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OVERRIDING ROYALTY AGREEMENT
006605
THIS ASSIGNMENT dated the 21 day of November, 2008
AMONG:
FORTUNA (US) L.P., a Delaware Limited Partnership carrying
on business in the State of Wyoming ("Fortuna")
(hereinafter called "Royalty Payor").
- and -
INTREPID OIL & GAS, LLC, a Colorado limited liability
company ("Royalty Owner")
(Royalty Payor and Royalty Owner collectively referred to as the "Parties" or,
individually, a "Party").
ì
WHEREAS, the Parties hereto desire to set forth the mutually agreed upon terms and
conditions governing the Overriding Royalty Interest.
NOW THEREFORE, FOR AND IN CONSIDERATION ofTen Dollars ($10.00) and
other good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Royalty Owner and Royalty Payor agree as follows:
ARTICLE 1
INTERPRETATION
1.1 Definitions
Each capitalized term used in this Agreement will have the following meaning:
(a) "AMI Agreement" means the Area of Mutual Interest Agreement dated May 9, 2008 and
made effective March 25,2008 between Fortuna (US) LP and Intrepid Oil & Gas, LLC;
(b) "Business Day" means any day other than a Saturday, a Sunday or a statutory holiday in
the State of Wyoming;
(c) "Existing Burdens" means all existing and valid burdens affecting the Leases including
the landowner's or lessor's royalty, overriding royalties, net profits interests, production
RECEIVED 1/26/2009 at 11:17 AM
RECEIVING # 944868
BOOK: 713 PAGE: 605
JEANNE WAGNER
LINCOLN COUNTY CLERK, KEMMERER, WY
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payments, and any other charges or existing burdens of a similar nature applicable thereto, but
excluding the Reserved Overriding Royalty;
(d) "Lands" means all rights, privileges and interests to explore for, drill or take Oil and Gas,
to the extent granted by the Leases, described in Schedule "A" attached hereto;
(e) "Leases" means the lease or leases described in Schedule "A" attached hereto;
(f) "Oil and Gas" means any and all petroleum, natural gas and other related hydrocarbon
substances of any kind or nature (including gas producible from shale or coal-bearing
fonnations) that may be explored for, drilled for, extracted, produced, taken, saved and marketed
from the Lands in accordance with the tenns of the Leases;
(g) "Reserved Overriding Royalty" means the overriding royalty calculated, conveyed and
granted to the Royalty Owner pursuant to the tenns of the AMI Agreement and as further
described in Article 2 hereof.
1.2 Conflictine: Terms
If any tenn or condition of this Agreement, whether express or implied, conflicts with or
is in variance with a tenn or condition in the Leases, then such tenn or condition in the Leases
shall prevail, and this Agreement shall be deemed to be amended to the extent necessary to give
effect to such tenn or condition in the Leases.
ARTICLE 2
RESERVED OVERRIDING ROYALTY
2.1 Assie:nment of Reserved Overridine: Rovalty
(a) Royalty Payor does hereby grant, transfer, and assign a non-convertible overriding
royalty to the Royalty Owner equal to two percent (2%) of all Oil and Gas produced and saved
from the Leases, (the "Reserved Overriding Royalty") free of all costs and expenses of
exploration, development, production, and operation; the Reserved Overriding Royalty shall be
calculated and payable in the same manner that the royalty under the applicable Lease is
calculated and shall be subject to its proportionate share of (i) any costs for dehydrating,
purifying, treating, boosting, compressing, gathering, processing and transporting to the point of
sale to the extent and only to the extent that such costs are deductible in detennining the royalty
payable under the applicable Lease; and (ii) all taxes assessed on the Reserved Overriding
Royalty share of production or the proceeds of the sale thereof.
(b) If Royalty Payor owns less than 100% of the leasehold interest under the Lease, or in the
event the Lease covers less than the full fee mineral estate in the Lands covered by the Lease,
then the Reserved Overriding Royalty shall be reduced proportionately according to Royalty
Payor's interest in such Lease or the partial fee mineral interest covered by the Lease. This grant
of Reserved Overriding Royalty is made without warranty of title, either express or implied
except that Royalty Payor represents and warrants that the Reserved Overriding Royalty is free
and clean of all liens, burdens and encumbrances arising by, through or under Royalty Payor.
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(c) The Reserved Overriding Royalty will not include Oil and Gas that the Royalty Payor
reasonably uses or unavoidably loses in the Royalty Payor's drilling and production operations
for the Lands. Those drilling and production operations include, but are not limited to, the
proportionate use of Oil and Gas in batteries, treaters, compressors, separators, satellites and
similar equipment serving Royalty Payor's Oil and Gas operations on the Lands, but does not
include the use of Oil and Gas for any enhanced recovery operations.
(d) The parties agree that Royalty Owner shall not be entitled to take its Reserved Overriding
Royalty share of the Oil and Gas in kind.
2.2 No Covenant to Develop
There shall be no obligation on Royalty Payor and no covenant is implied, to explore for,
develop or produce Oil and Gas from the Lands.
2.3 Date of Payment
Any cash payment required to be paid by Royalty Payor to Royalty Owner in respect of
the Reserved Overriding Royalty shall be made to Royalty Owner on or prior to the tenth day of
the second month following the month in which the Oil and Gas to which such amount relates
were produced and marketed from the Lands.
2.4 Production Statement
At the same time as the cash payment pursuant to clause 2.3 herein is due, Royalty Payor
shall forward to Royalty Owner a written statement of Royalty Owner's Reserved Overriding
Royalty share due to it for the production in the month concerned showing production,
inventories and sales; and the said statement shall be conclusive of the amount thereof unless
Royalty Owner objects thereto by notice in writing specifying the particulars of any error or
deficiency therein within twenty-four (24) months after the end of the calendar year in which the
said statement was received.
2.5 Books and Records
Royalty Payor shall keep and maintain in the Province of Alberta at all times during the
term hereof true and accurate books, statements, records, and accounts evidencing the quantity of
Oil and Gas produced from the Lands and the disposition thereof. Royalty Payor shall permit
Royalty Owner to inspect such records during nOlmal business hours and to make extracts or
copies thereof and at all times permit Royalty Owner to ascertain the quantity, kind, and nature
of the Oil and Gas produced or taken from any well located on the Lands.
2.6 Assienment
Each Party may transfer or assign all or any part of its interest in the Lands and the
Reserved Overriding Royalty by providing the other Party with a recorded copy of such transfer
or assignment in a format acceptable to Royalty Payor and which is sufficiently detailed to allow
for proper payment of the assigned interest. The notice provided for herein shall be given as
provided in clause 3.2 within ten (10) calendar days of receipt of the recorded document from the
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county recorder. Upon receipt of notice of such transfer or assignment, the assigning Party shall
be released and discharged from any and all liability and obligations thereafter accruing under
this Agreement, or the Leases relating to the Lands, insofar as they relate to the interest so
transferred or assigned. Until receipt of notice as provided herein, Royalty Payor shall have no
obligation or liability vis-a-vis the Royalty Owner to its assignees for payment of the Reserved
Overriding Royalty.
2.7 Pooling; and Unitization
Royalty Payor shall be entitled at any time and from time to time as a recurring right,
either before or after production, to pool or unitize all or a part of the Lands and anyone or more
of the fonnations thereunder with any other lands for the purposes of creating a spacing unit for
drilling or production of the Oil and Gas or to unitize all or a part of the Lands with any other
lands or leases in the immediate vicinity for cooperative development of a structure or reservoir,
if such pooling or unitization becomes necessary or desirable in the opinion of the Royalty Payor
irrespective of whether authority similar to this exists with respect to such other lands or leases.
The basis and manner of such pooling or unitization, the manner of allocating pooled or unitized
lands, and the contents of any agreement pertaining thereto shall be in the sole discretion and
detennination of Royalty Payor, and when so detennined shall be binding upon Royalty Owner.
Upon any such pooling or unitization the Reserved Overriding Royalty shall be paid on the basis
of production deemed to be produced from or allocated to Lands under the plan of unitization or
pooling and not upon the basis of actual production from the Lands.
Furthennore, Royalty Payor reserves the right to pool, communitize, unitize, or to
establish a development contract, a working interest unit, or a combination agreement; and
Royalty Owner shall be deemed committed to any such agreement for pooling, communitization,
unitization, or other cooperative agreement and bound thereby without Royalty Payor having to
obtain the separate consent or joinder of the Royalty Owner or its assignees.
ARTICLE 3
ADDITIONAL PROVISIONS
3.1 Taxes
Each Party hereto shall be liable for all taxes and other charges levied or assessed against
its interest as set out herein in the Oil and Gas, and in lieu of payment by Royalty Owner of its
share thereof Royalty Payor may, but is not obligated to make, such payment and deduct the
amount thereof from any money payable by it to Royalty Owner. Notwithstanding the
foregoing, the Reserved Overriding Royalty share of Royalty Owner shall be paid by Royalty
Payor to Royalty Owner free of any deduction for Lessor's royalty, Royalty Payor being solely
responsible for payment thereof. The payment on behalf of Royalty Owner by Royalty Payor of
any tax or other charge pursuant to the provisions of this clause 3.1 shall not in any way relieve
Royalty Owner from its obligation and responsibility to reimburse Royalty Payor for its share of
such costs.
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3.2 ~otices
Notices, reports and other communications required or permitted by this Agreement to be
given or sent by one Party to the other shall, except where otherwise provided herein, be in
writing and delivered by hand, or mailed postage prepaid, or transmitted by facsimile to the
addresses as follows:
Rovaltv Owner
Rovalty Pavor
Intrepid Oil & Gas LLC
Suite 1700, 700-1 th Street
Denver, CO 80202
Attention: Land Manager
Fax: (303) 298-7502
Fortuna (US) L.P.
Attention: Senior Manager, Land
c/o 888 - 3rd Street S.W., Suite 2000
Calgary, Alberta, Canada T2P 5C5
Fax: (403) 693-2536
(a) Hand delivered notices shall be conclusively deemed to have been received when actually
delivered if during a Business Day. If hand delivery is not during a Business Day such notice
shall be conclusively deemed to have been received by addressee at the commencement of the
next Business Day. If a notice is mailed by prepaid post, it shall be conclusively deemed to have
been received by the addressee on the fifth Business Day following the mailing thereof. Notices
transmitted by facsimile shall be conclusively deemed to have been received when actually
delivered if during a Business Day. If facsimile is not delivered during a Business Day such
notice shall be conclusively deemed to have been received by addressee at the commencement of
the next Business Day.
(b) When any disruption of the postal system is in effect or threatened, notices shall be hand
delivered or sent by facsimile.
( c) Any notice sent pursuant to the tenus of this Agreement shall make reference to the
relevant time period within which any return notice is due, if applicable
(d) Parties may from time to time change their respective addresses for service or their
respective fax numbers or both by giving written notice to the other Parties.
3.3 Force Maieure
The obligations of the Parties hereto shall be suspended and there shall be no liability for
damages during the time and to the extent that any Party hereto is prevented from complying
with its obligations under this Agreement in part or in whole by strikes, lock-outs, acts of God or
enemies of the State, war, blockades, riots, laws, orders, or regulations of govemmental bodies or
agencies, unavoidable accidents, delays in transportation, inability to obtain necessary materials
in the open market, or any other cause, except financial, whether similar or dissimilar to those
specifically enumerated, beyond the reasonable control of the Paliy hereto affected. The Party
hereto whose obligations under this Agreement are suspended shall give notice, including
reasonably full particulal's, of the cause of such suspension, to the other Party or Parties hereto
within a reasonable time after the occun-ence hereof. The performance of such obligations shall
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begin or be resumed within a reasonable time after such cause has been removed. No Party
hereto shall be required against its will to settle any labour dispute.
ARTICLE 4
MISCELLANEOUS
4.1 Duration of Reserved Overridine: Rovaltv
Subject to the terms contained herein, the Reserved Overriding Royalty shall continue for
the life of the Leases or unless the Parties agree otherwise in writing. The Reserved Overriding
Royalty shall apply to any extensions or renewals of the Leases acquired during the term of the
AMI Agreement. All terms, covenants, and conditions in this Agreement relating to the Reserved
Overriding Royalty shall run with and be binding upon the Leases, the Lands, and the estates
affected thereby for the duration of this Agreement.
4.2 Entire Ae:reement
This Agreement supersedes and replaces all previous agreements, whether written or oral,
memoranda, and correspondence among the Parties hereto with respect to the subject matter of
this Agreement except for the AMI Agreement.
4.3 Severable Clauses
Should any clause, prOVlSlon, condition of this Agreement be or become illegal or
unenforceable, it shall be considered separate and severable from this Agreement and the
remaining provisions and conditions shall continue in full force and be binding upon the Parties
hereto as though the said clause, provision, or condition has never been included.
4.4 Compliance with Laws
The Parties hereto covenant, so long as this Agreement is in force and effect, to comply
with any and all regulations and other laws with respect to anything done, or purported to be
done, pursuant to this Agreement, and with respect to the operations carried out hereunder.
4.5 Waiver
No waiver by any Party hereof of any teml of this Agreement shall take effect or be
binding upon that Party unless the same be expressed in writing and any waiver so given shall
extend only to the particular breach so waived and shall not limit or affect any rights with respect
to any other or future breach.
4.6 Time of the Essence
Time is of the essence of this Agreement.
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4.7 Choice of Laws
This Agreement shall, in all respects, be subject to, interpreted, construed and enforced in
accordance with and under the laws of the State of Wyoming and applicable laws of the United
States of America and shall, in all respects, be treated as a contract made in the State of
Wyoming. The Parties hereto irrevocably attorn and submit to the exclusive jurisdiction of the
courts of the State of Wyoming and courts of appeal therefrom in respect of all matters arising
out of or in connection with this Agreement, provided, however, that any Party may remove an
action filed in State of Wyoming Com1s to the United States District Court if subject matter and
diversity requirements for removal are met. Each Party irrevocably waives its right to a jury trial
with respect to matters contained herein.
4.8 Authority to Bind
FUSI GP Inc. for the Royalty Payor represents that it has the full right and authority to
enter into this Agreement and bind its partnership.
4.9 Counterpart Execution
This Agreement may be executed in counterpm1, no one copy of which need be executed
by each of the Parties hereto. When copies have been executed by each of the Parties hereto, all
copies together shall constitute one agreement and shall be a valid and binding contract among
the Parties as of the date first above written.
4.10 Enurement
This Agreement shall be binding upon and shall enure to the benefit <;>f each of the Parties
hereto and their respective heirs, executors, administrators, trustees, receivers, successors and
permitted assigns.
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IN WITNESS WHEREOF the Parties hereto have duly executed this Agreement as of the day
and year first above written.
ROYALTY PAYOR
ROYALTY OWNER
FORTUNA (US) L.P.
by its general partner FUSI GP Inc.
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OIL & GAS LLC
id Production Corporation
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Execution page to an Overriding Royalty Agreement dated the 21st day of November, 2008 among Fortuna (US)
L.P., and Intrepid Oil & Gas LLC
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ACKNOWLEDGEMENT
STATE OF
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COUNTY OF 'ÐlirJ liCK
(COLORADO AND WYOMING FORM)
20
The foregoing instrument was acknowledged before me this lõ/i day of JDMtÙJ-Ý ,2,(:)08,
by R.D 6e:f?í P. ::JbRtJ A '-/II fJrZ--lIf, fR€s¡/JCtJf of INTREPID PRODUCTION
COMPANY, Manager of INTREPID OIL & GAS, LLC, a Colorado limited liability company,
on behalf of company as manager of the limited liability company.
Witness my hand and official seal
Name:
qr;fBr
Notary Public
My commission expires:
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(NOTARIAL SEAL)
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ACKNOWLEDGEMENT
Province of Alberta
§
§
Dominion of Canada §
On this the \~.' .day of Þf¡:>Þ'\II,b.ø ,2008, b,¡¡fore me, the undersigned personally
appeared RQ.~ Þe.u.\-~e -.Q( and Qv . who
acknowledged themselves to be the . ~ ~ . " and
IN - . \\
\ Q.'V\ Qß. ð 1 ~i~\C>(Cl'\-l()\J\ ofFUSI GP INC, a c rporation, and the general
partner of-.FORTU A (US) L.P., and that they, being authorized so to do, exe. cute.d the /
foregoing instrument for the purposes therein contained.
In witness whereof] hereunto set my hand and official seal. ~
( ,
OËAN W. f:v1~LUSKEY
BARRISTER( SOLICITOR
Notary Public
My commission expires: at the pleasure of
Her Majesty Queen Elizabeth II
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Schedule "A"
to an Overriding Royalty Agreement dated the 21 day of November, 2008
among Fortuna (US) L.P. and Intrepid Oil & Gas, LLC.
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Fortuna Energy Inc,
SCHEDULE "A"
attached to and made part of an Overriding RoyaltyAgreement dated November 21, 2008
between Fortuna Energy Inc. and Intrepid Oil & Gas, LLC
ûOû61.6
FORTUNA
LANDS. LEASES. P&NG RIGHTS AND ENCUMBRANCES
Twp 26N Rge 114W 6TH 100%
PM Meridian Section 32
NEl/4SEl/4; ALL PNG
FROM SURFACE TO
BASEMENT
Permitted
Encumbrances····.·,
LOR 12.5% on 100%
prod, pd 100% by
Fortuna