AMENDMENT TO GAS PURCHASE CONTRACT

Exhibit 10.9

 

THE SYMBOL “[****]” DENOTES PLACES WHERE CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT IS BOTH (i) NOT MATERIAL, AND (ii) WOULD LIKELY CAUSE COMPETITIVE HARM TO THE COMPANY IF PUBLICLY DISCLOSED.

 

 

AMENDMENT TO GAS PURCHASE CONTRACT

 

This Amendment dated and effective as of May 1, 2019 (the “Effective Date”) is between APPROACH RESOURCES I, LP and APPROACH OIL & GAS INC. (collectively “Seller”) and DCP OPERATING COMPANY, LP (“Buyer”), formerly known as DCP Midstream, LP.

 

In consideration of the promises and of the mutual covenants contained herein, the parties agree to amend the Gas Purchase Contact dated January 1, 2011 between the parties or their predecessors, Buyer’s File No. PRR0029000 (together with any previous amendments, the “Contract”) covering properties in ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇▇ Counties, Texas, as follows:

 

1.Price.  The parties amend Section 5.2, Residue Gas Value, by deleting it and replacing it with the following:

 

5.2Residue Gas Value.  The Residue Gas value will be the weighted average of the prices per MMBtu received by Buyer f.o.b. Buyer’s Facilities for Residue Gas sold during the month, plus [****] per MMBtu up to a maximum of [****].  For Residue Gas in excess of [****], the Residue Gas value will be the weighted average of the prices per MMBtu received by Buyer f.o.b. Buyer’s Facilities for Residue Gas sold during the month.  Seller recognizes that Affiliates of Buyer may be involved in the handling, purchasing, marketing or sales of Residue Gas and acknowledges and agrees that the reasonable good faith, fair market prices so established will nevertheless control.

 

2.Price.  The parties amend Section 5.4(a), NGL Value, by deleting it and replacing it with the following:  

 

5.4 (a)NGL Value.  The net value of NGLs attributable to Seller will be the simple average of the midpoint of the daily high/low spot price for (i) purity ethane, (ii) non-TET propane, (iii) non-TET isobutane, (iv) non-TET normal butane, and (v) non-TET natural gasoline (pentanes and heavier) during the month as reported for Mont Belvieu, Texas published by the Oil Price Information Service (or in its absence, a comparable successor publication designated by Buyer and agreed by Seller) less the actual reasonable TF&S costs that Buyer incurs for the movement and disposition of NGLs using transportation on the Sand Hills Pipeline and other NGL lines for deliveries to ▇▇▇▇▇▇, Texas, Mont Belvieu, Texas, or other similarly-priced fractionator market centers mutually agreed by both parties, and less a $0.0025/gallon NGL marketing fee; provided, however, that with respect to calculating TF&S costs for [****]. [****]. If a change in downstream NGL pipeline specifications causes a failure to meet the revised NGLs quality specifications and Buyer incurs NGL off quality fees as a result, Buyer will so notify Seller, and the

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parties shall then negotiate an equitable solution of the problem; provided, however, that the terms of Section F of the General Terms and Conditions will continue to apply.  [****].  Seller recognizes that Affiliates of Buyer may be involved in the handling of NGLs downstream from the Plant, and acknowledges that the reasonable good faith, fair market prices or fees so established will nevertheless control.

 

3.Price.  The parties amend Subsection 5.6(c) and 5.6(f), by deleting them and replacing them with the following:

 

(c)Determination of NGL Volumes.  Buyer will determine the quantity of each NGL component attributable to Seller’s gas by multiplying Seller’s Plant Inlet Volume in Mcf by the gallons of each component contained in the gas delivered by Seller at each Delivery Point by the fixed recovery percentage that Seller elects in accordance with Section 5.6(f) below.

 

(f)Ethane Rejection.  At least six (6) business days before the first of each month, Seller shall notify Buyer of its election to be paid for NGLs based on either the Ethane Recovery Option or the Ethane Rejection Option as follows:

 

 

If Buyer fails to timely notify Seller of its election, then the fixed Ethane Recovery or Ethane Rejection percentages shall continue from the prior month.  Notwithstanding the foregoing in this Section 3, Seller shall make no election for the months of May 2019, June 2019, and July 2019, but instead the Ethane Recovery Option shall apply to each of those three months.

 

 

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4.Price.  The parties add the following new Section 5.8, Residue Take-In-Kind Option:

 

5.8Residue Gas Take in Kind Option.  (a)  In lieu of sale to Buyer and payment to Seller for Seller’s allocable Residue Gas as contemplated in this Contract, Seller may, in its sole discretion, make an election to take the Residue Gas allocable to Seller in kind at the Redelivery Points listed in Exhibit D by providing [****] advance written notice to Buyer of its election to take the Residue Gas allocable to Seller in kind, to be effective on a date that is either the first day of April or the first day of November (and no other date), following the [****] advance written notice during the Term of the Contract.  Any such election by Seller shall last for a period of [****], unless Seller provides Buyer [****] advance written notice prior to the end of the [****] period that Seller elects to take the Residue Gas allocable to Seller in kind for an additional [****] period commencing again consecutively from the next April 1 or November 1.  During periods when Seller is taking its Residue Gas in kind, title to the Seller’s allocable Residue Gas will remain with Seller.  Whenever Seller is taking Residue Gas in kind, Buyer will pay no Residue Gas compensation under Sections 5.1 or 5.2, and the nominations, scheduling, balancing and other provisions of Exhibit C to this Contract will apply.  

 

(b)During periods when the Residue Gas take in kind option is in effect, Seller shall take its Residue Gas in kind timely at the Redelivery Points.  The parties recognize that Buyer has no Residue Gas storage.  Buyer agrees to deliver Seller’s Residue Gas to or for the account of Seller.  Seller must receive and transport or cause to be received and transported when produced and available all of Seller’s Residue Gas.  Buyer is not required to install any additional facilities to accommodate Seller’s redelivered gas disposition.  Seller is solely responsible for all arrangements for receipt and transportation of its in kind Residue Gas, including any bypassed gas.  Consistently with Exhibit C, Seller shall make or cause its sales customers to make all arrangements with the downstream gas pipelines, and shall ensure that its desired nominations for downstream transportation are properly and timely placed with the downstream pipelines in accordance with their nomination and confirmation procedures.  Each party will endeavor to provide the other party prompt notice of scheduled maintenance, construction, and other operational events that will affect volumes materially, including but not limited to facility outages and operational changes.

 

(c)If Seller fails, for any reason, to take in kind or otherwise dispose of all or any part of Seller’s Residue Gas, Buyer shall have the option, but not the obligation, to sell or otherwise dispose in any manner necessary Seller’s Residue Gas not timely taken in kind or otherwise disposed of by Seller; provided that Buyer shall account to and timely pay Seller for any proceeds received by Buyer from a sale or disposition less transportation, storage, and other charges and marketing fees paid by Buyer to Affiliates or third parties.  Seller recognizes these sales may be distress sales at below market prices and that fees paid by Buyer for transportation, storage, marketing or handling may be higher for such disposition than when Buyer purchases Residue Gas under Sections 5.1 and 5.2, and Seller agrees to pay such fees.  

 

 

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5.Exhibit A.  The parties amend the General Terms and Conditions, Section O.9, by deleting and replacing it with the following:

 

O.9Dispute Resolution. The parties desire to resolve any disputes that may arise informally, if possible.  All disputes arising out of or relating to this Contract that are not resolved by agreement of the parties must be resolved using the provisions of this Section.  If a dispute or disputes arise out of or relating to this Contract, a party shall give written notice of the disputes to the other involved parties, and each party will appoint an employee to negotiate with the other party concerning the disputes.  If the disputes have not been resolved by negotiation within 30 Days of the initial dispute notice, or if the complaining party fails to send an initial dispute notice, the parties shall resolve their disputes by arbitration in accordance with the then current International Institute for Conflict Prevention and Resolution, Inc. (“CPR”) Rules for Non-Administered Arbitration and related commentary (“Rules”) and this Section.  The arbitration shall be governed by the Federal Arbitration Act, 9 U.S.C. §§ 1, et seq., and the Rules, to the exclusion of any provision of state law inconsistent with them.  The party seeking resolution shall initiate arbitration by written notice sent to the other party or parties to be involved.  The parties shall promptly select one disinterested arbitrator with at least ten years’ experience in the natural gas industry or with natural gas law, and not previously employed by either party or its Affiliates, and, if possible, selected by agreement between the parties.  If the parties cannot select an arbitrator by agreement within 30 Days of the date of the notice of arbitration, they will cause CPR to select a qualified arbitrator in accordance with the Rules.  If the disputes involve more than $1,000,000, a panel of three arbitrators with the above qualifications will decide them, one selected by each party, and the third selected by the party-appointed arbitrators, or in the absence of their agreement, pursuant to the Rules.  The arbitrator(s) shall resolve the disputes and render a final award in accordance with the substantive law of the state referenced in Section O.1, “Governing Law.”  The arbitration award will be limited by Sections O.7, “Fees and Costs; Damages” and O.8 above, “Mutual Waiver of Certain Remedies.”  The parties intend case specific dispute resolution; either party may opt out of any attempted class action for all claims of any party related to this Contract.  The arbitrator(s) shall state the reasons for the award in writing, and either party may enter judgment on the arbitration award in any court having jurisdiction.

 

6.Exhibit C.  The parties amend the Contract to add the new attached Exhibit C: Residue Nominations, Scheduling, and Imbalances.

 

7.Exhibit D.  The parties amend the Contract to add the new attached Exhibit D: Redelivery Points.

 

8.Scope.  The parties amend the Contract to the extent provided above.  In all other respects, they confirm it, and it shall continue in full force and effect.

 

 

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9.Confidentiality.  The parties acknowledge that this Amendment is subject to the Confidentiality provisions of Section 8 of the Contract.

 

10.Counterparts.  The parties may sign this Amendment in any number of counterparts, all of which constitute one instrument.  This Amendment is binding upon all parties signing it, whether or not all parties owning interests in the properties committed under the Contract as amended sign this Amendment.

 

Signature page to follow.

 

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The parties have signed this Amendment by their duly authorized representatives as of the date stated above.

 

 

 

 

Signature Page for Amendment dated May 1, 2019

to Gas Purchase Contract

 

 

 

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EXHIBIT C

To January 1, 2011, GAS PURCHASE CONTRACT

Between APPROACH RESOURCES I, LP and APPROACH OIL & GAS INC. as Seller

and DCP OPERATING COMPANY, LP as Buyer,

 

Amendment Dated as of May 1, 2019

 

RESIDUE NOMINATIONS, SCHEDULING, AND IMBALANCES

 

 

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C-1

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