Enterprise Products Partners L.P.

SEC Filings

10-Q
GULFTERRA ENERGY PARTNERS L P filed this Form 10-Q on 08/13/1996
Entire Document
 
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               LEVIATHAN PIPELINE PARTNERS, L.P. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
                                  (unaudited)

50% working interest in Garden Banks Block 117 (the "Assigned Properties") from
Tatham Offshore for $30.0 million.  All of the Assigned Properties are located
offshore in the Gulf.  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 $30.0 million paid to Tatham
Offshore) plus interest thereon at a rate of 15% per annum.  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 $7.5 million plus interest (Note 6).
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, exclusive of the $7.5 million plus interest added
to the Payout Amount in connection with certain transportation agreements as
discussed above.  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.  If however, Tatham
Offshore (i) satisfies in full the future demand charges payable for platform
access and processing, (ii) delivers evidence that it has received a rating of
BBB-, or better, from at least two reputable rating agencies or (iii) delivers
evidence that an entity with a rating of BBB-, or better, has agreed to
guarantee, assume or, to the reasonable satisfaction of the Partnership,
otherwise become responsible for such future demand charges payable, then
Tatham Offshore would receive a reassignment of the Assigned Properties upon
payout.  In the event payout has occurred but none of the above conditions have
been met, Tatham Offshore is entitled to receive one-third (1/3) of the
revenues, net of operating and platform access and processing fees, until such
time as one of the above conditions is met.

Each of the Assigned Properties is currently producing natural gas and/or oil.
As of June 30, 1996, the Payout Amount was $77.7 million, comprised of (i)
initial acquisition and transaction costs of $32.1 million, (ii) development
and operating costs of $49.3 million, (iii) prepaid demand charges of $7.5
million and (iv) interest of $7.1 million, reduced by net revenue of $18.3
million.

NOTE 3 -- CONSTRUCTION AND ACQUISITION ACTIVITIES:

In February 1996, the Partnership and Texaco, Inc. formed Poseidon Oil Pipeline
Company, L.L.C. ("POPCO"), a Delaware limited liability company, which at
inception, was 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. POPCO was
formed 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 agreements.

The Poseidon Oil Pipeline will ultimately consist of approximately 200 miles of
16 to 24 inch diameter pipeline capable of delivering up to 400,000 barrels per
day of sour crude oil production to multiple markets onshore Louisiana.  The
initial 117-mile segment, which extends easterly from Garden Banks Block 72 to
Ship Shoal Block 332, was placed in service in April 1996.  The second phase,
an 83-mile segment, extending in a northerly direction from the Ship Shoal
Block 332 Platform to Calliou Island, Louisiana, is currently under
construction and is scheduled to be completed by the fourth quarter of 1996.





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