Message-ID: <30118180.1075843919429.JavaMail.evans@thyme> Date: Mon, 25 Sep 2000 05:28:00 -0700 (PDT) From: rick.bergsieker@enron.com To: david.haug@enron.com, mike.mcconnell@enron.com Subject: Re: Cc: maurizio.la.noce@enron.com Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit Bcc: maurizio.la.noce@enron.com X-From: Rick Bergsieker X-To: David Haug, Mike McConnell, Jeffrey A Shankman@ECT X-cc: Maurizio.La.Noce@enron.com X-bcc: X-Folder: \Mark_McConnell_June2001\Notes Folders\All documents X-Origin: MCCONNELL-M X-FileName: mmcconn.nsf I have discussed this with McConnell, who has advised that Skilling will probably not approve this deal if it requires Enron equity to appraise reserves and if Sherrick is not willing to put equity in. I have asked Sherrick to define his minimal "bottom line" position so that we can discuss it with Atlantis. Sherrick's people got overly aggressive about this and tabled directly with Atlantis a new (and in my opinion, way over the top) proposal without my knowledge while I was in the air late last week. Atlantis announced Saturday that they were walking the deal because EGEP's request is so outragious. David Wilson, head of Atlantis, immediately departed Houston for the UAE. He is here now and is peddling the deal actively to others. I met with David today and got him to agree to give me a couple of days to sort this out with Sherrick. If I can't either get Sherrick on board or get UOG to agree to a restructuring that does not require any front-end Enron equity, we risk losing this deal. At the same time, we have reached agreement with UOG that they will put up 70% of the $40 million front-end reserves appraisal equity and they will pay Enron a promote and front-end success fee that will give us a return close to 30% and them a return of 18%. We risk losing this deal over $12 million of Enron equity to appraise reserves (and hopefully I can push a bit more of this risk onto UOG to reduce the number a bit more.) The deal would also give UOG and Dolphin a strong kick-start, and UOG is anxious to get it done. Will advise after I talk more with Sherrick, UOG and Atlantis. This deal will live or die this week. I will have major problems with UOG if it dies. Rick David Haug 09/18/2000 03:53 PM To: Rick Bergsieker/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT cc: Maurizio.La.Noce@enron.com Subject: Re: This is probably OK but we need to discuss. - - DLH Rick Bergsieker 09/16/2000 10:53 AM To: Albert Stromquist@ENRON, david.haug@enron.com cc: Maurizio.La.Noce@enron.com Subject: Re: FYI: Jeff Sherrick has decided not to invest EGEP equity in Atlantis. He is still ready to endorse the technical viability of the project and to provide upstream technical services to us, but is unwilling to invest with us unless he has the right to step in to all other Atlantis properties in the region as majority interest holder and operator. I have felt that EGEP's willingness to be in the project as an equity holder would give Joe and you the assurance that this deal was solid from an upstream perspective. However, I plan to continue developing this 25%-30% IRR project with only Enron Middle East (30%) and UOG(70%) as equity contributors and simply rely on Jeff to endorse the upstream numbers and provide upstream tech services. Rick Albert Stromquist@ENRON 09/14/2000 09:20 AM Sent by: Albert Stromquist@ENRON To: Rick Bergsieker/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Maurizio La Noce/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Howard D Martin/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Rafi Khan/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Daniel R Rogers/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Todd Culwell/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Kenneth Krasny/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Terence H Thorn/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Jeffrey Sherrick/Corp/Enron@ENRON, Horace Snyder/Corp/Enron@ENRON, Stephen Harper/Corp/Enron@ENRON cc: Brenda J Johnston/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Christina Grow/Corp/Enron@ENRON Subject: All I visited with Jeff Sherrick yesterday on the Atlantis project and want to share with the team my understanding of EGEP's decision and what will be EGEP's role in the project. First, Enron Global E & P has elected to forego an equity role in the Atlantis project. From a technical view, EGEP has independently verified the structure and gas column in Sharjah/Ajman and has an optimistic preliminary view of Umm al Qawain subject to 3-D confirmation. EGEP believes that the Atlantis concesions in the UAE offer significant upside potential outside of the Sharjah /Ajman and Umm al Qawain Production Areas. It is EGEP's view that Atlantis's greatest expected value is through NEWCO, and on the strength of NEWCO's (Enron's) leverage in the negotiation, it should not be unreasonable for NEWCO to expect Atlantis to concede express farmin rights to Enron to develop and produce new reserves in Atlantis's concessions. Jeff and team are dissappointed that Atlantis has rejected the concept, especially since David Wilson appeared to have reacted favorably to the idea when Jeff layed it out at the London meeting in July. EGEP believes that the NPV to NEWCO does not provide a sufficient hedge against potential slippage due to factors such as price uncertainty, precessing tarif, capex, gas GHV, etc, risks which could be mitigated and managed through Enron(EGEP) majority ownership of the upside, i.e. earned by farmin to the concession blocks. EGEP has ranked Atlantis against its other upstream opportunities based on the current deal and Jeff has decided to conserve his limited equity for other investments. This decision is independent of EGEP's commitment to support Enron upstream investments with or without equity and EGEP is continuing to develop the Technical Service Agreements with Atlantis and NEWCO to fulfill this responsibility. Best regards, Bert