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
March 3, 1997
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 February 19, 1997, the Company entered into a
letter agreement dated February 10, 1997 with Slawson Exploration
Company, Inc. ("Slawson"), a copy of which (without exhibits
thereto) is attached hereto as Exhibit 99.1 ("Agreement") .
Under the Agreement the Company acquired a 15% interest in
certain leasehold interests acquired or to be
acquired by Slawson constituting the "Bali 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 Agreement. The Bali Prospect
area of interest constitutes approximately 40 square miles.
B. Also on February 19, 1997, the Company entered
into a Letter Agreement ("Agreement") dated February 12, 1997
with Slawson Exploration Company, Inc. ("Slawson"), a copy of
which, without exhibits thereto, is attached hereto as Exhibit
99.2. Under the agreement the Company acquired a 15% interest in
certain leasehold interests acquired or to be acquired
constituting the "Fiji 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 Agreement. The Fiji Prospect
area of interest constitutes approximately 25 square miles.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
99.1 Letter agreement (without exhibits) with Slawson
Exploration Company, Inc. dated February 10, 1997 for
an interest in the Bali Prospect.
99.2 Letter agreement (without exhibits) with Slawson
Exploration Company, Inc. dated February 12, 1997 for
an interest in the Fiji 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: March 3, 1997 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 Letter agreement (without exhibits) with Slawson
Exploration Company, Inc. dated February 10, 1997 for an interest
in the Bali Prospect.
99.2 Letter agreement (without exhibits) with Slawson
Exploration Company, Inc. dated February 12, 1997 for an
interest in the Fiji Prospect.
February 10, 1997
Mr. Roger A. Parker
Delta Petroleum Corp.
555 17th St., Suite 3310
Denver, CO 80202
RE: RM 96-004 Bali Prospect Participation Agreement
Solano 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".
This Agreement will constitute our understanding
regarding Delta's purchase of an interest in Slawson's Bali
Prospect and the formation of an Area of Mutual Interest.
The terms of this agreement are as follows:
1. Slawson is in the process of acquiring leasehold
within the Bali Prospect, the general geographic area for which
is set out on Exhibit "1", attached hereto and made a part
hereof. Further, Slawson anticipates collecting and processing
approximately 40 square miles of 3-D seismic within Bali
Prospect.
2. Delta has agreed to participate with Slawson for a
proportionate 15% share of leasehold acquisition and collection
of 3-D seismic data within the Bali Prospect. Maximum cost for
seismic acquisition is estimated to be $1,280,000. Land costs
are estimated to be within a range of $180,000 to $370,000,
depending upon the amount of options versus leases received.
Delta is responsible for spending its proportionate 15% share of
such amounts under the terms of this agreement, assuming such
costs are incurred within twelve (12) months from the date of
this agreement. If either or both of such amounts are exceeded,
Delta may participate in additional expenditures on a selected
basis, under the terms of this agreement. Delta agrees to be
bound by the terms and provisions of leasehold in which it
participates. Slawson shall be responsible for the remaining 85%
of such obligations and shall hold Delta harmless therefrom.
3. Delta will reimburse Slawson for all leasehold and
geophysical costs on the basis of cost plus 35%, so that Delta's
share of actual costs is 20.25%. Slawson is currently in the
process of acquiring leasehold in the Bali Prospect area.
Immediately upon the execution of this Agreement, Delta will
reimburse Slawson the sum of $15,187 which represents leasehold
and brokerage costs anticipated for the months of January and
February. This pre-bill is based upon the sum of $25,000 for
brokerage and $50,000 for land. Reimbursement for remaining
costs, or estimates of such costs, which may be made from time to
time, will be made to Slawson by Delta within fifteen (15) days
from receipt of an invoice. Slawson agrees to pay the remaining
79.75% of costs or to find other participants to pay such costs.
4. An Area of Mutual Interest ("AMI") is hereby
established consisting of lands lying within Townships 7 and 8
North, Range 2 East, Solano County, California. The AMI will be
comprised of all lands located within the final outline 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 "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. Delta shall be obligated to acquire its
proportionate share of all leasehold acquired by Slawson within
the AMI up to a maximum gross (unpromoted) expenditure of
$370,000. If this amount is exceeded, and if additional
expenditures are incurred for acquisition, Slawson will promptly
notify Delta in writing of such acquisition, describing same and
the cost thereof. Delta will have 10 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 10 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 20 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 assignment 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 3.5% 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 AFE's 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
share 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. Excepted from this forfeiture would be: a) any area then
established as a revenue sharing unit for a producing well in
which Delta has previously participated, or b) 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 project area that have ongoing working interest
capabilities in each proposed well. Further, it is recognized
that said additional working interest owners in this project area
also have the ability to propose wells as set forth herein.
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.
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 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 Bali 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 Bali 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 Bali 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 Bali Prospect. The successor
Operator shall be selected from the parties owning an interest in
the Bali 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 Bali 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 thecision 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 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.
1612 Broadway, Suite 1450
Denver, CO 80202
FAX: (303) 592-8881
Delta Petroleum Corp.
555 17th St., Suite 3310
Denver, CO 80202
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 terms correctly set 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 19th DAY OF FEBRUARY, 1997.
DELTA PETROLEUM CORP.
By: s/Roger A. Parker
Pres.
February 12, 1997
Mr. Roger A. Parker
Delta Petroleum Corp.
555 17th St., Suite 3310
Denver, CO 80202
RE: RM 96-002 Fiji 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".
This Agreement will constitute our understanding
regarding Delta's purchase of an interest in Slawson's Fiji
Prospect and the formation of an Area of Mutual Interest.
The terms of this agreement are as follows:
1 . Slawson is in the process of acquiring leasehold
within the Fiji Prospect, the general geographic area for which
is set out on Exhibit "1", attached hereto and made a part
hereof. Further, Slawson anticipates collecting and processing
approximately 25 square miles of 3-D seismic within Fiji
Prospect.
Delta has agreed to participate with Slawson for a
proportionate 15% share of leasehold acquisition and collection
of 3-D seismic data within the Fiji Prospect. Maximum cost for
seismic acquisition is estimated to be $800,000. Land costs are
estimated to be within a range of $180,000 to $300,000, depending
upon the amount of options versus leases received. Delta is
responsible for spending its proportionate 15% share of such
amounts under the terms of this agreement, assuming such costs
are incurred within twelve (12) months from the date of this
agreement. If either or both of such amounts are exceeded, Delta
may participate in additional expenditures on a selected basis,
under the terms of this agreement. Delta agrees to be bound by
the terms and provisions of leasehold in which it participates.
Slawson shall be responsible for the remaining 85% of such
obligations and shall hold Delta harmless therefrom.
3. Delta will reimburse Slawson for all leasehold and
geophysical costs on the basis of cost plus 35%, so that Delta's
share of actual costs is 20.25%. Slawson is currently in the
process of acquiring leasehold in the Fiji Prospect area.
Immediately upon the execution of this Agreement, Delta will
reimburse Slawson the sum of $15,187 which represents leasehold
and brokerage costs anticipated for the months of January and
February. This pre-bill is based upon the sum of $25,000 for
brokerage and $50,000 for land. Reimbursement for remaining
costs, or estimates of such costs, which may be made from time to
time, will be made to Slawson by Delta within fifteen (15) days
from receipt of an invoice. Slawson agrees to pay the remaining
79.75% of costs or to find other participants to pay such costs.
4. An Area of Mutual Interest ("AMI") is hereby
established consisting of lands lying within Township 6 North,
Ranges 3 and 4 East, Yolo County, California. The AMI will be
comprised of all lands located within the final outline 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 "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. Delta shall be obligated to acquire its
proportionate share of all leasehold acquired by Slawson within
the AMI up to a maximum gross (unpromoted) expenditure of
$300,000. If this amount is exceeded, and if additional
expenditures are incurred for acquisition, Slawson will promptly
notify Delta in writing of such acquisition, describing same and
the cost thereof. Delta will have 10 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 10 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 20 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 assignment 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,.@ 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 ' g 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 AFE's 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
share 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. Excepted from this forfeiture would be: a) any area then
established as a revenue sharing unit for a producing well in
which Delta has previously participated, or b) 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 project area that have ongoing working interest
capabilities in each proposed well. Further, it is recognized
that said additional working interest owners in this project area
also have the ability to propose wells as set forth herein.
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.
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 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 Fiji 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
Fiji 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 Fiji 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 Fiji Prospect. The successor
Operator shall be selected from the parties owning an interest in
the Fiji 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 Fiji 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 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.
1612 Broadway, Suite 1450
Denver, CO 80202
FAX: (303) 592-8881
Delta Petroleum Corp.
555 17th St., Suite 3310
Denver, CO 80202
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 terms correctly set 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 19th DAY OF FEBRUARY, 1997.
DELTA PETROLEUM CORP.
By: s/Roger A. Parker
Pres.
