exv10w9



 








EXHIBIT 10.9




SPECIFIC TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT

FOR THOSE TERMS HAS BEEN REQUESTED. THE REDACTED MATERIAL HAS BEEN SEPARATELY

FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED

AT THE APPROPRIATE PLACE WITH TWO ASTERISKS (**).





GAS PURCHASE AGREEMENT




BY AND BETWEEN




ONEOK Texas Field Services, L. P.




AND




PEAK OPERATING OF TEXAS, LLC




Contract No. 431377

Date of Contract: October 1, 2003




	 	 	 	 	 
	INDEX:	 	 	 
	 
	I.

	 	BASIS OF COMPENSATION
	 	Page 2
	II.

	 	TERM
	 	Page 2
	III.

	 	DEDICATION, EXCLUSIVITY, INITIAL WELLS, AND
SUBSEQUENT WELLS
	 	Page 2
	 
	 	 	 	 
	IV.

	 	RESERVATIONS OF SELLER AND BUYER
	 	Page 4
	V.

	 	QUALITY OF DELIVERED GAS
	 	Page 5
	VI.

	 	DELIVERY, COMPRESSION, PRESSURES, METER FEES,
REBUILD AND ALTERATIONS
	 	Page 5
	 
	 	 	 	 
	VII.

	 	NOMINATIONS AND SCHEDULING
	 	Page 6
	VIII.

	 	PAYMENT, ESCALATION OF FEES, EXAMINATION,
INDEMNIFICATION, SUSPENSION, AND DEDUCTIONS
	 	Page 6
	IX.

	 	WARRANTY, TITLE, AND EASEMENTS
	 	Page 7
	 
	 	 	 	 
	X.

	 	INDEMNITY, INTERRUPTION, AND FORCE MAJEURE
	 	Page 7
	XI.

	 	ROYALTY AND TAXES
	 	Page 8
	 
	 	 	 	 
	XII.

	 	MEASUREMENT OF GAS VOLUME AND TESTING
	 	Page 8
	XIII.

	 	NOTICES AND STATEMENTS
	 	Page 11
	XIV.

	 	DEFAULT
	 	Page 12
	XV.

	 	DEFINITIONS
	 	Page 13
	 
	 	 	 	 
	XVI.

	 	MISCELLANEOUS
	 	Page 14
	 
	 	 	 	 
	 

	 	EXHIBIT “A”	 	 
	 

	 	EXHIBIT “B”	 	 
	 

	 	EXHIBIT “C”	 	 







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GAS PURCHASE AGREEMENT




     This Gas Purchase Agreement (“Agreement”) is made and entered into as of the first day
of October, 2003, by and between ONEOK Texas Field Services, L. P., hereinafter referred to as
“BUYER,” and Peak Operating of Texas, LLC hereinafter referred to as “SELLER”.



WITNESSETH:




     WHEREAS, SELLER owns and/or controls natural Gas produced from Wells on Lands or
Leases from properties more particularly described in Exhibit “B” attached hereto, including the
right
to process and sell such Gas, which shall be delivered to BUYER; and



     WHEREAS, BUYER desires to purchase and SELLER desires to sell said Gas to BUYER; and



     NOW THEREFORE, BUYER and SELLER, in consideration of the mutual covenants,
promises, and agreements contained herein and for other good and valuable consideration, do hereby
agree as follows:



I. BASIS OF COMPENSATION





	1.1	 	Compensation. The basis of compensation is set forth in Exhibit “A”
attached hereto and included herein by this reference.





II. TERM





	2.1	 	Term. This Agreement shall be effective on the first day of October, 2003
(“Effective Date”), and shall continue for (**) (“Primary Term”),
and (**) thereafter until terminated, such termination to be effective at the end of said
Primary Term or at any month thereafter by either party giving at least thirty (30) days
prior written notice to the other party or to be effective as otherwise provided by this
Agreement.





III.
DEDICATION, EXCLUSIVITY, INITIAL WELLS, AND SUBSEQUENT WELLS





	3.1	 	Dedication. SELLER hereby commits and dedicates to the performance of this
Agreement and for the term hereof, all of its owned or controlled interest in Gas produced
from all geological formations under the Lands and Leases and/or Wells described in Exhibit
“B” attached hereto (“Dedicated Wells”), except for the following reservations:






	 	3.1.1	 	To use Gas produced from or under the Lands or Leases and/or Wells for the
development and operation of same; including, but not limited to, Gas used by SELLER in
Gas lifting and pressure maintenance operations;
	 
	 	3.1.2	 	To use Gas which may be required to fulfill SELLER’s obligations to the
lessors of said Leases and/or Wells for domestic fuel; and,
	 
	 	3.1.3	 	To use Gas used as fuel in the operation of SELLER’s compression, dehydration
or treating facilities, if any, installed for the delivery of Gas hereunder.
	 
	 	3.1.4	 	(**)






	3.2	 	Exclusivity. Subject to the terms and conditions of this Agreement, SELLER hereby
contracts exclusively with BUYER for the purchase of SELLER’s Gas and the right to process and
extract Natural Gas Liquids attributable to SELLER’s Gas from
the Lands, Leases and/or Wells






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	 	 	described on Exhibit “B”. SELLER further agrees to dedicate to BUYER and to the terms and
conditions of this Agreement any interest in said Lands and Leases or Wells which (i) are
acquired by SELLER, or (ii) are owned by SELLER but are no longer subject to the terms of any
third-party agreement, subsequent to the Effective Date hereof. Any
transfer of SELLER’s
interest in the Lands and Leases or Wells dedicated hereunder shall be subject to BUYER’s
rights hereunder, and SELLER shall take action necessary to ensure that any such transfer is
subject to BUYER’s rights hereunder.






	3.3	 	Initial Well(s). SELLER agrees to proceed with due diligence to install or cause to
be installed, at its expense, all facilities upstream of the Receipt Point(s) which are
necessary to connect all Dedicated Wells completed for production as of the date of this
Agreement to the existing gathering system. All such facilities will be owned and operated by
SELLER or its designee at its expense.






	3.4	 	Contract Volumes and Excess Deliveries.






	 	3.4.1	 	Transitional Contract Volume.






	 	(a)	 	Initial Deliveries and Pressures. Commencing with the effective
date of the Agreement (“Effective Date”), SELLER may deliver up to (**) Mcf/d at
the Receipt Point specified in the Agreement at pressures sufficient to enter
BUYER’s system. BUYER estimates the line pressure to range between (**) psig.
Simultaneously, BUYER will (i) commence acquisition of a site (**) and (ii) (**).
	 
	 	(b)	 	High Pressure Deliveries. Commencing no later than ten (10)
days after the volume delivered at the Receipt Point(s) equals (**) Mcf/d, BUYER
will proceed to modify its system so as to provide delivery capacity to SELLER at
the Receipt Point(s) of up to (**) Mcf/d at pressures of approximately (**) psig.
	 
	 	(c)	 	Reduced Pressure Deliveries. At any time after the Effective
Date at such time as SELLER’S daily volume exceeds (**) Mcf/d, SELLER may notify
BUYER of SELLER’s desire that BUYER install (**) facilities in order for
BUYER accept deliveries consistent with the volume and pressure provisions of the
3.4.2 and 6.1 hereof. SELLER will provide all necessary projections of future
production in order for BUYER to maximize the efficiency of its compression
facilities consistent with its contract obligations. No less than four (4) months
following the receipt of SELLER’s notice, BUYER will be prepared to take deliveries
of natural gas under this Agreement pursuant to such provisions.






	 	3.4.2	 	Permanent Contract Volume. Following the installation of the facilities set forth
in 3.4.1(c), above, SELLER shall deliver and sell and BUYER shall receive and purchase at
the Receipt Point(s) all of SELLER’s Gas developed and produced from the Dedicated Wells
up to a volume of (**) Mcf/d (the “Contract Volume”). These volumes are to be delivered
consistent with the pressure requirements set forth in section 6.1.
	 
	 	3.4.3.	 	Additional Gas. Gas tendered for delivery to BUYER at the Receipt Point(s) in excess of
the Contract Volume shall be deemed “Additional Gas”. BUYER shall use its best reasonable
efforts to purchase all Additional Gas tendered for delivery by SELLER. In the event
BUYER is unable to take any portion of the Additional Gas, such portion (“Excess Gas”)
shall be released from the terms of this Agreement until and unless, within thirty (30)
days of such release BUYER notifies SELLER of intent to take and purchase such Excess Gas
under the terms of this Agreement and the date upon which such receipts are to commence,
provided such receipts are to commence no later than (**) days from the date of
BUYER’s notice, and subject to Seller’s prior nominations, which nominations






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	 	 	 	shall not exceed a one-month period. Failure to provide notice to SELLER of its
intent to take such Excess Gas shall be deemed a permanent release of such Gas.





IV. RESERVATIONS OF SELLER AND BUYER





	4.1	 	SELLER’s Reservations.






	 	4.1.1	 	To operate said Leases and/or Wells free from control by BUYER in such manner as
SELLER, in SELLER’s sole discretion, may deem advisable, including, without
limitation, the right to drill new Wells, to repair and rework old Wells, and to abandon
any Well or surrender any Lease when no longer deemed to be capable of producing Gas in
commercial paying quantities under normal methods of operation by SELLER.
	 
	 	4.1.2	 	To unitize or pool any of the Leases or portions thereof with other Leases, in
such event SELLER’s interest in the unit and the unit Gas
attributable to SELLER’s
interest shall be subject to and SELLER agrees to take all action necessary to commit
such unit Gas attributable to SELLER’s interest to this Agreement.
	 
	 	4.1.3	 	To retain all liquids and Condensate separated from the Gas by the use of typical
volumetric (non-refrigerated) oil and Gas separators prior to the delivery of the Gas to
BUYER at the Receipt Point(s) specified herein.






	4.2	 	BUYER’s Reservations.






	 	4.2.1	 	Processing Rights. SELLER does hereby grant, assign, and convey to BUYER
exclusive processing rights for the recovery of Plant Products for Gas delivered to BUYER
for processing at the Receipt Point(s). SELLER shall not process the Gas or allow the Gas
to be processed prior to Receipt by BUYER hereunder for processing.
	 
	 	4.2.2	 	Condensate. Condensate recovered by BUYER downstream of the Receipt
Point(s) shall belong to BUYER. Title to the Condensate shall pass to BUYER upon its
recovery by BUYER and shall be free and clear of all liens, claims, and encumbrances
created by, through or under SELLER.
	 
	 	4.2.3	 	Uneconomic Conditions. The purchase of Gas under the terms of this
Agreement will be deemed uneconomic as follows:






	 	(a)	 	The purchase of SELLER’s Gas from any Receipt Point shall be
uneconomic if and to the extent BUYER’s net revenue derived from the purchase and
resale of such Gas and associated products is less than BUYER’s actual average
operating costs associated with the gathering, compression and processing of such
Gas, excluding any allowance for depreciation or return on investment of BUYER’s
plant and equipment. In such event, BUYER shall offer SELLER pricing terms for
such uneconomic gas at which such conditions do not exist, in which event SELLER
may either (i) accept such revised pricing terms for so long as such uneconomic
condition exists or (ii) have the uneconomic gas released from this Agreement.
	 
	 	(b)	 	An “uneconomic Plant” condition shall be deemed to exist if BUYER
determines that the continued operation of BUYER’s gathering and processing
facilities with respect to the purchase, gathering and/or processing of all gas
collectively behind BUYER’s Plant results in BUYER being unable to recover its
actual costs in the operation of such facilities for a period of three
consecutive calendar months. In the event of an “uneconomic Plant” condition,
BUYER may elect to terminate gathering and plant processing operations upon
(**) days prior written notice to SELLER, at which time this Agreement
shall terminate.





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V. QUALITY OF DELIVERED GAS





	5.1	 	The Gas delivered at the Receipt Point(s) shall meet the quality specifications defined in
Exhibit “C” attached hereto.
	 
	5.2	 	SELLER shall not connect any well that would cause the Gas to be delivered to BUYER at the
Receipt Point(s) to fail to conform to the specifications set forth on Exhibit “C”.






	 	5.2.1	 	In the event SELLER wishes to connect any Well which would cause the Gas at
the Receipt Point(s) to fail to conform with such specifications (“Non-Conforming
Well”) SELLER shall notify BUYER of its desire to tender gas from a Non-Conforming Well
at which time BUYER may elect to either:






	 	(a)	 	accept Gas from such well without modification or treatment,
	 
	 	(b)	 	seek agreement with SELLER upon a means of treating the gas from
such well and the fees (if any) to be charged therefor prior to the flow of gas
from such well under this Agreement, or
	 
	 	(c)	 	release such Non-Conforming Well from this Agreement.






	 	5.2.2	 	In the event the quality of SELLER’s Gas generally fails to meet the
specifications, SELLER shall notify BUYER prior to the delivery of such Gas. Upon
receipt of SELLER’s notice BUYER and SELLER shall endeavor to agree upon a means to
bring such gas into compliance with the specifications and a fee (if any) therefore.
Failing such agreement, BUYER may either accept such Gas “as is” or release such Gas
from this Agreement.






	5.3	 	BUYER’s acceptance of Gas that does not conform to quality specifications set forth herein
will not constitute a waiver of SELLER’s obligation to conform to such specifications in the
future, nor a waiver of BUYER’s right to refuse delivery of such nonconforming Gas at any
time.





VI.
DELIVERY, COMPRESSION, PRESSURES, METER

 FEES, REBUILD AND ALTERATIONS





	6.1	 	Delivery Pressures. Commencing with the installation of facilities pursuant to
3.4.1(c) hereof, SELLER shall deliver Gas to BUYER at the Receipt Point(s) at a pressure
sufficient to enter BUYER’s system against the operating pressure as it exists from
time-to-time, but not to exceed (**) psig.
	 
	6.2	 	Pressures. Pressures calculated for purposes of this Agreement shall be
(**) pressures at the Receipt Point(s) for the Month as determined by BUYER.
	 
	6.3	 	Meter Fees. In the event that the total metered volume from any one (1) Receipt
Point falls below an average of (**) MCF per day for any month, BUYER shall
charge SELLER a meter fee for each MCF delivered by or for the account of SELLER for that
month. The meter fee shall be determined by dividing a sum of (**) by
the total metered volume (MCF) for that month. In the event the total metered volume is zero
(0) the fee shall be (**) multiplied by
SELLER’s owned or controlled
interest.
	 
	6.4	 	Rebuild and Alterations. BUYER reserves the right, in its sole discretion, to
alter, repair, maintain, expand or rebuild, without approval of
SELLER, any portion of BUYER’s
facilities. SELLER shall make no alterations, additions or repairs to or on the facilities of
BUYER. SELLER agrees not to connect or cause the connection of any
third-party well to BUYER’s
facilities for any purpose without the express written consent of BUYER, such consent to be in
BUYER’s sole discretion. If this condition is breached by SELLER, BUYER shall have the right






5









 









	 	 	and option, notwithstanding any other provision of this Agreement, to terminate this
Agreement immediately and without further obligation to SELLER.





VII. NOMINATIONS AND SCHEDULING





	7.1	 	Deliveries. SELLER shall deliver all available Gas in such uniform hourly flows
as is commercially practicable. In the event SELLER anticipates a material increase or
decrease in the flow of Gas at any Receipt Point, SELLER shall provide BUYER with at least
five (5) days advance notice of change.





VIII. PAYMENT, EXAMINATION,

INDEMNIFICATION, SUSPENSION, AND DEDUCTIONS





	8.1	 	Payment. BUYER shall, on the later of (i) the last day of the month or (ii) within
ten (10) days of BUYER’s receipt of any necessary allocation statements relating to sales and
purchases from third parties upstream of the Receipt Point(s), pay SELLER for the Gas
delivered hereunder during the preceding month. During any period BUYER purchases Gas from
SELLER and other SELLER(s) delivered to any Receipt Point(s), SELLER shall furnish, or cause
to be furnished, to BUYER on or before the (**) day of each calendar month, any
necessary allocation statements containing data (including, but not limited to, quantity and
BTU content) that BUYER may require to enable BUYER to make payments. SELLER is to cooperate
with other SELLER(s) delivering Gas at the Receipt Point(s) in order to appoint in writing a
representative who, as their agent, is to furnish an allocation statement. BUYER is entitled
to rely conclusively on such allocation statement, and has a complete defense to any claim by
SELLER for any sums due for Gas delivered by SELLER at the Receipt Point(s) during any period
by showing that BUYER has made payment to SELLER for its share, as identified in such
allocation statement, of the total quantity of Gas received by BUYER at the applicable Receipt
Point(s) during the period in question (other than for measurement error as specified in the
Article titled MEASUREMENT OF GAS VOLUME AND TESTING). If any allocation statement
is not furnished to BUYER by the (**) day of any month, the time that
BUYER has to make payment for delivered Gas (without interest) is to be extended until the
payment cycle which next follows the tenth
(10th) day after BUYER’s receipt of the
allocation statement.
	 
	8.2	 	Final Payment. All payments under this Agreement will be final unless questioned by
either party within two (2) years of the due date of a payment.
	 
	8.3	 	Examination of Records. Each party to this Agreement shall have the right, at any
and all reasonable times during normal business hours, to examine the books and records of the
other party, to the extent necessary to verify the accuracy of any statement, charge,
computation, or demand made under or pursuant to this Agreement, and both parties shall keep
all such records for at least (**) after the due date for payment for the
Receipt of Gas to which such records are applicable. Such books and records shall be
conclusively presumed to be correct, except as to claims or corrections by the parties made by
written notice to the other within such (**) period.
	 
	8.4	 	Indemnification, Payment Suspension. Each party agrees to indemnify and hold the
other party harmless with respect to all costs, losses, and damages (including without
limitation reasonable attorney’s fees) arising from or related to the breach of any covenant,
representation, or warranty contained in this Agreement. In the event of any claim arising
from or relating to such a breach by SELLER, BUYER shall be entitled, at its option, in
addition to any other rights it may have, to suspend payment of sums due SELLER hereunder up
to the amount of such claim






6









 









	 	 	until such claim is resolved or until such time as SELLER provides sureties acceptable
to BUYER. Any such suspension of payment hereunder shall not
constitute a breach of BUYER’s
payment obligations under this Agreement.
	 
	8.5	 	Deductions. BUYER shall also be entitled, at its option, in addition to any other
rights it may have, to deduct from any payment due SELLER under this Agreement any amounts
payable to BUYER from SELLER under this Agreement and to apply such amounts deducted to pay
such amounts payable to BUYER, and such deduction and application shall not constitute a
breach of BUYER’s payment obligations under this Agreement.
	 
	8.6	 	Reimbursement of State Severance Taxes. The payment set forth on Exhibit “A” for gas
purchased by BUYER hereunder shall be deemed to be inclusive of reimbursement to SELLER for
production and severance taxes borne by SELLER. No additional payment from BUYER to SELLER
hereunder, other than that specified on Exhibit “A”, shall be required to compensate SELLER
for such tax reimbursement.





IX. WARRANTY, TITLE, AND EASEMENTS





	9.1	 	Warranty of Title. SELLER warrants that it has the title to the Gas dedicated
hereunder and delivered at the Receipt Point(s), and said Gas is free from all liens and
adverse claims of all kinds, including the right and authority to sell and to process for the
recovery of Plant Products. SELLER shall hold BUYER harmless against adverse claims related
thereto.
	 
	9.2	 	Title. Title shall pass to BUYER at the Receipt Point(s).
	 
	9.3	 	Easements. To the extent SELLER has the right to do so, SELLER hereby permits BUYER
the rights of ingress and egress on the Leases to construct, install, operate, repair, inspect
and maintain BUYER’s facilities necessary to receive Gas from SELLER at the Receipt Point(s).
SELLER hereby assigns and grants to BUYER, to the extent it has the right to do so, an
easement and right-of-way upon all lands covered by the Leases for the purposes above. Any
property of BUYER placed in or upon any of those lands shall remain the personal property of
BUYER, and may be disconnected and removed at any time. SELLER shall, at its expense,
maintain and provide all such easements, rights-of-way, lease roads and other facilities upon
such Leases as may reasonably be deemed necessary by BUYER for its performance of this
Agreement. SELLER further agrees to indemnify BUYER from any adverse claims related thereto.





X.
INDEMNITY, INTERRUPTION, AND FORCE MAJEURE





	10.1	 	Indemnity. In addition to the indemnities contained herein, BUYER shall indemnify
and hold SELLER harmless against any claims for damages arising out of the operations
conducted hereunder by BUYER. Likewise, SELLER shall indemnify and hold BUYER harmless against
any claims for damages arising out of SELLER’s operations hereunder. The obligations of the
parties under this Agreement are obligations of the parties only and no recourse or remedy
shall be available against any officer, director, or employee representative of a party or
against any affiliate of a party.
	 
	10.2	 	Interruption. It is understood and agreed that either party hereto may, without
liability to the other party, interrupt the operations of its facilities for the purpose of
making necessary alterations, maintenance, or repairs thereto, but that such interruption
shall be for only such time as may be commercially reasonable to perform such operations.
Delivery and/or receipt of Gas pursuant to this Agreement may be suspended for such period of
interruption.
	 
	10.3	 	Force Majeure. If SELLER or BUYER is rendered unable, wholly or in part, by reason
of force majeure, from carrying out its obligations under this Agreement (other than the
obligation to make payment of amounts due hereunder), then upon said party’s giving prompt
written




7









 












	 	 	notice of such force majeure to the other party, the obligations of the party giving such
notice, so far as they are affected by such force majeure, shall be suspended during the
continuance of any inability so caused, but for no longer period, and such cause shall be
remedied with all commercially reasonable dispatch. The term “force majeure,” as used herein,
shall include acts of God; acts of federal, state, or local government or any agencies
thereof; compliance with rules, regulations, permits or orders of any governmental authority
or any office, department, agency, or instrumentality thereof; strikes, lockouts, or other
industrial disturbances; acts of the public enemy, wars, blockages, insurrections, riots, and
epidemics; landslides, lightning, earthquakes, fires, storms, floods, and washouts; arrests
and restraint of people; civil disturbances; explosions, leakage, breakage, or accident to
equipment or pipes; freezing of Wells or pipes; weather-related shutdowns; inability to
secure rights-of-way; inability to timely obtain equipment, supplies, materials, permits,
labor; failures or delays in transportation; receipt of non-specification or non-merchantable
Gas; and any other causes, whether of the kind herein enumerated or otherwise, not within the
reasonable control of the party claiming suspension, which, by the exercise of due diligence,
such party shall not have been able to avoid. The settlement of strikes or lockouts shall be
entirely within the discretion of the party having the difficulty. The requirement that any
force majeure shall be remedied with all commercially reasonable dispatch shall not require
the settlement of strikes or lockouts by acceding to the demands of the opposing party, when
such is deemed inadvisable by the party involved.





XI. ROYALTY AND TAXES





	11.1	 	Royalty. SELLER shall account for, pay, or cause to be paid all royalties,
overrides, and other sums due by SELLER to the owners of the mineral, royalty, and other
interests in the Gas, and SELLER shall indemnify and save BUYER harmless against all loss,
damage, and expense of every character on account of adverse claims to all such Gas, Residue
Gas, and Plant Products or royalties, taxes, payments, or other charges due thereon. Should
BUYER be obligated by law or regulation to make payment for any royalties or overrides due to
be paid by SELLER, BUYER shall deduct such payments from any amounts due by BUYER to SELLER.
Should such payments be in excess of amounts due by BUYER to SELLER, SELLER shall promptly
reimburse BUYER for the amount of royalties or overrides so paid within ten (10) days of
receipt of such statement
	 
	11.2	 	Taxes. SELLER shall pay or cause to be paid any sales, transaction, occupation,
service, production, severance, gathering, transmission, or excise taxes, assessments, or fees
levied, assessed, or fixed, whether by the United States, the state, or other governmental
agency, in respect of or applicable to the Gas delivered hereunder. Any taxes and statutory
charges levied or assessed against SELLER’s properties, facilities, or operations shall be
borne by SELLER. BUYER shall bear all taxes levied against its properties or facilities.
Should BUYER be obligated by law or regulation to make payment for any taxes due to be paid by
SELLER, BUYER shall deduct such payments from any amounts due by BUYER to SELLER. Should such
payments be in excess of amounts due by BUYER to SELLER, SELLER shall promptly reimburse BUYER
for the amount of taxes so paid within ten (10) days of receipt of such statement.





XII. MEASUREMENT OF GAS VOLUME AND TESTING





	12.1	 	Calibration. BUYER shall keep its measurement equipment accurately calibrated
and in repair, making tests at reasonable intervals of no less than once every calendar
quarter. BUYER agrees to give SELLER reasonable notice of such tests of the measuring
equipment so






8









 









	 	 	that, if SELLER desires, it may have its representative present. In the event the meters
are found to be inaccurate, such meters will be adjusted to register accurately.
	 
	12.2	 	Accuracy. Each party shall have the right to challenge the accuracy of any
related equipment and, when challenged, the equipment shall be tested, calibrated and repaired
by BUYER; the cost of any such special test shall be borne by BUYER if the percentage of
inaccuracy is found to be more than two percent (2%), but if the percentage of inaccuracy is
found to be two percent (2%) or less, the cost of such special test shall be borne by SELLER.
If, upon any test, the percentage of inaccuracy of the measuring equipment is found to be in
excess of two percent (2%), registrations thereof and any payment based upon such registration
shall be corrected for a period extending back to the time (not to exceed one (1) year) when
such inaccuracy began, if such time is ascertainable, and if not ascertainable, then back
one-half
(1/2) of the time elapsed since the last date of calibration not exceeding, however,
forty-five (45) days.
	 
	12.3	 	Repairs. If, for any reason, the meters are out of service or out of repair so
that the amount of Gas delivered cannot be ascertained or computed from the reading thereof,
the Gas delivered during the period such meters are out of service or out of repair shall be
estimated and agreed upon by the parties hereto upon the basis of the data available using the
first of the following methods that is feasible:






	 	12.3.1	 	By using the registration of any check meter or meters if installed and
accurately registering, or in the absence of (12.3.1) then;
	 
	 	12.3.2	 	By correcting the error if the percentage of error is ascertainable by
calibration, special test, or mathematical calculation, or in the absence of both
(12.3.1) and (12.3.2) then;
	 
	 	12.3.3	 	By estimating the quantity of Gas delivered based on the registration of any
meter or meters if installed and accurately registering, or in the absence of (12.3.1),
(12.3.2), and (12.3.3) then;
	 
	 	12.3.4	 	By estimating the quantity of Gas delivered or redelivered based on deliveries or
redeliveries during preceding periods under similar conditions when the meter was
registering accurately.






	12.4	 	Records. The records from the measuring equipment shall remain the property of the
party owning such equipment and shall be kept by such party on file for a period of not less
than two (2) years. At any time within such period, such party shall, upon request to the
other party, submit to such party records from the measuring equipment, together with
calculations therefrom, for inspection and verification, subject to return within thirty (30)
days from receipt thereof.
	 
	12.5	 	Measurement Standards. The measuring station or stations provided for hereunder shall
be so equipped with meters, recording gauges, or other types of meter or meters of standard
make and design used in the industry and according to applicable AGA or API standards, so as
to accomplish the measurement of Gas delivered and redelivered hereunder. Gas measured
hereunder will have its volume, mass, gravity, composition or energy content determined and
computed in accordance with applicable AGA standards in effect at the date of installation of
the measurement equipment and shall comply with applicable state and federal regulation. At
BUYER’s option, BUYER may update the measurement equipment and/or the determination of volume,
mass, gravity, composition or energy content in accordance with subsequent revisions,
supplements, and appendices to said AGA standards.
	 
	12.6	 	Pulsation. The Parties shall design, install, operate and maintain their respective
equipment in such a manner that pulsation-induced measurement error is minimized.
Pulsation-induced error shall not exceed one quarter of one percent (0.25%) of square root
error (SRE). Either party has the right to request a test of the orifice meter facility. If
SRE is found to exceed the limit stated above, the party responsible for the creation of the
SRE must have a plan for the





9









 






	 	 	elimination of the SRE within thirty (30) days and equipment installed or modified to
correct SRE in a reasonable amount of time, not to exceed six (6) months. Pulsation errors
determined by the use of a square root error indicator manufactured under a license for the
Southern Gas Association are to be used only for the purpose of determining SRE and are not
to be used for adjusting measured volumes.
	 
	12.7	 	Boyle’s Law. The measurement hereunder shall be corrected for deviation from Boyle’s
Law at the pressures and temperatures under which Gas is delivered hereunder.
	 
	12.8	 	Temperature. The temperature of the Gas shall be determined to the nearest one
degree Fahrenheit (1°F) at the points of measurement by the continuous use of recording
thermometers of standard manufacture acceptable to the parties, to be installed in accordance
with the recommendations contained in American Gas Association Measurement Committee Report
Number 3, 7, or 9 as appropriate, and the arithmetical average of hourly temperatures of the
Gas so determined each day shall be used in computing temperatures of the Gas during each day.
	 
	12.9	 	Supercompressibility. Unless otherwise allowed by state law, adjustment for the
effect of supercompressibility shall be determined by test or by mutual consent of the parties
hereto according to the provisions contained in American Gas Association Measurement Committee
Report Number 3, 7, 8 or 9 as appropriate, for the average conditions of pressure, flowing
temperature, and specific gravity at which the Gas was measured during the period under
consideration and with the respective proportionate values for carbon dioxide and nitrogen
fractional values and to obtain subsequent values of these Components as may be required from
time to time.
	 
	12.10	 	Check Measurement. At the Receipt Point(s) SELLER may install check measuring
equipment at its own cost and expense; provided, such equipment shall be so installed as not
to interfere with the operations of the BUYER. BUYER’s meter shall be the meter used for all
measurement purposes. BUYER and SELLER, in the presence of each other, shall have access to
the other’s measuring equipment at all reasonable times; but the reading, calibrating, and
adjusting thereof, and the changing of charts, if any, shall be done only by the owner of the
meter or its representative unless otherwise agreed. Each party shall give notice sufficiently
in advance, and the other parties notified shall have the right to be present at the time of
any installing, reading, cleaning, changing, repairing, inspecting, testing, calibrating, or
adjusting done in connection with the other’s measuring equipment; provided, however, failure
of either party so notified to witness such an operation after due notification shall not
affect the validity of such operation in any way.
	 
	12.11	 	Sampling. BUYER shall obtain a sample at least annually of Gas at the Receipt
Point(s) by using methods contained in GPA Standard 2166 / API 14.1, as revised, “Methods for
Obtaining Natural Gas Samples for Analysis by Gas Chromatography.” This sample may be
obtained utilizing a spot sampler, continuous sampler, on-stream chromatograph or other
instruments approved by BUYER. SELLER may request that additional samples be taken in order
that SELLER may have its own sample tested independently. Any additional samples requested by
SELLER shall be at SELLER’s sole expense.
	 
	12.12	 	Composition, Gross Heating Value, Specific Gravity. The composition of the
Gas shall be determined from the sample of the Gas by using GPA Standard 2261, as revised,
“Method of Analysis for Natural Gas and Similar Gaseous Mixtures by Gas Chromatography,” with
the exception of sulfur compounds. The gallons per MCF and the Gross Heating Value of the Gas
shall be determined by using technically correct methods contained in GPA Standard 2172, as
revised, “Method for Calculation of Gross Heating Value, Specific Gravity,
and Compressibility of Natural Gas Mixtures from Compositional Analysis”, and the Gross
Heating Values from GPA Standard 2145, as revised from time to time, “Table of Physical
Constants






10









 









	 	 	for the Paraffin Hydrocarbons and Other Components of Natural Gas,” Each composition, Gross
Heating Value and Specific Gravity determination shall be effective until the next
determination. The Specific Gravity of the Gas shall be recorded to the nearest
one-thousandth (0.001).
	 
	12.13	 	Water Content. Gas delivered at the Receipt Point(s) shall be considered to be
saturated with water at measurement temperature and pressure, unless Gas has been dehydrated
to a water content of seven (7) Ibs/MMCF or less prior to the point of measurement. The water
content shall be determined by BUYER using practices contained in GPA 181, GPA 2172, AGA
Report No. 3 or other reasonable practices as determined appropriate by BUYER. Gas with
seven (7) Ibs/MMCF or less shall be considered dry, i.e. containing no water
	 
	12.14	 	Assumed Atmospheric Pressure. The atmospheric pressure shall be assumed to be the
average atmospheric pressure for the elevation as used by BUYER in that particular geographic
area regardless of the actual atmospheric pressure where Gas is measure.
	 
	12.15	 	Sulfur. The sulfur content shall be determined from tests taken at the Receipt
Point(s) by methods accepted in the industry, such as GPA Standard 2377, as revised, “Method
of Test for Hydrogen Sulfide and Carbon Dioxide in Natural Gas Using Length of Stain Tubes.”
Other sulfur species can be determined by chromatographic analysis conditional on the parties’
acceptance of the type of analysis to be used and the condition of the sample.
	 
	12.16	 	NGL Measurement. The Natural Gas Liquids removed by processing will be measured
using measurement equipment and practices accepted in the industry and supported by AGA, API
and/or GPA standards, as applicable.





XIII. NOTICES AND STATEMENTS





	13.1	 	All notices, statements, payments and other communications required or permitted
to be given hereunder shall be in writing and shall be deemed to have been effectively given when
delivered by facsimile or mailed by first class mail, addressed to the parties as follows:





	 	 	 	 	 
	NOTICE TYPE	 	BUYER	 	SELLER
	CONTRACTS

	 	ONEOK Texas Field Services, L. P.
	 	Peak Operating of Texas, LLC
	 

	 	Attn: Contract Administration
	 	Attn:
	 

	 	P. O. Box 871
	 	3473 Main Avenue, Suite 23
	 

	 	Tulsa, OK 74102-0871
	 	Durango, CO 81301
	 

	 	Telephone: (918)732-1307
	 	Telephone: ( 970) 247-1500
	 

	 	Fax: (918) 588-7466
	 	Fax: (970) 247-5424
	 
	 	 	 	 
	SCHEDULING

	 	ONEOK Texas Field Services, L. P.
	 	Peak Operating of Texas, LLC
	 

	 	Attn: Scheduling
	 	Attn:
	 

	 	P. O. Box 871
	 	3473 Main Avenue, Suite 23
	 

	 	Tulsa, OK 74102-0871
	 	Durango, CO 81301
	 

	 	Telephone: (918) 591-5000
	 	Telephone: (970) 247-1500
	 

	 	Fax:
	 	Fax: (970) 247-5424
	 
	 	 	 	 
	ACCOUNTING

	 	ONEOK Texas Field Services, L. P.
	 	Peak Operating of Texas, LLC
	 

	 	Attn: Accounting
	 	Attn:
	 

	 	P. O. Box 871
	 	3473 Main Avenue, Suite 23
	 

	 	Tulsa, OK 74102-0871
	 	Durango, CO 81301
	 

	 	Telephone: (918) 591-5000
	 	Telephone: (970) 247-1500
	 

	 	Fax:
	 	Fax: (970) 247-5424






11









 





	 	 	 	 	 
	PAYMENTS	 	By Check	 	By Check 
	 

	 	ONEOK Texas Field Services, L. P.	 	 
	 

	 	 	 	 
	 

	 	P.O. Box 972833	 	 
	 

	 	 	 	 
	 

	 	Dallas, TX 75397-2833	 	 
	 

	 	 	 	 





	 	 	 	 	 
	PAYMENTS	 	By Wire 	 	By Wire
	 

	 	Bank One, Oklahoma, NA	 	 
	 

	 	15 East 5th Street	 	 
	 

	 	Tulsa, OK 74103	 	 
	 

	 	ABA# 103000648	 	 
	 

	 	Bank Account #632945051	 	 
	TAX ID:
	 	 	 	 
	 

	 	 
	 	 






	13.2	 	Changes. Notices of change of address of any of the parties shall be given in
writing to the other in the manner aforesaid and shall be observed in the giving of all
future notices, statements, or other communications required or permitted to be given
hereunder.





XIV. DEFAULT





	14.1	 	If either party shall fail to perform any of the covenants and obligations imposed upon
it under and by virtue of this Agreement (except where such failure shall be excused under
any of the provisions of this Agreement), then in such event the other party may, at its
option, terminate this Agreement by proceeding as follows:






	 	14.1.1	 	The party not in default shall give notice stating specifically the cause for
terminating this Agreement and declaring it to be the intention of the party giving
the notice to terminate same.
	 
	 	14.1.2	 	The party in default shall have sixty (60) days after the service of the aforesaid
notice in which to remedy or remove cause or causes stated in the notice for
terminating this Agreement, and, if within said period of sixty (60) days, the party
in default does so remove or remedy said cause or causes and fully indemnifies and/or
reimburses the party not in default for any and all damages, losses, and consequences
of such breach, then such notice shall be withdrawn and this Agreement shall continue
in full force and effect.
	 
	 	14.1.3	 	In case the party in default does not so remedy and remove the cause or causes or
does not indemnify and/or reimburse the party giving the notice for any and all
damages, losses, and consequences of such breach within said period of sixty (60)
days, then this Agreement shall, at the expiration of said sixty (60) day period,
terminate, except as to all accrued obligations not yet discharged; provided, however,
that if such default be remedied but no indemnification therefore has been made due to
a bona fide dispute between the parties as to the amount thereof, then this Agreement
shall not terminate, but the party not in default shall have the right to seek
indemnification in any manner provided by law or by this Agreement.






Any cancellation of this Agreement, pursuant to the provisions of this Article,
shall be without




12









 









	 	 	prejudice to the right of the party not in default to collect any amounts due for
breach of this Agreement; provided, however, the provisions herein for termination of this
Agreement shall not apply if the failure of BUYER involves failure to pay any sum or amount
due hereunder, and BUYER’s refusal to pay is subject to a bona fide dispute, and BUYER pays
all amounts not in dispute; provided further, however, that any termination of this
Agreement for breach shall be carried out by the party not in default exclusively in
accordance with to the provisions set out in this Article.
	 
	14.2	 	No waiver of any default under this Agreement shall constitute a waiver of any other
default, whether of like or different character.





XV. DEFINITIONS





	15.1	 	For the purpose of this Agreement, unless the context clearly indicates otherwise, the
following definitions shall be applicable:






	 	15.1.1	 	BTU shall mean British Thermal Unit and is equal to 1055.05585262 Joule.
	 
	 	15.1.2	 	Business Day shall mean any day except Saturday, Sunday or Federal Reserve Bank
holidays starting at eight o’clock a.m. Central Standard Time.
	 
	 	15.1.3	 	Condensate shall mean the liquid hydrocarbons that are recovered from the Gas
in typical oil and Gas separators or pipeline drips, usually from changes in ambient or
ground temperature and/or pressure, but not from processing.
	 
	 	15.1.4	 	Cubic Foot of Gas for the purpose of measurement of the Gas delivered hereunder
shall mean the amount of Gas necessary to fill one cubic foot of space at a base pressure
of fourteen and seventy-three hundredths (14.73) pounds per square inch absolute and at a
base temperature of sixty degrees Fahrenheit (60°F) (“Base Conditions”) and shall be the
volume unit of measurement.
	 
	 	15.1.5	 	Day or day shall mean a twenty-four (24) consecutive hour period. For
measurement purposes described herein it will begin with the hour that is the then
beginning hour that is the standard practice of BUYER.
	 
	 	15.1.6	 	FL&U shall mean the sum of the MMBTU’s of field fuel and the MMBTU’s of lost
and unaccounted gas, but not including other fuel retained for services such as
compression and dehydration.
	 
	 	15.1.7	 	Gas or gas shall mean natural gas as produced from Wells in its natural state
that meets the quality specifications of Article V of this Agreement.
	 
	 	15.1.8	 	GPM shall mean gallons per MCF.
	 
	 	15.1.9	 	Gross Heating Value of the Gas shall mean the BTU content of one Cubic Foot of
Gas at defined conditions which is the number of BTU’s produced by the complete
combustion of such Cubic Foot of Gas, at constant pressure with air of the same
temperature and pressure as the Gas, when the products of combustion are cooled to the
initial temperatures of the Gas and air, and when water is formed by such combustion is
condensed to a liquid state at the initial temperature of the Gas.
	 
	 	15.1.10	 	Gross Heating Value of the NGL’s shall mean the BTU per gallon, fuel as ideal
gas, as described in the current GPA Standard 2145 with the exception of hexanes plus,
which shall be that recommended in the current GPA Standard 2261, i.e. 60% hexane, 30%
n-heptane and 10% n-octane
	 
	 	15.1.11	 	Lands and Lease(s) shall mean the contractual right to the title of and to the
minerals, including oil and gas, from geological formations on and below the properties
described in Exhibit “B” attached hereto and made a part hereof and as amended from time
to time, including certain surface rights as necessary to explore, develop, drill and
produce said minerals from such properties or lands.




13









 












	 	15.1.12	 	MCF shall mean one thousand (1,000) Cubic Foot of Gas.
	 
	 	15.1.13	 	MMBTU shall mean one million (1,000,000) British Thermal Units.
	 
	 	15.1.14	 	MMCF shall mean one million (1,000,000) Cubic Foot of Gas.
	 
	 	15.1.15	 	Month shall mean that period of time beginning on the first Day of a calendar
Month and ending on the first Day of the following calendar Month, except that the first
Month shall commence on the Day of initial receipt of Gas hereunder and shall end on the
first Day of the following calendar Month.
	 
	 	15.1.16	 	Natural Gas Liquids or NGL’s shall mean those liquid hydrocarbons extracted
from the Gas from processing. The components (“Components”) of the NGL’s are identified
as ethane, propane, iso-butane, normal butane, natural gasolines and incidental methane
and other miscellaneous liquids that become associated with the NGL’s.
	 
	 	15.1.17	 	Psig shall mean pounds per square inch gauge.
	 
	 	15.1.18	 	Psia shall mean pounds per square inch absolute.
	 
	 	15.1.19	 	Plant(s) shall mean Gas processing facilities where Natural Gas Liquids and
other Plant Products are separated from the Gas.
	 
	 	15.1.20	 	Plant Products shall mean the Natural Gas Liquids and helium, if any, as
extracted from processing.
	 
	 	15.1.21	 	Receipt Point(s) shall mean the inlet flange of BUYER’S pipeline facilities
installed to take deliveries of Gas from SELLER.
	 
	 	15.1.22	 	Water Content shall mean the water vapor content of one Cubic Foot of Gas at
Base Conditions. The Gas not dehydrated to a Water Content of less than seven (7) pounds
per MMCF prior to delivery by SELLER at the Receipt Point(s) shall be considered to be
saturated with water at Base Conditions. Gas with a Water Content equal to or less than
seven (7) pounds per MMCF shall be considered to be dry at Base Conditions
	 
	 	15.1.23	 	Wells shall mean the Well or Wells productive of Gas from all geological
formations which is completed on the Leases described in Exhibit “B” attached hereto and
in which SELLER has an interest, owns or controls the right to dispose of Gas produced
therefrom.
	 
	 	15.1.24	 	Year shall mean any period of twelve (12) consecutive calendar Months.





XVI. MISCELLANEOUS





	16.1	 	Changes. All modifications, ratifications, amendments or changes to this
Agreement, whether  made simultaneously with or after the execution of this Agreement shall
be in writing, executed by both BUYER and SELLER, and attached hereto.
	 
	16.2	 	Regulation. This Agreement shall be subject to all valid rules, regulations,
interpretations, and orders of any duly constituted federal or state regulatory body having
jurisdiction hereof. This Agreement and the respective rights and obligations of the parties
hereto are subject to all existing and future laws, statutes, rules, regulations, orders or
directives promulgated by any duly constituted state or federal governmental authority,
regulatory body or commission having jurisdiction or control over the parties, their
respective facilities or services contemplated herein. Should either party be ordered or
required to do any act inconsistent with the provisions of this Agreement, this Agreement
shall be deemed modified to conform to the requirements of such law or regulation. If any
provision of this Agreement is held to be illegal, invalid, unenforceable or have a material
and substantial negative impact on the rights, duties or obligations of either party, then the
parties shall meet in good faith to determine if such negative impact can be eliminated or
mitigated. If such negative impact cannot be eliminated or mitigated to the satisfaction of
either party, then either party shall have the right to terminate this Agreement.










14









 












	16.3	 	Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, successors and assigns, and the
assigns of any oil and gas leases or interests subject to the terms hereof, and shall
constitute a covenant running with lands, leaseholds and interests covered hereby. Any
assignment, transfer or conveyance hereof shall expressly require that the assignee assume
and agree to discharge the duties and obligations of its assignor under this Agreement. No
assignment, transfer or conveyance of this Agreement or of any interest of either party
herein shall be binding upon the other until such party has been notified, in writing, of
such assignment, transfer or conveyance and furnished a true copy of same. No such
assignment, conveyance or transfer of either party shall in any way operate to enlarge, alter
or modify any obligation of the other party or parties hereto.
	 
	16.4	 	Entire Agreement. This Agreement contains the entire agreement between the parties
hereto and there are no oral promises, agreements, or warranties affecting same.
	 
	16.5	 	Headings. The topical headings and index used herein are inserted for convenience
only and shall not be construed as having any substantive significance or meaning whatsoever,
or as indicating that all of the provisions of this Agreement relating to any particular topic
are to be found in any particular section.
	 
	16.6	 	Interpretations. The parties hereto agree and confirm that, in the
consideration and interpretation of this Agreement, same shall be construed under the laws of
the State of Texas, excluding any conflicts of law, rule, principle, or law which might refer
to the laws of another state and this Agreement was prepared by all parties hereto and not by
any party to the exclusion of the other or others.
	 
	16.7	 	Independent Contractor. It is not the intention of the parties hereto to create,
nor is there created hereby, a partnership, joint venture, or association. The status of each
party hereunder is solely that of an independent contractor.
	 
	16.8	 	Confidentiality. SELLER AGREES THAT THE TERMS AND CONDITIONS OF THIS AGREEMENT WILL
BE HELD CONFIDENTIAL AND SHALL NOT BE DISCLOSED TO OTHER PARTIES WITHOUT CONSENT OF BUYER
UNLESS THAT DISCLOSURE IS REQUIRED BY FEDERAL OR STATE LAW OR AGENCY. SELLER SHALL FURNISH
BUYER PROMPT NOTICE IF SUCH DISCLOSURE IS MADE.
	 
	16.9	 	Damages.






	 	16.9.1	 	In no event shall either party be liable to the other for consequential,
incidental, special, punitive, indirect damages, lost profits, or other business
interruption damages in connection with the performance or nonperformance of the
parties under this Agreement.
	 
	 	16.9.2	 	THE PARTIES CERTIFY THAT THEY ARE NOT “CONSUMERS” WITHIN THE MEANING OF THE TEXAS
DECEPTIVE TRADE PRACTICES CONSUMER PROTECTION ACT, SUBCHAPTER E OF CHAPTER 17,
SECTIONS 17.41 ET SEQ. OF THE TEXAS BUSINESS AND COMMERCE CODE, AS AMENDED, (“DTPA”).
THE PARTIES COVENANT, FOR THEMSELVES AND FOR AND ON BEHALF OF ANY SUCCESSOR OR
ASSIGNEE, THAT, IF THE DTPA IS APPLICABLE TO THIS AGREEMENT, (1) THE PARTIES ARE
“BUSINESS CONSUMERS” AS THAT TERM IS DEFINED IN THE DTPA, (2) OTHER THAN SECTION 17.555
OF THE TEXAS BUSINESS AND COMMERCE CODE, EACH PARTY HEREBY WAIVES AND RELEASES
ALL OF ITS RIGHTS AND REMEDIES THEREUNDER AS APPLICABLE TO THE OTHER PARTY AND ITS
SUCCESSORS AND ASSIGNS, AND (3) EACH PARTY SHALL DEFEND AND INDEMNIFY THE OTHER PARTY
FROM AND AGAINST ANY AND ALL CLAIMS OF OR BY THE INDEMNIFYING PARTY OR ANY OF
ITS SUCCESSORS AND ASSIGNS OR ANY OF ITS OR THEIR AFFILIATES OR





15









 






SUBSIDIARIES BASED IN WHOLE OR IN PART ON THE DTPA ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT.



     IN WITNESS WHEREOF, the parties have executed this Agreement in one or more copies
or counterparts, each of which, when executed by BUYER and SELLER, shall constitute and
be an original effective Agreement between BUYER and such SELLER.



	 	 	 	 	 	 	 	 	 	 	 
	“BUYER”	 	 	 	“SELLER”	 	 
	ONEOK Texas Field Services, L.P.	 	 	 	PEAK OPERATING OF TEXAS, LLC	 	 
	a limited partnership	 	 	 	 	 	 	 	 
	By: ONEOK Field Services Co.	 	 	 	 	 	 	 	 
	general partner	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By

	 	/s/ Terry Spencer
 

	 	 	 	By
	 	/s/ Jack E. Vaughn
 

	 	 
	 
	Name:

	 	Terry Spencer
	 	 	 	Name:
	 	Jack E. Vaughn	 	 
	 
	Title:

	 	Vice President
	 	 	 	Title:
	 	President	 	 
	 
	Date:

	 	3/31/04
	 	 	 	Date:
	 	March 19, 2004	 	 







16









 









EXHIBIT “A”

Percent of Proceeds

Allocated Plants




     This Exhibit “A” is incorporated into that certain Gas Purchase Agreement dated the first day
October, 2003, by and between ONEOK Texas Field Services, L. P., hereinafter referred to as
“BUYER,” and Peak Operating of Texas, LLC, hereinafter referred to as “SELLER.”



BASIS OF COMPENSATION shall be the sum of the following:





	1.	 	NGL Products Payment. (**)
	 
	2.	 	Residue Gas Payment. (**)
	 
	3.	 	Compression Fee. (**)
	 
	4.	 	Gathering Fee. (**)
	 
	5.	 	Dehydration Fee.(**)
	 
	6.	 	Treating Fee.(**)





DEFINITIONS: ‘



(**)


17









 








EXHIBIT “B”




     This Exhibit “B” is incorporated into that certain Gas Purchase Agreement dated
the 1st day of October, 2003, by and between ONEOK Texas Field Services, L. P.,
hereinafter referred to as “BUYER,” and Peak Operating of Texas, LLC, hereinafter referred
to as “SELLER.”




	1.	 	SELLER dedicates to this Gas Purchase Agreement, as amended from time to time,
the Wells and Leases described below:





	 	 	 	 	 	 	 	 	 	 	 
	Wells	 	Lands/Lease Description	 	County	 	State	 	*WI%
	 

	 	(**)
	 	Hemphill
	 	TX
	 	 	100	%
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	(**)
	 	Hemphill
	 	TX
	 	 	100	%





This dedication excludes the following wells producing from the
designated zones, which are under terms of another contract:




	 	 	 
	(**), Hemphill County, TX

	 	Chert
	 
	 	 
	(**), Hemphill County, TX

	 	Strawn Granite Wash
	 
	 	 
	(**), Hemphill County, TX

	 	Strawn Granite Wash








 




			
	*	 	Includes owned or controlled interest.






19









 








EXHIBIT “C”



Quality Specifications. Unless excepted by specific exemption on Exhibit “B” attached
hereto, Gas from each Receipt Point(s) shall meet the following quality specifications:





Hydrogen Sulfide. The Gas shall not contain more than one part per million (1 ppm) of
hydrogen
sulfide by volume as determined by a method generally acceptable for use in the gas industry and
to the parties hereto.




Total Sulfur. The Gas shall not contain more than one quarter (1/4) grain of total
sulfur per one hundred (100) Cubic Foot of Gas as determined by a method generally acceptable for use in the
gas industry and to the parties hereto.




Temperature. The Gas shall not have a temperature of less than forty degrees Fahrenheit
(40°F) nor more than one hundred-twenty degrees Fahrenheit (120°F).




Carbon Dioxide. The Gas shall not contain in excess of two percent (2.0%) by volume of
carbon dioxide.




Nitrogen. The Gas shall not contain in excess of two percent (2%) by volume of nitrogen.




Oxygen. The Gas shall not contain in excess of ten parts per million (10 ppm) by
volume of oxygen.




Objectionable Liquids, Solids, Contaminants. The Gas shall be free of liquids and solids
and other
potentially harmful contaminants such as arsenic, mercury, selenium, radon, or antimony, Well
treating chemicals, dust, gums, gum-forming constituents, or other objectionable liquid or solid
matter.




Hazardous Waste. The Gas shall be free from all “hazardous waste” as defined in the
Resources
Conservation and Recovery Act, 42 USC 6901, et seq.




Water. The Gas shall not contain free water. Gas which contains in excess of seven (7)
pounds of water vapor per one million (1,000,000) Cubic Foot shall incur a charge for dehydration service
as shown in Exhibit “A” attached hereto.




Mercaptans. The Gas shall have a mercaptan content not in excess of one tenth of one
part per
million (0.1 ppm) by volume.




Hydrogen. The Gas shall contain no carbon monoxide, halogens, or unsaturated
hydrocarbons, and
no more than four hundred parts per million (400 ppm) of hydrogen.




Hydrocarbon Constituents. The Gas shall have not less than a ninety-five percent (95%)
hydrocarbon constituency by volume and shall have a Heating Value of not less than one thousand
(1,000) BTU per Cubic Foot.




20