SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 1996
Commission File Number: 0-23870
McMoRan Oil & Gas Co.
Incorporated in Delaware 72_1266477
(IRS Employer
Identification No.)
1615 Poydras Street, New Orleans, Louisiana 70112
Registrant's telephone number, including area code: (504) 582-4000
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. Yes X No
---
On June 30, 1996, there were issued and outstanding 13,881,188 shares
of the registrant's Common Stock, par value $0.01 per share.
MCMORAN OIL & GAS CO.
TABLE OF CONTENTS
Page
Part I. Financial Information
Financial Statements:
Condensed Balance Sheets 3
Statements of Operations 4
Statements of Cash Flow 5
Notes to Financial Statements 6
Remarks 6
Management's Discussion and Analysis
of Financial Condition and Results of Operations 7
Part II. Other Information 9
Signature 10
Exhibit Index E-1
McMoRan Oil & Gas Co.
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements.
MCMORAN OIL & GAS CO.
CONDENSED BALANCE SHEETS
(Unaudited)
June 30, December 31,
1996 1995
---------- ----------
(In Thousands)
ASSETS
Cash and short-term investments $ 3,829 $ 10,323
Accounts receivable and other 4,012 1,432
---------- ----------
Total current assets 7,841 11,755
Oil and gas properties, net 14,125 9,878
---------- ----------
Total assets $ 21,966 $ 21,633
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities $ 5,473 $ 3,498
Production loan 2,000 530
Other liabilities 441 -
Stockholders' equity 14,052 17,605
---------- ----------
Total liabilities and
stockholders' equity $ 21,966 $ 21,633
========== ==========
The accompanying notes are an integral part of these financial
statements.
MCMORAN OIL & GAS CO.
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Six Months
Ended June 30, Ended June 30,
------------------------ ------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
(In Thousands, Except Per Share Amounts)
Revenues:
Oil and gas sales $ 540 $ 1,351 $ 1,204 $ 1,406
Management fees 409 - 818 -
---------- ---------- ---------- ----------
Total revenues 949 1,351 2,022 1,406
---------- ---------- ---------- ----------
Costs and expenses:
Production and delivery,
including depreciation
and amortization 404 1,050 802 1,089
Exploration expenses (604) 5,370 3,871 7,959
General and
administrative expenses 731 1,065 1,384 2,543
---------- ---------- ---------- ----------
Total costs and
expenses 531 7,485 6,057 11,591
---------- ---------- ---------- ----------
Operating income (loss) 418 (6,134) (4,035) (10,185)
Interest expense (7) - (7) -
Other income
(expense), net 114 (117) 237 170
---------- ---------- ---------- ----------
Net income (loss) $ 525 $ (6,251) $ (3,805) $ (10,015)
========== ========== ========== ==========
Net income (loss)
per share $0.04 $(.45) $(0.27) $(.73)
===== ===== ====== =====
Average shares
outstanding 13,867 13,770 13,847 13,770
====== ====== ====== ======
The accompanying notes are an integral part of these financial
statements.
MCMORAN OIL & GAS CO.
STATEMENTS OF CASH FLOW
(Unaudited)
Six Months
Ended June 30,
------------------------
1996 1995
---------- ----------
(In Thousands)
Cash flow from operating activities:
Net loss $ (3,805) $ (10,015)
Adjustments to reconcile net loss to net
cash provided by (used in) operating
activities:
Depreciation and amortization 343 817
Exploration expenses 3,871 7,959
(Increase) decrease in working capital
and other 766 (2,283)
---------- ----------
Net cash provided by (used in) operating
activities 1,175 (3,522)
---------- ----------
Cash flow from investing activities:
Exploration and development expenditures (11,105) (12,769)
Proceeds from sale of oil and gas
interests 2,059 -
---------- ----------
Net cash used in investing activities (9,046) (12,769)
---------- ----------
Cash flow from financing activities:
Borrowings under production loan, net 1,377 -
---------- ----------
Net cash provided by financing activities 1,377 -
---------- ----------
Net decrease in cash and short-term
investments (6,494) (16,291)
Cash and short-term investments at
beginning of year 10,323 17,331
---------- ----------
Cash and short-term investments at
end of period $ 3,829 $ 1,040
========== ==========
The accompanying notes are an integral part of these financial
statements.
McMoRan Oil & Gas Co.
NOTES TO FINANCIAL STATEMENTS
1. SALE OF OIL AND GAS LEASEHOLD INTEREST
In June 1996, McMoRan Oil & Gas Co. (MOXY) sold one-half of its 50
percent leasehold interest in a joint venture with Phillips Petroleum
Company, respecting a 35,000 acre exploration area in south Louisiana,
to Freeport-McMoRan Resource Partners, Limited Partnership (FRP), an
affiliate of MOXY, for $2.1 million. This amount represented the
reimbursement for certain costs previously incurred by MOXY in
connection with this project area and was recorded as a reduction to
exploration expenses. MOXY sold the interest to FRP on the same
proportionate basis as the Phillips Petroleum acquisition of its
interest in 1995.
____________________
Remarks
The information furnished herein should be read in conjunction with
MOXY's financial statements contained in its 1995 Annual Report to
stockholders included in its Annual Report on Form 10-K.
The information furnished herein reflects all adjustments which are,
in the opinion of management, necessary for a fair statement of the
results for the periods. All such adjustments are, in the opinion of
management, of a normal recurring nature.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
OPERATIONAL ACTIVITIES
During the second quarter of 1996, McMoRan Oil & Gas Co. (MOXY) had
significant activity within its exploration and development program
with MCN Corporation (MCN), as follows:
* Daily gross production at the Vermilion Block 160 field averaged
approximately 15.2 million cubic feet of natural gas and 750 barrels
of condensate during the quarter. MOXY plans to drill an additional
development well on this property in the second half of 1996.
* Exploratory wells discovered natural gas on West Cameron Block
503, West Cameron Block 616 and Grand Isle Block 65. Drilling results
at these sites are currently being evaluated and further drilling is
anticipated to delineate the size of these discoveries.
* At a recent lease sale, MOXY was high bidder on and was awarded
four offshore lease blocks.
* Installation of the platforms and facilities at the Vermilion
Block 410 field is anticipated to begin in the third quarter and
commencement of production is scheduled for late 1996. The Galveston
Block 211 field, discovered in the first quarter of 1996, is scheduled
to begin production in the second half of 1996.
During the quarter, MOXY sold one-half of its 50 percent
leasehold interest in a joint venture with Phillips Petroleum Company
(Phillips) respecting a 35,000 acre exploration area in south
Louisiana. MOXY was paid $2.1 million by Freeport-McMoRan Resource
Partners, Limited Partnership (FRP) for certain costs previously
incurred. FRP acquired its interest on the same proportionate basis
as Phillips Petroleum in 1995. MOXY has identified two high-
potential, high-risk prospects on this project area - North Bay Junop
and East Fiddler's Lake. Exploratory drilling began at East Fiddler's
Lake in July. Evaluation of the North Bay Junop prospect continues,
with drilling anticipated to commence in late 1996. Interpretation of
the results of a 3-D seismic survey, which was performed on the
project area, has identified additional leads that may develop into
potential prospects which could be drilled in 1997.
MOXY also continues to analyze seismic data that may lead to
farmout opportunities on the 1.7 million acre concession area in
Indonesia, where previous drilling results have not discovered
hydrocarbons in commercial quantities.
RESULTS OF OPERATIONS
MOXY reported net income of $0.5 million ($0.04 per share) for the
second quarter of 1996 compared with a net loss of $6.3 million ($0.45
per share) for the 1995 period. For the six-month periods of 1996 and
1995, MOXY recognized a net loss of $3.8 million ($0.27 per share) and
$10.0 million ($0.73 per share), respectively. MOXY's revenues
currently consist of amounts received from its interest in the
Vermilion Block 160 field, its sole producing property, and from
administrative fees earned on the MOXY/MCN program. MOXY's revenue
level will benefit from the two fields scheduled to commence
production in late 1996, discussed above.
Second-quarter 1996 exploration expenses totaled negative $0.6
million, as $2.1 million reduction of expense related to the
reimbursement of prior costs in the North Bay Junop/East Fiddler's
Lake sale (Note 1) was offset by $1.5 million in geological and
geophysical costs. Second-quarter 1995 exploration expenses totaled
$5.4 million and primarily consisted of geological and geophysical
costs. Exploration expenses for the first six months of 1996 totaled
$3.9 million, consisting of $3.0 million in exploratory drilling and
leasehold costs and $3.0 million in geological and geophysical costs,
offset by the $2.1 million reimbursement. Exploration expenses for
the six-month 1995 period were $8.0 million, primarily comprised of
$6.9 million in geological and geophysical costs.
General and administrative expenses totaled $0.7 million and $1.4
million for the second-quarter and six-month 1996 periods,
respectively, compared with $1.1 million and $2.5 million for the 1995
periods. The reduction resulted from steps taken in the third quarter
of 1995 to reduce costs.
As a result of anticipated future exploration expenditures, MOXY
expects to report losses for at least the near future.
CAPITAL RESOURCES AND LIQUIDITY
In June 1995, MOXY entered into a joint venture with Phillips, equally
owned by each company, to explore 35,000 acres in south Louisiana. As
discussed above, during the current quarter MOXY sold one-half of its
remaining leasehold interest in this area. In September 1995, MOXY
also entered into an agreement with MCN for MOXY to be the operator of
a $65 million exploration and development program in the offshore Gulf
of Mexico area. Revenues and costs under this program are shared 40
percent by MOXY and 60 percent by MCN. MCN is funding its 60 percent
share of the expenditures and will loan funds for MOXY's 40 percent share.
At June 30, 1996, MOXY had $2.0 million of borrowings outstanding from
MCN, with an additional $12.4 million of borrowings available from MCN
for past expenditures. MOXY's share of net revenues from the program
properties, which include the Vermilion Block 160, Vermilion Block 410
and Galveston Block 211 fields, is dedicated to repay outstanding
loans.
These agreements resulted in MOXY receiving a significant inflow
of funds, as well as achieving important reductions to its future
capital commitments, which enabled MOXY to secure funding for its
currently planned exploration and development activities through at least
mid-1997. These agreements also enable MOXY to assess additional
prospects, thereby increasing its opportunities for success. Management
believes the opportunities for MOXY to discover meaningful oil and gas
reserves are significant. However, MOXY's future viability depends on a
number of factors, primarily the success of its exploration and development
activities, the production of its proved reserves and the prices of
oil and gas, none of which can be assured because of the uncertainties
and risks inherent in oil and gas operations. MOXY's ability to
continue its operations beyond the funding provided by the MCN program
and its current working capital is dependent on achieving success in
its operations and securing future funding. The availability or structure
of future funding to continue MOXY's exploration and development activities
beyond those now committed cannot be predicted and in large part will be
effected by MOXY's exploration success in the immediate future. No payment
of dividends to MOXY shareholders is presently contemplated.
MOXY incurred $11.1 million of cash exploration and development
expenditures during the first six months of 1996, principally
consisting of $2.1 million for development at Vermilion Block 410,
$2.9 million for capitalized drilling costs, a total of $2.3 million
in expensed drilling and leasehold costs and $3.8 million of
geological and geophysical costs. MOXY has committed expenditures of
approximately $5.0 million for the remainder of 1996, although MOXY's
exploration and development activities could result in additional
expenditures.
_________________________
The results of operations reported and summarized above are not
necessarily indicative of future operating results.
PART II--OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
(a) The Annual Meeting of Stockholders of the registrant was
held on May 2, 1996 (the Annual Meeting). Proxies for the Annual
Meeting were solicited pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended.
(b) At the Annual Meeting each of Richard C. Adkerson, Robert W.
Bruce III, Robert A. Day and Bobby Lee Lackey was elected to serve
until the 1999 annual meeting of stockholders. In addition to the
directors elected at the Annual Meeting, the terms of following
directors continued after the Annual Meeting: Thomas B. Coleman,
William B. Harrison, Jr., Rene L. Latiolais, Gabrielle K. McDonald,
James R. Moffett, George Putnam, B. M. Rankin, Jr., J. Taylor Wharton
and Ward W. Woods, Jr. Subsequent to the Annual Meeting, Mr. Woods
resigned.
(c) At the Annual Meeting the stockholders voted to elect four
directors. Set forth below is the name of each nominee and the number
of shares voted for and withheld from each such nominee. There were
no abstentions or broker non-votes with respect to the election of
directors.
Name For Withheld
- ------------------- ---------- --------
Richard C. Adkerson 12,799,699 74,068
Robert W. Bruce III 12,803,327 70,440
Robert A. Day 12,798,841 74,926
Bobby Lee Lackey 12,793,050 80,717
At the Annual Meeting the stockholders also voted on and
approved a proposal to ratify the appointment of Arthur Andersen LLP
as the independent auditors to audit the financial statements of the
registrant and its subsidiaries for the year 1996. Holders of
12,795,924 shares voted for, holders of 33,228 shares voted against
and holders of 44,615 shares abstained from voting on, such proposal.
There were no broker non-votes with respect to such proposal.
Item 6. Exhibits and Reports on From 8-K.
(a) The exhibits to this report are listed in the Exhibit Index
appearing on page E-1 hereof.
(b) No reports on Form 8-K were filed by the registrant during the
quarter for which this report is filed.
McMoRan Oil & Gas Co.
SIGNATURE
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 thereunto duly authorized.
McMoRan Oil & Gas Co.
By: /s/William J. Blackwell
---------------------------
William J. Blackwell
Controller
(authorized signatory and
Principal Accounting Officer)
Date: August 8, 1996
McMoRan OIL & GAS CO.
EXHIBIT INDEX
--------------
Sequentially
Numbered
Number Description Page
- ------ ----------- ----
10.1 Exploration Agreement effective
July 1, 1996, between MOXY and
Freeport-McMoRan Resource Partners,
Limited Partnership
27.1 Financial Data Schedule
EXHIBIT 10.1
EXPLORATION AGREEMENT
This Agreement (the "Agreement") is entered into effective
as of July 1, 1996 (the "Effective Date") by and between McMoRan
Oil & Gas Co., a Delaware corporation, whose address is 1615
Poydras Street, Post Office Box 60004, New Orleans, Louisiana
70160 (hereinafter referred to as "MOXY"), and Freeport-McMoRan
Resource Partners, Limited Partnership, a limited partnership
formed under the laws of the State of Delaware, acting herein
through its administrative managing general partner, Freeport-
McMoRan Inc., whose address is 1615 Poydras Street, Post Office
Box 60004, New Orleans, Louisiana 70160 (hereinafter referred to
as "FRP").
WHEREAS, MOXY entered into that certain Exploration
Agreement Bay Junop with Phillips Petroleum Company ("Phillips")
dated effective as of June 13, 1995, a copy of which is attached
hereto as Exhibit "A" (the "MOXY/Phillips Agreement") and made a
part hereof, covering the exploration and exploitation of certain
structures which may be potentially productive of hydrocarbons;
WHEREAS, pursuant to the terms of the MOXY/Phillips
Agreement, MOXY assigned and conveyed to Phillips an undivided
fifty percent (50%) of MOXY's right, title and interest in and to
the Properties and Other Agreements, as defined in the
MOXY/Phillips Agreement, by Assignment and Conveyance dated
effective June 13, 1995, and recorded November 9, 1995, in
Conveyance Book No. 1484, under Entry No. 965748 in the records
of Terrebonne Parish, Louisiana (the "Phillips Assignment"); and
WHEREAS, FRP and MOXY desire to enter into this Agreement;
NOW THEREFORE, for and in consideration of the premises set
forth above, and the mutual promises and covenants herein
contained, to be kept and performed by the parties hereto, and
other good and valuable consideration, MOXY and FRP do hereby
agree as follows:
ARTICLE I
DEFINITIONS
Unless the context clearly indicates otherwise, the terms
and phrases used herein shall have the meanings and/or
definitions as set forth in the MOXY/Phillips Agreement. For
purposes of this Agreement, the term "the parties" or
"participants" shall include FRP and MOXY.
ARTICLE II
RIGHTS IN MOXY/PHILLIPS AGREEMENT
MOXY does hereby transfer, grant, bargain, sell, convey and
assign to FRP an undivided fifty percent (50%) of MOXY's rights,
titles and interests in the MOXY/Phillips Agreement, together
with like undivided interests in and to all the property and
rights incident thereto, to the extent and only to the extent
that such rights, titles and interests in the MOXY/Phillips
Agreement are necessary to give force and effect to the terms and
conditions of this Agreement. FRP hereby agrees to be bound by
the terms of the MOXY/Phillips Agreement except as to Articles
XIX and XXII.
ARTICLE III
ASSIGNMENT OF PROPERTIES
Concurrent with the execution of this Agreement, MOXY shall
execute and deliver to FRP two (2) Assignments and Conveyances in
which MOXY assigns to FRP an undivided fifty percent (50%) of its
right, title and interest (being 50% of MOXY's undivided 50%
interest remaining after the Phillips Assignment) in and to the
Properties and the Other Agreements, on the forms attached hereto
as Exhibit "B" (the "LL&E et. al. Assignment") and "C" (the
"TOCE Assignment") which are made a part hereof (collectively,
the "Assignments"). Upon the execution and delivery of the LL&E
Assignment, FRP shall immediately record same on the public
records of Terrebonne Parish, Louisiana. FRP shall not record
the TOCE Assignment until after MOXY provides written notice that
FRP is free to record same. The Assignments shall be free and
clear of all mortgages, claims, liens, overriding royalty
interests, production payments and net profits interests, other
than those referred to herein. All rights acquired by FRP under
the Assignments shall be subject to the terms and conditions of
this Agreement, the MOXY/Phillips Agreement and the Other
Agreements.
ARTICLE IV
PROJECT INTEREST
Upon the execution hereof and the Assignments, the Project
Interest in the Properties, in the MOXY/Phillips Agreement, in
the Other Agreements and in and to the 3-D Data shall be as
follows:
Company Project Interest
FRP 25.00%
MOXY 25.00%
Phillips 50.00%
However, in a situation or circumstance where LL&E participates
in an acquisition or operation pursuant to the provisions of the
LL&E Agreement, the Project Interest of FRP, MOXY and Phillips
shall be reduced proportionately.
ARTICLE V
LL&E AGREEMENT
This Agreement is subject to the Other Agreements. Under
the terms of the LL&E Agreement, LL&E has the right to
participate for a twenty-five percent (25%) interest in, and to
operate, any Prospect and well proposed within such Prospect. As
to the first two prospects, the North Bay Junop and East
Fiddler's Lake Prospect Areas, LL&E has declined participation by
letter dated May 22, 1996, a copy of which is attached as Exhibit
"D". Further, the parties have amended the LL&E Agreement by
letter agreement dated April 15, 1996, a copy of which is
attached as Exhibit "E".
ARTICLE VI
REIMBURSEMENT OF SUNK COST
A. Consideration. Concurrrent with the execution of this
Agreement, FRP shall pay MOXY the following TOTAL AMOUNT:
a. Seismic and G&G PRE 3-D $ 201,553.79
b. 3-D Seismic Survey $ 1,033,180.47
c. Leasehold Cost $ 825,091.23
TOTAL AMOUNT $ 2,059,825.49
which is intended to represent twenty-five percent (25%) of the
sunk costs in the Project Area recorded in MOXY's accounting
records as of May 31, 1996 ("Sunk Costs"). All other Project
Area costs shall be shared, according to the parties' Project
Interest, except as otherwise provided herein; provided, however,
that FRP shall not be liable for any Project Area costs incurred
after the Effective Date that it has not approved. Expenses for
ongoing title work for the Bay Junop Prospect Areas and the East
Fiddler's Lake Prospect Areas, as hereinafter described, are
hereby approved. MOXY has made available to FRP copies of
documentation and accounting information evidencing the
expenditures set out in Article VI A. a., b. and c. above. The
above reimbursement of Sunk Costs specifically includes the cost
to MOXY for the GECO-Prakla processing of the 3-D Data.
B. Prior payments for Costs. FRP shall not be entitled to
any of the Sunk Costs paid by Phillips to MOXY.
ARTICLE VII
JOINT OPERATIONS
Prospects shall be designated (including any designation by
the parties hereto) within the Project Area using the same
procedures as set out in the LL&E Agreement, except as otherwise
provided herein and in the MOXY/Phillips Agreement. FRP shall
have the right to participate to the extent of its Project
Interest in the designation process. In the event LL&E does not
elect to exercise its option to operate as set out in the LL&E
Agreement, it is acknowledged by FRP that Phillips may elect to
be designated operator on a Prospect by Prospect basis for any
drilling and/or production operations within each Prospect Area.
Other than the Bay Junop Prospect Area and East Lake Fiddler's
Prospect Area, as hereinafter described, no Prospect Area, as
defined in the LL&E Agreement, shall be larger than one thousand
two hundred and eighty (1,280) acres without the mutual consent
of the Parties. Failure to timely respond to a Prospect
designation and well proposal thereon shall be deemed an election
not to participate in such well and Prospect. Any party electing
not to participate in such a proposal shall not be entitled to
participate in any further operation or interest within the
Prospect Area and shall, within ten (10) days of written request,
assign all right, title and interest in and to the Prospect to
the party electing to participate in the well. FRP shall be
entitled as a participating party to receive its proportionate
share of any such assignments. The assignment shall have no
burdens other than those referred to in Article XIV hereof. If
the proposed well has not been commenced within one hundred and
eighty (180) days from the date of the election not to
participate or the well is not drilled to its proposed objective
depth for reasons other than force majeure or conditions that
would cause a prudent operator not to continue drilling to such
objective depth, then the Prospect Area shall be null and void
and of no further force or effect, and the participating
party(ies) shall reassign any interest assigned to it within the
Prospect Area by the non-participating party. The reassigned
interest shall be free of any burdens created by the
participating party subsequent to receiving the assignment from
the non-participating party.
ARTICLE VIII
INITIAL EXPLORATORY WELLS
A. Promoted Wells. By letter agreements dated May 2 and
21, 1996, copies of which are attached as Exhibit "F", MOXY and
Phillips have agreed, inter alia, that (i) the first well drilled
on the Bay Junop Prospect Area, shall be considered the first
Promoted Well and (ii) the first well drilled on the East
Fiddler's Lake Prospect Area, shall be considered the second
Promoted Well. FRP has agreed to participate in the first and
second Promoted Well under the terms hereof. FRP shall pay
thirty-three and thirty-three one-hundredths percent (33.33%) of
8/8ths of the costs attributable to the first Promoted Well (the
first well drilled on the Bay Junop Prospect Area) which are
incurred in the drilling, testing, evaluation and abandonment of
such well, through rig release, as well as the costs of well site
restoration in the event the well is a dry hole. If FRP elects
to complete the well to produce hydrocarbons, after such an
election has been made, FRP shall be responsible for all costs
for such well to the extent of its Project Interest, subject to
the terms and provision of the applicable Operating Agreement.
As to the second Promoted Well (the first well drilled on the
East Fiddler's Lake Prospect Area), FRP shall pay thirty percent
(30%) of 8/8ths of the costs attributable to the well which are
incurred in the drilling, testing, evaluation and abandonment of
such well, through rig release, as well as the costs of well site
restoration in the event the well is a dry hole. If FRP elects
to complete the well to produce hydrocarbons, after such an
election has been made, FRP shall be responsible for all costs
for such well to the extent of its Project Interest, subject to
the terms and provisions of the applicable Operating Agreement.
All other costs in the Project Area shall be borne by FRP to the
extent of its Project Interest, subject to the terms and
provision of the applicable Operating Agreement.
B. Limitation on Promote, Participation. If a good faith
effort has been made by the operator of a Promoted Well to reach
total depth as proposed for the drilling of such well, if such
well is not drilled on a turnkey basis, and the cost incurred in
the drilling of such well is equal to or greater that one hundred
and twenty-five percent (125%) of the cost estimate or AFE under
which the proposed well is drilled ("AFE"), then further
operations on the Promoted Well and the cost therefor shall from
that point forward be paid by FRP according to its Project
Interest, subject to the terms and conditions of the applicable
Operating Agreement. At such time as the cost incurred in the
drilling of a promoted Well exceeds one hundred and fifty percent
(150%) of the AFE, the parties shall have the option to withdraw
from further participation in the drilling of such well. Any
party so withdrawing shall from that time forward be deemed to
have relinquished its interest in such well according to the
nonparticipation penalty provisions of the applicable Operating
Agreement for the Prospect for such Promoted Well until the
participating party recovers the costs incurred for such well
after the withdrawing party has withdrawn, plus penalties as to
such costs.
C. Substitute Promoted Well. If any Promoted Well is
abandoned prior to reaching the total depth proposed for such
well, and the cost incurred in drilling such well has exceeded
one hundred and twenty-five percent (125%) of the AFE, then the
second well and/or substitute well drilled in the Prospect for
such Promoted Well shall not be considered a Promoted Well.
However, should any Promoted Well be abandoned prior to reaching
the total depth proposed for such well and before the cost
incurred in drilling such well has exceeded one hundred and
twenty-five percent (125%) of the AFE, and the parties desire to
drill a substitute well therefor, said substitute well shall be
considered a Promoted Well only until the cost of drilling such
substitute well equals the difference between one hundred and
twenty-five percent (125%) of the AFE for the Promoted Well and
the actual cost incurred in drilling and abandoning the Promoted
Well. All costs incurred in drilling the substitute well shall
thereafter be shared by the parties according to their Project
Interest, subject to the terms and provisions of the applicable
Operating Agreement for the Prospect for such well.
ARTICLE IX
AREA OF MUTUAL INTEREST
A. Notice of Acquisition. Except as otherwise provided in
Article X dealing with the selection of leases under the State
Agreement or the LL&E Agreement, if MOXY, FRP or Phillips
("Acquiring Party") acquires either an oil and gas lease (or any
interest therein) or renews or extends an existing oil and gas
lease subject to this Agreement or acquires any other mineral
interest, including options to acquire oil and gas leases (and
including any notices from Phillips to MOXY under the terms of
Article IX of the MOXY/Phillips Agreement), covering lands lying
within the AMI, or if the Acquiring Party enters into any type of
agreement by which such an interest may be earned or otherwise
acquired by conducting drilling, seismic, or other operations on
the lands lying within the AMI, then the Acquiring Party shall
promptly notify the others of such acquisition or such agreement.
Any interest acquired by MOXY, FRP or Phillips in lands outside
of the AMI, however, shall not be subject to the terms of this
Agreement.
B. Election Period. The notification provided for above
shall contain all available title information, and copies of
leases and agreements by which the interests were acquired, and
all other pertinent instruments. It shall also describe in
detail the cost and expense of such acquisition and any other
obligations which may be incurred pursuant thereto. Except as
hereinafter provided, each Party hereto shall have fifteen (15)
days from receipt of notice thereof in which to elect to
participate in such acquisition to the extent of its Project
Interest. Failure to notify the Acquiring Party of its election
within fifteen (15) days shall be deemed an election not to
participate in such acquisition. However, if a drilling rig is
on location within the AMI, then each Party shall have only
forty-eight (48) hours from receipt of such notice in which to
elect to participate in such acquisition, exclusive of Saturdays,
Sundays and holidays.
C. Assignment and Payments. The Acquiring Party and the
participating parties under this Article shall share in the
acquisition in the proportion that each such party's respective
Project Interest bears to the sum of the Project Interest of the
Acquiring Party and the participating parties. Upon receipt of
an invoice from the Acquiring Party setting forth in detail the
cost and expense of the acquisition, each participating parties
shall promptly reimburse the Acquiring Party for its
proportionate share thereof and/or assume its proportionate share
of any obligations involved in such acquisition. The Acquiring
Party shall then promptly assign to each participating party its
Project Interest in the acquisition. Any assignments hereunder
shall be made free and clear of mortgages (unless such mortgages
are subordinated to this Agreement), claims, liens, overriding
royalty interests, production payments, net profits interests,
and other encumbrances or leasehold burdens placed thereon by the
Acquiring Party or resulting from its ownership and operation of
such lease or interest on and after the date of this instrument,
except such burdens referred to in Article XIV hereof, or with
which the lease or interest was burdened when acquired by the
Acquiring Party, but otherwise without warranty of title, either
express or implied. Additionally and notwithstanding the
foregoing, to receive an assignment of its proportionate share of
the interest acquired as a result of conducting drilling,
seismic, or other operations on the AMI, the receiving party must
have: (1) participated in all operations necessary for the
acquisition of the interest, including completion operations and
also must have paid all costs and expenses incurred in connection
therewith; (2) participated in any previous drilling, seismic or
other operations that were necessary or were a condition
precedent to the operations resulting in the acquisition of the
interest; and (3) participated in accordance with the terms,
provisions, covenants, and conditions of the agreements governing
the acquisition of interest.
D. Acquired Interest Subject to this Agreement. If both
MOXY and FRP elect to participate in any acquisition, then any
such acquired interest shall thereafter be subject to this
Agreement. Otherwise, such acquired interest will not be subject
to this Agreement.
E. Exclusions. The provisions of this Article shall not
be applicable to acquisitions by any party hereto of oil and gas
leases, undivided interests in oil and gas leases or other
mineral interest through mergers (including acquisition of all or
any portion of the assets or stock of another company), corporate
reorganizations or through consolidation with a subsidiary or
affiliated company, partnership or individual, nor shall any
party hereto be obligated to tender any such interest which is
acquired by a partnership in which such party is a limited
partner or any other entity in which such party is a passive
investor.
ARTICLE X
JOINT SELECTIONS
Prior to making selection of leases under the LL&E Agreement
and/or the State Agreement, MOXY, Phillips and FRP will conduct a
technical meeting for the purpose of jointly agreeing on leases
to be selected. The parties shall work together and shall
attempt to reach mutual agreement as to the leases to be jointly
selected. If the parties are unable to reach agreement, each
party desiring to acquire a lease or leases will furnish to the
other party a plat outlining the area it wishes to acquire,
together with geological and/or geophysical data supporting the
proposed selection. If, after considering the above provided
information, the parties still cannot mutually agree on leases to
be selected, then any disputed acreage shall not be selected
until a Prospect Area is designated which encompasses such
acreage within its boundaries, or until sixty (60) days prior to
the last date in which leases can be selected under the LL&E
Agreement or the State Agreement, whichever date is the earlier.
Any party originally desiring not to participate in a proposed
selection, shall be given notice when such selection is formally
made and such party shall have fifteen (15) days from receipt of
such notice to notify the selecting Party of its election to
participate in the selection. Failure to respond within the
fifteen (15) days period shall constitute an election not to
participate.
If a Party does not elect to participate in the selection of
a lease, such lease shall not be subject to this Agreement and
the Party not participating in the selection shall have no
further interest in such lease under the terms of this Agreement
or under the terms of the LL&E Agreement or the State Agreement,
as applicable.
ARTICLE XI
OPERATING AGREEMENT
Joint operations under this Agreement shall be conducted
pursuant to the terms of the applicable Operating Agreement. The
operating agreement attached to the LL&E Agreement as Exhibit "E"
shall apply to those Prospects in which LL&E participates. The
operating agreement attached to the MOXY/Phillips Agreement as
Exhibit "D" shall apply to those Prospects in which LL&E does not
participate. The term "Operating Agreement" shall mean the
operating agreement applicable to a specific Prospect whether in
the form of Exhibit "E" to the LL&E Agreement or Exhibit "D" to
the MOXY/Phillips Agreement. Separate operating agreements will
be entered into for each Prospect designated pursuant to the
terms hereof, which agreements shall be in the form of the
Operating Agreement appropriately amended to incorporate those
provisions of this Agreement which relate to or affect the
particular Prospect involved. In the event of a conflict between
this Agreement and the Operating Agreement, this Agreement shall
prevail.
ARTICLE XII
AUDITS
Participants shall maintain, and shall procure their
subcontractors' agreement to do likewise, a true and correct set
of records pertaining to all activities relating to their
performance under this Agreement and all transactions related
thereto. Participants further agree, and shall procure that
their subcontractors agree, to retain all such records for a
period of not less than two (2) years after completion of
performance under this Agreement. The participants and any
representative or representatives authorized by them at any and
all times during such term upon notice in writing to the other
party shall have the right to audit the other party's accounts
and records hereunder. The participants agree to make
adjustments of their records and accounts where there is
agreement regarding deficiencies revealed by the other party's
audit. The audited party shall respond to any audit exception by
the auditing party on or before one hundred eighty (180) days
from receipt of written notice thereof. In addition, the
participants shall also retain the required records for such
period of time as is sufficient to allow for the audit of those
records by the Internal Revenue Service, as provided by the
Internal Revenue Code of 1986, as amended from time to time, and
for such period of time which is sufficient to allow for the
audit of those records by the appropriate state taxing authority
as provided by similar provisions of state tax laws.
ARTICLE XIII
OWNERSHIP OF DATA
Upon request by FRP, MOXY shall provide FRP with a license
to any 2-D seismic data (which MOXY has the right to license to
FRP) for which FRP has reimbursed MOXY under Article VI A. above.
Within fifteen (15) days of its receipt of written request by
FRP, MOXY shall provide FRP with field tapes, observers logs and
positioning data, and SEG-Y tapes of both the final migrated 3-D
volume and unmigrated volume (without AGC or final filter).
Subject to the provisions of Article XV of the MOXY/Phillips
Agreement, FRP shall own the 3-D Data in the proportion of its
Project Interest and shall have the right to license, sell or
trade the 3-D Data. FRP shall share in proportion to its Project
Interest any revenues or trades derived by MOXY, FRP or Phillips
from the sale or trade of such 3-D Data during a period of three
(3) years from the June 13, 1995; thereafter, each party shall
retain one hundred percent (100%) of the proceeds of any such
sale or trade it may make.
ARTICLE XIV
PROJECT NET REVENUE
FRP recognizes that MOXY, under the terms of certain
agreements with its consultants, CLK Company and Michael C.
Fauquir, has burdened the Project Area and the Properties with an
aggregate overriding royalty of 3.125%. FRP agrees to
proportionately share this burden. The parties shall also bear
their proportionate share of all landowner royalties, overriding
royalties, mortgages, liens and other burdens existing of record
as of the date of this Agreement or provided for in the Other
Agreements, or provided for in any instrument whereby an oil and
gas interest is acquired subsequent to the date of this Agreement
and such interest is subject to the terms and provisions hereof.
ARTICLE XV
LEASE MAINTENANCE
MOXY shall be responsible for the maintenance of the leases
subject to this Agreement, including the payment of rentals,
shut-in well payments and minimum royalties, but shall not be
liable for its failure to do so. At least forty-five days (45)
prior to the due date of any such lease maintenance payment, MOXY
shall advise FRP of MOXY's recommendation regarding such payment,
and FRP shall have fifteen (15) days after receipt of this notice
to advise MOXY whether or not it concurs with such
recommendation. FRP may request, and shall be entitled to
receive, proper evidence of all such payments. In the event of
failure to make proper payment of any rental, shut-in well
payment, or minimum royalty through mistake or oversight where
such payment is required to continue the lease in force, any loss
which results from such non-payment shall be borne jointly by the
parties thereto as to their Project Interest. In the event that
a party (including Phillips) elects not to pay its Project
Interest share of a rental payment, the party electing not to
participate in such rental payment shall assign to the paying
party(ies) all of its undivided interest in the lease, or portion
thereof, affected by such rental payment, free of any burdens
other than those referred to herein and without warranty of
title, either express or implied.
ARTICLE XVI
PRE-EXISTING CONDITIONS
By execution of this Agreement or any instruments in
connection herewith, FRP has not assumed, and MOXY and FRP hereby
agree that by such actions FRP has not assumed, the obligations
of MOXY to Phillips under the terms of Article XXII of the
MOXY/Phillips Agreement. MOXY agrees to hold harmless and
indemnify FRP for any pre-existing contamination or environment
claims and damages including costs of remediation, arising from
any operations, acts or omissions by MOXY, its contractors and
subcontractors, within the Project Area which may have occurred
prior to the Effective Date; provided, however, there is excepted
and excluded from this indemnification of FRP by MOXY, any
contamination or environmental claims and damages, including
costs of remediation, arising from any operations, acts or
omissions by MOXY, its contractors and subcontractors, arising
out of or in connection with any drilling operations, including
dredging activities, on the first or second Promoted Well
performed after June 13, 1995, but before the Effective Date.
MOXY represents and warrants that it is not aware of any claims
or demands for contamination or environmental damages arising
prior to the Effective Date, other than claims for damages to
oyster beds caused by dredging.
ARTICLE XVII
TECHNICAL SUPPORT
MOXY shall provide to FRP all such technical support and
information, including, without limitation, geological,
geophysical and engineering interpretations or evaluations, as
is reasonable under the circumstances to allow FRP to make an
informed election in response to any proposal or request for
participation made in connection with this Agreement.
Additionally and upon request by FRP, representatives of MOXY
shall meet with FRP representatives and shall report on the
status of the activities in connection with the Project Area.
Such meetings shall be held during normal business hours at the
offices of MOXY and shall not be so frequent as is unreasonable
under the circumstances. At such meetings, MOXY shall present
all technical information or data available to it and which MOXY
representatives reasonably believes will aid FRP in fully
understanding the value of its interests in the Project Area.
MOXY shall be reimbursed by FRP for any out of pocket expenses it
incurs in connection with any such presentations.
ARTICLE XVIII
NOTICE
Any notice or communication to a Party hereunder may be
given, sent, paid or tendered by postage prepaid mail addressed
to said Party at the address shown below, or such other address
as it may hereafter designate, in writing or transmitted by
telecopier or fax to the number designated below:
If to MOXY:
Freeport-McMoRan Oil & Gas Co.
P.O. Box 60004
New Orleans, Louisiana 70160
Street Address:
1615 Poydras Street
New Orleans, Louisiana 70112
Attention: Glenn A. Kleinert
Telephone: (504) 582-4610
Telecopier: (504) 582-4155
If to FRP:
c/o Freeport-McMoRan Inc.
P. O. Box 60004
New Orleans, Louisiana 70160
Street Address:
1615 Poydras Street
New Orleans, Louisiana 70112
Attention:Charles W. Goodyear
Telephone:(504) 582-1734
Telecopier:(504) 582-1611
The originating notice given under any provision hereof
shall be deemed given only when received by the party to whom
such notice is directed, and the time for such party to give any
response thereto shall run form the date the originating notice
is received. The second or responsive notice shall be deemed
given when received. All notices shall be given during normal
business hours, or if not, shall be deemed to have been received
the next business day following receipt thereof. Each party
shall have the right to change its address at any time, and from
time to time, by giving written notice thereof to the other
party.
ARTICLE XIX
ALTERNATE DISPUTE RESOLUTION
The parties will attempt in good faith to resolve any
controversy or claim arising out of or relating to this Agreement
promptly by negotiations between management personnel of the
parties.
If a controversy or claim should arise, an executive officer
of FRP and an executive officer of MOXY, or their respective
successors in the position they now hold (hereinafter called the
"Project Managers"), will meet at least once and will attempt to
resolve the matter. Either Project Manager may request the other
to meet within fourteen (14) days, at a mutually agreed time.
If the matter has not been resolved within twenty (20) days
of their first meeting, the Project Managers shall refer the
matter to senior managers, who shall have authority to settle the
dispute (hereinafter called the "Senior Managers"). Thereupon,
the Project Managers shall promptly prepare and exchange
memoranda stating the issues in dispute and their positions,
summarizing the negotiations which have taken place, and
attaching relevant documents. The Senior Managers will meet for
negotiations within fourteen (14) days of the end of the twenty-
day (20) period referred to above, at a mutually agreed time.
The first meeting shall be held at the offices of the
Project Manager receiving the request to meet. If more than one
meeting is held, the meetings shall be held in rotation at the
offices of FRP and MOXY.
If the matter has not been resolved within thirty (30) days
of the meeting of the Senior Managers (which period may be
extended by mutual agreement), the Parties will attempt in good
faith to resolve the controversy or claim in accordance with the
Center for Public Resources Model Procedure for Mediation of
Business Disputes.
If the matter has not been resolved pursuant to the
aforesaid mediation procedure within sixty (60) days of the
commencement of such procedure (which period may be extended by
mutual agreement), the controversy shall be settled by
arbitration in accordance with the Center for Public Resources
Rules for Non-Administered Arbitration of Business Disputes, by
three (3) arbitrators (each party selecting one arbitrator and
those arbitrators shall select the third arbitrator). The
arbitration shall be governed by the United States Arbitration
Act, 9 U.S.C. 1-16 and any award shall include holdings of fact
and reasons. Judgment upon the award rendered by the
Arbitrator(s) may be entered by any court having jurisdiction
thereof. The place of arbitration shall be New Orleans,
Louisiana.
ARTICLE XX
CONFORMANCE WITH LAWS AND REGULATIONS
This Agreement is subject to all applicable federal, state,
and local laws and all applicable rules, orders and regulations
of any authorized and duly constituted federal, state and local
regulatory body or authority having jurisdiction thereof, and all
operations conducted hereunder shall be in conformity therewith.
The provisions hereof are binding upon the parties and shall
extend to their respective legal representatives, successors and
assigns. This Agreement shall be governed by and construed in
accordance with the laws of the State of Louisiana.
ARTICLE XXI
TAX PARTNERSHIP PROVISION
Nothing in this Agreement is intended, and shall not be
construed, to create a partnership, joint venture, mining
partnership, corporation, association or other relationship under
state law whereby any party hereto shall ever be held liable or
deemed liable in any manner for the acts, omissions, or
obligations of the other. The duties, obligations and
liabilities of the parties set forth in this Agreement shall be
several and not joint so that each party shall be liable only for
its proportionate share of the duties, obligations and
liabilities of the parties under the terms of this Agreement.
For federal and state income tax purposes only, the parties
hereto shall be governed by the terms and provisions of the Tax
Partnership provision attached as Exhibit "G" to the operating
agreement attached as Exhibit "D" to the MOXY/Phillips Agreement.
ARTICLE XXII
SUCCESSORS AND ASSIGNS
The terms, covenants, and conditions hereof shall be deemed
to be covenants running with the Properties and, as such, shall
extend to, bind and inure to the benefit of the parties hereto,
their successors and assigns.
ARTICLE XXIII
SUBSEQUENT ASSIGNMENTS OF INTEREST
Any assignment, sale or transfer of the interest in or under
this Agreement shall be made expressly subject to all of the
terms and provisions of this Agreement, and the assignee shall
expressly agree in writing to be bound by the terms hereof. The
assigning party shall promptly furnish all other parties with a
fully executed copy of any such assignment, sale or transfer.
Notwithstanding anything hereinabove to the contrary, no
assignment shall be made without the prior written consent of the
other party, which consent shall not be unreasonably withheld.
ARTICLE XXIV
APPROVALS
It is recognized and acknowledged by FRP and MOXY that this
Agreement is subject to the approval of Phillips and that the
Assignment is subject to the approval of various persons
including, without limitation, the State Mineral Board of the
State of Louisiana, The Louisiana Land and Exploration Company,
Texaco Exploration and Production Inc. and Toce Petroleum
Company. MOXY shall obtain all requisite approvals to this
Agreement and to the Assignment with all due diligence. To the
extent the lack of any such approval affects the record title of
FRP under the Assignments, MOXY shall hold the Interests assigned
to FRP under the Assignments as the nominee of FRP until such
approval is obtained. As nominee of FRP, MOXY shall treat FRP in
all respects as if full record title in the Interests assigned to
FRP in the Assignments had fully vested in FRP. Notwithstanding
the foregoing, in the event that MOXY does not obtain the
approval of (i) Phillips to this Agreement and/or (ii) The
Louisiana Land and Exploration Company and Texaco Exploration and
Production Inc. to the Assignments within ninety (90) days after
the Effective Date and the failure to obtain any such approval
materially affects FRP's rights in this Agreement or under the
LL&E et al Assignment, then FRP may elect to void this Agreement
effective as of the Effective Date. In the event of such an
election by FRP, MOXY shall reimburse FRP for all payments made
hereunder and FRP shall reassign to MOXY all the Properties.
ARTICLE XXV
ENTIRE AGREEMENT
This Agreement and its exhibits shall constitute the entire
agreement between the parties relating to the subject matter
hereof, and there are no other written or oral agreements,
undertakings, obligations, promises, assurances or conditions,
whether precedent or otherwise relating thereto. Any conflict
between the provisions of the attached exhibits including,
without limitation, the MOXY/Phillips Agreement, and this
Agreement shall be resolved in favor of this Agreement.
ARTICLE XXVI
TERM
This Agreement shall remain in effect until June 13, 2000,
or for as long as the parties have the option to make selections
under the LL&E Agreement or the State Agreement, whichever time
is the later.
ARTICLE XXVII
HEADINGS FOR CONVENIENCE
The paragraph headings used in this Agreement are inserted
for convenience only and shall be disregarded in construing this
Agreement.
IN WITNESS WHEREOF, the parties have executed and accepted
this Agreement on the dates set out in their respective
acknowledgments, but effective as of the Effective Date.
WITNESSES: McMoRan Oil & Gas Co.
____________________________ BY: /s/Glenn A. Kleinert
---------------------
Glenn A. Kleinert
____________________________ Senior Vice President
WITNESSES: Freeport-McMoRan Resource
Partners, Limited Partnership,
_____________________________ by its administrative managing
general partner,
_____________________________ Freeport-McMoRan Inc.
BY: /s/Charles W. Goodyear
-----------------------
NAME: Charles W. Goodyear
---------------------
TITLE: Executive Vice President
------------------------
<PAGE>
STATE OF LOUISIANA
PARISH OF ORLEANS
On this 28th day of June,
1996, before me personally appeared Glenn A. Kleinert, to me
personally known, who, being by me duly sworn, did say that he is
the Senior Vice President of McMoRan Oil & Gas Co., a Delaware
corporation, and that the foregoing instrument was signed on
behalf of said corporation by authority of the Board of
Directors, and said appearer acknowledged said instrument to be
the free act and deed of said corporation.
WITNESSES:
_______________________________
_______________________________
---------------------------------
Notary Public, State of Louisiana
My commission expires At Death.
<PAGE>
STATE OF LOUISIANA
PARISH OF ORLEANS
On this 28th day of June 1996, before
me personally appeared Charles W. Goodyear, to me
personally known, who, being by me duly sworn, did say that he is
the Executive Vice President of Freeport-McMoRan Inc.
administrative managing general partner of Freeport-McMoRan
Resource partners, Limited Partnership, and that the foregoing
instrument was signed on behalf of said Freeport-McMoRan Resource
Partner, Limited Partnership by authority of the Board of
Directors of its administrative managing general partner,
Freeport-McMoRan Inc. and said appearer acknowledged said
instrument to be the free act and deed of said Freeport-McMoRan
Resource Partner, Limited Partnership.
--------------------
WITNESSES: Notary Public
--------------------
--------------------
<PAGE>
List of Exhibits to that Certain Exploration Agreement
dated effective July 1, 1996
by and between MOXY and FRP
Exhibits
A. MOXY/Phillips Agreement
B. LL&E et al Assignment
C. TOCE Assignment
D. LL&E letter dated May 22, 1996
E. Letter agreement dated April 15, 1996 by and between MOXY
and LL&E
F. Letter agreements dated May 2 and 21, 1996, by and between
MOXY and Phillips
<PAGE>
EXHIBIT "A"
Exhibit A the Exploration Agreement dated June 13, 1995 between McMoRan
Oil & Gas Co., and Phillips Petroleum Company is incorporated by
reference to the Company's Quarterly Report on Form 10-Q for the
quarter ending June 30, 1995.
<PAGE>
EXHIBIT "B"
ASSIGNMENT AND CONVEYANCE
STATE OF LOUISIANA
PARISH OF TERREBONNE
THIS Assignment and Conveyance, made effective as of July 1,
1996, is from McMoRan Oil & Gas Co., a Delaware Corporation,
(herein referred to as "Assignor"), whose address is 1615 Poydras
Street, Post Office Box 60004, New Orleans, Louisiana 70160, to
Freeport McMoRan Resource Partners, Limited Partnership, a
limited partnership formed under the laws of the State of
Delaware, acting herein through its administrative managing
general partner, Freeport-McMoRan Inc. (herein referred to as
"Assignee"), whose address is 1615 Poydras Street, Post Office
Box 60004, New Orleans, Louisiana 70160.
FOR AND IN CONSIDERATION of the sum of ONE HUNDRED DOLLARS
AND NO/100 ($100.00) and other good and valuable consideration in
hand paid, the receipt and sufficiency of which hereby are
acknowledged by Assignee, Assignor, subject to the reservations
contained herein, does hereby transfer, grant, bargain, sell,
convey and assign to Assignee the following (all of which are
herein called "Interests"):
1. An undivided Fifty Percent (50%) of Assignor's right,
title and interest (being an undivided 50% of Assignor's
undivided 50% interest) in and to those certain oil, gas and
mineral leases listed and described in Exhibit "A", which is
attached hereto and made a part hereof for all purposes and to
the estates created by the leases, licenses, permits, contractual
rights, and other agreements described in Exhibit "A", LESS AND
EXCEPT any right, title and interest acquired by Assignor by or
through the (i) Partial Assignment of State Lease 13298 dated
effective February 20, 1996, between Toce Oil Co., Inc. and
Assignor recorded in Conveyance Book 1509, under Entry No. 976275
of the records of Terrebonne Parish, Louisiana, (ii) Partial
Reassignment of Sublease dated effective November 14, 1994,
between Toce Oil Co., Inc. et al. and Assignor, recorded in
Conveyance Book 1509, under Entry No. 976276 of the records of
Terrebonne Parish, Louisiana, and (iii) Partial Reassignment of
Sublease dated effective November 14, 1994, between Toce Oil Co.,
Inc. et al. and Assignor, recorded in Conveyance Book 1509, under
Entry No. 976277, of the records of Terrebonne Parish, Louisiana,
(all of which are herein called the "Leases") covering the lands
described therein (herein called the "Lands");
2. An undivided Fifty Percent (50%) of Assignor's right,
title and interest (being an undivided 50% of Assignor's
undivided 50% interest) in and to all wells on the Leases and
Lands, all production therefrom, all gathering and flowlines,
pipelines, processing plants, facilities, equipment and
improvements, any and all other personal property now located on
the Leases and Lands, or appurtenant thereto or used or obtained
in connection therewith, and all other appurtenances thereunto
belonging;
3. An undivided Fifty Percent (50%) of Assignor's right,
title and interest (being an undivided 50% of Assignor's
undivided 50% interest) in and to the estates created by the
licenses, permits, and contractual rights relating to the 3-D
Seismic Survey and to Proprietary Line 85-1, both described in
Exhibit "A"; and
4. An undivided Fifty Percent (50%) of Assignor's right,
title and interest (being an undivided 50% of Assignor's
undivided 50% interest) in The Louisiana Land and Exploration
Company Seismic & Exploration Agreement and the State of
Louisiana Exclusive Geophysical Agreement described in Exhibit
"A", together with like undivided interests in and to all the
property and rights incident thereto, including such rights in,
to and under all the agreements, leases, permits, easements,
licenses and orders in any way relating thereto.
TO HAVE AND TO HOLD the Interests unto Assignee and its
successors and assigns, subject to the following conditions:
1. This Assignment and Conveyance is made and accepted
without warranty of title, either express or implied, except
against every person whomsoever lawfully claiming or to claim the
Interests or part thereof, by, through or under Assignor only,
but is made with full substitution and subrogation of all rights
and actions of warranty Assignor may have against all others as
to the Interests assigned.
2. This Assignment and Conveyance is made and accepted
subject to all burdens, encumbrances, contracts and agreements
which are of record and/or provided for in those instruments
and/or agreements described in Exhibit "A", to the extent that
same are in force and effect and Assignee specifically accepts
its proportionate share thereof. This Assignment and Conveyance
is further made subject to (i) that Exploration Agreement dated
effective July 1, 1996, between Assignor and Assignee relative to
the Interests and (ii) that certain Exploration Agreement Bay
Junop dated effective as of June 13, 1995, between Phillips
Petroleum Company and Assignor.
3. Reference is hereby made for all purposes to that
certain Assignment of Oil and Gas Leases by Union Oil Company of
California, as assignor, to Energy Properties, Inc., as assignee,
dated effective as of June 1, 1992, recorded in Conveyance Book
1336, page 287, under Entry No. 905195 of the records of
Terrebonne Parish, Louisiana, and all of the terms and provisions
of that assignment are incorporated into this agreement by
reference. Assignee does hereby expressly assume an undivided
Twenty-five (25%) percent of all of the obligation owed by Energy
Properties, Inc. to Union Oil Company of California under and
pursuant to the terms of that assignment.
4. Reference is hereby made for all purposes to that
certain Sale and Assignment by Texaco Exploration and Production
Inc. to Assignor, dated effective as of November 14, 1994,
recorded in Conveyance Book 1451, page 77, under Entry No. 950839
of the records of Terrebonne Parish, Louisiana (and to the
Agreement to Purchase and Sell between Texaco Exploration and
Production Inc. and Assignor incorporated by reference into that
Sale and Assignment, and attached to and recorded with that Sale
and Assignment), and all of the terms and provisions of that Sale
and Assignment and Agreement to Purchase and Sell are
incorporated into this agreement by reference. Assignee does
hereby expressly assume an undivided Twenty-five (25%) percent of
all of the obligations owed by Assignor to Texaco Exploration
and Production Inc. under and pursuant to the terms and
provisions of numbered Paragraph 3 of the Sale and Assignment and
numbered Paragraph 1 of the Agreement to Purchase and Sell.
Pursuant to the Agreement to Purchase and Sell between Texaco
Exploration and Production Inc. and Assignor dated effective as
of November 14, 1994, any future or subsequent transaction(s)
affecting that certain oil, gas and mineral lease dated March 25,
1946, executed by the State Mineral Board for and on behalf of
the State of Louisiana to Union Oil Company of California,
designated as State Lease No. 725, recorded in Conveyance Book
150, page 354, under Entry No. 62382 of the records of Terrebonne
Parish, Louisiana must also receive the prior written consent of
Texaco Exploration and Production Inc.
5. Insofar as this Assignment and Conveyance effectuates
an assignment of interests in or affecting State Lease Nos. 725
and 13298, this Assignment and Conveyance is subject to the
approval of the State Mineral Board of the State of Louisiana,
and Assignee does hereby accept such assignment and agrees to
fulfill its 25% share of all obligations, conditions and
stipulations in State Lease Nos. 725 and 13298, and the rules and
regulations of the State Mineral Board insofar as applicable to
the interests transferred by this Assignment and Conveyance.
6. Insofar as this Assignment and Conveyance effectuates
an assignment of interests in or affecting the Terrebonne Parish
School Board Lease, this Assignment and Conveyance is subject to
the approval of the Terrebonne Parish School Board, and Assignee
does hereby accept such assignment and agrees to fulfill its 25%
share of all obligations, conditions and stipulations in the
Terrebonne Parish School Board Lease and the rules and
regulations of the Terrebonne Parish School Board Lease insofar
as applicable to the interests transferred by this Assignment and
Conveyance.
7. This Assignment and Conveyance shall extend to, be
binding upon and inure to the benefit of Assignor and Assignee
and their respective successors and assigns.
8. To the extent the Interests conveyed hereby constitute
personal property or fixtures ASSIGNOR EXPRESSLY DISCLAIMS AND
NEGATES (a) ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY;
(b) ANY IMPLIED OR EXPRESS WARRANTY OF FITNESS FOR A PARTICULAR
PURPOSE; AND, ANY IMPLIED OR EXPRESS WARRANTY OF CONFORMITY TO
MODELS OR SAMPLES OF MATERIALS.
IN WITNESS WHEREOF, Assignor and Assignee have executed and
accepted this Assignment and Conveyance on the dates set out in
their respective acknowledgments hereto, but effective as of the
date set forth above, subject to (i) the approval by the State
Mineral Board of the State of Louisiana as to the State interests
affected hereby, (ii) the approval of The Louisiana Land and
Exploration Company as to its interests affected hereby, and
(iii) the approval of Texaco Exploration and Production Inc. as
to that certain oil, gas and mineral lease dated March 25, 1946,
executed by the State Mineral Board for and on behalf of the
State of Louisiana to Union Oil Company of California, designated
as State Lease No. 725, recorded in Conveyance Book 150, page
354, under Entry No. 62382 of the records of Terrebonne Parish,
Louisiana.
WITNESSES: McMoRan Oil & Gas Co.
BY: __________________________
Glenn A. Kleinert
Senior Vice President
WITNESSES: Freeport-McMoRan Resource
Partners, Limited Partnership,
________________________ by its administrative managing
general partner,
________________________ Freeport-McMoRan Inc.
BY: ___________________________
NAME: _________________________
TITLE: ________________________
<PAGE>
STATE OF LOUISIANA
PARISH OF ORLEANS
On this day of ,
1996, before me personally appeared Glenn A. Kleinert, to me
personally known, who, being by me duly sworn, did say that he is
the Senior Vice President of McMoRan Oil & Gas Co., a Delaware
corporation, and that the foregoing instrument was signed on
behalf of said corporation by authority of the Board of
Directors, and said appearer acknowledged said instrument to be
the free act and deed of said corporation.
WITNESSES:
______________________________
______________________________
______________________________
Notary Public, State of Louisiana
My commission expires At Death.
<PAGE>
STATE OF LOUISIANA
PARISH OF ORLEANS
On this day of 1996, before
me personally appeared , to me
personally known, who, being by me duly sworn, did say that he is
the of Freeport-McMoRan Inc.
administrative managing general partner of Freeport-McMoRan
Resource partners, Limited Partnership, and that the foregoing
instrument was signed on behalf of said Freeport-McMoRan Resource
Partner, Limited Partnership by authority of the Board of
Directors of its administrative managing general partner,
Freeport-McMoRan Inc., and said appearer acknowledged said
instrument to be the free act and deed of said Freeport-McMoRan
Resource Partner, Limited Partnership.
WITNESSES: Notary Public
_________________________
_________________________
<PAGE>
EXHIBIT "C"
ASSIGNMENT AND CONVEYANCE
STATE OF LOUISIANA
PARISH OF TERREBONNE
THIS Assignment and Conveyance, made effective as of July 1,
1996, is from McMoRan Oil & Gas Co., a Delaware Corporation,
(herein referred to as "Assignor"), whose address is 1615 Poydras
Street, Post Office Box 60004, New Orleans, Louisiana 70160, to
Freeport McMoRan Resource Partners, Limited Partnership, a
limited partnership formed under the laws of the State of
Delaware, acting herein through its administrative managing
general partner, Freeport-McMoRan Inc. (herein referred to as
"Assignee"), whose address is 1615 Poydras Street, Post Office
Box 60004, New Orleans, Louisiana 70160.
FOR AND IN CONSIDERATION of the sum of ONE HUNDRED DOLLARS
AND NO/100 ($100.00) and other good and valuable consideration in
hand paid, the receipt and sufficiency of which hereby are
acknowledged by Assignee, Assignor, subject to the reservations
contained herein, does hereby transfer, grant, bargain, sell,
convey and assign to Assignee the following (all of which are
herein called "Interests"):
1. An undivided Fifty Percent (50%) of Assignor's right,
title and interest (being an undivided 50% of Assignor's
undivided 50% interest) in and to those certain oil, gas and
mineral leases listed and described in Exhibit "A", which is
attached hereto and made a part hereof for all purposes and to
the estates created by the leases, licenses, permits, contractual
rights, and other agreements described in Exhibit "A", TO THE
EXTENT AND ONLY TO THE EXTENT Assignor's right, title and
interest was acquired by or through the (i) Partial Assignment of
State Lease 13298 dated effective February 20, 1996, between Toce
Oil Co., Inc. and Assignor recorded in Conveyance Book 1509,
under Entry No. 976275 of the records of Terrebonne Parish,
Louisiana, (ii) Partial Reassignment of Sublease dated effective
November 14, 1994, between Toce Oil Co., Inc. et al. and
Assignor, recorded in Conveyance Book 1509, under Entry No.
976276 of the records of Terrebonne Parish, Louisiana, and (iii)
Partial Reassignment of Sublease dated effective November 14,
1994, between Toce Oil Co., Inc. et al. and Assignor, recorded in
Conveyance Book 1509, under Entry No. 976277, of the records of
Terrebonne Parish, Louisiana, (all of which are herein called the
"Leases") covering the lands described therein (herein called the
"Lands"); and
2. An undivided Fifty Percent (50%) of Assignor's right,
title and interest (being an undivided 50% of Assignor's
undivided 50% interest) in and to all wells on the Leases and
Lands, all production therefrom, all gathering and flowlines,
pipelines, processing plants, facilities, equipment and
improvements, any and all other personal property now located on
the Leases and Lands, or appurtenant thereto or used or obtained
in connection therewith, and all other appurtenances thereunto
belonging.
TO HAVE AND TO HOLD the Interests unto Assignee and its
successors and assigns, subject to the following conditions:
1. This Assignment and Conveyance is made and accepted
without warranty of title, either express or implied, except
against every person whomsoever lawfully claiming or to claim the
Interests or part thereof, by, through or under Assignor only,
but is made with full substitution and subrogation of all rights
and actions of warranty Assignor may have against all others as
to the Interests assigned.
2. This Assignment and Conveyance is made and accepted
subject to all burdens, encumbrances, contracts and agreements
which are of record and/or provided for in those instruments
and/or agreements described in Exhibit "A", to the extent that
same are in force and effect and Assignee specifically accepts
its proportionate share thereof. This Assignment and Conveyance
is further made subject to (i) that Exploration Agreement dated
effective July 1, 1996, between Assignor and Assignee relative to
the Interests and (ii) that certain Exploration Agreement Bay
Junop dated effective as of June 13, 1995, between Phillips
Petroleum Company and Assignor.
3. Insofar as this Assignment and Conveyance effectuates
an assignment of interests in or affecting State Lease Nos. 725
and 13298, this Assignment and Conveyance is subject to the
approval of the State Mineral Board of the State of Louisiana,
and Assignee does hereby accept such assignment and agrees to
fulfill its 25% share of all obligations, conditions and
stipulations in State Lease Nos. 725 and 13298, and the rules and
regulations of the State Mineral Board insofar as applicable to
the interests transferred by this Assignment and Conveyance.
4. This Assignment and Conveyance shall extend to, be
binding upon and inure to the benefit of Assignor and Assignee
and their respective successors and assigns.
5. To the extent the Interests conveyed hereby constitute
personal property or fixtures ASSIGNOR EXPRESSLY DISCLAIMS AND
NEGATES (a) ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY;
(b) ANY IMPLIED OR EXPRESS WARRANTY OF FITNESS FOR A PARTICULAR
PURPOSE; AND, ANY IMPLIED OR EXPRESS WARRANTY OF CONFORMITY TO
MODELS OR SAMPLES OF MATERIALS.
IN WITNESS WHEREOF, Assignor and Assignee have executed and
accepted this Assignment and Conveyance on the dates set out in
their respective acknowledgments hereto, but effective as of the
date set forth above, subject to the approval by the State
Mineral Board of the State of Louisiana as to the State interests
affected hereby.
WITNESSES: McMoRan Oil & Gas Co.
________________________ BY: _______________________
Glenn A. Kleinert
________________________ Senior Vice President
WITNESSES: Freeport-McMoRan Resource
Partners, Limited Partnership,
________________________ by its administrative managing
general partner,
________________________ Freeport-McMoRan Inc.
BY: ________________________
NAME:
TITLE:
<PAGE>
STATE OF LOUISIANA
PARISH OF ORLEANS
On this day of ,
1996, before me personally appeared Glenn A. Kleinert, to me
personally known, who, being by me duly sworn, did say that he is
the Senior Vice President of McMoRan Oil & Gas Co., a Delaware
corporation, and that the foregoing instrument was signed on
behalf of said corporation by authority of the Board of
Directors, and said appearer acknowledged said instrument to be
the free act and deed of said corporation.
WITNESSES:
____________________________
____________________________
Notary Public, State of Louisiana
My commission expires At Death.
<PAGE>
STATE OF LOUISIANA
PARISH OF ORLEANS
On this day of 1996, before
me personally appeared , to me
personally known, who, being by me duly sworn, did say that he is
the of Freeport-McMoRan Inc.
administrative managing general partner of Freeport-McMoRan
Resource partners, Limited Partnership, and that the foregoing
instrument was signed on behalf of said Freeport-McMoRan Resource
Partner, Limited Partnership by authority of the Board of
Directors of its administrative managing general partner,
Freeport-McMoRan Inc., and said appearer acknowledged said
instrument to be the free act and deed of said Freeport-McMoRan
Resource Partner, Limited Partnership.
WITNESSES: Notary Public
<PAGE>
EXHIBIT "D"
[LL&E Letterhead]
May 22, 1996
McMoRan Oil & Gas Co.
1615 Poydras Street
New Orleans, Louisiana 70112
Attention: Mr. Glenn A. Kleinert
3-D Seismic and Exploration Agreement
Prospect Elections
N. Bay Junop and E. Fiddler's Lake Prospects
Terrebonne Parish, Louisiana
Gentlemen:
This is to advise that The Louisiana Land and Exploration
Company has reviewed the 3-D seismic data acquired over the AMI
as established for the captioned agreement ("the Agreement") and
has determined that it elects not participate as to its
Proportionate Share in the Prospect Areas depicted on the plats
attached hereto and labeled Exhibit "A", North Bay Junop and
Exhibit "B", East Fiddler's Lake. Under such election, LL&E
relinquishes its right to participate as a working interest owner
as to such Prospect Areas pursuant to the terms of the captioned
Agreement dated December 19, 1994.
Additionally, as per our previous conversation LL&E is
preparing an oil and gas lease covering LL&E fee acreage within
the East Fiddler's Lake Prospect as shown on Exhibit "B" which is
not subject to an existing lease in favor of McMoRan.
Should you need anything further, please advise.
Very truly yours,
THE LOUISIANA LAND AND
EXPLORATION COMPANY
/s/ Robert J. Chebul
Robert J. Chebul
RJC/cl
Attachments
<PAGE>
EXHIBIT "E"
[MCMORAN OIL & GAS CO. LETTERHEAD]
April 15, 1996
The Louisiana Land and Exploration Company
909 Poydras Street
36th Floor
New Orleans, Louisiana 70112
Attention: Mr. Bill Johnson
NORTH BAY JUNOP
TERREBONNE PARISH, LOUISIANA
3-D SEISMIC AND EXPLORATION AGREEMENT
Gentlemen:
This letter shall evidence our agreement to amend
the captioned agreement of December 19, 1994
(hereinafter referred to as the "Agreement") in
order to incorporate the following changes:
1. The MOXY Leases, and LL&E Leases, as defined
in the Agreement, shall be collectively
considered as a single lease for the purposes
of the continuous drilling provisions of
Paragraph 6 of the lease agreement forms.
Accordingly, as long as MOXY continuously
spuds successive wells on the leased premises
of any MOXY Lease or LL&E Lease within one
hundred and eighty days from the completion
or abandonment of a well drilled on the
leased premises of any MOXY Lease or LL&E
Lease, all MOXY Leases and LL&E Leases will
be deemed to be maintained in full force and
effect by such operation as if such operation
was being performed on the leased premises of
each lease.
2. MOXY does hereby furnish notice that the
initial well will be spudded no later than
August 31, 1996 subject to rig availability
and the granting of necessary permits. In
the event of a delay resulting from the lack
of a suitable drilling rig or the granting of
necessary permits, the spud date for the
initial well may be delayed, as necessary,
beyond August 31, 1996, but in no event shall
such spud date be extended beyond November
30, 1996, unless mutually agreed to by the
parties hereto.
3. The Geophysical Option granted to MOXY under
Paragraph II A. of the Agreement is hereby
extended so as to provide that the option to
acquire LL&E Leases under the provisions of
Paragraph II A. of the Agreement may be
exercised on or before, but not later than,
90 days after the initial well spudded on a
Prospect designated by MOXY has reached the
projected total depth and the rig is released
from that well. In the unlikely event that
the initial well has not been spudded by
November 30, 1996 and no extension of such
date has been agreed to, then any exercise of
an option under Paragraph II.A of the
Agreement must be exercised no later than
November 30, 1996.
4. This letter shall serve as notice in
compliance with the provisions of Paragraph
I.C.2 of the Agreement since MOXY has
proposed to drill a prospect test well
pursuant to Article IV of the Agreement
during 1996 and shall confirm that the 1996
rental payments are waived.
5. Capitalized Terms used herein shall have
the same meaning ascribed to them in the
Agreement.
The Agreement as amended hereby is acknowledged to
be in full force and effect and is ratified for
all purposes.
Very truly yours,
McMoRan Oil & Gas Co.
By: /s/ Glenn A. Kleinert
Glenn A. Kleinert
Senior Vice President
AGREED TO AND ACCEPTED ON
THIS 23rd DAY OF APRIL, 1996.
THE LOUISIANA LAND AND EXPLORATION COMPANY
BY: /s/ Robert J. Chebul
Robert J. Chebul
Vice President and
General Manager
<PAGE>
EXHIBIT "F"
[McMoRan Oil & Gas Letterhead]
May 21, 1996
Phillips Petroleum Company
Box 1967
Houston, Texas 77251-1967
Attn. Mr. W. H. Rainbolt
WELL PROPOSALS
BAY JUNOP EXPLORATION AGREEMENT
TERREBONNE PARISH, LOUISIANA
Gentlemen:
We have received your letter agreement dated May 2, 1996 and the
terms and conditions contained therein are acceptable to MOXY,
subject to the following clarification and modifications:
- The LL&E B#1, the East Fiddlers Lake test well, as such well
is currently permitted and proposed in the well plan design
and cost estimate attached to your letter of May 2, 1996,
shall be considered formally proposed by such letter. The
depths of 16,100', 17,700' and 18,500' and their respective
"Line", "Trace" and "Footage" descriptions shall be
considered the center of the target and bottomhole locations
respectively and any reference to formations in said item 3
shall be deleted. The election period as contemplated by
the Exploration Agreement dated July 13, 1995 shall start to
run on May 2, 1996. MOXY hereby agrees to participate for
its Project Interest in the drilling of such well. Unless
extended by mutual agreement, drilling operations for such
well shall commence on or before July 1, 1996, subject to
rig availability, completion of location access dredging and
location preparation, and transfer to Phillips of all state,
federal and local permits and approvals required for the
drilling of such well.
- The Prospect Area for the Bay Junop test well (LL&E A#1)
shall be the area proposed to and accepted by LL&E. Such
Prospect Area is set out on Exhibit "A" attached hereto;
- The Prospect Area for the East Fiddlers Lake test well (LL&E
B#1) shall be the area set out on Exhibit "B" attached
hereto, subject only to modifications which may be necessary
to gain LL&E approval;
If for any reason MOXY and Phillips have not reached
agreement on a well plan for the LL&E A#1 well on or before
September 1, 1996 and Phillips has not agreed to spud such
well by October 1, 1996 in accordance with the agreed plan,
then MOXY shall have the option, at any time after September
1, 1996, to activate the five (5) day election period
contemplated by item 4 of the above referenced letter
agreement, which period shall commence on the date of MOXY's
notice to Phillips of the final surface location, bottomhole
location and well plan for said well.
- Phillips shall have three (3) working days after receipt
from MOXY of a copy of the proposed dredging contract and
applicable permit documents to review the contract and
documents and provide comments and/or approval. Failure to
respond during such three (3) day period shall be deemed to
be an election to participate in such operation. In the
event Phillips does not approve such contract, the parties
shall immediately meet and if a mutually acceptable contract
is not agreed to within 48 hours from the end of the above
three (3) day period, the original proposal of MOXY shall
prevail. Except for the 48 hours, the times referred to
herein shall be exclusive of Saturdays, Sundays and legal
holidays.
- Phillips understands that MOXY has filed permit documents
for drilling location "C" (set out on Exhibit "C" hereto)
and that the parties may decide to move forward with
preparation for and drilling of this location prior to
completion of drilling on the LL&E B#1 and/or the LL&E A#1,
subject to any such operations being proposed and approved
pursuant to said Exploration Agreement.
- MOXY and Phillips agree that oyster damages and dredging
costs incurred by MOXY relating to the LL&E B#1 well shall
be borne 60% by Phillips; such costs relating to the LL&E
A#1 well shall be borne 66 2/3% by Phillips; and, such costs
relating to the said "C" location, if any such operations
are approved by Phillips and MOXY, shall be borne 50% by
Phillips.
If the above clarification and modifications to your May 2, 1996
letter agreement are acceptable, please execute and return one
copy of this letter for our files on or before May 28, 1996. If
MOXY has not received an executed copy hereof on or before May
28, 1996, this letter agreement shall have no further force and
effect.
Very truly yours,
McMoRan Oil & Gas Co.
/s/ Glenn A. Kleinert
Glenn A. Kleinert
Senior Vice President
Agreed and Accepted this 24th day of May, 1996.
Phillips Petroleum Company
By: /s/ J.E. Carlton
Its: J.E. Carlton
Attorney-in-Fact
<PAGE>
EXHIBIT "F"
[PHILLIPS PETROLEUM COMPANY LETTERHEAD]
May 2, 1996
McMoRan Oil & Gas Co.
1615 Poydras Street
New Orleans, LA 70112
Attention: Mr. Glenn Kleinert
Re: Well Proposals
Bay Junop Exploration Agreement
Terrebonne Parish, Louisiana
Gentlemen:
We are in receipt of your well proposal dated April 19, 1996 for
the drilling of the LL&E No. 1 Well on the Bay Junop prospect.
Said proposal was made pursuant to our Exploration Agreement
dated July 13, 1995 between McMoRan Oil & Gas Co. ("MOXY") and
Phillips Petroleum Company ("Phillips"). As you know, subsequent
to receiving said proposal, representatives of Phillips and MOXY
met at MOXY's office to discuss our respective positions on how,
when and where to drill both the Bay Junop prospect test well
("LL&E-A #1") and the East Fiddler's Lake test well ("LL&E-B#1).
As a result of said meeting and additional discussions between
the parties, Phillips and MOXY hereby agree to the following:
1. Phillips will immediately proceed to secure its
management approval to drill the LL&E-B #1.
2. Phillips agrees that MOXY's April 19, 1996 proposal to
drill the LL&E-A #1 will be considered the first
prospect proposal pursuant to said Exploration
Agreement and said well will be considered the first
Promoted Well pursuant to said agreement.
3. Subject to Phillips acquiring its management approval
for the drilling of the LL&E-B #1, said well will be
considered the second Promoted Well under said
Exploration Agreement but will be drilled first with an
anticipated spud date on or around the middle of June,
1996, pending final approval, settlement of oyster
damages, dredging and clearance of title. Phillips and
MOXY agree that the surface, target and bottomhole
locations for the LL&E-B #1 will be as follows:
Depth (TVD) Line Trace Footage
____________ _______ _______ _______________________________
Surface 380 1300 1050'FSL, 1370'FWL Sec 8-21S-14E
16,100' Cib Carst 382 1322 2850'FSL, 1220'FWL Sec 8-21S-14E
17,700' Tex-W 383 1331 3500'FSL, 1170'FWL Sec 8-21S-14E
18,500' TD 383 1335 3825'FSL, 1147'FWL Sec 8-21S-14E
Attached is Phillips' cost estimate and well plan for
the LL&E-B#1.
4. Pending Phillips management approval to drill the LL&E-
A #1, MOXY agrees to hold its April 19, 1996 prospect
proposal for said well in abeyance. It is Phillips'
intention to review the preliminary results of its pre-
stack depth migration in the Bay Junop area to
determine the best well plan for the LL&E-A #1 prior to
spudding such well. Subject to obtaining said
management approval, Phillips would commence drilling
operations on the well following rig release from the
LL&E-B #1, utilizing the same barge rig as that used to
drill the LL&E-B #1. Immediately upon review of the
preliminary results of the pre-stack depth migrated
data in the Bay Junop area, Phillips and MOXY shall
meet to attempt to mutually agree upon a well plan for
the LL&E-A #1. Should Phillips and MOXY be unable to
reach such agreement, MOXY shall have the right to
propose a final surface and bottomhole location and
well plan for the &E-A #1 and Phillips shall have five
(5) days exclusive of Saturdays' Sundays and holidays
to elect whether or not to participate for its Project
Interest in said well. Failure to respond to MOXY's
proposal shall be deemed an election not to participate
in said well.
5. MOXY shall use its best efforts to settle oyster
damages necessary to drill both the LL&E-B #1 and the
LL&E-A #1. MOXY shall award a contract and commence
operations to dredge the necessary access and location
for the LL&E-B #1, however, MOXY shall consult with and
obtain Phillips' approval prior to awarding such
contract and shall not commence operations until
Phillips has reviewed all of the state, federal and
local permits and approvals required for such
operations. Regardless of whether Phillips obtains its
management approval for the drilling of the LL&E-B #1
and the LL&E-A #1, Phillips shall reimburse MOXY
promptly, when presented with a proper invoice, for 60%
of all costs incurred by MOXY for the above mentioned
oyster damages and dredging costs. In no event,
however, shall MOXY expend an amount greater than
$250,000.00 gross for such costs without the prior
written approval of Phillips.
If the above is acceptable to MOXY, please so indicate by
executing both originals of this letter and returning one to W.
H. Rainbolt at the letterhead address. Please call Mr. Rainbolt
at (713) 669-7497 if you have any questions regarding this
agreement. It is understood and agreed to by Phillips and MOXY
that this agreement amendes the Exploration Agreement insofar,
and only insofar, as it addresses the prospect proposals and
promoted wells addressed in Articles VIII and XIII of said
Exploration Agreement.
Sincerely,
PHILLIPS PETROLEUM COMPANY
/s/ J.E. Carlton
J. E. Carlton
Attorney-in-Fact
cc: S. E. Gast
N. P. Omsberg
W. H. Rainbok
AGREED TO AND ACCEPTED THIS
24th DAY OF MAY, 1996.
McMoRan Oil & Gas Co.
By: /s/ Glenn A. Kleinert
Title: Senior Vice President
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