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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report: April 1, 2004
(Date of earliest event reported)
ENTERPRISE PRODUCTS PARTNERS L.P.
(Exact name of registrant as specified in its charter)
DELAWARE 1-14323 76-0568219
State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation or organization) Identification Number)
2727 NORTH LOOP WEST, HOUSTON, TEXAS 77008
(Address of principal executive offices) (Zip Code)
(713) 880-6500
(Registrant's telephone number, including area code)
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ITEM 5. OTHER EVENTS.
1. On April 5, 2004, Enterprise Gas Processing, LLC (a subsidiary of the
registrant and referred to herein as the "Processor"), Shell Oil
Company and several affiliates of Shell Oil Company ("Shell") executed
the Seventh Amendment to Conveyance of Gas Processing Rights, dated as
of April 1, 2004, (the "Amendment"). The Amendment is included as an
exhibit to this report.
The Amendment amends various sections of the agreement, including
Section 6.6. Section 6.6 provides for certain reductions to the plant
thermal reduction ("PTR") reimbursement payable to Shell if the
Processor's Average Net Margin (as defined in Section 6.6) is below a
certain "floor" amount or certain increases to the PTR reimbursement
payable to Shell if the Processor's Average Net Margin is above certain
"ceiling" amounts. Further, the Amendment adds a new Section 6.7 to the
agreement that provides for a further reduction each month to the PTR
reimbursement payable to Shell based on the total volume of Shell's gas
that is processed during the month. The purpose of the foregoing
adjustments is to provide the Processor with an acceptable return on
the processing of Shell's gas along with a share of the upside
associated with such processing when gas processing margins are
positive and provide Shell with relative assurance that its gas will
continue to be processed during periods when natural gas prices are
high relative to NGL prices (times when the Processor would normally
choose not to process a producer's natural gas stream).
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) EXHIBITS:
*10.1 Seventh Amendment to Conveyance of Gas Processing Rights,
dated as of April 1, 2004 among Enterprise Gas Processing,
LLC, Shell Oil Company, Shell Exploration & Production
Company, Shell Offshore Inc., Shell Consolidated Energy
Resources Inc., Shell Land & Energy Company, Shell Frontier
Oil & Gas Inc. and Shell Gulf of Mexico Inc.
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*Portions of this exhibit have been omitted pursuant to a request for
confidential treatment.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrants have duly caused this report to be signed on their behalf by the
undersigned hereunto duly authorized.
ENTERPRISE PRODUCTS PARTNERS L.P.
By: Enterprise Products GP, LLC,
as General Partner
Date: April 26, 2004 By: /s/ Michael J. Knesek
-----------------------------------
Michael J. Knesek
Vice President, Controller and
Principal Accounting Officer
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EXHIBIT INDEX
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------ -------------------
*10.1 Seventh Amendment to Conveyance of Gas Processing Rights,
dated as of April 1, 2004 among Enterprise Gas Processing,
LLC, Shell Oil Company, Shell Exploration & Production
Company, Shell Offshore Inc., Shell Consolidated Energy
Resources Inc., Shell Land & Energy Company, Shell Frontier
Oil & Gas Inc. and Shell Gulf of Mexico Inc.
- ---------
*Portions of this exhibit have been omitted pursuant to a request for
confidential treatment.
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EXHIBIT 10.1
PAGES WHERE CONFIDENTIAL TREATMENT HAS BEEN REQUESTED ARE MARKED "CONFIDENTIAL
TREATMENT REQUESTED." THE REDACTED MATERIAL HAS BEEN SEPARATELY FILED WITH THE
COMMISSION, AND THE APPROPRIATE SECTION HAS BEEN MARKED AT THE APPROPRIATE PLACE
AND THE MARGIN WITH A STAR (*).
SEVENTH AMENDMENT TO CONVEYANCE
OF
GAS PROCESSING RIGHTS
DATED AS OF APRIL 1, 2004
BETWEEN
ENTERPRISE GAS PROCESSING, LLC,
SHELL OIL COMPANY,
SHELL EXPLORATION & PRODUCTION COMPANY,
SHELL OFFSHORE, INC.,
SHELL CONSOLIDATED ENERGY RESOURCES, INC.,
SHELL LAND & ENERGY COMPANY,
SHELL FRONTIER OIL & GAS, INC.
AND
SHELL GULF OF MEXICO INC.
TABLE OF CONTENTS
1. DEFINITIONS................................................................................................. 3
2. TERM........................................................................................................ 7
2.1 Primary and Successive Terms....................................................................... 7
2.2 Termination of Agreement........................................................................... 7
2.3 Survival Provision................................................................................. 7
2.3.1 Post Termination: Continuation as to Dedicated Leases........................................... 7
2.3.2 Post Termination: Proposals for New Volumes..................................................... 8
3. ASSIGNMENT OF GAS PROCESSING RIGHTS......................................................................... 8
3.1 Grant of Processing Rights......................................................................... 8
3.2 Attachment of Gas Processing Rights................................................................ 9
3.3 Producers' Nondisturbance Covenant; Prior Reservations or Contracts................................ 9
3.4 Processor's Right to Consume PTR................................................................... 9
3.5 Title to Raw Make, Products, Processor's Retrograde and PTR........................................ 10
3.6 Limitations on Upstream Processing................................................................. 10
3.6.1 Producer's Operational Requirements............................................................. 10
3.6.2 Processor's Exclusive Rights.................................................................... 10
3.6.3 NGL Banks....................................................................................... 10
4. PROCESSOR'S OBLIGATION TO PROCESS AND REDELIVER; LIMITATIONS................................................ 11
4.1 Processor's Obligation to Process and Redeliver Residue Gas........................................ 11
4.2 Temporary Cessation of Processing.................................................................. 11
4.3 Refused Volumes.................................................................................... 11
4.3.1 Insufficient Capacity; Option to Refuse Volumes................................................. 11
4.3.2 Option to Reacquire Refused Volumes............................................................. 12
4.4 Excludable Gas..................................................................................... 12
4.4.1 Option to Exclude Certain Gas................................................................... 12
4.4.2 Option to Reacquire Excludable Gas.............................................................. 13
4.5 Suspension in Case of Dangerous Condition.......................................................... 13
5. SPECIFICATIONS FOR GAS AND SLUG LIQUIDS..................................................................... 13
5.1 Quality Specifications............................................................................. 13
5.2 Testing............................................................................................ 13
5.3 Off-Spec Deliveries................................................................................ 14
5.4 Notification of Non-Conformity; Rejection of Delivery.............................................. 14
5.5 Acceptance of Nonconforming Product................................................................ 14
5.6 Processor's Limited Commitment to Accept Non-Conforming Product.................................... 14
5.7 Specifications for Residue Gas Redelivered by Processor............................................ 14
5.8 Off Spec Pipeline.................................................................................. 15
6. CONSIDERATION............................................................................................... 15
6.1 Payment............................................................................................ 15
6.2 Consideration Basis................................................................................ 15
6.3 Consideration Timing............................................................................... 15
6.4 Consideration Basis Updates........................................................................ 15
6.5 Processor Provided PTR............................................................................. 15
6.6 Consideration Adjustment .......................................................................... 16
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6.7 Consideration Reduction.......................................................................... 17
7. PTR AND PTR TRANSPORTATION.................................................................................. 18
8. ROYALTY..................................................................................................... 18
8.1 Responsibility for Royalty Payments................................................................ 18
8.2 Delivery of Royalty Taken In Kind.................................................................. 19
8.3 Compliance with Federal Acts....................................................................... 19
9. METERING, ANALYSIS, AND ALLOCATION.......................................................................... 19
9.1 Gas Metering, Analysis and Reports................................................................. 19
9.2 Liquids Metering and Analysis...................................................................... 20
9.3 Meter Failure...................................................................................... 20
10. INDEMNITY................................................................................................... 20
11. CURTAILMENT................................................................................................. 20
11.1 Mutual Agreement Not to Curtail or Withhold........................................................ 20
11.2 Limited Right to Interrupt Performance for Maintenance, etc........................................ 20
12. FORCE MAJEURE............................................................................................... 21
12.1 Performance Excused................................................................................ 21
12.2 Force Majeure Defined.............................................................................. 21
13. AUDIT RIGHTS................................................................................................ 21
14. NOTIFICATIONS............................................................................................... 22
14.1 Annual Information................................................................................. 22
14.2 Notice of Material Changes to Annual Information................................................... 22
14.3 Notice of Proposed Transfers of Dedicated Leases................................................... 22
14.4 Notice of Pending Transportation Agreements........................................................ 22
14.5 Notice of Scheduled Plant Downtime................................................................. 22
15. CONFIDENTIALITY............................................................................................. 22
15.1 General............................................................................................ 22
15.2 Annual Information................................................................................. 23
16. DISPUTE RESOLUTION.......................................................................................... 23
16.1 Arbitration. ...................................................................................... 23
16.2 Initiation of Procedures........................................................................... 23
16.3 Negotiation Between Executives..................................................................... 24
16.4 Binding Arbitration................................................................................ 24
17. TRANSFER AND ASSIGNMENT..................................................................................... 24
17.1 Successors and Assigns............................................................................. 24
17.2 Processor's Rights Under Leases.................................................................... 25
17.3 Affiliates of Producer Parties..................................................................... 25
17.4 Excepted Leases.................................................................................... 25
18. MISCELLANEOUS............................................................................................... 25
18.1 Title and Captions................................................................................. 25
18.2 Pronouns and Plurals............................................................................... 25
18.3 Separability....................................................................................... 25
18.4 Successors......................................................................................... 26
18.5 Further Actions.................................................................................... 26
18.6 Notices............................................................................................ 26
18.7 Amendment only in Writing.......................................................................... 26
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18.8 Right of Ingress and Egress........................................................................ 26
18.9 No Special Damages................................................................................. 26
18.10 Applicable Law..................................................................................... 27
18.11 Entire Agreement................................................................................... 27
18.12 Counterparts....................................................................................... 27
EXHIBIT A Dedicated Leases as of August 1, 1999
EXHIBIT B Excluded Leases
EXHIBIT C Consideration Bases
EXHIBIT D Upstream Pipelines
EXHIBIT E Letter of Attornment
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SEVENTH AMENDMENT TO CONVEYANCE
OF GAS PROCESSING RIGHTS
THIS SEVENTH AMENDMENT TO CONVEYANCE OF GAS PROCESSING RIGHTS (this
"AGREEMENT") dated as of April 1, 2004 ("EFFECTIVE DATE") is made by and between
Enterprise Gas Processing, LLC ("PROCESSOR"), a Delaware limited liability
company, on the one hand, and Shell Oil Company ("SOC"), Shell Exploration &
Production Company ("SEPCO"), Shell Offshore Inc., individually and as successor
in interest by merger to Shell Deepwater Development Inc. and Shell Deepwater
Production Inc. ("SOI"), Shell Consolidated Energy Resources Inc. ("SCERI"),
Shell Land & Energy Company ("SLEC"), Shell Frontier Oil & Gas Inc. ("SFOGI"),
and Shell Gulf of Mexico Inc. ("SGOM"), all Delaware corporations, on the other,
the latter seven parties and their respective Affiliates (as defined below),
successors and assigns being collectively referred to as "PRODUCER" or
"PRODUCERS". Producers and Processor are sometimes referred to as a "PARTY" or
collectively as the "PARTIES".
RECITALS
A. Effective January 1, 1982, SOI and SOC executed that certain
Conveyance of Gas Processing Rights (the "ORIGINAL CONVEYANCE"), which granted
to SOC the right to process SOI's gas sold pursuant to certain identified gas
sale contracts.
B. Effective January 1, 1984, SOC assigned its rights under the
Original Conveyance to Shell Western E&P Inc. ("SWEPI").
C. Effective January 1, 1992, the Original Conveyance was amended
(the "FIRST AMENDMENT") to provide for a different method of calculating the
annual compensation to be paid to SOI by SWEPI and to provide that a list of
mineral leases, rather than gas sales contracts, to which the Original
Conveyance applied, would be updated annually.
D. Effective January 1, 1997, the First Amendment was amended
(the "SECOND AMENDMENT") solely with respect to certain mineral leases, the
production from which was dedicated for Processing at the Venice Plant of Venice
Energy Services Company, L.L.C., to confirm SWEPI's ownership of the Gas
Processing Rights for those mineral leases.
E. Effective January 1, 1998, the Second Amendment was amended in
its entirety (the "THIRD AMENDMENT") to (1) recognize and confirm SWEPI's
ownership of the Producers' Gas Processing Rights associated with the Equity Gas
attributable to the leases listed on Exhibit "A" to such Third Amendment,
including the right to Process Equity Gas, and receive the benefits therefrom,
with respect to such leases; (2) confirm that the transfer of such rights to
SWEPI was and is binding on Producers as SOI's successors and assigns, and their
respective Affiliates, notwithstanding non-compliance by Producer or SWEPI with
respect to any provision concerning annual notification requirements of the
First Amendment; (3) provide that SWEPI shall be conveyed without further act,
the Gas Processing Rights for Equity Gas from any Lease upon the earlier of that
point in time (x) when Gas production from such Lease is committed to be
transported in an Upstream Pipeline, (y) when such Lease (or unitized portion
thereof) begins
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Gas production to an Upstream Pipeline, or (z) when SWEPI requires a written
dedication of Gas Processing Rights for a Lease in connection with SWEPI's
efforts to provide Processing capacity for Gas production from such Lease,
regardless of whether Exhibit A is thereafter amended to include Leases; and (4)
to make such other changes to the Conveyance as specified in the Third
Amendment.
F. Effective January 12, 1998, SWEPI assigned to Tejas Holdings,
LLC all of its rights under the Third Amendment and Tejas Holdings, LLC
subsequently assigned all of such rights to Tejas Natural Gas Liquids, LLC.
G. Effective August 1, 1999, the Third Amendment was amended and,
as so amended, restated in its entirety (the "FOURTH AMENDMENT") to clarify the
respective rights and obligations of the Processor and Producers thereunder.
H. Effective September 30, 1999, Tejas Natural Gas Liquids LLC
changed its name to Enterprise Natural Gas Liquids, LLC.
I. Effective October 31, 1999, Enterprise Natural Gas Liquids,
LLC merged with and into Enterprise Products Operating L.P., with Enterprise
Products Operating L.P. being the surviving entity of such merger.
J. Effective March 31, 2001, Enterprise Products Operating L.P.
assigned all of its rights under the Fourth Amendment to its wholly-owned
subsidiary, Enterprise Gas Processing, LLC, which assignment was in all respects
approved and consented to by Producers.
K. Effective April 1, 2001, the Fourth Amendment was amended and,
as so amended, restated in its entirety (the "FIFTH AMENDMENT") to incorporate
certain changes in the respective rights and obligations of the Processor and
Producers thereunder.
L. Effective September 18, 2002, SGOM ratified and joined in the
Fifth Amendment as a Producer Party.
M. Effective March 1, 2003, the Fifth Amendment was amended and,
as so amended, restated in its entirety (the "SIXTH AMENDMENT") to incorporate
certain changes in the respective rights and obligations of the Processor and
Producers thereunder.
L. The Parties desire to further amend the Sixth Amendment to
incorporate further changes in their respective rights and obligations
thereunder and to restate the Conveyance in its entirety.
NOW THEREFORE, in consideration of the mutual agreements, covenants and
conditions herein contained, the Parties hereby amend and restate the Conveyance
to read in its entirety as follows:
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1. DEFINITIONS.
1.1 "AFFILIATE" means, with respect to any relevant Person, any
other Person that directly or indirectly controls, is controlled by, or is under
common control with, such relevant Person in question. As used herein, the term
"control" (including its derivatives and similar terms) means owning, directly
or indirectly, the power (1) to vote ten percent or more of the voting stock of
any such relevant Person and (2) to direct or cause the direction of the
management and policies of any such relevant Person.
1.2. "ANNUAL INFORMATION" has the meaning given it in Section 14.1.
1.3. "BTU" or "BRITISH THERMAL UNIT" means the quantity of heat
required to raise the temperature of one pound of pure water from 58.5 degrees
to 59.5 degrees on the Fahrenheit temperature scale at a constant pressure of
14.73 psia. The term "MMBTU" shall mean 1,000,000 BTU's.
1.4 "COMMITMENT DATE" has the meaning given it in Section 3.2.
1.5 "CONSIDERATION ADJUSTMENT" has the meaning given it in Section
6.6(a).
1.6 "CONSIDERATION BASIS" has the meaning given it in Section 6.2.
1.7 "CONSIDERATION PAYMENT" has the meaning given it in Section
6.6(a).
1.8 "CONSIDERATION REDUCTION" has the meaning given it in Section
6.7.
1.9 "CONVEYANCE" means the Original Conveyance, as amended to date
and by this Agreement, and as it may hereafter be amended from time to time.
1.10 "CUBIC FOOT OF GAS" shall mean the volume of Gas contained in
one cubic foot of space at a standard pressure base of 14.73 pounds per square
inch absolute, and at a standard temperature base of 60 (Degree)F. Whenever the
conditions of pressure and temperature differ from the above standard,
conversion of the volume from these conditions to the above stated standard
conditions shall be made in accordance with the Ideal Gas Laws, corrected for
deviation due to supercompressibility by the methods set forth in ANSI/API 2530,
as revised or amended from time to time, and further detailed in American
Petroleum Institute Manual of Petroleum Measurement Standards (API MPMS) Chapter
14, Section 2, American Gas Association (AGA) Report Number 3, "Compressibility
Factors of Natural Gas and Other Related Hydrocarbons," as revised or amended
from time to time. The terms "MCF" and "MMCF" shall mean, respectively, 1,000
Cubic feet of Gas and 1,000,000 Cubic feet of Gas.
1.11 "DEDICATED LEASE" means a Lease owned by a Producer as of or
after the Commitment Date as provided in Section 3.2.
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1.12 "EQUITY GAS" means Gas that is produced from a Dedicated Lease
and is owned and marketed by, or on behalf of, Producers. Equity Gas shall also
include any lessor's royalty Gas produced from a Dedicated Lease that is not
taken "in-kind" by lessor and which is marketed by, or on behalf of, Producers.
Equity Gas shall also include Gas produced from units which include Dedicated
Leases or portions thereof, but only to the extent that unit Gas production is
allocated to a Producer under the applicable unit agreement or order creating
the unit, and which allocated share of unit Gas production is marketed by, or on
behalf of, Producers. Equity Gas shall exclude the following:
(i) Gas consumed by a Producer in the development and
operation of Dedicated Leases, including, but not
limited to, the following operations: drilling;
deepening; reworking of wells; compression; Gas lift;
treating; separation; operationally integrated power
generation; maintenance of facilities; and consumed
as fuel in such operations.
(ii) Gas provided by a Producer to another operator or
producer in the general vicinity of such Producer's
operations to be used by such operators or producers
for purposes similar to those set forth in (i) above;
provided, however, if Gas furnished by Producer is
used for such purposes, Producer shall keep Processor
whole from an economic standpoint for any volumes
that are so used.
(iii) Gas used by a Producer as makeup or non-consent Gas
to or for the benefit of Third Parties as may be
required under joint operating, Gas balancing or
other similar agreements and produced from wells
covered by such agreements, or to settle Gas
imbalance claims with other mineral and/or leasehold
interest owners.
(iv) Gas used by a Producer to make payment of royalty
and/or overriding royalty in kind if required in the
Dedicated Leases or instruments pursuant to which
such royalties and overriding royalties were created,
excluding any overriding royalties held by Affiliates
of Producer.
(v) Gas attributable to overriding royalty interests
owned by a Producer in Dedicated Leases, where such
Producer is receiving net proceeds in payment of its
overriding royalty interest in lieu of taking Gas in
kind.
(vi) Gas produced from units which include Dedicated
Leases or portions thereof, but only to the extent
that unit Gas production is allocated to Third
Parties under the applicable unit agreement or order
creating the unit.
(vii) Gas which is actually used by pipelines for fuel to
transport lease production and/or is otherwise
flared, lost or unaccounted for prior to delivery to
a Plant.
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(viii) Gas which is precluded from being produced or
Processed due to governmental intervention,
regulations, laws or judicial or administrative
orders.
1.13 "EXCEPTED LEASES" has the meaning given it in Section 17.4.
1.14 "EXCLUDABLE GAS" has the meaning given it in Section 4.4.1.
1.15 "EXCLUDED LEASES" means the leases listed on Exhibit B.
1.16 "EXISTING EQUITY GAS" has the meaning given it in Section
4.3.1.
1.17 "FIELD DELIVERY POINT" means any point at which Gas being
transported in Upstream Pipelines is measured for the purpose of allocating PTR
and Products from a Plant.
1.18 "GALLON" means one U.S. Standard Liquid Gallon of 231 cubic
inches, adjusted to a temperature of 60(degree) F and either the equilibrium
pressure of the product at 60(degree) F or 14.696 psia, whichever is greater.
1.19 "GAS" means all vaporized hydrocarbons and vaporized
concomitant materials whether produced from wells classified as oil wells or Gas
wells.
1.20 "GAS PROCESSING RIGHTS" has the meaning given it in Section
3.1.
1.21 "GEOGRAPHICAL SCOPE" means that area (i) within the state
waters of Louisiana, Texas, Mississippi, Alabama and Florida, and/or (ii) within
the federal waters of the United States of America in the Gulf of Mexico,
including any portion thereof claimed by Mexico.
1.22 "GPM" means Gallons per MCF of Gas.
1.23 "INJECTED LIQUIDS" means liquid hydrocarbons and liquid
concomitant materials that are delivered into an Upstream Pipeline.
1.24 "LEASE" means any oil, Gas, and/or mineral lease or interest
therein owned now or hereafter acquired, in whole or part, by Producers or their
Affiliates within the Geographical Scope, except for Excluded Leases.
1.25 "NEW EQUITY GAS" has the meaning given it in Section 4.3.1.
1.26 "NEW VOLUMES" has the meaning given it in Section 2.3.2.
1.27 "OFF-SPEC DELIVERIES" has the meaning given it in Section 5.3.
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1.28 "PERSON" means any individual or entity, including, without
limitation, any corporation, limited liability company, partnership (general or
limited), joint venture, association, joint stock company, trust, unincorporated
organization or government (including any board, agency, political subdivision
or other body thereof).
1.29 "PLANT" means a natural Gas processing plant.
1.30 "PLANT DELIVERY POINT" means the point where an Upstream
Pipeline interconnects with a Plant.
1.31 "PLANT REDELIVERY POINT" means the point at or near the
tailgate of a Plant at which the Residue Gas is delivered by a Plant into any
interstate or intrastate pipeline connected to that Plant.
1.32 "PROCESS" or "PROCESSING" means the removal of liquefiable
hydrocarbons and/or impurities from Gas using mechanical separation, extraction,
condensation, compression, absorption, stripping, refrigeration, adiabatic
expansion, and/or other generally accepted natural Gas processing methods.
1.33 "PROCESSING PARTY" means Enterprise Products Operating L.P.
and any other wholly owned subsidiary of Enterprise Products Operating L.P.,
including Processor.
1.34 "PROCESSOR" means Enterprise Gas Processing, LLC, a Delaware
limited liability company, and its successors and assigns.
1.35 "PROCESSOR'S RETROGRADE" means (i) liquefiable hydrocarbons
that condense from Equity Gas in the Upstream Pipelines listed in Exhibit D, and
(ii) any liquid hydrocarbons that are collected in a Plant prior to Processing.
Processor's Retrograde shall not include Injected Liquids but shall include any
lessor's royalty share of such liquefiable hydrocarbons in clauses (i) and (ii)
of this definition not taken "in kind" by lessor.
1.36 "PRODUCER" means each of those entities listed in the first
paragraph of this Agreement and their respective Affiliates, successors and
assigns (but as to any such assigns, only to the extent such assigns acquire all
or part of a lessee's interest in a Dedicated Lease).
1.37 "PRODUCTS" means the individual liquefied hydrocarbons
recovered from Equity Gas and/or Processor's Retrograde by Processing including,
but not by way of limitation, condensate, natural gasoline, butanes, propane,
ethane, and/or any unfractionated mixture thereof including, in each case, such
methane as is liquefied and incidentally recovered.
1.38 "PTR" means Plant thermal reduction or the heat content stated
in MMBTU's removed from Equity Gas and/or Processor's Retrograde as a result of
Processing, including those MMBTU's (i) associated with extraction of Products,
(ii) consumed in the operation of a Plant, and (iii) flared, lost or otherwise
unaccounted for in the operation of a Plant.
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1.39 "QUALITY SPECIFICATIONS" has the meaning given it in Section
5.1.
1.40 "RAW MAKE" means a combined stream of liquefied hydrocarbons
and concomitant materials extracted from Equity Gas by Processing, including
Processor's Retrograde if subsequently combined with the other Raw Make.
1.41 "REFUSED VOLUMES" has the meaning given it in Section 4.3.1.
1.42 "RESIDUE GAS" means the portion of Equity Gas remaining after
removal of PTR and available for redelivery to a pipeline at the Plant
Redelivery Point.
1.43 "ROYALTY CHARGES" has the meaning given it in Section 8.1(a).
1.44 "SLUG LIQUIDS" means free water, liquid hydrocarbons and other
concomitant materials which are separated from Gas upstream of the Plant
Delivery Point.
1.45 "TERMINATION DATE" has the meaning given it in Section 2.2.
1.46 "THIRD PARTY" means any Person that is not a Producer or
Processor.
1.47 "THIRD PARTY CONTRACT" has the meaning given it in Sections
4.3.1 and 4.4.1.
1.48 "UPSTREAM PIPELINE" means any pipeline that transports Gas
and/or Slug Liquids between the Field Delivery Points and the Plant Delivery
Points.
2. TERM.
2.1 PRIMARY AND SUCCESSIVE TERMS. The term of this Agreement shall
begin on August 1, 1999, and continue for a primary term of 20 years. At the end
of the primary term, the term of this Agreement shall be automatically extended
for ten successive two year terms, unless sooner terminated under Section 2.2.
2.2 TERMINATION OF AGREEMENT. The Processor or any Producer shall
have the right, subject to Section 2.3, to terminate this Agreement as to such
Producer at the end of the primary term or at the end of any successive two year
term thereafter ("TERMINATION DATE") by giving written notice of termination, in
accordance with Section 18.6, no sooner than 20 nor later than 18 months prior
to the expiration of the then effective primary term or two year successive
term.
2.3 SURVIVAL PROVISION.
2.3.1 POST TERMINATION: CONTINUATION AS TO DEDICATED
LEASES. Notwithstanding termination of this Agreement pursuant to Section 2.2
above, the Gas Processing Rights held by Processor and all the provisions of
this Agreement shall continue in full force and effect with respect to each
Lease which is a Dedicated Lease as of the Termination Date until the expiration
of each such Dedicated Lease.
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2.3.2 POST TERMINATION: PROPOSALS FOR NEW VOLUMES. For a
period of 20 years after the Termination Date, as to Gas which is discovered and
is to be ultimately produced by Producers from Leases which were not Dedicated
Leases as of the Termination Date ("NEW VOLUMES"), Producers agree to provide
Processor, as soon as reasonably practicable, with notice of the estimated
quantity of New Volumes and the estimated date on which such New Volumes will be
available for Processing. Producers further agree that they will provide
Processor a nonexclusive opportunity to submit a proposal to Process the New
Volumes. If, in the sole discretion of the Producer offering the New Volumes,
the proposal of Processor is not acceptable, then the Producer will notify
Processor of such, without any obligation to disclose terms or conditions of, or
differences between, other proposals. The Producer will then enter into
negotiations with Processor for no more than a 15-day period in an effort to
enter into agreements concerning the New Volumes. If Processor and Producer do
not enter into such mutually agreeable Processing agreements within the 15-day
period, then Producer shall be free to deliver and/or dedicate said New Volumes,
in its sole discretion, and for any purpose, to a Third Party.
3. ASSIGNMENT OF GAS PROCESSING RIGHTS.
3.1 GRANT OF PROCESSING RIGHTS. Subject to the other provisions of
this Agreement, Producers hereby grant, sell, transfer, convey and assign to
Processor the following (the "GAS PROCESSING RIGHTS"):
(1) the exclusive right to process any and all Equity Gas
for the extraction and retention of liquefiable
hydrocarbons and other constituents of Raw Make
and/or Products;
(2) all title, interest and /or ownership in Raw Make
and/or Products recovered from Processing Equity Gas;
and
(3) the right and option to assume, subject to this
Agreement, any contract for the Processing of Equity
Gas, including all of a Producer's rights and
obligations therein, that is assumed by a Producer in
connection with the acquisition of a Lease, provided
that Processor has given written notice to the
Producer of Processor's exercise of its option to
assume such contract within 90 days of Processor's
receipt of written notice from the Producer that
Producer has assumed or intends to assume such
contract in connection with its acquisition of a
Lease, which said notice shall be given by Producer
to Processor at a reasonable time.
It is the intention of the Parties to confer on the Processor, subject to this
Agreement, the Gas Processing Rights, and the economic benefits and burdens to
be derived therefrom, for all Gas from Leases, whether derived from (a) Leases
which are currently owned by a Producer and which are currently Dedicated Leases
or which subsequently become Dedicated Leases or (b) Leases which are
subsequently acquired by a Producer and which are Dedicated Leases as of the
date of acquisition or which subsequently become Dedicated Leases while still
owned by a Producer, subject only to (i) rights previously granted by the
transferors of subsequently acquired Leases to Third Parties as provided in
Section 3.3 and (ii) the right of Producers under Section
8
3.2 to transfer, free of Processor's rights under this Agreement, Leases that at
the time of transfer are not Dedicated Leases.
3.2 ATTACHMENT OF GAS PROCESSING RIGHTS. This conveyance of Gas
Processing Rights shall be irrevocable as to Dedicated Leases, except for
Excluded Leases. A Lease shall be considered a Dedicated Lease upon the earliest
of that point in time (the "COMMITMENT DATE"): when (i) when a well is spud on
the Lease; (ii) a Plan of Exploration or similar document including all or part
of the Lease is submitted or amended to the appropriate regulatory agency and a
well is or has been spud on any of the Leases included in the Plan of
Exploration; (iii) a Development Operations Coordination Document or similar
document including all or part of the Lease is submitted or amended to the
appropriate regulatory agency; or (iv) Gas production begins from the Lease. A
Lease acquired by a Producer shall become a Dedicated Lease on the later of (1)
the effective date of the acquisition of such Lease by Producer if at any time
prior to such acquisition an event occurred that would constitute a Commitment
Date had the Producer owned an interest in such Lease at the time of such event,
or (2) the later Commitment Date for such Lease. Dedicated Leases as of August
1, 1999 are listed on Exhibit A. Producer shall have the right to transfer,
sell, assign, exchange or otherwise alienate a Lease free of any obligations
under this Agreement and without any obligation to the Processor with respect to
the Lease prior to its Commitment Date. In the case of a transfer, sale,
assignment, exchange or other alienation of a Lease or an interest therein to a
Third Party pursuant to what is generally known in the petroleum industry as a
"perform to earn" contract, said transfer, sale, assignment, exchange or other
alienation shall for purposes of this Agreement be considered to have taken
place on the date on which such fully executed and delivered perform to earn
contract is effective, not the later date on which the rights earned under said
perform to earn contract are earned, nor the date on which said transfer, sale,
assignment, exchange or other alienation is executed or made effective;
provided, however, in the event any such Lease or interest therein reverts to
Producer, it shall again be subject to this Agreement.
3.3 PRODUCERS' NONDISTURBANCE COVENANT; PRIOR RESERVATIONS OR
CONTRACTS. Excepting Producers' rights to sell, assign, exchange or otherwise
alienate Leases as provided for in Section 3.2 and Producer's rights to enter
into agreements which could cause Gas to be excluded from Equity Gas under
Sections 1.12(i) through 1.12(viii), Producers agree not to make any assignment
or conveyance of, or enter into any other obligation concerning Gas Processing
Rights with respect to, any Lease to the prejudice of Processor or its rights
under this Agreement. Producers further agree that, in connection with the
acquisition of a Lease, they will not permit the transferor to reserve to itself
or convey to any Person other than a Producer any right to Process Equity Gas to
be produced from the Lease. However, as to any Lease acquired by a Producer
subject to a prior grant of rights to Process Equity Gas to be produced under
the Lease to Persons other than a Producer, Processor's rights under this
Agreement shall be subject to such rights previously granted, to the extent
thereof.
3.4 PROCESSOR'S RIGHT TO CONSUME PTR. In conveying the Gas
Processing Rights under this Agreement, Producers acknowledge and agree that the
Equity Gas Processed in a Plant will be subject to a PTR incidental to the
exercising of the Gas Processing Rights, and Producers hereby grant to Processor
the rights to consume Equity Gas as PTR associated with Processor's Retrograde
and Products.
9
* CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN SEPARATELY
FILED WITH THE COMMISSION, AND THE APPROPRIATE SECTION HAS BEEN MARKED AT THE
APPROPRIATE PLACE AND THE MARGIN WITH A STAR (*).
3.5 TITLE TO RAW MAKE, PRODUCTS, PROCESSOR'S RETROGRADE AND PTR.
Producers hereby (i) represent and warrant to Processor that title to the
liquefiable hydrocarbons in Equity Gas is and will be free from all production
burdens, liens and adverse claims, (ii) warrant their right to sell the same and
(iii) agree to indemnify, defend and hold harmless Processor against all claims
to said liquefiable hydrocarbons arising (x) by, through, or under Producers or
(y) prior to Producers' delivery of said liquefiable hydrocarbons to Processor.
The transfer of title to the extracted liquefiable hydrocarbons shall pass to
Processor at the meters for Raw Make and/or Products, as appropriate, of the
applicable Plant. The Processor and Producers acknowledge and agree that title
to PTR does not pass to Processor.
3.6 LIMITATIONS ON UPSTREAM PROCESSING.
3.6.1 PRODUCER'S OPERATIONAL REQUIREMENTS. Producers agree
that, except as dictated by operational requirements, including the
need to meet pipeline specifications (excepting when such need will be
met by Processor under this Agreement), they will not remove or permit
to be removed any liquefiable hydrocarbons from Equity Gas upstream of
the Plants except for (i) liquefiable hydrocarbons that condense from
* the Gas during transportation to the Plants and (ii) [REDACTED].
3.6.2 PROCESSOR'S EXCLUSIVE RIGHTS. The rights granted to
Processor herein are exclusive, and Producers shall use their
commercially reasonable efforts to ensure that no owner or operator of
an Upstream Pipeline shall have or exercise any right or opportunity to
Process, or extract Products from, Equity Gas as to which the Gas
Processing Rights have been conveyed to Processor under this Agreement.
3.6.3 NGL BANKS. In the event that any Upstream Pipeline or
the shippers on an Upstream Pipeline institute a bona fide mechanism to
mitigate inequities that may occur between shippers on such Upstream
Pipeline as a result of such shippers' Gas streams containing different
liquifiable hydrocarbon compositions being commingled in a pipeline
with multiple delivery points located upstream of Gas Processing Plants
(an "NGL BANK"), Producers and Processor agree to participate in the
NGL Bank so as to confer on Processor the financial benefits and
detriments related to such liquifiable hydrocarbons under the terms of
the NGL Bank. Producers and Processor agree to execute and deliver to
one another such instruments as may be necessary or useful and to take
such further actions as may be reasonably necessary to carry out or
further evidence the intent of this Section 3.7. Pending execution of
such instruments, Producers shall not be required to curtail any Equity
Gas production. However, Producers shall ensure Processor receives all
financial benefits and detriments referenced in this Section 3.7 from
the date of initiation of the NGL Bank.
10
4. PROCESSOR'S OBLIGATION TO PROCESS AND REDELIVER; LIMITATIONS.
4.1 PROCESSOR'S OBLIGATION TO PROCESS AND REDELIVER RESIDUE GAS.
Subject to the provisions of this Agreement, throughout the term of this
Agreement and for any subsequent period of time as contemplated by Section
2.3.1, Processor agrees to Process, or cause to be Processed, all Equity Gas.
After Processing Equity Gas and/or Slug Liquids and the recovery of the Raw
Make, Products and Processor's Retrograde therefrom, Processor shall deliver or
cause to be delivered Producers' Residue Gas to Producers or Producers' designee
at the applicable Plant Redelivery Point.
4.2 TEMPORARY CESSATION OF PROCESSING. If at any time or from time
to time Processor reasonably determines that the temporary cessation of
Processing Equity Gas at a Plant would not cause curtailment of the applicable
Equity Gas, then Processor shall have the option, in its sole discretion, to
temporarily cease Processing at that Plant. Processor shall provide Producer
with at least two business days' notice of any such election to temporarily
cease Processing or to subsequently recommence Processing at a Plant and shall
not change its election more than two times in a month.
4.3 REFUSED VOLUMES.
4.3.1 INSUFFICIENT CAPACITY; OPTION TO REFUSE VOLUMES. If
Processor accepts or has previously accepted for Processing Equity Gas from a
Dedicated Lease, it may not thereafter refuse to Process any Equity Gas produced
from or allocated to such Dedicated Lease ("EXISTING EQUITY GAS") on the basis
of insufficient Plant capacity, except as provided hereafter in this Section
4.3.1. Processor may, at its option, to be exercised by Processor as soon as
reasonably practicable by providing the applicable Producer with written notice
of such election, elect to Process or not to Process a volume of ("REFUSED
VOLUMES"):
(i) Equity Gas produced from or allocated to a Dedicated Lease
from which it has not previously accepted Equity Gas for
Processing ("NEW EQUITY GAS") that exceeds or that Processor
reasonably expects to exceed its available Processing capacity
at a Plant; and/or
(ii) Existing Equity Gas to the extent and only to the extent
that (a) such Existing Equity Gas exceeds or is reasonably
expected by Processor to exceed 120 percent of the most recent
12 month average MCF volume of the aggregate of all such
Existing Equity Gas delivered to a Plant, as measured at the
applicable Field Delivery Point(s), or if a 12 month
volumetric history is not available for such Existing Equity
Gas, then 120 percent of the peak volume for such Existing
Equity Gas from the most recent 12 month forecast provided by
Producer, and (b) such Existing Equity Gas exceeds or is
reasonably expected by Processor to exceed its available
processing capacity at a Plant.
If Processor elects not to Process such Refused Volumes, Producer may,
nonetheless, by written notice to Processor, require that Processor and Producer
enter into exclusive good faith
11
negotiations for a period of 90 days from the date of the notice to negotiate
the terms and conditions of a mutually agreeable alternative Processing
arrangement for the Refused Volumes that would allow Processor in its sole
judgment to economically acquire or construct additional capacity at the Plant.
If within the 90-day period Processor and Producer are unable to negotiate and
execute a definitive agreement related thereto, Producer shall be free to
negotiate and enter into an agreement with any one or more Third Parties for
Processing services ("THIRD PARTY CONTRACT") for the Refused Volumes that
Processor has elected not to Process hereunder; provided that (i) the terms of
each such Third Party Contract are, taken as a whole, more favorable to the
Producer than the terms for Processing services last offered by Processor to
Producer during the 90-day period, and (ii) each such Third Party Contract
provides that Producer may at any time freely assign such Third Party Contract
to Processor, and that Processor shall succeed to all of Producer's rights and
obligations under the Third Party Contract that arise as of and after the
effective date of any such assignment.
4.3.2 OPTION TO REACQUIRE REFUSED VOLUMES. Processor shall
have the option, exercisable by written notice to Producer given at any time on
or before the later of the first anniversary of the (a) effective date of a
Third Party Contract, (b) date on which said Third Party Contract was fully
executed and delivered or (c) date Gas was first delivered under said Third
Party Contract, to take an assignment from Producer of a Third Party Contract,
effective on the first day of the third month following the month in which the
notice is given to Producer, provided that Processor shall promptly reimburse
Producer for all direct costs that were incurred by Producer in connection with
acquiring the Third Party Contract. Promptly following the execution and
delivery of a Third Party Contract, Producer shall furnish Processor with a copy
of the Third Party Contract and, to the extent not included in the Third Party
Contract, an itemized statement showing all of the direct costs incurred by
Producer in connection with acquiring the Third Party Contract. Equity Gas that
becomes subject to a Third Party Contract as Refused Volumes shall, upon
termination of such Third Party Contract, again be subject to this Agreement as
Existing Equity Gas.
4.4 EXCLUDABLE GAS.
4.4.1 OPTION TO EXCLUDE CERTAIN GAS. Processor may, at its
option, elect to Process or not Process all or any part of New Equity Gas that
contains or that Processor reasonably expects to contain less than or equal to
0.5 GPM of ethane and heavier hydrocarbons as measured at a Field Delivery Point
("EXCLUDABLE GAS") and agrees to provide the applicable Producer with notice of
such election as soon as reasonably practicable. Processor may not elect to
refuse to Process any Existing Equity Gas under the provisions of this Section
4.4.1 as Excludable Gas. If Processor elects not to Process such Excludable Gas,
Producer may, nonetheless, by written notice to Processor, require that
Processor and Producer enter into exclusive good faith negotiations for a period
of 90 days from the date of the notice to negotiate the terms and conditions of
a mutually agreeable alternative Processing arrangement for the Excludable Gas.
If within the 90-day period Processor and Producer are unable to negotiate and
execute a definitive agreement related thereto, Producer shall be free to
negotiate and enter into an agreement with any one or more Third Parties for
Processing services ("THIRD PARTY CONTRACT") for the Excludable Gas that
Processor has elected not to Process hereunder; provided that (i) the terms of
each such Third Party Contract are, taken as a whole, more favorable to the
12
Producer than the terms for Processing services last offered by Processor to
Producer during the 90-day period, and (ii) each such Third Party Contract
provides that Producer may at any time freely assign such Third Party Contract
to Processor, and that Processor shall succeed to all of Producer's rights and
obligations under the Third Party Contract that arise as of and after the
effective date of any such assignment.
4.4.2 OPTION TO REACQUIRE EXCLUDABLE GAS. Processor shall
have the option, exercisable by written notice to Producer given at any time on
or before the later of the first anniversary of the (a) effective date of a
Third Party Contract, (b) date on which said Third Party Contract was fully
executed and delivered or (c) date Gas was first delivered under said Third
Party Contract, to take an assignment from Producer of a Third Party Contract,
effective on the first day of the third month following the month in which the
notice is given to Producer, provided that Processor shall promptly reimburse
Producer for all direct costs that were incurred by Producer in connection with
acquiring the Third Party Contract. Promptly following the execution and
delivery of a Third Party Contract, Producer shall furnish Processor a copy of
the Third Party Contract and, to the extent not included in the Third Party
Contract, an itemized statement showing all of the direct costs incurred by
Producer in connection with acquiring the Third Party Contract. Equity Gas that
becomes subject to a Third Party Contract as Excludable Gas shall, upon
termination of such Third Party Contract, again be subject to this Agreement as
Existing Equity Gas.
4.5 SUSPENSION IN CASE OF DANGEROUS CONDITION. If any of
Producers' operations or any of the Equity Gas or Slug Liquids delivered
hereunder create a condition that, in the exclusive judgment of Processor, may
endanger a Plant or property of Processor or the lives or property of
Processor's employees or any Third Party, Processor may, without liability,
immediately discontinue receipt of such Equity Gas and/or Slug Liquids, as the
case may be, until the condition has been remedied to the reasonable
satisfaction of Processor.
5. SPECIFICATIONS FOR GAS AND SLUG LIQUIDS.
5.1 QUALITY SPECIFICATIONS. Producers shall deliver Equity Gas and
Injected Liquids to each Field Delivery Point in conformity with the
specifications (except for all specifications for liquefiable hydrocarbon
content) of the applicable Upstream Pipeline (the "QUALITY SPECIFICATIONS").
5.2 TESTING. The determination as to the conformity of Equity Gas
or Injected Liquids to the Quality Specifications shall be made by Processor in
accordance with generally accepted procedures of the Gas Processing industry.
Such determinations shall be made as often as Processor deems necessary, and
Producer may witness such determinations or make joint determinations with its
own appliances. If, in a Producer's judgment, the result of any such test or
determination is inaccurate, Processor, at such Producer's request, will again
conduct the questioned test or determination, and the costs of such additional
test or determination shall be borne by said Producer unless same shows the
original test or determination to be materially inaccurate.
13
5.3 OFF-SPEC DELIVERIES. If any of Equity Gas or Injected Liquids
delivered at a Field Delivery Point fail to meet the Quality Specifications
("OFF-SPEC DELIVERIES"), Processor, subject to the provisions of Sections 5.4,
5.5 and 5.6, at its sole option, may accept, or notify the appropriate Producer
to discontinue or curtail, such Off-Spec Deliveries. Processor's acceptance of
Off-Spec Deliveries shall not be deemed a waiver of Processor's right to later
reject such Off-Spec Deliveries, nor shall acceptance of Off-Spec Deliveries
from one Field Delivery Point require Processor to accept similar Off-Spec
Deliveries from any other Field Delivery Point.
5.4 NOTIFICATION OF NON-CONFORMITY; REJECTION OF DELIVERY.
Processor shall notify a Producer of any Off-Spec Deliveries, and Producer shall
make a diligent effort to conform such Equity Gas and/or Injected Liquids to the
Quality Specifications. If any Producer reasonably concludes that it cannot
economically deliver Equity Gas and/or Injected Liquids conforming to the
Quality Specifications, then such Producer shall so advise Processor in writing
within 30 days after receipt of Processor's notice. Within 30 days after receipt
of Producer's notice, Processor shall give notice to the Producer in writing of
its election to accept or reject such Off-Spec Deliveries. If Processor rejects
such Off-Spec Deliveries, then upon receipt of Processor's notice of same by
such Producer, Processor may, without liability, refuse to accept delivery of
such Off-Spec Deliveries until such time as the Off-Spec Deliveries conform to
the Quality Specifications or Processor subsequently notifies such Producer of
its acceptance of the Off-Spec Deliveries.
5.5 ACCEPTANCE OF NONCONFORMING PRODUCT. If Processor accepts such
Off-Spec Deliveries, Processor, after written notice to a Producer as specified
in Section 5.4, may charge such Producer any reasonable costs incurred by
Processor to monitor the quality of Equity Gas and/or Injected Liquids and bring
them within the Quality Specifications. Processor shall invoice such Producer on
a monthly basis for any such costs, the payment of which shall be due and
payable within 30 days after the Producer's receipt thereof.
5.6 PROCESSOR'S LIMITED COMMITMENT TO ACCEPT NON-CONFORMING
PRODUCT. Notwithstanding the provisions of Sections 5.3, 5.4 and 5.5, Processor
agrees that it will use reasonable efforts to continue acceptance of a
Producer's Off-Spec Deliveries for Processing in those cases where (i) Section
4.6 does not apply and (ii) the acceptance of such Off-Spec Deliveries does not
(x) cause damage to a Plant, (y) render a Plant unable to meet applicable
specifications of the pipelines receiving Residue Gas at the Plant Redelivery
Points or of the purchaser or transporter of the Products from the Plant, or (z)
cause the Plant to violate applicable emissions permits or other regulatory
requirements.
5.7 SPECIFICATIONS FOR RESIDUE GAS REDELIVERED BY PROCESSOR.
Processor will take commercially reasonable actions within its control to assure
that the Residue Gas redelivered by Processor complies with the specifications
in effect on the date of delivery to the pipeline transporter receiving such
Residue Gas at the applicable Plant Redelivery Point so long as the Equity Gas
attributable to such Residue Gas met the same specifications (except for all
specifications for liquefiable hydrocarbon content) at the applicable Field
Delivery Point.
14
* CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN SEPARATELY
FILED WITH THE COMMISSION, AND THE APPROPRIATE SECTION HAS BEEN MARKED AT THE
APPROPRIATE PLACE AND THE MARGIN WITH A STAR (*).
5.8 OFF SPEC PIPELINE. Nothing in this Agreement shall require
Processor to accept delivery of any Gas that does not conform to the Quality
Specifications at the Plant Delivery Point.
6. CONSIDERATION.
6.1 PAYMENT. For each calendar month during the term of this
Agreement, Processor agrees, for each Plant, to pay to each of the respective
Producers delivering Equity Gas to such Plant, a cash amount equal to the
product of:
(1) the Consideration Basis, as defined in Section 6.2,
for the respective Plant; and
(2) the PTR for (1) such Producer's Equity Gas Processed
at such Plant and (2) any Processor's Retrograde
associated with such Producer's Equity Gas.
6.2 CONSIDERATION BASIS. For purposes of Section 6.1, the term
"CONSIDERATION BASIS" shall mean, and be defined as, for each calendar month
* during the term of this Agreement, the [REDACTED].
6.3 CONSIDERATION TIMING. Processor shall pay to Producer the
applicable cash consideration set forth in Section 6.1 (as same may be adjusted
pursuant to Section 6.6 of this Agreement) no later than the third to last
business day of the second month following the month in which the subject PTR
and Processor's Retrograde is delivered to a Plant, such payment to be made by
wire transfer of immediately available funds to an account designated from time
to time by Producers at least fifteen days prior to the date any such payment is
due and payable by Processor. In the event a particular Producer owes an amount
hereunder to Processor, it may be netted by Processor against the applicable
amount owing to such Producer hereunder.
* 6.4 CONSIDERATION BASIS UPDATES. [REDACTED].
6.5 PROCESSOR PROVIDED PTR. Producers and Processor acknowledge
and agree that, in lieu of, and as an alternative to, any cash payment required
under Section 6.1 to be paid by Processor to Producers, Processor shall have an
election to provide, from time to time, PTR at a particular Plant for
Processor's own account in respect of all of Producer's Equity Gas Processed at
such Plant. Processor agrees that any such election to provide PTR for its own
account shall be effective on the first day of a month, and that Processor shall
provide Producers with at least fifteen days' prior written notice of any such
election. If, for any particular month, Processor has elected to provide PTR for
its own account, Processor shall not be entitled to rescind, revoke or change
such election for such month. Processor agrees to provide any notifications with
respect
15
* CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN SEPARATELY
FILED WITH THE COMMISSION, AND THE APPROPRIATE SECTION HAS BEEN MARKED AT THE
APPROPRIATE PLACE AND THE MARGIN WITH A STAR (*).
to such Processor-provided PTR that may be required by an Upstream Pipeline to
which Processor delivers such PTR.
6.6 CONSIDERATION ADJUSTMENT.
(a) The cash amount of the total of all payments to be
made by Processor to each of the respective Producers calculated under Section
6.1 (the "CONSIDERATION PAYMENT") shall be adjusted, proportionately for each
such payment, for each calendar month during the term of this Agreement as
follows (the "CONSIDERATION ADJUSTMENT"):
* (i) [REDACTED]; or
* (ii) [REDACTED]; or
* (iii) [REDACTED]; or
* (iv) [REDACTED].
(b) Processor shall provide Producer with an estimate of
the Average Net Margin and the Products Volume for each calendar month, in
writing, no later than the fifth business day of the next calendar month
following the month in which the PTR and Processor's Retrograde is delivered to
a Plant.
(c) For purposes of this Section 6.6, the following
definitions shall be applicable.
(i) "AVERAGE NET MARGIN" means the Average Gross
Margin less the Calculated Expenses.
(ii) "AVERAGE GROSS MARGIN" means (A) the
Products Value minus the PTR Value divided
by (B) the Products Volume.
(iii) "PRODUCTS VALUE" means the Products Volume
multiplied by the Products Price.
(iv) "PRODUCTS PRICE" means: (A) for natural gas
* liquids, [REDACTED]; and (B) for condensate,
* [REDACTED], divided by 42.
16
* CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN SEPARATELY
FILED WITH THE COMMISSION, AND THE APPROPRIATE SECTION HAS BEEN MARKED AT THE
APPROPRIATE PLACE AND THE MARGIN WITH A STAR (*).
(v) "PRODUCTS VOLUME" means the total volume of
Products, in Gallons, allocated to Processor
for Equity Gas in a calendar month,
* [REDACTED].
(vi) "PTR VALUE" means the sum, for a calendar
month, of the product of the PTR and the
Consideration Basis for each Plant where
Equity Gas is Processed during such calendar
month plus the total amount paid by
Processor to Producers for transportation of
PTR and Processor's Retrograde for such
calendar month as set forth in Section 7
below.
(vii) "CALCULATED EXPENSES" means the monthly
expenses associated with the Processing of
Equity Gas, in cents per Gallon, calculated
for each calendar month using the following
formula:
* [REDACTED]
Where:
X equals the index price, in dollars per million BTUs,
* [REDACTED]; and
* Y equals [REDACTED].
(d) If for any reason any of the price indexes used in
this Section 6.6 cease to be published, then such affected index price(s) shall,
if available, be obtained from an alternative industry publication (private or
government) which publishes the same pricing information. If an index price is
no longer available, then Producer and Processor shall, within 60 days of the
first day of the month that the cessation occurred, agree upon an alternate
pricing mechanism for such affected index price(s). The alternate pricing
mechanism agreed upon shall apply retroactively to the first day of the month
that the former index terminated. If the Parties cannot agree on an alternate
pricing mechanism within the 60 day period, then the issue of how such affected
index price(s) should be determined shall be a Dispute under this Agreement. It
is the intent of the Parties that any replacement methodology or index shall
resemble as closely as possible the index being replaced.
6.7 CONSIDERATION REDUCTION.
For each calendar month during the term of this Agreement, and any
continuation thereof under Section 2.3.1, each Consideration Payment shall be
proportionately reduced by an amount equal to the product of V and W
("CONSIDERATION REDUCTION");
Where:
17
* CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN SEPARATELY
FILED WITH THE COMMISSION, AND THE APPROPRIATE SECTION HAS BEEN MARKED AT THE
APPROPRIATE PLACE AND THE MARGIN WITH A STAR (*).
* V initially equals [REDACTED]; and
* W equals [REDACTED]
7. PTR AND PTR TRANSPORTATION.
Producers shall provide, or cause to be provided, the PTR and the
transportation for (i) the PTR associated with the Processing of Equity Gas and
(ii) Processor's Retrograde from the wellhead to the Plant Delivery Point, for
all Equity Gas and Processor's Retrograde subject to the payment of
consideration under Article 6. Producers shall also pay for all necessary
facilities to cause the Equity Gas and/or Injected Liquids to meet the Quality
Specifications and all other costs associated with delivering such PTR and
Processor's Retrograde to the Plant Delivery Point. Processor shall pay
Producers, for transportation of the PTR and Processor's Retrograde referenced
in this Article 7, an amount equal to three cents ($0.03) per MMBTU. If
Processor provides PTR for its own account under Section 6.5, Processor shall
provide, or cause to be provided, transportation for such PTR at its sole
expense.
8. ROYALTY.
8.1 RESPONSIBILITY FOR ROYALTY PAYMENTS.
(a) As between Processor and Producers, (i) Producers
shall be and remain fully liable for, and shall be fully responsible for
remitting any and all payments to the Department of the Interior, the Minerals
Management Service, the States of Louisiana, Texas, Mississippi, Alabama and
Florida, any other governmental agencies or authorities, and any private lessors
who are not federal or state lessors in respect of, any and all federal, state
or local royalties and/or severance taxes due on any or all hydrocarbon
production of Producers or which in any way relate to, or are in connection
with, any of the transactions under this Agreement, including, without
limitation, any such federal, state or local royalties and/or severance taxes
on, relating to, or calculated on the basis of, any value of (x) the PTR used by
Processor, (y) the Products extracted from the Equity Gas and (z) Processor's
Retrograde (collectively, "ROYALTY CHARGES"), and (ii) Processor shall have no
liability for or in respect of any such Royalty Charges.
(b) Producers hereby agree to hold harmless and indemnify
Processor (and its Affiliates) from and against, and shall fully and promptly
reimburse Processor (and its Affiliates) for, any and all claims, demands, and
causes of action of any kind and all losses, damages, costs, and expenses
(including court costs and reasonable attorneys' fees) arising from, relating
to, or in connection with, any Royalty Charges.
18
8.2 DELIVERY OF ROYALTY TAKEN IN KIND. Any request by a private,
state or federal governmental lessor to take royalty production in kind for any
Raw Make or Products recovered through Processing shall, if lawful, be fulfilled
by Processor's delivery to the lessor or its designee of such in kind royalty at
a specified location, all as may be required in accord with properly promulgated
notices, regulations, or lease terms and to the extent that such delivery by
Processor is approved (if required) by private, state or federal lessor. In such
case, Processor shall be entitled to recover all costs allowed by statute,
regulation or lease term including but not limited to costs of transportation
and administrative services. In the event that Processor is prohibited from
fulfilling such in kind royalty requests by the private state or federal lessor,
then Processor shall be relieved of such obligation but shall tender to
Producers an amount of Raw Make or Products recovered from Processing sufficient
to fulfill such obligations at a mutually agreeable delivery point.
8.3 COMPLIANCE WITH FEDERAL ACTS. As between Processor and
Producers, Processor agrees to fulfill Producers' obligation under Section
8(b)(7) of the Outer Continental Shelf Lands Act of 1978 by offering Processor's
Retrograde and Products recovered through processing at the market value and
point of delivery provided by regulators to small and independent refiners as
defined in the Emergency Petroleum Allocations Act of 1973. Processor shall be
entitled to retain the proceeds derived from such sale. In the event Processor
is prevented for any reason from fulfilling this obligation, Processor shall
tender to Producers' sufficient volumes of such Processor's Retrograde and
Products sufficient for Producers themselves to fulfill such obligation, and
Producers shall reimburse Processor for such liquids at a mutually agreed price
which shall include the cost of handling and administration of such sales.
Producer shall be entitled to retain the proceeds derived from such sale.
9. METERING, ANALYSIS, AND ALLOCATION.
9.1 GAS METERING, ANALYSIS AND REPORTS.
9.1.1 Producers shall be responsible for the metering at
the Field Delivery Points of all Equity Gas and Injected Liquids, the
calibration of such meters and any disputes with respect to such metering.
Producers agree to use reasonable efforts to cause Gas meters to be tested on a
minimum 45-day frequency for correct calibration and agree to provide, or cause
to be provided, to Processor reasonable access to all meters.
9.1.2 Producers shall furnish to Processor such statements
as Processor may reasonably require to show the volume in MCF of Equity Gas
delivered to Upstream Pipelines during a month at each of Producers' Field
Delivery Points no later than the tenth business day of the month immediately
following the month in which such Gas is delivered to the Upstream Pipeline.
This information may be conveyed by facsimile transmission, with subsequent
written confirmation, if necessary to meet the aforesaid deadline.
9.1.3 Producers shall furnish to Processor a representative
sample of Equity Gas measured at each Field Delivery Point that identifies GPM
for each liquefiable hydrocarbon component in accordance with generally accepted
industry standards by no later than the tenth business day of the month
immediately following the month in which such Gas is delivered to
19
the Upstream Pipeline. This information may be conveyed by facsimile
transmission, with subsequent written confirmation, if necessary to meet the
aforementioned deadline.
9.2 LIQUIDS METERING AND ANALYSIS. Processor shall be responsible
for the metering and analysis of all liquefiable hydrocarbons extracted from
Equity Gas, calibration of such meters and any disputes with respect to such
metering. Processor agrees to cause such liquids meters to be tested on a
minimum 45-day frequency for correct calibration and agrees to provide, or cause
to be provided to Producers, reasonable access to such meters.
9.3 METER FAILURE. In the case of the failure of any measurement
meter of a Plant with multiple Gas suppliers, the residue stream attributable to
Equity Gas production shall be determined and allotted to Producers according to
the provisions of either the applicable agreement controlling the construction
and operation of the Plant involved or according to related agreements executed
between the owners of the Plant and the owners of any Upstream Pipeline.
10. INDEMNITY.
Processor hereby indemnifies and holds Producers harmless against any
and all claims, demands, and causes of action of any kind and all losses,
damages, costs, and expenses (including court costs and reasonable attorneys'
fees) arising from injuries to persons or property attributable to the Equity
Gas or Processor's Retrograde, after delivery thereof has been made to Processor
at a Plant Delivery Point. Producers hereby indemnify and hold Processor
harmless against any and all claims, demands, and causes of action of any kind
and all losses, damages, costs, and expenses (including court costs and
reasonable attorneys' fees) arising from injuries to persons or property
attributable to the Equity Gas or Injected Liquids, including but not limited to
Processor's Retrograde, prior to delivery to Processor at the Plant Delivery
Point(s) and after Producer's share of the Residue Gas and Products (if
applicable under Section 8.2) is delivered to Producer or Producer's designee at
the Plant Redelivery Point(s).
11. CURTAILMENT.
11.1 MUTUAL AGREEMENT NOT TO CURTAIL OR WITHHOLD. Producers agree
not to unreasonably or arbitrarily withhold production of Equity Gas solely to
prejudice the rights granted to Processor hereunder. However, Producers will
have no liability to Processor under this Agreement if production is restricted
or curtailed for any good faith reason. Likewise, Processor agrees not to
arbitrarily withhold Processing services solely to prejudice the rights granted
to Producer hereunder. In any such case, Processor shall have no liability to
Producer if Processing services are withheld for any good faith reason.
11.2 LIMITED RIGHT TO INTERRUPT PERFORMANCE FOR MAINTENANCE, ETC.
Processor and any Producer may, without liability, interrupt its performance
hereunder for the purpose of making necessary or desirable inspections,
maintenance, repairs, alterations and replacements; and the Processor or
Producer requiring such relief shall give to the other reasonable notice of its
intention to interrupt its performance hereunder, except in cases of emergency
where such notice is impracticable or in cases where the operations of the other
Party will not be affected. The
20
Processor or Producer requiring such relief shall endeavor to arrange such
interruptions so as to minimize any adverse economic effect on the other Party.
12. FORCE MAJEURE.
12.1 PERFORMANCE EXCUSED. If either Processor or any Producer is
rendered unable, wholly or in part by Force Majeure to perform its obligations
under this Agreement, other than the obligation to make payments then due or
thereafter becoming due as a result of performance of an obligation prior to
such Force Majeure, it is agreed that performance of the respective obligations
of Processor and such Producer hereunder, so far as they are affected by such
Force Majeure, shall be suspended from the inception of any such inability until
it is corrected, but for no longer period. The Party claiming such inability
shall give notice thereof to the other Party as soon as reasonably practicable
after the occurrence of the Force Majeure. The Party claiming such inability
shall promptly correct such inability to the extent it may be corrected through
the exercise of reasonable diligence. Neither Party shall be liable to the other
for any losses or damages, regardless of the nature thereof and howsoever
occurring, whether such losses or damages be direct or indirect, immediate or
remote, by reason of, caused by, arising out of, or in any way attributable to
the suspension or performance of any obligation of either Party to the extent
that such suspension occurs because a Party is rendered unable, wholly or in
part, by Force Majeure to perform its obligations.
12.2 FORCE MAJEURE DEFINED. For purposes of this Agreement, the
term "Force Majeure" shall mean an event, which (i) is not within the reasonable
control of the Party claiming suspension, and which by the exercise of
reasonable diligence such Party is unable to overcome or (ii) acts of God;
strikes, lockouts or other industrial disturbances, acts of the public enemy,
wars, blockades, insurrections, civil disturbances and riots, and epidemics;
landslides, lightning, earthquakes, fires, storms, hurricanes and threats of
hurricanes, floods and washouts; arrests, orders, requests, directives,
restraints and requirements of the government and governmental agencies, either
federal or state, civil or military; explosions, breakage or accident to
machinery, equipment or lines of pipe and outages (shutdowns) of equipment,
machinery or lines of pipe. The term "Force Majeure" shall also include any
event of force majeure occurring with respect to the facilities or services of
either Party's suppliers or customers delivering or receiving any Raw Make,
Products, Slug Liquids, Gas, fuel, or other substance necessary to the
performance of such Party's obligations, and shall also include curtailment or
interruption of deliveries or services by such Third Party suppliers or
customers as a result of an event of force majeure.
13. AUDIT RIGHTS.
For a period of two years following any statement or payment hereunder
or such other period of time, if any, as may be prescribed under applicable
COPAS standards, Producers or Processor or any Third Party representative
thereof shall have the right, at its expense, upon reasonable notice and at
reasonable times, to examine the books and records of the other Party hereto, to
the extent reasonably necessary to verify the accuracy of any such statement or
payment under this Agreement. In addition, Processor and Producer shall be
required to retain all records, contracts and files pertaining to royalty
payments for the period of time necessary to
21
comply with contractual or regulatory obligations to lessors, and the same shall
be made available upon reasonable notice to the other Parties hereunder.
14. NOTIFICATIONS.
14.1 ANNUAL INFORMATION. On or before September 1 of each year,
each Producer shall provide to Processor, without warranty as to accuracy, in
reasonable form and substance, Producer's projected volumes and Gas richness
(best available composition data) at each existing and projected Field Delivery
Point by prospect, Upstream Pipeline and year for the following ten year period.
Producers' current "C" volume exploration models or other statistical production
models shall be included but may be reported in aggregate. Such provided
information shall be referred to collectively as, the "ANNUAL INFORMATION".
Producers shall also inform Processor as part of the Annual Information of any
plans to purchase or sell Dedicated Lease(s).
14.2 NOTICE OF MATERIAL CHANGES TO ANNUAL INFORMATION. Processor
and Producers shall review the Annual Information regularly. Producer shall
advise Processor as soon as reasonably practicable of any changes to the Annual
Information that could materially impact Processor's plans to Process the
projected Equity Gas Volumes.
14.3 NOTICE OF PROPOSED TRANSFERS OF DEDICATED LEASES. In addition
to notifying Processor as a part of the Annual Information, Producers shall
notify Processor, as soon as reasonably practicable, of, but in any case prior
to, any efforts to sell, exchange, or otherwise assign any Dedicated Lease, and
Processor shall inform the Producer of its intent to reserve or release such
Dedicated Lease from this Agreement.
14.4 NOTICE OF PENDING TRANSPORTATION AGREEMENTS. Each Producer
shall notify Processor as soon as reasonably practicable of any ongoing or
planned negotiation for the transportation of Equity Gas in an Upstream
Pipeline, in order to facilitate Processor's entering into a Gas Processing
Agreement for such Equity Gas. Processor and Producer agree to enter into such
transportation and Gas Processing contracts contemporaneously, to the extent
reasonably practicable and provided that a Producer shall not be obligated to
delay entry into any transportation contract when such Producer reasonably
believes such delay will result in curtailment of Equity Gas.
14.5 NOTICE OF SCHEDULED PLANT DOWNTIME. Processor agrees to notify
Producers as soon as reasonably practicable of any scheduled Plant downtime that
could impact Producer's ability to continue to produce Equity Gas.
15. CONFIDENTIALITY.
15.1 GENERAL. Neither Producers nor Processor shall disclose the
terms of this Agreement (or the results of any audit pursuant to Article 13) to
a Third Party (other than the employees, lenders, counsel, consultants, or
accountants of a Processor or a Producer who have agreed to keep such terms
confidential) except (i) in order to comply with any applicable law, order,
regulation or exchange rule, (ii) in connection with bona fide negotiations with
a potential Third Party transferee of a Dedicated Lease or (iii) in connection
with bona fide negotiations
22
involving the acquisition or construction of Plant capacity or negotiations on
contracts for Third Party Gas Processing agreements. Each Party shall notify the
other Party of any proceeding of which it is aware which may result in
disclosure and use reasonable efforts to prevent or limit the disclosure. Such
confidentiality obligations shall terminate two years after the Termination
Date.
15.2 ANNUAL INFORMATION. Processor hereby agrees to maintain Annual
Information as confidential and agrees to disclose Annual Information only (i)
to employees, lenders, counsel, consultants, or accountants of Processor or an
Affiliate of Processor, who need to know and agree to maintain the
confidentiality of such Annual Information, and (ii) to the extent necessary to
comply with any applicable law, order, regulation or exchange rule. Processor
shall notify the applicable Producers of any proceeding of which it is aware
which may result in disclosure and use reasonable efforts to prevent or limit
the disclosure. Such confidentiality obligations shall terminate two years after
the Termination Date.
16. DISPUTE RESOLUTION.
16.1 ARBITRATION. Producers and Processor hereby agree that any
claim, controversy or dispute arising among the Parties or their successors in
interest or between any of them relating to this Agreement, or any of their
respective rights, duties or obligations under or in connection with this
Agreement (a "DISPUTE"), if not resolved by the Parties in the ordinary course
of business or under the procedures set forth in Sections 16.2 and 16.3, shall
with reasonable promptness be submitted to and determined by binding arbitration
in Houston, Texas in accordance with the commercial arbitration rules of the
American Arbitration Association ("AAA") then in effect; and judgment upon any
arbitration award rendered pursuant to and in accordance with the arbitration
provisions of Section 16.4 may be entered in any court having jurisdiction over
such arbitration proceeding and over Producers and Processor; and any such Party
may institute proceedings in any court having jurisdiction for the specific
performance by any Party of any such arbitration award. Each of the Parties
specifically agrees to be bound by any arbitration award or determination made
in any such arbitration proceeding. This Section 16 will be the sole and
exclusive procedure for the resolution of any Dispute, except that any Party,
without prejudice to the following procedures, may file a complaint to seek
preliminary injunctive or other provisional judicial relief in a court of
competent jurisdiction, if in its sole judgment, that action is necessary to
avoid irreparable damage or to preserve the status quo; provided, however, that
any such provisional relief granted shall be vacated or extended upon and in
accordance with any determination of the arbitrators with respect thereto.
16.2 INITIATION OF PROCEDURES. Any Party wishing to initiate the
dispute resolution procedures set forth in this Section 16 with respect to a
Dispute not resolved in the ordinary course of business must give written notice
of the Dispute to the other Parties ("DISPUTE NOTICE"). The Dispute Notice must
include (1) a statement of that Party's position and a summary of arguments
supporting that position, and (2) the name and title of (a) the executive
responsible for administering this Agreement or the matter in Dispute and who
will represent that Party and (b) any other person who will accompany the
executive in the negotiations under Section 16.3. Within 15 days after delivery
of the Dispute Notice, the receiving Parties will submit to the other a written
response. The response will include (1) a statement of that Party's position and
a summary of arguments supporting that position, and (2) the name and title of
(x)
23
the executive who will represent that Party and (y) any other person who
will accompany the executive in the negotiations conducted under Section 16.3.
16.3 NEGOTIATION BETWEEN EXECUTIVES. If any Party has given a
Dispute Notice under Section 16.2, the Parties will attempt in good faith to
resolve the Dispute within 30 days after the receipt of the written response to
the Dispute Notice by negotiations between executives identified in Section
16.2. During the 30 days following the receipt of the written response to the
Dispute Notice, the executives (identified in Section 16.2) will meet no less
than eight hours a day and exhaustively negotiate in good faith and at the
expense of all other responsibilities.
16.4 BINDING ARBITRATION. At the end of the 30-day period provided
in Section 16.3, if the executives have been unable to resolve the Dispute, and
if a disputing Party wishes to submit the Dispute to binding arbitration, the
disputing Party shall provide to the other disputing Party three business days'
prior written notice of such disputing Party's intention to submit the Dispute
to binding arbitration. The other disputing Party shall be entitled to join in
the submission of the Dispute to binding arbitration in accordance with the
commercial arbitration rules of the AAA (expedited procedures). The AAA shall be
instructed to choose an arbitrator who shall have a minimum of 15 years
experience in the oil and gas processing industry, or such other experience such
that he or she is considered an expert on the business of the Processor. Notice
of a disputing Party's submission of the matter for arbitration shall be given
to the other Party or Parties within three business days thereafter (the
"ARBITRATION NOTICE"). Upon delivery of the Arbitration Notice by the disputing
Party, each disputing Party shall have 30 days to provide the arbitrator (and
the disputing Party) with a statement of its position (with supporting
documentation) regarding the matter or matters in dispute together with its best
and final offer for settlement of the Dispute. The failure to provide a
statement of position within this period shall constitute a waiver of a
disputing Party's right to have such materials considered by the arbitrator. The
arbitrator shall consider the statements of position submitted by the disputing
Parties and shall, within 30 business days after receipt of such materials,
issue his or her decision in writing picking one of the statements of position
submitted by the disputing Parties as the position to be adopted to settle the
Dispute. All determinations made by the arbitrator shall be final, conclusive
and binding on the disputing Parties. Each of the disputing Parties will pay
one-half of the fees of the arbitrator and all other arbitration fees and
expenses and the fees of their respective arbitrators (if required).
17. TRANSFER AND ASSIGNMENT.
17.1 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
Producers and Processor. Except for an assignment by Processor in connection
with a mortgage of its assets, a disposition of its assets by merger,
reorganization or consolidation, sale of all or a substantial part of its
assets, or transfer of its assets to an Affiliate, this Agreement shall not be
assignable by Processor except with the prior written consent of the affected
Producer, which consent shall not be unreasonably withheld or delayed. Except
for an assignment by a Producer in connection with a mortgage of its assets, a
disposition of its assets by merger, reorganization or consolidation, sale of
all or a substantial part of its Leases, or transfer of one or more of its
Leases to an Affiliate, this Agreement shall not be assignable by a Producer
except with the prior written consent of Processor, which consent shall not be
unreasonably withheld or delayed.
24
17.2 PROCESSOR'S RIGHTS UNDER LEASES. Subject to Section 17.4,
Producers hereby agree that it is their intent that, to the extent permitted by
law, this Agreement constitutes a conveyance by Producers of a portion of their
rights as lessee under the Dedicated Leases and that this Agreement shall bind
all persons that now or at any time hereafter have any right as lessee or
otherwise under any Dedicated Leases, whether by voluntary transfer, involuntary
transfer, or otherwise of Leases; provided, however, that nothing in this
Section 17.2 or any other provision of this Agreement shall require, or be
deemed to require, Processor to pay, or be responsible for, any Royalty Charges,
it being the intent of the Parties to this Agreement that Producers shall pay,
and be responsible for, any and all Royalty Charges, as provided in Section 8.1.
Producers further agree (i) to make any transfer of any Dedicated Lease subject
to the terms and conditions of this Agreement and (ii) not to transfer
Producer's interest in a Dedicated Lease without first requiring the transferee
to execute and deliver to Producer and Processor a Letter of Attornment in the
form attached hereto as Exhibit E.
17.3 AFFILIATES OF PRODUCER PARTIES. Subject to Section 17.4, it is
the intention of the Parties that this Agreement shall bind not only the
Producers who are made a Party to this Agreement but also their respective
Affiliates, successors and assigns. Each Producer covenants and agrees to
exercise its best efforts to have each of its Affiliates, successors and assigns
that acquires an interest in a Lease become and be made a Party to this
Agreement and to perform its obligations hereunder.
17.4 EXCEPTED LEASES. As to any Dedicated Leases, or portions
thereof, or interests therein that were transferred or assigned by Producers to
Third Parties during the period of January 1, 1998 through the Effective Date,
inclusive, that were not made subject to the Conveyance as a condition of any
such transfer or assignment ("EXCEPTED LEASES"), Processor waives the
application of the Conveyance as to the Excepted Leases, and the Parties agree
that this Agreement shall not apply to the Excepted Leases unless and until an
Excepted Lease is subsequently reacquired by a Producer.
18. MISCELLANEOUS.
18.1 TITLE AND CAPTIONS. All section titles or captions in this
Agreement are for convenience of reference only. They are not intended to be
part of this Agreement or to in any way define, limit, extend, or describe the
scope or intent of any provisions of this Agreement. Except as specifically
provided otherwise, reference to "Sections" and "Exhibits" are to Articles and
Sections of and Exhibits to this Agreement.
18.2 PRONOUNS AND PLURALS. Whenever the context so requires, any
pronoun used in this Agreement includes the corresponding masculine, feminine or
neuter forms, and the singular form of nouns, pronouns and verbs includes the
plural and vice versa.
18.3 SEPARABILITY. Each provision of this Agreement shall be
considered to be separable and, if, for any reason, any such provision, is
determined to be in whole or part invalid and contrary to any existing or future
applicable law, such invalidity shall not impair the operation of or affect
those portions of this Agreement that are valid, and this Agreement shall be
25
construed and enforced in all respects as if the invalid or unenforceable
provision had been omitted.
18.4 SUCCESSORS. This Agreement shall be binding upon and inure to
the benefit of the Parties and their respective successors and assigns but this
provision shall not be deemed to permit any assignment by a Party of any of its
rights or obligations under this Agreement except as expressly provided herein.
18.5 FURTHER ACTIONS. Each Party agrees to execute and deliver such
further instruments and do such further acts and things as may be required or
useful to carry out or further evidence the intent and purpose of this Agreement
and which are not inconsistent with its terms.
18.6 NOTICES. All notices or other communications hereunder must be
in writing and must be delivered either personally or by (i) facsimile means
(delivered during the recipient's regular business hours), (ii) registered or
certified mail (postage prepaid and return receipt requested), or (iii) express
courier or delivery service, addressed as follows:
Producers: [Producer] Processor: Enterprise Gas Processing, LLC
-------- 2727 North Loop West - 7th Floor
c/o Shell Offshore, Inc. Houston, TX 77008
200 N. Dairy Ashford Fax #: (713) 880-6570
Houston, TX 77079 Attn: President
Fax #: (281) 544-3544
Attn: Manager
Marketing & Transportation
or at such other address and number as any Party shall have previously
designated by notice given to the other Parties in the manner provided in this
Section. Notices shall be deemed given when received during normal business
hours if sent by facsimile means (confirmation of such receipt by confirmed
facsimile transmission being deemed receipt of communications sent by facsimile
means), and when delivered and receipted for (or upon the date of attempted
delivery where delivery is refused), if hand-delivered, sent by express courier
or delivery service, or sent by certified or registered mail.
18.7 AMENDMENT ONLY IN WRITING. No amendment, waiver, modification
or change of this Agreement shall be enforceable unless in writing signed by the
Party against whom enforcement is sought.
18.8 RIGHT OF INGRESS AND EGRESS. To the extent Producers are able
to grant such rights, Processor shall have the right of ingress and egress to
and from the premises of Producers and to and from the Field Delivery Points for
all purposes necessary for the fulfillment of this Agreement.
18.9 NO SPECIAL DAMAGES. No Party shall be liable for any
consequential, incidental, punitive, exemplary, or indirect damages in tort,
contract, under any indemnity provision or otherwise.
26
18.10 APPLICABLE LAW. This Agreement shall be governed by, and
construed, interpreted and enforced in accordance with, the substantive law of
the state of Louisiana without regard to principles of conflicts of laws.
18.11 ENTIRE AGREEMENT. This Agreement embodies the entire agreement
and understanding between Producers and Processor and supersedes all prior
agreements and understandings relating to the subject matter hereof.
18.12 COUNTERPARTS. This Agreement may be executed in one or more
counterparts and each of such counterparts, for all purposes, shall be deemed to
be an original, but all of such counterparts together shall constitute but one
and the same instrument, binding upon all Parties, notwithstanding that all of
the Parties may not have executed the same counterpart.
IN WITNESS WHEREOF, the Parties hereto, by their duly authorized
representatives have executed this Agreement effective as of the Effective Date.
PRODUCERS:
SHELL OIL COMPANY WITNESSES:
By: /s/ B. K. Garrison M. J. Roedel
------------------------------ -----------------------------
Name: B. K. Garrison Dave Harris
Title: Attorney-in-Fact -----------------------------
SHELL OFFSHORE INC. WITNESSES:
By: /s/ J. W. Kimmel M. J. Roedel
------------------------------ -----------------------------
Name: J. W. Kimmel Dave Harris
Title: Attorney-in-Fact -----------------------------
SHELL CONSOLIDATED ENERGY WITNESSES:
RESOURCES INC.
By: /s/ J. W. Kimmel M. J. Roedel
------------------------------ -----------------------------
Name: J. W. Kimmel Dave Harris
Title: Attorney-in-Fact -----------------------------
27
SHELL LAND & ENERGY COMPANY WITNESSES:
By: /s/ J. W. Kimmel M. J. Roedel
------------------------------ -----------------------------
Name: J. W. Kimmel Dave Harris
Title: Attorney-in-Fact -----------------------------
28
SHELL FRONTIER OIL & GAS INC. WITNESSES:
By: /s/ J. W. Kimmel M.J. Roedel
------------------------------ ---------------------------------
Name: J. W. Kimmel Dave Harris
Title: Attorney-in-Fact ---------------------------------
SHELL EXPLORATION & WITNESSES:
PRODUCTION COMPANY
By: /s/ W. T. Mooney M.J. Roedel
------------------------------ ---------------------------------
Name: W. T. Mooney Dave Harris
Title: Vice President - Tax ---------------------------------
SHELL GULF OF MEXICO INC. WITNESSES:
By: /s/ J. W. Kimmel M.J. Roedel
------------------------------ ---------------------------------
Name: J. W. Kimmel Dave Harris
Title: Attorney-in-Fact ---------------------------------
PROCESSOR:
ENTERPRISE GAS PROCESSING, LLC WITNESSES:
By: /s/ W. Ordemann M.J. Roedel
------------------------------ ---------------------------------
Name: W. Ordemann Dave Harris
Title: Senior Vice President ---------------------------------
29
STATE OF TEXAS
COUNTY OF HARRIS
BEFORE ME, the undersigned Notary Public, on this day personally appeared B. K.
Garrison, known to me to be the person whose name is subscribed to the foregoing
instrument and acknowledged to me that he, being fully authorized to do so,
executed and delivered the same as Attorney-in-Fact for Shell Oil Company, a
Delaware corporation, on the day and year therein mentioned and as the act and
deed of said corporation, for the purpose and consideration therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 2nd day of April, 2004.
/s/ Gayle Kacal
-------------------------------
Notary Public
My Commission Expires: June 14, 2007.
STATE OF TEXAS
COUNTY OF HARRIS
BEFORE ME, the undersigned Notary Public, on this day personally appeared J. W.
Kimmel, known to me to be the person whose name is subscribed to the foregoing
instrument and acknowledged to me that he, being fully authorized to do so,
executed and delivered the same as Attorney-in-Fact for Shell Offshore Inc., a
Delaware corporation, on the day and year therein mentioned and as the act and
deed of said corporation, for the purpose and consideration therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 4th day of April, 2004.
/s/ Maria Cristina Charles
-------------------------------
Notary Public
My Commission Expires: April 4, 2008.
30
STATE OF TEXAS
COUNTY OF HARRIS
BEFORE ME, the undersigned Notary Public, on this day personally appeared J. W.
Kimmel, known to me to be the person whose name is subscribed to the foregoing
instrument and acknowledged to me that he, being fully authorized to do so,
executed and delivered the same as Attorney-in-Fact for Shell Consolidated
Energy Resources Inc., a Delaware corporation, on the day and year therein
mentioned and as the act and deed of said corporation, for the purpose and
consideration therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 4th day of April, 2004.
/s/ Maria Cristina Charles
--------------------------------
Notary Public
My Commission Expires: April 4, 2008.
STATE OF TEXAS
COUNTY OF HARRIS
BEFORE ME, the undersigned Notary Public, on this day personally appeared J. W.
Kimmel, known to me to be the person whose name is subscribed to the foregoing
instrument and acknowledged to me that he, being fully authorized to do so,
executed and delivered the same as Attorney-in-Fact for Shell Land & Energy
Company, a Delaware corporation, on the day and year therein mentioned and as
the act and deed of said corporation, for the purpose and consideration therein
expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 4th day of April, 2004.
/s/ Maria Cristina Charles
--------------------------------
Notary Public
My Commission Expires: April 4, 2008.
31
STATE OF TEXAS
COUNTY OF HARRIS
BEFORE ME, the undersigned Notary Public, on this day personally appeared J. W.
Kimmel, known to me to be the person whose name is subscribed to the foregoing
instrument and acknowledged to me that he, being fully authorized to do so,
executed and delivered the same as Attorney-in-Fact for Shell Frontier Oil & Gas
Inc., a Delaware corporation, on the day and year therein mentioned and as the
act and deed of said corporation, for the purpose and consideration therein
expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 5th day of April, 2004.
/s/ Maria Cristina Charles
--------------------------------
Notary Public
My Commission Expires: April 4, 2008.
STATE OF TEXAS
COUNTY OF HARRIS
BEFORE ME, the undersigned Notary Public, on this day personally appeared W. T.
Mooney, known to me to be the person whose name is subscribed to the foregoing
instrument and acknowledged to me that he, being fully authorized to do so,
executed and delivered the same as Vice President, Tax of Shell Exploration &
Production Company, a Delaware corporation, on the day and year therein
mentioned and as the act and deed of said corporation, for the purpose and
consideration therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 5th day of April, 2004.
/s/ Maria Cristina Charles
--------------------------------
Notary Public
My Commission Expires: April 4, 2008.
32
STATE OF TEXAS
COUNTY OF HARRIS
BEFORE ME, the undersigned Notary Public, on this day personally appeared J. W.
Kimmel, known to me to be the person whose name is subscribed to the foregoing
instrument and acknowledged to me that he, being fully authorized to do so,
executed and delivered the same as Attorney-in-Fact for Shell Gulf of Mexico
Inc., a Delaware corporation, on the day and year therein mentioned and as the
act and deed of said corporation, for the purpose and consideration therein
expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 4th day of April, 2004.
/s/ Maria Cristina Charles
--------------------------------
Notary Public
My Commission Expires: April 4, 2008.
STATE OF TEXAS
COUNTY OF HARRIS
BEFORE ME, the undersigned Notary Public, on this day personally appeared W.
Ordemann, known to me to be the person whose name is subscribed to the foregoing
instrument and acknowledged to me that he, being fully authorized to do so,
executed and delivered the same as a Senior Vice President of Enterprise Gas
Processing, LLC, a Delaware limited liability company, on the day and year
therein mentioned and as the act and deed of said corporation, for the purpose
and consideration therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 5th day of April, 2004.
/s/ Maria Cristina Charles
--------------------------------
Notary Public
My Commission Expires: April 4, 2008.
33
EXHIBIT A
SEVENTH AMENDMENT TO CONVEYANCE OF GAS PROCESSING RIGHTS
DEDICATED LEASES AS OF AUGUST 1, 1999
FEDERAL LEASES
LEASE
AREA BLOCK LEASE # CURRENT LEASE OPERATOR DATE SPUD DATE
- -----------------------------------------------------------------------------------------
AC 0556 11607 Shell Deepwater Dev 10/01/89
0557 8272 Shell Deepwater Dev 10/01/85
0558 9263 Shell Deepwater Dev 10/01/87
AC 0600 8580 Shell Deepwater Dev 10/01/86 04/15/96
AC 0601 8581 Shell Deepwater Dev 10/01/86
AC 0602 9266 Shell Deepwater Dev 10/01/87
AC 0644 11609 Shell Deepwater Dev 10/01/89
AC 0645 9268 Shell Deepwater Dev 10/01/87
AC 0646 11610 Shell Deepwater Dev 10/01/89
BA 0505 15724 IP Pet 11/01/95 03/04/97
BA 0577 17111 IP Pet 01/01/97 08/12/97
BA A0019 3936 Shell Offshore 03/01/79 11/26/79
BA A0020 3472 Shell Offshore 08/01/77 05/23/94
BA A0023 3938 Shell Offshore 03/01/79 07/19/79
EC 0060 5359 Shell Offshore 07/01/83 03/30/93
EC 0126 15139 Shell Offshore 07/01/95 08/04/98
EC 0187 15142 Shell Offshore 07/01/95 07/23/97
EC 0276 12845 Walter O&G 07/01/91 04/27/96
EC 0287 16268 Newfield Exp 06/01/96 10/20/97
EI 0097 17964 Shell Offshore 07/01/97 01/31/99
EI 0136 3152 Shell Offshore 07/01/75 09/04/97
EI 0152 15244 Shell Offshore 07/01/95 02/26/96
EI 0157 11951 Shell Offshore 05/01/90 07/05/94
EI 0158 1220 Shell Offshore 06/01/62 07/12/62
EI 0176 445 Shell Offshore 01/01/55 09/18/68
EI 0183 17981 Elf Exp 08/01/97 05/31/98
EI 0184 5498 Elf Exp 07/01/83 02/12/88
EI 0331 2116 Shell Offshore 01/01/71 02/10/71
EW 0833 18167 Shell Offshore 07/01/97
EW 0834 18168 Shell Offshore 07/01/97 07/11/98
GA 0180 3228 Shell Offshore 09/01/75 01/16/78
GA 0213 17120 Basin Exp 02/01/97 01/19/98
GB 0083 11450 Shell Offshore 12/01/89 03/02/90
GB 0084 11451 Shell Offshore 12/01/89 07/04/91
GB 0127 11454 Shell Offshore 12/01/89 01/28/95
GB 0128 11455 Shell Offshore 12/01/89 03/16/94
GB 0168 15846 Shell Offshore 11/01/95 01/05/99
GB 0172 14221 Shell Offshore 01/01/94 02/03/95
GB 0215 9216 Amerada Hess 10/01/87 03/23/88
GB 0248 13815 Shell Deepwater Dev 10/01/92 10/04/97
GB 0254 13816 Chevron USA 12/01/92 06/15/93
GB 0336 15877 Shell Deepwater Dev 11/01/95 07/31/96
GB 0341 15879 Shell Deepwater Dev 02/01/96 12/01/98
GB 0426 8241 Shell Deepwater Prod 10/01/85 05/09/88
GB 0427 7493 Shell Deepwater Prod 09/01/84 06/03/87
GB 0451 15898 Shell Deepwater Dev 11/01/95 01/23/98
GB 0452 15899 Shell Deepwater Dev 11/01/95
GB 0470 8248 Shell Deepwater Prod 10/01/85 07/08/87
GB 0471 7498 Shell Deepwater Prod 09/01/84 02/23/87
GB 0472 11528 Shell Deepwater Dev 10/01/89 07/13/99
Page 1 of 4
EXHIBIT A
SEVENTH AMENDMENT TO CONVEYANCE OF GAS PROCESSING RIGHTS
DEDICATED LEASES AS OF AUGUST 1, 1999
FEDERAL LEASES
GB 0515 20792 Marathon Oil 01/01/99 06/04/99
GB 0516 8252 Shell Deepwater Dev 10/01/85 09/21/95
GB 0559 11546 Shell Deepwater Dev 10/01/89 02/08/99
GB 0602 11553 Shell Deepwater Dev 10/01/89 09/13/95
GB 0919 11591 Shell Deepwater Dev 10/01/89
GB 0920 11592 Shell Deepwater Dev 10/01/89 06/07/99
GB 0963 11597 Shell Deepwater Dev 10/01/89
GB 0964 11598 Shell Deepwater Dev 10/01/89
GC 0019 4131 Shell Offshore 10/01/79 02/09/80
GC 0065 5889 Shell Offshore 07/01/83 08/04/83
GC 0069 13159 Shell Deepwater Dev 05/01/91 02/23/98
GC 0073 5897 Shell Deepwater Prod 07/01/83 05/26/85
GC 0108 14668 Shell Offshore 07/01/94
GC 0109 5900 Shell Offshore 07/01/83 06/02/84
GC 0110 14023 Shell Offshore 07/01/93 04/09/95
GC 0112 15545 Shell Deepwater Dev 07/01/95 03/29/97
GC 0113 15546 Shell Deepwater Dev 09/01/95 08/08/97
GC 0116 5904 Shell Deepwater Prod 07/01/83 11/14/84
GC 0117 5905 Shell Deepwater Prod 07/01/83 07/15/85
GC 0155 16698 Shell Deepwater Dev 09/01/96 04/28/98
GC 0158 7995 Shell Deepwater Dev 07/01/85 12/23/88
GC 0177 16702 Spinnaker Exp 09/01/96 07/08/99
GC 0200 12209 BP Exp & Oil 05/01/90 03/16/97
GC 0201 12210 BP Exp & Oil 05/01/90
GC 0202 7998 Shell Deepwater Dev 07/01/85 09/29/97
GC 0244 11043 BP Exp & Oil 05/01/89 02/14/94
GC 0245 5916 BP Exp & Oil 07/01/83 08/08/95
GC 0247 15564 Shell Deepwater Dev 09/01/95
GC 0248 15565 Shell Deepwater Dev 09/01/95 02/21/96
GC 0472 5097 Shell Deepwater Dev 04/01/82 12/08/88
GC 0473 5922 Shell Deepwater Dev 07/01/83 09/17/91
GC 0517 5923 Shell Deepwater Dev 07/01/83
GC 0644 11080 BP Exp & Oil 05/01/89 12/20/98
GC 0645 11081 BP Exp & Oil 05/01/89
GI 0110 13943 Anadarko Pet 08/01/93 11/15/98
GI 0111 18069 Anadarko Pet 07/01/97
GI 0116 13944 Anadarko Pet 07/01/93 04/16/98
HI 0035 15768 IP Pet 12/01/95 08/31/96
HI 0037 15769 IP Pet 12/01/95 06/28/96
HI 0068 15771 IP Pet 11/01/95 01/09/97
HI 0108 15776 IP Pet 11/01/95 05/31/96
HI 0119 14882 Shell Offshore 10/01/94 07/08/96
HI 0135 741 Shell Offshore 05/01/60 03/21/64
HI 0136 742 Shell Offshore 05/01/60 05/17/64
HI 0161 744 Shell Offshore 05/01/60 06/26/61
HI 0179 3236 Shell Offshore 09/01/75 02/14/76
HI 0194 6166 Shell Offshore 10/01/83 06/16/84
HI 0201 4576 Shell Offshore 01/01/81 06/19/82
HI A0006 4734 Shell Offshore 09/01/81 04/04/93
HI A0350 2428 Shell Offshore 08/01/73 08/15/73
MC 0108 9777 BP Exp & Oil 07/01/88 04/02/89
MC 0110 18192 Shell Offshore 08/01/97 03/12/98
MC 0119 14629 Shell Deepwater Dev 05/01/94 05/12/99
MC 0151 2643 Shell Offshore 05/01/74 07/27/75
MC 0194 2638 Shell Offshore 05/01/74 06/28/75
MC 0195 2639 Shell Offshore 05/01/74 01/22/76
Page 2 of 4
EXHIBIT A
SEVENTH AMENDMENT TO CONVEYANCE OF GAS PROCESSING RIGHTS
DEDICATED LEASES AS OF AUGUST 1, 1999
FEDERAL LEASES
MC 0311 2968 Shell Offshore 12/01/74 12/21/74
MC 0383 7937 Shell Deepwater Dev 08/01/85 06/27/87
MC 0385 7938 Shell Deepwater Dev 07/01/85
MC 0429 7944 Shell Deepwater Dev 07/01/85 11/08/95
MC 0430 9808 Shell Deepwater Dev 05/01/88
MC 0496 14005 Shell Deepwater Dev 07/01/93 07/03/98
MC 0520 9821 Amoco Prod 05/01/88 10/30/96
MC 0521 8822 Amoco Prod 06/01/87
MC 0522 8823 Amoco Prod 06/01/87 04/27/89
MC 0565 11002 Amoco Prod 05/01/89
MC 0566 8831 Amoco Prod 06/01/87
MC 0584 14010 Union Pacific Res 08/01/93 12/16/97
MC 0607 9837 Amoco Prod 05/01/88 09/20/97
MC 0608 9838 Amoco Prod 05/01/88
MC 0657 8496 Shell Deepwater Dev 06/01/86 11/07/87
MC 0686 5862 Shell Deepwater Prod 07/01/83 09/10/96
MC 0687 5863 Shell Deepwater Prod 07/01/83 12/19/95
MC 0730 7954 Shell Deepwater Prod 07/01/85 06/10/88
MC 0731 7955 Shell Deepwater Prod 07/01/85 11/20/86
MC 0762 7957 Shell Offshore 07/01/85
MC 0763 7958 Shell Offshore 07/01/85 01/13/89
MC 0764 8852 Shell Deepwater Dev 06/01/87 07/23/88
MC 0806 7962 Shell Deepwater Prod 07/01/85 04/10/91
MC 0807 7963 Shell Deepwater Prod 07/01/85 07/26/89
MC 0809 5868 Shell Deepwater Dev 07/01/83 07/19/93
MC 0810 9873 Shell Deepwater Dev 05/01/88 03/01/95
MC 0850 9881 Shell Deepwater Dev 05/01/88
MC 0851 9882 Shell Deepwater Dev 05/01/88
MC 0852 5870 Shell Deepwater Dev 07/01/83 12/07/83
MC 0853 5871 Shell Deepwater Dev 07/01/83
MC 0854 9883 Shell Deepwater Dev 05/01/88 07/10/90
MC 0890 7969 Shell Deepwater Dev 07/01/85 10/29/98
MC 0891 9889 Shell Deepwater Dev 05/01/88
MC 0898 9895 BP Exp & Oil 05/01/88
MC 0899 9896 BP Exp & Oil 05/01/88 01/25/91
MC 0911 9899 BP Exp & Oil 05/01/88 08/03/97
MC 0912 9900 BP Exp & Oil 05/01/88
MC 0934 7975 Shell Deepwater Dev 07/01/85 12/22/94
MC 0935 7976 Shell Deepwater Dev 07/01/85 01/28/94
MC 0942 9904 Shell Deepwater Dev 05/01/88 09/23/98
MC 0955 8862 Shell Deepwater Dev 06/01/87
MC 0956 8863 Shell Deepwater Dev 06/01/87
MC 0999 8866 Shell Deepwater Dev 06/01/87
MC 1000 8867 Shell Deepwater Dev 06/01/87
MO 0821 5058 Shell Offshore 04/01/82 10/16/85
MP 0251 7823 Shell Deepwater Prod 08/01/85 11/16/86
MP 0252 7824 Shell Deepwater Prod 08/01/85 11/13/85
MP 0309 8760 Shell Offshore 06/01/87 06/21/89
MP 0310 4126 Shell Offshore 10/01/79 05/19/80
MP 0312 16520 Shell Offshore 07/01/96 01/20/97
MP 0315 8467 Shell Offshore 07/01/86 10/16/86
PN 0969 5953 Shell Offshore 10/01/83 02/04/84
PN 0975 20603 Shell Offshore 10/01/98 12/09/98
PN 0976 5954 Shell Offshore 10/01/83 04/09/90
SA 0010 3958 Shell Offshore 03/01/79 03/30/79
SA 0012 14590 IP Pet 07/01/94 10/02/82
Page 3 of 4
EXHIBIT A
SEVENTH AMENDMENT TO CONVEYANCE OF GAS PROCESSING RIGHTS
DEDICATED LEASES AS OF AUGUST 1, 1999
FEDERAL LEASES
SM 0130 2280 Shell Offshore 02/01/73 04/05/73
SM 0131 2281 Shell Offshore 01/01/73 02/21/73
SS 0076 15276 Mobil E&P SE 08/01/95 11/04/95
SS 0201 5557 L L & E 07/01/83 11/24/90
SS 0258 5560 Shell Frontier O&G 07/01/83 01/18/86
SS 0259 5044 Shell Frontier O&G 04/01/82 08/21/82
ST 0211 16435 IP Pet 07/01/96
ST 0300 4240 Shell Offshore 12/01/79 07/10/81
ST 0301 3594 Shell Offshore 08/01/77 02/08/78
ST 0302 6779 Shell Offshore 06/01/84 12/16/84
SX 0017 4143 Shell Offshore 10/01/79 02/22/81
SX 0040 4745 Shell Offshore 09/01/81 10/28/86
VK 0736 13987 Shell Offshore 07/01/93 09/23/98
VK 0780 6884 Shell Offshore 06/01/84 02/04/86
VK 0783 6886 Shell Deepwater Prod 06/01/84 11/02/84
VK 0784 13060 Shell Deepwater Prod 07/01/91 02/10/96
VK 0824 15436 Shell Offshore 09/01/95 06/09/98
VK 0827 7910 Shell Deepwater Prod 09/01/85 09/14/98
VK 0867 6889 Amoco Prod 07/01/84
VK 0871 8469 Amoco Prod 06/01/86 05/26/94
VK 0872 19907 Shell Deepwater Dev 08/01/98 11/20/98
VK 0873 19908 Shell Deepwater Dev 08/01/98 12/15/98
VK 0911 6892 Shell Deepwater Prod 07/01/84 08/27/98
VK 0912 6893 Shell Deepwater Prod 07/01/84 03/01/85
VK 0915 6894 Amoco Prod 06/01/84 04/14/93
VR 0161 1127 Samedan 06/01/62 01/01/63
VR 0195 19760 Shell Offshore 08/01/98
VR 0196 19760 Shell Offshore 08/01/98 01/01/63
VR 0207 19760 Shell Offshore 08/01/98
VR 0260 15197 Shell Offshore 07/01/95 12/04/95
VR 0308 11892 Newfield Exp 05/01/90 10/25/94
VR 0355 12876 Shell Offshore 07/01/91 02/14/92
WC 0094 15054 IP Pet 07/01/95 10/26/96
WC 0170 4085 CXY Energy Off 10/01/79 06/25/80
WC 0182 15062 Seneca Res 08/01/95 10/22/96
WC 0195 16123 IP Pet 06/01/96 05/09/97
WC 0266 13838 Shell Offshore 08/01/93 11/01/96
WC 0269 13563 Shell Offshore 08/01/92 06/22/95
WC 0270 15073 Shell Offshore 07/01/95 06/24/96
WC 0311 15079 IP Pet 07/01/95 04/27/96
WC 0505 16200 LLOG Exp Off 06/01/96 10/04/98
WC 0565 2015 Shell Offshore 02/01/71 01/06/72
WC 0633 2238 Shell Offshore 01/01/73 01/22/73
WD 0034 3414 Forcenergy 01/01/77 01/30/77
Page 4 of 4
EXHIBIT A
SEVENTH AMENDMENT TO CONVEYANCE OF GAS PROCESSING RIGHTS
DEDICATED LEASES AS OF AUGUST 1, 1999
LEASES WITH OPERATING RIGHTS
CURRENT
LEASE
AREA BLOCK LEASE # LEASE OPERATOR LEASE DATE Description of Operating Rights
- -------------------------------------------------------------------------------------------------------
EI 0088 10721 G10721 Burlington 07/01/89 N1/2; SE1/4; E1/2SW1/4; NW1/4SW1/4;
E1/2SW1/4SW1/4, limited from the
surface to a depth of 25,000'
subsea; and W1/2SW1/4SW1/4, limited
from a depth of 8,200' subsea to a
depth of 25,000' subsea.
EI 0089 044 G00044 Burlington 08/28/45 N1/2; SW1/4; W1/2SE1/4;
W1/2E1/2SE1/4; NE1/4NE1/4SE1/4;
SE1/4SE1/4SE1/4, Block 89, Eugene
Island Area, limited from the
surface to a depth of 25,000'
subsea; and the SE1/4NE1/4SE1/4;
NE1/4SE1/4SE1/4, limited from a
depth of 8,200' subsea to a depth
of 25,000' subsea.
EI 0090 229 G00229 Burlington 11/19/48 SE1/4 of Block 90, Eugene Island
Area, INSOFAR AND ONLY INSOFAR AS
lease covers the following:
NE1/4SE1/4; W1/2SE1/4;
W1/2SE1/4SE1/4, limited from the
surface to a depth of 25,000'
subsea; and the E1/2SE1/4SE1/4,
limited from a depth of 10,800'
subsea to a depth of 25,000' subsea.
EI 0093 228 G00228 Burlington 11/19/48 E1/2 of Block 93, Eugene Island
Area, INSOFAR AND ONLY INSOFAR AS
said lease covers the following:
W1/2E1/2NE1/4; W1/2NE1/4; SE1/4,
limited from the surface to a depth
of 25,000' subsea; and the
E1/2E1/2NE1/4, limited from a depth
of 25,000' subsea.
EI 0094 5488 G05488 Burlington 07/01/83 N1/2; SE1/4; N1/2SW1/4;
N1/2S1/2SW1/4; S1/2SE1/4SW1/4;
E1/4SW1/4SW1/4, limited from the
surface to a depth of 25,000'
subsea; and the SW1/4SW1/4SW1/4,
limited from a depth of 10,800'
subsea; to a depth of 25,000'
subsea.
EI 0095 046 G00046 Burlington 08/28/45 E1/2; E1/2W1/2; SW1/4SW1/4;
S1/2NW1/4SW1/4; NW1/4NW1/4SW1/4;
SW1/4NW1/4NW1/4; W1/2SW1/4NW1/4;
Block 95, Eugene Island Area,
limited from the surface to a depth
of 25,000' subsea ; and the
N1/2NW1/4NW1/4; SE1/4NW1/4NW1/4;
E1/2SW1/4NW1/4; NE1/4NW1/4SW1/4;
limited from a depth of 8,200'
subsea to a depth of 25,000' subsea.
EI 0109 17967 G17967 Tana 07/01/97 All of Block 109, Eugene Island
Area, INSOFAR AND ONLY INSOFAR AS
said lease covers that portion of
Eugene Island Block 109 below
17,000 feet true vertical depth
(TVD) down to and including 35,000
feet TVD;
Page 1 of 3
EXHIBIT A
SEVENTH AMENDMENT TO CONVEYANCE OF GAS PROCESSING RIGHTS
DEDICATED LEASES AS OF AUGUST 1, 1999
LEASES WITH OPERATING RIGHTS
EI 0255 1958 G01958 Forest 01/01/70 S1/2 of Block 255, Eugene Island
Area, INSOFAR AND ONLY INSOFAR AS
the operating rights affect the
SW1/4SW1/4SW1/4 INSOFAR AND ONLY
INSOFAR AS the "P" Sand which is
defined in that certain Federal
Unit Agreement (Contract No.
14-08-0001-12325) Eugene Island
Block 276 "P" Sand, Reservoir 'A',
as the stratigraphic equivalent of
that productive sand.
GA 0394 13317 G13317 IP Pet 12/01/91 All of Block 394, Galveston Area,
INSOFAR AND ONLY INSOFAR as the
operating rights in the lease cover
the depths from the surface of the
earth down to the stratigraphic
equivalent of 8,850 feet true
vertical depth as seen in the
Electric log for the OCS-G 13317
Well No. 2.
GA 0395 12508 G12508 IP Pet 10/01/90 All of Block 395, Galveston Area,
INSOFAR AND ONLY INSOFAR AS the
operating rights in the lease cover
the depths from the surface of the
earth down to the stratigraphic
equivalent of 100 feet below the
total depth drilled in the OCS-G
12508 Well 1, which was drilled to
a true vertical depth of 8,508
feet.
HI 0131 14863 G14863 Vastar 10/01/94 All of Block 131, High Island Area,
INSOFAR AND ONLY INSOFAR AS said
lease includes Assignor's operating
rights from the surface to 8,000
feet TVD in the W1/2 of the Lease;
HI 0154 14159 G14159 SOI 01/01/94 N1/2 of block 154, High Island
Area, INSOFAR AND ONLY INSOFAR as
the lease covers the NW1/4;
W1/2NE1/4 and W1/2E1/2NE1/4 of said
Block 154, from below 8,000 TVD to
30,000 TVD;
HI 0154 2357 G02357 Northstar 08/01/73 S1/2 of Block 154, High Island
Area, INSOFAR AND ONLY INSOFAR AS
said lease covers all depths from
the surface down to 100 feet below
the base of the stratigraphic
equivalent of that sand encountered
at a measured depth of 9,815 feet
in OCS-G 14159, Well No. 1.
MC 0267 3799 G03799 Exxon 06/01/78 All of Block 267, Mississippi
Canyon, INSOFAR AND ONLY INSOFAR AS
the operating rights cover the W1/2
of said block from the surface to
the earth down to and including the
stratigraphic equivalent of 12,135'
MD, as seen in Shell OCS-G 3799 No.
3 Sonic Log.
MP 0131 13651 G13651 ATP 09/01/92 All of Block 131, Main Pass Area,
INSOFAR AND ONLY INSOFAR AS the
lease covers all depths below 8,000
feet true vertical depth.
MP 0303 4253 G04253 Oxy 12/01/79 INSOFAR AND ONLY INSOFAR AS the
lease covers the S1/2S1/2 of Block
303, Main Pass Area, South and East
Addition, down to a depth of
25,000'.
Page 2 of 3
EXHIBIT A
SEVENTH AMENDMENT TO CONVEYANCE OF GAS PROCESSING RIGHTS
DEDICATED LEASES AS OF AUGUST 1, 1999
LEASES WITH OPERATING RIGHTS
MP 0304 3339 G03339 Oxy 04/01/76 INSOFAR AND ONLY INSOFAR AS the
lease covers the SW1/4SW1/4 and the
W1/2SE1/4SW1/4 of Block 304, Main
Pass Area, South and East Addition,
down to a depth of 25,000'.
MP 0313 4127 G04127 Chevron 10/01/79 All of Block 313, Main Pass Area,
South & East Addition, INSOFAR AND
ONLY INSOFAR AS said lease covers
depths below a true vertical depth
of 12,000'.
SS 0202 5558 G05558 LL&E 07/01/83 All of Block 202, Ship Shoal Area,
all intervals lying at depths
greater than the stratigraphic
equivalent of the top of the "MI"
Sand at a depth 350' below the
total depth of Conoco's Ship Shoal
201 No. 1 Well, same being 12,450'
TVD.
SS 0356 5206 G05206 Soco Off 01/01/83 All of Block 356, Ship Shoal Area,
(Delmar Op) INSOFAR BUT ONLY INSOFAR AS said
lease covers depths below 8,600'.
VR 0171 1130 G01130 LL&E 06/01/62 Block 171, Vermilion Area, INSOFAR
BUT ONLY INSOFAR AS said lease
covers depths from the surface down
to a depth of 11,022' below the
mean low wave of the Gulf of Mexico.
VR 0241 15194 G15194 EEX 07/01/95 All of Block 241, Vermillion Area,
INSOFAR AND ONLY INSOFAR AS said
lease covers the NW1/4 as to all
depths from the surface down to 100
feet below the base of the
stratigraphic equivalent of that
sand encountered at a measured
depth of 11,840 feet as seen in the
OCS-G 5386, Well No. 1.
VR 0332 9514 G09514 Samedan 07/01/88 All of Block 332, Vermilion Area,
South Addition, INSOFAR AND ONLY
INSOFAR AS the lease covers a depth
from 12,000' subsea to 100,000'
subsea.
Page 3 of 3
EXHIBIT A
SEVENTH AMENDMENT TO CONVEYANCE OF GAS PROCESSING RIGHTS
DEDICATED LEASES AS OF AUGUST 1, 1999
OVERRIDING ROYALTY INTERESTS AND OTHER OIL AND GAS RIGHTS
BLOCK LEASE # LEASE CURRENT LEASE OPERATOR DATE SPUD DATE
- ----------------------------------------------------------------------------------------------------
BS 0050 LA. 16393 L06393 Log Exploration 02/15/99
EB 0642 9183 G09183 Kerr-McGee 10/01/87 -
EB 0643 9184 G09184 Kerr-McGee 10/01/87 11/25/97
EB 0688 9191 G09191 Kerr-McGee 11/01/87 01/17/98
EB 0732 9194 G09194 Kerr-McGee 10/01/87 -
EI 0116 478 G00478 Ocean Energy 01/01/55 09/05/97
EI 0172 5494 G05494 Newfield 07/01/83 01/21/99
EI 0255 1958 G01958 Forest 01/01/70 06/04/99
EI 0354 10752 G10752 Texaco 05/01/89 10/03/97
EW 0921 12142 G12142 British-Borneo 05/01/90 02/05/99
EW 0963 13084 G13084 Marathon 07/01/91 11/19/96
EW 0964 12144 G12144 British-Borneo 05/01/90 07/20/99
EW 0965 12145 G12145 British-Borneo 05/01/90 01/23/98
GA 0144 17119 G17119 Mariner 01/01/97 08/23/98
GA 0321 11316 G11316 Apache 11/01/89 01/23/92
GB 0117 12631 G12631 Flextrend 10/01/90 11/04/96
GB 0200 15852 G15852 Amerada Hess 11/01/95 01/18/99
GI 0076 2161 G02161 Forcenergy 10/01/72 01/05/78
GC 0020 15531 G15531 Reading & Bates 09/01/95 12/23/96
GC 0825 9981 G09981 Amoco 05/01/88 -
GC 0826 9982 G09982 Amoco 05/01/88 12/08/98
MP 0047 LA. 16392 L16392 Log Exploration 02/15/99
MP 0233 16509 G16509 Coastal Oil 09/01/96 04/07/98
MP 0255 7825 G07825 Snyder 08/01/85 09/10/97
MP 0259 7827 G07827 Snyder 09/01/85 11/03/98
MP 0260 7828 G07828 Snyder 09/01/85 02/26/98
MC 0546 14642 G14642 British-Borneo 05/01/94 05/25/98
MC 0718 7952 G07952 Mariner 08/01/85 06/03/95
MO TR.92 ALA 705 A00705 Mobil 07/19/88 -
MO TR.74 ALA 703 A00703 Mobil 07/19/88 -
MO TR.75 1584/0130 A01584 Mobil
2865/585
2865/591
3322/346
MO TR.93 ALA 706 A00706 Mobil 07/19/88 -
MU 862-L TX. M-98756 T98756 10/07/97
MU 863-L TX. M-98757 T98757 10/07/97
SS 0103 18007 G18007 Basin 07/01/97 04/03/99
SS 0321 12955 G12955 ATP 05/01/91 04/24/97
SM 0255 9564 G09564 Seagull 08/01/88 07/11/93
SM 0266 9565 G09565 Seagull 08/01/88 09/23/93
VR 0159 3128 G03128 McMoran 07/01/75 06/04/98
VR 0221 4424 G04424 TDC 11/01/80 06/04/94
VR 0296 9511 G09511 Seneca Res 06/01/88 03/11/93
VR 0370 2275 G02275 Transworld 02/01/73 10/19/98
VR 0385 12880 G12880 Transworld 07/01/91 06/04/96
VK 0692 7898 G07898 Snyder 09/01/85 -
Page 1 of 2
EXHIBIT A
SEVENTH AMENDMENT TO CONVEYANCE OF GAS PROCESSING RIGHTS
DEDICATED LEASES AS OF AUGUST 1, 1999
OVERRIDDING ROYALTY INTERESTS AND OTHER OIL AND GAS RIGHTS
VK 0693 7898 G07898 Snyder 09/01/85 11/19/90
VK 0698 7901 G07901 Snyder 08/01/85 06/07/97
WD 0137 14566 G14566 Sonat 05/01/94 01/31/99
WC 0368 5315 G05315 Century Offshore 07/01/83 5/59/98
Page 2 of 2
EXHIBIT A
SEVENTH AMENDMENT TO CONVEYANCE OF GAS PROCESSING RIGHTS
DEDICATED LEASES AS OF AUGUST 1, 1999
STATE LEASES
LEASE
AREA BLOCK LEASE # OPERATOR LEASE DATE
- ---------------------------------------------------------------------------------------
Mobile - Fairway 113 AL 531 SOI 4/2/81
Mobile - Fairway 132 AL 532 SOI 4/2/81
Mobile Bay 109 AL 627 SOI 8/14/84
South Pass 1 LA 988 SOI 4/25/47
Galveston 249 L TX 98156 Spinnaker Exp Co, LLC 4/1/97
Galveston 249 L TX 99204 Spinnaker Exp Co, LLC 4/7/98
Galveston 250 L TX 98157 Spinnaker Exp Co, LLC 4/1/97
South Pass 31 31 LA14860 SOI 1/17/95
South Pass 31 31 LA14861 SOI 1/17/95
Main Pass 47 La 16392 Main Pass LLC 2/15/99
Breton Sound 50 La 16393 Main Pass LLC 2/15/99
Page 1 of 1
EXHIBIT A
SEVENTH AMENDMENT TO CONVEYANCE OF GAS PROCESSING RIGHTS
DEDICATED LEASES AS OF AUGUST 1, 1999
PARTICIPATION AGREEMENTS
LEASE SPUD
AREA BLOCK LEASE # LEASE CURRENT LEASE OPERATOR DATE DATE
- ---------------------------------------------------------------------------------------------
HI A545 17199 G17199 SOI 01/01/97 09/12/97
VK 0779 13673 G13673 ELF 08/01/95 02/16/99
VK 0823 10942 G10942 ELF 07/01/89 07/17/99
EI 0172 5494 G05494 NEWFIELD EXP 07/01/83 01/21/99
Page 1 of 1
EXHIBIT B
SEVENTH AMENDMENT TO CONVEYANCE OF GAS PROCESSING RIGHTS
EXCLUDED LEASE
SUPPLY SOURCE RECEIPT POINT LEASE NUMBER
- ------------- ------------- ------------
Grand Isle 33 Grand Isle 33 OCS-G-4002
Sabine 10 Sabine 10 OCS-G-3958
Sabine 12 Sabine 12 OCS-G-14590
Sabine 17 Sabine 10 OCS-G-4143
East Breaks 641 East Breaks 643 OCS-G-21374
East Breaks 642 East Breaks 643 OCS-G-09183
East Breaks 643 East Breaks 643 OCS-G-09184
East Breaks 686 East Breaks 643 OCS-G-20729
East Breaks 688 East Breaks 643 OCS-G-09191
East Breaks 732 East Breaks 643 OCS-G-09194
NPI 969 NPI 969 OCS-G-5953
NPI 975 NPI 969 OCS-G-20603
NPI 976 NPI 969 OCS-G-5954
BR A-19 BR A-19 OCS-G-3936
Page 1 of 2
EXHIBIT B
SEVENTH AMENDMENT TO CONVEYANCE OF GAS PROCESSING RIGHTS
EXCLUDED LEASE
BR A-20 BR A-19 OCS-G-3476
WC 565 WC 565 OCS-G-2015
Mobile Block 113 Yellowhammer AL-531
Mobile Block 132 Yellowhammer AL-532
Page 2 of 2
EXHIBIT C
SEVENTH AMENDMENT TO CONVEYANCE OF GAS PROCESSING RIGHTS
CONSIDERATION BASIS
* CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN SEPARATELY
FILED WITH THE COMMISSION, AND THE APPROPRIATE SECTION HAS BEEN MARKED AT THE
APPROPRIATE PLACE AND THE MARGIN WITH A STAR (*).
PLANT CONSIDERATION BASIS
----- -------------------
* [REDACTED]
Page 1
EXHIBIT D
SEVENTH AMENDMENT TO CONVEYANCE OF GAS PROCESSING RIGHTS
UPSTREAM PIPELINES WITH PROCESSOR'S RETROGRADE
UPSTREAM PIPELINE GAS PLANT COUNTY/PARISH
- ------------------ --------- -------------
Southern Natural Pipeline Toca St. Bernard, LA
Mississippi Canyon Gas Pipeline Venice Plaquemines, LA
Destin Pipeline Pascagoula Jackson, MS
Page 1
EXHIBIT E
SEVENTH AMENDMENT TO CONVEYANCE OF GAS PROCESSING RIGHTS
ATTORNMENT LETTER
[Name of Producer] [Name of Transferee of Lease]
[Address of Producer] [Address of Transferee of Lease]
Ladies and Gentlemen:
Subject: Transfer of Certain Leases
Notification and Consent to Assignment
1. AGREEMENT FOR TRANSFER OF LEASES. Per prior discussions, your
respective offices have been apprised that [name of producer] ("[name of
producer]") and [name of transferee] ("Successor Producer") have entered an
agreement by which [name of producer] will transfer to Successor Producer (the
"Transfer") those certain interests in and to certain properties and leases as
described on Exhibit A ( the "Properties").
2. COGNIZANCE OF PRIOR CONVEYANCE OF PROCESSING RIGHTS. The parties
acknowledge that all gas processing rights associated with the Properties have
been conveyed to Processor by virtue of that certain Seventh Amendment to
Conveyance of Gas Processing Rights (as the same may be amended from time to
time after April 1, 2004, the "Conveyance of Processing Rights") dated April 1,
2004 by and between Enterprise Gas Processing, LLC ("Processor") and Shell Oil
Company and certain of its named affiliates (collectively, "Producers"), a copy
of which is attached hereto and made a part hereof as if set forth herein in its
totality.
3. RESERVATION OF RIGHTS BY PROCESSOR. Processor hereby expressly
reserves all its rights under the Conveyance of Processing Rights with respect
to the Properties. Successor Producer hereby acknowledges and agrees that it is
acquiring the Properties subject to the rights conveyed to Processor in the
Conveyance of Processing Rights.
4. ASSUMPTION OF PRODUCER'S OBLIGATIONS. Successor Producer hereby
assumes and agrees to perform all of the obligations of [name of producer] to
Processor, and receives and accepts all rights of [name of producer], under the
Conveyance of Processing Rights, insofar as they relate to the Properties.
5. CONSENT TO TRANSFER. Processor hereby acknowledges and consents to
the Transfer and agrees to render to Successor Producer the performance of
Processor's obligations to Producers under the Conveyance of Processing Rights
insofar as they relate to the Properties.
6. COUNTERPARTS. This document may be executed in any number of
counterparts, each of which when combined and taken together, shall be
considered but one and the same document.
7. COVENANTS RUNNING WITH THE LAND. The parties intend that, to the
extent permitted by law, this instrument and the Conveyance of Gas Processing
Rights shall be considered to be covenants running with the Properties which
shall inure to the benefit of, and be binding upon, the successors and assigns
of the parties' interests insofar as they relate to the Conveyance of Gas
Processing Rights or the Properties.
Your prompt attention to this matter will be appreciated. Should you
have any questions or require further information in this regard, please contact
our office.
Yours very truly,
Name
[title]
[NAME OF TRANSFEREE] [NAME OF PRODUCER]
Agreed to and approved this ______ Agreed to and approved this ______
day of ______________________, 20__. day of ______________________, 20__.
By: ___________________________ By: ___________________________
Title: _________________________ Title: _________________________
ENTERPRISE GAS PROCESSING, LLC
Agreed to and approved this ______
day of ______________________, 20__.
By: ___________________________
Title: __________________________
