A Proposed Seismic Operating Agreement

Early in 1999 a group of concerned geophysical managers for various producing companies were organized by Cec Keeping into a meeting. This group, later to be called the Chief Geophysicists' Forum, intended to explore common geophysical issues for operating production / exploration companies. The meetings, first organized by Cec Keeping with the support of Sigma Explorations Inc., and later co-sponsored by the CSEG and Canadian Forest Oils through Doug Uffen and Ken MitcheII began to explore some contemporary problem issues in the petroleum industry. One of the outgrowths of this group has been the establishment of a joint CSEG/CAPL sub-committee to examine the issue of joint operating seismic agreements and how they can be standardized. The first results of the efforts of this committee are presented here, and will also be made available on the CSEG Website as well as the November 23 CSEG luncheon. It is hoped that the broad presentation of this working document will evoke comments from the membership of the CSEG so that the final document can practically serve at least 80% of the needs of the geophysical community.

The first draft of a joint operating seismic agreement is presented here along with some initial comments by members of the Chief Geophysicists'. Members comments should be addressed to the CSEG website in the online Forum, in writing to myself in care of the CSEG office, or at the open microphone portion of the November 23 CSEG luncheon.

Seismic operations agreement V1.1 September 14, 1999

Definition of Seismic Data

"Seismic Data" is termed as property that consists of field data and processed data, whether such data is digital or otherwise, including without limitation:

1. monitor records, recorded at each and every shot point;
2. original field data and stack data for each and every shot point;
3. paper and film copies of processed record sections;
4. observer's reports, surveyor's notes, chaining notes, and drilling reports for each and every shot point;
5. SEGP1 files and location maps for the shot points.

Definition of Licensed Copy

A "licensed copy" shall be defined as a copy of the seismic data (see "Definition of Seismic Data") that is, in part, subject to the following restrictions:

1. The licensee is not entitled to revenues from sales of the data .
2. The data is for the use of the licensee only and cannot be sold, traded or transferred, nor can copies be created for sale, trade or transfer, to a third party.
3. After the defined proprietary period (Schedule C), the seismic data can be utilized by a third party for the purpose of enhancing the licensee's corporate value but only where the data remains secure, either within the licensee's premises or at a bonded, secure site. As per item 2, no copies may be taken.

Definition of Operator

For purposes of this document it will be understood the operator is the entity which engages in and fulfills all of the required activities to record new seismic data on behalf of themselves and the coparticipants in the program. Conduct and responsibilities of the operator and participant shall be covered under the CAPL operating agreement clause XXX. In addition the operator shall be responsible for the proper storage, protection and management of the original data according to accepted industry standards.

Co-owners' relationship

Participants in the seismic program shall be viewed as "Tenants in Common". The Tenants in Common for this seismic agreement shall be here declared along with their associated interests:

COMPANY A    X%
COMPANY B    Y%

1. Need to define co-owners and co-participants as equal to tenants in common
2. Contract needs to exist independently of the CAPL.

Scope of the Agreement

This agreement will apply to all seismic data to be acquired by the operator on behalf of the Tenants in Common as listed in Schedule A and shown on attached map in Schedule B. Agreed upon amendments to the program will be included as Schedule amendments.

Rights of co-owners

Co-owners of the seismic data have proportional ownership in all data and are entitled to ONE copy of all seismic data as defined in this document. Because this document recognizes the seismic data to exist as property of the owners, the owners have the rights to capitalize on their interest in the data in the following manner:

1. Any owner of more than X% of the data may dispose of any portion of his interest in the data to another party subject to any time related restrictions to be outlined in Schedule C attached, and must provide notice to the other interest holders of the details of such a disposal. Any owner with less than X% of the data may not further subdivide his interest but may dispose of his total share to another party subject to any time related restrictions to be outlined in Schedule C attached, and must provide notice to the other interest holders of the details of such a disposal.
2. If agreed to by an ownership % of ??? or greater of the co-owners, the data may be licensed to third parties for industry accepted fees to be distributed pro rata to all owners.
3. The data may not be lent, copied or otherwise distributed to third parties without the approval of all other co-owners.

Rights of co-owners - could #1 have 3 parts a,b and c?

A = wide open unrestricted

B = no subdividing of ownership

C = new partner compensates partners proportionately

Distribution - only owners with a minimum WI of ??% can distribute a min of ??% with written notice to partners.

"Ownership" - resp for flowing holes.etc

"Sale rights" - marketing only - Amoco and Seitel sales

Silent Partners - undeclared, financial interests

WI owners to be declared, specify no SPs involved or contemplated

1. Is 2% interest in land or seismic the same? Do you become a licensee if WI in seismic is below (l -Y)%?
2. Distribution to managed companies
3. Failure to respond in 3. (above) should default to approval in defined time frame

Classes of ownership:

1. Licensee - right to use (keep through acquisitions, cannot be assigned, or partially sold, no transfer fees
2. Revenue interest - return on sales covered by agreement
3. Co-owner - tenant in common - this agreement needs to cover acquisitions, assigned interests and partial sales

Schedule A - Ownership and Cost Percentages

Line Number:

Party A
W Int%    Unit lnt%    % of cost

Party B
W Int%    Unit Int%    % of cost

Party C
W Int%    Unit Int%    % of cost

99-001  50  45  45  50  45  45  0  10  10
Unit seismic example

99-002  45  0  45  45  0  45  10  0  10
Non Unit example

As per the attached Schedule C, Party C, as a minor interest owner, cannot restrict the sale or trade of the data by the other parties after the exclusive/proprietary period. Working interest owners are entitled to their share of revenues from sales based on the above Working Interest percentages.

Data swap - non-cash - could we specific some compensation for another member doing a trade?

Need to define the difference between sale and trade

SCHEDULE C

Seismic data described in this agreement will not be shown to any third party for a period of 1 year without the written consent of the co-owners. After this time, the data may be used in a show and tell, workstation interpretation inhouse, or a workstation interpretation in a secure offsite facility. No copies of seismic data or maps will be allowed to leave the co-owners office.

Successor companies are bound by and party to this agreement.

Show and tell "presentation" or "working the data" - maps and measurements

Define hierarchy of agreements

Strike the word "maps"

Transfer to successor companies - only one copy - includes transfer of license copy??

Hierarchy of agreements - AMIs, JOAs, Units - which are subordinate?

Regional and Frontier shoots vs Provincial type shoots - CAPL Frontier & 2000 documents.