Exhibit 10.2

 

LETTER AGREEMENT

 

TO AMEND THE GAS GATHERING AND PROCESSING AGREEMENT

 

This LETTER AGREEMENT entered into on the date set forth below is by and between
Monarch Natural Gas, LLC, a Delaware Limited Liability Company whose address is
5613 DTC Parkway, Suite 200, Greenwood Village, Colorado 80111 (“Gatherer”) and
Gasco Production Company, a Delaware Corporation whose address is 8 Inverness
Drive East, Suite 100, Englewood, Colorado 80112 (“Producer”).  Gatherer and
Producer are sometimes referred to herein individually as a “Party” and
collectively as the “Parties”.  Capitalized terms used but not defined herein
shall have the meanings given to them in the Gas Gathering and Processing
Agreement, effective March 1, 2010 (the “Gathering Agreement”).

 

The Parties agree to negotiate in good faith to amend the Gathering Agreement
and take such other actions as necessary to affect the terms and conditions
below (the “Amendment”); provided however, the terms and conditions of this
Letter Agreement shall be binding and shall govern the action of the Parties
until such time the amendment to the Gathering Agreement is executed by the
Parties.

 

1.                                     Gatherer agrees to cease processing all
Gas gathered from wells operated by Gasco Production Company and to temporarily
release and waive its rights to process Gas produced from six (6) specific
sections of land (identified in Exhibit A hereto), which specific sections
contribute Gas to the Dedicated Reserves; provided, however, it is understood
and agreed to by the Parties, Gatherer agrees to temporarily release and waive
its rights to process Gas on the first 30,000 MMBtu per day of volume
redelivered to the Questar Pipeline Company (“Questar”), Questar Mainline ML-40,
Current Delivery Point MAP 359 Green River M&R (wet line) (“Delivery Point”) by
Gatherer from all of the Dedicated Reserves pursuant to the terms of this Letter
Agreement.  Such Gas, the first 30,000 MMBtu per day, gathered and redelivered
by Gatherer to the Delivery Point, shall be referred to as the “Initial
Production.”

2.                                     Gatherer shall retain all processing
rights for all Gas volumes from the Dedicated Reserves in excess of the Initial
Production gathered and redelivered by Gatherer to the Delivery Point for
processing downstream at the processing plant owned by Chipeta Processing LLC in
Uintah County, Utah (“Chipeta Plant”), unless otherwise mutually agreed by
Producer and Gatherer.

3.                                     Section 4.1 (i), Section 4.1 (ii) and
Section 4.1 (iii) of the Gathering Agreement shall remain in full force and
effect and shall continue to apply to all gas temporarily released from
processing hereunder; provided, however, such fees due Gatherer under 4.1
(ii) and 4.1 (iii), during the term of this Letter Agreement, shall not be
subject to the Gas being directly processed by Gatherer.

4.                                     In addition to the fees paid to Gatherer
in Sections 4.1(i), 4.1(ii), and 4.1(iii) under the Gathering Agreement,
Producer agrees to pay Gatherer an additional process sharing fee equal to
one-third (1/3rd) of the amount equal to the Net Uplift (defined below) realized
downstream of the Delivery Points (“Process Sharing Fee”).

 

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5.                                     “Net Uplift” means (a) the payment
received from Chipeta Processing LLC (“Chipeta”) for the sale of Plant Products
from the Initial Production or the Excess Production pursuant to the Gas
Processing Agreement between Chipeta and Producer dated as of [July 1, 2011]
(attached hereto as Exhibit B) (“Chipeta Processing Agreement”) less
(b) (i) reservation charges, usage charges, fuel costs and any supplemental
charges pursuant to the transportation service agreement to be entered into
pursuant to the Questar wet line agreement (attached hereto as Exhibit C) for
transportation of the Initial Production or the Excess Production on Questar’s
wet line, (ii) the processing fee, electric compression, and fuel costs related
to the Initial Production or the Excess Production paid by Producer to Chipeta
pursuant to the Chipeta Processing Agreement; except where such fees, costs or
charges were offset from the amount paid to Producer by Chipeta described in
(a) above, and (iii) any deficiency payment paid by Producer to Chipeta under
the Chipeta Processing Agreement to the extent caused, in whole or in part, by
Gatherer, including, but not limited to, Gatherer’s failure to perform its
obligations under the Gathering Agreement; except that, with respect to
(iii) above, Net Uplift shall not include any deficiency payment paid by
Producer to Chipeta under the Chipeta Processing Agreement to the extent caused
by the routine maintenance of Gatherer’s Gathering System in accordance with
Section 10.5 of the Gathering Agreement or a Gathering System Force Majeure
event.

6.                                     Producer agrees to have the proceeds from
NGL sales related to gathered gas processed downstream, paid directly to
Gatherer, from which Gatherer will deduct any fees owed it (net out) and remit
the remainder to Producer.

7.                                     The initial term and effective date of
this Letter Agreement will coincide with the term and effective date of any
processing agreement Producer, or its assigns, may enter into with Chipeta. 
Producer shall not amend the term of any processing agreement downstream of the
Delivery Point without Gatherers written consent.

8.                                     Except as expressly modified in this
Letter Agreement, all terms and conditions of the Gathering Agreement shall
remain in full force and effect.

 

The Parties have agreed to this Letter Agreement on September 20, 2011.

 

 

Producer:

 

 

 

GASCO PRODUCTION COMPANY

 

 

 

By:

/s/ Michael Decker

 

 

 

 

Name:

Michael Decker

 

 

 

 

Title:

EVP / COO

 

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Gatherer:

 

 

 

MONARCH NATURAL GAS, LLC

 

 

 

By:

/s/ Terry Klare

 

 

 

 

Name:

Terry Klare

 

 

 

 

Title:

President and COO

 

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EXHIBIT A TO THE LETTER AGREEMENT

 

TO AMEND THE GAS GATHERING AND PROCESSING AGREEMENT

 

Dated: September 20, 2011

 

The six (6) sections of land referred to in this Amendment are initially as
follows:

 

QUARTER

 

SECTION

 

TOWNSHIP

 

RANGE

 

COUNTY/STATE

 

 

 

 

 

 

 

 

 

All

 

16

 

10 South

 

17 East

 

Duchesne/Utah

 

 

 

 

 

 

 

 

 

All

 

20

 

10 South

 

17 East

 

Duchesne/Utah

 

 

 

 

 

 

 

 

 

All

 

26

 

9 South

 

18 East

 

Duchesne/Utah

 

 

 

 

 

 

 

 

 

All

 

27

 

9 South

 

18 East

 

Duchesne/Utah

 

 

 

 

 

 

 

 

 

All

 

20

 

9 South

 

19 East

 

Duchesne/Utah

 

 

 

 

 

 

 

 

 

All

 

21

 

9 South

 

19 East

 

Duchesne/Utah

 

Upon written notice from Producer to Gatherer, Producer may change any or all of
these sections as of the date of such notice by identifying substitute sections
from the Dedicated Reserves to be part of the six (6) sections referred to in
this Amendment.  At no time will the number of sections be greater or less than
six (6).

 

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