JERRY L. CANFIELD, P.A. THOMAS A. DAILY, P.A. WYMAN R. WADE, JR., P.A. DOUGLAS M. CARSON, P.A. ROBERT R. BRIGGS, P.A. * C. MICHAEL DAILY COBY W. LOGAN L. MATTHEW DAVIS * Fayetteville Office Also Licensed in Oklahoma DAILY & WOODS A PROFESSIONAL LIMITED LIABILITY COMPANY ATTORNEYS AT LAW KMW BUILDING 58 SOUTH SIXTH STREET P.O. BOX 1446 FORT SM ITH, AR 72902 TELEPHONE (479) 782-0361 FAX (479) 782-6160 3538 N. HIGHWAY 112, SUITE 200 FAYETTEVILLE, AR 72703 TELEPHONE (479) 582-0361 FAX (479) 251-8111 JAMES E. WEST PHILLIP J. NORVELL * DALE CARLTON * OF COUNSEL HARRY P. DAILY (1886-1965) JOHN P. WOODS (1886-1976) JOHN S. DAILY (1912-1987) May 6, 2009 Arkansas Oil and Gas Commission 301 Natural Resources Drive, Suite 102 Little Rock, Arkansas 72205 Re: ORDER REFERENCE NO. 341-2009-05 Application of SEECO, Inc. for Integration of All Unleased Mineral Interests and Non-consenting Working Interests in a unit described as Section 24, Township 8 North, Range 14 West, Faulkner County, Arkansas Commissioners: SEECO, Inc., 2350 N. Sam Houston Parkway E, Houston, TX 77032, hereby applies to the Arkansas Oil and Gas Commission for the integration of all unleased mineral interests and non-consenting working interests in its proposed drilling unit which is described above. 1. The proposed drilling unit is an established unit as defined in paragraph (f) of Arkansas Oil and Gas Commission General Rule B-43. Applicant proposes to drill a horizontal well from a non-exceptional surface location in the Southeast Quarter down to a non-exceptional bottom hole location in the Northeast Quarter of the abovedescribed unit. The proposed well will be drilled to a total vertical depth of 5,634 feet to test the Fayetteville Shale Formation. 2. Applicant owns oil and gas leases covering a substantial part of the proposed unit. Applicant should be named as operator of the well. The person or persons to be integrated are shown in Exhibit "A" attached hereto and made a part hereof. 3. Applicant has made diligent efforts to negotiate with the non-participating leasehold working interest owners, each of said parties owning an oil and gas leasehold interest in the proposed unit, but applicant has been unable to secure an assignment of the leasehold interest on an equitable basis or to secure participation by said parties in the drilling of the proposed well.
4. Applicant states that it has made repeated efforts to negotiate with the owners of the unleased mineral interests in order to agree on a plan of development of said drilling unit; that those owners have been offered an opportunity to participate in the proposed well; that they have been offered a fair and reasonable bonus consideration for the execution of an oil and gas lease covering their interests; that they have been furnished with a proposed oil and gas lease and a copy of the AAPL operating agreement form which applicant proposes to use in connection with the drilling of said well; but that all of the efforts of the applicant have produced no agreement by said parties. 5. Applicant states that it is in the best interest of conservation and the protection of correlative rights of all interested parties that the proposed unit be developed for oil and gas production without undue delay. 6. In order that applicant may proceed with the orderly development of said unit, applicant hereby requests that the Arkansas Oil and Gas Commission issue its order, in the alternative, that: (a) (b) The owners of non-consenting oil and gas leasehold working interests indicated above shall participate in the cost of drilling, testing and completion of the test well to be drilled by applicant on the captioned unit, subject to the terms of an Operating Agreement which substantially employs the terms of the AAPL Operating agreement, with a COPAS attached. All of the non-consenting oil and gas leasehold working interests within the proposed unit shall be force pooled and integrated into said unit, and a reasonable risk factor shall be established and assessed as a penalty against said integrated interest. 7. Applicant further states that due to the risks and costs inherent in the drilling of the proposed well, the Commission should fix a reasonable risk factor to be assessed as a penalty against the integrated interests within the unit. The risk factor should be applied to the proportionate cost and expense of drilling, completing and equipping the well, which would have been borne by the interest of said parties had they participated. Applicant requests that if the integrated parties do not elect within 15 days after issuance of the Commission's order as between alternatives (a) and (b), it shall be assumed that the integrated parties elected alternative (b) in lieu of the right to participate in the working interest in said unit. 8. Applicant requests that the Arkansas Oil and Gas Commission set this matter for public hearing, and after same, issue its order, in the alternative, that: (a) Each of the owners of the unleased mineral interests indicated above execute and deliver to applicant a one year oil and gas lease, on an AAPL lease form, for a bonus consideration of
$750.00 per net mineral acre to be paid as fair and reasonable compensation in lieu of the right to participate in the working interest in said unit, and that said oil and gas lease provide for a 1/5 royalty on oil and gas. (b) (c) Each of the owners of unleased mineral interests indicated above be force pooled and integrated into the captioned unit with assessment of a reasonable risk factor penalty against their interest. The owners of unleased mineral interests shall participate in the cost of drilling, testing and completion of the test well to be drilled by applicant on the captioned unit, subject to the terms of an operating agreement which substantially employs the terms of the AAPL Operating Agreement. Applicant further requests that said mineral owners be required to elect within fifteen (15) days after issuance of the Commission's order which method will be pursued in the development of the above described unit, and, in the event no election is made, that it shall be assumed that the owner of said unleased mineral interest has elected to accept a bonus of $750.00 per net mineral acre as compensation in lieu of the right to participate in the working interest in said unit, and with the royalty to be 1/5. 9. Applicant further states that due to the risks and costs inherent in the drilling of the proposed well, the Commission should fix a reasonable risk factor to be assessed as a penalty against the integrated interests within the unit. The risk factor should be applied to the proportionate cost and expenses of drilling, completing and equipping the well, which would have been borne by the interest of said parties had they participated. 10. Applicant further requests that this Commission's order specifically provide that any party electing either to participate or be force pooled subject to recoupment of a risk factor penalty be bound by the terms of the attached AAPL Operating Agreement for the life of commercial production within the unit so that all future unit operations might be proposed pursuant to the provisions of such agreement without the necessity of future action by this Commission. 11. Applicant also requests that said order be made applicable to any unknown spouse, heir, devisee, personal representative, successor or assign of said parties. 12. The names and addresses of parties interested in this proceeding are set forth in Exhibit "A" attached hereto and made a part hereof.
13. Please note the appearance of Thomas A. Daily of Daily & Woods, P.L.L.C., P.O. Box 1446, Fort Smith, Arkansas, 72902, on behalf of applicant. Very truly yours, Thomas A. Daily jmt
Page 1 of 3 Interested Parties Sec. 24-T08N-R14W INTERESTED PARTIES UNLEASED MINERAL OWNERS: ALLEN, R.B. Application for Integration Sec. 24-T08N-R14W Faulkner County, Arkansas April 2009 BAKER, N.J. BROWN, CORA M. BURTON, SHAUNTA CROWE, CURTIS & PATRICIA, H/W DURANT, LOUISIANA EALY, BESSIE EALY, CHRIS EALY, DIANE EALY, ERIC EALY, HOWARD & TELITHA, H/W EALY, QUEEN EALY, SHIRLEY EALY, VANESSA EALY, VERNITA EISELE, C.O. FOGLE, KENNETH R. & DARLENE J., H/W FOSTER, HERBERT & ETTA, H/W HANELL, C.L. HENDERSON, RITA CROWE & LESTER, H/W EXHIBIT A
Page 2 of 3 Interested Parties Sec. 24-T08N-R14W JENKINS, BENITA L. & DEBORAH D. CARRINGTON JOHNSON, JOHN JOHNSON, JOHN JR. JOHNSON, MARK JOHNSON, STEVE JOHNSON, NETTIE B. JOSEPH & MINNIE REITZ PARTNERSHIP LASH, CORA D. & EDNA L. THOMAS LAUENER, SHELBY K. & DANNA, H/W LAUENER, WALTER LEE, WANDA LAUENER MARTIN, HENRY, B. MCMEANS, HANNA MITCHELL, TAMMY OSTRANDER, JANE LAUENER & TRACY W/H PUTMAN, I.D. REYNOLDS, FANNY N. RODRIGUES, CHESTER M. RODRIGUES, SARAH A. & THERESA HURST SANDFORD, GEORGE L. SMITH, F.W. & NELLIE B., J/T THOMPSON, MORRIS W. & MINNIE B., H/W THOMPSON, S.F. & EUNICIA, H/Q EXHIBIT A
Page 3 of 3 Interested Parties Sec. 24-T08N-R14W TOKLAN ROYALTY CORP. TOWN OF TWIN GROVES TUCKER TIFFANY WORKING INTEREST OWNERS: BP AMERICA PRODUCTION COMPANY EXHIBIT A
Page 1 of 9 Interested Parties Sec. 24-T08N-R14W RESUME OF EFFORTS Application for Integration Sec. 24-T08N-R14W Faulkner County, Arkansas April 2009 UNLEASED MINERAL OWNERS: ALLEN, R.B. 02/18/09 Nick Nixon performed an internet search but was unsuccessful BAKER, N.J. 02/18/09 Nick Nixon performed an internet search but was unsuccessful BROWN, CORA M. 01/29/09 Nick Nixon sent a lease offer via U.S. Mail to last known address. 03/05/09 Nick Nixon sent a lease offer via U.S. Mail to last known address. 03/18/09 Nick Nixon sent another lease offer via U.S. Mail to last known address. BURTON, SHAUNTA CROWE, CURTIS & PATRICIA, H/W 01/29/09 Nick Nixon sent a lease offer via U.S. Mail to last known address. 03/05/09 Nick Nixon called telephone number found by internet search, and left a message. Nick Nixon also sent a lease offer to last known address. 03/20/09 Nick Nixon sent another lease offer via U.S. Mail. EXHIBIT B
Page 2 of 9 Interested Parties Sec. 24-T08N-R14W DURANT, LOUISIANNA 02/10/09 Nick Nixon performed an internet search for Louisiana Durant but was unsuccessful. Nick also tried corporations in Louisiana with the name Durant but no results were returned. 03/30/09 Nick Nixon performed an internet search but was not able to fine Louisiana Durant or any heir. EALY, BESSIE EALY, CHRIS EALY, DIANE EALY, ERIC EALY, HOWARD & TELITHA, H/W 01/29/09 Nick Nixon sent a lease offer via U.S. Mail to possible last known address. 03/05/09 Nick Nixon performed an internet search but was unsuccessful. Nick Nixon sent a lease offer to possible last known address. 03/18/09 Nick Nixon sent another lease offer to same address via U.S. Mail. EXHIBIT B
Page 3 of 9 Interested Parties Sec. 24-T08N-R14W EALY, QUEEN EALY, SHIRLEY EALY, VANESSA EALY, VERNITA EISELE, C.O. 02/05/09 Nick Nixon performed an internet search and found a John and Carole Eisele who appeared to be heirs of C.O. Eisele. 02/18/09 Nick Nixon mailed a lease offer to John and Carol at their address. 03/30/09 Nick Nixon performed an internet search but was not able to find C.O. Eisele or any heirs. FOGLE, KENNETH R. & DARLENE J., H/W 02/06/09 Nick Nixon called John Fogle, Kenneth s son, and was asked to let him think about it. 02/18/09 Nick Nixon sent a lease offer to John Fogle. 03/20/09 Barry Jeremiah sent a lease to John Fogle. EXHIBIT B
Page 4 of 9 Interested Parties Sec. 24-T08N-R14W FOSTER, HERBERT & ETTA, H/W 02/18/09 Nick Nixon sent a lease offer to possible address. 03/07/09 Nick Nixon performed an internet search but was unsuccessful. Nick Nixon sent a lease offer via U.S. Mail. 04/06/09 Nick Nixon received his lease offer back undeliverable. HANELL, C.L. HENDERSON, RITA CROWE & LESTER, H/W 01/29/09 Nick Nixon sent a lease offer via U.S. Mail to possible address. 02/18/09 Nick Nixon called possible telephone number found by internet search, and left a message. Nick Nixon also sent a lease offer to last known possible address. 03/20/09 Nick Nixon called a telephone number received from Curtis Crowe, and left a message. Nick Nixon sent another lease offer to last address. JENKINS, BENITA L. & DEBORAH D. CARRINGTON 01/20/09 Nick Nixon called telephone number and left a message for Benita Jenkins. 02/18/09 Nick Nixon sent a lease offer to possible last known address. 03/18/09 Nick Nixon spoke to Benita Jenkins and was told to send them a lease. 03/20/09 Nick Nixon sent a lease as requested. JOHNSON, JOHN JOHNSON, JOHN JR. EXHIBIT B
Page 5 of 9 Interested Parties Sec. 24-T08N-R14W JOHNSON, MARK JOHNSON, STEVE JOHNSON, NETTIE B. 01/29/09 Nick Nixon sent a lease offer High Street. 02/18/09 Nick Nixon sent a lease offer High Street. 03/05/09 Nick Nixon performed an internet search but was unsuccessful. Nick Nixon sent a lease offer to High Street. 03/18/09 Nick Nixon sent another lease offer to High Street. JOSEPH & MINNIE REITZ PARTNERSHIP 02/10/09 Nick Nixon performed an internet search for Joseph & Minnie Reitz, no phone numbers found. 02/18/09 Nick Nixon sent a lease offer to an address found by internet search. 03/18/09 Nick Nixon sent another lease offer. LASH, CORA D. & EDNA L. THOMAS 02/18/09 Nick Nixon sent a lease offer to last known address. 03/05/09 Nick Nixon performed an internet search but was unsuccessful. Nick Nixon sent a lease offer to last known address. 03/18/09 Nick Nixon sent a lease offer. EXHIBIT B
Page 6 of 9 Interested Parties Sec. 24-T08N-R14W LAUENER, SHELBY K. & DANNA, H/W 02/18/09 Nick Nixon sent a lease offer to P.O. Box. 03/05/09 Nick Nixon performed an internet search but was unsuccessful. Nick Nixon sent a lease offer to P.O. Box. 03/13/09 Nick Nixon received an e-mail from Shelby stating that they would like to consult with their lawyer. 03/30/09 Nick Nixon e-mailed Shelby to follow up. LAUENER, WALTER 02/18/09 Nick Nixon sent a lease offer to P.O. Box. 03/05/09 Nick Nixon performed an internet search but was unsuccessful. Nick Nixon sent a lease offer to P.O. Box. 03/13/09 Nick Nixon received an e-mail from Shelby stating that they would like to consult with their lawyer. 03/30/09 Nick Nixon e-mailed Shelby to follow up. LEE, WANDA LAUENER 02/18/09 Nick Nixon sent a lease offer to P.O. Box and physical address. 03/05/09 Nick Nixon performed an internet search but was unsuccessful. Nick Nixon sent a lease offer to P.O. Box. 03/13/09 Nick Nixon received an e-mail from Shelby Lauener stating that they would like to consult with their lawyer. 03/30/09 Nick Nixon e-mailed Shelby to follow up. MARTIN, HENRY, B. 02/10/09 Nick Nixon performed an internet search for Henry Martin but was unable to find any info or possible heirs. 03/30/09 Nick Nixon performed an internet search but was not able to find Henry Martin or any heir. MCMEANS, HANNA 02/10/09 Nick Nixon attempted to contact Hanna McMeans but was unable to find a phone number. 02/18/09 Nick Nixon sent a lease offer to physical address found by internet search. 03/30/09 Nick Nixon performed an internet search but was not able to find more info. Nick cent another lease offer. EXHIBIT B
Page 7 of 9 Interested Parties Sec. 24-T08N-R14W MITCHELL, TAMMY 02/18/09 Nick Nixon sent a lease offer to last known physical address. 03/05/09 Nick Nixon performed an internet search but was unsuccessful. Nick Nixon sent a lease offer to P.O. Box. 03/18/09 Nick Nixon sent another lease offer. OSTRANDER, JANE LAUENER & TRACY W/H 02/18/09 Nick Nixon sent a lease offer to P.O. Box and physical address. 03/05/09 Nick Nixon performed an internet search but was unsuccessful. Nick Nixon sent a lease offer to P.O. Box and physical address again. 03/13/09 Nick Nixon received an e-mail from Shelby Lauener stating that they would like to consult with their lawyer. 03/30/09 Nick Nixon e-mailed Shelby to follow up. PUTMAN, I.D. 02/10/09 Nick Nixon attempted to contact Ione Putman, possible heir of I.D. Putnam found by internet search. Nick called and left a message. 02/18/09 Nick Nixon sent a lease offer to Ione Putnam found internet search. 03/30/09 Nick Nixon performed an internet search but was not able to find I.D. Putnam or any more possible heirs. REYNOLDS, FANNY N. 03/30/09 Nick Nixon performed an internet search but was not able to find Fanny Reynolds or any heir. RODRIGUES, CHSTER M. 01/20/09 Nick Nixon called and left a message for Chester Rodrigues. 01/26/09 Nick Nixon spoke to Chester Rodrigues and was asked to mail a lease. 01/29/09 Nick Nixon mailed a lease to address given by Rodrigues. 02/18/09 Nick Nixon called Chester to follow up on lease status; Chester asked for more time. 03/18/09 Nick Nixon called Chester again and left a message. EXHIBIT B
Page 8 of 9 Interested Parties Sec. 24-T08N-R14W RODRIGUES, SARAH A. & THERESA HURST 01/29/09 Nick Nixon sent a lease offer to address in Maine. 02/18/09 Nick Nixon asked Chester Rodriques for Sarah s contact info; he was unable to provide any. 03/30/09 Nick Nixon sent a lease offer to address in Maine. SANDFORD, GEORGE L. 03/30/09 Nick Nixon performed an internet search but was not able to find George Sanford or any heir. SMITH, F.W. & NELLIE B., J/T 03/30/09 Nick Nixon performed an internet search but was not able to find or any heirs. THOMPSON, MORRIS W. & MINNIE B., H/W 02/18/09 Nick Nixon sent a lease offer to physical address. 03/05/09 Nick Nixon performed an internet search but was unsuccessful. Nick Nixon sent a lease offer to physical address again. 03/18/09 Nick Nixon sent a lease offer to same address. THOMPSON, S.F. & EUNICIA, H/W, T/E 01/29/09 Nick Nixon attempted to contact a Eunicia Thompson in Salem. A woman did answer but was very hard of hearing. Nick had a hard time communication with her so he sent a letter to follow up. 02/18/09 Nick Nixon sent a lease offer via mail to physical address. 03/18/09 Nick Nixon sent a lease offer via mail to two different physical addresses. TOKLAN ROYALTY CORP. 02/10/09 Nick Nixon sent a lease offer to physical address found by internet search. 02/18/09 Nick Nixon sent a lease offer again to same address. 03/05/09 Nick Nixon performed an internet search but was unsuccessful. Nick Nixon sent a lease offer again. 03/18/09 Nick Nixon sent a lease offer. EXHIBIT B
Page 9 of 9 Interested Parties Sec. 24-T08N-R14W TOWN OF TWIN GROVES 01/21/09 Nick Nixon called in the morning and afternoon and never received an answer. 02/18/09 Nick Nixon sent a lease offer to last known physical address. 03/05/09 Nick Nixon called in the morning and afternoon and never received an answer. 03/18/09 Nick Nixon sent a 3 rd lease offer. TUCKER TIFFANY WORKING INTEREST OWNERS: BP AMERICA PRODUCTION COMPANY April 6, 2009 Formal well proposal and AFE mailed. EXHIBIT B
EXHIBIT C Applicant s statement regarding Operating Agreement The applicant requests incorporation of the Model Form Joint Operating Agreement approved by the Arkansas Oil and Gas Commission on October 24, 2006, with Paragraph III.1.A.(1) of the COPAS providing for a drilling well rate of $7,500.00 and a producing well rate of $750.00, and with the following proposed revisions, deletions and/or insertions, if applicable: NONE