Document:

Exhibit
10.105

 

THE
COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE
“COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS.  ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE
BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE
COMMISSION.  OMITTED PORTIONS ARE
INDICATED IN THIS EXHIBIT WITH “*****”.

 

 

	
  

  

 

March 25, 2009

 

Cano Petroleum, Inc.

801 Cherry Street, Suite 3200 Unit 25

Fort Worth, Texas 76102-6882

 

Re:          Gas
Purchase Agreement dated April 1,  2007,
Eagle Rock Contract (#50038 Schafer)

 

Gentlemen:

 

Eagle
Rock Field Services, L.P. (“Eagle Rock”) and W.O. Operating Company, Ltd. (“Producer’)
are parties to that certain Gas Purchase Agreement dated April 1, 2007,
covering the purchase of gas from various properties located in Carson, Gray,
Hutchinson, and Wheeler Counties, Texas (‘Agreement”).

 

Due to
the recent downward spiral of oil and gas prices, the continued purchase of gas
under the terms of the Agreement have become uneconomic to Eagle Rock.  Therefore, in lieu of Eagle Rock exercising
its right to terminate the Agreement in accordance with Article IV., Reservations
of Seller and Buyer, Section 4.2.3 Uneconomic, effective May 1,
2009 (“Renegotiation Effective Date”) Eagle Rock proposes to 1) delete Exhibit “A” &
Exhibit “C” therefrom and replace with the new Exhibit “A-1” &
Exhibit “C-1” attached hereto (any reference in the Agreement to Exhibit “A” &
Exhibit “C” would include Exhibit “A-1” & Exhibit “C-1”),
and 2) delete Section 2.1 of the Agreement and replace with the following,
respectively:

 

“2.1 Term. This
Agreement shall be effective April 1, 2007 (“Effective Date”) and shall
continue through April 30, 2012 (“Primary Term”), and Month to Month
thereafter until terminated, such termination to be effective at the end of the
Primary Term or any Month thereafter by either party giving at least thirty
(30) Days prior written notice to the party or to be effective as otherwise
provided by this Agreement.”

 

Should
the change in terms as described above and on the attached Exhibit A-1 be
acceptable to Producer, please secure execution of both originals of this
Letter Amendment on behalf of your company in the space provided and return one
(1) executed original to the undersigned by the Renegotiation Effective
Date.  However, in the event Eagle Rock
has not received this Letter Amendment executed by Producer by the
Renegotiation Effective Date, please accept this letter as Eagle Rock’s
official written notice of Agreement termination to be effective on the
Renegotiation Effective Date.

 

In the
event Producer does not elect to execute and return this Letter Amendment by
the Renegotiation Effective Date and Producer continues to deliver gas to Eagle
Rock after the Renegotiation Effective Date, any deliveries of gas tendered to
Eagle Rock after the Renegotiation Effective Date may be accepted by Eagle Rock
on a fully interruptible day to day non committal basis and priced to Producer
as non committed as.  At this time, the
general pricing terms for non committed gas shall be the same as those detailed
in the terminated Agreement and on the attached Exhibit “A-1”.  All other standard general terms and
conditions for gas purchases made by Eagle Rock shall apply to day to day non
committed

 

	
  16701 Greenspoint Park
  Drive, Suite 200

  	
   

  
	
  Houston, Texas 77060

  	
   

  
	
   

  	
   

  
	
  281.481.1200 Office

  	
   

  
	
  281.408.1399 Fax

  	
  WWW.EAGLEROCKENERGY.COM

  
	
   

  	
   

  

2

 

purchases.
 However, Eagle Rock reserves the right
not to accept any specific quantity of non committed gas and to change or amend
the pricing terms for non committed gas at any time without prior notice to
Producer.

 

Should
you have any questions, please give me a call at 281 -408-1206.

 

If
this meets with your understanding of our agreement, please secure execution of
this letter agreement on behalf of Producer and return one (1) fully
executed copy to my attention by May I, 2009.  Should you have any questions, please give me
a call at 281-408-1206.

 

	
  Sincerely,

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ J. Stacy Horn

  	
   

  	
   

  
	
  J. Stacy Horn

  	
   

  	
   

  
	
  V.P. Commercial
  Development

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Accepted and Agreed to
  this     Day
  of        2009. 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  W.O. Operating Company,
  Ltd.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
  Date:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  cc:

  	
  Mr. Patrick M.
  McKinney

  	
   

  	
   

  
	
   

  	
  CANO
  Petroleum, Inc.

  	
   

  	
   

  
	
   

  	
  801 Cherry Street,
  Suite 3200

  	
   

  	
   

  
	
   

  	
  Fort Worth, Texas 76102

  	
   

  	
   

  

 

3

 

EXHIBIT “A-1”

Percent of Proceeds

Allocated Plants

 

This
Exhibit “A-1” is incorporated into that certain Gas Purchase Agreement
dated April 1, 2007, by and between Eagle Rock Field Services, L.P.,
hereinafter referred to as “BUYER”, and W.O. Operating Company, Ltd.
hereinafter referred to as “SELLER.”

 

BASIS OF COMPENSATION shall
be the sum of the following:

 

1.              NGL Products Payment & Residue Gas Payment. BUYER shall pay to SELLER an amount of the Net NGL Proceeds and the Net
Residue Proceeds in accordance with the following table:

 

	
  Monthly
  Average Volume (Mcf/Day)

  	
   

  	
   

  	
   

  
	
  At Each Receipt
  Point

  	
   

  	
  SELLER’s %

  	
   

  
	
  <10

  	
   

  	
  *****

  	
  %(1)

  
	
  11-20

  	
   

  	
  *****

  	
  %(1)

  
	
  21-50

  	
   

  	
  *****

  	
  %(1)

  
	
  51-100

  	
   

  	
  *****

  	
  %(1)

  
	
  101-200

  	
   

  	
  *****

  	
  %(1)

  
	
  >200

  	
   

  	
  *****

  	
  %(1)

  

 

2.             Compression Fee. NA

 

3.             Gathering Fee. NA

 

4.             Dehydration Fee. NA

 

5.             Treating Fee. In the event the Gas received at a Receipt Point contains a Hydrogen Sulfide content
greater than the contract specification contained on Exhibit “C-1” hereof,
and BUYER elects to accept and treat
such gas for the removal of Hydrogen Sulfide, BUYER shall deduct from payments
due SELLER a gas treating fee of thirty five cents ($.35) per Mcf
received at such Receipt Point.  However,
nothing herein shall obligate BUYER to accept Gas containing Hydrogen Sulfide
in excess of the maximum specification
contained on Exhibit “C-I” hereof.

 

6.             Oxygen/Nitrogen
Blending Fee. In the event the Gas
received at a Receipt Point contains Oxygen and/or Nitrogen in excess of the
contract specification contained on Exhibit “C” hereof, and BUYER elects
to accept such out of specification Gas, BUYER shall have the right to reduce
SELLER’s percentage of Net NGL Proceeds and the Net Residue Proceeds for Gas
delivered to such Receipt Point by *****(1). However,
nothing herein shall obligate BUYER to accept Gas containing Oxygen and/or
Nitrogen in excess of the maximum specification contained on Exhibit “C-1”
hereof.

 

(1) THE
COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE
“COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS.  ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE
BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE
COMMISSION.  OMITTED PORTIONS ARE
INDICATED IN THIS EXHIBIT WITH “*****”.

 

 

Exhibit “A-1” Continued

 

EXHIBIT A-1 DEFINITIONS:

 

SELLER’s NGL Products shall be
determined by multiplying the total quantity of each NGL Component saved and
sold at the Plant(s) by a fraction, the numerator of which shall be the
theoretical gallons of such Component contained in SELLER’s Gas delivered at
the Receipt Point(s) and the denominator of which shall be the total
theoretical gallons of each Component contained in all Gas delivered to BUYER’s
facilities upstream of the Plant(s).

 

Net NGL Proceeds shall be the
sum of each Component of SELLER’s NGL Products multiplied by the Monthly
Average NGL Sales Price of each Component.

 

Monthly Average NGL Sales Price shall mean *****(2) of the weighted average net
price received by BUYER f.o.b. BUYER’s Plant for the sale of each NGL Component.
 The Monthly Average NGL Sales Price
shall be less all third party costs, including, but not limited to ngl
transportation, marketing, fractionation, storage, and line fill costs.

 

Residue Gas shall mean the
total quantity of MMBTU’s of gas (both processed and unprocessed) sold at the
tailgate of BUYER’s Plant(s) processing SELLER’s Gas.

 

NGL Shrinkage  shall be the
sum of the BTU equivalent (BTU/gal, fuel as ideal gas) of each such NGL
Component as set forth in the OPA Standard 2145, as revised, “Table
of Physical Constants of Paraffin Hydrocarbons and Other Components of Natural
Gas with the exception of hexanes plus, the value of which shall be 117,007 BTU
per gallon.

 

Residue Price shall mean
weighted average net price per MMBTU received by BUYER for the sale of Residue
Gas, f.o.b. BUYER’s Plant(s) processing SELLER’s Gas, less a gas marketing
fee of *****(2) per MMBTU of
Residue Gas.  The Residue Price shall be
less all third party costs, including, but not limited to gas marketing fees,
down stream transportations costs, gas storage costs, and imbalance costs or
penalties assessed to BUYER by the down stream market or transporting pipeline.

 

Net Residue Proceeds shall be determined
by multiplying SELLER’s Residue Gas by the Residue Price.

 

SELLER’s Residue Gas shall be the
total MMBTU’s of Residue Gas multiplied by a fraction, the numerator of which
shall be the MMBTU’s contained in SELLER’s Gas at the Receipt Point(s), less
the MMBTU’s of NGL Shrinkage attributable to SELLER’s NGL Products and less any
Residue Gas returned to SELLER, and the denominator of which shall be the total
MMBTU’s of all gas delivered to BUYER upstream of BUYER’s Plant less NGL
Shrinkage attributable to the total quantity of NOL Components saved and sold
from BUYER’s Plant(s).

 

(2) THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND
EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED
PORTIONS.  ACCORDINGLY, THE CONFIDENTIAL
PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY
WITH THE COMMISSION.  OMITTED PORTIONS
ARE INDICATED IN THIS EXHIBIT WITH “*****”.

 

 

EXHIBIT “C-1”

Gas Quality Specifications

 

This
Exhibit “C-1” is incorporated into that certain Gas Purchase Agreement
dated April 1, 2007, by and between Eagle Rock Field Services, L,P.,
hereinafter referred to as “BUYER”, and W.O. Operating Company, Ltd.
hereinafter referred to as “SELLER.”

 

Quality
Specifications.  Unless excepted by specific exemption on Exhibit “A-1”
attached hereto, Gas from each Receipt Point(s) shall meet the following
quality specifications:

 

Hydrogen Sulfide.  The
Gas shall not contain more than four parts per million (4  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 sulfer 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 three-tenths of two percent (2%) by volume of
carbon dioxide.

Nitrogen.  The Gas
shall not contain in excess of three percent (3%) by volume of nitrogen. Oxygen.
 The Gas shall not contain in excess
often 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.Exhibit 10.106

 

	
  

  

 

April 30, 2009

 

Cano Petroleum, Inc.

801 Cherry Street, Suite 3200 Unit 25

Fort Worth, Texas 76102-6882

 

Re:           Gas Purchase
Agreement dated April 1,  2007,
Eagle Rock Contract (#50038 Schafer)

 

Gentlemen:

 

Eagle Rock Field Services LP. (“Eagle Rock”) and W.O. Operating
Company, Ltd. (“Producer”) are parties to that certain Gas Purchase Agreement
dated April 1, 2007, covering the purchase of gas from various properties
located in Carson, Gray, Hutchinson, and Wheeler Counties, Texas (“Agreement”).

 

Pursuant to Eagle Rock’s renegotiation letter dated March 25,
2009, the new pricing terms proposed by Eagle Rock are to take effect on May 1,
2009, the Renegotiation Effective Date.  However,
Eagle Rock is still preparing data for Producer to fully review the terms of
the proposal, and the parties are continuing good faith negotiations that will
not be complete by the Renegotiation Effective Date.  Therefore, the parties desire to extend the “Renegotiation
Effective Date” from May I, 2009 until June 1, 2009 to complete such
negotiations.

 

If this meets with your understanding of our agreement, please secure
execution of this letter agreement on behalf of Producer and return one (1) fully
executed copy to my attention by May I, 2009.  Should you have any questions, please give me
a call at 281-408-1206.

 

	
  Sincerely,

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ J. Stacy Horn

  	
   

  	
   

  
	
  J. Stacy Horn

  	
   

  	
   

  
	
  V.P. Commercial
  Development

  	
   

  	
   

  
	
  Eagle Rock Field
  Services, L.P.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Accepted and Agreed to
  this 31st  Day of
  April 2009. 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  W.O. Operating Company,
  Ltd.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Ben Daitch

  
	
   

  	
   

  	
  Title:

  	
  VP & CFO

  
	
   

  	
   

  	
   

  	
   

  
	
  16701 Greenspoint Park
  Drive, Suite 200

  	
   

  	
   

  	
   

  
	
  Houston, Texas 77060

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  281.481.1200 Office

  	
   

  	
   

  	
   

  
	
  281.408.1399 Fax

  	
   

  	
   

  	
  WWW.EAGLEROCKENERGY.COM

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00160-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00160-of-00352.parquet"}]]