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SKELLY OIL COMPANY P. O. BOX 1650 EXPLORATION AND PRODUCTION JUDD H. OUALLINE TULSA, OKLAHOMA 74102 VICE PRESIDENT July 17, 1969 File: West Dollarhide Drinkard Unit Lea County, New Mexico New Mexico Oil Conservation Commission P. 0. Box 2088 Santa Fe, New Mexico 87501 Gentlemen: As provided in paragraph (3) of the order in Order No. R-3764, we are furnishing herewith copies of ratification of agreement executed by the following subsequent to the effective date of the unit: These joinders involve tracts which were qualified and included in the unit on the effective date. No new lands are involved. Also attached for your files is a copy of Revised Exhibits "A" and "B" to the Unit Agreement and Exhibit "D" to the Unit Operating Agreement. Exhibit "C", Schedule of Tract Participation, to the Unit Agreement remains the same as that shown i n the original document previously furnished you. No expansion or contraction of the unit area occurred. Estate of Josephine M. Smith Estate of Charles T. Lupton Estate of James H. Snowden Very truly yours, for V. E. Fletcher Chairman, Working Interest Owners' Committee FDM:bls Attachments CELEBRATING OUR 50th ANNIVERSARY

SKELLY OIL COMPANY - New Mexico Department of Energy ...ocdimage.emnrd.state.nm.us/imaging/filestore... · SKELLY OIL COMPANY P. O. BOX 1650 EXPLORATION AND PRODUCTION JUDD H. OUALLINE

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Page 1: SKELLY OIL COMPANY - New Mexico Department of Energy ...ocdimage.emnrd.state.nm.us/imaging/filestore... · SKELLY OIL COMPANY P. O. BOX 1650 EXPLORATION AND PRODUCTION JUDD H. OUALLINE

S K E L L Y O I L C O M P A N Y P . O. B O X 1 6 5 0

E X P L O R A T I O N A N D P R O D U C T I O N J U D D H . O U A L L I N E

T U L S A , O K L A H O M A 7 4 1 0 2

V I C E P R E S I D E N T July 17, 1969

F i l e : West Dollarhide Drinkard Unit Lea County, New Mexico

New Mexico O i l Conservation Commission P. 0. Box 2088 Santa Fe, New Mexico 87501

Gentlemen:

As provided i n paragraph (3) of the order i n Order No. R-3764, we are furnishing herewith copies of r a t i f i c a t i o n of agreement executed by the following subsequent to the effective date of the u n i t :

These joinders involve tracts which were qu a l i f i e d and included i n the u n i t on the effective date. No new lands are involved. Also attached for your f i l e s i s a copy of Revised Exhibits "A" and "B" to the Unit Agreement and Exhibit "D" to the Unit Operating Agreement. Exhibit "C", Schedule of Tract Pa r t i c i p a t i o n , to the Unit Agreement remains the same as that shown i n the o r i g i n a l document previously furnished you. No expansion or contraction of the unit area occurred.

Estate of Josephine M. Smith Estate of Charles T. Lupton Estate of James H. Snowden

Very t r u l y yours,

for V. E. Fletcher Chairman, Working Interest Owners' Committee

FDM:bls Attachments

CELEBRATING OUR 50th ANNIVERSARY

Page 2: SKELLY OIL COMPANY - New Mexico Department of Energy ...ocdimage.emnrd.state.nm.us/imaging/filestore... · SKELLY OIL COMPANY P. O. BOX 1650 EXPLORATION AND PRODUCTION JUDD H. OUALLINE

*

CONSENT TO AND RATIFICATION OF UNIT AGREEMENT AND UNIT OPERATING AGREEMENT

WEST DOLLARHIDE DRINKARD UNIT LEA COUNTY, NEW MEXICO

KNOW ALL MEN BY THESE. PRESENTS, THAT:

For tho consideration and purposes stated i n those ce r t a i n agreements, e n t i t l e d as above, both being dated August 1, 1968, the undersigned represents that i t is a Working Interest Owner w i t h i n the meaning of that term as used i n captioned Unit Agreement and, as such, does hereby consent to r a t i f y , confirm, and j o i n i n the execution of said Unit Agreement and Unit Operating Agreement, same being incorporated herein by reference, to the same extent and with l i k e e f f e c t as i f the undersigned had executed the o r i g i n a l of said Unit Agreement and Unit Operating Agreement or a counterpart thereof and, further, the undersigned does hereby commit a l l of i t s r i g h t , t i t l e and in t e r e s t i n and to the lands w i t h i n said Unit to the terms, provisions and agreements set f o r t h i n said Unit Agreement and Unit Operating Agreement.

I f the undersigned is also a Royalty Owner, w i t h i n the meaning of that term as used i n said Unit Agreement, then for the considerations and purposes herein­above stated, this r a t i f i c a t i o n s h a l l extend to the undersigned's Royalty Interest as well as to i t s Working I n t e r e s t .

The undersigned hereby acknowledges receipt of copies of said Unit Agreement and Unit Operating Agreement and, further acknowledges that these instruments have been signed and delivered on the date set out hereinbelow subject to the following terms and conditions:

1. Provision 11.5 of the Unit Operating Agreement e n t i t l e d "Lien of Unit Operator" shall not be applicable to the int e r e s t or interests hereby committed to the Unit and Unit Operating Agreements, nor shall Unit Operator have any im­p l i e d l i e n on such i n t e r e s t .

2. I n the event of default by the undersigned i n the payment of i t s share of Unit expenses, the Unit Operator's sole and only recourse against the under­signed or the inte r e s t owned by the undersigned hereby committed to the Unit Agreement and Unit Operating Agreement shall be the r i g h t which i s hereby granted by the undersigned to the Unit Operator to c o l l e c t from the purchaser the pro­ceeds from the sale of the undersigned's share of Unitized Substances u n t i l the amount owed by the undersigned, plus i n t e r e s t thereon at the rate of eight per­cent (37.) per annum, has been paid. Each purchaser shall be e n t i t l e d to r e l y upon Unit Operator's w r i t t e n statement concerning the amount of any default.

This r a t i f i c a t i o n shall extend to and be binding upon the undersigned, i t s legal representatives, successors and assigns.

IN WITNESS WHEREOF, th i s instrument i s executed t h i s 2 3 r d day of j u n e 1969.

and-Attorney-in-Fact

Page 3: SKELLY OIL COMPANY - New Mexico Department of Energy ...ocdimage.emnrd.state.nm.us/imaging/filestore... · SKELLY OIL COMPANY P. O. BOX 1650 EXPLORATION AND PRODUCTION JUDD H. OUALLINE

INDIVIDUAL NOTARY ACKNOWLEDGMENT FOKM

STATE OF T7.XAS ) ) S S :

COUNTY OF TARRANT )

Tlie foregoing instrument was acknowledged before me th is 2 3 r d day of JLun<2 » 196 9 , by El izabeth G. Lockwood. A pent and At torney- in-Fac t f o r James M. Snowden, Independent Executor o f the Estate o f James H. Snowden, Deceased. / - -,., /*

/ / J ' <- :.... NOTARY PUBLIC , ^

My cojamission expires:

0:i •:•/,

STATE 0? TEXAS ) ) S S :

COUNTY OF TARRANT )

The foregoing instrument was acknowledged before me this 23rd day of June, 1969, by Elmer L. Lockwood, Independent Executor of the Estate of James H. Snowden, Deceased.

Notary Public

My corrmission expires:

Cv , /? 7 / —r-

CORPORATION NOTARY ACKNOWLEDGMENT FORM

STATE OF ) • ) SS:

COUNTY OF )

The foregoing instrument was acknolwedgment before me thi s day of , 196 , by

President of ^corporation, on behalf of said corporation.

My coismission expires: NOTARY PUBLIC

Page 4: SKELLY OIL COMPANY - New Mexico Department of Energy ...ocdimage.emnrd.state.nm.us/imaging/filestore... · SKELLY OIL COMPANY P. O. BOX 1650 EXPLORATION AND PRODUCTION JUDD H. OUALLINE

POWER OF ATTORNEY

THE STATE OF NEW YORK

COUNTY OF /ka' (:'t>-1i'L I ^ KNOW ALL MEN BY THESE PRESENTS A

THAT I , JAMES M. SNOWDEN, EXECUTOR OF THE ESTATE OF JAMES

He SNOWDEN, of said state and county, have made, constituted and

appointed, and by these presents do make, co n s t i t u t e and appoint

ELIZABETH G. LOCKWOOD, of Fort Worth, Tarrant County, Texas, ray

true and law f u l attorney, f o r me and i n my name, place and stead

to take any and a l l action of every kind or character which my

said attorney s h a l l deem proper and advisable i n connection w i t h

committing the i n t e r e s t owned by the Estate of James H. Snowden

i n c e r t a i n leases w i t h i n the West Dollarhide Drinkard Unit, Lea

County, New Mexico, to such Uni t , including execution of r a t i f i ­

cations of Unit Agreement and Unit Operating Agreement, on such

terms and provisions as my attorney deems expedient, giving and

granting unto my said attorney f u l l power and a u t h o r i t y to do

and perform a l l and every act and thing whatsoever r e q u i s i t e

and necessary to be done i n and about the premises, as f u l l y ,

to a l l intents and purposes, hereby r a t i f y i n g and confirming

whatsoever ray said attorney s h a l l and may do by v i r t u e hereof

i n the premises; and I agree and represent to those dealing w i t h

ray said attorney i n f a c t that t h i s power of attorney may be

v o l u n t a r i l y revoked alone by revocation entered of record i n

the o f f i c e of the county c l e r k of Lea County, New Mexico.

IN WITNESS WHEREOF, I have hereunto set my hand th i s

/ O - day of June, 1969. ^

Jaries M. Snowden, Executor or" Estate of James H. Snowden, Deceased.

THE STATE OF NEW YORK J COUNTY OF !'<:-.• i .-.vC i r-

The foregoing instrument was acknowledged before me this the IC ,:- day of June, 1969, by JAMES M. SNOWDEN, EXECUTOR OF ESTATE OF JAMES H. SNOWDEN, DECEASED.

A :. ; > A/AY^-S^ My Commission Expires: Notary PubTIc j

Page 5: SKELLY OIL COMPANY - New Mexico Department of Energy ...ocdimage.emnrd.state.nm.us/imaging/filestore... · SKELLY OIL COMPANY P. O. BOX 1650 EXPLORATION AND PRODUCTION JUDD H. OUALLINE

\

ROYALTY OWNER'S RATIFICATION OI' UNIT AGREEMENT WEST DOLLARHIDE DRINKARD UNIT

LEA COUNTY, NEV? MEXICO

KNOW ALL MEN BY THESE PRESENTS: THAT,

WHEREAS, cnc.li of thc undersigned hereby acknowledge receipt of a true and correct counterpart of that c e r t a i n instrument dated August 1, 1968, and e n t i t l e d "Unit Agreement, West Dollarhide Drinkard Unit, Lea County, New Mexico", reference to which said agreement being here made for a l l pertinent purposes; and

WHEREAS, each of'the undersigned represents that i t i s a "Royalty Ovner" (as that term i s defined i n said Unit Agreement) and, as such, owns an i n t e r e s t or i n t e r e s t s i n one or more of the separate t r a c t s of land covered by said agreement and more p a r t i c u l a r l y i d e n t i f i e d on Exhibits "A" and "B" thereto (which snid separate t r a c t s , i n the segregate, comprise the Unit Area of the West Dollarhide Drinkard U n i t ) ; and

iWHEREAS, among other things, said Unit Agreement provides that ^ i t may be r a t i f i e d by a separate instrument i n w r i t i n g , and the under­signed, being f a m i l i a r w i t h the contents of said agreement, desires to r a t i f y and confirm same;

NOW, THEREFORE, for and i n consideration of the premises, the mutual covenants and agreements set f o r t h i n said Unit Agreement, and the mutual benefits to be derived therefrom, each of the undersigned does hereby r a t i f y , adopt and confirm said Unit Agreement w i t h respect to a l l of i t s i n t e r e s t or i n t e r e s t s i n a l l of the land coveied by said agreement, thereby becoming a party to said agreement to the same extent as i f i t had executed a counterpart thereof. Each of the undersigned hereby s t i p u l a t e s that i t s i n t e r e s t or i n t e r e s t s i n said Unit Area i s hereby u n i t i z e d i n accordance w i t h and subject to a l l of the terms ai\d conditions of said Unit Agreement. •

• \ " • The undersigned (whether one or more) i s referred to i n the

singular and i n the neuter gender. This r a t i f i c a t i o n s h a l l extend to and be binding upon the under­

signed, i t s h e i r s , legal representatives, successors and assigns. IN WITNESS WHEREOFi this instrument i s executed this ,11th day •

of , June . . 196JL-- 'J- ' THE FIRST'NATIONAL BANK OF DENVER, Trustee

' ' of the Trust Created Under the W i l l of / "a Josephine M. Smith, Deceased

ATTEST:

Assistant Cashier " Vice President

' EXHIBIT "B"

Page 6: SKELLY OIL COMPANY - New Mexico Department of Energy ...ocdimage.emnrd.state.nm.us/imaging/filestore... · SKELLY OIL COMPANY P. O. BOX 1650 EXPLORATION AND PRODUCTION JUDD H. OUALLINE

ROYALTY OWNER'S J w j/f> • RATIFICATION OF UNIT AGREEMENT1" ^5 H^ 'S9 WEST DOLLARHIDE DRINKAR&'A^NIT u^ O't'F^

LEA COUNTY. NEW MEXICO 4 F£' H. M. "

KNOW ALL MEN BY THESE PRESENTS: That,

WHEREAS, the undersigned hereby acknowledges r e c e i p t o f a t r u e and c o r r e c t counterpart of t h a t c e r t a i n instrument dated August 1, 1968, and e n t i t l e d "Unit Agreement, West D o l l a r -hide D r i n k a r d U n i t , Lea County, New Mexico", reference t o which s a i d agreement being here made f o r a l l p e r t i n e n t purposes; and

WHEREAS, the undersigned represents t h a t i t i s a "Royalty Owner" (as t h a t term i s de f i n e d i n said U n i t Agreement) and, as such, owns an i n t e r e s t or i n t e r e s t s i n one or more o f the separate t r a c t s o f land covered by said agreement and more par­t i c u l a r l y i d e n t i f i e d on E x h i b i t s "A" and "B" t h e r e t o (which s a i d separate t r a c t s , i n the aggregate, comprise the U n i t Area of the West D o l l a r h i d e D r i n k a r d U n i t ) ; and

WHEREAS, among other t h i n g s , s a i d U n i t Agreement pro­vides t h a t i t may be r a t i f i e d by a separate instrument i n w r i t i n g , and the undersigned, being f a m i l i a r w i t h the contents of said agreement, de s i r e s t o r a t i f y and con f i r m same;

NOW, THEREFORE, f o r and i n c o n s i d e r a t i o n o f the premises, the mutual covenants and agreements set f o r t h i n said U n i t Agreement, and the mutual b e n e f i t s t o be der i v e d therefrom, the undersigned does hereby r a t i f y , adopt and con f i r m said U n i t Agreement w i t h respect t o a l l o f i t s i n t e r e s t or i n t e r e s t s i n a l l of the land covered by s a i d agreement, thereby becoming a p a r t y t o s a i d agreement t o the same extent as i f i t had executed a counterpart t h e r e o f . The undersigned hereby s t i p u l a t e s t h a t i t s i n t e r e s t or i n t e r e s t s i n s a i d U n i t Area i s hereby u n i t i z e d i n accordance w i t h and sub j e c t t o a l l o f the terms and c o n d i t i o n s o f s a i d U n i t Agreement.

The undersigned executes t h i s instrument s o l e l y i n i t s c a p a c i t y as Trustee under the W i l l of Charles T. Lupton, Deceased, and not i n i t s i n d i v i d u a l corporate c a p a c i t y . i t makes no w a r r a n t i e s o f any k i n d hereunder and i f any l i a b i l i t y can be l a w f u l l y asserted against i t recourse may be had only against the assets o f s a i d t r u s t .

The undersigned i s r e f e r r e d t o i n the s i n g u l a r and i n the neuter gender.

This r a t i f i c a t i o n s h a l l extend t o and be b i n d i n g upon the undersigned, i t s successors and assigns.

IN WITNESS WHEREOF, t h i s instrument i s executed t h i s h th day o f June , 1969, i n t r i p l i c a t e .

The F i r s t N a t i o n a l Bank o f Denver, as Trustee under the W i l l of Charles T. Lupton, Deceased

"TEST; 7 zJ/SY. " ' A s s i s t a n t Cashier

v • / < Vrce Pres iden t

Page 7: SKELLY OIL COMPANY - New Mexico Department of Energy ...ocdimage.emnrd.state.nm.us/imaging/filestore... · SKELLY OIL COMPANY P. O. BOX 1650 EXPLORATION AND PRODUCTION JUDD H. OUALLINE

STATE OF COLORADO ) ) ss.

City and County of Denver )

The foregoing instrument was acknowledged before me t h i s day of <: ... • • -• 1969, by John R. L i g g i t t as Vice President of The F i r s t National Bank of Denver, a national banking association/ on behalf of said association, as Trustee under the Will of Charles T. Lupton, deceased.

Witness my hand and seal.

My commission expires MvO-.—~:--- - / \<n

Page 8: SKELLY OIL COMPANY - New Mexico Department of Energy ...ocdimage.emnrd.state.nm.us/imaging/filestore... · SKELLY OIL COMPANY P. O. BOX 1650 EXPLORATION AND PRODUCTION JUDD H. OUALLINE

CERTIFICATE RELATING TO FIRST REVISION OF

EXHIBITS "A" AND "B" ATTACHED TO UNIT AGREEMENT - WEST DOLLARHIDE DRINKARD UNIT

LEA COUNTY, NEW MEXICO

THE STATE OF NEW MEXICO ) ) SS:

COUNTY OF LEA )

KNOW ALL MEN BY THESE PRESENTS:

THAT, SKELLY OIL COMPANY, in i t s capacity as Unit Operator of the above described Unit and pursuant to the terms and provisions of said Unit Agreement of record in Book 279, page 376 of the Miscellaneous Records of the County Court Clerk's Office in Lea County, New Mexico, reference to such agreement and the record thereof being hereby made for a l l purposes, does hereby certify as follows, to-wit:

1. That i t has, in compliance with said agreement, revised Exhibits "A" and "B" attached thereto, each of said revisions being occasioned by and in accordance with the provisions thereof;

2. That true and correct copies of said Exhibits "A" and "B", marked "First Revision - Effective June 1, 1969", as so revised are attached hereto and by reference made a part hereof; and

3. That in accordance with the provisions of said Unit Agreement, the said revised Exhibits "A" and "B" are each to become effective as of June 1, 1969; and shall thereafter remain in full force and effect until again revised pursuant to the terms and provisions of said Unit Agreement.

IN WITNESS WHEREOF, SKELLY OIL COMPANY, acting in i t s capacity as Unit Operator, has on this f f day of June, 1969, executed this instrument by and through i t s Vice President thereunto duly authorized.

Approved M tO

ATTEST: SKELLY OIL COMPANY tatmtfCjf

I

Assistant/ Secretary ' tary ' Vice President

STATE OF OKLAHOMA ) ) SS:

COUNTY OF TULSA )

The foregoing instrument was acknowledged before me this / f day of June, 1969, by C. L. BLACKSHER, Vice President of SKELLY OIL COMPANY, a Delaware corporation, on behalf of said corporation.

My commission expires:

>• ~ .V.ijf ol, 1871

Notary Public

Page 9: SKELLY OIL COMPANY - New Mexico Department of Energy ...ocdimage.emnrd.state.nm.us/imaging/filestore... · SKELLY OIL COMPANY P. O. BOX 1650 EXPLORATION AND PRODUCTION JUDD H. OUALLINE

FIRST REVISION Effective June 1, 1969

WEST DOLLARHIDE DRINKARD UNIT LEA COUNTY, NEW MEXICO

cfcyervd. EXHIBIT "A" i i i M i w m i UNIT BOUNDARY

FEDERAL LANDS

\ . C " \ STATE LANDS

| | FEE LANDS

(T) TRACT NUMBER

Page 10: SKELLY OIL COMPANY - New Mexico Department of Energy ...ocdimage.emnrd.state.nm.us/imaging/filestore... · SKELLY OIL COMPANY P. O. BOX 1650 EXPLORATION AND PRODUCTION JUDD H. OUALLINE

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F i r s t Revision Effective June 1, 1969

EXHIBIT "D"

TO UNIT OPERATING AGREEMENT WEST DOLLARHIDE DRINKARD UNIT LEA COUNTY, NEW MEXICO

Working Interest Owner

At l a n t i c Richfield Company

Baroid Division, National Lead Company

Mrs. Ruby C. Bell

Fred J. Brotherton

Mrs. E. W. Chaney

Julianan Cowden

E l l i o t t Production Company

Featherstone Farms, Ltd.

Aileen Gardner

Gulf Oil Corporation

Elton M. Hyder, Jr.

W. E. Irwin

J. D. Kennedy

Gus Layton

James H. Snowden Estate

Ralph Lowe Estate

J. C. Maxwell

Marilyn Maxwell Trust

George A. Meihaus, Jr.

Pan American Petroleum Corporation

Reading & Bates, Inc.

Skelly O i l Company

Sunshine Royalty Cotopany

Texaco Inc.

TOTAL

Phase I

16.57711

.01154

.02701

.02877

.02702

.07901

4.80297

.05403

.02876

14.26211

.01976

.01438

.65774

.05752

.02876

.49689

4.60420

1.31548

.01438

13.21853

.04599

27.32406

.54318

15.76080

100.00000

Phase I I

1£L_

16.96125

.01196

.04387

.02985

.04388

.04956

2.48598

.08775

.02985

22.51811

.01239

.01492

.66282

.05971

.02985

.14038

4.63972

1.32563

.01492

9.05805

.04774

27.17057

.77921

13.78203

100.00000

Phase I I I

il) 16.57833

.01241

.03051

.03093

.03052

.06588

5.15564

.06104

.03093

17.43756

.01648

.01546

.64083

.06186

.03092

.43796

4.48581

1.28166

.01546

13.34837

.04944

26.89555

.60914

12.67731

100.00000

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RI_LQP_ W l .

RI__?9.9_-%-v/.i_±Q£!_ ~"

SitiiiiJ.muiii8tii tutx « 4 T E X A C O

nJ tf. L. Slephan F r t r j TEXACO f T E X ACO , 1 . . *H

Rl J_OQ_ wi_LOCL

j l Royalty r.\Hol3ing Co. t ! j TEXACO

R i J-Q.Q %_

WEST DOLL ARK IDE DRINKARD UNIT L E A COUNTY, NEW MEXICO

icr:.'SJ5iaai UNIT BOUNDARY

\ y / / / / ' ^ \ FEDERAL L ANDS } [ STATE LANDS

crrzzi F E E L A N D S

O TRACT NUMBER

UHIT TOTALS Rl SO.Ol % (Phase U!)-

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WEST DOLLARHIDE DRINKARD UNIT LEA COUNTY, NEW MEXICO

SCHEDULE OF TRACT SIGN-UP

Phase I I I Tract: Percentage of % of Unit Signed Base Tract P a r t i c i p a t i o n • Tract Ownership Signed on Phase I I I Factors No. (%) W.I. R. I . * W. I . R.I.

1 0.17797 100.0 98.1 0.18 0.17 2 10.04427 100.0 100.0 10.04 10.04 3 5.10576 100.0 100.0 5.11 5.10 4 0.60914 100.0 100.0 0.61 0.61 5 3.04279 100.0 100.0 3.04 3.04 6 1.39563 100.0 100.0 1.40 1.39 7 0.71722 100.0 100.0 0.72 0.72 8 0.75083 98.1 100.0 0. 74 0.75 9 0.86620 98.1 100.0 0.85 0.87 10 0.80022 100.0 100.0 0.80 0.80 11 1.07269 100.0 100.0 1.07 1.07 12 14.07896 100.0 100.0 14.08 • 14.08 13 13.34837 100.0 100.0 13.35 13.35 14 14.31710 100.0 100.0 14.32 14.32 15 16.64303 100.0 100.0 16.64 16.64 16 8.99016 100.0 100.0 8.99 8.99 17 0.40994 100.0 100.0 0.41 0.41 18 1.46570 100.0 100.0 1.47 1.47 19 0.38342 100.0 99.9 0.38 0.38 20 0.05381 100.0 100.0 0.05 0.05 21 1.77363 100.0 100.0 1.77 1.77 22 0.43796 100.0 100.0 0.44 0.44 23 1.01836 100.0 97.3 1.02 0.99 24 0.23285 100.0 99.0 0.23 0.23 25 2.26399 100.0 99.1 _2.26 2.24

100.00000 99.97 99.92

* Percentages include overriding royalty i n t e r e s t . Preliminary approval of State Land Office and U.S.G.S. have been secured.

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SEGMENT

FOR NT AND OPERATION

THE

WES DRINKARD UNIT

NEW MEXICO

* ««P«:lad •

SKELLY OIL CO. EXHtBIT NO. _ i J L - - l l _ ^

CASE NO. „. DOCK'-T OP i j l j y

"OATH Mxl3ia3i|-. BEFORE EXAMfKER UTZ

pll^ CONSERVATION CO^M^'iON EXMIBTf KO. ' -: " •-•

CASE Na

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UNIT AGREEMENT

WEST DOLLARHIDE DRINKARD UNIT

LEA COUNTY, NEW MEXICO

Table of Contents

Index

Preamble

Agreement Proper

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UNIT AGREEMENT WEST DOLLARHIDE DRINKARD UNIT

LEA COUNTY, NEW MEXICO

INDEX

SECTION PAGE

1 Enabling Act and Regulations 2

2 Unit Area and Definitions 2

3 Exhibits 5

4 Expansion 6

5 Unitized Land and Unitized Substances 7

6 Unit Operator 7

7 Resignation or Removal of Unit Operator 7

8 Successor Unit Operator 8

9 Accounting Provisions and Unit Operating Agreement 9

10 Rights and Obligations of Unit Operator 9

11 Equipment and F a c i l i t i e s Not Fixtures Attached to Realty 10

12 Plan of Operations 10

13 Easements or Use of Surface 11

14 Tract P a r t i c i p a t i o n 11

15 Tracts Qualified for Unit P a r t i c i p a t i o n 14

16 Allocation of Unitized Substances 15

17 Balancing of Production 17

18 Royalty Settlement 18

19 Rental Settlement 19

20 Conservation 19

21 Drainage 19

22 Leases and Contracts Conformed and Extended 19

23 Covenants Run With Land 21

24 Effective Date and Term 22

25 Rate of Prospecting, Development and Production 23

26 Nondiscrimination " 24

27 Appearances ^

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SECTION PAGE

28 Notices 24

29 No Waiver of Certain Rights 25

30 Waiver of Rights to P a r t i t i o n 25

31 Unavoidable Delay 25

32 Loss of T i t l e 25

33 Joinder i n Dual Capacity 26

34 Nonjoinder and Subsequent Joinder 26

35 Counterparts 27

36 Taxes 28

37 Conflict of Supervision 29

38 No Partnership 29

39 Border Agreement 29

Exhibit "A"o Map of Unit Area

Exhibit "B"s Description of Unit Area

Exhibit "C"s Schedule of Tract P a r t i c i p a t i o n

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CERTIFICATION - DETERMINATION

Pursuant to the authority vested i n the Secretary of the I n t e r i o r ,

under the act approved February 25, 1920. 41 Stat. 437, as amended, 30 U.S.C.

Sec„ 181, et seq., and delegated to the Oil & Gas Supervisors of the Geological

Survey (33 F R. 5812), I hereby^

A. Approve the attached agreement for the development and operation

of the West Dollarhide Drinkard Unit Area, Lea County, New Mexico.

B. Ce r t i f y and determine that the unit plan of development and opera­

t i o n contemplated i n the attached agreement i s necessary and advisable i n the

public interest for the purpose of more properly conserving the natural resources.

C C e r t i f y and determine that the d r i l l i n g , producing, r e n t a l ,

minimum royalty, and royalty requirements of a l l Federal leases committed to

said agreement are hereby established, altered, changed, or revoked to conform

with the terms and conditions of this agreement,

Dated

Oil & Gas Supervisor, United States Geological Survey

Contract Number

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UNIT AGREEMENT

WEST DOLLARHIDE DRINKARD UNIT

LEA COUNTY, NEW MEXICO

State of New Mexico No,

THIS AGREEMENT, entered into as of the f i r s t day of August, 1968, by

and between the parties subscribing, r a t i f y i n g cr consenting hereto, and herein

referred to as "parties hereto",

WITNESSETH:

WHEREAS5 the parties hereto are the owners of working, royalty or

other o i l or gas interests i n the Unit Area subject to t h i s agreement; and

WHEREAS, the Commissioner of Public Lands of the State of New Mexico

is authorized by an Act of the Legislature (Sec, 3, Chap. 88, Laws 1943, as

amended by Sec. 1 of Chap, 152, Laws of 1951, Chap, 7, Art. 11, Sec. 39, N.M.S..

1953 anno.) to consent to or approve this agreement on behalf of the State of

New Mexico, insofar as i t covers and includes lands and mineral interests of the

State of New Mexico; and

WHEREAS, the Commissioner of Public Lands of the State of New Mexico

is authorized by an Act of the Legislature (Sec 3, Chap. 88, laws of 1943, as

amended by Sec, 1, Chap. 162s Laws of 1951, Chap, 7, Art. 11, See. 41, N.M.S.

1953 anno ) to amend with the approval of "he lessee, any i i and gas lease

embracing State lands so that the length of the term of said lease w i l l coincide

with the term of this agreement; and

WHEREAS, the O i l Conservation Commission of the State of New Mexico i s

authorized by law (Art, 111, Chap, 65. Vol 9, part 2.. New Mexiro Statutes, 1953

Annotated) to approve th i s agreement, and the conservation provisions hereof; and

WHEREAS, the Mineral Leasing Act of February 25k 1920 (41 Stat 437, as

amended 30 U.S.C. Sections 181 et seq.) authorizes Federal lessees and the i r

representatives to unite with each other or j o i n t l y or separately with others i n

c o l l e c t i v e l y adopting and operating a cooperative or u n i t plan of development or

operation of any o i l or gas pool, f i e l d or l i k e area or any part thereof for the

purpose of more properly conserving the natural resources thereof whenever

determined and c e r t i f i e d by the Secretary of the I n t e r i o r to bs necessary or

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advisable in the public interest; and

WHEREAS, the parties hereto hold s u f f i c i e n t interests i n the West

Dollarhide Drinkard Unit Area, covering the land hereinafter described to give

reasonably ef f e c t i v e control of operation therein; and

WHEREAS, i t i s the purpose of the parties hereto to enable i n s t i t u t i o n

and consummation of secondary recovery operations, conserve natural resources, to

prevent waste and secure the other benefits obtainable through development and

operation of the area subject to this agreement under the terms, conditions and

lim i t a t i o n s herein set f o r t h .

NOW, THEREFORE, i n consideration of the premises and the promises here­

i n contained, the parties hereto commit to this agreement th e i r respective

interests i n the "Unit Area" and the "Unitized Formation" lying thereunder (as

those terms are defined hereinafter),, and agree severally among themselves as

foilows

SECTION 1, ENABLING ACT AND REGULATIONS. The Mineral Leasing Act of

February 25, 1920, as amended, supra, and a l l v a l i d , pertinent regulations,

including operating and u n i t plan regulations, heretofore issued thereunder and

va l i d , pertinent and reasonable regulations hereaftei issued thereunder are

accepted and made a part of th i s agreement as co Federal lands, provided such

regulations are not inconsistent with the terms of this agreement, and as to non-

Federal lands, the o i l and gas operating regulations m effect as of the effective

date hereof governing d r i l l i n g and producing operations, not inconsistent with

the terms hereof or the laws of the State i n which the non-Federal land is

located, are hereby accepted and made a part of this agreement

SECTION 2. UNIT AREA AND DEFINIIIONS, For the purpose of this agree­

ment, the following terms and expressions as used herein shall mean

(a) "Unit Area" i s defined as the area described by tracts in Exhibit

"B" and depicted on Exhibit "A1* attached hereto containing 3.5 33 52 acres, more

or less, or to which i t may be extended as herein provided

ik) "Commissioner" i s defined as the Commissioner of Public Land of

the State of New Mexico,

Cc) "Commission" is defined as the Oil Conservation Commission of the

State of New Mexico.

(d) "Director" i s defined as the Director of the United States

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Geological Survey.

(e) "Secretary" i s defined as the Secretary of the i n t e r i o r of the

United States of America or any other person duly authorized to exercise the

powers vested i n that o f f i c e .

( f ) "Department" i s defined as the Department of the I n t e r i o r of the

United States of America.

(g) "Supervisor" i s defined as the O i l and Gas Supervisor of the

United States Geological Survey for the region i n which the Unit Area ts situated

(h) "Unitized Formation" means the Tubb-Drinkard Formation underlying

the unitized land; said i n t e r v a l having been heretofore found to occur i n Skelly

Oil Company's Mexico "L" No. 3 well (located 1980 feet from the east l i n e and

660 feet from the north l i n e of Section 5, Tcwsship 25 South, Range 38 East,

Lea County, New Mexico) at an indicated depth of from 5,950 feet to 7,367 feet,

as recorded on the Schlumberger e l e c t r i c a l leg Run No 1 taken A p r i l 13, 1952,

said log being measured from a derrick f l o o r elevation of 3.168 feet above sea

leve1.

( i ) "Unitized Substances" means a l l o i l , gas, gaseous substances,

sulphur contained i n gas, condensate, d i s t i l l a t e and a i l associated and consti­

tuent l i q u i d or lique f i a b l e hydrocarbons w i t h i n or produced from the Unitized

Formation

( j ) "Tract" i s defined as each parcel of land described as such and

given a t r a c t number i n Exhibit "B!*.

(k) "Tract P a r t i c i p a t i o n " is defined as the percentage of parti c i p a ­

tions as shown on Exhibit "C", for allocating Unitized Substances to a Tract

under t h i s agreement.

Cl) "Unit P a r t i c i p a t i o n " of each Working Interest Owner means the sum

of the products obtained by multiplying the Working Interest of: such Working

Interest 'Owner i n each Tract by the Tract Participation of such Tract.,

(m) "Working I n t e r e s t " i s defined as the r i g h t to search for, produce

and acquire Unitized Substances whether held as an incident of ownership of

mineral fee simple t i t l e , under an o i l and gas lease or otherwise.

(n) "Working Interest Onwer" is defined as and shall mean any party

hereto owning a Working Interest, including a carried working interest owner,

holding an interest i n Unitized Substances bv vi r t u e of a less?, nnprat-ino

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agreement, fee t i t l e or otherwise, which interest i s chargeable with and obligated

to pay or bear, either i n cash or out of production, or otherwise, a i l or a

portion of the cost of d r i l l i n g , developing and producing the Unitized Substances

and operations hereunder. The owner of o i l and gas rights which are free of

leases or other instruments conveying the Working Interest to another shall be

regarded as a Working Interest Owner to the extent of seven-eighths (7/8) of his

interest i n Unitized Substances, and as a Royalty Owner with respect to his

remaining one-eighth (1/8) in t e r e s t therein,

(o) "Record Owner" i s defined as the holder of the record t i t l e to a

lease covering Federal lands according to the applicable records of the Depart­

ment of the I n t e r i o r of the United States of America.

(p) "Royalty I n t e r e s t " or "Royalty" is defined as an interest other

than a Working Interest i n or r i g h t to receive a portion of the Unitized Sub­

stances or the proceeds thereof and includes the royalty interest reserved by

the lessor by an o i l and gas lease and any overriding royalty interest, o i l

payment interest, net p r o f i t contracts or any other payment or burden which does

not carry with i t the r i g h t to search for and produce Unitized Substances,

(q) "Royalty Owner" i s defined as and shall mean the owner of a

Royalty Interest,

( r ) "Voting I n t e r e s t " shall mean, unless otherwise s p e c i f i c a l l y

defined herein, that each Working Interest Owner shall have a voting interest

equal to i t s Unit P a r t i c i p a t i o n i n effe c t at the time of voting.

(s) "Usable Well" shall mean a well which, i n accordance with good

o i l f i e l d practice, i s adequately equipped so that the Unitized Formation i s i n

condition to permit production of Unitized Substances to the surface by conven­

t i o n a l production methods,

( t ) "Unit Operating Agreement" is defined as and shall mean any

agreement or agreements (whether one or more entered into separately or

c o l l e c t i v e l y ) by and between the Unit Operator and the Working Interest Owners

as provided i n Section 9 Accounting Provisions and Unit Operating Agreement,

i n f r a , and shall be styled "Unit Operating Agreement, West Dollarhide Drinkard

Unit, Lea County, New Mexico,"

(u) "Unit Manager" i s defined as the person or corporation appointed

by the Working Interest Owners to perform the duties of the Unit Operator u n t i l

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the selection and q u a l i f i c a t i o n of a successor Unit Operator as provided for in

Section 8 hereof.

SECTION 3 EXMBITS, Exhibit "A" attached hereto is a map showing

the Unit Area and the boundaries and i d e n t i t y of Tracts and leases in said Unit

Area to the extent known to the Unit Operator Exhibit "E" attached hereto is

a schedule showing, to the extent known to the Unit Operator, the acreage com­

prising each Tract and the percentage ownership of each Working Interest Owner

m each Tract. Exhibit "C" attached hereto i s a schedule showing the Tract

Participation of each Tract, However, nothing herein or in said schedule or map

shall be construed as a representation by any party hereto as to the ownership

of any interest other than such interest or interests as are shown i n said map

or schedule as owned by such party.

Whenever reference herein or i n the Unit Operating Agreement is made

to an Exhibit, the reference is to the Exhibit as o r i g i n a l l y attached or, i f

revised, to the la t e s t approved revision

The description and ownership of the respective Tracts have been

established by using the best information available I f i t subsequently appears

that c l e r i c a l errors, including errors in Tract Ownership or mechanical miscal­

culations have been made, Unit Operator shall revise the Exhibits to conform with

the facts The revision shall not include any re-evaluation of engineering or

geological interpretations used in determining Tract Participations Errors and

miscalculations discovered p r i o r to the effective date of this agreement shall

be corrected by Unit Operator i n the f i r s t revision of Exhibits following the

ef f e c t i v e date and said f i r s t revisions shall be effective as of the effective

date of this agreement. The correction of any errors other than the correction

of a c l e r i c a l or mechanical error shail be made by Unit Operator only a f t e r f i r s t

having obtained approval of Working interest Owners, the Supervisor, and the

Commissioner,

Exhibits "A", "B", and "C" shall be revised by Unit Operator whenever

changes render such revision necessary, or when requested by the Supervisor or the

Commissioner. I f an Exhibit i s revised pursuant to t h i s agreement, Unit Operator shall

c e r t i f y and f i l e the required number of copies of the revised Exhibit with the Com­

missioner and the Supervisor, and one (1) copy for record with the County Clerk, Lea

County, New Mexico, Except as specified above, a revised Exhibit shall become effective

-5-

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on such date as may be determined by the Working Interest Owners and set f o r t h

on said revised Exhibit.

SECTION 4. EXPANSION, The Unit Area may, when practicable, be expanded

to include therein any additional t r a c t or tracts regarded as reasonably necessary

or advisable for the purposes of t h i s agreement Such expansion shall be effected

in the following manners

(a) The Working Interest Owner or Owners of a Tract or Tracts desiring

to bring such Tract or Tracts into t h i s Unit, shall f i l e an application therefor

with Unit Operator requesting such admission

(b) Unit Operator shall circulate a notice to each Working Interest

Owner of the proposed expansion, setting out the basis for admission, the

recommended Tract P a r t i c i p a t i o n to be assigned to such Tract or Tracts, and other

pertinent data. After negotiation (at Working Interest Owners' meeting or other­

wise) i f at least three Working Interest Owners having in the aggregate eighty

percent (80%) based on Phase I I I Unit P a r t i c i p a t i o n have agreed to such Tract or

Tracts being brought into the Unit, then Unit Operator shall

(1) After preliminary concurrence by the Director and the

Commissioner prepare a notice of proposed expansion describing the contemplated

changes i n the boundaries of the Unit Area, the reason therefor, the basis for

admission of the additional Tract or Tracts, the Tract Participation to be

assigned thereto and the proposed effective date thereof; and

(2) Deliver copies of said notice to the Commissioner, the

Supervisor, each Working Interest Owner and to the lessee and lessor whose

interests are affected, advising such parties that t h i r t y (30) days w i i l be

allowed for submission to the Unit Operator of any objection to such proposed

expansion; and

(3) F i l e s upon the expiration of said t h i r t y (30) day period as

set out i n (2) immediately above with the Commissioner and Supervisor the follow­

ing: (a) Evidence of mailing or delivering copies of said notice of expansion;

ib) An application for such expansion; (c) An instrument containing the

appropriate joinder r e f l e c t i n g the q u a l i f i c a t i o n s of the new Tract i n the same

manner required for the q u a l i f i c a t i o n of Tracts under Section 15 hereof, Tracts

Qualified for Pa r t i c i p a t i o n ; and (d) Copies of any objections received

The expansion s h a l l , a f t e r due consideration of a l l pertinent

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information and approval by the Commissioner, the Commissions and the Supervisor,

become effective as of the date prescribed in the notice thereof, preferably the

f i r s t day of a month subsequent to the date of notice or on such other date as

may be agreed upon by the Working Interest Owners ano approved by the Commissioner,

the Commission, and the Supervisor. In any approved expansion of the Unit Area,

the revised Tract Participations of these Tracts which were committed p r i o r to

each such expansion shall remain i n the same r a t i o one to another

SECTION 5. UNITIZED LAND AND UNITIZED SUBSTANCES- A l l land committed

to t h i s agreement shall constitute land referred to herein as "unitized land" or

"land subject to thi s agreement", A i l "unitized iand" and Unitized Substances

w i t h i n the Unit Area are unitized under the terms of this agreement Nothing

herein shall be construed to un i t i z e , pool, or in any way affect the o i l , gas and

other minerals contained i n or that may be produced from any formation other than

the Unitized Formation as described under Section 2 fh)

SECTION 6, UNIT OPERATOR Skelly Oil Company is hereby designated

the I n i t i a l Unit Operator, and by signing this instrument as Unit Operator i t

agrees and consents to accept the duties and obligations of Unit Operator for

the operation, development and production of Unitized Substances as herein pro­

vided Whenever reference is made herein to the Unit Operator, such reference

means the Unit Operator acting i n that capacity and not as an owner of interests

in Unitized Substances, and the term "Working Interest Owner" when used herein

shall include or refer to the Unit Operator as the owner of a Working Interest

when such an interest is owned by i t ,

SECTION 7. jgSIgN^I^N_OR_RJMOVAL,.OF_yNIT_OP_ERATQR Unit Operator

shall have the r i g h t to resign at any time, but such resignation shall not

become effective so as to release Unit Operator from the duties and obligations

of Unit Operator and terminate Unit Operator's ri g h t s as s*.,ch for a period of

six (6) months a f t e r w r i t t e n notice of intention to resign has been given by Unit

Operator to a l l Working Interest Owners, the Commissioner and the Supervisor, and

u n t i l a l l unit wells are placed i n a satisfactory condition for suspension,

abandonment, or continued operations, as required by the Supervisor as to Federal

lands and the Commissioner as to State lands, unless a new Unit Operator shall

have taken over and assumed the duties and obligations of Unit Operator p r i o r to

the expiration of said period

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The Unit Operator shall,-, upon default or f a i l u r e i n the performance of

i t s duties or obligations hereunder, be subject to removal by three \3) or more

Working Interest Owners having m the aggregate eighty percent (80%) or more of

the Phase I I I Unit Participation remaining a f t e r excluding the Phase I I I Unit

Pa r t i c i p a t i o n of the Unit Operator. Such removal shall be e f f e c t i v e upon notice

thereof to the Commissioner and the Supervisor

In a l l such instances of effective resignation ot removal, u n t i l a

successor to Unit Operator is selected and approved as hereinafter provided, the

Working Interest Owners shall be j o i n t l y responsible for the performance of the

duties of the Unit Operator and s h a l l , not later than t h i r t y (30) days before

suctt resignation or removal becomes e f f e c t i v e , appoint a Unit Manager to represent

them in any action to be taken hereunder

The resignation or removal of Unit Operator under this agreement shall

not terminate i t s r i g h t s , t i t l e or interest as the owner of a Working Interest

or other interest i n Unitized Substances,; but upon the resignation or removal of

Unit Operator becoming e f f e c t i v e , such Unit Operator shall deliver possession of

a l l wells, equipment, books, and records, materials, appurtenances and any other

assets., used i n connection with the unit, operations and owned by the Working

Interest Owners to the new duly q u a l i f i e d successor Unit Operator or to the Unit

Manager i f no such new Unit Operator is elected,, to be used f o i the purpose of

conducting unit, operations hereunder. Nothing herein shall be construed as

authorizing the removal of any material, equipment, and appurtenances needed for

the preservation of any wells

Nothing herein contained shall be construed to release, relieve or

discharge a Unit Operator who resigns or is removed hereunder from any l i a b i l i t y

for default by i t hereunder or from duties accruing or performable by i t p r i o r

to tne effective date of such resignation or removal.

SECTION 8. SyCCJESSORJfflK^gERArOR, Whenever the Unit Operator shall

tender i t s resignation as Unit Operator or sha!L be removed as hereinabove

provided, the Working Interest Owners shall select a successor Unit Operator as

herein provided. Such selection shall not become effe c t i v e u n t i l (a) a Unit

Operator so selected shall accept i n w r i t i n g the duties and r e s p o n s i b i l i t i e s of

Unit Operator, and (b) the selection shall have been f i l e d w ith the Supervisor

and the Commissioner. Tf no s uccessor Urn r O n p r a t n r or TIr>f r Mana»cr tc c o l o c f o d

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as herein provided, the Commissioner and the Director, at th e i r election, may

declare t h i s agreement terminated.

In selecting a successor Unit Onerator the affirmative vote of three

s 3') or more Working Interest Owners owning a t o t a i of sixty percent < 60%) or more

of the Phase I I I Unit Pa r t i c i p a t i o n shall p r e v a i l , provided that i f any one Work­

ing Interest Owner has a Phase I I I Unit Participation greater than f o r t y percent

140%), i t s negative vote or f a i l u r e to vote sh.i 1 i not be regarded as s u f f i c i e n t

unless supported by the vote of two (2; or more Work-ng Interest Owners having

combined Phase I I I Unit Participations of at least five percent (5%). I f the

Unit Operator who is removed votes only zo suc~e.?u i t i t or f a i l s cc vote, the

successor Unit Operator may be selected by the af rlrrar ••• ive vote of Working

Interest Owners owning a t o t a l of at least f i f t y - o n e percent (5l%\ of the Phase

I I I Unit P a r t i c i p a t i o n remaining a f t e r excluding the Un t Participation of Unit

Operator so removed,

SECTION 9. ACTOUNT1NG _ PRQyISQtj S A j> D I'N I I OP I , " A T1 N'G A C-REEME " I , Costs

and expenses incurred by Unit Operator tn conducting j n i t operations hereunder

shall be apportioned among, borne and paid by tne- V'ork:.»-«$?, Interest Owner? i n

accordance with this agreement and the Unit Oo era ting Agreement. The i.'mr

Operating Agreement shall also provide the manner in which the Working Interest

Owners sha;I be e n t i t l e d to receive their respective proportionate and allocated

share r>i ths benefits accruing hereto i n conformity with their under! y ing

operating .igreements, leases or other independent contracts nnd such othar rights

and obligations as between Unit Operator and tr.e Working interest Owners as may

be agreed upon by the Unit Operator ana the Working Incerest Owners; however, no

such Unit Operating Agreement shall be deemed either zo mod i fy any of the terms

and cori i t . c.-ns of this Unit Agreement or to relieve tho I ' r i t Operator of any-

right or obligation established under t h i s agreement. „T.d Ln case of any incon­

sistency ,->i c o n f l i c t between this agreement and the Unit Operating Agreement,

this Unit ':-;reement shall p r e v a i l . Two tree copies of <>r>y Unit Operating Agree­

ment executed pursuant to t h i s Section shal i be f i l e d w ir.h the Ccamiss loner and

three true copies thereof shall be f i l e d v i t h tht Supervisor prior tc approval

of this agreement.

SECTION 10, RIGHTS AND OBLIGATIONS OF Jf f l l r.OP&jUTOR. Except as other­

wise s p e c i f i c a l l y provided herein, the exclusive r i g h t , p r i v i l e g e and duty of

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exercising any and a i l r i g h t s of the parties hereto which are necessary or con­

venient for prospecting for, producing, storing., allocating and d i s t r i b u t i n g the

Unitized Substances are hereby delegated to and shall be exercised by the Unit

Operator as herein provided. Upon request, acceptable evidence of t i t l e to said

ri g h t s shall be deposited with said Unit Operator, and together with t h i s agree­

ment, shall constitute and define the rig h t s , privileges and obligations of Unit

Operator. Nothing herein, however, shall be construed to transfer t i t l e to any

land or to any lease or operating agreement, i t being understood that under this

agreement the Unit Operator, i n i t s capacity as Unit Operator, shall exercise the

righ t s of possession and use vested i n the parties hereto only for the purposes

herein specified.

SECTION 11. EQUIPMENT^NI^. FACJLIITES, NOT QXTURES AITACHED_TO REALTY.

Each Working Interest Owner has heretofore placed and used on i t s Tract or Tracts

committed to thi s agreement, various well and lease equipment and other property,

equipment and f a c i l i t i e s . I t i s also recognized that additional equipment and

f a c i l i t i e s may hereafter be placed and used upon the Unitized Land as now or

hereafter constituted. Therefore, for a l i purposes of this agreement any and

a l l such equipment shall be considered to be personal property and not fixtures

attached to real t y . Accordingly, said well and lease equipment and personal

property is hereby severed from the mineral estates affected by this agreement,

and i t is agreed that any and a l l such equipment and personal property shall be

and remain personal property for a i l purposes

SECTION 12. PLAN._QF_JJgERA'IIONS I t is recognized and agreed, by the

parties hereto chat the object and purpose of this agreement is to formulate and

to put into e f f e c t a secondary recovery project i n order to effect additional

recovery of Unitized Substances, prevent waste and conserve natural resources.

The parties hereto agree that the Unit Operator may, subject to the consent and

approval of a plan of operation by the Working Interest Owners, the Supervisor,

the Commissioner and the Commission, i n j e c t into the Unitized Formation, through

any well or wells completed therein, brine, water, air., gas, o i l and any one or

more other substances or combination of substances whether produced ftom the

Unitized Formation or not, and that the location of input wells and the rates of

in j e c t i o n therein and the rate of production shall be governed by standards of

good geologic and petroleum engineering practices and conservation methods. The

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parties hereto, subject to p r i o r r i g h t s , i f any, grant, to Unit Operator the use

of brine or non-potable water or both from any formation in and under the Unitized

Land for i n j e c t i o n into the Unitized Format ion. After commencement of secondary

operations, Unit Operator shall furnish the Commissioner and the Supervisor

monthly i n j e c t i o n and production reports for each well i n the Unit, The Working

Interest Owners, the Commissioner, and the Supervisor snail be furnished periodic

reports on the progress of the plan of operation and any revisions or changes

thereto necessary to meet changed condition; or to protect tbe interests of a l l

parties to this agreement; provided, however, that any major revisions of the

plan of operation involving a basic devia<". ion from the i n i t i a l plan of operation

shall be subject to the consent and approval of the working Interest Owners, the

Commission, the Commissioner and the Supervisor

Concurrently with the f i l i n g of this agreement for f i n a l approval by

the Commissioner and the Supervisor, Unit Operator snail submit a plan of opera­

t i o n for the Unitized Land for approval and upon approval thereof by the

Supervisor and the Commissioner, such plan' shall constitute the future operating

obligations of the Unit Operator under this Unit Agreement for the period

specified therein. Thereafter, from time to time before the expiration of any

existing plan, the Unit Operator shall subcsit for l i k e approval a plan for an

additional specified period of operation

SECTION 1.3. EASEMENTS,. OR .USE ..OF SURFACE, The parties hereto, to the

extent of their r i g h t s and interest, hereby grant to Working Interest. Owners the

right to use as much of the surface of the .and w i t h i n the Unit Area as may

reasonably be necessary for unit, operations, including the free use of water from

the Unit Area for u n i t operations, except water from any v e i l , lake, pond or

i r r i g a t i o n d i t c h of Royalty Owner, provided that,, nothing herein shall be con­

strued as leasing or otherwise conveying to Working Interest Owners a si t e for a

water, gas in j e c t i o n , processing,or ether plant or camp site

SECTION 14, TRACT PARTICIPATION. Tract Participations of each Tract

are shown i n Exhibit "C", and have been computed in accordance with the following:

fa) Phase I Participation. Beginning at 7:00 A, M, on the effective

date hereof and remaining i n e f f e c t u n t i l 7.00 A.M. on the f i r s t day of the month

next following the month i n which the cumulative amount of o i l produced from the

Unitized Formation underlvine the Unit Area on and after Seotember J. 1967. pmials

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1,000,000 barrels, the Tract Participation of each Tract shall be as shown under

Phase I of Exhibit "C" and shall be determined from the following formula:

Tract Pa r t i c i p a t i o n Percentage, Phase 1 equals

A iOOt g

Where:; A equals t o t a i current o i i and gas income from such Tract from

the Unitized. Formation during the period March 1, 1967, to

September 1, 1967

B equals the summation of the t o t a l current o i l and gas income

from a l l Tracts i n the Unit Area from the Unitized Formation

during tne period March 1. 1957, to September l s 1967,

(b) Phase I I Participation- Beginning at 7.00 AM on the f i r s t day

of the month next following the date the 1,000,000 barrels referred to i n (a)

above shall have been produced and u n t i l 7 00 A.M on the f i r s t day of the month

next following the date when the cumulative o i l produced from the Unitized Forma­

ti o n underlying a l l of the tracts described i n Exhibit ''B'" after termination of

Phase I equals 1,672,835 barrels, the Tract Par t i c i p a t i o n of each Tract shall be

as shown under Phase I I of Exhibit "C", and shal1 be determined from the following

f ormu'i a:.

Tract Participation Percentage, Phase I I equals

25%, f plus 7 5% |

Where5 A and B are as defined i n Ca) above

C equals the estimated remaining primary barrels of o i l

producible from the Unitized Formation underlying each such

Tract as of September I , 1967, such estimated remaining primary

barrels being as agreed upon by tne Working Interest Owners.

D equals the summation of the estimated remaining primary

barrels of o i l producible from the Unitized Formation under­

lying a l l such Tracts in the Unit Area as of September 1, 1967,

such estimated remaining primary barrels of o i l for each Tract

being as agreed upon by the Working Interest Owners.

(c) Phase I I I P a r t i c i p a t i o n Beginning at 7,:00 A M on the f i r s t day

of the month next following the date when the 1,572,835 barrels referred to i n

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«b) above shall have been produced, the Tract Pa r t i c i p a t i o n of each Tract shall

be as shown under Phase 111 of Exhibit nC", and shall be determined from the

following formula:

Tract Par t i c i p a t i o n Percentage, Phase I I I equals

100%

F

Wherei E equals the estimated quantity of o i l ultimately recoverable

from the Unitized Formation underlying each such Tract by

primary recovery operations as agreed upon by the Working

Interest Owners.

F equals the summation of the estimated quantity of o i l

ultimately recoverable fvox the Unitized Formation underlying

a l l such Tracts by primary recovery operations as agreed upon

by the Working Interest Owners

I f less than a l l Tracts w i t h i n the Unit Area qualify for p a r t i c i p a t i o n

hereunder as of the ef f e c t i v e date hereof Unit Operator, v i t a approval of the

Working Interest Owners^ shall f i l e with the Supervisor, ths Commissioner and

the Commission a schedule of q u a l i f i e d Tracts as of the said effective date,

which schedule shall be designated ''Revised Exhibit ('C!' and considered for a l l

purposes as a part of th i s agreement, Such revised Exhibit "C" shall set f o r t h

opposite each such q u a l i f i e d Tract the revised Tract Par t i c i p a t i o n therefor which

shall be calculated by using the same Tract factors and formula which were used

to arrive at the Tract P a r t i c i p a t i o n of each Tract as set out in Exhibit "C"

attached hereto, but applying the same only to the qu a l i f i e d Tracts, i t being

expressly understood and agreed that the i,000,000 barrels referred to in Section

14, Tract Par t i c i p a t i o n (a) and (b) hereof shall be reduced by an amount equal to

1,000,000 times the t o t a l Phase 1 Tract Pa r t i c i p a t i o n (expressed as a decimal) of

a l l the tracts which f a i l to qualify for p a r t i c i p a t i o n ; and the 1,672,835 barrels

referred to i n Section I t (b) and (c) hereof snail be reduced by an amount equal

to 1,672,835 times the t o t a l Phase I I Tract Participations (expressed as a

decimal) of a l l the Tracts which f a i l to qualify for p a r t i c i p a t i o n . Such revised

Exhibit I!C"» upon approval by the Supervisor and the Commissioner, shall super­

sede, ef f e c t i v e as of the ef f e c t i v e date hereof, the Tract Participations set f o r t h in Exhibit "C" attached hereto.

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The Trac t Participations shewn <T. Exhibit "C* attached hereto, or as may

be shewn on the revised Exhibit '"C" as above provided, shall govern the allocation

of unitized substances on and after the effective date of this unit agreement, and

u n t i l the all o c a t i o n schedule i s revised pursuant to this agreement and the revised

Tract Participations are approved by the Supervisor and the Commissioner,

SECTION 15., TRACTS QUALIFIED_FOR PARTICIPATION, Or. and aft e r the

effective date hereof, and u n t i l the enlargement thereof, the tracts w i t h i n the

Unit Area shall be e n t i t l e d to Participation (as provided in Section 14,

Tract Participation, hereof) i n the production of Unitized Substances shall be

composed of the Tracts l i s t e d in Exhibit 'B" which corner or have a common

boundary (Tracts separated only by a public highway or a railroad r i g h t of way

shall be considered to have a common boundary's and that otherwise qualif y as

foilows -

ia) Each Tract as to which Working Interest Owners owning one hundred

percent (.100%) of the Working Interest and as to which Record Owners owning one

hundred percent (100%) therein have become parties hereto and as to which Royalty

Owners own trig seventy- f ive percent (75%'i or more of the Royalty Interest therein

have become parties hereto,

lb) Each Tract as to which Working Interest Owners owning one hundred

percent 1100%) of the Working Interest and as to which Record Owners owning one

hundred percent (100%) thsre in have become parties hereto and as to which Royalty

Owners owning less than seventy-five percent \7 5%) of the Royaity Interest

therein have become parties hereto and, further, as to which,

( i ) A l l Working Interest Owners i n any such Tract have joined i n

a request for the q u a l i f i c a t i o n of such Tract, and

( x l ) Eighty percent (80%) of the combined voting interests of

Working Interest 'Owners in a l l Tracts meeting the requirements of paragraph (a)

hereof have voted m favor of qualifying such Tract

For the purpose of thi s paragraph CM, a Working Interest Owner's

'voting i n t e r e s t " shall be equal to the r a t i o (expressed i n percent) which i t s

aggregate Phase I Unit P a r t i c i p a t i o n i n a t l Tracts qualifying under paragraph

(a) bears to the t o t a i Phase I Unit P a r t i c i p a t i o n of a l l Working Interest Owners

in a i l Tracts qualifying under paragraph (a«„

(Ci Each Tract as to which Working Interest Owners owning less than

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one hundred percent (100%) of the Working Interest and as to which Record Owners

owning less than one hundred percent (100%) therein have become parties hereto,

regardless of the percentage of Royalty Interest therein which is committed

hereto and, further, as to which:

( i ) The Working Interest Owner operating any such Tract and a l l

of the other Working Interest Owners i n such Tract who have become parties hereto

have joined i n a request for q u a l i f i c a t i o n of such Tract and ac least 8.5% of such

parties have executed and delivered an indemnity agreement indemnifying and agree­

ing to hold harmless the other Working Interest Owners i n che Unit, their

successors and assigns,, against a l l claims and demands which arise out of the

q u a l i f i c a t i o n of such Tract, which may be made by the owners of Working Interests

in such Tract who are not parties hereto, and

( i l ) Eighty percent (80%) of the combined voting interest of

Working Interest Owners i n a l l Tracts meeting the requirements of paragraphs (a)

and (b) have voted i n favor of the q u a l i f i c a t i o n of such Tract and acceptance of

the indemnity agreement.

For the purpose of th i s paragiapn ( c ) , a Working Interest Owner's voting

interest snail be equal to the r a t i o (expressed i n percent'* which i t s aggregate

Phase 1 Unit P a r t i c i p a t i o n i n a l l Tracts qualifying under paragraphs (a) and (b)

bears to the t o t a i Phase I Unit Pa r t i c i p a t i o n of a l l Wording Interest Owners i n

a l l Tracts qualifying under paragraphs (a) and tb)• Upon the q u a l i f i c a t i o n of

such a Tract, the Unit P a r t i c i p a t i o n which would have been a t t r i b u t e d to the non-

sub scribing owners of the Working Interest i n such Tract, had they become parties

to this agreement and the Unit Operating Agreement, shall be attr i b u t e d to the

Working Interest Owners i n such Tract who have become parties to such agreements,

in proportion to t h e i r respective Working Interests i n the Tract

SECTION 16.. Al-LOCMIpN^OFJjMni SUBSTANCES. A l l Unitized Substances

produced and saved (less, save and except any part of such Unitized Substances

used i n conformity with good operating practices w i t h i n the Unit Area for d r i l l ­

ing, operating, camp and other production or development purposes and for pressure

maintenance or unavoidably l o s t ) shall be apportioned among and allocated to the

committed Tracts i n accordance w i t h the respective Tract Participations effective

hereunder during the respective periods such Unitized Substances were produced,

as set f o r t h i n the schedule of p a r t i c i p a t i o n i n Exhibit "C". The amount of

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Unitized Substances so allocated to each tr a c t , and only that amount (regardless

of whether i t be more or less than the amount of the actual production of Unitized

Substances from the well or wells, i f any, on such Tract) s h a l l , for a l l intents,

uses and purposes, be deemed to have been produced from such Tract,

The Unitized Substances allocated to each such Tract shall be d i s t r i ­

buted among, or accounted for to, the parties executing, consenting to or

r a t i f y i n g this agreement and e n t i t l e d to share i n the production from such Tract

in the same manner, i n the same proportions, and upon the same conditions, as

they would have participated and shared i n the production from such Tracts, or

i n the proceeds thereof, had this agreement not been entered into, and with the

same legal force and e f f e c t

No Tract committed to t h i s agreement and qualLfied for p a r t i c i p a t i o n as

above provided shall be subsequently excluded from p a r t i c i p a t i o n hereunder on

account of depletion of Unitized Substances from said Tract,

I f the Working Inter-as t and the Royalty Interest i n any Tract are

divided with respect to separate parcels or portions of such Tract and owned

severally by d i f f e r e n t persons, the Tract P a r t i c i p a t i o n of such Tract sh a l l , i n

the absence of a recordable instrument executed by a l l such owners and furnished

to Unit Operator f i x i n g the divisions of ownership, be divided among such parcels

or portions i n proportion to the number of surface acres in each

The Unitized Substances allocated to each Tract shall be delivered i n

kind to the respective Working Interest Owners and parties e n t i t l e d thereto by

v i r t u e of the ownership of o i l and gas rights therein or by purchase from such

Dwners Each Working Interest Owner and the parties e n t i t l e d thereto shall have

the continuing r i g h t to receive such production i n kind at a common point w i t h i n

the Unit Area and to s e l l or dispose of the same as i t sees f i t Each such party

shall have the r i g h t to construct, maintain and operate a i l necessary f a c i l i t i e s

for that purpose w i t h i n the Unit Area, provided the same are so constructed,

maintained and operated as not to i n t e r f e r e with operations carried on pursuant

hereto Subject to Section 18s Royalty Settlement, hereof, any extra expenditure

incurred by Unit Operator by reason of the delivery i n kind of any portion of the

Unitized Substances shall be borne by the party receiving the same in kind In

the event any working Interest Owner shall f a i l to take or otherwise adequately

dispose of i t s proportionate share of the production from the Unitized Formation

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currently as and when produced, then so nong as such condition continues. Unit

Operator, for the account and at the expense of the Working Interest Owner of

the Tract or Tracts concerned, and i n order to avoid c u r t a i l i n g the operation of

the Unit Area, may s e l l or otherwise dispose of such production to i t s e l f or to

others on a day-to-day basis at not less than the prevailing market price i n the

area for l i k e production, and the account of such Working Interest Owner shall be

charged therewith as having received such production. The net proceeds, i f any,

of the Unitized Substances so disposed of by Unit Operator shall be paid to the

Working Interest Owner of the Tract or Tracts concerned or a party designated in

w r i t i n g by such Working Interest Owner Notwithstanding the foregoing, Unit

Operator shall not make a sale into interstate commerce of any Working Interest

Owner's share of gas production without f i r s t giving such Working Interest Owner

sixty (60) days notice of such intended sale.

Any party receiving i n kind or separately disposing of a i l or any part

of che Unitized Substances allocated to any Tract, or receiving the proceeds

therefrom i f the same i s sold or purchased by Unit Operator, shall be responsible

for the payment of a l l Royalty due under the lease or leases covering the Tracts

contributed by i t and received into the Unit, and each such party shall hold each

other party hereto harmless against a i l claims,, demands and causes of action for

such Royalty on the lease or. leases and Tracts contributed by. i t to the Unit Area

SECTION 17. BALANCING OF PRODUCTION. Unit Operator shall make a

proper and timely gauge of a l l lease and other tanks located on each committed

Tract i n order to ascertain the amount of merchantable o i i i n such tanks, above

the pipe line connections, as of 700 AM on the ef f e c t i v e date hereof, A l l

Unitized Substances which are a part of the p r i o r allowable of the well or wells

from which the same were produced shall be and remain the property of the Working

Interest Owners e n t i t l e d thereto as i f the Unit had not been formed and such Work­

ing Interest Owners shall promptly remove same Any such Unitized Substances not

so removed may be sold by the Unit Operator for the account of such Working

Interest Owners, subject to the payment of a l l royalty to Royalty Owners under

the terms and provisions of the applicable lease or leases and other contracts.

A l l such Unitized Substances which are in excess of the p r i o r allowable of the

well or wells from which the same were produced shall be regarded and treated the

same as Unitized Substances produced after the e f f e c t i v e date hereof I f , as of

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the effective date hereof, any Tract is overproduced with respect to the allow­

able of the well or wells on that Tract and the amount of such over-production

has been sold or otherwise disposed of, such over-production shall be regarded

and included as a part of the Unitized Substances produced a f t e r the effe c t i v e

date hereof, and the amount thereof charged to such Tract as having been

delivered to the persons e n t i t l e d to Unitized Substances allocated to such Tract.

SECTION 18 ROYALjnL.SET^^NT The State of New Mexico and the

United States of America and a l l Royalty Owners who, under an existing contract,

are e n t i t l e d to take i n kind a share of the Unitized Substances produced from any

Tract unitized hereunder, shall hereafter be e n t i t l e d to take in kind their share

of the Unitized Substances allocated to such Tract, and Unit Operator shall make

deliveries of such Royalty share taken in kind i n conformity with the applicable

contracts, laws and regulations Settlement for Royalty Interests not taken i n

kind shall be made by Working Interest Owners responsible therefor under exi s t ­

ing contracts, laws and regulations, on or before the last day of each month for

Unitized Substances produced during the preceding calendar month; provided, how­

ever, that nothing herein contained shall operate to relieve the lessees of any

land from t h e i r respective lease obligations for the payment of any Royalty due

under t h e i r leases, except that such Royalty shall be computed i n accordance with

the terms of this Unit Agreement,

Royalty due the United States shall be computed as provided i n the

operating regulations and paid i n value or delivered in kind as to a l l Unitized

Substances on the basis of the amounts thereof allocated to unitized federal

land as provided herein at the rate specified i n the respective federal leases

or at such lower rate or rates as may be authorized by law or regulation, pro­

vided, that for leases on which the royalty rate depends on the dai l y average

production per w e l l , such average production shall be determined in accordance

with the operating regulations as though the unitized lands were a single con­

solidated lease.

I f the amount of production or the proceeds thereof accruing to any

Royalty Owner {except the United States of America) i n a Tract depends upon the

average production per well or the average pipeline run per well from a Tract

during any period of time, then such production shall be determined from and

afte r the effective date hereof by dividing the production allocated each Tract

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during such period of time by the number of wells located thereon capable of pro­

ducing as of the effective date hereof, provided, however, any Tract without a

producible well on said ef f e c t i v e date shall,, for the purposes herein contained,

be considered as having one such well tnareon

A l l Royalty due the State of New Mexico and the United States of America

and the other Royalty Owners hereunder shall be computed and paid on the basis of

a l l Unitized Substances allocated to the respective Tract or Tracts committed

hereto, in l i e u of actual production from such Tract or Tracts

Each Royalty Owner (other than the State of New Mexico and the United

States of America) that r a t i f i e s this agreement represents and warrants that he

is the owner of a Royalty Interest i n a Tract or Tracts w i t h i n the Unit Area as

his interest appears i n Exhibit "B" attached hereto

SECTION 19 .RENTAL,SETTLEMENT Rentals or minimum royalties due on

leases committed hereto shall be paid by Working Interest Owners responsible

therefor under existing contracts, laws and regulations provided that nothing

herein contained shall operate to relieve the lessees of any land from t h e i r

respective lease obligations for the payment of any rental or minimum royalty

i n l i e u thereof, due under t h e i r leases Rental for lands of the State of New

Mexico subject to thi s agreement shall be paid at the rate specified in the

respective leases from the State of New Mexico Rental or minimum royalty for

lands of the United States of America subject to thi s agreement shall be paid at

the rate specified i n the respective leases from the United States of America,

unless rental or minimum royalty is waived, suspended, or reduced by law or by

approval of the Secretary or his duly authorized representative,

SECTION 20. Cg^ERVATION, Operations hereunder and production of

Unitized Substances shall be conducted to provide for the most economical and

e f f i c i e n t recovery of said substances without waste, as defined by or pursuant

to Federal and State laws and regulations

SECTION 21, DRAINAGEo The Unit Operator shall take such measures as

the Supervisor or the Commissioner deems appropriate and adequate to prevent

drainage of Unitized Substances from the Unitized Land by wells on land not

subject to thi s agreement,

SECTION 22„ LEASES AND CONTRACTS CONFORMED AND EXTENDED,, The terms,

conditions and provisions of a l l leases, subleases and other contracts r e l a t i n g

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to exploration, d r i l l i n g , , development or operation for o i l or gas on lands

committed to thi s agreement are hereby expressly modified and amended to the

extent necessary to make the same conform to the provisions hereof, but otherwise

to remain i n f u l l force and ef f e c t , and the parties hereto hereby consent that

the Secretary and the Commissioner, respectively, sh a l l , and by th e i r approval

hereof, or by the approval hereof by their duly authorized representatives, do

hereby establish, a l t e r , change, or revoke the d r i l l i n g , producing, re n t a l ,

minimum royalty and royalty requirements of Federal and State leases committed

hereto and the regulations In respect thereto to conform said requirements to the

provisions of thi s agreement

Without l i m i t i n g the generality of the foregoing, a l l leases, sub-leases

and contracts are p a r t i c u l a r l y modified m accordance with the following"

(a) The development and operation of lands subject to t h i s agreement

under the terms hereof shall be deemed f u l l performance of a l l obligations for

development and operation with respect to each and every separately owned Tract

committed to t h i s agreement, regardless of whether there is any development of

any p a r t i c u l a r Tract cf the Unitized Land

(b) D r i l l i n g and producing operations performed hereunder upon any

Tract of Unitized Land w i l l be accepted and deemed to be performed upon and for

the benefit of each and every Tract of Unitized Land, and no lease shall be

deemed to expire by reason of f a i l u r e to d r i l l or produce wells situated on the

land therein embraced,

(c) Suspension of d r i l l i n g cr producing operations on a i l Unitized

Lands pursuant to d i r e c t i o n or consent of the Commissioner and the Secretary or

his duly authorized representative shall be deemed to constitute such suspension

pursuant to such di r e c t i o n or consent as to each and every Tract of Unitized Land.

A suspension of d r i l l i n g or producing operations on specified lands shall be

applicable only to such lands

(d) Each lease,, sublease, or contract r e l a t i n g to the exploration,

d r i l l i n g , development or operation for Unitized Substances, which by i t s terms

might expire p r i o r to the termination of this agreement, is hereby extended beyond

any such term so provided therein so that i t shall be continued i n f u l l force and

effect for and during the term of this agreement, as to the land committed so

lone as such lease remains subieet hereto

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(e) Any .ease embracing lar.i:- :>f tne 5 tate : i Nev.? Mexico vhich i s made

subject to t h i s agreement s h a l l conti~oe ir? rnrce behind i r e term provided t h e r e i n

as to the lands committee hereto u n t i l t?<s t-.-rmmati-n hereof

i f ) Anv lease embracing lard? cf the State oi Ne* Mexico having only

a p o r t i o n of i t s lands committed hereto s h a l l be segregated as to the p o r t i o n

committed and as to the p o r t i o n not committed and the terms of such lease s h a l l

apply separately as to such segregated port-ens commencing as of the e f f e c t i v e

date hereof Notwith?tanding any ot the orov. 5 ions of thi? agreement to the

cont r a r y , any lease eit.brac ing lands of the State of Nev Mexico having only a

p o r t i o n of i t s lands committed hereto -h-i;; co.rti.nue ir, f u l l force and e f f e c t

beyond the term provided t h e r e i n as to %.., i 'ands embraced i n such lease (whether

w i t h i n or w i t h o u t the Unit Area";, L f o i l or gas are discovered and are capable

of being produced i n paying q u a n t i t i e s from some p a r t of the land? embraced m

such lease committed to t h i s agreement at the e x p i r a t i o n o i cha secondary term of

such lease; or i f , a t the e x p i r a t i o n of the secondary term, the lessee cr the

Unit Operator i s then engaged i n bona f i d e o n . 1 ir.g or reworking c o e r c i o n s on

some p a r t of the lands embraced t h e r e i n . such lease ; h 31 .1 rf.maio i n f u l l

f orce and e f f e c t so long as sunh operations are be ine d i i ige:; T 1 y prosecuted, and

i f they r e s u l t i n the production of U n i ' u e i Substances, said !ea~e s h a l l con­

tinue i n f u l l force and e f f e c t as to a,;, of the lands emc-tuced t h e r e i n , 5.0 long

t h e r e a f t e r as Unit feed Substances are produced i t . pay mg q u a n t i t i e s from any

p o r t I o n o f s a i d 1 a n d •:•

f g ; The segregation of any Federal ..ease committed tc t h i s agreement

i s governed by the f o l l o w i n g p r o v i s i o n ..rs tne f o u r t h paragraph of Section 17<j>

of the Mineral Leasing Act as amended by the Ac t of September 2. i960 Stat.

781 • 78M "Any ( Federa i ) /.ease heretof ore o- h e r e a f t e r ccrraintted t o any such

{ u n i t * p i an embracing lands that, are m p a r t w i t h i n , and i n p a r t out.-ide of the

area covered by any such plan s h a l l be segregated i r i ' ; separate lease; as to the

lands committed and the \ ands no*" committed as of the e f f e c t i v e date of u n i t i z a ­

t i o n , provided, however, th a t any such lease as to the nonumtized p o r t i o n s h a l l

continue i n force and e f f e c t f o r the term thereof but f o r r.ct less mar. two years

from the date of such segregation and so long t h e r e a f t e r as o i l or gas i s produced

m paying q u a n t i t i e s "

SECTION 21 COVENANTS RUN WITH LAND The covenants herein s h a l l be

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construed to be covenants running with the land with respect to the interests of

the parties hereto and the i r successors i n interests u n t i l t h i s agreement

terminates,, and any grant, transfer, or conveyance of interest in land or leases

subject hereto shall be and hereby i s conditioned upon the assumption of a l l

privileges and obligations hereunder by the grantee, transferee, or other

successor i n interest, No assignment or transfer of any Working Interest subject

hereto shall be binding upon Unit Operator u n t i l the f i r s t day of the calendar

month a f t e r Unit Operator i s furnished with the o r i g i n a l , photostatic or c e r t i ­

fied copy of the instrument of transfer; and no assignment or transfer of any

Royalty Interest shall be binding upon the Working interest Owner responsible

therefor u n t i l the f i r s t day of the calendar month after said Working Interest

Owner i s furnished with the o r i g i n a l , photostatic or c e r t i f i e d copy of the

instrument of transfer.

SECTION 24 EFFECTIVE DATJ_AND_TERM This agreement shall become

binding upon each party who executes or r a t i f i e s i t as of the date of execution

or r a t i f i c a t i o n by such party and shall become effective as of 7.00 o'clock A.M.

cf the f i r s t day of the calendar month next following

(a) The execution or r a t i f i c a t i o n of this agreement and the Unit

Operating Agreement by Working Interest Owners owning Tracts with a combined

Phase 111 Unit P a r t i c i p a t i o n of at least eighty-five percent (85%), and the

execution or r a t i f i c a t i o n of this agreement by Royalty Owners owning Tracts with

a combined interest of at least s i x t y - f i v e percent (65%) of the Royalty Interest

in the Unit Area, calculated on the basis of Phase I I I Unit Participations; and

(b) The approval of th i s agreement by the Commissioner, the Director

or his duly authorized representative, and the Commission; and

(c) The f i l i n g of at least one counterpart of thi s agreement for

record in the o f f i c e of the County Clerk of Lea County, New Hexico, by the Unit

Operator; and provided,, further, that i f (a), (b) and (c) above are not

accomplished on or before August 1, 1969, th i s agreement shall ipso facto expire

on said date (hereinafter called "expiration date'') and thereafter be of no

furtner force or e f f e c t , unless p r i o r thereto t h i s agreement has been executed

or r a t i f i e d by Working Interest Owners owning Tracts with a combined Phase I I I

Unit P a r t i c i p a t i o n of at least eighty percent (80%), ana the Working Interest

Owners owning Tracts with a combined Phase 111 Unit P a r t i c i p a t i o n of at least

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s i x t y - f i v e percent (65%) committed to this agreement have decided to extend said

expiration date for a period not to exceed six (6) months (hereinafter called

''extended expiration date"). I f said expiration date is so extended and (a), (b)

and (c) are not accomplished on or before said extended expiration date, this

agreement shall ipso facto expire on said extended expiration date and thereafter

be of no farther force and e f f e c t .

Unit Operator s h a l l , w i t h i n t h i r t y 130) days after the effective date

of this agreement, f i l e for record i n the of f i c e where a counterpart of this

agreement is recorded, a c e r t i f i c a t e to the ef f e c t that t h i s agreement has become

effe c t i v e according to i t s terms and stating further the effective date

The term of this agreement shal; be for and during the time that

Unitized Substances are or can be produced in paying quantities from the Unitized

Land and so long thereafter as d r i l l i n g , reworking or other operations (including

secondary recovery operations) are prosecuted thereon without cessation of more

than ninety (90) consecutive days, and so long thereafter as such Unitized Sub­

stances can be produced as aforesaid

This agreement may be terminated at any time with the approval of the

Commissioner and the Director by Working Interest Owners owning Tracts with a

combined Phase TII Unit Participation of at ieast seventy-five percent (75%).

Notice of any such termination shall be given by Unit Operator to a i l parties

hereto.

Upon termination of th i s agreementj the parties hereto shall be

governed by the terms and provisions of the leases and contracts affecting the

separate Tracts,

I f not otherwise covered by the leases u n i t ^ e d under this agreement,

Royalty Owners hereby grant Working Interest Owners a period of six (6) months

afte r termination of this agreement in which to salvage, s e l l , d i s t r i b u t e or

otherwise dispose of the personal property and f a c i l i t i e s used in connection

with Unit Operations

SECTION 25- RATE OF PROSPECTING. DEVELOPMENT AND PRODUCTION, All

production and the disposal thereof shall be m conformity with allocations and

quotas made or fixed by any duly authorized person or regulatory body under any

Federal or State statute. The Director is hereby vested with authority to alter

or modify from time to time, in his discretion, the rate of nmtna-t *inn ar,A

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development and to a l t e r or modify the quantity and rate of production under this

Agreement, such authority being hereby limited to a l t e r a t i o n or modification i n

the public interest, the purpose thereof and the public interest to be served

thereby to be stated i n the order of a l t e r a t i o n or modification; provided,

further, that no such a l t e r a t i o n or modification shall be effective as to any

land of the State of New Mexico as to the rate of prospecting and development i n

the absence of the specific w r i t t e n approval thereof by the Commissioner and as

to any lands of the State of New Mexico or privately-owned lands subject to this

agreement as to the quantity and rate of production i n the absence of specific

w r i t t e n approval thereof by the Commission

Powers i n t h i s Section vested in the Director and Commissioner shall

only be exercised a f t e r notice to Unit Operator and opportunity for hearing to

be held not less than f i f t e e n days from notice

SECTION 26, NpjJDJSC^IMINATTON. In connection with the performance of

work under t h i s agreement, the Unit Operator agrees to comply with a l l of the

provisions of Section 202 (1) to (7) inclusive, of Executive Order 112&6 (30 F,R.

12319), which are hereby incorporated by reference i n this agreement

SECTION 27. APPEARANCES Unit Operator shall have the ri g h t to appear

for or on behalf of any and a l l interests affected hereby before the Commissioner

the Department, and the Commission, and to appeal from any order issued under the

rules and regulations of the Commissioner, the Department, or the Commission, or

to apply for r e l i e f from any of said rules and regulations cr in any proceedings

r e l a t i v e to operations before the Commissioner, the Department, or the Commission

or any other le g a l l y constituted authority; provided, however, that any other

interested party shall also have the r i g h t at his or i t s own expense to be heard

in any such proceeding.

SECTION 28, NOTICES A l l notices, demands, objections or statements

required hereunder to be given or rendered to the parties hereto sha]S be deemed

f u l l y given i f made i n w r i t i n g and personally delivered to the party or parties

or sent by postpaid c e r t i f i e d mail, addressed to such party or parties at their

respective addresses set f o r t h i n connection with the signature hereto or to the

r a t i f i c a t i o n or consent hereof or to such other address as any such party or

parties may have furnished i n w r i t i n g to the party sending the notice, demand or

statement

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SECTION 29. NO WAIVER OF CERTAIN RIGHTS Nothing m th i s agreement

contained shall be construed as a waiver by any narty hereto of the r i g h t to

assert any legal or con s t i t u t i o n a l r i g h t or defense as to the v a l i d i t y or i n ­

v a l i d i t y of any Federal or State law or rule or regulation issued thereunder i n

any way affec t i n g such party, or as a waiver by any such party or any r i g h t

beyond his or i t s authority to waive

SECTION 30. WAIVER OF.RIGHTS, TO PARTITION, Each party hereto covenants

that, during the existence of this agreement, i t w i l l not resort to any action

to p a r t i t i o n the Unitized Formation or the Unit Equipment; and to that extent

waives the benefits of a l l laws authorizing such p a r t i t i o n .

SECTION 31. yMVpJDABl^.DELAY A l l obligations under th i s agreement

requiring the Unit Operator to commence or continue secondary recovery operations

or to operate on or produce Unitized Substances from any of the lands covered by

this agreement shall be suspended while, but only so long as the Unit Operator

despite the exercise of due care and diligence, i s prevented from complying with

such obligations, i n whole or i n part, by strikes, acts of God, Federal, State or

municipal law or agency, unavoidable accident, uncontrollable delays i n trans­

portation, i n a b i l i t y to obtain necessary materials in open market, or other

matters beyond the reasonable control of the Unit Operator whether similar to

matters herein enumerated or not. Nothing herein shall be construed to require

Unit Operator to s e t t l e strikes against i t s w i l l

SECTION 32. iMS_piJ_TJTLE. In the event t i t l e to any Tract of Unitized

Land shall f a i l so as to render the Tract inoperable under this agreement and che

true owner cannot be induced to j o i n t h i s Unit Agreement, such Tract shall be

automatically regarded as not committed hereto and there shall be such readjust­

ment of future costs and benefits as may be required on account of the loss of

such t i t l e I f a Tract ceases to be subject to thi s agreement because of the

f a i l u r e of t i t l e , Unit Operator, subject to Section Tract Participation,

hereof, shall recompute the Tract P a r t i c i p a t i o n of each of the Tracts remaining

q u a l i f i e d for p a r t i c i p a t i o n and shall revise Exhibits "A", ''B" and "C" accord­

ingly The revised exhibits shall be ef f e c t i v e as of the f i r s t day of the

calendar month i n which such f a i l u r e of t i t l e i s f i n a l l y determined.

I f t i t l e to a Working Interest f a i l s , the rig h t s and obligations of

Working Interest Owners by reason of the f a i l u r e of t i t l e shall be governed by

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the Unit Operating Agreement. I f t i t l e to a Royalty Interest f a i l s , but the Tract

to which i t relates remains q u a l i f i e d , the parties whose t i t l e f a i l e d shall not

be e n t i t l e d to share hereunder with respect to such interest. In the event of a

dispute as to t i t l e as to any Royalty, Working Interest or other interest subject

thereto, payment or delivery on account thereof may be withheld without l i a b i l i t y

or interest u n t i l the dispute i s f i n a l l y settled; provided, that as to State or

Federal land or leases, no payments of funds due the State of New Mexico or the

United States of America shall be withheld, but such funds shall be deposited as

directed by the Commissioner or the Supervisor (as the case may be), to be held

as unearned money pending f i n a l settlement of the t i t l e dispute, and then applied

as earned or returned i n accordance with such f i n a l settlement

Unit Operator as such is relieved from any r e s p o n s i b i l i t y for any defect

or f a i l u r e of any t i t l e hereunder.

SECTION 33. JOINDER IN DUAL CAPACITY, Execution as herein provided by

any party either as a Working Interest Owner or as a Royalty Owner shall commit

a l l interests that may be owned or controlled by such party.

SECTION 34. NONJOINDER AND SUBSEQUENT JOINDER. I f the owner of any

substantial i n t e r e s t i n a Tract w i t h i n the Unit Area f a i l s or refuses to sub­

scribe or consent to thi s agreement, the owner of the Working Interest i n that

Tract may withdraw said Tract from this agreement by w r i t t e n notice to the

Supervisor, the Commissioner and the Unit Operator p r i o r to the approval of this

agreement by the Supervisor and the Commissioner. Any o i l or gas interests in

lands w i t h i n the Unit Area not committed hereto p r i o r to submission of t h i s

agreement for f i n a l approval may thereafter be committed hereto by the owner or

owners thereof subscribing or consenting to thi s agreement, and, i f the interest

i s a working interest, by the owner of such interest also subscribing to the Unit

Operating Agreement, After operations are commenced hereunder, the r i g h t of sub­

sequent joinder, as provided i n this section, by a Working Interest Owner is

subject to such requirements or approvals, i f any, pertaining to such joinder,

as may be provided for i n the Unit Operating Agreement. After f i n a l approval

hereof, joinder by a non-Working Interest Owner must be consented to i n w r i t i n g

by the Working Interest Owner committed hereto and responsible for the payment

of any benefits that may accrue hereunder i n behalf of such non-Working Interest.

Joinder by any Royalty Owner, at any time, must be accompanied by appropriate

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joinder of the corresponding Working Interest Owner i n order for the interest of

such Royalty Owner to be regarded as e f f e c t i v e l y committed Joinder to the Unit

Agreement by a Working Interest Owner, at any time, must be accompanied by

appropriate joinder to the Unit Operating Agreement i n order for such interest to

be regarded as e f f e c t i v e l y committed to thi s Unit Agreement

The r i g h t of subsequent joinder as provided in th i s Section shall be

subject to such requirements or approvals and on such basis as may be agreed upon

by Working Interest Owners owning Tracts with Phase i l l P a r t i c i p a t i o n of at least

eighty percent (80%) and approval of the Supervisor and the Commissioner.

Provided that the Tract p a r t i c i p a t i o n of each previously q u a l i f i e d Tract shall

remain i n the same r a t i o one to the other Such joinder by a proposed Working

Interest Owner must be evidenced by his execution or r a t i f i c a t i o n of this agree­

ment and the Unit Operating Agreement. Such joinder by a Royalty Owner must be

evidenced by his execution or r a t i f i c a t i o n of this agreement and must be con­

sented to i n w r i t i n g by the Working Interest Owner responsible for the payment

of any benefits that may accrue hereunder in behalf of such Royalty Owner,

Except as may be otherwise herein provided, subsequent joinder to this agreement

shall be effe c t i v e at 7;00 o'clock A.M, as of the f i r s t day of the month follow­

ing the f i l i n g with the Commissioner and the Supervisor of duly executed counter­

parts of any and a l l documents necessary to establish effective commitment of any

Tract or interest to thi s agreement, unless objection to such joinder by the

Commissioner or the Supervisor i s duly made w i t h i n six t y (60) days a f t e r such

f i l i n g ; provided, however, that as to State lands such subsequent joinder must be

approved by the Commissioner.

I t is expressly agreed by the parties hereto that the provisions of

thi s Section 34 are made subject to the provisions of Section 15 hereinabove set

fo r t h and nothing contained herein shall be construed i n contravention or dero­

gation thereof.

SECTION 35. COUNTERPARTSo This agreement may be executed i n any

number of counterparts, no one of which needs to be executed by a l l parties and

may be r a t i f i e d or consented to by separate instrument i n w r i t i n g s p e c i f i c a l l y

r e f e r r i n g hereto, and shall be binding upon a l l those parties who have executed

such a counterpart, r a t i f i c a t i o n or consent hereto with the same force and effect

as i f a l l parties had signed the same document, and regardless of whether or not

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i t i s executed by a i l other parties owning or claiming an interest i n the land

w i t h i n the above described Unit Area.,

SECTION 36. TAXES. The Working Interest Owners shall render and pay

or cause to be rendered and paid for their account and the account of the Royalty

Owners a l l v a l i d taxes on or measured by the Unitized Substances i n and under or

that may be produced, gathered and sold from the land subject to this agreement

a f t e r the effective date of this agreement, or upon the proceeds or net proceeds

derived therefrom. The Working Interest Owners tn each Tract may charge the

proper proportion of said taxes to the Royalty Owners having interests in said

Tract, and may currently r e t a i n and deduct s u f f i c i e n t of the Unitized Substances

or derivative products, or net proceeds thereof,, from the allocated share of each

Royalty Owner to secure reimbursement for the taxes so paid No such taxes shall

be charged to the United States or the State of New Mexico or to any lessor who

has a contract with his lessee to pay such taxes.

In order to avoid t i t l e f a i l u r e which might inc i d e n t a i i y cause the

t i t l e to a Working Interest or Royalty Interest to f a i l , the owners of (1) the

surface rights to each committed Tract, (2) severed mineral or Royalty Interest

m said Tracts and (3) improvements located i n said Tracts not u t i l i z e d for Unit

operations shall i n d i v i d u a l l y be responsible for the rendition and assessment,

for ad valorem tax purposes, of a l l such property, and for the payment of such

taxes, except as otherwise provided i n any contract or agreement between such

owners and a Working Interest Owner or Owners I f any ad valorem taxes are not

paid by such owner responsible therefor when due, Unit Operator may, at any time

p r i o r to tax sale, pay the same, redeem such property and discharge such tax l i e n

as may arise through non-payment, In the event Unit Operator makes any such

payment or redeems any such property from tax sale. Unit Operator shall be re­

imbursed therefor by the Working Interest Owners In proportion to t h e i r respective

Unit Participations then i n e f f e c t , and Unit Operator shall withhold from any

proceeds derived from the sale of Unitized Substances otherwise due to said

delinquent taxpayer or taxpayers an amount s u f f i c i e n t to defray the costs of

such payment or redemption, such withholding to be d i s t r i b u t e d among the Working

Interest Owners i n proportion to t h e i r respective contributions toward such pay­

ment or redemption. Such withholding shall be without prejudice to any other

remedy, either at law or i n equity, which may be available for exercise by the

Page 57: SKELLY OIL COMPANY - New Mexico Department of Energy ...ocdimage.emnrd.state.nm.us/imaging/filestore... · SKELLY OIL COMPANY P. O. BOX 1650 EXPLORATION AND PRODUCTION JUDD H. OUALLINE

Unit Operator or by the Working Interest Owners

SECTION 37. CONFLICT OF SUPERVISION, Neither the Unit Operator nor

the Working Interest Owners, nor any of them, shall be subject to any f o r f e i t u r e ,

termination or expiration of any rights hereunder or under any leases or contracts

subject hereto, or to any penalty or l i a b i l i t y on account of delay or f a i l u r e i n

whole or i n part to comply with any applicable provisions thereof to the extent

that the said Unit Operator or the Working Interest Owners, or any of them, are

hindered, delayed or prevented from complying therewith by reason of f a i l u r e of

the Unit Operator to obtain, i n the exercise of due diligence, the concurrence

of proper representatives of the United States and proper representatives of the

State of New Mexico i n and about any matters or things concerning which i t i s

required herein that such concurrence be obtained. The parties hereto, including

the Commission, agree that a i l powers and authority which by any provisions of

this agreement are vested i n the Commission shall be exercised by i t pursuant

to the provisions of the laws of the State of New Mexico and subject in any case

to appear or j u d i c i a l review as may now or hereafter be provided by the laws of

the State of New Mexico

SECTION 38 NO PARTNERSHIP. The duties, obligations and l i a b i l i t i e s

of the parties hereto are intended to be several and not j o i n t or col l e c t i v e

This agreement i s not intended to create, and shall not be construed to create,

an association or t r u s t , or to impose a partnership duty, obligation or l i a b i l i t y

with regard to any one or more of the parties hereto Each party hereto shall

be i n d i v i d u a l l y responsible for i t s own obligations as herein provided,

SECTION 39. BORDER_AGREEMENTS Unit Operator, with concurrence of

Working Interest Owners having a combined Phase I I I Unit P a r t i c i p a t i o n of sixty-

five percent (65%) or mores may, subject to approval of the Supervisor, enter

into a border-protection agreement or agreements with the Working Interest Owners

of adjacent lands along the exterior boundary of the Unit Area with respect to

the operations i n the border area for the maximum ultimate recovery, conservation

nnrnnsps and n r o n e r n r n t p c t i n n r>f the n a r f i p s and i n f p r p s f s

Page 58: SKELLY OIL COMPANY - New Mexico Department of Energy ...ocdimage.emnrd.state.nm.us/imaging/filestore... · SKELLY OIL COMPANY P. O. BOX 1650 EXPLORATION AND PRODUCTION JUDD H. OUALLINE

IN WITNESS WHEREOF, the parties hereto have caused t h i s agreement to

be executed and have set opposite t h e i r respective names the date of execution.

SKELLY OIL COMPANY

By- _ _ _ _ _ _ _ _ _ _ _ Vice President

UNIT OPERATOR

ATTEST;

Assistant Secretary

Dates

NON-OPERATORS

STATE OF NEW MEXICO ) ) SS:

COUNTY OF LEA )

The foregoing instrument was acknowledged before me th i s day of

. _. 1968, by _ , Vice President for SKELLY OIL COMPANY, on behalf of said company.

Notary Public

My commission expires"

Page 59: SKELLY OIL COMPANY - New Mexico Department of Energy ...ocdimage.emnrd.state.nm.us/imaging/filestore... · SKELLY OIL COMPANY P. O. BOX 1650 EXPLORATION AND PRODUCTION JUDD H. OUALLINE

WEST DOLLARHIDE DRINKARD UNIT LEA COUNTY, NEW MEXICO

EXHIBIT "A" i i n i i i i i n i UNIT BOUNDARY

V / / / / / A FEDERAL LANDS

| | STATE LANDS

| | FEE LANDS

Q TRACT NUMBER

. I A N I C I C f l

Page 60: SKELLY OIL COMPANY - New Mexico Department of Energy ...ocdimage.emnrd.state.nm.us/imaging/filestore... · SKELLY OIL COMPANY P. O. BOX 1650 EXPLORATION AND PRODUCTION JUDD H. OUALLINE

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Page 69: SKELLY OIL COMPANY - New Mexico Department of Energy ...ocdimage.emnrd.state.nm.us/imaging/filestore... · SKELLY OIL COMPANY P. O. BOX 1650 EXPLORATION AND PRODUCTION JUDD H. OUALLINE

ro U l

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Page 70: SKELLY OIL COMPANY - New Mexico Department of Energy ...ocdimage.emnrd.state.nm.us/imaging/filestore... · SKELLY OIL COMPANY P. O. BOX 1650 EXPLORATION AND PRODUCTION JUDD H. OUALLINE

EXHIBIT "C"

UNIT AGREEMENT SCHEDULE OF TRACT PARTICIPATION WEST DOLLARHIDE DRINKARD UNIT

LEA COUNTY, NEW MEXICO

Tract No.

1

2

3

4

5

6

7

8 (a) (b)

9 (a) (b)

10 (a) (b)

•JRACTPARTICIPATION (%)

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

Phase I

0.20922

10.24564

4, 79752

0.54318

3.43045

0,88184

0.49068

0.09077 0.50358 0.59435

0.13933 0.76979 0.90912

0.10806 0 600 31 0,70837

1.42746

14 =16922

13 21853

10.96097

18,11256

8, 19712

0 51100

2,46941

0.74186

0.00000

2 86733

0.49689

1.02295

0,32568

2.66865

Phase_II

0.05231

10 48875

5.28622

0.77921

1 72975

0. 3993*-

0.35689

0.04886 0_27J.09 0.31995

0 599-1 04947 1 2 3941

0. 17 550 0^7497

1 15047

0 8L950

13.91421

9.05805

19 40308

2i.960^7

4 55224

0 31266

2 11354

0.54090

0 00000

2 63118

0 14038

0 87362

0.12298

1.75489

Fhase_lII

0. 17797

10.04427

5 1057 6

0.60914

3 04279

1 39563

0 71722

0 11466 0_j63617 0.75083

0. i 3275 0^73345 6.86620

0 12207 0 J6J815

6 80022

1 07269

14 07896

13 34837

14 31710

16 64303

8 99016

0 40994

1.465 70

0 38342

0 05381

1 77 363

0.43796

! 01836

0 2 3285

2 26399 TOTAL 100.00000 100 OOOOO I nn nnnnn

Page 71: SKELLY OIL COMPANY - New Mexico Department of Energy ...ocdimage.emnrd.state.nm.us/imaging/filestore... · SKELLY OIL COMPANY P. O. BOX 1650 EXPLORATION AND PRODUCTION JUDD H. OUALLINE

WORKING INTEREST OWNERS WEST DOLLARHIDE DRINKARD UNIT

LEA COUNTY, NEW MEXICO

*A t l a n t i c Richfield Company (Formerly Sin c l a i r O i l & Gas Company) Attn: Mr. R. F. Sawyer P. 0. Box 1470 Midland, Texas 79701

Baroid Division National Lead Company Attn: Mr. H. L. Richardson, Jr. P. 0. Box 1675 Houston, Texas 77001

Mrs. R. C. Bell 1331 Third Street New Orleans, Louisiana 70130

Mr. Fred J. Brotherton 185 East Palisade Avenue Englewood, New Jersey 07631

Mrs. E. W. Chaney P. 0. Box 285 Roswell, New Mexico 88201

E l l i o t t Production Company P. 0. Box 1355 Roswell, New Mexico 88201

Mr. F. 0. E l l i o t t P. 0. Box 703 Roswell, New Mexico 88201

Featherstone Farms, Ltd. Petroleum Building Roswell, New Mexico 88201

Miss Aileen Gardner 127 LeRoy Place San Francisco, Cali f o r n i a 94109

Gulf O i l Corporation Attn: D i s t r i c t Production Manager P. 0. Box 1938 Roswell, New Mexico 88201

Mr. Ora R. Hall, Jr. P. 0. Box 1754 Roswell, New Mexico 88201

Mr. W. E. Irw i n 3700 Bellaire Drive North Fort Worth, Texas 76109

Mr. J. D. Kennedy 2017 Continental Nat'l. Bank Bldg. Fort Worth, Texas 76102

Mr. Gus Layton 1714 Commerce Building Fort Worth, Texas 76102

Ralph Lowe Estate Attn: Mr. J. A. O'Neill P. 0. Box 832 Midland, Texas 79701

Mr. J. C. Maxwell 2017 Continental Nat'l. Bank Bldg. Fort Worth, Texas 76102

i

Marilyn Maxwell Trust 2017 Continental Nat'l. Bank Bldg. Fort Worth, Texas 76102

Mr. George A. Meihaus, Jr. P. 0. Box 400 Arlington, Texas 76010

Pan American Petroleum Corporation Attn: Mr. B. A. Landis, Jr.

Mr. K. W. Bolt P. 0. Box 1410 Fort Worth, Texas 76101

Reading & Bates, Inc. 11th Floor, Philtower Building Tulsa, Oklahoma 74103

**Skelly Oil Company Attn: Mr. J. R. Teel P. 0. Box 1650 Tulsa, Oklahoma 74102

James H. Snowden Estate 2104 Continental L i f e Bldg. Fort Worth, Texas 76102

Sunshine Royalty Company P. 0. Box 1355 Roswell, New Mexico 88201

Texaco Inc. Attn: Mr. R. D. Rawdon P. 0. Box 3109 Midland, Texas 79704

* Also owns royalty interest. ** Also owns overriding royalty i n t e r e s t .

Page 72: SKELLY OIL COMPANY - New Mexico Department of Energy ...ocdimage.emnrd.state.nm.us/imaging/filestore... · SKELLY OIL COMPANY P. O. BOX 1650 EXPLORATION AND PRODUCTION JUDD H. OUALLINE

ROYALTY INTEREST OWNERS WEST DOLLARHIDE DRINKARD UNIT

LEA COUNTY, NEW MEXICO

Lester Alston Box 1595 Lovington, New Mexico

Addie L Augustine Box 423 Sterling City, Texas

Elizabeth S. Be l l 3308 Covert Avenue Fort Worth, Texas

Ernest B. Blake 72-B Calle Aragon Laguna H i l l s , C a l i f o r n i a 92651

Joseph C. Blake 516 Macomb El Reno, Oklahoma

Daisy D. Blankenship 2103 F i r s t National Building Oklahoma City, Oklahoma

James 0. Bradish 5612 West 79 Street Prarie Village, Kansas

Constance E. Byers 209 West Gate Building 1122 Colorado Street Austin, Texas 78701

Robert E. Byers 212 Austin National Bank Bldg. Austin, Texas 78701

Ronald J. Byers 209 Westgate Building 1122 Colorado Street Austin, Texas 78701

Anderson Carter Box 725 Lovington, New Mexico

E f f i e Carter Box 1296 Roswell, New Mexico

Powhatan Carter, Jr. Box 328 Fort Sumner, New Mexico

The City National Bank Mineral Wells, Texas

Georgia Lee Clarke Box 70 Oklahoma City, Oklahoma 73101

Georgia Lee Clarke Box 70 Oklahoma City, Oklahoma 73101

Continental National Bank of Fort Worth

Guardian of Estate of Ford Bradish, Jr.

c/o Trust Department P. 0. Box 910 Fort Worth, Texas 76101

*Hugh Corrigan I I I Station 1, Drawer HC Vero Beach, Florida 32960

*J. Patrick Corrigan Station 1, Drawer CR Vero Beach, Florida 32960

Je t t Cowden Estate P. 0. Box 305 Jal Ranch Alvarado, Texas 76009

Juanita Brants Dacy Route 5, Box 197 Fort Worth, Texas 76116

C. S. Daley

Myrtle L. Davis 3324 Eastman Drive Oklahoma City,. Oklahoma 73112

H. M. Dow Box 10 Roswell, New Mexico

Margaret R. E l l i s o n c/o E l l i s o n & Holmes 701 F i r s t National Building Oklahoma City, Oklahoma 73102

Elizabeth L. Ehrhart 3014 East 6 Street Tucson, Arizona

Roy F. Faskin 140S North Pennsylvania Oklahoma City, Oklahoma

Ida H a r r i e t t Fellers Box 365 San Jon, New Mexico

Geneva B. Gardner, Administratrix of Estate of Mary C. Beeson

Box 931 Roswell, New Mexico

* Also owns overriding rovaltv Interest.

Page 73: SKELLY OIL COMPANY - New Mexico Department of Energy ...ocdimage.emnrd.state.nm.us/imaging/filestore... · SKELLY OIL COMPANY P. O. BOX 1650 EXPLORATION AND PRODUCTION JUDD H. OUALLINE

Royalty Interest Owners West Dollarhide Drinkard Unit Page Two

Kate G. Gilbert 411 South Missouri Avenue Roswell, New Mexico

Carrie Ellen Thomas Hair 12531 Old River School Road Downey, Cal i f o r n i a 90242

R. W. Hamilton 2206 Woodmont Austin, Texas

R. F. Imbt 4218 Kenwood Court Fort Worth, Texas

Mrs. Elizabeth R. Lamb 125 Riverside Drive Greenwood, Mississippi

Ervin J. Levers Box 1691 Roswell, New Mexico 88201

Forest E. Levers Box 1691 Roswell, New Mexico 88201

Harrison Levy, Executor of Estate of Harry Levy

709 Mercantile Building 30 North Hudson Street Oklahoma City, Oklahoma 73102

Paul and Martha Lyon Geary, Oklahoma

Eugenia H i l l Maxwell 2017 Continental National Bank Bldg. Fort Worth, Texas 76102

J. B. McGhee c/o Trust Department F i r s t National Bank Santa Fe, New Mexico

Beverly B. Nelson 2534 South Evanston Tulsa, Oklahoma 74114

Joseph Nelson

Veva K. Nelson 2412 Argosy Way Hollywood, Ca l i f o r n i a

State of New Mexico Commissioner of Public Lands Santa Fe, New Mexico

Tom A. Peays Robert Lee, Texas

Rocket Oil & Gas Company Attn: Mr. Stanley Singer Philtower Building Tulsa, Oklahoma 74103

Ada Mae Hair Rosebrough 3105 Pontiac Farmington, New Mexico 87401

Royalty Holding Company 4540 N. W. 10th Street Oklahoma City, Oklahoma 73107

H. D i l l a r d Schenck Box 1225 Lovington, New Mexico

J. E. Simmons Box 548 Lovington, New Mexico

Jean Simmons Shipley Box 548 Lovington, New Mexico

Earle M. Simon 2705 N. W. 25 Street Oklahoma City, Oklahoma 73107

* * A t l a n t i c Richfield Company (Formerly S i n c l a i r O i l & Gas Company)

P. 0. Box 521 Tulsa, Oklahoma 74102

June D. Speight Drawer 1687 Lovington, New Mexico

June D. Speight A/C Drawer 1687 Lovington, New Mexico

Georgia L. Stephen 1507 East 17 Street Odessa, Texas

Helen Swanson 1110 Chestnut Street Chico, Cali f o r n i a

United States Geological Survey Roswell, New Mexico

Fern Vance 1513 Grand Avenue Fort Worth, Texas. 76106

Leslie E. Vance 2516 Fairway Drive Fort Worth, Texas 76119

Neva Vance 3312 Creston Avenue Fort Worth, Texas 76115

** Also owns working i n t e r e s t .

Page 74: SKELLY OIL COMPANY - New Mexico Department of Energy ...ocdimage.emnrd.state.nm.us/imaging/filestore... · SKELLY OIL COMPANY P. O. BOX 1650 EXPLORATION AND PRODUCTION JUDD H. OUALLINE

Royalty Interest Owners West Dollarhide Drinkard Unit Page Three

Rex B. Vance P. 0. Box 105 Granbury, Texas 76048

Elmer H. Wahl 6 Oakwood Drive Oklahoma City, Oklahoma 73111

Mrs. Hattie C. Williams 3208 - 29th Street Lubbock, Texas

A. W. Wuestenberg 2841 N. W. 17 Street Oklahoma City, Oklahoma

Page 75: SKELLY OIL COMPANY - New Mexico Department of Energy ...ocdimage.emnrd.state.nm.us/imaging/filestore... · SKELLY OIL COMPANY P. O. BOX 1650 EXPLORATION AND PRODUCTION JUDD H. OUALLINE

OVERRIDING ROYALTY INTEREST OWNERS WEST DOLLARHIDE DRINKARD UNIT

LEA COUNTY, NEW MSXICO

Albuquerque National Bank Testamentary Trustee of

Frank A. Andrews Albuquerque, New Mexico

Mrs. Selma E. Andrews Agency No. 1335 c/o Trust Department Republic National Bank of Dallas P. 0. Box 241 Dallas, Texas 75221

R. S. Chancellor P. 0. Box 391 Midland, Texas

L i l l i a n H. Coll, Individually and as Executrix and Trustee under w i l l of M. W. Coll

P. 0. Box 919 Roswell, New Mexico

W. B. Collins P. 0. Box 271 Midland, Texas

*Hugh Corrigan I I I Station 1, Drawer HC Vero Beach, Florida 32960

*J. Patrick Corrigan Station 1, Drawer CR Vero Beach, Florida 32960

F. F e r r e l l Davis 1967 Trust c/o The F i r s t Nat'l. Bank of Midland Attn: Mr. R. L. Noah P. 0. Box 270 Midland, Texas 79701

F i r s t National Bank of Denver Testamentary Trustee of Estate

of Josephine M. Smith P. 0. Box 5590 TA Denver, Colorado 80217

F i r s t National Bank of Denver Trustee of Estate of Charles T. Lupton P. 0. Box 5590 TA Denver, Colorado 80217

Fort Worth Nat'l. Bank Trustee Magruder Fort Worth National Bank Bldg. Fort Worth, Texas

Harold Everett Hults 3030 We s t c l i f f Road South Fort Worth, Texas

* Also owns royalty i n t e r e s t . ** Also owns working i n t e r e s t .

Helen M. K o l l i k e r 3812 H i l l c r e s t Drive El Paso, Texas

John M. Loffland, Jr. 261 Rowan Building Fort Worth, Texas 76116

Mrs. Myrtle A. Martin Box 362 Richardson, Texas

Roger B. Owings 1814 Fair Building Fort Worth, Texas

Gracean M. Pedley 115 McGoodwin Avenue Princeton, Kentucky

T. A. Pedley, Jr. 4025 East 22 Avenue Denver, Colorado

Neville G. Penrose Fair Building Fort Worth, Texas

Petroleum Land & Royalty Syndicate c/o Hyman L. Battle, Jr. Trustee Old Orchard Road, Washington Valley Morristown, New Jersey 07960

**Skelly O i l Company Attn: Mr. J. R. Teel P. 0. Box 1650 Tulsa, Oklahoma 74102

Fred B. & J u l l i e t t e M. Turner Box 910 Midland, Texas

E f f i e E. Valentine Attn: Trust Department International Trust Company Denver, Colorado

The W. K. Warren Foundation P. 0. Box 1589 Tulsa, Oklahoma 74101

Page 76: SKELLY OIL COMPANY - New Mexico Department of Energy ...ocdimage.emnrd.state.nm.us/imaging/filestore... · SKELLY OIL COMPANY P. O. BOX 1650 EXPLORATION AND PRODUCTION JUDD H. OUALLINE

PROPOSED DOLLARHID;- DRINKARD UNIT

ELLIOTT & ELLIOTT, INC.

Federal "H" Well No. 7 480' FNL & 1650' FEL, Section 31, T 24 S, R 38 E

Lea County, New Mexico •

ilevacion: 3136 D.F

TOD Cement @ 2990'

TOP Tubb 5976

BEFORE EXAMINER UTZ OIL CONSERVATION C0MA\iSS!Or-

EXHIBIT NO

CASE NO.

Too Drinkard 6306'

SKELLY OIL CO.

EXHIBIT NO.

DOCKET OR DCKET OR • / / - ? < /

CASE NO Yry /

DATE S-JZi/M T.D. 6521'

10 3/4" Csg. Set © 208" Cmt. W/150 Sks. Circ.

7 5/8" Csg. Set @ 3020' W/450 Sks. Circ.

2 3/8" Tubing,Internal Coated

Double Crip Packer @ approx. 6350'.

5 1/2" Csg. Set @ 6400' W/400 Sks.

6400'.

iOpenhole

Page 77: SKELLY OIL COMPANY - New Mexico Department of Energy ...ocdimage.emnrd.state.nm.us/imaging/filestore... · SKELLY OIL COMPANY P. O. BOX 1650 EXPLORATION AND PRODUCTION JUDD H. OUALLINE

PROPOSED DOLLARHIDE DRINKARD UNIT

ELLIOTT AND HALL ELLIOTT "R" WELL NO. 1

2310' FNL & 330' FEL, Section 31-24S-33E Lea County, New Mexico

16" Csg. Set & 161' W/125 Sks. Circ.

10 3/4" Csg. Set @ 3009' W/2500 Sks. Cement Top Calc. @ 693'

2 3/8" Tubing,:Internally Coated

Double Grip Packer @ Approx 6275'

7" Csg. Set © 6325' W/400 Sks.

6325' Openhole

6488'

T.D.6488'

Page 78: SKELLY OIL COMPANY - New Mexico Department of Energy ...ocdimage.emnrd.state.nm.us/imaging/filestore... · SKELLY OIL COMPANY P. O. BOX 1650 EXPLORATION AND PRODUCTION JUDD H. OUALLINE

PRuPOSED DOLLARHIDE DRINKARD UNIT

GULF OIL CORPORATION LEONARD"G"WELL KO. 11

990' FNL & 990' FWL, Section 33-24 S- 38 E Lea County, New Mexico

.levation: 3193' D. F.

Coo Cement @ 2845'

?op Tubb 6193'

Top Drinkard 6512'

Top Abo 6748'

PBTD 6945'

13 3/4" Csg. Set @ 327' W/350 Sks. Circ.

9 5/8" Csg. Set @ 2903' W/850 Sks. Circ.

2 3/8" Tubing,' I n t e r n a l l y Coated

Double Grip Packer © Approximately 6500'

6555'

6725'

S765' 6835' 6875' 6896'

7" Csg. Set @ 6959' W/7S0 Sks.

PERFORATIONS

T. D. 8170'

Page 79: SKELLY OIL COMPANY - New Mexico Department of Energy ...ocdimage.emnrd.state.nm.us/imaging/filestore... · SKELLY OIL COMPANY P. O. BOX 1650 EXPLORATION AND PRODUCTION JUDD H. OUALLINE

PROPOSED DOLLARHIDE DRINKARD UNIT

GULF OIL CORPORATION LEONARD "G" WELL NO. 12

I960' FNL & 630' FEL, Section 4, T 25 S, R 38 E Lea County, New Mexico

Elevation: 3167' K.B.

D. V. Tool @ 1254' Cement Circ. above Tool. (Calc.)

Top Tubb 6147'

Too Drinkard 6458'

Top Abo 6692'

"i i - - — - ^ - A i • ^4

T. D. 68.40'

10 3/4" Csg. Set @ 299' W/300 Sks. Circ.

Top Cement @ 2472'. Below D. V. Tool.(Calc.)

2 3/8" Tubing,: I n t e r n a l l y Coated.

Double Grip Packer @ Approx. 6250'

7" Csg. Set @ 6309' W/1010 Sks.

6309'

6840' Openhole

Page 80: SKELLY OIL COMPANY - New Mexico Department of Energy ...ocdimage.emnrd.state.nm.us/imaging/filestore... · SKELLY OIL COMPANY P. O. BOX 1650 EXPLORATION AND PRODUCTION JUDD H. OUALLINE

PROPOSED DOLLARHIDE DRINKARD UNIT

GULF OIL CORPORATION LEONARD "G" WELL NO. 14

1980' FSL 6c 660' FWL, Section 33, T 24 S, R 38 E Lea County, New Mexico

T. D. 6870' W/1236 Sks.

Page 81: SKELLY OIL COMPANY - New Mexico Department of Energy ...ocdimage.emnrd.state.nm.us/imaging/filestore... · SKELLY OIL COMPANY P. O. BOX 1650 EXPLORATION AND PRODUCTION JUDD H. OUALLINE

PWOSED DOLLARHIDE DRINKARD UNIT

GULF OIL CORPORATION LEONARD "G" WELL NO. 15

560' FSL & 781' FEL, Section 33, T 24 S, R 33 E Lea County, New Mexico

rvation: 3172' D. F.

D. V. Tool @ 1118' Cement Circ. Above Tool

:on Tubb 6080'

Top Drinkard 6412

•Top Abo 6657'

.9 5/8" Csg. Set @ 295 ' W/275 Circ.

Top Cement (3 2S68* Below D. V. Tool (Calc.)

2 3/8" Tubing I n t e r n a l l y Coated

Double Grip Packer © Approx. 6200'

7" Csg. Set @ 6250 W/810 Sks.

6250'

6850' Onenhole

T. D. 6850'

Page 82: SKELLY OIL COMPANY - New Mexico Department of Energy ...ocdimage.emnrd.state.nm.us/imaging/filestore... · SKELLY OIL COMPANY P. O. BOX 1650 EXPLORATION AND PRODUCTION JUDD H. OUALLINE

PROPOSED DOLLARHIDE DRINKARD UNIT

GULF OIL CORPORATION LEONARD "G" WELL NO. 19

990' FNL & 330' FWL, Section 4, T 25 S, R 38 E Lea County, New Mexico

Elevation: 3165' K.B.

D. V. Tool @ 1142* Cement Circ. Above Tool

Top Tubb 6025'

?op Drinkard 6327'

Top Abo 6560"

9 5/8" Csg. Set % 413' W/275 Sks. Circ.

Top Cement © 1468' Below D. V. Tool (Calc.)

2 3/8" Tubing I n t e r n a l l y Coated

Double Grip Packer @ Approx. 6043'

x 6093'

• PERFORATIONS

, 6330'

7" Csg. Set © 6389' W/1T25 Sks.

i3389*

- 6 8 7 0 ' Openhole

T. D. 6870'

Page 83: SKELLY OIL COMPANY - New Mexico Department of Energy ...ocdimage.emnrd.state.nm.us/imaging/filestore... · SKELLY OIL COMPANY P. O. BOX 1650 EXPLORATION AND PRODUCTION JUDD H. OUALLINE

PROPOSED DOLLARHIDE DRINKARD UNIT

CULF OIL CORPORATION LEONARD WELL NO. 2

629' FEL & 1980' FNL, Section 33, T 24 S, R 38 E Lea County, New Mexico

T.D. 6900'

Page 84: SKELLY OIL COMPANY - New Mexico Department of Energy ...ocdimage.emnrd.state.nm.us/imaging/filestore... · SKELLY OIL COMPANY P. O. BOX 1650 EXPLORATION AND PRODUCTION JUDD H. OUALLINE

PROPOSED DOLLARHIDE DRINKARD UNIT

GULF OIL CORPORATION W. A. RAMSAY "D" WELL NO. 2

660' FSL & 779' FEL, Section 28, I 24 S, R 38 E Lea County, New Mexico

. ievatior 3201 D

;o Tubb @ 6268-

Top Drinkard 659.7'

Top Abo 6796'

PBTD 7340'

A N 2 3 3/8" Csg. Sot & 310' f—^W/335- Sks, Circ.

9 5/8" Csg. Set @ 2999' W/1595 Sks. Top Cement 406'

Top Cement @ 5271'

2 3/8" Tubing I n t e r n a l l y Coated

Double Grip Packer @ Approx. 6600'

6650'

6728' 6742'

6795" 6808'

6832'

PERFORATIONS

7" Csg. Se: 8030' W/387 Sks.

T.D. 8277'

Page 85: SKELLY OIL COMPANY - New Mexico Department of Energy ...ocdimage.emnrd.state.nm.us/imaging/filestore... · SKELLY OIL COMPANY P. O. BOX 1650 EXPLORATION AND PRODUCTION JUDD H. OUALLINE

PROPOSED DOLLARHIDE DRINKARD UNIT

RALPH LOWE F. HAIR WELL NO. I

1980' FNL & 1980' FWL, Section 30, T 24 S, R 35 Lea County, Nev; Mexico

>P Cement Q 3065

Top Tubb 16150'

?op Drinkard 6428'

j ^ j 10 3/4" Csg. Set @ 340' ~ W/200 Sks. Circ.

7 5/8" Csg. Set 3 3250' W/1700 Sks. To? Cement 829!(C

2 3/8" Tubing I n t e r n a l l y Coated

Double Grip Packer Approx. 6495'

5 1/2" Csg. Set -@ 6545' W/325 Sks.

6545'

6626'

ODenhole

Page 86: SKELLY OIL COMPANY - New Mexico Department of Energy ...ocdimage.emnrd.state.nm.us/imaging/filestore... · SKELLY OIL COMPANY P. O. BOX 1650 EXPLORATION AND PRODUCTION JUDD H. OUALLINE

PROPOSED DOLLARHIDE DRINKARD UNIT

PAN AMERICAN PETROLEUM CORPORATION STATE "Y" WELL NO. 6

660' FNL & 660' FWL, Section 32, T 24 S, R 38 E Lea County, New Mexico

Ltion 3176' K.B

13 3/8" Csg. Set © 300' • Ai W/290 Sks. Circ.

9 5/8" Csg. Set © 3149 W/350 Sks.T.C. @ 950'

Top Cement 6000'

2 3/8" Tubing I n t e r n a l l y Coated

Double Grip Packs: © Approx. 6395''

6446' 6472' 6500'

• PERFORATIONS 6554' 6660'

6760'

7" Csg. Set © 7020' W/125 Sks.

T.D. 7020

Page 87: SKELLY OIL COMPANY - New Mexico Department of Energy ...ocdimage.emnrd.state.nm.us/imaging/filestore... · SKELLY OIL COMPANY P. O. BOX 1650 EXPLORATION AND PRODUCTION JUDD H. OUALLINE

PROPOSED DOLLARHIDE DRINKARD UNIT

PAN AMERICAN PETROLEUM CORPORATION STATE "Y" WELL NO. 8

2310' FNL & 19801 FWL, Section 32, T 24 S, R 38 E • Lea County, New Mexico

Elevation:

13 3/8" Csg. Set © 302'

-rc.

8 5/8" Csg. Set © 3144' W/350 Sks. Circ.

Top Cement 5486' (Calc.)

2 3/8" Tubing I n t e r n a l l y Coated

Double Grip Packer © Approx. 6105' 6155'

PERFORATIONS

6317'

6364'

6566'

^ 5 1/2" Csg. Set © 6641' • W/12'5 Sks. 125 Cu. Ft. P e r l i t e

oo 41' Onenhole

3912'

T.D. 6912

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PROPOSED DOLLARHIDE DRINKARD UNIri

PAN AMERICAN PET -..EH CORPORATION STATE "Y" WELL HO. 10

360' FNL & 1980' FEL, Section 32, T 24 S, R 38 E Lea County, New Mexico

SJ?"*A). 1 '•> 3/8" Cs6. W/290 Sks. Circ.

9 5/3" Csg. Set © 3150' W/350 Sks. T.C. 828' (Calc.)

Top Cement 5560' (Calc.)

2 3/8" Tubing I n t e r n a l l y Coated

Double Grip Packer <§ Approx. 6130'

6180'

6426'

PERFORATIONS

6584*

6690'

5 1/2" Csg. Set © 6715 W/12"5 Sks. 125 Cu.Ft. P e r l i t e T>. - C - r V ^. i

6715' Onenhole

6950'

T.D. 6950

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PROPOSED DOLLARHIDE

SINCLAIR OIL CORPORATION J. H. MC CLURE WELL NO. 1

330' FSL & 990' FEL, Section 30, T 24 S, R 33 E Lea County, New "Mexico

T. D. 6800'

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PROPOSED DOLLARHIDE DRINKARD UNIT

SINCLAIR OIL CORPORATION J. H. KC CLURE WELL NO. 5

1550' FSL & 1980' FEL, Seccion 30- T 24 S, R 33 E Lea County, Hew Hexico

T.D. 6850'

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'PROPOSED DOLLARHIDE .

SINCLAIR OIL CORPORATION J. H. MC CLURE WE'LL NO. 16

990" FNL & 1650' FEL, Section 30, T 24 S, R 38 E Lea County, Nev; Mexico

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PROPOSED DOLLAR::ID.I :> •) UNIT

SKELLY OIL COMPANY MEXICO "J" '.-RViVL EO. 15

510' FEL & 810' FSL, SECTION 32, T 24 S, R 38 E LEA COUNTY. NEW MEXICO

.ovation 3180' D.F.

8 5/8" Cs-. z © 3150' W/2000 Sks. Circ.

Top Cc

^ T:ibh © 6013

?cr> Abo © 3555

"//. s /

'<//• 1

•• or

35

I"

2 3/8" Tubing I n t e r n a l l y Coa ted

Double Grip Packer © Approx. 8071'

6121'

527£

PERFORATIONS

,06

3516'

5 1/2" Csg. Set © 6565 T.7 / /450 S

35 6 5

6900

T.D. o90u

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r.'jFGSi..; JGLL.

SKELLY GIL,

KEXICO "E:-

660' FSL & 1980' TWL, S LEA COUNTY, '

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£905

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T-D. 6 SJ D '

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D. 637C

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vCvG.'HD DOLL/,;-..

6505 FNL & 2310' FWL LFA COUNTY ••..•Al.CiJ

;.7:o3

O " / Q 1:

s £35;

6574'

6574

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T

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T. D.

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L . C . C A S EI. P . EC.

C O N S U L T A N T . O I L F I E L D W A T E R P R O B L E M S

2 0 O D R I V E

T U L S A , O K L A H O M A 7411-4

L U T H E R 3 - 9 3 0 7

JL DOC Kr

NO. „.

y~r-r—y-r&rKlaf.nhnr, D i s t r i c t Superintendent Skelly O i l Company Hobbs, New Mexico

February 2^1?^.-. ^ .. ! w

Dear Sir: Subject: Water Analysis-

Dollarhide Tubb-Drinkard

Your subject l e t t e r of January 29 s-Hd tho water samples wore receive~„ Thc requested tests were as follows.

c - - no0

Daocription-

i ' i i j . x i -

graxnD per

l i t e r

Sodium,Ns. CalciuTn,Ca Magnesium,Kg Sulfate,30i Chloride ,C± Bicarbonate,HC03 Carbonate ,C0o

Jal Water System Supply Water, taken from 6" renin valve. Sec. 32-243-3Sc0 Drinkc'd out-l e t near plant s i t e ,

649 240

2,050 2,400

915

Total Solids 7>937

Sp.Gr. at 60°F Dissolved iron,Fo

..006 n i l

Mexico "K" Lease Taken from gunbarrol Sec. 29-24s-38e Dollarhide Drinkard.

"62,088 11,058 3,689

940 125,250

177 n i l

203,202

1.142 11.0 mg/i before f i l t o : 1.2 " after "

Not present Hydrogen sulfide Much

Definition of cWater Character (Palmer Values)

Primary Salinity Secondary Salinity Primary Alkalinity Secondary Alkalinity

58.42 29.62

0„00 11.96

75.94 23.98 0.00 0.08

100.00?f

Compatibility Tests: Mixed in %

Mixture -Sample 1 -Sariple 2 -Turbidity, as CaC03j

lbs/1,000 bb l -

100.00%

shown, 24 hrs. standing tiir-e:

3

'5%

•--oj

~50% 50£

1.1

75$o 25£

1.0

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C A R L . G I L B E R T ( I 8 9 t - I 9 6 3 |

L . C . W H I T E

WILLIAM W. GILBERT SUMNER S. KOCH WILLIAM BOOKER KELLY J O H N F . M C C A R T H Y , J R ,

W H I T E , G I I J B E R T , K O C H & K E X I / S ^

( G I L B E R T , W H I T E A N D G I L B E R T )

ATTORNEYS AND COUNSELORS AT LAW LINCOLN BUILDING ^

SANTA FE, NEW MEXICO 87501 • z ~

May 2, 1969 P O S T O F F I C E B O X 7 8 7

T E L E P H O N E 9 6 2 - 4 3 0 1

( A R E A C O O E 5 0 5 I

New Mexico O i l Conservation Commission P. 0. Box 2088 Santa Fe, New Mexico

Re: S k e l l y O i l Company'a A p p l i c a t i o n re West D o l l a r h i d e Drinkard U n i t Lea County, New Mexico and D o l l a r -h i de Tubb-Drinkard Pool

Gentlemen:

Please enter our appearance as r e s i d e n t counsel f o r S k e l l y O i l Company i n the above a p p l i c a t i o n s t o be heard May 21, 1969.

Very t r u l y yours.

L. C . WHE TE

LCW:el

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Docket No. 15-69

DOCKET: EXAMINER HEARING - WEDNESDAY - MAY 21, 1969

9 A.M. - OIL CONSERVATION COMMISSION CONFERENCE ROOM, STATE LAND OFFICE BUILDING - SANTA FE, NEW MEXICO

The f o l l o w i n g cases w i l l be heard before E l v i s A„ Utz, Examiner, or Daniel S. Nu t t e r , A l t e r n a t e Examiner:

CASE 3405; (Reopened) (Continued from the May 7, 1969 Examiner Hearinq)

I n the matter o f Case No. 3405 being reopened pursuant t o the p r o v i s i o n s of Order No. R-3081, which order e s t a b l i s h e d 640-acre spacing f o r the North I n d i a n Hills-Morrow Gas Pool, Eddy County, New Mexico, f o r a p e r i o d o f one year a f t e r f i r s t p i p e ­l i n e connection i n the p o o l . A l l i n t e r e s t e d p a r t i e s may appear and show cause why said pool should or should not be developed on 320-acre spacing u n i t s .

CASE 4131: A p p l i c a t i o n o f Gulf O i l Corporation f o r downhole commingling, Lea County, New Mexico. A p p l i c a n t , i n the above-styled cause, seeks a u t h o r i t y t o commingle p r o d u c t i o n from the Jalmat and South Eunice o i l pools. Lea County, New Mexico, i n the wellbores of s i x w e l l s l o c a t e d as f o l l o w s :

TOWNSHIP 21 SOUTH,, RANGE 36 EAST A r n o t t Ramsay (NCT-D) Well No. 6 - Un i t K - Section 33 A r n o t t Ramsay (NCT-D) Well No. 7 - Un i t M - Section 33 A r n o t t Ramsay (NCT-D) Well No. 8 - U n i t N - Section 33 A r n o t t Ramsay (NCT-D) Well No. 9 - U n i t L - Section 33 J. F. Janda (NCT-B) Well No. 4 - U n i t O - Section 32

TOWNSHIP 22 SOUTH, RANGE 36 EAST

J. F. Janda (NCT-F) Well No. 8 - U n i t C - Section 4

CASE 4132: A p p l i c a t i o n o f Pan American Petroleum Corporation f o r an exception t o Order No, R-3221, as amended, Eddy County, New Mexico. A p p l i c a n t , i n the above-styled cause, seeks an excep­t i o n t o Order No. R-3221, as amended, which order p r o h i b i t s the di s p o s a l of water produced i n c o n j u n c t i o n w i t h the p r o d u c t i o n of o i l on the surface of the ground i n Lea, Eddy, Chaves, and Roosevelt Counties, New Mexico, a f t e r January 1, 1969. Said exception would be f o r t h r e e w e l l s l o c a t e d i n U n i t D, E, and P o f Section 27, Township 18 South, Range 31 East, Shugart F i e l d , Eddy County, New Mexico. A p p l i c a n t seeks a u t h o r i t y t o continue t o dispose of s a l t water produced i n two u n l i n e d surface p i t s l o c a t e d i n the E/2 of sa i d Section 27.

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Examiner Hearing - May 21, 1969 -2- Docket No. 15-69

CASE 4133: A p p l i c a t i o n of S k e l l y O i l Company f o r a u n i t agreement, Lea County, New Mexico, A^sps^icant; i n the above-styled cause, seeks approval of thevWest j j o l l a r h i d e Drinkard U n i t Area comprising 3 ,533*, 52 acr&H^i more or l e s s , of Fee, Federal, and State lands i n Townships 24 and 2 5 South, Range 38 East, Lea County, New Mexico.

CASE 4134: A p p l i c a t i o n of S k e l l y O i l Company f o r a w a t e r f l o o d p r o j e c t , Lea County, New Mexico. A p p l i c a n t , i n the above-styled cause, seeks a u t h o r i t y t o i n s t i t u t e a w a t e r f l o o d p r o j e c t i n i t s West Dollarhxde Drinkard U n i t Area by the i n j e c t i o n of water i n t o the Tubb-Drinkard formation through 4 3 w e l l s l o c a t e d i n Town­ships 24 and 25 South, Range 38 East, D o l l a r h i d e Tubb-Drinkard Pool,, Lea County, New Mexico, A p p l i c a n t f u r t h e r seeks a procedure whereby s a i d p r o j e c t may be expanded a d m i n i s t r a t i v e l y w i t h o u t a showing o f w e l l response.

CASE 4135: A p p l i c a t i o n of Roy E. Kimsey , Jr» f o r an exception t o Order No. R-3221, as amended, Eddy County, New Mexico. A p p l i c a n t , i n the above-styled cause, seeks an exception t o Order No. R-3221, as amended, which order p r o h i b i t s the d i s p o s a l of water produced i n c o n j u n c t i o n w i t h the p r o d u c t i o n o f o i l or gas or both, on the surface o f the ground i n Lea, Eddy, Chaves, and Roosevelt Counties, New Mexico, a f t e r January 1, 1969. Said exception would be f o r the P. R„ Bass-Federal Well No. 1 loc a t e d i n U n i t F o f Section 3, Township 16 South, Range 30 East, West Henshaw Pool, Eddy County, New Mexico. A p p l i c a n t seeks a u t h o r i t y t o continue t o dispose of produced s a l t water i n an u n l i n e d surface p i t l o c a t e d near sai d w e l l .

CASE 4136: A p p l i c a t i o n o f M a l l a r d Petroleum, I n c , f o r s a l t water d i s p o s a l , Lea County, New Mexico. A p p l i c a n t , i n the above-styled cause, seeks a u t h o r i t y t o dispose o f produced s a l t water i n t o the Yates f o r m a t i o n i n the i n t e r v a l from 3606 f e e t t o 3627 f e e t i n i t s MiIner Federal Well No. 4 loc a t e d i n U n i t C o f Section 35, Township 20 South, Range 34 East, Lynch Pool, Lea County, New Mexico.

CASE 4137: A p p l i c a t i o n of A t l a n t i c R i c h f i e l d Company f o r a u n i t agreement, Eddy County, New Mexico. A p p l i c a n t , i n the above-styled cause, seeks approval o f the East Shugart U n i t Area comprising 1359.40 acres, more or l e s s , of Federal and State lands i n Townships 18 and 19 South, Range 31 East, Eddy County, New Mexico.

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Examiner Hearing - May 21, 1969 -3- Docket No, 15-69

CASE 4138; A p p l i c a t i o n of A t l a n t i c R i c h f i e l d Company f o r a w a t e r f l o o d p r o j e c t and unorthodox i n j e c t i o n w e l l l o c a t i o n , Eddy County, New Mexico. A p p l i c a n t , i n the above-styled cause, seeks a u t h o r i t y t o i n s t i t u t e a w a t e r f l o o d p r o j e c t by the i n j e c t i o n o f water i n t o the Yates-Seven Rivers-Queen formations through 11 w e l l s i n Townships 18 and 19 South, Range 31 East, Shugart Pool, Eddy County, New Mexico,, A p p l i c a n t f u r t h e r seeks an exception t o permit the d r i l l i n g of one of sa i d w e l l s a t an unorthodox l o c a t i o n 100 f e e t front the South l i n e and 990 f e e t from the West l i n e of Section 35, Township 18 South, Range 31 East.

CASE 4139; A p p l i c a t i o n o f A l l i e d Chemical Corporation f o r a u n i t agree­ment, Roosevelt County, New Mexico. A p p l i c a n t , i n the above-s t y l e d cause, seeks approval o f the Mllnesand (San Andres) U n i t Area comprising 5370,18 acres tmore or l e s s , of Federal and Fee lands i n Township 8 South, Ranges 34 and 35 East, Roosevelt County, New Mexico,

CASE 4140: A p p l i c a t i o n o f A l l i e d Chemical Corporation f o r a w a t e r f l o o d p r o j e c t , Roosevelt County, New Mexico., A p p l i c a n t , i n the above-styled cause, seeks a u t h o r i t y t o i n s t i t u t e a water-f l o o d p r o j e c t i n i t s Mllnesand (San Andres) Uni t Area by the i n j e c t i o n o f water i n t o the San Andres formation through 33 w e l l s l o c a t e d i n Township 8 South, Ranges 34 and 35 East, Milnesand-San Andres Pool, Roosevelt County, New Mexico. A p p l i c a n t f u r t h e r seeks a procedure whereby said p r o j e c t may be expanded a d m i n i s t r a t i v e l y w i t h o u t a showing of w e l l response.

CASE 4141: A p p l i c a t i o n of McCasland Disposal System f o r s a l t water d i s ­p o s a l , Lea County, New Mexico. A p p l i c a n t , i n the above-s t y l e d cause, seeks a u t h o r i t y t o dispose of produced s a l t water i n t o the Seven Rivers formation i n the i n t e r v a l s from approximately 3756 f e e t t c 3851 f e e t and from approximately 3918 f e e t t o 3939 f e e t , r e s p e c t i v e l y , i n the Getty O i l Company J, H„ Day Wells Nos. 1 and 2 „ both located i n the NW/4 o f Section 8, Township 22 South, Range 36 East, Jalmat Pool, Lea County, New Mexico.

CASE 4142: A p p l i c a t i o n o f Tamarack Petroleum Corporation, I n c . , f o r s a l t water d i s p o s a l , Lea County, New Mexico. A p p l i c a n t , i n the above-styled cause, seeks a u t h o r i t y t o dispose of produced s a l t water by i n j e c t i o n i n t o the Queen formation i n the i n ­t e r v a l from 4946 f e e t t o 5040 f e e t i n i t s Cabot 15 State W ell No. 2 lo c a t e d i n U n i t P o f Section 15, Township 19 South, Range 35 East, Pearl-Queen Pool, Lea County, New Mexico.

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Examiner Hearing - May 21, 1969 -4- Docket No, 15-69

CASE 4143; A p p l i c a t i o n of Amerada Petroleum Corporation f o r downhole commingling and s p e c i a l g a s - o i l r a t i o l i m i t a t i o n , Lea County, New Mexico. A p p l i c a n t , i n the above-styled cause, seeks a u t h o r i t y t o commingle produ c t i o n from the Eumont Gas Pool and the Skaggs-Grayburg Pool i n the wel l b o r e of i t s Fred Turner, J r . , "A" Well No. 2, the Eumont completion o f which i s p r e s e n t l y c l a s s i f i e d as a gas completion, l o c a t e d i n U n i t K o f Section 18, Township 20 South* Range 38 East, Lea County, New Mexico. A p p l i c a n t * f u r t h e r seeks the establishment o f a sp e c i a l g a s - o i l r a t i o l i m i t a t i o n f o r the subject well.,

(Continued from the May 7, 1969 Examiner Hearing) CASE 4121; A p p l i c a t i o n of Roger Co Hanks f o r s p e c i a l pool r u l e s , Lea

County, New Mexico, A p p l i c a n t , i n the above-styled cause, seeks the promulgation of s p e c i a l pool r u l e s f o r the Bar U-Pennsylvanian Pool, Lea County, New Mexico, i n c l u d i n g a p r o v i s i o n f o r 160-acre spacing and p r o r a t i o n u n i t s and the assignment of 80-acre allowables.

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Cs

c

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Page 135: SKELLY OIL COMPANY - New Mexico Department of Energy ...ocdimage.emnrd.state.nm.us/imaging/filestore... · SKELLY OIL COMPANY P. O. BOX 1650 EXPLORATION AND PRODUCTION JUDD H. OUALLINE

S113M SNIOnaOMd JO «3SWN

Page 136: SKELLY OIL COMPANY - New Mexico Department of Energy ...ocdimage.emnrd.state.nm.us/imaging/filestore... · SKELLY OIL COMPANY P. O. BOX 1650 EXPLORATION AND PRODUCTION JUDD H. OUALLINE

I ( I .

Page 137: SKELLY OIL COMPANY - New Mexico Department of Energy ...ocdimage.emnrd.state.nm.us/imaging/filestore... · SKELLY OIL COMPANY P. O. BOX 1650 EXPLORATION AND PRODUCTION JUDD H. OUALLINE

Attached is a plat which shows the development of the West Dollarhide Drinkard Pool and the proposed Unit boundary. The proposed i n j e c t i o n wells are indicated on t h i s plat and are tabulated below:

COMPANY LEASE WELL # LOCATION UNIT SEC-T-R

Texaco, Inc. Paul Stephens 2 D 19-24-38

Texaco, Inc. E. M. Byers 1 L 19-24-38 Texaco, Inc. United Royalty "A" 3 F 19-24-38 Texaco, Inc. United Royalty "A" 5 N 19-24-38 Sincl a i r Oil & Gas Company McClure Fed. 21 B 19-24-38 Sincl a i r O i l 6c Gas Company McClure Fed. 19 J 19-24-38 Sin c l a i r O i l & Gas Company McClure Fed. 18 P 19-24-38 Ralph Lowe F. Hair 1 F 30-24-38 Sin c l a i r O i l & Gas Company L. E. Vance 1 K 30-24-38 Sin c l a i r O i l & Gas Company McClure Fed. 1 P 30-24-38

Sincl a i r O i l & Gas Company McClure Fed. 5 J 30-24-38 Sincl a i r Oil & Gas Company McClure Fed. 8 H 30-24-33 Sincl a i r Oil & Gas Company McClure Fed. 16 B 30-24-38 Skelly Oil Company Mexico "K" 1 P 29-24-38 Skelly O i l Company Mexico "K" 4 N 29-24-38 Skelly Oil Company Mexico "K" 6 L 29-24-38 Skelly O i l Company Mexico "K" 9 J 29-24-38 Skelly O i l Company Mexico "K" 13 F 29-24-38 Skelly Oil Company Mexico "K" 15 D 29-24-38 Gulf O i l Corporation Ramsay "D" 2 N 28-24-38 Gulf Oil Corporation Leonard " I " 2 F 33-24-38 Gulf Oil Corporation Leonard "G" 11 D 33-24-38 Gulf Oil Corporation Leonard nG" 14 L 33-24-38 Gulf Oil Corporation Leonard "G" 15 N 33-24-38 Skelly O i l Company Mexico "J" 7 L 32-24-38 Skelly O i l Company Mexico "J" 9 J 32-24-38 Skelly O i l Company Mexico "J" 16 P 32-24-38 Skelly O i l Company Mexico "J" 20 N 32-24-38 Pan American State "Y" 11 H 32-24-38 Pan American State "Y" 8 F 32-24-38 Pan American State "Y" 10 B 32-24-38 Pan American State "Y" 6 D 32-24-38 Texaco, Inc. J. B. McGhee 6 J 31-24-38 Texaco, Inc. J. B. McGhee 7 P 31-24-38 E l l i o t t Production E l l i o t t "H" 7 B 31-24-38 E l l i o t t and Hall E l l i o t t "R" 1 H 31-24-38 Sunshine Royalty E l l i o t t Fed. 1 F 31-24-38 Skelly O i l Company Mexico "L" 15 D 5-25-38 Skelly O i l Company Mexico "L" 17 B 5-25-38 Skelly Oil Company Mexico "L" 18 H 5-25-38 Skelly O i l Company Mexico "L" 20 F 5-25-38 Gulf Oil Corporation Leonard "G" 12 F 4-25-38 Gulf O i l Corporation Leonard "G" 19 D 4-25-38

•^Conversion of these four wells w i l l be temporarily delayed.unfigl, lea,ae „ ^ l i n e agreements are made. ir\ L L L s U i L U U .

EXHiRi / hO j3 § p a & £ EXAMINER d f £ § i L CONSERVATION C G A ^ i S S ^

EXHIBIT KG.

CASE NO.

*" CASE NO. „J6!Z2$L^

Page 138: SKELLY OIL COMPANY - New Mexico Department of Energy ...ocdimage.emnrd.state.nm.us/imaging/filestore... · SKELLY OIL COMPANY P. O. BOX 1650 EXPLORATION AND PRODUCTION JUDD H. OUALLINE

R - 3 6 - E

D C X L A A l t l O f c |

C L E A H I O H K U M T '

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LEGEND — — I ' » . O . ' O J E 0 U N l f L C A J M j A t i r

J 1 . P t . G f ' u j l _ £ . Fi i N J t C t t O N W E t - L

, » * . ' . [ L M I N . . L C T 1 U N W t i - L

PROPOSED WATERFLOOD PATTERN

DOLLARHIDE (TUBB DRINKARD) POOL

LEA COUNTY, NEW MEXICO

Page 139: SKELLY OIL COMPANY - New Mexico Department of Energy ...ocdimage.emnrd.state.nm.us/imaging/filestore... · SKELLY OIL COMPANY P. O. BOX 1650 EXPLORATION AND PRODUCTION JUDD H. OUALLINE

R - 3 8 - E

T 24 S

Unit i d h l ^ o l t f ' A ' UcC l j r * F«<l*ral

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PROPOSED WATERFLOOD PATTERN

DOLLARHIDE (TUBS DRINKARD) POOL

LEA COUNTY, NEW MEXICO

DATF MAY ;- l 1969

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Attached i s a plat which shows the development of the West Dollarhide Drinkard Pool and the proposed Unit boi.:.dary. The proposed i n j e c t i o n wells are indicated on t h i s plat and are tabulated below:

*

CO>-;?A>:Y LEASE WELL # LC CATION UNIT SEC-T-R

Texaco, Inc. Paul Stephens f D 19-24-38 .-Texaco, Inc. X L 19-24-38, • Texaco, Inc. United Royalty "A" F 19-24-33 v. Texaco, Inc. United Royalty "A" ~5 N 19-24-38 Sin c l a i r Oil & Gas Company McClure Fed. B 19-24-38 Sincl a i r O i l & Gas Company McClure Fed. IS J 19-24-38 Si n c l a i r O i l & Gas Company McClure Fed. 18 P 19-24-38 Ralph Lowe F. Hair 1 F 30-24-33 Sincl a i r OiL & Gas Company L. 2. Vance 1 N 3C-24-33 Sin c l a i r O i l & Gaa Company McClure Fed. I P 30-24-33

Sinclair Oil & Gas Company McClure Fed. 5 J 30-24-38 Sincl a i r Oil & Gas Company McClure Fed. 8 H 30-24-33 Sinclair Oil & Gas Company McClure Fed. 16 3 30-24-38 Skelly Oil Company Mexico "K" 1 P 29-24-38 Skelly O i l Company Mexico "X" 4 N 29-24-38 Skelly O i l Company Mexico "K" 6 L 29-24-38 Skelly O i l Company Mexico "K" 9 J 29-24-38 Skelly Oil Company Mexico "K" 13 F 29-24-38 Skelly O i l Company Mexico "K" 15 D 29-24-38 Gulf O i i Corporation Ramsay "D" 2 N 28-24-38 Gulf O i l Corporation Leonard " I " 2 F 33-24-38 Gulf O i l Corporation Leonard "G" 11 D 33-24-38 Gulf Oil Corporation Leonard "G" 14 L 33-24-38 Gulf Oil Corporation Leonard "G" 15 N 33-24-38 Skelly O i l Company Mexico " J " 7 L 32-24-38 Skelly O i l Company Mexico " J " 9 J 32-24-38 Skelly O i l Company Mexico "J" 16 P 32-24-38 Skelly Oil Company Mexico "J" 20 . N 32-24-38 Pan American State "Y" 11 H 32-24-38 Pan American State "Y" 8 F 32-24-38 Pan American State "Y" 10 B 32-24-38 Pan American State "Y" 6 D 32-24-38 Texaco, Inc. J. 3. McGhee 6 J 31-24-38 Texaco, Inc. J. B. McGhee 7 P 31-24-38 E l l i o t t Production E l l i o t t "H" 7 B 31-24-38 E l l i o t t and Hall E l l i o t t "R" 1 H 31-24-38 Sunshine Royalty E l l i o t t Fed. 1 F 31-24-38 Skelly Oil Company Mexico "L" 15 D 5-25-38 Skelly O i l Company Mexico "L" 17 3 5-25-38 Skelly Oil Company Mexico "L" 18 H 5-25-38 Skelly Oil Company Mexico "L" 20 F 5-25-38 Gulf Oil Corporation Leonard "G" 12 F 4-25-38 Gulf O i l Corporation Leonard "G" 19 D 4-25-38

*Conversion of these four wells w i l l be temporarily delayed u n t i l lease l i n e agreements are made.

/

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UNIT AGREEMENT

FOR THE DEVELOPMENT AND OPERATION

OF THE

WEST DOLLARHIDE DRINKARD UNIT

LEA COUNTY, NEW MEXICO

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UNIT AGREEMENT

WEST DOLLARHIDE DRINKARD UNIT

LEA COUNTY, NEW MEXICO

Table of Contents

Index

Preamble

Agreement Proper

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UNIT AGREEMENT WEST DOLLARHIDE DRINKARD UNIT

LEA COUNTY, NEW MEXICO

INDEX

§ICII°M PAGE

1 Enabling Act and Regulations 2

2 Unit Area and Definitions 2

3 Exhibits 5

4 Expansion 6

5 Unitized Land and Unitized Substances 7

6 Unit Operator 7

7 Resignation or Removal of Unit Operator 7

8 Successor Unit Operator 8

9 Accounting Provisions and Unit Operating Agreement 9

10 Rights and Obligations of Unit Operator 9

11 Equipment and F a c i l i t i e s Not Fixtures Attached to Realty 10

12 Plan of Operations 10

13 Easements or Use of Surface 11

14 Tract P a r t i c i p a t i o n 11

15 Tracts Qualified for Unit P a r t i c i p a t i o n 14

16 Allocation of Unitized Substances 15

17 Balancing of Production 17

18 Royalty Settlement 18

19 Rental Settlement 19

20 Conservation 19

21 Drainage 19

22 Leases and Contracts Conformed and Extended 19

23 Covenants Run With Land 21

24 Effective Date and Term 22

25 Rate of Prospecting, Development and Production 23

26 Nondiscrimination * 24

27 Appearances 24

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SECTION PAGE

28 Notices 24

29 No Waiver of Certain Rights 25

30 Waiver of Rights to P a r t i t i o n 25

31 Unavoidable Delay 25

32 Loss of T i t l e 25

33 Joinder i n Dual Capacity 26

34 Nonjoinder and Subsequent Joinder 26

35 Counterparts 27

36 Taxes 28

37 Conflict of Supervision 29

38 No Partnership 29

39 Border Agreement 29

Exhibit "A"o Map of Unit Area

Exhibit "B": Description of Unit Area

Exhibit "C"s Schedule of Tract P a r t i c i p a t i o n

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CERTIFICATION - DETERMINATION

Pursuant to the authority vested i n the Secretary of the I n t e r i o r ,

under the act approved February 25, 19205 41 Stat. 437, as amended, 30 U.S„C.

Sec, 181, et seq., and delegated to the Oil & Gas Supervisors of the Geological

Survey (33 F R. 5812), I hereby:

A. Approve the attached agreement for the development and operation

of the West Dollarhide Drinkard Unit Areas Lea County, New Mexico.

B. Ce r t i f y and determine that the unit plan of development and opera­

t i o n contemplated i n the attached agreement i s necessary and advisable i n the

public interest for the purpose of more properly conserving the natural resources.

C C e r t i f y and determine that the d r i l l i n g , producing, r e n t a l ,

minimum royalty, and royalty requirements of a l l Federal leases committed to

said agreement are hereby established, altered, changed, or revoked to conform

with the terms and conditions of this agreement

Da ted

Oil & Gas Supervisor, United States Geological Survey

Contract Number

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UNIT AGREEMENT

WEST DOLLARHIDE DRINKARD UNIT

LEA COUNTY, NEW MEXICO

State of New Mexico No, _______

THIS AGREEMENT, entered into as of the f i r s t day of August, 1968, by

and between the parties subscribing, r a t i f y i n g or consenting hereto, and herein

referred to as "parties hereto",

WITNESSETH-'

WHEREAS, the parties hereto are che owners of working, royalty or

other o i l or gas interests i n the Unit Area subject to t h i s agreement; and

WHEREAS, the Commissioner of Public Lands of the State of New Mexico

is authorized by an Act of the Legislature (See, 3, Chap 88, Laws 1943, as

amended by Sec, 1 of Chap, 162, Laws of 1951, Chap. 7, Art I I , Sec 39, N.M. S.

1953 anno.,) to consent to or approve th i s agreement on behalf of the State of

New Mexico, insofar as i t covers and includes lands and mineral interests of the

State of New Mexico; and

WHEREAS, the Commissioner of Public Lands of the State of New Mexico

is authorized by an Act of the Legislature (Sec 3, Chap. 88, laws of 1943, as

amended by Sec 1, Chap. 162, Laws of 1951, Chap, 7, Art. 11,, Sec 41, N.M.S.

1953 anno) to amend with the approval of zhe lessee, any o i l and gas lease

embracing State lands so that the length of the term of said lease w i l l coincide

with the term of this agreement; and

WHEREAS, the O i l Conservation Commission of the State of New Mexico i s

authorized by law (Art,, I ' l l , Chap., 65, Vol 9, part 2, New Mexico Statutes, 1953

Annotated) to approve th i s agreement, and the conservation provisions hereof; and

WHEREAS, the Mineral Leasing Act of February 25, 1920 (41 Stat, 437, as

amended 30 U.S.C, Sections 181 et seq.) authorizes Federal lessees and th e i r

representatives to unite with each other or j o i n t l y or separately with others i n

c o l l e c t i v e l y adopting and operating a cooperative or uni t plan of development or

operation of any o i l or gas pool, f i e l d or l i k e area or any part thereof for the

purpose of more properly conserving the natural resources thereof whenever

determined and c e r t i f i e d by the Secretary of the I n t e r i o r to be necessary or

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advisable Ln the public i n t e r e s t ; and

WHEREAS, the parties hereto hold s u f f i c i e n t interests i n the West

Dollarhide Drinkard Unit Area, covering the land hereinafter described to give

reasonably effective control of operation therein; and

WHEREAS, i t i s the purpose of the parties hereto to enable i n s t i t u t i o n

and consummation of secondary recovery operations, conserve natural resources, to

prevent waste and secure the other benefits obtainable through development and

operation of the area subject to thi s agreement under the terms, conditions and

lim i t a t i o n s herein set f o r t h ,

NOW, THEREFORE, i n consideration of the premises and the promises here­

i n contained, the parties hereto commit to thi s agreement their respective

interests in the "Unit Area" and the "Unitized Formation1' l y i n g thereunder (as

those terms are defined hereinafter)., and agree severally among themselves as

foilows:

SECTION 1, ENABLING ACT AND REGULATIONS. The Mineral Leasing Act of

February 25, 1920s as amended, supra, and a l l v a l i d , pertinent regulations,

including operating and uni t plan regulations, heretofore issued thereunder and

va l i d , pertinent and reasonable regulations hereafter issued thereunder are

accepted and made a part of th i s agreement as to Federal lands, provided such

regulations are not inconsistent with the terms of this agreement, and as to non-

Federal lands, the o i l and gas operating regulations i n effec t as of the effective

date hereof governing d r i l l i n g and producing operations, not inconsistent with

the terms hereof or the laws of the State i n which the non-Federal land is

located, are hereby accepted and made a part of t h i s agreement

SECTION 2- UNIT AREA AND DEFINTIIONS For the purpose of this agree­

ment, the following terms and expressions as used herein shall mean

(a) "Unit Area" i s defined as the area described by tracts i n Exhibit

"B'1 and depicted on Exhibit "A" attached hereto containing 3,533 52 acres, more

or less, or to which i t may be extended as herein provided

(b) "Commissioner" i s defined as the Commissioner of Public Land of

the State of New Mexico..

(c) "Commission" is defined as the Oil Conservation Commission of the

State of New Mexico,

(d) "Director" i s defined as the Director of the United States

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Geological Survey.

(e) ''Secretary" i s defined as the Secretary of the I n t e r i o r of the

United States of America or any other person duly author 1 zed to exercise the

powers vested i n that o f f i c e .

( f ) "Department" is defined as the Department of the I n t e r i o r of the

United States of America.

(g) "Supervisor" is defined as the O i l and Gas Supervisor of the

United States Geological Survey for the region i n which the Unit Area is situated

(h) "Unitized Formation" means the Tubb-Drinkard Formation underlying

the unitized land; said i n t e r v a l having been heretofore found to occur i n Skelly

Oil Company's Mexico "L" No. 3 well (located i960 feet from the east line and

660 feet from the north l i n e of Section b, Tovr-ship 25 South, Range 38 East,

Lea County, New Mexico) at an indicated depth of from 5,950 feet to 7,367 feet,

as recorded on the Schlumberger e l e c t r i c a l leg Run No 1 taken A p r i l 13, 1952,

said log being measured from a derrick f l o o r elevation of 3,168 feet above sea

leve!.

( i ) "Unitized Substances" means a l l o i l , gas, gaseous substances,

sulphur contained i n gas, condensate, d i s t i l l a t e and a l l associated and consti­

tuent l i q u i d or li q u e f i a b l e hydrocarbons w i t h i n or produced from the Unitized

Formation

i j ) "Tract" i s defined as each parcel of land described as such and

given a tr a c t number i n Exhibit "B!!.

(k) "Tract P a r t i c i p a t i o n " i s defined as the percentage of parti c i p a ­

tio n , as shown on Exhibit "C", for allocating Unitized Substances to a Tract

under this agreement,

CD "Unit P a r t i c i p a t i o n " of each Working Interest Owner means the sum

of the products obtained by multiplying the Working Interest of such Working

Interest Owner i n each Tract by the Tract P a r t i c i p a t i o n of such Tract

(m) "Working I n t e r e s t " i s defined as the r i g h t to search for, produce

and acquire Unitized Substances whether held as an incident of ownership of

mineral fee simple t i t l e , under an o i l and gas lease or otherwise.

(n) "Working Interest Onwer" is defined as and shall mean any party

hereto owning a Working Interest, including a carried working interest owner,

holding an interest i n Unitized Substances by vi r t u e of a lease, ooeratine

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agreement, fee t i t l e or otherwise, which interest is chargeable with and obligated

to pay or bear, either i n cash or out of production, or otherwise, a l l or a

portion of the cost of d r i l l i n g , developing and producing the Unitized Substances

and operations hereunder. The owner of o i l and gas rights which are free of

leases or other instruments conveying the Working Interest to another shall be

regarded as a Working Interest Owner to the extent of seven-eighths (7/8) of his

Interest i n Unitized Substances, and as a Royalty Owner with respect to his

remaining one-eighth (1/8) interest therein,

(o) "Record Owner" i s defined as the holder of the record t i t l e to a

lease covering Federal lands according to the applicable records of the Depart­

ment of the I n t e r i o r of the United States of America.

(p) "Royalty I n t e r e s t " or "Royalty'' is defined as an interest other

than a Working Interest i n or r i g h t to receive a portion of the Unitized Sub­

stances or the proceeds thereof and includes the royalty interest reserved by

the lessor by an o i l and gas lease and any overriding royalty interest, o i l

payment interest, net p r o f i t contract, or any other payment or burden which does

not carry with i t the r i g h t to search for and produce Unitized Substances,

(q) "Royalty Owner" is defined as and shall mean the owner of a

Royalty Interest,

( r ) "Voting I n t e r e s t " shall mean, unless otherwise s p e c i f i c a l l y

defined herein, that each Working Interest Owner shall have a voting interest

equal to i t s Unit P a r t i c i p a t i o n i n e f f e c t at the time of voting.

vs) "Usable Well" shall mean a well which, i n accordance w i t h good

o i l f i e l d practice, i s adequately equipped so that the Unitized Formation i s i n

condition to permit production of Unitized Substances to the surface by conven­

tional production methods,

i t ) "Unit Operating Agreement" is defined as and shall mean any

agreement or agreements (whether one or more entered into separately or

c o l l e c t i v e l y ) by and between the Unit Operator and the Working Interest Owners

as provided i n Section 9 Accounting Provisions and Unit Operating Agreement,

i n f r a , and shall be styled "Unit Operating Agreement, West Dollarhide Drinkard

Unit, Lea County, New Mexico."

(u) "Unit Manager" i s defined as the person or corporation appointed

by the Working Interest Owners to perform the duties of the Unit Operator u n t i l

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the s e l e c t i o n and q u a l i f i c a t i o n of a successor Unit Operator as provided f o r in

Section 8 hereof.

SECTION 3 EXHIBITS, E x h i b i t "A" attached hereto i s a map showing

the Unit Area and the boundaries and i d e n t i t y of Tracts and leases Ln said Unit

Area to the extent known to the Unit Operator E x h i b i t "B" attached hereto i s

a schedule showing, to the e x t e n t known to the Unit Operator, the acreage com­

p r i s i n g each Tract and the percentage ownership of each Working I n t e r e s t Owner

i n each Tract. E x h i b i t "C" attached hereto i s a schedule showing the Tract

P a r t i c i p a t i o n of each Tract, However, nothing h e r e i n or i n said schedule or map

s h a l l be construed as a r e p r e s e n t a t i o n by any p a r t y hereto as to the ownership

of any i n t e r e s t other than such i n t e r e s t or i n t e r e s t s as are shown i n said map

or schedule as owned by such party.

Whenever reference h e r e i n or i n the Unit Operating Agreement is made

to an E x h i b i t , the reference i s to the E x h i b i t as o r i g i n a l l y attached or, i f

revised, to the l a t e s t approved r e v i s i o n

The d e s c r i p t i o n and ownership of the respective Tracts have been

est a b l i s h e d by using the best i n f o r m a t i o n a v a i l a b l e I f i t subsequently appears

tha t c l e r i c a l e r r o r s , i n c l u d i n g e r r o r s in Tract Ownership or mechanical miscal­

c u l a t i o n s have been made, Unit Operator s h a l l revise the E x h i b i t s to conform w i t h

the f a c t s The r e v i s i o n s h a l l not include any r e - e v a l u a t i o n of engineering or

g e o l o g i c a l i n t e r p r e t a t i o n s used i n determining Tract P a r t i c i p a t i o n s Errors and

m i s c a l c u l a t i o n s discovered p r i o r to the e f f e c t i v e date of t h i s agreement s h a l l

be corrected by Unit Operator i n the f i r s t r e v i s i o n of E x h i b i t s f o l l o w i n g the

e f f e c t i v e date and said f i r s t r e v i s i o n s s h a l l be e f f e c t i v e as of the e f f e c t i v e

date of t h i s agreement, The c o r r e c t i o n of any e r r o r s other than the c o r r e c t i o n

of a c l e r i c a l or mechanical e r r o r s h a l l be made by Unit Operator only a f t e r f i r s t

having obtained approval of Working I n t e r e s t Owners, the Supervisor, and the

Commissioner

E x h i b i t s "A", "B", and "C" s h a l l be revised by Unit Operator whenever

changes render such r e v i s i o n necessary, or when requested by the Supervisor or the

Commissioner. I f an E x h i b i t i s revised pursuant to t h i s agreement, Unit Operator s h a l l

c e r t i f y and f i l e the r e q u i r e d number of copies of the revised E x h i b i t w i t h the Com­

missioner and the Supervisor, and one (1) copy f o r record w i t h the County Clerk, Lea

County, New Mexico Except as s p e c i f i e d above, a revised E x h i b i t s h a l l become e f f e c t i v e -

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on such date as may be determined by the Working Interest Owners and set f o r t h

on said revised Exhibit.

SECTION 4. EXPANSION. The Unit Area may, when practicable, be expanded

to include therein any additional t r a c t or tracts regarded as reasonably necessary

or advisable for the purposes of t h i s agreement Such expansion shall be effected

in the following manner:

(a) The Working Interest Owner or Owners of a Tract or Tracts desiring

to bring such Tract or Tracts into this Unit, shall f i l e an application therefor

with Unit Operator requesting such admission

(b) Unit Operator shall circulate a notice to each Working Interest

Owner of the proposed expansion, setting out the basis for admission, the

recommended Tract P a r t i c i p a t i o n to be assigned to such Tract or Tracts, and other

pertinent data. After negotiation (at Working Interest Owners meeting or other­

wise) i f at least three Working Interest Owners having in the aggregate eighty

percent (80%) based on Phase I I I Unit P a r t i c i p a t i o n have agreed to such Tract or

Tracts be mg brought into the Unit, then Unit Operator shall

(1) After preliminary concurrence by the Director and the

Commissioner prepare a notice of proposed expansion describing the contemplated

changes in the boundaries of the Unit Area, the reason therefor, the basis for

admission of the additional Traet or Tracts, the Tract P a r t i c i p a t i o n to be

assigned thereto and the proposed effective oate thereof; and

(2) Deliver copies of said notice to the Commissioner, the

Supervisor, each Working Interest Owner and to the lessee and lessor whose

interests are affected, advising such parties that t h i r t y (30) days w i l l be

allowed for submission to the Unit Operator of any objection to such proposed

expansion; and

(3) F i l e , upon the expiration of said t h i r t y (30) day period as

set out i n (2) immediately above with the Commissioner and Supervisor the follow­

ing: (a) Evidence of mailing or delivering copies of said notice of expansion;

<b) An application for such expansion; (c) An instrument containing the

appropriate joinder r e f l e c t i n g the q u a l i f i c a t i o n s of the new Tract i n the same

manner required for the q u a l i f i c a t i o n of Tracts under Section 15 hereof, Tracts

Qualified for Participation; and (d) Copies of any objections received

The expansion s h a l l , a f t e r due consideration of a l l pertinent

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information and approval by the Commissioner, the Commission, and the Supervisor,

become effective as of the date prescribed i n the notice thereof, preferably the

f i r s t day of a month subsequent to the date of notice or on such other date as

may be agreed upon by the Working Interest Owners and approved by the Commissioner,

the Commission, and the Supervisor, I n any approved expansion of the Unit Area,

the revised Tract Participations of those Tracts which were committed p r i o r to

each such expansion shall remain i n the same r a t i o one to another.

SECTION 5, UNITIZED LAND AND UNITIZED SUBSTANCES. A l l land committed

to t h i s agreement shall constitute land referred to herein as "unitized land" or

"land subject to this agreement". A l l "unitized land" and Unitized Substances

w i t h i n the Unit Area are unitized under the terms of this agreement Nothing

herein shall be construed to u n i t i z e , pooi, or in any way affect the o i l , gas and

other minerals contained i n or that may be produced from any formation other than

the Unitized Formation as described under Section 2 fh)

SECTION 6. UNIT OPERATOR. Skelly Oil Company is hereby designated

the I n i t i a l Unit Operator, and by signing this instrument as Unit Operator i t

agrees and consents to accept the duties and obligations of Unit Operator for

the operation, development and production of Unitized Substances as herein pro­

vided Whenever reference is made herein to the Unit Operator, such reference

means the Unit Operator acting i n that capacity and not as an owner of interests

i n Unitized Substances, and the term "Working Interest Owner" when used herein

shall include or refer to the Unit Operator as the owner of a Working Interest

when such an interest is owned by i t .

SECTION 7. RESIGNATION OR REMOVAL OF ,UNIr_OPERATOR, Unit Operator

shall have the r i g h t to resign at any time, but such resignation shall not

become effe c t i v e so as to release Unit Operator from the duties and obligations

of Unit Operator and terminate Unit Operator's r i g h t s as such for a period of

six (6) months a f t e r w r i t t e n notice of intent i o n to resign has been given by Unit

Operator to a l l Working Interest Owners, the Commissioner and the Supervisor, and

u n t i l a l l unit wells are placed i n a satisfactory condition for suspension,

abandonment, or continued operations, as required by the Supervisor as to Federal

lands and the Commissioner as to State lands, unless a new Unit Operator shall

have taken over and assumed the duties and obligations of Unit Operator p r i o r to

the expiration of said period

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The Unit Operator s h a l l , upon default or f a i l u r e i n the performance of

i t s duties or obligations hereunder, be subject to removal by three \ i ) or more

Working Interest Owners having i n the aggregate eighty percent /80%) or more of

the Phase I I I Unit Participation remaining a f t e r excluding the Phase I I I Unit

Pa r t i c i p a t i o n of the Unit Operator, Such removal shall be eff e c t i v e upon notice

thereof to the Commissioner and the Supervisor

In a l l such instances of effe c t i v e resignation or removal; u n t i l a

successor to Unit Operator i s selected and approved as hereinafter provided, the

Working Interest Owners shall be j o i n t l y responsible for the performance of the

duties of the Unit Operator and sh a l l , not l a t e r than t h i r t y (30) days before

such resignation or removal becomes e f f e c t i v e , appoint a Unit Manager to represent

them m any action to be taken hereunder

The resignation or removal of Unit Operator under this agreement shall

not terminate i t s r i g h t s , t i t l e or interest as the owner of a Working Interest

or other interest i n Unitized Substances, but upon the resignation or removal of

Unit Operator becoming e f f e c t i v e , such Unit Operator shall deliver possession of

a l l wells, equipment, books, and records, materials, appurtenances and any other

assets, used i n connection with the u n i t operations and owned by the Working

Interest Owners to the new duly q u a l i f i e d successor Unit Operator or to the Unit

Manager i f no such new Unit Operator is elected, to be used for the purpose of

conducting u n i t operations hereunder. Nothing herein shall be construed as

authorizing the removal of any material, equipment, and appurtenances needed for

the preservation of any wells.

Nothing herein contained shall be construed to release, relieve or

discharge a Unit Operator who resigns or is removed hereunder from any l i a b i l i t y

for default by i t hereunder or from duties accruing or perfo.tm.ahle by i t p r i o r

to the effective date of such resignation or removal,

SECTION 8, SUCCESSOR UNIT OPERATOR Whenever the Unit Operator shall

tender I t s resignation as Unit Operator or shal 1 be removed as hereinabove

provided, the Working Interest Owners shall select a successor Unit Operator as

herein provided. Such selection shall not become effective u n t i l (a) a Unit

Operator so selected shall accept i n w r i t i n g the duties and r e s p o n s i b i l i t i e s of

Unit Operator, and (b) the selection shall have been f i l e d with the Supervisor

and the Commissioner, I f no successor Unit Operator or Unit Manager i s selected

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as herein provided, the Commissioner and the Director, at th e i r election, may-

declare t h i s agreement terminated.

In selecting a successor Unit Operator the affirmative vote of three

(3) or more Working Interest Owners owning a t o t a l of sixty percent c 60%) or more

of the Phase I I I Unit Pa r t i c i p a t i o n shall p r e v a i l , provided that i f any one Work­

ing Interest Owner has a Phase I I I Unit Pa r t i c i p a t i o n greater than f o r t y percent

(40%), i t s negative vote or f a i l u r e to vote shall not be regarded as s u f f i c i e n t

unless supported by the vote of two (2) or more Work"ng Interest Owners having

combined Phase I I I Unit Participations of at least f i v e percent (5%). I f the

Unit Operator who is removed votes only to sucreed i t r . r - i f or f a l l s tc vote, the

successor Unit Operator may be selected by the af f i r a r ~.tve vote of Working

Interest Owners owning a t o t a l of at least f i f t y - o n e percent (51%) of tlie Phase

I I I Unit Pa r t i c i p a t i o n remaining a f t e r excluding the "Unr Participation of Unit

Operator so removed

SECTION 9. ACCOUNTING PROVISIONS AKO UN *." 0? TOTING AGREEMENT : Costs

and expenses incurred by Unit Operator in conducting j n i t operations hereunder

shall be apportioned among, borne and paid by the forking Interest Owner? in

accordance with this agreement and the Unit Operating Agreement. The Unit

Operating Agreement shall also provide the manner in which the Work ing Interest

Owners sha;1 be e n t i t l e d to receive their respective proportionate and allocated

share of chi benefits accruing hereto i n conformity wtth their underlying

operating agreements, leases or other independent contracts and such othar rights

and obligations as between Unit Operator and tne Working Interest Owners as may

be agreed upon by the Unit Operator and tlie Working : nee rest Owners; however, no

such Unit i t e r a t i n g Agreement shall be deemed either to modify any of the terms

and cor.dit^ns of this Unit Agreement or to relieve tho Unit Operator of any-

rig h t or ob • igation established under t h i s agreement, ar.d in case of any incon­

sistency m c o n f l i c t between this agreement and the Unit Operating Agreenent,

this Unit -ureement shall p r e v a i l . Two treo copies of my 'Unit Operating Agree­

ment executed pursuant to th i s Section shall be r i l e d witr. the Commissioner and

three true- ."cpies thereof shall be f i l e d with t h t Supervisor prior tc approval

of t h i s agreement,

SECTION 10. RIGHTS AND OBLIGATIONS OF UNIT OPERATOR, Except as other­

wise s p e c i f i c a l l y provided herein, the exclusive r i g h t , p r i v i l e g e and duty of

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exercising any and a l l r i g h t s of the parties hereto which are necessary or con­

venient for prospecting for, producing, storing, allocating and d i s t r i b u t i n g the

Unitii e d Substances are hereby delegated to and shall be exercised by the Unit

Operator as herein provided. Upon request, acceptable evidence of t i t l e to said

ri g h t s shall be deposited with said Unit Operator, and together with t h i s agree­

ment, shall constitute and define the r i g h t s , privileges and obligations of Unit

Operator, Nothing herein, however, shall be construed to transfer t i t l e to any

land or to any lease or operating agreement, i t being understood that under this

agreement the Unit Operator, i n i t s capacity as Unit Operator, shall exercise the

rig h t s of possession and use vested i n the parties hereto only for the purposes

herein specified.

SECTION 11. EQUIPMENT AND FACILITIES NOT FIXTURES ATTACHED TO REALTY,

Each Working Interest Owner has heretofore placed and used on i t s Tract or Tracts

committed to t h i s agreement, various well and lease equipment and other property,

equipment and f a c i l i t i e s . I t i s also recognized that additional equipment and

f a c i l i t i e s may hereafter be placed and used upon the Unitized Land as now or

hereafter constituted. Therefore, for a l l purposes of thi s agreement any and

a l l such equipment shall be considered to be personal property and not fix t u r e s

attached to real t y . Accordingly, said well and lease equipment and personal

property is hereby severed from the mineral estates affected by this agreement,

and i t is agreed that any and a l l such equipment and personal property shall be

and remain personal property for a l l purposes

SECTION 12, PLAN OF OPERATIONS, I t i s recognized and agreed by the

parties hereto that the object and purpose of this agreement is to formulate and

to put into e f f e c t a secondary recovery project i n order to ef f e c t additional

recovery of Unitized Substances, prevent waste and conserve natural resources.

The parties hereto agree that the Unit Operator may, subject to the consent and

approval of a plan of operation by the Working Interest Owners, the Supervisor,

the Commissioner and the Commission, i n j e c t into the Unitized Formation, through

any well or wells completed therein, brine, water, a i r , gas, o i l and any one or

more other substances or combination of substances whether produced from the

Unitized Formation or not, and that the location of input wells and the rates of

Inje c t i o n therein and the rate of production shall be governed by standards of

good geologic and petroleum engineering practices and conservation methods. The

. i n .

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parties hereto, subject to p r i o r r i g h t s , i f any, grant to Unit Operator the use

of brine or non-potable water or both from any formation i n and under the Unitized

Land for i n j e c t i o n into the Unitized Formation, After commencement of secondary

operations, Unit Operator shall furnish the Commissioner and the Supervisor

monthly I n j e c t i o n and production reports for each well i n the Unit, Ihe Working

Interest Owners, the Commissioner and the Supervisor shall be furnished periodic

reports on the progress of the plan of operation and any revisions or changes

thereto necessary to meet changed conditions or to protect the interests of a l l

parties to this agreement; provided, however, that any major revisions of the

plan of operation involving a basic deviation from the i n i t i a l plan of operation

shall be subject to the consent and approval of the Working Interest Owners, the

Commission, the Commissioner and the Supervisor,

Concurrently with the f i l i n g of thi s agreement for f i n a l approval by

the Commissioner and the Supervisor, Unit Operator shall submit a plan of opera­

t i o n for the Unitized Land for approval and, upon approval thereof by the

Supervisor and the Commissioner, such plan shall constitute the future operating

obligations of the Unic Operator under this Unic Agreement for the period

specified therein. Thereafter, from time to time before the expiration of any

existing plan, the Unit Operator shall submit for l i k e approval a plan for an

additional specified period of operation,

SECTION 13, EASEMENTS OR USE OF SURFACE„ The parties hereto, to the

extent of the i r r i g h t s and interest, hereby grant to Working Interest Owners the

ri g h t to use as much of the surface of the land w i t h i n the Unit Area as may

reasonably be necessary for unit, operations, including the free use of water from

the Unit Area for u n i t operations, except water from any well,, lake, pond or

i r r i g a t i o n d i t c h of Royalty Owner, provided that, nothing herein shall be con­

strued as leasing or otherwise conveying to Working Interest Owners a s i t e for a

water, gas i n j e c t i o n , processing,or other plant or camp site

SECTION 14, TRACT PARTICIPATION, Tract Participations of each Tract

are shown i n Exhibit "C", and have been computed i n accordance with the following:

(a) Phase I Partici p a t i o n , Beginning at 7-00 A, M. on the effective

date hereof and remaining i n effe c t u n t i l 7 00 A.M. on the f i r s t day of the month

next following the month i n which the cumulative amount of o i l produced from the

Unitized Formation underlying the Unit Area on and afte r September 1, 1967, eauals

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1,000,000 barrels, the Tract Par t i c i p a t i o n of each Tract shall be as shown under

Phase I of Exhibit "C" and shall be determined from the following formula:

Tract P a r t i c i p a t i o n Percentages Phase i equals

A 100% V

Where;: A equals t o t a l current o i l and gas income from such Tract from

the Unitized Formation during the period March 1, 1967, to

September 1, 1967

B equals the summation of the t o t a l current o i i and gas income

from a l l Tracts i n the Unit Area from the Unitized Formation

during the period March 1, 1957, to September 1, 1967.

(b) Phase I I Par t i c i pa t ion. Beginning at 7:. 00 A.M on the f i r s t day

of the month next following the date the 1,000,000 barrels referred to in (a)

above shall have been produced and u n t i l 7.00 A.M. on the f i r s t day of the month

next following the date when the cumulative o i l produced from the Unitized Forma­

ti o n underlying a l l of the tracts described i n Exhibit a f t e r termination of

Phase I equals 1,672,835 barrels, the Tract Par t i c i p a t i o n of each Tract shall be

as shown under Phase I I of Exhibit "C'\ and sh a l l be determined from the following

formula:

Tract Participation Percentage, Phase I I equals

25% f plus 75% |

Where: A and B are as defined i n (a) above

C equals the estimated remaining primary barrels of o i l

producible from the Unitized Formation underlying each such

Tract as of September 1, 1967, such estimated remaining primary

barrels being as agreed upon by the Working Interest Owners.

D equals the summation cf the estimated remaining primary

barrels of o i l producible from the Unitized Formation under­

lying a l l such Tracts i n the Unit Area as of September 1, 1967,

such estimated remaining primary barrels of o i l for each Tract

being as agreed upon by the Working Interest Owners.

(c) Phase I I I P a r t i c j l p a t i o n . Beginning at 7.00 A M on the f i r s t day

of the month next following the date when the 1.672,835 barrels referred to i n

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Cb) above shall have been produced, the Tract Pa r t i c i p a t i o n of each Tract shall

be as shown under Phase 111 of Exhibit. "C", and shall be determined from the

following formula?

Tract Participation Percentage, Phase I I I equals

100%

F

Where: E equals the estimated quantity of o i l ultimately recoverable

from the Unitized Formation underlying each such Tract by

primary recovery operacions as agreed upon by the Working

Interest Owners,

F equals the summation of the estimated quantity of o i l

ulti m a t e l y recoverable from the Unitized Formation underlying

a l l such Tracts by primary recovery operations as agreed upon

by the Working Interest Owners.

I f less than a l l Tracts w i t h i n the Unit Area qualify for p a r t i c i p a t i o n

hereunder as of the ef f e c t i v e date hereof. Unit Operator, v i t h approval of the

Working interest Owners,, shall f i l e with the Supervisor, the Commissioner and

the Commission a schedule of q u a l i f i e d Tracts as of the said effective date,

which schedule shall be designated "'Revised Exhibit ' C! and considered for a l l

purposes as a part of t h i s agreement. Such revised Exhibit "C" shall set f o r t h

opposite each such q u a l i f i e d Tract the revised Tract P a r t i c i p a t i o n therefor which

shall be calculated by using the same Tract factors and formula which were used

to arrive at the Tract P a r t i c i p a t i o n of each Tract as set out in Exhibit "C"

attached hereto, but applying the same only to the q u a l i f i e d Tracts; i t being

expressly understood and agreed that the 1,000,000 barrels referred to i n Section

14- Tract P a r t i c i p a t i o n (a) and (b) hereof shall be reduced by an amount equal to

1,000,000 times the t o t a l Phase I Tract P a r t i c i p a t i o n (expressed as a decimal) of

a l l the tracts which f a i l to qualify for p a r t i c i p a t i o n ; and the 1,672,835 barrels

referred to i n Section 14 (b) and (c) hereof shall be reduced by an amount equal

to 1,672,835 times the t o t a l Phase I I Tract Participations (expressed as a

decimal) of a l l the Tracts which f a i l to qualify for p a r t i c i p a t i o n Such revised

Exhibit "C", upon approval by the Supervisor and the Commissioner, shall super­

sede, eff e c t i v e as of the ef f e c t i v e date hereof, the Tract Participations set f o r t h

in Exhibit ''C" attached hereto.

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The Tract Participations shown on Exhibit "C" attached hereto, or as may

be shown on the revised Exhibit "C" as above provided, shall govern the allocation

of unitized substances on and after the effective date of this u n i t agreement, and

u n t i l the al l o c a t i o n schedule i s revised pursuant to this agreement and the revised

Tract Participations are approved by the Supervisor and the Commissioner.

SECTION 15„ ^^Ii_MMJJn^.^I£^l^I2I^nQl- 0 n a n d after the

effective date hereof, and until the enlargement thereof, the tracts within the

Unit Area shall be entitled to Participation Cas provided in Section 14,

Tract Participation, hereof) In the production of Unitized Substances shall be

composed of the Tracts listed in Exhibit 'B" which corner or have a common

boundary (Tracts separated only by a public highway or a railroad right of way

shall be considered to have a common boundary), and that otherwise qualify as

foilows:

(a! Each Tract as to which Working Interest Owners owning one hundred

percent (100%) of the Working Interest and as to which Record Owners owning one

hundred percent (100%) therein have become parties hereto and as to which Royalty

Owners owning seventy-five percent (75%) or more of the Royalty Interest therein

have become parties hereto.

(b) Each Tract as to which Working Interest Owners owning one hundred

percent (100%) of the Working Interest and as to which Record Owners owning one

hundred percent (100%) therein have become parties hereto and as to which Royalty

Owners owning less than seventy-five percent (75%) of the Royalty Interest

therein have become parties hereto and, further, as to which.

( i ) A l l Working Interest Owners i n any such Tract have joined i n

a request for the q u a l i f i c a t i o n of such Tract, and

( i i ) Eighty percent (80%) of the combined voting interests of

Working Interest Owners i n a l l Tracts meeting the requirements of paragraph (a)

hereof have voted i n favor of qualifying such Tract

For the purpose of t h i s paragraph (b), a Working Interest Owner's

"voting i n t e r e s t " shall be equal to the r a t i o (expressed i n percent) which i t s

aggregate Phase I Unit P a r t i c i p a t i o n i n a i l Tracts qualifying under paragraph

(a) bears to the t o t a l Phase I Unit P a r t i c i p a t i o n of a l l Working Interest Owners

in a l l Tracts qualifying under paragraph (a).

(c) Each Tract as to which Working Interest Owners owning less than

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one hundred percent (100%) of the Working Interest and as to which Record Owners

owning less than one hundred percent (100%) therein have become parties hereto,

regardless of the percentage of Royalty Interest therein which is committed

hereto and, further, as to which:

( i ) llie Working Interest Owner operating any such Tract and a l l

of the other Working Interest Owners in such Tract who have become parties hereto

have joined i n a request for q u a l i f i c a t i o n of such Tract and at least 85% of such

parties have executed and delivered an indemnity agreement indemnifying and agree­

ing to hold harmless the other Working Interest Owners in the Unit, t h e i r

successors and assigns, against a l l claims and demands which arise out of the

q u a l i f i c a t i o n of such Tract, whieh may be made by the owners of Working Interests

in such Tract who are not parties hereto, and

( i i ) Eighty percent (80%) of the combined voting interest of

Working Interest Owners i n a l l Tracts meeting the requirements of paragraphs (a)

and (b) have voted i n favor of the q u a l i f i c a t i o n of such Tract and acceptance of

the indemnity agreement.

For the purpose of t h i s paragraprs * c l , a Working Interest Owner's voting

interest shall be equal to the r a t i o (expressed m percent) which i t s aggregate

Phase I Unit P a r t i c i p a t i o n i n a l l Tracts qualifying under paragraphs (al and (b)

bears to the t o t a l Phase I Unit Pa r t i c i p a t i o n of a l l Working Interest Owners i n

a l l Tracts qualifying under paragraphs (a) and (b), Upon the q u a l i f i c a t i o n of

such a Tract, the Unit P a r t i c i p a t i o n which would have been a t t r i b u t e d to the non-

subscribing owners of the Working Interest i n such Tract, had they become parties

to t h i s agreement and the Unit Operating Agreement, shall be att r i b u t e d to the

Working Interest Owners i n such Tract who have become parties to such agreements,

in proportion to t h e i r respective Working Interests i n the Tract

SECTION 16, ALLOCATION OF. WnTgED_ SUBSTAyCES . A l l Unitized Substances

produced and saved (less, save and except any part of such Unitized Substances

used i n conformity with good operating practices w i t h i n the Unit Area for d r i l l ­

ing, operating, camp and other production or development purposes and for pressure

maintenance or unavoidably l o s t ) shall be apportioned among and allocated to the

committed Tracts i n accordance with the respective Tract Participations effective

hereunder during the respective periods such Unitized Substances were produced,

as set f o r t h i n the schedule of p a r t i c i p a t i o n i n Exhibit "C" The amount of

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Unitized Substances so allocated to each t r a c t s and only that amount (regardless

of whether i t be more or less than the amount of the actual production of Unitized

Substances from the well or wells, i f any, on such Tract) sh a l l , for a l l intents,

uses and purposes, be deemed to have been produced from such Tract.,

The Unitized Substances allocated to each such Tract shall be d i s t r i ­

buted among, or accounted for to, the parties executing, consenting to or

r a t i f y i n g this agreement and e n t i t l e d to share i n the production from such Tract

in the same manner, i n the same proportions, and upon the same conditions, as

they would have participated and shared i n the production from such Tracts, or

i n the proceeds thereof, had t h i s agreement not been entered into, and with the

same legal force and e f f e c t .

No Tract committed to t h i s agreement and q u a l i f i e d for p a r t i c i p a t i o n as

above provided shall be subsequently excluded from p a r t i c i p a t i o n hereunder on

account of depletion of Unitized Substances from said Tract.

I f the Working Interest and the Royalty Interest i n any Tract are

divided with respect to separate parcels or portions of such Tract and owned

severally by d i f f e r e n t persons, the Tract P a r t i c i p a t i o n of such Tract sh a l l , i n

the absence of a recordable instrument executed by a l l such owners and furnished

to Unit Operator f i x i n g the divisions of ownership, be divided among such parcels

or portions i n proportion to the number of surface acres in each.

The Unitized Substances allocated to each Tract shall be delivered i n

kind to the respective Working Interest Owners and parties e n t i t l e d thereto by

v i r t u e of the ownership of o i l and gas rights therein or by purchase from such

owners Each Working Interest Owner and the parties e n t i t l e d thereto shall have

the continuing r i g h t to receive such production i n kind at a common point w i t h i n

the Unit Area and to s e l l or dispose of the same as i t sees f i t Each such party

shall have the r i g h t to construct., maintain and operate a l l necessary f a c i l i t i e s

for that purpose w i t h i n the Unit Area; provided the same are so constructed,

maintained and operated as not to i n t e r f e r e with operations carried on pursuant

hereto Subject to Section 18, Royalty Settlement, hereof, any extra expenditure

incurred by Unit Operator by reason of the delivery i n kind of any portion of the

Unitized Substances shall be borne by the party receiving the same in kind, In

the event any working Interest Owner shall f a i l to take or otherwise adequately

dispose of i t s proportionate share of the production from the Unitized Formation

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currently as and when produced, then so tong as such condition continues. Unit

Operator, for the account and at the expense of the Working Interest Owner of

the Tract or Tracts concerned, and i n order to avoid c u r t a i l i n g the operation of

the Unit Area, may s e l l or otherwise dispose of such production to i t s e l f or to

others on a day-to-day basis at not less than the prevailing market price i n the

area for l i k e production, and the account of such Working Interest Owner shall be

charged therewith as having received such production. The net proceeds, i f any,

of the Unitized Substances so disposed of by Unit Operator shall be paid to the

Working Interest Owner of the Tract or Tracts concerned or a party designated in

wr i t i n g by such Working Interest Owner Notwithstanding the foregoing, Unit

Operator shall not make a sale into interstate commerce of any Working Interest

Owner's share of gas production without f i r s t giving such Working Interest Owner

sixty (60) days notice of such intended sale

Any party receiving i n kind or separately disposing of a l l or any part

of the Unitized Substances allocated to any Tract, or receiving the proceeds

therefrom i f the same i s sold or purchased by Unit Operator, shall be responsible

for the payment of a l l Royalty due under the lease or leases covering the Tracts

contributed by i t and received into the Unit, and each such party shall hold each

other party hereto harmless against a l l claims, demands and causes of action for

such Royalty on the lease or leases and Tracts contributed by. i t to che Unit Area.

SECTION 17. BALANCTNG_0F__PROj>UCTION» Unit Operator shall make a

proper and timely gauge of a l l lease and other tanks located on each committed

Tract i n order to ascertain the amount of merchantable o i l i n such tanks, above

the pipe line connections, as of 7,00 A.M on the ef f e c t i v e date hereof A i l

Unitized Substances which are a part of the pr i o r allowable of the well or wells

from which the same were produced shall be and remain the property of the Working

Interest Owners e n t i t l e d thereto as i f the Unit had not been formed and such Work­

ing Interest Owners shall promptly remove same Any such Unitized Substances not

so removed may be sold by the Unit Operator for the account of such Working

Interest Owners, subject to the payment of a l l royalty to Royalty Owners under

the terms and provisions of the applicable lease or leases and other contracts.

A l l such Unitized Substances which are i n excess of the p r i o r allowable of the

well or wells from which the same were produced shall be regarded and treated the

same as Unitized Substances produced a f t e r the ef f e c t i v e date hereof I f , as of

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the ef f e c t i v e date hereof, any Tract is overproduced with respect to the allow­

able of the well or wells on that Tract and the amount of such over-production

has been sold or otherwise disposed of, such over-production shall be regarded

and included as a part of the Unitized Substances produced a f t e r the effective

date hereof, and the amount thereof charged to such Tract as having been

delivered to the persons e n t i t l e d to Unitized Substances allocated to such Tract.

SECTION 18 ROYALS... SETTLEMENT - The State of New Mexico and the

United States of America and a l l Royalty Owners who, under an existing contract,

are e n t i t l e d to take i n kind a share of the Unitized Substances produced from any

Tract unitized hereunder, shall hereafter be e n t i t l e d to take i n kind their share

of the Unitized Substances allocated to ?uch Tract, and Unit Operator shall make

deliveries of such Royalty share taken i n kind i n conformity with the applicable

contracts, laws and regulations Settlement for Royalty Interests not taken in

kind shall be made by Working Interest Owners responsible therefor under exist­

ing contracts, laws and regulations, on or before the las t day of each month for

Unitized Substances produced during the preceding calendar month; provided, how­

ever, that nothing herein contained shall operate to relieve the lessees of any

land from t h e i r respective lease obligations for the payment of any Royalty due

under t h e i r leases, except that such Royalty shall be computed i n accordance with

the terms of t h i s Unit Agreement,

Royalty due the United States shall be computed as provided i n the

operating regulations and paid i n value or delivered i n kind as to a l l Unitized

Substances on the basis of the amounts thereof allocated to unitized federal

land as provided herein at the rate specified i n the respective federal leases

or at such lower rate or rates as may be authorized by law or regulation, pro­

vided, that for leases on which the royalty rate depends on the d a i l y average

production per w e l l , such average production shall be determined i n accordance

with the operating regulations as though the unitized lands were a single con­

solidated lease.

I f the amount of production or the proceeds thereof accruing to any

Royalty Owner (except the United States of Ameri t depends upon the

average production per well or the average pipeline run per well from a Tract

during any period of time, then such production shall be determined from and

a f t e r the e f f e c t i v e date hereof by dividing the production allocated each Tract

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during such period of time by the number of wells located thereon capable of pro­

ducing as of the effe c t i v e date hereof, provided, however, any Tract without a

producible well on said effective date sha l l , for the purposes herein contained,

be considered as having one such well thereon

A l l Royalty due the State of New Mexico and the United States of America

and the other Royalty Owners hereunder shall be computed and paid on the basis of

a l l Unitized Substances allocated to the respective Tract or Tracts committed

hereto, in l i e u of actual production from such Tract or Tracts

Each Royalty Owner (other than the State of New Mexico and the United

States of America) that r a t i f i e s this agreement represents and warrants that he

is the owner of a Royalty Interest in a Tract or Tracts w i t h i n the Unit Area as

his interest appears i n Exhibit "B" attached hereto

SECTION 19 ^NTAL ,SETTjjMENT Rentals or minimum royalties due on

leases committed hereto shall be paid by Working Interest Owners responsible

therefor under existing contracts, laws and regulations provided that nothing

herein contained shall operate to relieve the lessees of any land from t h e i r

respective lease obligations for the payment of any rental or minimum royalty

i n l i e u thereof, due under t h e i r leases Rental for lands of the State of New

Mexico subject to thi s agreement shall be paid at the rate specified in the

respective leases from the State of New Mexico Rental or minimum royalty for

lands of the United States of America subject to thi s agreement shall be paid at

the rate specified i n the respective leases from the United States of America,

unless rental or minimum royalty is waived, suspended, or reduced by law or by

approval of the Secretary or his duly authorized representative,

SECTION 20 CONSERVATION, Operations hereunder and production of

Unitized Substances shall be conducted to provide for the most economical and

e f f i c i e n t recovery of said substances without waste, as defined by or pursuant

to Federal and State laws and regulations

SECTION 21 DRAINAGE., The Unit Operator shall take such measures as

the Supervisor or the Commissioner deems appropriate and adequate to prevent

drainage of Unitized Substances from the Unitized Land by wells on land not

subject to thi s agreement,

SECTION 22 LEASES AND CONTRACTS CONFORMED AND EXTENDED. The terms,

conditions and provisions of a l l leases, subleases and other contracts r e l a t i n g

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to exploration, d r i l l i n g ^ development or operation for o i l or gas on lands

committed to thi s agreement are hereby expressly modified and amended to the

extent necessary to make the same conform to the provisions hereof, but otherwise

to remain i n f u l l force and ef f e c t , and the parties hereto hereby consent that

the Secretary and the Commissioner, respectively, sh a l l , and by th e i r approval

hereof, or by the approval hereof by their duly authorized representatives, do

hereby establish, a l t e r , change, or revoke the d r i l l i n g , producing, r e n t a l ,

minimum royalty and royalty requirements of Federal and State leases committed

hereto and the regulations i n respect thereto to conform said requirements to the

provisions of this agreement.

Without l i m i t i n g the generality of the foregoing, a l l leases, sub-leases

and contracts are p a r t i c u l a r l y modified i n accordance with the following:

(a) The development and operation of lands subject to t h i s agreement

under the terms hereof shall be deemed f u l l performance of a l l obligations for

development and operation with respect to each and every separately owned Tract

conmiitted to t h i s agreement, regardless of whether there is any development of

any p a r t i c u l a r Tract of the Unitized Land

(b) D r i l l i n g and producing operations performed hereunder upon any

Tract of Unitized Land w i l l be accepted and deemed to be performed upon and for

the benefit of each and every Tract of Unitized Land, and no lease shall be

deemed to expire by reason of f a i l u r e to d r i l l or produce wells situated on the

land therein embraced.

(c) Suspension of d r i l l i n g or producing operations on a l l Unitized

Lands pursuant to d i r e c t i o n or consent of the Commissioner and the Secretary or

his duly authorized representative shall be deemed to constitute such suspension

pursuant to such di r e c t i o n or consent as to each and every Tract of Unitized Land,

A suspension of d r i l l i n g or producing operations on specified lands shall be

applicable only to such lands

(d) Each lease., sublease, or contract r e l a t i n g to the exploration,

d r i l l i n g , development or operation for Unitized Substances, which by i t s terms

might expire p r i o r to the termination of this agreement, is hereby extended beyond

any such term so provided therein so that i t shall be continued i n f u l l force and

effect for and during the term of this agreement, as to the land committed so

lone as such lease remains subiect hereto

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(e) Any lease embracing lands of tne State of New Mexico which i s made

subject to t h i s agreement s h a l l continue i n force beyond tne term provided t h e r e i n

as to the lands committed hereto u n t i l the t e r m i n a t i o n hereof

Cf) Any lease embracing lands of the State of New Mexico having only

a p o r t i o n o f i t s lands committed hereto s h a l l be segregated as to the p o r t i o n

committed and as to the p o r t i o n not committed and the terms of such lease s h a l l

apply separately as to such segregated p o r t i o n s commencing as of the e f f e c t i v e

date hereof, Notwithstanding any of the p r o v i s i o n s of t h i s agreement to the

co n t r a r y , any lease embracing lands of the State of New Mexico having only a

p o r t i o n of i t s lands committed hereto s h a l l continue i n f u l l force and e f f e c t

beyond the term provided t h e r e i n as to a i l lands embraced i n such lease (whether

w i t h i n or w i t h o u t the Un i t Area), i f o i l or gas are discovered and are capable

of being produced i n paying q u a n t i t i e s from some p a r t of the lands embraced i n

such lease committed to t h i s agreement a t the e x p i r a t i o n of the secondary term of

such lease; or i f , a t the e x p i r a t i o n of the secondary term, the lessee or the

u n i t Operator i s then engaged i n bona fi.de d r i l l i n g or reworking operations on

some p a r t of the lands embraced t h e r e i n , any such lease s h a l l remain i n f u l l

f orce and e f f e c t so long as such operations are being d i l i g e n t l y prosecuted, and

i f they r e s u l t i n the production of U n i t i z e d Substances, said lease s h a l l con­

tinue i n f u l l force and e f f e c t as to a i l of the lands embraced t h e r e i n , so long

t h e r e a f t e r as U n i t i z e d Substances are produced i n paying q u a n t i t i e s from any

p o r t i o n of said lands

(g) The segregation of any Federal lease committed to t h i s agreement

i s governed by the f o l l o w i n g p r o v i s i o n m the f o u r t h paragraph of Section I 7 ( j )

of the Mineral Leasing Act as amended by the Act of September 2, i960 (74 Stat,

781-784); "Any (Federal) lease h e r e t o f o r e or h e r e a f t e r committed to any such

( u n i t ) plan embracing lands t h a t are i n p a r t w i t h i n and i n p a r t outside o f the

area covered by any such p l a n s h a l l be segregated i n t o separate leases as to the

lands committed and the lands not committed as of the e f f e c t i v e date of u n i t i z a ­

t i o n ; provided, however, t h a t any such lease as to the nonunitized p o r t i o n s h a l l

continue i n force and e f f e c t f o r the term thereof but f o r not less than two years

from the date of such segregation and so long t h e r e a f t e r as o i l or gas i s produced

i n paying q u a n t i t i e s "

SECTION 23, COVEMNJJJiy^ The covenants h e r e i n s h a l l be

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construed to be covenants running with the land with respect to the interests of

the parties hereto and the i r successors i n interests u n t i l t h i s agreement

terminates; and any grant, transfer, or conveyance of interest in land or leases

subject hereto shall be and hereby i s conditioned upon the assumption of a l l

privileges and obligations hereunder by the grantee, transferee, or other

successor i n interest. No assignment or transfer of any Working Interest subject

hereto shall be binding upon Unit Operator u n t i l the f i r s t day of the calendar

month a f t e r Unit Operator i s furnished with the o r i g i n a l , photostatic or c e r t i ­

fied copy of the instrument of transfer; and no assignment or transfer of any

Royalty Interest shall be binding upon the Working Interest Owner responsible

therefor u n t i l the f i r s t day of the calendar month after said Working Interest

Owner i s furnished with the o r i g i n a l , photostatic or c e r t i f i e d copy of the

instrument of transfer.

SECTION 24 EFFECTIVE DATE_AND TERM This agreement shall become

binding upon each party who executes or r a t i f i e s i t a? of the date of execution

or r a t i f i c a t i o n by such party and shall become eff e c t i v e as of 7 00 o'clock A.M,

of the f i r s t day of the calendar month next following;

(a) The execution or r a t i f i c a t i o n of this agreement and the Unit.

Operating Agreement by Working Interest Owners owning Tracts with a combined

Phase 111 Unit P a r t i c i p a t i o n of at least eighty-five percent {85%), and the

execution or r a t i f i c a t i o n of th i s agreement by Royalty Owners owning Tracts with

a combined int e r e s t of at least s i x t y - f i v e percent (65%) of the Royalty Interest

i n the Unit Area, calculated on the basis of Phase I I I Unit Participations; and

(b) The approval of th i s agreement by the Commissioner, the Director

or his duly authorized representative, and the Commission; and

Cc) The f i l i n g of at least one counterpart of thi s agreement for

record in the o f f i c e of the County Clerk of Lea County, New Mexico, by the Unit

Operator; and provided s further, that i f (a), (b) and (c) above are not

accomplished on or before August 1, 1969, t h i s agreement shall ipso facto expire

on said date (hereinafter called "expiration date") and thereafter ba of no

further force or ef f e c t , unless p r i o r thereto t h i s agreement has been executed

or r a t i f i e d by Working Interest Owners owning Tracts with a combined Phase I I I

Unit P a r t i c i p a t i o n of at least eighty percent (807«), and the Working Interest

Owners owning Tracts with a combined Phase I I I Unit P a r t i c i p a t i o n of at least

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s i x t y - f i v e percent (657o) committed to this agreement have decided to extend said

expiration date for a period not to exceed SLX (6) months (hereinafter called

"extended expiration date"). I f said expiration date LS s~ extended and (a), (b)

and (c) are not accomplished on or before said extended expiration date, this

agreement shall ipso facto expire on said extended expiration date and thereafter

be of no further force and ef f e c t .

Unit Operator s h a l l , w i t h i n t h i r t y (30) days after the effective date

of t h i s agreement, f i l e for record i n the o f f i c e where a counterpart of thi s

agreement i s recorded, a c e r t i f i c a t e to the effe c t that t h i s agreement has become

effec t i v e according to i t s terms and stating further the effective date.

The term of this agreement sha!': be for and during the time that

Unitized Substances are or can be produced in paying quantities from the Unitized

Land and so long thereafter as d r i l l i n g , reworking or other operations (including

secondary recovery operations) are prosecuted thereon without cessation of more

than ninety (90) consecutive days, and sc long thereafter as such Unitized Sub­

stances can be produced as aforesaid

This agreement may be terminated at any time with the approval of the

Commissioner and the Director by Working Interest Owners owning Tracts with a

combined Phase I I I Unit Participation of at least seventy-five percent ? 75%).

Notice of any such termination shall be given by Unit Operator to a l l parties

hereto,

Upon termination of thi s agreement, the parties hereto shall be

governed by the terms and provisions of the leases and contracts affecting the

separate Tracts,

I f not otherwise covered by the leases unitized under this agreement,

Royalty Owners hereby grant Working Interest Owners a period of six (6) months

af t e r termination of thi s agreement i n which to salvage, s e l l , d i s t r i b u t e or

otherwise dispose of the personal property and f a c i l i t i e s used in connection

with Unit Operations,

SECTION 25, RATE OF PROSPECTING, DEVELOPMENT AND PRODUCTION,, A i l

production and the disposal thereof shall be i n conformity with allocations and

quotas made or fixed by any duly authorized person or regulatory body under any

Federal or State statute. The Director i s hereby vested with authority to a l t e r

or modify from time to time, in his discretion, the rate of prospecting and

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development and to a l t e r or modify the quantity and rate of production under this

Agreement, such authority being hereby limited to a l t e r a t i o n or modification i n

the public interest, the purpose thereof and the public interest to be served

thereby to be stated i n the order of a l t e r a t i o n or modification; provided,

further, that no such a l t e r a t i o n or modification shall be eff e c t i v e as to any

land of the State of New Mexico as to the rate of prospecting and development i n

the absence of the specific w r i t t e n approval thereof by the Commissioner and as

to any lands of the State of New Mexico or privately-owned lands subject to this

agreement as to the quantity and rate of production i n the absence of specific

w r i t t e n approval thereof by the Commission

Powers i n thi s Section vested i n the Director and Commissioner shall

only be exercised a f t e r notice to Unit Operator and opportunity for hearing to

be held not less than f i f t e e n days from notice.

SECTION 26. NONDISCRIMINATION. In connection with the performance of

work under th i s agreement, the Unit Operator agrees to comply with a l l of the

provisions of Section 202 (1) to (7) inclusive, of Executive Order 11246 (30 F.R.

12319), which are hereby incorporated by reference i n this agreement

SECTION 27. APPEARANCES, Unit Operator shall have the r i g h t to appear

for or on behalf of any and a l l interests affected hereby before the Commissioner,

the Department, and the Commission, and to appeal from any order issued under the

rules and regulations of the Commissioner, the Department, or the Commission, or

to apply for r e l i e f from any of said rules and regulations or i n any proceedings

r e l a t i v e to operations before the Commissioner, the Department, or the Commission,

or any other l e g a l l y constituted authority; provided, however, that any other

interested party shall also have the r i g h t at his or i t s own expense to be heard

in any such proceeding.

SECTION 28. NOTICES A l l notices, demands, objections or statements

required hereunder to be given or rendered to the parties hereto shal1 be deemed

f u l l y given i f made i n w r i t i n g and personally delivered to the party or parties

or sent by postpaid c e r t i f i e d mail, addressed to such party or parties at their

respective addresses set f o r t h i n connection with the signature hereto or to the

r a t i f i c a t i o n or consent hereof or to such other address as any such party or

parties may have furnished i n w r i t i n g to the party sending the notice, demand or

statement

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SECTION 29, NO WAIVER QF_CERTAIN_RjGHTS Nothing in thi s agreement

contained shall be construed as a waiver by any party hereto of the r i g h t to

assert any legal or con s t i t u t i o n a l r i g h t or defense as to the v a l i d i t y or i n ­

v a l i d i t y of any Federal or State law or rule or regulation issued thereunder i n

any way affecting such party, or as a waiver by any such party or any r i g h t

beyond his or i t s authority to waive

SECTION 30. WAIVER OF RIGHTS TO PARTITION Each party hereto covenants

that, during the existence of this agreement, i t w i l l not resort to any action

to p a r t i t i o n the Unitized Formation or the Unit Equipment; and to that extent

waives the benefits of a l l laws authorizing such p a r t i t i o n ,

SECTION 31. yNM2IMBLE^|^Y A i l obligations under th i s agreement

requiring the Unit Operator to commence or continue secondary recovery operations

or to operate on or produce Unitized Substances from any of the lands covered by

this agreement shall be suspended while, but only so long as the Unit Operator

despite the exercise of due care and diligence, i s prevented from complying with

such obligations, i n whole or i n part, by strikes, acts of God, Federal, State or

municipal law or agency, unavoidable accident, uncontrollable delays i n trans­

portation, i n a b i l i t y to obtain necessary materials i n open market, or other

matters beyond the reasonable control of the Onit Operator whether similar to

matters herein enumerated or not. Nothing herein shall be construed to require

Unit Operator to s e t t l e strikes against i t s w i l l ,

SECTION 32, LOSS OF TITLE, In the event t i t l e to any Tract of Unitized

Land shall f a i l so as to render the Tract inoperable under th i s agreement and the

true owner cannot be induced to j o i n this Unit Agreement, such Tract shall be

automatically regarded as not committed hereto and there shall be such readjust­

ment of future costs and benefits as may be required on account of the loss of

such t i t l e . I f a Tract ceases to be subject to thi s agreement because of the

f a i l u r e of t i t l e , Unit Operator, subject to Section 1&, Tract Participation,

hereof, shall recompute the Tract P a r t i c i p a t i o n of each of the Tracts remaining

q u a l i f i e d for p a r t i c i p a t i o n and shall revise Exhibits "A", "B" and "C" accord­

ingly. The revised exhibits shall be effe c t i v e as of the f i r s t day of the

calendar month i n which such f a i l u r e of t i t l e i s f i n a l l y determined.

I f t i t l e to a Working Interest f a i l s , the rig h t s and obligations of

Working Interest Owners by reason of the f a i l u r e of t i t l e shall be governed by

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the Unit Operating Agreement, I f t i t l e to a Royalty Interest f a i l s , but the Tract

to which i t relates remains q u a l i f i e d , the parties whose t i t l e f a i l e d shall not

be e n t i t l e d to share hereunder with respect to such int e r e s t In the event of a

dispute as to t i t l e as to any Royalty, Working Interest or other interest subject

thereto, payment or delivery on account thereof may be withheld without l i a b i l i t y

or interest u n t i l the dispute i s f i n a l l y settled; provided, that as to State or

Federal land or leases, no payments of funds due the State of New Mexico or the

United States of America shall be withheld, but such funds shall be deposited as

directed by the Commissioner or the Supervisor (as the case may be), to be held

as unearned money pending f i n a l settlement of the t i t l e dispute, and then applied

as earned or returned i n accordance with such f i n a l settlement

Unit Operator as such is relieved from any re s p o n s i b i l i t y for any defect

or f a i l u r e of any t i t l e hereunder,

SECTION 33. JOINDER IN DUAL CAPACITY, Execution as herein provided by

any party either as a Working Interest Owner or as a Royalty Owner shall commit

a l l interests that may be owned or controlled by such party.

SECTION 34. NONJOINDER AND SUBSEQUENT JOINDER, I f the owner of any

substantial i n t e r e s t i n a Tract w i t h i n the Unit Area f a i l s or refuses to sub­

scribe or consent to thi s agreement, the owner of the Working Interest i n that

Tract may withdraw said Tract from this agreement by w r i t t e n notice to the

Supervisor, the Commissioner and the Unit Operator p r i o r to the approval of this

agreement by the Supervisor and the Commissioner, Any o i l or gas interests i n

lands w i t h i n the Unit Area not committed hereto p r i o r to submission of thi s

agreement for f i n a l approval may thereafter be committed hereto by the owner or

owners thereof subscribing or consenting to th i s agreement, and, i f the interest

is a working interest, by the owner of such interest also subscribing to the Unit

Operating Agreement, After operations are commenced hereunder, the r i g h t of sub­

sequent joinder, as provided i n this section, by a Working Interest Owner is

subject to such requirements or approvals, i f any, pertaining to such joinder,

as may be provided for i n the Unit Operating Agreement. After f i n a l approval

hereof, joinder by a non-Working Interest Owner must be consented to i n w r i t i n g

by the Working interest Owner committed hereto and responsible for the payment

of any benefits that may accrue hereunder i n behalf of such non-Working Interest.

Joinder by any Royalty Owner, at any time, must be accompanied by appropriate

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joinder of the corresponding Working Interest Owner i n order for the interest of

such Royalty Owner to be regarded as e f f e c t i v e l y committed Joinder to the Unit

Agreement by a Working Interest Owner, at any time, must be accompanied by

appropriate joinder to the Unit Operating Agreement in order for such interest to

be regarded as e f f e c t i v e l y committed to th i s Unit Agreement

The r i g h t of subsequent joinder as provided in th i s Section shall be

subject to such requirements or approvals and on such basis as may be agreed upon

by Working Interest Owners owning Tracts with Phase I I I P a r t i c i p a t i o n of at least

eighty percent (80%) and approval of the Supervisor and the Commissioner.

Provided that the Tract p a r t i c i p a t i o n of each previously q u a l i f i e d Tract shall

remain i n the same r a t i o one to the other Such joinder by a proposed Working

Interest Owner must be evidenced by his execution or r a t i f i c a t i o n of this agree­

ment and the Unit Operating Agreement. Such joinder by a Royalty Owner must be

evidenced by his execution or r a t i f i c a t i o n of t h i s agreement and must be con­

sented to i n w r i t i n g by the Working Interest Owner responsible for the payment

of any benefits that may accrue hereunder in behalf of such Royalty Owner.

Except as may be otherwise herein provided, subsequent joinder to this agreement

shall be ef f e c t i v e at 7;:00 o'clock A.M. as of the f i r s t day of the month follow­

ing the f i l i n g with the Commissioner and the Supervisor of duly executed counter­

parts of any and a l l documents necessary to establish effective commitment of any

Tract or interest to this agreement, unless objection to such joinder by the

Commissioner or the Supervisor i s duly made w i t h i n six t y (60) days a f t e r such

f i l i n g ; provided, however, that as to State lands such subsequent joinder must be

approved by the Commissioner.

I t i s expressly agreed by the parties hereto that the provisions of

this Section 34 are made subject to the provisions of Section 15 hereinabove set

for t h and nothing contained herein shall be construed i n controvention or dero­

gation thereof.

SECTION 35. COUNTERPARTS„ This agreement may be executed i n any

number of counterparts, no one of which needs to be executed by a l l parties and

may be r a t i f i e d or consented to by separate instrument i n w r i t i n g s p e c i f i c a l l y

r e f e r r i n g hereto, and shall be binding upon a l l those parties who have executed

such a counterpart, r a t i f i c a t i o n or consent hereto with the same force and effect

as i f a l l parties had signed the same document, and regardless of whether or not

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i t i s executed by a l l other parties owning or claiming an interest i n the land

w i t h i n the above described Unit Area,

SECTION 36. TAXES. The Working Interest Owners shall render and pay

or cause to be rendered and paid for t h e i r account and the account of the Royalty

Owners a l l v a l i d taxes on or measured by the Unitized Substances i n and under or

that may be produced, gathered and sold from the land subject to t h i s agreement

a f t e r the e f f e c t i v e date of this agreement, or upon the proceeds or net proceeds

derived therefrom. The Working Interest Owners in each Tract may charge the

proper proportion of said taxes to the Royalty Owners having interests in said

Tract, and may currently r e t a i n and deduct s u f f i c i e n t of the Unitized Substances

or derivative products, or net proceeds thereof, from the allocated share of each

Royalty Owner to secure reimbursement for the taxes so paid No such taxes shall

be charged to the United States or the State of New Mexico or to any lessor who

has a contract with his lessee to pay such taxes,

In order to avoid t i t l e f a i l u r e which might i n c i d e n t a l l y cause the

t i t l e to a Working Interest or Royalty Interest to f a i l , the owners of (1) the

surface rights to each committed Tract, (2) severed mineral or Royalty Interest

i n said Tracts and (3) improvements located i n said Tracts not u t i l i z e d for Unit

operations shall i n d i v i d u a l l y be responsible for the rendition and assessment,

for ad valorem tax purposes, of a l l such property, and for the payment of such

taxes, except as otherwise provided i n any contract or agreement between such

owners and a Working Interest Owner or Owners I f any ad valorem taxes are not

paid by such owner responsible therefor when due, Unit Operator may, at any time

p r i o r to tax sale, pay the same, redeem such property and discharge such tax l i e n

as may arise through non-payment. In the event Unit Operator makes any such

payment or redeems any such property from tax sale, Unit Operator shall be re­

imbursed therefor by the Working Interest Owners i n proportion to t h e i r respective

Unit Participations then i n e f f e c t , and Unit Operator shall withhold from any

proceeds derived from the sale of Unitized Substances otherwise due to said

delinquent taxpayer or taxpayers an amount s u f f i c i e n t to defray the costs of

such payment or redemption, such withholding to be d i s t r i b u t e d among the Working

Interest Owners i n proportion to t h e i r respective contributions toward such pay­

ment or redemption. Such withholding shall be without prejudice to any other

remedy, either at law or i n equity, which may be available for exercise by the

-2R-

Page 174: SKELLY OIL COMPANY - New Mexico Department of Energy ...ocdimage.emnrd.state.nm.us/imaging/filestore... · SKELLY OIL COMPANY P. O. BOX 1650 EXPLORATION AND PRODUCTION JUDD H. OUALLINE

Unit Operator or by the Working Interest Owners..

SECTION 37. CONFLICT OF SUPERVISION, Neither the Unit Operator nor

the Working Interest Owners, nor any of them, shall be subject to any f o r f e i t u r e ,

termination or expiration of any rig h t s hereunder or under any leases or contracts

subject hereto, or to any penalty or l i a b i l i t y on account of delay or f a i l u r e i n

whole or i n part to comply with any applicable provisions thereof to the extent

that the said Unit Operator or the Working Interest Owners, or any of them, are

hindered, delayed or prevented from complying therewith by reason of f a i l u r e of

the Unit Operator to obtain, i n the exercise of due diligence, the concurrence

of proper representatives of the United States and proper representatives of the

State of New Mexico i n and about any matters or things concerning which i t i s

required herein that such concurrence be obtained. The parties hereto, including

the Commission, agree that a l l powers and authority which by any provisions of

this agreement are vested i n the Commission shall be exercised by i t pursuant

to the provisions of the laws of the State of New Mexico and subject i n any case

to appear or j u d i c i a l review as may now or hereafter be provided by the laws of

the State of New Mexico,

SECTION 38. NCj_PARTjjERSHXP° The duties, obligations and l i a b i l i t i e s

of the parties hereto are intended to be several and not j o i n t or col l e c t i v e

This agreement i s not intended to create, and shall not be construed co create,

an association or tr u s t , or to impose a partnership duty, obligation or l i a b i l i t y

with regard to any one or more of the parties hereto Each party hereto shall

be i n d i v i d u a l l y responsible for i t s own obligations as herein provided,

SECTION 39 BORDER AGREEMENTS Unit Operator, with concurrence of

Working Interest Owners having a combined Phase I I I Unit P a r t i c i p a t i o n of sixty-

f i v e percent (65%) or more, may, subject to approval of the Supervisor, enter

into a border-protection agreement or agreements with the Working Interest Owners

of adjacent lands along the exterior boundary of the Unit Area with respect to

the operations i n the border area for the maximum ultimate recovery, conservation

purposes and proper protection of the parties and interests.

Page 175: SKELLY OIL COMPANY - New Mexico Department of Energy ...ocdimage.emnrd.state.nm.us/imaging/filestore... · SKELLY OIL COMPANY P. O. BOX 1650 EXPLORATION AND PRODUCTION JUDD H. OUALLINE

IN WITNESS WHEREOF, the parties hereto have caused t h i s agreement to

be executed and have set opposite t h e i r respective names the date of execution,

ATTEST SKELLY OIL COMPANY

By: Assistant? Secretary

Date: /JljUfT^A , % / ? 6 #

Vice Pres iden t

UNIT OPERATOR

NON-OPERATORS

STATE O F ^ ^ K O ) ^

COUNTY OF-fcEA- )

The f o r e g o i n g ins t rument was acknowledged be fo re me t h i s day o f

&cJZZ£*^> 1968, by Q . /^X

Vice President for SKELLY OIL COMPANY, on behalf of said company,

Notary Public

My commission expires:

../.*;. J i».«V ol, 1971

Page 176: SKELLY OIL COMPANY - New Mexico Department of Energy ...ocdimage.emnrd.state.nm.us/imaging/filestore... · SKELLY OIL COMPANY P. O. BOX 1650 EXPLORATION AND PRODUCTION JUDD H. OUALLINE

i i n i u i i i i i UNIT BOUNDARY

FEDERAL LANDS

| ; 3 . y ) STATE LANDS

| 1 FEE LANDS

Q TRACT NUMBER

JAN 1968

WEST DOLLARHIDE DRINKARD UNIT L E A COUNTY, NEW MEXICO

EXHIBIT "A"

Page 177: SKELLY OIL COMPANY - New Mexico Department of Energy ...ocdimage.emnrd.state.nm.us/imaging/filestore... · SKELLY OIL COMPANY P. O. BOX 1650 EXPLORATION AND PRODUCTION JUDD H. OUALLINE

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Page 187: SKELLY OIL COMPANY - New Mexico Department of Energy ...ocdimage.emnrd.state.nm.us/imaging/filestore... · SKELLY OIL COMPANY P. O. BOX 1650 EXPLORATION AND PRODUCTION JUDD H. OUALLINE

EXHIBIT "C"

UNIT AGREEMENT SCHEDULE OF TRACT PARTICIPATION WEST DOLLARHIDE DRINKARD UNIT

LEA COUNTY, NEW MEXICO

Tract No.

1

2

3

4

5

6

7

8 (a) (b)

9 (a) (b)

10 (a) (b)

TRACT PARTICIPATION (%)

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

Phase I

0.20922

10.24564

4.79752

0.54318

3.43045

0.88184

0.49068

0.09077 0.50358 0.59435

0.13933 0.76979 0.90912

0.10806 0,60031 0.70837

1.42746

14.16922

13 21853

10.96097

18.11256

8 19712

0 51100

2.46941

0.74186

0,00000

2 86733

0.49689

1.02295

G.32568

2.66865

Ph_ase_II

0,05231

10 48875

5.28622

0.77921

1.72975

0.39934

0.35689

0.04886 0_27_109 0.31995

0 18994 1.04947 1~2394]

0. 17550 0^97497 1.15047

0.81950

13,91421

9.05805

19 40308

21.96047

4,55224

0,31266

2 11354

0.54090

0 00000

2 63118

0 14038

0 87362

0.12298

1.75489

Phase I I I

0.17797

10.04427

5 10576

0.60914

3 04279

1 39563

0 71722

0 U466 0.63617 0.75083

0,i3275 0. 73345 0.86620

0.12207 (X 67815 0 80022

1 07269

14.07896

13 34837

i h 31710

16 64303

8.99016

0 40994

1.46570

0 38342

0 C5381

1 77363

0.43796

1 01836

0.23285

2 26399

TOTAL 100.00000 100.00000 100.00000