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
October 10, 1996
DELTA PETROLEUM CORPORATION
(Exact name of registrant as specified in its charter)
Colorado 0-16203 84-1060803
(State of Commission (I.R.S. Employer
Incorporation) File No. Identification No.)
Suite 3310
555 17th Street
Denver, Colorado 80202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,including area code: (303) 293-9133
ITEM 5. OTHER EVENTS
A. On September 27, 1996, the Registrant's board of
directors appointed Jerrie F. Eckelberger as a director of the
Company to fill the vacant position occupied by Don E. Mettler
until his death on September 3, 1996 and to serve until the next
meeting of the registrant's shareholders. Mr. Eckelberger was
also appointed to serve on the compensation and audit committees
and to serve as a member of the Incentive Plan Committee for the
Delta Petroleum Corporation 1993 Incentive Plan. A brief
biography of Mr. Eckelberger is attached hereto
as Exhibit 99.1.
B. On August 26, 1996, the Company entered into a
letter agreement dated August 22, 1996 with Slawson Exploration
Company, Inc. ("Slawson"), a copy of which (without exhibits
thereto) is attached hereto as Exhibit 99.2 ("Agreement") .
Under the Agreement the Company acquired a 12% interest in an
agreement ("Sunset Agreement") between Slawson and Sunset
Exploration Company, Inc., under which certain
leasehold interests were acquired constituting the "Yolo Bypass
Prospect" in Yolo County, California. The Company will
participate in collecting and processing 3D seismic data and in
the drilling of wells upon these leases under the terms of the
Slawson and Sunset Agreements. The leases comprising the Yolo
Bypass Prospect constitute approximately
18,000 acres.
C. On October 10, 1996, the Company entered into a
letter agreement dated January 12, 1994 and amended by letter
agreement of September 30, 1996 with Slawson Exploration Company,
Inc. ("Slawson"), a copy of which, without exhibits thereto, is
attached hereto as Exhibit 99.3. Under the agreement the Company
acquired a 15% interest in an agreement ("Black Coral Agreement")
between Slawson and Black Coral Limited Liability Company under
which certain leasehold interests were acquired constituting the
"West Orion Prospect" in Colusa County, California. The Company
will participate in collecting and processing 3D seismic data and
in the drilling of wells upon these leases under the
terms of the Slawson and Black Coral agreements. The leases and
proposed leases comprising the West Orion Prospect constitute
approximately 10,000 acres.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
99.1 Biography of Jerrie F. Eckelberger, director.
99.2 Letter agreement (without exhibits) with Slawson
Exploration Company, Inc. dated August 22, 1996
for an interest in the Yolo Bypass prospect.
99.3 Letter agreement (without exhibits) with Slawson
Exploration Company, Inc. dated September 30,
1996 for an interest in the West Orion prospect.
Pursuant to the requirements of the Securities and Exchange
Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
DELTA PETROLEUM CORPORATION
(Registrant)
Date: October 15, 1996 By: s/Aleron H. Larson, Jr.
Aleron H. Larson, Jr.
Chairman/C.E.O.
INDEX TO EXHIBITS
(1) Underwriting Agreement. Not applicable.
(2) Plan of Acquisition, Reorganization, Arrangement,
Liquidation or Succession. Not applicable.
(3) (i) Articles of Incorporation. Not applicable.
(ii) Bylaws. Not applicable.
(4) Instruments Defining the Rights of Security Holders,
including Indentures. Not applicable.
(5) Opinion: re: Legality. Not applicable.
(6) Opinion: Discount on Capital Shares. Not applicable.
(7) Opinion: re: Liquidation Preference. Not Applicable.
(8) Opinion: re: Tax Matters. Not Applicable.
(9) Voting Trust Agreement. Not Applicable.
(10) Material Contracts. Not Applicable.
(11) Statement re: Computation of Per Share Earnings.
Not Applicable.
(12) Statement re: Computation of Ratios. Not Applicable.
(13) Annual Report to Security Holders, etc. Not Applicable.
(14) Material Foreign Patents. Not Applicable.
(15) Letter re: Unaudited Interim Financial Information.
Not Applicable.
(16) Letter re: Change in Certifying Accountant.
Not applicable.
(17) Letter re: Director Resignation. Not applicable.
(18) Letter re: Change in Accounting Principles. Not Applicable.
(19) Report Furnished to Security Holders. Not Applicable.
(20) Other Documents or Statements to Security Holders.
Not applicable.
(21) Subsidiaries of the Registrant. Not Applicable.
(22) Published Report Regarding Matters Submitted to Vote of
Security Holders. Not Applicable.
(23) Consents of Experts and Counsel. Not applicable.
(24) Power of Attorney. Not applicable.
(25) Statement of Eligibility of Trustee. Not Applicable.
(26) Invitations for Competitive Bids. Not Applicable.
(27) Financial Data Schedule. Not Applicable.
(99) Additional Exhibits.
99.1 Biography of Jerrie F. Eckelberger, director.
99.2 Letter agreement (without exhibits) with Slawson
Exploration Company, Inc. dated August 22, 1996 for
the interest in the Yolo Bypass prospect.
99.3 Letter agreement (without exhibits) with Slawson
Exploration Company, Inc. dated September 30, 1996 for
the interest in the West Orion prospect.
Jerrie F. Eckelberger, age 52, is an investor, real estate
developer and attorney who has practiced law in the State of
Colorado for 25 years. He graduated from Northwestern University
with a Bachelor Arts Degree in 1966 and received his Juris Doctor
Degree in 1971 from the University Colorado School of Law. From
1972 to 1975, Mr. Eckelberger was a staff attorney with the
eighteenth Judicial District Attorney's Office in Colorado . After
spending two years in the litigation department of a Denver law
firm, he founded Eckelberger & Associates which he is still the
principal member. From 1982 to 1992 Mr. Eckelberger was the senior
partner of Eckelberger & Feldman, a law firm with offices in
Englewood, Colorado. Mr. Eckelberger previously served as an
officer, director and corporate counsel for Roxborough Development
Corporation. He is presently the President and Chief Executive
Officer of 1998, Ltd., a Colorado corporation actively engaged in
the development of real estate in Colorado. He is the Managing
Member of The Francis Companies, L.L.C., a Colorado Limited
Liability Company, which actively invests in real estate.
Additionally, Mr. Eckelberger is the General Partner of 2003
Limited, a Colorado Limited Partnership, specializing in real
estate development.
August 22, 1996
Mr. Roger A. Parker
Delta Petroleum Corp.
555 17th St.. Suite 3310
Denver, CO 80202
RE: Yolo Bypass Prospect Participation Agreement Yolo County,
California
Gentlemen:
In this Participation Agreement, Slawson Exploration
Company, Inc., a Kansas Corporation d/b/a Donald C. Slawson
Exploration Company, Inc. within the State of California,
shall hereinafter be referred to as "Slawson" and Delta
Petroleum Corp. shall hereinafter be referred to as "Delta".
The terms of this agreement are as follows:
1.1 Slawson and Sunset Exploration, Inc. (hereinafter referred to
as "Sunset") have entered into an agreement dated effective
August 29, 1996, (herein, "The Sunset Agreement"). This
agreement is attached hereto as Exhibit "1". Delta, through
Slawson, will acquire an undivided 12% interest in The Sunset
Agreement, subject to the terms as set out herein. As
consideration for acquiring this interest, Delta agrees to be
bound by the terms and provisions of The Sunset Agreement, and
to bear its proportionate 12% share of the obligations
incurred by Slawson and created by such agreement. Slawson
shall be responsible for the remaining 88% of such obligations
and will hold Delta harmless therefrom.
2. Slawson, through Sunset, owns an interest in the following
agreements attached hereto, to which Delta will acquire a 12%
interest:
Exhibit "2A" Seismic Option and Lease Option Agreement dated
effective March 15, 1996, with "Glide/Colby".
Exhibit "2B" Seismic Survey and Oil and Gas Lease Option
Agreement dated effective August 1, 1996, with the S.H. Cowell
Foundation.
Exhibit "2C" Assignment and Bill Of Sale from Enerfin
Resources Northwest dated effective July 1, 1996.
3. Upon execution of this agreement, Delta will reimburse
Slawson $10,800 for leasehold costs to date within Yolo
Bypass Prospect. Delta will reimburse Slawson for all
additional leasehold and geophysical costs incurred in this
prospect on the basis of cost plus 35%, so that Delta
actually pays 16.20% of these costs. Slawson and Sunset
anticipate collecting and processing approximately 40 square
miles of 3D seismic at an unpromoted cost of approximately
$30,000 per square mile. Slawson agrees to pay the
remaining 83.80% of these costs or to find other
participants to pay such costs. The estimated cost of the
3D survey will be placed in escrow prior to commencement;
otherwise, reimbursement for leasehold and seismic costs
will be made to Slawson by Delta within 30 days from receipt
of an invoice.
4. An Area of Mutual Interest ("AMI") is hereby established
consisting of lands lying within Townships 7 and 8 North,
Range 3 East, Yolo County, California. The AMI will be
comprised of all lands located within the boundaries of the
3D seismic survey that is being conducted under the terms of
this agreement. When available, an outline of the survey,
and thus the AMI, will be attached hereto as Exhibit "5".
This AMI shall remain in effect for the term of any oil and
gas leases which become subject to this agreement, whether
by acquisition, extension or renewal, and shall thereafter
terminate unless production is established on any portion of
said lands through this agreement, and shall then continue
so long as there is production. If additional leasehold or
leasehold interest is acquired after the date of this
agreement, Slawson will promptly notify Delta in writing of
such acquisition, describing same and the cost thereof.
Delta will have 20 days from receipt of such notice to elect
whether or not to participate for its proportionate share of
such acquisition, insofar only as same covers lands in the
subject AMI. The failure of Delta to reply positively
within the 20 day time period will be deemed an election not
to participate in the acquisition. Delta shall not acquire
any interest within this AMI except through this agreement,
while in effect, without the express written consent of
Slawson.
5. Slawson shall be responsible for payment of all delay
rentals, minimum and shut-in royalties, as well as any other
payments required to maintain leases in full force and
effect. Slawson shall not be liable for failure to properly
make such payments, in the absence of gross negligence.
Upon receipt of an invoice, Delta shall, within 30 days,
reimburse Slawson for its proportionate share of such
payments, or, at Delta' election, notify Slawson that it no
longer desires to hold an interest in the applicable
lease(s), in which case Delta's interest shall be
relinquished to Slawson.
6. To the extent that Slawson may acquire leases within this
AMI through farmin, Slawson shall hold contractual rights
under said farmin agreements beneficially for Delta' 12%
interest, and Delta shall be subrogated to the rights of
Slawson under said farmin agreements to the extent of Delta'
12% interest, until such time as an assignment is earned by
Slawson. Slawson shall, at that time, make an assignment to
Delta. Where Slawson has the ready ability to do so (no
"consent to assignment" required), Slawson will assign to
Delta its' 12% interest in all leases subject to this
agreement upon receipt of any money due, and upon request by
Delta. Slawson will retain Delta's proportionate share of
title to any remaining leasehold beneficially for Delta
until such time as a well is drilled and completed, and a
pooling agreement, if required, has been filed. Slawson
will then deliver an assignment to Delta of its
proportionate share of leasehold in the revenue sharing unit
for the well, subject to obtaining any required consent to
assign under the provisions of the lease and/or farmin
agreements. If such consent to assign cannot be readily
obtained, Slawson shall hold title to the leasehold and
agreements on behalf of Delta. All leasehold acquired by
any method under this agreement (whether by Slawson or
Delta) will be subject to a proportionately reduced 3.00% of
8/8ths overriding royalty interest in favor of Slawson and
Sunset employees.
7. It is anticipated that Slawson will propose wells to be
drilled within this AMI on an ongoing basis. At the time of
proposal, Slawson will provide Delta with written notice of
its intended operation, specifying the location of the well,
estimated spud date, the depth and formation(s) to be
drilled, and an Authorization For Expenditure ("AFE")
setting out estimated dry hole and completion costs, and any
other pertinent information. It is expressly understood
that Slawson will make best efforts to insure that its AFEs
represent actual anticipated costs. Upon receipt of notice
of a proposed well, Delta shall have 20 days within which to
notify Slawson, in writing, of its election to participate.
The failure of Delta to so elect within the time specified
shall be deemed an election by Delta not to participate in
the proposed well. If Delta elects not to participate in a
proposed well, or is deemed to have so elected, it shall
forfeit all of its interest in the leasehold, farmins,
options, etc. covering the lands within the revenue sharing
unit for the proposed well. Excepted from this forfeiture
would be any area then established as a revenue sharing unit
for a producing well, or for a well which is drilling or
which has not spud, but in which Delta has committed to
participate.
Should Delta elect to participate in a well, it will be
obligated to participate in the entire proposed operation to
casing point. An election to participate will also obligate
Delta to acquire its proportionate share of all interest
acquired by Slawson in the well through lease acquisition,
farmin acreage and/or non-consent interest. In order to be
entitled to the benefits of this numbered paragraph, Slawson
shall, within 90 days from expiration of the initial notice
period, spud the proposed well. The parties agree to make
any and all assignments necessary to accomplish the above
provisions. Except in the case of an expiring lease,
farmout agreement, farmout option agreement or similar
circumstance, only one well proposal may be made every 20
days under the terms of this numbered paragraph. In all
instances within this numbered paragraph, the names Slawson
and Delta may be interchanged so that either party may
propose wells. It is recognized that there are additional
working interest owners in this prospect that have ongoing
working interest capabilities in each proposed well.
8. Delta shall pay a $1,200 spud fee to Slawson for each well
drilled under the terms of this agreement, in which it
participates. All wells drilled under this agreement shall be
subject to a proportionate 5% back-in working interest after
payout, in favor of Slawson.
9. An Operating Agreement in the form attached hereto as Exhibit
"3" will be executed for each well drilled under the terms of
this agreement. The Contract Area for each Operating -
Agreement will be comprised of the designated revenue sharing
unit for the well. In the event of a conflict between the
terms of this agreement and any such Operating Agreement, the
terms of this agreement shall prevail.
10. It is understood that the parties hereto may be required to
negotiate operating agreements with third parties. The
parties agree that if there are any conflicts between the
Operating Agreement attached hereto and any third party
operating agreement, the terms of the Operating Agreement
attached hereto shall control the relationship between Slawson
and Delta.
11. An Escrow Agreement in the form attached hereto as Exhibit "4"
shall be entered into between Slawson and Delta for each well
drilled under the terms of this agreement. Article I of the
Escrow Agreement provides a date by which the participants in
the well will deposit their funds into the Escrow Account. Such
date will be established by Slawson to be approximately 10 days
prior to spud of each well. If Delta fails to deposit its share of
the applicable costs, including its spud fee as set out in paragraph
8 of this agreement, by this date, it will be assumed that Delta
does not wish to participate in the well. In this event, Slawson
shall give Delta notice that it has not received its funds and Delta
will either deliver such funds to Slawson by 1:00 PM MST on the next
business day or be subject to the provisions of paragraph 7 of this
agreement, relative to non participation. Slawson shall be
obligated to place funds received from all participants in the same
escrow account, in pro rata amounts based on their share of costs.
12. Delta's representatives shall have free access to any well in which
it participates at all times and to all records pertaining thereto.
In addition, all geological information obtained in the drilling of
any well, in which Delta participates, shall be made available.
Delta may provide a list of its geological requirements to Slawson,
which shall be provided by Slawson, as reasonable.
13. If Slawson terminates its legal existence, transfers its interest
to a successor and no longer owns an interest in the Yolo Bypass
Prospect, or becomes insolvent or bankrupt, or is placed in
receivership, it shall cease to be Operator without any action by
Delta or Slawson's other Non-Operating partners, except the
selection of a successor. Slawson may be removed if it fails or
refuses to carry out its duties hereunder or is no longer capable
of serving as Operator by the affirmative vote of Delta and
Slawson's other Non-Operating partners owning a majority interest
based on ownership in the Yolo Bypass Prospect, after excluding the
voting interest of Slawson. Such resignation or removal shall not
become effective until 7:00 o'clock A.M. on the first day of the
calendar month following the expiration of 60 days after the giving
of notice of resignation by Slawson or action by the Non-Operators
to remove Slawson, unless a successor Operator has been selected and
assumes the duties of Operator at an earlier date. Slawson, after
the effective date of resignation or removal, shall be bound by the
terms hereof as Non-Operator. A change of a corporate name or
structure of Slawson or transfer of Slawson's interest to any single
subsidiary or parent corporation shall not be the basis for removal
of Slawson.
Upon the resignation or removal of Slawson, a successor Operator
shall be selected by the affirmative vote of Delta and Slawson's
other Non-Operating partners owning a majority interest based on the
ownership in the Yolo Bypass Prospect. The successor Operator shall
be selected from the parties owning an interest in the Yolo Bypass
Prospect at the time such successor Operator is selected. If
Slawson is removed or is deemed to have resigned, fails to vote or
votes only to succeed itself, the successor Operator shall be
selected by the affirmative vote of Delta and Slawson's other Non-
Operating partners in the Yolo Bypass Prospect owning a majority
interest, and after excluding the voting interest of Slawson.
This provision shall also apply to the resignation or removal of any
successor Operators.
14. The parties hereto agree that all disputes between them arising out
of, or in connection with, this Agreement shall be resolved by
arbitration as provided herein. This agreement to arbitrate shall
survive the rescission or termination of this contract. All
arbitration shall be conducted pursuant to the Commercial
Arbitration Rules of the American Arbitration Association. If
available, the panel used shall be selected from arbitrators having
at least 10 years of oil and gas experience and employed by the
American Arbitration Association and the decision of the arbitrators
shall be final and binding on all parties. All arbitration shall
be undertaken pursuant to the Federal Arbitration Act, where
applicable, and the decision of the arbitrators shall be enforceable
in any court of competent jurisdiction.
15. Delta shall be an equity owner for its proportionate 12% share of
the 3D seismic data. If such data is ever sold, Delta will be
entitled to 12% of the proceeds of such sale. Delta will not trade
the data without Slawson's express written consent.
16. All notices required herein shall be considered given when delivered
personally or when sent by facsimile or deposited in the U.S. Mail
properly addressed as follows:
Slawson Exploration Company, Inc. Delta Petroleum Corp.
1612 Broadway, Suite 1450 555 17th St., Suite 3310
Denver, CO 80202 Denver, CO 80202
FAX: (303) 592-8881 FAX: (303) 298-8251
17. The liabilities of the parties shall be several and not joint or
collective, and each party shall be responsible only for its share
of the costs and liabilities incurred as provided herein. It is not
the purpose or intention of this agreement to create any
partnership, mining partnership or association, and neither this
agreement nor the operations herein shall be construed or considered
as creating any such legal relationship.
18. The terms and covenants hereof shall extend to, and be binding on,
the parties hereto, their heirs, successors, legal representatives
and assigns; however, Delta will not assign its interest in this
agreement without the express written consent of Slawson. Such
consent shall not be unreasonably withheld. This agreement sets
forth the entire agreement between the parties hereto, and there are
no oral agreements not set out herein in writing.
If the foregoing correctly sets forth our understanding, please
execute and return one copy of this agreement.
Very Truly Yours,
s/Bruce Branson
Bruce Branson
District Landman
AGREED TO AND ACCEPTED THIS 26th DAY OF AUGUST, 1996.
DELTA PETROLEUM CORP.
BY: /Roger A. Parker, President
September 30, 1996
Delta Petroleum Corp.
555 17th Street, Suite 3310
Denver, CO 80202
Attention: Mr. Roger A. Parker
RE: West Orion Prospect Participation Agreement Colusa County,
California
Gentlemen:
In this Participation Agreement, Slawson Exploration Company,
Inc., a Kansas Corporation d/b/a Donald C. Slawson Exploration
Company, Inc. within the State of California, shall
hereinafter be refer-red to as "Slawson" and Delta Petroleum
Corp. shall hereinafter be referred to as "Delta".
The terms of this agreement are as follows:
1. Slawson and Black Coral Limited Liability Company have entered
into a Joint Venture Agreement dated January 12, 1994, a copy
of which is attached hereto as Exhibit " 1 ". This agreement
has been amended by Letter Agreement of September 30, 1996
which is also a part of Exhibit 1. West Orion Prospect covers
a portion of the "Orion" and "Orion Expansion" Prospects in
the Black Coral Agreement. Delta will acquire an undivided
15% interest in the Joint Venture Agreement, as amended,
through Slawson, as to the West Orion Prospect, which covers
the geographic area set out in paragraph 4 of this agreement.
As consideration for acquiring this interest, Delta agrees to
be bound by the terms and provisions of said Joint Venture
Agreement, as amended, and to bear its proportionate 15% share
of the obligations incurred by Slawson and created by such
Joint Venture Agreement, only as to West Orion Prospect.
Slawson shall be responsible for the remaining 85% of such
obligations and will hold Delta harmless therefrom.
2. Slawson owns an interest in the following leases and
agreements attached hereto, to which Delta will acquire a 15%
interest out of Slawson's interest:
Exhibit "2A" This Exhibit sets out the leases acquired as of
September 15, 1996 that are subject to this agreement. After
September 15, 1996, leases acquired, under the provisions of
the AMI as described in paragraph 4 of this agreement, shall
be added to this Exhibit from time to time to reflect such
additional acquisitions.
Exhibit "2B" Seismic Option Agreement dated March 4, 1996,
amended April 25, 1996, between Slawson and The Termo Company.
3. Slawson anticipates collecting and processing approximately 14
square miles of 3D seismic at an unpromoted, estimated cost of
$30,000 per square mile. The seismic monies are being
escrowed and immediately upon execution of this agreement,
Delta shall pay Slawson the sum of $92,063 for the estimated
cost of seismic. Further, upon the execution of this
agreement, Delta will reimburse Slawson $19,513 for leasehold
costs and $672 for brokerage costs incurred within West Orion
Prospect. The above amounts are set forth on the attached
invoice and are calculated on the basis of cost plus 35% so
that Delta's share of actual costs is 20.25%. These amounts
represent Delta's share of costs as of September 15, 1996.
After September 15, 1996, Delta will reimburse Slawson for all
additional leasehold, brokerage and geophysical costs incurred
in this prospect on the basis of cost plus 35%, so that Delta
actually pays 20.25% of such additional costs. Slawson agrees
to pay the remaining 79.75% of these costs or to find other
participants to pay such costs. Reimbursement for leasehold,
brokerage and seismic costs will be made to Slawson by Delta
within 30 days from receipt of an invoice.
4. An Area of Mutual Interest ("AMI") is hereby established
consisting of the following lands lying within Colusa County,
California:
Township 14 North, Range 1 East Township 14 North,Range 1 West
Section 29: SW/4 Section 25: S/2
Section 30: S/2 Section 36: AR
Section 3 1: All
Section 32: W/2
Township 13 North, Range 1 East Township 13 North, Range 1 West
Section 5: N/2, SW/4 Section 1: AR
Section 6: AU Section 11: E/2SE/4
Section 7: AU Section 12: AU
Section 8: SW/4 Section 13: AU
Section 18: W/2E/2, W/2 Section 14: E/2NE/4, SE/4
Section 19: AU Section 23: E/2
Section 30: AU Section 24: All
Section 25: All
Section 26: E/2
Section 35: NE/4
Section 36: N/2
This AMI shall remain in effect for the term of any oil and
gas leases which become subject to this agreement, whether by
acquisition, extension or renewal, and shall thereafter
terminate unless production is established on any portion of
said lands through this agreement, and shall then continue so
long as there is production. If additional leasehold or
leasehold interest is acquired after the date of this
agreement, Slawson will promptly notify Delta in writing of
such acquisition, describing same and the cost thereof Delta
will have 20 days from receipt of such notice to elect whether
or not to participate for its proportionate share of such
acquisition, insofar only as same covers lands in the subject
AMI. The failure of Delta to reply positively within the 20
day time period will be deemed an election not to participate
in the acquisition. Delta shall not acquire any interest
within this AMI except through this agreement, while in
effect, without the express written consent of Slawson.
5. Slawson shall be responsible for payment of all delay rentals,
minimum and shut-in royalties, as well as any other payments
required to maintain leases in full force and effect. Slawson
shall not be liable for failure to properly make such
payments, in the absence of gross negligence. Upon receipt of
an invoice, Delta shall, within 30 days, reimburse Slawson for
its proportionate share of such payments, or, at Delta's
election, notify Slawson that it no longer desires to hold an
interest in the applicable lease(s), in which case Delta's
interest shall be relinquished to Slawson.
6. Slawson will retain Delta's proportionate share of title to
all acquired leasehold and/or farmin agreements beneficially
for Delta until such time as a well is drilled and completed
and a pooling agreement, if required, has been filed. Slawson
will then deliver an assignment to Delta of its proportionate
share of leasehold in the revenue sharing unit or acreage held
by the well's production, on a well-by-well basis, subject to
obtaining any required consent to assign under the provisions
of the lease and/or farmin agreements. If such consent to
assign cannot be readily obtained, Slawson shall hold title to
the leasehold and agreements on behalf of Delta. If such
consent is obtained, Slawson will promptly make assignment
under the terms of this paragraph. To the extent that Slawson
may acquire leases within this prospect area through farmin,
Slawson shall hold its contract rights under said farmin
agreements beneficially for Delta's proportionate 15%
interest, and Delta shall be subrogated to the rights of
Slawson under said farmin agreements to the extent of Delta's
interest. It is understood that the intent of this paragraph
is for Slawson to hold title beneficially for Delta in order
to avoid the administrative time and expense involved in
making assignments; however, notwithstanding the provisions of
this paragraph, Delta has the right to demand assignment from
Slawson of all leasehold to which it holds an interest under
the terms of this agreement. If such a request is made,
Slawson will make all reasonable efforts to provide the
assignments in a timely manner, subject to the provisions of
this agreement. All leasehold acquired by any method under
this agreement (whether by Slawson or Delta) will be subject
to a proportionately reduced 3.00% of 8/8ths overriding
royalty interest in favor of Slawson.
7 . It is anticipated that Slawson will propose wells to be
drilled within this AMI on an ongoing basis. At the time of
proposal, Slawson will provide Delta with written notice of
its intended operation, specifying the location of the well,
estimated spud date, the depth and formations) to be
drilled, and an Authorization For Expenditure ("AFE")
setting out estimated dry hole and completion costs, and any
other pertinent information. It is expressly understood
that Slawson will make best efforts to insure that its AFEs
represent actual anticipated costs. Upon receipt of notice
of a proposed well, Delta shall have 20 days within which to
notify Slawson, in writing, of its election to participate.
The failure of Delta to so elect within the time specified
shall be deemed an election by Delta not to participate in
the proposed well. If Delta elects not to participate in a
proposed well, or is deemed to have so elected, it shall
forfeit all of its interest in the leasehold, farmins,
options, etc. covering the lands within the revenue sharing
unit for the proposed well, and also in all direct and
diagonal offsetting revenue sharing units, of the same size
and shape as the revenue sharing unit for the proposed well,
as to formations lying between the surface and the
stratigraphic equivalent of 100' below the total depth
drilled in the proposed well.
Should Delta elect to participate in a well, it will be
obligated to participate in the entire proposed operation to
casing point. An election to participate will also obligate
Delta to acquire its proportionate share of all interest
acquired by Slawson in the well through lease acquisition,
farmin acreage and/or non-consent interest. In order to be
entitled to the benefits of this numbered paragraph, Slawson
shall, within 90 days from expiration of the initial notice
period, spud the proposed well. The parties agree to make any
and all assignments necessary to accomplish the above
provisions. Except in the case of an expiring lease, farmout
agreement, farmout option agreement or similar circumstance,
only one well proposal may be made every 20 days under the
terms of this numbered paragraph. In all instances within
this numbered paragraph, the names Slawson and Delta may be
interchanged so that either party may propose wells. It is
recognized that there are additional working interest owners
in this project area that have ongoing working interest
capabilities in each proposed well. Further, it is recognized
that said additional working interest owners m this project
area also have the ability to propose wells as set forth
herein.
8.8 Delta shall pay a $1,500 spud fee to Slawson for each well
drilled under the terms of this agreement, in which it
participates.
9. An Operating Agreement in the form attached hereto as Exhibit
"3" will be executed for each well drilled under the terms of
this agreement. The Contract Area for each Operating
Agreement will be comprised of the designated revenue sharing
unit for the well. In the event of a conflict between the
terms of this agreement and any such Operating Agreement, the
terms of this agreement shall prevail.
10. It is understood that the parties hereto may be required to
negotiate operating agreements with third parties. 'Me
parties agree that if there are any conflicts between the
Operating Agreement attached hereto and any third party
operating agreement, the terms of the Operating Agreement
attached hereto shall control the relationship between Slawson
and Delta.
11. An Escrow Agreement in the form attached hereto as Exhibit "4"
shall be entered into between Slawson and Delta for each well
drilled under the terms of this agreement. Article 1 of the
Escrow Agreement provides a date by which the participants in
the well will deposit their funds into the Escrow Account.
Such date will be established by Slawson to be approximately
10 days prior to spud of each well. If Delta fails to deposit
its share of the applicable costs, including its spud fee as
set out in paragraph 8 of this agreement, by this date, it
will be assumed that Delta does not wish to participate in the
well. In this event, Slawson shall give Delta notice that it
has not received its funds and Delta will either deliver such
funds to Slawson by 1:00 PM MST on the next business day or be
subject to the provisions of paragraph 7 of this agreement,
covering non participation. Slawson shall be obligated to
place funds received from all participants in the same escrow
account, in pro rata amounts, based on their share of costs.
12. Delta's representatives shall have free access to any well,
within the West Orion Prospect, in which it participates at
all times and to all records pertaining thereto. In addition,
all geological information obtained in the drilling of any
well, in which Delta participates, shall be made available.
Delta may provide a list of its geological requirements to
Slawson, which shall be provided by Slawson, as reasonable.
13. If Slawson terminates its legal existence, transfers its
interest to a successor and no longer owns an interest in the
West Orion Prospect, or becomes insolvent or bankrupt, or is
placed in receivership, it shall cease to be Operator without
any action by Delta or Slawson's other Non-Operating partners,
except the selection of a successor. Slawson may be removed
if it fails or refuses to carry out its duties hereunder or is
no longer capable of serving as Operator by the affirmative
vote of Delta and Slawson's other Non-Operating partners
owning a majority interest based on ownership in the West
Orion Prospect, after excluding the voting interest of
Slawson. Such resignation or removal shall not become
effective until 7:00 o'clock A.M. on the first day of the
calendar month following the expiration of 60 days after the
giving of notice of resignation by Slawson or action by the
Non-Operators to remove Slawson, unless a successor Operator
has been selected and assumes the duties of Operator at an
earlier date. Slawson, after the effective date of
resignation or removal, shall be bound by the terms hereof as
Non-Operator. A change of a corporate name or structure of
Slawson or transfer of Slawson's interest to any single
subsidiary or parent corporation shall not be the basis for
removal of Slawson.
Upon the resignation or removal of Slawson, a successor
Operator shall be selected by the affirmative vote of Delta
and Slawson's other Non-Operating partners owning a majority
interest based on the ownership in the West Orion Prospect.
The successor Operator shall be selected from the parties
owning an interest in the West Orion Prospect at the time such
successor Operator is selected. If Slawson is removed or is
deemed to have resigned, fails to vote or votes only to
succeed itself, the successor Operator shall be selected by
the affirmative vote of Delta and Slawson's other Non-
Operating partners in the West Orion Prospect owning a
majority interest, and after excluding the voting interest of
Slawson.
This provision shall also apply to the resignation or removal
of any successor Operators.
14. The parties hereto agree that all disputes between them
arising out of, or in connection with, this Agreement shall be
resolved by arbitration as provided herein. This agreement to
arbitrate shall survive the rescission or termination of this
contract. All arbitration shall be conducted pursuant to the
Commercial Arbitration Rules of the American Arbitration
Association. If available, the panel used shall be selected
from arbitrators having at least 10 years of oil and gas
experience and employed by the American Arbitration
Association and the decision of the arbitrators shall be final
and binding on all parties. All arbitration shall be
undertaken pursuant to the Federal Arbitration Act, where
applicable, and the decision of the arbitrators shall be
enforceable in any court of competent jurisdiction.
15. Delta shall be an equity owner for its proportionate 15% share
of the 3D seismic data. If such data is ever sold, Delta will
be entitled to 15% of the proceeds of such sale. Delta will
not trade the data, or allow a third party other than its
consultants to review the data, without Slawson's express
written consent.
16. All notices required herein shall be considered given when
delivered personally or when sent by facsimile or deposited in
the U.S. Mail properly addressed as follows:
Slawson Exploration Company, Inc. Delta Petroleum Corp.
1612 Broadway, Suite 1450 555 17th St., Suite 3310
Denver, CO 80202 Denver, CO 80202
FAX: (303) 592-8881 FAX: (303) 298-8251
17. The liabilities of the parties shall be several and not joint
or collective, and each party shall be responsible only for
its share of the costs and liabilities incurred as provided
herein. It is not the purpose or intention of this agreement
to create any partnership, mining partnership or association,
and neither this agreement nor the operations herein shall be
construed or considered as creating any such legal
relationship.
18. The terms and covenants hereof shall extend to, and be binding
on, the parties hereto, their heirs, successors, legal
representatives and assigns; however, Delta will not assign
its interest in this agreement without the express written
consent of Slawson. Such consent shall not be unreasonably
withheld. This agreement sets forth the entire agreement
between the parties hereto, and there are no oral agreements
not set out herein in writing.
If the foregoing correctly sets forth our understanding, please
execute and return one copy of this agreement.
Very Truly Yours,
s/Bruce Branson
Bruce Branson
District Landman
AGREED TO AND ACCEPTED THIS 10th DAY OCTOBER, 1996.
DELTA PETROLEUM CORP.
BY: s/Roger A. Parker, President
