Anadarko Basin Seismic Operations Agreement-2/15/96

This Anadarko Basin Seismic Operations Agreement (this "Agreement") is dated effective as of the 15th day of February, 1996, and is by and between BRIGHAM OIL & GAS, L.P. ("BOG") and VERITAS GEOPHYSICAL, LTD. ("Veritas") (BOG and Veritas being sometimes individually referred to herein as a "Party" and collectively referred to herein as the "Parties");


WHEREAS, BOG has identified a number of areas within the lands described in Exhibit A which is attached hereto and incorporated herein for all purposes (the lands described in Exhibit A being hereinafter referred to as the "Alliance Area"), within which BOG desires to pursue oil and gas exploration and/or development operations with project participants; and


WHEREAS, BOG desires to have Veritas conduct three-dimensional seismic operations within the Alliance Area as provided in this Agreement; and


WHEREAS, Veritas desires to perform such three-dimensional seismic operations within the Alliance Area pursuant to the terms set forth in this Agreement;


NOW, THEREFORE, for and in consideration of the mutual covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto agree as follows:


ARTICLE I.
RELATIONSHIP OF PARTIES


Section 1.1. No Partnership. The liabilities of the Parties hereunder shall be several, not joint or collective. It is not the intention of the Parties to create, nor shall this Agreement be deemed as creating, a mining, tax or other partnership or association or to render the Parties liable as partners. However, if for federal income tax purposes, this Agreement and the operations hereunder are regarded as a partnership, each Party thereby affected elects to be excluded from the application of all of the provisions of Subchapter "K," Chapter 1, Subtitle "A," of the Internal Revenue Code of 1986, as amended (hereinafter referred to as the "Code"), as permitted and authorized by Section 761 of the Code and the regulations promulgated thereunder. Should there be any requirement that each Party hereby affected give further evidence of this election, each such Party shall execute such documents and furnish such other evidence as may be required by the Federal Internal Revenue Service or as may be necessary to evidence this election. No Party shall give any notice or take any other action inconsistent with the election made hereby. In making the foregoing election, each Party states that the income derived by such Party from operations hereunder can be adequately determined without the computation of partnership taxable income.


ARTICLE II.
CONDUCT OF SEISMIC OPERATIONS


Section 2.1. BOG Project Areas. The Parties recognize and acknowledge that BOG will be designating geographic areas within the Alliance Area (the separate geographic areas being herein referred to as "Project Areas") for the conduct of three-dimensional seismic operations (hereinafter referred to as "3-D Operations") hereunder for the benefit of BOG and its participants. For purposes of this Agreement BOG's participants (hereinafter referred to as "BOG Participants") shall mean (i) those parties that have entered into an agreement with BOG providing for such parties' joint participation with BOG in an entire Project Area, and (ii) those entities in which BOG either owns more than fifty one percent (51%) of the ownership equity in such entity or controls the day to day operations of such entity. The Parties recognize and acknowledge that third parties that enter into agreements with BOG under which such parties either assign or are assigned interests covering less than an entire Project Area are not BOG Participants for purposes of this Agreement. For example, in the event that BOG simply enters into a farm-in agreement with the owner of an oil and gas leasehold estate covering less than an entire Project Area, such party will not be considered a BOG Participant for purposes of this Agreement. 2
Section 2.2. BOG Commitment to 500 Square Miles.


A. Subject to the terms and provisions which are contained in this Agreement, within eighteen months of the effective date of this Agreement BOG agrees to utilize a Veritas seismic crew (hereinafter referred to as the "Alliance Seismic Crew") to conduct 3-D Operations within Project Areas covering a total of at least five hundred square miles within the Alliance Area; provided, however, that at BOG's option such eighteen month period shall be extended for any days during which the Alliance Seismic Crew does not conduct operations hereunder due to weather conditions or any other causes which are not the fault of BOG. The Parties recognize and acknowledge that in order to complete 3-D Operations across the entire final Project Area which is to be shot pursuant to the terms of this Agreement, the total square miles covered by 3-D Operations hereunder may exceed five hundred square miles; provided, however, that the Parties agree that the total square miles covered by the 3-D Operations will not exceed five hundred fifty square miles without the consent of both Parties. In addition, the Parties recognize and acknowledge that in the event that Terrain Excluded Project Areas (as defined in Section 2.6 below) or Sand Tire Excluded Project Areas (as defined in Section 2.7 below) are designated hereunder, such five hundred square mile commitment shall be reduced by the number of square miles which are covered by the Terrain Excluded Project Areas and Sand Tire Excluded Project Areas.


B. For purposes of this Agreement the number of square miles which are covered by the 3-D Operations shall be determined by the total number of source and receiver points which are shot as part of the 3-D Operation for the Project Area.


(i) For the 1,320' receiver line spacing parameters one hundred
ninety two total source and receiver points shall be deemed to be one
square mile; provided, however, that in the event that the total
number of receiver points are greater than fifty-one percent of the
total source and receiver points for any Project Area, any receiver
points exceeding such fifty-one percent amount shall not be counted
for purposes of determining the number of square miles covered by the
3-D Operations, and in the event that the total number of source
points are greater than fifty-one percent of the total source and
receiver points for the Project Area, any source points exceeding such
fifty-one percent amount shall not be counted for purposes of
determining the number of square miles covered by the 3-D Operations.
However, in the event that the total number of receiver points exceed
fifty-one percent of the total source and receiver points for a
Project Area and BOG approves such excess receiver points, though
those excessive receiver points will not be counted for purposes of
determining the number of square miles which are covered by the 3-D
Operations, BOG shall be charged for the number of receiver points
exceeding such fifty-one percent of total points at a rate of
sixty-seven dollars ($67.00) per additional receiver point. In the
event that the total number of source points exceed fifty-one percent
of the total source and receiver points for a Project Area and BOG
approves such excessive source points, though those excessive source
points will not be counted for purposes of determining the number of
square miles which are covered by the 3-D Operations, BOG shall be
charged for the number of source points exceeding such fifty-one
percent of total points at a rate of one hundred twelve dollars
($112.00) per additional source point. In the event that Veritas must
cable around a tract that is to be excluded from the 3-D Operations
and the amount of cable which is utilized to cable around such tract
would normally have more than five receiver points on it, then the
number of receiver points along the cable length which is used to
cable around such tract shall be counted as receiver points for
purposes of determining the number of square miles which are covered
by the 3-D Operations.


(ii) For the 660' receiver line spacing parameters two hundred
eighty-eight total source and receiver points shall be deemed to be
one square mile; provided, however, that in the event that the total
number of receiver points are greater than sixty-seven and one-half
percent of the total source and receiver points for any Project Area,
any receiver points exceeding such sixty-seven and one-half percent
amount shall not be counted for purposes of determining the number of
square miles covered by the 3-D Operations, and


Anadarko Basin Seismic Operations Agreement 2 3
in the event that the total number of source points are greater than
sixty-seven and one-half percent of the total points for the Project
Area, any source points exceeding such sixty-seven and one-half
percent amount shall not be counted for purposes of determining the
number of square miles covered by the 3-D Operations. However, in the
event that the total number of receiver points exceed sixty-seven and
one-half percent of the total source and receiver points for a Project
Area and BOG approves such excess receiver points, though those
excessive receiver points will not be counted for purposes of
determining the number of square miles which are covered by the 3-D
Operations, BOG shall be charged for the number of receiver points
exceeding such sixty- seven and one-half percent of total points at a
rate of seventy-nine dollars ($79.00) per additional receiver point.
In the event that the total number of source points exceed sixty-seven
and one-half percent of the total source and receiver points for a
Project Area and BOG approves such excessive source points, though
those excessive source points will not be counted for purposes of
determining the number of square miles which are covered by the 3-D
Operations, BOG shall be charged for the number of source points
exceeding such sixty-seven and one-half percent of total points at a
rate of one hundred thirty-two dollars ($132.00) per additional source
point. In the event that Veritas must cable around a tract that is to
be excluded from the 3-D Operations and the amount of cable which is
utilized to cable around such tract would normally have more than five
receiver points on it, then the number of receiver points along the
cable length which is used to cable around such tract shall be counted
as receiver points for purposes of determining the number of square
miles which are covered by the 3-D Operations, and


Section 2.3. Parameters and Equipment. For each Project Area BOG shall select: 1) the seismic parameters that are to be utilized for the 3-D Operations to be conducted within such Project Area from the parameters which are set forth in Exhibit D; and 2) the equipment which is to be utilized for the 3-D Operations to be conducted within such Project Area from the equipment list which is set forth in Exhibit E. However, if for any Project Area BOG desires to utilize parameters other than those which are set forth in Exhibit D or equipment other than that which is listed in Exhibit E, BOG and Veritas shall attempt to mutually agree upon the reasonable charges to be incurred for such parameters or equipment. Should the Parties fail to reach agreement on such charges, such Project Area shall be removed from this Agreement and shall not be considered part of the five hundred square mile commitment which is set forth in this Agreement; such five hundred square mile commitment shall not, however, be reduced as the result of any such removal of a Project Area.


Section 2.4. Notification of Project Area Outline and Parameters and Equipment. No less than twenty-one days prior to the expected commencement of the field seismic acquisition operations for each of its Project Areas, BOG will notify Veritas in writing of 1) the location and outline of the specific Project Area, 2) the parameters to be utilized for the Project Area, 3) the equipment to be utilized for the Project Area, and 3) the approximate patch to be used for source and receiver lines within the Project Area.


Section 2.5. Veritas 3-D Seismic Crew Commitment. Commencing with the effective date of this Agreement and continuing for a period of eighteen months thereafter (as same may be extended as provided in Section 2.2 above), Veritas hereby agrees to give BOG priority use of the Alliance Seismic Crew for the continuous conduct of 3-D Operations covering approximately five hundred square miles as provided in Section 2.2 above. BOG shall make a reasonable effort to have Project Areas ready for surveying and field acquisition such that the Alliance Seismic Crew may go directly from the completion of 3-D Operations within one Project Area to the start of 3-D Operations for the next Project Area. As long as BOG has a Project Area ready for surveying and field seismic acquisition, Veritas agrees that the Alliance Seismic Crew will go from Project Area to Project Area without interruption unless and until such time as BOG does not have a Project Area ready for surveying and field seismic acquisition. In the event that BOG notifies Veritas that BOG will not have a Project Area ready for surveying in source and receiver points upon the completion of the current Project Area, Veritas shall make every reasonable effort to place the


Anadarko Basin Seismic Operations Agreement 3


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Alliance Seismic Crew on a third-party project area with as little stand-by time as possible incurred prior to the commencement of the next BOG Project Area. However, in the event that following the completion of 3-D Operations for a BOG Project Area the Alliance Seismic Crew is moved to a third-party project area as provided above, at BOG's request, Veritas will schedule the Alliance Seismic Crew to move to a designated BOG Project Area as soon as possible following the completion of the intervening third-party project areas which have been scheduled by Veritas prior to its receipt of BOG's notice. In the event that following the completion of 3-D Operations for a BOG Project Area a subsequent BOG Project Area is not ready for surveying and, despite Veritas' efforts to place the Alliance Seismic Crew on a third- party project area, the Alliance Seismic Crew experiences stand-by time, unless BOG has given Veritas at least sixty days advance notice, as provided below in this Section 2.5, that no Project Area will be ready, BOG shall compensate Veritas for stand-by time incurred by the Alliance Seismic Crew as follows (a) for the first three days of stand-by time BOG shall pay Veritas fifteen thousand dollars per day, and (b) for any stand-by time incurred after three days, BOG shall pay Veritas ten thousand dollars per day; provided, however, in no event shall BOG be required to pay Veritas more than four hundred fifty thousand dollars in total stand-by charges for stand-by time incurred between the completion of any one BOG Project Area and the commencement of the next succeeding BOG Project Area. Anything to the contrary contained herein notwithstanding, in the event that BOG gives Veritas at least sixty days advance notice that BOG will not have any Project Areas ready for surveying and field seismic acquisition, anything to the contrary contained in this Section 2.5 notwithstanding, BOG shall not be required to pay any stand-by time charges for any stand- by time that may be incurred by Veritas more than sixty days after Veritas' receipt of such notice. In the event that BOG gives Veritas sixty days notice that BOG will not have any Project Areas ready for surveying and field seismic acquisition, after such sixty day time period BOG shall not be responsible for stand-by charges, unless and until BOG gives Veritas written notice of a date by which BOG will have a Project Area ready for 3-D Operations and then BOG subsequently fails to have a Project Area ready for surveying within the time frame BOG has given Veritas. Any stand-by charges incurred pursuant to this Section 2.5 shall be invoiced by Veritas on a monthly basis and paid in full by BOG within thirty days of its receipt of an invoice correctly reflecting the amount of such charges.


Section 2.6. Terrain Exception. No less than sixty days prior to the expected commencement of the field seismic acquisition operations for a Project Area BOG shall notify Veritas in writing of the general outline of such Project Area so that Veritas may evaluate the terrain and operating conditions that may be expected within the Project Area. In the event that Veritas believes, in its reasonable opinion, that the terrain or operating conditions for a Project Area is unreasonable such that routine seismic acquisition operations will be excessively affected, Veritas must notify BOG in writing of such determination within fifteen days of its receipt of BOG's notice of the general outline for the Project Area. In the event that the terrain or operating conditions for a Project Area is deemed to be unreasonable in Veritas' reasonable opinion as aforesaid, the Parties shall attempt to negotiate a fair Turnkey Charge (as defined in Article III below) for such Project Area. In the event that within five business days of BOG's receipt of Veritas' notification the Parties have not reached agreement on a Turnkey Charge for the Project Area, such Project Area shall be deemed to have been excluded from this Agreement for all purposes (hereinafter referred to as a "Terrain Excluded Project Area") and BOG's commitment to conduct 3-D Operations within Project Areas covering a total of at least five hundred square miles shall be reduced by the size of such Terrain Excluded Project Area. Anything to the contrary contained in this Agreement notwithstanding, the Parties agree that the terrain and operating conditions which exist within the lands which are outlined on Exhibit G, are not unreasonable such that routine seismic acquisition operations within such lands would be excessively affected. The Parties also recognize and agree that for purposes of this Section 2.6, other lands which have terrain and operating conditions which are similar to those that exist within the lands which are outlined on Exhibit G shall not be deemed to be unreasonable such that routine seismic acquisition operations within such lands would be excessively affected.


Section 2.7. Sand Tire Exception. In the event that BOG desires to have the Alliance Seismic Crew vibrators equipped with sand tires for a Project Area, no less than sixty days prior to the expected commencement of the field seismic acquisition operations for such Project Area BOG shall notify Veritas of its desire to utilize sand tires for such Project Area. In the event that Veritas' existing sand tires will not be available for such Project Area Veritas must notify BOG in writing of such determination within five business days of its receipt of BOG's notice. In the


Anadarko Basin Seismic Operations Agreement ...