Exhibit 10.1

CRUDE OIL PURCHASE AGREEMENT

by and between

PLAINS EXPLORATION & PRODUCTION COMPANY

and

CONOCOPHILLIPS COMPANY

Dated as of January 1, 2012

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TABLE OF CONTENTS

 

ARTICLE I – DEFINITIONS AND CONSTRUCTION

  

1.1

   Definitions      1   

1.2

   Construction      3   

ARTICLE II – QUANTITY

  

2.1

   Delivery Amount      4   

2.2

   Disclaimer of Implied Warranties      9   

ARTICLE III – PRICING/TAXES

  

3.1

   Delivery Amount Price      9   

3.2

   Adjustments      10   

3.3

   Taxes      13   

ARTICLE IV – PAYMENT

  

4.1

   General      14   

4.2

   Interest      14   

4.3

   Accounting Address      14   

ARTICLE V – TITLE WARRANTIES AND TRANSFER

  

5.1

   General      15   

5.2

   Specific Fields      15   

ARTICLE VI – MEASUREMENT

  

6.1

   Measurement      15   

6.2

   Meters and Tests      16   

ARTICLE VII – TERM AND TERMINATION

  

7.1

   Term      16   

7.2

   Suspension Rights      16   

7.3

   Termination Rights      17   

ARTICLE VIII – REPRESENTATIONS, WARRANTIES AND OTHER COVENANTS

  

8.1

   PXP Representations and Warranties      17   

8.2

   CoP Representations and Warranties      18   

8.3

   Covenants      20   

 

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ARTICLE IX – FINANCIAL MATTERS

  

9.1

   Credit Requirements      20   

9.2

   Financial Responsibility      21   

ARTICLE X – DISPUTES

  

10.1

   Pricing Disputes      21   

10.2

   Other Disputes      23   

ARTICLE XI – MISCELLANEOUS

  

11.1

   Notices      23   

11.2

   Confidentiality      24   

11.3

   Assignment      25   

11.4

   Force Majeure      25   

11.5

   Waiver      25   

11.6

   Entire Agreement      25   

11.7

   Control      26   

11.8

   Severability      26   

11.9

   Audit      26   

11.10

   Safety      27   

11.11

   Business Practices      27   

11.12

   Governing Law      27   

11.13

   Entirety of Agreement and Amendments      28   

11.14

   Headings      28   

11.15

   General Provisions      28   

11.16

   Further Assurances      28   

11.17

   Time and Performance of the Essence      28   

11.18

   No Third Party Beneficiaries      28   

11.19

   Hazards and Risks      28   

11.20

   Inglewood      28   

11.21

   Arroyo Grande Pipeline      28   

11.22

   Public Announcements      29   

11.23

   Alternate Transportation from Point Pedernales      29   

EXHIBITS

 

EXHIBIT 1    SUBJECT FIELDS EXHIBIT 2    PXP ESTIMATED AMOUNT NOTIFICATION
EXHIBIT 3    BENCHMARK PRICE/SPECIFIED GRAVITY EXHIBIT 4    POSTING
GROUP/SUBJECT FIELD PRICING DIFFERENTIALS EXHIBIT 5    ILLUSTRATIVE EXAMPLE OF
MONTHLY PRICE CALCULATION FOR ***** AND *****

 

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CRUDE OIL PURCHASE AGREEMENT

This Crude Oil Purchase Agreement (this “Agreement”) dated as of January 1,
2012, is entered into between Plains Exploration & Production Company (“PXP”)
and ConocoPhillips Company (“CoP”). PXP and CoP are sometimes collectively
referred to herein as the “Parties” or individually as a “Party.”

ARTICLE I

DEFINITIONS AND CONSTRUCTION

1.1 Definitions. When used in the Agreement, the terms listed below and any
grammatical variation thereof have the following meanings:

“Actual Pipeline Transport Cost” means the published pipeline tariff rate for
the relevant transportation segment on a common carrier pipeline excluding any
quality-based adjustment but including any loss allowance and/or, if applicable,
the actual cost of transportation over the relevant transportation segment on a
proprietary pipeline.

“API” means the American Petroleum Institute.

“Arbitrator” shall have the meaning set forth in Section 10.1(a).

“Argus” means Argus Americas Crude Report, as currently published by Argus Media
Ltd., or such replacement publication as the Parties may agree to in writing if
such publication ceases to be published or such publication ceases to provide
the information to be obtained therefrom pursuant to this Agreement.

“ASME” means the American Society of Mechanical Engineers.

“ASTM” means the American Society of Testing Materials.

“Average Delivery Amount” shall have the meaning set forth in Section 2.1(c).

“Barrel” means 42 U.S. gallons of 231 cubic inches per gallon corrected to 60
degrees Fahrenheit.

“BS&W” means basic sediment and water.

“Business Day” shall mean any calendar day other than a Saturday, Sunday or
other calendar day on which banks are authorized to be closed in Texas.

“Day” means any complete 24-hour period during the term of this Agreement,
commencing at 7:00 a.m. Pacific Time on a given calendar day and ending at 6:59
a.m. Pacific Time on the succeeding calendar day. The reference date for a given
Day shall be the calendar day on which such Day begins.

 

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“Delivery Amount” shall have the meaning set forth in Section 2.1(a).

“Delivery Amount Price” shall have the meaning set forth in Section 3.1(a).

“Delivery Month” means each complete monthly period during the term of this
Agreement, commencing at 7:00 a.m. Pacific Time on the first calendar day of a
given calendar month and ending at 6:59 a.m. Pacific Time on the first calendar
day of the following calendar month. The reference date for a given Delivery
Month shall be the calendar month in which such Delivery Month begins.

“Estimated Amount” shall have the meaning set forth in Section 2.1(b).

“Event of Default” shall mean any of the following:

(i) failure to make any payment within five (5) Business Days of when due under
this Agreement;

(ii) failure by PXP to deliver the Delivery Amount for ten (10) consecutive
calendar days beyond the time that such performance is due where such failure is
not due to Force Majeure;

(iii) failure by CoP to provide financial assurance pursuant to Section 9.1 of
this Agreement;

(iv) a material breach by a Party of any other covenant or provision of this
Agreement by such Party;

(v) initiation of proceedings (voluntarily or involuntarily) by or with respect
to a Party under the bankruptcy or insolvency laws of any jurisdiction, which
proceedings are not dismissed within sixty (60) calendar days after filing;
written admission of inability to pay debts generally as they come due; the
making of an assignment for the benefit of creditors; an application of
reappointment of a receiver, custodian or trustee; or the passing of a
resolution for winding up or liquidation by or on behalf of a Party; or

(vi) any representation or warranty made in this Agreement by a Party being
false or misleading in any material respect at the time it was made or deemed to
have been made.

“Force Majeure” means any war, riots, insurrections, fire, explosions, sabotage,
strikes, and other labor or industrial disturbances, acts of God or the
elements, governmental laws or regulations, disruption or breakdown of
production or transportation facilities, delays by unaffiliated pipeline
carriers in receiving and delivering Sales Volumes tendered, or any other event
reasonably beyond the control of a Party claiming such Force Majeure, but does
not include mere economic loss or hardship to such Party or the shut down of
facilities that are no longer considered economic to operate.

 

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“Major Poster” means any of Chevron Corporation, Exxon Mobil Corporation, CoP
(as published under its Union 76 posting), and Shell Trading (US) Company, or in
each case such successor thereto or affiliate thereof or such joint venture with
such company or its affiliate that provides crude oil postings.

*****

“New Field Pre-Agreement Period” shall have the meaning set forth in
Section 2.1(d).

“New Fields” shall have the meaning set forth in Section 2.1(d).

“New Volume Pre-Agreement Period” shall have the meaning set forth in
Section 2.1(e).

“New Volumes” shall have the meaning set forth in Section 2.1(e).

*****

“Posting Group” shall mean any one of the three groups of Subject Fields having
the same designated “Posting Group” in Exhibit 4, which Posting Group shall have
the name so designated in Exhibit 4.

“Rules” shall have the meaning set forth in Section 10.1(a).

“Sales Volumes” shall mean hydrocarbons in a liquid state under ordinary
production and transportation operating conditions (e.g. not including natural
gas or liquefied petroleum gas) produced and saved and not combined with other
hydrocarbons except when such combining occurs in connection with ordinary or
customary production, gathering or transportation operations.

“Set Aside Volume” shall have the meaning set forth in Section 2.1(c).

“Subject Fields” means, collectively (i) the fields and/or leases described in
Exhibit 1 to this Agreement, and (ii) the fields and leases added to this
Agreement pursuant to Section 2.1(d).

“Year” means a period of 12 consecutive calendar months according to the
Gregorian calendar, beginning on the first calendar day of the first such
calendar month and ending on the last calendar day of the twelfth such calendar
month.

1.2 Construction. This agreement has been prepared jointly by the Parties with
the advice and participation of counsel, and shall not be interpreted against
one Party in favor of the other.

 

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ARTICLE II

QUANTITY

2.1 Delivery Amount.

(a) Subject to the terms and conditions hereof and subject to PXP’s rights under
Section 2.1(c), PXP agrees to sell and deliver to CoP, and CoP agrees to receive
and purchase from PXP, one hundred percent (100%) of PXP’s owned and controlled
interest in Sales Volumes produced from the Subject Fields, which production is
currently estimated to be 45,000 Barrels per calendar day (the “Delivery
Amount”).

(b) Not later than ten (10) calendar days prior to the commencement of each
Delivery Month, PXP will notify CoP of its then current good faith, but
non-binding, estimate of the Delivery Amount for such Delivery Month and the
Delivery Month immediately thereafter, which notice shall generally be in the
form of Exhibit 2 attached hereto (the “Estimated Amount”).

(c) Set Aside Volume. Notwithstanding Section 2.1(a), PXP shall be entitled, in
accordance with the procedures set forth below, to retain a portion of the
Delivery Amount and exclude same from this Agreement (the “Set Aside Volume”)
for the period of time such Set Aside Volume is in effect as permitted by this
Agreement. Upon agreement of the Parties pursuant to Section 2.1(c)(ii), or upon
delivery of the Set Aside Volume Election pursuant to Section 2.1(c)(iii), such
Set Aside Volume shall be excluded from this Agreement and CoP shall have no
further rights under this Agreement with respect thereto, but such exclusion
shall be only for the period of time such Set Aside Volume is in effect as
permitted by this Agreement. The procedures for, and restrictions on, retaining
a Set Aside Volume and excluding same from this Agreement are as follows:

(i) PXP shall have the right to notify CoP in writing no later than June 1 of
any given calendar Year if it desires to have any Set Aside Volume (a
“Preliminary Set Aside Notice”). Each such Preliminary Set Aside Notice shall
set forth (A) the percentage (no greater than 10%) of the Delivery Amount that
PXP desires to retain (the “Election Percentage”), (B) a calculation estimating
the amount, in Barrels per Day, that such percentage is anticipated to represent
(calculated in accordance with. Section 2.1(c)(iv) and (v)), (C) the Subject
Fields from which such Set Aside Volume will be produced, and (D) the Delivery
Months that will be subject to such Set Aside Volume.

(ii) Upon CoP’s receipt of a Preliminary Set Aside Notice, the Parties shall
endeavor in good faith to negotiate the terms and conditions upon which CoP
would purchase such Set Aside Volume.

(iii) With respect to any given calendar Year in which PXP provides CoP with a
Preliminary Set Aside Notice, if the Parties fail to agree upon the terms and
conditions upon which CoP will purchase such Set Aside Volume pursuant to
Section 2.1(c)(ii) on or before June 30 of such Year, then PXP shall have the
right, on or before October 1 of such Year, to notify CoP in writing of its
intent to sell such Set Aside Volume to a third party (a “Set Aside Volume
Election”). The Set Aside Volume Election may only be made as to the same
Election Percentage, Subject Fields, and Delivery Months as set forth in the
Preliminary Set Aside Notice, but shall contain any updated estimated amount, in
Barrels per Day, that such Election Percentage is anticipated to represent
(calculated in accordance with Section 2.1 (c)(iv) and (v)).

 

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(iv) In estimating the Set Aside Volume, in Barrels per Day, for purposes of the
Preliminary Set Aside Notice and the Set Aside Volume Election, PXP shall
multiply the Election Percentage in connection therewith times the average Daily
Delivery Amount for the immediately preceding three (3) Delivery Months for
which such information is available, rounding such product to the nearest 1,000
Barrels per Day. The actual Set Aside Volume, in Barrels per Day, for a given
delivery Year shall equal the Election Percentage elected for such delivery Year
multiplied by the Average Delivery Amount for the Year immediately preceding
such delivery Year rounded to the nearest 1,000 Barrels per Day. For purposes of
this Section, the term “Average Delivery Amount” shall, for a given Year, mean
an amount calculated as follows:

(A) The Parties shall calculate an average of the Daily Delivery Amounts for
each of the Delivery Months of June through November of such Year.

(B) The Parties shall determine the four Delivery Months of such six Delivery
Months that have the highest average Daily Delivery Amount calculated pursuant
to clause (A).

(C) The Parties shall calculate the average Daily Delivery Amount of all Days
during the four Delivery Months determined pursuant to clause (B).

(D) The average Daily Delivery Amount calculated pursuant to clause (C) shall be
the “Average Delivery Amount” for such Year.

In addition, in making a calculation for a Set Aside Volume, no deduction from
the gross amount of average Daily Delivery Amount shall be made for any previous
Set Aside Volume.

(v) In calculating the average Daily Delivery Amount for a given Delivery Month
for purposes of Section 2.1 (c)(iv), the Parties

(A) shall not include Delivery Amounts attributable to Subject Fields or
interests in Sales Volumes, which Subject Fields or interests in Sales Volumes
were sold by PXP at any time during the period commencing as of the first Day
from which such average is being calculated and ending on the last Day prior to
the commencement of the relevant delivery Year, and

(B) shall include an amount, in Barrels per Day, normalized throughout the
period over which such average is being calculated, equal to the average Daily
Delivery Amounts attributable to Subject Fields or

 

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interests in Sales Volumes, which Subject Fields or interests in Sales Volumes
were acquired by PXP at any time during the period commencing as of the first
Day from which such average is being calculated and ending on the last Day prior
to the commencement of the relevant delivery Year.

(vi) Notwithstanding the foregoing, the Set Aside Volume may not include amounts
of Sales Volumes from Subject Fields belonging to the Posting Group referred to
as Midway Sunset in Exhibit 4 in excess of 25% of the average Daily Delivery
Amount (calculated in accordance with Section 2.1(c)(v) and with respect to the
periods required pursuant to Section 2.1(c)(iv)) attributable to all Subject
Fields belonging to such Posting Group.

(d) Additional Subject Fields. To the extent not otherwise restricted or
prohibited by agreements existing or effective at the time of such acquisition
or development, and in all cases subject to such agreements, all fields and
leases in the State of California, or located in California state waters or
Federal waters offshore of the State of California, that PXP acquires or
develops during the term of this Agreement shall constitute Subject Fields
effective as of the date of such acquisition or development, provided that PXP
gives written notice of the pending acquisition or development of such a field
or lease as soon as possible prior to its acquisition or development and CoP has
thirty (30) Days from receipt of such notice to notify PXP in writing whether
CoP elects to reject said field or lease based on its determination that
notwithstanding its exercise of commercially reasonable efforts it will not be
able to process the Sales Volume expected to be produced from such field or
lease at, and/or transport such Sales Volume to, one of CoP’s California
refineries, in which case such field or lease shall not be deemed to be or have
been a “Subject Field.” If CoP fails to respond in such time period the field or
lease will be deemed to be a “Subject Field.” The pricing and delivery location
for Delivery Amounts produced from such additional fields and leases shall be as
mutually agreed by the Parties or as otherwise determined pursuant hereto. For
purposes of the foregoing sentence, with respect to fields and leases located
within the geographic boundaries of existing Subject Fields or that are
otherwise considered by the applicable regulatory authority to be a part of a
field included within a current Subject Field, and provided that the Sales
Volumes produced from such fields and leases is of Substantially the Same
Quality as that produced from such Subject Field, then the Parties shall be
deemed to have agreed that the pricing and delivery location for Delivery
Amounts produced from such fields and leases shall be the same as that for such
Subject Field. For purposes of this Agreement, Sales Volumes shall have
“Substantially the Same Quality” as other Sales Volumes if its sulfur content
does not vary from the other by more than 1% by weight, its total acid number
(or “TAN”) does not exceed 0.3 mg and if its gravity does not vary from the
other by more than 5 degrees API. If the Parties fail to agree, and are not
otherwise deemed to have agreed, on the pricing and/or delivery location for
Delivery Amounts produced from such fields and leases on or before the 30th
calendar day following the acquisition or development of such fields or leases
by PXP, then the Parties shall refer the determination of such pricing and
delivery location to arbitration pursuant to Section 10.1, and upon such
determination, such pricing and/or delivery location shall thenceforth apply to
such fields and leases. During the period, if any, commencing with

 

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the date such fields and leases constitute Subject Fields (the “New Fields”) and
ending upon the last Day of the last Delivery Month ending prior to the
agreement of the Parties (or the decision of the Arbitrator, as applicable) as
to pricing and/or delivery location, as applicable (the “New Field Pre-Agreement
Period”), the Parties shall use, for purposes of temporary payment for and
delivery of Delivery Amounts from such New Fields, the pricing and/or delivery
location, as applicable, set forth below:

(i) If the delivery location has not been so agreed or determined by
arbitration, the delivery location during the New Field Pre-Agreement Period
shall be the location at which Delivery Amounts produced from such New Field
pass from equipment or locations owned or controlled by PXP, or owned or
controlled by a third party designated to make delivery on behalf of PXP.

(ii) If the pricing has not been so agreed or determined by arbitration, the
pricing during the New Field Pre-Agreement Period shall be determined as if such
New Field belonged to the Posting Group whose “Specified Gravity” under Exhibit
3 is closest to the average gravity of the Delivery Amounts then being produced
from such Subject Field (and if two such Posting Groups have Specified Gravities
that are equally close to such average gravity, then the Posting Group with the
higher Specified Gravity shall apply for purposes of this clause).

From and after the termination of such New Field Pre-Agreement Period, the
pricing and delivery location agreed by the Parties (or selected by the
Arbitrator, as applicable), shall thenceforth apply subject to the terms of this
Agreement. If the pricing provisions applied during the New Field Pre-Agreement
Period differ from those following the New Field Pre-Agreement Period as a
result of the mutual agreement of the Parties or the decision of the Arbitrator,
in each case pursuant to this Section, then the Parties shall account for such
difference in pricing in the next invoice from CoP pursuant to this Agreement,
which accounting shall be in the form of a credit or debit and which will
include interest from the date such New Field Pre-Agreement Period prices were
paid until the date of such invoice, calculated at the interest rate provided in
Section 4.2. If any fields or leases acquired or developed by PXP would
constitute a Subject Field pursuant to this Section 2.1(d) but for the existence
of restrictions or prohibitions contained in agreements existing or effective at
the time of such acquisition, then upon the termination of such restrictions,
prohibitions or agreements, such fields and leases shall then be subject to this
Section as if the date of such termination was the date of acquisition.

(e) Additional Interests in Sales Volumes. To the extent not otherwise
committed, restricted or prohibited by agreements existing or effective at the
time of such acquisition, and in all cases subject to such agreements, all
interests in Sales Volumes production in the State of California, or in
California state waters or Federal waters offshore of the State of California,
that PXP acquires during the term of this Agreement shall be included in the
Delivery Amount effective as of the date of such acquisition. The pricing and
delivery location for such Delivery Amounts shall be mutually agreed by the
Parties or as otherwise determined pursuant hereto. For purposes of the
foregoing sentence, with respect to additional interests in Sales Volumes
produced from a Subject Field, which Sales Volumes are of Substantially the Same
Quality as that produced from such Subject

 

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Field, the Parties shall be deemed to have agreed that the pricing and delivery
location for such Delivery Amounts shall be the same as that for such Subject
Field. If the Parties fail to agree, and are not otherwise deemed to have
agreed, on the pricing and delivery location for such additional Delivery
Amounts on or before the 30th calendar day following the acquisition of such
interest in Sales Volumes by PXP, then the Parties shall refer the determination
of such pricing and delivery location to arbitration pursuant to Section 10.1,
and upon such determination, such pricing and/or delivery location shall
thenceforth apply to such Delivery Amounts. During the period, if any,
commencing with the date such interest in Sales Volumes are included in the
Delivery Amount (the “New Volumes”) and ending upon the last Day of the last
Delivery Month ending prior to the agreement of the Parties (or the decision of
the Arbitrator, as applicable) as to pricing and/or delivery location, as
applicable (the “New Volume Pre-Agreement Period”), the Parties shall use, for
purposes of temporary payment for and delivery of such Delivery Amounts, the
pricing and/or delivery location, as applicable, set forth below:

(i) If the delivery location has not been so agreed or determined by
arbitration, the delivery location during the New Volume Pre-Agreement Period
shall be the location at which such Delivery Amounts pass from equipment or
locations owned or controlled by PXP, or owned or controlled by a third party
designated to make delivery on behalf of PXP.

(ii) If the pricing has not been so agreed or determined by arbitration, the
pricing during the New Volume Pre-Agreement Period shall be determined as if
such Delivery Amounts were produced from a Subject Field belonging to the
Posting Group whose “Specified Gravity” under Exhibit 3 is closest to the
average gravity of such Delivery Amounts (and if two such Posting Groups have
Specified Gravities that are equally close to such average gravity, then the
Posting Group with the higher Specified Gravity shall apply for purposes of this
clause).

From and after the termination of such New Volume Pre-Agreement Period, the
pricing and delivery location agreed by the Parties (or selected by the
Arbitrator, as applicable), shall thenceforth apply subject to the terms of this
Agreement. If the pricing provisions applied during the New Volume Pre-Agreement
Period differ from those following the New Volume Pre-Agreement Period as a
result of the mutual agreement of the Parties or the decision of the Arbitrator,
in each case pursuant to this Section, then the Parties shall account for such
difference in pricing in the next invoice from CoP pursuant to this Agreement,
which accounting shall be in the form of a credit or debit and which will
include interest from the date such New Volume Pre-Agreement Period prices were
paid until the date of such invoice, calculated at the interest rate provided in
Section 4.2. If any interest in Sales Volumes acquired by PXP would be included
in the Delivery Amount pursuant to this Section 2.2(e) but for the existence of
commitments, restrictions or prohibitions contained in agreements existing or
effective at the time of such acquisition, then upon the termination of such
commitments, restrictions, prohibitions or agreements, such interests in Sales
Volumes shall then be subject to this Section as if the date of such termination
was the date of acquisition.

 

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(f) Quality. The Delivery Amount delivered hereunder shall be merchantable,
meeting the requirements of the approved tariff of the first common carrier
pipeline involved.

(g) Planned Refinery Maintenance. CoP shall notify PXP in writing as far in
advance as practical of the time and expected duration of planned maintenance of
CoP’s Santa Maria or Rodeo refineries that is reasonably expected to affect
CoP’s ability to transport and/or store Sales Volumes hereunder. During any such
planned maintenance of which CoP has so notified PXP, CoP shall be excused from
its obligation to accept delivery of or to pay for Sales Volume to the extent
that:

(i) such Sales Volume includes a volume of barrels in excess of (A) 9,000
barrels/day, minus (B) the number of barrels that PXP is able to store in its
own facilities consistent with past practices between the Parties, and

(ii) CoP is in fact unable to transport and/or store such Sales Volumes,

provided that the Parties shall cooperate in efforts to store excess production
at a PXP facility and/or to arrange for alternate transportation so as to avoid
or minimize the need to shut in any PXP production of the Sales Volumes.

2.2 Disclaimer of Implied Warranties. PXP AND COP EACH ACKNOWLEDGES THAT IT HAS
ENTERED INTO THIS AGREEMENT BASED SOLELY ON THE EXPRESS REPRESENTATIONS,
WARRANTIES, COVENANTS AND AGREEMENTS SET FORTH HEREIN AND, SUBJECT TO THE
EXPRESS REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS SET FORTH HEREIN,
COP ACCEPTS SALES VOLUMES DELIVERED HEREUNDER “AS IS.” EXCEPT AS OTHERWISE
EXPRESSLY PROVIDED IN THIS AGREEMENT, COP EXPRESSLY NEGATES, AS TO THE DELIVERY
AMOUNTS, ANY OTHER REPRESENTATION, WARRANTY, COVENANT OR AGREEMENT, WRITTEN OR
ORAL, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, ANY REPRESENTATION OR
WARRANTY WITH RESPECT TO (A) CONFORMITY TO MODELS OR SAMPLES,
(B) MERCHANTABILITY, OR (C) FITNESS FOR A PARTICULAR PURPOSE.

ARTICLE III

PRICING/TAXES

3.1 Delivery Amount Price.

 

  (a) Basic Calculation. The price to be paid by CoP for each Barrel of the
Delivery Amount produced from a given Subject Field in a given Posting Group
during a given Delivery Month (each, a “Delivery Amount Price”), subject to
Section 3.2(a) and (b), shall be as follows:

 

  (i) Buena Vista Posting Group. The price to be paid for the Buena Vista
Posting Group shall be equal to *****.

 

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  (ii) Midway Sunset Posting Group. The price to be paid for the Midway Sunset
Posting Group shall be equal to *****.

 

  (iii) OCS Posting Group. The price to be paid for the OCS Posting Group shall
be equal to *****.

(b) Uniform Deliveries. In computing the Delivery Amount Price for the Delivery
Amount hereunder for a given Delivery Month, it shall be assumed that such
Delivery Amount was delivered in equal daily quantities during such Delivery
Month.

(c) Truck Receipts. Subject to Section 3.2(a)(iii), the Delivery Amount Price
for Delivery Amount shall be unaffected by whether such Delivery Amount is
received by truck or by pipeline carrier. CoP shall arrange for the scheduling
of trucks for receipt of Delivery Amounts that are not delivered to a pipeline
carrier.

3.2 Adjustments.

(a) Delivery Amount Price. The following adjustments shall apply to the Delivery
Amount Prices:

(i) Subject Field Pricing Differential. The Delivery Amount Price for a given
Subject Field shall be adjusted by the “Subject Field Pricing Differential” set
forth in Exhibit 4 for such Subject Field.

(ii) Additional Pricing Adjustment. The Delivery Amount Price for all Sales
Volumes delivered to or for the benefit of CoP shall be increased by $.05 per
Barrel.

(iii) Trucking Costs. Except as otherwise specifically provided herein, for
Delivery Amounts received by truck, CoP may deduct the actual cost of trucking
from the Delivery Amount Price payable pursuant to this Agreement with respect
thereto; provided, however, that if any such Delivery Amount could have been
delivered to a pipeline carrier and is delivered by truck at CoP’s election,
such cost of trucking shall not be deducted.

(iv) Gravity Adjustment. The Delivery Amount Price for a given Subject Field and
Delivery Month shall be adjusted, upward or downward as applicable, by the
product obtained by multiplying:

(A) the average of the gravity price adjustments (in $/barrel/degree API)
published by each of the four Major Posters for such Delivery Month for crude
oil of the gravity produced from such Subject Field, by

(B) the difference obtained by subtracting:

(x) the Specified API Gravity set forth in Exhibit 3 for the Posting Group to
which such Subject Field belongs, from

 

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(y) the average gravity (in degrees API) for Sales Volumes delivered from such
Subject Field for each Day during such Delivery Month.

For purposes of Section 3.2(a)(iv)(A), if greater than one but fewer than four
Major Posters have published gravity price adjustments for such Delivery Month
for crude oil produced in California, then the Parties shall use the average of
such Major Posters. If only one or less Major Posters have so published gravity
price adjustments, then the Parties shall mutually agree upon the appropriate
gravity adjustment for purposes of Section 3.2(a)(iv)(A) and failing such
agreement, the gravity adjustment shall be determined pursuant to
Section 3.2(b)(iii).

(v) Point Pedernales and Lompoc Adjustments. The Delivery Amount Price for Sales
Volumes produced from the Subject Fields designated as Point Pedernales and
Lompoc in Exhibit 1 shall be adjusted for location differential in accordance
with Exhibit 4 and also for sulfur. The sulfur adjustment shall be *****.

(vi) Point Arguello Adjustment. The Delivery Amount Price for Sales Volumes
produced from the Subject Field designated as Point Arguello shall not bear a
Gravity Adjustment, nor shall it bear an adjustment for sulfur content.

(vii) Arroyo Grande Adjustment. The Delivery Amount Price for Sales Volumes
produced from the Subject Field designated as Arroyo Grande shall not receive
***** but rather shall be based only on *****.

(b) Periodic Pricing Adjustment. The Parties acknowledge and agree that the
pricing formulas set forth in this Agreement utilize appropriate pricing
mechanisms and publications and fairly reflect the markets that are available
for the Sales Volumes subject hereto. As the Parties recognize that such pricing
mechanisms, publications or markets may change materially during the term of
this Agreement, the Parties hereby agree to the following procedures for
periodically evaluating (and potentially adjusting) such pricing formulas to
reflect the fair market value of the Sales Volumes.

(i) In the event that, during the term of this Agreement, either Party
determines, in good faith, that the pricing formulas set forth in this Agreement
for one or more Subject Fields materially vary from the fair market pricing for
the relevant Sales Volumes for such Subject Fields, then such Party may propose
a change in the pricing under this Agreement for such Subject Fields to take
effect commencing upon the 1st anniversary of this Agreement and each
anniversary thereafter, by giving the other Party written notice of the proposed
change no later than ninety (90) calendar days prior to such anniversary date.
If a Party gives such notice in accordance herewith, and the Parties agree on
any such change in the pricing for such Subject Fields, such change shall take
effect as of such anniversary date. If the Parties fail to agree upon such new
pricing for any such Subject Field by thirty (30) calendar days prior to such
anniversary date, either

 

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Party may submit the issue for resolution in accordance with Section 10.1;
provided that such Party submits such issue for resolution prior to such
anniversary date. Although the Parties are encouraged to engage in dialogue,
written or otherwise, regarding pricing and pricing changes under this
Agreement, including under this Section, a Party may only formally invoke the
provisions of this Section 3.2(b)(i) once per anniversary date listed above.
Until a Party asserts in writing that it has formally invoked its rights under
this Section, it shall in no way be limited in its rights to propose or discuss
pricing changes hereunder. Either Party shall have the right to request that the
other Party confirm in writing whether it has, through its written
correspondence, formally invoked this Section with respect to a given
anniversary date, and until receipt of an affirmative response to such request
for confirmation, the requesting Party shall be under no obligation to respond
to such correspondence.

(ii) In the event that, during the term of this Agreement, either Party
determines, in good faith, that there has occurred a material change to the
quality specifications attributable to, or any other material component used for
determining, the price for one or more Subject Fields, then such Party may
propose a change in the pricing for such Subject Fields under this Agreement to
take effect commencing upon the 1st anniversary of this Agreement and each
anniversary thereafter by giving the other Party written notice of the proposed
change no later than ninety (90) calendar days prior to such anniversary date.
If a Party gives such notice in accordance herewith, and the Parties agree on
any such change in the pricing for such Subject Fields, such change shall take
effect as of such anniversary date. If the Parties fail to agree upon such new
pricing for any such Subject Field by thirty (30) calendar days prior to such
anniversary date, either Party may submit the issue for resolution in accordance
with Section 10.1; provided that such Party submits such issue for resolution
prior to such anniversary date. Although the Parties are encouraged to engage in
dialogue, written or otherwise, regarding pricing and pricing changes under this
Agreement, including under this Section, a Party may only formally invoke the
provisions of this Section 3.2(b)(ii) once per anniversary date listed above.
Until a Party asserts in writing that it has formally invoked its rights under
this Section, it shall in no way be limited in its rights to propose or discuss
pricing changes hereunder. Either Party shall have the right to request that the
other Party confirm in writing whether it has, through its written
correspondence, formally invoked this Section with respect to a given
anniversary date, and until receipt of an affirmative response to such request
for confirmation, the requesting Party shall be under no obligation to respond
to such correspondence.

(iii) In the event that, during the term of this Agreement, only one or fewer
Major Posters are publishing gravity price adjustments for crude oil produced in
California, and the Parties are unable to agree upon the gravity adjustment for
purposes of Section 3.2(a)(iv)(A), then either Party may submit the issue for
resolution in accordance with Section 10.1.

 

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(iv) In the event of any dispute resolution pursuant to Section 10.1, the
pricing formulas hereunder shall, subject hereto, remain in effect pending the
written decision of the Arbitrator. If the decision of the Arbitrator results in
a change in pricing,

(A) the change will be retroactive to the anniversary date on which the pricing
change was to be effective pursuant to this Section 3.2(b), and

(B) the Parties shall make a cash settlement to reflect such retroactivity of
the pricing change (together with interest at the rate calculated in accordance
with Section 4.2) within twenty (20) calendar days after the Arbitrator’s
written decision is delivered.

(v) Any pricing change in accordance with this Section shall constitute an
amendment to this Agreement without further action, but the Parties shall take
such steps as reasonably requested by either Party to further evidence such
amendment.

(vi) Notwithstanding anything to the contrary herein, the Parties agree that if
any material change to the pricing methodology results in a material
disadvantage or harm to a Party, the Parties agree to immediately discuss and
attempt to resolve such issue.

(vii) If for any reason pricing for the benchmark crudes of ***** stop being
reported or another crude type becomes the benchmark, either Party has the right
to renegotiate the affected pricing benchmark upon 30 days written notification
to the other Party. The Parties agree to mutually review the applicability of
the benchmarks on no less than a quarterly basis.

(viii) The price negotiated for future pricing periods should most closely
reflect future expectations taking into consideration the current state of the
market, recent trends that justify the current market, recent negotiated
contracts with third parties (appropriately weighted and verified) and the
impact of waterborne deliveries.

3.3 Taxes. CoP shall reimburse PXP for all taxes imposed by federal, state or
local governments, other than taxes on income, assessed on PXP, directly or
indirectly in connection with and occasioned by the transfer of title of Sales
Volumes delivered under this Agreement. Each Party shall be solely responsible
for any taxes assessed on it pursuant to Sections 8670.40 or 8670.48, or
applicable successor Sections, of the California Government Code. If CoP is
entitled to purchase any such Delivery Amount free of any tax (state or
federal), CoP shall furnish PXP the proper exemption certificate.

 

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ARTICLE IV

PAYMENT

4.1 General.

(a) CoP’s Obligation. CoP shall, except as expressly provided otherwise in this
Agreement, pay PXP, by wire transfer in immediately available funds no later
than twenty (20) calendar days after the end of each Delivery Month, the
aggregate for all Subject Fields of (i) the Delivery Amount Price for each
Subject Field and such Delivery Month multiplied by (ii) the Delivery Amount
attributable to such Subject Field and such Delivery Month as reflected in the
relevant delivery tickets. CoP shall wire amounts due PXP hereunder as follows:

Wells Fargo Bank

ABA#: 121000248

Credit: Plains Exploration & Production Company

Account #: 4945090041

Reference: Crude Oil Purchases

(b) Weekends/Holidays. Notwithstanding Section 4.1(a):

(i) if the deadline for payment under such provisions falls on a Saturday, such
deadline shall be deemed to have instead fallen on the immediately preceding
Business Day;

(ii) if the deadline for payment under such provisions falls on a Sunday, such
deadline shall be deemed to have instead fallen on the immediately succeeding
Business Day;

(iii) if the deadline for payment under such provisions falls on a Monday that
is not a Business Day, such deadline shall be deemed to have instead fallen on
the immediately succeeding Business Day; and

(iv) if the deadline for payment under such provisions falls on a Day that is
neither a Business Day nor a Saturday, Sunday or Monday, such deadline shall be
deemed to have instead fallen on the immediately preceding Business Day.

4.2 Interest. Any payments that are past due under this Agreement shall bear
interest at the lesser of (i) a rate per annum equal to the rate published as
the “Prime Rate” in the “Money Rates” section of The Wall Street Journal for the
calendar day payment was due (or if not published on such calendar day, such
rate as last published), plus two percent (2%), or (ii) the maximum rate of
interest permitted by applicable law.

4.3 Accounting Address. All accounting documentation delivered pursuant to or in
connection with this Agreement shall be delivered to the following addresses:

To PXP:

Plains Exploration & Production Company

717 Texas, Suite 2100

Houston, Texas 77002

Attn:    Revenue Accounting

Fax:     713-579-6611

 

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To CoP:

ConocoPhillips Company

600 North Dairy Ashford Road

Houston, TX 77079

Attn:    Supply Trader/West Coast Pipeline

Fax:     918-662-5908

ARTICLE V

TITLE WARRANTIES AND TRANSFER

5.1 General. PXP warrants good title to the Delivery Amount delivered by it
hereunder and agrees to indemnify and hold harmless CoP from and against any and
all loss, claim or demand by reason of any failure of such title to such
Delivery Amount or failure or breach of this warranty. Title to, possession and
risk of loss of the Delivery Amount shall, except as set forth in Section 5.2,
pass to CoP as such Delivery Amount passes from equipment or locations owned or
controlled by PXP, or owned or controlled by a third party designated to make
delivery on behalf of PXP.

5.2 Specific Fields. Notwithstanding anything to the contrary in Section 5.1
above, for any Sales Volumes to be delivered to CoP hereunder that is produced
from the Subject Field designated as Point Pedernales in Exhibit 1 hereto, title
to, possession and risk of loss of such Sales Volumes shall pass to CoP as such
Sales Volumes pass from PXP’s Lompoc oil and gas plant into CoP’s Unocap
pipeline.

ARTICLE VI

MEASUREMENT

6.1 Measurement.

(a) Method. Deliveries of the Delivery Amount shall be measured by means of
automatic custody transfer unit as and when the Delivery Amount is produced, or
by tank gauge as and when the Delivery Amount is produced and accumulated in
tank lots. All tank measurements shall be made using certified gauge tables
available to the receiving Party.

(b) LACT Pinning. CoP shall provide PXP with at least forty-eight (48) hours
notice in advance of the “pinning” or other closure of any LACT meter other than
in the case of an emergency, in which case CoP shall provide as much notice of
such “pinning” or other closure as is practicable. PXP leases are recommended to
have on-site crude oil storage capacity for at least forty-eight (48) hours of
production, although it is recognized that some leases may have less capacity.

 

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6.2 Meters and Tests.

(a) Measurements in connection with this Agreement will be obtained using
measurement equipment, standards and procedures as the Parties may mutually
agree. Quantity measurement, quality sampling and testing, and deduction for
BS&W content shall be conducted in accordance with the most current API or ASTM
standards, as applicable. The delivering Party shall be responsible for all
pipeline carrier charges due to failure to meet the specifications required of
such Party under this Agreement.

(b) Either Party shall have the right to have a representative witness all meter
provings, gaugings, samplings, tests and measurements. Each Party will provide
not less than 48 hours notification (unless otherwise mutually agreed) to the
other Party prior to conducting such activities. In the absence of the other
Party’s representative, such meter provings, gaugings, samplings, tests and
measurements shall be deemed to be correct by the attendant representative.

ARTICLE VII

TERM AND TERMINATION

7.1 Term. This Agreement shall commence as of 7:00 a.m. Pacific Time January 1,
2012, and shall continue until 6:59 a.m. Pacific Time January 1, 2023, unless
terminated earlier in accordance with this Agreement. Termination of this
Agreement shall not relieve any Party from any liability arising hereunder prior
to such termination.

7.2 Suspension Rights.

(a) If an Event of Default occurs and is continuing, the non-defaulting Party
may, by giving five (5) calendar days’ written notice, suspend its obligation to
deliver Sales Volumes hereunder or its obligation to purchase Sales Volumes
hereunder, as applicable. While deliveries of Sales Volumes hereunder are
suspended pursuant to this Section 7.2, PXP shall have the right, but not the
obligation, to sell any undelivered volumes to other purchasers and shall, if
PXP is the non-defaulting Party, be entitled to damages from CoP equal to the
amount it would have received under the terms of this Agreement for such
undelivered volumes less the amount received from other purchasers of the
undelivered volumes, plus actual costs and expenses incurred by PXP in arranging
sales to other purchasers. While any purchases of Sales Volumes hereunder are
suspended pursuant to this Section 7.2, CoP may purchase Sales Volumes from
other sellers and shall, if CoP is the non-defaulting Party, be entitled to
damages from PXP equal to the amount paid to purchase the Sales Volumes from
other sellers less the amount it would have paid for the Sales Volumes under the
terms of this Agreement, plus actual costs and expenses incurred by CoP in
arranging purchases from other sellers.

(b) The right of the non-defaulting Party to suspend performance under this
Section 7.2 shall continue until the earlier of (i) the Event of Default is
cured or (ii) this Agreement is terminated pursuant to Section 7.3.

(c) An election by a Party to suspend performance under this Section 7.2 shall
not preclude that Party from later electing to terminate this Agreement under
Section 7.3.

 

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7.3 Termination Rights.

(a) If an Event of Default occurs and is continuing, the non-defaulting Party
may give the defaulting Party written notice of such Event of Default. If the
Event of Default is not cured within 10 calendar days after receipt of such
notice, the non-defaulting Party, in addition to all other rights and remedies
available to the non-defaulting Party and notwithstanding Section 7.1, shall be
entitled to terminate this Agreement.

(b) If this Agreement is terminated pursuant to this Section 7.3 the
non-defaulting Party may provide the defaulting Party with a statement setting
out in reasonable detail the computation of the (A) all amounts due and payable
under this Agreement, including interest on any later payments, and (B) the
amount of actual damages, losses or other directly related costs and expenses
(including, but not limited to, reasonable attorney’s fees and court costs)
incurred by the non-defaulting Party arising out of or related to the Event of
Default or the termination of this Agreement, excluding any punitive,
consequential or indirect damages. In calculating such amounts, the
non-defaulting Party may offset any sums due to the defaulting Party, whether
hereunder or by reason of any other agreements or arrangements, against any
amounts owed by the defaulting Party hereunder.

(c) No later than five Business Days after receiving the statement from the
non-defaulting Party pursuant to Section 7.3(b), the defaulting Party shall pay
the non-defaulting Party the sum of the amount set forth in such statement.

(d) Neither Party shall be liable under this Agreement to the other Party for
any punitive, consequential, special or indirect damages, in tort or contract or
otherwise, as a result of or related to, any breach of or default under this
Agreement.

(e) The rights and obligations created by this Section 7.3 shall survive the
termination of this Agreement.

ARTICLE VIII

REPRESENTATIONS, WARRANTIES AND OTHER COVENANTS

8.1 PXP Representations and Warranties. PXP represents and warrants to CoP that
as of the date of execution of this Agreement:

(a) PXP is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware;

(b) PXP has all requisite power and authority to enter into and perform this
Agreement;

(c) the execution, delivery and performance of this Agreement and the
transactions contemplated hereby have been duly authorized by PXP;

 

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(d) this Agreement has been duly executed and delivered by PXP and constitutes
the legal, valid and binding obligation of PXP, enforceable against PXP in
accordance with its terms, subject, however, to applicable bankruptcy,
insolvency, reorganization, moratorium, or similar laws affecting creditors’
rights generally and except as the enforceability thereof may be limited by
general principles of equity (regardless of whether considered in a proceeding
in equity or at law);

(e) the execution, delivery, and performance by PXP of this Agreement and the
transactions contemplated hereby will not

(A) violate or conflict with any provision of PXP’s organizational documents
(including articles of incorporation and bylaws),

(B) violate or constitute a default under any agreement or instrument to which
PXP is a party or by which PXP is bound, which violation will have a material
and adverse effect on PXP’s ability to perform its obligations hereunder,

(C) violate any statute or law or any judgment, decree, order, regulation or
rule of any court or governmental authority applicable to PXP, which violation
will have a material and adverse effect on PXP’s ability to perform its
obligations hereunder, or

(D) require any consent, approval or authorization of, or designation,
declaration or filing with, any governmental authority on the part of PXP
(except such governmental authorizations and filings as PXP’s performance of
this Agreement from and after the date hereof may then require in the ordinary
course of business), under any law or any agreements to which PXP is a party or
by which it is bound; and

(f) there are no suits, judicial or administrative actions, proceedings or
investigations (including, without limitation, bankruptcy, reorganization or
insolvency actions, proceedings or investigations) pending against PXP or its
affiliates or, to PXP’s knowledge, threatened, that

(A) challenge the validity of this Agreement or the transactions contemplated
hereby,

(B) seek to restrain or prevent any action taken or to be taken by PXP in
connection with this Agreement, or

(C) if adversely determined, would have a material and adverse effect upon PXP’s
ability to perform its obligations hereunder.

8.2 CoP Representations and Warranties. CoP represents and warrants to PXP that
as of the date of execution of this Agreement:

(a) CoP is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware;

 

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(b) CoP has all requisite power and authority to enter into and perform this
Agreement;

(c) the execution, delivery and performance of this Agreement and the
transactions contemplated hereby have been duly authorized by CoP;

(d) this Agreement has been duly executed and delivered by CoP and constitutes
the legal, valid and binding obligation of CoP, enforceable against CoP in
accordance with its terms, subject, however, to applicable bankruptcy,
insolvency, reorganization, moratorium, or similar laws affecting creditors’
rights generally and except as the enforceability thereof may be limited by
general principles of equity (regardless of whether considered in a proceeding
in equity or at law);

(e) the execution, delivery, and performance by CoP of this Agreement and the
transactions contemplated hereby will not

(A) violate or conflict with any provision of CoP’s organizational documents
(including articles of incorporation and bylaws),

(B) violate or constitute a default under any agreement or instrument to which
CoP is a party or by which CoP is bound, which violation will have a material
and adverse effect on CoP’s ability to perform its obligations hereunder,

(C) violate any statute or law or any judgment, decree, order, regulation or
rule of any court or governmental authority applicable to CoP, which violation
will have a material and adverse effect on CoP’s ability to perform its
obligations hereunder, or

(D) require any consent, approval or authorization of, or designation,
declaration or filing with, any governmental authority on the part of CoP
(except such governmental authorizations and filings as CoP’s performance of
this Agreement from and after the date hereof may then require in the ordinary
course of business), under any law or any agreements to which CoP is a party or
by which it is bound; and

(f) there are no suits, judicial or administrative actions, proceedings or
investigations (including, without limitation, bankruptcy, reorganization or
insolvency actions, proceedings or investigations) pending against CoP or its
affiliates or, to CoP’s knowledge, threatened that

(A) challenge the validity of this Agreement or the transactions contemplated
hereby,

 

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(B) seek to restrain or prevent any action taken or to be taken by CoP in
connection with this Agreement, or

(C) if adversely determined, would have a material and adverse effect upon CoP’s
ability to perform its obligations hereunder.

8.3 Covenants. Each Party shall through the term of this Agreement:

(a) preserve its corporate existence and good standing as necessary to perform
its obligations hereunder;

(b) comply in all material respects with all statutes and laws applicable to
performance of this Agreement and with all judgments, decrees, orders,
regulations and rules of any court or governmental authority applicable to
performance of this Agreement;

(c) give the other Party prompt written notice of the existence of any agreement
or instrument to which the Party is a party or by which the Party is bound that
may have a material and adverse effect in the Party’s ability to perform its
obligations hereunder; and

(d) give the other Party prompt written notice of any pending or threatened
suits, judicial or administrative actions, proceedings or investigations that
may have a material and adverse effect on the Party’s ability to perform its
obligations hereunder.

ARTICLE IX

FINANCIAL MATTERS

9.1 Credit Requirements.

(a) Credit Rating. Subject to Section 9.1(b), if CoP shall fail to maintain a
long term issuer rating of BB or higher with Standard & Poor’s Ratings Group,
then, within thirty (30) calendar days of receiving a written request from PXP
for additional financial assurances, CoP shall provide PXP with (i) a guaranty
of payment and performance from its ultimate direct or indirect parent
corporation in a form acceptable to PXP, or (ii) if such parent corporation is
unable or otherwise fails to issue such a guaranty or fails to maintain its
credit rating at the level specified above, a standby letter of credit in a
format and issued by a bank acceptable to PXP for an amount equal to the sum of
the amounts due hereunder for the two prior Delivery Months.

(b) Lack of Rating Publication. If Standard & Poor’s Rating Group shall cease to
publish a long term issuer rating for CoP, the Parties shall mutually agree to
the use of a substitute rating service and shall require the maintenance of a
rating by such substitute service that provides the closest approximation of the
credit quality characterized by rating set forth in Section 9.1(a).

(c) Letters of Credit. Any letter of credit provided pursuant to this
Section 9.1 shall, subject to this Section, be for a one-Year period and
automatically renewable for

 

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successive one-Year periods unless the issuing bank provides notice of
non-renewal at least sixty (60) calendar days prior to maturity, in which case a
substitute bank acceptable to PXP shall issue such letter of credit.
Notwithstanding the foregoing, if the then remaining obligations to deliver
Sales Volumes under this Agreement of PXP are for a period of less than one
Year, then such letter of credit may be for a period ending forty-five
(45) calendar days after the last such scheduled delivery of Sales Volumes.
Provided that CoP or its ultimate direct or indirect parent maintains its credit
rating at the level specified above, then a parent guaranty meeting the above
requirements may be substituted for any letter of credit delivered hereunder. In
the event that CoP is required to provide a parent guaranty or letter of credit
hereunder and then subsequently re-establishes a credit rating at or above the
level set forth above for a period of 12 consecutive months, the obligation to
provide a parent guaranty or a letter of credit pursuant to this Section 9.1
shall be suspended so long as CoP maintains its credit rating at the level
specified for CoP above.

9.2 Financial Responsibility. If during the term of this Agreement, the
financial responsibility of a Party becomes such that such Party’s ability to
perform its obligations hereunder is impaired or unsatisfactory to the other
Party, in its good faith, (the “Demanding Party”) then in any such case advance
cash payment, properly endorsed negotiable bills of lading, or satisfactory
security shall be given upon written demand, and performance hereunder may be
withheld by the Demanding Party until such payment, bills of lading, or security
is received. If such payment, bills of lading, or security is not received
within fifteen (15) calendar days from demand therefor, the Demanding Party may
terminate this Agreement. In the event either Party makes an assignment for the
benefit of creditors or any general arrangement with creditors, or if there are
instituted by or against either Party proceedings in bankruptcy or under any
insolvency law or law for reorganization, receivership or dissolution, the other
Party may withhold shipments or terminate this Agreement without notice. The
exercise by either Party of any right under this paragraph shall be without
prejudice to any claim for damages or any other right under this Agreement or
applicable law.

ARTICLE X

DISPUTES

10.1 Pricing Disputes. Any and all disputes related to pricing pursuant to
Section 3.2(b), or pricing or delivery location of newly acquired leases, fields
or interests in Sales Volumes pursuant to Section 2.1(d) or 2.1(e), or the
pipeline price pursuant to Section 11.22, of this Agreement shall be finally
settled by arbitration pursuant to this Section 10.1:

(a) The Parties hereby agree and consent to submit to the American Arbitration
Association any and all such disputes for settlement by final and binding
arbitration by one (1) arbitrator (the “Arbitrator”) pursuant to the Commercial
Arbitration Rules of the American Arbitration Association in effect as of the
date of this Agreement (the “Rules”). The resulting decision of the Arbitrator
shall be the sole and exclusive remedy between the Parties regarding any and all
such disputes.

(b) Arbitration proceedings pursuant to this Section shall be held in Los
Angeles, California, or such other location as the Parties may agree. To the
extent that it is

 

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necessary to apply substantive law, the substantive law of the State of
California shall be applied, without reference to conflicts of law rules that
would direct the matter to the law of another jurisdiction.

(c) The Parties shall initiate arbitration proceedings hereunder in accordance
with Section 6 of the Rules. The Parties shall use commercially reasonable
efforts to agree upon and appoint the Arbitrator, who shall have not less than
fifteen (15) Years of experience (commercial or legal) related to the marketing
of domestic crude oil (not less than five (5) Years of which shall relate to
such marketing in California). In the event that the Parties fail to appoint the
Arbitrator within fifteen (15) calendar days after the American Arbitration
Association receives the notice of arbitration, each Party shall submit to the
American Arbitration Association a list containing the names of three
(3) persons who meet the qualifications set out above that it nominates to serve
as the Arbitrator. The Parties shall instruct the American Arbitration
Association to appoint the Arbitrator (from the names submitted by each Party in
accordance herewith) within forty-five (45) calendar days after it receives the
notice of arbitration. Should a Party fail to submit a list of names, the
American Arbitration Association shall appoint the Arbitrator from the names
submitted. Should both Parties fail to submit a list of names, the American
Arbitration Association shall appoint the Arbitrator it deems appropriate within
forty-five (45) calendar days after it receives the notice of arbitration.

(d) Within sixty (60) calendar days after the American Arbitration Association
receives the notice of arbitration, each Party shall submit to the Arbitrator in
writing its proposed resolution to such dispute and any information it considers
relevant to the Arbitrator’s decision. The failure of a Party to make such a
submission or the absence or default of a Party to the arbitration shall not
prevent or hinder the arbitration procedure in any stage. The arbitration shall
continue in accordance with Section 30 of the Rules.

(e) The Parties shall instruct the Arbitrator to select, as its decision, the
resolution proposed by one of the Parties. If only one Party submits a proposed
resolution in accordance with this Agreement, the Arbitrator shall select that
resolution as its decision. The Parties shall instruct the Arbitrator to render
its decision in writing to the Parties within ninety (90) calendar days after
the American Arbitration Association receives the notice of arbitration. The
decision of the Arbitrator shall be final and binding on all Parties.
Notwithstanding any provision in this Agreement to the contrary, the Parties
shall instruct the Arbitrator that the standard by which it shall resolve such
disputes under this Section 10.1 shall be which Party’s resolution of such
pricing dispute best reflects the then current fair market pricing for the
relevant production from the relevant Subject Fields.

(f) The Parties agree to exclude any right of application or appeal to the
courts of any jurisdiction in connection with the arbitration proceedings, the
subject matter of the arbitration proceedings or the decision of the Arbitrator,
except for the purpose of enforcement of a decision of the Arbitrator to the
extent providing for a change to the method for calculating the Delivery Amount
Price hereunder, as provided in Section 10.1(g) below.

 

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(g) Any written decision of the Arbitrator providing for a change to the method
for calculating the Delivery Amount Price hereunder shall be deemed to
constitute an amendment to this Agreement without the necessity of formally
amending this Agreement. Any such decision of the Arbitrator effecting a pricing
change shall be valid and enforceable in any court of competent jurisdiction.

(h) Nothing in this Section 10.1 shall limit the Parties’ remedies or rights to
seek judicial resolution with respect to disputes under this Agreement to the
extent not involving pricing or otherwise directed by this Agreement to be
resolved by arbitration pursuant to this Agreement.

10.2 Other Disputes.

(a) Except for arbitration proceedings commenced in accordance with
Section 10.1, any legal action taken in connection with this Agreement will be
brought in a state court or U.S. Federal District Court having subject matter
jurisdiction and sitting in Harris County, Texas. PXP and CoP each irrevocably
submit to the jurisdiction of such courts.

(b) Each Party irrevocably waives, to the fullest extent permitted by law, any
claim or objection that it may have, now or hereafter, that venue or personal
jurisdiction is not proper with respect to any such legal action or legal
proceeding brought in a court set out above, including, without limitation, any
claim that such legal action or legal proceeding has been brought in an
inconvenient forum and any claim that a Party is not subject to personal
jurisdiction or service of process.

(c) EACH PARTY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY DISPUTE RELATING TO OR
ARISING OUT OF THIS AGREEMENT, THE SUBJECT MATTER HEREOF OR THE TRANSACTIONS
CONTEMPLATED HEREBY, AND AGREES TO TAKE ANY AND ALL ACTION NECESSARY OR
APPROPRIATE TO EFFECT SUCH WAIVER.

ARTICLE XI

MISCELLANEOUS

11.1 Notices. Notices, other than accounting documentation provided pursuant to
this Agreement, shall be in writing and may be given by delivering same by hand
at, or by sending the same by facsimile, express delivery service or first class
mail to, the relevant address set forth below or such other address as each
Party may notify the other Party in writing from time to time. Such notice or
communication shall be deemed to have been given when delivered, if by hand;
when actually received, if by first class mail or express delivery service; and
upon receipt by the sender of electronic confirmation of transmission, if by
facsimile.

To PXP:

Plains Exploration & Production Company

717 Texas, Suite 2100

Houston, Texas 77002

Attn:    Marketing Dept.

Fax:     713-579-6209

 

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To CoP:

ConocoPhillips Company

600 North Dairy Ashford Road

Houston, TX 77079

Attn:    Manager/Americas Crude

Fax:     281-293-6328

11.2 Confidentiality. Each Party agrees that it will maintain this Agreement,
all parts and contents hereof, and any information or data received hereunder,
in strict confidence, and that it will not cause or permit disclosure of same to
any third party without the express written consent of the other Party.
Notwithstanding the foregoing, disclosure by a Party is permitted in the event
and to the extent that

(a) such Party is required by a court or agency exercising jurisdiction over the
subject matter hereof, by order or by regulation, to make such a disclosure
(provided, however, that in the event either Party becomes aware of judicial or
administrative proceeding that has resulted or may result in such an order
requiring disclosure, it shall

(i) so notify the other Party immediately,

(ii) utilize all reasonably available means to limit the scope of the order or
regulation requiring disclosure, and

(iii) take all actions reasonably necessary to prevent disclosure to the public
as a result of disclosure to the court or administrative body),

(b) disclosure is required by law or regulation or order of governmental
authority or by the rules of any stock exchange applicable to such Party or its
affiliates, or as part of such Party’s good faith attempt to comply with
disclosure obligations under any of the same,

(c) disclosure is to such Party’s affiliates, attorneys, financial or lending
institutions, outside auditors and insurers, provided that the person or entity
to which such information is disclosed executes an agreement to hold it
confidential, and

(d) disclosure (other than with respect to Section 3.2(a)(viii) or 11.9) is to
entities involved in the negotiation or bidding for the acquisition of a Party,
its stock or assets, provided that the person or entity to which such
information is disclosed executes an agreement to hold it confidential.

 

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11.3 Assignment.

(a) General. Except with respect to assignments in conjunction with an
assignment of the Subject Fields as provided in Section 11.3(b), neither Party
shall assign this Agreement without the prior written consent of the other. Any
such purported assignment made without such consent shall be null and void. With
respect to any assignment permitted hereunder, the assigning Party shall remain
liable to the other Party for fulfillment of any existing obligation under this
Agreement. Subject to the limitations on transfer contained herein, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of the Parties.

(b) Producing Property Sales. Nothing in this Agreement shall limit PXP’s right
to sell, exchange or otherwise dispose of any interest in a Subject Field or any
interest in production therefrom. PXP will notify CoP promptly following any
sale of interests in any of the Subject Fields subject to this Agreement.
Promptly after notification of such a sale by PXP, CoP shall use its best
efforts to enter into an agreement with the assignee of the sold interests on
the same terms and conditions set forth herein, to the extent such terms and
conditions apply to such interests. Notwithstanding Section 11.3(a), with
respect to any such interests that are sold, this Agreement (other than with
respect to Section 3.2(a)(viii) and other than with respect to Section 11.9)
shall be binding on CoP and the successors in interest to PXP of such interests
without the prior written consent of CoP.

11.4 Force Majeure. If either Party is rendered unable, wholly or in part, by
Force Majeure to perform its obligations hereunder, other than to make payments
due hereunder, the affected Party shall give written notice to the other Party
of such Force Majeure within forty-eight (48) hours after such failure to
perform, and the obligations of the affected Party shall be suspended during the
continuance and to the extent of the inability so caused, but for no longer
period. In the event that any such period of suspension shall continue in excess
of ninety (90) calendar days, this Agreement may be terminated as to the Subject
Fields subject to such suspension at the option of either Party, without
liability of either Party. Any such failure to perform shall be remedied with
all reasonable dispatch, but PXP shall not be required to supply substitute
quantities of Sales Volumes from other sources of supply. Failure to perform
this Agreement due to events of Force Majeure shall not extend the term of this
Agreement.

11.5 Waiver. No waiver by any Party of any one or more defaults by another Party
in the performance of this Agreement shall operate or be construed as a waiver
of any future default or defaults by the same Party, whether of a like or of a
different character. Except as expressly provided in this Agreement, no Party
shall be deemed to have waived, released or modified any of its rights under
this Agreement unless such Party has expressly stated, in writing, that it does
waive, release or modify such right.

11.6 Entire Agreement. The Parties agree that effective January 1, 2012, this
Agreement contains the entire agreement of the Parties for the sale of the
Delivery Amount from the Subject Fields, and supersedes and replaces in its
entirety all prior agreements regarding crude oil sales, including the
following:

(a) that certain Crude Oil Purchase Agreement dated January 1, 2000, between
Nuevo Energy Company and Tosco Corp. d/b/a/ Tosco Refining, Co., as amended;

 

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(b) that certain Crude Oil Outright Purchase Agreement dated November 21, 2006,
as amended, between PXP and CoP;

(c) that certain Crude Oil Outright Purchase Agreement dated October 1, 2007, as
amended, between PXP and CoP.

No statement or agreement, oral or written, made before or at the signing
hereof, shall be offered or used to vary or modify the written terms of this
Agreement.

11.7 Control. Nothing in this Agreement shall be construed or deemed to require
PXP to take any action, or to prohibit PXP from taking any action, regarding
operations of or with respect to the Subject Fields. Specifically, but not by
way of limitation, CoP acknowledges and agrees that PXP shall have no obligation
to drill, produce, or abandon any well, or to achieve any specific production
volumes. CoP acknowledges and agrees that all decisions with respect to such
actions and operations are expressly and exclusively within PXP’s control.

11.8 Severability. If and for so long as any provision of this Agreement shall
be deemed or judged to be invalid for any reason whatsoever, such invalidity
shall not affect the validity or operation of any other provisions of this
Agreement except only so far as shall be necessary to give effect to the
construction of such invalidity, and any such invalid provision shall be deemed
severed from this Agreement without affecting the validity of the balance of
this Agreement.

11.9 Audit. Each Party and its duly authorized representatives shall have access
to the accounting records and other documents maintained by the other Party that
relate to Sales Volumes sold under this Agreement, and shall have the right to
audit such records at any reasonable time prior to the third anniversary of the
termination of this Agreement subject to the following conditions or
restrictions:

(a) the auditing Party shall furnish the other Party written notice at least
thirty (30) Business Days prior to the date of the audit;

(b) the notice shall specify what accounting period, records and other documents
the auditing Party desires to review and/or photocopy;

(c) the audit shall be conducted at the offices of the Party being audited
during the hours of 8:00 am and 5:00 pm on a Business Day;

(d) a Party may not initiate an audit hereunder more often than once every two
Years unless such additional audits are justified on the grounds of fraud or the
occurrence of a catastrophic event;

(e) the duration of an audit shall not exceed seven (7) Business Days unless
matters revealed during such audit reasonably justify an extension of such time
period;

 

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(f) the documents, reports and records prepared in the audited Party’s ordinary
course of business shall be furnished in sufficient form to substantiate the
volumes, deliveries and pricing of the transactions contemplated hereunder;

(g) to the extent, if any, that the Party being audited must use internal or
external accounting or electronic information systems person(s) to retrieve,
produce or explain the documents and records requested, the auditing Party shall
reimburse the other Party the full cost thereof;

(h) photocopying shall be done at the expense of the auditing Party (but
photocopying in violation of copyrights shall not be required);

(i) the auditing Party shall be responsible for its own costs and expenses
incurred in connection with the audit;

(j) the audit shall be limited to no more than the three (3) Years immediately
preceding the date of the request to audit; and

(k) the auditing Party shall designate a single contact person from among the
auditing personnel to be the person with whom the audited Party may limit its
contacts.

11.10 Safety. Each Party agrees that its agents and employees will comply with
all safety regulations of the other when such agents or employees are upon the
premises of the other in connection with the performance of this Agreement.

11.11 Business Practices.

(a) Each Party shall in the performance of this Agreement comply with all
applicable governmental laws and regulations.

(b) Each Party hereto agrees that all financial settlements, billings, and
reports rendered to the other Party as provided for in this Agreement and/or any
amendments to it will, to the best of its knowledge and belief, reflect properly
the facts about all activities and transactions related to this Agreement, which
data may be relied upon as being complete and accurate in any further recording
and reporting made by such other Party for whatever purpose.

(c) Each Party hereto agrees to notify the other Party promptly upon discovery
of any instance where the notifying Party fails to comply with Section 11.11(a)
above, or where the notifying Party has reason to believe data covered by
Section 11.11(b) above is no longer accurate and complete.

11.12 Governing Law. This Agreement and any disputes arising hereunder shall be
construed, enforced, and governed by the laws of the State of Texas, without
reference to conflicts of law rules which would direct the matter to the law of
another jurisdiction.

 

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11.13 Entirety of Agreement and Amendments. This Agreement contains the entire
Agreement of the Parties with respect to the subject matter hereof and there are
no other promises, representations or warranties with respect thereto. Except as
expressly provided otherwise in this Agreement, this Agreement may only be
amended by a written instrument executed by authorized officers of the Parties
specifically referencing this Agreement.

11.14 Headings. The Section headings used in this Agreement are for convenience
only and shall not be construed as having any substantive significance or as
indicating that all of the provisions of this Agreement relating to any topic
are to be found in any particular Section.

11.15 General Provisions. To the extent not in conflict with the terms of this
Agreement, Conoco’s General Provisions, Domestic Crude Oil Agreements, effective
January 1, 1993 are incorporated herein and made a part hereof for all purposes.

11.16 Further Assurances. Each Party shall execute, acknowledge and deliver such
other instruments or documents and shall take such other actions as may be
necessary to carry out their respective obligations under this Agreement or to
consummate or substantiate transactions contemplated by this Agreement.

11.17 Time and Performance of the Essence. Time and full performance hereunder
by the Parties are of the essence of this Agreement.

11.18 No Third Party Beneficiaries. Other than with respect to permitted
successors and assigns, nothing in this Agreement is intended to inure to the
benefit of any third party and this Agreement shall not create any third party
beneficiaries.

11.19 Hazards and Risks. Each Party acknowledges the hazards and risks in
handling and using crude oil. Each Party shall advise its affiliates and its and
their employees and third parties, who may purchase or come into contact with
crude oil delivered under this Agreement, about the reasonable hazards and risks
of crude oil, as well as precautionary procedures for handling such crude oil.

11.20 Inglewood. The primary term for the current Crude Oil contract covering
Sales Volumes from the Subject Field designated as Inglewood is to expire
December 1, 2011. It is expressly agreed between the Parties that the terms and
conditions of this Agreement shall be effective for Inglewood Crude Oil Sales,
and Inglewood only, as of 7:00 a.m. Pacific Time, December 1, 2011.

11.21 Arroyo Grande Pipeline. CoP hereby commits to use its commercially
reasonable efforts to facilitate the completion of the Arroyo Grande pipeline
project by the planned start-up date of PXP’s water disposal plant (currently
estimated to be June 1, 2014), but in no event later than August 31, 2014. If
said pipeline is not so completed by this time, CoP agrees to bear the actual
costs incurred to truck up to 4,000 barrels/day (but no more than is permitted
by applicable law) of PXP’s Arroyo Grande production until such time as the
pipeline becomes operational. Upon the successful start-up of the pipeline, the
Election Percentage as defined in Section 2.1 (c)(i) shall be reduced from no
greater than 10% to 5%.

 

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11.22 Public Announcements. Buyer and Seller shall consult with each other
before issuing any press release or otherwise making any public statement with
respect to this Agreement, the Transaction Documents or any of the transactions
contemplated hereby or thereby and shall not issue any such press release or
make any such public statement without the consent of the other Party, which
consent shall not be unreasonably withheld, except as may be required by Laws or
any listing agreement that such Party has entered into with a national
securities exchange.

11.23 Alternate Transportation from Point Pedernales. Buyer and Seller agree to
actively cooperate with the other in the study, development and implementation
of potential alternate transportation for Point Pedernales origin crude oil.
Among other things, each Party agrees to (a) consult with the other in
identifying reasonable transportation alternatives, (b) develop the best
alternative or alternatives, (c) coordinate timely filings, if any are required,
to secure appropriate permit modifications necessary to pursue the
transportation alternative, and (d) utilize its commercially reasonable efforts
to pursue the transportation alternative, provided that each Party will not be
required to incur any material expenses or capital costs in the performance of
its obligations under this Section 11.23 unless a cost reimbursement agreement
is entered into between the Parties.

[Signature page follows.]

 

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IN WITNESS WHEREOF, this Agreement has been executed by the Parties on August 1,
2011, and is dated as of the date and year first above written.

 

CONOCOPHILLIPS COMPANY     PLAINS EXPLORATION & PRODUCTION COMPANY By:  

    /s/ Glenn E. Simpson

    By:  

    /s/ Winston M. Talbert

  Glenn E. Simpson       Winston M. Talbert   Manager/Americas Crude      
Executive Vice President & Chief Financial Officer

[This is the signature page of the January 1, 2012 Crude Oil Purchase Agreement

between ConocoPhillips Company and Plains Exploration & Production Company.]

 

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