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UNIT AGREEMENT MILNESAND (SAN ANDRES) UNIT ROOSEVELT COUNTY, NEW MEXICO

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Page 1: UNIT AGREEMENT MILNESAND (SAN ANDRES) UNIT …ocdimage.emnrd.state.nm.us/imaging/filestore...UNIT AGREEMENT MILNESAND (SAN ANDRES) UNIT ROOSEVELT COUNTY, NEW MEXICO INDEX SECTION PAGE

UNIT AGREEMENT

MILNESAND (SAN ANDRES) UNIT

ROOSEVELT COUNTY, NEW MEXICO

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UNIT AGREEMENT

MILNESAND (SAN ANDRES) UNIT

ROOSEVELT COUNTY, NEW MEXICO

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UNIT AGREEMENT MILNESAND (SAN ANDRES) UNIT ROOSEVELT COUNTY, NEW MEXICO

I N D E X

SECTION PAGE

1 Enabling Act and Regulations 2 2 Unit Area and Definitions 2 3 Exhibits 6 4 Expansion 7 5 Unitized Land and Unitized Substances 8 6 Unit Operator 8 7 Resignation or Removal of Unit Operator 9 8 Successor Unit Operator 10 9 Accounting Provisions and Unit Operating Agreement 11 10 Rights and Obligations of Unit Operator 12 11 Plan of Operations 12 12 Easements or Use of Surface 14 13 Tract P a r t i c i p a t i o n 14 14 Tracts Qualified f o r Unit P a r t i c i p a t i o n 17 15 Allocation of Unitized Substances 19 16 Royalty Settlement 23 17 Rental Settlement 24 18 Conservation 25 19 Drainage 25 20 Leases and Contracts Conformed and Extended 25 21 Mathematical Errors 27 22 Covenants Run with Land 27 23 Effective Date and Term 2 8 24 Rate of Prospecting, Development and Production 30 25 Nondiscrimination 30 26 Appearances 30 27 Notices 31 28 No Waiver of Certain Rights 31 29 Unavoidable Delay 31 30 Loss of T i t l e 32 31 Nonjoinder and Subsequent Joinder 33 32 Counterparts 34 33 Taxes 34 34 C o n f l i c t of Supervision 35 35 No Partnership 35 36 Production as of the Effective Date 36 37 Border Agreement 36

EXHIBIT A (Map of Unit Area)

EXHIBIT B (Schedule of Ownership)

EXHIBIT C (Tract P a r t i c i p a t i o n )

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UNIT AGREEMENT

MILNESAND (SAN ANDRES) UNIT

ROOSEVELT COUNTY, NEW MEXICO

THIS AGREEMENT, entered i n t o as of the day of

, , 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 1 1,

W I T N E S S E T H :

WHEREAS, the parties hereto are the owners of working,

r o y a l t y or other o i l or gas interests i n the Unit Area subject to

thi s Agreement; and

WHEREAS, the O i l Conservation Commission of the State of

New Mexico i s authorized by law (Chap. 72, Laws of 1935, as amended

by Chap. 193, Laws of 1937, Chap. 166, Laws of 1941, and Chap. 168,

Laws of 1949) to approve t h i s Agreement, and the conservation pro­

visions hereof; and

WHEREAS, the Mineral Leasing Act of February 25, 1920

(41 Stat. 437, as amended 30 U.S.C. Sections 181 et seq.) author­

izes Federal Lessees and t h 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 adopt­

ing 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 f o r 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 advisable i n 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 Milnesand (San Andres) Unit Area, covering the land here­

i n a f t e r described to give reasonably e f f e c t i v e control of

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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 opera­

ti o n s , conserve natural resources, to prevent waste and secure the

other benefits obtainable through development and operation of the

area subject to t h i s Agreement under the terms, conditions and

li m 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 herein contained, the parties hereto commit to th i s

Agreement t h e i r respective interests i n the below defined Unit

Area, and agree severally among themselves as follows:

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 regula­

t i o n s , heretofore issued thereunder and v a 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 t h i s

Agreement; and as to non-Federal lands, the o i l and gas operating

regulations i n e f f e c t as of the e f f e c t i v e 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 i s

located, are hereby accepted and made a part of this Agreement.

SECTION 2. UNIT AREA AND DEFINITIONS. For the purpose

of t h i s Agreement, the following terms and expressions as used

herein s h a l l mean:

(a) "Union Texas Petroleum" s h a l l mean "Union Texas

Petroleum, a d i v i s i o n of A l l i e d Chemical Corporation".

(b) The area described by trac t s i n Exhibit B and

depicted on Exhibit A attached hereto i s hereby designated and

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recognized as c o n s t i t u t i n g the Unit Area, and i s described as

follows:

ROOSEVELT COUNTY, NEW MEXICO

T. 8 S., R. 34 E.

Section 12: E/2, SW/4, E/2 NW/4, SW/4 NW/4

Section 13: A l l

Section 14: E/2

Section 23: NE/4, NE/4 SE/4

Section 24: E/2, NW/4, N/2 SW/4, SE/4 SW/4

Section 25: NE/4, E/2 SE/4

T. 8 S., R. 35 E.

Section 5: SW/4, W/2 SE/4

Section 6: S/2 S/2

Section 7: A l l

Section 8: N/2 NW/4, SW/4 NW/4, NW/4 NE/4

Section 18: A l l

Section 19: A l l

Section 20: SW/4, W/2 NW/4, S/2 SE/4

containing 5,370.18 acres, more or less.

(c) "Commission" i s defined as the O i l Conservation

Commission of the State of New Mexico.

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

States 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 Super­

visor of the United States Geological Survey f o r the region i n

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which the Unit Area is situated.

(h) "Unitized Formation" means that i n t e r v a l underlying

the Unit Area which i s productive of Unitized Substances and the

v e r t i c a l l i m i t s of which extend from a point at the top of the "B"

marker of the San Andres formation to 190 feet below said top of

the "B" marker; said i n t e r v a l having been heretofore found to

occur i n Union Texas Petroleum's (formerly El Chorro's) Heffel-

finger No. 2 w e l l (located 660 feet FNL and FWL, Section 18,

Township 8 South, Range 35 East, Roosevelt County, New Mexico) at

an indicated depth of from 4530 feet to 4720 f e e t , as recorded on

the Well Perforators, Inc., Radioactivity log, said log being

measured from a Kelly bushing elevation of 4250 feet above sea

l e v e l .

( 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 constituent l i q u i d or l i q u e f i a b l e hydrocarbons

w i t h i n or produced from the Unitized Formation.

( j ) "Unit P a r t i c i p a t i o n " of a Working Interest Owner

as used herein s h a l l mean the sum of the Tract Participations of

such Working Interest Owner, either Primary Phase or Secondary

Phase, whichever i s pertinent, as shown by Tracts f o r each such

Working Interest Owner i n Exhibit C to t h i s Agreement.

(k) "Working I n t e r e s t " means an i n t e r e s t i n Unitized

Substances by v i r t u e of a lease, operating agreement, fee t i t l e , or

otherwise, including a carried i n t e r e s t , which i n t e r e s t i s charge­

able 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, producing and operating the Unitized Formation.

(1) "Working Interest Owner" means a party hereto who

owns a Working I n t e r e s t . The owner of o i l and gas r i g h t s that are

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free of lease or other instrument conveying the Working Interest

to another s h a l l be regarded as a Working Interest Owner to the

extent of seven-eighths (7/8) of his i n t e r e s t i n Unitized Substan­

ces, and as a Royalty Owner with respect to his remaining one-

eighth (1/8) i n t e r e s t therein.

(m) "Royalty I n t e r e s t " means a r i g h t to or i n t e r e s t i n

any portion of the Unitized Substances or proceeds thereof other

than a Working I n t e r e s t .

(n) "Royalty Owner" i s defined as and s h a l l mean the

owner of a Royalty I n t e r e s t .

(o) "Unit Operating Agreement" i s defined as and s h a l l

mean any agreement or agreements (whether one or more entered i n t o

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, i n f r a , and

s h a l l be styled "Unit Operating Agreement, Milnesand (San Andres)

Unit, Roosevelt County, New Mexico".

(p) "Unit Manager" i s defined as the person or corpora­

t i o n appointed by the Unit Working In t e r e s t Owners to perform the

duties of the Unit Operator u n t i l the selection and q u a l i f i c a t i o n

of a successor Unit Operator as provided f o r i n Section 8 hereof.

(q) "Paying Quantities" is defined as production of

Unitized Substances i n quantities s u f f i c i e n t to pay f o r the cost

of producing same from wells on the u n i t i z e d land.

( r ) "Primary Phase of Operations" sometimes referred to

as "Primary Phase" i s defined as the period of u n i t i z e d operations

commencing with the e f f e c t i v e date of t h i s Agreement and ending at

7 o'clock A. M. the f i r s t day of the calendar month next follow­

ing the month i n which the t o t a l volume of merchantable o i l pro­

duced from the Unit Area, subsequent to September 1, 1966, exceeds

2,284,845 barrels. For the purposes of t h i s d e f i n i t i o n the

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Operator's Monthly Reports, Form C-115, f i l e d with the New Mexico

O i l Conservation Commission s h a l l be deemed the c o n t r o l l i n g e v i ­

dence of the production of 2,284,845 barrels of o i l a f t e r September

1, 1966.

(s) "Secondary Phase of Operations" sometimes referred

to as "Secondary Phase" i s defined as the period of u n i t i z e d

operations subsequent to the completion of the Primary Phase of

Operations, i . e . , the period of time commencing at 7:00 o'clock

A.M. the f i r s t day of the calendar month next following the month

in which the t o t a l volume of merchantable o i l produced from the

Unit Area, subsequent to September 1, 1966, exceeds 2,284,845

barrels and ending with the termination of u n i t i z e d operations.

( t ) "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.

SECTION 3. EXHIBITS. Exhibit A attached hereto is a

map showing the Unit Area and the boundaries and i d e n t i t y of

tr a c t s and leases i n said Unit Area to the extent known to the

Unit Operator. Exhibit B attached hereto i s a schedule showing,

to the extent known to the Unit Operator, the acreage comprising

each t r a c t , percentage and kind of ownership of o i l and gas i n t e r ­

ests i n a l l land i n the Unit Area. Exhibit C i s a schedule showing

the percentage of p a r t i c i p a t i o n credited to each t r a c t during

Primary Phase and Secondary Phase on the basis of the commitment

of a l l tr a c t s to t h i s u n i t agreement. However, nothing herein or

i n said schedule or map s h a l l be construed as a representation by

any party 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 interests as are shown i n said map or schedule as

owned by such party. Exhibits A, B and C s h a l l be revised by the

Unit Operator whenever changes render such revision necessary or

when requested by the Supervisor, and not less than four copies

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thereof s h a l l be f i l e d with the Supervisor as required.

SECTION 4. EXPANSION. The Unit Area may when p r a c t i ­

cable be expanded to include therein any additional t r a c t or

tra c t s regarded as reasonably necessary or advisable for the pur­

poses of t h i s Agreement. Such expansion s h a l l be effected i n the

following manner:

(a) The Working Interest Owner or Owners of a t r a c t or

tr a c t s desiring to bring such t r a c t or t r a c t s i n t o t h i s Unit s h a l l

f i l e an application therefor with Unit Operator requesting such

admission.

(b) Unit Operator s h a l l c i r c u l a t e a notice to each

Working Interest Owner of the proposed expansion, s e t t i n g out the

basis f o r admission, the t r a c t p a r t i c i p a t i o n to be assigned to

such t r a c t or t r a c t s , and other pertinent data. A f t e r negotiation

(at Working Interest Owners' meeting or otherwise), i f three or

more Working Interest Owners having i n the aggregate eighty per­

cent (80%) or more Secondary Phase P a r t i c i p a t i o n have agreed to

such t r a c t or t r a c t s being brought i n t o the Unit, then Unit Opera­

tor s h a l l :

(1) A f t e r preliminary concurrence by the Director

prepare a notice of proposed expansion describing the contem­

plated changes i n the boundaries of the Unit Area, the reason

therefor, the basis f o r admission of the add i t i o n a l t r a c t or

t r a c t s , the Primary and Secondary Phase Participations to be

assigned thereto and the proposed e f f e c t i v e date thereof; and

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

each Working In t e r e s t 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 f o r submission to the Unit Operator of

any objection to such proposed expansion; and

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(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 Super­

visor the following: (a) Evidence of mailing or delivering

copies of said notice of expansion; (b) An application f o r

approval of such expansion; (c) An instrument containing the

appropriate joinders 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

t r a c t i n the same manner required f o r the q u a l i f i c a t i o n of

tracts under Section 14 hereof; and (d) Copies of any objec­

tions received.

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

ti n e n t information and approval by the Commission and the Super­

vis o r , become e f f e c t i v e 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 set by the Commission and

the Supervisor i n the order or instrument approving such expansion.

In 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 s h a l l 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 th i s Agreement s h a l l constitute land referred to

herein as "Unitized Land" or "Land subject to t h i s Agreement".

A l l o i l , gas, gaseous substances, sulphur contained i n gas, con­

densate, d i s t i l l a t e and a l l associated and constituent l i q u i d or

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

Formation are called "Unitized Substances". Nothing herein s h a l l

be construed to u n i t i z e , pool or i n any way a f f e c t 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 above described.

SECTION 6. UNIT OPERATOR. Union Texas Petroleum i s

hereby designated the Unit Operator, and by signing t h i s

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instrument as Unit Operator i t agrees and consents to accept the

duties and obligations of Unit Operator for the operation, devel­

opment and production of Unitized Substances as herein provided.

Whenever reference i s made herein to the Unit Operator, such r e f ­

erence means the Unit Operator acting i n that capacity and not as

a Working Interest Owner. The term "Working Interest Owner" when

used herein s h a l l include the Unit Operator as the owner of a

Working Interest when such an in t e r e s t i s owned by i t .

SECTION 7. RESIGNATION OR REMOVAL OF UNIT OPERATOR.

Unit Operator s h a l l have the r i g h t to resign at any time, but such

resignation s h a l l not become e f f e c t i v e so as to release Unit Oper­

ator from the duties and obligations of Unit Operator and terminate

Unit Operator's r i g h t s as such f o r a period of six (6) months

a f t e r w r i t t e n notice of in t e n t i o n to resign has been given by

Unit Operator to a l l Working I n t e r e s t Owners and the Director, and

u n t i l a l l u n i t wells are placed i n a condition s a t i s f a c t o r y to the

Supervisor f o r suspension or abandonment of operations, whichever

i s intended by the Unit Manager, unless a new Unit Operator s h a l l

have taken over and assumed the duties and obligations of Unit

Operator p r i o r to the expiration of said period.

The resignation of Unit Operator s h a l l not release Unit

Operator from any l i a b i l i t y f o r any default by i t hereunder

occurring p r i o r to the e f f e c t i v e date of i t s resignation.

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, or f o r any

other cause, be subject to removal by two or more of the committed

Working I n t e r e s t Owners having i n the aggregate eighty percent (80%)

or more Unit P a r t i c i p a t i o n f o r the Secondary Phase of Operations

exclusive of the Unit P a r t i c i p a t i o n of the Working Interest Owner

who i s the Unit Operator. Such removal s h a l l be e f f e c t i v e upon

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notice thereof to the Director.

In a l l such instances of e f f e 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 s h a l l

be j o i n t l y responsible f o r the performance of the duties of the

Unit Operator and s h 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 i n any action to be taken hereunder.

The resignation or removal of Unit Operator under t h i s

Agreement s h a l l not terminate i t s r i g h t s , t i t l e or in t e r e s t as

the owner of a Working Interest or other i n t e r e s t 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 s h a l l 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 i s elected, to be used fo r the purpose of conducting Unit

operations hereunder. Nothing herein s h a l l be construed as auth­

o r i z i n g the removal of any materials, equipment or appurtenances

needed fo r the preservation of any wells. Nothing herein contained

s h a l l be construed to re l i e v e or discharge any Unit Operator who

resigns or i s removed hereunder fo r any l i a b i l i t y or duties

accruing or performable by i t p r i o r to the e f f e c t i v e date of such

resignation or removal.

SECTION 8. SUCCESSOR UNIT OPERATOR. Whenever the Unit

Operator s h a l l tender i t s resignation as Unit Operator or sh a l l be

removed as hereinabove provided, the Working In t e r e s t Owners s h a l l

select a successor Unit Operator as herein provided. Such selec­

t i o n s h a l l not become e f f e c t i v e u n t i l (a) a Unit Operator so

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selected s h a l l 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 s h a l l have been approved

by the Supervisor. I f no successor Unit Operator or Unit Manager

i s selected and approved as herein provided, the Director, at his

e l e c t i o n , may declare t h i s Agreement terminated.

In selecting a successor Unit Operator the a f f i r m a t i v e

vote of three or more Working Interest Owners having a t o t a l of

at least s i x t y percent (607o) or more of the t o t a l Voting Interest

i n the Unit s h a l l p r e v a i l , provided that i f any one Working I n t ­

erest Owner has a voting i n t e r e s t of more than f o r t y percent (40%),

i t s negative vote or f a i l u r e to vote s h a l l not be regarded as

s u f f i c i e n t unless supported by the vote of one or more other

Working Interest Owners having a combined voting i n t e r e s t of at

least f i v e percent ( 5 % ) . I f the Unit Operator who i s removed votes

only to succeed i t s e l f or f a i l s to vote, the successor Unit Opera­

tor may be selected by the a f f i r m a t i v e vote of at least f i f t y - o n e

percent (51%) of the Voting i n t e r e s t remaining a f t e r excluding the

Voting I n t e r e s t of Unit Operator so removed. In voting under t h i s

Section 8 each Working Interest Owner s h a l l have a Voting Interest

equal to i t s Secondary Phase Unit P a r t i c i p a t i o n .

SECTION 9. ACCOUNTING PROVISIONS AND UNIT OPERATING

AGREEMENT. Costs and expenses incurred by Unit Operator i n con­

ducting u n i t operations hereunder s h a l l be paid, apportioned

among and borne by the Working Interest Owners i n accordance with

the Unit Operating Agreement. Such Unit Operating Agreement s h a l l

also provide the manner i n which the Working Interest Owners s h a l l

be e n t i t l e d to receive t h e i r respective proportionate and allocated

share of the benefits accruing hereto i n conformity with t h e i r

underlying operating agreements, leases or other independent

contracts and such other r i g h t s and obligations as between Unit

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Operator and the Working In t e r e s t Owners as may be agreed upon by

the Unit Operator and the Working Interest Owners; however, no

such Unit Operating Agreement s h a l l be deemed either to modify any

of the terms and conditions of t h i s Unit Agreement or to r e l i e v e

the Unit Operator of any r i g h t or obligation established under

t h i s Agreement, and i n case of any inconsistency or c o n f l i c t

between t h i s Agreement and the Unit Operating Agreement, t h i s Unit

Agreement s h a l l p r e v a i l . Three true copies of any Unit Operating

Agreement executed pursuant to t h i s Section s h a l l be f i l e d with

the Supervisor p r i o r to approval of t h i s Agreement.

SECTION 10. RIGHTS AND OBLIGATIONS OF UNIT OPERATOR.

Except as otherwise 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 exercising any and a l l r i g h t s of the

parties hereto which are necessary or convenient f o r prospecting

f o r , producing, s t o r i n g , a l l o c a t i n g and d i s t r i b u t i n g the Unitized

Substances are hereby delegated to and s h a l l be exercised by the

Unit Operator as herein provided. Upon request acceptable evidence

of t i t l e to said r i g h t s s h a l l be deposited with said Unit Operator,

and together with t h i s Agreement, s h a l l constitute and define the

r i g h t s , p r i v i l e g e s and obligations of Unit Operator. Nothing

herein, however, s h a l l 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 t h i s Agreement the Unit Operator, i n i t s capacity as Unit

Operator, s h a l l exercise the r i g h t s of possession and use vested

i n the parties hereto only f o r the purposes herein specified.

SECTION 11. PLAN OF OPERATIONS. I t is recognized and

agreed by the parties hereto that a l l of the land subject to t h i s

Agreement is reasonably proved to be productive of Unitized Sub­

stances i n paying quantities and that the object and purpose of

t h i s Agreement i s to formulate and to put i n t o e f f e c t a secondary

recovery project i n order to e f f e c t a d d i t i o n a l recovery of Unitized

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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 and the Commission, i n j e c t i n t o the Unitized

Formation, through any w e l l or wells completed therein, brine,

water, a i r , gas, o i l and any one or more other substances or com­

bination of substances, whether produced from the Unitized Forma­

t i o n or not, and that the location of input wells and the rates

of i n j e c t i o n therein and the rate of production s h a l l be governed

by standards of good geologic and petroleum engineering practices

and conservation methods. After commencement of secondary opera­

tions, Unit Operator s h a l l furnish the Supervisor monthly i n j e c t i o n

and production reports f o r each w e l l i n the Unit. The Working

Int e r e s t Owners and the Supervisor s h a l l 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 pro­

tec t the interests of a l l parties to t h i s Agreement, which r e v i ­

sions and changes s h a l l be subject to approval by the Commission

and the Supervisor. Subject to l i k e approval the Plan of Operation

may be revised as conditions may warrant.

The i n i t i a l plan of operation s h a l l be f i l e d f o r appro­

val with the Supervisor and the Commission concurrently with the

f i l i n g of t h i s Unit Agreement fo r f i n a l approval. Said i n i t i a l

plan of operation and a l l revisions thereof s h a l l be as complete

and adequate as the Supervisor and the Commission may determine to

be necessary f o r timely operation consistent herewith. Reasonable

diligence s h a l l be exercised i n complying w i t h the obligations of

the approved plan of operation. Thereafter, from time to time

before the expiration of any e x i s t i n g plan, the Unit Operator s h a l l

submit f o r l i k e approval a plan f o r an additional specified period

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of operation.

SECTION 12. EASEMENTS OR USE OF SURFACE. The parties

hereto, to the extent of t h e i r r i g h t s and i n t e r e s t , hereby grant

to Working Interest Owners the r i 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 u n i t operations and for the removal of Unitized Substances

from the Unit Area, including the free use of water from the Unit

Area f o r u n i t operations, insofar as such r i g h t s are granted by

the o i l and gas leases.

SECTION 13. TRACT PARTICIPATION. In Exhibit C attached

hereto there are l i s t e d and numbered the various tra c t s w i t h i n the

Unit Area, and set f o r t h opposite each t r a c t are figures calculated

and determined i n accordance with the factors set f o r t h i n t h i s

section which represent the percentage of p a r t i c i p a t i o n which

would be allocated to each t r a c t i n the Unit Area during the

Primary and Secondary Phases of Operations, respectively, as those

terms are defined herein i f a l l t r a c t s i n the Unit Area q u a l i f y

for p a r t i c i p a t i o n i n Unitized Substances.

Beginning at 7:00 A.M. on the e f f e c t i v e date hereof and

u n t i l 7 o'clock A. M. on the f i r s t day of the month next follow­

ing the date when cumulative o i l production from a l l of the tracts

described i n Exhibit B from the Unitized Formation, subsequent to

September 1, 1966, equals 2,2 84,845 bar r e l s , the p a r t i c i p a t i o n of

each t r a c t s h a l l be equal to:

Primary Phase = 0.25 x A/B + 0.75 x C/D where:

A = Total quantity of o i l produced from such Tract from

the Unitized Formation during the period from January

1, 1966, to September 1, 1966.

B = Total quantity of o i l produced from a l l Tracts i n

the Unit Area from the Unitized Formation during the

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period from January 1, 1966, to September 1, 1966.

C = Total remaining barrels of primary o i l to be pro­

duced from such Tract from and a f t e r September 1, 1966,

as presented i n the Engineering Study, Waterflood

F e a s i b i l i t y , Proposed Milnesand (San Andres) Unit,

dated February 1968 and prepared by the Technical Sub­

committee .

D = Total remaining barrels of primary o i l to be pro­

duced from a l l Tracts i n the Unit Area from and a f t e r

September 1, 1966, as shown f o r such Tracts i n the

Engineering Study, Waterflood F e a s i b i l i t y , Proposed

Milnesand (San Andres) Unit, dated February 1968 and

prepared by the Technical Subcommittee.

For purposes of determining when the 2,2 84,845 barrels

of o i l has been produced i n reference to t h i s provision, the

Operator's Monthly Production Report, Form C-115, on f i l e with the

New Mexico O i l Conservation Commission s h a l l be deemed the c o n t r o l ­

l i n g evidence.

Beginning at 7 o'clock A. M. on the f i r s t day of the

month following the date when the 2,284,845 barrels referred to

immediately above s h a l l have been produced, the p a r t i c i p a t i o n of

each t r a c t s h a l l be based:

Secondary Phase = 0.75 x A/B + 0.05 x C/D + 0.20

x E/F where:

A = Total number of ultimate primary barrels of o i l

produced or to be produced from such Tract as presented

i n the Engineering Study, Waterflood F e a s i b i l i t y , Pro­

posed Milnesand (San Andres) Unit, dated February

1968 and prepared by the Technical Subcommittee.

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B = Total number of ultimate primary barrels of o i l

produced or to be produced from a l l Tracts i n the

Unit Area as shown f o r such Tracts i n the Engineering

Study, Waterflood F e a s i b i l i t y , Proposed Milnesand

(San Andres) Unit, dated February 1968 and prepared

by the Technical Subcommittee.

C = Total porosity acre feet a t t r i b u t a b l e to such

Tract as presented i n the Engineering Study, Water-

flood F e a s i b i l i t y , Proposed Milnesand (San Andres)

Unit, dated February 1968 and prepared by the Tech­

n i c a l Subcommittee.

D = Total porosity acre feet a t t r i b u t a b l e to a l l

Tracts i n the Unit Area as shown f o r such Tracts i n

the Engineering Study, Waterflood F e a s i b i l i t y , Pro­

posed Milnesand (San Andres) Unit, dated February

1968 and prepared by the Technical Subcommittee.

E = Total quantity of o i l produced from such Tract

from the Unitized Formation from date of i n i t i a l com­

pl e t i o n to September 1, 1966.

F = Total quantity of o i l produced from a l l Tracts

in the Unit Area from the Unitized Formation from

date of i n i t i a l completion to September 1, 1966.

The percentages computed for Primary and Secondary Phases

are shown on Exhibit C and are based on data approved by the Work­

ing I n t e r e st Owners.

In the event less than a l l t r a c t s are q u a l i f i e d f o r par­

t i c i p a t i o n on the e f f e c t i v e date hereof, the Primary and Secondary

Phase P a r t i c i p a t i o n percentages s h a l l be calculated by using the

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same Tract factors and formula which were used to a r r i v e at the

Tract P a r t i c i p a t i o n of each t r a c t as set out i n the o r i g i n a l

Exhibit C but applying the same only to those Tracts which are

q u a l i f i e d f o r p a r t i c i p a t i o n e f f e c t i v e as of the e f f e c t i v e date of

the Unit Agreement.

SECTION 14. TRACTS QUALIFIED FOR PARTICIPATION. On and

a f t e r the e f f e c t i v e date hereof the tra c t s w i t h i n the Unit Area

which s h a l l be e n t i t l e d to p a r t i c i p a t e i n the production of U n i t i ­

zed Substances therefrom s h a l l be those tracts more p a r t i c u l a r l y

described i n Exhibit B that corner or have a common boundary

( t r a c t s separated only by a public highway or a r a i l r o a d r i g h t - o f -

way s h a l l be considered to have a common boundary), and that other­

wise q u a l i f y as follows:

(a) Each t r a c t as to which Working Interest Owners own­

ing one hundred percent (100%) of the Working In t e r e s t therein

have become parties to t h i s Agreement and as to which Royalty

Owners owning seventy-five percent {15%) or more of the Royalty

Interest therein have become parties to t h i s Agreement.

(b) Each t r a c t as to which Working In t e r e s t Owners own­

ing one hundred percent (100%) of the Working Interest therein

have become parties to t h i s Agreement, and as to which Royalty

Owners owning less than seventy-five percent (75%) of the Royalty

Interest therein have become parties to this Agreement, and as to

which (1) a l l Working Interest Owners i n such tra c t s have joined

i n a request f o r the inclusion of such t r a c t to t h i s Agreement, and

as to which (2) seventy-five percent (75%) of the combined Secon­

dary Phase voting interests of Working Interest Owners i n a l l

t r a c t s that meet the requirements of Section 14 (a) above have

voted i n favor of the inclusion of such t r a c t . For the purpose of

t h i s Section 14 (b) the voting i n t e r e s t of a Working Interest

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Owner s h a l l be equal to the r a t i o that i t s Secondary Phase P a r t i ­

cipation a t t r i b u t a b l e to tracts which q u a l i f y under Section 14 (a)

bears to the t o t a l Secondary Phase P a r t i c i p a t i o n of a l l Working

Int e r e s t Owners a t t r i b u t a b l e to a l l t r a c t s which q u a l i f y under

Section 14 (a).

(c) Each t r a c t as to which Working Interest Owners

owning less than one hundred percent (100%) of the Working Interest

therein have become parties to t h i s Agreement, regardless of the

percentage of Royalty Interest therein that i s committed hereto,

and as to which (1) the Working Interest Owner who operates the

t r a c t and a l l other Working Interest Owners i n such t r a c t who have

become parties to t h i s agreement have joined i n a request f o r

inclusion of such t r a c t and have executed and delivered an indem­

n i t y agreement indemnifying and agreeing to hold harmless the

other Working In t e r e s t Owners that are parties hereto, t h e i r suc­

cessors and assigns, against a l l claims and demands that may be

made by the owners of Working Interests i n such t r a c t who are not

parties to t h i s Agreement, and which arise out of the inclusion of

the t r a c t ; and as to which (2) seventy-five percent (75%) or more

of the combined voting i n t e r e s t of the Working In t e r e s t Owners i n

a l l t r a c t s that meet the requirements of Section 14 (a) and 14 (b)

have voted i n favor of the inclusion of such t r a c t and to accept

the indemnity agreement. For the purpose of th i s Section 14 ( c ) ,

the voting i n t e r e s t of each Working I n t e r e s t Owner s h a l l be equal

to the r a t i o that i t s Secondary Phase Pa r t i c i p a t i o n a t t r i b u t a b l e

to tracts that q u a l i f y under Sections 14 (a) and 14 (b) bears to

the t o t a l Secondary Phase P a r t i c i p a t i o n of a l l other Working I n t ­

erest Owners a t t r i b u t a b l e to a l l t r a c t s that q u a l i f y under Sections

14 (a) and 14 ( b ) . Upon the q u a l i f i c a t i o n of such a t r a c t , the

Tract Participations under either the Primary or Secondary Phase

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of operations which would have been a t t r i b u t e d to the non-subscribing

owners of the working i n t e r e s t i n such t r a c t , had they become parties

to t h i s Agreement and the Unit Operating Agreement, sh a l l be a t t r i ­

buted to the Working Interest Owners i n such t r a c t who have become

parties to such agreements i n proportion to t h e i r respective work­

ing interests i n the t r a c t .

As the objective of t h i s Unit Agreement is to have lands

i n the Unit Area operated and e n t i t l e d to p a r t i c i p a t i o n under the

terms hereof, i t i s agreed tha t , notwithstanding anything else

herein, no joinder s h a l l be considered a commitment to th i s Unit

Agreement unless the t r a c t involved i s q u a l i f i e d under t h i s Section

14 hereof, Tracts Qualified f o r P a r t i c i p a t i o n . The record i n t e r e s t

s h a l l supplant the r o y a l t y i n t e r e s t with respect to Federal lands

f o r the purposes of t h i s section.

I f , on the e f f e c t i v e date of t h i s Agreement, there i s

any t r a c t or trac t s which have not been committed as above pr o v i ­

ded, then such t r a c t or tracts s h a l l not be e n t i t l e d to p a r t i c i ­

pate hereunder. Unit Operator s h a l l , when submitting t h i s Agree­

ment fo r f i n a l approval by the Supervisor, f i l e therewith a sched­

ule of those tracts which have been committed and made subject to

thi s Agreement and are e n t i t l e d to p a r t i c i p a t e i n the production

from the Unit Area hereunder. Said schedule s h a l l set f o r t h

opposite each such committed t r a c t the lease number, the owner of

record of the lease, and the percentage p a r t i c i p a t i o n of such

t r a c t which s h a l l be computed according to the p a r t i c i p a t i o n f o r ­

mula set out i n Section 13 (Tract P a r t i c i p a t i o n ) above. This

schedule of p a r t i c i p a t i o n s h a l l be Exhibit C of t h i s Agreement and

sh a l l govern the a l l o c a t i o n of production of Unitized Substances

u n t i l a new schedule i s approved by the Supervisor.

SECTION 15. ALLOCATION OF UNITIZED SUBSTANCES, A l l

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Unitized Substances produced and saved (les s , save and except any

part of such Unitized Substances used i n conformity with good oper­

ating practices as concerns the Unitized Formation on unitized

land f o r d r i l l i n g , operating, camp and other production or devel­

opment purposes and for pressure maintenance or unavoidable loss)

s h a l l be apportioned among and allocated to the committed tra c t s

w i t h i n the Unit Area i n accordance with the respective t r a c t par­

t i c i p a t i o n e f f e c t i v e 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 Unitized Substances so

allocated to each t r a c t , and only that amount (regardless of

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

t i o n of Unitized Substances from the w e l l or wells, i f any, on

such Tract) s h a l l , for a l l i n t e n t s , uses and purposes, be deemed

to have been produced from such t r a c t .

The Unitized Substances allocated to each t r a c t s h a l l be

di s t r i b u t e d among,or accounted for, to the parties executing, con­

senting to or r a t i f y i n g t h i s Agreement e n t i t l e d to share i n the

production from such t r a c t i n the same manner, i n the same propor­

tions , and upon the same conditions, as they would have p a r t i c i ­

pated and shared i n the production from such t r a c t s , or i n the

proceeds thereof, had t h i s Agreement not been entered i n t o ; and

with the same legal force and e f f e c t .

No t r a c t committed to th i s Agreement and q u a l i f i e d f o r

p a r t i c i p a t i o n as above provided s h a l l 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, and nothing herein contained s h a l l be construed as

requiring any ret r o a c t i v e adjustment f o r production obtained p r i o r

to the e f f e c t i v e date of the joinder of any t r a c t .

I f the Working In t e r e s t or Royalty Interest i n any t r a c t ,

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on or a f t e r the e f f e c t i v e date hereof, i s divided w i t h respect to

separate parcels or portions of such t r a c t and owned severally by

d i f f e r e n t persons, the percentage p a r t i c i p a t i o n assigned to such

t r a c t s h a l l , i n the absence of a recordable instrument executed

by a l l 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 propor­

t i o n to the number of surface acres i n each.

The Unitized Substances allocated to each t r a c t s h a l l 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

r i g h t s therein or by purchase from such owners. Each Working I n t ­

erest Owner and the parties e n t i t l e d thereto s h a l l have the con­

tinuing 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 s h a l l 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 f o r that purpose on u n i t i z e d

land, 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 16, Royalty Settlement, hereof, any extra expen­

diture incurred by Unit Operator by reason of the delivery i n kind

of any portion of the Unitized Substances s h a l l be borne by the

party responsible therefor under the c o n t r o l l i n g lease or contract.

In the event any party hereto s h a l l f a i l to take or otherwise

adequately dispose of i t s proportionate share of the Unitized

Substances currently as and when produced, then so long as such

conditions continue, Unit Operator, f o r the account and at the

expense of such party and i n order to avoid c u r t a i l i n g the opera­

t i o n of the Unit Area, may s e l l or otherwise dispose of such pro­

duction to i t s e l f or others on a day-to-day basis at not less than

the p r e v a i l i n g market price i n the area f o r l i k e production, and

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the account of such party s h a l l be charged therewith as having

received such production. The net proceeds, i f any, of the Unitized

Substances so disposed of by Unit Operator s h a l l be paid to the

party e n t i t l e d thereto. Notwithstanding the foregoing, Unit

Operator s h a l l not make a sale into i n t e r s t a t e commerce of any

other party's share of gas production without f i r s t giving such

other party s i x t y (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 t r a c t ,

or receiving the proceeds therefrom i f the same i s sold or pur­

chased by Unit Operator, s h a l l be responsible f o r the payment of

a l l r o y a l t y on the lease or leases and trac t s contributed by i t

and received i n t o the Unit, and each such party s h a l l hold each

other party hereto harmless against a l l claims, demands and causes

of action for such ro y a l t y on the lease or leases and tracts con­

tributed by i t to the Unit Area.

I f , a f t e r the e f f e c t i v e date of t h i s Agreement, there i s

any t r a c t or trac t s that are subsequently committed hereto, as

provided i n Section 4 (Expansion) hereof, or any t r a c t or tracts

w i t h i n the Unit Area not committed hereto as of the e f f e c t i v e date

hereof but which are subsequently committed hereto under the pro­

visions of Section 31 (Nonjoinder and Subsequent Joinder), or i f

any t r a c t i s excluded from the Unit Area as provided f o r i n Section

30 (Loss of T i t l e ) , the schedule of p a r t i c i p a t i o n as shown i n

Exhibit C, subject to Section 13 (Tract Pa r t i c i p a t i o n ) or Section

31 (Nonjoinder and Subsequent Joinder), whichever i s appropriate,

s h a l l be revised by the Unit Operator and d i s t r i b u t e d to the Work­

ing I n t e r e s t Owners and the Supervisor to show the new percentage

p a r t i c i p a t i o n of a l l the then e f f e c t i v e l y committed t r a c t s ; and

the revised Exhibit C, upon approval by the Supervisor, s h a l l

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govern a l l the al l o c a t i o n of production from and a f t e r the e f f e c t i v e

date thereof u n t i l a new schedule i s f i l e d and approved by the

Supervisor. In any such revised Exhibit C pursuant to t h i s para­

graph, the Tract P a r t i c i p a t i o n of the previously q u a l i f i e d Tracts

s h a l l remain i n the same r a t i o one to the other.

SECTION 16. ROYALTY SETTLEMENT. The United States of

America and a l l Royalty Owners who, under an ex i s t i n g contract,

are e n t i t l e d to take i n kind a share of the substances produced

from any t r a c t u n i t i z e d hereunder, s h a l l continue to be e n t i t l e d

to such r i g h t to take i n kind t h e i r share of the Unitized Substan­

ces allocated to such t r a c t , and Unit Operator s h a l l make deliveries

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

contracts, laws and regulations. Settlement f o r Royalty Interest

not taken i n kind s h a l l be made by Working Interest Owners respon­

si b l e therefor under e x i s t i n g contracts, laws and regulations, on

or before the l a s t day of each month fo r Unitized Substances pro­

duced during the preceding calendar month; provided, however, that

nothing herein contained s h a l l operate to reli e v e the lessees of

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

of any roy a l t y due under t h e i r leases, except that such ro y a l t y

s h a l l be computed i n accordance with the terms of t h i s Unit

Agreement.

Royalty due the United States s h a l l be computed as pro­

vided 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 uni t i z e d 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;

provided, that f o r leases on which the royalty rate depends on the

daily average production per w e l l , such average production s h a l l

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be determined i n accordance with the operating regulations as

though the un i t i z e d lands were a single consolidated 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 t r a c t depends upon the average production per w e l l or the

average pipeline run per we l l from such t r a c t during any period

of time, then such production s h a l l be determined from and a f t e r

the e f f e c t i v e date hereof by div i d i n g the quantity of Unitized

Substances allocated hereunder to such t r a c t during such period of

time by the number of wells located thereon capable of producing

as of the e f f e c t i v e date hereof,

A l l r o y a l t y due the United States of America and the

other Royalty Owners hereunder sh a l l be computed and paid on the

basis of a l l Unitized Substances allocated to the respective t r a c t

or tracts committed hereto, i n l i e u of actual production from such

t r a c t or t r a c t s .

Each Royalty Owner (other than the United States of

America) that r a t i f i e s t h i s Agreement represents and warrants that

he i s the owner of a Royalty Interest i n a t r a c t or tracts w i t h i n

the Unit Area as his i n t e r e s t appears i n Exhibit B attached hereto.

I f any Royalty Interest i n a t r a c t or trac t s should be l o s t by

t i t l e f a i l u r e or otherwise i n whole or i n part, during the term of

th i s Agreement, then the Royalty Interest of the party represent­

ing himself to be the owner thereof s h a l l be reduced proportionately

and the i n t e r e s t of a l l parties s h a l l be adjusted accordingly,

SECTION 17. RENTAL SETTLEMENT. Rentals or minimum

ro y a l t i e s due on leases committed hereto s h a l l be paid by Working

Int e r e s t Owners responsible therefor under e x i s t i n g contracts, laws

and regulations, provided that nothing herein contained s h a l l

operate to reli e v e the lessees of any land from t h e i r respective

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lease obligations f o r the payment of any r e n t a l or minimum roy a l t y

i n l i e u thereof, due under t h e i r leases. Rental or minimum roy a l t y

for lands of the United States of America subject to t h i s Agreement

s h a l l be paid at the rate specified i n the respective leases from

the United States of America, unless r e n t a l or minimum royalty i s

waived, suspended or reduced by law or by approval of the Secretary

or his duly authorized representative.

SECTION 18. CONSERVATION. Operations hereunder and

production of Unitized Substances s h a l l 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 19. DRAINAGE. The Unit Operator s h a l l take

appropriate and adequate measures to prevent drainage of Unitized

Substances from u n i t i z e d land by wells on land not subject to t h i s

Agreement.

SECTION 20. 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 to exploration, d r i l l i n g , development or

operation f o r o i l or gas on lands committed to t h i 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 e f f e c t , and the parties hereto hereby

consent that the Secretary, by his approval hereof, or by the

approval hereof by his duly authorized representative, does 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 ro y a l t y and ro y a l t y requirements of Federal leases

committed hereto and the regulations i n respect thereto to conform

said requirements to the provisions of t h i s Agreement.

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

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leases, subleases 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 s h a l l be deemed f u l l perfor­

mance of a l l obligations f o r development and operation with respect

to each and every part or separately owned t r a c t subject to t h i s

Agreement, regardless of whether there i s any development of any

pa r t i c u l a r part or t r a c t of the Unit Area, notwithstanding any­

thing to the contrary i n any lease, operating agreement or other

contract by and between the parties hereto or t h e i r respective

predecessors i n i n t e r e s t , or any of them.

(b) D r i l l i n g , producing or secondary recovery operations

performed hereunder upon any t r a c t of un i t i z e d lands s h a l l be

accepted and deemed to be performed upon and for the benefit of

each and every t r a c t of unitiz e d land, and no lease s h a l l 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 land therein embraced.

(c) Suspension of d r i l l i n g or producing operations on

a l l u n i t i z e d lands pursuant to d i r e c t i o n or consent of the Super­

visor or his duly authorized representative, s h a l l be deemed to

constitute such suspension pursuant to such d i r e c t i o n or consent

as to each and every t r a c t of unitized 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 f o r o i l and gas

which by i t s terms might expire p r i o r to the termination of th i s

Agreement i s hereby extended beyond any such term so provided

therein, so that i t s h a l l be continued i n f u l l force and e f f e c t

for and during the term of t h i s Agreement.

(e) Termination of th i s Agreement s h a l l not a f f e c t any

lease which, pursuant to the terms thereof or any applicable laws,

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s h a l l continue i n force and e f f e c t thereafter.

( f ) Any lease which is made subject to t h i s Agreement

sh a l l continue i n force beyond the term provided therein as to the

lands committed hereto as long as such lands remain subject hereto.

(g) The segregation of any Federal lease committed to

this Agreement i s governed by the following provision i n the

fourth paragraph of Section 17 ( j ) of the Mineral Leasing Act, as

amended by the Act of September 2, 1960, (74 Stat. 781-784): "Any

(Federal) lease heretofore or hereafter committed to any such ( u n i t )

plan embracing lands that are i n part w i t h i n and i n part outside

of the area covered by any such plan s h a l l be segregated into sep­

arate 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, that

any such lease as to the non-unitized portion s h a l l continue i n

force and e f f e c t f o r the term thereof but for not less than two

years from the date of such segregation and so long thereafter as

o i l or gas i s produced i n paying q u a n t i t i e s . "

SECTION 21. MATHEMATICAL ERRORS. I t i s hereby agreed

by a l l parties to th i s Agreement that Unit Operator is empowered

to correct any mathematical or c l e r i c a l errors which might e x i s t

i n the pertinent exhibits to t h i s Agreement upon approval by the

Supervisor.

SECTION 22. COVENANTS RUN WITH LAND. The covenants

herein s h a l l be construed to be covenants running with the land

with respect to the i n t e r e s t of the parties hereto and t h e i r

successors i n i n t e r e s t u n t i l t h i s Agreement terminates, and any

grant, transfer or coveyance of in t e r e s t i n land or leases sub­

j e c t hereto s h a l l be and hereby i s conditioned upon the assumption

of a l l p r i v i l e g e s and obligations hereunder by the grantee, trans­

feree or other successor i n i n t e r e s t . No assignment or transfer

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of any Working Int e r e s t subject hereto s h a l l 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 , or acceptable photostatic

or c e r t i f i e d copy, of the recorded instrument of transfer; and no

assignment or transfer of any Royalty I n t e r e s t subject hereto s h a l l

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 a f t e r said Working I n t ­

erest Owner i s furnished with the o r i g i n a l , or acceptable photo­

s t a t i c or c e r t i f i e d copy, of the recorded instrument of transfer.

SECTION 23. EFFECTIVE DATE AND TERM. This Agreement

s h a l l 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

sha l l become e f f e c t i v e as of 7 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 t h i s Agreement and

the Unit Operating Agreement by Working Interest Owners owning a

combined Secondary Phase Unit P a r t i c i p a t i o n of seventy-five percent

(757o) or more, and the execution or r a t i f i c a t i o n of the Agreement

by Royalty Owners owning a combined i n t e r e s t of s i x t y - f i v e percent

(6570) or more, of the Royalty I n t e r e s t , i n said Unit Area; and

(b) The approval of t h i s Agreement by 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 th i s

Agreement f o r record i n the o f f i c e of the County Clerk of Roose­

v e l t County, New Mexico, by the Unit Operator; and provided, f u r ­

ther, that i f ( a ) , (b) and (c) above are not accomplished on or

before July 1, 1969, t h i s Agreement s h a l l ipso facto expire on

said date (hereinafter called "expiration date") and thereafter be

of no further 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 a

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combined Secondary Phase Unit P a r t i c i p a t i o n of seventy-five percent

(75%) or more, and the Working Interest Owners owning a combined

Secondary Phase Unit P a r t i c i p a t i o n of s i x t y - f i v e percent (657») or

more committed to this Agreement have decided to extend said expira­

t i o n date f o r a period not to exceed twelve (12) months (hereinafter

called "extended expiration date"). I f said expiration date i s so

extended and ( a ) , (b) and (c) are not accomplished on or before said

extended expiration date, t h i s Agreement s h a l l ipso facto expire on

said extended expiration date and thereafter be of no further 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 (30) days a f t e r the

e f f e c t i v e date of t h i s Agreement, f i l e f o r record i n the o f f i c e where

a counterpart of t h i s Agreement i s recorded, a c e r t i f i c a t e to the

e f f e c t that t h i s Agreement has become e f f e c t i v e according to i t s

terms and s t a t i n g further the e f f e c t i v e date.

The term of this Agreement s h a l l be for and during the

time that Unitized Substances are or can be produced i n paying quanti­

ti e s from the Unit Area 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) con­

secutive days, and so long thereafter as such u n i t i z e d substances

can be produced as aforesaid.

This Agreement may be terminated at any time with the

approval of the Supervisor by Working Interest Owners owning seventy-

f i v e percent (75%) or more Secondary Phase Unit P a r t i c i p a t i o n whenever

such Working Interest Owners determine that Unit Operations are no

longer i n the i n t e r e s t of conservation. Notice of any such termina­

t i o n s h a l l be given by Unit Operator to a l l parties hereto.

Upon termination of t h i s Agreement, the parties hereto s h a l l

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

a f f e c t i n g the separate t r a c t s . -29-

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I f not otherwise provided by the leases u n i t i z e d under

t h i s Agreement, Royalty Owners hereby grant Working In t e r e s t Owners

a period of six months a f t e r termination of th i s 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 i n connection with Unit Operations.

SECTION 24. RATE OF PROSPECTING, DEVELOPMENT AND PRODUCTION.

A l l production and the disposal thereof s h a l l be i n conformity with

allocations and quotas made or fix e d 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,

i n his d i s c r e t i o n , the rate of prospecting and development to a l t e r

or modify the quantity and rate of production under t h i s Agreement,

such auth o r i t y being hereby l i m i t e d to a l t e r a t i o n or modification i n

the public i n t e r e s t , the purpose thereof and the public i n t e r e s t 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, f u r t h e r , that no such a l t e r a t i o n or modification s h a l l be

ef f e c t i v e as to the rate of prospecting and development on p r i v a t e l y -

owned lands subject to t h i s Agreement or as to the quantity and rate

of production from such lands 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 i n the Director s h a l l only

be exercised a f t e r notice to Unit Operator and opportunity f o r

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

SECTION 25. NONDISCRIMINATION. 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)

incl u s i v e , of Executive Order 11246, (30 F.R. 12319), which are

hereby incorporated by reference i n t h i s Agreement.

SECTION 26. APPEARANCES. Unit Operator s h a l l have the

r i g h t to appear for or on behalf of any and a l l interests affected

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hereby before the Department and the Commission, and to appeal from

any order issued under the rules and regulations of the Department

or the Commission, or to apply f o r 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 Department or the Commission, or any other l e g a l l y constituted

a u t h o r i t y ; provided, however, that any other interested party s h a l l

also have the r i g h t at his or i t s own expense to be heard i n any such

proceeding.

SECTION 27. NOTICES. A l l notices, demands, objections or

statements required hereunder to be given or rendered to the parties

hereto s h a l l be deemed f u l l y given i f made in 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 t h e i r respective addresses set

f o r t h i n connection with the signatures 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.

SECTION 2 8. NO WAIVER OF CERTAIN RIGHTS. Nothing i n t h i s

Agreement contained s h a l l be construed as a waiver by any party

hereto of the r i g h t to assert any legal or c o n 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 ru l e or regulation issued thereunder i n any way a f f e c 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 a u t h o r i t y to waive.

SECTION 29. UNAVOIDABLE DELAY. A l l obligations under t h i s

Agreement requiring the Unit Operator to commence or continue secon­

dary recovery operations or to operate on or produce Unitized Sub­

stances from any of the lands covered by th i s Agreement s h a l l be sus­

pended while, but only so long as the Unit Operator, despite the

exercise of due care and diligence, i s prevented from complying w i t h

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such obligations, i n whole or i n part, by s t r i k e s , acts of God,

Federal, State or municipal law or agency, unavoidable accident,

uncontrollable delays i n transportation, i n a b i l i t y to obtain neces­

sary materials i n open market, or other matters beyond the reasonable

control of the Unit Operator whether s i m i l a r to matters herein

enumerated or not.

SECTION 30. LOSS OF TITLE. In the event t i t l e to any

t r a c t of u n i t i z e d land s h a l l f a i l so as to render the t r a c t inoperable

under t h i s Agreement and the true owner cannot be induced to j o i n

t h i s Unit Agreement, such t r a c t s h a l l be automatically regarded as

not committed hereto and there s h a l l be such readjustment of future

costs and benefits as may be required on account of the loss of such

t i t l e . I f a t r a c t i s removed from t h i s Unit Agreement because of

the f a i l u r e of t i t l e , Unit Operator, subject to Section 13 hereof,

s h a l l recompute the Tract P a r t i c i p a t i o n of each of the tr a c t s remaining

subject to t h i s Agreement and s h a l l revise Exhibit C accordingly.

The revised exhibits s h a l l be e f 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 r i g 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 s h a l l be governed by the Unit Operating Agreement. I f t i t l e

to a Royalty I n t e r e s t f a i l s , but the t r a c t 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 s h a l l not be

e n t i t l e d to share hereunder with respect to such i n t e r e s t . I n the

event of a dispute as to t i t l e as to any Royalty, Working Interest

or other i n t e r e s t subject thereto, payment or delivery on account

thereof may be withheld without l i a b i l i t y or i n t e r e s t u n t i l the dis­

pute i s f i n a l l y s e t t l e d ; provided, that as to Federal land or leases,

no payments of funds due the United States of America s h a l l be

withheld, but such funds s h a l l be deposited as directed by the

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Supervisor, 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 accor­

dance with such f i n a l settlement.

Unit Operator as such i s relieved from any r e s p o n s i b i l i t y

fo r any defect or f a i l u r e of any t i t l e hereunder.

SECTION 31. NONJOINDER AND SUBSEQUENT JOINDER. I f the

owner of any substantial i n t e r e s t i n a t r a c t w i t h i n the Unit Area

f a i l s or refuses to subscribe or consent to this Agreement, the owner

of the Working In t e r e s t i n that t r a c t may withdraw said t r a c t from

t h i s Agreement by w r i t t e n notice to the Supervisor and the Unit

Operator p r i o r to the approval of t h i s Agreement by the Supervisor.

Any o i l or gas i n t e r e s t i n the Unitized Formation not

committed hereto p r i o r to the e f f e c t i v e date of this Agreement may

thereafter be committed hereto upon compliance with the applicable

provisions of t h i s Section and of Section 14 (Tracts Qualified f o r

Unit P a r t i c i p a t i o n ) hereof, at any time during a period of six (6)

months a f t e r the e f f e c t i v e date of the Unit Agreement on the same

basis of p a r t i c i p a t i o n as provided i n said Section 14, by the owner

or owners thereof subscribing, r a t i f y i n g or consenting i n w r i t i n g

to t h i s Agreement and, i f the i n t e r e s t i s a Working I n t e r e s t , by the

owner of such i n t e r e s t subscribing also to the Unit Operating

Agreement.

I t i s understood and agreed, however, that a f t e r such six

months the r i g h t of subsequent joinder as provided i n t h i s Section

s h a l l be subject to such requirements or approvals and on such equi­

table basis as may be agreed upon by Working Interest Owners owning

i n the aggregate eighty percent (80%) or more Secondary Phase

Par t i c i p a t i o n and the Supervisor. Joinder to t h i s Agreement by a

Working Interest Owner, at any time, must be evidenced by his execu­

t i o n or r a t i f i c a t i o n of t h i s Agreement and the Unit Operating

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Agreement. Joinder to t h i s Agreement, a f t e r the expiration of the

six (6) month period provided for subsequent 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 consented to i n w r i t i n g by the Working Interest

Owner responsible f o r the payment of any benefits that may accrue

hereunder i n behalf of such Royalty Owner. Except as may be other­

wise herein provided, subsequent joinder to t h i s Agreement s h a l l be

ef f e c t i v e at 7 o'clock A. M. of the f i r s t day of the month following

the f i l i n g with the Supervisor of duly executed counterparts of any

and a l l documents necessary to establish e f f e c t i v e commitment of

any t r a c t or i n t e r e s t to t h i s Agreement, unless objection to such

joinder by the Supervisor i s duly made w i t h i n s i x t y (60) days a f t e r

such f i l i n g .

SECTION 32. 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 sha l l 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 e f f e c t as i f

a l l parties had signed the same document, and regardless of whether

or not i t i s executed by a l l other parties owning or claiming an

in t e r e s t i n the land w i t h i n the above described Unit Area,,

SECTION 33. TAXES. Each party hereto s h a l l , f o r i t s own

account, render and pay i t s share of any taxes levied against or

measured by the amount or value of the Unitized Substances produced

from the u n i t i z e d land; provided, however, that i f i t i s required

or i f i t be determined that the Unit Operator or the several Working

Interest Owners must pay or advance said taxes f o r the account of

the parties hereto, i t i s hereby expressly agreed that the parties

so paying or advancing said taxes s h a l l be reimbursed therefor by

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the parties hereto, including Royalty Owners, who may be responsible

fo r the taxes on t h e i r respective allocated share of said Unitized

Substances. No such taxes s h a l l be charged to the United States nor

to any lessor who has a contract with a lessee which requires his

lessee to pay such taxes.

SECTION 34, CONFLICT OF SUPERVISION. Neither the Unit

Operator nor the Working Interest Owners, nor any of them, s h a l l

be subject to any f o r f e i t u r e , termination or expiration of any ri g 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 exer­

cise of due diligence, the concurrence of proper representatives of

the United States 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 a u t h o r i t y which by any provisions of th i s Agreement are vested

i n the Commission s h a l l 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

appeal 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 35. 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 c o l l e c t i v e . This Agreement i s not intended to create, and

sh a l l 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 s h a l l be

i n d i v i d u a l l y responsible f o r i t s own obligations as herein provided.

Page 39: UNIT AGREEMENT MILNESAND (SAN ANDRES) UNIT …ocdimage.emnrd.state.nm.us/imaging/filestore...UNIT AGREEMENT MILNESAND (SAN ANDRES) UNIT ROOSEVELT COUNTY, NEW MEXICO INDEX SECTION PAGE

SECTION 36. PRODUCTION AS OF THE EFFECTIVE DATE. Unit

Operator s h a l l make a proper and timely gauge of a l l lease and

other tanks w i t h i n the Unit Area pertaining to the interests to be

uni t i z e d i n order to ascertain the amount of merchantable o i l above

the pipeline connection i n such tanks as of 7 o'clock A. M. on

the e f f e c t i v e date hereof. A l l such o i l which has then been pro­

duced l e g a l l y s h a l l be and remain the property of the Interest Owner

e n t i t l e d thereto, the same as i f the Unit had not been formed; and

such parties s h a l l promptly remove said o i l from the Unit Area. Any

such o i l not so removed s h a l l be sold by Unit Operator f o r the

account of such p a r t i e s , subject to the payment of a l l r o y a lty to

Royalty Owners under the terms and provisions of the Unit Agreement

and any leases and other contracts. Any o i l that i s i n excess of

the p r i o r allowable of the wells from which i t was produced s h a l l be

deemed to be Unitized Substances produced a f t e r the e f f e c t i v e date

hereof.

I f on the e f f e c t i v e date hereof any t r a c t i s over produced

with respect to the allowable of the wells on that t r a c t and the

amount of overproduction has been sold or otherwise disposed of,

such overproduction s h a l l be deemed to be a part of the Unitized

Substances produced a f t e r the e f f e c t i v e date hereof and s h a l l be

charged to such t r a c t as having been delivered to the parties e n t i t l e d

to Unitized Substances allocated to such t r a c t .

SECTION 37. BORDER AGREEMENTS. Unit Operator, with

concurrence of Working In t e r e s t Owners having a combined Secondary

Phase Unit P a r t i c i p a t i o n of seventy-five percent (75%) or more,

may, subject to approval of the Supervisor, enter i n t o a border-

protection agreement or agreements with the Working In t e r e s t Owners

of adjacent lands along the e x t e r i o r boundary of the Unit Area with

respect to the operations i n the border area f o r the maximum

-36-

Page 40: UNIT AGREEMENT MILNESAND (SAN ANDRES) UNIT …ocdimage.emnrd.state.nm.us/imaging/filestore...UNIT AGREEMENT MILNESAND (SAN ANDRES) UNIT ROOSEVELT COUNTY, NEW MEXICO INDEX SECTION PAGE

ultimate recovery, conservation purposes and proper protection of

the parties and interests.

IN WITNESS WHEREOF, the parties hereto have caused this

Agreement to be executed and have set opposite their respective

names the date of execution.

ALLIED CHEMICAL CORPORATION

By Date Attorney-in-Fact

-37-

Page 41: UNIT AGREEMENT MILNESAND (SAN ANDRES) UNIT …ocdimage.emnrd.state.nm.us/imaging/filestore...UNIT AGREEMENT MILNESAND (SAN ANDRES) UNIT ROOSEVELT COUNTY, NEW MEXICO INDEX SECTION PAGE

STATE OF TEXAS $

COUNTY OF HARRIS J

The foregoing instrument was acknowledged before me th i s

day of , 1969, by ,

Attorney-in-Fact f o r ALLIED CHEMICAL CORPORATION, a New York corpora­

t i o n , on behalf of said corporation.

My commission expires:

Notary Public

STATE OF I

COUNTY OF I

The foregoing instrument was acknowledged before me th i s

day of , 1969, by .

My commission expires:

Notary Public

STATE OF I

COUNTY OF I

BEFORE ME, the undersigned a u t h o r i t y , on t h i s day

personally appears , known to me to be the

person who executed the foregoing instrument as

of and acknowledged to me that

he executed the same f o r the purposes and consideration therein

expressed; as the act and deed of said corporation and i n the

capacity therein stated.

GIVEN under my hand and seal of o f f i c e t h i s day

of , 1969.

My commission expires:

Notary Public

Page 42: UNIT AGREEMENT MILNESAND (SAN ANDRES) UNIT …ocdimage.emnrd.state.nm.us/imaging/filestore...UNIT AGREEMENT MILNESAND (SAN ANDRES) UNIT ROOSEVELT COUNTY, NEW MEXICO INDEX SECTION PAGE

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Page 43: UNIT AGREEMENT MILNESAND (SAN ANDRES) UNIT …ocdimage.emnrd.state.nm.us/imaging/filestore...UNIT AGREEMENT MILNESAND (SAN ANDRES) UNIT ROOSEVELT COUNTY, NEW MEXICO INDEX SECTION PAGE

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Page 44: UNIT AGREEMENT MILNESAND (SAN ANDRES) UNIT …ocdimage.emnrd.state.nm.us/imaging/filestore...UNIT AGREEMENT MILNESAND (SAN ANDRES) UNIT ROOSEVELT COUNTY, NEW MEXICO INDEX SECTION PAGE

ON

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Page 45: UNIT AGREEMENT MILNESAND (SAN ANDRES) UNIT …ocdimage.emnrd.state.nm.us/imaging/filestore...UNIT AGREEMENT MILNESAND (SAN ANDRES) UNIT ROOSEVELT COUNTY, NEW MEXICO INDEX SECTION PAGE

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Page 46: UNIT AGREEMENT MILNESAND (SAN ANDRES) UNIT …ocdimage.emnrd.state.nm.us/imaging/filestore...UNIT AGREEMENT MILNESAND (SAN ANDRES) UNIT ROOSEVELT COUNTY, NEW MEXICO INDEX SECTION PAGE

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Page 47: UNIT AGREEMENT MILNESAND (SAN ANDRES) UNIT …ocdimage.emnrd.state.nm.us/imaging/filestore...UNIT AGREEMENT MILNESAND (SAN ANDRES) UNIT ROOSEVELT COUNTY, NEW MEXICO INDEX SECTION PAGE

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Page 58: UNIT AGREEMENT MILNESAND (SAN ANDRES) UNIT …ocdimage.emnrd.state.nm.us/imaging/filestore...UNIT AGREEMENT MILNESAND (SAN ANDRES) UNIT ROOSEVELT COUNTY, NEW MEXICO INDEX SECTION PAGE

EXHIBIT !'C" Attached to Unit Agreement Milnesand (San Andres) Unit Roosevelt County, New Mexico T-8-S; R-34-E; R-35-E; NMPM

Tract No.

4

4-A

5

8

10

11

11-A

12

13

Tract Participation Percent During Primary Phase

2.19800

D e s c r i p t i o n o f Land

N/2 SW/4; SE/4 SW/4; & W/2 SE/4; Sec. 5, T-8-S; R-35-E

SE/4 Sec. 19; SW/4; 14.75021 S/2 SE/4; & W/2 NW/4 Sec. 20; T-8-S; R-35-E

S/2 Sec. 18; N/2 and 28.22179 SW/4 Sec. 19, T-8-S, R-35-E

N/2 SE/4; Sec. 14; T-8-S, 0.03728 R-34-E

S/2 SE/4; Sec. 14; T-8-S, 0.17168 R-34-E

N/2 Sec. 13; E/2 Sec. 24; & E/2 SE/4 Sec. 25; T-8-S, 14.47187 R-34-E

NW/4 NE/4; W/2 NW/4; & 0.62401 NE/4 NW/4; Sec. 8; T-8-S, R-35-E

SW/4 SW/4; Sec. 5; T-8-S, 0.89002 R-35-E

NE/4 SE/4; Sec. 23; T-8-S, 0.13153 R-34-E

S/2 S/2; Sec. 6; T-8-S: R-35-E

0.58519

NE/4 NW/4; SE/4 NW/4; SW/4 0.41360 NW/4; Sec. 12; T-8-S, R-34-E

E/2 NE/4; SW/4 NE/4; S e c 12; 0.96968 T-8-S, R-34-E

NW/4 NE/4; Sec. 12; T-8-S, 0.19382 R-34-E

W/2; Sec. 7; T-8-S, R-35-E 7.32601

E/2; Sec. 7; T-8-S, R-35-E 4.52624

Trac t P a r t i c i p a t i o n Percent Dur ing Secondary Phase

1.60751

8.02764

23.70086

0.17215

0.64422

18.31980

0.71811

1.15538

0.20130

0.97386

0.45156

1.48648

0.33305

8.40717

4.30593

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EXHIBIT C To Unit Agreement (Continued) Milnesand (San Andres) Unit Roosevelt County, New Mexico T-8-S; R-34-E; R-35-E; NMPM page 2

Description of Land

14 W/2 SW/4; Sec. 12; T-8-S, R-34-E

Tract Participation Percent During Primary Phase

0.29462

15 E/2 SW/4; Sec. 12; T-8-S, R-34-E 1.68694

16 SE/4; Sec. 12; T-8-S, 4.29345 R-34-E

17 NE/4; Sec. 14; T-8-S, 0.03192 R-34-E

18 N/2; Sec. 18; T-8-S, 7.53155 R-35-E

19 SE/4; NW/4 SW/4; & SE/4 6.48864 SW/4; Sec. 13; T-8-S, R-34-E

19-A NE/4 SW/4; SW/4 SW/4; 0.28206 Sec. 13; T-8-S, R-34-E

20 NE/4; Sec. 25; T-8-S, 1.03013 R-34-E

21 NE/4; Sec. 23; T-8-S, 0.62933 R-34-E

22 NW/4; N/2 SW/4; SE/4 SW/4; 2.22043 Sec. 24; T-8-S, R-34-E

Trac t P a r t i c i p a t i o n Percent During Secondary Phase

0.66463

2.11553

4.76808

0.28263

8.12870

7.14144

0.95283

1.09548

1.06783

3.27783

TOTALS 100.00000 100.00000