Exhibit 10.1
LARIAT SERVICES,
INC.
P.O BOX 10209
AMARILLO, TX
79116-0209
October 20, 2005
Clayton Williams Energy, Inc.
VIA FAX
Attention: Mel Riggs
6 Desta Drive
Suite 6500
Midland, Texas 79705
Re: Drilling Rig Joint Venture (LARCLAY,
LLC)
Dear Mel:
This letter, when executed by Clayton Williams
Energy, Inc. (“CWEI”), will constitute a binding
agreement between Lariat Services, Inc. (“Lariat”) and
Williams to form an entity LARCLAY, LLC (“LARCLAY”) to
acquire at least 12 drilling rigs. It is contemplated that
the parties will execute further agreements, including Regulations
to LARCLAY, an Operating Agreement between LARCLAY and Lariat,
which will operate the equipment, and other necessary documents to
consummate the transaction.
1.
THE ENTITY
Though we may decide to acquire additional
equipment, we will form an entity to acquire drilling rigs from the
manufacturer in China. The name of the entity will be
LARCLAY, LLC. The ownership will be 50% CWEI and 50% Lariat.
The sole relationship of the parties is one of members in
LARCLAY. Except as set forth herein, neither party shall owe
any duty to the other for business opportunities arising in
connection with the drilling rigs, such as for drilling, exploring
or operating. !
2.
THE
EQUIPMENT
Although additional equipment may subsequently
be acquired, LARCLAY shall initially acquire four 1,300 hp, six
1000 hp and two 2000 hp drilling rigs. Eight of the
rigs will have 5,000 psi BOPs, and four of the rigs will have
10,000 psi BOPs. The rigs shall be ordered for construction
through Linggas, Limited and are expected to be delivered in
Houston, within six to twelve months from order. Attached
hereto as schedule 1 is the preferred order of construction of
rigs, however the manufacturing process may dictate the order the
equipment is delivered. Once the rigs are delivered in the
United States, the parties recognize that the additional work will
be necessary to assemble and outfit them to make ready for use,
including the installation of motors, electrical works,
plumbing,
and mud pumps, which assembly and installation
may be performed at the delivery point or such other place as is
reasonable under the circumstances. The parties understand
that this additional work may take as much as thirty days to
complete depending on the circumstances. Lariat shall be
responsible with consultation with CWEI for the drafting and
negotiation of the contracts for the construction of the rigs, the
decisions with respect to the equipping and outfitting of the rigs,
inspection during the construction phase and arranging shipment to
the states. Costs incurred by Lariat in connection with the
foregoing shall be borne proportionately by Lariat and CWEI.
It is understood that concurrently with the acquisition of the rigs
contemplated herein, Lariat may acquire for its own benefit rigs to
be used in the conduct of its business.
3.
DEPLOYMENT AND PRICING OF THE
EQUIPMENT
It is contemplated that the equipment will be
utilized primarily on CWEI owned or operated properties or
prospects. The equipment will be priced at not less than
current market rates, and subject to changes in the market;
provided if long term contracts are required by the lender in order
to obtain financing for the rigs, any such contracts thus executed
shall not be subject to the foregoing. Initially it is
expected that the two 2000HP rigs and two of the 1000HP rigs
will go to the Northern Louisiana, one of the 1000 HP rigs might be
deployed to Colorado, depending upon delivery, one of the 1000HP
rigs might be deployed in the Giddings area of Texas and the
remainder of the rigs are to be deployed to West Texas. CWEI
and its affiliates, shall have a preference for rig availability
for drilling of its prospects; provided that such preference shall
not result in a breach of a drilling contract with a third
party. This preference shall include arrangements for the use
of the rig to earn an interest in a well or lease. There
shall be no duty of the party having such arrangement to offer to
the other party. At delivery of each rig, CWEI shall
provide Lariat a rig utilization schedule showing the anticipated
wells to be drilled with such rig during the following three
months. The schedule shall be updated monthly, or more often if
necessary such that necessary arrangements can be made for the
efficient movement of the rig. CWEI shall notify Lariat
promptly upon learning that a CWEI location will not be available
upon the completion of the well then being drilled by such well,
and shall give the estimated date when such the rig shall be
needed. In such event, Lariat shall attempt to contract the
rig out to a third party for the duration of time that the rig
shall not be needed by CWEI
4.
FUNDING THE PARTNERSHIP AND
FINANCING THE EQUIPMENT
Other than funding the formation of LARCLAY,
neither party shall be required to make any additional capital
co
