songa venus contract terms

Exoil RI document released 06-11-2009 has the terms of the Songa Venus contract for Braveheart and Cornea, starting page 48
Its a 6mb pdf at link below

http://www.nsxa.com.au/ftp/news/021722150.PDF

The pdf also contains some interesting info wrt Shell's previous drilling at Cornea

Excerpt wrt Songa Venus contract details

""Songa Venus Rig and Drilling Service Arrangements with respect to WA-333-P
On 14 July 2008, Exoil’s wholly-owned subsidiary Hawkestone Oil Pty Ltd (“Hawkestone”), acting in its
capacity as Operator of the Browse Joint Venture, entered into two agreements relating to the steps taken to
secure a rig to drill the Braveheart-1 well in WA-333-P.
The first agreement, the Project Management Services Agreement, is between Hawkestone and Australian
Drilling Associates Pty Ltd (“ADA”) and other parties pursuant to which Hawkestone has agreed to engage
ADA to provide drilling management services to Hawkestone as operator. Hawkestone has agreed to pay to
ADA aggregate management fees of $900,000 on behalf of the joint venture.
The second agreement is the Drilling Co-operation Agreement between Hawkestone, ADA and all the other
members of the consortium formed to contract the Songa Venus rig (“DCA”). Those consortium members
are Hawkestone Oil Pty Ltd (ABN 23 052 812 236), Auralandia NL (ABN 53 004 913 884), Stuart Petroleum
(Offshore) Pty Ltd (ABN 99 127 971 363), MEO Australia Limited (ABN 43 066 447 952), CNOOC Australia
E&P Pty Ltd (ABN 85 118 934 062) and Anzon Energy Limited (ABN 43 097 972 364). Each of those
consortium members is an Operator under the DCA and the italicised terms in this Section 1.9 are defined
terms in the DCA.
Under the DCA, the various consortium members have agreed how they will share certain rig costs, including
mobilisation, demobilisation and towing costs and have agreed to pay various fees to ADA associated with
ADA’s work in bringing the consortium together and securing shared services (logging contracts, work boats
and the like).
Each Operator agrees to undertake its Drilling Program in accordance with the DCA. Clause 3.9 of the DCA
requires that each Operator acknowledges that it will be required under the Drilling Contract to pay the Drilling
Contractor the applicable Daily Rate for each Day the Drilling Unit is utilised in undertaking that Operator’s
Drilling Program.
The DCA is based around each Operator having provided an estimate of the number of days that that
Operator will require for its Drilling Program. In the event that any Operator’s Drilling Program results in what
are defined as Shortfall Days, because that Operator’s Drilling Program was shorter in duration than
estimated, that Operator is liable to pay the cost of those Shortfall Days. However, if ADA cannot recover the
cost of those Shortfall Days from any Operator the DCA provides that all of the Operators have joint and
several liability to pay the cost of the Shortfall Days to ADA.
Under the terms of the DCA, ADA may require the Operators to provide ADA with any of:
• a bank guarantee ;
• a parent company guarantee ;
• advanced payment of funds into an escrow account held by ADA.
Although the DCA provides for specific liability for each Operator for other costs, including mobilisation and
demobilisation costs, the DCA also provides for joint and several liability for those costs.
The primary risk that each of the members of the consortium is exposed to under the DCA is a failure by any
other Operator or Operators to meet their contracted drilling obligations and associated costs, thus leaving a
shortfall in payment to ADA which, after the various enforcement procedures set out in the ADA are
49
exhausted in relation to the defaulting party, each consortium member must assume liability for. While each
Operator has rights against a defaulting Operator to enable it to pursue recovery of any liability which it meets
because of default, the recovery of such amounts might be uncertain and the prospect must exist that
recovery might not be possible. However, the Company has no reason to believe that any of the Operators
will default in any manner which will crystallise those joint and several liabilities.
These agreements together form the contractual framework pursuant to which Hawkestone, as operator, has
secured the Songa Venus rig to drill the Braveheart-1 well and the services of ADA to manage the drilling
programme.
1.10 Songa Venus Rig and Drilling Service arrangements with respect to WA-342-P
On 21st October 2009 (with effect from 1st
September 2009), Hawkestone, acting in its capacity as Operator
of the Cornea Joint Venture, entered into an agreement with Auralandia N.L. (“Auralandia”) relating to
securing a drilling slot on the Songa Venus to drill the Cornea 3 appraisal well in WA-342-P. Consequently
the provisions of the Songa Venus Rig arrangements with respect to WA-333-P referred to in clause 1.9
above apply with like effect to WA-342-P.
Auralandia is a party to he Drilling Co-Operation Agreement referred to in clause 1.9 above and is an
Operator under the DCA. Hawkestone has taken an assignment of all of Auralandia’s rights, obligations and
interests in the Rig and Drilling Contract. This enables Hawkestone to utilise the Songa Venus rig to drill the
Cornea 3 appraisal well.
1.11 Songa Venus Drilling Contract and Deed of Accession
By a combination of Deeds of Accession executed between Hawkestone Oil Pty Ltd and Auralandia N.L.,
each of those parties acceded to the Songa Venus Drilling Contract (“the Drilling Contract”) and became a
member of a drilling consortium comprising other parties who have acceded to the Drilling Contract. The
Deeds of Accession are straightforward.
The Drilling Contract is a contract entered into between Songa Offshore ASA (“Songa Offshore”) and
Australian Drilling Associates Pty Ltd (ADA) under which the Songa Venus semi-submersible drilling rig
(“Songa Venus”) has been contracted to drill combined programme for the drilling consortium.
Under the Drilling Contract, Songa Offshore provides the Songa Venus to enable the drilling of wells for each
of the members of the drilling consortium. The initial term of the Drilling Contract is for a period of 355 days of
which 55 days are “move days”, and commenced on or about 8 January 2009.
Songa Offshore has provided the rig at a daily operating rate of US$400,000 during the period in which the
Songa Venus is operating and at a cost of US$388,000 during mobilisation, demobilisation and in relation to
periods where the rig is moving. Under the Deeds of Accession, Hawkestone and Auralandia have effectively
committed to pay for the Songa Venus rig for an aggregate of 36 days at the operating rate and 2 days at the
moving rate. The allocation between the Braveheart-1 well and the Cornea 3 appraisal well is 15 days for the
Braveheart-1 well and 21 days for the Cornea 3 appraisal well. The move days will be pro rated between the
relative parties on that ratio.
If all the wells, as contracted, are drilled in less than the Drilling Contract period (355 days) then each drilling
consortium member in respect of whom there is a shortfall period (as defined) undertakes to pay Songa
Venus the applicable daily rate for each day in the shortfall period. However, there is unlikely to be a shortfall
period of material consequence, if at all, as the 355 days Drilling Contract period expires on or about 29
December 2009.""