British Columbia Order in Council — Order under Petroleum and Natural Gas Minister to enter into an agreement for the unitized operation of part of the Oak field to be known as the Oak North Cecil "E" Unit Agreement (O.C. 640/2000)

O.C. 640/2000

British Columbia — Orders in Council

PROVINCE OF BRITISH COLUMBIA ORDER OF THE LIEUTENANT GOVERNOR IN COUNCIL Order in Councii-No. 640 , Approved and Ordered MAY - 4 2000 Lieutenant Governor Executive Council Chambers, Victoria On the recommendation of the undersigned, the Lieutenant Governor, by and with the advice and consent of the Executive Council, orders that the Minister of Energy and Mines is hereby authorized to enter into a unitization agreement, on behalf of the Crown, substantially in the form set out in draft agreement on file with the Deputy Minister of Energy and Mines, for the unitized operation of part of the Oak field to be known as the Oak North Cecil "E" Unit Agreement. Minister of Energy and Mines (Thi%

part is fi,r administrative pal poses only and is not part of the Order.) Authority under %%Welt Order is made: Act and section: Petroleum and Natural Gas Act,

section 114 Other (Teeny): 11)P 4013, G5(1100/13 112

FEB 10 We ENE'ROY AND MINER ASS DIV ISION FIL E R 00A/ • UNIT AGREEMENT Oak North Cecil "E" Pool

TABLE OF CONTENTS

ARTICLE I

INTERPRETATION 101.

Definitions 1 102. Headings 3 103. Number and Gender 3 104. Time 3

ARTICLE II EXHIBITS 201. Exhibits 3 202. Exhibits Correct 4 203. Correction of Exhibits 4 204. Effective Time of Corrected Exhibits 4 205. Supply of Exhibits 4 206. Form of Revised or Corrected Exhibits 5

ARTICLE III UNITIZATION AND EFFECT 301. Unitization 5 302. Personal Property Excepted 5 303. Continuation of Leases 5 304. Leases Amended 5 305. Ratification of Leases 6 306. Effect of Unitization on Titles 6 307. Name 6

ARTICLE IV AUTHORITY TO WORKING INTEREST OWNERS 401. Operations 6 402. Delegation 6 403. Vote of Working Interest Owners 6

ARTICLE V INCLUSION AND QUALIFICATION OF TRACTS 501. Tracts Included on Effective Date 7 502. Qualification of Tracts 7 503. Revision of Exhibits 8

ARTICLE VI TRACT PARTICIPATION 601. Tract Participation 8

ARTICLE VII ALLOCATION OF UNITIZED SUBSTANCES PRODUCED 701. Allocation to Tracts 8

702. Distribution Within Tracts 8 703. Calculation of Royalty 8 704. Taking Unitized Substances in Kind 9 705. Failure to Take in Kind 9

ARTICLE VIII USE, LOSS AND RE-INJECTION OF UNITIZED SUBSTANCES 801. Use or Loss 10 802. Re-Injection 11

ARTICLE IX ENLARGEMENT OF UNIT AREA 901. Application for Lateral Enlargement 11 902. Adjustment of Tract Participation 11 903. Exhibits 12 904. Effective Time of Enlargement 12 905. No Retroactive Adjustment 12 906. Cessation of Application of Enlargement Provisions 12

ARTICLE X DISPUTES 1001. Disputes 12

ARTICLE XI TITLE DISPUTES 1101. Titles Committee 13 1102. Approval of Titles by Working Interest Owners 13 1103. Warranty and Indemnification 13 1104. Subsequent Failure of Title 14 1105. Title Failure Clarification 14 1106. Revision of Exhibits 14

ARTICLE XII TRANSFER OF INTEREST 1201. Disposition 15

ARTICLE XIII IN GENERAL 1301. Execution in Counterpart 16 1302. Capacity in Executing 16 1303. Subsequent Execution 16 1304. Enuring Clause 16 1305. No Partnership 16 1306. Force Majeure 16 1307. Taxes 17 1308. Right of Redemption 17 1309 Notices and Communications 17 1310. Time of the Essence 18 1311. Encumbrance Responsibility 18 1312. Governing Laws 18 1313. Statutory Compliance 19 ii

ARTICLE XIV EFFECTIVE DATE 1401. Effective Date 19 1402. Notice to Effective Date 19 1403. Release of Parties 20

ARTICLE XV TERM 1501. Effect of Execution and Delivery 20 1502. Termination 20 1503. Salvaging Equipment Upon Termination 20 1504. Notice to Royalty Owners 20 EXHIBITS Exhibit "A" Exhibit "B" Exhibit "C" Exhibit "D" iii

UNIT AGREEMENT Oak North Cecil "E" Pool

WHEREAS the Parties own Royalty Interests and Working Interests, or either of them, in the Unitized Zone; AND

WHEREAS the Parties desire that the Unitized Zone be developed, produced and operated as a unit, all as hereinafter provided;

NOW THEREFORE in consideration of the covIanants herein contained, the Parties agree as follows:

ARTICLE I

INTERPRETATION 101.

Definitions In this Agreement: (a) "Affiliate" means, with respect to the relationship between Parties: (

I) that one of them controls the other; or (ii) that two or more of them are controlled by the same person or corporation.

For purposes herein, "control" or "controlled by" means having the power and authority, or being subject to the power and authority, either directly or indirectly, to formulate, determine and direct the management and policies of the person controlled, whether through the exercise of voting rights, ownership of shares, contractual rights, a trust or otherwise held by or for the benefit of the person who controls or by whom another is controlled, as the case may be except where the shares, contractual rights or other vehicle under which such power or authority is derived is held by way of security only; (b) "Crown" means Her Majesty the Queen in right of the Province of British Columbia; (c) "Effective Date" means the time and date referred to in

Article XIV; (d) "Petroleum Substances" means petroleum, natural gas, and related hydrocarbons together with associated substances, both before and after they have been subjected to processing; 1

(e) "Oak North Cecil "E" Pool" means the Cecil E formation occurring between the depths of 1243 metres and 1247 metres on the Density Log of the well situated in legal subdivision fourteen (14) of

section twenty-eight (28), township eighty-six (86), range eighteen (18), west of the sixth (6th) meridian and known as Encal et al Oak 14-28-86-18-W6M, as identified in Exhibit "C". (f) "L ease" means an instrument granting a Working Interest in the Unitized Zone; (g) "Minister means the Minister of Energy and Mines in and for the Province of British Columbia; (h) "Party" means a person who is bound by this Agreement; (i) "Royalty Interest" means: (

I) an ownership, fee simple or similar estate in Unitized Substance in the Oak North Cecil "E" Pool Formation; or (ii) a right to a share of Unitized Substance produced from the Oak North Cecil "E" Pool Formation, or a right to a share of On. proceeds from the sale thereof; but does not include a Working Interest, the interest of a purchaser of Unitized Substances after production, or a mortgage, charge or other security interest; (i) "Royalty Owner" means a Party owning a Royalty Interest in or in respect of Unitized Substances; (k) "Spacing Area" means the area allocated to a well by or pursuant to the provisions of the Petroleum and Natural Gas Act of the Province of British Columbia with respect to the Oak North Cecil "E" Pool Formation for the purpose of drilling for or producing Petroleum Substances; (I) "Tract" means a parcel of land described and given a Tract number in Exhibit "A" and shown outlined on Exhibit "B"; (m) "Tract Participation" means the percentage allocated to a Tract and set forth in Exhibit ..A.,; (n) "Unit Area" means the lands described in Exhibit "A", and shown outlined on Exhibit "B"; (o) "Unit Operating Agreement" means the agreement entitled "Unit Operating Agreement - Oak North Cecil "E" Pool Unit" entered into by the Working Interest Owners; (p) "Unit Operations" means any operations or activity undertaken on behalf of the Working Interest Owners in connection with the development or exploitation of the Unitized Zone, the production of Unitized Substances or the installation, operation, maintenance or removal of unit facilities, insofar as such operation or activity has been authorized or provided for under this Agreement or the Unit Operating Agreement; 2

(q) "Unit Operator means the Party who is so designated under the Unit Operating Agreement; (r) "Unit Participation" means, with respect to each Working Interest Owner, the sum of all its shares of Tract Participations as set forth in Exhibit "A"; (s) "Unitized Substances" means Petroleum Substances in or obtained from the Unitized Zone; (t) "Unitized Zone" means the Oak North Cecil "E" Pool Formation within the Unit Area; (u) "Working Interest' means any right to produce and dispose of Unitized Substance from the Oak North Cecil "E" Pool Formation including an interest chargeable with any costs of drilling for, recovery of and disposal of Unitized Substance therefrom; and (v) "Working Interest Owner" means a Party owning a Working Interest in or in respect of the Unitized Substances. 102.

Headings The headings of the Articles and clauses headings in this Agreement have been inserted for convenience of reference only and shall not be considered in interpreting the text. 103. Number and Gender In this Agreement words importing the singular Include the plural and vice versa; words importing gender include the masculine, feminine and neuter genders; and words Importing persons, firms, corporations, partnerships or bodies politic may be used interchangeably, all as the context requires. 104.

Time In this Agreement all times are Mountain Standard Time or Daylight Saving Time, whichever is then being used and observed in accordance with the

Interpretation Act (R.S.B.C. 1996) c.238, s. 26 (British Columbia).

ARTICLE II EXHIBITS 201. Exhibits The following exhibits are attached to and incorporated in this Agreement: (

a) Exhibit "A" -

Part I which numbers and describes each Tract, sets forth its Tract Participation and, with respect to each Tract, sets forth: 3

(

i) the names of the owners of the Working Interests therein, their respective percentage Working Interests therein, and their respective shares of the Tract Participation therefor; (ii) the names of the owners of the Royalty Interests; (iii) the petroleum and natural gas lease numbers relating to the Unitized Zone and Unitized Substances; and Exhibit "A" -

Part II which is a list of the Working Interest Owners and their respective Unit Participations; (

b) Exhibit "B" which is a plan of the Unit Area, identifying the Tracts; and (

c) Exhibit "C" which is a reproduction of a portion of the Log referred to in subclause 101(

e) hereof. (

d) Exhibit "D" which is the failure to make adequate disposition arrangements. 202. Exhibits Correct Each exhibit shall be deemed conclusively to be correct to the effective time of a revision or correction thereof as herein provided. 203. Correction of Exhibits If any mistake or mechanical error occurs in an exhibit, Unit Operator may, or upon request of the Working Interest Owners shall, prepare a corrected exhibit but the methods and data used in establishing Tract Participations shall not be re-evaluated. 204.

Effective Time of Corrected Exhibits Any corrected exhibit prepared on or before the Effective Date or within sixty (60) days thereafter shall be effective on the Effective Date. Any corrected exhibit prepared after the said sixty (60) days shall be effective at 08:00 hours on the first day of the calendar month next following Its preparation or on such other date as is determined by the Working Interest Owners. 205.

Supplying of Exhibits Each time that an exhibit is revised or corrected pursuant to this Agreement, Unit Operator shall supply the Minister with three (3) copies each and shall supply each Working Interest Owner with a copy thereof. Each Working Interest Owner shall supply each of its Royalty Owners, excepting the Crown, with a copy thereof. 4

206. Form of Revised or Corrected Exhibits Exhibits that are revised or corrected shall show the effective time of the revision or correction and shall be numbered consecutively.

ARTICLE III UNITIZATION AND EFFECT 301. Unitization On and after the Effective Date the interests of each Royalty Owner and of each Working Interest Owner in or in respect of the Unitized Substances and the Unitized Zone are hereby unitized in accordance with the provisions of this Agreement. 302.

Personal Property Excepted All equipment and facilities used in connection with Unit Operations heretofore or hereafter Installed, affixed or constructed by any of the Working Interest Owners on or in lands within the Unit Area are and shall remain the personal property of the Working Interest Owners, or such of them as may from time to time have an interest therein, and no interest in any such equipment or facilities shall vest in the Royalty Owners by virtue of the provisions of this Agreement. 303.

Continuation of Leases All operations conducted with respect to the Unitized Zone or production of Unitized Substances shall, except for the purpose of calculating payments to Royalty Owners, be deemed conclusively to be operations upon or production from all of the Unitized Zone in each Tract, and such operations or production shall continue in force and effect each Lease and any other agreement or instrument relating to the Unitized Zone or Unitized Substances as if such operations had been conducted on, and a well was producing from, each Tract or Spacing Area, or portion thereof, in the Unit Area. 304.

Leases Amended Each Lease and any other agreement or instrument relating to the Unitized Zone or Unitized Substances is hereby amended only to the extent necessary to make it conform to this Agreement. 5

305. Ratification of Leases Except for a Lease with respect to which a Royalty Owner is involved in a court action which has been commenced and is pending on the date on which such Royalty Owner executes and delivers a counterpart of this Agreement, each Royalty Owner hereby ratifies each Lease, as amended by this Agreement, to which It is a party and hereby confirms that no notice of default has been given and remains outstanding with respect to any such Lease, and that each such Lease is in effect as of the date of such execution and delivery.

The provisions of this clause 305 do not constitute a waiver, and shall not give rise to an estoppel of any right to pursue the enforcement of any outstanding obligation under any such Lease. 306. Effect of Unitization on Titles Nothing herein shall be construed as a transfer or exchange of any interest in the Leases, Tracts or Unitized Zone, or in the Unitized Substances before production thereof. 307. Name The name of the unit hereby constituted is "Oak North Cecil "E" Pool Unit".

ARTICLE IV AUTHORITY TO WORKING INTEREST OWNERS 401. Operations The Working Interest Owners are hereby granted the right to develop and operate the Unitized Zone without regard to the boundary lines of the Tracts or Spacing Areas. 402. Delegation The Working Interest Owners may delegate to Unit Operator any of the rights and powers herein or otherwise granted to them. 403. Vote of Working Interest Owners Any matter to be determined under this Agreement by the Working Interest Owners shall be determined by vote of the parties to the Unit Operating Agreement as prescribed therein. 6

ARTICLE V INCLUSION AND QUALIFICATION OF TRACTS 501. Tracts Included on Effective Date The Tracts included in the Unit Area as of the Effective Date are those Tracts which qualified under clause 502: (

a) before the Effective Date; or (

b) on or within sixty (60) days after the Effective Date. 502. Qualification of Tracts A Tract is qualified for inclusion in the Unit Area when its title has been approved by the Working Interest Owners pursuant to clause 1102 and when: (

a) owners of one hundred percent (100%) of the Working Interest therein have become Parties and parties to the Unit Operating Agreement and owners of one hundred percent (100%) of the Royalty Interest therein have become Parties; or (

b) owners of one hundred percent (100%) of the Working Interest therein have become Parties and parties to the Unit Operating Agreement and owners of less than one hundred percent (100%) of the Royalty Interest therein have become Parties, and such owners of Working Interests agree, if required by the other Working Interest Owners, to indemnify the other Working Interest Owners in a form and manner satisfactory to them for any loss or damages that may be suffered by such other Working Interest Owners in respect of claims and demands that, because of the inclusion of the Tract in the Unit Area, may be made by those owners of Royalty Interests in the Tract who have not become Parties; or (

c) owners of Working Interests therein have agreed with the owners of Working Interests then Parties and parties to the Unit Operating Agreement as to the basis on which the Tract shall become qualified, where the Tract cannot be qualified pursuant to subclause (

a) or (

b) of this clause. 7

503. Revision of Exhibits Within sixty (60) days after the Effective Date the exhibits shall be revised, if necessary, to set out only those Tracts included in the Unit Area under this Article. The revised Exhibit "A" shall set forth the Tract Participations of the Tracts recalculated on the same basis and using the same data as that used in the calculation of Tract Participations in the original Exhibit "A" and so that their summation is one hundred percent (100%). The exhibits as so revised shall be effective as of the Effective Date.

ARTICLE VI TRACT PARTICIPATION 601. Tract Participation Each Tract has a Tract Participation as shown on Exhibit "A".

ARTICLE VII ALLOCATION OF UNITIZED SUBSTANCES PRODUCED 701. Allocation to Tracts Subject to clauses 703, 801, 802, and 1313 the Unitized Substances when produced shall be allocated among the Tracts in accordance with their Tract Participations. The amount of Unitized Substances allocated to each Tract, and only that amount, regardless of whether it be more or less than the amount of actual production of Unitized Substances from the well or wells, if any, on the Tract, shall be deemed conclusively to have been produced from the Unitized Zone in the Tract. 702.

Distribution Within Tracts The Unitized Substances allocated to a Tract shall be distributed by the Working Interest Owners thereof among, or accounted for to, the Parties entitled to share In production from the Tract in the same manner, the same proportions, and upon the same conditions as they would have participated and shared in the production from the Tract, or in the proceeds from the sale thereof, had the Unitized Substances allocated to the Tract actually been produced therefrom by the Working Interest Owners. 703.

Calculation of Royalty Subject to clause 1313(b), the Working Interest Owners of each Tract shall calculate royalty 8

on the Unitized Substances allocated to the Tract at the applicable rate under the Lease, other agreement or instrument relating to the Tract. The Royalty Owners of each Tract agree to accept payment of royalty so calculated in satisfaction of the obligation of a Working Interest Owner to make royalty payments on Unitized Substances under the Lease, other agreement or instrument covering such Tract; but a lessee under a Lease shall not be relieved from making payment of royalty to its lessor if payment is not made by the Working Interest Owner as aforesaid.

In calculating royalty on residue gas, sulphur and fluid hydrocarbons, or any of them, obtained by processing Unitized Substances, other than crude oil, by compression, absorption or other plant extraction or stabilization, proper allowances shall be made for costs, expenses and charges, including a reasonable return on investment, incurred in or attributable to gathering and processing the Unitized Substances. 704.

Taking Unitized Substances in Kind The Unitized Substances allocated to a Tract shall be delivered in kind at the time and place of production to the Working Interest Owners entitled thereto who may, if there is no interference with Unit Operations, construct, maintain and operate in the Unit Area all necessary facilities for taking delivery in kind. 705. Disposition of Unitized Substances (

a) Failure to Take in Kind The share of Unitized Substances allocated to each Working Interest Owner pursuant to the provisions of clauses 701 and 702 shall be a several share, and the right to possession of, and the responsibility for, such share shall vest in each Working Interest Owner upon production.

Each Working Interest Owner shall, not less than ninety (90) days prior to the commencement of production of Unitized Substances pursuant hereto, and thereafter not less than thirty (30) days prior to any change in disposition arrangements, provide the Unit Operator with a written notice setting forth such information with respect to such Working Interest Owner's arrangements for the disposition of its allocated share of Unitized Substances (including any portion thereof which is to be taken in kind by a Royalty Owner) as the Unit Operator may reasonably require in order to facilitate such arrangements.

Such notice shall remain in effect and shall bind such Working Interest Owner until the later of the date specified in any written replacement notice In respect thereof and the date thirty (30) days following the date on which such replacement notice is 9

delivered to the Unit Operator. In the event that a Working Interest Owner fails to provide such a notice, or in the event that any of the disposition arrangements specified in such a notice are inadequately provided for or are otherwise unworkable or impracticable, or at any time cease to be adequately provided for or otherwise become unworkable or impracticable, the Unit Operator shall forthwith so notify such Working Interest Owner, and the provisions of Exhibit "13" shall apply.

The Working Interest Owners may from time to time change the time for giving a notice pursuant to this clause 705, or specify the required form or contents of such a notice, in which event the Unit Operator shall notify the Crown, and each Working Interest Owner shall notify its Royalty Owners, other than the Crown, of such change in notice requirements not less than thirty (30) days prior to the date upon which such change becomes effective. (

b) Recovery of Outside Substances If any Outside Substances are injected into the Unitized Zone, the first like substances subsequently produced from the Unitized Zone for sale or for use other than for Unit Operations shall be deemed conclusively to be such Outside Substances until a quantity equal to the quantity of the Outside Substances injected into the Unitized Zone is recovered. Unitized Substances which are so deemed to be Outside Substances shall not be allocable to the Tracts, and accordingly no royalty shall be payable or deliverable in respect of such substances as Unitized Substances.

ARTICLE VIII USE, LOSS AND RE-INJECTION OF UNITIZED SUBSTANCES 801. Use or Loss The Working Interest Owners shall be entitled to use as much of the Unitized Substances, other than crude oil, as may reasonably be required for Unit Operations. No Unitized Substances consumed through such use, and no Unitized Substances unavoidably lost in the conduct of Unit Operations, shall be allocable to the Tracts, and accordingly no royalty shall be payable or deliverable in respect thereof. The provisions of this clause 801 shall not be construed as relieving the Unit Operator or any other Working Interest Owner from any liability which it would otherwise 10

have for any loss of Unitized Substances. 802. Re-inlection The Working Interest Owners are hereby granted the right to re-inject Unitized Substances into the Unitized Zone for any purpose related to Unit Operations. No Unitized Substances so re-injected shall be allocable to the Tracts until such time as they are ultimately recovered for sale or for use other than for Unit Oporations, and accordingly no royalty shall be payable or deliverable in respect thereof until such time.

ARTICLE IX ENLARGEMENT OF UNIT AREA 901. Application for Lateral Enlargement After the expiry of thirty (30) days from the Effective Date, if an owner of a Working Interest in lands in the vicinity of the Unit Area indicated to be potentially productive of Unitized Substance from the Oak North Cecil "E" Pool Formation makes application therefor, the Working interest Owners may, upon such terms and conditions as they may determine, approve the admission of such lands into the Unit Area. If such lands qualify for inclusion in the Unit Area pursuant to clause 502, the Unit Area shall be enlarged to include them.

Notwithstanding that any owner of a Working Interest or a Royalty Interest in such lands is already a Party, such owner shall not, for the purpose of the qualification of such lands pursuant to clause 502, be considered to have executed and delivered this Agreement until it executes and delivers to the Unit Operator an additional counterpart incorporating exhibits which reflect the proposed enlargement. 902. Adjustment of Tract Participation The Tract Participation of each Tract added pursuant to clause 901 shall be determined by the Working Interest Owners.

The Tract Participations shall then be adjusted so that: (

a) the ratios of the Tract Participations of Tracts shown on Exhibit "A" immediately prior to the enlargement remain the same to each other; and (

b) the total of the Tract Participations for all Tracts of the enlarged Unit Area and Unitized Zone is one hundred percent (100%). II

903. Exhibits Unit Operator shall revise Exhibits "A" and "B" as required by the enlargement. 904. Effective Time of Enlargement An enlargement pursuant to clause 901 and an adjustment of Tract Participations under this

Article shall become effective at 08:00 hours on the first day of the first calendar month following approval of admission under clause 901 and Tract qualification under clause 502. 905. No Retroactive Adjustment There shall never be any retroactive adjustment of the allocation of Unitized Substances by reason of an enlargement under this Article. 906. Cessation of Application of Enlargement Provisions If all of the Working Interests in all of the Tracts are at any time owned by a single Working Interest Owner, or by a group of Working Interest Owners all of which are Affiliates of one another, the provisions of this

Article IX shall cease to apply.

ARTICLE X DISPUTES 1001. Disputes If the title or right of a Party, save and except the Crown, to receive in kind all or any portion of the Unitized Substances allocated to a Tract, or any share of the proceeds from the sale thereof, is in dispute, the Party concerned shall forthwith give notice thereof to Unit Operator. If Unit Operator is so notified or if Unit Operator is directed to do so by the Working Interest Owners in the event that it is otherwise Informed of the dispute, Unit Operator shall withhold and sell the portion of Unitized Substances the title or right to which is in dispute, and hold in an interest bearing trust account the proceeds from the sale thereof until: (

a) the Party concerned furnishes security in a form and manner satisfactory to the Working Interest Owners for the proper accounting thereof to the rightful owner if the title or right of the Party shall fail In whole or in part, whereupon the proceeds, including interest, shall be paid to the Party; or (

b) the title or right thereto is established by a final judgment of a court or otherwise 12

to the satisfaction of the Working Interest Owners, whereupon such proceeds, including interest, shall be paid to the person rightfully entitled. Any Party which is a party to a Working Interest title dispute and fails to give Unit Operator notice of such dispute forthwith upon initiating or being advised of the same shall be liable for any liability, loss, costs, claims or damages suffered or incurred by the Unit Operator or the other Working Interest Owners as a result of such failure to notify in a timely manner.

ARTICLE XI APPROVAL OF TITLES 1101. Titles Committee The Working Interest Owners shall appoint a titles committee which shall Investigate the ownership of the Working Interests and of the Royalty Interests of all Tracts, and each Working Interest Owner shall be entitled to be represented thereon. Each Working Interest Owner shall submit to the titles committee such title data and information as the titles committee may reasonably require from time to time.

The titles committee shall report the result of its investigation to the Working Interest Owners specifying titles to Tracts which it unanimously recommends for approval. 1102. Approval of Titles by Working Interest Owners The Working Interest Owners may approve or decline to approve the titles for each Tract on such basis as they consider appropriate in the circumstances.

A decision of the Working Interest Owners to approve a title notwithstanding knowledge of subsisting or prospective deficiencies therein shall not be construed as an acceptance of or acquiescence in any such deficiency, and shall not relieve any Working Interest Owner of any liability which it might have under clause 1103 or under any other provision of this Agreement or the Unit Operating Agreement. 1103. Warranty and Indemnification Each of the Parties having a Working Interest ascribed to it in Exhibit "A": (

a) represents and warrants that it is the owner of the Working Interests ascribed to it in Exhibit "A", and that it has full right, power and authority to commit the said Working Interests to unitization In accordance with the provisions of this Agreement, and thereby to bind the same; and (

b) agrees to Indemnify and save harmless each of the other Parties against and 13

from any liability, loss, costs, claims or damages of any nature whatsoever arising out of: any breach or failure of such representation and warranty, whether in whole or in part; or (ii) any failure of, or defect in, the title to any of the Working Interests ascribed to it in Exhibit "A", no matter when occurring or arising. 1104. Subsequent Failure of Title If the title of a Working Interest Owner to a Tract fails, the Tract shall be excluded from this Agreement and the Unit Operating Agreement as of 08:00 hours on the first day of the calendar month in which the failure of title is finally determined unless: (

a) any other Party, save and except the Crown, is held or declared to own the title in which event that Party shall be bound by this Agreement and the Unit Operating Agreement in respect of the Tract; or (

b) by the last day of the next following calendar month the Tract qualifies for inclusion in the Unit Area pursuant to clause 502. 1105. Title Failure Clarification Without in any manner limiting the generality of the meaning of failure of title, the cancellation, surrender or other termination of a Lease for any reason whatsoever shall, for the purposes of this Agreement, be regarded as a failure of title. 1106. Revision of Exhibits Unit Operator shall revise the exhibits to reflect any change in ownership in or exclusion from this Agreement of a Tract pursuant to clause 1104.

Where a Tract is excluded, the Tract Participations of the other Tracts shall each be increased, without changing their ratios to each other, so that their summation is one hundred percent (100%). The revised exhibits shall be effective as of 08:00 hours on the first day of the calendar month in which the failure of title referred to in clause 1104 is finally determined. 14

ARTICLE XII TRANSFER OF INTEREST 1201. Disposition In this clause the term "disposition" means any disposition of a Working Interest or a Royalty Interest, or any interest therein, whether legal or equitable, by way of sale, assignment, transfer, lease, sublease, conveyance, gift, parting with possession, or any transaction of a similar nature, whether by trust or otherwise and includes any realization upon a mortgage, charge or other security interest but does not include the granting of or other creation of any such security interest.

A disposition of an interest in a Tract by a Party shall cover the whole of or an undivided interest in the whole of such Party's interest in the Tract. A disposition shall not be binding on Unit Operator until: (

a) at least one of the parties to the disposition has given notice thereof to Unit Operator by a copy of the instrument evidencing such disposition; and (

b) the acquiring parties who are not Parties have executed and delivered to Unit Operator a counterpart of this Agreement and, in the event that the disposition is a disposition of a Working Interest, any acquiring parties who are not parties to the Unit Operating Agreement have executed and delivered to Unit Operator a counterpart of the Unit Operating Agreement. Unit Operator shall revise the exhibits to reflect each disposition of an interest in a Tract and the revised exhibits shall be effective as of 08:00 hours on the first day of the calendar month following the date Unit Operator receives the documentation required under subclauses (

a) and (

b) of this clause . When the disposition becomes binding on the Unit Operator, the assignor shall be deemed released and discharged from the observance and performance of its covenants and agreements under the terms hereof arising thereafter in respect of the interest assigned, and the assignee shall be deemed to have assumed the rights and obligations of the assignor as aforesaid accruing thereafter in respect of the interest assigned. Notwithstanding the foregoing, nothing herein shall be construed as a release of the assignor from any obligation or liability hereunder accruing or relating to any period ending prior to the date on which the disposition becomes binding upon the Unit 15

Operator as aforesaid.

ARTICLE XIII IN GENERAL 1301. Execution in Counterpart This agreement may be executed in separate counterparts and all the executed counterparts together shall constitute one agreement. 1302. Capacity in Executing (

a) If a Party owns a Working Interest and a Royalty Interest, its execution of this Agreement shall constitute execution in both capacities. (

b) Execution of this Agreement by the Minister shall be on behalf of the Crown in its capacity as a Royalty Owner. 1303. Subsequent Execution An owner of an interest in a Tract who has not become a Party as of the date the Tract was included in the Unit Area under either

Article V or IX, may become a Party with respect to that interest only on such terms and conditions as may be prescribed by the Working Interest Owners. 1304. Enuring Clause This agreement shall enure to the benefit of and be binding upon the heirs, executors, administrators, successors and assigns of the Parties. 1305. No Partnership The duties and obligations of the Parties shall be separate and not joint or collective. Nothing contained in this Agreement shall be construed to create a partnership or association. 1306.

Force Majeure Neither Unit Operator nor any other Party shall be deemed to be in default with respect to non-performance of its obligations hereunder, other than financial, if and for so long as its non-performance is due, in whole or in part, to any cause beyond its reasonable control, but lack of funds shall not be a cause beyond a Party's reasonable control. The performance of such obligations shall begin or be resumed within a reasonable time after such cause has been removed. Nothing 16

herein contain 3d shall be construed to require any party to settle a strike, lockout or other labour difficulty by acceding against its judgment to the demands of opposing persons in any labour dispute. Where the performance of any Party is prevented or materially affected as aforesaid, such Party shall give notice and full particulars to the other Parties within a reasonable time after the occurrence of the cause rolled upon and shall give notice to the other Parties immediately when such cause ceases to operate.

Neither this Agreement nor any Lease or any other agreement or instrument relating to the Unitized Zone or Unitized Substances shall terminate by reason of suspension of Unit Operations for the cause set forth in this clause. 1307. Taxes All taxes levied in respect of the ownership, production, or sale of Unitized Substances associated with or allocated to a Tract shall be borne in accordance with the provisions of the applicable Lease.

In the event that a Royalty Owner, other than the Crown, fails to pay when due any such taxes which are payable by it, Its Working Interest Owner may pay such taxes on its behalf and, if any portion of such taxes is to be borne by its Royalty Owner, the Working Interest Owner may deduct su:h amount of the payment so made from the Royalty Owner's royalty. 1308.

Right of Redemption In the event that a Royalty Owner, other than the Crown, fails to pay when due any amount owing under or in respect of any mortgage, agreement for sale or other instrument or arrangement by virtue of which a third party claims an interest in a Tract, the Working Interest Owners for such Tract may, with full rights of subrogation, pay such amount on the Royalty Owner's behalf and deduct the Royalty Owner's share of any payment so made from any royalty payable or deliverable to it in respect of such Tract. 1309.

Notices and Communications Except with respect to notices and communications between a Working Interest Owner and its Royalty Owners, the giving of which shall be governed by the applicable Lease or other agreement or instrument, all notices and other communications to be given In connection with this Agreement shall be in writing and shall be sufficiently given: (

a) if delivered by hand or by courier service to a Party at Its address for service as hereinafter provided, and any such notice or communication so delivered shall be deemed conclusively to have been given and received on the date of delivery other than a Saturday, Sunday or statutory holiday; or 17

(

b) if sent by first class mail, properly addressed and postage prepaid, to a Party at its address for service as hereinafter provided, and any such notice or communication so mailed shall be deemed conclusively to have been given and received seventy-two (72) hours after the date of mailing, excluding Saturdays, Sundays, statutory holidays and postal disturbances; or (

c) if sent by telecommunication to a Party's proper telecommunication number, and any such telecommunication shall be deemed conclusively to have been given and received sixteen (16) hours after the sending thereof. If given during normal business hours, or on the next business day if given after normal business hours. The address appearing below the execution of each Party shall be the address to which notices and communications to it shall be directed, but a Party may change its address by notice to the Unit Operator. Unit Operator shall, upon request therefor, furnish any Party with the address for service of any other Party. Notwithstanding subclause (

b) of this clause, notices and communications shall be sent by personal delivery or by telecommunication in the event of mail disruptions such as, but not limited to, strikes. 1310. Time of the Essence Time is of the essence in this Agreement. 1311.

Encumbrance Responsibility If the interest of any Working Interest Owner in the Unitized Zone of a Tract is now, or hereafter becomes, encumbered by a royalty, production payment, or other charge of a similar nature, the Parties covenant and agree that such royalty, production payment, or charge so created shall at all times during the term of this Agreement remain the sole responsibility of the Party whose Interest is so encumbered. 1312.

Governing Laws This agreement shall be governed by and construed in accordance with the laws of the Province of British Columbia, and each of the Parties submits to the Jurisdiction of the courts of the Province of British Columbia for the

interpretation and enforcement hereof. 18

1313. Statutory Compliance (

a) In exercising their respective rights and discharging their respective obligations under this Agreement, the Parties shall comply with all statutes, regulations and other lawful governmental directives from time to time in force in the Province of British Columbia. In the event of any conflict between the provisions of this Agreement and the provisions of any such statute, regulation or other lawful governmental directive, the provisions of such statute, regulation or other governmental directive shall take precedence. (

b) Notwithstanding the generality of the foregoing, in the event of any conflict between the provisions of clause 701, 703, 801, 802 and 1306 and the manner in which Crown royalty rates are determined pursuant to the Petroleum and Natural Gas Royalty Regulations, the latter shall take precedence.

ARTICLE XIV EFFECTIVE DATE 1401. Effective Date The unitization provided for herein shall become effective at 08:00 hours on the first day of January, 1995, provided: (

a) qualification under clause 502 of Tracts having a combined Tract Participation of one hundred percent (100%) of the total Tract Participations as originally set out in Exhibit "A"; and (

b) the filing of a copy of this Agreement and the Unit Operating Agreement with the Minister. 1402. Notice of Effective Date As soon as possible after the Effective Date, Unit Operator shall notify all Working Interest Owners and the Minister of the Effective Date, and of the Tracts qualified as of the Effective Date. Each Working Interest Owner shall advise each of its Royalty Owners, excepting the Crown, of the Effective Date. 19

1403. Release of Parties This agreement shall cease to bind the Parties if the unitization provided for herein has not become effective on or before the first day of January 1998.

ARTICLE XV TERM 1501. Effect of Execution and Delivery Subject to clause 1403, this Agreement is binding upon a person who executes and delivers a counterpart thereof to Unit Operator, and that person is bound by tnis Agreement as of the time of such delivery; but if a proposed Tract is not included in the Unit Area under

Article V, the Parties owning interest therein shall be completely released from this Agreement with respect to it upon the expiration of thirty (30) days after the Effective Date. 1502. Termination Subject to clause 1503, this Agreement terminates ninety (90) days after all wells for the production of Unitized Substances in the Unit Area have been abandoned, plugged or disposed of or upon the termination of the Unit Operating Agreement, whichever is first to occur.

Thereafter the Parties shall be governed by the terms and provisions of their Leases and other agreements or instruments relating to the Unitized Zone or Unitized Substances. 1503. Salvaging Equipment Upon Termination The Royalty Owners grant the Working Interest Owners the right for a period of six (6) months after termination of this Agreement to salvage, sell, distribute or otherwise dispose of the personal property and facilities used in connection with Unit Operations. This provision shall survive the termination of this Agreement for such six (6) month period. 1504.

Notice to Royalty Owners The Working interest Owners shall give notice in accordance with their Leases to their respective Royalty Owners of the termination of this Agreement within thirty (30) days thereafter. 20

IN WITNESS WHEREOF the Parties have executed this Agreement each on the date shown opposite its execution hereof. Date: Working interest Owner/Royalty Owner Execution: Name: Title: ADDRESS FOR SERVICE (Under Seal) This is the execution page of the "Oak North Cecil "E" Pool Unit" - Unit Agreement. 21

IN WITNESS WHEREOF the Parties have executed this Agreement each on the date shown opposite its execution hereof. 1998 AUL 14 Date: Working Interest Owner/Royalty Owner Execution: Name: Title: . E4NCA NERGY LTD. • RDINE BARROWS PROD " LAND & CORPORA'. E. ADDRESS FOR SERVICE ENCAL ENERGY LTD. 1800, 421 - 7th Avenue S.W P.O. Box 2310, Station "M" Calgary, Alberta T2P 2Mfi (Under Seal) This is the execution page of the "Oak North Cecil "E" Pool Unit" - Unit Agreement. 21

IN WITNESS WHEREOF the Parties have executed this Agreement each on the date shown opposite its execution hereof. 1996 AUG 1 4 Date: Working Interest Owner/Royalty Owner NERGY LTD. Execution: Name: TA BARROWS, V.P. PROD. Title: ADDRESS FOR SERVICE ENCAL ENERGY LTD. 1800, 421 - 7th Avenue S.W. P.O. Box 2310, Station "M" Calgary Aihcarta T2P 21.16 (Under Seal) This is the execution page of the "Oak North Cecil "E" Pool Unit" - Unit Agreement. 21

Execution: Name: Title: ADDRESS FOR SERVICE .L. NORD •H FRESIDEAT CA CEO

IN WITNESS WHEREOF the Parties have executed this Agreement each on the date shown opposite its execution hereof. l'ig3 AT.; 16 Date: Working Interest Owner/Royalty Owner CELSIUS ENERGY RESOURCES LTD. (Under Seal) This is the execution page of the "Oak North Cecil "E" Pool Unit" - Unit Agreement. 21

gIG.L. NO LOH PRESIDENT 3 C:i0 Execution: Name: Title:

IN WITNESS WHEREOF the Parties have executed this Agreement each on the date shown opposite its execution hereof. l'398 AUG 6 Date: Working Interest Owner/Royalty Owner CELSIUS ENERGY RESOUKC.ES LTD. ADDRESS FOR SERVICE bt (Under Seal) This is the execution page of the "Oak North Cecil "E" Pool Unit" - Unit Agreement. 21

EXHIBIT "A" -

PART I ATTACHED TO AND MADE PART OF AN AGREEMENT ENTITLED UNIT AGREEMENT - Oak North Cecil "E" Pool TRACT No. Lease Description Lease Number P&NG Type Royalty Owners Working Interest Owners Tract Ownership Tract Factor Tract Factor Participation Celsius Encal Celsius Encal TRACT No.1 NW 17-86-18-VV6M 45176 P&NG Crown, Encal 24.000% 76.000% 6.5626% 1.57502% 4 98758% TRACT No.2 SE 20-86-18-W6M 15791 P&NG Crown.

Encal 24.000% 76.000% 7.3757% 1.77017% 5 60553% TRACT No.3 SW 20-86-18-VV6M 15791 P&NG Crown, Encal 24.000% 76.000% 6.3107% 1.51457% 4.79613% TRACT No.4 NW 20-86-18-VV6M 15791 P&NG Crown, Encal 24.000% 76.000% 3.6991% 0.88778% 2.81132% TRACT No.5 NE 20-8b-18-W6M 15791 P&NG Crown, Encal 24.000% 76.000% 11.0829% 2.65990% 8.42300% TRACT No.6 SW 28-86-18-VV6M 15790 P&NG Crown, Encal 24.000% 76.000% 11.4911% 2.75786% 8.73324% TRACT No.7 SE 29-86-18-W6M 43103 P&NG Crown, Encal 24.220% 75.780% 12.0759% 2.92478% 9.15112% TRACT No.8 SW 29-86-18-VV6M 43103 P&NG Crown, Encal 31.420% 68.580% 0.0375% 0.01178% 0.02572% TRACT No.9 NE 29-86-18-VV6M 43103 P&NG Crown, Encal 24.220% 75.780% 6.9193% 1.67585% 5.24345% TRACT No.10 NW 28-86-18-VV6M 15790 P&NG Crown, Encal 24.000% 76.000% 17.0770% 4.09848% 12.97852% TRACT No.11 SE 33-86-18-W6M 42836 P&NG Crown, Encal 32.800% 67.200% 1.3996% 0.45907% 0.94053% TRACT No.12 SW 33-86-18-VV6M 41014 P&NG Crown, Encal 24.000% 76.000% 11.9061% 2.85746% 9.04864% TRACT No.13 SE 32-86-18-W6M 42835 P&NG Crown, Encal 40.000% 60.000% 0.7005% 0.28020% 0.42030% TRACT No.14 NW 33-86-18-VV6M 41014 P&NG Crown, Encal 24.000% 76.000% 1.3983% 0.33559% 1.06271% TRACT No.15 NE 33-86-18-W6M 42836 P&NG Crown, Encal 32.800% 67.200% 0.8434% 0.27664% 0.56676% TRACT No.16 N 33-86-18-W6M (Gas) 42836, 41014 P&NG Crown, Encal 24.000% 76.000% 1.1203% 0.26887% 0.85143% Encai means Encal Energy Ltd.

Celsius means Celsius Energy Resources Ltd. total 1 00 0000 % 24.35402% 75.64598% 100.000000% Revision No. Date: Page 1

EXHIBIT "A" -

PART II ATTACHED TO AND MADE PART OF AN AGREEMENT ENTITLED UNIT AGREEMENT - Oak North Cecil "E" Pool Unit Participations Encal Energy Ltd. 75.64598% Celsius Energy Resources Ltd. 24.35402% Total 100.0000% Revision No. Date: Page 2

• • Tract 16 N/2 of j ection 33 35 1*----"-4 25 EXHIBIT "B" to Unit Agreement — Oak North Cecil "E" Pool Unit Area R 18 31 13 • 4. 8 7 • 19 3 • • 2 S 1 2 4 • 21 • 16 15 • Oak North Cecil "E" Pool — Unit Area

EXHIBIT "D" ATTACHED TO AND MADE PART OF THE AGREEMENT ENTITLED "Unit Agreement - Oak North Cecil "E" Pool Unit" FAILURE TO MAKE ADEQUATE DISPOSITION ARRANGEMENTS 1.

Definitions In addition to the

definitions set forth in clause 101 of the Unit Agreement of which this Exhibit forms part, for the purposes of this Exhibit: (a) "Affected Substances" has the meaning ascribed thereto in paragraph 2 hereof; (b) "Market Price" means, with respect to any Affected Substances being disposed of pursuant to the provisions of this Exhibit, a sales price therefor which is not unreasonable having regard to prevailing market conditions and all other relevant factors, including, without limitation, the kind, quality and volume of such Affected Substances, the term of the sale agreement, the point of sale of such Affected Substances, and the type of transportation service available to effect delivery of such Affected Substances to such point of sale; and (c) "Non-Taking party" has the meaning ascribed thereto in paragraph 2 hereof. 2.

Disposition by Unit Operator In the event that a Working Interest Owner fails to provide timely notice of its production disposition arrangements as required by clause 705, or in the event that the disposition arrangements specified in any such notice are inadequately provided for or are otherwise unworkable or impracticable, or at any time cease to be adequately provided for or otherwise become unworkable or impracticable (the "Non- Taking Party"), the Unit Operator shall have the authority to take possession of all or any part of the Non-Taking Party's Unitized Substa rces (the "Affected Substances") and as agent for the Non-Taking Party, to dispose of such Affected Substances in one or more of the following ways, namely: D- I

• • (

a) by selling such Affected Substances together with and at the same price as the Unit Operator is receiving for its own share of Unitized Substances under an arm's length production sale contract; (

b) by selling such Affected Substances to an arm's length buyer at a Market Price, or (

c) by selling such Affected Substances to itself or an Affiliate at a Market Price, with the right to reell at a profit. 3. Term of Arrangement No agreement for the sale of Affected Substances entered into pursuant to paragraph 2 of this Exhibit shall have a term in excess of one month unless such agreement may be terminated without penalty on no more than one month's notice, or unless the Non- Taking Party has otherwise agreed in writing. 4. Costs and Fees In connection with any sale of Affected Substances pursuant to paragraph 2 hereof the Unit Operator shall be entitled to charge to the account of the Non-Taking Party: (

a) all direct processing and transportation costs incurred by the Unit Operator on behalf of the Non-Taking Party in rendering such Affected Substances suitable for sale and delivering them to the point of sale; (

b) all incremental third party and internal administrative costs incurred by the Unit Operator in connection with the disposition of such Affected Substances on behalf of the Non-Taking Party; and (

c) except in the case of a sale of Affected Substances pursuant to subparagraph 2(

c) hereof, a marketing fee equal to 2.5% of the net proceeds of sale of such Affected Substances. and for the purposes of this subparagraph (c), the phrase "net proceeds of sale" means gross proceeds of sale less costs chargeable pursuant to subparagraphs (

a) and (

b) of D- 2

this paragraph 4. Without limiting the Unit Operator's rights to recover such costs and fees from the Non- Taking Party, the Unit Operator shall be entitled to deduct all such costs and fees from any proceeds of sale, and shall have a lien against all such proceeds of sale as security for the recovery of such costs and fees. 5. Notwithstanding that the Operator may dispose of a Non-Taking Party's share of production pursuant to this agreement, the Non-Taking Party is responsible for payment of royalties pursuant to

Article VI of the Unit Agreement. D- 3

Document details

Collection	British Columbia — Orders in Council
Citation	O.C. 640/2000
Type	order_in_council
Volume / chapter	arc oic 0640 2000
Language	en
Format	pdf
Source	PROVINCIAL
Identifier	98f372e227ad5aee0ebe6740c50b1b6930f5c0b3

Source file is stored in the law ingest library (pdf).