HomeMy WebLinkAbout870296.tiff RESOLUTION
RE: APPROVE REQUEST OF SUNSHINE VALLEY PETROLEUM CORPORATION TO
WAIVE BIDDING PROCEDURE CONCERNING OIL AND GAS LEASE AND
ACCEPT OFFER TO LEASE MINERAL ACRES
WHEREAS, the Board of County Commissioners of Weld County,
Colorado, pursuant to Colorado statute and the Weld County Home
Rule Charter, is vested with the authority of administering the
affairs of Weld County, Colorado, and
WHEREAS, Sunshine Valley Petroleum Corporation has requested
that the bidding procedure be waived concerning an Oil and Gas
Lease on the following described mineral acres:
A tract of land located in the SWa of Section
1 , Township 5 North , Range 65 West of the 6th
P.M. , Weld County, Colorado, more fully
described in Exhibit A of the lease, and
containing 0 . 737 acres , more or less
WHEREAS, after review, the Board found that Sunshine Valley
Petroleum Corporation did show good cause for waiving the bidding
procedure on said Oil and Gas Lease, and
WHEREAS , Sunshine Valley Petroleum Corporation is offering to
lease the above described mineral acres , containing 0 . 737 mineral
acres , more or less, and
WHEREAS, the Board finds that the lease offer from Sunshine
Valley Petroleum Corporation in the amount of TWO HUNDRED AND
NO/100 DOLLARS ($200 . 00) , is acceptable, with the further terms
and conditions being as stated in said Oil and Gas Lease , a copy
being attached hereto and incorporated herein by reference.
NOW, THEREFORE, BE IT RESOLVED by the Board of County
Commissioners of Weld County, Colorado, that the request of
Sunshine Valley Petroleum Corporation , 950 Stafford, Casper,
Wyoming 82609 , to waive the bidding procedure on an Oil and Gas
Lease concerning the 0. 737 mineral acres , be , and hereby is ,
approved.
BE IT FURTHER RESOLVED by the Board that the offer of
Sunshine Valley Petroleum Corporation , as hereinabove stated , be,
and hereby is , accepted.
870296
T/ 7S
Page 2
RE: WAIVE BID - SUNSHINE VALLEY PETROLEUM CORPORATION
The above and foregoing Resolution was , on motion duly made
and seconded, adopted by the following vote on the 22nd day of
April , A.D. , 1987 .
`�� BOARD OF COUNTY COMMISSIONERS
ATTEST: a A !"" WELD CouwLyx OLORADO
Weld County Jerk and Recorder •
�'
and Clerk to the Board Gor ac , irman
• u C.W. Kirb , Pro em
Ceputy County erk
EXCUSED
APPROVED AS TO FORM: Gene R. Brantner
C:11.7C7 42 EXCUSED
Jacqu. ' ne boson
„h /
County Attorney
Frank Yamaguchi
870296
Ati20972.74
- - WELD COUNTY OIL AND GAS LEASE
Containing 0.737 acres, more or less;
Containing 0.737 net mineral acres, more or less:
THIS LEASE AGREEMENT, dated this 22nd day of April , 19 87 , made and entered
into by and between WELD COUNTY, COLORADO, a political subdivision of the STATE OF COLORADO, acting by and
through the BOARD OF COUNTY COMMISSIONERS OF THE COUNTY OF WELD, for its respective interests, c/o BOARD OF
O COUNTY COMMISSIONERS, WELD COUNTY CENTENNIAL CENTER, 915 10TH STREET, GREELEY, CO 80631, hereinafter called
o U Lessor, and:
o Sunshine Valley Petroleum Corporation
O 950 Stafford
Casper, WY 82609
ahereinafter called Lessee:
CD W
CD $
O % WITNESSETH
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pWHEREAS, said Lessee has applied to Lessor for an oil and gas lease covering the land herein described,
and has paid a filing foe in the a.:ount of $10:00, plus a bonus consideration of $200.00 y..e mineral
rn a -sere; fixed by Lessor as esal- consideration for the granting of this lease, and Lessee agrees to
pay an annual rental of $0.74.. .ry , computed at the rate of $ 1.00 , per mineral acre or
fraction thereof per year.
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WHEREAS, all the requirements relative to said application have been duly complied with and said
eo U application has been approved and allowed by Lessor;
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N H THEREFORE, in consideration of the agreements herein, on the paid, kept
� W gr part of Lessee to be aid ke and
operformed, Lessor does lease exclusively to lessee for the sole and only purpose of drilling for,
fk development of and production of oil and gas, or either of them, thereon and therefrom with the right to own
all oil and gas so produced and saved therefrom and not reserved as royalty by Lessor under the terms of
N W this lease, together with rights-of-way, easements and servitudes for pipelines, telephone and telegraph
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r lines, tanks and fixtures for producing and caring for such product, and housing and boarding employees, and
N �z any and all rights and privileges necessary for the exploration andoperation of said land for oil andgas,
8h P R P
the following described land situated in the County of Weld, State of Colorado, and more particularly
>4 described as follows:
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DESCRIPTION OF LAND SECTION TOWNSHIP RANGE
ti ti See Exhibit A attached hereto and, by this reference, made a part hereof.
W W TO HAVE AND TO HOLD said land, and all the rights and privileges granted hereunder to Lessee until the
hour of twelve o'clock noon on the 22nd day of April , 19 90 as primary term, and so long
thereafter as oil and gas, or either of them, is produced in paying quantities from said land or Lessee is
diligently engaged in bona fide drilling or reworking operations on said land, subject to the terms and
conditions herein. Drilling or reworking operations shall be deemed to be diligently performed if there is
no delay or cessation thereof for a greater period than sixty consecutive days unless an extension in
writing is granted by Lessor; provided that such drilling or reworking operations are commenced during said
primary term or any extension thereof or while this lease is in force by reason of production of oil and gas
or either of them, or that such reworking is commenced within sixty days upon cessation of production for
the purpose of re-establishing the same, and provided further that such production is commenced during such
(Rev. 11/86)
870296
primary term or any extension thereof, or while this lease is in force by reason of such drilling or
reworking operations or other production.
EXPLORATION - Lessor reserves the right to conduct exploration on the leased land provided such
exploration does not interfere with rights granted herein.
In consideration of the premises, the parties covenant and agree as follows:
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1. RENTAL - If this lease is extended for an additional term as provided for in the EXTENSION
N O paragraph hereof, Lessee shall during such extended period pay to lessor an annual rental at double the rate
U above specified for the land covered hereby. The rental -in effect at the time production is established
Ca shall not be increased due to the term of this lease being extended by such production. Rentals set at the
o44 time of established production shall be paid during the remaining life of this lease, annually, in advance,
on or before each anniversary date hereof. There shall be no refund of unused rental.
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O 2. ROYALTY - Lessee shall account for any and all substances produced on the leased land and Lessee
o• shall pay to Lessor as royalty, in addition to the rentals provided, but except for products used on the
leased land, unavoidably lost or flared on the leased land, with approval of Lessor, the following:
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„ ,b (a) On oil, 1/11% of the oil produced and saved from the leased land.
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C4' At the option of Lessor, and with sixty (60) days' notice to Lessee, Lessor way take its
r a royalty oil in kind, in which event Lessee shall deliver such royalty oil to Lessor on the leased land,
co U free of cost or deduction, into the pipelines or storage tanks designated by Lessor, but Lessee shall
r 2 not in such case be required to provide free tankage for any such oil for a longer period than one
• jmonth after the same is run into tanks. With sixty (60) days' notice to Lessee, Lessor may cease
'd' H taking oil royalty in kind. When paid in cash, the royalty shall be calculated upon the fair market
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C4 value of the oil at the well which shall not be deemed to be less than the price actually paid to
Lessee at the well by the purchaser thereof; and in no event shall the royalties be based upon a market
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r W value at the well less than the posted price in the field for such oil, or in the absence of a posted
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r price in the field for such oil, upon a market value at the well less than the prevailing price
0 2 received by other producers in the field for oil of like grade and gravity at the time such oil is run
< into pipelines or storage tanks.
U C4 (b) On gas, including casinghead gas or other gaseous substance, 12'.44 of the fair market
A: value at the well or of the price received by Lessee at the well, whichever is greater, of all gas
a' v produced and sold from the leased land or utilized off the lend by Lessee. A copy of all contracts for
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sale of gas shall be furnished to Lessor. Where gas is sold under contract that has been approved by
Lessor, the fair market value of such gas for determining the royalties payable hereunder shall be the
Q7 G4 price at which such gas is sold under such contract. No approval by Lessor of the terms of any such
-- agreement shall operate to make Lessor a party thereto or obligate it thereunder in any way. At the
option of Lessor, and with sixty (60) days' notice to Lessee, Lessor may take its royalty in kind.
With sixty (60) days' notice to Lessee, Lessor may cease taking gas royalty in kind.
(c) All costs of marketing the oil and/or gas produced shall be borne by Lessee and such costs
shall not directly or indirectly reduce the royalty payments to Lessor. Except that marketing costs
for Lessor's in-kind royalty shall be borne by Lessor.
(d) If Lessor owns a lesser interest in the oil and gas deposits of the above-described land than
the entire and undivided fee simple estate, then the royalties and rentals herein provided shall be
paid to Lessor only in the portion which its interest bears to the whole and undivided fee, but no
refund of any bonus consideration shall be made by Lessor hereunder.
870296
(Rev. 11/86)
3. RECORDS - Lessee agrees to keep and to have in possession complete and accurate books and records
showing the production and disposition of any and all substances produced on the leased land and to permit
Lessor, at all reasonable hours, to examine the same, or to furnish copies of same to Lessor upon request
along with purchaser's support documentation. Lessor will not be unreasonable with requests. All said
books and records shall be retained by Lessee and made available in Colorado to Lessor for a period of not
less than five years.
4. MEASUREMENTS - All production shall be accurately measured using standards established by the
American Gas Association (AGA) and/or the American Petroleum Institute (API) and all measuring devices shall
be tamperproof as nearly as possible. 011 royalties due within the terms of this lease shall be calculated
on actual and accurate measurements within API standards unless a different means of measurement, subject to
Lessor's approval, is provided.
5. PAYMENTS & REPORTS - All payments and reports due hereunder shall be made on or before the day
such payments and reports are due. Nothing in this paragraph shall be construed to extend the expiration of
the primary term hereof.
Oil royalty payments and supporting documents shall be submitted prior to the last day of the
month following each month's sale of production, and gas royalty payments and supporting documents shall be
submitted prior to the last day of the second month following each month's sale of production.
All payments shall be made by cash, check, certified check or money order. Payments having
restrictions, qualifications, or encumbrances of any kind whatsoever shall not be accepted by Lessor. A
penalty for a late payment shall be charges as set forth in the PENALTIES paragraph herein.
6. PENALTIES - A penalty shall be imposed for, but not limited to late payments, improper payments,
operational deficiencies, violation of any covenant of this lease, or false statements made to Lessor.
Penalties shall be determined by Lessor unless otherwise provided for by law and may be in the form of, but
not limited to, interest, fees, fines, and/or lease cancellation. A penalty schedule shall be prepared by
Lessor and shall become effective immediately after public notice. Said schedule may be changed from time
to time after public notice.
7. LAW - The terms and conditions of this lease shall be performed and exercised subject to all laws,
rules, regulations, orders, local ordinances or resolutions applicable to and binding upon the
administration of lands and minerals owned by the County of Weld, and to laws, rules and regulations
governing oil and gas operations in Colorado. Violations shall result in penalties as provided for by law
or as set forth in the aforementioned schedule or shall, at the option of Lessor, result in default as
provided hereinafter.
8. SURRENDER - Lessee may at any time, by paying to Lessor all amounts then due as provided herein,
surrender this lease insofar as the same covers all or any portion of the land herein leased and be relieved
from further obligations or liability hereunder with respect to the land so surrendered; provided that no
partial surrender or cancellation of this lease shall be for less than contiguous tracts of approximately
forty (40) acres or Governmental lot corresponding to a quarter-quarter section; provided further that this
surrender clause and the option herein reserved to Lessee shall cease and become absolutely inoperative
immediately and concurrently with the institution of any suit in any court of law by Lessee, Lessor or any
assignee of either to enforce this lease, or any of its terms expressed or implied. In no case shall any
surrender be effective until Lessee shall have made full provision for conservation of the leased products
and protection of the surface rights of the leased land.
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F 1195 MARY ANN FEUERSTEIN CLERK & RECORDER WELD CO, CO
870296
(Rev. 11/86)
9. ASSIGNMENTS -
(a) Lessee, with prior written consent of Lessor, shall have the right to assign the entire
leasehold interest of said Lessee in all or part of the land covered hereby, but not less, however,
than contiguous tracts of approximately forty (40) acres or Governmental lot corresponding to a
quarter-quarter section for any partial assignment, and for approval of such assignment Lessor shall
make an assignment charge in an amount to be determined by Lessor. Prior to written approval by Lessor
of assignment of this lease, Lessee (assignor) shall not be relieved of its obligations under the terms
and conditions herein. An assignment shall not extend the term of this lease.
(b) If any assignment of a portion of the land covered hereby shall be approved, a new lease
shall be issued to the assignee covering the assigned land, containing the same terms and conditions as
this lease, and limited as to term as this lease is limited, and the assignor shall be released and
discharged from all further obligations and liabilities as to that portion so assigned.
(c) Lessee shall notify Lessor of all assignments of undivided percentage or other interests.
Said interests will not be recognized or approved by Lessor, and the effect of any such assignments
will be strictly and only between the parties thereto, and outside the terms of this lease: and no
dispute between parties to any such assignment shall operate to relieve Lessee from performance of any
terms or conditions hereof or to postpone the time therefor. Lessor shall at all times be entitled to
look solely to Lessee or his assignee shown en its books as being the sole owner hereof, and for the
sending of all notices required by this lease and for the performance of all terms and conditions
hereof.
(d) Although not binding on Lessor, all instruments of every kind and nature whatsoever affecting
this lease should be filed with the Lessor.
10. OVERRIDING ROYALTY - Any and all reservations or assignments or overriding royalties shall be
subject to approval by Lessor. The total of said overriding royalties shall not exceed five percent (5%),
including any overriding royalty previously provided for unless production exceeds a monthly average of
fifteen (15) barrels per day or ninety thousand cubic feet of gas per day (90 MCF/D). In the event that
production drops to this amount or less, any overriding royalties which exceed five percent (5%) may be
suspended. Lessor's approval of a reservation or assignment of an overriding royalty shall not bind Lessor
for payment of said overriding royalty and shall not relieve Lessee of any of its obligations for payment of
royalties to Lessor as provided by ROYALTY paragraphs herein.
11. OFFSET WELLS - Lessee agrees to protect the leased land from drainage by offset wells located on
adjoining lands not owned by Lessor, when such drainage is not compensated for by counter-drainage. It
shall be presumed that the production of oil and gas from offset wells results in drainage from the leased
land, unless Lessee demonstrates to Lessor's satisfaction, by engineering, geological, or other data, that
production from such offset well does not result in such drainage, or that the drilling of a well or wells
on the leased land would not accomplish the purposes of protecting the deposits under the leased land.
Lessor's decision as to the existence of such drainage shall be final, and Lessee shall comply with Lessor's
order thereon or surrender this lease as to any such undeveloped acreage as designated by Lessor.
12. DEVELOPMENT - Upon discovery of oil and gas or either of them on the leased land, Lessee shall
proceed with reasonable diligence to develop said land at a rate and to an extent commensurate with the
economic development of the field in which the leased land lies.
13. POOLING CLAUSE - Lessee may at any time or times pool any part or all of said land and lease or
any stratum or strata with other lands and leases, stratum or strata, in the same field so as to constitute
a spacing unit to facilitate an orderly or uniform well-spacing pattern or to comply with any order, rule,
or regulation of the State or Federal regulatory or conservation agency having jurisdiction. Such ooling
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(Rev. 11/86) F 1196 MARY ANN FEUERSTEIN CLERK & RECORDER WELD CO, CO
shall be accomplished or terminated by filing of record a declaration of pooling, or declaration of
termination of pooling, and by mailing or tendering a copy to Lessor, or to the depository bank. Drilling
or reworking operations upon or production from any part of such spacing unit shall be considered for all
purposes of this lease as operations or productions from this lease. Lessee shall allocate to this lease
the proportionate share of production which the acreage in this lease included in any such spacing unit
bears to the total acreage in said spacing unit.
14. UNITIZATION - COMMUNITIZATION - In the event Lessor permits the land herein leased to be included
within a communitization or unitization agreement, the terms of this lease may be deemed to be modified to
conform to such agreement. When only a portion of the land under this lease is committed by an agreement,
Lessor may segregate the land and issue a separate lease for each portion not committed thereunder; the term
of such separate lease shall be limited as to the original term of this lease. The terms of the lease on
that portion remaining in the unit shall be deemed to be modified to conform to such agreement.
Nonproducing leases shall terminate on the first anniversary date of the lease following the termination
date of the unit or part thereof modifying the lease, but in no event prior to the end of the primary term
of the lease or the extension term of the lease.
15. PRODUCTION - Lessee shall, subject to applicable laws, regulations and orders, operate and produce
all wells upon the leased land so long as the same are capable of producing in paying quantities, and shall
operate the same so as to produce at a rate commensurate with the rate of production of wells on adjoining
lands within the same field and within the limits of good engineering practice, except for such times as
there exist neither market nor storage therefor, and except for such limitations on or suspensions of
production as may be approved in writing by Lessor. Lessee shall be responsible for adequate site security
on all producing properties.
16. SNOT-IN WELLS - If Lessee shall complete a well on the leased land productive of gas and Lessee is
unable to produce such gas due to a lack of suitable market therefor, Lessor ray grant Lessee suspension of
his obligations to produce hereunder until a suitable market for such gas can be found, and during any such
suspension period, it shall be deemed that gas is being produced hereunder in paying quantities. Except,
however, that beginning on the anniversary date next, of the year of an extension of the lease by reason of
a shut-in well, Lessee shall pay to Lessor a shut-in royalty equal to $2 per acre of the lease per annum in
addition to the annual rental. The minimum amount of such shut-in royalty payment shall be $240. Each
year's shut-in royalty shall be forfeited to Lessor except for the shut-in royalty paid for the year during
which the well begins production. The maximum extension of the lease, due to the existence of a shut-in
well, shall be five years beyond the extension term as described in the EXTENSION paragraph herein. The
granting of any further extensions shall be at the sole option of Lessor.
17. OPERATIONS - No exploration, drilling or production operation, including permanent installations,
shall be within 200 feet of any existing building or other improvement, including water well or reservoir,
without the written permission of the owner of said improvements. Lessee shall keep a correct log of each
well drilled hereunder, showing by name or description the formations passed through, the depth at which
each formation was reached, the number of feet of each size casing set in each well, where set, and the
total depth of each well drilled. Lessee, within thirty (30) days after the completion or abandonment of
any well drilled hereunder, shall file in the office of Lessor a complete and correct log of such well,
together with a copy of the electric log and the radioactivity log of the well when such logs, or either of
them, are run; and also a copy of all drill stem test results, core records and analyses, record of
perforations and initial production tests, if any. If any of the information required by this paragraph is
contained in reports required to be filed with the Oil and Gas Conservation Commission of Colorado, the
requirements of this paragraph for such information may be satisfied by such filing with said Commission,
except for copies of the reports as are required by the following paragraph, and provided that all such
information is immediately available to Lessor. Any proprietary information so submitted shall not be
subject to public inspection under Colorado law.
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70296
Lessee shall bury pipelines below plow depth. Lessee shall set and cement sufficient surface
casing to protect the fresh water wells of the area.
18. NOTIFICATION - Lessee shall notify Lessor and the surface lessee or surface owner of the location
of each drill site at least two weeks prior to commencing drilling operations thereon. Lessee shall notify
Lessor before commencing to plug and abandon any well by copy of Lessee's request for approval or sundry
notice of intent to plug and abandon.
19. BONDS - Lessee shall be liable for all damages to the surface of the land, livestock, growing
crops, water wells, reservoirs, or improvements caused by Lessee's operations on said land. No operations
shall be commenced on the land hereinabove described unless and until Lessee shall have filed a good and
sufficient bond with Lessor, in an amount to be fixed by Lessor, to secure the payment for such damages as
may be caused by Lessee's operations on said land and to assure compliance with all the terms and provisions
of this lease, the laws of the State of Colorado, and the rules and regulations thereto appertaining. A
bond may be held in effect for the life of production of any well.
20. SETTLEMENT - Lessee shall not remove any machinery, equipment or fixtures placed on said land,
other than drilling equipment, nor draw the casing from any well unless and until all payments and
obligations currently due Lessor under the terms of this lease shall have been paid or satisfied. Any
machinery, equipment or fixtures left on this land for a period of more than six (6) months after the
expiration hereof, shall automatically become the property of Lessor.
21. OTHER DISCOVERY - Should Lessee discover any valuable products other than oil and gas, on or
within the leased land, Lessee shall within seven (7) days report such discovery to Lessor, in which event
Lessee and Lessor may negotiate a provision for production of such discovery.
22. WATER - This lease does not grant permission, express or implied, to Lessee for water exploration,
drilling, or establishing water wells without the written permission of the surface owner. If Lessor is the
surface owner, said permission shall not be unreasonably withheld. If Lessee desires to establish or
adjudicate any water right for beneficial use on the leased land, any such adjudication or application shall
be in the name of Lessor if Lessor is the surface owner. The same shall apply to any nontributary water
rights established on the leased land which may be put to beneficial use off said land.
23. DEFAULT - Upon failure or default of Lessee to comply with any of the terms and provisions hereof
including but not limited to the failure to comply with laws, rules and regulations governing Colorado oil
and gas operations, Lessor is hereby authorized upon notice and hearing, as hereinafter provided, to cancel
this lease as to all of the leased land so claimed or possessed by Lessee hereunder. In the event of any
such default or failure, Lessor shall, before making any such cancellation, send to Lessee by certified
mail, to the post office address of said lessee as shown by the records of Lessor, a notice of intention to
cancel for such failure or default, specifying the same, stating that if within thirty (30) days from the
date of mailing said notice, Lessee shall correct such failure or default, no cancellation will be made. If
such failure or default is not corrected within thirty (30) days after the mailing of such notice, and if
Lessee does not request a hearing on such notice within thirty (30) days, this lease will terminate and be
cancelled by operation of this paragraph without further action by Lessor, or further notice to Lessee.
24. EXTENSION - If Lessee fails to make discovery of oil and gas, or either of them, in paying
quantities during the primary term hereof, or during drilling operations commenced during the primary term
hereof, Lessee may make written application to Lessor for an extension of this lease for a term equal to the
primary term as to all of the mineral acres covered hereby (excluding any mineral acres theretofore
surrendered as in the SURRENDER Paragraph provided, or assigned as in the ASSIGNMENTS Paragraph provided).
The granting of such extension shall be at the sole option of Lessor at double the rental for the primary
pr
"
term hereof. t.. e Agau6i
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25. BOLD HARMLESS - Lessee shall indemnify Lessor against all liability and loss, and against all
claims and actions, including the defense of such claims or actions, based upon or arising out of damage or
injury, including death, to persons or property caused by or sustained in connection with operations on this
leased land or by conditions created thereby, or based upon any violation of any statute, ordinance, or
regulation.
26. CONDEMNATION - If the leased land shall be taken in any condemnation proceeding, this lease shall
automatically terminate as of the date of taking. The award for such condemnation shall be paid to Lessor,
except for any specific award(s) paid to Lessee for severed oil and gas reserves, in which event
none of such specific award(s) shall be paid to Lessor in lieu of royalty lost by virtue of the
condemnation. Improvements shall be removed by Lessee per terms in the SETTLEMENT Paragraph herein. If
only a portion of the leased land is taken by condemnation, Lessor may, at its option, terminate this lease
or terminate only that portion of the lease so taken.
27. ERRORS - Every effort is made by Lessor to avoid errors in all procedures including but not
limited to auction listings and lease preparation. Lessor shall not be liable for any inconvenience or loss
caused by errors which may occur. Lessee shall notify Lessor immediately upon discovery of any errors or
discrepancy whatever.
28. ARCHAEOLOGY - Lessee shall not destroy, disturb, mar, collect, remove or alter any prehistoric or
historic resources of any kind on Weld County lands as provided by law. These resources include but are not
limited to all artifacts of stone, wood or metal, pictographs, structures, and bones. A discovery of
anything of prehistoric or historic nature shall be reported to Lessor or the State of Colorado
Archaeologist immediately.
29. DEFINITIONS -
(a) "Gas" as used herein shall mean all gases (combustible and noncombustible), including but not
limited to all gaseous hydrocarbons, gaseous compounds, carbon dioxide, and helium.
(b) "Oil and gas" as used herein shall include all substances produced as by-products therewith,
including but not limited to sulfur.
(c) "Paying quantities" as used herein shall mean and refer to quantities of oil and gas or of
either of them sufficient to pay for the current cost of producing same.
30. HEIRS AND ASSIGNS - The benefits and obligations of this lease shall inure to and be binding upon
the heirs, legal representatives, successors or assigns of Lessee; but no sublease or assignment hereof, or
of any interest herein, shall be binding upon Lessor until the same has been approved by Lessor as explained
in the ASSIGNMENTS' paragraph provided.
•
31. WARRANTY OF TITLE - Lessor does not warrant title to the leased premises, but it shall, upon
request, allow Lessee access to such abstracts and other title papers as it has in its files. There shall
be no obligation on Lessor's part to purchase new or supplemental or other title papers nor to do any
curative work in connection with title to the subject lands. All abstracts of title, whether new or
supplementary, obtained by Lessee and covering the subject lands shall become the property of and be
delivered to Lessor after Lessee has completed its title examination and curative work, subject, however, to
the right of Lessee to use such abstracts upon request at any time during the term of the Lease.
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IN WITNESS WHEREOF, lessor has hereunto signed and caused its name to be signed by the BOARD OF COUNTY
COMMISSIONERS OF THE COUNTY OF WELD, with the seal of the office affixed, and Lessee has signed this
agreement, the day and year first above written.
BOARD OF COUNTY COMMISSIONERS
WELD COUNTY, C LO
ATTEST:
5,10 0 (Ai' ' COMMISSIONER BRANTNER EXCUSED
Weld County Cl$rRi .., of kr
and Clerk to t er _
- COMMISSIONER JOHNSON EXCUSED
4i*4K_Thf
a // 4
LESSEE: SUNSHINE VALLEY PETROLEUM CORPORATION
By: _% i°',-'
William G. Crews, Attorney-in-Fact
STATE OF COLORADO )
) SS.
COUNTY OF WELD )
The foregoing instrument was acknowledged before me this 22nd day of April ,
19 87 by William G. Crews as Attorney—in—Fact for Sunshine Valley Petroleum Corporation.
Witness my hand and official seal.
My Cpmmis�s'lo4 Expires: �_ 3( 1990
\. 11110.- . /}
' `do- c�. o_sl. .011 D S ein-i- a-�,r�
Notary Public
1rc........ ••'5'
C,= COQ
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F 1200 MARY ANN FEUERSTEIN CLERK & RECORDER WELD CO, CO
(Rev. 11/86) 870296
EXHIBIT A
A. Description of Lands Covered:
Township 5 North, Range 65 West, 6th. P.M.
Section 1: That portion of the following described tract contained in
the "NzSW*:
A tract of land located in the SW4 of Section 1, Township 5
North, Range 65 West of the 6th P.M. , Weld County, Colorado,
lying North of the Ogilvy Ditch as the same is now
constructed, and being more particularly described as
follows: Beginning at the North Quarter Corner of said
Section 1 and considering the North-South centerline of
Section 1 as bearing South 00°33'14" West, with all other
bearings contained herein being relative thereto; Thence
South 00°33'14" West, along the North-South centerline of
said Section 1, 3175.57 feet to a point on the southerly
right-of-way line of Colorado State Highway No. 263, said
point being the True Point of Beginning; Thence South
78°10'11" West, along the southerly right-of-way line of
Colorado State Highway No. 263, 92.30 feet; Thence South
02°58'31" East, 394.35 feet to a point on the approximate
northerly right-of-way line of the Ogilvy Ditch as the same
is now constructed; Thence South 76°02'33" East, along the
approximate northerly right-of-way line of the Ogilvy Ditch
67.72 feet to a point on the North-South centerline of said
Section 1; Thence North 00°33' 14" East, along the North-
South Centerline of said Section 1, a distance of 429.07
feet to the True Point of Beginning, containing 0.737 acres,
more or less.
B. Paid-Up Lease:
Notwithstanding anything to the contrary herein contained, this is a
paid-up lease and no rentals shall become due hereunder.
B 1154 REC 02097274 04/27/87 15: 19 $0. 00 9/009
F 1201 MARY ANN FEUERSTEIN CLERK & RECORDER WELD CO, CO
670296
WILLIAM G. CREWS
Oil and Gas
1223 28TH AVENUE, SUITE 2 (303)351-0733(GREELEY)
GREELEY,COLORADO 80631 (303)659-7710 (DENVER)
April 17, 1987 •
lTh.) Cr- ,
B
Board of County Commissioners I_
Weld County, Colorado APR 2 01987
Centennial Building ;;;LI
915 10th Street
Greeley, CO 80631
Dear Commissioners:
This letter is to request scheduling at a regular meeting of the Board to
consider this, a request from Sunshine Valley Petroleum Corporation, for an
oil and gas lease covering the .737 acre, more or less, parcel in the NE+SW+
of Section 1, Township 5 North, Range 65 West which was conveyed to Weld
County by Quit Claim Deed dated November 21, 1975 and recorded in Book 755
under Reception No. 1677478.
Sunshine Valley requests that normal bid procedures be waived for this tract,
and that the Board accept $100 per net acre, 18.75% royalty, and a one-year
primary term. While Sunshine Valley will not be drilling on this parcel, it
may be necessary to utilize an existing road across it to gain access to any
well drilled south of the highway crossing the N4SWI Sunshine Valley and its
partners own other leases covering the rest of said N;SW*.
Your consideration of this request is sincerely appreciated.
Cordially,
illiam G. Crews
Attorney-in-Fact for
Sunshine Valley Petroleum Corporation
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ai_ A tract of land located in the Southwest Quarter (SM41 of Al
Section 1, Township 5 North, Range 65 West of the 6th P.M. CI
t .f .1 Weld County, Colorado, lying North of the Ogilvy Ditch as
the same is now constructed, and being note particularly . 6;
1 {
�1 described as follows; ',
Beginning at the North Quarter Corner of said Section 1 z„
and considering bhe North-South centerline of Section 1 as a,
.,1 bearing South 00 ))'11' West, with all other bearings con- - w
nrl 4,j �±, talned herein being relative thereto; thence South 00°ll'14' ;�t . C•
f2 West, along the North-South centerline of acid Section 1, P
ail: h 1'; )179.17 feet to a point on the Southerly R-O-M line of
0,lc y Colorado State Mighwsy No, 261, said point being the True
Point of Re Inn nqs O1
£r,p thence South 70�10'll' West, along the Southerly R-O-M line ' ii
,,, f of Colorado State highway No, 26), 01,10 feet; thence South i`-.
r �',"r, 02°16'11' Rest, 144.11 feet to a point on the approximate
% Al
'. 7 ' Northerly P-O-N line of the Qqi ivy Ditch as the same is now f s,
It constructed; thence Routh 76"01'))' test along the approximate f%
I, atrF yr ,r Northerly P-O-if line of the Ogilvy Ditch, 67.72 feet to a point y ,
\ /" w" on the North-South centerline of cold Section It thence North a""'
,''• . 1 00°11'14' Rest, along the North-South centerline of said al
i, 1.-'.!,I
Section 1, a distance of 420.07 feet to the tree Point of ,,r A
beginning, containing 0.711 acres, more or less. yS T� 9�
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870296
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LOHF & BARNHILL, P. C.
ATTORNEYS AT LAW
900 CHERRY TOWER
950 SOUTH CHERRY
DENVER,COLORADO 80222
303 753.9000
February 12, 1987
MAILING ADDRESS:
R. o.SOT 24199
OENVER.COLORAOO 80222
Sunshine Valley Petroleum Corporation DAVID G. EeN ER
950 Stafford
Casper, Wyoming 82609
DRILL SITE. TITLE (PINION
State: Colorado
County: Weld
Property Name: Gatewood
Description: Township 5 North, Range 65 West, 6th P.M.
Section 1: NW/4 and N/2 SW/4
I. MATERIALS EXAMINED
1. Abstract of Title 46,186 (final certificate) covering the N/2 NW/4 of
Section 1, consisting of 60 numbered pages and certified from inception to
8:45 a.m. on April 30, 1924, by The Weld County Abstract and Investment Com-
pany.
2. Abstract of Title 46,187 (final certificate) covering the S/2 NW/4 of
Section 1, consisting of 77 numbered pages and certified from inception to
8:45 a.m. on April 30, 1924, by The Weld County Abstract and Investment Com-
pany.
3. Abstract of Title 46,188 (final certificate) covering the N/2 SW/4 of
Section 1, consisting of 56 numbered pages and certified from inception to
8:45 a.m. on April 30, 1924, by The Weld County Abstract and Investment Com—
pany.
4. Abstract of Title 25,227 (final certificate) covering the captioned
lands, consisting of 163 numbered pages and certified from April 30, 1924 to
7:45 a.m. on March 16, 1972, by The Security Abstract Company of Weld County.
5. Abstract of Title 152,426 covering the captioned lands, consisting of
375 numbered pages and certified from March 16, 1972 to 7:45 a.m. on Janu-
ary 29, 1987, by Transamerica Title Insurance Company.
t 70296
2--Sunshine Valley Petroleum Corporation February 12, 1987
II. TITLE
Based upon our examination of the foregoing materials and subject to the
matters set forth herein, we find title to the captioned lands vested at
7:45 a.m. on January 29, 1987, as follows:
Surface Ownership
All of the captioned lands, except (i) the County Parcel, (ii) State Highway
Parcel, and (iii) Airport Parcel
Noffsinger Manufacturing Co. , Inc. 100%
County Parcel, as described in Appendix 1 to this opinion
Weld County, Colorado 100%
State Highway Parcel, as described in Appendix 1 to this opinion
Department of Highways, State of Colorado 100%
Airport Parcel, as described in Appendix 1 to this opinion
Greeley-Weld County Airport Authority 100%
Mineral Ownership
All of the captioned lands, except the County Parcel
Mizel Exploration Company 50% (Lease 1)
Noffsinger Manufacturing Co. , Inc. 50% (Lease 2)
County Parcel, as described in Appendix 1 to this opinion
Weld County, Colorado 100% (Unleased)
Oil and Gas Operating Rights
All of the captioned lands, except the County Parcel
Sunshine Valley Petroleum Corporation 50% (Lease 1)
Coors Energy Company 50% (Lease 2)
County Parcel, as described in Appendix 1 to this opinion
Weld County, Colorado 100% (Unleased)
Royalties, Production Payments and Other Burdens*
All of the captioned lands, except the County Parcel
Mizel Exploration Company 6.250000% landowner royalty interest
(Lease 1)
Alarado Resources, Ltd. .625000% overriding royalty interest
(Lease 1)
Ted E. Amsbaugh .453125% overriding royalty interest
(Lease 1)
Jeanne A. Anderson .025000% overriding royalty interest
(Lease 1)
87 296
•
3--Sunshine Valley Petroleum Corporation February 12, 1987
Royalties, Production Payments and Other Burdens
Buddy Baker .250000% overriding royalty interest
(Lease 1)
Barrett Energy Company .565625% overriding royalty interest
(Lease 1)
Stephen B. Evans .453125% overriding royalty interest
(Lease 1)
Barry L. Snyder .453125% overriding royalty interest
(Lease 1)
Christina L. Snyder .093750% overriding royalty interest
(Lease 1)
Vicki L. Wambolt .037500% overriding royalty interest
(Lease 1)
Laurence N. Watts .093750% overriding royalty interest
(Lease 1)
Zenith Drilling Corporation .200000% overriding royalty interest
(Lease 1)
Noffsinger Manufacturing Co. , Inc. 6.250000% landowner royalty interest
(Lease 2)
Newport Exploration, Inc. 2.500000% overriding royalty interest
(Lease 2)
Gary Sandlin .625000% overriding royalty interest
(Lease 2)
The County Parcel, as described in Appendix 1 to this opinion
Unleased
* The burdens against Lease 1 (the Sunshine Valley lease) total 9.5% of
8/8ths; the burdens against Lease 2 (the Coors lease) total 9.375% of
8/8ths.
III. THE LEASES
A summary tabulation of the concerned leases appears in Appendix 2 to this
opinion.
IV. LEASE HISTORY
Lease 1
1. The Lease. Lease 1 (the Sunshine Valley lease) was originally
obtained by Aeon Energy Co. on March 17, 1982, for a five year primary term.
Abstract 152,426, page 121.
870296
4—Sunshine Valley Petroleum Corporation February 12, 1987
2. Baker Overriding Royalty. By Assignment of Overriding Royalty
Interest, dated April 1, 1982 and recorded in Book 1011 under Reception
No. 1944730, Aeon Energy Co. assigned to`Baker 'Oil Coipuration a 0.5% overrid-
ing royalty interest (subject to proportionate reduction) on all oil, gas and
other hydrocarbon substances produced under the terms of the lease. Abstract
152,426, page 171. Thereafter, by Assignment of Overriding Royalty, dated May
15, 1985 and recorded in Book 1069 under Reception No. 1009865, Baker Oil
Corp. assigned its entire interest in any overriding royalty interest it might
own in Weld County to Buddy Baker. Abstract 152,426, page 237.
3. Partial Assignments to Alarado and Zenith. By Assignment of Oil and
Gas Lease, dated April 21, 1982 and recorded in Book 971 under Reception No.
1896600, Aeon Energy Co. assigned an aggregate 75% interest in the lease to
Alarado Resources, Limited (50%) and Zenith Drilling Corporation (25%) ,
reserving a 3.5% overriding royalty on all oil, gas and other hydrocarbon
substances produced, saved and marketed from the leased lands.
Abstract 152,426, page 125. These assignments provide for proportionate
reduction of the overriding royalty only to the extent that the lease covers
less than the full fee oil and gas estate, so the conveyance of only a 75%
leasehold interest does not affect the reserved 3.5% royalty. A stipulation
among the parties recorded in Book 1024 under Reception No. 1961330 confirms
that the reserved 3.5% overriding royalty interest is not to be reduced in
proportion to the 75% interest assigned, but instead is to be a full 3.5% of
8/8ths. Abstract 152,426, page 175.
4. Barry Snyder/Evans/Amsbaugh/Barrett/Christina Synder/Watts and Clark
Overriding Royalty Interests. By Assignment of Overriding Royalty Interest,
dated July 1, 1982 and recorded in Book 972 under Reception No. 1897754, Aeon
Energy Co. conveyed an aggregate 3.375% overriding royalty interest on all
oil, gas and other hydrocarbon substances produced under the terms of the
lease to Barry L. Snyder (.75%) , Stephen B. Evans (.75%) , Ted E. Amsbaugh
(.75%) , Barrett Energy Company (.75%) , Christina L. Snyder (.125%) , Lawrence
N. Watts (.125%) and Vicki L. Clark (.125%) . Abstract 152,426, page 144.
5. Vicki Clark/Jeanne A. Anderson Overriding Royalty Interest. By
Assignment of Overriding Royalty Interest, dated July 2, 1984 and recorded in
Book 1037 under Reception No. 1974977, Aeon Energy Co. assigned its remaining
.125% overriding royalty interest (subject to proportionate reduction) on all
oil, gas and other hydrocarbon substances produced, saved and sold under the
terms of the lease to Vicki L. Clark (.075%) and Jeanne A. Anderson (.05%) .
6. Aeon Assignment to Barrett, Snyder, Evans and Amsbaugh. By Assign-
ment of Oil and Gas Lease, dated July 6, 1982 and recorded in Book 972 under
Reception No. 1897788, Aeon Energy Co. assigned an aggregate 25% interest in
the lease to Barrett Energy Company (6.25%) , Barry L. Snyder (6.25%) , Stephen
B. Evans (6.25%) and Ted E. Amsbaugh (6.25%) , without reserving any overriding
royalty or other interest in the lease.
toe0296
5—Sunshine Valley Petroleum Corporation February 12, 1987
7. Zenith Assignment to Barrett. By Assignment of Oil and Gas Lease,
dated July 28, 1982 and recorded in Book 974 under Reception No. 1900183,
Zenith Drilling Corporation assigned to Barrett Energy Company a 9% working
interest in the lease, without reserving any overriding royalty interest.
Abstract..152,426,, page 151.
8. Christina L. Snyder/Laurence N. Watts Overriding Royalty Interest.
By Assignment of Overriding Royalty Interest, dated September 8, 1982 and
recorded in Book 977 under Reception No. 1903470, Vicki L. Clark conveyed an
aggregate .125% overriding royalty interest on all oil, gas and other hydro—
carbon substances produced under the terms of the lease to Christina L. Snyder
(.0625%) and Laurence N. Watts (.0625%) .
9. Farmout to Sunshine Valley. By Farmout Agreement, dated December 19,
1986, Barrett Energy Company, Alarado Resources, Limited, Zenith Drilling
Corporation, Barry L. Snyder, Stephen B. Evans and Ted E. Amsbaugh granted
Sunshine Valley Petroleum Corporation the right to drill a test well at a
legal location on the captioned lands to a depth sufficient to test the Codell
Sandstone formation. If this well is commenced by March 17, 1987 (or such
later date as may be permitted under certain provisions relating to an exten-
sion or renewal lease) and completed either as a producer or as a dry hole,
Sunshine Valley will earn an assignment of the lease insofar as it covers the
captioned lands from the surface of the earth to the total depth drilled in
such well, subject only to a reservation by the assigning parties of an over-
riding royalty interest equal to the difference between 19% and lease burdens
of record at March 21, 1986.
Jpace 2
1. The Lease. Lease 2 (the Coors lease) was originally obtained by
Newport Exploration, Inc. on November 17, 1979 for a five year primary term.
Abstract 152,426, page 107. By Affidavit of Lease Extension, A. A. Phillips,
the President of Coors Energy Company, provided notice of the extension of
this lease beyond its primary term as a result of oil and gas production from
lands covered by the lease or lands pooled therewith. Abstract 152,426,
page 230. We believe such production was obtained from the Tipton #7-26 well
in the SW/4 of Section 26, Township 6 North, Range 65 West.
2. Assignment to Sandlin. By Assignment of Oil and Gas Lease, dated
March 8, 1982 and recorded in Book 964 under Reception No. 1887634, Newport
Exploration, Inc. assigned its entire interest in the lease to Gary Sandlin,
reserving a 5% overriding royalty interest (subject to proportionate reduc-
tion) on all oil, gas and casinghead gas produced, saved and marketed from the
leased lands. Abstract 152,426, page 114.
3. Sandlin Assignment to Coors Energy. By Assignment of Oil and Gas
Leases, dated November 15, 1982 and recorded in Book 983 under Reception
87029r
6--Sunshine Valley Petroleum Corporation February 12, 1987
No. 1910440, Gary Sandlin assigned his entire interest in the lease to Coors
Energy Company, reserving a 1.25% overriding royalty interest (subject to
proportionate reduction) on all oil, gas and casinghead gas produced, saved
and marketed from the leased lands.
V. EASEMENTS
1. Section Line Roads. By Order, dated October 12, 1889 and recorded in
Book 5 at page 298, the County Commissioners of Weld County declared all
section and township lines on the public domain in Weld County to be public
highways.
2. Ogilvy Ditch: N/2 SW/4. By Quit Claim Deed, dated February 4, 1889
and recorded in Book 76 at page 80, Charles Emerson granted to L. Ogilvy a
right of way for an irrigating ditch through the N/2 SW/4 of Section 1.
Abstract 46,188, page 23. In addition, by Quit Claim Deed, dated September
16, 1931 and recorded in Book 1003 at page 599, Albert B. Right conveyed to
The Ogilvy Irrigating and Land Company a right of way for the Ogilvy ditch the
N/2 SW/4 of Section 1. Abstract 25,227, page 17.
3. County Road: N/2 SW/4. By Right of Way Deed, dated September 16,
1940 and recorded in Book 1068 at page 310, Dollie Hopkins Right, Grace Kight
and Ruth Ella Kight conveyed to Weld County, Colorado a right of way for a
public highway following a specifically described course across the N/2 SW/4
of Section 1. Abstract 25,227, page 22.
4. Airport Clear Zone: N/2 SW/4. By Clear Zone Easement, dated
June 29, 1963 and recorded in Book 500 under Reception No. 1424405, Grace
Kight Gatewood, Joseph S. Gatewood and Dolly Hopkins Kight promised the City
of Greeley, Colorado, the County of Weld, Colorado, and the Weld County Munic-
ipal Airport Board that they would not erect or permit the erection of any
structure or other object to a height above the clear zone approach surface of
a specific runway. Permissible heights are governed by specific descriptions,
ratios and distances set forth in the agreement and are not here summarized.
Abstract 25,227, page 72.
5. Mountain States Telephone: N/2 SW/4. By Right-of-Way Easement, dated
March 3, 1972 and recorded in Book 671 under Reception No. 1592992, Noffsinger
Manufacturing Co. , Inc. conveyed to The Mountain Telephone and Telegraph
Company a Buried Cable Line Easement, 16.5 feet in width, lying north of the
north right-of-way line of Colorado Highway 263. Abstract 152,426, page 37.
6. NGA Pipeline. By Right-of-Way Grant, dated January 31, 1984 and
recorded in Book 1021 under Reception No. 1957081, Noffsinger Manufacturing
Co., Inc. conveyed to Colorado Gathering & Processing Corp. a buried pipeline
right of way specifically described by reference to a Weld County Assessor's
Office plat. Abstract 152,426, page 172. This right of way has since been
87029G
7—Sunshine Valley Petroleum Corporation February 12, 1987
assigned by Colorado Gathering and Processing Corp. to Natural Gas Associates,
Inc. Abstract .152,426, page 353.
By Right-of-Way Easements and Licenses, dated January 21, 1986 and
recorded in Book 1102 under Reception No. 2041859, Ogilvy Irrigating and Land
Company conveyed to Natural Gas Associates the right to construct and operate
a pipeline beneath its canal in the N/2 SW/4 of Section 1. Abstract 152,426,
page 266. This right of way has since been assigned to Natural Gas Associ-
ates, Inc. Abstract 152, 426, page 359.
Finally, by Pipeline Right-of-Way Grant, dated December 19, 1985 and
recorded in Book 1102 under Reception No. 2041860, Noffsinger Manufacturing
Co. , Inc. conveyed to Natural Gas Associates a Buried Pipeline Easement fol-
lowing a specifically described course across the N/2 SW/4 of Section 1.
Abstract 152,426, page 270.
VI. ENCUTIBRANCES
None.
VII. COMMENTS AND REQUIREMENTS
1. Unleased Weld County Interest: N/2 SW/4. The interest of Weld
County, Colorado, in the N/2 SW/4 of Section 1 currently appears to be
unleased.
REY UIRu4E T: Obtain and record in the real property records of Weld
County an appropriate oil and gas lease covering the open interest of
Weld County, Colorado.
2. Sunshine Valley Farmin. By Farmout Agreement, dated December 19,
1986, Barrett Energy Company, Alarado Resources, Limited, Zenith Drilling
Corporation, Barry L. Snyder, Stephen B. Evans and Ted E. Amsbaugh granted
Sunshine Valley Petroleum Corporation the right to drill a test well at a
legal location on the captioned lands to a depth sufficient to test the Codell
Sandstone formation. If this well is commenced by March 17, 1987 (or such
later date as may be permitted under certain provisions relating to an exten-
sion or renewal lease) and completed either as a producer or as a dry hole,
Sunshine Valley will earn an assignment of the lease insofar as it covers the
captioned lands from the surface of the earth to the total depth drilled in
such well, subject only to a reservation by the assigning parties of an over-
riding royalty interest equal to the difference between 19% and lease burdens
of record at March 21, 1986.
We have shown no depth limitation in our tabulation of "Oil and Gas
Operating Rights" or "Royalties, Production Payments and Other Burdens" in
870296
8—Sunshine Valley Petroleum Corporation February 12, 1987
Section II ("Title") , since the Farmout Agreement does not specify a maximum
depth for the initial well. After the initial test well is drilled and the
assignment made, Sunshine Valley's operating rights under Lease 1 will extend
only from the surface of the earth to the deepest depth drilled in the test
well. In addition, we draw your attention to the fact that the current owners
of the leasehold estate in Lease 1 may consider the phrase "to a depth
sufficient to test the Codell Sandstone formation" to be an implied limitation
on a total depth of the initial test well and consequently recommend that you
contact such parties if the initial test well is proposed to a depth deeper
than the Codell Sandstone formation.
REQUIREMENT Carefully review the full text of the Farmout Agreement
and conduct all operations on the captioned lands in strict compli-
ance with all terms and conditions contained therein.
3. Present Effectiveness of Leases 1 and 2. We have examined no
receipts or other materials evidencing the timely payment of delay rentals due
under Lease 1 (the Sunshine Valley lease) . While an Affidavit of Lease Exten-
sion, dated October 25, 1984 and recorded in Book 1047 under Reception
No. 1986649, indicates that Lease 2 (the Coors lease) has been extended beyond
its primary term by production from the leased lands or lands pooled there-
with, we have examined no materials evidencing continuous production in suf-
ficient quantities to keep Lease 2 in full force and effect.
REQUIREMENT: Assure yourselves to your satisfaction that all delay
rentals necessary to keep Lease 1 in full force and effect have been
timely and properly paid and that production sufficient to keep
Lease 2 in full force and effect continues to the commencement date
of your proposed well on the captioned lands.
4. Vicki Wambolt Marriage. Vicki L. Clark is the current record owner
of a .0375% of 8/8ths overriding royalty interest (after proportionate reduc-
tion) in all production from the captioned lands, although we have been
advised that Ms. Clark has married and is now known as Vicki L. Wambolt. We
accordingly have tabulated her interest under the name Vicki L. Wambolt,
although no marriage certificate or other evidence of a name change appears in
the materials we examined.
REQUIREMENT: For greater assurance of title, obtain and record in
the real property records of Weld County a certified copy of the
Vicki L. Clark marriage certificate.
5. Defective Acknowledgements. The acknowledgements used in the follow-
ing instruments relating to Lease 1 (the Sunshine Valley lease) are defective:
5.1 The overriding royalty assignment relating to Lease 1, dated
July 1, 1982 and recorded in Book 972 under Reception No. 1897754 made by Aeon
Energy Co. to several parties (including Vicki L. Clark) was acknowledged
before Vicki L. Clark, a notary public.
P"-!”5,0 6
9--Sunshine Valley Petroleum Corporation February 12, 1987
5.2 The Assignment of Overriding Royalty Interest relating to
Lease 1, dated September 8, 1982 and recorded in Book 977 under Reception
No. 1903470, made by Vicki L. Clark to Christina L. Snyder and Lawrence N.
Watts was acknowledged before Christina L. Snyder, a notary public.
While these acknowledgements are defective because of the notary's interest in
the concerned transaction, they do not in any way impair the validity or
effect of the instruments themselves, although they do remove the prima facie
evidence of valid execution that otherwise would be afforded by an effective
acknowledgement.
REQUIRE: For greater assurance of title, obtain and record in
the real property records of Weld County corrected versions of these
two instruments, each properly acknowledged before a. notary public or
ether authorized officer who has no interest in the transaction.
Alternatively, on a business risk basis, you may ignore these defec-
tive acknowledgements and rely on the apparent authenticity of the
concerned signatures.
6. Clark and Anderson Overriding Royalties. The Assignment by Aeon
Energy Co. of an aggregate 75% interest in Lease 1 to Alarado Resources Lim-
ited and Zenith Drilling Corporation provided for proportionate reduction of
the reserved 3.5% overriding royalty only in that the lease covers less than
the full fee oil and gas estate, so the conveyance of a 75% leasehold interest
did not reduce the reserved 3.5% royalty. In the final overriding royalty
assignment from Aeon Energy Co. to Vicki L. Clark and Jeanne A. Anderson,
dated July 2, 1984 and recorded in Book 1037 under Reception No. 1974977, Aeon
indicated that the aggregate .125% overriding royalty interest there conveyed
was to be "further proportionately reduced by the working interest assigned
wherein the override was retained," although the assignment also expressly
stated the intention of Aeon to convey all of its present overriding royalty
interest. We view the intention language as controlling, although we are
aware that the proportionate reduction language normally would cause the .125%
overriding royalty conveyed to Vicki L. Clark and Jeanne A. Anderson to be
reduced to an aggregate .09375%.
REQUIREMENT: If production is obtained, obtain either a corrected
assignment of overriding royalty interest or appropriate division
orders executed by Aeon Energy Co. , Jeanne A. Anderson and Vicki L.
Wambolt.
7. Easements. The N/2 SW/4 of Section 1 is burdened by ditch, tele-
phone, road, and airport clear zone easements, all as more specifically
identified in Section V ("Easements") , above. In addition to such express
easements, it is possible that Federal Aviation Administration or other gov-
ernmental regulations may limit the height of temporary structures on the
captioned lands.
87029
10--Sunshine Valley Petroleum Corporation
February 12, 1987
REQUIREMENT: Conduct all operations on the captioned lands in a
manner which does not interfere with the use and enjoyment of the
easements identified in Section V, above, or any applicable regula-
tions relating to the Greeley-Weld County Airport.
8. Survey. The lands in the N/2 SW/4 of Section 1 owned by the Colorado
Department of Highways and Weld County are described by complex metes and
bounds descriptions, thereby precluding our ability to calculate the exact
acreage contained therein.
REQUIREMENT: If production is obtained from the N/2 SW/4 of Sec-
tion 1, retain a licensed surveyor to determine the acreage contained
within each parcel comprising the applicable producing unit.
9. Standard Regirements: Surface Inspection, Zoning and Spacing. As
with all oil and gas properties (i) a surface inspection should be performed
to determine the persons in physical possession of the captioned lands;
(ii) local ordinances and rules checked to determine whether zoning or per-
mitting requirements have been adopted which affect operations on, or access
to, the captioned lands; and (iii) the records of the Colorado Oil and Gas
Conservation Commission checked to determine the current status of spacing
orders affecting the captioned lands.
REQUIREMENT: Conduct a surface inspection of the captioned lands and
take appropriate steps to ensure that your proposed operations comply
with all applicable local ordinances and Conservation Conmtission
requirements.
VIII. TAXES
While the only information we have concerning the payment of taxes is the
statement contained in Abstract 152,426 that certification does not extend to
payment of 1986 taxes, the materials we examined reflect no unredeemed tax
sales. The captioned lands are also included within numerous special dis-
tricts, each of which likely imposes special assessments in the nature of
taxes against such lands. The materials we examined reflected no liens for
unpaid special district assessments or actions in respect to any unpaid
special district assessments.
IX. LIMITATIONS ON OPINION
This opinion is prepared in connection with proposed oil and gas drilling
operations and is based upon examination of the materials identified in Sec-
tion I ("Materials Examined") , above. This opinion consequently does not
cover water rights; rights of persons in possession; defects of title, encum-
GcU v96
11--Sunshine Valley Petroleum Corporation February 12, 1987
brances, or other matters that would be disclosed by a surface inspection;
liens for labor or materials accrued but not filed; mortgage or other liens
solely against pipeline easements and rights-of-way; matters involving bound-
aries-, areas, or surveys; orders of any administrative body; or any matter not
of record.
Very truly yours,
LOHF & BARNHILL, P.C.
tW J 9 ELKAr
By: David G. Ebner
DGE:wld
870296
Appendix 1:
Property Descriptions
rY�
The County Parcel
Township 5 North, Range 65 West, 6th P.M.
Section 1: That portion of the following described tract contained in the
N/2 SW/4:
A tract of land located in the SW/4 of Section 1, Township 5
North, Range 65 West of the 6th P.M., Weld County, Colorado,
lying North of the Ogilvy Ditch as the same is now constructed,
and being more particularly described as follows:
Beginning at the North Quarter Corner of said Section 1 and
considering the North-South centerline of Section 1 as bearing
S.00°33'14"W. , with all other bearings contained herein being
relative thereto; thence S.00°33'14"W. , along the North-South
centerline of said Section 1, 3175.57 feet to a point on the
southerly right-of-way line of Colorado State Highway No. 263,
said point being the True Point of Beginning;
thence S.78°10'11"W., along the southerly right-of-way line of
Colorado State Highway No. 263, 92.30 feet;
thence S.02°58'31"E. , 394.35 feet to a point on the approximate
northerly right of way line of the Ogilvy Ditch as the same is
now constructed;
thence S.76°02'33"E. , along the approximate northerly right of
way line of the Ogilvy Ditch. 67.72 feet to a point on the
North-South centerline of said Section 1;
thence N. 00°33'14" East, along the North-South centerline of
said Section 1, a distance of 429.07 feet to the True Point of
Beginning, containing 0.737 acres, more or less.
[Source: Quit Claim Deed dated November 21, 1975 and recorded in Book 755
under Reception No. 1677478]
The State Highway Parcel
Township 5 North, Range 65 West, 6th P.M.
Section 1: That portion of the following described tract contained in the
N/2 SW/4:
A tract or parcel of land, No. 8 of Grantee's Project No.
S 0032(1) containing 3. 602 acres, more or less, in the SW/4 of
Section 1, Township 5 North, Range 65 West, of the 6th P.M. , in
Weld County, Colorado, said tract or parcel being more particu-
larly described as follows:
Beginning at a point on the west line of said Section 1, from
which point the NW Corner of said Section 1 bears N.0°21'E. , a
distance of 3562.5 feet;
thence S.78°21'E. , a distance of 103.5 feet to a point on the
existing north right of way of State Highway No. 263;
thence along the existing north right of way of State Highway
No. 263, N.62°19'30"E., a distance of 199.9 feet;
thence along the existing north right of way of State Highway
No. 263, N.68°37'E., a distance of 42.6 feet;
thence along the arc of a curve to the right, having a radius of
1472.5 feet, a distance of 338.0 feet, the chord of this arc
bears N.73°28'30"E. , a distance of 337.2 feet;
thence N.84°02'E., a distance of 304.0 feet;
thence N.86°03'E. , a distance of 733.0 feet to a point on the
existing north right of way of State Highway No. 263;
thence S.3°57'E. , a distance of 80.0 feet to a point on the
existing south right of way of State Highway No. 263;
thence along the existing south right of way of State Highway
No. 263, S.86°03'W., a distance of 200.0 feet.
thence along the existing south right of way of State Highway
No. 263, S.83°49'W., a distance of 939.8 feet
thence along the existing south right of way of State Highway
No. 263, S.77°30'30"W., a distance of 97.0 feet;
thence along the existing south right of way of State Highway
No. 263, S.72°10'W., a distance of 147.2 feet;
thence along the existing south right of way of State Highway
No. 263, S. 60°54'W. , a distance of 358.0 feet to a point on the
west line of Section 1;
thence along the west line of Section 1, N.0°21'E. , a distance
of 169.4 feet, more or less, to the point of beginning.
The above-described parcel contains 3.602 acres, more or less,
of which 3. 235 acres are in the right of way of the present
road.
[Source: Special Warranty Deed dated April 23, 1956 and recorded in Book 1450
at page 54J
The Airport Parcel
Township 5 North, Range 65 West, 6th P.M.
Section 1: That portion of the following described tract contained in the
N/2 SW/4:
Parcel 1:
A tract of land located in the SW/4 of Section 1, Township 5
North, Range 65 West of the 6th P.M. , being more particularly
described as follows:
Curmuending at the NW Corner of said Section 1, and considering
the west line thereof to bear S.01°26'03"W. with all other
bearings contained herein being relative thereto;
-2- 670296
thence S.01°26'03"W. , 2523.55 feet to a point being 1000 feet
north, as mesured at right angles from the centerline extended
of a Weld County Municipal Airport runway, said point being the
True Point of Beginning;
thence S.74°12'00"E. , parallel with said runway, 389.06 feet;
thence S.15°48'00"W. , 821.46 feet to a point on the northerly
right of way of Colorado-State Highway No. 263;
thence along said northerly right of way by the following two
courses: -
S.62°20'00"W. , 134.28 feet;
N.78°20'30"W. 56.65 feet to a point on the west line of
said Section 1;
thence N.01°26'03"E. , 947.55 feet to the True Point of Begin-
ning, located in the County of Weld, State of Colorado
Parcel 2:
A tract of land located in the N/2 SW/4 of Section 1, Township 5
North, Range 65 West of the 6th P.M. lying South of the South
right of way line of Colorado State Highway No. 263, being more
particularly described as follows:
Commencing at the NW Corner of said Section 1 and considering
the West line thereof to bear S.01°2'6'03"W. , with all other
bearings contained herein being relative thereto;
thence S.01°26'03W. , 3768.02 feet to the SW Corner of said
N/2 SW/4 and the True Point of Beginning;
thence N.01°26'03"E. , 161.07 feet to a point on the South right
of way line of said Colorado State Highway No. 263;
thence N. 60°54'30"E., 169.74 feet along said South right of way
line;
thence S.15°48'00"W. , 255.94 feet to a point on the South line
of the N/2 SW/4 of said Section 1;
thence N.88°07'04"W. , 82.72 feet to the True Point of Beginning,
located in the County of Weld, State of Colorado.
[Source: Warranty Deed dated February 27, 1985 and recorded in Book 1060
under Reception No. 2000999]
-3-
Appendix 2:
The Leases
Lease No. 1
Form: Form 88 - (Producers) Kan. , Okla. and Colo. 1957 C Rev. 1974
Dated: March 17, 1982
Recorded: Book 970, Reception No. 1895423 (Weld County)
Lessor: Victor Verity, conservator of the Grace Kight Gatewood Estate.
Ratified by Mizel Exploration Company by Ratification and Rental
Division Order, dated March 31, 1986 and recorded in Book 1108
under Reception No. 2049.
Lessee: Aeon Energy Co.
Description: Township 5 North, Range 65 West, 6th P.M.
Section 1: NW/4 and N/2 SW/4
Primary Term: 5 years
Rental: $240 (before proportionate reduction)
Royalty: 12.5%
Special Indemnification by Lessee against claims and demands of third
Provisions: parties for losses or damages arising out of Lessee's operations
on the leased lands and an express representation that the lease
relates only to a severed mineral interest and that all lease
references to surface use, water use and surface improvements
are inapplicable.
Lease No. 2
Form: Producers 88 - 1959
Dated: November 17, 1979
Recorded: Book 890, Reception No. 1811945 (Weld County)
Lessor: Noffsinger Manufacturing Co. , Inc., a Colorado corporation
Lessee: Newport Exploration, Inc.
Description: Township 5 North, Range 65 West, 6th P.M.
Section 1: NW/4 and N/2 SW/4
870296
Section 2: W/2 NW/4 and the west 80 feet of the E/2 NW/4 of
said Section 2, less and except 9.85 acres, more or
less, more particularly described in that certain
decree recorded in Book 1225 at .page 585 of the
records of Weld County, Colorado.
Township 6 North, Range 65 West, 6th P.M.
Section 26: SW/4 less and except that certain tract of land
containing an area of 8.40 acres, more or less,
more particularly described in an instrument
recorded in Book 300 at page 189 of the records of
Weld County, Colorado.
Section 34: E/2 SW/4 and E/2 NE/4
Primary Term: HBP; see Affidavit of Lease Extension, dated October 25, 1984
and recorded in Book 1047 under Reception No. 1986649
Royalty: 12.5%
Special So far as is reasonably practicable, Lessee will attempt to con-
Provisions: duct drilling activities between December 15 and April 1;
attempt to use not more than three acres for each well site and
ancillary roads, pipelines and tank batteries; construct its
facilities after consultation with the Lessor and in a manor
which will minimize damage to the surface; use establish_.;
roadways to the extent reasonably possible; bury pipelines
beneath plow depth; fully reclaim each well site; provide geo-
logical information requested by Lessor; pay Lessor $750 for
each well drilled on the leased lands prior to commencement of
drilling operations and additional damages if drilling is con-
ducted during the crop season; and not locate the well or
equipment in a manner which might interfere with the center
pivot irrigation system.
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870296
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