceability. This Agreement has been duly executed and delivered
on behalf of Pease, and at the Closing all documents and instruments
required to be executed and delivered by Pease in order to consummate this
sale and purchase pursuant to this Agreement, shall be executed and
delivered. This Agreement does, and such documents and instruments shall,
constitute legal, valid and binding obligations of Pease enforceable in
accordance with their terms.
6 Litigation and Claims. No lawsuit, action, claim, demand,
administrative proceeding or other litigation or proceeding is pending
before any court or governmental agency as of the date of this Agreement
against Pease concerning the subject matter of this Agreement.
7 Broker's Fees. Pease has incurred no liability, contingent or
otherwise, for broker's or finder's fees relating to the transactions
contemplated by this Agreement for which Seller shall have any
responsibility whatsoever.
3 Representations and Warranties of Fortune. Fortune represents and
warrants to Seller the following:
1 Organization. Fortune is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and
is qualified to do business in Louisiana.
2 Corporate Power. Fortune has all requisite power and authority to
carry on its business as presently conducted, to enter into this Agreement,
to purchase the Properties on the terms described in this Agreement, and to
perform its other obligations under this Agreement.
6
<PAGE>
3 Conflicts. The consummation of the transactions contemplated by this
Agreement will not violate, be in conflict with, or constitute a default
under any provision of the articles of incorporation, bylaws or governing
documents of Fortune, any provision of any agreement or instrument to which
or by which Fortune is a party or by which it is bound, or any judgment,
decree, judicial or administrative order, award, writ, injunction, statute,
rule or regulation applicable to Fortune or the Properties.
4 Authorization. The execution, delivery and performance of this
Agreement and the transactions contemplated hereby shall have by Closing
been duly and validly authorized by all necessary corporate action,
including any necessary board or shareholder approval, by Fortune.
5 Enforceability. This Agreement has been duly executed and delivered
on behalf of Fortune, and at the Closing all documents and instruments
required to be executed and delivered by Fortune in order to consummate
this sale and purchase pursuant to this Agreement, shall be executed and
delivered. This Agreement does, and such documents and instruments shall,
constitute legal, valid and binding obligations of Fortune enforceable in
accordance with their terms.
6 Litigation and Claims. No lawsuit, action, claim, demand,
administrative proceeding or other litigation or proceeding is pending
before any court or governmental agency as of the date of this Agreement
against Fortune concerning the subject matter of this Agreement.
7 Broker's Fees. Fortune has incurred no liability, contingent or
otherwise, for broker's or finder's fees relating to the transactions
contemplated by this Agreement for which Seller shall have any
responsibility whatsoever.
ARTICLE IV
CONDITIONS TO CLOSING
1 Seller's Conditions. The obligations of Seller at the Closing are subject
to the satisfaction at or prior to the Closing of the following conditions:
1 Buyers' Representations and Warranties Shall Be True at Closing. All
representations and warranties of Buyers contained in this Agreement shall
be true in all material respects at and as of the Closing as if such
representations and warranties were made at and as of the Closing Date, and
Buyers shall have performed and satisfied all material agreements in all
material respects required by this Agreement to be performed and satisfied
by Buyers at or prior to the Closing.
2 No Restraining or Prohibiting Orders. No order shall have been
entered by any court or governmental agency having jurisdiction over the
Parties or the subject matter of this contract that restrains or prohibits
the purchase by Buyers or the sale by Seller contemplated by this Agreement
and which remains in effect at the Closing Date.
2 Buyers' Conditions. The obligations of Buyers at the Closing are subject
to the satisfaction at or prior to the Closing of the following conditions:
1 Seller's Representations and Warranties Shall Be True at Closing.
All representations and warranties of Seller contained in this Agreement
shall be true in all material respects at and as of the Closing as if such
representations were made at and as of the Closing Date, and Seller shall
have performed and satisfied all material agreements in all material
respects required by this Agreement to be performed and satisfied by Seller
at or prior to the Closing.
7
<PAGE>
2 No Restraining or Prohibiting Orders. No order shall have been
entered by any court or governmental agency having jurisdiction over the
Parties or the subject matter of this Agreement that restrains or prohibits
the transaction contemplated by this Agreement and which remains in effect
at the Closing Date.
3 Adverse Material Changes. None of the Properties shall have suffered
any material destruction, damage or loss which is not adequately covered by
insurance policies currently in force.
4 Consents and Approvals. All nongovernmental consents and approvals
required to be obtained for the assignment of the Properties to Buyers,
unless listed on Exhibit "E" or waived by Buyers, shall have been obtained,
and all preferential purchase rights arising in connection with the
assignment of the Properties to Buyers, shall have been waived or shall
have expired.
5 Compliance. Seller shall have performed and complied in all material
respects with each of the covenants and conditions imposed on Seller by
this Agreement and for which performance or compliance is required prior to
or at the Closing.
6 Assignments. Seller shall have received and recorded assignments
into Seller of the interests in the Leases described in Exhibit "A" hereto,
except the interests in those certain Leases from the State of Louisiana,
identified in Exhibit "A" as items 4 and 5 on page A-3 thereof.
7 Completion of Due Diligence; Reliance. Prior to the Closing Date,
Buyers shall have been afforded an opportunity to (i) examine the
Properties and such materials as it has requested to be provided to it by
Seller, (ii) to discuss with representatives of Seller such materials and
the nature and administration of the Properties, and (iii) to investigate
the condition of the Properties. In consummating the transactions
contemplated by this Agreement, Buyers understand and agree that Buyers
shall be relying solely on the express representations and covenants of
Seller in this Agreement, Buyers' independent investigation of, and
judgment with respect to, the Properties and the advice of its own legal,
tax, economic, environmental, engineering, geological and geophysical
advisors and not on any comments, statements, or reports or studies of any
representatives of, or consultants or advisors engaged by, Seller or any
such advisor. Buyers acknowledge that their representations under this
Agreement in Sections 3.2 and 3.3 are a material inducement to Seller to
enter into this Agreement and to close the sale of the Properties to
Buyers.
ARTICLE V
CLOSING
1 Closing Date. Unless the Parties hereto mutually agree otherwise, and
subject to the conditions stated in this Agreement, the consummation of the
transactions contemplated hereby (herein called the "Closing") shall be held at
or before 5:00 p.m., Central Standard Time, March 7, 1997, or at such other time
as Buyers and Seller may agree in writing. The date Closing actually occurs is
herein called the "Closing Date." Time shall be of the essence of this
Agreement.
8
<PAGE>
2 Place Of Closing. The Closing shall be held at the offices of Seller or
at such other place as Buyers and Seller may agree in writing.
3 Closing Obligations. At the Closing, the following events shall occur,
each being a condition precedent to the others and each being deemed to have
occurred simultaneously with the others:
1 Assignment. Seller shall execute, acknowledge and deliver to Buyers
an Assignment, Bill of Sale and Conveyance substantially in form and
substance as set forth in Exhibit "B" hereto (the "Assignment") conveying
the Properties to Buyers.
2 Delivery of Possession. Seller shall deliver to Buyers,
proportionately based on their respective interests as identified in
Paragraph 5.3.3, exclusive possession of Seller's interest in and to the
Properties.
3 Payment of Purchase Price. Against delivery of the documents and
materials described above, Buyers shall deliver to Seller a cashier's or
certified check, or by wire transfer to its account number 0010032191 at
Bank One Texas, N.A. (ABA number 111000614), the Final Purchase Price. As
between Buyers the Final Purchase Price shall be borne in the following
proportions:
Buyer Interest
Pease Eight Hundred Seventy-Five Thousandths (.875)
Fortune One Hundred Twenty-Five Thousandths (.125)
Notwithstanding the foregoing apportionment of the Final Purchase Price, Seller
shall have no obligation to convey the Properties unless all of the said Final
Purchase Price is tendered by Buyers at Closing.
ARTICLE VI
POST-CLOSING OBLIGATIONS
1 Files And Records. Within fifteen (15) days after the Closing Date,
Seller shall, upon the request of Pease, deliver to Pease such copies of files
and records relating to the Properties as are in Seller's possession or subject
to Seller's control. Pease shall, upon the request of Fortune, deliver to
Fortune such copies.
2 Sales Taxes And Recording Fees. Seller shall pay any sales taxes
occasioned by the sale of the Properties. Buyers shall pay all documentary,
filing and recording fees required in connection with the filing and recording
of any instruments.
3 Indemnification. After the Closing and to the extent permitted by law,
Seller and Buyers shall indemnify each other as follows:
1 Seller's Indemnities. Seller shall defend, indemnify and save and
hold Buyers harmless only with respect to the bonus payment or other direct
expenses relating to the obtaining of the State Lease described as Item 5
on Page A-3 to Exhibit "A" hereto. From and after the Closing Seller shall
have no financial or other responsibility or liability with respect to the
Properties.
2 Buyers' Indemnities. Save and except for the Item covered by the
indemnity in Section 6.3.1 above, Buyers shall defend, indemnify and save
and hold Seller harmless against all claims, costs, damages, losses,
expenses, obligations and liabilities with respect to the Properties which
accrue or occur prior to or after the Effective Time. In this connection,
from and after Closing, Buyers agree to assume any obligations of Seller
pertaining to all costs, obligations and liabilities that arise under the
9
<PAGE>
Properties, or the Contracts or otherwise relate to the Properties and in
each case arise from or relate to events occurring or conditions existing
on or after the Effective Time or accrue after the Effective Time.
4 Survival. The foregoing indemnities of or by the Parties shall survive
the Closing and the execution and delivery of any of the instruments to be
delivered at Closing.
5 Further Assurances. After Closing, Seller and Buyers shall execute,
acknowledge and deliver or cause to be executed, acknowledged and delivered such
instruments and take such other action as may be necessary or advisable to carry
out their obligations under this Agreement and under any document, certificate
or other instrument delivered pursuant hereto.
ARTICLE VII
TERMINATION OF AGREEMENT
1 Termination by Seller. Seller may terminate this Agreement without
liability if the conditions to its obligations at Closing as set forth in this
Agreement are not satisfied in all material respects or waived, as of the
Closing Date.
2 Termination by Buyers. Buyers may terminate this Agreement if the
conditions to Buyers' obligations at Closing as set forth in this Agreement are
not satisfied in all material respects or waived, as of the Closing Date, or in
the event of a "Casualty Loss," as defined hereafter. For purposes of this
Agreement, "Casualty Loss" shall mean with respect to all or any portion of the
Properties, any destruction by fire, blowout, storm, or other casualty, or any
taking, or pending or threatened taking, in condemnation or under the right of
eminent domain, prior to the Closing.
3 Termination by Mutual Agreement. The Parties may terminate this Agreement
without liability among them at any time by their mutual written agreement.
4 Termination For Failure of Timely Closing. Seller may terminate this
Agreement without liability if the Closing shall not have occurred by the
Closing Date; provided, however, that Seller cannot so terminate if it is in
breach of this Agreement. Buyers may terminate this Agreement if the Closing
shall not have occurred by the Closing Date, provided, however, that Buyers
cannot so terminate if they are in breach of this Agreement.
5 Liabilities Upon Termination. Except as otherwise provided in this
Agreement, if this Agreement is terminated for any reason or is breached,
nothing contained herein shall be construed to limit Seller's or Buyers' legal
or equitable remedies, including damages for the breach or failure of any
representation, warranty, covenant or agreement contained herein or the right to
specific performance of this Agreement.
ARTICLE VIII
ALLOCATION OF COSTS AND EXPENSES
At Closing, Buyers shall assume and be responsible for paying, in the
proportions identified in Paragraph 5.3.3 above, all of the costs and expenses
of Seller related to the Properties on or after the Effective Time; provided,
however, that with respect to the costs and expenses of drilling and completing
the C. E. Schwing No. 1, Buyers shall assume those costs invoiced subsequent to
that certain joint interest billing dated October 15, 1996.
10
<PAGE>
ARTICLE IX
TAX PRORATIONS
Any ad valorem property taxes for the Properties for the year in which
Closing occurs shall be borne by Buyers.
ARTICLE X
MISCELLANEOUS
1 Exhibits. The exhibits referred to in this Agreement are hereby
incorporated into this Agreement by reference and constitute a part of this
Agreement.
2 Notices. All notices and communications required or permitted under this
Agreement shall be in writing, and any communication or delivery hereunder shall
be deemed to have been duly made when personally delivered to the Party, or if
mailed or telecopied, when received at the address or facsimile machine of the
Party charged with such notice, provided below:
If to Seller:
Transworld Exploration & Production, Inc.
Bank One Center
910 Travis Street, Suite 800
Houston, Texas 77002
Attn: Mr. J. Curtis Grindal
President
Fax: (713) 847-8051
If to Pease:
Pease Oil and Gas Company
751 Horizon Court, Suite 203
Grand Junction, Colorado 81506-8718
Attn: Mr. Willard H. Pease, Jr.
President
Fax: (970) 243-8840
If to Fortune:
Fortune Petroleum Corporation
One Commerce Green
515 W. Greens Road, Suite 720
Houston, Texas 77067
Attn: Mr. Tyrone J. Fairbanks
President and CEO
Fax: (281) 872-1213
Any Party may, by written notice delivered to the other Parties in compliance
with this paragraph, change the address or facsimile number for notice purposes.
3 Amendments. This Agreement may not be amended except by a written
instrument signed by all Parties hereto.
4 Alienability. Neither Seller nor Buyers may assign their rights or
obligations hereunder without the written consent of all Parties. Subject to the
foregoing, this Agreement shall be binding upon the Parties hereto and their
respective successors and assigns.
5 Third-Party Beneficiaries. Nothing in this Agreement shall entitle anyone
other than Seller and Buyers to any claim, cause of action, remedy or right of
any kind.
11
<PAGE>
6 Counterparts. This Agreement may be executed by Buyers and Seller in any
number of counterparts, each of which shall be deemed an original instrument,
but all of which together shall constitute but one and the same instrument.
7 Governing Law. This Agreement and the transactions contemplated hereby
shall be construed in accordance with, and governed by, the laws of the State of
Texas.
8 Entire Agreement. This Agreement, including the exhibits hereto,
constitutes the entire understanding among the Parties with respect to the
subject matter hereof, superseding all negotiations, prior discussions and prior
agreements and understandings relating to such subject matter.
9 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect.
10 Waiver. No waiver of any of the provisions of this Agreement shall
constitute or be deemed a waiver of any other provision hereof, whether or not
similar, nor shall such waiver constitute a continuing waiver unless otherwise
expressly provided.
11 Captions. The captions in this Agreement are for convenience only and
shall not be considered a part of, or affect the construction or interpretation
of, any provision of this Agreement.
12 Costs. Each party shall pay its own costs, including fees and expenses
of its own counsel, consultants and accountants, in connection with the purchase
and sale of the Properties, except as otherwise provided for herein. Seller
shall discharge all Encumbrances other than the Permitted Encumbrances. Seller
shall pay any sales and other transfer taxes, if any, incurred in connection
with the transaction contemplated by this Agreement. Buyers shall pay all
documentary, filing and recording fees. As between themselves Buyers shall each
pay their proportionate share of all third-party fees and expenses incurred by
either Buyer in connection with the transaction contemplated by this Agreement.
13 Publicity. Seller and Buyers shall agree in advance with each other with
regard to all publicity and other releases issued at or prior to the Closing
concerning this Agreement and, except as may be required by applicable laws or
the applicable rules and regulations of any governmental agency or stock
exchange, neither Buyers nor Seller shall issue any such press release or other
publicity without the prior consent of the other party, which shall not be
unreasonably withheld.
14 Gender And Number. As used in this Agreement, the masculine, feminine or
neuter gender and the plural or singular number shall each be deemed to include
the others whenever the context so indicates.
This Agreement has been duly executed by Seller and Buyers this _____ day
of February, 19__ (the "Agreement Date"). SELLER:
TRANSWORLD EXPLORATION &
PRODUCTION, INC.
By:
--------------------------------------
J. Curtis Grindal
President
BUYERS:
PEASE OIL AND GAS COMPANY
By:
--------------------------------------
Willard H. Pease, Jr.
President
FORTUNE PETROLEUM CORPORATION
By:
--------------------------------------
Tyrone J. Fairbanks
President and CEO
12
<PAGE>
EXHIBIT "A"
TO
PURCHASE AND SALE AGREEMENT
This Exhibit "A" sets forth the description of the property interests
covered by the Purchase and Sale Agreement to which this Exhibit "A" is
attached. All of the terms defined in the Purchase and Sale Agreement and used
in this Exhibit "A" have the same meanings given therein.
This Exhibit "A" and the Purchase and Sale Agreement cover and include the
following:
(a) All of Seller's right, title and interest in and to the oil, gas and
mineral leases described herein, as such leases have been or may be modified
from time to time, and/or lands described in and subject to such oil, gas and
mineral leases (regardless, as to such leases and/or lands, of any surface
acreage and/or depth limitations set forth in any description of any of such
oil, gas and mineral leases), except as otherwise provided for herein, and all
of Seller's right, title and interest in and to any of the oil, gas and minerals
in, on or under the lands, if any, described on this Exhibit, including, without
limitation, all contractual rights, servitudes, fee interests, leasehold
interests, overriding royalty interests, non-participating royalty interests,
mineral interests, production payments, net profits interests, or any other
interest measured by or payable out of production of oil, gas or other minerals
from the oil, gas and mineral leases and/or lands described herein, except as
otherwise provided for herein;
(b) All right, title and interest of Seller in, to and under or derived
from any operating, participation, exploration, letter, farmout, and bidding
agreements, assignments and subleases, whether described in this Exhibit "A," to
the extent, and only to the extent, that such agreements, assignments and
subleases cover or include (i) any of Seller's right, title and interest in and
to the leases, units and/or lands described in this Exhibit "A," (ii) any of
Seller's right, title, and interest in and to leases, units and/or lands
described in or covered by any such agreements, assignments and subleases
specifically described in this Exhibit "A," or (iii) cover or include any other
undivided interests now held by Seller in, to and under the described leases,
units and/or lands, including any operating, participation, exploration, letter,
assignments and subleases and pooling, unitization and communitization
agreements and the units created thereby (including, without limitation, all
units formed under orders, regulations, rules or other official acts of any
governmental body or agency having jurisdiction) to the extent and only to the
extent that such agreements, assignments, subleases, or units cover or include
the described leases or lands.
Notwithstanding the intention of the Parties that this Purchase and Sale
Agreement cover all of the right, title and interest of Seller in and to the
described leases, and lands, except as otherwise provided for herein, Seller
hereby specifically warrants and represents that the interests covered by this
Exhibit are not greater than the working interest nor less than the net revenue
interest, overriding royalty interest, net profit interest, production payment
interest, royalty interest or other interest payable out of or measured by
production set forth in connection with each lease described in this Exhibit. In
the event Seller owns any other or greater interest, such additional interest
shall also be covered by and included in this Purchase and Sale Agreement,
except as otherwise provided for herein.
A-1
<PAGE>
The designation "Working Interest" or "W.I." means an interest owned in an
oil, gas, and mineral lease that determines the cost bearing percentage of the
owner of such interest. The designation "Net Revenue Interest" or "N.R.I." means
net revenue interest, or that portion of the production attributable to the
owner of a working interest after deduction for all royalty burdens, overriding
royalty burdens, or other burdens on production, except severance, production,
windfall profits and other similar taxes. "A.P.P.O." shall mean after prospect
payout as defined by the contracts and agreements described in item B below.
"B.P.P.O." shall mean before prospect payout as defined by the contracts and
agreements described in item B below.
A. LEASES
1. That certain Oil, Gas and Mineral Lease dated January 10, 1994, by and
between Schwing, Inc. et al, as Lessor, and UMC Petroleum Corporation,
as Lessee, recorded under COB 467, Folio 474, Entry No. 71 of the
records of Iberville Parish, Louisiana.
B.P.P.O.W.I. - 11.42857%
B.P.P.O.N.R.I. - 8.2257%
A.P.P.O.W.I. - 10.17857%
A.P.P.O.N.R.I. - 7.32857%
2. That certain Oil, Gas and Mineral Lease dated December 27, 1995,
effective December 14, 1995, by and between Wilbert Funeral Home,
Inc., as Lessor, to W&T Offshore, Inc., as Lessee, recorded under COB
485, Folio 364, Entry No. 99 of the records of Iberville Parish,
Louisiana.
B.P.P.O.W.I. - 11.42857%
B.P.P.O.N.R.I. - 8.2257%
A.P.P.O.W.I. - 10.17857%
A.P.P.O.N.R.I. - 7.32857%
3. That certain Oil, Gas and Mineral Lease dated June 14, 1996, by and
between A. Wilbert's Sons Limited Partnership, as Lessor, to W&T
Offshore, Inc., as Lessee, recorded under COB 489, Folio 158, Entry
No. 75 of the records of Iberville Parish, Louisiana.
B.P.P.O.W.I. - 11.42857%
B.P.P.O.N.R.I. - 8.2257%
A.P.P.O.W.I. - 10.17857%
A.P.P.O.N.R.I. - 7.32857%
A-2
<PAGE>
4. That certain State Lease No. 15357 dated August 19, 1996 by and
between the State of Louisiana, as Lessor, W&T Offshore, Inc., as
Lessee, recorded under COB 491, Entry No. 123 of the records of
Iberville Parish, Louisiana.
B.P.P.O.W.I. - 11.42857%
B.P.P.O.N.R.I. - 8.51428%
A.P.P.O.W.I. - 10.17857%
A.P.P.O.N.R.I. - 7.58303%
5. That certain State Lease No. 15358 dated August 19, 1996 by and
between the State of Louisiana, as Lessor, and National Energy Group,
Inc., as Lessee, recorded under COB 492, Entry No. 9 of the records of
Iberville Parish, Louisiana.
B.P.P.O.W.I. - 11.42857%
B.P.P.O.N.R.I. - 7.65714%
A.P.P.O.W.I. - 10.17857%
A.P.P.O.N.R.I. - 6.81964%
B. UNITS
1. The W & T Offshore, Inc. - CIB. HAZ. 3 Sand, Reservoir A Unit, in the
Bayou Sorrel Field, as created by Order No. 374-U of the Office of
Conservation of the State of Louisiana dated December 5, 1996, but
effective on October 22, 1996.
2. The W & T Offshore, Inc. - CIB. HAZ. 2 Zone, Reservoir B Unit, in the
Bayou Sorrel Field, as created by Order No. 374-P- 1 of the Office of
Conservation of the State of Louisiana dated December 5, 1996, but
effective on October 22, 1996.
C. CONTRACTS
1. Letter agreement dated December 15, 1995, among Supply Development
Group, Inc., Transworld Exploration & Production, Inc., Atocha
Exploration, Inc., Potosky Oil & Gas, Inc., Liberty Energy
Corporation, Fortune Petroleum Corporation d/b/a Fortune Natural
Resources Corporation, Browning Oil Company, Inc., UMC Petroleum
Corporation, Bonray, Inc., and National Energy Group, Inc., regarding
participation in the East Bayou Sorrel Prospect, Iberville Parish,
Louisiana.
2. Operating agreement dated December 15, 1995, for the East Bayou Sorrel
Contract Area, Iberville Parish, Louisiana, among W & T Offshore,
Inc., as Operator, and Supply Development Group, Inc., National Energy
Group, Inc., Liberty Energy Corporation, Fortune Petroleum Company
d/b/a Fortune Natural Resources Corporation, Transworld Exploration &
Production, Inc., Browning Oil Company, Inc., Potosky Oil & Gas, Inc.,
Atocha Exploration, Inc., and Bonray, Inc., as Non-Operators.
A-3
<PAGE>
3. Letter agreement dated July 30, 1996, among W & T Offshore, Inc.,
Supply Development Group, Inc., Transworld Exploration & Production,
Inc., Atocha Exploration, Inc., Bonray, Inc., Potosky Oil & Gas, Inc.,
Liberty Energy Corporation, Fortune Petroleum Corporation d/lo/a
Fortune Natural Resources, Inc., Browning Oil Company, Inc., and
National Energy Group, Inc., regarding the area of interest for the
East Bayou Sorrel Prospect, Iberville Parish, Louisiana.
4. Letter agreement dated December 10, 1996, among Atocha Exploration,
Inc., Potosky Oil & Gas, Inc., Browning Oil Company, Inc., Supply
Development Group, Inc., Liberty Energy Corporation, Bonray, Inc., and
Transworld Exploration & Production, Inc., regarding the East Bayou
Sorrel Prospect, Iberville Parish, Louisiana.
A-4
<PAGE>
EXHIBIT "B"
TO
PURCHASE AND SALE AGREEMENT
[ASSIGNMENT FORM]
ASSIGNMENT OF INTEREST IN OIL, GAS AND MINERAL LEASES
STATE OF LOUISIANA ss.
ss. KNOW ALL PERSONS BY THESE PRESENTS:
PARISH OF IBERVILLE ss.
THAT, TRANSWORLD EXPLORATION & PRODUCTION, INC., a Delaware corporation,
Bank One Center, 910 Travis Street, Suite 800, Houston, Texas 77002
("Assignor"), for and in consideration of the sum of TEN AND NO/100 ($10.00)
DOLLARS and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged and confessed, has granted, sold, transferred,
assigned and conveyed and does hereby GRANT, SELL, TRANSFER, ASSIGN and CONVEY
to the following parties ("Assignees") in the following proportions:
PEASE OIL AND GAS COMPANY .875
a Nevada corporation
751 Horizon Court, Suite 203
Grand Junction, Colorado 81506-8718
FORTUNE PETROLEUM CORPORATION .125
a Delaware corporation
One Commerce Green
515 W. Greens Road, Suite 720
Houston, Texas 77067
the following interests (the "Interests") in, to and under (i) the following
hydrocarbon leases (the "Leases"):
B-1
<PAGE>
1. That certain Oil, Gas and Mineral Lease dated January 10, 1994, by and
between Schwing, Inc. et al, as Lessor, and UMC Petroleum Corporation,
as Lessee, recorded under COB 467, Folio 474, Entry No. 71 of the
records of Iberville Parish, Louisiana.
B.P.P.O.W.I. - 11.42857%
B.P.P.O.N.R.I. - 8.2257%
A.P.P.O.W.I. - 10.17857%
A.P.P.O.N.R.I. - 7.32857%
2. That certain Oil, Gas and Mineral Lease dated December 27, 1995,
effective December 14, 1995, by and between Wilbert Funeral Home,
Inc., as Lessor, to W&T Offshore, Inc., as Lessee, recorded under COB
485, Folio 364, Entry No. 99 of the records of Iberville Parish,
Louisiana.
B.P.P.O.W.I. - 11.42857%
B.P.P.O.N.R.I. - 8.2257%
A.P.P.O.W.I. - 10.17857%
A.P.P.O.N.R.I. - 7.32857%
3. That certain Oil, Gas and Mineral Lease dated June 14, 1996, by and
between A. Wilbert's Sons Limited Partnership, as Lessor, to W&T
Offshore, Inc., as Lessee, recorded under COB 489, Folio 158, Entry
No. 75 of the records of Iberville Parish, Louisiana.
B.P.P.O.W.I. - 11.42857%
B.P.P.O.N.R.I. - 8.2257%
A.P.P.O.W.I. - 10.17857%
A.P.P.O.N.R.I. - 7.32857%
4. That certain State Lease No. 15357 dated August 19, 1996 by and
between the State of Louisiana, as Lessor, to W&T Offshore, Inc., as
Lessee, recorded under COB 491, Entry No. 123 of the records of
Iberville Parish, Louisiana.
B.P.P.O.W.I. - 11.42857%
B.P.P.O.N.R.I. - 8.51428%
A.P.P.O.W.I. - 10.17857%
A.P.P.O.N.R.I. - 7.58303%
5. That certain State Lease No. 15358 dated August 19, 1996 by and
between the State of Louisiana, as Lessor, and National Energy Group,
Inc., as Lessee, recorded under COB 492, Entry No. 9 of the records of
Iberville Parish, Louisiana.
B.P.P.O.W.I. - 11.42857%
B.P.P.O.N.R.I. - 7.65714%
A.P.P.O.W.I. - 10.17857%
A.P.P.O.N.R.I. - 6.81964%
B-2
<PAGE>
(ii) any and all wells drilled thereon, except such wells which have been
abandoned and can give rise to plugging responsibility (the "Well"), (iii) all
surface and underground equipment and other personalty and fixtures in, on, used
in connection with, or related to the Leases (the "Movables"), (iv) all rights
under unitization, communitization, and pooling agreements and orders covering
the Leases and Well, or any part or parts thereof, and the units, and pooled
areas created thereby (the "Units"), including but not limited to:
1. The W & T Offshore, Inc. - CIB. HAZ. 3 Sand, Reservoir A Unit, in the
Bayou Sorrel Field, as created by Order No. 374-U of the Office of
Conservation of the State of Louisiana dated December 5, 1996, but
effective on October 22, 1996.
2. The W & T Offshore, Inc. - CIB. HAZ. 2 Zone, Reservoir B Unit, in the
Bayou Sorrel Field, as created by Order No. 374-P- 1 of the Office of
Conservation of the State of Louisiana dated December 5, 1996, but
effective on October 22, 1996.
and (v) the following joint operating agreements, farmout agreements,
exploration agreements, participation agreements, other letter agreements,
division orders, and sale, purchase or exchange contracts and processing or
other agreements, for the disposition of gas or oil production (the
"Agreements"):
1. Letter agreement dated December 15, 1995, among Supply Development
Group, Inc., Transworld Exploration & Production, Inc., Atocha
Exploration, Inc., Potosky Oil & Gas, Inc., Liberty Energy
Corporation, Fortune Petroleum Corporation d/b/a Fortune Natural
Resources Corporation, Browning Oil Company, Inc., UMC Petroleum
Corporation, Bonray, Inc., and National Energy Group, Inc., regarding
participation in the East Bayou Sorrel Prospect, Iberville Parish,
Louisiana.
2. Operating agreement dated December 15, 1995, for the East Bayou Sorrel
Contract Area, Iberville Parish, Louisiana, among W & T Offshore,
Inc., as Operator, and Supply Development Group, Inc., National Energy
Group, Inc., Liberty Energy Corporation, Fortune Petroleum Company
d/b/a Fortune Natural Resources Corporation, Transworld Exploration &
Production, Inc., Browning Oil Company, Inc., Potosky Oil & Gas, Inc.,
Atocha Exploration, Inc., and Bonray, Inc., as Non-Operators.
3. Letter agreement dated July 30, 1996, among W & T Offshore, Inc.,
Supply Development Group, Inc., Transworld Exploration & Production,
Inc., Atocha Exploration, Inc., Bonray, Inc., Potosky Oil & Gas, Inc.,
Liberty Energy Corporation, Fortune Petroleum Corporation d/b/a
Fortune Natural Resources, Inc., Browning Oil Company, Inc., and
National Energy Group, Inc., regarding the area of interest for the
East Bayou Sorrel Prospect, Iberville Parish, Louisiana.
4. Letter agreement dated December 10, 1996, among Atocha Exploration,
Inc., Potosky Oil & Gas, Inc., Browning Oil Company, Inc., Supply
Development Group, Inc., Liberty Energy Corporation, Bonray, Inc., and
Transworld Exploration & Production, Inc., regarding the East Bayou
Sorrel Prospect, Iberville Parish, Louisiana.
B-3
<PAGE>
and any other right, title, and interest of Assignor in and to the Leases, Well,
Movables, Units, and Agreements, except as otherwise expressly excluded above.
For the purposes of the foregoing, the following definitions shall apply:
1. "B.P.P.O." shall mean before prospect payout as defined by the
Agreements.
2. "A.P.P.O." shall mean after prospect payout as defined by the
Agreements.
3. "W.I." shall mean the working interest, or the interest owned in an
oil, gas and mineral lease that determines the cost bearing percentage
of the owner of such interest.
4. "N.R.I." means net revenue interest, or that portion of the production
attributable to the owner of a working interest after deduction for
all royalty burdens, overriding royalty burdens, or other burdens on
production, except severance, production, windfall profit and other
similar taxes.
The rights in and to the Agreements assigned herein are the subject of that
certain Declaration of Participation and Joint Operating Agreements dated
January 7, 1997, filed January 23, 1997, recorded in COB 494, Folio 138,
Iberville Parish, Louisiana, executed by National Energy Group, Inc.
TO HAVE AND TO HOLD the above described property and premises, together
with all and singular the rights and appurtenances thereto in any way belonging,
unto Assignees and their successors and assigns, and Assignor does hereby bind
itself and its successors and assigns to warrant and forever defend all and
singular the said property and premises unto Assignees and their successors and
assigns against every person whomsoever lawfully claiming or to claim the same
or any part thereof, by, through or under Assignor, but not otherwise.
This Assignment is made subject to the following terms, conditions,
reservations and limitations:
1. This Assignment is made pursuant to, in accordance with, and subject
to the terms, covenants, and conditions of, that certain Purchase and
Sale Agreement dated February ___, 19__, by and between Assignor and
Assignees.
2. This Assignment is made subject to the terms, covenants and conditions
of the Leases and the Agreements.
B-4
<PAGE>
3. This Assignment and its terms, covenants and conditions shall be
binding upon and inure to the benefit of Assignor and Assignees, and
their successors and assigns.
IN WITNESS WHEREOF, this instrument is executed the ___ day of __________,
1997, but effective as of 12:01 a.m., Central Standard Time, October 16, 1996.
WITNESSES: TRANSWORLD EXPLORATION, & PRODUCTION,
INC.
- ---------------------------------- ----------------------------------------
- ------------------- J. Curtis Grindal, President
PEASE OIL AND GAS COMPANY
- ---------------------------------- ----------------------------------------
- ------------------- Willard H. Pease, Jr., President
FORTUNE PETROLEUM CORPORATION
- ---------------------------------- ----------------------------------------
- ------------------- Tyrone J. Fairbanks, President and CEO
B-5
<PAGE>
STATE OF TEXAS ss.
ss.
COUNTY OF HARRIS ss.
On this day of _________, 1997, before me appeared J. Curtis Grindal, to me
personally known, who being by me duly sworn did say that he is the President of
TRANSWORLD EXPLORATION & PRODUCTION, INC., a Delaware corporation; that the
instrument was signed in behalf of the corporation by authority of its Board of
Directors; and that he acknowledged the instrument to be the free act and deed
of the corporation.
------------------------------------------
Notary Public
STATE OF ss.
ss.
COUNTY OF ss.
On this _____day of ____________, 1997, before me appeared Willard H.
Pease, Jr., to me personally known, who being by me duly sworn did say that he
is the President of PEASE OIL AND GAS COMPANY, a Nevada corporation; that the
instrument was signed in behalf of the corporation by authority of its Board of
Directors; and that he acknowledged the instrument to be the free act and deed
of the corporation.
------------------------------------------
Notary Public
B-6
<PAGE>
STATE OF ss.
ss.
COUNTY OF ss.
On this day of __________________, 1997, before me appeared Tyrone J.
Fairbanks, to me personally known, who being by me duly sworn did say that he is
the President and CEO of FORTUNE PETROLEUM CORPORATION, a Delaware corporation;
that the instrument was signed in behalf of the corporation by authority of its
Board of Directors; and that he acknowledged the instrument to be the free act
and deed of the corporation.
------------------------------------------
Notary Public
B-7
<PAGE>
EXHIBIT C"
TO
PURCHASE AND SALE AGREEMENT
[AUTHORIZATIONS FOR EXPENDITURE]
(1) W&T Offshore, Inc.
AFE #70022 R Ev. # 1
Dated: 13-Sept-96
Amount: $932,000.00
Install Waskey Deck & Production Facilities
(copy attached)
(2) National Energy Group, Inc.
AFE # N/A
Dated: 13-Jan-97
Amount: Dry Hole $2,473,655.00
Completed $3,361,273.00
Drill and Complete C. E. Schwing et al #2
(copy attached)
C-1
<PAGE>
EXHIBIT "D"
TO
PURCHASE AND SALE AGREEMENT
[COSTS AND EXPENSES TO BE PAID BY BUYERS]
1. Cash call for the Schwing #2 Well in the amount of $278,589.10 and
paid by Seller on February 12, 1997.
2. November 30, 1996, joint interest billing from National Energy Group,
Inc., in the amount of $63,038.28 and paid by Seller's check no.
015370 on February 20, 1997.
D-1
<PAGE>
EXHIBIT "E"
TO
PURCHASE AND SALE AGREEMENT
1. State Lease No. 15357 dated August 19, 1996, from the State of
Louisiana to W&T Offshore, Inc.
2. State Lease No. 15358 dated August 19, 1996 from the State of
Louisiana to National Energy Group, Inc.
3. Oil, Gas and Mineral Lease dated January 10, 1994 from Schwing, Inc.,
et al to UMC Petroleum Corporation.
4. Oil, Gas and Mineral Lease dated June 14, 1996 from A. Wilbert's &
Sons Limited Partnership to W&T Offshore, Inc.
E-1
