The Trade

The project and trade presented herein relates exclusively to the Ellenburger Dolomite Formation which underlies the subject oil and gas lease, between the subsurface depths of 4,350’ - 4,550’. All other subsurface formations located on, in or under the subject West Taylor Oil & Gas Lease, as well as all oil, gas and/or associated hydrocarbon production from the excluded formations, are specifically excluded from this trade and project, and are reserved by the current owner/operator of the lease, Novco Operating Company, and its partners. The West Taylor Oil & Gas Lease is burdened with 25% Royalty & Overriding Royalty Interests. Thus, 100% of the Working Interest in the lease will receive 75% of the Net Revenue received from the sale of oil, gas and associated hydrocarbons produced from the Ellenburger Dolomite Formation. Participants in the drilling project will pay for 100% of the estimated costs of drilling and completing the proposed well, and neither NOC nor Eagle Island LLC will pay for any of the costs.

 

BEFORE PAYOUT, the interests of the parties shall be as follows:

1. Participants shall receive an 80% Working Interest (WI), which is a 60% Net Revenue Interest (NRI) in the revenue received from the sale of oil, natural gas and natural gas products produced by the proposed well, after payment of its pro rata share of severance taxes, property taxes and all expenses of operation.

2. NOC shall receive a 12% WI, which is a 9% NRI in the revenue received from the sale of oil, natural gas and natural gas products produced by the proposed well, after payment of its pro rata share of severance taxes, property taxes and all expenses of operation

3. Eagle Island LLC shall receive an 8% WI, which is a 6% NRI in the revenue received from the sale of oil, natural gas and natural gas products produced by the proposed well, after payment of its pro rata share of severance taxes, property taxes and all expenses of operation.

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AFTER PAYOUT, the interests of the parties shall be as follows:

1. Participants shall be assigned a 49% WI, which is a 36.75% NRI, in the 40 Acre Unit immediately adjacent to and surrounding the proposed new well, as set forth on “Exhibit C”. 2. NOC shall be assigned a 31% WI which is a 23.25% NRI in the proposed 40 Acre Unit

3. Eagle Island LLC shall be assigned a 20% WI, which is a 15% NRI, in the proposed 40 Acre Unit. The parties owning an interest in the proposed well are responsible for paying Federal and/or State Income Taxes levied on the revenue each receives from the sale of oil, natural gas and natural gas products produced by the proposed well.