COMPRESSION FACILITY AGREEMENT
THIS GAS PURCHASE AGREEMENT (this "Agreement") made and entered into as of
the 9th day of January, 2004 (the "Effective Date"), by and between Xxxxxxxxx
Energy Corporation ("Xxxxxxxxx"), 0000 Xxxxx XxxxxXxxx Xxxxxxxxx, Xxxxx 000,
Xxxxxxxxx, Xxxxxxxx 00000, and Nexus Energy Company ("Nexus"), 000 Xxxxx Xxxx
Xxxxxx, Xxxxxxx, Xxxxxx 00000, each referred to herein as a "Party" and
collectively referred to as the "Parties".
RECITALS:
WHEREAS, Nexus gathers and/or transports gas throughout Eastern Xxxx
County, Colorado; and
WHEREAS, said gas is delivered to two separate central delivery points
("CDP")in Xxxx County; and
WHEREAS, Nathaniel's CDP named the "Spelunker CDP" situated in Section 20
of T335-R43W, Xxxx County, Colorado, receives 2.2 to 2.5 MMCFPD from Nexus;
and
WHEREAS, the Duke Field Services CDP named the "Flank CDP", situated in
Section 33 of T335, R42W, receives 3.2 to 4.0 MMCFPD from Nexus; and
WHEREAS, Spelunker CDP gas volume has a helium content of 1.7% of total
flow and the Flank CDP gas volume has a helium content of 1% of total flow;
and
WHEREAS, Nexus proposes to move gas from the Flank CDP to the Spelunker
CDP, which will require an estimated 6,065 feet of eight-inch (8") supply
line to be provided and installed by Nexus.
NOW, THEREFORE, in consideration of the representations, covenants, and
conditions herein contained, the receipt and sufficiency of which is hereby
acknowledged, the Parties hereto agree as follows:
ARTICLE 1.
COMBINED VOLUMES AND COSTS ASSOCIATED WITH THE PROJECT
1.1 Nexus shall deliver 3.2 to 4.0 MMCFPD from the Flank CDP to the Spelunker
CDP which will require installation of compression at the Spelunker CDP in order
to manage line pressure on the Flank and Spelunker systems.
1.2 The parties agree that estimated suction pressure of 20 psig and a discharge
pressure of 110 psig on the compression, with the combined volumes of the
Spelunker and Flank CDP systems will produce an expected increase of gas volume
yield to 6.9 MMCFPD.
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1.3 The term of this Agreement shall be for an initial period of ten (10) years
from the in-service date, and shall be extended for a second ten (10) year term,
provided that Nexus is capable of producing commercial quantities of gas from
the Flank and Spelunker CDP's. Nexus shall use all reasonable means to acquire,
install, test and startup the pipeline and compression facility by February 15,
2004.
1.4 Costs associated with this project include, but are not limited to
Compression, Compression Installation, Daily Compression Monitoring, Coolant and
Lubricants, compressor fuel gas. The equipment and related services shall be
itemized and specifically set forth in Exhibit A, attached hereto and
incorporated herewith by reference.
1.5 Itemization of costs shall be substantial and verified by bids, invoices or
other authentication and/or documentation Xxxxxxxxx shall have the right to
request copies of all documentation related to charges associated with this
facility and shall have the right to audit Nexus' books on an annual basis.
1.6 Xxxxxxxxx and Nexus shall mutually review and share equally the
aforementioned costs, amortized over the term of this Agreement, provided that
costs of acquisition shall terminate at such time as the costs of respective
equipment or leases thereof are paid in full. Aforementioned estimated costs and
related services are specifically listed and set forth in Exhibit "A" and shall
be paid per the terms of Article 1.7 and Exhibit A..
1.7 Payment for costs shall be paid equally between the parties. Two payments
shall be made by Xxxxxxxxx for compressor installation, The first payment of one
half of the estimated installation costs agreed upon by the parties being due 30
days after successful startup of the facility. The second payment will be due 60
days after successful startup of the facility and will be based on actual final
costs. Payments for compressor lease, maintenance, operating labor, fluids and
fuel gas shall be billed monthly based on actual costs per the terms of Exhibit
A.
1.8 Any additional costs shall be evaluated by the respective parties and
mutually agreed to in advance via signed writing.
ARTICLE 2.
EQUIPMENT AND RELATED SERVICES
2.1 Nexus shall be responsible for the acquisition, installation, maintenance,
and monitoring of the compression equipment. Nexus shall provide all required
Federal, State and local permits. Nexus shall provide a detailed description to
Xxxxxxxxx of compressor specifications, including horsepower, operating
pressures, manufacturer recommended annual maintenance, and daily fuel usage. A
copy of the lease agreement is attached as Exhibit C.
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2.2 Nexus shall supply the trained and certified personnel necessary to maintain
and monitor the compression equipment. (See description of compression equipment
and related services, attached hereto in Exhibit A and incorporated herein by
reference).
2.3 Nexus shall be responsible for establishing the associated utilities
(electrical) and! or fuel gas as required for compression.
2.4 Xxxxxxxxx shall acquire and install a new meter run at the Spelunker CDP.
2.5 Nexus shall be responsible for the costs associated with the purchase and
installation of the V6,065 linear feet of 8" supply line from the Flank CDP to
the Spelunker CDP.
2.6 Nexus shall indemnify and hold Xxxxxxxxx harmless from any and all
environmental damages which result from operation of the compression or
gathering facilities or pipeline.
2.7 Nexus shall provide Xxxxxxxxx with easements or other right of access to the
compressor facility for the term of the agreement or any extensions.
2.8 Nexus and Xxxxxxxxx shall be equal owners of the facility and Xxxxxxxxx
shall have first right of refusal in the event Nexus offers their ownership in
the compression facility, gathering or pipeline for sale.
2.9 Nexus shall obtain mechanics lien waivers and hold Xxxxxxxxx harmless for
failure to pay any subcontractor in the construction or maintenance of the
compressor facility over the term of this Agreement.
2.10 Gas delivered shall be free of salts, and other contaminants, and shall
have a free water content of less than 1 pound per MMCF.
ARTICLE 3.
PAYMENT RATE FOR GAS TRANSPORTED
3.1. Nexus will pay Xxxxxxxxx $0.05 per MCF transported on the Xxxxx Helium
gathering line from Spelunker to the Keyes Helium plant at Xxxxx, Oklahoma.
3.2. Nexus will pay Xxxxxxxxx a compression fee equal to 4% of all the
dekatherms compressed at Spelunker CDP. For the purpose of example, if Nexus
delivers 160,000 dekatherms in a given month for compression at Spelunker,
Xxxxxxxxx would be entitled to 6,400 dekatherms. Nexus will sell Nathaniel's
6,400 dekatherm as a part of their marketing agreement. If the market price were
$4.50 per dekatherm, Xxxxxxxxx would be entitled to a payment of $28,800 for the
given month.
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3.3 The contained Helium will be acquired based on the percentage of Helium
content by volume of the gas stream gathered from the Flank CDP to the Spelunker
CDP to the Keyes Helium plant at Xxxxx, Oklahoma under this agreement as
detailed in Exhibit "B", attached hereto and incorporated by reference.
3.4 Nexus will dedicate all gas gathered on the Spelunker and Flank systems to
the Xxxxx Helium system. Nexus shall, however, have the option to take all of
their gas to the Flank CDP during those times that El Paso, Northern Natural or
Xxxxx Helium are unable to accept the Nexus volumes. When flow can be resumed to
the Xxxxx Helium system, Nexus will return flow to the Spelunker CDP.
3.5 Xxxxxxxxx acknowledges that Nexus volumes are subject to interruptions.
Circumstances that could possibly lead to interruption include, but are not
limited to: pipeline repair, dehydration repair, gas well shut-in or abandonment
and termination of gathering agreements. In the event of interruptions, Nexus
will restore volumes as soon as practically possible. Nexus shall provide
immediate notice to all affected parties of interruptions and an estimate of the
duration of the interruption.
ARTICLE 4.
MISCELLANEOUS
4.1 This Agreement was jointly drafted by counsel for Xxxxxxxxx and Nexus and
shall not be strictly construed against either Xxxxxxxxx or Nexus.
4.2 Any communications provided for hereunder or in regard to this Agreement
shall be in writing and addressed to the attention of the parties as described
below via U.S. Mail or facsimile. Communications mailed to Xxxxxxxxx Energy
shall be sent to 0000 Xxxxx XxxxxXxxx Xxxxxxxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxxx
00000, phone: (000) 000-0000, fax: (000) 000-0000, to the attention of Xxxxx
Xxxxxx. Communications mailed to Nexus Energy Company shall be sent to 000 Xxxxx
Xxxx Xxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxx, 00000, phone: (000) 000-0000, fax:
(000) 000-0000, to the attention of Xxxx Xxxxxxxx. The person designated to
receive communications or the address to receive mail may be changed by
providing written notice to the other party.
4.3 The parties hereto each acknowledge that this Agreement constitutes the
entire agreement among them with respect to the matter discussed herein. All
prior negotiations, statements or representations are superseded and displaced
hereby.
4.4 Notwithstanding any provision herein to the apparent contrary, nothing
herein contained is intended, nor shall it be construed to create, recognize or
ratify any third party beneficial rights.
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4.5 The laws of the State of Colorado shall govern the construction and
interpretation of this Agreement and any claim, dispute or other matter arising
out of this Agreement.
4.6 In the event that any one or more of the provisions contained in this
Agreement shall be held to be invalid, illegal or unenforceable in any respect
such invalidity, illegality, or unenforceability shall not affect any other
provision hereof, and this Agreement shall be construed as if such invalid,
illegal or unenforceable provision did not exist.
4.7 All of the definitions, provisions and tenns hereof (with the exception of
headings) are contractual and are not mere recitals.
4.8 This Agreement may be executed in multiple counterparts, all of which shall
constitute a single agreement. Execution of this Agreement via facsimile shall
be effective, and signatures received via ftiesimile shall be binding upon the
parties hereto and shall be effective as originals.
4.9 Dispute Resolution. As to any controversy, claim or dispute between the
parties arising out of the interpretation or performance of this Agreement the
parties shall first negotiate in good faith to resolve such dispute. If the
parties are unable to resolve the dispute to their mutual satisfaction within
thirty (30) days after one party gives written notice to such effect to the
other, either party may submit the dispute to arbitration for final settlement
conducted in accordance with the commercial arbitration rules of the American
Arbitration Association (the "AAA"). Unless the decision of the arbitrators
shall otherwise direct, the parties shall bear equally the costs and expenses of
the arbiiration and each party shall bear its own costs and expenses of its own
counsel, advisors and experts.
EXECUTED in multiple originals, each of equal dignity, on the dates set forth
below:
XXXXXXXXX ENERGY CORPORATION NEXUS ENERGY COMPANY
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By: /s/ Xxxxxx Xxxxxxxx By: /s/ Xxxx Xxxxxxxx
-------------------- ------------------
Name: Xxxxxx Xxxxxxxx Name: Xxxx Xxxxxxxx
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Title: Chief Operating Officer Title: Manager
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Dated: January 9, 2004 Dated: 1/9/03
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EXHIBIT A
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This Exhibit A is incorporated and made part of the Agreement dated January 9,
2004 between Xxxxxxxxx and Nexus. Xxxxxxxxx and Nexus shall mutually review and
share equally the costs associated with the equipment and services identified
below, amortized over the term of this Agreement, provided that costs of
acquisition shall terminate at such time as the costs of respective equipment or
leases thereof are paid in fu11.
These estimated equipment costs and related services are described and set forth
below:
DESCRIPTION: ANNUAL COSTS:
----------- ------------
1: Compression Equipment $163,000
2: Compression Installation $35,000
3: Ancillary Equipment & Parts $10,000
4: Daily Compression Monitoring & Support $15,000
5: Compressor Fluids (Coolant and Lubricants) $1,200
7: Fuel Gas TBD
Payment for costs shall be paid equally between the parties. Payments for
Nathaniel's share of the compressor lease and maintenance agreement shall be
made on a monthly basis from actual xxxxxxxx by the compressor vendor to Nexus.
Compressor facility installation payment shall be made based on actual costs and
paid per the terms of Article 1 .7. Ancillary Equipment and Parts are not
anticipated and will be billed on a mutually agreed basis if greater than $500.
Daily Monitoring and Support and Compressor Fluids shall be billed monthly on an
actual basis. Fuel gas shall be metered and billed monthly on an actual cost
basis
EXHIBIT B
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This Exhibit B is incorporated and made part of the Agreement dated January 9,
2004 between Nexus and Xxxxxxxxx. If the stream of gas delivered to Xxxxx has
helium content of 1.5% or greater then KHC will pay N/EAC $.l0 per MCF
delivered. If the blended stream is 1.2% to 1 .5% the compensation drops to $.09
per MCF delivered. 1% to 1.2% equals $.08 per MCF delivered. Below 1% equals
$.05. This proposal is consistent with the existing processing agreement.
"Xxxxxxxxx will compensate Nexus for helium recovered from the gas stream
delivered to the Spelunker CDP utilizing the following parameters:
Should the blended gas stream at the Spelunker CDP contain 1.5% helium
by volume, Xxxxxxxxx will pay Nexus $.10 MCF of blended gas delivered
to the Spelunker CDP
For volumes of blended gas with helium content from 1.2% to 1.5% by
volume, Xxxxxxxxx will pay Nexus $.09 per MCF of blended gas delivered
to the Spelunker CDP.
For volumes of blended gas with helium content from 1% to 1.2% by
volume, Xxxxxxxxx will pay Nexus $.08 per MCF of blended gas delivered
to the Spelunker CDP.
For volumes of blended gas with helium content below 1% by volume,
Xxxxxxxxx will pay Nexus $.05 per MCF of blended gas delivered to the
Spelunker CDP.
Nexus will be responsible for distribution of helium revenue to the appropriate
producer upstream of the Spelunker CDP. Producers receiving helium distribution
will be responsible any royalty and tax and payments associated with the helium
payments."
