Deed of Guaranty And Indemnity Dated 1/11/2003

EXHIBIT 10.1


THIS DEED OF GUARANTEE AND INDEMNITY is made the 11th day of January 2003


GIVEN BY:


APACHE CORPORATION, a company incorporated in the State of Delaware, United States of America, whose principal place of business is at 2000 Post Oak Boulevard, Suite 100, Houston Texas 77056-4400 (the "PURCHASER'S GUARANTOR")


IN FAVOUR OF:


BP EXPLORATION OPERATING COMPANY LIMITED, a company incorporated in England (registered number 00305943) whose registered office is at Britannic House, 1 Finsbury Circus, London EC2M 7BA (the "SELLER").


WHEREAS:


(A) The Seller has today entered into the Sale and Purchase Agreement with
Apache North Sea Limited a company incorporated in England (registered
number 4614761) whose registered office is at Level 1, Exchange House,
Primrose Street, London EC2A 2HS (the "PURCHASER");


(B) The Seller has agreed to enter into the Sale and Purchase Agreement
subject to the Purchaser's Guarantor agreeing to enter into this Deed of
Guarantee and Indemnity in respect of the Guaranteed Obligations as set
out in Clause 2; and


(C) The Purchaser's Guarantor has agreed (it being in its best commercial
interests to do so) to enter into this Deed of Guarantee and Indemnity in
respect of the Guaranteed Obligations.


NOW THIS DEED WITNESSETH AS FOLLOWS:


1. INTERPRETATION


1.1 Unless otherwise defined or provided for in this Deed of Guarantee and
Indemnity, words and expressions shall have the following meanings:-


"ABANDONMENT COST" means the estimated cost, calculated in accordance with
the Assumption, in money of the day (i.e. at the predicted abandonment
date) to the Purchaser and the other parties to each JOA of final
abandonment and/or demolition and removal of all platforms, pipelines,
plant, machinery, wells and facilities and other offshore installations
and structures comprising the Interests together with any necessary site
reinstatement as may be required by the Licences, other Licensed


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Interest Documents (to the extent that such documents affect the Seller or
the Seller's Affiliates) and/or any Act of Parliament or any other
statutory provision (including, without limitation, any order, regulation,
instrument or other subordinate legislation) or common law in each case
from time to time in force, after allowing for estimated salvage value (if
any) and any other expected receipts arising from abandonment and/or
demolition and removal (excluding tax and royalty relief);


"ABANDONMENT PROGRAMME" means the abandonment programme(s) related to the
Interests required to be submitted or as submitted to, and approved
(within the meaning of Section 32 of the Petroleum Act 1998) by, the
Secretary pursuant to and in accordance with the Petroleum Act 1998, or
other relevant statute, regulations or order from any competent authority
or guidelines from time to time in force, as the same may be amended or
modified with the approval or concurrence of the Secretary;


"ACCEPTABLE BANK" means a bank or other financial institution rated a
minimum of "A2" by Moody's or "A" by Standard and Poor's (or such other
comparable credit rating agency as may be approved by the Seller) or
better on their senior, unsubordinated, unsecured long term debt, or any
other bank or other financial institution with the prior written agreement
of the Seller;


"ANNUAL C" means the value of C calculated annually or otherwise in
accordance with Clauses 9.3.1 and 9.3.2;


"ASSUMPTION" means the following assumption: the calculation of the cost
of decommissioning will be on the basis of the OSPAR Decision 98/3 and any
IMO guidelines, both as so amended or replaced from time to time, and good
oilfield practice in the United Kingdom continental shelf, or to meet
United Kingdom government regulation from time to time if requiring a more
demanding standard. The foregoing basis will be interpreted to mean that
if decommissioning was to take place at the date of this Deed of Guarantee
and Indemnity, at least the following would require to take place:
topsides facilities being removed and recycled onshore with all steel
jackets removed, transported onshore and recycled. Permanent well
abandonment, including removal of conductors. Pipelines exceeding twelve
inches (12") diameter may be left in position, disconnected and cleaned of
all hydrocarbons. Pipelines less than twelve (12") diameter which are
adequately buried may also be left in position;


"CALCULATION EVENT" shall mean the occurrence of either of the
following:-


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(i) the Guarantor's Rating maintained by either rating agency falling
below the Relevant Rating or being removed by such rating agency;


(ii) the Guarantor's Rating maintained by either rating agency being at
the level specified in Clause 9.1.1(A) but being placed on "credit
watch" with negative implications; or


(iii) the currently provided Abandonment Cost in money of the day the
relevant costs are incurred used by the Purchaser's Guarantor for
a calculation of Interim Annual C under paragraph (ii) of the
definition thereof being less than the Floor;


"C" means the present value of that portion of the Abandonment Cost as is
attributable to the Interests (subject to Clause 9.11) as at 31st December
of the calendar year prior to that in which the calculation is made,
calculated by the discounted cash flow technique at the discount rate
proposed by the Purchaser's Guarantor in its calculation of Annual C and
approved by the Seller (or determined by the expert) in accordance with
Clause 9.3;


the "FLOOR" means L395,800,000 x 0.7 x (1.025)(x) where x is the period in
years (expressed as a fraction for part years) from the date of this
document until the date to which the audited financial statements of the
Purchaser's Guarantor were drawn up for the relevant calculation of
Interim Annual C.


"GUARANTOR'S RATING" has the meaning given to it in Clause 9.1.1;


"IMO" means the International Maritime Organisation;


"INTERIM ANNUAL C" shall mean:


(i) on and from the date hereof until the date of filing with the
Securities and Exchange Commission of the annual audited financial
statements of the Purchaser's Guarantor for the year ending 31st
December 2003, L175,000,000; and


(ii) thereafter, either (aa) the figure used by the Purchaser's Guarantor
for the asset retirement obligations associated with the Interests
in computing its aggregate asset retirement obligations for the
purposes of its most recent annual audited financial statements,
determined in accordance with generally accepted accounting
principles in the United States, in respect of which an


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officer's certificate has been provided in accordance with clause
9.5(C) or (bb) if the calculation in (aa) above results in a
Calculation Event arising by virtue of paragraph (iii) of the
definition of "Calculation Event", the most recent previous figure
for Interim Annual C which did not result in a Calculation Event
(or, if since the date of that figure Annual C or Provisional Annual
C shall have been calculated or determined, then that amount);


"LETTER OF CREDIT" means the irrevocable letter(s) of credit in favour of
the Seller payable in London, England issued by an Acceptable Bank in
substantially the form set out in the Schedule (and taking into account
the reasonable comments of the issuing bank) and any replacement or
renewal thereof or addition thereto;


"LC TRUST ACCOUNT" has the meaning given to it in Clause 9.12.1;


"OSPAR" means the OSPAR Convention which came into force on 25 March 1998;


"PARTIES" means the Purchaser's Guarantor and the Seller;


"PETROLEUM ACT 1998" means the Petroleum Act 1998 (as amended, modified or
re-enacted from time to time) or any successor legislation, and any
reference to a section of the Petroleum Act 1998 shall also be a reference
to the corresponding section of any such amended, modified, re-enacted or
successor legislation;


"PROVISIONAL ANNUAL C" means the value of C calculated in substitution for
Annual C pursuant to Clause 9.3.4;


"RATING LOSS DATE" means the date that the second of the relevant rating
agencies discloses that the Guarantor's Rating has fallen below the
Relevant Rating (as defined in Clause 9.1.1) or been removed;


"SALE AND PURCHASE AGREEMENT" means the agreement of even date herewith
and entered into between the Seller and the Purchaser for the sale and
purchase of certain interests in United Kingdom Continental Shelf
Petroleum Production
Licences;


"STAMP DUTY AGREEMENT" means the agreement dated of even date herewith and
entered into between the Seller and the Purchaser concerning the retention
of the Sale and Purchase Agreement and certain other documents outside the
United Kingdom;


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"SECTION 29 PARTY" means (i) those parties (other than the Purchaser or an
Affiliate of the Purchaser) who are currently the recipients of notices
given under Section 29 of the Petroleum Act 1998 in relation to the
Interests, (ii) any other person (other than the Purchaser or an Affiliate
of the Purchaser) who at any time becomes the recipient of such notice in
relation to the Interests and (iii) any person (other than the Purchaser
or an Affiliate of the Purchaser) on whom a duty is at any time imposed
under Section 34 of the Petroleum Act 1998 to secure that the Abandonment
Programme is carried out;


"SUPPLEMENTAL SECURITY" means the aggregate amount of the value of any
security or other cover and/or credit balances which meets the
requirements of Clause 9.7 including the proviso thereto and any
alternative security cover has been approved by the Seller pursuant to
Clause 9.10; and


"TAXATION" means:


(a) all forms of taxation and statutory, governmental, state, federal,
provincial, local government or municipal charges, duties, imposts,
contributions, levies, withholdings or liabilities wherever
chargeable and whether of the United Kingdom or any other
jurisdiction; and


(b) any penalty, fine, surcharge, interest, charges or costs payable in
connection with any Taxation within (a) above.


1.2 Words and expressions defined in the Sale and Purchase Agreement shall
(except where the context otherwise requires) have the same meanings
wherever used herein.


1.3 All references to clauses and recitals are, unless otherwise expressly
stated, references to clauses and recitals to this Deed of Guarantee and
Indemnity.


1.4 The headings in this Deed of Guarantee and Indemnity are inserted for
convenience only and shall be ignored in construing this Deed of Guarantee
and Indemnity. Unless the context otherwise requires in this Deed of
Guarantee and Indemnity the singular shall include the plural and vice
versa.


1.5 Reference to statutory provisions shall be construed as reference to those
provisions as amended, consolidated, extended or re-enacted from time to
time.


1.6 References in this Deed of Guarantee and Indemnity to the words "include",
"including" and "other" shall be construed without limitation.


5 2. GUARANTEE


The Purchaser's Guarantor hereby unconditionally guarantees the due and
punctual performance by the Purchaser of its obligations under the Sale
and Purchase Agreement and/or the Stamp Duty Agreement (the "GUARANTEED
OBLIGATIONS") to the intent that if the Purchaser shall fail to observe
and perform any of the Guaranteed Obligations the Purchaser's Guarantor
shall be liable to perform the same as if the Purchaser's Guarantor were
the party principally bound thereby in place of the Purchaser (subject to
all the same limitations on liability to which the Purchaser is entitled
under or in respect of the Sale and Purchase Agreement or the Stamp Duty
Agreement, as the case may be).


3. MATTERS NOT TO REDUCE THE PURCHASER'S GUARANTOR'S LIABILITY


3.1 If any purported obligation or liability of the Purchaser under the Sale
and Purchase Agreement or the Stamp Duty Agreement which, if valid, would
have been the subject of this Deed of Guarantee and Indemnity is not or
ceases to be valid or enforceable on any ground by reason of any defect in
or want of powers of the Purchaser or irregular exercise thereof or lack
of authority by any person apparently authorised to act on behalf of the
Purchaser or any legal incapacity or any change in the constitution of or
any amalgamation, reconstruction or liquidation of the Purchaser, the
Purchaser's Guarantor shall nevertheless be liable in respect of that
purported obligation or liability as if the same were fully valid and
enforceable and as if the Purchaser's Guarantor were the principal debtor
in respect thereof. The Purchaser's Guarantor hereby agrees to keep the
Seller fully indemnified in accordance with the terms of this Deed of
Guarantee and Indemnity against all Losses and Expenses arising from any
failure of the Purchaser to carry out any such purported obligation or
liability by reason of it not being or ceasing to be valid or enforceable
as aforesaid.


3.2 The Purchaser's Guarantor undertakes that if any of the Guaranteed
Obligations are not recoverable on the basis of a guarantee for any
reason, it will (as a separate and independent stipulation) pay the Seller
on demand whatever amount or amounts shall equal what it would have been
liable to pay but for such irrecoverability.


3.3 The Guaranteed Obligations shall be discharged by the full performance by
the Purchaser of its obligations under the Sale and Purchase Agreement and
the Stamp Duty Agreement, but otherwise shall not be discharged or
affected by any act, omission, matter or thing which, but for this
provision, might operate to release or otherwise exonerate the Purchaser's
Guarantor from those obligations in whole or in part including:


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3.3.1 the granting of time, or any waiver or other indulgence (including
any extension, renewal, acceptance, forbearance or release in
respect of any of the Guaranteed Obligations);


3.3.2 the taking, variation, compromise, renewal or release of or refusal
or neglect to perform or enforce any rights, remedies or securities
against the Purchaser;


3.3.3 any modification, variation or addition to the terms
of any of the Guaranteed Obligations or of any other
document or security;


3.3.4 any irregularity, defect or informality in the terms of any of the
Guaranteed Obligations or any other document or security or any
legal limitation, disability, incapacity or want of authority of any
person other than the Seller or its Affiliates;


3.3.5 any corporate reorganisation, reconstruction, amalgamation,
dissolution, liquidation, merger, acquisition of or by or other
alteration in the corporate existence or structure of the Seller or
the Purchaser or the Purchaser's Guarantor;


3.3.6 any composition or similar arrangement by the Seller or the
Purchaser or the Purchaser's Guarantor or any other person; or


3.3.7 any other act or thing whatsoever done or omitted or neglected to be
done by the Seller in relation to the Guaranteed Obligations.


4. NO COMPETITION


Until all the Guaranteed Obligations have been paid, discharged or
satisfied in full, the Purchaser's Guarantor waives all rights of
subrogation and indemnity against the Purchaser in respect of Guaranteed
Obligations and agrees not to share in any security held or monies
received by the Seller on account of such liabilities or to claim or prove
in competition with the Seller in the liquidation of the Purchaser (or its
equivalent in any relevant jurisdiction) in respect of any monies paid by
the Purchaser's Guarantor to the Seller under this Deed of Guarantee and
Indemnity.


5. DISCHARGE


Where any discharge (whether in respect of any of the Guaranteed
Obligations or any security for the Guaranteed Obligations or otherwise)
is made in whole or in part or any


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arrangement is made on the faith of any payment, security or other
disposition which is avoided or must be restored for any reason, the
liability of the Purchaser's Guarantor under this Deed of Guarantee and
Indemnity shall continue as if the discharge or arrangement had not been
made.


6. ENFORCEMENT


6.1 The Seller shall not be obliged before taking steps to enforce this Deed
of Guarantee and Indemnity:


6.1.1 to take any action or obtain judgement in any court
against the Purchaser or any other person;


6.1.2 to make or file any claim in any bankruptcy or liquidation (or its
equivalent in an relevant jurisdiction) of the Purchaser or of any
other person;


6.1.3 to make, enforce or seek to enforce any claim against the Purchaser
or any other person under any security or other document, agreement
or arrangement; or


6.1.4 to enforce against and/or realise (or seek so to do) any security
that it may have in respect of all or any part of the Guaranteed
Obligations.


7. WARRANTIES


7.1 The Purchaser's Guarantor hereby warrants to the Seller that:


7.1.1 the Purchaser's Guarantor is duly incorporated with limited
liability and validly existing under the laws of the State of
Delaware, United States of America;


7.1.2 the documents which contain or establish Purchaser's Guarantor's
constitution incorporate provisions which authorise, and all
necessary corporate action has been taken to authorise, Purchaser's
Guarantor to execute and deliver this Deed of Guarantee and
Indemnity and perform the transactions contemplated hereby;


7.1.3 the signing and delivery of this Deed of Guarantee and Indemnity and
the performance of the obligations contemplated by this Deed of
Guarantee and Indemnity, will not contravene or constitute a default
under any provision contained in any material agreement, instrument,
law, judgment, order,


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licence, permit or consent by which Purchaser's Guarantor or any of
its Affiliates or any of its assets is bound or affected; and


7.1.4 no litigation, arbitration, administrative proceeding, dispute or
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