amendment unit agreement for outer ...participating areas "a" and "et that comprise...

AMENDMENT

UNIT AGREEMENT FOR OUTER CONTINENTAL SHELF EXPLORATION,

DEVELOPMENT, AND PRODUCTION OPERATIONS ON THE

ALAMINOS CANYON BLOCK 859 UNIT

ALAMINOS CANYON AREA

OFFSHORE TEXAS o ^ j WJr: 4 3 tei/

UNIT AGREEMENT NO. 754307006

This Amendment ("Amendment") to the Alaminos Canyon Block 859 Unit Agreement,

Contract No. 754307006 (the "AC 859 Unit Agreement") is made as of the Amendment Effective

Date, by Shell Offshore Inc. ("SOI") as Unit Operator under the AC 859 Unit Agreement, along

with the undersigned Working Interest Owners.

WHEREAS, SOI entered into the AC 859 Unit Agreement and was designated the Unit

Operator for unit operations within the Unit Area effective November 1, 2006; and

WHEREAS, effective May 1, 2011, the Minerals Management Service approved the Initial

Participating Area "A" within the Unit Area, containing 1,890 acres in Alaminos Canyon Block

815, Lease OCS-G 19409, for that part of the Unit Area reasonably proven to be capable of

producing in Paying Quantities from the FR12/FR14 Reservoir; and

WHEREAS, effective October 1, 2011, the Bureau of Safety and Environmental

Enforcement ("BSEE") approved Participating Area "B" within the Unit Area, containing 2,160

acres (900 acres in Alaminos Canyon Block 815, OCS-G 19409; and 1,260 acres in Alaminos

Canyon Block 859, OCS-G 20871), for that part of the Unit Area reasonably proven to be capable

of producing in Paying Quantities from the WM12 Reservoir; and

WHEREAS, BSEE approved revised Exhibits "A" and "B" to the AC 859 Unit Agreement

effective December 1, 2015, to reflect the change in the Unit Area resulting from the

implementation of the contraction provision contained in Article XIII (Automatic Adjustment of

Unit Area) of the AC 859 Unit Agreement; and

WHEREAS, pursuant to Article X (Revision of Unit Area) of the AC 859 Unit Agreement,

the Unit Area may be further revised to include additional lands within the common geologic

structure that are necessary for unit operations or capable of producing oil and'or gas in Paying

Quantities, whenever such action appears proper.

NOW, THEREFORE, for good and valuable consideration of the mutual promises

exchanged herein, the undersigned, being the Unit Operator and the Working Interest Owners in

the unitized leases, amend the AC 859 Unit Agreement as follows:

1. The second and third "WHEREAS" clauses in the recitals are hereby amended, as follows:

WHEREAS, pursuant to applicable Regulations, 30 CFR 250.1300, et seq.. it is deemed to

be in the interest of promoting and expediting exploration and development, or prevention

of waste, conservation, or the protection of correlative rights, including Federal royalty

interests, to unitize the oil and gas interest in the Unit Area; and

WHEREAS, it is deemed to be necessary in the interest of promoting and expediting

exploration and development, or prevention of waste, conservation, or the protection of

correlative rights, including Federal royalty interests, to conduct exploration, development,

and production operations in the Unit Area as though the area were subject to a single

lease;

2. Article I (Definitions) is hereby amended to include the following definitions:

AMENDMENT EFFECTIVE DATE is October 1, 2017.

PRE-AMENDMENT UNIT AREA means the portions of Alaminos Canyon Blocks 815

and 859, Leases OCS-G 19409 and OCS-G 20871, respectively, that remained in the unit

after the unit contracted effective December 1, 2015, shown in blue on the attached Exhibit

"A" for illustration purposes but specifically described below:

• The following portions of Alaminos Canyon Block 815, OCS-G19409:

SE/4SE/4NW/4; SW/4SW/4NE/4; E/2SW/4NE/4; SE/4NE/4; NE/4SW/4;

SE/4SW/4; E/2SW/4SW/4; SW/4SW/4SW/4; NW/4SE/4; NW/4NE/4SE/4; and

W/2SW/4SE/4; and

• The following portions of Alaminos Canyon Block 859, OCS-G 20871:

N/2NW/4; SW/4NW/4; NW/4SE/4NW/4; and NW/4NW/4SW/4

EXPANDED UNIT AREA means the lands added to the Unit Area through this

Amendment, consisting of the Blocks, or portions thereof, shown in red on the attached

Exhibit "A" for illustration purposes but specifically described below:

• The S/2 of Alaminos Canyon Block 684, OCS-G 31194; and

• Alaminos Canyon Block 728, OCS-G 31195; and

• Alaminos Canyon Block 771, OCS-G 32988; and

• Alaminos Canyon Block 772, OCS-G 35153.

3. Article III (Unit Area and Exhibits) is hereby amended as follows:

Section 3.2 is deleted in its entirety and replaced with the following:

3.2 Exhibit "A", which is attached to this Agreement and made a part hereof, is a plat

identifying the Pre-Amendment Unit Area and the Expanded Unit Area and

component Blocks and leases, which collectively comprise the Unit Area.

4. Article IX (Plan of Operation) is deleted in its entirety and replaced with the following:

Article IX (Unit Area Plan of Operation)

9.1 Prior to the occurrence of any adjustment of the Unit Area pursuant to the provisions

of Article XIII, the terms and conditions of Sections 9.2,9.3 and 9.4 below shall apply

separately and individually to each of (i) the Pre-Amendment Unit Area, and (ii) the

Expanded Unit Area. During this period, the term "Unit Area" as used in Sections

9.2 and 9.3 below will apply separately and individually to (i) the Pre-Amendment

Unit Area, and (ii) the Expanded Unit Area. Subsequent to any adjustment of the

Unit Area pursuant to the provisions of Article XIII, the term "Unit Area", subject to

the provisions of Article X and Article XVII , will refer collectively to the existing

Participating Areas "A" and "ET that comprise the Pre-Amendment Unit Area, and

any new Participating Area(s) derived from the Expanded Unit Area.

9.2 The Unit Operator shall submit a plan of operation for the Unit Area which describes

scheduled operations for the Participating Area(s) and the non-Participating Areas,

which is consistent with the requirements for Exploration Plans or Development

Operations Coordination Documents as required by the Outer Continental Shelf

Lands Act, Subpart B of 30 CFR Parts 250 and 550, and other sections of applicable

Regulations. All operations within the Unit Area shall be conducted in accordance

with an approved plan.

9.3 When no oil or gas is being produced in Paying Quantities from the Unit Area, and

when all or part of the Unit Area is subject to one or more leases beyond the primary

term, a continuous drilling or well-reworking program shall be maintained with

lapses of no more than a 1-year period per lapse between such operations unless a

suspension of production or other operation has been ordered or approved by the

Regional Supervisor or unless extended pursuant to 30 CFR 250.180(e). Plans may

call for a cessation of drilling operations for a reasonable period of time after the

discovery and delineation of a Reservoir when such a pause in drilling activities is

warranted to permit the design, fabrication, erection, and commissioning of platforms

and other installations needed for development and production operations, provided

a suspension of production or other operation has been ordered or approved by the

Regional Supervisor.

9.4 An acceptable initial plan of operation for the Expanded Unit Area shall be submitted

at the time this Amendment is filed for the Regional Supervisor's approval. Each plan

of operation for the Unit Area shall expire on the date specified in the plan. At least

sixty (60) days before the expiration of any plan, unless the Regional Supervisor

grants an extension for good cause, the Unit Operator shall file an acceptable

subsequent plan of operation for approval in accordance with this Article IX. The

initial and subsequent plans for the Expanded Unit Area should address, but not be

limited to, appraisal and pre-development activities, and schedules for: contracting

Pre-FEED and FEED studies, design and build contracts for facilities, development

infrastructure, the commencement of the fabrication of a new host facility and/or

modification of existing facilities, and the commencement of production from the

Expanded Unit Area. After production commences from the Expanded Unit Area, the

plans should include drilling of wells for developing and producing the entire

Expanded Unit Area.

5. Article X (Revision of Unit Area) is deleted in its entirety and replaced with the

following:

Article X (Revision of Unit .Area)

10.1 The Unit Area may be further revised by additions of areas within the common

geologic structure that are necessary for unit operations or are capable of producing

oil and/or gas in Paying Quantities, whenever such action appears proper for

prevention of waste, conservation of the natural resources, or protection of correlative

rights including Federal royalty interests, pursuant to 30 CFR 250.205 and Part 250

Subpart M. Additionally, the Unit Area may be further revised by the contraction of

the Unit Area when such contraction is necessary or advisable to conform with the

purposes of this Agreement. Such additions or contractions shall be effected by the

Unit Operator on its own motion after preliminary concurrence of the Regional

Supervisor or on demand of the Regional Supervisor. The effective date of any

expansion or contraction of the Unit Area shall be the first of the month following

the date of approval of the expansion or contraction by the Regional Supervisor

provided, however, that a more appropriate effective date may be used if justified by

the Unit Operator and approved by the Regional Supervisor.

10.2 When the revision to the Unit Area occurs after production has commenced and

involves an expansion of an existing Participating Area(s), or the designation of a

new Participating Area, whether requested by the Unit Operator or on demand of the

Regional Supervisor, the Participating Area(s) must be amended consistent with

Section 11.2 of this Agreement.

10.3 Except as provided in Section 13.2, the Unit Area shall not be reduced on account of

the depletion ofthe Unitized Substances for which it was established, but the Unit

Area established under the provisions of this Article X shall tenninate automatically

whenever operations are pennanently abandoned in the unit.

10.4 Effective November 1, 2017, until contraction and unification pursuant to Article

XIII, the Pre-Amendment Unit Area and the Expanded Unit Area are separately and

independently subject to automatic termination when operations are not being

conducted in the relevant area in accordance with Article IX of this Agreement, or a

suspension has not been ordered or approved by the Regional Supervisor for the

relevant area. If either the Pre-Amendment Unit Area or the Expanded Unit Area

terminate automatically, the remaining area will continue to operate under the

provisions of this Agreement.

10.5 If a well is drilled into the stratigraphic equivalent of WM 25 or below, as seen

between the depths of 17,796' SS and 21,823' SS in the Alaminos Canyon Block

772, Well No. 1 ("OCS-G 35153, Well No. 1"), from or into any portion of AC Blocks

815 or 859 that is not included within the Pre-Amendment Unit Area, the aliquot(s)

that contains the surface location, well path, and bottom hole location of the well will

be added into the Expanded Unit Area automatically upon the spudding of the well.

The drilling of such well, including all immediate (without rig departure) re-spud,

bypass, and sidetrack operations required, if any, to adequately test the WM 25 or

below, will be deemed operations with respect to the Expanded Unit Area for

purposes of 30 CFR 250.180 and Article XVII. Additional drilling, including re

entry sidetracks from the aforementioned well, within either AC Blocks 815 or 859

will not be deemed operations with respect to the Expanded Unit Area for purposes

of 30 CFR 250.180 and Article XVII, unless approved by the Regional Supervisor.

In the event a proposed additional well is approved by the Regional Supervisor to be

deemed operations with respect to the Expanded Unit Area for the purposes of 30

CFR 250.180 and Article XVII, the aliquot(s) that contain the surface location, well

path and bottom hole location of the well will be added into the Expanded Unit Area

automatically upon the spudding of the well. Only aliquots that are outside ofthe

Pre-Amendment Unit Area in either AC Blocks 815 or 859 will be added to the

Expanded Unit Area based on the drilling in this Section 10.5. If a well is drilled to

the WM 25 or below under the provisions of this Section 10.5, then the provisions of

Section 17.2 (g) will no longer apply.

10.6 If a well drilled pursuant to Section 10.5 fails to penetrate into the stratigraphic

equivalent of the WM 25 or below, the Unit Operator must present information and

data sufficient to demonstrate to the Regional Supervisor that all reasonable means

were utilized to reach the WM 25 or below and that the addition of an aliquot should

be considered for inclusion into the Expanded Unit Area pursuant to Section 10.5.

10.7 To utilize Section 10.5 for purposes of continuing the lease terms of all lands in the

Expanded Unit Area, the Unit Operator must present the relevant well infomiation to

BSEE prior to spudding the well and after the Application for Permit to Drill (APD)

is accepted into review by the relevant BSEE office. The Unit Operator must present

to BSEE sufficient information showing that there is a demonstrated and objective

intent to test the stratigraphic equivalent of WM 25 or below as seen in OCS-G 35153,

Well No. 1. Information submitted should include, but not be limited to, all the

information submitted with the APD, additional geological and geophysics

information, and interpreted data.

6. Article XI (Participating Area) is amended as follows:

Section 11.1 is deleted in its entirety and replaced with the following:

11.1 Prior to commencement of production of Unitized Substances from the Expanded Unit

Area, or as soon thereafter as required by the Regional Supervisor, the Unit Operator

shall submit to the Regional Supervisor a revised Exhibit "C," expanded to include a

schedule by lease of (a) all land from the Expanded Unit Area reasonably proven to

be productive of Unitized Substances in Paying Quantities by the drilling and

completion of producible wells, geological and geophysical information, and'or

engineering data, and (b) the percentage of Unitized Substances to be allocated, as

provided in Article XII, to each relevant lease from the Expanded Unit Area, and from

additional land reasonably proven to be productive within Alaminos Canyon Blocks

815 and 859. This Exhibit C will reflect both the existing approved or current

Participating Areas of the Pre-Amendment Unit Area as well as the new Participating

Area(s) ofthe Expanded Unit Area, though production from each area (i.e., the Pre-

Amendment Unit Area and Expanded Unit Area) will be allocated by the revision

and approval of the established separate Participating Areas or the establishment and

approval of new separate Participating Area(s). Upon approval of the revised Exhibit

"C" by the Regional Supervisor, any Participating Area(s) covering the Expanded

Unit Area shall constitute the initial Participating Area of the Expanded Unit .Area,

effective as of the date such production commences. In order to protect correlative

rights, including Federal royalty interests, and pursuant to 30 CFR 250.205 and Part

250 Subpart M, where a producing or injection well could intersect or drain an

adjacent property, the Regional Supervisor may, in his discretion, require such lands

to be included in the Participating Area, including lands with higher royalty rate leases

or leases with a different royalty suspension volume (RSV). The Participating Area

shall be described in parcels no smaller than 1/4 x 1/4 x 1/4 blocks.

7. Article XIII (Automatic Adjustment of Unit Area) is deleted in its entirety and replaced

with the following:

Article XIII (Automatic Adjustment of Unit Area)

13.1 Any lease(s) in the Expanded Unit Area not entitled to receive an allocation of unit

production two years after the commencement of production from the Expanded Unit

Area shall be eliminated automatically from the Unit Area. Effective the date of such

contraction of the Unit Area, and subject to the provisions of Articles X and XVII,

the Pre-Amendment Unit Area and any new Participating Area(s) derived from the

Expanded Unit Area shall collectively constitute the revised Unit Area.

13.2 If no production, drilling, well reworking or other operations pursuant to Section 9.3

are being conducted in one of the separate Participating Areas approved in the

schedule(s) under Article XI. that Participating Area will terminate. In the event a

Participating .Area tenninates, all leases wholly or partially contained therein will no

longer be subject to this Agreement or the Unit Operating Agreement unless (a) such

leases are receiving an allocation from another Participating Area or (b) there has not

been an automatic adjustment ofthe Expanded Unit Area pursuant to Section 13.1

and such leases contain a well drilled pursuant to either Section 10.5 or Section 17.2

(g). In the event of Section 13.2(b), any aliquots containing the surface location, well

path, and bottom hole location of that well that are not already in the Expanded Unit

Area, will automatically become part of the Expanded Unit .Area concunently with

the termination of the last Participating Area containing those aliquots.

13.3 If a lease is no longer subject to this Agreement in accordance with the provisions of

this Article XIII. that lease shall only be maintained and continued in force and effect

in accordance with the terms and provisions contained in the Act, Regulations, and

the lease.

Article XVII (Leases and Contracts Conformed and Extended) is amended to modify

Section 17.2 (a) and insert new Sections 17.2 (e), (f), (g), and (h) to read as follows:

17.2

(a) Except as provided in Section 10.3 and Section 13.2, drilling and/or producing

operations performed hereunder upon any unitized lease will be accepted and

deemed to be performed upon and for the benefit of each and every unitized lease,

and no lease committed to this Agreement shall be deemed to expire by reason of

failure to drill or produce a well thereon.

(e) Prior to the effective date ofthe automatic adjustment described in Section 13.1,

the foregoing Sections 17.2 (a) - (d) will apply separately and independently to

the unitized lands in the Pre-Amendment Unit Area and the unitized lands in the

Expanded Unit Area.

(f) The Pre-Amendment Unit Area and the Expanded Unit Area will comprise a

single revised Unit Area effective on the date of automatic adjustment stipulated

in Section 13.1.

(g) Notwithstanding Section 17.2 (e), the drilling of a well into the stratigraphic

equivalent of WM 25 or below, as seen between the depths of 17,789' SS and

21,390' SS in OCS-G 35153, Well No. 1, from anywhere in the Pre-Amendment

Unit .Area will operate as an appraisal well for the benefit of the Expanded Unit

.Area. The drilling of such well, including all immediate (without rig departure)

re-spud, bypass, or sidetrack operations required, if any, to adequately test the

WM 25 or below, will be deemed operations with respect to the Expanded Unit

Area for purposes of 30 CFR 250.180 and this Article XVII. Additional drilling,

including re-entry sidetracks from the aforementioned well, within either AC

Blocks 815 or 859 will not be deemed operations with respect to the Expanded

Unit Area for purposes of 30 CFR 250.180 and this .Article XVTt, unless approved

by the Regional Supervisor. In the event a proposed additional well is approved

by the Regional Supervisor to be deemed operations with respect to the Expanded

Unit Area for purposes of 30 CFR 250.180, the aliquot(s) that reflects the surface

location, well path, and bottom hole location of the well will be added into the

Expanded Unit Area automatically upon the spudding of the well. Only aliquots

that are outside of the Pre-Amendment Unit Area in either AC Blocks 815 or 859

will be added to the Expanded Unit Area based on the drilling discussed in this

Article XVII. If a well is drilled to the WM 25 or below under the provisions of

this Article XVII, then the provisions of Section 10.5 will no longer apply.

(h) To utilize Section 17.2 (g) for purposes of continuing the lease terms of all lands

in the Expanded Unit Area, tlie Unit Operator must present the relevant well

information to BSEE prior to spudding the well and after the APD is accepted

into review by the relevant BSEE office. The Unit Operator must present to BSEE

sufficient infonnation showing that there is a demonstrated and objective intent

to test the stratigraphic equivalent of WM 25 or below as seen in OCS-G 35153,

Well No. 1. Infonnation submitted should include, but not be limited to, all the

information submitted with the APD, additional geological and geophysics

infonnation, and interpreted data.

9. Article XX (Remedies) of the Unit Agreement is hereby amended to insert new Section

20.3, to read as follows:

20.3 Prior to the effective date of the automatic adjustment described in Section 13.1, a

determination of Unit Operator failure pursuant to Section 20.1 will be administered

separately and individually for the Expanded Unit Area and the Pre-Amendment Unit

Area, respectively, and will be effective only as to unitized lands within the particular

area for which the determination is reached. A determination of default and

subsequent failure to remedy may result in a termination of the Pre-Amendment Unit

Area or the Expanded Unit Area without affecting the continuation of this Agreement

with respect to the other area.

10. As of the Amendment Effective Date, Exhibits "A" and "B" shall be replaced with the

attached amended Exhibits "A*1 and "B". These exhibits have been amended to incorporate

updated information related to the amendment provisions herein.

11. Upon the Amendment Effective Date, the Unit Operator will submit the Unit Operating

Agreement(s) with modifications required by this Amendment.

Other than the specific amendments set forth above, all other terms and conditions of the AC 859

Unit Agreement shall remain in full force and effect as originally executed.

This Agreement may be executed by signing the original or a counterpart thereof. If this

Agreement is executed in counterparts, all counterparts taken together shall have the same effect

as i f all parties had signed the same agreement, but no party shall be bound to this Agreement

unless and until all parties have executed a counterpart or the original.

IN WITNESS WrHEREOF, each party, through its duly authorized agent or representative, has

executed this Amendment effective as of the date first above written.

ACCEPTANCE OF RIGHTS AND OBLIGATIONS BY UMT OPERATOR

As Unit Operator, I hereby accept and assume all rights and obligations associated with this .Amendment to the AC 859 Unit Agreement. S

Dated: ? % I ̂

Authorized Signature:

Name: &^C1 Ham

Title: Attomey-in- Fact

Corporation: Shell Offshore Inc.

Address: Post Office Box 61933, New Orleans, Louisiana 70161

B this Qil '

Notary Public:

r, 20

My Commission Expires: BRIAM Q BIRDSALL,

NOTARY PUBLIC #912 STATE OF LOUISIANA

MY COMMISSION IS FOR LIFE

ACCEPTANCE OF RIGHTS AND OBLIGATIONS BY WORKING INTEREST OWNERS

As an owner of a Working Interest in the Unit Area, I hereby agree to the tenns and conditions set forth in this .Amendment to the AC 859J>rtTt)\greement.

Dated:


Name: S.9»iTi-iam

Title: Attomey-in- Fact

Corporation: Shell Offshore Inc.

Address: Post Office Box 61933, New Orleans, Louisiana 70161

Subscribed and Sworn to me this da/o^NovembA-, 20 J

Notary Public: V )

x , n P BRIAN G. BIRDSALL My Commission Expires: NOTARY PUBLIC #912

STATE OF LOUISIANA MY COMMISSION IS FOR LIFE.

As an owner of a Working Interest in the Unit Area, I hereby agree to the terms and conditions set forth in this Amendment to the AC 859 Unit Agreement.

NOV 2 712017 Dated:


Name: J. K^ith Couvillion

Title: Assistant Secretary

Corporation: Chevron U.S.A. Inc.

Address: 100 Northpark Boulevard, Covington, Louisiana 70433

Subscribed and Sworn to me this day of November, 2017

Notary Public: (L, .

My Commission Expires: ^ ^Hj ZOjfi CARIN C GALLOWAY

My Commission Expires April 4. 2019

As an owner of a Working Interest in the Unit Area, I hereby agree to the tenns and conditions set fonh in this Amendment tp the AC 859 Unit Agreement.

Dated: NOV 2 7,

Authorized Signature: ^^Y^tl

Name:

Title:

Corporation:

J. Keitfi Couvillion

Assistant Secretary

Union Oil Company of Califomia

Address: 100 Northpark Boulevard. Covington, Louisiana 70433

Subscribed and Swom to me this of November, 2017

Notary Public: C/buL^ d. J^J)Pd^i

My Commission Expires:

As an owner of a Working Interest in the Unit Area, I hereby agree to the tenns and conditions set forth in this Amendment to the AC 859 Unit Agreement.

Dated:


Name: James C. Waithman

Title: Senior Manager, Development

Corporation: Nexen Petroleum Offshore U.S.A. Inc.

Address: 945 Bunker Hill, Suite 1400, Houston, Texas 77024

Subscribed and Swom to me this of November, 2017

Notary- Public: ^ ^ M ^ L ^

My Commission Expires: 0X111/3-0/3

Exhibit "A" AC859 Unit

Alaminos Canyon Blocks 684 (S/2), 728, 771, 772, 815, 859 •• •• i

1.5 Miles

N

A

E ^ W W e v^\e. \o \ -l0v7

I Pre-Amendment Unit Area

I I Expanded Unit Area

Potential Additional Expanded Unit Area

EXHIBIT B

OWNERSHIP OF EACH LEASE IN AC 859 UNIT- UNIT CONTRACT NO. 754307006

ALAMINOS CANYON AREA. OFFSHORE TEXAS

LEASE

BLOCK

NUMBER

EFFECTIVE

DATE OF LEASE

EXPIRATION

DATE AMOUNT OF

ACREAGE

ROYALTY

OWNERSHIP LEASE

OWNERSHIP

OCS-G 31194 684 12/1/2007 11/30/2017 2880 16 2/3% USA

Shell Offshore Inc. 60%

Chevron U.S.A. Inc. 40%

OCS-G 31195 728 12/1/2007 11/30/2017 5760 16 2/3% USA



OCS-G 32988 771 11/1/2008 10/31/2018 5760 18 3/4% USA



OCS-G 35153 772 1/1/2014 12/31/2023 5760 18 3/4% USA



OCS-G 19409 815 12/1/1997 11/30/2007 5760 12 1/2% USA



OCS-G 20871 859 12/1/1998 11/30/2008 5760 12 1/2% USA


Nexen Petroleum Offshore U.S.A. Inc. 13.34%

Chevron U.S.A. Inc. 16.65%

Union Oil Company of California 40.01%