JOINT OPERATING JOINT OPERATING AGREEMENTS AGREEMENTS

BYBYDORSEY T. ROACHDORSEY T. ROACH

AREA LAND MANAGERAREA LAND MANAGERCHEYENNE PETROLEUM COMPANYCHEYENNE PETROLEUM COMPANY

PRESENTED TOPRESENTED TOOU ENERGY MANAGEMENT PROGRAMOU ENERGY MANAGEMENT PROGRAM

SEPTEMBER 27, 2007SEPTEMBER 27, 2007

INTRODUCTIONINTRODUCTION

EVOLUTION OF THE MODEL EVOLUTION OF THE MODEL FORM OPERATING FORM OPERATING

AGREEMENTAGREEMENT Pre-1956Pre-1956 AAPL 1956 FormAAPL 1956 Form AAPL 1977 FormAAPL 1977 Form AAPL 1982 FormAAPL 1982 Form AAPL 1989 FormAAPL 1989 Form AAPL 1982 & 1989 CBM AAPL 1982 & 1989 CBM

ModificationsModifications

PREAMBLEPREAMBLE Identifies JOA as a legal documentIdentifies JOA as a legal document Parties to JOA have agreed to the Parties to JOA have agreed to the

provisions within the agreementprovisions within the agreement

ARTICLE II. EXHIBITSARTICLE II. EXHIBITS Exhibit “A” Exhibit “A”

Describes Contract AreaDescribes Contract Area Provides Working Interest Owner’s Provides Working Interest Owner’s

names, addresses and ownership names, addresses and ownership percentagespercentages

Exhibit “B” – Form of O&G LeaseExhibit “B” – Form of O&G Lease Exhibit “C” – Accounting ProceduresExhibit “C” – Accounting Procedures

EXHIBITSEXHIBITS Exhibit “D” – InsuranceExhibit “D” – Insurance Exhibit “E” – Gas Balancing AgreementExhibit “E” – Gas Balancing Agreement Exhibit “F” – Non-Discrimination Exhibit “F” – Non-Discrimination

CertificateCertificate Exhibit “G” – Tax Partnership Exhibit “G” – Tax Partnership

AgreementAgreement Exhibit “H” – OtherExhibit “H” – Other

PlatPlat Cost and Production Allocation Formula Cost and Production Allocation Formula

ARTICLE III. INTEREST OF ARTICLE III. INTEREST OF THE PARTIESTHE PARTIES

Article III.B. – Parties share in costs Article III.B. – Parties share in costs and production in accordance with and production in accordance with their respective interests as shown on their respective interests as shown on Exhibit “A”Exhibit “A” Payment of RoyaltiesPayment of Royalties

Working Interest UnitWorking Interest Unit Spacing, or Proration, UnitSpacing, or Proration, Unit

Article III.C. Subsequently Created Article III.C. Subsequently Created InterestsInterests

ARTICLE IV. TITLESARTICLE IV. TITLES Article VI.A. – Title ExaminationArticle VI.A. – Title Examination

Drillsite Tract vs. Entire Drilling UnitDrillsite Tract vs. Entire Drilling Unit Hearings Before Governmental Hearings Before Governmental

AgenciesAgencies Title Examination CostsTitle Examination Costs

All Costs Are Direct Charges to Joint All Costs Are Direct Charges to Joint AccountAccount

ARTICLE V. OPERATORARTICLE V. OPERATOR Article V.A. Designation and Article V.A. Designation and

Responsibilities of OperatorResponsibilities of Operator Standards of OperationStandards of Operation

Reasonable Prudent OperatorReasonable Prudent Operator Good and Workmanlike MannerGood and Workmanlike Manner Due Diligence and DispatchDue Diligence and Dispatch Good Oilfield PracticeGood Oilfield Practice Compliance with Law and RegulationsCompliance with Law and Regulations

ARTICLE VI.B.1. ARTICLE VI.B.1. RESIGNATION OR RESIGNATION OR

REMOVAL OF OPERATORREMOVAL OF OPERATOR REMOVAL ONLY FOR “Good Cause”REMOVAL ONLY FOR “Good Cause”

Gross Negligence and Willful Gross Negligence and Willful MisconductMisconduct

Breach/Inability To Meet the Standards Breach/Inability To Meet the Standards of Operation (Article V.A)of Operation (Article V.A)

Failure/Inability to Perform Its Failure/Inability to Perform Its Obligations (Article V.D)Obligations (Article V.D)

ARTICLE V.D. RIGHTS AND ARTICLE V.D. RIGHTS AND DUTIES OF OPERATORDUTIES OF OPERATOR

Competitive Rates and Use of AffiliatesCompetitive Rates and Use of Affiliates Materials and Services Provided By Affiliates Materials and Services Provided By Affiliates

Must Also Be At Competitive RatesMust Also Be At Competitive Rates Discharge of Joint Account ObligationsDischarge of Joint Account Obligations

Operator Shall Promptly Pay All Joint Operator Shall Promptly Pay All Joint Account ExpensesAccount Expenses

Protection From LiensProtection From Liens Operator Shall Protect Property From Operator Shall Protect Property From

Vendor LiensVendor Liens

ARTICLE V.D. RIGHTS AND ARTICLE V.D. RIGHTS AND DUTIES OF OPERATORDUTIES OF OPERATOR

Custody of FundsCustody of Funds Access To Contract AreaAccess To Contract Area

Access Not To Interfere With Operator’s Access Not To Interfere With Operator’s OperationsOperations

Filing and Furnishing Governmental Filing and Furnishing Governmental ReportsReports

ARTICLE V.D. RIGHTS AND ARTICLE V.D. RIGHTS AND DUTIES OF OPERATORDUTIES OF OPERATOR

Drilling and Testing OperationsDrilling and Testing Operations Notice of Well SpudNotice of Well Spud Well InformationWell Information Operator Shall Test All ZonesOperator Shall Test All Zones

Cost EstimatesCost Estimates Operator to Provide Current and Operator to Provide Current and

Cumulative Costs At Reasonable IntervalsCumulative Costs At Reasonable Intervals InsuranceInsurance

ARTICLE VI.A. INTIAL ARTICLE VI.A. INTIAL WELLWELL

Drilling Of The Initial Well And The Drilling Of The Initial Well And The Participation Therein By All Parties Participation Therein By All Parties Is Obligatory Is Obligatory

ARTICLE VI.B. ARTICLE VI.B. SUBSEQUENT SUBSEQUENT OPERATIONSOPERATIONS

Subsequent WellsSubsequent Wells Operations in Existing WellsOperations in Existing Wells

RecompletionRecompletion ReworkRework DeepenDeepen SidetrackSidetrack

ARTICLE VI.B.2. (a) ARTICLE VI.B.2. (a) DETERMINATION OF DETERMINATION OF

PARTICPATIONPARTICPATION Acquiring Non-Consent InterestsAcquiring Non-Consent Interests

Limit ParticipationLimit Participation Acquire Proportionate Share (Your Interest Acquire Proportionate Share (Your Interest

Divided By All Consenting Parties Interests)Divided By All Consenting Parties Interests) Acquire Proportionate Share Plus More Acquire Proportionate Share Plus More

(Specify)(Specify) 100% Subscription Required To Proceed 100% Subscription Required To Proceed

With An OperationWith An Operation

ARTICLE VI.B.2.(b) ARTICLE VI.B.2.(b) RELINQUISHMENT OF RELINQUISHMENT OF INTEREST FOR NON-INTEREST FOR NON-

PARTICIPATIONPARTICIPATION Non-Consenting Party Relinquishes:Non-Consenting Party Relinquishes:

WellWell Production From the Non-Consent Production From the Non-Consent

OperationOperation

NON-CONSENT NON-CONSENT PENALTIESPENALTIES

Non-Risk PenaltiesNon-Risk Penalties Surface Equipment Beyond The Surface Equipment Beyond The

WellheadWellhead Operation Of The WellOperation Of The Well

Risk PenaltiesRisk Penalties

ARTICLE VI.B.4. ARTICLE VI.B.4. DEEPENINGDEEPENING

After reaching TD, well is proposed After reaching TD, well is proposed to be drilled to a deeper formationto be drilled to a deeper formation

ARTICLE VI.B.5. ARTICLE VI.B.5. SIDETRACKINGSIDETRACKING

Proposal to plug off the bottom portion of well, cut a window in the pipe and drill to a new bottom hole location

ARTICLE VI.B.7. PAYING ARTICLE VI.B.7. PAYING WELLSWELLS

No Operations Are To Be Conducted No Operations Are To Be Conducted On A Well On A Well Capable Of ProducingCapable Of Producing Without The Consent Of Without The Consent Of AllAll Parties Parties

ARTICLE VI.C - CASING ARTICLE VI.C - CASING POINT ELECTIONSPOINT ELECTIONS

Separate Election As To Each Separate Election As To Each Separate Completion Or Separate Completion Or Recompletion AttemptRecompletion Attempt

Recoupment of Non-Consent Recoupment of Non-Consent Penalties Must Be From Zone Penalties Must Be From Zone RelinquishedRelinquished Amounts Cannot Be Carried Over To Amounts Cannot Be Carried Over To

Next OperationNext Operation

ARTICLE VI.D. OTHER ARTICLE VI.D. OTHER OPERATIONSOPERATIONS

Artificial Lift EquipmentArtificial Lift Equipment Ancillary Production FacilitiesAncillary Production Facilities

Salt Water Disposal WellsSalt Water Disposal Wells Majority Approval Majority Approval

Insert PercentageInsert Percentage

ARTICLE VI.E. ARTICLE VI.E. ABANDONMENT OF WELLSABANDONMENT OF WELLS Dry HolesDry Holes ProducersProducers

Failure To Respond Is Deemed Consent Failure To Respond Is Deemed Consent To P&ATo P&A

Assignment Limited To Wellbore and Assignment Limited To Wellbore and ZoneZone

ARTICLE VI.G. TAKING ARTICLE VI.G. TAKING PRODUCTION IN KINDPRODUCTION IN KIND

Upon Written Notice, Operator Has Right Upon Written Notice, Operator Has Right To Sell For a Non-Taking Party’s Account, To Sell For a Non-Taking Party’s Account, But Non-Operator Has Right To TerminateBut Non-Operator Has Right To Terminate

Operator Has No Duty To SellOperator Has No Duty To Sell Non-Taking Party Has No Rights To Non-Taking Party Has No Rights To

Purchase ContractsPurchase Contracts All Parties To Provide Marketing All Parties To Provide Marketing

Arrangements For Next Succeeding Arrangements For Next Succeeding MonthMonth

ARTICLE VII.A LIABILITY ARTICLE VII.A LIABILITY OF PARTIESOF PARTIES

No Liability To Third PartiesNo Liability To Third Parties Not a Joint Venture, Agency Not a Joint Venture, Agency

Relationship, Association, Co-Relationship, Association, Co-Venturers Or PrincipalsVenturers Or Principals

Parties Are Not FiduciariesParties Are Not Fiduciaries Act In Accordance With Own Self Act In Accordance With Own Self

InterestInterest Obligation To Act In Good FaithObligation To Act In Good Faith

ARTICLE VIIB. LIENS AND ARTICLE VIIB. LIENS AND SECURITY INTERESTSSECURITY INTERESTS

Lien And Security Interest Covers Lien And Security Interest Covers All RightsAll Rights

Recording SupplementRecording Supplement First And Prior LienFirst And Prior Lien Purchasers Of Production May Rely Purchasers Of Production May Rely

On Notification Of DefaultOn Notification Of Default Power Of SalePower Of Sale

DEFAULTS AND DEFAULTS AND REMEDIESREMEDIES

Suspension Of RightsSuspension Of Rights Suit For DamagesSuit For Damages Deemed Non-ConsentDeemed Non-Consent Advance PaymentAdvance Payment Costs and Attorneys’ FeesCosts and Attorneys’ Fees

ARTICLE VII.DARTICLE VII.DMAINTENANCE MAINTENANCE

PROVISIONPROVISION All assignments must cover all right, All assignments must cover all right,

title and interest in all leases, wells, title and interest in all leases, wells, equipment and productionequipment and production

Assignments may also cover an Assignments may also cover an undivided interest in leases, wells, undivided interest in leases, wells, equipment and productionequipment and production

PREFERENTIAL RIGHT TO PREFERENTIAL RIGHT TO PURCHASE PROVISIONPURCHASE PROVISION

If a party should accept an offer to If a party should accept an offer to sell their interest, the other parties sell their interest, the other parties shall have the right to acquire the shall have the right to acquire the selling party’s interest on the same selling party’s interest on the same termsterms

ARTICLE XIII. TERM OF ARTICLE XIII. TERM OF AGREEMENTAGREEMENT

JOA term runs concurrent with JOA term runs concurrent with leasesleases

JOA terminates upon abandonment JOA terminates upon abandonment of the last wellof the last well

ARTICLE XV.A. ARTICLE XV.A. EXECUTIONEXECUTION

Binding On Each Party That Signs Binding On Each Party That Signs JOAJOA

Operator May Terminate JOA If Operator May Terminate JOA If Insufficient ParticipationInsufficient Participation

ARTICLE XV.C. ARTICLE XV.C. COUNTERPARTSCOUNTERPARTS

JOA May Be Executed In Any JOA May Be Executed In Any Number Of CounterpartsNumber Of Counterparts

AAPL FORM 610RSAAPL FORM 610RSMODEL FORM RECORDING MODEL FORM RECORDING

SUPPLEMENTSUPPLEMENT Identifies Existence of JOAIdentifies Existence of JOA Identifies Lands Covered By JOAIdentifies Lands Covered By JOA Identifies Parties To JOAIdentifies Parties To JOA Perfects Lien And Security Interests Perfects Lien And Security Interests

Under JOAUnder JOA References Important ProvisionsReferences Important Provisions

Subsequently Created InterestSubsequently Created Interest Maintenance ProvisionMaintenance Provision

CONCLUSIONCONCLUSION