Exhibit 10.2
-----------------------PUBLIC TRANSLATION OF
EXTENSION AGREEMENT---------------------
MEMORANDUM OF
AGREEMENT------------------------------------------------------------------------
On June 11, 2009 in the city of Neuquén,
a meeting is held between, on behalf of the Province of
Neuquén, the members of the Renegotiation Technical
Commission set up by Executive Order number 822/2008 and Resolution
of the State Secretariat of Natural Resources number 104/08, Mr.
Héctor Mendiberri, Mr. Juan Carlos Nayar, Mr. Alex Valdez,
Mr. José Gabriel López and Mr. Ricardo
Dardo Esquivel domiciled at Rioja 229 of the city of Neuquén
(hereinafter the “PROVINCE”), one party, and Petrolera
Entre Lomas S.A. (hereinafter “ PELSA”), herein
represented by Oscar Aníbal Vicente and
José Pantano, domiciled at Bouchard 680,
18 th Floor, City of Buenos Aires, Petrobras Energia
S.A., herein represented by Mr. Marcelo Daniel Sampataro, domiciled
at Maipú 1, 22 nd . Floor,
City of Buenos Aires, and APCO Argentina, herein represented by Mr.
Mr. Ernesto Alejandro Hermo, domiciled at Libertador 498, 26
th Floor , City of Buenos Aires (hereinafter all
of them jointly referred to as the “COMPANIES” and
individually as “COMPANY”), the other party, and both
jointly referred to as the "PARTIES", and ------------ WHEREAS:
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On May 23, 2008, the Executive Power of the
PROVINCE issued the Executive Order number 822/08 by means of which
the State Secretariat of Natural Resources was authorized by the
National Government to call for public bids of companies licensed
to exploit hydrocarbon areas which were interested in their
registration in the Provincial Registry of Renegotiation of
Concessions of Hydrocarbon Areas, under the applicable national and
provincial law in effect, approving the Fundamental Terms and
Conditions of said public call for bids pursuant to National Laws
number 17319, 23696, 24145 and 26197, National Executive Orders
number 1055/89, 1212/89, 1589/89, 1285/92, 1287/92, 1291/94 and
1008/94, and Administrative Decision of the Chief of the Cabinet of
Ministers of the National Executive Power number 407/97, and all
other applicable national and provincial laws.
On the other hand, the PROVINCE, pursuant to the
applicable hydrocarbon laws in effect, in addition to the
administration of the areas and concessions, is extending the
concession terms for the exploitation of the national concessions
referred to, with the purpose hereinafter stated, and essentially
with the purpose of obtaining better income on the gas and oil
production within its sovereignty, increasing the reserves and the
production as well as improving the investments in exploration, all
of this under Acts number 17319, 24145, 23696 (and norms derived
from the latter), and Act 26197, whose section 6 sets
forth: “As from the enactment of this law, the Provinces, as
Application Authority, shall exercise the functions of counterpart
of the exploration permits, hydrocarbon exploitation and
transportation concessions, having authority, among others, to:
(I) exercise fully and independently the activities related
to the control and supervision of the above mentioned permits and
concessions, and of any other kind of hydrocarbon exploration
and/or exploitation contract executed or approved by the National
Government; (II) demand the fulfillment of the legal and/or
contractual obligations applicable with reference to investments,
rational exploitation of resources, information, and payment of
concession fees and royalties; (III) order the extension of
legal and/or contractual terms; and (IV) apply the sanction
system set forth in Act number 17319 and its regulation
(sanctions consisting in fines, suspension of
the registration, lapsing of rights and any other sanction provided
for in the specifications of the fundamental terms and conditions
or in the contracts).” -------
The powers described in the previous paragraph
do not limit the rest of the powers derived from the granting
authority arising out of Act number 17319 and its regulation.
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On August 5, 2008, the COMPANIES
submitted to the PROVINCE a notice by means of which they applied
for the registration in the Provincial Registry of Negotiation of
extension of Exploitation Concessions stated in SECTION 1 herein;
they attached to said notice the documentation and information
provided for in section 4.1 of Executive Order number 822/2008. On
March 20, 2009 the PROVINCE communicated to PELSA, in its capacity
of operator of said Concessions, the beginning of the negotiation
period. As a consequence of said process, it is the intention of
the PARTIES to subscribe this MEMORANDUM OF AGREEMENT which shall
be subject to the following terms and conditions, pursuant to the
powers granted by Provincial Law number 2615.
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THEREFORE THE PARTIES AGREE
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SECTION 1 : SUBJECT MATTER
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The PARTIES agree, pursuant to National Laws
17319, 23696, 24145 and 26197, Provincial Law 2615, National
Executive Orders 1055/89, 1212/89, 1589/89, 1285/92, 1287/92,
1291/94, and 1008/94, Administrative Decision of the Chief of the
Cabinet of Ministers of the National Executive Power 407/97, and
national and provincial laws applicable to the matter, to carry out
the renegotiation provided for in Executive Order 822/08 and,
consequently, extend the original term of the Exploitation
Concessions whose oil fields are located in the territory
administered by the PROVINCE which are detailed hereinafter, under
the provisions of section 35 of Act 17319, for the term of ten
years as provided for “infra”.
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1. Entre Lomas, granted by Executive Order number
87/91 and Deed Granting Formal Title to the Concession number 64 of
the Argentine’s Office of the General Notary dated February
24, 1997, the current Concession Holder being PELSA, with maturity
date on January 21, 2016 and extended up to January 21,
2026. 2. Bajada del Palo, granted by Executive
Orders number 1769/90 and 263/92, the current Concession Holders
being,
pursuant to file number 3450-2068/07 of the
State Secretariat of Energy and Mining of the Province of
Neuquén, PELSA (73,15%), APCO
Argentina Inc. Argentine Branch (23%) and Petrobras
Energía S.A. (3,85%), with maturity date on September 06,
2015 and extended up to September 06, 2025.
SECTION 2 :REPRESENTATIONS AND GUARANTEES
The COMPANIES hereby irrevocably represent and
guarantee to the PROVINCE that: 1. They shall carry out
exploration tasks in the areas of remaining exploration that may
exist, corresponding to the licensed areas they own as mentioned in
SECTION 1 and the integral assessment of all its reservoirs, with
the purpose of tending to increase the reserves, which shall allow
an adequate level of production and horizon of said reserves on the
basis of the technical-economic viability of the reservoirs.
Moreover, in order to exploit their oil fields they shall use the
best technology available, by means of a permanent and sustained
investment, which shall allow maximizing the extraction of these
resources, under conditions of adequate economic profitability, and
financial viability, carrying out good practices for the
exploitation of the different reservoirs and keeping the necessary
care, remedy and protection of the environment.
2. The unified denomination of COMPANIES exists to the end
of expressing that each COMPANY undertakes the rights and duties
herein provided for exclusively to the extent of their specific
participation in the area covered by the exploitation concession
they own. 3. Taking into account that PELSA
sells its crude oil production almost entirely to its majority
shareholder Petrobras Energía SA, for the purposes of
calculating the Extraordinary Income, PELSA shall be considered a
company incorporated under the provisions of Act 2615.
------------------------------------------The PROVINCE hereby
irrevocably represents and guarantees to the COMPANIES that:
1. The COMPANIES shall have the peaceful use and enjoyment
of the exploitation and transportation concessions they own, for
the whole term of the concession and its
extension period, and the PROVINCE shall keep
the COMPANIES indemnified in case of any claim or action or
decision or legislative change that might affect or modify the
ownership system that applies to the areas of the concessions
within the jurisdiction of the Province of Neuquén,
undertaking the obligation to maintain the COMPANIES in full
exercise of their rights with relation to said concessions. The
PROVINCE has full powers to enter into this Memorandum of Agreement
and comply with its obligations hereunder. 2. The execution
and fulfillment of this Memorandum of Agreement on the part of the
PROVINCE does not breach nor infringe any disposition of any
applicable norm whatsoever (notwithstanding the type of norm it may
be, including but not limited to federal, provincial and municipal
norms), as well as any resolution, decision or judgment of any
national or provincial governmental and/or judicial authority. In
particular, the PROVINCE represents and guarantees that the
extension of the concessions is subject to Acts 17319 and 26197 and
that sections 95, 96 and 100 of the Constitution of the Province of
Neuquén shall not apply, all this pursuant to the normative
prevalence provided for in section 31 of the National Constitution.
3. There is no action, lawsuit, claim, complaint, audit,
arbitration, investigation or proceeding (either civil, criminal,
administrative, preliminary criminal proceeding or of another kind)
which may prevent the PROVINCE from subscribing this Memorandum of
Agreement.
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SECTION 3 :NEGOTIATION CONDITIONS OF TERM
EXTENSIONS
The PARTIES, with reference to the extension of
the exploitation concessions mentioned in SECTION 1 hereof, agree
as follows: 3.1 INITIAL PAYMENT: PELSA, as operator of the
Concessions and acting on behalf of the other COMPANIES, shall pay
to the PROVINCE or under its direction to the Trusts or Trust Funds
to be set up by the PROVINCE, as initial payment, the total amounts
indicated hereinafter, which shall be transferred to the accounts
stated by the PROVINCE: A) To the account of the concession
fee to enter the area
(renegotiation concession fee), the amount of
United States dollars 6.971.652 (u$s six million,
nine hundred and seventy one thousand, six hundred and fifty two),
with the aim of financing infrastructure works, investments under
development and projects related to production, tourism, culture,
sports, health, security, human, neighborhood, rural, regional and
environmental promotion, alternative energies, housing
improvements, divisions of land into lots with services, and
equipments, and satisfying works and credits originated in
productive and regional and social promotion investments. B)
To the account for Municipal development and promotion, the amount
of United States dollars 1.682.813 (u$s one million, six hundred
and eighty two thousand, eight hundred and thirteen), with the aim
of financing programs for the promotion of the community and the
development of municipalities, works and equipment applicable as
set forth by the provincial legislation, with the purpose of
environmental cleaning up, drinking water, treatment of waste,
electrification, laying of gas pipes, resurfacing work,
urbanization, industrial parks and others established by the act
that approves this Memorandum of Agreement. C) To the
account for the province development and promotion, the amount of
United States dollars 2.564.285 (u$s two million, five hundred and
sixty four, two hundred and eighty five), with the aim of financing
a Development Program with the purpose of ensuring territory
integration and environmental care, guaranteeing general welfare
and prosperity. (If necessary, these funds shall be intended for
financing the aims in point A). -The payments to these
accounts shall be made effective in monthly installments at the
sell exchange rate of the Banco Nación Argentina at the
close of the third day prior to the payment, according to the
following details and conditions: 3.1.1 The first
installment shall be paid within the ten first running days after
this Memorandum of Agreement becomes effective pursuant to Section
5 herein, in the total amount of United States dollars 590.474
(u$s Five hundred and ninety, four hundred and seventy four).
3.1.2 As from July 2009
inclusive, eighteen (18) equal and
successive monthly installments shall be paid becoming due within
the first ten working days of each month, each one in the amount of
United States dollars 590.460 (u$s Five hundred and
ninety, four hundred and sixty). 3.1.3 To the effect of
providing documentary evidence of the payment obligations
undertaken in this SECTION 3.1, within 72 hours as from the date on
which this Memorandum of Agreement becomes effective (pursuant to
the provisions of SECTION 5), PELSA as operator of the Concessions
and acting on behalf of the COMPANIES shall subscribe and deliver
to the order of the PROVINCE nineteen (19) promissory notes in
accordance with the provisions stated in Annex IV. Each promissory
note above mentioned shall be returned by the PROVINCE to PELSA
within five working days after the obligation they guarantee is
honored by the COMPANY. 3.2 EXTRAORDINARY
PRODUCTION ROYALTY: The COMPANIES shall pay the PROVINCE on a
monthly basis and in cash THREE PER CENT (3%) of the accountable
production of Crude Oil and Natural Gas of each one of the
exploitation concessions they own as mentioned in SECTION 1 herein,
appraised according to the provisions of section 56, subsection c)
paragraph I of Act 17319, upon the specifications set forth herein
and the deductions and adjustments provided for in National
Executive Order 1671/69 and others in accordance therewith and the
provisions of the resolutions of the Energy Secretariat 155/92,
435/04, 188/93, 73/94 and their applicable modifications and
substitutions. The payment of the Extraordinary Royalty shall begin
to accrue as from the month following the entering into force of
the Memorandum of Agreement, and the maturity dates shall operate
for the advance payment the fifteenth day of the month following
the month of settlement or the following working day if said day is
a public holiday. The final declaration shall be on the fifteenth
day of the month following the month of settlement or the following
working day if said day is a public holiday. The sell exchange rate
to be considered shall be that of the Banco Nación Argentina
at the close of
the third working day prior to the compliance
with the advance payment. In case there is a balance in
favor of the COMPANIES as Extraordinary Royalty, it shall be
deducted from future settlements.
Price of Crude Oil : in each period it is the weighted average per
volume per sale of Medanito Crude Oil in the domestic and/or
foreign market (net of export duties and/or any other tax that may
modify or replace them in the future) effectively collected by
the COMPANIES in each case, or the usual price in the domestic
market of oil produced in the PROVINCE, in case of transfer to oil
refineries controlled by the COMPANIES in each case.
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Price of Natural Gas : in each period it is the weighted average
price per volume of sales of natural gas produced by the COMPANIES
in the PROVINCE bound for the different domestic and foreign
markets (net of export duties and/or any other tax that may modify
or replace them in the future) effectively collected, which
includes, to date and by way of example, the following segments:
Residential, Commercial, GNC (compressed natural gas), Industries,
Power Stations, and others, pursuant to Resolution of the State
Secretariat number 599/07 as well as the sales carried out in the
domestic market through the regulatory mechanisms existing today,
(Permanent Additional Injection) Resolution of the State
Secretariat number 659/07.
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Transfer without Price: In case a COMPANY does not have
commercialization operations in the domestic market of hydrocarbons
produced in the province of Neuquén, the prices to be
considered for said COMPANY in order to calculate the EXTRAORDINARY
PRODUCTION ROYALTY shall be the usual prices for the month in
question in the province of Neuquén of the above mentioned
hydrocarbons in the domestic market, taking into account, among
other aspects, the quality, caloric power, place of delivery
and,
especially in the case of natural gas, the
market segment said hydrocarbon is intended for (Industrial, Power
Stations, GNC, etc.).
3.3 INVESTMENTS UNDERTAKINGS: The COMPANIES agree to
carry out a working plan, with reference to the criteria enumerated
in SECTION 2.1, which shall include investments and disbursements
for a total amount of United States dollars TWO HUNDRED AND
THIRTY-SIX MILLION SIX HUNDRED AND FORTY THOUSAND ( u$s
236,640,000) in the concessions they own as mentioned in SECTION 1,
according to the estimate of investments and disbursements
enumerated in Annex I, which is an integral part of this Memorandum
of Agreement. Said annex contains the items of investments and
disbursements for the exploitation of the oil fields projected
until the end of the extension of the exploitation concessions
mentioned in SECTION 1 hereof, which also includes an investment
undertaking in the remaining exploration area
(670.85 Km2) of United States dollars FIFTY-SIX MILLION
THREE HUNDRED AND EIGHTY THOUSAND (u$s 56,380,000), as long as
while the concessions are in force: a) they are not subject to any
total or partial reversion, b) the remaining exploration area is
not reduced due to an expansion and/or appearance of exploitation
lots, pursuant to the provisions of Annex II, which is an integral
part of this Memorandum of Agreement, in which case the
corresponding adjustments shall be made. The particular cases that
may cause the amounts previously stated to be diverted shall be
informed to the Application Authority for their consideration and
approval. 3.4 CONTROLS: The follow-up of the works,
disbursements and investments to be carried out under the
concessions mentioned in SECTION 1 shall be inspected and certified
whenever necessary in accordance with the norms in effect by the
Application Authority or other provincial entities, who shall be
entitled to demand the formation of a working group made up by the
PARTIES with the aim of making the exercise of the Application
Authority more efficient. 3.5
NEUQUÉN
BUYING: The COMPANIES, under the concessions
they own, as mentioned in SECTION 1, shall prioritize the hiring of
Labor, Suppliers and Services located in Neuquén, for which
the provincial Executive Order number 2700/00 sets forth the
minimum conditions with the purpose of sustaining permanent sources
of employment dependant on the oil industry and consolidating a
competitive local and regional market through strengthening micro,
small and medium-sized companies in Neuquén as
well as oil undertakings derived from YPF privatization and the
growth of an offer of products, goods and services which link the
range of oil workers, producers, industrialists, professionals,
businesspeople, works and service companies of all lines of
business located in the PROVINCE. However, in the case in which,
due to the specificity and/or characteristics of the works to be
done (for example, non availability or delivery within the terms
required by the operation, security for people and premises, etc.),
it is not feasible to hire Labor, Suppliers and Services located in
Neuquén, the COMPANIES shall be released from this
obligation. In that sense, this obligation shall not be binding in
those cases in which the hiring of Labor, Suppliers and Services is
more expensive than in other jurisdictions. 3.6 SOCIAL
COMPANY RESPONSIBILITY: PELSA as operator of the Concessions and
acting on behalf of the COMPANIES shall donate to the Government of
the province of Neuquén as Social Company Responsibility
while the exploitation concessions are in force the total amount of
United States dollars 1.281.250 (u$s One million, two hundred and
eighty one, two hundred and fifty) at its own expense, to
contribute within the scope of the Government of the province of
Neuquén to the development in the fields of education,
environment, health, culture, science and research, alternative
energies and community development, payable throughout the fiscal
years 2009 and 2010, in nineteen (19) equal and successive monthly
installments each one of United States dollars
67.434. (u$s Sixty seven thousand, four hundred and
thirty four). The first installment shall be paid within the
first
ten running days after this Memorandum of
Agreement becomes effective pursuant to Section 5
herein. As from July 2009 inclusive, each one of the
remaining installments shall be paid within the first ten working
days of each month. Upon the request of the Government of the
province of Neuquén at its own expense, the contributions
shall be allocated for the Trusts or Trust Funds the Government of
the province of Neuquén creates to that
end. Furthermore, the Government of the province of
Neuquén agrees to regularly inform PELSA as operator of the
Concessions and acting on behalf of the COMPANIES about the use
given to the funds invested in the above mentioned lines of
business. The sell exchange rate to be considered shall be that of
Banco Nación Argentina at the close of the third day prior
to the payment. 3.7 EXTRAORDINARY INCOME: The PARTIES agree
to make additional adjustments to the percentage provided for the
Extraordinary Production Royalty, up to a 3% for Crude Oil and/or
up to a 3% for Natural Gas, when there is a situation of
extraordinary income in Crude Oil and/or Natural Gas or for the
increase in the price effectively collected for the sale of Crude
Oil and/or Natural Gas, in accordance with the following guideline:
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The additional adjustment for Extraordinary
Income shall be made effective when the price of Crude Oil is over
the prices hereinafter stated: a. The COMPANIES shall pay on
a monthly basis and in cash ONE PER CENT in addition to the
Extraordinary Production Royalty when the price of Crude Oil
reaches or exceeds 78 u$s /bbl and up to 83 u$s /bbl, provided that
the Price of the Gas Oil exceeds 0.5546 u$s/l. b. The
COMPANIES shall pay on a monthly basis and in cash ONE POINT FIVE
PER CENT in addition to the Extraordinary Production Royalty when
the Price of the Crude Oil exceeds 83 u$s /bbl and up to 88 u$s
/bbl, provided that the Price of Gas Oil exceeds 0.5901 u$s /l.
This adjustment is not cumulative with the one mentioned in point
a) hereinbefore. c. The
COMPANIES shall pay on a monthly basis and in
cash TWO PER CENT in addition to the Extraordinary Production
Royalty when the Price of Crude Oil exceeds 88 u$s/bbl and up to 93
u$s/bbl, provided that the Price of Gas Oil exceeds 0.6257 u$s/l.
This adjustment is not cumulative with the one mentioned in points
a) and b) hereinbefore. d. The COMPANIES shall pay on a
monthly basis and in cash TWO POINT FIVE PER CENT in addition to
the Extraordinary Production Royalty when the Price of Crude Oil
exceeds 93 u$s/bbl and up to 98 u$s/bbl, provided that the Price of
Gas Oil exceeds 0.6612 u$s/l. Thi
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