Exhibit 10.13

 

Transportation AGREEMENT

 

BETWEEN

 

Energy xxi Gulf Coast, inc.

 

AND

 

energy xxi usa, inc.

 

DATED EFFECTIVE AS OF

 

March 11, 2015

 

 

 

 

TRANSPORTATION AGREEMENT

 

TABLE OF CONTENTS

 

ARTICLE 1  DEFINITIONS AND INTERPRETATION 1     ARTICLE 2  NOMINATIONS AND
TRANSPORTATION 3     ARTICLE 3  RATES AND CHARGES 4     ARTICLE 4  QUALITY AND
PRESSURE SPECIFICATIONS 5     ARTICLE 5  OFFSHORE PLATFORM FACILITIES AND
OPERATING PROCEDURES 6     ARTICLE 6  GRAVITY BANK 8     ARTICLE 7  MEASUREMENT
AND TESTING 9     ARTICLE 8  TERM 11     ARTICLE 9  TITLE AND CUSTODY 11    
ARTICLE 10  BILLING AND PAYMENT 11     ARTICLE 11  REMEDIES 12     ARTICLE
12  FORCE MAJEURE 13     ARTICLE 13  INDEMNIFICATION 14     ARTICLE 14  NOTICES
14     ARTICLE 15  ASSIGNMENT 15     ARTICLE 16  MISCELLANEOUS 15

 

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TRANSPORTATION AGREEMENT

 

This Transportation Agreement (the “Agreement”), dated as of March 11, 2015 (the
“Effective Date”), is by and between Energy xxi Gulf Coast, inc., a Delaware
corporation (“Shipper”), and energy xxi usa, inc., a Delaware corporation
(“Transporter”). Shipper and Transporter may be referred to herein individually
as a “Party” or collectively as the “Parties”.

 

WITNESSETH:

 

WHEREAS, Shipper desires to contract with Transporter for transportation service
on Transporter’s Gathering System;

 

WHEREAS, Transporter is willing to transport Shipper’s Crude Petroleum on the
Gathering System for the compensation and subject to the terms and conditions
set forth below;

 

NOW, THEREFORE, in consideration of the mutual agreements, covenants and
conditions herein contained, Transporter and Shipper hereby agree as follows:

 

ARTICLE 1
DEFINITIONS AND INTERPRETATION

 

1.1           Definitions. In addition to terms defined elsewhere in this
Agreement and in Annex I hereto, the following definitions shall apply
hereunder:

 

“Agreement” shall have the definition set forth in the preamble of this
Agreement.

 

“A.P.I.” shall mean the American Petroleum Institute.

 

“Barrel” or “Bbl” shall mean forty-two (42) United States gallons at a
temperature of sixty degrees (60°) Fahrenheit.

 

“BS&W” shall mean the basic sediment, water or other impurities found in a
stream of Crude Petroleum.

 

“Claiming Party” shall have the meaning set forth in the definition of Force
Majeure below.

 

“Crude Petroleum” shall mean the direct liquid products of oil wells, indirect
petroleum products resulting either from distillate recovery equipment in gas
and distillate fields, or a mixture of the direct product and indirect petroleum
products.

 

“Delivery Point” shall mean the point(s) of interconnection between the
Gathering System and one or more oil pipelines downstream of the Gathering
System where Transporter delivers Crude Petroleum to Shipper. The initial
Delivery Point shall be located at Grand Isle.

 

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“Downstream Pipelines” shall mean any pipeline or other receiving facility
downstream of the Delivery Point.

 

“Effective Date” shall have the definition set forth in the preamble of this
Agreement.

 

“Force Majeure” shall mean an event which is not within the reasonable control
of the Party claiming suspension (the “Claiming Party”), and which by the
exercise of due diligence the Claiming Party is unable to overcome in a
commercially reasonable manner. Force Majeure includes, to the extent such event
satisfies the requirements of the preceding sentence: acts of God; wars
(declared or undeclared); insurrections; hostilities; strikes; lockouts; riots;
floods; fires; storms; storm warnings; named or numbered tropical disturbances
and evacuations associated with the threat of the same; industrial disturbances;
acts of the public enemy; sabotage; blockades; epidemics; landslides; lightning;
earthquakes; washouts; arrests and restraints of rulers and peoples; civil
disturbances; explosions; breakage or accidents to machinery or lines of pipe;
hydrate obstruction or blockages of any kind of lines of pipe; adverse operating
conditions on Shipper’s facilities, Transporter’s facilities, or the facilities
of Downstream Pipelines; repairs, improvements, replacements or alterations to
plants, lines of pipe or related facilities; inability of either Party to obtain
necessary machinery, drilling or workover rigs, materials, permits, easements or
rights-of-way on reasonable terms; freezing of delivery facility; and other
events beyond the reasonable control of Shipper that affect production levels;
action or restraint by court order or public or governmental authority (so long
as the Claiming Party has not applied for or assisted in the application for,
and has opposed where and to the extent reasonable, such government action);
provided, however, that none of the loss of Shipper’s or its Affiliates’
markets, Shipper’s or its Affiliates’ inability to obtain adequate capacity
(other than for reasons of force majeure affecting a Downstream Pipeline), nor
Shipper’s or its Affiliates’ inability economically to use or resell Crude
Petroleum transported hereunder shall constitute an event of Force Majeure. A
force majeure event that occurs respecting one or more Downstream Pipelines for
which there are no reasonable alternatives for a Claiming Party to utilize in
order to meet its duties and obligations under this Agreement, regardless of
whether such Downstream Pipeline declared such force majeure event, shall
constitute Force Majeure for purposes of this Agreement, subject to the
requirement of the first sentence of this definition. The failure of a Claiming
Party to settle or prevent a strike or other labor dispute with employees shall
not be considered to be a matter within such Claiming Party’s control.

 

“Gathering System” shall mean Transporter’s Grand Isle Gathering System.

 

“Month” shall mean a period of time beginning at 7:00 a.m. Central Clock Time on
the first day of a calendar month and ending at 7:00 a.m. Central Clock Time on
the first day of the next succeeding calendar month.

 

“Psig” shall mean pounds per square inch gauge.

 

“Receipt Point” shall mean the point(s) of interconnection between the Gathering
System and one or more oil pipelines or other interconnecting facilities located
upstream of the Gathering System where Shipper delivers Crude Petroleum to
Transporter. The initial Receipt Points are identified on Exhibit A.

 

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“Shipper” shall have the definition set forth in the preamble of this Agreement.

 

“Transporter” shall have the definition set forth in the preamble of this
Agreement.

 

1.2           Other Terms. Other capitalized terms used in this Agreement and
not defined in Section 1.1 above shall have the meanings ascribed to them
throughout this Agreement.

 

ARTICLE 2
NOMINATIONS, SCHEDULING AND TRANSPORTATION

 

2.1          Nomination.

 

(a)           Applications for the transportation of Crude Petroleum shall be
submitted in writing on Transporter's prescribed nomination of shipment form.

 

(b)           Shipper desiring to nominate Crude Petroleum for transportation
shall make such nomination to Carrier in writing on or before the twenty-fifth
day of the month preceding the month during which the transportation under the
nomination is to begin; except that, if space is available for current movement,
a Shipper may nominate Crude Petroleum for transportation after the twenty-fifth
day of the month preceding the month during which the transportation under the
nomination is to begin.

 

2.2          Capacity Allocation.

 

(a)           When pursuant to nominations hereunder, there shall be offered to
Transporter more Crude Petroleum than can be immediately gathered and/or
transported, the gathering and/or transportation shall be apportioned among all
Shippers by Transporter on a just and reasonable basis.

 

2.3          Transportation.

 

(a)           Subject to the provisions of this Agreement and all applicable
Laws, Transporter shall accept and transport Shipper’s Crude Petroleum and
redeliver the quantity of Crude Petroleum received by Transporter, less
applicable Losses as set forth in Section 7.3, at the Delivery Point.
Transporter shall be under no obligation to deliver the identical Crude
Petroleum received, and reserves the right to make delivery out of its common
stock.

 

2.4         Transporter’s Right to Shutdown Operations.

 

(a)          Transporter shall have absolute discretion and authority to
partially or totally shutdown any and all operations and activities (and
temporarily or permanently discontinue the services) contemplated hereunder at
any time, if in Transporter’s sole discretion, such shutdown is warranted to (i)
ensure the safety of persons, property, or the environment; (ii) ensure the
operational integrity of the Gathering System; or (iii) modify, inspect,
maintain or repair the Gathering System. Transporter shall notify Shipper in
writing in the event of any of the occurrences listed above. In such cases,
Transporter shall not have any liability to Shipper for such shutdowns.

 

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(b)           In the event interruption of service is required, Transporter’s
dispatcher will advise Shipper of an interruption as soon as practicable.

 

(c)           Nothing contained herein shall preclude Transporter from taking
reasonable action(s) necessary to adjust receipts or deliveries hereunder in
order to maintain the operational integrity of the Gathering System.

 

2.5          Line Fill and Tank Bottom Inventory.

 

(a)           Either prior to or after the acceptance of Crude Petroleum for
transportation, Transporter will, upon reasonable notice, require Shipper to
provide a pro rata part of the volume of Crude Petroleum necessary for pipeline
fill, unavailable stocks below tank connections, and reasonable additional
minimum quantities required for efficient operation or to safeguard
Transporter’s tankage during passage of a tropical storm or hurricane. Crude
Petroleum provided by Shipper for this purpose may be withdrawn after reasonable
written notice of Shipper’s intention to discontinue shipment in the Gathering
System. Transporter may require advance payment of final transportation charges
and settlement of any unpaid accounts receivable before final delivery will be
made.

 

(b)           In the event Shipper’s inventory balance drops below its pro rata
part of the volume of Crude Petroleum necessary for pipeline fill, unavailable
stocks below tank connections, and reasonable additional minimum quantities
required for the efficient operation of the system, then Transporter will
require Shipper to provide the necessary volume to meet its pro rata part of
such volume of Crude Petroleum.

 

(c)           In the event that Shipper maintains an inventory balance after
Shipper ceases movements on the Gathering System or Shipper gives written notice
of its intent to cease movements over the system and Shipper is unable to
schedule appropriate shipments to clear the inactive inventory balance, Shipper
will be required to settle the inactive inventory balance through Transporter.
In the event no such Shipper notice is given, then Transporter may require
either an adjustment in Shipper’s inventory balance or settlement of Shipper’s
inventory balance at any time after Shipper has ceased making movements under
this Agreement for a period of six months. Such settlement will be based upon
the fair market value of the Crude Petroleum, as published by Platts, at the
time Shipper provides written notice of termination of this Agreement or if no
such written notice is given, then at such time as Transporter calls for the
settlement of the Shipper’s inventory balance.

 

ARTICLE 3
RATES AND CHARGES

 

3.1           Transportation Charges. Crude Petroleum accepted for
transportation by Transporter shall be subject to the transportation rates set
forth on Exhibit A plus any other applicable charges specified in this Article
3.

 

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ARTICLE 4
QUALITY AND PRESSURE SPECIFICATIONS

 

4.1           Quality Specifications. Transporter reserves the right to reject
any and all shipments of: (i) Crude Petroleum delivered by Shipper to
Transporter whose gravity, viscosity, and/or other characteristics are such that
it is not readily susceptible to transportation through the Transporter’s
existing facilities and it will damage the quality of other shipments or cause
disadvantage to other shippers and/or the Transporter; (ii) Crude Petroleum
containing water, sediment and other impurities totaling in excess of one per
cent as determined by centrifugal test, or by such other tests as may be agreed
upon by the Shipper and Transporter; or (iii) Crude Petroleum where Shipper has
failed to comply with all applicable laws, rules, and regulations made by any
governmental authorities regarding shipment of Crude Petroleum.

 

4.2           Contaminants. Transporter has the right, at its discretion, to
reject crude oil containing contaminants. If Transporter determines that a
Shipper has delivered to Transporter’s facilities Crude Petroleum that has been
contaminated by the existence of and or excess amounts of impure substances,
including but not limited to chlorinated and/or oxygenated hydrocarbons,
arsenic, lead and/or other metals which results in harm to other shippers,
Downstream Pipelines, users of the contaminated Crude Petroleum or Transporter,
such Shipper will be excluded from further entry into applicable segments of the
pipeline system until such time as the quality of the Crude Petroleum is to the
satisfaction of the Transporter. Transporter is not responsible for monitoring
receipts or deliveries for contaminants. Further, Transporter reserves the right
to dispose of any contaminated Crude Petroleum blocking its pipeline system.
Disposal thereof may be made in any reasonable manner including but not limited
to commercial sales, and any liability associated with the contamination or
disposal of any Crude Petroleum shall be borne by the Shipper introducing the
contaminated Crude Petroleum into Transporter’s system. Shipper liability
includes, but is not limited to, claims from other shippers, carriers, or users
of the contaminated Crude Petroleum and the costs of any regulatory or judicial
proceeding.

 

4.3           Periodic Samples. Transporter reserves the right to periodically
sample and test the quality of the Crude Petroleum delivered by Shipper at any
Receipt Point. Transporter shall be responsible for all costs attributable to
such periodic sampling and testing. If at any time Shipper’s Crude Petroleum
triggers any of the rejection rights set forth in Section 4.1, Shipper shall pay
for any tests performed thereafter to establish that such Crude Petroleum no
longer triggers such provisions.

 

4.4           Pressure. The present maximum operating pressure at all reception
points is 1440 psig. Shipper’s injection pressure shall be maintained within
this stated maximum limit and shall conform, as near as possible, to the
hydraulic gradient. Transporter reserves the right to reduce the maximum
operating pressure by written notice to Shipper. Shipper shall furnish, or cause
the producer from which Crude Petroleum is purchased to furnish, install,
calibrate, and maintain continuous pressure recording devices at or near
injection points to monitor pipeline operating pressures. Copies of the
recording charts taken from these recording devices shall be furnished to
Transporter on a weekly basis by Shipper. Shipper shall also furnish Transporter
copies of annual calibration certificates for recording devices. Transporter
reserves the right to witness calibration of these devices, and Shipper shall
notify Transporter at least 48 hours prior to the initiation of such calibration
procedures. Circumstances may arise which in Transporter’s judgment require the
Gathering System, or any part thereof, be shut down. Following such shutdown
periods, Shippers shall obtain authorization from Transporter prior to the
resumption of injections.

 

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4.5           Excess Water, Sediment and Other Impurities. If during any monthly
accounting period, the weighted average of the BS&W on all meter tickets
covering Crude Petroleum delivered to Transporter by Shipper reflects a water,
sediment and other impurities content which exceeds 1%, Shipper shall pay to
Transporter a handling charge as specified in the table in Exhibit A on such
excess water, sediment, and other impurities to cover the treating, separation
and other aspects of handling such excess water, sediment and other impurities
delivered to Transporter. This explicitly excludes disposal. Transporter shall
accept excess water for handling only when Shipper has made the necessary
arrangements for disposal of such excess water. Shipper may dispose of its
excess water by method acceptable to Transporter such as barging or trucking
subject to a mutually agreed upon schedule for excess water removal by Shipper
from Transporter’s Grand Isle tankage. As an alternative, Shipper may request
Transporter to dispose of Shipper’s excess water by use of Transporter’s onshore
disposal wells. The fees for disposal are set forth in Exhibit A. In any event,
Shipper must contact Transporter in advance at 713-351-3000 to schedule means by
which BS&W will be disposed. Where no meter tickets are available or meter
tickets are in Transporter’s opinion unreliable, water, sediment and other
impurities in the system in excess of that reported on acceptable meter tickets
will be allocated in a fair and equitable manner by Transporter. Notwithstanding
the fact that Transporter levies a handling charge covering excess water,
sediment and other impurities content in a Crude Petroleum stream, Transporter
reserves the right to reject any nomination of products other than Crude
Petroleum which satisfies all quality standards, requirements and conditions set
forth herein.

 

ARTICLE 5
OFFSHORE PLATFORM FACILITIES AND OPERATING PROCEDURES

 

5.1          Transporter or its authorized representative shall have access to
the platform from which shipments are received for the purpose of examining and
checking meters and other installations utilized in connection with the handling
of Crude Petroleum injected into the pipeline.

 

5.2           Shipper, upon request by Transporter, shall install, maintain and
operate, or make arrangements with platform owners to install, maintain, and
operate equipment to inject corrosion inhibitors, biocides, scale inhibitors,
paraffin chemicals, or other chemicals as specified by Transporter.

 

5.3           Shipper shall provide or arrange with platform operator to
furnish, operate, and maintain such pumping equipment as is necessary to inject
the Crude Petroleum nominated by Shipper for shipment or will cause same to be
done. Pumping equipment shall be controlled and operated so that the hourly rate
at which Crude Petroleum is injected during each month shall not exceed 120% of
the average hourly volume nominated and accepted for shipment during the current
calendar month. If piston pumps are used, surge absorbers shall be installed,
upon reasonable request of Transporter, to minimize pulsation. Transporter
reserves the right, upon written notification to all Shippers to further limit
the variation of Shipper’s injection rates, if in Transporter’s judgment
proration is imminent. Reasonable exceptions to variations of injection rates
for Shippers with newly discovered, expended production, and unusual production
difficulties will be allowed by Transporter.

 

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5.4           Physical and legal transfer of custody of Crude Petroleum to
Transporter shall be at points where producer’s or other delivering parties’
lines are connected to Transporter’s existing facilities, however, measurement
of quantities received for the account of Shipper at such points shall be
determined by measurement facilities installed on the production platforms where
the Crude Petroleum is produced or to which it is moved for delivery into
Transporter’s existing facility.

 

5.5           The Transporter shall have the right to require uniform
measurement and sampling equipment/procedures at all installations so that
custody transfer measurements are made on a uniform basis. Transporter reserves
the right to require Shipper to install or cause platform owners to install in
accordance with applicable API and ASTM (American Society for Testing Materials)
standards metering and meter proving equipment capable of continuous custody
measurement, and devices for continuous proportional to-flow sampling of the
Crude Petroleum.

 

5.6           If Crude Petroleum to be delivered to Transporter is produced at
some distance from the Transporter’s facilities and Transporter does not elect
to provide a connection directly to the production platform where it is
produced, Shipper may furnish, or cause to be furnished, free of cost to
Transporter, the connecting pipeline required to deliver such Shipper’s Crude
Petroleum to the location designated by Transporter. If such location is on
another producer’s platform, all arrangement for installing the connecting
pipeline or other required equipment or facilities on such platform shall be the
sole responsibility of the Shipper.

 

5.7           At Transporter’s request, Shipper will allow, or cause the
platform owner(s) to allow, Transporter to place, operate, repair and maintain
riser piping, scraper traps, valves, surveillance equipment, and any other
equipment deemed by Transporter to be needed for the safe and efficient
operation of the Gathering System. In the event Transporter should decide to
transmit meter readings or other data from the platform from which Shipper’s
Crude Petroleum is run, Shipper will allow, or cause the platform owner(s) to
allow, reasonable access to and use of communication facilities which may be
available at the platform.

 

5.8           Where meter readings are available Transporter will prepare, as
near as practicable to 7:00 a.m. on the first day of each month, a monthly
pipeline run ticket for Shipper showing opening and closing meter readings and
water, sediment, other impurities percentage on the basis of which Crude
Petroleum and water, sediment, and other impurities volumes will be determined.
If for any reason Transporter’s representative fails to reach any receipt point
on the first day of the month, Shipper’s own representative, with prior
authorization from Transporter, will obtain and make a record for Transporter’s
representative of the closing meter reading and will withdraw the sample
material from the sampling equipment. The sample material thus withdrawn will be
sealed in a special container and retained by Shipper’s representative for
Transporter’s representative who will, during his next trip to that receipt
point, determine the water, sediment, and other impurities percentage of the
sample material in the special container and prepare the monthly pipeline run
ticket. Where no meter readings are available, Crude Petroleum including water,
sediment and other impurities will be determined by Transporter from the best
available data.

 

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5.9           It is recognized that from time to time producers inject acid into
well formations containing Crude Petroleum in an attempt to stimulate production
and fluids subsequently produced from such wells may contain unspent acid which
must be neutralized to a pH of 4.5 or greater before the fluids (with which acid
is produced) are delivered to Transporter. If such total fluids (Crude Petroleum
plus unspent acid) is not so neutralized, the Gathering System may have to be
shut down which in turn will require all connected producers to shut in their
wells. To assist Transporter to anticipate the need and to prepare for possible
corrective actions which may be required to void or minimize operating
difficulties caused by any unneutralized acid, Shippers shall furnish, or cause
the producer from which Crude Petroleum is purchased to furnish to Transporter,
the following information at least 24 hours in advance of start of production
from any well which has been acidized: (i) estimated time of first production
from acidized well; (ii) estimated time that first production from acidized
well, which has been neutralized to a pH equal to or greater than 4.5, will be
injected into the Gathering System; and (iii) estimated time that produced
fluids from previously acidized wells, which has been neutralized to a pH equal
to or greater than 4.5, will be free of neutralized acids. Shipper shall assume
full responsibility for and reimburse Transporter for all extra costs and
expenses incurred by Transporter as the result of any unspent and/or
unneutralized acids being present in the Crude Petroleum delivered to
Transporter by Shipper. Shipper will be billed for all such extra costs and
expenses for shutting down, purging of such unspent acids, and subsequent
resuming operation of the Transporter’s Gathering System. Transporter shall not
be liable to any Shipper for any damage sustained by Shipper(s) as the result of
unspent and/or unneutralized acids being received from other Shipper(s).

 

5.10         In the event that Shipper does not operate the wells from which the
Crude Petroleum nominated for shipment is produced or does not operate the
treating, measurement, or pumping equipment through which such Crude Petroleum
is handled prior to its delivery to Transporter, then Shipper shall designate
the party or parties responsible for the operation of such facilities and shall
authorize and direct such party or parties to (1) comply with all provisions of
this Agreement related to their operations and (2) furnish to Transporter such
reasonably requested operational, technical, administrative, and analytical data
as Transporter deems necessary to account for volumes being delivered to
Transporter and assure safe, lawful, and efficient operations.

 

ARTICLE 6
GRAVITY BANK

 

6.1           To assure that no shipper will be materially damaged or allowed to
benefit by changes in gravity due to the intermixing of petroleum in the
Gathering System, Shipper will be required, as a condition of tendering, to
participate in a Gravity Bank. The table of gravity differential values per
barrel as attached hereto as Exhibit B is incorporated herein and made a part of
this Agreement.

 

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6.2          Transporter shall administer the Gravity Bank providing adjustments
for the value of crudes with different qualities in the manner specified below
for both receipt and delivery volumes. Applicable barrels and gravities shall be
the net barrels at 60 degrees Fahrenheit (with no deduction for Loss allowance)
and the gravities recorded by the Operator at points where it customarily
records gravities and quantities. The weighted average gravity differential
value per barrel (for two or more gravities of petroleum), as hereinafter
referred to, shall be obtained in the following manner: multiply the gravity
differential values per barrel (from the attached table as same is from time to
time revised) by the number of barrels to which such gravity differential values
are applicable and then divide the total of the resultant gravity differential
values in dollars and cents by the total of the applicable barrels.

 

6.3          Adjustments between shippers shall be computed as follows:
(i) compute the weighted average gravity differential value per barrel of the
barrels received from by each shipper and (ii) compute the weighted average
gravity differential value per barrel of the composite common stream for
receipts.

 

6.4          Calculation:

 

(a)           If the weighted average gravity differential value per barrel of a
shipper as so determined under Section 6.3(i) above shall be greater than the
weighted average gravity differential value per barrel of the aforementioned
common stream petroleum as determined under Section 6.3(ii), the difference in
cents per barrel shall be calculated and shipper shall be credited (receives) an
amount calculated by multiplying said difference in gravity differential value
per barrel by the applicable barrels.

 

(b)           If the weighted average gravity differential value per barrel of a
shipper is less than the weighted average gravity differential value per barrel
of the aforementioned common stream petroleum, the difference shall be
calculated as above outlined and a shipper debited for such difference.

 

(c)            A sample calculation is attached as Exhibit C.

 

6.5          These calculations shall be made for each calendar month and the
algebraic sum of the adjustments for the system shall be zero +/- One Dollar. If
a shipper shall have a net debit balance in combining the two adjustments made
above, the balance shall be remitted to the clearinghouse within fifteen (15)
days from receipt of statement of such debit. If Shipper shall have a credit,
the clearinghouse shall remit the amount thereof after receipt by the
clearinghouse of the sums from those shippers having debits as calculated above.

 

ARTICLE 7
MEASUREMENT AND TESTING

 

7.1          Crude Petroleum tendered to Transporter for transportation shall be
measured and tested by a representative of Transporter prior to its receipt from
Shipper. Shipper shall have the privilege of being present or represented at the
measurement and testing. Quantities shall be measured by meters and calculated
in accordance with applicable A.P.I. Manual of Petroleum Measurement Standards.
All shipments of required specifications will be received and delivered as net
standard volume, as the total volume excluding water, sediment and other
impurities, corrected by the appropriate volume correction factor for the
observed temperature and A.P.I. gravity, relative density, or density to a
standard temperature of 60 degrees Fahrenheit and also corrected by the
applicable pressure correction factor and meter factor. Where measurement and
testing of shipments to determine water, sediment, and other impurities content
is not performed, the Transporter shall determine the water, sediment, and other
impurities content of shipments based on the best available data. Due to the
complexity of the allocations of the non-metered receipt locations, any prior
period volume adjustment of 500 barrels or less will be corrected by including
the corrected prior Months’ (positive or negative) volume in the current month
allocation process. Any shipper request for volume or quality adjustments prior
to the most previous twenty-four (24) Month time frame will not be considered.

 

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7.2           Evidence of Receipts and Deliveries. Transporter shall account to
Shipper for Crude Petroleum received and delivered. Crude Petroleum received
from Shipper and Crude Petroleum delivered to Shipper shall, in each instance,
be evidenced by tickets, showing opening and closing tank gauges or meter
readings, as applicable, temperature, basic sediment and water, and any other
data essential to the determination of quantity. Such tickets shall be jointly
signed by representatives of Transporter and Shipper, and shall constitute full
receipt for (a) the Crude Petroleum received and (b) the Crude Petroleum
delivered. Where meter tickets are not available or in Transporter’s opinion are
unreliable, Transporter shall use the best available data to determine the
quantity of Crude Petroleum received and delivered. For receipt locations where
custody transfer measurement is by Lease Automatic Custody Transfer (“LACT”)
unit or by allocation process, a deduction of twenty-five hundredths of one
percent (0.25%) will be made to cover evaporation, interface losses and normal
losses during transportation.

 

7.3         Losses.

 

(a)           All shipments of Crude Petroleum of 50 degrees A.P.I. gravity or
above shall be subject to a deduction to cover the shrinkage resulting from the
mixture thereof, in the facilities of Transporter, with Crude Petroleum of
A.P.I. gravity of 49.9 degrees or less according to the following table:

 

A.P.I. Gravity
(Degrees)   Deduction  50 through 59.9   1% 60 through 74.9   2% 75 through
84.9   3% 85 through 94.9   4% 95 through 104.9   5% 105 through  120.9   6%

 

(b)          The quantity of Crude Petroleum deliverable shall be the net
standard volume less shrinkage, evaporation, or any other losses in transit or
due to leaks or pipeline breaks. All such shrinkage, evaporation, and gains or
losses shall be assigned by Transporter to Shipper on a just and reasonable
basis.

 

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ARTICLE 8
TERM

 

8.1           Term. Subject to the other provisions of this Agreement, the term
of this Agreement shall commence on the Effective Date and shall remain in
effect until terminated by either Party upon thirty (30) days’ prior written
notice.

 

8.2           Remedies Cumulative. Each Party shall have any and all remedies
available to it under this Agreement, at law, or in equity for any breach by the
other Party of the other Party’s obligations under this Agreement. All such
remedies are cumulative, not exclusive, and such Party may exercise any or all
of such remedies in addition to or as an alternative to termination of the Term.
No election of remedies shall be required or implied as the result of a Party’s
decision to avail itself of a remedy hereunder.

 

ARTICLE 9
TITLE and Custody

 

9.1           Title. A nomination of Crude Petroleum shall be deemed a warranty
of title to such Crude Petroleum by Shipper, or a warranty of the good right to
deliver such Crude Petroleum for transportation hereunder. Transporter may, in
the absence of adequate security, decline to receive any Crude Petroleum which
is in litigation, or as to which a dispute over title may exist, or which is
encumbered by any lien. By nominating Crude Petroleum, Shipper also agrees to be
responsible for any and all losses resulting from disputes, encumbrances, or
failure of title thereto. Neither acceptance for transportation, nor redelivery
by Transporter at the Delivery Point shall be deemed a representation by
Transporter as to title.

 

9.2           Custody. As among the Parties, Shipper shall be in custody,
control and possession of the Crude Petroleum affected by this Agreement at all
times prior to delivery to Transporter at the Receipt Point and after redelivery
by Transporter at the Delivery Point and Transporter shall have custody and
control of the Crude Petroleum affected by this Agreement at all times after
delivery by Shipper at the Receipt Point and prior to redelivery by Transporter
at the Delivery Point.

 

ARTICLE 10
BILLING AND PAYMENT

 

10.1         Payment. All payments are due within 10 days of receipt of the
invoice by ACH or wire transfer, unless the Transporter determines in a manner
not unreasonably discriminatory that the financial condition of Shipper or
Shipper’s guarantor (if any) is or has become impaired or unsatisfactory or
Transporter determines in a manner not unreasonably discriminatory it necessary
to do so, in which case the payment due date shall be that specified in a
written notice to the Shipper. Notwithstanding the foregoing, Shipper may
withhold payment of amounts it disputes in good faith, provided that if any such
amount is later determined to have been due Transporter Section 10.2 below shall
apply to such amount.

 

11

 

 

10.2        Past-Due Interest. If any charge remains unpaid after the due date
specified in Transporter’s invoice, then such amount due may bear interest from
the day after the due date until paid, calculated at an annual rate equivalent
to the lesser of (1) 125% of the prime rate of interest, as of the date of
Transporter’s invoice, charged by the Citibank N.A. of New York, New York, for
ninety (90) day loans made to substantial and responsible commercial borrowers
or (2) the maximum rate allowed by law. In addition Shipper shall pay all
documented costs incurred by Transporter to collect any unpaid amounts.

 

10.3        Setoff. In the event Shipper fails to pay any such undisputed
charges when due, Transporter shall have the right to setoff such amounts owed
and future amounts owed against those amounts Transporter owes Shipper.

 

10.4        In the event Transporter determines in a manner not unreasonably
discriminatory that the financial condition of Shipper or Shipper’s guarantor
(if any) is or has become impaired or unsatisfactory or Transporter determines
in a manner not unreasonably discriminatory it is necessary to obtain security
from Shipper, Transporter, upon notice to Shipper, may require any of the
following prior to Transporter’s delivery of Shipper’s Crude Petroleum in
Transporter’s possession or prior to Transporter’s acceptance of Shipper’s Crude
Petroleum: (1) prepayment of all charges, (2) a letter of credit at Shipper’s
expense in favor of Transporter in an amount sufficient to ensure payment of all
such charges and, in a form, and from an institution acceptable to Transporter,
or (3) a guaranty in an amount sufficient to ensure payment of all such charges
and in a form and from a third party acceptable to Transporter. In the event,
Shipper fails to comply with any such requirement on or before the date supplied
in Transporter’s notice to Shipper, Transporter shall not be obligated to
provide Shipper access to Transporter’s facilities or provide services pursuant
to this Agreement until such requirement is fully met.

 

ARTICLE 11
REMEDIES

 

11.1        Lien/Auction.

 

(a)           Transporter shall have a lien on all Crude Petroleum delivered to
Transporter to secure the payment of any and all transportation, or any other
charges that are owed Transporter. Such lien shall survive delivery of Crude
Petroleum to Shipper. Such lien shall extend to all Crude Petroleum in
Transporter’s possession beginning with Shipper’s first receipt of
transportation or other services from Transporter. The lien provided herein
shall be in addition to any lien or security interest provided by statute or
applicable law. Transporter may withhold delivery to Shipper of any of Shipper’s
Crude Petroleum in its possession and exercise any other rights and remedies
granted under this Agreement or existing under applicable law until all such
charges have been paid as provided above.

 

(b)           If Shipper fails to pay the undisputed portion of an invoice by
the due date, in addition to any other remedies under this Agreement or under
applicable law, Transporter shall have the right, either directly or through an
agent, to sell at a private sale any and all Crude Petroleum of such Shipper in
its custody at fair market value at the time of sale. The proceeds of any sale
shall be applied to the following order: (i) to the reasonable expenses of
holding, preparing for sale, selling, and to the extent allowed by law,
reasonable attorney’s fees and legal expenses incurred by Transporter; and
(ii) to the satisfaction of the Shipper’s indebtedness including interest herein
provided from the date of payment is due. The balance of the proceeds of the
sale remaining, if any, shall be paid to Shipper or, if there is a dispute or
claim as to entitlement, held for whoever may be lawfully entitled thereto.

 

12

 

 

11.2         Suspension of Performance. In the event Shipper fails to pay
charges when due, Transporter shall not be obligated to provide Shipper access
to Transporter’s facilities or provide services pursuant to this Agreement until
such time as payment is received by Transporter.

 

11.3         Legality of Shipments. Transporter reserves the right to reject any
and all Crude Petroleum nominated for shipment when Shipper fails or is
unwilling or unable to comply with all applicable Laws, or fails to reasonably
demonstrate to Transporter that the shipment would be in conformance with the
provisions of this Agreement.

 

11.4         Claims. As a condition precedent to recovery for losses or delay to
shipments, claims must be filed in writing with Transporter within one year and
one day after delivery of the Crude Petroleum, or, in case of failure to make
delivery, then within one year and one day after a reasonable time for delivery
has elapsed; and suits arising out of such claims shall be instituted against
the Transporter only within two years and one day from the date of delivery, or
within two years and one day after a reasonable time for delivery has elapsed.
Where claims are not filed or suits are not instituted thereon in accordance
with the foregoing provisions, Transporter shall not be liable and such claims
will not be paid.

 

ARTICLE 12
FORCE MAJEURE

 

12.1         Force Majeure. If either Transporter or Shipper is rendered unable
by an event of Force Majeure to carry out, in whole or part, its obligations
hereunder and such Party gives notice and full details of the event to the other
Party as soon as practicable after the occurrence of the event, then, pending
such Force Majeure, but only during that period, the obligations of the Party
affected by the event (other than the obligation to make payments then due or
becoming due with respect to performance prior to the event) shall be canceled
or suspended, as applicable, to the extent required; provided, however, that
notwithstanding anything in the foregoing to the contrary, Shipper’s obligation
to pay the transportation charge set forth in Section 3.1 shall not be reduced,
suspended or otherwise excused in any manner as the result of Force Majeure,
regardless of which Party is affected. The Party affected by the Force Majeure
shall use commercially reasonable efforts to remedy the Force Majeure condition
with all reasonable dispatch, shall give written notice to the other Party of
the termination of the Force Majeure, and shall resume performance of any
suspended obligation promptly after termination of such Force Majeure; provided,
that notwithstanding anything in the foregoing to the contrary, a Party may
elect, in its sole discretion, whether or not to repair or replace its
facilities following catastrophic destruction of all or substantially all of
such facilities.

 

13

 

 

ARTICLE 13
INDEMNIFICATION

 

13.1         Shipper shall release, indemnify, defend, and hold harmless
Transporter and its affiliates, directors, officers, employees, agents,
consultants, representatives, and invitees from and against all claims and
losses arising out of or relating to (i) the operations of Shipper, (ii) any
breach of this agreement by Shipper, except to the extent attributable to the
negligence, willful misconduct or fault of Transporter, and (iii) operations or
activities upstream or downstream of the Gathering System, except to the extent
attributable to the negligence, willful misconduct or fault of Transporter.

 

13.2         Transporter shall release, indemnify, defend, and hold harmless
Shipper and its Affiliates, directors, officers, employees, agents, consultants,
representatives, and invitees from and against all claims and losses arising out
of or relating to (i) the operations of Transporter and (ii) any breach of this
agreement by Transporter, except to the extent attributable to the negligence,
willful misconduct or fault of Shipper.

 

ARTICLE 14
NOTICES

 

14.1         Notices. Unless otherwise provided herein, any notice, request,
invoice, statement, or demand which either Party desires to serve upon the other
regarding this Agreement shall be made in writing and shall be considered as
delivered (i) when hand delivered, (ii) when delivery is confirmed by pre-paid
delivery service (such as FedEx, UPS, DHL or a similar delivery service),
(iii) if mailed by United States certified mail, postage prepaid, three (3)
Business Days after mailing, (iv) if sent by facsimile transmission, when
receipt is confirmed by the equipment of the transmitting Party, or (v) when
sent, if sent by Email. Any notice shall be given to the other Party at the
following address, or to such other address as either Party shall designate by
written notice to the other:

 

energy xxi usa, inc.           Attn:       Phone:       Fax:      
Email address:           Energy xxi Gulf Coast, inc.           Attn:      
Phone:       Fax:       Email address:    

 

14

 

 

ARTICLE 15
ASSIGNMENT

 

15.1       Assignment.

 

(a)          Shipper shall have the right to assign, or transfer all, but not
less than all, of its rights and obligations under this Agreement with the prior
written consent of Transporter, which consent may be withheld in Transporter’s
sole discretion.

 

(b)         No assignment or transfer of this Agreement shall be effective as to
Transporter unless and until Transporter has been provided written notice
thereof.

 

15.2       Encumbrance.

 

(a)          Shipper shall not pledge, encumber or grant any security interest
with respect to any portion of its interests or rights under this Agreement.

 

(b)         Transporter shall have the right to pledge, encumber or otherwise
grant security interests in its interests or rights under this Agreement.

 

15.3       Nothing herein shall prevent or prohibit Shipper, without consent of
Transporter, from engaging and using contractors and subcontractors to perform
services, for the benefit of Shipper, in connection with the performance by
Shipper of its obligations under this Agreement.

 

ARTICLE 16
Miscellaneous

 

16.1        Applicable Laws. This Agreement is subject to, and the Parties shall
comply with, all valid present and future laws, regulations, rules and orders of
Governmental Authorities now or hereafter having jurisdiction over the Parties,
this Agreement, or the Services performed or the facilities utilized under this
Agreement.

 

16.2        Authorizations. The Parties hereto represent that they have all
requisite corporate and/or company authorizations necessary or proper to
consummate this Agreement.

 

16.3        Entirety. This Agreement constitutes the entirety of the
understanding between the Parties with respect to the subject matter dealt with
herein, and replaces and supersedes all prior agreements, conditions,
understandings, representations and warranties made between the Parties with
respect to the subject matter hereof, whether written or oral. It is further
agreed that no amendment, modification or change herein shall be enforceable,
except as specifically provided for in this Agreement, unless reduced to writing
and executed by both Parties.

 

16.4        Governing Law; Jurisdiction; Jury Waiver.

 

(a)           The validity, construction and performance of this Agreement shall
be governed by the laws of the State of Texas, not including any of its
conflicts of law rules that would direct or refer to the laws of another
jurisdiction. The Parties have allocated liability risk pursuant to this
Agreement and therefore intend that no anti-indemnity law, rule or regulation
apply hereto.

 

15

 

 

(b)           The Parties agree that the appropriate, exclusive and convenient
forum for any disputes between the Parties arising out of this Agreement or the
transactions contemplated hereby shall be in any state or federal court in
Harris County, Texas, and each of the Parties irrevocably submits to the
jurisdiction of such courts solely in respect of any proceeding arising out of
or related to this Agreement. The Parties further agree that the Parties shall
not bring suit with respect to any disputes arising out of this Agreement or the
transactions contemplated hereby in any court or jurisdiction other than the
above specified courts.

 

(c)            EACH PARTY HERETO WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
DISPUTE ARISING FROM OR UNDER THIS AGREEMENT.

 

16.5        Non-Waiver. No waiver by either Party hereto of any one or more
defaults by the other in the performance of any of the provisions of this
Agreement shall be construed as a waiver of any other default or defaults
whether of a like kind or different nature. Any delay, less than any applicable
statutory period of limitations, in asserting or enforcing any rights under this
Agreement, shall not be deemed a waiver of such rights. Failure of either Party
to enforce any provision of this Agreement or to require performance by the
other Party of any of the provisions hereof shall not be construed to affect the
validity of this Agreement or any part thereof, or the right of either Party
thereafter to enforce each and every provision hereof.

 

16.6        Severability. If any term or other provision or portion of a
provision of this Agreement is determined to be invalid, illegal or incapable of
being enforced by any rule of Law or public policy, all other terms and
conditions of this Agreement shall nevertheless remain in full force and effect.

 

16.7        Amendments. This Agreement shall not be altered or amended, except
by an agreement in writing executed by all parties to this Agreement in
accordance with the limited partnership agreement of Transporter.

 

16.8        Confidentiality.

 

(a)          Confidentiality. Except as otherwise provided in this Section 16.8,
each Party agrees that it shall maintain all terms and conditions of this
Agreement, and all information disclosed to it by the other Party or obtained by
it in the performance of this Agreement and relating to the other Party’s
business (including all data relating to the production of Shipper, including
well data, production volumes, volumes gathered, transported, or compressed, and
quality) (collectively, “Confidential Information”) as confidential, and that it
shall not cause or permit disclosure of this Agreement or its existence or any
provisions contained herein without the express written consent of the other
Party.

 

16

 

 

(b)          Permitted Disclosures. Notwithstanding Section 16.8(a), disclosures
of any Confidential Information may be made by either Party (i) to the extent
necessary for such Party to enforce its rights hereunder against the other
Party; (ii) to the extent to which a Party is required to disclose all or part
of this Agreement by a statute or by the order or rule of a Governmental
Authority exercising jurisdiction over the subject matter hereof, by order, by
regulations, or by other compulsory process (including deposition, subpoena,
interrogatory, or request for production of documents in any administrative,
judicial, or legislative proceedings); (iii) to the extent required by the
applicable regulations of a securities or commodities exchange; (iv) to a third
person in connection with a proposed sale or other transfer of all or any
portion of a Party’s assets and properties related to the subject matter of this
Agreement, provided that such third person agrees in writing to be bound by the
terms of this Section 16.8; (v) to its own directors, officers, employees,
agents and representatives; (vi) to an Affiliate; (vii) to financial advisors,
attorneys, and banks, provided that such Persons are subject to a
confidentiality undertaking consistent with this Section 16.8(b); or (ix) any
information which, through no fault of a Party, becomes a part of the public
domain.

 

(c)          Notification. If either Party is or becomes aware of a fact,
obligation, or circumstance that has resulted or may result in a disclosure of
any of the terms and conditions of this Agreement authorized by
Section 16.8(b)(ii) or (iii), it shall so notify in writing the other Party
promptly and shall provide documentation or an explanation of such disclosure as
soon as it is available.

 

(d)          Party Responsibility. Each Party shall be deemed solely responsible
and liable for the actions of its directors, officers, employees, agents,
representatives and Affiliates for maintaining the confidentiality commitments
of this Section 16.8

 

(e)          The provisions of this Section 16.8 shall survive any termination
of this Agreement for a period of one (1) year.

 

17

 

 

16.9         Representations. Each Party declares, warrants, and represents on
behalf of itself (i) that it has contributed to the drafting of this Agreement
or has had it reviewed by legal counsel before executing it, (ii) that this
Agreement has been purposefully drawn and correctly reflects such Party’s
understanding of the transaction that it contemplates as of the Effective Date
hereof, (iii) that this Agreement has been validly executed and delivered;
(iv) that this Agreement has been duly authorized by all action necessary for
the authorization thereof, and (v) this Agreement constitutes a binding and
enforceable obligation of the Party, enforceable in accordance with its terms.

 

16.10        Counterparts. This Agreement may be executed in any number of
counterparts and if so signed in counterparts, all counterparts taken together
shall have the same effect as if all parties had signed the same instrument.

 

16.11        No Partnership. This Agreement shall not constitute a partnership
or joint venture between Transporter and Shipper. Transporter shall carry out
its operations with respect to the Gathering System as an independent contractor
and shall not (except as expressly set forth in this Agreement) be subject to
the control of Shipper in doing so.

 

16.12        No Third Party Beneficiaries. This Agreement is for the sole and
exclusive benefit of the Parties hereto. Except as expressly provided herein to
the contrary, nothing herein is intended to benefit any other Person not a Party
hereto, and no such Person shall have any legal or equitable right, remedy or
claim under this Agreement.

 

16.13        Exhibits. All exhibits and the like contained in or attached to the
Agreement are integrally related to this Agreement and are hereby made a part of
the Agreement for all purposes. To the extent of any ambiguity, inconsistency or
conflict between the body of this Agreement and any of the exhibits and the like
attached to the Agreement, the terms of the body of the Agreement shall prevail.

 

16.14       Further Assurances. Each Party shall take such acts and execute and
deliver such documents as may be reasonably required to effectuate the purposes
of this Agreement.

 

16.15       Limitation of Liability. EXCEPT WITH REGARD TO OBLIGATIONS TO
INDEMNIFY A PARTY FOR CLAIMS MADE BY THIRD PARTIES, NEITHER PARTY SHALL BE
LIABLE TO THE OTHER PARTY (OR ITS AFFILIATES) PURSUANT TO THIS AGREEMENT FOR ANY
CONSEQUENTIAL, INCIDENTAL, INDIRECT, OR SPECIAL DAMAGES OR LOSSES OR ANY
PUNITIVE, EXEMPLARY, TREBLE, OR SIMILAR DAMAGES ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE PERFORMANCE OF, OR FAILURE TO PERFORM, ITS OBLIGATIONS
HEREUNDER, EVEN IF SUCH DAMAGES OR LOSSES ARE CAUSED BY THE SOLE, JOINT, OR
CONCURRENT NEGLIGENCE, STRICT LIABILITY, OR OTHER FAULT OF THE PARTY WHOSE
LIABILITY IS BEING WAIVED HEREBY.

 

[Next page is signature page]

 

18

 

 

IN WITNESS WHEREOF, the Parties hereto have executed this Agreement in duplicate
originals to be effective as of the Execution Date.

 

energy xxi usa, inc.   Energy xxi Gulf Coast, inc.           By: /S/ ANTONIO DE
PINHO   By: /S/ RICK FOX           Name: ANTONIO DE PINHO   Name: RICK FOX      
    Title: PRESIDENT   Title: CFO

 

19

 

 

EXHIBIT A
TABLE OF RATES

 

FROM ESTABLISHED RECEPTION POINTS TO
GRAND ISLE (JEFFERSON PARISH), LOUISIANA

 

From  Rate in Cents Per Barrel of
42 United States Gallons  Reception
Points Offshore Louisiana  Crude Petroleum
Transportation   Excess Water, Sediment,
and 
Other Impurities Handling  Block 22, Grand Isle 16   38.58    29.76  Block 30,
Grand Isle 33   57.91    29.76  Block 73, West Delta 73   122.78    29.76  Block
90, West Delta 90   122.78    29.76  Block 62, West Delta 62   152.28    60.88 
Block 54, South Timbalier 54   166.65    60.88  Block 30, West Delta 30 
 172.71    60.88  Block 32, West Delta 30   172.71    60.88  Block 45, West
Delta 45   172.68    60.88  Block 93, South Pass 89   177.11    60.88  Block
152, Mississippi Canyon 268   242.01    60.88  Block 311, Mississippi Canyon
311   242.01    60.88  Block 397, Mississippi Canyon 397   282.87    60.88 
Block 280, Mississippi Canyon 281   291.11    60.88 

 

Disposal Fee: _______________________

 

A-1

 

 

EXHIBIT B
ADJUSTMENT AUTHORIZATION

 

TABLES OF DIFFERENTIALS FOR USE IN DETERMINING ADJUSTMENTS
FOR DIFFERENCE IN GRAVITY OF CRUDE PETROLEUM

 

API GRAV   DIFF/BBL   API GRAV   DIFF/BBL   API GRAV   DIFF/BBL   API GRAV  
DIFF/BBL   API GRAV   DIFF/BBL   API GRAV   DIFF/BBL 20   2.75   24.9   3.485  
29.8   4.22   34.7   4.955   39.6   5.08   44.5   5.1 20.1   2.765   25   3.5  
29.9   4.235   34.8   4.97   39.7   5.08   44.6   5.1 20.2   2.78   25.1   3.515
  30   4.25   34.9   4.985   39.8   5.08   44.7   5.1 20.3   2.795   25.2   3.53
  30.1   4.265   35   5   39.9   5.08   44.8   5.1 20.4   2.81   25.3   3.545  
30.2   4.28   35.1   5   40   5.1   44.9   5.1 20.5   2.825   25.4   3.56   30.3
  4.295   35.2   5   40.1   5.1   45   5.1 20.6   2.84   25.5   3.575   30.4  
4.31   35.3   5   40.2   5.1   45.1   5.085 20.7   2.855   25.6   3.59   30.5  
4.325   35.4   5   40.3   5.1   45.2   5.07 20.8   2.87   25.7   3.605   30.6  
4.34   35.5   5   40.4   5.1   45.3   5.055 20.9   2.885   25.8   3.62   30.7  
4.355   35.6   5   40.5   5.1   45.4   5.04 21   2.9   25.9   3.635   30.8  
4.37   35.7   5   40.6   5.1   45.5   5.025 21.1   2.915   26   3.65   30.9  
4.385   35.8   5   40.7   5.1   45.6   5.01 21.2   2.93   26.1   3.665   31  
4.4   35.9   5   40.8   5.1   45.7   4.995 21.3   2.945   26.2   3.68   31.1  
4.415   36   5.02   40.9   5.1   45.8   4.98 21.4   2.96   26.3   3.695   31.2  
4.43   36.1   5.02   41   5.1   45.9   4.965 21.5   2.975   26.4   3.71   31.3  
4.445   36.2   5.02   41.1   5.1   46   4.95 21.6   2.99   26.5   3.725   31.4  
4.46   36.3   5.02   41.2   5.1   46.1   4.935 21.7   3.005   26.6   3.74   31.5
  4.475   36.4   5.02   41.3   5.1   46.2   4.92 21.8   3.02   26.7   3.755  
31.6   4.49   36.5   5.02   41.4   5.1   46.3   4.905 21.9   3.035   26.8   3.77
  31.7   4.505   36.6   5.02   41.5   5.1   46.4   4.89 22   3.05   26.9   3.785
  31.8   4.52   36.7   5.02   41.6   5.1   46.5   4.875 22.1   3.065   27   3.8
  31.9   4.535   36.8   5.02   41.7   5.1   46.6   4.86 22.2   3.08   27.1  
3.815   32   4.55   36.9   5.02   41.8   5.1   46.7   4.845 22.3   3.095   27.2
  3.83   32.1   4.565   37   5.04   41.9   5.1   46.8   4.83 22.4   3.11   27.3
  3.845   32.2   4.58   37.1   5.04   42   5.1   46.9   4.815 22.5   3.125  
27.4   3.86   32.3   4.595   37.2   5.04   42.1   5.1   47   4.8 22.6   3.14  
27.5   3.875   32.4   4.61   37.3   5.04   42.2   5.1   47.1   4.785 22.7  
3.155   27.6   3.89   32.5   4.625   37.4   5.04   42.3   5.1   47.2   4.77 22.8
  3.17   27.7   3.905   32.6   4.64   37.5   5.04   42.4   5.1   47.3   4.755
22.9   3.185   27.8   3.92   32.7   4.655   37.6   5.04   42.5   5.1   47.4  
4.74 23   3.2   27.9   3.935   32.8   4.67   37.7   5.04   42.6   5.1   47.5  
4.725 23.1   3.215   28   3.95   32.9   4.685   37.8   5.04   42.7   5.1   47.6
  4.71 23.2   3.23   28.1   3.965   33   4.7   37.9   5.04   42.8   5.1   47.7  
4.695 23.3   3.245   28.2   3.98   33.1   4.715   38   5.06   42.9   5.1   47.8
  4.68 23.4   3.26   28.3   3.995   332   4.73   38.1   5.06   43   5.1   47.9  
4.665 23.5   3.275   28.4   4.01   33.3   4.745   38.2   5.06   43.1   5.1   48
  4.65 23.6   3.29   28.5   4.025   33.4   4.76   38.3   5.06   43.2   5.1  
48.1   4.635 23.7   3.305   28.6   4.04   33.5   4.775   38.4   5.06   43.3  
5.1   48.2   4.62 23.8   3.32   28.7   4.055   33.6   4.79   38.5   5.06   43.4
  5.1   48.3   4.605 23.9   3.335   28.8   4.07   33.7   4.805   38.6   5.06  
43.5   5.1   48.4   4.59 24   3.35   28.9   4.085   33.8   4.82   38.7   5.06  
43.6   5.1   48.5   4.575

 

B-1

 

 

API GRAV   DIFF/BBL   API GRAV   DIFF/BBL   API GRAV   DIFF/BBL   API GRAV  
DIFF/BBL   API GRAV   DIFF/BBL   API GRAV   DIFF/BBL 24.1   3.365   29   4.1  
33.9   4.835   38.8   5.06   43.7   5.1   48.6   4.56 24.2   3.38   29.1   4.115
  34   4.85   38.9   5.06   43.8   5.1   48.7   4.545 24.3   3.395   29.2   4.13
  34.1   4.865   39   5.08   43.9   5.1   48.8   4.53 24.4   3.41   29.3   4.145
  34.2   4.88   39.1   5.08   44   5.1   48.9   4.515 24.5   3.425   29.4   4.16
  34.3   4.895   39.2   5.08   44.1   5.1   49   4.5 24.6   3.44   29.5   4.175
  34.4   4.91   39.3   5.08   44.2   5.1   49.1   4.485 24.7   3.455   29.6  
4.19   34.5   4.925   39.4   5.08   44.3   5.1   49.2   4.47 24.8   3.47   29.7
  4.205   34.6   4.94   39.5   5.08   44.4   5.1   49.3   4.455

 

B-2

 

 

EXHIBIT C

SAMPLE QUALITY BANK CALCULATION

 

GRAND ISLE GATHERING SYSTEM COMMON STREAM HLS CRUDE

 

Receipt Bank

SHIPPER   BBLS REC’D   API GRAV   FROM EXH. A 
GRAV DIFF   BBLS REC’D X 
GRAV DIFF A   100.00   29.8   4.220   422.00 B   150.00   38.6   5.060   759.00
C   100.00   36.4   5.020   502.00 C   200.00   46.2   4.920   984.00 TOTAL  
550.00         2667.00

 

Common stream weighted average GRAVITY value: 2667.00/550.0 = 4.84909091

 

Shipper A:           Weighted average GRAVITY value: 422.00/100 = 4.220         
Calculation: (4.84909091 - 4.220) x 100 =  $62.909                   Total
Shipper A pays the bank:       $62.91              Shipper B:           Weighted
average GRAVITY value: 759.00/150 = 5.060           Calculation: (4.84909091 -
5.060) x 150 =  ($31.636)                  Total Shipper B pays the bank:      
($31.64)             Shipper C:          Weighted average GRAVITY value:
1486.00/300 = 4.953           Calculation: (4.84909091 - 4.953) x 300 = 
($31.273)                  Total Shipper B pays the bank:       $(31.27)        
    NET       $0.00 

 

C-1