Attached files
Exhibit 10.1
FARMOUT AGREEMENT
This Agreement dated the 16th day of January, 2014
BETWEEN:
NORSTRA ENERGY INC., a Nevada corporation, having an office at
1048 West 11th, Spokane, WA 99204
(hereinafter referred to as "Norstra" or the "Farmor")
OF THE FIRST PART
AND:
SUPER NOVA MINERALS CORP., a British Columbia corporation having
an office at Suite 1100 - 736 Granville Street, Vancouver, BC,
V6Z 1G3
(hereinafter referred to as "Super Nova" or the "Farmee" )
OF THE SECOND PART
WHEREAS the Farmor is the legal and beneficial owner of 100% working interests
in and to the Leases relating to the Farmout Lands, as more particularly
described in the attached Schedule "A".
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the mutual
covenants and agreements herein contained, the parties hereby covenant and agree
as follows:
1. DEFINITIONS
Each capitalized term used in this Agreement will have the meaning given to it
in the Farmout & Royalty Procedure and in addition:
(a) "Bakken Prospect" means all of the Farmout Lands described in Schedule
"A";
(b) "Initial Block" means the area identified as the Initial Block of
Schedule "A";
(c) "Second Block" means the area identified as the Second Block of
Schedule "A";
(d) "Third Block" means the area identified as the Third Block of Schedule
"A";
(e) "Exchange" means Canadian Securities Exchange, Formerly the Canadian
National Stock Exchange;
(f) "Farmee" means Super Nova;
(g) "Farmor" means Norstra;
(h) "Farmout Lands" means those lands described as the Bakken Prospect in
the attached Schedule "A";
(i) "Initial Well" means the well described in Paragraph 3 to be drilled
on the Initial Block; and
(j) "Leases" means the document or documents of title described in the
attached Schedule "A".
2. SCHEDULES
The following schedules are attached hereto and form part of this Agreement:
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(a) Schedule "A" which describes the Bakken Prospect and each of the
Initial Block, Second Block and Third Block including the Leases
covering the same;
(b) Schedule "B" - Authorization for Expenditures ("AFE") which describes
the estimated costs to drill and complete a well to approximately
8,900 feet or to a depth adequate to test the Bakken formation;
(c) Schedule "C" - Schedule of Royalties; and
(d) Schedule "D" - Standard Form Operating Agreement.
3. INTEREST EARNED
3.1 The Farmee shall have the option to earn an 80% working interest in the
Initial Block by:
(a) paying to Norstra $1,400,000 (the "Commitment Funds") to be applied as
follows:
(i) $385,000 to reimburse costs incurred by Norstra to date on the
Farmout Lands, including costs related to the Initial Well (the
"Previously Incurred Costs"); and
(ii) $1,015,000 being the balance of the estimated cost for the
drilling, as set forth in Schedule "B", of an 8,900 foot well on
the Initial Block or to a depth adequate to test the Bakken
formation (the "Target Depth"),
and by:
(b) successfully drilling the Initial Well as a producer or dry hole.
3.2 In the event that the Farmee drills to a lesser depth than the Target Depth
on the Initial Black, the interest of the Farmee in the Initial Block, Second
Block and Third Block shall be limited to that lesser depth.
3.3 In the event that following drilling of the Initial Well the Operator (as
defined in paragraph 6(a) of this Agreement) recommends the drilling of a
horizontal well in the hole of the Initial Well (the "Horizontal Well"), the
Farmee may elect to proceed with the recommendation and provide the funds
necessary to drill the Horizontal Well. In the event that the Farmee shall elect
not to drill the Horizontal Well and to complete the Initial Well as a vertical
well only or fails to provide the funds within one year after having elected to
drill the Horizontal Well, the interest of the Farmee in the Initial Block shall
be limited to the Initial Well and its 160 acre spacing unit.
3.4 The Commitment Funds shall be paid to Norstra as follows:
(a) $25,000 within 30 days of execution of this Agreement;
(b) $15,000 to paid monthly, commencing 60 days after execution of this
Agreement;
(c) In any event, the balance of Commitment Funds remaining after
subtracting the payments made by the Farmee in accordance with
paragraphs 3.4(a) and (b) of this Agreement, shall be paid no later
than 12 months from the date of this Agreement;
3.5 If the Agreement is terminated in accordance with paragraph 11(a)(ii) of
this Agreement as a result of the Farmee failing to make any of the payments set
out in paragraph 3.4 of this Agreement, the portion of the Commitment Funds
previously paid shall be forfeited to the Farmor and the Farmee shall have no
interest in the Initial Block.
3.6 Any payment made in accordance with paragraph 3.4(b) of this Agreement shall
be deducted from the Previously Incurred Costs.
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4. ADDITIONAL OPTION
4.1 Subject to successful completion of the Initial Well as a producer or dry
hole, the Farmee shall have the option, within 240 days from the date of rig
release from the drilling of the Initial Block:
(a) to commence the drilling of an 8,900 foot vertical well on the Second
Block on the same terms and conditions as the Initial Block to earn an 80%
working interest in the Second Block, and subject to successfully completion of
a well on the Second Block as a producer or a dry hole, within 240 days from the
date of rig release from the drilling of the well on the Second Block, Farmee
shall have the option to commence the drilling of an 8,900 foot vertical well in
the Third Block, to earn an 80% working interest in the Third Block on the same
terms and conditions as the Initial Block; or
(b) to commence the drilling of an 8,900 foot vertical well on the Third
Block on the same terms and conditions as the Initial Block to earn an 80%
working interest in the Third Block, and subject to the successful completion of
a well on the Third Block as a producer or a dry hole, within 240 days from the
date of rig release from the drilling of the well on the Third Block, Farmee
shall have the option to commence the drilling of an 8,900 foot vertical well in
the Second Block, to earn an 80% working interest in the Second Block on the
same terms and conditions as the Initial Block.
4.2 Notwithstanding paragraph 4.1, the terms and conditions for the Second or
Third Block will not include the monthly payments that were required under
paragraph 3.4(b) for the Initial Block.
5. ROYALTIES, WORKING INTEREST AND CARRIED WORKING INTEREST
The Farmee acknowledges that the Farmout Lands are subject to the royalty
burdens described in Schedule "C" totalling 16% and that the Initial Block is
subject to an additional royalty of 3.5%. The Farmee also acknowledges that the
Farmor will retain a carried working interest of 20%. Accordingly, the Farmee
will hold 80% working interest and the Farmor will hold 20% carried working
interest. For better clarity the Farmee will receive 64.4% of the net revenue in
the Initial Block and 67.2% in the Second and Third Blocks.
6. OPERATIONS
(a) The operator shall be Black Gold, LLC of 1048 West 11th, Spokane, WA
99204 (the "Operator").
(b) The Operations will be conducted pursuant to a Standard Form Operating
Agreement, a copy of which is attached as Schedule "D".
(c) All operations conducted pursuant to this Agreement will be in a
lawful manner and in accordance with good oilfield practice and the
Standard Form Operating Agreement.
(d) The Farmee will be entitled to be represented on the committee
approving all budgets and operations and will be entitled to receive
access to and copies of all contracts, financial and technical
information relating to operations.
7. REPRESENTATIONS AND WARRANTIES
The Farmor hereby represents and warrants to the Farmee as follows:
(a) The Farmor has been duly incorporated and each is a valid and
subsisting body corporate under the laws of its jurisdiction of
incorporation;
(b) The Farmor has full right, power and authority to enter into and
accept the terms of this Agreement and to carry out the transactions
contemplated therein;
(c) The Farmor is the beneficial owner of 100% working interest in and to
the Leases and the Farmout Lands as set forth in the attached Schedule
"A" and all Leases are in good standing;
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(d) The royalty burdens on the Farmout Lands are as described in Schedule
"D";
(e) Milford Colony Inc. has retained and reserved free use of wellhead gas
from the acreage immediately surrounding the Farmout Lands; and
(f) There are no claims, proceedings, actions, lawsuits, administrative
proceedings or governmental investigations in existence, or so far as
the Farmor is aware, contemplated or threatened against or with
respect to the Farmor or any of the Farmout Lands or Leases and there
is no particular circumstance, matter or thing known to the Farmor
which could reasonably be anticipated to give rise to any such claim,
proceeding, action, lawsuit, proceeding or investment.
The Farmee hereby represents and warrants to the Farmor as follows:
(a) The Farmee has been duly amalgamated and is a valid and subsisting
body corporate under the laws of its jurisdiction of amalgamation; and
(b) The Farmee has full right, power and authority to enter into and
accept the terms of this Agreement and to carry out the transactions
contemplated therein.
8. NOTICES
The addresses for service of the Parties in the Agreement are as follows:
NORSTRA ENERGY INC.
1048 West 11th
Spokane, WA 99204
Attention: Glen Landry
SUPER NOVA MINERALS CORP.
Suite 1100 - 736 Granville Street
Vancouver, BC, V6Z 1G3
Attention: Wolf Wiese
9. REGULATORY APPROVAL
The obligations of the Farmee are subject to acceptance by the Exchange of any
and all filings required to be made with the Exchange in respect of this
Agreement and/or the subject matter thereof.
10. TRANSFER OF INTEREST
Upon the Farmee earning an interest in the Farmout Lands, the Farmor will
proceed to transfer and assign such interest in the Leases and the Farmout Lands
to the Farmee. The interest of the Farmee shall be recorded in any division
orders filed with respect to producing wells on the Farmout Lands.
11. TERMINATION
(a) This Agreement and the transactions contemplated hereby may be
terminated:
(i) By mutual agreement of the Parties; or
(ii) By either Party on 45 days written notice, send by registered
mail, if there has been a material breach of a covenant or
agreement contained in this Agreement, on the part of the other
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Party, or the failure of a condition, and such breach of a
covenant or agreement or failure of a condition has not been
cured or waived.
12. DIRECTOR REPRESENTATION
The Farmor will be entitled to nominate a person acceptable to the Exchange to
serve as a director of the Farmee.
13. ARBITRATION
(a) All questions or matters in dispute under this Agreement shall be
submitted to arbitration pursuant to the terms hereof.
(b) It shall be a condition precedent to the right of any party to submit
any matter to arbitration pursuant to the provisions hereof, that any
party intending to refer any matter to arbitration shall have given
not less than 10 days prior notice of its intention to do so to the
other party, together with particulars of the matter in dispute. On
the expiration of such 10 days, the party who gave such notice may
proceed to refer the dispute to arbitration as provided in Paragraph
13(c) of this Agreement.
(c) The party desiring arbitration shall appoint one arbitrator, and shall
notify the other party of such appointment, and the other party shall,
within 15 days after receiving such notice, either consent to the
appointment of such arbitrator which shall then carry out the
arbitration or appoint an arbitrator, and the two arbitrators so
named, before proceeding to act, shall, within 30 days of the
appointment of the last appointed arbitrator, unanimously agree on the
appointment of a third arbitrator to act with them and be chairman of
the arbitration herein provided for. If the other party shall fail to
appoint an arbitrator within 15 days after receiving notice of the
appointment of the first arbitrator, the first arbitrator shall be the
only arbitrator. If the two arbitrators appointed by the parties shall
be unable to agree on the appointment of the chairman, the chairman
shall be appointed under the provisions of the Commercial Arbitration
Act of British Columbia. Except as specifically otherwise provided in
this section, the arbitration herein provided for shall be conducted
in accordance with such Act. The chairman, or in the case where only
one arbitrator is appointed, the single arbitrator, shall fix a time
and place in Vancouver, British Columbia, for the purpose of hearing
the evidence and representations of the parties, and he shall preside
over the arbitration and determine all questions of procedure not
provided for under such Act or this section. After hearing any
evidence and representations that the parties may submit, the single
arbitrator, or the arbitrators, as the case may be, shall make an
award and reduce the same to writing, and deliver one copy thereof to
each of the parties. The expense of the arbitration shall be paid as
specified in the award.
(d) The parties agree that the award of a majority of the arbitrators, or
in the case of a single arbitrator, of such arbitrator, shall be final
and binding upon each of them.
14. GENERAL
(a) The rights and obligations of the parties hereunder will be binding
and enure for the benefit of and be enforceable by each of the parties
hereto, and their respective successors and permitted assigns.
(b) This Agreement constitutes the entire Agreement between the parties
hereto and no variation of the terms hereof will be binding unless the
same is contained in a written document that is signed by all of the
parties.
(c) This Agreement shall be governed by and be construed in accordance
with the laws of the Province of British Columbia, Canada.
(d) Time is of the essence of this Agreement.
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(e) The headings of the paragraphs of this Agreement are inserted for
convenience only and do not define, limit, enlarge or alter the
meanings of any paragraph or clause herein.
(f) This Agreement has been prepared by Northwest Law Group acting solely
on behalf of the Farmee and the Farmor acknowledges that it has been
advised to obtain and has obtained independent legal advice.
(g) This Agreement may be executed in two or more counterparts and
delivered by electronic transmission, each of which will be deemed to
be an original and all of which will constitute one agreement,
effective as of the reference date given above and executed electronic
copies will be deemed for all purposes under this Agreement to be
valid executed copies of this Agreement.
(h) All the monetary amounts shall be in the currency of the United States
unless otherwise stated.
THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK
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IN WITNESS WHEREOF each of the parties has duly executed this Agreement to be
effective as of the date first above written.
NORSTRA ENERGY INC.
per: /s/ Glen Landry
--------------------------------
Its: Chief Executive Officer
SUPER NOVA MINERALS CORP.
per: /s/ Wolf Wiese
--------------------------------
per: Chief Executive Officer
