Development Agreement

EXHIBIT 10.8.3.1


DEVELOPMENT AGREEMENT


THIS DEVELOPMENT AGREEMENT (the "Agreement") is effective as of the 22nd day of November, 2002 ("Effective Date"), by and between AMERICAN NATURAL ENERGY CORPORATION ("ANEC"), an Oklahoma corporation, and EXXON MOBIL CORPORATION ("ExxonMobil"), a New Jersey Corporation hereinafter collectively referred to as the ("Parties") or individually as a ("Party").


WITNESSETH:


WHEREAS, ANEC is currently the holder of the rights of lessee under the "Bayou Couba Lease" (as herein defined); and


WHEREAS, ExxonMobil is the owner of certain mineral fee interests in the "ExxonMobil Lands" (as herein defined); and


WHEREAS, ANEC owns a 3-D seismic survey covering all of a 23.138 square mile area as indicated on Exhibit "A" hereto; and


WHEREAS, the Parties desire to establish and create an Area of Mutual Interest ("AMI"), which shall be defined as the area lying within the red outline, as set forth on Exhibit "A" hereto, covering approximately 8,427 acres; and


WHEREAS, the Parties desire to set forth the Parties' agreement to jointly develop the AMI.


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


CONTENTS ARTICLE PAGE


1. DEFINITIONS 2 2. SEISMIC 3 3. ESTABLISHMENT OF AMI 3 4. OPERATIONS WITHIN THE AMI 5 5. CONFIDENTIALITY 7 6. TERM 7 7. PRODUCTION HANDLING AND GAS LIFT SUPPORT 8 8. MISCELLANEOUS 8


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ARTICLE 1.
DEFINITIONS


The following terms shall have the following meanings for purposes of this Agreement:


1.01 "ACREAGE" shall mean all fee mineral interests, term mineral interests, mineral leasehold rights, prescribed interests, farm-in rights, force pooled acreage, rights under voluntary unitization agreements, option rights, and all other rights, whether by recorded instruments or under contract, giving rise to the right to drill upon lands lying within the geographic boundaries of an AMI.


1.02 "AFFILIATE" shall mean any Company that is owned or controlled by a Party. Ownership or control is deemed to exist if fifty percent (50%) or more of the stock of such company, having the right to vote for directors, is owned or controlled, directly or indirectly, by the particular Party. An Affiliate of a Party also includes any company that is owned or controlled, directly or indirectly, by any other company that is owned or controlled by a Party. An Affiliate of a Party also includes any parent company that owns or controls, directly or indirectly, fifty percent (50%) or more of the voting shares, partnership interests or voting rights, or other equity interest of such Party.


1.03 "AMI" or "AREA OF MUTUAL INTEREST" shall mean the area lying within the red outline, as set forth on Exhibit "A" hereto, covering approximately 8,427 acres.


1.04 "AMI JOA" shall mean the AAPL Form 610-1982 Model Form Operating Agreement, as modified, attached as Exhibit "B" hereto.


1.05 "BAYOU COUBA LEASE" shall mean all of the undivided working interest owned by ANEC in a 1,319.991 gross acre divided portion of that certain Oil, Gas, and Mineral Lease from Delta Securities Company, Inc. as Lessor to Gulf Refining Company as Lessee dated November 14, 1941, recorded in Entry No. 1458, Conveyance Book SS, Folio 382, of the records of St. Charles Parish, Louisiana.


1.06 "CONFIDENTIAL DATA" shall mean all geological, geophysical or reservoir information, including, without limitation, the 3D Seismic (and reprocessed 3D Seismic), logs or other information pertaining to the progress, tests or results of any well drilled within the AMI, furnished by one Party to the other pursuant to this Agreement which is not otherwise available in the public domain.


1.07 "DRILLING PROSPECTS" shall mean any geologic presentation proposed in a Notice which shall be specifically identified as to (a) a legal geographic location of the initial wellbore, (b) maximum depth to be drilled, (c) the estimated cost to drill the well


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and (c) anticipated areal extent of a proposed prospect area surrounding such unit and well (not to exceed 1280 acres), unless otherwise agreed by the Parties.


1.08. "EXXONMOBIL LANDS" shall mean the real property located in the area within the AMI outlined in yellow, as set forth on Exhibit "A" hereto.


1.09 "NOTICE" shall mean a written notice of drilling opportunity or acquisition opportunity described in Article III of this Agreement which Notice shall set forth all pertinent information with respect to such opportunity and shall be delivered in the manner prescribed in Section 6.04 below.


1.10 "3D SEISMIC" shall mean the 3D seismic survey owned by ANEC and covering the real property depicted on Exhibit "A" attached hereto.


ARTICLE II.
SEISMIC


2.01 REPROCESSING: ANEC represents and warrants that it possesses 3D Seismic which has been reprocessed using pre-stacked time and pre-stacked depth migration techniques with respect to an area encompassing approximately 23.138 square miles as shown on Exhibit "A" hereto. All cost and expense related to such reprocessing have been assumed by ANEC and ExxonMobil shall have no liability therefor.


2.02 SHARING: Upon execution of this Agreement, ANEC agrees that it shall provide ExxonMobil with a copy of the reprocessed 3D Seismic, in any form available to ANEC, for ExxonMobil and its Affiliates' use in evaluating prospects on ExxonMobil's fee acreage. Furthermore, ANEC agrees, upon request, to provide ExxonMobil copies of any other information, including all well files for wells located on ANEC's "Bayou Couba Lease" as defined herein, which may assist ExxonMobil's evaluation. ANEC shall provide copies of the reprocessed 3D seismic and additional information at no cost to ExxonMobil, except that ExxonMobil shall reimburse ANEC for reasonable costs of reproducing such information.


2.03 ADDITIONAL 3-D SEISMIC DATA ACQUISITION: During the Primary Term of this Agreement (as defined below), if ExxonMobil elects to acquire additional 3-D seismic or reprocess existing 3-D Seismic over the AMI, ANEC shall have the option to participate in such seismic data acquisition. If ANEC elects not to participate in the acquisition or reprocessing of seismic data, ANEC shall permit ExxonMobil to proceed at its own risk and expense to acquire or reprocess 3-D seismic data over the entire AMI with no consideration due ANEC for such permission.


ARTICLE III.
ESTABLISHMENT OF AMI


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3.01 ESTABLISHMENT Of AMI: The Parties hereby establish and create an AMI, which shall be defined as the area lying within the red outline, as set forth on Exhibit "A" hereto, covering approximately 8,427 acres.


The following four classes of Acreage comprise the AMI:


"CLASS 1": ANEC's "Bayou Couba Lease" on ExxonMobil's Bayou Couba fee
acreage contributing approximately 1319 acres.
"CLASS 2": ExxonMobil's unleased fee acreage contributing
approximately 3,240 acres to the AMI. ExxonMobil shall
reserve a 25% royalty interest on all production
attributable to its unleased fee acreage in addition to its
rights to participate to earn up to 50% of 8/8ths working
interest in the proceeds of production for Drilling
Prospects developed pursuant to this Agreement.
"CLASS 3": ANEC's State Lease No. 17353 contributing approximately
1,491 acres to the AMI.
"CLASS 4": Currently unleased State and private acreage comprising
approximately 2,377 acres. If ANEC acquires any interest in
any oil and gas leases, farmouts, options, assignments or
other contractual rights in this acreage, the cost and
burdens associated with such acquisition shall be the sole
responsibility of ANEC and ExxonMobil shall have no
obligation in connection with any such acquisition. ANEC or
ExxonMobil may generate prospects for drilling opportunities
within such acquired Acreage and ExxonMo ...