Item 8.01 Other Events.
As previously disclosed, on June 24, 2021, Evolve Transition Infrastructure LP (“Evolve”) increased the tariff rate for interruptible throughput volumes from Eastern Catarina (as defined below). Despite the increase, Mesquite Energy, Inc. (“Mesquite”) continued to short-pay invoices and was paying the fees being charged for throughput volumes from Western Catarina (as defined below) for all throughput volumes from Eastern Catarina (the “Tariff Short-Pay”). As previously disclosed, on August 30, 2021, Catarina Midstream, LLC (“Catarina Midstream”) initiated a non-administered arbitration against SN Catarina, LLC (“SN Catarina”) pursuant to the International Institute for Conflict Prevention & Resolution Non-Administered Arbitration Rules (the “Catarina Arbitration”). The Catarina Arbitration sought to bring commercial resolution to the tariff rate on Eastern Catarina. Notwithstanding the Tariff Short-Pay, all disputed amounts were held in accounts receivable during the pendency of the Catarina Arbitration. Additionally, as previously disclosed, Mesquite and SN Catarina initiated adversary proceeding 21-03931 (MI) against Evolve and Catarina Midstream in the Bankruptcy Court (the “Mesquite Adversary”).
As previously disclosed, on May 27, 2022, in order to resolve the various claims, defenses, causes of action, and other disputes between and among SN Catarina, Catarina Midstream, Mesquite, Evolve, Evolve Transition Infrastructure GP, LLC (the “General Partner”), SP Holdings, LLC (“SP Holdings”), and SN Operating LLC (“SN Operating,” collectively, with SN Catarina, Catarina Midstream, Mesquite, Evolve, the General Partner, and SP Holdings, the “Settlement Parties”), including the Catarina Arbitration and the Mesquite Adversary, the Settlement Parties entered into that certain Settlement Agreement (the “Settlement Agreement”).
As part of the Settlement Agreement, Mesquite will pay $10 million to Evolve and each of the Settlement Parties will execute and deliver to each other party to the Settlement Agreement customary releases providing for, among other things, the release of any and all actions, causes of action, suits, debts, dues, sums of money, accounts, reckonings, contracts, damages, judgments, claims, and demands whatsoever, in law or equity, known or unknown, asserted or unasserted, including, but not limited to claims that were or could have been asserted through May 27, 2022, in each case with respect to the accounts receivable attributable to the Tariff Short-Pay or otherwise in connection with the Catarina Arbitration or the Mesquite Adversary.
The foregoing description of the Settlement Agreement does not purport to be complete and is qualified in its entirety by reference to such document, which was previously filed with the Securities and Exchange commission as Exhibit 10.1 to Evolve’s Current Report on Form 8-K filed on May 31, 2022.
On June 8, 2022, Evolve issued a press release announcing the approval by the United States Bankruptcy Court for the Southern District of Texas of the Settlement Agreement. A copy of the press release is included herewith as Exhibit 99.1 and the information in the press release is incorporated by reference into this Item 8.01.
Also, as previously disclosed, in connection with the execution of the Settlement Agreement, Evolve and Mesquite entered into the Amended and Restated Firm Gathering and Processing Agreement (the “A&R Gathering Agreement”) pursuant to which Evolve received an additional dedication of Mesquite’s Eastern Catarina acreage position in Dimmitt, La Salle, and Webb
