and not satistaetory tor hg
`recirrdation andior altergfiowsgrvfgrgh
`Present at the time of Imaging
`
`
`
`Cause ho. 000-05843
`
`LOUIS DREYFUS NATURAL GAS
`CORR,
`
`Plaintiff,
`
`vs;
`
`SANIEDAN OIL CORPORATION.
`
`Defendant.
`
`§
`§
`§
`
`§§
`§
`g
`§
`§
`§
`
`IN THE DISTRICT COURT OF
`,IIARRIS COUNTY, TEXAS
`
`FCIIAIEE1F§E¢$AEESED
`'~
`MAY 3 1 m2.
`Harris County teaas
`
`3!
`'
`270TI-I JUDICIAL DISTRIGRIMIU
`
`I’LAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT
`
`Plaintiff Louis Dreyfus Natural Gas Corp. (“Dreyfus") seeks a judgment ordering Samedan
`
`Oil Corporation to turn over all funds, with interest, that it has withheld from payment to
`
`Dreyfus-under the purported authority of its operator's lien—for the purpose of enforcing its
`
`“judgment.“
`
`Introduction
`
`This is the second time that Dreyfus and Samedan have come to this Court with a dispute
`
`over their joint oil and gas operations in the Bowdoin Field in Montana. The first time through
`
`(“Dreyfus 1“),' the parties' dispute concerned whether or not Samedan was precluded by rcsjudr’cata
`
`from challenging the formula used by Dreyfus and its predecessor American Exploration Company
`
`for paying the maintenance or “overhead“ fees that Dreyfus is contractually obligated to pay to
`
`Samedan on several hundred wells in the Bowdoin Field over the life of a contract between the
`
`rt'
`. .
`pa m
`
`REGOHDEH'S MEMORANDUM
`This instrument is at poor quatrty m
`and not satistaetory tor phptograp
`recordalien; andior alterations were
`present at the time at imaging
`
`Cause No. 98-l 7870; Louis qutfiis Natural Gas Carp v. Samedan Oil Corporation; in the
`1
`270th luriieial District Court of Harris County. Texas.
`
`

`

`As this Court may recall, the parties’ overhead fee dispute first became a matter for court
`
`resolution in a case Samedan filed in Colorado in 1996. The Colorado case was decided in
`arbitration, but the arbitrators’ award—ostensibly in Samedan’s favor—failed to give Samedan the
`coercivereliefit hadrequested. At Samedan's insistence, thearbitrators award was adoptedwithout
`change by the Colorado court and became a final, unappealable judgment. Because the parties
`subsequently disagreed over the effect of the Colorado judgment, Dreyfus filed a declaratory
`judgment action in this court to settle the question.
`
`After full briefing and extensive oral argument, this Court held that the doctrine of res
`judicata precluded the parties from raising again in any subsequent litigation certain questions
`concerning the payment of overhead fees that Samedan had previously raised in its complaint in
`Colorado. The questions that this Court found to be foreclosed were disputes that needed to be
`
`resolved in Samedan’s favor to bridge the gap between the limited arbitration award Samedan won
`
`in Colorado and the considerable coercivejudgment that Samedan sought in Colorado. Given the
`breadth ofSamedan’s pleadings in Colorado, this Court’sjudgment effectively prevents Samedan
`from challenging Dreyfus’ overhead fee payment methodology during the remaining term ofthe
`contract bet“ ccn the parties (assuming the methodology does not change).2
`
`As the Court also recalls, Samedan appealed thatjudgment. The Eastland Court ofAppeals
`affirmed theju:lgmcnt with a minor modification. Samedan then petitioned the Supreme Court for
`
`review. The Texas Supreme Court denied Samedan’s petition for review on March 2 l , 2002, and
`
`on May 30, 2002, completely foreclosed any furtheravenue ofappeal by denying Samedan’s motion
`
`——_——_——____
`
`Sce Samedan 0i! Corp. v. Louis Dir-Qtfus Natural Gas Corp, 52 S.W.2d 788, 794
`(Tex.App._—Eastland 2001, pet. denied).
`
`

`

`for rehearing. The upshot ofthe Supreme Court’s refusal to review the Eastland Court's decision
`
`is that Samedan no longer has any basis to assert that it has a judgment against Dreyfus for the
`
`payment of overhead fees.
`
`provides that Dreyfus will have its natural gas purchaser pay the proceeds due to Dreyfus to
`
`Samedan in order to permit Samedan to properly calculate royalties and production taxes and
`
`predecessor American, beginning with Samedan’s purchased ofits interest in the Bowdoin Field in
`
`Octo oer of 1993, began requiring their natural gas purchaser, KN Energy, to pay Samedan.
`
`In
`
`August of 1998, Samedan surreptitiously began withholding funds from cheeks it was paying to
`
`Dreyfus using the “judgment“ it had won in Colorado asjustification. By the time Dreyfus figured
`
`out what Samedan was doing and withdrew its authorization to the gas buyer to pay funds through
`Samedan, Stunedan had managed to retain $1,341,322.92 of Dreyfus’ revenue.J Now that
`
`Samedan‘s solejusti fication for retaining that money is no longer even colorable, Dreyfus asks the
`
`court to order Samedan to return the funds, with interest.
`
`Background Facts
`
`While the issue presented in this motion is not complicated, it may help the Court to put the
`issue in the context of the underlying proceedings. Dreyfus and Samedan, through mesne
`
`conveyances, are now the parties in interest to a 1985 contract referred to as the “Purchase and
`
`————-——_—_
`
`The exhibits to this motion are attached behind lettered tabs. The amount of the funds
`3
`retained by Samedan is taken from a schedule attached to a February 23, 1999 letter sent by Samedan to Louis
`Dreyfus, and contained behind Tab “M."
`
`-3-
`
`

`

`Participation Agreement.“1 Article VII of that agreement governs overhead fees. That article was
`
`amended in October of 1988 by a letter agreement.” The 1985 Purchase and Participation
`
`Agreement, as amended, shall be referred to hereinafter as “the Agreement.”
`
`Samedan brought the 1996 Colorado case that initiated this spat of litigation because the
`
`parties disagreed, first, over whether or not the Agreement continued to apply to the Bowdoin Field
`
`wells al‘ter Samedan purchased its interest in those wells in late 1993, and second, over how the
`
`overhead fee due to Samedan should be calculated in either event. Samedan said the Agreement
`
`continued to apply and that the correct overhead fee rate was the rate established under § 7.2 (b) of
`
`the Agreement (the “1381.“! Rate"). Dreyfus said the Agreement did not continue to apply, and it
`
`paid the subject overhead fees using the rate established under the three federal units in which a vast
`
`majority of the wells are located (the “Unit Agreement Rate").
`
`Samedan filed suit in Colorado to address this dispute, seeking both declaratory and coercive
`
`relief on the saute basic question. Samedan’s complaint asked for the following relief: (i) a
`declaration that the Agreement did continue to govern the overhead fee payment formula; (ii) a
`
`declarttion that the E&W Rate was the proper overhead fee fomtula that Samedan was and is
`
`entitlei to use to bill Dreyfus, as opposed to the Unit Agreement Rate that Dreyfus used to pay
`
`Samedan; (iii) a coercive award ofdamages for Dreyfus’ past failure to pay overhead fees under the
`
` "
`
`Behind Tab “A" is a true and correct copy of selected pages of the 1985 Purchase and
`Participation Agreement. Most of its pages and all of its exhibits have been omitted because they are
`voluminous and not gemtane to this motion.
`
`Behind Tab “[3" is a true and correct copy of the October 28, 1938, letter agreement
`5
`amending the Purchase and Participation Agreement.
`
`.4-
`
`

`

`E&W Rate in the past, and; (iv) a coercive order requiring Dreyfus to pay according to the E&.W
`
`Rate in the future.6
`
`The 1996 Colorado case, as noted in the introduction, culminated in a judgment that
`incorporated verbatim a decision reached by an arbitration panel. The resultingjudgmentwas quite
`limited.
`It held that the Agreement did continue to apply to the Bowdoin Field wells, but the
`judgment did not put a judicial imprimatur or Samedan's billing methodology, nor did it give
`Samcdan any ofthe coercive reliefthat Samcdan had requested.7
`
`At that point in this saga, Dreyfus believed that the parties still needed to resolve many of
`the questions that had been raised in the 1996 Colorado case but were left unanswered.
`Consequently, Dreyfus filed a motion after thejudgment was signed asking the Colorado court to
`
`entera scheduling orderso that the other issues in the case could be decided.“ Satuedan, on the other
`hand, believed that thejudgment rendered all ofthe reliefthat it had requested in its pleadings, so
`it filed a motion that asked the court to enforce thejudgment as final, as well as a briefin opposition
`to Dreyfus‘ motion for a scheduling order.’
`
`——_—————____
`
`h
`
`litigation.
`
`Behind Tab “ " '
`
`C ts a true and correct copy ofSamcdan's complaint in the 1996 Colorado
`
`Because this fact is not disputed and is sim
`is not attaching a copy of the supporting document.
`
`ply background to the question at issue, Dreyfus
`
`Because this fact is not disputed and is simply background to the question at issue, Dreyfus
`is not attaching a copy of the supporting document.
`
`-5-
`
`

`

`Both Samedan’s opposition brief and its motion to enforce argued that the Colorado
`
`judgmentwas linalloand that the Colorado court was withoutjurisdiction to do anything but enforce
`the judgment as rendered. Believing that Samedan’s jurisdictional argument had merit, Dreyfus
`filec. a declaratoryjudgment action in Texas—Dreyfus I—to bring the outstanding issues toacourt that
`
`would havejurisdiction. Dreyfus’s original petition, filed on April 20, 1998, essentially asked this
`Court to declare which party had the correct method for calculating overhead fees.“ As explained
`later, Dreyfus amended that complaint in December of 1998 to seek the very declaration that was
`
`eventually issued by this Court.
`
`On August 14. 1998. four months alter Dreyfus 1 was filed, the Colorado court heard the
`
`parties’ pending motions. At the hearing. the judge agreed with Samedan on the elI'ect of the
`
`judgment on other outstanding issues. He ruled that the judgment was final and that he had no
`
`longerhadjurisdiction to change it. lie did not, however, agree with Samedan‘s assessment that the
`
`judgment gave Samedan a sizable monetaryjudgmcnt.l2
`
`__—______
`
`Because this fact is not disputed and is simply background to the question at issue. Dreyfus
`'0
`is not attaching a copy of the supporting document.
`
`Behind Tab "E" is a true and co
`"
`Judgment And I-‘or Damages in Dreyfus I.
`'1
`
`The Court may recall this quotation front the Coloradojudge who heard the parties motions
`on August 14, I998:
`
`I mean there'
`I really don't.
`"I don't think I can do anything on this case.
`s no money
`judgment here to enforce. All it is, is basically telling you what the-what the a
`rbiters have
`said the agreement is between the two
`parties. It's Declaratory Judgment is all you've got
`and nothing more. "
`
`Behind Tab “F" is a true and correct copy ol'selected pages of the transcript ofthe August 14. 1997, hearing
`held in :he 1996 Colorado case.
`
`-5-
`
`

`

`As a result of the decision at the August hearing—that Samedan did not have a money
`judgment to enforce—Samedan filed the second Colorado suit.” One of the claims for relief, as
`
`less appropriate deductions, to
`Dreyfus. Paragraph 6. l(d) oftheAgreementrecites Samedan‘s predecessor’s agreement to receive
`sales revenue from the Bowdoin Field attributable to Dreyfus' predecessor's interest, and to
`
`shall remit all funds received by [Samedan] on or before the 25'h day ofeach month
`by wire transfer of funds to [Dreyfus] within five (5) days thereafter, .
`. . .”
`
`l3
`
`Behind Tab “G" is a true and correct copy ofl’laintiffs Ori
`ginal Complaint in the case styled
`Sammie-n 0i! Gtrparatr’on v. I.
`Court, City and County of Deom'sDrcgfiis Natural Gas Corp..- Civil Action No. 98-CV-677S, in the District
`nver, Colorado (the 1998 Colorado litigation).
`See Agreement, Tab “A."
`
`1"
`I5
`
`This fact is not disputed.
`
`

`

`against Dreyfus, Samedan had already began doing so by withholding portions of the revenue that
`it was supposed to be paying to Dreyfus." Samedan did not notify Dreyfus that it was doing so. lts
`justification. as discussed later, was the “judgment" that Samedan had won in Colorado.
`
`At about this same time, Dreyfus undertook a review of the gas sales records and gas
`payment records for the Bowdoin Field properties. Due to that review, Dreyfus discovered a sizable
`discrepancy between the gas sold on its behalf and the revenue it received for that gas, and it sent
`a letter dated October 8, 1998, to Samedan demanding an explanation.”r Receiving no response, it
`repeated the demand in a letter dated November 13, 1998.”i
`
`Samedan finally responded by letter dated November 24, 1998.‘9 In the letter, Samedan
`explained that gas volume reallocations and “retroactive adjustmcnts" ofrevenue byKN Energy, the
`buyer of gas from Bowdoin, had straddled Samedan with the complex task of reviewing and
`reconciling its records, including the records pertaining to funds owed to Dreyfus?“ Although the
`numbers were preliminary, the letter referred to an enclosed accounting schedule that indicated “a
`total amount due [Dreyfus] of $1,013,734.08.”I The letter stated that the “aggregate amount will
`
`__.__________
`
`Behind Tab “r1" '
`'6
`rs a true and correct copy of
`Samedan Oil Comoration‘s Second
`Supplemental Answers and Ob'eetions to Plaintiff's Firs Set of
`
`
`
`
`Discover Re uests. See Answer to
`Interrogatory No. 5.
`
`Behind Tab
`‘7
`Dreyfus to Samedan.
`'
`
`“1" is a true and correct copy of a letter dated October 8, [998. from Louis
`
`‘8
`
`Behind Tab “J" is a true and correct copy ofa letter dated November 13. 1998. from Louis
`
`Dreyfus to Samedan.
`
`Behind Tab “K" is a true and correct copy of a letter dated November 24, 1998, from
`1"
`Samedan to Dreyfus.
`
`

`

`...I|
`
`1
`"1
`
`H
`
`_'
`_.
`
`H
`,..,
`
`‘-
`--
`
`..
`
`"'
`
`‘
`
`I!
`
`‘
`
`.
`
`be reduced by $299,232.01” because ofSamedan’s operator‘s lien, indicating that the remainder of
`the amount “due” to Dreyfus would be paid.22 The letter gave no further explanation on why
`Samedan was asserting its lien rights, or how the amount was determined. Dreyfus wrote back on
`
`December 4, 1998, to ask when it would receive the million dollar plus payment referred to in the
`
`earlier letter, and to request an explanation ofthe operator’s lien.”
`Samedan finally came clean in February of 1999. In a letter dated February 23, Samedan
`explained forthe first time that it was holding funds undisputably due to Dreyfus as a means to self-
`
`cnfotee the Arbitration Award:
`
`The remaining $1,044,109.66 which is the $1,605,929.25 less the payment, is being
`withheld to enforce SOC's claim of$1,341,322.92 awarded to SOC in the October
`31, 1997 Arbitration Award in Denver, Colorado.“
`
`Almost three months before Samedan admitted its subterfuge, Dreyfus had amended its
`declaratoryjudgmentaction, abandoningthe notion that there were other issues to resolve in favor
`ofthe idea that resjudr'cam prevented Samedan from obtaining any reliefit had already sought but
`failed to obtain.” Dreyfus later sought a summaryjudgment on that claim, which this Court granted.
`
`Samedan appealed, thejudgment was modified by the Eastland Court to affirm that only claims that
`could have been brought in the_formcrColorado case were barred, and the Texas Supreme Courthas
`
`now denied a petition to review the Eastland Court‘s decision.
`
`
`
`:2
`
`Id. (See the third full 1| on the first page).
`
`2’
`
`to Samedan.
`
`Behind Tab “L" is a true and correct copy ofa letter dated December 4, 1998, from Dreyfus
`
`Behind Tab “M" is a true and correct copy ofa letter dated February 23, 1999, from John
`2"
`chelka of Samedan to Mr. Arlo Van Denovcr of Louis Dreyfus.
`
`Behind Tab “N" is a true and correct copy of Plaintiff's First Amended Petition For
`2’
`Declaratory Judgment And For Damages in Dreyfus 1’.
`
`-9-
`
`

`

`Arguments and Authorities
`
`The dispute addressed by this motion is simple. Samedan admits that it has withheld sums
`
`operator’s lien to collect on ajudgment in its favor. Ifthis truth was not clear from Samedan’s other
`
`correspondence, Samedan made the point explicitly in a January 27, 1999, letter to KN in which it
`
`explained that it was invoking its “operator's lien" due to the “Final Judgment entered March 12,
`1998, by the District Court, City and County of Denver, State of Colorado, Civil No. 96-CV-
`0029."26
`
`Ofeourse, the judgment in Samedan's favor does not give it any monetary recovery. With
`
`no money owed, there is no debt.
`
`it is elementary that to enforce a lien there must be a debt owed
`
`to which the lien may attach. Perkins v. Sterne, 23 Tex. 561 (1859); Trane Company v. li’ortliam,
`428 S.W.2d all? (Tex.Civ.App.-Houston [lst Dist] 1968, writ ret‘d n.r.e.) (“it is fundamental that
`
`without a debt there can be no lien.").21
`
`Samedan claims ajudgment lien but the judgment in question does not require Dreyfus to
`pay anything to Samedan. The Colorado court that issued thejudgment saw that, this Court saw
`
`that, and now two Texas appellate courts have agreed. Dreyfus owes no debt to Samcdan; therefore,
`Samcdan had no right to take Dreyfus' funds and has no right to continue to hold these funds.
`
`—__————____
`
`26
`
`Behind Tab "0" is a true and correct copy ofa letter dated January 27, 1999. from Orville
`Walraven of Sanledan to Steve H. 07awa of KN.
`
`To the extent thattheremay be a choiceoflaw in this matter,
`27
`the law in Colorado is the same.
`See. c.g.. Bishop v. Moore, 137 Colo. 263, 323 P.2d 897 (Colo. 1958) (‘
`‘A prime requisite to the establishment
`of a valid lien is that an indebtedness exists in favor of the clai
`mant for labor or materials“).
`
`-[0-
`
`

`

`'1
`
`.-1
`
`"1
`
`"
`_
`
`_
`
`._
`
`-.
`
`"I
`
`Prayer
`
`Dreyfus asks thIs court to order Santedan to pay to Dreyfus (l) the pnneIpal amount
`wIthheld uhteh Santedan has admitted to be $1,341,322.92, plus (2) any additional funds thatmay
`butecomeintoSamedan'spossession attributabletoDreyfus’ sales ofnaturalgas, orotherwise,that
`has been retained by Samedan, plus (3) interest at the maximum legal rate.
`Respectfully submitted,
`FARNSWORTH & vonBERG
`
`'
`
`
`
`'] Brooke Famsworth
`State Bar No. 06828000
`Bennett S. Bartlett
`State Bar No. 01842440
`333 North Sam Houston Parkway; Suite 300
`Houston, Texas 77060
`(281) 931-8902
`(28 l) 931-6032 facsimile
`
`Arlo Van Dcnover
`State Bar No. 20440500
`[415 Louisiana, Suite 2700
`Houston, Texas 77002
`(713) 756-6369
`(713) 756-6022 facsimile
`
`COUNSEL FOR DOMINION OKLAHOMA TEXAS
`EXPLORATION 8; PRODUCTION, INC.
`
`-11-
`
`

`

`l__-
`
`CERTIFICATE OF SERVICE
`———.______
`
`The undersigned hereby certifies that a true and correct copy of the above and foregoing
`motion was served as noted below to the b
`elow listed counsel of record this 315f‘day of
`4525‘. 2002.
`Lawrence R. Labanowski
`
`facsimile: 713-622-0700 (without exhibits)
`and by regular mail with the exhibits
`
`3939 Essex, Suite 600
`Houston, Texas 77027
`
`Alan B. Cameron
`DANIEL, COKER.HOR1‘ON & BELL
`1006 Van Buren Ave.
`P. 0. Box 1396
`Oxford. Mississippi 38655-1396
`
`Albert D. Iioppc. Esq.
`NOBLE Al-‘FIIJATES. INC.
`350 Glenborough. Suite 100
`Houston. Texas 77067
`
`regular mail
`
`regular mail
`
`
`
`F HINDI.“
`
`\II MINM FEDS-Lulu! Ilium-IMPMJ'I'II “5:“!th lnl'IIIMIluI i kill ’.'II I. lit-Ila.Ln: Hut Drum I'll
`
`

`

`$.13. W3.
`
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`
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`
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`
`PURCHASE 8: PARTICIPATION AGREEMENT
`
`
`
`McMoRan OIL and GAS Co.
`
`and
`'
`' BRITOIL VENTURES INC.
`
`MARCH 20. "I!"
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`contemplated by this Agreement and not already taken into
`account in adjusting the Purchase Price.
`Such payment shall
`include interest thereon at the rate of Eleven Percent
`(11%) per
`
`V. CONTRACT OPERATING AGREEMENTK
`Except as otherwise provided in this Agreement. all op-
`5.1
`crations on each Leaseincluded in the Subject Properties.
`tcr jointly acquired by.the,Partiee. ehall _be carried out iii-accordance
`with the Fjii‘tiWa'iéfl's “bl" t‘fi'e' Ipoh't-i-Hé’tf'OpéE-atifl'gi'fi’g’i‘é'emeti‘t’f'fi't‘th’thed
`hereto as Eithibit '"Hl'. “with".éharé'ea an'd-"ci-editii' to"the"joint account
`to “be made in accordance--thérewith.
`'-A particular'Tease ctr-Leases
`
`VI. ACCOUNTING SERVICES
`.
`'_"'—'—'—'—-—-—
`_
`Notwithstanding the provisions of the Contract Operating-
`'
`5.1.
`the Plant Operating Agreement or any Third Party Op-
`Agrcement.
`erating- Agreement. it is agreed that in connection with the interests
`
`5
`
`.
`
`
`
`

`

`McMoRan will make such arrangements as will provide
`(a)
`that Joint Interest Billings and Third Party Billings attributed to
`the BVI interest in the Subject Properties are directed to. and
`received by McMoRan on behalf of BVl, and McMoRan will settle
`
`in accordance - with
`cash outlay for the succeeding month, all
`Paragraph 3 of Section I of the Accounting Procedure Exhibit
`"C" to the Contract Operating Agreement. McMoRan will invoice'
`BVI
`for costs not previously billed in accordance with the
`guidelines of
`the Accounting Procedure Exhibit
`“C"
`to the
`Contract Operating Agreement.
`
`McMoRan will make such arrangements as will provide
`(b)
`that the EV! share of oil and gas production from the Subject.
`Preperties is marketed and sold on behalf ci' 3‘” and that. the
`proceeds therefor are paid 'to. and received by, B'Vl
`in accor- '
`dance with subparagraph 8.1(d) hereof
`("Revenue Service").
`Such production will be sold on the same basis as McMoltan sells
`its production; however, McMoRan will not purchase BVl's pro-
`duction for McMoRan's account or sell such production to any
`Affiliate of incidental without first obtaining B‘V'l's consent. Any
`contract for such purchase- or any such purchase- or sale by
`Mendelian shall be subject always‘i-to‘the21i'glttl'ci' B-Vli‘ltd' exercise
`at any time its right to take in kind, or s'eparately- dispose of.
`its share of all oil not previously delivered to,"a purchaser. Any
`contract for such purchase.or. any purchase or sale; by McMol'tan
`of BVl's share of oil shall be only for such'reasonable periods-of
`time as are consistent with the minimum needs of the industry
`under the particular circumstances, but in no event for a period
`in excess of one (1) year.
`In all cases. 3'?! shall be included
`as a party to any new gas sales contract, a signatory party
`thereto, and no gas sales contract covering BVl's share of gas
`, production shall" be entered into without BVl's consent.
`'Subject
`to the terms of applicable gas sales contracts, BVi shall always.
`have the right to exercise at any time its right to take in kind.
`or separately dispose of. its share of all gas production. or not
`to market its share of gas production.
`
`amounts payable by BVl. MeMoRan shall furnish such computer
`tape or disc to B?! for its use. The Parties recognize that the
`revenue accounting information furnished by McMoRan will cover
`
`-21..
`
`

`

`only production proceeds received by McMoRan on behalf of B?!
`from jointly aimed properties which is jointly marketed at
`the
`same sales price.
`
`interests in the Subjectf froperties. Within sixty (63,) gays
`.011.
`.
`”.9791? .keesnwfi-
`..'*te=_r.z=.a ac t teeee x: mm
`svfifimnfi'meflz sh_$-._dfrect :eacl%‘gt?tcha3€n;3xs§, designated, by
`3V1) of.._B'V1's,'share,oi‘ 'oiI.'and gasnprqduction frpqgthe Subject
`Properties
`(9;.
`ii‘ BVI elects, “such other party from
`-McMoRan is receiving-
`such production proceeds)
`to pay _ail
`revenues attributable to BVI‘
`
`For this purpose, 3?! will develop such systems
`be provided.
`as are necessary for' the acceptance by the EV! computer system
`
`development of such systems by B'VI. The data and information
`to be made avails
`data and information which McMoRan has for its own use in the
`conduct of its own accounting functions relating to the Subject
`
`d
`
`.
`
`

`

`much in advance as possible. of any anticipated change in
`McMoRan'a chart of accounts or c
`anywise affect or change .- compatibility with BVI'a computer
`system.
`In the event of any-such change. McMoRan will provide
`RV!
`and
`its
`consultants 'with
`information
`and
`reasonably necessary to enable any change of BVI's
`system
`which may be required.
`
`e for its own undertaking.
`‘
`McMoRan shall furnish the aforesaid computer tape or disc and
`other accounting information for
`the Billing- Service and the
`Revenue Service in respect of each
`
`ereof until such accounting-
`.
`.
`.
`..
`12355.ni59ififitggggégfilrfimied 'ih accsog ance with
`n
`I
`'95: “7.3
`5
`
`other person. firm or corporation
`of MeMoRan being first had and
`6.3
`McMoRan ab
`
`, either in whole or in part.
`
`to any;
`
`————.—-—-————I—-—
`
`4
`
`

`

`vn'. OVERHEAD res
`——‘—__
`Quarterly Overhead Fee:
`
`7. 1
`
`to reimburse McMoRan for B'Vl's proportionate I
`In order
`
`share of the costs and expenses incurred by McMoRan attributable to
`the management.
`administration,
`supervision.
`and office
`services
`related to the operation of the Subject Properties. and including the
`
`Overhead Fee ("Quarterly Overhead Fee“). payable in advance on a.
`monthly basis as provided for herein.
`
`7.2
`
`Basic Principles:
`
`
`
`.ss follows:
`
`
`The Parties hereto agree upon the basic principles set forth _
`
`
`McMoRan, as Operator, shall be entitled to recover and
`(a)
`receive payment
`in the form of the Quarterly Overhead Fees
`provided for hereby. for BVI's proportionate share of McMoRan's
`. general and administrative overhead expenses attributable to the
`Subject Properties even though such expenses may be over and
`_ 2.2 abovctmm Menacotmthpsse 3m:£0u0¢fifigys wed-.md
`.provided-ibrzunder the provisions ointherl’lant Operating Agree-
`" '
`--;-:..ment. .ths ' Contracth Onerating;IAg¢-cement--and- -Thir.d...Par.ty Op-
`
`t0'_ operate.
`shall endeavor
`as Operator.
`McMoRan.
`(b)
`manage.and administer the Subject Properties in such a way as
`to minimize the cost but in a manner consistent with the policies,
`procedures
`and methods
`exercised
`by
`reasonably prudent
`operators in the oil industry similar to McMoRan.
`- (c)
`The Parties agree that it is intended that as a result
`of the joint ownership and operation of. the Subject Properties;
`neither Party shall realize any profit at the expense of the other
`Party.
`'
`.
`
`7.3
`
`Overhead Fee for credenti- Year 1985:
`—___-—————_—."—
`The Quarterly Overhead Fee for the period from the Effec-
`tive Date through December 31. 1985.
`shall be the sum ot‘ Three
`Hundred Eighty One Thousand. Two Hundred Fifty and Noiloo Dollars
`(11.3.)
`($381,250.00) per calendar quarter. At Closing. BVI shall
`'malte payment to McMoRan for the first and second calendar quarters
`
`
`
`
`-24-
`
`'
`
`

`

`H
`
`q
`
`q
`
`“'1
`
`..
`
`‘
`
`II].
`
`..
`
`
`I‘
`
`NEWS my CGIPANY
`
`EHW
`
`R. M. Dams, President
`
`HMS GAS WON
`
`By: 51: 3f, £ZW
`R. H. Dams, President
`
`'
`
`'
`
`Br=__-==§—-__-=§-—;\§B~m:
`
`.
`
`Gram: Joh'asto
`Asst. Secretary
`
`'
`
`By: L- /&k$~
`
`
`mmlm P. Mariam
`Director
`
`

`

`va— " '
`-
`.
`\
`
`--—..._.... -.
`
`- _ -————_..._
`
`-'Jt:tober 23,- x'eee
`
`MoMoRan Oil 3. Gas Co.
`Managing General Fennel hf
`TIP Operating Company. A Unused Pam-Isms
`Lll D. lnowu. Jn.
`SENIOR IIICUTWI VICI PIIIIDIN'I'
`LANG. tlflAL ARI ADMINIITIATION
`e
`
`A.
`
`Ninian Oil Company
`4500 Republicaank Center
`Houston. Texas 11002
`
`Attention: Hr. niliiam G. ?attillo
`Vice President - Land
`
`Gentlemen:
`
`executed by Ninian Oil Company '(lormeriy Britoil
`This letter. when
`Ventures. Inc.) ("Minion") shall constitute an amendment to that certain
`Purchase and Participation Agreement dated March 20. 1935. executed by
`and between Hcfloflan Oil A Gas Co.
`(“HcHoRan') and Britoil Ventures. Inc.
`[the 'Agreement").
`
`transferred and
`that HcHoRan heretotore has
`recognise
`The parties
`conveyed all of its interests in the Subject Properties to EH? Operating
`Company. a Limited Partnership (“FRED“). a! which Hcflokan
`is
`the
`
`Managing General Partner.
`
`the
`the procedures established by
`to revise
`The parties desire
`provisions of Article VII of the Agreement relating to the Overhead Fee.
`'For and in consideration 0! the premises and the mutual promises
`and
`covenants contained herein.
`the parties do hereby agree as follows:
`
`I.
`
`2.
`
`The original provisions of Article VII of the Agreement shall be.
`and the
`same are. hereby deleted in their entirety.
`effective
`January 1. 1983.
`
`In lieu of the original provisions of Article VII of the Agreement.
`effective January 1. 1988.
`there shall be inserted the following.
`
`Illl Porous smr.
`
`Pq, lee sows.
`
`:7.
`Ile- cuss-Is. Lula-ans moo
`
`lion all-I'll!
`
`1w: llo-fll-IIII
`
`AEC 000408
`Tween flotilla-ms
`
`n
`
`I-I
`
`_
`
`.1
`
`H
`
`q
`
`_.
`
`-II
`
`I“
`
`‘
`
`‘
`
`I
`
`

`

`----——.- ------ . ———.
`
`. Ninian on. Coupahy
`October 2:. me
`Page 2
`
`-
`
`.
`
`the provisions oi' Article vu: of
`so that effective January 1. 1938.
`the Agreement shall be. and the salne shall read. as tollews:
`
`'-
`
`"vtt .
`
`Overhead Pee
`
`'
`
`1988.
`for the period January 1.
`1.1 The Honthly Overhead Fee
`through Hatch 11. 1939. shall be the sum of. Thirty Eight Thousand.
`Nine Hundred sixty Eight and Nelle!) Dollars ($18,953.05). such sum
`to be due and payable to FHPO by Ninian on or betore the first
`day
`of each calendar month.
`
`.
`
`.
`
`the Honthiy
`1989.
`subsequent to March 31,
`7.2 For all periods
`Overhead Fee shall be determined annually, ettective April 1. 1989.
`and each April 1st thereatter. and shall be based on the following:
`
`(a)
`
`in the
`and wells included
`to properties
`flith respect
`Subject Properties where parties other
`than Ninian and
`FHPO are involved and an Operating Agreement“) has been.
`or is hereatter.
`entered into.
`the negotiated Overhead
`Rate. as provided for in such Operating Agreementlsl
`shall apply and be applicable.
`
`to
`the parties, and with respect
`“3) Otherwise. as between
`properties and wells included in the Subj'ect Properties
`where Ninian and FHPO are
`the only parties.
`the Average
`Drilling and Producing Well Rates as reflected in Ernst i
`flhinney's "was Survey at Combined Fixed Rate Overhead
`Charges for Oil and Gas Producers."
`shall be applicable
`according to well depth and geographic location at
`each
`such property and well for
`the year commencing April
`1.
`1989 and ending March 31. 1990.
`
`(c) For each 12-month period thereafter. the well rates shall
`be adjusted annually on the basis at the provisions of
`Paragraph 1.A.l3) of Exhibit
`"C“ to the Joint Operating
`Agreement attached to the Operating Agreement as Exhibit
`I'l-ll".
`
`1.3 The Monthly Overhead Fees provided for hereby shall be in lieu
`of. and a substitute tor.
`the total
`sums which would have been
`incurred or paid for by Ninian as administrative overhead charges
`under the provisions of (a)
`the Contract Operating Agreement,
`(b)
`the Pleni- Or-r'eg IgPI-menl'.
`and
`tr)
`nnv other Operating
`Agreements in which FHPO is the Operator. covering and applying to
`the joint interest at EHPO and Hinian in the Subject Properties.“
`
`3.
`
`The Original provisions contained on Page la of Exhibit 'c' to the
`Joint Operating Agreement.
`attached
`as Exhibit
`"H"
`to
`the
`Agreement. are hereby deleted in their entirety.
`
`AEC 000409
`
`

`

`e—ge—o
`
`'-
`
`.-s.e m.“—
`
`q
`
`I
`
`_-a
`
`flinian oil Col-many
`October 28. was
`Page 3
`
`_- ——-E'-FI'I|—lfr—'
`
`4.
`
`5.
`
`in
`FHPO has sold its interests
`The parties further recognize that
`certain of the producing oil
`and gas properties which
`initially
`"were included in the Subject
`Properties.
`it is agreed that
`the
`provisions of
`this Agreement
`shall
`apply only to those of
`the
`Subject Properties in which both FHPO and Ninian continue to own
`leasehold interests.
`
`icnted on the
`The Monthly Overhead Fees provided for herein are pred
`E
`E “ESE;
`assumption that Ninian shall continue
`to he the sole res onsible at
`Ninian
`and payee insofar as the
`records of Film are concerne .
`shall be responsible for any further assignment or breakdown of the
`interests and/or payments.
`
`If the aboue and foregoing correctly evidences the agreement between us.
`please sign the
`enclosed copy of this
`letter at
`the space
`indicated
`below and return same to this office on or before December 1
`
`1988. y
`
`Very truly yours.
`
`HIP Operating Company
`a Limited Partnership
`3y: McHoRan pill. i Gas Co.
`Its Managing Gene'rai Partner
`I
`
`By:
`
`"
`Ollie-D. Brown.
`
`r.
`
`L.
`
`ODB.Jr.:ds
`
`The above and foregoing is hereby accepted and agreed to this
`of November. 1963.
`
`28th day
`
`NINIAN OIL COMPANY
`
`ILG. Psttiiie
`Vice Pr-sident-Lnnd
`
`AEC 0004 l 0
`
`

`

`_
`
`_
`
`_
`
`.
`
`'
`
`_'
`
`.
`
`:_-'.|_-'--{-rL-LII.J.'1|
`\X...CgfllfiFfifio
`
`,-
`
`-'.
`
`DISTRICT COURT, CITY AND COUNTY OF DENVER, STATECg.EQLORADO: 3 i.
`‘gb L“
`U U a 9
`J
`r'II ‘1'
`
`
`Division No.
`
`Case No.
`
`"
`
`
`
`. comma:
`
`
`' SAMEDAN OIL CORPORATION,
`
`Plaintiff,
`
`V.-
`
`AMERICAN EXPLORATION COMPANY,
`
`I Defendant.
`
`
`COMES NOW Plaintiff, Samedan oil Corporation ("Samedan") , by
`and through its counsel of record, Poulson, Odell E Peterson, LDC,
`
`'and £11er its" Complaint against--Defendant,-American-Exploration
`
`Company ("American") , as follows:
`
`PARTIES
`
`Plaintiff, Samedan, is 'a Delaware corporation qualified
`1.
`to do and doing business in the State of Colorado with offices
`located- at 1050 Seventeenth Street, Suite 1100, Denver, Colorado
`80265 I
`
`is a Delaware corporation whose
`Defendant... American,
`2.
`address is