Assignment and Participation Agreement between Rio Exploration Company and Houston American Energy Corporation for Tambaqui Association Contract (Colombia)

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Summary

This agreement, effective January 1, 2003, is between Rio Exploration Company and Houston American Energy Corporation (HAEC). Rio agrees to transfer a 12.5% interest in Hupecol, LLC and the Tambaqui Association Contract in Colombia to HAEC. In return, HAEC will pay $312,500 and cover 12.5% of the drilling and completion costs for a specified well. HAEC will also share monthly overhead costs and receive relevant project data. Both parties agree to offer each other participation rights in future Colombian oil and gas projects for five years. The agreement is governed by Texas law.

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EX-10.1 3 doc2.txt Exhibit 10.1 RIO EXPLORATION COMPANY January 15, 2003 Mr. John F Terwilliger, Chairman Houston American Energy Corporation 801 Travis, Suite 2020 Houston, TX 77002 Re: Tambaqui Association Contract Rio Exploration Company/Hupecol, LLC State of Casanare, Colombia Effective Date: December 31, 1997 Dear Mr. Terwilliger, This letter, when fully executed, shall constitute an agreement and binding contract effective January 1, 2003 (the agreement), between Rio Exploration Company, a Texas Corporation, 8700 Crownhill Blvd., Suite 501, San Antonio, Texas 78209, represented and acting by and through and under its President, John T. Saunders, Jr. (hereinafter referred to as "Rio"), and Houston American Energy Corporation,. a Texas Corporation, 801 Travis, Suite 2020, Houston, Texas 77002, acting under its Chairman, John F. Terwilliger (hereinafter referred to as "HAEC"). Rio and HAEC are herein collectively referred to as the "parties," and each of the terms Rio and HAEC shall also be deemed to include their respective parents or affiliates, if any. Upon execution of this agreement, Rio being the equitable and forthcoming legal owner of a 16.38102% of one hundred percent (100%) interest in Hupecol, LLC, who is the legal owner of the Cara Cara Association Contract conveyed to Hupecol by ECOPETROL, the state-owned oil company of the Country of Colombia, dated December 31, 1997, in the State of Casanare, Colombia, has agreed to convey, transfer, and assign and by these presents has conveyed, transferred, and assigned to HAEC a twelve and one-half percent (12 %) of one hundred percent (100%) interest in Hupecol, LLC, and the Tambaqui Association Contract, composed of 36,000 hectares more or less, and to be known as the Tainbaqui Association Contract, issued by ECOPETROL and the State of Casanare. It is also understood by the parties hereto that Hupecol, LLC, a Texas limited liability company, is in the process of forming a new limited liability company, which will be the sole owner of the Tambaqui Association Contract, of which Rio will be assigned, and be the owner of a 16.38102% of one hundred percent (100%) share of the new "Tambaqui Limited Liability Company." Upon assignment to Rio of the "Tambaqui Limited Liability Company," Rio agrees to assign to HAEC a twelve and one-half percent (12 %) of one hundred percent (100%) interest in the Tambaqui LLC, within five working days of the date assigned to Rio. 8700 Crownhill Boulevard, Suite 501, San Antonio, Texas ###-###-#### 4 For and in consideration of three hundred and twelve thousand five hundred and no/100 U.S. dollars ($312,500.00), the receipt and sufficiency of which is hereby acknowledged and the commitment and obligation of HAEC to assume twelve and one-half percent (12 %) of the drilling and completion cost of the Tambaqui #2 well, to be commenced on or about March 15, 2003, as outlined in the AFE attached as Exhibit "A" hereto, the estimated cost of the HAEC twelve and one-half percent (12 %) interest to be one hundred and sixty eight thousand five hundred and seventy nine and 38/100 U.S. dollars ($168,579.38), Rio hereby makes this assignment. Upon execution of this agreement by the parties hereof on or before February 1, 2003, HAEC agrees to forward a check, made payable to Rio Exploration Company, in the amount of three hundred and twelve thousand five hundred and no/100 U.S. dollars ($312,500.00), as consideration for purchasing the Rio interest. In addition, HAEC agrees to forward to Hupecol the amount of one hundred and sixty eight thousand five hundred and seventy nine and 38/100 U.S. dollars ($168,579.38) upon cash call from Hupecol. Rio agrees to furnish HAEC with copies of all data pertinent to the Tambaqui Block, including, but not limited to, contracts, geophysical data, log data, or data requested by HAEC that is currently available to Rio and Hupecol, LLC, or generated for the benefit of the parties and shall be owned by the parties in proportion to their interest in the contract and any such party shall be entitled to copy such data. The party or parties requesting such data shall pay all cost of reproduction of such data. This agreement shall be supplemented by a (mutually agreeable by all parties subject to the contract) Joint Development and Operating Agreement that will be attached to the new "Tambaqui Limited Liability Company" incorporating the principal terms, conditions, and provisions set forth in this agreement and such other provisions as are essential to the management and operation of the proposed LLC and Association Contract. This agreement shall be construed and interpreted by the parties to be pursuant to the laws of the State of Texas, irrespective that all operations are being conducted in the Republic of Colombia. Jurisdiction and venue shall be applicable to the "Tambaqui Association Contract" as if the same were within the boundaries of the State of Texas and governed by the laws and statutes of the State of Texas. Rio makes no warranties, express or implied, as to the reserves in place or the viability of the existing wellbores, or the success of the well to be drilled under said agreement The interest is sold "as is" subject to all terms, conditions, and provisions pertaining thereto. Effective January 1, 2003, HAEC agrees to bear twelve and one-half percent (12 %) of the monthly overhead being paid by Hupecol and its owners on a month-to-month basis to cover operations and overhead attributable to this agreement. Presently, the monthly overhead to Hupecol is thirteen thousand five hundred and no/100 U.S. dollars ($13,500.00) per month, resulting in a monthly contractual overhead to HEAC effective January 1,, 2003, of one thousand six 1 hundred eighty seven and 50/100 U.S. dollars ($1,687.50) per month, plus any additional overhead expenses incurred, which shall remain in force and effect until the monthly overhead rates are adjusted by agreement between the parties. Nothing contained in this agreement shall be deemed in any way or manner to prohibit or restrict in any way the right or freedom of any party hereto to engage in oil and gas activities outside the Tambaqui Block in Colombia, South America. However, if either party hereto enters into a geological project, such as geological mapping or other oil and gas activity and decides to go forward with an oil and gas project and enters into an association contract, both parties to this agreement agree to offer each other the right to participate for a twelve and one-half percent (12 %) working interest on or at cost basis, whether it be with the companies that are subject to this agreement or their principles or assigns for a period of five years from the date of this agreement. If the foregoing terms and conditions are acceptable, please execute your acceptance hereof by executing duplicate originals of this agreement in the space provided below and return one original to Rio. AGREED TO and ACCEPTED this 15th day of January, 2003. ---- RIO EXPLORATION COMPANY HOUSTON AMERICAN ENERGY CORPORATION By John T. Saunders, Jr. By: ' John F. Terwilliger President Chairman 2 HUPECOL P. 0. DRAWER 669 BEEVITLE, TEXAS AUTHORITY FOR EXPENDITURE # 2002-02 DATE: 10/31/02 WELL: TAMBAQUI #2 COUNTRY: COLUMBIA PROSPECT: TAMBAQUI PROSPECT (offset to Tambaqui #1) PROPOSED DEPTH; 5500' LOCATION: x=1,288,940 y=1,031,900 (900 Meters NE of Tambaqui #1)
Total Acct. Drilling Completion Estimated Intangible Costs (G/L # 6010) Codes Costs Costs Costs - ------------------------------ ----- -------- ---------- --------- LOCATION COSTS: Survey 105 4,000 4,000 Location & Road (w/damages) 121 52,000 50,000 102,000 Location Cleanup/Environmental 189 17,000 17,000 DRILLING COSTS: Drilling Overhead 101 Permit Fees/Community Aid/Security 109 10,000 10,000 Rig Mobilization 119 100,000 100,000 Drilling ft to 129 12 days at $9,960.00 / Day 129 119,520 115,488 235,008 Fuel 248 3,900 3,900 7,800 Water 141 2,400 2,400 4,800 Drilling & Completion Fluids/chemicals 133 45,028 5,750 50,778 Drill Bits 137 37,388 37,338 Cementing Services 169 25,312 23,357 48,668 Casing Crews/Labor/Inspections 213 11,590 10,728 22,318 Surface Equip. Rental 210 50,993 23,013 74,006 Drillstring & Downhole Rental 211 3,406 1,975 5,381 Directional Drilling Services 139 Hauling & Freight/Air 206 3,600 2,400 6,000 Roustabout & Misc. Services 218 4,250 3,000 7,250 Mud & Cuttings Disposal 193 Communication Expenses 230 3,600 3,600 Gate Guard 215 Tubular / BOP Testing 541 Plugging Costs (if necessary) 175 EVALUATION COSTS: Electric Logging 149 83,550 83,550 Mud Log Services 145 13,920 4,140 18,060 Core & Paleo Analysis 157 Drill Stem Testing 161 COMPLETION COSTS: Completion Unit 181 Cased Hole Wireline Services 173 16,409 16,409 Well Testing / DST 266 7,717 51,775 59,492 Well Stimulation Treatments 177 MISC. COSTS: Supervision 551 25,500 18,000 43,500 Drilling Liability Ins. 573 VAT (Taxes) 576 80,678 80,678 Contingencies 280 62,338 27,958 90,296
HUPECOL P.0. DRAWER 669 BEEVILLE, TEXAS AFE # 2002-02 Well: TAMBAQUI#2
Total Acct. Drilling Completion Estimated TANGIBLE COSTS (G/L #1150) Costs Costs Costs Costs - -------------------------- ----- --------- ----------- ---------- WELLHEAD EQUIPMENT: Brandenhead 435 Casing Spool 435 2,494 2,494 Tubing Spool 430 6,688 6,688 Christmas Tree 430 11,818 11,818 COMPLETION EQUIPMENT: Packers 425 1,751 1,751 3,502 Gravel Pack & Equipment 178 50,000 50,000 Downhole Pump 482 TUBULARS: Conductor 402 2,000 2,000 Surface 500' of 9-5/8", N80 Buttr 404 10,000 10,000 Intermediate 406 Liner 408 Production 5500' of 7", 26# N80 Buttr 410 82,500 82,500 Tubing 5400' of 3-1/2", 9.3# N80 EUE 8rd 415 45,900 45,900 Sucker Rods 481 SURFACE EQUIPMENT: Line Heaters 455 Heater Treater 455 Tanks 440 Dehydration 470 Separation 450 Gas Mess 475 Flowlines 420 Pump Equipment (Cavity Pump) 480 5,800 5,800 Engines 483 Elec. Equipment & Power lines 462 Misc. Valves, Fittings, Etc. 465 Installation Costs 495 - ---------------------------------------------------------------------------------------------- Total Tangible Costs $ 16,245 $ 204,457 $ 220,702 - ---------------------------------------------------------------------------------------------- GRAND TOTAL $ 703,207 $ 645,428 $1,348,635 - ----------------------------------------------------------------------------------------------
This AFE is an Estimate of Costs only. Approval of same is a commitment to pay your proportionate share of the actual costs in drilling to the objective depth specified or complete the work herein specified.