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(*).
SIXTH AMENDMENT TO CONVEYANCE
OF
GAS PROCESSING RIGHTS
DATED AS OF MARCH 1, 2003
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
RECITALS..........................................................................................................1
1. DEFINITIONS...............................................................................................3
2. TERM......................................................................................................6
2.1 PRIMARY AND SUCCESSIVE TERMS............................................................................6
2.2 Termination of Agreement................................................................................7
2.3 SURVIVAL PROVISION......................................................................................7
2.3.1 POST TERMINATION: CONTINUATION AS TO COMMITTED LEASES.............................................7
2.3.2 POST TERMINATION: PROPOSALS FOR NEW VOLUMES........................................................7
2.4 EARLY TERMINATION OF ENTIRE AGREEMENT DUE TO UNPROFITABLE PROCESSING....................................7
2.4.1 RIGHT TO TERMINATE.................................................................................7
2.4.2 OBLIGATION TO CONTINUE PROCESSING..................................................................8
3. ASSIGNMENT OF GAS PROCESSING RIGHTS.......................................................................8
3.1 GRANT OF PROCESSING RIGHTS..............................................................................8
3.2 ATTACHMENT OF GAS PROCESSING RIGHTS.....................................................................8
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.............................................9
3.6 LIMITATIONS ON UPSTREAM PROCESSING......................................................................9
3.6.1 PRODUCER'S OPERATIONAL REQUIREMENTS................................................................9
3.6.2 PROCESSOR'S EXCLUSIVE RIGHTS......................................................................10
3.7 NGL BANKS..............................................................................................10
4. PROCESSOR'S OBLIGATION TO PROCESS AND REDELIVER; LIMITATIONS.............................................10
4.1 PROCESSOR'S OBLIGATION TO PROCESS AND REDELIVER RESIDUE GAS............................................10
4.2 TEMPORARY CESSATION OF PROCESSING......................................................................10
4.3 REFUSED VOLUMES........................................................................................11
4.3.1 INSUFFICIENT CAPACITY; OPTION TO REFUSE VOLUMES...................................................11
4.3.2 OPTION TO REACQUIRE REFUSED VOLUMES...............................................................11
4.4 EXCLUDABLE GAS.........................................................................................11
4.4.1 OPTION TO EXCLUDE CERTAIN GAS.....................................................................11
4.4.2 TERMS OF CONTINUED PROCESSING PENDING THIRD PARTY CONTRACT........................................11
4.4.3 OPTION TO REACQUIRE EXCLUDABLE GAS................................................................12
4.5 UNPROFITABLE PLANT.....................................................................................12
4.5.1 RIGHT TO CLOSE UNPROFITABLE PLANT.................................................................12
4.5.2 TERMS OF CONTINUED PROCESSING.....................................................................12
4.6 SUSPENSION IN CASE OF DANGEROUS CONDITION..............................................................12
5. SPECIFICATIONS FOR GAS AND SLUG LIQUIDS..................................................................13
5.1 QUALITY SPECIFICATIONS.................................................................................13
5.2 TESTING................................................................................................13
5.3 OFF-SPEC DELIVERIES....................................................................................13
5.4 NOTIFICATION OF NON-CONFORMITY; REJECTION OF DELIVERY..................................................13
5.5 ACCEPTANCE OF NONCONFORMING PRODUCT....................................................................13
5.6 PROCESSOR'S LIMITED COMMITMENT TO ACCEPT NON-CONFORMING PRODUCT........................................14
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5.7 SPECIFICATIONS FOR RESIDUE GAS REDELIVERED BY PROCESSOR................................................14
5.8 OFF SPEC PIPELINE......................................................................................14
6. CONSIDERATION............................................................................................14
6.1 PAYMENT................................................................................................14
6.2 CONSIDERATION BASIS....................................................................................14
6.3 CONSIDERATION TIMING...................................................................................14
6.4 CONSIDERATION BASIS UPDATES............................................................................15
6.5 PROCESSOR PROVIDED PTR.................................................................................15
6.6 CONSIDERATION ADJUSTMENT OUTSIDE OF NORMAL OPERTIONS...................................................15
7. PTR AND PTR TRANSPORTATION...............................................................................17
8.1 RESPONSIBILITY FOR ROYALTY PAYMENTS....................................................................17
8.2 DELIVERY OF ROYALTY TAKEN IN KIND......................................................................18
8.3 COMPLIANCE WITH FEDERAL ACTS...........................................................................18
9. METERING, ANALYSIS, AND ALLOCATION.......................................................................18
9.1 GAS METERING, ANALYSIS AND REPORTS.....................................................................18
9.2 LIQUIDS METERING AND ANALYSIS..........................................................................19
9.3 METER FAILURE..........................................................................................19
10. INDEMNITY................................................................................................19
11. CURTAILMENT..............................................................................................19
11.1 MUTUAL AGREEMENT NOT TO CURTAIL OR WITHHOLD.........................................................19
11.2 LIMITED RIGHT TO INTERRUPT PERFORMANCE FOR MAINTENANCE, ETC.........................................20
12. FORCE MAJEURE............................................................................................20
12.1 PERFORMANCE EXCUSED.................................................................................20
12.2 FORCE MAJEURE DEFINED...............................................................................20
13. AUDIT RIGHTS.............................................................................................21
14. NOTIFICATIONS............................................................................................21
14.1 ANNUAL INFORMATION..................................................................................21
14.2 NOTICE OF MATERIAL CHANGES TO ANNUAL INFORMATION..................................................21
14.3 NOTICE OF PROPOSED TRANSFERS OF DEDICATED LEASES....................................................21
14.4 NOTICE OF PENDING TRANSPORTATION AGREEMENTS.........................................................21
14.5 NOTICE OF SCHEDULED PLANT DOWNTIME..................................................................22
15. CONFIDENTIALITY..........................................................................................22
15.1 GENERAL.............................................................................................22
15.2 ANNUAL INFORMATION..................................................................................22
16. DISPUTE RESOLUTION.......................................................................................22
16.1 ARBITRATION.........................................................................................22
16.2 INITIATION OF PROCEDURES............................................................................23
16.3 NEGOTIATION BETWEEN EXECUTIVES......................................................................23
16.4 BINDING ARBITRATION.................................................................................23
17. TRANSFER AND ASSIGNMENT..................................................................................24
17.1 SUCCESSORS AND ASSIGNS..............................................................................24
17.2 PROCESSOR'S RIGHTS UNDER LEASES.....................................................................24
17.3 AFFILIATES OF PRODUCER PARTIES......................................................................24
18. MISCELLANEOUS............................................................................................24
18.1 TITLE AND CAPTIONS..................................................................................24
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18.2 PRONOUNS AND PLURALS................................................................................25
18.3 SEPARABILITY........................................................................................25
18.4 SUCCESSORS..........................................................................................25
18.5 FURTHER ACTIONS.....................................................................................25
18.6 NOTICES.............................................................................................25
18.7 AMENDMENT ONLY IN WRITING...........................................................................26
18.8 RIGHT OF INGRESS AND EGRESS.........................................................................26
18.9 NO SPECIAL DAMAGES..................................................................................26
18.10 APPLICABLE LAW......................................................................................26
18.11 ENTIRE AGREEMENT....................................................................................26
18.12 COUNTERPARTS........................................................................................26
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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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(*).
SIXTH AMENDMENT TO CONVEYANCE
OF GAS PROCESSING RIGHTS
THIS SIXTH AMENDMENT TO CONVEYANCE OF GAS PROCESSING RIGHTS (this
"Agreement") dated as of March 1, 2003 ("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".
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 ("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 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 is hereby 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. The parties desire to further amend the Fifth Amendment to
incorporate certain changes in their respective rights and obligations
thereunder and to restate the Conveyance in its entirety.
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NOW THEREFORE, in consideration of the mutual agreements, covenants and
conditions herein contained, the Parties hereby agree as follows:
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.
1.3 "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 Basis" has the meaning given it in Section 6.2.
1.6 "Conveyance" means the Original Conveyance described in Recital A,
as amended to date and by this Agreement and as hereafter amended from time to
time.
1.7 "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.
1.8 "Dedicated" means, with respect to a Lease, a Lease owned by a
Producer as of or after the Commitment Date.
1.9 "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 that is not taken "in-kind" by lessor and which
is marketed by, or on behalf of, Producers. Equity Gas shall exclude the
following:
3
(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 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.
(vi) Gas which is precluded from being produced or
Processed due to governmental intervention,
regulations, laws or judicial or administrative
orders.
1.10 "Excludable Gas" means any Equity Gas that contains less than or
equal to one GPM of ethane and heavier hydrocarbons as measured at a Field
Delivery Point.
1.11 "Excluded Lease" means a Lease listed on Exhibit B.
1.12 "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.
1.13 "Gallon" means one U.S. Standard Liquid Gallon of 231 cubic
inches, adjusted to a temperature of 60 degrees F and either the equilibrium
pressure of the product at 60 degrees F or 14.696 psia, whichever is greater.
4
1.14 "Gas" means all vaporized hydrocarbons and vaporized concomitant
materials whether produced from wells classified as oil wells or gas wells.
1.15 "Gas Processing Rights" has the meaning given it in Section 3.1.
1.16 "Geographical Scope" means that area (i) within the state waters
of Louisiana, Texas, Mississippi, Alabama and Florida, (ii) within the federal
waters of the United States of America in the Gulf of Mexico, including any
portion thereof claimed by Mexico.
1.17 "GPM" means Gallons per MCF of Gas.
1.18 "Injected Liquids" means liquid hydrocarbons and liquid
concomitant materials that are delivered into an Upstream Pipeline.
1.19 "Lease" means any oil, Gas, and/or mineral lease or interest
therein owned now or hereafter acquired by Producers or their Affiliates within
the Geographical Scope excluding any lease listed on Exhibit B.
1.20 "New Volumes" has the meaning given it in Section 2.3.2.
1.21 "Off-Spec Deliveries" has the meaning given it in Section 5.3.
1.22 "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).
1.23 "Plant" means a natural gas processing plant.
1.24 "Plant Delivery Point" means the point where an Upstream Pipeline
interconnects with a Plant.
1.25 "Plant Redelivery Point" means the point at or near the tailgate
of a Plant at which the Residue Gas is redelivered by a Plant into any
interstate or intrastate pipeline connected to that Plant.
1.26 "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.
1.27 "Processor" means Enterprise Gas Processing, LLC, a Delaware
limited liability company, and its successors and assigns.
5
1.28 "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 the 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.
1.29 "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).
1.30 "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.
1.31 "PTR" means plant thermal reduction or the heat content stated in
MMBTU's removed from the 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.
1.32 "Quality Specifications" has the meaning given it in Section 5.1.
1.33 "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.
1.34 "Residue Gas" means the portion of Equity Gas remaining after
removal of PTR during Processing and available for redelivery to a pipeline at
the Plant Redelivery Point.
1.35 "Slug Liquids" means free water, liquid hydrocarbons and other
concomitant materials which are separated from Gas upstream of the Plant
Delivery Point.
1.36 "Transportation Cost" means the cost of transportation of PTR from
the wellhead to the Plant Delivery Point.
1.37 "Termination Date" has the meaning given it in Section 2.2.
1.38 "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, unless
sooner terminated under
6
Section 2.2. 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 COMMITTED LEASES.
Notwithstanding termination of this Agreement pursuant to Section 2.2 above (but
not Section 2.4), 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 Dedicated Lease until the expiration of such Dedicated Lease.
2.3.2 POST TERMINATION: PROPOSALS FOR NEW VOLUMES. For a
period of 20 years after the Termination Date, as to Leases (other than
Dedicated Leases) from which Gas is discovered to be ultimately produced by
Producers ("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 their sole discretion, and for any
purpose, to a third party.
2.4 EARLY TERMINATION OF ENTIRE AGREEMENT DUE TO UNPROFITABLE
PROCESSING.
2.4.1 RIGHT TO TERMINATE. If for any 12-month period, the
expenses of Processor incurred in Processing Equity Gas exceed revenues obtained
therefrom, then Processor may, at its sole option, terminate this Agreement upon
delivery to all Producers of notice to terminate in accordance with Section
18.6. After delivery of such notice, at the written request of Processor or any
Producer, the Processor and such Producer shall enter into exclusive good faith
negotiations for a period of 90 days from delivery of notice of termination to
negotiate the terms and conditions of a mutually agreeable alternative
Processing arrangement. If the Processor and Producer are unable to negotiate
and execute the definitive agreement for such alternative Processing arrangement
within the 90-day period, then any Producer that has not entered into such a
definitive agreement shall be free to negotiate and enter into an agreement with
any one or more third parties for Processing services; provided, however, that
the terms agreed to between
7
such Producer and a potential third party processor for Processing services are,
taken as a whole, more favorable to the Producer than the latest terms for
Processing services previously offered by Processor to Producer during such
90-day period.
2.4.2 OBLIGATION TO CONTINUE PROCESSING. Processor shall
continue to process Equity Gas for each Producer until the earlier of (i) 12
months after the expiration of the 90-day period referenced in Section 2.4.1, or
(ii) the effective date of the Producer's new third party processing agreement
with respect to such Gas. In any such case, if Processor's expenses incurred
exceed the revenues obtained through Processing a Producer's Equity Gas in any
given month, such Producer shall reimburse Processor on a monthly basis the
difference between the Processor's expenses and revenues for such month.
Producer shall pay Processor any cash due no later than 60 days following the
end of the month in which the Producer's Equity Gas is delivered for Processing.
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 all economic burdens
and to obtain all economic benefits reserved to the
Gas producer under a contract for Processing Equity
Gas that is assumed by a Producer in connection with
the acquisition of a Lease.
It is the intention of the parties to confer on the Processor all of the
economic benefits to be derived from Processing all Gas from Leases, whether
derived from Leases currently owned and/or Dedicated or Leases subsequently
acquired by a Producer and/or subsequently Dedicated, 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
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". 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 ("POE") 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
8
spud on any of the Leases included in the POE; (iii) a Development Operations
Coordination Document ("DOCD") 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 the
Commitment Date with respect to a Lease.
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, 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 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.
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, and risk of loss for, the extracted liquefiable
hydrocarbons shall pass to Processor at the meters for Raw Make and/or Products,
as appropriate, of the applicable Plant. As between the parties, Producers shall
be deemed to be in exclusive control and possession of the liquefiable
hydrocarbons prior to such transfer of title to Processor. 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, they will
9
not remove or permit to be removed any liquefiable hydrocarbons from Equity Gas
upstream of the Plants except for liquefiable hydrocarbons that condense from
the gas during transportation to the Plants.
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.
3.7 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.
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.
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4.3 REFUSED VOLUMES.
4.3.1 INSUFFICIENT CAPACITY; OPTION TO REFUSE VOLUMES.
Processor may, at its option, elect not to Process a volume of Equity Gas that
exceeds its available Processing capacity at a Plant ("Refused Volumes") and
agrees to provide the applicable Producer with notice of such election as soon
as reasonably practicable. 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 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 such a definitive
agreement, then Producer shall be free to negotiate with any third party for
Processing services for the Refused Volumes for a primary terms not to exceed
one year and Processor shall have no further obligation to negotiate with
Producer. In any event, Processor shall have no obligation to acquire or
construct new capacity. Producers shall make a reasonable effort to deliver
Equity Gas to Upstream Pipelines that will subsequently deliver it to Plants in
which Processor has sufficient capacity to Process such Equity Gas.
4.3.2 OPTION TO REACQUIRE REFUSED VOLUMES. Processor shall
have the option, exercisable by three months' written notice to the Producers,
to acquire the right to Process such Refused Volumes beginning on any
anniversary date of the third party agreement and may do so without prejudice to
subsequent exercise of its rights under Section 4.3.1.
4.4 EXCLUDABLE GAS.
4.4.1 OPTION TO EXCLUDE CERTAIN GAS. Processor may, at its
option, elect to not Process all or any part of Equity Gas that contains less
than or equal to one 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. If
Processor elects not to Process such Excludable Gas, a 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, then Producer shall be free to negotiate with any
third party for Processing services for the Excludable Gas for a primary term
not to exceed one year and Processor shall have no further obligation to
negotiate with Producer.
4.4.2 TERMS OF CONTINUED PROCESSING PENDING THIRD PARTY
CONTRACT. Upon the written request of a Producer, Processor shall continue to
Process such Producer's Excludable Gas until the earlier of (i) 12 months after
the expiration of the 90-day period referenced in Section 4.4.1, or (ii) the
effective date of the new third party Processing agreement. In any such case, if
Processor's expenses incurred exceed revenues obtained from Processing a
Producer's Excludable Gas in any given month during that period of time, such
Producer shall reimburse
11
Processor on a monthly basis the difference between the Processor's expenses and
revenues for such month. Producer shall pay Processor any cash due no later than
60 days following the end of the month in which the Producer's Excludable Gas is
delivered for Processing.
4.4.3 OPTION TO REACQUIRE EXCLUDABLE GAS. Processor shall have
the option, exercisable by three months' written notice to the Producers, to
acquire the right to Process any Excludable Gas under this Agreement beginning
on any anniversary date of the third party agreement and may do so without
prejudice to subsequent exercise of its rights under Section 4.4.1.
4.5 UNPROFITABLE PLANT.
4.5.1 RIGHT TO CLOSE UNPROFITABLE PLANT. If for any 12-month
period, expenses of operating one or more Plants that Process Equity Gas exceed
revenues obtained from Processing, then Processor shall have the right, upon at
least 90 days' prior written notice to all affected Producers in accordance with
Section 18.6, to elect to shut down any such Plant for a continuous period of at
least one year and, if such Equity Gas cannot be delivered to another Plant, to
exclude the Equity Gas delivered to the shut down Plant from this Agreement.
After delivery of such notice, at the written request of Processor or any
Producer, the Processor and Producer shall enter into exclusive good faith
negotiations for a period of 90 days from delivery of such notice to negotiate
the terms and conditions of a mutually agreeable alternative Processing
arrangement for the Equity Gas delivered to the Plant that would allow the Plant
to remain profitable. If the Processor and Producer are unable to negotiate and
execute the definitive agreement for such alternative Processing arrangement
within the 90-day period, then any Producer that has not entered into such a
definitive agreement shall be free to negotiate and enter into an agreement with
any one or more third parties for Processing services; provided, however, that
the terms agreed to between such Producer and a potential third party processor
for Processing services are, taken as a whole, more favorable to the Producer
than the latest terms for Processing services previously offered by Processor to
Producer during such 90-day period. The parties shall promptly amend Exhibit B
to include among Excluded Leases any Lease that is excluded from this agreement
under the terms of this Section 4.5.1.
4.5.2 TERMS OF CONTINUED PROCESSING. Upon the written request
of a Producer, Processor shall continue to process such Equity Gas at the Plant
for a period of time not to exceed 12 months after the expiration of the 90-day
period referenced in Section 4.5.1. In any such case, if Processor's expenses
incurred exceed the revenues obtained through Processing such Producer's Equity
Gas in any given month during that period of time, such Producer shall reimburse
Processor on a monthly basis the difference between the Processor's expenses and
revenues for the month. Producer shall pay Processor any cash due no later than
60 days following the end of the month in which the Equity Gas is delivered for
Processing.
4.6 SUSPENSION IN CASE OF DANGEROUS CONDITION. If any of Producer's
operations or any of the Equity Gas or Slug Liquids delivered hereunder create a
condition that, in the exclusive judgment of Processor, may endanger the Plant
or property of Processor or the lives or property of Processor's employees or
any third party, Processor may, without liability,
12
immediately discontinue receipt of 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 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 Producer's judgment, the result of any such test or
determination is inaccurate, Processor, at Producer's request, will again
conduct the questioned test or determination, and the costs of such additional
test or determination shall be borne by Producer unless same shows the original
test or determination to be materially inaccurate.
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 said notice by such Producer,
this Agreement will be suspended with respect to the Field Delivery Points with
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 Producers as specified
in Section 5.4, may charge Producers 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 Producer on a monthly
basis for any such costs, the payment of which shall be due and payable within
30 days after Producer's receipt thereof.
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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 the Plant, (y) render the 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)
does not cause the Plant to violate applicable emissions permits or other
regulatory requirements.
5.7 SPECIFICATIONS FOR RESIDUE GAS REDELIVERED BY PROCESSOR. The
Residue Gas redelivered by Processor shall comply with the Quality
Specifications in effect on the date of delivery to the transporter receiving
such Residue Gas at the Plant Redelivery Point if that Equity Gas and/or
Injected Liquids meets the Quality Specifications upon delivery to the Upstream
Pipeline at the Field Delivery Point or Processor has elected to accept Off-Spec
Deliveries under the conditions of Sections 5.5 and 5.6 of this Agreement.
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 respective adjusted index price listed by
Plant on Exhibit C.
6.3 CONSIDERATION TIMING. Processor shall pay to Producer the
applicable cash consideration set forth in Section 6.1 no later than the 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.
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*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(*).
6.4 CONSIDERATION BASIS UPDATES. Processor and Producers shall
periodically amend Exhibit C, as appropriate, if (i) another Plant is added by
Processor, (ii) the price indexes listed in Exhibit C are no longer available or
(iii) different index prices would, in the reasonable judgment of Processor and
Producers, more accurately represent market conditions. The amount of any new
Consideration Basis (as a result of any such amendment to Exhibit C) shall
represent the market value of Gas at the appropriate Plant Redelivery Point.
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 have Processor so provide
PTR for its own account begin on the first day of a month and to provide
Producers with at least fifteen days' prior written notice of any such election.
If, for any month, Processor has provided to Producers a notice of any such
election, Processor shall not be entitled to rescind, revoke or change any such
notice for such month. Processor agrees to provide any notifications with
respect to such Processor-provided PTR that may be required by an Upstream
Pipeline to which Processor delivers such PTR.
6.6 CONSIDERATION ADJUSTMENT OUTSIDE OF NORMAL OPERATIONS.
(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 in which the Average Net Margin (as defined hereafter) is
* [REDACTED] as follows:
(i) in the event the Average Net Margin is
* [REDACTED], the Consideration Payment shall
be reduced by an amount that equals the
product of the amount by which the Average
* Net Margin is [REDACTED] multiplied by the
Products Volume; or
(ii) in the event the Average Net Margin is
* [REDACTED], the Consideration Payment shall
be increased by an amount that equals the
product of the amount by which the Average
* Net Margin is [REDACTED] multiplied by the
Products Volume.
(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 subject PTR and Processor's
Retrograde is delivered to a Plant.
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(*).
(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, the respective monthly average of
* the [REDACTED], minus [REDACTED]; and (B)
for condensate, the calendar monthly average
* of the [REDACTED], less [REDACTED], divided
by 42.
(v) "Products Volume" means the total volume of
Products, in Gallons, allocated to Equity
Gas in a calendar month, less the applicable
volume of in-kind fractionation fees for
such month attributable to gross production
* from the Yscloskey Plant ([REDACTED]) and
* the Toca Plant ([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.
(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:
CALCULATED EXPENSES
* IN CENTS PER GALLON = [REDACTED]
Where:
X equals the index price, in dollars per million BTUs,
* [REDACTED]
* Y equals [REDACTED] increased annually commencing March 1,
* 2004, at the rate of [REDACTED] per year compounded.
* [REDACTED]. Either party has the right to request good
faith negotiation of a new Y escalation factor if they
feel this portion of Calculated Expenses is inappropriate.
Any such request must be made in writing at least sixty
(60) days prior to the end of an anniversary year to be
effective for the following anniversary year. In the event
the parties do not agree on a new Y escalation factor at
least thirty (30)
16
days prior to the end of the anniversary year, the
determination of the new Y escalation factor shall be a
Dispute under this Agreement.
(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.
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 Section 6.1. 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 Section 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.
17
(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.
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
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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 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
19
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 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.
20
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 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.
21
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. Producers or Processor shall not disclose the terms of
this Agreement (or the results of any audit pursuant to Section 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 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;
22
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) 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
23
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 the sale of all or a substantial part of Processor's assets, this Agreement
shall not be assignable by Processor except with the prior written consent of
the affected Producer, or by a Producer, except with the prior written consent
of Processor; provided, however, that no such consent may be unreasonably
withheld or delayed.
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,
that were transferred or assigned by Producers to third parties during the
period of January 1, 1998 through May 30, 1999, inclusive, that were not made
subject to the Third Amendment as a condition of any such transfer or assignment
("Excepted Leases"), Processor waives the application of the Third Amendment as
to the Excepted Leases, and the Parties agree that this Agreement shall not
apply to the Excepted Leases.
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.
24
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 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) 880-6960
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.
25
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.
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, except that
Section 2 of the Third Amendment is hereby incorporated in this Agreement by
reference and shall survive this Agreement as though fully set forth herein.
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.
26
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 /s/ Maria Perez Chahin
--------------------- ----------------------
Name: B. K. Garrison
Title: Attorney-in-Fact /s/ Jane A. Newitt
----------------------
SHELL OFFSHORE INC. WITNESSES:
By: /s/ J. W. Kimmel /s/ Maria Perez Chahin
--------------------- -----------------------
Name: J. W. Kimmel
Title: Attorney-in-Fact /s/ Martha R. Sparks
-----------------------
SHELL CONSOLIDATED ENERGY WITNESSES:
RESOURCES INC.
By: /s/ B. K. Garrison /s/ Maria Perez Chahin
--------------------- ----------------------
Name: B. K. Garrison
Title: Attorney-in-Fact /s/ Jane A. Newitt
----------------------
SHELL LAND & ENERGY COMPANY WITNESSES:
By: /s/ B. K. Garrison /s/ Maria Perez Chahin
--------------------- ----------------------
Name: B. K. Garrison
Title: Attorney-in-Fact /s/ Jane A. Newitt
----------------------
SHELL FRONTIER OIL & GAS INC. WITNESSES:
By: /s/ J. W. Kimmel /s/ Maria Perez Chahin
--------------------- ----------------------
Name: J. W. Kimmel
Title: Attorney-in-Fact /s/ Martha R. Sparks
----------------------
27
SHELL EXPLORATION & WITNESSES:
PRODUCTION COMPANY
By: /s/ R. M. Restucci /s/ Maria Perez Chahin
--------------------- ----------------------
Name: R. M. Restucci
Title: President & CEO /s/ Shirley R. Holm
----------------------
SHELL GULF OF MEXICO INC. WITNESSES:
By: /s/ J. W. Kimmel /s/ Maria Perez Chahin
--------------------- ----------------------
Name: J. W. Kimmel
Title: Attorney-in-Fact /s/ Martha R. Sparks
----------------------
PROCESSOR:
ENTERPRISE GAS PROCESSING, LLC WITNESSES:
By: /s/ W. Ordemann /s/ Brigid A. Walsh
--------------------- ---------------------
Name: W. Ordemann
Title: Senior Vice President /s/ Thomas M. Zulim
---------------------
28
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 9th day of April, 2003.
/s/ Belinda Hirsch
-----------------------
Notary Public
My Commission Expires March 26, 2006.
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 9th day of April, 2003.
/s/ Maria Cristina Charles
--------------------------
Notary Public
My Commission Expires April 4, 2004.
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 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 9th day of April, 2003.
/s/ Belinda Hirsch
------------------------------
Notary Public
My Commission Expires March 26, 2006.
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 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 9th day of April, 2003.
/s/ Belinda Hirsch
------------------------------
Notary Public
My Commission Expires March 26, 2006.
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 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 9th day of April, 2003.
/s/ Maria Cristina Charles
----------------------------
Notary Public
My Commission Expires April 4, 2004.
STATE OF TEXAS
COUNTY OF HARRIS
BEFORE ME, the undersigned Notary Public, on this day personally appeared R. M.
Restucci, 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 President and CEO 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 9th day of April, 2003.
/s/ Maria Cristina Charles
----------------------------
Notary Public
My Commission Expires April 4, 2004.
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 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 9th day of April, 2003.
/s/ Maria Cristina Charles
----------------------------
Notary Public
My Commission Expires April 4, 2004.
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 9th day of April, 2003.
/s/ Brigid A. Walsh
---------------------
Notary Public
My Commission Expires October 30, 2006.
32
EXHIBIT A
SIXTH AMENDMENT TO CONVEYANCE OF GAS PROCESSING RIGHTS
DEDICATED LEASES AS OF AUGUST 1, 1999
FEDERAL LEASES
<Table>
<Caption>
AREA BLOCK LEASE # CURRENT LEASE OPERATOR LEASE DATE SPUD DATE
- ---------------------------------------------------------------------------------------------------------------
AC 0556 11607 Shell Deepwater Dev 10/01/89
AC 0557 8272 Shell Deepwater Dev 10/01/85
AC 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
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
Page 1 of 4
EXHIBIT A
SIXTH AMENDMENT TO CONVEYANCE OF GAS PROCESSING RIGHTS
DEDICATED LEASES AS OF AUGUST 1, 1999
FEDERAL LEASES
<Table>
<Caption>
AREA BLOCK LEASE # CURRENT LEASE OPERATOR LEASE DATE SPUD DATE
- ---------------------------------------------------------------------------------------------------------------
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
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
Page 2 of 4
EXHIBIT A
SIXTH AMENDMENT TO CONVEYANCE OF GAS PROCESSING RIGHTS
DEDICATED LEASES AS OF AUGUST 1, 1999
FEDERAL LEASES
<Table>
<Caption>
AREA BLOCK LEASE # CURRENT LEASE OPERATOR LEASE DATE SPUD DATE
- ---------------------------------------------------------------------------------------------------------------
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
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
Page 3 of 4
EXHIBIT A
SIXTH AMENDMENT TO CONVEYANCE OF GAS PROCESSING RIGHTS
DEDICATED LEASES AS OF AUGUST 1, 1999
FEDERAL LEASES
<Table>
<Caption>
AREA BLOCK LEASE # CURRENT LEASE OPERATOR LEASE DATE SPUD DATE
- ---------------------------------------------------------------------------------------------------------------
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
</Table>
Page 4 of 4
EXHIBIT A
SIXTH AMENDMENT TO CONVEYANCE OF GAS PROCESSING RIGHTS
DEDICATED LEASES AS OF AUGUST 1, 1999
LEASES WITH OPERATING RIGHTS
<Table>
<Caption>
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
SIXTH AMENDMENT TO CONVEYANCE OF GAS PROCESSING RIGHTS
DEDICATED LEASES AS OF AUGUST 1, 1999
LEASES WITH OPERATING RIGHTS
<Table>
<Caption>
CURRENT
LEASE
AREA BLOCK LEASE # LEASE OPERATOR LEASE DATE DESCRIPTION OF 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
SIXTH AMENDMENT TO CONVEYANCE OF GAS PROCESSING RIGHTS
DEDICATED LEASES AS OF AUGUST 1, 1999
LEASES WITH OPERATING RIGHTS
<Table>
<Caption>
CURRENT
LEASE
AREA BLOCK LEASE # LEASE OPERATOR LEASE DATE DESCRIPTION OF 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, INSOFAR BUT ONLY
(Delmar Op) 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.
</Table>
Page 3 of 3
EXHIBIT A
SIXTH AMENDMENT TO CONVEYANCE OF GAS PROCESSING RIGHTS
DEDICATED LEASES AS OF AUGUST 1, 1999
OVERRIDING ROYALTY INTERESTS AND OTHER OIL AND GAS RIGHTS
<Table>
<Caption>
AREA BLOCK LEASE # LEASE CURRENT LEASE OPERATOR LEASE 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 -
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
</Table>
Page 1
EXHIBIT A
SIXTH AMENDMENT TO CONVEYANCE OF GAS PROCESSING RIGHTS
DEDICATED LEASES AS OF AUGUST 1, 1999
STATE LEASES
<Table>
<Caption>
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
</Table>
Page 1
EXHIBIT A
SIXTH AMENDMENT TO CONVEYANCE OF GAS PROCESSING RIGHTS
DEDICATED LEASES AS OF AUGUST 1, 1999
PARTICIPATION AGREEMENTS
<Table>
<Caption>
AREA BLOCK LEASE # LEASE CURRENT LEASE OPERATOR LEASE DATE SPUD 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
</Table>
Page 1
EXHIBIT B
SIXTH AMENDMENT TO CONVEYANCE OF GAS PROCESSING RIGHTS
EXCLUDED LEASE
SUPPLY SOURCE RECEIPT POINT RELATED PLANT / OPERATOR RELATED PIPELINE
- ------------- ------------- ------------------------ ----------------
Grand Isle 33 Grand Isle 33 Grand Isle / Exxon Exxon's Grand Isle Gathering System
Page 1
EXHIBIT C
SIXTH AMENDMENT TO CONVEYANCE OF GAS PROCESSING RIGHTS
CONSIDERATION BASES
PLANT CONSIDERATION BASIS
- ----- -------------------
Barracuda GMR - Transcontinental Gas Pipeline Corp., Zone 2 (pooling point)
Blue Water Average of GMR - Tennessee Gas Pipeline, Louisiana, 800 leg
GMR - Columbia Gulf Transmission Co., Louisiana
Burns Point GMR - Koch Gateway Pipeline Co., South Louisiana/East Side
Calumet (ANR) GMR - ANR Pipeline Co., Louisiana
Calumet (Trunkline) GMR - Trunkline Gas Co., Louisiana
Garden City/Neptune Average of GMR - Koch Gateway Pipeline Co., South Louisiana/East Side
GMR - Columbia Gulf Transmission Co., Louisiana
GMR - Texas Gas Transmission Corp., Zone SL
GMR - Henry Hub
Iowa GMR - Texas Eastern Transmission Corp., West Louisiana Zone
N. Terrebonne (Transco) GMR - Transcontinental Gas Pipeline Corp., Zone 3 (pooling point)
N. Terrebonne (Koch) GMR - Koch Gateway Pipeline Co., South Louisiana/East Side
Mobile Bay* Average of GMR - Transcontinental Gas Pipe Line Corp., Mississippi, Alabama less 9.6 cents
(Yellowhammer only) GMR - Florida Gas Transmission Co., Zone 3
Note: GMR ==> Inside F.E.R.C.'s Gas Market Report, First of Month Index
* Assumes Processor or Processor's agent pays any cost associated with moving
all of the Yellowhammer Gas to the Plant.
Page 1 of 2
EXHIBIT C
SIXTH AMENDMENT TO CONVEYANCE OF GAS PROCESSING RIGHTS
CONSIDERATION BASES
PLANT CONSIDERATION BASIS
- ----- -------------------
Pascagoula Average of GMR - Transcontinental Gas Pipe Line Corp., Mississippi, Alabama
GMR - Koch Gateway Pipeline Co., South Louisiana/East Side
GMR - Florida Gas Transmission Co., Zone 3
GMR - Southern Natural Gas, Louisiana
GMR - Tennessee Gas Pipeline, Louisiana, 500 leg
Sabine Pass GMR - Tennessee Gas Pipeline, Louisiana, 800 leg
Sea Robin Average of GMR - Columbia Gulf Transmission Co., Louisiana
GMR - Southern Natural Gas Co., Louisiana
Stingray GMR - Natural Gas Pipeline Co. of America, Louisiana
Toca GMR - Southern Natural Gas, Louisiana
Venice Average of GMR - Texas Eastern Transmission Corp., East Louisiana zone
GMR - Columbia Gulf Transmission Co., Louisiana
GMR - Koch Gateway Pipeline Co., South Louisiana/East Side
Yscloskey GMR - Tennessee Gas Pipeline, Louisiana, 500 leg
Note: GMR ==> Inside F.E.R.C.'s Gas Market Report, First of Month Index
Page 2 of 2
EXHIBIT D
SIXTH 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
SIXTH 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 Sixth Amendment to
Conveyance of Gas Processing Rights (as the same may be amended from time to
time after March 1, 2003, the "Conveyance of Processing Rights") dated March 1,
2003 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 ______ day of Agreed to and approved this ______ day of
______________________, 20__. ______________________, 20__.
By: By:
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Title: Title:
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ENTERPRISE GAS PROCESSING, LLC
Agreed to and approved this ______ day of ______________________, 20__.
By:
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Title:
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