Rental Equipment Terms and Conditions

Empire Tool (the “Lessor”) hereby leases to the party named on the Rental Agreement (the “Lessee”) the drill pipe, tools, or other equipment described in the Rental Agreement upon the terms and conditions hereinafter set forth and as described in the Rental Agreement.

1. Condition of Equipment

   • All pipe and tools are run at the Lessee’s risk.
   • The Lessor exercises extreme precaution to keep all equipment in premium condition but does not guarantee it.
   • Prior to the lease, all pipe is inspected according to API-RP7G specifications, plus magnetic particle inspection of tool joints.
   • The Lessee accepts the pipe as premium-grade inspected upon delivery unless the Lessor is notified immediately.

2. Inspection and Repairs

   • Upon completion of the lease, it is the responsibility of the Lessee to have the pipe inspected to API-RP7G specifications, including magnetic particle inspection of tool joints.
   • All inspection and repair charges will be charged to the Lessee.
   • Any pipe not returned, or that fails inspection to premium grade, and/or which Empire Tool considers unfit for further rental use, will be charged to the Lessee at current replacement cost.

3. Minimum Lease Period

   • The minimum lease period is 20 days.

4. Lessee's Property on Lessor’s Premises

   • Empire Tool is not responsible for customer property left on its premises for more than 60 days.

5. Liability and Indemnity

   • The Lessee agrees that the Lessor shall not be liable for any damage, whether subsurface or not, to any property of the Lessee or any property upon which the Lessee is lawfully in occupation.
   • This applies regardless of whether the damage is caused by the sole negligence of the Lessor.
   • The Lessee hereby agrees to hold harmless and indemnify the Lessor and its employees from and against all claims by any person, firm, or corporation for personal injuries or property damage (whether subsurface or not), regardless of whether the damage is caused by the equipment or the sole negligence of the Lessor.

6. Responsibility for Equipment

   • The Lessee assumes all responsibility for equipment while it is out of the possession of the Lessor.
   • The Lessee agrees to return the equipment to the Lessor in as good condition as it was at the effective date of the lease, excepting normal wear and tear from reasonable use.

7. Exposure to Sour Gas

   • Where sour gas is present, Empire Tool, as per IRP Volume 1-2008, paragraph 1.8.5.1, requires exposure control for all grades of pipe.
   • Overexposure of sour gas to the drill string will result in the Lessee being invoiced for replacement of the drill string.

8. Damaged or Lost Equipment

   • All equipment lost or damaged beyond repair will be paid for by the Lessee at the new replacement cost, including any expenses incurred by the Lessor due to currency exchange rate differences.
   • Damaged equipment that can be repaired will be repaired at the Lessee’s expense, including any servicing charges or third-party expenses incurred by the Lessor.
   • Transportation charges shall be borne by the Lessee.

9. Rental Charges

   • Rental begins when equipment leaves the Lessor’s yard and continues until returned unless otherwise agreed upon.
   • Damaged equipment under repair will be charged at half the rental rate until it is ready for service.
   • Lost equipment will be charged at the full rental rate until it is replaced.

10. Governing Law

• This lease is made and shall be effective when the equipment is delivered to the Lessee or the carrier of the equipment.
• The laws of the Province of Alberta shall govern this agreement.
• In the event of a dispute, the parties agree to submit to the jurisdiction of the Courts of Edmonton, Alberta.

11. Drill Pipe Excessive Wear

• All drill string rentals will be subject to the CAOEC T-24-02 Excessive wear clause and all addendums thereafter outlines on the CAOEC website. Unless otherwise agreed to by the parties.

• Definition of Excessive Wear

  • Excessive tube wear is defined as any wall thickness loss that exceeds what Empire Tool expects over the life of the pipe.
  • Empire Tool expects the life of its pipe to be 1,500 days, as per COADC Technical Information Bulletin T-21-01: Abnormal/Excessive Wear in Tubular Equipment.
  • This expectation equates to an allowable wear percentage per day of 0.067%.

• Wear Calculation

  • Wear on the tubes will be calculated using the wall thickness measurement from the previous inspection and the current inspection.
  • The percentage of wear will be compared to the allowable wear percentage defined above to determine if there is excessive wear.

• Excessive Wear Charges

  • Excessive wear will be charged using current market prices for the drill pipe.
  • The formulas for calculating excessive wear are as follows:
    • Excessive Wear % = (% worn during interval) - (% wear allowable during interval)
    • Excessive Wear Cost = (Excessive Wear %) × (Replacement cost)

• Example Calculation

  • Drill pipe: 4 ½” S135, 16.60 lbs/ft, with DS40 connections
  • Nominal wall thickness: 0.337”
  • Premium minimum wall thickness: 0.270”
  • Wall thickness from current inspection: 0.293”
  • Wall thickness from previous inspection: 0.321”
  • Operating days: 300
  • Replacement cost: $1,700

  Steps:

  • Wear % between inspections = $(0.321 - 0.293) ÷ 0.067$ = 41.79%
  • Allowable wear for 300 days = (300 × 0.067%) = 20.10%
  • Excessive wear = (41.79% - 20.10%) = 21.69%
  • Excessive wear cost = ($1,700 × 21.69%) = $368.73

• Payment Terms

  • Net Cash – No Discount: All charges are due and payable at the office of the Lessor in Nisku, Alberta, on the 20th of the month following the invoice date.
  • Interest at 12% will be charged on overdue balances after 60 days.
  • A 1.9% Safety and Environmental Fee will be applied to all rental items, with a maximum fee of $950.00.