Petrosearch Announces Extension Agreement with Exxon
Petrosearch Energy Corporation entered into an Extension Agreement with ExxonMobil Corporation, Harding Company, Eagle Oil & Gas Co., PS Gas Partners, LLC, and Gas Partners, L.P. dated March 30, 2006, under which the parties have agreed to extend until May 2, 2006, ExxonMobil's preferential purchase rights related to the separate sale agreements between Harding Company and each of the other parties relating to the Barnett Shale project.
The parties entered into the Extension Agreement in order to give all of the parties the ability to explore possible alternative structures with the stated goal to form an integrated venture which would include both upstream and pipeline assets and activities, which would better align each party's interest, and which would enhance the ability of the venture to assure that adequate pipeline capacity would be available to move natural gas to market. The opportunity for Petrosearch to participate in an integrated venture, which includes the gathering and evacuation systems, was not present in the First Amended and Restated Program Agreement executed by Petrosearch and Harding Company on February 6, 2006.
On February 6, 2006, Petrosearch announced the execution of a First Amended and Restated Program Agreement with Harding Company under which Petrosearch would acquire a working interest in an area of mutual interest covering the Barnett Shale trend in 1.6 million acres in five North Texas counties. The First Amended and Restated Program Agreement followed a June 29, 2005 Lease Acquisition and Development Agreement between ExxonMobil Corporation and Harding Company and a Memorandum of Understanding Regarding Gas Evacuation from ExxonMobil and Harding Barnett Shale E&P Venture covering the project. Under the ExxonMobil/Harding Agreements, Harding is responsible to serve as operator for a significant portion of the area of mutual interest and to acquire and develop the leases in the area of mutual interest. ExxonMobil is responsible for the operation and construction of the gathering and evacuation systems associated with the area of mutual interest. The First Amended and Restated Program Agreement provides that Petrosearch will participate in Harding's acquisition and development activities.
At the time of execution of the First Amended and Restated Program Agreement, as well as the separate agreements between Harding and the other participants, Harding had not obtained from ExxonMobil a consent to transfer and a waiver of Exxon/Mobil's preferential purchase right set forth in the ExxonMobil/Harding Agreements. At the time of Petrosearch's execution of and initial funding under its First Amended and Restated Program Agreement, Petrosearch had no direct contractual relationship with ExxonMobil. Petrosearch believed that all conditions necessary to assign and convey the working interest from Harding had been met. Petrosearch subsequently learned that ExxonMobil had not waived the contingencies and that ExxonMobil desired to explore possible alternative ownership structures beneficial to all concerned before making a determination with respect to the preferential right to purchase.
The Extension Agreement preserves all parties' respective rights
and claims as they existed prior to the execution of the Extension
Agreement. In the event that the parties cannot achieve a mutually
agreed alternative structure on or before May 2, 2006, ExxonMobil
could exercise its preferential purchase right which, if exercised,
would prevent Petrosearch's participation in the project, but would
not prejudice the available remedies to Petrosearch relating to the
factual circumstances surrounding these agreements.
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