EX-10.3 7 ex103ofund.txt EUGENE ISLAND 357 PARTICIPATION AGREEMENT PARTICIPATION AGREEMENT EUGENE ISLAND 357 PROSPECT OFFSHORE, LOUISIANA This Participation Agreement ("Agreement") is made and entered into effective as of the 1st day of July, 2005 by and between Walter Oil & Gas Corporation ("Walter"), and Ridgewood Energy Corporation ("Ridgewood"). RECITALS WHEREAS, Walter has identified a prospect on Eugene Island block 357 and has acquired Oil & Gas Lease OCS-G 23884 dated June 1, 2002 covering block 357 from the United States of America; and, WHEREAS, Walter plans to drill or participate in the drilling of an initial test well on Eugene Island block 357, OCS-G 23884; and, WHEREAS, Walter has offered to Ridgewood the opportunity to participate in the drilling of the initial test well and to acquire a 25% working interest in block 357, OCS-G23884, less and except the NE/4 of the lease from the surface to 11,500' subsea (hereafter "Lease"), and Ridgewood has accepted Walter's offer all in accordance with the terms set forth herein. NOW, THEREFORE, in consideration of the mutual covenants and agreement herein contained, the parties hereto agree as follows: SECTION I Initial Costs 1.01 Within ten (10) days of Ridgewood's execution of this Agreement, Ridgewood agrees to pay Walter $141,203.00 (which represents Ridgewood's 25% share of the Lease bonus, rental and shallow hazard survey costs incurred by Walter). SECTION 11 Initial Test Well 2.01 Walter plans to participate in the drilling of an initial test well on the Lease. The initial test well will be drilled from a surface location of approximately 5,625' FSL and 6,610' FEL of the Lease and drilled to a depth of 15,800' TVD (hereinafter "Initial Test Well"). As consideration for the opportunity to earn a twenty-five percent (25%) working interest in the Lease, Ridgewood shall bear Thirty-Three and One-Third percent (33.33%) of the costs to drill the Initial Test Well to casing point and through plugging and abandonment, if the Initial Test Well is not saved for production. This disproportionate cost sharing obligation shall be referred to as the "Promote." The Promote will be applicable to the dry hole costs of the Initial Test Well and will be limited to 110% of the Initial Test Well's estimated dry hole cost as noted in the attached AFE. The Promote will also apply to any substitute well or sidetrack of the Initial Test Well until Walter has received 110% of the original AFE dry hole costs. Concurrent with Ridgewood's execution of this Agreement, Ridgewood will be deemed to have approved the attached AFE and well plan. 2.02 Subject only to rig availability and the ability to obtain the required governmental permits, Walter and Ridgewood agree that if the Initial Test Well is not spudded on or before December 1, 2005 ("Commencement Date"), and such date has not been extended by Ridgewood, then this Agreement shall ipso facto terminate. Within 10 days of such termination, Walter shall reimburse Ridgewood for any payments it received in accordance with Paragraph 1.01 of this Agreement and Ridgewood shall submit assignments to Walter re-conveying Ridgewood's 25% working interest in the Lease previously received from Walter, which assignment shall be free and clear of any liens, charges, or lease burdens, overriding royalty interest, or any other encumbrance created by Ridgewood. For clarification purposes only, there shall be no other penalty(ies) assessable to either party hereto for failure of the Initial Test Well to be spudded on or before the Commencement Date. 2.03 It is understood and agreed that Newfield Exploration Company (`Newfield") will have a 50% working interest in the Lease and Initial Test Well and will be the designated operator. SECTION III Assignment and Assumption of Rights 3.01 Within ten (10) days from receipt of Ridgewood's payment described in 1.01 above, Walter shall assign to Ridgewood Twenty Five percent (25%) operating rights interest in the Lease. The interest assigned to Ridgewood in the Lease shall be subject to the existing royalty burden and a 2.25% of 8/8ths overriding royalty interest ("ORRI") to be reserved by Walter, all proportionately reduced to Ridgewood's assigned interest. Walter represents to Ridgewood that total Lease burdens created by, through and under Walter as of the effective date of this Agreement, including lessor's royalty, are no greater than 18.917% (of 8/8ths). The form of Assignment is attached hereto as Exhibit "A." SECTION IV Operating Agreement 4.01 Contemporaneous with the execution of this Agreement, the parties hereto agree to execute a mutually agreeable operating agreement ("JOA"), naming Newfield operator of the Lease. Both parties hereto acknowledge that the JOA is a three-party agreement also requiring Newfield's signature. All operations on the Initial Test Well and any and all subsequent operations on the Lease shall be conducted in accordance with the terms and provisions of the JOA. If there are any conflicts between this Agreement and the JOA, the terms and provisions of this Agreement shall prevail and govern. SECTION V Notices 5.01 All notices, requests or demands to be given under this Agreement shall be in writing and governed and directed to the representatives as specified below: Ridgewood Energy Corporation Walter Oil & Gas Corporation 11700 Old Katy Rd., Suite 280 1100 Louisiana Street, Suite 200 Houston, Texas 77079 Houston, TX 77002 Attn: Mr. W. Greg Tabor Attn: Mr. Ron Wilson Phone: 281-293-8449 Phone: 713-659-1221 Fax: 281-293-7705 Fax: 713-756-1177 SECTION VI GOVERNING LAW AND BREACH OF CONTRACT 6.01 This Agreement shall be governed by the laws of the State of Texas except where the Maritime Laws of the United States of America are applicable. In the event that any dispute results in formal legal action, venue shall be appropriate in the federal or state courts of Harris County, Texas. 6.02 In the event of a breach of this Agreement by any party hereto, the non-breaching party shall be entitled to all remedies available at law or equity, including but not limited to, specific performance, monetary damages and injunctive relief. SECTION VII MISCELLANEOUS 7.01 Walter shall provide Ridgewood with full and complete access to Walter's files, records and data, so that Ridgewood may perform its due diligence review of Walter's acquisition, ownership and obligations associated with the Lease. Additionally, Walter shall provide Ridgewood with access to its technical data associated with the Lease, including seismic, maps, well data and geological data, subject however, to all confidentiality and data licensing restrictions. 7.02 A term, provision, covenant, representation, warranty, or condition of this Agreement may be waived only by written instrument executed by the party waiving compliance. The failure or delay of any party in the enforcement or exercise of the rights granted under this Agreement shall not constitute a waiver of said rights nor shall it be considered as a basis for estoppel. 7.03 This Agreement, together with all of its exhibits, is intended by the parties to be a complete and final statement of the agreement of the parties with respect to the subject matter hereof, and supersedes any prior oral or written statements or agreements between the parties hereto. 7.04 The terms and provisions hereof shall be binding upon and inure to the benefit of Walter and Ridgewood, and their respective heirs, legal representatives, successors and assigns, and shall be covenants running with the Lease. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first set forth above. WITNESSES WALTER OIL GAS CORPORATION [ILLEGIBLE SIGNATURE] /s/ Ron A. Wilson -------------------------- Ron A. Wilson Vice President [ILLEGIBLE SIGNATURE] RIDGEWOOD ENERGY CORPORATION [ILLEGIBLE SIGNATURE] /s/ W. Greg Taber ------------------ Executive 'vice President [ILLEGIBLE SIGNATURE] EXHIBIT "A" Attached to and made a part of that certain Participation Agreement dated July 1, 2005 between Walter Oil & Gas Corporation and Ridgewood Energy Corporation. ASSIGNMENT OF OPERATING RIGHTS TO OIL AND GAS LEASE OCS-G 23884 UNITED STATES OF AMERICA ss. OUTER CONTINENTAL SHELF ss. OFFSHORE LOUISIANA ss. For and in consideration of the sum of One Hundred Dollars ($100.00) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Walter Oil & Gas Corporation, a Texas Corporation, whose mailing address is 1100 Louisiana, Suite 200, Houston, Texas 77002 (hereinafter called "Assignor"), does SELL, TRANSFER, ASSIGN, SET OVER AND CONVEY unto Ridgewood Energy Corporation, a __________________ Company, whose mailing address is 11700 Old Katy Rd., Suite 280, Houston, TX 77079, (hereinafter called "Assignee"), a 25.0000% operating rights interest in and to the following federal oil and gas Lease ("Lease"): Oil and Gas Lease No. OCS-G 23884 dated June 1, 2002 from the United States of America, as Lessor, to Walter Oil & Gas Corporation, as Lessee, covering Eugene Island Area, Block 357, OCS Leasing Map, Louisiana Map No. 4A, containing 4999.88 acres; LESS AND EXCEPT the Northeast Quarter (NE14) of the Lease from the surface down to 11,500' subsea (hereinafter referred to as ("Assigned Interest"). Subject to the matters set forth herein, this Assignment is made without warranty of title, express, implied or statutory, even for return of any consideration paid therefor; provided only that Assignor warrants that it has not heretofore granted or conveyed to any other party any interest in or any lien or encumbrance on the interest being assigned hereunder in the Lease except as described herein. WITH RESPECT TO ANY PERSONALTY OR CHATTELS CONVEYED HEREBY, ASSIGNOR HEREBY NEGATES AND DISCLAIMS THE IMPLIED WARRANTY OF MERCHANTABILITY AND THE IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE AND ANY IMPLIED WARRANTY OF CONFORMITY TO MODELS OR SAMPLES OF MODELS. ASSIGNEE AND ASSIGNOR AGREE THAT, TO THE EXTENT REQUIRED BY APPLICABLE LAW TO BE EFFECTIVE, THE DISCLAIMERS OF CERTAIN WARRANTIES CONTAINED IN THIS INSTRUMENT ARE "CONSPICUOUS" DISCLAIMERS. TO HAVE AND TO HOLD the Assigned Interests hereby conveyed, together with all and singular rights and appurtenances thereto in anyway belonging unto Assignee, its successors and assigns. This Assignment is made by Assignor and accepted by Assignee subject to the following: 1) the terms, provisions and conditions of the Lease and any limitation on or contained in the Lease; 2) That certain Participation Agreement dated July 1, 2005 by and between Assignor and Assignee and covering the Assigned Interest; 3) That certain Offshore Operating Agreement dated July 1, 2005 by and between Newfield Exploration Company, as Operator, and Assignor and Assignee, as Non-Operators, and covering the Assigned Interest; 4) Assignor reserves unto itself, and retains an overriding royalty interest equal to 2.25% of eight-eights (8/8ths) in and to all hydrocarbons that are produced, saved, and sold from the Lease. Said overriding royalty shall be free of all costs of any kind whatsoever including but not limited to costs associated with exploration, development, production or operating, but shall bear its proportionate share of severance and production taxes unless provided otherwise in the Lease. Said overriding royalty shall be calculated and paid or delivered to Assignee in the same manner as provided in the Lease affected thereby for the calculation and payment or delivery of royalties therein reserved to the Lessor, a) It is understood that the overriding royalty interest reserved hereinabove is an 8/8ths number and that Assignee shall bear its proportionate share of such overriding royalty interest based on the Assigned Interest herein. 4) The terms and conditions of this Assignment shall extend to and be binding upon the successors and assigns of the parties. IN WITNESS WHEREOF, this Assignment of Operating Rights Interest is executed and effective this day of, 2005. WITNESSES: ASSIGNOR: Walter Oil & Gas Corporation ________________________ ________________________ By: ________________________ Ron A. Wilson Vice President WITNESSES: ASSIGNEE: Ridgewood Energy Corporation ________________________ ________________________ By: ________________________ W. Greg Tabor Executive Vice President STATE OF TEXAS COUNTY OF HARRIS On this _____ day of __________ 2005 before me appeared W. Greg Tabor, to me personally known, who, being by me duly sworn, did say that he is the Executive Vice President of Ridgewood Energy Corporation, and that the foregoing instrument was signed on behalf of said company, and said W. Greg Tabor acknowledged said instrument to be the free act and deed of said corporation. __________________________ NOTARY PUBLIC My Commission Expires __________________________. STATE OF TEXAS COUNTY OF HARRIS On this _____ day of __________ 2005 before me appeared before me appeared Ron A. Wilson, to me personally known, who, being by me duly sworn, did say that he is the Vice President of Walter Oil & Gas Corporation, and that the foregoing instrument was signed on behalf of said partnership, and said Ron A. Wilson acknowledged said instrument to be the free act and deed of said corporation. __________________________ NOTARY PUBLIC My Commission Expires __________________________. [NEWFIELD LOGO] Authorization for Expenditure [ILLEGIBLE TABLE] Newfield Exploration Company Authority For Expenditure Newfield Exploration Company, Authority For Expenditure
Well Name: El 357 WELL: #1 18-Jul-05 AFE Type: Exploration AFE NUMBER: 8955 PRE AFE Description: DRILL & EVALUATE DHC COMPLETE COMPLETE TOTAL 1 850 DRILLING INTANGIBLE GROSS 850 .001 LOC PERMITS 5,000 5,000 850 .002 LOC SURVEYS 25,000 25,000 850 .003 LOC PREPARATION 0 0 850 .004 LOC CLEAN UP 0 0 850 .005 LOC INSURANCE 132,000 132,000 850 .006 LOC MISC 0 0 850 .007 LOC CONTINGENCY 1,368,100 1,368,100 850 0.011 DRLO MOB DEMOB 650,000 650,000 850 .012 DRLG RIG 5,520,000 5,520,000 850 .013 DRLG FUEL 241,500 241,600 850 .014 DRLO WATER 9,200 9,200 850 .015 DRLG BITS 123,000 123,000 850 .016 DRLt3 TOOLS - STAB,H.UR 19,800 19,800 850 .021 MUD CHEMICALS 835,300 835,300 850 .022 MUD COMPLETION FLUIDS 0 0 850 .023 MUD CORROSION INHIBITOR 0 0 850 .024 MUD ACID 0 0 850 .026 RENT BOPS 8,600 8,600 850 .027 RENT DRIB. STRING 92,300 92,300 850 .029 RENT MUD EQUIPMENT 24,200 24,200 850 .029 RENT CASING TOOLS 100.000 100,000 850 .030 RENT COMMUNICATIONS 32,400 32,400 850 .031 RENT ELECT LINE UNIT 0 0 850 .032 RENT TESTING UNIT 0 0 850 .033 RENT MISC 4,000 4,000 850 .036 CEMENT 305,000 305,000 850 .041 SERVICES MUD LOGGING 50,600 59,600 850 .042 SERVICES OPEN HOLE LOOOINO 390,000 390.000 850 .043 SERVICES CASINO HOLE LOGGING 0 0 850 .044 SERVICES DIRECTIONAL SURVEY 5,000 5,000 850 .045 SERVICES CASINO INSPECTION 20,800 20,800 850 .046 SERVICES TUBING INSPECTION 0 0 850 .047 SERVICES TUBING TESTING 0 0 850 .048 SERVICES DRILL. PIPE INSPEC 0 0 850 .049 SERVICES BHA INSPEC 5,300 5,300 850 .050 SERVICES GALLEY 27,800 27,600 850 .051 SERVICES TRASH 5,600 8.600 850 .052 SERVICES WELDING & LABOR 8,000 8,000 850 .053 SERVICES CORE ANALYSIS 0 0 850 .054 SERVICES FISHING TOOLS 0 0 850 .055 SERVICES DIRECTIONAL TOOLS 0 0 850 .056 SERVICES 80P TESTING 0 0 850 .057 SERVICES MUDLINE HANGER 6,000 6,000 850 .058 SERVICES WELLHEAD 6,000 6,000 850 .059 SERVICES CEMENTING 95,100 85,100 850 .060 SERVICES DOCKS 32,200 32,200 850 .061 SERVICES DISPATCHER 32,200 32,200 7/18/2005
Newfield Exploration Company, Authority For Expenditure
Well Name: El 357 WELL: #1 18-Jul-05 AFE Type: Exploration AFE NUMBER: 8955 PRE AFE Description: DRILL & EVALUATE DHC COMPLETE COMPLETE TOTAL 850 .062 SERVICES DIVERS 0 (0) 850 .063 SERVICES LLNER HANGER 0 0 850 .064 SERVICES GRAVEL PACK 0 (0) 850 .065 SERVICES ACIDIZ1NG 0 (0) 850 .066 SERVICES MISC 48,000 48,000 850 .071 TRANS TRUCKING 69,000 69,000 850 .072 TRANS WORKBOATS 299,000 299,000 850 .073 TRANS TUGS 0 0 850 .014 TRANS CREWBOATS 138,000 138,000 850 .075 TRANS AIR 165,800 185,600 850 .076 TRANS FUEL 120,800 120,800 850 .077 TRANS MISC 0 0 850 .081 SUPR ADMIN 46,000 46,000 850 .082 SUPR CONSULTANT 119,600 119,600 850 .083 SUPR ENGINEER 7,200 7,200 SUBTOTAL $50 511,163,000 $11,193,000 1 853 DRILLINO TANGIBLE COST 853 .01 PIPE CAISSON 0 0 833 .02 PIPE DRIVE 187,200 187,200 853 .03 PIPE CONDUCTOR 163,500 183,500 853 .04 PIPE SURFACE 435{000 435,000 853 .05 PIPE INTERMEDIATE 584,600 684,500 853 .06 PIPE PRODUCTION 0 0 853 .07 PIPE LINER 0 0 853 .08 PIPE TIEBACK 0 0 853 .09 PIPE TUBING 0 0 853 .16 WELLHEAD 44,000 44,000 853 .25 CASING EQUIPMENT 162,500 162,500 853 .31 CETUBTNG ACC 0 0 853 .32 CE SSSV 0 0 SUBTOTAL 833 $ 1,576,700 11,576,700 T0TAL AFE# 8955 $ 12,759,700 $ 12,759,700 7/18/2005
APPROVED: [ILLEGIBLE SIGNATURE] [ILLEGIBLE INITIALS] DATE: 7/20/05 NEWFIELD EXPLORATION COMPANY GENERAL INFORMATION Field Eugene Island Block 357 Well Name EI 367 #1 OCS-G 23884 AFE No. 8965 Permit Depth 16,500' MD 116,500' TVD Water Depth /Elevation (RKB to MSL) 1320' / +- l00' est. Drilling Contractor/ Rig Name / Type Rowan/ Gorilla IV I ILC Jack-up Operating Port or Facility Fourchon, Louisiana Port Distance From Well +-120 miles WELL LOCATION -------------------------------------------------------------------------------- Surface Location 5,610' FSL 6,750' FEL EI 357 -------------------------------------------------------------------------------- X Y -------------------------------------------------------------------------------- Lat Long -------------------------------------------------------------------------------- Bottom Hole Location 5,610' FSL 6,760' FEL EI 367 -------------------------------------------------------------------------------- WELL TYPE: [X] Vertical Well [_]Directional Well -------------------------------------------------------------------------------- KOP NA Inclination NA Azlmuth NA Build Rate NA Drop Rate N/A -------------------------------------------------------------------------------- 2nd Build NA Inclination NA Azlmuth NA Build Rate NA Drop Rate NA -------------------------------------------------------------------------------- GEOLOGICAL OBJECTIVES AND TARGET DESCRIPTION -------------------------------------------------------------------------------- Bul I Sand 14,480' TVD 150'Radius 5,610' FSL 6,750' FEL EI 367 -------------------------------------------------------------------------------- 2 Obj 15,300' TVD 150'Radius 6,610 FSL 8 760' FEL EI 357 --------------------------------------------------------------------------------
PERMITTED CASING PROGRAM ------------------------------------------------------------------------------------------------------ Casing Point Casing Size Casing Wt Casing Grade Casing Conn. RKB MD RKB TVD ------------------------------------------------------------------------------------------------------ Drive Pipe 36" x 1.0" 374 ppf X-56 DDS 720' 720' ------------------------------------------------------------------------------------------------------ Conductor 20" 106.5 ppf J-55 BTC 1,500' 1,500' ------------------------------------------------------------------------------------------------------ Surface 13-3/8" 68 ppf HCN-80 BTC 5,000' 5,000' ------------------------------------------------------------------------------------------------------ Drilling Intermediate 9-5/8" 53.5 ppf HCP-110 LTC 8,000' 8,000' ------------------------------------------------------------------------------------------------------ Drilling Liner 7-5/8" 39 ppf HCP-110 STL 12,000' 12,000' ------------------------------------------------------------------------------------------------------ Production Liner 5" 18 ppf HCP-110 STL 16,500' 16,500' ------------------------------------------------------------------------------------------------------
NEWFIELD EXPLORATION COMPANY PROPOSED GEOLOGICAL EVALUATION PROGRAM ----------------------------------------------------- Conductor Hole None ----------------------------------------------------- 17-1/2" Surface Hole LWD: None E-Log: None ----------------------------------------------------- 12-1/4" Hole LWD: GR/Res E-LOG: None Planned ---------------------------- Mudlogging: 5,000' to Csg Pt ----------------------------------------------------- 8-1/2" Hole LWD: GR/Res E-LOG: None Planned ---------------------------- Mudlogging: 8,000' to Csg Pt ----------------------------------------------------- 6-1/2" Hole LWD: GRI/Res ---------------------------- E-LOG: DIL/LDT/CNL/GR Possible SWC's ----------------------------------------------------- Mudlogging: 12,000' to TD ----------------------------------------------------- NEWFIELD EXPLORATION COMPANY [NEWFIELD LOGO] EUGENE ISLAND BLOCK 357 #1 WELL SUMMARY [ILLEGIBLE TABLE] NEWFIELD EXPLORATIONS EI 357 #1 [GRAPHIC CHART OMITTED]