Page 22 - Petrospex_Elaine Prospect

3. Designation and Responsibilities of Operator:

The Party designated as Operator in #1 of this Agreement shall be Operator of
the Contract Area, and shall conduct and direct and have full control of all operations
on the Contract Area permitted, required by, and within the limits of this Agreement.
In its performance of services for Owner, Operator shall be an independent contractor
not subject to the control or direction of Owner except as to the type of operation to
be undertaken in accordance with the election procedures contained in this
Agreement. Operator shall not be deemed, or hold itself out as, the agent of Owner
with authority to bind them to any obligation or liability assumed or incurred by
Operator as to any third party.

A. In the performance of all duties on the Contract Area, Operator shall act
as a reasonably prudent Operator in a good and workmanlike manner with due
diligence and dispatch in accordance with good oilfield practice and in accordance
with applicable law and regulation; PROVIDED, HOWEVER, EXCEPT FOR
OPERATOR’S INTEREST IN THE CONTRACT AREA, OWNERS SHALL
INDEMNIFY OPERATOR FOR, FROM, AND AGAINST ANY AND ALL CLAIMS,
DAMAGES, AND LIABILITY OF EVERY KIND AND CHARACTER (INCLUDING
ALL COSTS AND EXPENSES, INCLUDING BUT NOT LIMITED TO ATTORNEYS
FEES), RESULTING FROM, ARISING OUT OF, OR INCIDENTAL TO
OPERATOR’S PERFORMANCE OF DUTIES ON THE CONTRACT AREA EVEN IF
THOSE LIABILITIES ARISE FROM OR ARE ATTRIBUTED TO OPERATOR’S
NEGLIGENCE. THE ONLY LIABILITIES TO WHICH THIS INDEMNITY
OBLIGATION DOES NOT APPLY ARE THOSE RESULTING FROM OPERATOR’S
GROSS NEGLIGENCE AND INTENTIONAL TORTS FOR WHICH OPERATOR
SHALL BE SOLELY RESPONSIBLE.

B. Each Owner hereby constitutes and appoints Operator as her/his
lawful agent and attorney in fact for the purpose of executing upon her/his
behalf, all applications, reports and related instruments required by
proper governmental agencies, or that may be otherwise necessary for the
drilling, completing, deepening, plugging, abandoning, perforating, shooting,
acidizing, re-working, operating, producing, repairing, maintaining, using as
a gas or water input well, or using as a salt water disposal well, of any well
drilled or proposed to be drilled upon the property, for the execution of oil and
gas contracts for the sale of oil and gas, division orders and similar
agreements and instruments all to the same extent and with the same force
and effect, within the scope of said appointment, as if said applications,
reports, instruments and agreements were executed and sworn to by each
such Owner individually, hereby ratifying and confirming all that said
attorney-in-fact has done or shall do in the premises by virtue hereof.

Operating Agreement - Page 2 of 15