Enterprise Products Partners L.P.

SEC Filings

GULFTERRA ENERGY PARTNERS L P filed this Form 10-Q on 05/15/1996
Entire Document
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50% working interest in Garden Banks Block 117 (the "Assigned Properties") from
Tatham Offshore for $30,000,000.  All of the Assigned Properties are located
offshore in the Gulf.  Under the terms of the Purchase and Sale Agreement,
Flextrend Development has committed, subject to obtaining financing, to pay all
of its working interest share of the costs associated with the drilling and, if
successful, completion of a minimum of five new wells, two on Viosca Knoll
Block 817, two on Garden Banks Block 72 and one on Garden Banks Block 117, and
the completion and tie-back of one existing well located on Garden Banks Block
117.  Flextrend Development is entitled to retain all of the revenues
attributable to the Assigned Properties until it has received net revenues
equal to the Payout Amount (as defined below), whereupon Tatham Offshore is
entitled to receive a reassignment of the Assigned Properties, subject to
reduction and conditions as discussed below. "Payout Amount" is defined as an
amount equal to all costs incurred by Flextrend Development with respect to the
Assigned Properties (including the $30,000,000 paid to Tatham Offshore) plus
interest thereon at a rate of 15% per annum.  After having an opportunity to
review the initial production history from the Assigned Properties, Flextrend
Development may exercise either of the following options: (i) to permanently
retain 50% of the assigned working interest in either the Viosca Knoll Block
817 property or the Garden Banks Block 72/Garden Banks Block 117 properties in
exchange for forgiving 25% of the then-existing Payout Amount or (ii) to
permanently retain 50% of the assigned working interest in all three Assigned
Properties in exchange for forgiving 50% of the then-existing Payout Amount.
In the event Flextrend Development elects to reduce the Payout Amount, it will
become obligated to fund any further development costs attributable to Tatham
Offshore's portion of the working interests, such costs to be added to the
Payout Amount.  Otherwise, any further development costs will be funded by
Flextrend Development on a discretionary basis, such costs to be added to the
Payout Amount.  Further, in the event Flextrend Development forgoes its right
to permanently retain a working interest in all or a portion of the Assigned
Properties, it will be entitled to recover from working interest revenues in
respect of the Assigned Properties all future demand charges payable for
platform access and processing, in their inverse order of maturity, prior to
any reassignment to Tatham Offshore.  Effective February 1, 1996, the
Partnership entered into an agreement with Tatham Offshore regarding certain
transportation agreements that increases the amount recoverable from the Payout
Amount by $7,500,000 plus interest.  See Note 6.

In December 1995, Flextrend Development initiated production from the Viosca
Knoll 817 lease.  In addition, Flextrend Development has drilled and is in the
process of placing on production two wells on the Garden Banks 72 lease and is
in the process of completing and placing on production an existing well at
Garden Banks Block 117.  As of March 31, 1996, the Payout Amount was
approximately $65.8 million, comprised of (i) initial acquisition and
transaction costs of $32.1 million, (ii) development and operating costs of
$31.4 million, (iii) prepaid demand charges of $7.5 million and (iv) interest
of $4.7 million, reduced by revenues of $9.9 million.


In February 1996, the Partnership and Texaco, Inc. formed Poseidon Oil Pipeline
Company, L.L.C. ("POPCO"), a Delaware limited liability company, which is 50%
owned by Poseidon Pipeline Company, L.L.C. ("Poseidon LLC"), an Operating
Company of the Partnership, and 50% owned by Texaco Trading and Transportation
Inc. ("Texaco Trading"), a subsidiary of Texaco, Inc. to construct own and
operate the Poseidon Oil Pipeline. Pursuant to the terms of the organizational
documents, Poseidon LLC initially contributed assets, at net book value,
related to the construction of the initial phase of the Poseidon Oil Pipeline
as well as certain dedication agreements with producers and Texaco Trading
initially contributed an equivalent amount of cash as well as its rights under
certain oil purchase and sale agreements. Poseidon LLC and Texaco Trading have
each also agreed to contribute 50% of the additional construction and
installation costs of the Poseidon Oil Pipeline, currently estimated at $75.0
million in the aggregate.