Document:

exv10w6

 

Exhibit 10.6

GAS PURCHASE AGREEMENT

CONTRACT #5389

THIS AGREEMENT, MADE THIS 14th day of September, 2005 by and between CGAS Exploration, Inc.,
a(n) Ohio corporation located at 300 Capital Street, Suite 700, Charleston, WV 25301 hereinafter
called “Seller”, and Exelon Energy Company, a Delaware corporation, with headquarters located at
2315 Enterprise Drive, Westchester, IL 60154, hereinafter called “Exelon”.

WITNESSETH:

WHEREAS, Seller has developed a supply of natural gas (“Gas”) available for sale on the
pipeline system of The Dominion East Ohio Gas Company (“DEO”) from the meters enumerated and
described on Exhibit “A” attached hereto, which may be amended from time to time by mutual
agreement, all of which are made a part hereof by reference; and

WHEREAS, Seller is the owner of such Gas or is the authorized agent for the owner or owners of such
Gas and therefore has the authority to contract for the sale of such Gas; and

WHEREAS, Seller desires to sell and agrees to sell, for itself and those owners for which it is the
authorized selling agent, and to deliver to Exelon, at the Delivery Point hereinafter specified,
Gas produced from the meters described on Exhibit “A”, hereinafter referred to as “the Meters”; and

WHEREAS, Exelon is willing to purchase from the Seller the Gas produced from the Meters on a
best-efforts basis for resale to its end use customers at the rates and subject to the terms,
conditions, and limitations herein provided.

NOW THEREFORE, in consideration of their mutual promises contained herein the parties agree as
follows:

	1.	 	AGREEMENT.
	 
	 	 	Subject to terms and conditions herein contained, Exelon shall buy the Gas delivered to it
by Seller at the Delivery Point. Seller shall deliver and sell to Exelon all the Gas owned,
produced or purchased by Seller from the Meters, excepting only such quantity as the Seller
may require for leasehold operations on said premises and such quantity as may be reserved
to the landowners by virtue of the underlying oil and gas lease(s).
	 
	2.	 	TERM.
	 
	 	 	This Agreement shall commence with the DEO November 2005 production period and
continue through the DEO March 2007 production period. Thereafter, this Agreement shall
continue on a month-to-month basis unless terminated by either party upon forty-five (45)
days advance written notice of termination. For purposes of termination notices, it shall be
assumed that the production period commences on the first calendar day of the month. Subject
to the other provisions hereof, delivery of Gas shall begin as soon as DEO accepts
deliveries from the Meters.

 

 

	3.	 	PRICE.
	 
	 	 	Subject to the other terms and provisions of this Agreement, Exelon shall pay Seller
a monthly market price based upon the monthly Nymex futures contract settlement plus
ninety-four cents ($0.94) per
enhanced MCF (as adjusted by DEO pursuant to the Production Enhancement Agreement for
locally produced gas), for the Gas delivered to the DEO Delivery Point(s) inclusive of all
gathering, metering, and production costs incurred to deliver Seller’s Gas to the Delivery
Point(s). Seller may request the conversion from a Monthly Nymex price to a Fixed Price for
increments of 10,000 mcf per month for any forward month or combination of months through
the contract term at any time prior to 11:30 a.m. Eastern Standard Time, five (5) business
days prior to the monthly Nymex contract settlement day. This conversion shall not be
effective until confirmed by an authorized Exelon representative. In the event the actual
metered production falls short of the converted Fixed Price volume by more than 10%, Exelon
may, at its option, recover from Seller any expenses incurred as a result of the under
production.
	 
	4.	 	CONNECTION TO THE DELIVERY POINT.
	 
	 	 	For purposes of this Agreement, “Delivery Point(s)” shall be the point of
interconnection between Seller’s gathering facilities and DEO’s gathering and/or
transmission facilities. Seller shall be responsible for any and all costs and facilities
necessary to deliver Gas from the Meters to the “Delivery Point(s)” including gathering and
pipeline costs, if any, meters, appurtenant fixtures, gathering lines and fittings,
compression costs, and any other equipment located prior to or necessary for the connection
to the Delivery Point(s). Exelon shall designate the account(s) on the DEO system that will
receive Gas at the Delivery Point(s) including Exelon’s pools and industrial end-use
accounts.
	 
	5.	 	VOLUME.
	 
	 	 	Seller shall sell to Exelon and Exelon shall use its best efforts to purchase all of
the Gas produced from the
Meters identified in Exhibit “A” attached hereto and made a part hereof, except with respect
to Gas used or
sold to satisfy Seller’s obligations to landowners arising out of the underlying oil and gas
leases and Gas used in leasehold operations. Seller estimates of the aggregate volume from
the Meters identified in Exhibit “A” to be approximately 150,000 enhanced Mcf per DEO-28 day
production period. At Exeion’s request, Seller agrees to notify Exelon within five (5) days
of any material (i.e. greater than 10% variance of the current
production period vs. the
prior production period) change in the monthly estimate or the average daily production
rate. Seller understands that such information is vital in Exelon’s management of its DEO
pools and end use accounts. Failure of Seller to provide such information on a timely basis
to Exelon shall provide Exelon with the right to assess any charges upon Seller, as
reasonably determined by Exelon, to result from Seller’s failure to comply with these
notification provisions.
	 
	6.	 	SPECIFICATIONS.
	 
	 	 	All Gas delivered hereunder must conform to DEO’s specifications in regard to
quality, heating value and all other operational standards and requirements including all
requirements for production receipt points and gas delivery under transportation tariffs and
pooling agreements of DEO which are incorporated herein by reference, as the same may be
amended or modified from time to time.

2

 

	7.	 	STATEMENTS AND PAYMENT.
	 
	 	 	The volumes of Gas delivered pursuant hereto shall be determined by the measurement
procedures used by DEO, as the same may be amended or modified from time to time, with
volumes produced from the Meters identified in Exhibit “A” to be dedicated to Exelon’s
account by Seller. Within two business days of the receipt of actual metered volumes from
DEO, Exelon shall render to Seller a statement showing the quantity of Gas delivered from
Wells during the most recent DEO production period for which DEO has provided final Gas
Delivery Statements. On the last day of each month or the first business day thereafter,
Exelon shall remit to Seller the amounts due for the volumes of Gas delivered pursuant to
this Agreement for the applicable DEO production period. (For example: Gas Delivery
Statements for the DEO April production period (received from DEO on or around May
25th) will be provided by Exelon to Seller via email on or around May
27th and
payment rendered on or around May 31st via wire transfer or ACH payment.)
Unless otherwise specifically agreed, Exelon shall make a deduction from the amounts due
Seller for the Ohio Oil & Gas Energy Education Program (OOGEEP) assessment which is
currently set by OOGEEP at one-tenth of one cent ($0.001) per mcf.
Exelon will remit these
funds to OOGEEP on a timely basis. Seller represents that all stations included on Exhibit A
are participating in the DEO Production Enhancement Program and authorizes Exelon to make a
deduction from the amounts due hereunder at the rates as specified by DEO and The Ohio Oil &
Gas Association (OOGA). Exelon agrees to remit the funds to OOGA or its agent in a timely
manner.
	 
	 	 	Any payments made by Exelon to Seller on the basis of such statements shall, to the extent
of the amount of such payment, constitute full acquittance to Exelon for the purchase price
of the Gas purchased under this agreement and Exelon shall be under no obligation to see
that proper allocation is made by Seller. In the event Gas volumes credited by DEO are
subsequently adjusted, payment or credit for such adjustments shall be included in the next
scheduled payment. No retroactive adjustment shall be made for any period beyond twelve (12)
months from the date a discrepancy occurred. In the event Seller disputes the volume
reported by DEO, Seller and Exelon agree to cooperate in providing necessary information to
DEO to attempt to resolve such dispute. In any event, Exelon shall pay to Seller the amount
not in dispute pending resolution of the dispute. The obligation to make payment or refunds
hereunder shall survive the termination or cancellation of this Agreement.
	 
	8.	 	TITLE, WARRANTY AND INDEMNITY.
	 
	 	 	Unless otherwise specifically agreed, title to the Gas shall pass from Seller to Exelon at
the Delivery Point(s). Exelon shall have responsibility for and assume any liability with
respect to said Gas after its delivery to Exelon at the Delivery Point(s).
	 
	 	 	Seller warrants that it has the right to convey, or has due authorization to sell on behalf
of others, and will transfer good and merchantable title to all Gas
sold hereunder and
delivered by it to Exelon, free and clear of all liens, encumbrances and claims whatsoever.
In the event any claim related to this provision is asserted against Exelon at any time with
respect to any of the Gas sold hereunder, Exelon may withhold payment arising from the sale
of Gas under this Agreement in the amount of such claim or the amount
attributable to the
Meters in dispute, without interest, until such claim has been finally determined or until
Seller has provided a bond or other surety acceptable to Exelon.
	 
	 	 	Seller agrees to indemnify Exelon and save it harmless from all losses, liabilities or
claims including attorneys’ fees and costs of court (“Claims”) from any and all persons,
arising from or out of claims of title, personal injury or property damage from said Gas or
other charges thereon which attach before title passes to Exelon. Exelon agrees to indemnify
Seller and save it harmless from all Claims, from any and all persons, arising from or out
of claims regarding payment, personal injury or property damage from said Gas or other
charges thereon which attach after title passes to Exelon.
	 
	 	 	Notwithstanding the other provisions of this Section 8, as between Seller and Exelon, Seller
will be liable for all Claims to the extent that such arise from the failure of Gas
delivered by Seller to meet the quality requirements of Section 6, SPECIFICATIONS.

3

 

	9.	 	TAXES.
	 
	 	 	Seller shall pay, or cause to be paid, all production, severance, ad valorem or other
taxes levied or imposed on the Gas delivered prior to the Delivery Point. Exelon shall pay,
or cause to be paid, all taxes levied on the Gas after the Delivery Point. If a party is
required to remit or pay taxes, which are the other party’s responsibility hereunder, the
party responsible for such taxes shall promptly reimburse the other party for such taxes.
Any party entitled to an exemption from any such taxes or charges shall furnish the other
party any necessary documentation thereof.
	 
	10.	 	FORCE MAJEURE.
	 
	 	 	No failure or delay in performance, whether in whole or in part, by either Exelon or Seller,
shall be deemed to be a breach hereof when such failure or delay is occasioned by or due to any
act of God, strike, lockout, or other industrial disturbance, act of public enemy, sabotage, war
(whether or not an actual declaration is made thereof), blockage, insurrection, riot, epidemic,
landslide, lightning, earthquake, flood, storm, fire, washout, arrest and restraint of ruler or
people, civil disturbance, explosion, breakage or accident to machinery or line of pipe, lack of
pipeline capacity, repair, maintenance, improvement, replacement or alteration to any transmission
facility, delay in transportation, temporary failure of Gas supply, freezing of the well or
delivery facility, well blowout, cratering, partial or entire failure of the gas Well(s) and the
act of any court or governmental authority, or any other cause, whether of the kind enumerated or
otherwise, not within the control of the party claiming suspension and the affected party gives
written notice and reasonably full particulars to the other party and uses reasonable diligence to
again put itself in a position to carry out all of its obligations. Exelon shall not be relieved
of its obligation to make payment for Gas delivered hereunder. The force majeure condition shall
be remedied so far as practicable with reasonable dispatch. If at some future date there is a
change in any law, rule or regulation and, by such change, a governmental certificate or
authorization is required or Exelon is prevented, prohibited or
frustrated from carrying
out the terms of this Agreement in the manner contemplated hereunder, this Agreement, at the sole
discretion of Exelon, may be canceled.
	 
	11.	 	NOTICES.
	 
	 	 	Any notice, request, statement or payment provided for in this Agreement shall be in
writing, shall be deemed to have been sufficiently given for all purposes hereof if sent by
telegram or if mailed by certified or registered mail, postage prepaid, and shall be
directed to the address of each of the parties hereto as follows:

	 	 	 	 	 
	 

	 	Exelon:
	 	Ohio Gas Supply Manager
	 

	 	 	 	Exelon Energy Company
	 

	 	 	 	470 Olde Worthington Road
	 

	 	 	 	Suite 375 
	 

	 	 	 	Westerville, OH 43082
	 

	 	 	 	Telephone: 614-797-4369
	 

	 	 	 	Facsimile: 614-797-4380
	 

	 	 	 	E-mail: connie.slocum@exelonenergy.com
	 
	 	 	 	 
	 

	 	SELLER:
	 	CGAS Exploration, Inc.
	 

	 	 	 	200 Capital Street, Suite 300
	 

	 	 	 	Charleston, WV 25301
	 

	 	 	 	Attn: Ken Mariani
	 

	 	 	 	Telephone: 304-343-5505
	 

	 	 	 	Facsimile: 304-343-5525
	 

	 	 	 	E-mail: krnariani@enervestop.com

		 	or to such other address as the parties shall designate in writing from time to time.
A notice sent by facsimile transmission shall be deemed received at the time the
sending party receives confirmation of successful transmission.

4

 

	12.	 	ASSIGNMENT.
	 
	 	 	All of the covenants, conditions and obligations of this Agreement shall extend to
and be binding upon the successors and assigns respectively of the parties hereto. Seller
shall not assign its rights or obligations under this Agreement without the prior written
consent of Exelon, which consent shall not be unreasonably withheld.
	 
	13.	 	COMPLETE AGREEMENT.
	 
	 	 	This Agreement and Exhibit “A” attached hereto, constitute the full and complete
agreement between the parties hereto and any amendment, modification or change must be
reduced to writing and executed by both parties.
	 
	14.	 	SEVERABILITY.
	 
	 	 	Any provision, article or section declared or rendered unlawful by a court of law or
regulatory agency with jurisdiction over the parties, or deemed unlawful because of
statutory change, will not otherwise affect the lawful obligations that arise under this
Agreement. In the event any provision of this Agreement is declared invalid, the parties
shall promptly negotiate to restore this Agreement as nearly as possible to its original
intent.
	 
	15.	 	CONFIDENTIALITY.
	 
	 	 	Neither party shall disclose the terms of any transaction to a third party (other
than such Party’s and its affiliate’s employees, lenders, counsel, accountants or
counterparts) except in order to comply with any applicable law, order, regulation or
exchange rule; provided, however, that each party shall notify the other party in writing of
any proceedings of which it is aware that may result in disclosure, and the party subject to
such proceeding shall use reasonable efforts to prevent or limit such disclosure. The
parties shall be entitled to all remedies at law or in equity to enforce, or seek relief in
connection with, this confidentiality obligation.
	 
	16.	 	CHOICE OF LAW.
	 
	 	 	This Agreement will be governed by and construed in accordance with the laws of the
State of Ohio.
	 
	17.	 	REPRESENTATIONS.
	 
	 	 	Each party to this Agreement represents and warrants that it has full and complete
authority to enter into and perform this Agreement. Each person who executes this
Agreement on behalf of either party represents and warrants that it has full and complete
authority to do so and that such party will be bound thereby.

AGREED TO AND ACCEPTED this 14th day of September, 2005.

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Witness	 	 	 	EXELON ENERGY COMPANY	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	/s/ Connie J. Slocum	 	 	 	 	 	By:	 	/s/ Don L.Williams	 	 
	 	 	 	 	 	 	 	 	 	 	 
	Name:

	 	Connie J. Slocum
	 	 	 	 	 	Name:
	 	 Don L. Williams	 	 
	 

	 	 	 	 	 	 	 	Title
	 	: Director Sales - Ohio	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Witness	 	 	 	CGAS EXPLORATION INC	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	/s/ Kimberly A. George
	 	 	 	 	 	By:	 	/s/ Ken Mariani	 	 
	 	 	 	 	 	 	 	 	 	 	 
	Name:

	 	Kimberly A. George
	 	 	 	 	 	Name
	 	: Ken Mariani	 	 
	 

	 	 	 	 	 	 	 	Title
	 	: Executive Vice president - Exploration	 	 

5

 

EXHIBIT “A”

Attached
to and forming a part of the Agreement dated September 14, 2005.

DEO Meter Numbers

	 	 	 	 	 	 	 
	3906

	 	B293
	 	E652
	 	H403
	4527

	 	C116
	 	E796
	 	H442
	5018

	 	C167
	 	E808
	 	H476
	5184

	 	C203
	 	E828
	 	H484
	5288

	 	C225
	 	E951
	 	H485
	5368

	 	C232
	 	E974
	 	H507
	5459

	 	C238
	 	E985
	 	H510
	5477

	 	C244
	 	E989
	 	H553
	5557

	 	C274
	 	F018
	 	H559
	6583

	 	C314
	 	F044
	 	H569
	6594

	 	C357
	 	F090
	 	H573
	6634

	 	C376
	 	F092
	 	H592
	6724

	 	C437
	 	F199
	 	H795
	6730

	 	C457
	 	F301
	 	J060
	6825

	 	C476
	 	F316
	 	J218
	6831

	 	C507
	 	F374
	 	J551
	A205

	 	C527
	 	F383
	 	J552
	A232

	 	C530
	 	F397
	 	J618
	A238

	 	C554
	 	F643
	 	J631
	A241

	 	C620
	 	G023
	 	J851
	A261

	 	C716
	 	G061
	 	K438
	A262

	 	C748
	 	G084
	 	K478
	A271

	 	C749
	 	G225
	 	K538
	A272

	 	C765
	 	G228
	 	K644
	A273

	 	C795
	 	G233
	 	K649
	A278

	 	C844
	 	G274
	 	K650
	A378

	 	C885
	 	G378
	 	K652
	A348

	 	C887
	 	G379
	 	K730
	A545

	 	D051
	 	G387
	 	K733
	A602

	 	D102
	 	G471
	 	K965
	A605

	 	D269
	 	G568
	 	R002
	A614

	 	D270
	 	G601
	 	R003
	A641

	 	D287
	 	G602
	 	R130
	A647

	 	D318
	 	G604
	 	R131
	A746

	 	D564
	 	G614
	 	R132
	A754

	 	D567
	 	G648
	 	R147
	A769

	 	D651
	 	G710
	 	R148
	A795

	 	D689
	 	G724
	 	R225
	A897

	 	D808
	 	G763
	 	R352
	B150

	 	D817
	 	G766
	 	R364
	B174

	 	E281
	 	H018
	 	R375
	B189

	 	E404
	 	H021
	 	R441
	B201

	 	E500
	 	H090	 	 
	B206

	 	E549
	 	H094	 	 
	B211

	 	E642
	 	H199	 	 
	B218

	 	E651
	 	H309	 	 
	B225
	 	 	 	 	 	 

6exv10w7

 

Exhibit 10.7

TERM SHEET

October 11, 2005

	1.	 	Period covered by Term Sheet:
	 
	 	 	November 1, 2005 through October 31, 2006
	 
	2.	 	Quantity of Gas to be Delivered:
	 
	 	 	Estimated 38,500 Dt/Month (See Attached Exhibit)
	 
	3.	 	Points of Delivery:
	 
	 	 	Into Dominion Transmission, Inc.
	 
	4.	 	Price:
	 
	 	 	100% of Index (as published by Inside F.E.R.C.’s Gas Market Report for Appalachian
gas delivered into Dominion Transmission for the first of the month) plus $.02/Dt. The Seller
may request a negotiation of a mutually agreeable fixed price at a later date.
	 
	5.	 	The conditions of the Term Sheet are binding unless disputed within (3) business days.

APPROVED AND AGREED to as the Term Sheet to the Agreement dated March 21, 2003, between EnerVest
WV, LP and Riley Natural Gas Company.

	 	 	 
	Seller:

	 	Buyer:
	 
	 	 
	EnerVest WV, LP

	 	Riley Natural Gas Company
	 
	 	 
	/s/ Keneth Mariaw

	 	/s/ Thomas E. Riley
	 

	 	 
	Signature

	 	Signature
	 
	Name: Keneth Mariaw

	 	Name: Thomas E. Riley
	Title: VP

	 	Title: President
	Date: 10/26/05

	 	Date: JAN 10, 2006

 

 

ENERVEST
WV, LP

EXHIBIT

to the Term Sheet dated

October 11, 2005

	 	 	 
	MID #	 	ACCOUNT #
	3344101
	 	AT3344101
	3357201
	 	AT3357201
	3577501
	 	AT3577501
	3579401
	 	AT3579401
	4212301
	 	AT4212301
	4371301
	 	AT4371301
	4374101
	 	AT4374101
	4329201
	 	ES4329201
	3066001
	 	RP1116112
	3162401
	 	RP1116114
	3163101
	 	RP1116116
	3066401
	 	RP1116118
	3311501
	 	RP1116122
	3067501
	 	RP1116123
	3314501
	 	RP1116129
	3320601
	 	RP1116130
	3477001
	 	RP1116140
	4334101
	 	RP1116151
	3545601
	 	RP1116152
	3416001
	 	RP1116153
	3052001
	 	RP1116155
	3550301
	 	RP1116157
	4241301
	 	RP1143015
	4241401
	 	RP1143016
	3313701
	 	RP1149601
	4176401
	 	KP1150301
	3314901
	 	RP1152802
	3074901
	 	RP1173401
	3062001
	 	RP1691101
	3516201
	 	RP3516201
	1048601
	 	RPH202401
	1062301
	 	RPH202403
	1062401
	 	RPH202404
	1065201
	 	RPH202406

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