Message-ID: <7939647.1075849655407.JavaMail.evans@thyme> Date: Tue, 2 Jan 2001 05:21:00 -0800 (PST) From: gary.bryan@enron.com To: jean.mrha@enron.com Subject: St. Mary's Production LLC VPP Cc: eric.moon@enron.com, john.griffith@enron.com, eric.wardle@enron.com, linda.roberts@enron.com, jill.zivley@enron.com, melissa.graves@enron.com, bob.hall@enron.com, george.weissman@enron.com Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit Bcc: eric.moon@enron.com, john.griffith@enron.com, eric.wardle@enron.com, linda.roberts@enron.com, jill.zivley@enron.com, melissa.graves@enron.com, bob.hall@enron.com, george.weissman@enron.com X-From: Gary Bryan X-To: Jean Mrha X-cc: Eric Moon, John Griffith, Eric Wardle, Linda Roberts, Jill T Zivley, Melissa Graves, Bob M Hall, George Weissman X-bcc: X-Folder: \John_Griffith_Nov2001\Notes Folders\Discussion threads X-Origin: GRIFFITH-J X-FileName: jgriffit.nsf ECT Merchant Investments Corp. has entered into a Volumetric Production Payment agreement with St. Mary's Production LLC (Preston) which provides for the dedication of St. Mary's non-operated gas production from the Hunt Oil Company operated Myette Point Northwest Field. The VPP has both a firm and swing volume component. We will move both packages of gas through the Enron North America Upstream Wellhead Desk to manage the sale, nomination and transport of this production. I negotiated a contract between ENA and ECT Merchant Investments Corp. whereby we will manage the firm and swing portions of this transaction through our wellhead desk. The negotiated contract has financial keep whole language for the firm portion of this transaction and George will be able to manage the swing volumes. We will be receiving the volumes at the Texas Gas meters rather than the wellhead. Preston is required to transport this gas to the Texas Gas meters by moving the gas across the producer owned gathering system and Preston will be assuming those gathering fees. The volumes are currently split 50-50 between Texas Gas metes 9437 and 9502. Based on our information, we actually expect 87% of the volume at meter 9437 and 13% of the volume at meter 9502. With respect to the ECT Merchant Investments Corp. and the ENA contract and the St. Mary's Production, LLC and ENA contract ("Preston" deal), George Weissman and Melissa Graves will assume responsibility for having our records and deals properly updated. They will also work closely with Eric Wardle, ECT Merchant Investments Corp. to assure the firm volumes are managed daily and any keep whole requirements are managed properly. Robert Cook has reviewed the reserves with Craig Fox and, in addition to a third party reserve study, will finalize his study later this week to determine if any additional volumes are available for further mark-to-market valuation. The following is a summary of the transaction: 1. Term commencing 1/1/2001 and ending 6/30/2003 2. Firm purchase for 90% of the wellhead volume, starting at 90% of 11,567 per day and declining as defined by the VPP volumes 3. Gas daily purchase for the remaining 10% of the wellhead volume 4. The transaction between ENA and ECT Merchant Investments will keep Enron Upstream whole should volumes for the 90% firm component fail to show up on any given day of term of the transaction. 5. Pricing to customer Texas Gas SL Index plus 0.0025 6. Volumes for Phase 1 Preston ,including both firm and swing, total approximately 15,000 MMBTU/d 7. Volumes for Phase 2 Preston ,including both firm and swing, will increase by 8,000 MMBTU/d 8. Total February 2001 Preston volumes from the 8 wells will be approximately 23,000 MMBTU/d An additional note regarding this transaction. Preston has been a non-operator and therefor they have not been marketing their gas. They have allowed Hunt to market under the JOA and , as a result, Hunt has been paying Preston's royalties. Starting in January, under the arrangement we are putting in place with ATS, ATS will be paying the royalties for Preston for the term of this transaction. Should you wish to discuss this transaction further, please advise.