Exhibit 10.1
[Bridas Energy USA, Inc. letterhead]
April 30, 2003
Cadence Resources
Corporation
P.O. Box 2056
Walla Walla, Washington
99362
Re:
Joint Exploration
Agreement
Northeast
Logansport Prospect
(the
"Prospect")
DeSoto Parish, Louisiana
Gentlemen:
This
letter when accepted by you in the space provided below, will
constitute a joint
exploration agreement
that evidences the
understandings and
obligations between Bridas Energy USA, Inc., a
Delaware corporation
("BEUSA")
and Cadence Resources
Corporation, a Utah
corporation ("Cadence"), relating to
the exploration and
development of the Prospect (this "Agreement").
1. PROSPECT LEASES
------------------
Cadence
is the owner of
leasehold working interests in the oil and gas
leases covering lands located in Sections 27, 28, 33,
34, and the E/2 of both
Sections 29 and 32, T-13-N,
R-15-W, DeSoto Parish Louisiana,
which leases
are
described in Exhibit "A-1 "
attached to this Agreement (the "Prospect Leases").
The lands covered by the
Prospect Leases are
depicted by yellow
shading on the
plat attached to this Agreement as Exhibit "A-2" (the "Plat"). Cadence
represents that, its interests in the
Prospect Leases are 100% working interest
and an approximate 80%
weighted average net revenue interest.
2. PROSPECT ASSEMBLY COSTS
--------------------------
As part of the
consideration
for Cadence's execution and return of
this
Agreement, BEUSA agrees to pay in cash to
Cadence the sum of $50,000. Such
payment shall serve as reimbursement for BEUSA's share of the total of
geological, overhead,
seismic, lease acquisition, drafting, and other
generation
costs relating to the
assembly of the Prospect. All subsequent acquisitions of
leases on lands covered by
the AMI shall be borne proportionately by the parties
hereto according to their
proportionate ownership set out below.
<PAGE>
Cadence Resources
Corporation
April 30, 2003
Page 2
3. INITIAL ASSIGNMENT
---------------------
Upon
receipt of such
consideration,
Cadence shall assign to BEUSA, by
recordable conveyance containing a special
warranty of title only, an undivided
55% leasehold working interest in the Prospect
Leases. This undivided 55%
working interest shall be subject to its proportionate share of existing
landowners' royalties and an undivided 2% overriding royalty interest to be
assigned by Cadence to the
generators of the Prospect. The reserved overriding
royalty interest shall be free of all cost and expense of drilling and
producing, but shall bear its proportionate
share of all severance, production
and windfall profits taxes. The execution of this Agreement, the payment by
BEUSA of the cash
consideration,
the execution by the
parties of the Operating
Agreement described below, and the execution by Cadence of the initial
assignment above shall occur on or before April 30, 2003 at a mutually
acceptable location (the
"Closing").
4. ACREAGE SELECTION
--------------------
Within 60 days
from the execution date of this Agreement, BEUSA shall
select, in writing furnished to Cadence, 640 acres covered by the Prospect
Leases (the "Selection
Acreage"), which shall include the location for the
first
well to be drilled on the
Prospect. The
Selection Acreage
shall consist of one
(1) regular section, two (2) adjacent half-sections, or four (4) contiguous
quarter sections, each in the
shape of a square.
5. INITIAL WELL
---------------
As additional
consideration for this Agreement, BEUSA agrees to commence
or
cause to be commenced the
drilling of a well in search of oil and/or natural gas
in commercial quantities (the "Initial Well") on the Selection
Acreage. The
Initial Well will be drilled at a location of BEUSA's choice. Drilling
operations shall be commenced on or before
150 days from the execution date of
this Agreement. The Initial Well shall be drilled in a good
and
workmanlike
manner to a depth of 10,000
feet or to the Cotton Valley formation, whichever is
the lesser depth (the
"Contract Depth"). The Initial Well shall be drilled
at
the sole risk and
expense of BEUSA through completion and, if such well is
successfully completed as a
producer of oil and/or gas in commercial quantities,
into the tanks or pipeline
connection
without cost to Cadence. Should BEUSA
elect to abandon the Initial
Well, before or after making a completion attempt,
Cadence will have the right
to assume operations thereof at its own risk for its
own account and will not
deliver the Secondary Assignment provided below.
6. SECONDARY ASSIGNMENT FOLLOWING INITIAL WELL
----------------------------------------------
In addition to the 55% working interest in the Prospect Leases,
as
conveyed by the initial
assignment in Paragraph 3, Cadence hereby agrees to
convey an additional 20%
working interest in
<PAGE>
Cadence Resources
Corporation
April 30, 2003
Page 3
the Prospect Leases when the Initial
Well has been
drilled to the
objective
depth described in paragraph 5 (the "Secondary Assignment"). The Secondary
Assignment shall be limited
to the Selection Acreage and shall be subject to its
proportionate share of existing landowners' royalties and an undivided 2%
overriding royalty interest.
The reserved
overriding royalty
interest shall be
free of all cost and
expense of drilling and producing, but shall bear its
proportionate share of all
severance, production and windfall profits taxes.
7. OPERATING AGREEMENT
----------------------
Following
completion
of the Initial Well as a producer of oil and/or
natural gas, all operations
hereunder shall be
conducted pursuant to
the terms
and provisions of the A.A.P.L.
Form 610-1989
Model Form
Operating Agreement
attached hereto as Exhibit "B" (the
"Operating
Agreement"),
naming BEUSA as
Operator. BEUSA and Cadence agree to execute
and file for record the Model Form
Recording Supplement to the
Operating Agreement and Financing Statement attached
to the Operating Agreement. Each party agrees to abide by all of the
terms,
provisions and conditions
thereof; provided, however, in the event of a conflict
between the terms of this
Agreement and those of
the Operating
Agreement,
the
terms and provisions hereof shall prevail. The percentage interests in the
Prospect Leases to be owned by the parties
to this Agreement
are set forth
as
follows:
Selection Acreage
-----------------
At closing
BEUSA
55%
Cadence
45%*
---------
100%
Upon Designating Selection
Acreage
BEUSA
75%
Cadence
25%*
---------
100%
All Other Acreage
-----------------
At Closing and
Thereafter
BEUSA
55%
Cadence
45%
---------
100%
<PAGE>
Cadence Resources
Corporation
April 30, 2003
Page 4
* Cadence's interest in
the Initial Well shall be a carried working interest.
As such, Cadence shall not pay or bear any costs related to the
exploration,
drilling, testing,
equipping,
completing, and
producing the
Initial Well,
and that such
interest shall be cost-free to Cadence as
to
the oil and
condensate produced
through the initial deposit of such oil or
condensate
into the tanks,
and, as to gas
produced, through the initial
delivery
of gas to the
purchaser of same; provided, however, (i) that
Cadence
shall have to pay and bear its
proportionate
share of the
costs
related to the
operation and
maintenance
of the Initial Well
which occur
subsequent
in time to the initial
deposit of oil or
condensate or initial
delivery of such
gas and (ii) that Cadence shall also have to pay and
bear
its
proportionate share of the costs related to the recompleting,
reworking
or plugging back
of the Initial Well once completed as a producer of oil
or
gas, as well as
all of the costs
related to the drilling and producing of
any wells
subsequent to the Initial Well.
8. SUBSTITUTE WELL
------------------
In the event the
Initial Well fails to reach Contract Depth, BEUSA shall
be
entitled to notify Cadence of
the drilling of a "Substitute Well." A Substitute
Well shall be any well
drilled as an attempt
to reach Contract
Depth, in the
event the Initial Well failed to reach Contract Depth. Such notice must be
submitted in writing to
Cadence within
thirty (30) days from
the date that the
Initial Well is abandoned.
The Substitute
Well shall be drilled
under the same
terms and conditions
applicable to the Initial Well.
9. NONPERFORMANCE
-----------------
Should
BEUSA fail or refuse to drill the Initial Well in the time and
manner as provided
above (subject to standard regional conditions affecting
ability to gain access to the
drillsite with a
suitable drilling
rig), BEUSA
shall forfeit all rights only
in the Prospect Leases
and this Agreement
shall
terminate. BEUSA agrees to reconvey to Cadence all
of its working
interest in
the Prospect Leases, free and clear of any encumbrances or burdens created
subsequent to its acquisition
of such working interest.
10. AREA OF MUTUAL INTEREST PROVISIONS
--------------------------------------
The Plat
attached hereto as Exhibit "A-2" contains a description of an
area
which shall be an Area of Mutual
Interest (sometimes the "AMP") between the
parties hereto. The AMI is delineated on the Plat by a heavy, bold-faced
boundary line and is intended to be located one-half mile from all of the
outer-most boundaries of the Prospect
Leases. If any party hereto acquires a
leasehold, mineral or royalty
interest, farmout, seismic and/or drilling option,
including an extension or
renewal of a Prospect Lease subject to this Agreement,
either directly or i
