Document:

ex10_3.htm

    
      

    

    Exhibit 10.3

     

    
      The
Partnership has redacted certain confidential information in this agreement in
reliance upon its confidential treatment request that it has filed with the
Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities
Exchange Act of 1934. In this agreement, we indicate each redaction by use of
an asterisk *.

    

     

    

    

    GAS
PURCHASE AND PROCESSING AGREEMENT

    

    BETWEEN

    

    DUKE
ENERGY FIELD SERVICES, INC., A COLORADO CORPORATION

    

    AND

    

    UNITED
STATES EXPLORATION, INC, A COLORADO CORPORATION

    

    AND

    

    PETROLEUM
DEVELOPMENT CORPORATION, A NEVADA CORPORATION

    

    

    ("DEDICATED
ACREAGE")

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

    INDEX

    

    
      	
              I

            	
              REPRESENTATIONS
      OF SELLERS

            	
              2

            
	 	 	 
	
              II

            	
              COMMITMENT
      OF SELLERS' GAS

            	
              2

            
	 	 	 
	
              III

            	
              CONSTRUCTION
      OF PIPELINE GATHERING SYSTEM

            	
              2

            
	 	 	 
	
              IV

            	
              QUANTITY

            	
              2

            
	 	 	 
	
              V

            	
              GENERAL
      TERMS AND CONDITIONS

            	
              3

            
	 	 	 
	
              VI

            	
              PRICE

            	
              3

            
	 	 	 
	
              VII

            	
              NOTICES

            	
              3

            
	 	 	 
	
              VIII

            	
              TERM

            	
              4

            
	 	 	 
	
              IX

            	
              MISCELLANEOUS

            	
              4

            
	 	 	 
	 
      	
              EXHIBIT
      A - THE LEASES

            	
              Page
      1 A

            
	 	 	 
	 
      	
              EXHIBIT
      B - APPENDIX - GENERAL TERMS AND CONDITIONS

            	 
      
	 	 	 
	 
      	
              1

            	
              DEFINITIONS

            	
              Page
      1 E

            
	 
      	
              2

            	
              POINT(S)
      OF DELIVERY, PRESSURE AND OWNERSHIP

            	
              Page
      2 B

            
	 
      	
              3

            	
              RESERVATIONS
      OF SELLER

            	
              Page
      3 B

            
	 
      	
              4

            	
              QUANTITY
      RESTRICTIONS

            	
              Page
      3 B

            
	 
      	
              5

            	
              SELLER'S
      WARRANTIES

            	
              Page
      4 B

            
	 
      	
              6

            	
              EASEMENTS

            	
              Page
      4 B

            
	 
      	
              7

            	
              SHRINKAGE

            	
              Page
      4 B

            
	 
      	
              8

            	
              GAS
      MEASUREMENT AND QUALITY

            	
              Page
      4 B

            
	 
      	
              9

            	
              ALLOCATION
      OF RESIDUE GAS & PLANT PRODUCTS REVENUES

            	
              Page
      6 B

            
	 
      	
              10

            	
              PRICING
      INFORMATION & REFUNDS

            	
              Page
      7 B

            
	 
      	
              11

            	
              TAXES

            	
              Page
      7 B

            
	 
      	
              12

            	
              PAYMENT

            	
              Page
      7 B

            
	 
      	
              13

            	
              SELLER'S
      REPRESENTATIVE

            	
              Page
      8 B

            
	 
      	
              14

            	
              REGULATORY
      BODIES

            	
              Page
      9 B

            
	 
      	
              15

            	
              FORCE
      MAJEURE

            	
              Page
      9 B

            
	 
      	
              16

            	
              DEFAULTS

            	
              Page
      10 B

            
	 
      	
              17

            	
              UNECONOMIC
      WELL CONNECTIONS

            	
              Page
      10 B

            
	 
      	
              18

            	
              UNECONOMIC
      OPERATION OF GAS PLANTS

            	
              Page
      10 B

            
	 
      	
              19

            	
              LITIGATION
      - ATTORNEYS' FEES

            	
              Page
      11 B

            
	 
      	
              20

            	
              DAMAGES

            	
              Page
      11 B

            
	 
      	
              21

            	
              GENERAL

            	
              Page
      11 B

            

    

    (REVISED
10/11/99)

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

    GPA 018 R
(TLL,S/D)

    

    GAS PURCHASE AND PROCESSING
AGREEMENT

    

    

    THIS GAS
PURCHASE AND PROCESSING AGREEMENT, entered into as of the last date acknowledged
below, (herein, as the same may be amended from time to time, called this "Agreement") by and between
DUKE ENERGY FIELD SERVICES, INC., a Colorado corporation, with offices at 370
Seventeenth Street, Suite 900, Denver, Colorado 80202, hereinafter referred to
as "Buyer/Processor",
and UNITED STATES EXPLORATION, INC, a Colorado corporation, whose address is
1560 Broadway, Suite 1900, Denver, Colorado 80202, and PETROLEUM DEVELOPMENT
CORPORATION, a Nevada corporation, whose address is 103 E. Main St., Bridgeport,
WV 26330, hereinafter referred to collectively as "Sellers".

    

    R E C I T A L S

    

    

    
      	
              1

            	
              Buyer/Processor
      owns, operates and maintains a natural gas gathering system, compression
      facilities and natural gas processing facilities, and Buyer/Processor's
      designee owns, operates and maintains certain natural gas liquids
      fractionation facilities (the "Fractionator"), all
      such facilities in the aggregate hereinafter referred to as the "Facilities", which
      Facilities are located in Weld, Larimer, Morgan, Adams and Boulder;
      Counties, Colorado, to enable Buyer/Processor to purchase and accept
      delivery of Sellers' natural gas (including natural gasoline and other
      liquefiable hydrocarbons), produced and saved from the oil and gas leases,
      lands and formations committed hereunder, at the Point(s) of Delivery
      defined herein.

            

    

    

    
      	
              2

            	
              Sellers
      own and hold, or have an interest or interests in certain oil and gas
      leases, wells and/or- lands described in Exhibit "A" attached hereto and
      made a part hereof, said oil and gas leases, wells and/or lands and
      formations thereunder hereinafter sometimes being referred to as the "Leases".

            

    

    

    
      	
              3.

            	
              Sellers
      desires to sell to Buyer/Processor all of the Gas owned or controlled by
      Sellers which is produced and saved from the Leases covered hereunder; as
      well- as to contract with Buyer/Processor to process all such Gas upon the
      terms and for the consideration herein
  expressed.

            

    

    

    
      	
              4

            	
              Buyer/Processor
      desires to purchase, gather and process Sellers' Gas, as defined herein,
      utilizing the Facilities constructed, owned and operated by
      Buyer/Processor upon the terms and for the consideration herein
      expressed.

            

    

    

    

    (DEDICATED
ACREAGE)

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

    
      	
              5

            	
              Buyer/Processor
      has entered into, and may enter into additional, third-party Residue Gas
      Sales Agreements pursuant to which Buyer/Processor shall utilize its best
      efforts to sell the Residue Gas resulting from the processing of Sellers'
      Gas (as defined herein).

            

    

    

    FOR GOOD
AND VALUABLE CONSIDERATION, the Parties hereto agree as follows:

    

    ARTICLE
I

    REPRESENTATIONS OF
SELLERS

     

    
      	
              1.1

            	
              Sellers
      represent and warrant to Buyer/Processor, its successors and assigns, that
      Sellers own an interest in, or have the right to market Sellers' portion
      of the Gas produced and saved from the Leases ("Sellers' Gas") and that Sellers intend
      to construct, or cause to be constructed, the facilities necessary, if
      any, to enable Sellers to sell and deliver to Buyer/Processor for sale at
      the Point(s) of Delivery, as hereinafter set forth, all of Sellers' Gas in
      accordance with the terms and provisions of this
  Agreement.

            

    

    

    ARTICLE
II

    COMMITMENT OF SELLERS'
GAS

    

    
      	
              2.1

            	
              Subject
      to the terms and conditions contained herein, Sellers hereby commit to the
      performance of this Agreement all of Sellers' Gas produced and saved from
      the Leases, and to insure the faithful performance of the provisions of
      this Agreement, Sellers covenant to sell and deliver' the same to
      Buyer/Processor' at the Point(s) of Delivery without other disposition
      except as herein otherwise
provided.

            

    

    

    ARTICLE
III

    CONSTRUCTION OF PIPELINE
GATHERING SYSTEM

    

    
      	
              3.1

            	
              Subject
      to the terms and conditions contained herein, Buyer/Processor agrees to
      construct or has already constructed sufficient miles of pipeline
      gathering system to connect all of the wells drilled and produced, or to
      be drilled and produced, on the Leases by Sellers ("Sellers Wells") at the
      Point(s) of Delivery.

            

    

    

    ARTICLE
IV

    QUANTITY

    

    
      	
              4
      1

            	
              Subject
      to the terms and conditions contained herein, Sellers shall deliver and
      sell to Buyer/Processor, and Buyer/Processor shall receive and purchase
      Sellers' Gas on a best efforts
basis.

            

    

    

    
      	
              4.2

            	
              Sellers
      acknowledge and understand that Buyer/Processor will receive and purchase
      Sellers' Gas utilizing the Facilities which also receive, transmit and
      process Gas delivered to Buyer/Processor by other
  parties.

            

    

    

    
      
        
           

        

        
          2

          
            

          

        

        
           

        

      

    

    

    ARTICLE
V

    GENERAL TERMS AND
CONDITIONS

    

    
      	
              5.1

            	
              The
      General Terms and Conditions set forth in the Appendix attached hereto as
      Exhibit "B" (the "Appendix") are the
      general terms and conditions applicable to this Agreement, which Appendix
      is by reference hereby incorporated into and made an integral part of this
      Agreement.

            

    

    

    ARTICLE
VI

    PRICE

    

    
      	
              6.1

            	
              Effective
      the date of first deliveries of Sellers' Gas under this Agreement, Sellers
      shall receive a price for all of Sellers' Gas purchased hereunder which
      price shall be calculated as follows, pursuant to Section 9 of the
      Appendix:

            

    

    

    
      	
               
      

            	
              A.

            	
              [ *
      ] percent [ * ] of the Residue Gas Revenues
      attributable to each of Sellers' Wells;
plus

            

    

    

    
      	
               
      

            	
              B.

            	
              [ *
      ] percent [ * ] of the Plant Products Revenue attributable to
      each of Sellers' Wells

            

    

    

    
      	
              6.2

            	
              Sellers
      shall be responsible for distribution of revenues to owners of interest in
      the Gas purchased by Buyer/Processor hereunder, as further described in
      the Payment section of the
Appendix.

            

    

    

    ARTICLE
VII

    NOTICES

    

    
      	
              7.1

            	
              All
      notices and communications required or permitted under this Agreement
      shall be in writing and any communication or delivery hereunder shall be
      deemed to have been duly made when delivered personally or three (3)
      business days following deposit in the United States mails, certified
      mail, return receipt requested, or one (1) business day following delivery
      to recognized overnight courier- service, or upon transmittal by
      facsimile, in each such case postage or charges prepaid and addressed as
      follows:

            

    

     

    

    
      	
              TO:

            	
              SELLERS'
      REPRESENTATIVE:

            	 
      
	 	 	 
	 
      	
              United
      States Exploration, Inc

            	
              Petroleum
      Development Corporation

            
	 
      	
              1560
      Broadway, Suite 1900

            	
              103
      East Main Street

            
	 
      	
              Denver,
      Colorado 80202

            	
              P.O.  Box
      26

            
	 
      	 
      	
              Bridgeport,
      WV 26330

            

    

    

    
      	 
      	
              ATTN:

            	
              Connie
      L Nordberg

            	
              Thomas
      E. Riley

            
	 
      	 
      	
              (303)
      863-3505

            	
              Vice
      President

            
	 
      	 
      	
              (303)
      863-1932-FAX

            	
              (304)
      842-3597

            
	 
      	 
      	 
      	
              (304)
      842-8936- FAX

            

    

    

    
      
        
           

        

        
          3

          
            

          

        

        
           

        

      

    

    

    TO:         BUYER/PROCESSOR:

    

    Duke
Energy Field Services, Inc

    370 -
17th Street, Suite 900

    Post
Office Box 5493

    Denver,
Colorado 80217

    

    
      	
               
      

            	
              ATTN:

            	
              Vice
      President - Gas Supply

            

    

    (303)
595-3331

    (303)
595-0480 - FAX

    

    

    ARTICLE VIII

    TERM

    

    
      	
              8.1

            	
              This
      Agreement shall be effective as of October 1, 1999 and shall continue and
      remain in full force and effect for the economic life of the
      Facilities.

            

    

     

    ARTICLE
IX

    MISCELLANEOUS

    

    9.1           Respecting
certain rights of the Parties hereto:

    

    
      	
               
      

            	
              A.

            	
              This
      Agreement shall be binding upon and inure to the benefit of the Parties
      hereto, their successors, assigns, heirs, administrators and/or executors
      and shall constitute a real right and covenant running with the lands and
      leasehold-interests covered hereby. Either Party may assign his or its
      right, title, and interest in, to and under this Agreement, including,
      without limitation, any and all renewals, extensions, amendments, and/or
      supplements hereto; provided, however; that no such assignment shall in
      any way operate to enlarge, alter, or change any right or obligation of
      the other Party or Parties hereto.  No assignment shall be effective
      or binding until a copy of same has been furnished to the other
      Party.

            

    

    

    
      	
               
      

            	
              B.

            	
              Further,
      this Agreement, including, without limitation, any and all renewals,
      extensions, amendments and/or supplements hereto shall be binding upon any
      purchaser of Buyer/Processor's Facilities and upon any purchaser of
      Sellers' Leases, or any part thereof or interest therein which are subject
      to this Agreement. It is agreed that no sale of Sellers' Leases, or any
      part thereof or interest therein, or of all or substantially all of
      Buyer/Processor's Facilities, shall be made unless the purchaser thereof
      shall assume and agree to be bound by this Agreement insofar as the same
      shall affect and relate to the Leases, Facilities or interests so sold or
      conveyed. It is further agreed, however; that nothing herein contained
      shall in any way prevent either Party hereto from pledging or mortgaging
      all or any part of such Party's Leases or Facilities as security under any
      mortgage, deed of trust, or other similar lien, or from pledging this
      Agreement or any benefits accruing hereunder to the Party making the
      pledge, without the assumption of obligations hereunder by the mortgagee,
      pledgee or other grantee under such an
  instrument.

            

    

    

    
      
        
           

        

        
          4

          
            

          

        

        
           

        

      

    

    

    
      	
               
      

            	
              C.

            	
              Nothing
      in this Agreement, expressed or implied, confers any rights or remedies on
      any person or entity not a party hereto other than successors and assigns,
      or heirs, administrators or executors of the Parties
    hereto.

            

    

    

    
      	
              9.2

            	
              Sellers
      expressly do not by the terms of this Agreement, sell, transfer or assign
      unto Buyer/Processor any title or interest whatsoever in the Leases or any
      pipe, meters, lines or other equipment of any nature owned or used by
      Sellers in the operation of Sellers' Wells and the
  Leases.

            

    

    

    
      	
              9.3

            	
              This
      Agreement constitutes the entire agreement and understanding between the
      Parties hereto and supersedes and renders null and void and of no further
      force and effect any prior understandings, negotiations or agreements
      between the Parties relating to the subject matter
      hereof, and all amendments and letter agreements in any way
      relating thereto. No provision of this Agreement may be changed, modified,
      waived or discharged orally, and no change, modification, waiver or
      amendment of any provision will be effective except by written instrument
      to be executed and approved by the Parties
  hereto.

            

    

    

    
      	
              9.4

            	
              THIS
      AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS
      OF THE STATE OF COLORADO WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
      LAWS.

            

    

    

    

    THE
PARTIES HERETO have executed this Agreement as of the day and year first above
written.

     

    
      

      
        	 
      	 	
                BUYER/PROCESSOR:

              	 
	
                (SEAL)

              	 	 
      	 
	
                ATTEST:

              	 	
                DUKE
      ENERGY FIELD SERVICES, INC

              	 
	 
      	 	
                A
      COLORADO CORPORATION

              	 
	 
      	 	 
      	 
	
                By:

              	
                /s/ WILLIAM B. MATHEWS

              	 	
                BY:

              	
                /s/ KEVIN L. WILLIAMS

              	 
	 
      	
                WILLIAM
      B. MATHEWS,

              	 	 
      	
                KEVIN
      L. WILLIAMS,

              	 
	 
      	
                ASSISTANT
      SECRETARY

              	 	 
      	
                VICE
      PRESIDENT

              	 

      

    

     

    
      
        
           

        

        
          5

          
            

          

        

        
           

        

      

    

     

    
      
        	 
      	 
      	 
      	 
      	
                SELLERS:

              
	 
      	 
      	 
      	 
      	 
      	 
      
	
                (SEAL)

              	 
      	 
      	 
      	 
      
	
                ATTEST:

              	 
      	 
      	
                UNITED
      STATES EXPLORATION, INC.

              
	 
      	 
      	 
      	 
      	
                A
      COLORADO CORPORATION

              
	 
      	 
      	 
      	 
      	 
      	 
      
	
                BY:

              	
                /s/ Shirley R. Kovar

              	 
      	
                BY:

              	
                /s/ Bruce D. Benson

              	 
      
	 
      	
                Shirley
      R. Kovar

              	 
      	 
      	
                Bruce
      D. Benson

              	 
      
	 
      	
                Assistant
      Secretary

              	 
      	 
      	
                President

              	 
      
	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	
                SELLER'S
      TAX ID NO. 84-1120323

              
	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      
	
                (SEAL)

              	 
      	 
      	 
      	 
      
	
                ATTEST:

              	 
      	 
      	
                PETROLEUM
      DEVELOPMENT CORPORATION

              
	 
      	 
      	 
      	 
      	
                A
      NEVADA CORPORATION

              
	 
      	 
      	 
      	 
      	 
      	 
      
	
                BY:

              	/s/
      Dale G Rettinger	 
      	
                BY:

              	/s/
      Thomas E. Riley	 
      
	 
      	Assistant
      Secretary	 
      	 
      	Vice
      President	 
      
	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	
                SELLER'S
      TAX ID NO. 95-2636730

              

      

      

      
        	
                STATE
      OF COLORADO

              	
                )

              
	 
      	
                )
      ss

              
	
                CITY
      & COUNTY OF DENVER

              	
                )

              

      

      

      Before
me, Elaine
D. Hegler, a Notary Public in and for said County and State, on this
28th
day of October,
1999, personally appeared KEVIN L. WILLIAMS and WILLIAM B. MATHEWS, known to me
to be the Vice President and Assistant Secretary, respectively, of Duke Energy
Field Services, Inc, a Colorado corporation, on behalf of said corporation and
acknowledged to me that they executed this Agreement for the considerations and
purposes therein set forth.

      

      Given
under my hand and seal of office this 28th day of October,
1999.

      

      

      
        	
                MY
      COMMISSION EXPIRES:

              	 	
                /s/ Elaine D. Hegler

              	 
	 
      	 	
                NOTARY
      PUBLIC

              	 
	
                11-17-02

              	 	 
      	 

      

    
      
        
           

        

        
          6

          
            

          

        

        
           

        

      

    

    

    
      

      
        	
                STATE
      OF Colorado

              	
                )

              
	 
      	
                )
      ss

              
	
                COUNTY
      OF Denver

              	
                )

              

      

      

      Before
me, CONSTANCE
L. NORDBERG, a Notary Public in and for said County and State, on this
15 day of October, 1999, personally
appeared BRUCE D.
BENSON, and SHIRLEY R. KOVAR,
known to me to be the PRESIDENT and ASSISTANT
SECRETARY respectively,
of United States Exploration, Inc., a Colorado corporation, on behalf of said
corporation and acknowledged to me that they executed this Agreement for the
considerations and purposes therein set forth.

      

      Given
under my hand and seal of office this 15 day of October
1999.

      

      

      
        	
                MY
      COMMISSION EXPIRES:

              	 	
                /s/ Constance L.
Nordberg

              
	 
      	 	
                NOTARY
      PUBLIC

              
	
                May 5, 2002

              	 	 
      
	 
      	 	
                CONSTANCE
      L. NORDBERG

              
	 
      	 	
                NOTARY
      PUBLIC

              
	 
      	 	
                STATE
      OF COLORADO

              
	 
      	 	
                My
      Commission Expires May 5, 2002

              

      

      

      
        	
                STATE
      OF
      West Virginia

              	
                )

              
	 
      	
                )
      ss

              
	
                COUNTY OF
      HARRISON

              	
                )

              

      

      

      Before
me, Misty
L. Finch, a Notary Public in and for said County and State, on this 20th
day of October,
1999, personally appeared Dale G.
Rettinger and Thomas E. Riley known
to me to be the Asst.
Secretary and Vice
President,
respectively, of Petroleum Development Corporation, a Nevada corporation,
on behalf of said corporation and acknowledged to me that they executed this
Agreement for the considerations and purposes therein set forth.

      

      Given
under my hand and seal of this 20th
day of October,
1999

      

      
        	
                MY
      COMMISSION EXPIRES:

              	 	
                /s/ Misty L. Finch

              
	 
      	 	
                NOTARY
      PUBLIC

              
	
                October 16, 2001

              	 	 
      

      

      

      

    

     

    
      
        
           

        

        
          7

          
            

          

        

        
           

        

      

    

     

    
      
        	
                EXHIBIT
      “A”

              
	
                LEASE
      SCHEDULE

              
	
                ESSOR

              	 	
                LESSEE

              	 	
                DESCRIPTON

              	 	
                LEASE
      DATE/TERM

              	 	
                RECORDED
      BOOK PAGE

              	 	
                COUNTY

              	 	
                GROSS
      ACRES

              	 	
                NET
      ACRES

              
	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      
	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      
	
                Union
      Pacific Resources Company

              	 	
                United
      States Exploration, Inc.

              	 	
                T4N-R67W
      Sec. 13; NENE Weld Co., CO Insofar and only Insofar as the Lease covers
      the Codell formation and further limited to the wellbore of the Bernhardt
      13A well located in the NENE of section 13, T4N-R67W

              	 	
                To
      be determined

                *

              	 	
                To
      be determined

                *

              	 	
                Weld

              	 	
                40

              	 	
                40

              

      

       

      
        	
                 
      

              	
                *

              	
                To
      be earned under that certain Exploration Agreement dated effective 6/1/98,
      as amended, by and between Union Pacific Resources Company and United
      States Exploration, Inc.

              

      

    

     

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

    (ROGGEN)

    

    EXHIBIT
B

    

    APPENDIX

    TO

    GAS PURCHASE AND PROCESSING
AGREEMENT

    GENERAL TERMS AND
CONDITIONS

    

    

    
      	
              1.

            	
              DEFINITIONS

            

    

    

    A.          For
the purposes of the Gas Purchase and Processing Agreement {the "Agreement") to which this
Appendix is attached, unless the context of the Agreement requires otherwise,
the following terms and expressions used therein and in this Appendix shall be
defined as follows:

    

    
      	
               
      

            	
              1)

            	
              "Accounting Period",
      except the initial "Accounting Period",
      shall mean a period of one calendar month, commencing at 8:00 a.m. local
      time on the first day of each month, and ending at 8:00 a.m. local time on
      the first day of the succeeding calendar month. The initial “Accounting Period"
      shall commence at 8:00 a.m. local time on the date of initial deliveries
      of Gas hereunder, continuing for a period of consecutive calendar days
      until 8:00 a.m. local time on the first day of the succeeding calendar
      month.

            

    

    

    
      	
               
      

            	
              2)

            	
              "Btu" (British Thermal
      Unit) shall mean the amount of heat required to raise the temperature of
      one (1) avoirdupois pound of pure water from fifty-eight and five-tenths
      degrees (58.5°) to fifty-nine and five-tenths degrees (59.5°) Fahrenheit
      under standard conditions.

            

    

    

    
      	
               
      

            	
              3)

            	
              "Buyer/Processor's Gathering
      System" shall mean the pipelines (including field compression) and
      appurtenances constructed by Buyer/Processor for the purpose of accepting
      delivery and transmitting Seller's Gas from the Point(s) of Delivery to
      the Gas Plants.

            

    

    

    
      	
               
      

            	
              4)

            	
              "Cubic foot of Gas"
      shall mean the amount of Gas required to fill a cubic foot of space when
      the Gas is at a base pressure of 14.65 Psia and at a base temperature of
      60° F.

            

    

    

    
      	
               
      

            	
              5)

            	
              "Day" shall mean the
      24-hour period beginning and ending at 8:00 a.m. Local
    Time.

            

    

    

    
      	
               
      

            	
              6)

            	
              "Facilities" shall have
      meaning ascribed by the first Recital of the
  Agreement.

            

    

    

    
      	
               
      

            	
              7)

            	
              "Fractionator" shall
      have the meaning ascribed by the first Recital of the
      Agreement.

            

    

    

    
      	
               
      

            	
              8)

            	
              "Gas" shall mean the
      effluent vapor stream including ail of the constituents thereof, entrained
      liquids as produced from a well, whether a gas well or an oil well, and
      delivered into the Facilities by Seller and other producers at their
      respective Point(s) of Delivery.

            

    

    

    
      	
               
      

            	
              9)

            	
              "Gas Plant” shall mean
      Buyer/Processor's Roggen natural gas processing plant (excluding
      fractionation facilities) located in the SW1/4 of Section 24, Township 2
      North, Range 63 West, Weld County, Colorado, as well as those processing
      facilities which may be added or deleted (including the Roggen plant) by
      Buyer/Processor in its sole discretion from time to time for the efficient
      operation of any of the Facilities.  Buyer/Processor, in its sole
      discretion from time to time for the efficient administration of the
      Facilities, may perform allocations under this Agreement on a single
      processing facility basis or on a pooled basis among any or all of the
      processing facilities constituting the Gas
  Plant.

            

    

    

    
      	
               
      

            	
              10)

            	
              "MMBtu" shall mean one
      million (1,000,000) Btu's.

            

    

    

    

    {Revised
10/11/99}

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

    
      	
               
      

            	
              11)

            	
              "Market Price" shall be
      defined as the weighted average commodity price per MM Btu received by
      Buyer/Processor for the amounts of Residue Gas (excluding any storage
      amounts) sold to uncommitted Residue Gas markets via the pipeline
      facilities of Public Service Company of Colorado or Colorado Interstate
      Gas Company at the best price then obtainable in Buyer/Processor's sole
      judgment and discretion, less any applicable transportation, handling and
      storage fees Incurred and paid by Buyer/Processor in association
      therewith. As used above, "uncommitted Residue Gas
      markets" shall mean those markets not committed to specific Gas
      Purchase and Processing or similar Agreements and/or
    sellers.

            

    

    

    
      	
               
      

            	
              12)

            	
              "Month" shall mean the
      period beginning at 8:00 a.m. local time on the first day of a calendar
      month and ending at 8:00 a.m. local time on the first day of the next
      succeeding calendar month.

            

    

    

    
      	
               
      

            	
              13)

            	
              "Party" or "Parties" shall mean
      one or both, respectively, of the signatories to this
      Agreement.

            

    

    

    
      	
               
      

            	
              14)

            	
              "Plant Products” shall
      mean all liquefiable hydrocarbons including without limitation ethane,
      propane, butane, and natural gasoline, individually or as a mixture, as
      determined by the latest GPA Publication 2145 extracted and saved at the
      Gas Plants from all of the Gas delivered to and processed by
      Buyer/Processor, whether or not fractionated into individual components at
      the Fractionator. Plant Products shall not be deemed to include liquids or
      drip (condensed hydrocarbons) which have collected in and are removed from
      Buyer/Processor's Gathering System upstream of the inlets to the Gas
      Plant.

            

    

    

    
      	
               
      

            	
              15)

            	
              "Points of
      Delivery"
      shall have the meaning ascribed to it by Section 2 of this
      Appendix.

            

    

    

    
      	
               
      

            	
              16)

            	
              "Psia" shall mean
      pounds per square inch absolute.

            

    

    

    
      	
               
      

            	
              17)

            	
              "Psig" shall mean
      pounds per square inch gauge.

            

    

    

    
      	
               
      

            	
              18)

            	
              "Residue Gas" shall
      mean that portion of all Gas, as measured at the tailgate of the Gas
      Plant, remaining after the extraction therefrom of Plant Products, Gas
      Plant and field fuel requirements, and Gas Plant and field losses or uses
      of Gas at the Gas Plant.

            

    

    

    
      	
               
      

            	
              19)

            	
              "Seller's Gas Reserves”
      shall mean the total quantity of Seller's Gas attributable to Seller's
      present or future interest in, and/or which Seller has the right to market
      from the Leases.

            

    

    

    
      	
               
      

            	
              20)

            	
              "Shrinkage" shall mean
      the thermal reduction in the Gas which results from Facilities fuel gas
      consumption and the extraction of Plant
  Products.

            

    

    

    
      	
              2.

            	
              POINT(S) OF DELIVERY,
      PRESSURE AND OWNERSHIP

            

    

    

    A.           The
Point(s) of Delivery of all Gas delivered under the Agreement shall be at the
inlet of Buyer/Processor's metering facilities located at Seller's lease
separation facilities or at such other Point(s) of Delivery as may be mutually
agreed upon in writing by the Parties from time to time, and title to said Gas
(including such hydrocarbons from the Gas that have not been or cannot be
recovered through the use of conventional mechanical wellhead gas-oil
separators) shall pass from Seller to Buyer/Processor at said Point(s) of
Delivery with respect to all amounts of Seller's Gas sold to Buyer/Processor
hereunder.

    

    B.           Seller,
at its own expense, shall equip, maintain and operate all facilities to deliver
Seller's Gas to Buyer/Processor at the Point(s) of Delivery, including, but not
limited to, installation and maintenance of Seller's gathering facilities and
mechanical separation equipment.

    

    C.           Buyer/Processor
shall construct, maintain, own and operate all necessary facilities to accept
Seller's Gas from Seller at the Point(s) of Delivery.  Buyer/Processor
shall keep Buyer/Processor's Gathering System and Facilities reasonably clear of
obstruction and in consideration thereof shall own all vapors, liquids or drip
collected and removed from same.

    

    
      
        
           

        

        
          2
B

          
            

          

        

        
           

        

      

    

    

    D.           Seller
will deliver Gas at the Point(s) of Delivery at a pressure sufficient to enter
Buyer/Processor's Gathering System, which Buyer/Processor agrees to maintain at
an average maximum working pressure during each Accounting Period of [ *
] Psig. However, in the event Seller determines that such working pressure
excessively limits the production of Seller's Wells, Seller shall provide
written notice thereof to Buyer/Processor. Upon receipt of such notice,
Buyer/Process or, as soon as practicable, shall present to Seller a written
proposal pursuant to which Buyer/Processor shall construct, own and operate such
field compression facilities as may be necessary to reduce such pressure to a
mutually acceptable level and shall disclose the charges to be assessed Seller
therefore together with a schedule of payment. Once such proposal has been
accepted by Seller in writing, Buyer/Processor shall utilize its best efforts to
construct or cause to be constructed and placed in operation the required field
compression facilities within ninety (90) days of receipt of such written
acceptance.

    

    E.           As
between the Parties, Seder shall be in possession and control of the Gas
deliverable under the Agreement and responsible for any injury or damage caused
thereby until the same shall have been delivered to Buyer/Processor, after which
delivery Buyer/Processor shall be deemed to be in exclusive possession and
control thereof and responsible for any injury or damage caused
thereby.

    

    
      	
              3

            	
              RESERVATIONS OF
      SELLER

            

    

    

    A.           Seller,
as a reasonable and prudent operator, hereby expressly reserves the following
rights with respect to
Seller's Gas Reserves and the Leases subject hereto:

    

    
      	
               
      

            	
              1)

            	
              The
      right to use the Gas produced from the Leases prior to delivery to
      Buyer/Processor for the following
purposes:

            

    

    

    
      	
               
      

            	
              a)

            	
              For
      fuel in the development and operation of the Leases from which the Gas is
      produced;

            

    

    

    
      	
               
      

            	
              b)

            	
              For
      delivery to the lessors of the Leases of the Gas if such lessors are
      entitled to use or take such Gas in kind under the terms of the
      Leases;

            

    

    

    
      	
               
      

            	
              c)

            	
              For
      fuel in the operation of the facilities which Seller may install in order
      to deliver Gas hereunder in accordance with the terms
    hereof.

            

    

    

    
      	
               
      

            	
              2)

            	
              The
      right to pool or unitize the Leases (or-any portion thereof) with other
      lands and leases so long as such action does not reduce Seller's Gas
      Reserves. In the event of any such pooling or unitization, the Agreement
      will cover Seller's interest in the pool or unit and the Gas attributable
      thereto to the extent that such interest is derived from Seller's Gas
      Reserves.

            

    

    

    B.           Seller
shall provide to Buyer/Processor all necessary information whereby
Buyer/Processor can make the proper allocation herein called for or required by
Buyer/Processor's normai and customary accounting practices or required by
Buyer/Processor's normal and customary contract administration practices, when
different vintages of Gas are being delivered through a single Point of
Delivery.

    

    C.           Seller
shall operate the Leases free of any control by Buyer/Processor, including
without limitation the right to make farmouts of any lease subject to this
Agreement, and to abandon any well and surrender any lease when Seller deems the
same no longer capable of producing Gas in commercial quantities under normal
methods of operation. Seller shall not be required to produce any well or wells
in any manner which in its sole judgment and discretion would not constitute
good operating practice, nor shall Seller be obligated to drill additional wells
or to deepen, repair or rework any existing wells.

    

    
      	
              4.

            	
              QUANTITY
      RESTRICTIONS

            

    

    

    A.           Buyer/Processor's
obligation to receive Seller's Gas under the Agreement is subject to the
limitations and conditions set forth below:

    

    
      	
               
      

            	
              1)

            	
              If
      Buyer/Processor is unable to receive and purchase the total amounts of
      Seller's Gas tendered to Buyer/Processor from Seller's Wails due to market
      restrictions or capacity restrictions on the Facilities, Buyer/Processor
      shall receive and purchase only that portion of Seller's Gas available for
      delivery to the Gas Plant which is ratable on a thermal basis with the
      heating value of all Gas available for delivery to the Gas Plant,
      excluding gas being transported by Buyer/Processor, based upon the most
      recent Accounting Period of production during which no delivery
      restrictions wars imposed and/or no events of force majeure were in
      effect, after all required-purchase and/or dedicated capacity Gas has been
      received and purchased.

            

    

    

    
      
        
           

        

        
          3
B

          
            

          

        

        
           

        

      

    

    

    
      
        	
              	
                2) 

              	
                The
      terms of any third-party Residue Gas sales agreements then in
      force.

              

      

    

    

    
      	
              5.

            	
              SELLER'S
      WARRANTIES

            

    

    

    A.           Seller
hereby warrants title to the Gas sold and delivered hereunder and the right of
Seller to sell the same; and Seller warrants that all such Gas is owned by
Seller, or that Seller has the right to market said Gas free from ad liens and
adverse claims, including liens to secure payments of production taxes,
severance taxes, and other taxes. Seller agrees to defend (with counsel
reasonably acceptable to Buyer/Processor), indemnify Buyer/Processor and save it
harmless from all suits, actions, debts, accounts, damages, costs, losses and
expenses arising from or out of adverse claims, whether meritorious or not, of
any and all persons, firms, or corporations to said Gas or to royalties,
overriding royalties, taxes, license fees, or charges thereon, resulting from
actions of, by, through or under Seller, including, without limitation,
nonpayment or incorrect payment of proceeds of production. Buyer/Processor shall
be entitled to recover all attorneys’ fees incurred as a result of its
Involvement in any action or claim described herein. Buyer/Processor, at any
time thereafter, when it shall appear to Buyer/Processor by reason of receipt of
written notice of claim or dispute that the ownership or title to all or part of
the Leases, or the Gas produced therefrom, may be in a party or parties other
than Seller, or upon learning of any other claims, liens, taxes, royalties,
fees, expenses or other adverse claims, may suspend payments hereunder and
retain as security for the performance of Seller's obligations with respect
thereto, the entire purchase price of the Gas until Buyer/Processor has been
satisfied as to the amount of such claim or ownership claimed, and thereafter up
to the amount of such ownership interest or claim until it has been finally
determined and satisfied or until Seller shall have furnished a bond to
Buyer/Processor in an amount and with sureties satisfactory to Buyer/Processor,
conditioned upon the protection of Buyer/Processor with respect to such
ownership or claim.

    

    
      	
              6.

            	
              EASEMENTS

            

    

    

    A.           To
the extent that it may contractually or lawfully do so under its leasehold
interest without impairing its own similar right. Seller hereby assigns and
transfers to Buyer/Processor any easement across the Seller's Leases, and across
any adjoining lands in which Seller may have an interest, for the purposes of
installing, using, inspecting, repairing, operating, replacing, and/or removing
Buyer/Processor's pipe, meters, lines, and other equipment used or useful in the
performance of the Agreement, It is intended that any property of
Buyer/Processor placed in or upon any of such land shall remain the personal
property of Buyer/Processor, subject to removal by it upon the expiration or
termination of the Agreement for any reason.  Buyer/Processor shall have a
reasonable time after the expiration or termination of the Agreement to remove
same. Buyer/Processor shall defend (with counsel reasonably acceptable to
Seller), indemnify and hold Seller harmless of and from any and all claims and
damages for all injuries to persons, including death, or damage to property
arising out of or incident to Buyer/Processor's use of the easement hereunder
transferred, only in the event said claim or damage shall be the result of
negligence legally imputable to Buyer/Processor, its employees, agents, and
representatives.

    

    
      	
              7.

            	
              SHRINKAGE

            

    

    

    A.           Buyer/Processor
agrees to use ordinary care in transporting Seller's Gas from the Point(s) of
Delivery to the Gas Plant, and after processing Seller's Gas, delivering the
resultant Residue Gas to its purchaser at the tailgate of the Gas Plant.
 However, the Parties understand and agree that certain losses in the Gas
will occur and shall be shared by and among Seller and other third parties whose
gas is transported to the Gas Plant, in the proportion that each party delivers
gas into Buyer/Processor's Gathering System at their respective Point(s) of
Delivery.

    

    
      	
              8.

            	
              GAS MEASUREMENT AND
      QUALITY

            

    

    

    A.           Buyer/Processor
shall furnish and install a suitable orifice meter at the Point(s) of Delivery
of the Gas covered hereby.  Each meter installed by Buyer/Processor shall
be a meter acceptable in the industry and each mater shall be installed and
operated in accordance with the requirements of applicable provisions in
ANSI/API 2530, “Orifice
Metering of Natural Gas” (American Gas Association Gas Measurement
Committee Report No. 3) of the Natural Gas Department of the American Gas
Association, as amended from time to time, or by any other method commonly used
in the industry and mutually acceptable to the Parties, Any meter installed
hereunder shall be open to inspection by Seller at ail reasonable times. The
charts and records pertaining to measurement hereunder shall be kept on file by
Buyer/Processor for a period of two (2) years for the mutual use of the Parties.
 In the event any question arises as to the accuracy of the measurement,
the meter or meters shall be tested upon the demand of either Party. The expense
of any such special test shall be borne by the Party demanding same if the meter
registration is found to be correct, and by Buyer/Processor if found to be
incorrect.

    

    
      
        
           

        

        
          4
B

          
            

          

        

        
           

        

      

    

    

    B.           Seller
may, at its option and sole expense, install, maintain and operate check meters
and other equipment to check Buyer/Processor's meters; provided, however, that
such check meters and other equipment shall be installed by Seller so as not to
interfere with the operation of any of the Facilities.. Buyer/Processor and
Seller shall have access to each other's measuring equipment at all times during
business hours, but the reading, calibrating and adjustment thereof and the
changing of charts shall be done only by the employees or agents of
Buyer/Processor and Seller, respectively, as to meters or check meters so
installed hereunder.

     

    C.           At
least semi-annually Buyer/Processor shall calibrate all meters installed
hereunder and make adjustments as necessary. Should Seller so desire,
Buyer/Processor shall give notice to Seller of the time of such calibrations
sufficiently in advance of holding same in order that Seller may have its
representative present. With respect to any test made hereunder, a registration
within two percent (2%) of correct shall be considered correct. However, the
meter or meters, when found to be incorrect, shall be adjusted to one hundred
percent (100%) accuracy as soon as possible. Settlement for any period during
which the meter registration deviates by more than two percent (2%) of correct
shall be corrected at the rate of inaccuracy for any period of inaccuracy which
is definitely known or agreed upon; but in case the period is not definitely
known or agreed upon, then either for a period of fifteen (15) days prior to the
date of said test, or for a period calculated from the beginning of the
Accounting Period in which the test was conducted, whichever is longer. The rate
of the inaccuracy shall be estimated and agreed upon by the Parties hereto on
the basis of the best available data, using the first of the following methods
which is feasible:

     

    
      	
               
      

            	
              1)

            	
              By
      using the registration of any check meter or meters if installed and
      accurately registering; or, in the absence
  thereof,

            

    

    
      	
               
      

            	
              2)

            	
              By
      calibration, test, or mathematical calculation;
  or

            

    

    
      	
               
      

            	
              3)

            	
              By
      estimation based on comparison of the quantity of deliveries with
      deliveries during preceding periods under similar conditions when the
      meter was registering accurately.

            

    

     

    D.           All
fundamental constants, observations, records and procedures involved in the
determination and/or verification of the quantity and other characteristics of
Gas measured hereunder, unless otherwise specified herein, shall be In
accordance with the applicable provisions in ANSI/API 2530, "Orifice Metering of Natural Gas" (American
Gas Association Gas Measurement Committee Report No. 3) of the Natural Gas
Department of the American Gas Association, as amended from time to time, or by
any other method commonly used in the industry and mutually acceptable to the
Parties.  The average local atmospheric pressure shall be assumed to be
12.3 Psia. The temperature of Gas flowing through each meter shall be determined
by a recording thermometer, installed by Buyer/Processor at its sole cost and
expense to properly record the temperature of the flowing Gas, and the
arithmetical average of the temperature recorded while the Gas is flowing during
each meter chart interval shall be used in correcting amounts delivered
hereunder to a temperature base of sixty degrees Fahrenheit (60°F) and to a
pressure base of 14.65 pounds Psia.

     

    E.           Seller
agrees that all Gas delivered to Buyer/Processor under the Agreement
shall:

     

    
      	
               
      

            	
              1)

            	
              Contain
      not more than one-fourth (1⁄4) grain of
      hydrogen sulfide per one hundred (100) cubic feet of Gas, or more than
      five (5) grains of total sulfur per one hundred (100) cubic feet of
      Gas;

            

    

     

    
      	
               
      

            	
              2)

            	
              Contain
      not more than two percent (2%) by volume of carbon dioxide, nor more than
      three percent (3%) by volume of nitrogen, nor more than two-tenths percent
      (0.2%) by volume of oxygen;

            

    

     

    
      	
               
      

            	
              3)

            	
              Not
      have a maximum temperature greater than one hundred twenty degrees
      Fahrenheit (120°F), or a minimum temperature less than forty degrees
      Fahrenheit (40°F); and

            

    

     

    
      	
               
      

            	
              4)

            	
              Be
      commercially free of all objectionable dust or other solid or liquid or
      gaseous matters which might interfere with its merchantability or cause
      injury to or interference with proper operations of any of the Facilities
      through which the Gas flows.

            

    

    

    
      
        
           

        

        
          5
B

          
            

          

        

        
           

        

      

    

    

    F.           Buyer/Processor
may test Seller's Gas delivered hereunder for adherence to the specifications
above set forth, such testing to be in accordance with generally accepted
industry standards and procedures. If the Gas so delivered by Seller does not
meet the specifications set forth above. Buyer/Processor, at its option, may
refuse to accept delivery of said Gas into its Facilities, or may accept such
Gas, provided that measured volumes of such Gas shall be reduced by the amount
by which the total volume of inert components exceed five percent (5%) as set
forth above. If Seller shall deliver Gas to Buyer/Processor which exceeds the
maximum pressure specifications or fails to meet the quality specifications for
any given Delivery Point, Seller shall be responsible for any damages caused to
Buyer/Processor's Facilities and any other damages as a result of Seller's
delivery of such nonconforming Gas.

     

    G.           At
least annually, Buyer/Processor shall take samples from each of Seller's Wells
at the Delivery Points and have such samples analyzed by chromatograph analysis
to determine the liquids content by component and the heating value of such Gas.
Buyer/Processor shall have the right to take and analyze a spot Gas sample prior
to the regularly scheduled sampling. Additionally, upon Seller's written request
to Buyer/Processor and at Seller's sole cost, risk and expense, Buyer/Processor
shall take and analyze Gas samples more frequently, All Gas samples taken
hereunder shall be taken at such times that are reasonably mutually agreeable so
that the sample will be representative of the Gas produced, shall be analyzed
using the most current Gas Processor's Association Publications and Seller shall
be permitted to be present for such sampling and permitted to take a split
sample.  Heating values determined by calculation from compositional
analysis according to GPA Standard 2172-84 (or latest revision) shall be
converted to values that reflect the actual condition of the Gas on delivery as
adjusted for pressure, water content, and compressibility unless otherwise
prescribed by statute. Gas produced and not dehydrated at point of measurement
shall be considered to be saturated with water at measurement temperature and
pressure unless determined otherwise. For the purpose of making Btu
calculations, Gas which contains seven (7) pounds of water or more per Mcf shall
constitute wet gas and Gas which contains less than seven (7) pounds of water
per Mcf shall constitute dry gas. Any chromatograph analysis taken hereunder
shall be effective for Gas delivered commencing on the first day of the next
succeeding month and shall not be effective retroactively unless otherwise
mutually agreed by the Parties.

     

    
      	
              9.

            	
              ALLOCATION OF RESIDUE
      GAS AND PI ANT PRODUCTS
REVENUES

            

    

     

    A.           For
the purpose of determining the Residue Gas MMBtu's attributable to Producer's
Gas, Gatherer/Processor shall calculate a fraction, the numerator being the
Theoretical Residue MMBtu's of Gas attributable to each of Producer's Wells and
the denominator being the total Theoretical Residue MMBtu's of all Gas received
and processed-by Gatherer/Processor, This fraction shall be multiplied by the
total Residue Gas MMBtu's available at the tailgate of the Gas Plant to
determine the Residue Gas attributable to each of Producer's Wells.. Residue Gas
attributable to each of Producer's Wells shall be allocated to
Gatherer/Processor and Producer pursuant to the Gathering and Processing Fees
provisions contained herein.. For the purpose of making Btu calculations, Gas
which contains seven (7) pounds of water or more per Mcf shall constitute wet
gas and Gas which contains less than seven (7) pounds of water per Mcf shall
constitute dry gas. Any chromatograph analysis taken hereunder shall be
effective for Gas delivered commending on the first day of the next succeeding
month and shall not be effective retroactively unless otherwise agreed by the
Parties.

     

    B.           Theoretical
Residue MMBtu's attributable to each of Producer's Wells shall be determined by
calculating the MMBtu's measured at each of Producer's Wells and deducting the
Shrinkage MMBtu's attributable to each of Producer's Wells Shrinkage MMBtu's
shall be the sum of the MMBtu's determined by multiplying the allocated gallons
of each of Plant Product attributable to each of Producer's Wells by the
following conversion factors:

     

    
      	
              Plant
      Product

            	
              Conversion
      Factor (Btu/Gallon)

            
	
              [
      * ]

            

    

     

     

    C.           Plant
Products Revenue attributable to each of Producer's Wells shall be calculated by
multiplying the percentage of each Plant Product allocable to each of Producer's
Wells by the total apportioned fractionated and non-fractionated Plant Products
Sales Revenue received by Gatherer/Processor for the total of each Plant Product
marketed by Gatherer/Processor or it designee during the applicable Accounting
Period {FOB the Gas Plant and/or the Fractionator, as applicable), less
transportation and fractionation fees with respect to fractionated volumes
(currently [ * ][ * ] per gallon), subject to adjustment by Gatherer/Processor
or its designee, as determined at the inlet to the Fractionator. Division of
revenues from tile Plant Products shall be determined in accordance with the
Gathering and Processing Fees provisions contained herein.

    

    
      
        
           

        

        
          6
B

          
            

          

        

        
           

        

      

    

    

    D.           For
purposes of determining the percentage of each plant Product allocable to each
of Producer's Wells, Gatherer/Processor shall multiply the volume in MCF's of
Gas attributable to each of Producer's Wells by the GPM (Gallons Per MCF) for
each Plant Product contained in the well stream. Said GPM shall be determined by
an Initial chromatograph analysis taken on spot Gas samples from each of
Producer's Wells subject to the measurement provisions of the Existing
Agreements, The calculated value will be the Theoretical Plant Product Content
for each Plant Product of Producer's Gas. Said Theoretical Plant Product Content
for each Plant Product shall be divided by the Total Theoretical Plant Product
Content for each Plant Product of all gas received by Gatherer/Processor to
determine the percentage of Plant Product for each Plant Product attributable to
each of Producer's Wells.

     

    E.           Gatherer/Processor
or its designee, in its sole discretion, shall determine whether or not to
fractionate ail or any portion of the Plant Products based upon then current
market conditions, and will market one hundred percent (100%) of the Plant
Products, both fractionated and unfractionated, upon terms which, in
Gatherer/Processor's or its Designee's sole judgement, are commercially
reasonable. Upon request, Gatherer/Processor will furnish Producer on a monthly
basis with reports containing volumes sold and prices applicable thereto. Upon
execution of Gatherer/Processor's confidentiality agreement. Producer shall have
the right at reasonable times during normal business hours to review the books
and records of Gatherer/Processor pertaining to the sale of Plant Products,
allocation of Residue Gas and revenues received therefrom.

     

    
      	
              10.

            	
              PRICING INFORMATION
      AND REFUNDS

            

    

     

    A.           Seder
agrees that it will supply data and information at Buyer/Processor's reasonable
request, and otherwise cooperate with Buyer/Processor in any regulatory
proceeding wherein the price or other provisions set forth herein may be the
subject of review.

     

    B.           Should
Buyer/Processor make payment to Seller based on the price for any category of
Gas subject to any governmental agency or judicial review of such determination,
and if it is subsequently determined that the Gas for which payment was made was
not eligible for the price upon which payment was based, or if the price to be
paid hereunder for such Gas is determined to be in excess of the maximum lawful
price permitted by applicable NGPA price categories, or if for any reason
Buyer/Processor is not permitted to receive or retain such prices in its resale
rates, then the rate thereafter to be paid shall be accordingly reduced and
Seller will refund to Buyer/Processor any previous excess payments together with
interest at the rate prescribed in 18 C.F.R. Sec. 273.302 or subsequent
regulation.

     

    C.    The Parties
acknowledge that Buyer/Processor has not reviewed the terms of Seller's Leases
pertaining to Seller's Gas and that, to the extent it is responsible for doing
so, Buyer/Processor shall account and make payment to royalty, overriding
royalty, and other interest owners and to taxing authorities based on the price
paid by Buyer/Processor for Seller's Gas as set forth in the Agreement, and that
so long as Buyer/Processor makes payment as aforesaid, Buyer/Processor shall not
be responsible for any other deficiency or overpayment.

     

    
      	
              11.

            	
              TAXES

            

    

     

    A.           Seller
agrees to pay, or cause to be paid, when due, the taxes lawfully levied on
Seller's Gas prior to its delivery to Buyer/Processor, as wall as its
proportionate share of taxes, if any, levied upon the Plant Products to be
marketed by Buyer/Processor hereunder and not paid by the
purchaser.

     

    
      	
              12.

            	
              PAYMENT

            

    

     

    A.           After
delivery of Seller's Gas has commenced, Buyer/Processor shall mail a statement
to Seller indicating the quantity of Gas delivered to and the Plant Products and
Residue Gas purchased by Buyer/Processor during the preceding Accounting Period,
adjustments, if any, made by Buyer/Processor, and the amount due therefore.
Where Buyer/Processor is responsible for distribution of revenues, it shall be
the obligation of Buyer/Processor to cause proper settlement and accounting to
be made and to make distribution of proceeds to all owners of interest in the
proceeds from the sale of Gas delivered to Buyer/Processor hereunder, and in
consideration therefore, Buyer/Processor shall charge a monthly accounting and
settlement fee in the amount of  [ * ] Dollars [ *
] per well per interest owner to whom Buyer/Processor distributes revenues,
said fee to be deducted by Buyer/Processor pro rata from the amount due the
working interest owners hereunder on a per-well basis, The monthly accounting
and settlement fee shall be increased [ each July 1 ] by a percentage equal to
the percentage change In the cumulative implicit GNP price deflator (January
1995 = 1.0) computed and published as an annual rate by the U.S. Department of
Commerce (or, if not available, a comparable economic indicator), provided that
such number shall never be a negative number. Where Seller is responsible for
revenue distribution, Buyer/Processor shall remit the amount due for all Gas
purchased to Seller, and it shall be the obligation of Seller to cause proper
settlement and accounting to be made and to make distribution of proceeds to all
owners of interest in the proceeds from the sale of Gas delivered to
Buyer/Processor hereunder, Buyer/Processor shall mail the statement and payment
either on or before the last day of each month (or on the next business day if
such day is a weekend or holiday) for Gas purchased the preceding Accounting
Period, provided, however, that until Buyer/Processor has received satisfactory
evidence of title, it may suspend payments hereunder.  The Party
responsible for distribution of revenues to owners of interest in the Gas hereby
agrees to defend (with counsel reasonably acceptable to the other Party)),
indemnify and hold the other harmless of and from any and all claims, demands,
actions, causes of action, costs, damages and expenses related to, arising out
of or in any way stemming from such obligation; provided, however, that
notwithstanding anything contained herein or the Agreement to the
contrary.  Seller shall defend (with counsel reasonably acceptable to
Buyer/Processor), indemnify and hold Buyer/Processor of and from any and all
claims, demands, actions, causes of action, costs, damages and expenses related
to incorrect information provided to Buyer/Processor concerning ownership
interests in the proceeds of production. Buyer/Processor, at its election, may
deduct from its payment to Seller, sums, if any, due to Buyer/Processor under
the terms of the Agreement or other transactions.

    

    
      
        
           

        

        
          7
B

          
            

          

        

        
           

        

      

    

    

    B.           Buyer/Processor
shall have the right to deduct from payment to Seller a metering fee of [ *
] per meter, per month for each meter that is less than 100 MMBtu during
any month is delivered to Buyer/Processor.

     

    C.           Upon
execution of the other Party's Confidentiality Agreement, each Party to the
Agreement shall have, at its expense, the right at all times to examine the
books and records of the other Party, during normal working hours, to the extent
necessary to verify the accuracy of any statement, charge, computation, or
demand made under or pursuant to the Agreement. Each Party agrees to keep
records and books of account in accordance with generally accepted accounting
principles in the industry.  The Parties agree that the sole and
exclusive remedy and measure of damages for any improper payments under this
Agreement shall be the amount of underpayment or overpayment, as the case may
be, during the two (2) year period immediately preceding the date on which a
statement delivered hereunder was questioned in writing.

     

    
      	
              13.

            	
              SELLER’S
      REPRESENTATIVE

            

    

     

    A.           The
party set forth in Article 7 of the Agreement, Notices, is designated as
Seller's representative with respect to all matters under this Agreement,
including but not limited to the following:

     

    
      	
               
      

            	
              1)

            	
              To
      give and receive all notices;

            

    

     

    
      	
               
      

            	
              2)

            	
              To
      make and witness any tests to be made of Seller's Gas and measuring
      equipment and adjustments to such
equipment;

            

    

     

    
      	
               
      

            	
              3)

            	
              To
      deliver the quantities of Seller's Gas deliverable
    hereunder;

            

    

     

    
      	
               
      

            	
              4)

            	
              To
      obtain, execute and deliver to Buyer/Processor such division order title
      opinions and division orders as may be required by Buyer/Processor
      hereunder; and

            

    

     

    
      	
               
      

            	
              5)

            	
              To
      comply with the requirements, rules and regulations of any duly
      constituted authority having
jurisdiction.

            

    

     

    
      	
               
      

            	
              6)

            	
              If
      Seller is responsible for distribution of revenues, to receive payment
      hereunder and to cause proper settlement and accounting to be made and
      make distribution of proceeds to all owners of interest in the proceeds
      from the sale of Gas delivered to Buyer/Processor
    hereunder.

            

    

     

    B.           Buyer/Processor
may act, and shall be fully protected in acting, in reliance upon any and all
acts and things done and performed by or agreements made with respect to all
matters dealt with herein by said Representative on behalf of Seller as fully
and with the same effect as though Seller had done, performed, made or executed
the same.

    

    
      
        
           

        

        
          8
B

          
            

          

        

        
           

        

      

    

    

    C.           Seller
may change its Representative designated above, or designate a new
Representative from time to time by delivery of written notice of change and
designation of Representative to Buyer/Processor.  The Representative
so designated shad have and may exercise all power and authority therein granted
with like effect as though named as such Representative herein in the first
instance.

     

    14.           REGULATORY
BODIES

     

    A.           The
Agreement is subject to all present and future valid laws and lawful orders of
all regulatory bodies now or hereafter having jurisdiction of the Parties, or
either of them; and should either of the Parties, by force of such law or
regulation imposed at any time during the term of the Agreement, be ordered or
required to do any act inconsistent with the provisions of the Agreement, the
Agreement shall continue nevertheless and shall be deemed modified to conform
with the requirements of such law or regulation for that period only during
which the requirements of such law or regulation are applicable. Nothing in the
Agreement or this Appendix shall prohibit either Party from obtaining or seeking
to obtain modification or repeal of such law or regulation or restrict either
Party's right to legally contest the validity of such law or regulation, and
each Party reserves the right to file with such regulatory bodies any material
necessary to implement the terms of the Agreement and this Appendix as they
existed prior to the modification.

     

    15           FORCE
MAJEURE

     

    A.           Except
for Buyer/Processor's and Seller's respective obligations to make proper
settlement, accounting and distribution of proceeds to all interest owners as
provided above for Gas delivered to and purchased by Buyer/Processor under the
Agreement, in the event either Buyer/Processor or Seller is rendered unable, by
reason of an event of force majeure, to perform, wholly or in part, any
obligation or commitment set forth in the Agreement, then upon such Party giving
notice and full particulars (including all supporting documentation) of such
event as soon as practicable after the occurrence thereof, the obligations of
both Parties shall be suspended to the extent and for the period of such force
majeure provided that the Party claiming an event of force majeure shall make
all reasonable attempts to remedy the same with all reasonable
dispatch.

     

    B.           The
term "force majeure",
as used herein, shall mean acts of God, strikes, lockouts or industrial disputes
or disturbances, civil disturbances, arrest and restraint of rulers or people,
interruptions by government or court orders, necessity for compliance with any
present and future valid orders of court, or any law, statute, ordinance or
regulation promulgated by any governmental or regulatory authority having proper
jurisdiction, acts of the public enemy, wars, riots, blockades, insurrections,
including inability to secure materials by reason of allocations promulgated by
authorized governmental agencies, epidemics, landslides, lightning, earthquakes,
fires, storms, floods, washouts, inclement weather which necessitates
extraordinary measures and expense to construct facilities and/or maintain
operations, explosions, partial or entire failure of Gas supply, breakage or
accident to machinery or lines of pipe, freezing of wells or pipelines,
inability to obtain or delays in obtaining easements or rights-of-way, the
shutting in of facilities for the making of repairs, alterations or maintenance
to wells, pipelines or plants, or any other cause whether of the kind herein
enumerated or otherwise, not reasonably within the control of the Party claiming
"force
majeure”.

     

    C.           Neither
Party shall be entitled to the benefit of the provisions of this Section under
either or both of the following circumstances:

     

    
      	
               
      

            	
              1)

            	
              To
      the extent that the failure was caused by the Party claiming suspension
      having failed to remedy the condition by taking all reasonable acts, short
      of litigation, if such remedy requires litigation, and having failed to
      resume performance of such commitments or obligations with reasonable
      dispatch; or,

            

    

     

    
      	
               
      

            	
              2)

            	
              If
      the failure was caused by lack of funds, or with respect to the payment of
      any amount or amounts then due
hereunder.

            

    

     

    D.           Settlement
of strikes and lockouts shall be entirely within the discretion of the Party
affected, and the duty that any event of force majeure shall be remedied with
all reasonable dispatch shall not require the settlement of strikes and lockouts
by acceding to the demands of the Parties directly or indirectly involved in
such strikes or lockouts when such course is inadvisable in the discretion of
the Party having such difficulty.

    

    
      
        
           

        

        
          9
B

          
            

          

        

        
           

        

      

    

    

    16.           DEFAULTS

     

    A.           It
is covenanted and agreed that if either Party shall fail to perform any of the
covenants or obligations imposed upon it under and by virtue of the Agreement or
this Appendix, in addition to its other rights and remedies, the other Party may
terminate the Agreement by proceeding as follows:

     

    
      	
               
      

            	
              1)

            	
              The
      Party not In default shall cause a written notice to be served on the
      other Party in default, stating specifically the cause for terminating the
      Agreement, and declaring it to be the Intention of the Party giving notice
      to terminate the same; thereupon, the Party in default shall have thirty
      (30) days after the service of the aforesaid notice in which to remedy or
      remove the cause or causes stated in the notice for terminating the
      Agreement. If within said thirty (30) days the Party in default does so
      remove and remedy said cause or causes, or fully indemnifies the Party not
      in default for any and all consequences of such breach, then such notice
      shall be withdrawn and the Agreement shall continue in full force and
      effect.

            

    

     

    
      	
               
      

            	
              2)

            	
              In
      case the Party in default does not remedy and remove the cause or causes,
      or does not indemnify the Party giving the notice for any and all
      consequences of such breach, within said period of thirty (30) days, then
      the Agreement shall become null and void from and after the expiration of
      said period.

            

    

     

    
      	
               
      

            	
              3)

            	
              Any
      cancellation of the Agreement pursuant to the provisions of this Section
      shall be without prejudice to the obligation of Buyer/Processor to make
      proper settlement, accounting and distribution of proceeds to ad owners of
      interest in the proceeds received for Gas delivered to Buyer/Processor
      thereunder to the time of cancellation, and without waiver of any remedy
      to which the Party not in default may be entitled for violations of the
      Agreement.

            

    

     

    B.           No
waiver by either Seller or Buyer/Processor of any default of the other under
this Agreement shall operate as a waiver of any future default, whether of like
or different character or nature, nor shall any failure to exercise any right
hereunder be considered as a waiver of such right in the future

     

    17.           UNECONOMIC WELL
CONNECTIONS

     

    A.           In
the event Seller desires Buyer/Processor to connect a well to Buyer/Processor's
Gathering System which well, in Buyer/Processor's sole opinion, would not
constitute an economic connection, Buyer/Processor shall be under no obligation
to connect any such well, or to accept any Gas therefrom. Nevertheless,
Buyer/Processor, upon Seller's request, may accept Gas from any such well if
Seller shall acquire and assign without charge to Buyer/Processor a - measuring
station site on Buyer/Processor's existing Gathering System at a mutually
agreeable point, together with all necessary rights of ingress and egress
thereto, and bear the cost of the construction, operation and maintenance of all
facilities necessary to deliver Gas from such well into Buyer/Processor's
Gathering System at said mutually agreeable point. Should Seller elect not to
deliver Gas to Buyer/Processor from such well, Buyer/Processor shall release
such well and the acreage attributable to the drilling and spacing unit thereof
from the Agreement, but only as to the formation in which such well is then
completed.

     

    B.           In
the event Gas volumes available for delivery from any of Seller's Wells
hereunder become uneconomic to Buyer/Processor in the exercise of
Buyer/Processor's reasonable judgment, Buyer/Processor agrees to release from
dedication to this Agreement the affected Well(s) and the Leases to the extent
of the drilling and spacing unit(s) corresponding to such WelI(s).

     

    
      	
              18.

            	
              UNECONOMIC OPERATION
      OF GAS PLANT OR BUYER/PROCESSOR'S GATHERING
  SYSTEM

            

    

     

    A.           If,
in the opinion of Buyer/Processor, any of the Gas Plant or Buyer/Processor's
Gathering System is or becomes uneconomic to operate due to its volume, quality,
Plant Products content, governmental regulation or any other cause,
Buyer/Processor may either modify or suspend operations thereof, in which case
Buyer/Processor shall not be obligated to take delivery of, or may cease
processing all or any portion of the Gas from Seller's Wells, so long as such
condition exists. For the purposes hereof, "uneconomic operation" shall be
defined as circumstances under which Buyer/Processor's share of net operating
revenues (the sum of Buyer/Processor's percentage of revenues attributable to
sales of Plant Products and Residue Gas) of any of the Gas Plant or
Buyer/Processor's Gathering System is insufficient to offset actual operating
costs thereof.

    

    
      
        
           

        

        
          10
B

          
            

          

        

        
           

        

      

    

    

    B.           During
periods of uneconomic operation of any of the Gas Plant or Buyer/Processor's
Gathering System and/or suspension of operation of portions thereof,
Buyer/Processor, at the request of the Seller, shall place back in service and
operate such suspended portions of the affected Gas Plant or Buyer/Processor's
Gathering System as may be necessary to accept and process all or any portion of
Seller's Gas'. In consideration thereof, Seller agrees to reimburse
Buyer/Processor, in the same proportion as the ratio of the Gas volumes
supplied by Seller bear to the total Gas volumes supplied to the affected Gas
Plant or Buyer/Processor's Gathering System by other third-party sellers, for
any losses (costs of operations of the affected Gas Plant or Buyer/Processor's
Gathering System in excess of revenues attributable to operations of the
affected Gas Plant or Buyer/Processor's Gathering System after deducting
payments to all contributing producers for Gas delivered to and processed by the
affected Gas Plant or Buyer/Processor's Gathering System) incurred by
Buyer/Processor during such continued uneconomic operations. Buyer/Processor
may, at its option, elect to sell the affected Gas Plant or Buyer/Processor's
Gathering System rather than operate the same under the terms of this
Section.

     

    
      	
              19.

            	
              LITIGATION -
      ATTORNEYS' FEES

            

    

     

    A.           In
the event litigation arising out of the Agreement (excluding litigation or
actions indemnified pursuant to Section 5, Seller's Warranties,
or Sections 2.E or 21 A of this Appendix) should be initiated by any Party
hereto, the prevailing Party, after the entry of a final non-appealable order,
shall be entitled to recover from the other Party, as a part of said judgment,
all court costs, fees and expenses of such litigation, including reasonable
attorneys' fees.

     

    
      	
              20.

            	
              DAMAGES

            

    

     

    A.           Whether
or not occasioned by a default or other breach of the Agreement, neither Party
shall be liable to he other for special, exemplary, or consequential damages,
except as to third-party claims, pursuant to the indemnification provisions of
the Agreement or this Appendix.

     

    
      	
              21.

            	
              GENERAL

            

    

     

    A.           The
Parties hereto assume full responsibility and liability for the maintenance and
operation of their respective properties and agree to indemnify and save
harmless the other Party from all liability and expense on account of any
damages, claims or actions arising from any act or accident in connection with
the installation, presence, maintenance or operation of the property or
equipment of the indemnifying Party.

     

    B.           Seller
agrees that Buyer/Processor, its successors and assigns, shall have the right,
but not the obligation, at any time to redeem for Seller, its successors and
assigns, or other interest owners by payment of any taxes, deeds of trust,
judgments or other liens on the Leases described in Exhibit "A" hereto, on
Seller's Gas Reserves or the production therefrom, in the event of default of
payment by Seller or other interest owners, and be subrogated to the rights of
the holder or holders thereof Seller further agrees that any such redemption and
payment by Buyer/Processor for the account of Seller or other interest owners
shall be applied by way of a setoff against the purchase price which
Buyer/Processor would otherwise pay to Seller or the other interest owners under
Section 9 of the Appendix attached hereto, such set-off to continue until all
payments by Buyer/Processor under this Agreement, plus interest, have been fully
recouped by Buyer/Processor.

     

    C.           Upon
consent of Buyer/Processor, this Agreement may be ratified and adopted by any
owner of an interest in the Leases subject hereto, or any leases with which the
Leases subject hereto may be pooled or unitized, by execution and delivery to
Buyer/Processor of a separate written instrument ratifying and adopting this
Agreement insofar as said owner's interest in any such lands or leases is
concerned, all the terms and provisions of this Agreement shall be binding upon
such interest owner.  In addition, upon Buyer/Processor's request, Seller
shall cause each interest owner in the Leases to execute and deliver to
Buyer/Processor a ratification of this Agreement.

     

    D.          Each
Seller executing or ratifying the Agreement makes and enters into the Agreement
severally and not jointly with other sellers, and they are not acting as
partners, joint venturers, or otherwise jointly in this transaction, and nothing
herein contained or provided shall operate to create, or be construed as
creating, any such relationship, It is expressly provided that there shall never
be any joint liability against the Parties designated herein as Seller and that
no single party Seller shall be liable for the acts or omissions of any other
single party Seller.

     

    E.           In
the event Seller desires to commit additional Gas produced and saved, or to be
produced and saved, from oil and gas leases other than those dedicated hereunder
and in which Seller owns and holds, or has an interest or interests, such oil
and gas leases and the wells drilled and completed, or to be drilled and
completed, thereon shall be covered by a separate Gas Purchase and Processing
Agreement between Seller and Buyer/Processor.

    

    
      
        
           

        

        
          11
B

          
            

          

        

        
           

        

      

    

    

    F.           The
Equal Employment Opportunity Clause required under Executive Order No. 11246,
the affirmative action commitment for disabled veterans and veterans of the
Vietnam Era, set forth in 41 CFR 60-250 4, the affirmative action clause for
handicapped workers, set forth in CFR 650-741 4, and the related regulations of
the Secretary of Labor, 41 CFR Chapter 60, are incorporated by reference in this
Agreement. By accepting this Agreement, Seller certifies that it complies with
the authorities cited above and that it does not maintain segregated facilities
or permit its employees to perform services at locations where segregated
facilities are maintained, as required by 41 CFR 60.1.8.

     

    

    END OF GENERAL TERMS AND
CONDITIONS

    

    
      
        
           

        

        
          12
B

          
            

          

        

        
           

        

      

    

     

    
      
        		 	
                K N
      Gas Gathering, Inc. 

                A
      Subsidiary of K N Energy Inc 

                635
      N 7th Ave. Brighton,
      CO 80601 

                (303)
      659-5922

              

      

      

      

      September
17, 1999

      

      

      Connie L.
Nordberg

      United
States Exploration, Inc

      1560
Broadway, Suite 1900

      Denver,
CO 80202

      

      Ms.
Nordberg,

      

      KN Gas
Gathering, Inc., hereby releases the following proposed well from our gathering
contract dedication: Bernhardt 13-A, located at NE/4, Section 13 - T4N - R67W,
in Weld County, Colorado

      

      If you
have any questions, please call me at 303-655-4341.

      

      Sincerely,

      

      

      /s/ Scott
Emerson

      Scott
Emerson

      General
Manager

      Wattenberg
Operations

      

      
        	
                Cc:

              	
                Rick
      Williams

              
	 
      	
                Billy
      Cantwell

              
	 
      	
                Darrel
      Gentry

              

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      
        	
                Denver
      District Office

              	 	
                 
      

              

      

      

      

      October
4, 1999

      

      

      Ms.
Connie Nordberg

      United
States Exploration, Inc

      1560
Broadway

      Suite
1900

      Denver,
Colorado S0202

      

      
        	
                RE:

              	
                Gas
      Purchase and Sale Agreement

              
	 
      	
                Greater
      Wattenberg Area

              
	 
      	
                Bernhardt
      #13 A T4N, R67W Section 13: NENE

              
	 
      	
                Weld
      County, Colorado

              

      

      

      

      Dear
Connie:

      

      I'm
writing in response to your recent request for a Release of Dedication for the
referenced well from our Gas Purchase and Sale Agreement, effective July 1,
1999.  Narco hereby agrees to release the referenced well from the
dedication of acreage as contained in our Area of Mutual Interest (AMI) to
enable UXP to connect said well to Duke's Gathering System.

      

      All other
terms and conditions remain in full force and effect.  This release
applys only to the referenced well Should you have any questions, please let me
know.

      

      

      Sincerely,

      

      /s/
Christopher J. Denison

      Christopher
J Denison

      Gas
Supply Representative

      

      

      1700
Broadway • Suite 2000 • Denver, Colorado 80290

      Telephone:
303-861-9183ex10_4.htm

    
      

    

    Exhibit
10.4

     

    The
Partnership has redacted certain confidential information in this agreement in
reliance upon its confidential treatment request that it has filed with the
Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities
Exchange Act of 1934, In this agreement, we indicate each redaction by use of an
asterisk *.

    
 

    GAS
PURCHASE AND PROCESSING AGREEMENT

    

    BETWEEN

    

    NATURAL
GAS ASSOCIATES, A COLORADO PARTNERSHIP

    

    AND

    

    ACEITE
ENERGY CORPORATION

    

    WALKER
EXPLORATORY PROGRAM 1982-A LIMITED

    

    CREEK
CATTLE COMPANY

    
 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    
      	 
      	
              INDEX

            	 
      
	 
      	 
      	 
      
	
              I.

            	
              DEFINITIONS

            	
              Page
      2

            
	
              II.

            	
              PRELIMINARY
      ACTS OF PARTIES

            	
              Page
      4

            
	
              III.

            	
              DEDICATION
      OF ACREAGE

            	
              Page
      4

            
	
              IV.

            	
              DEDICATION
      OF PLANT CAPACITY AND PIPELINE GATHERING SYSTEM .

            	
              Page
      5

            
	
              V.

            	
              RESERVATIONS
      OF SELLER

            	
              Page
      5

            
	
              VI.

            	
              QUANTITY

            	
              Page
      6

            
	
              VII.

            	
              POINT(S)
      OF DELIVERY, PRESSURE AND OWNERSHIP

            	
              Page
      7

            
	
              VIII.

            	
              GAS
      MEASUREMENT AND QUALITY

            	
              Page
      9

            
	
              IX.

            	
              ALLOCATION
      OF RESIDUE GAS AND PLANT PRODUCTS

            	
              Page
      11

            
	
              X.

            	
              PRICE

            	
              Page
      11

            
	
              XI.

            	
              BILLING

            	
              Page
      14

            
	
              XII.

            	
              REGULATORY
      BODIES

            	
              Page
      14

            
	
              XIII.

            	
              FORCE
      MAJEURE

            	
              Page
      15

            
	
              XIV.

            	
              WARRANTY
      OF TITLE TO GAS

            	
              Page
      15

            
	
              XV.

            	
              SELLER’S
      REPRESENTATIVE

            	
              Page
      16

            
	
              XVI.

            	
              NOTICES

            	
              Page
      17

            
	
              XVII.

            	
              EASEMENTS

            	
              Page
      17

            
	
              XVIII.

            	
              TERM

            	
              Page
      18

            
	
              XIX.

            	
              DEFAULTS

            	
              Page
      18

            
	
              XX.

            	
              UNECONOMIC
      WELL CONNECTIONS AND UNECONOMIC OPERATIONS OF PLANT

            	
              Page
      19

            
	
              XXI.

            	
              OPTIONS

            	
              Page
      21

            
	
              XXII.

            	
              SHRINKAGE

            	
              Page
      22

            
	
              XXIII.

            	
              SPECIAL
      PROVISIONS

            	
              Page
      22

            
	
              XXIV.

            	
              MISCELLANEOUS

            	
              Page
      23

            

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    GAS PURCHASE AND PROCESSING
AGREEMENT

    

    THIS
AGREEMENT, entered into this 14th day of October 1983, by and between Natural
Gas Associates, a Colorado partnership, with offices at 1200 Trinity Place,
Denver, Colorado 80202, hereinafter referred to as "Buyer/Processor", and Aceite
Energy Corporation, a Colorado corpora­tion, with offices at 1900 Grant
Street, Suite 1050, Denver, Colorado 80203; Walker Exploratory Program 1982-A
Limited, a New York limited partnership, with offices at 52 Vanderbilt Avenue,
5th Floor, New York, New York 10017; and Creek Cattle Company, a Texas
corporation, whose address is P.O. Box 9354, Amarillo, Texas 79015, hereinafter
collective­ly referred to as "Seller".

    

    WITNESSETH
THAT:

    

    WHEREAS,
Buyer/Processor has constructed or proposes to construct or' cause to be
constructed and to operate and maintain a natural gas gathering system,
compression facilities and natural gas processing facilities, all such
facilities in the aggregate hereinafter referred to as the "Facilities", said
Facilities to be located in Weld County, Colorado, to enable Buyer/Processor to
purchase and accept delivery of Seller's natural gas (including natural gasoline
and other liquefiable hydrocarbons) hereinafter referred to as "Gas", produced
and saved from the leases committed and dedicated hereunder at the Point(s) of
Delivery defined herein; and,

    

    WHEREAS,
Seller owns and holds, or has an interest or interests in certain oil and gas
leases {the "Leases") located in Weld County, Colorado, which Leases are
described and listed in Exhibits "A" (Acreage Earned and Dedicated) and "A-l"
(Acreage to be Earned and Dedicated), respectively, attached hereto and
incorporated herein by reference; and

    

    WHEREAS,
Seller desires to sell to Buyer/Processor all of the Gas owned or controlled by
Seller produced and saved from the Leases dedicated hereunder, as well as to
contract with Buyer/Processor to process all of said volumes of Gas upon the
terms and for the consideration expressed herein; and,

    

    WHEREAS,
Buyer/Processor desires to purchase and gather all of the Gas owned or
controlled by Seller saved and produced from the Leases and process such Gas
utilizing the gas processing plant (the "Plant") to be constructed and operated
by Buyer/Processor for the consideration herein expressed; and,

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    WHEREAS,
Buyer/Processor has entered into certain third-party Residue Gas Sales and
Purchase Agreement(s), which Agreement(s) (is) (are) currently in full force and
effect, and pursuant to which Buyer/Proces­sor shall sell all of the Residue
Gas resulting from Seller's Gas production dedicated and purchased
hereunder.

    

    NOW
THEREFORE, in consideration of the premises, mutual covenants and other good and
valuable consideration expressed herein, the parties hereto agree as
follows:

    

    ARTICLE
I

    DEFINITIONS

    

    For the
purpose of this Agreement, unless the context of the instrument requires
otherwise, the following terms and expressions used herein shall be defined as
follows:

    

    
      	
              1.

            	
              "Accounting
      Period", except the initial "Accounting Period", shall mean a period of
      one calendar month, commencing at 8:00 a.m. local time on the first day of
      each month, and ending at 8:00 a.m. local time on the first day of the
      succeeding calendar month. The initial "Accounting Period" shall commence
      at 8:00 a.m. local time on the date of initial deliveries of Gas
      hereunder, continuing for a period of consecutive calendar days until 8:00
      a.m. local time on the first day of the succeeding calendar
      month.

            

    

    

    
      	
              2.

            	
              "BTU"
      shall mean British Thermal Unit.

            

    

    

    
      	
              3.

            	
              "Commence
      Operations", whether in reference to Seller's original well(s), or to
      Seller's additional tie-in well(s), shall include, but not be limited to,
      any of the following acts undertaken by Seller and Buyer/Processor:
      Negotiations for the purchase of rights-of-way or easements, surveying or
      staking the course of pipeline(s), ditching and excavation, and such other
      acts not listed above which demonstrate Buyer/Processor's bona fide effort
      to tie-in Seller's well(s).

            

    

    

    
      	
              4.

            	
              "Cubic
      Foot of Gas" shall mean the amount of Gas required to fill a cubic foot of
      space when the Gas is at a base pressure of 14.65 pounds Psia and at a
      base temperature of 60°F.

            

    

    

    
      	
              5.

            	
              "Day"
      shall mean the 24-hour period commencing at 8:00 a.m. Local Time on one
      calendar day and ending at 8:00 a.m. Local Time on the following calendar
      date.

            

    

    
      
         

      

      
        - 2
-

        
          

        

      

      
         

      

    

    
      	
              6.

            	
              "Point(s)
      of Delivery " shall mean the point(s) at which Seller delivers Gas to
      Buyer/Processor at the well-site or other mutually agreeable points on the
      Buyer/Processor's Gathering System,

            

    

    

    
      	
              7.

            	
              "Gas"
      shall mean the effluent vapor stream including all of the constituents
      thereof, entrained liquids as produced from each lease or well, whether a
      gas well or an oil well dedicated hereunder and delivered by Seller to
      Buyer/Processor at the Point(s) of Delivery specified
    herein.

            

    

    

    
      	
              8.

            	
              "Mcf"
      shall mean one thousand (1,000) cubic
feet.

            

    

    

    
      	
              9.

            	
              "Month"
      shall mean the period beginning at 8:00 a.m. local time on the first day
      of a calendar month and ending at 8:00 a.m. local time on the first day of
      the next succeeding calendar month.

            

    

    

    
      	
              10.

            	
              "Psia"
      shall mean pounds per square inch
absolute.

            

    

    

    
      	
              11.

            	
              "Psig"
      shall mean pounds per square inch
gauge.

            

    

    

    
      	
              12.

            	
              "Seller's
      Gas Reserves" shall mean the total quantity of Gas attributable to
      Seller's present or future interest in, and/or which Seller has or may
      earn the right to market from the Leases described in Exhibits "A" and
      "A-l" attached hereto, as they now exist or may be hereafter
      amended.

            

    

    

    
      	
              13.

            	
              "Plant
      Products" means all liquefiable hydrocarbons extracted and saved at the
      Plant from Gas delivered by Seller to Buyer/Processor. These liquefiables
      shall include, but not be limited to, ethane, propane, butane, and natural
      gasoline, individually or as a mixture, as determined by the latest GPA
      Publication 2145.

            

    

    

    
      	
              14.

            	
              "Plant"
      shall mean Buyer/Processor's gas processing plant located in SE/4 of Sec.
      35, T4N, R66W of 6th PM, Weld County, Colorado, more particularly
      described in Exhibit "B" attached
hereto.

            

    

    

    
      	
              15.

            	
              "Residue
      Gas" shall mean that portion of the Gas remaining after the extraction
      therefrom of Plant Products, Plant fuel require­ments, and Plant
      losses or uses.

            

    

    

    
      	
              16.

            	
              "Buyer/Processor's
      Gathering System" shall mean the pipelines (including field compression)
      and appurtenances constructed by Buyer/Processor for the purpose of
      accepting delivery and transmitting Seller's Gas from the Point(s) of
      Delivery to Buyer/Processor's
Plant.

            

    

    
      
         

      

      
        - 3
-

        
          

        

      

      
         

      

    

    
      	
              17.

            	
              "Shrinkage"
      shall mean that reduction in total volumes of the Gas which results from
      the extraction of Plant Products, but exclusive of fuel
    gas.

            

    

    

    
      	
              18.

            	
              "System"
      shall mean in the aggregate that portion of Buyer/Processor's Gathering
      System constructed by Buyer/Processor for the benefit of Seller to connect
      Seller's wells to Buyer/Processor's Gathering System, together with that
      portion of the Plant capacity dedicated to Seller, as the same may be
      extended and/or expanded from time to
time.

            

    

    

    ARTICLE
II

    PRELIMINARY ACTS OF
PARTIES

    

    Seller
represents and warrants to Buyer/Processor, its successors and assigns, that
Seller owns or may earn an interest in, or has or may earn the right to market
Seller's portion of the Gas underlying the Leases described in Exhibits "A" and
"A-l" attached hereto and that Seller intends to construct, or cause to be
constructed, the facilities neces­sary, if any, to enable Seller to sell and
deliver to Buyer/Processor at the Point(s) of Delivery, as hereinafter set
forth, all Gas attributable to such interest, all in accordance with the
provisions of this Agreement.

    

    ARTICLE
III

    DEDICATION OF
ACREAGE

    

    
      	
              1.

            	
              Subject
      to the terms and conditions contained herein, Seller hereby commits and
      dedicates to the performance of this Agreement all of Seller's Gas
      Reserves from the Leases described in Exhibit "A" (as it now exists, or
      may be amended hereafter), and all of Seller's Gas Reserves attributable
      to the Leases or portions thereof described in Exhibit A-l (as it now
      exists or may be amended here­after) and earned by Seller, and to
      insure the faithful performance of the provisions of this Agreement,
      covenants to sell and deliver to Buyer/Processor at the Point(s) of
      Delivery all of Seller's Gas Reserves without other disposition except as
      herein otherwise provided.

            

    

    

    
      	
              2.

            	
              Seller
      shall operate the Leases dedicated hereunder free of any control by
      Buyer/Processor and shall not be required to produce any well or wells in
      any manner which in its sole judgment and discretion would not constitute
      good operating practice, including without limitation the right to make
      farmouts of any dedicated lease, subject to this Agreement, nor shall
      Seller be obligated to drill additional wells or to deepen, repair or
      rework any existing wells, to abandon any well and surrender any lease
      dedicated hereunder when Seller deems the same no longer capable of
      producing Gas in commercial quantities under normal methods of operation
      when in its sole judgment it would not be prudent or profitable to do
      so.

            

    

    
      
         

      

      
        - 4
-

        
          

        

      

      
         

      

    

    ARTICLE
IV

    DEDICATION OF PLANT CAPACITY
AND PIPELINE GATHERING SYSTEM

    

    
      	
              1.

            	
              In
      consideration of the sale of Gas by Seller to Buyer/Processor hereunder
      and based upon Buyer/Processor's Plant capacity of [*] MCF per day,
      buyer/Processor agrees to dedicate to Seller [*] MCF per day of such Plant
      capacity.

            

    

    

    
      	
              2.

            	
              In
      addition, Buyer/Processor agrees to construct and install, or have
      constructed and installed, for the benefit of Seller seven (7) miles of
      pipeline gathering system, specifically to connect the initial wells of
      Seller drilled and produced on Seller's acreage dedicated
      hereunder.

            

    

    

    
      	
              3.

            	
              The
      cost of construction of the System, as the same may be expanded and/or
      extended from time to time, plus interest on said capital investment at
      the rate per annum of [*] percent [*] over the prime rate charged from
      time to time by Continental Illinois National Bank and Trust Company of
      Chicago and paid by Buyer/Processor on any borrowed funds which comprise
      all or a portion of said capital investment incurred by Buyer/Processor,
      shall be utilized in determining payout, as defined herein, for the
      appropriate calculation and distribution of revenues to Seller as provided
      hereunder.

            

    

    

    ARTICLE
V

    RESERVATIONS OF
SELLER

    

    
      	
              1.

            	
              Seller,
      as a reasonable and prudent operator, hereby expressly reserves the
      following rights with respect to Seller's Gas Reserves and the Leases
      subject hereto:

            

    

    

    
      	
               
      

            	
              A.

            	
              The
      right to use the Gas produced from the Leases prior to delivery to
      Buyer/Processor for the following
purposes:

            

    

    

    
      	
               
      

            	
              1)

            	
              For
      fuel in the development and operation of the well from which the Gas was
      produced.

            

    

    

    
      	
               
      

            	
              2)

            	
              For
      delivery to the lessors of the Leases of the Gas if such lessors are
      entitled to use or take such Gas in kind under the terms of the
      Leases;

            

    

    
      
         

      

      
        - 5
-

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              3)

            	
              For
      fuel in the operation of the facilities which Seller may install in order
      to deliver Gas hereunder in accordance with the terms
    thereof.

            

    

    

    
      	
               
      

            	
              B.

            	
              The
      right to pool or unitize the Leases (or any portion thereof) with other
      lands or Leases so long as such action does not reduce Seller's Gas
      Reserves. In the event of any such pooling or unitization, the Agreement
      will cover Seller's Interest in the pool or unit and the Gas attributable
      thereto to the extent that such interest is derived from Seller's Gas
      Reserves.

            

    

    

    
      	
              2.

            	
              Seller
      shall provide to Buyer/Processor all necessary information whereby
      Buyer/Processor can make the proper allocation herein called for or
      required by Buyer/Processor's normal and customary accounting practices or
      required by Buyer/Processor's normal and customary contract administration
      practices, when different vintages of Gas are being delivered through a
      single Point of Delivery.

            

    

    

    ARTICLE
VI

    QUANTITY

    

    
      	
              1.

            	
              Commencing
      on the date Buyer/Processor first takes delivery of Gas hereunder and
      continuing thereafter for the term hereof, Buyer/Processor agrees to
      receive and purchase and Seller agrees to deliver and sell to
      Buyer/Processor from Seller's Gas Reserves, subject to the limitations and
      conditions herein elsewhere provid­ed, during each Accounting Period,
      all of the Gas available from Seller's Gas
  Reserves.

            

    

    

    
      	
              2.

            	
              Buyer/Processor
      shall receive and purchase Seller's Gas subject to the following
      limitations;

            

    

    

    
      	
               
      

            	
              A.

            	
              Buyer/
      Process or shall be required to Receive and purchase Seller's Gas up to
      [*] MCF per day.

            

    

    

    
      	
               
      

            	
              B.

            	
              Buyer/Processor
      shall receive and purchase Seller's Gas over and above the dedicated
      capacity on a capacity available
basis.

            

    

    

    
      	
               
      

            	
              C.

            	
              All
      other quantity limitations shall be in accordance with the terms and
      provisions of the Residue Gas Sales and Purchase Agreement(s) entered into
      by and between Buyer/Processor and Western Slope Gas Company dated
      December 17, 1982, including any payments required to be made to
      Buyer/Processor thereunder in the event the purchaser fails to take the
      required minimum volumes of Gas, which payments shall be passed through
      and distributed proportionately to Seller by Buyer/Processor in accordance
      with the pricing provisions contained in Article X
  hereof.

            

    

    
      
         

      

      
        - 6
-

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              D.

            	
              During
      periods that Buyer/Processor is unable to receive the total volumes of Gas
      delivered to Buyer/Processor from all of Seller's wells and Leases
      dedicated hereunder, Buyer/Processor shall receive and purchase only that
      portion of such Gas from the wells and Leases of Seller covered hereby
      which is ratable on a volumetric basis with the total volumes historically
      delivered to Buyer/Processor from all of Seller's wells and Leases
      dedicated hereunder. Buyer/Processor shall reduce or eliminate Gas
      deliveries from those wells and Leases of Seller from which Gas is being
      received on a capacity available basis prior to ratably reducing
      deliveries from Seller's producing wells whose volumes were originally
      covered by the Plant capacity dedicated to Seller
    hereunder.

            

    

    

    
      	
               
      

            	
              E.

            	
              Seller
      acknowledges and understands that Buyer/Processor will receive and
      purchase the Gas gathered from Seller's wells and Leases dedicated
      hereunder utilizing the Facilities which also receive, transmit and
      process Gas purchased by Buyer/Processor from other wells and leases
      dedicated to Buyer/Processor by other
Sellers.

            

    

    

    
      	
               
      

            	
              F.

            	
              Seller
      acknowledges and understands that Buyer/Processor reserves the right to
      receive and purchase such third-party Gas over and above the dedicated
      capacity of the Plant on a capacity available basis. Plant capacity
      priority shall be given to Seller's Gas up to the limit defined in Article
      IV.1 and Article VI.2.A.

            

    

    

    ARTICLE
VII

    POINT(S) OF DELIVERY,
PRESSURE AND OWNERSHIP

    

    
      	
              1.

            	
              The
      Point{s) of Delivery of all Gas delivered hereunder shall be at the inlet
      of Buyer/Processor's metering facilities located at Seller's lease
      separation facilities or at such other Point(s) of Delivery as may be
      mutally agreed upon in writing by the parties hereto from time to time,
      and title to said Gas (including such hydrocarbons from the Gas that have
      not been or cannot be recovered through the use of conventional mechanical
      wellhead gas-oil separa­tors) shall pass from Seller to
      Buyer/Processor at said Point(s) of
Delivery.

            

    

    
      
         

      

      
        - 7
-

        
          

        

      

      
         

      

    

    
      	
              2.

            	
              Seller,
      at its own expense, shall equip, maintain and operate all lease facilities
      to deliver Seller's Gas to Buyer/Processor at the Point(s) of Delivery,
      including, but not limited to, Installation and maintenance of separation
      equipment.

            

    

    

    
      	
              3.

            	
              Buyer/Processor
      shall construct, maintain, own and operate all necessary facilities to
      accept Seller's Gas from Seller at the Point(s) of
    Delivery.

            

    

    

    
      	
              4.

            	
              Seller
      will deliver Gas at the required pressure at the Point(s) of Delivery
      sufficient to enter Buyer/Processor's Gathering System at a maximum
      working pressure of [*] pounds Psig. However, in the event seller
      determines that such working pressure excessively limits the production of
      Seller's wells, Seller shall provide written notice thereof to
      Buyer/Processor, Upon receipt of such notice, Buyer/Processor, as soon a
      practica­ble, shall present to Seller a written proposal pursuant to
      which Buyer/Processor shall construct, own and operate such field
      com­pression facilities as may be necessary to reduce such pressure to
      a mutually acceptable level and shall disclose the charges to be assessed
      Seller therefore together with a schedule of payment. Once such proposal
      has been accepted by Seller in writing, Buy­er/Processor shall utilize
      its best efforts to construct or cause to be constructed and placed in
      operation the required field compression facilities within ninety (90)
      days of receipt of such written acceptance. In the event Seller rejects
      the proposal of Buyer/Processor, Seller, at its option and sole expense,
      may construct, own and operate such field compression facilities as Seller
      deems necessary to reduce wellhead pressure to an acceptable level subject
      to receipt of written approval of Buyer/Processor with respect to the
      location and design of such field compression facilities and the manner of
      operation thereof, which approval shall not be unreasonably
      withheld.

            

    

    

    
      	
              5.

            	
              As
      between the parties hereto, Seller shall be in possession and control of
      the Gas deliverable hereunder and responsible for any injury or damage
      caused thereby until the same shall have been delivered to
      Buyer/Processor, after which delivery Buyer/Processor shall be deemed to
      be in exclusive possession and control thereof and responsible for any
      injury or damage caused
thereby.

            

    

    
      
         

      

      
        - 8
-

        
          

        

      

      
         

      

    

    ARTICLE
VIII

    GAS MEASUREMENT AND
QUALITY

    

    
      	
              1.

            	
              Buyer/Processor
      shall furnish and install a suitable orifice meter at the Point(s) of
      Delivery of the Gas produced and saved from the Leases described herein.
      Each meter installed by Buyer/Processor shall be a meter acceptable in the
      industry and each meter shall be installed and operated in accordance with
      the physical requirements of American Gas Association Gas Measurement
      Committee Report No. 3, dated April, 1955, of the Natural Gas Department
      of the American Gas Association as amended from time to time, or by any
      other method commonly used in the industry and mutually acceptable to the
      parties. Any meter installed hereunder shall be open to inspection by
      Seller at all reasonable times. The charts and records pertain­ing to
      measurement hereunder shall be kept on file by Buyer/Proces­sor for a
      period of two (2) years for the mutual use of the par­ties. In the
      event any question arises as to the accuracy of the measurement, the meter
      or meters shall be tested upon the demand of either party. The expense of
      any such special test shall be borne by the party demanding same if the
      meter registration is found to be correct, and by Buyer/Processor if found
      to be incorrect.

            

    

    

    At least
semi-annually Buyer/Processor shall calibrate all meters installed hereunder and
make adjustments as necessary. Should Seller so desire, Buyer/Processor shall
give notice to Seller of the time of such calibrations sufficiently in advance
of holding same in order that Seller may have its representative present. With
respect to any test made hereunder, a registration within two percent (2%) of
correct shall be considered correct. However, the meter or meters, when found to
be incorrect, shall be adjusted to one hundred percent (100%) accuracy as soon
as possible. Settle­ment for any period during which the meter registration
deviates by more than two percent (2%) of correct shall be corrected at the rate
of inaccuracy for any period of inaccuracy which is definitely known or agreed
upon; but in case the period is not definitely known or agreed upon, then either
for a period of fifteen (15) days prior to the date of said test, or for a
period calculated from the beginning of the Accounting Period in which the test
was conducted, whichever is longer. The rate of the inaccuracy shall be
estimated and agreed upon by the parties hereto on the basis of the best
available data, using the first of the following methods which is
feasible:

    

    
      	
               
      

            	
              A.

            	
              By
      calibration, test, or mathematical
calculation.

            

    

    

    
      	
               
      

            	
              B.

            	
              By
      estimation based on comparison of the quantity of deliveries with
      deliveries during preceding periods under similar conditions when the
      meter was registering
accurately.

            

    

    
      
         

      

      
        - 9
-

        
          

        

      

      
         

      

    

    All
fundamental constants, observations, records and procedures involved in the
determination and/or verification of the quantity and other characteristics of
Gas measured hereunder, unless other­wise specified herein, shall be in
accordance with the standards prescribed in American Gas Association Gas
Measurement Committee Report No. 3, dated April, 1955, of the Natural Gas
Department of the American Gas Association, as amended from time to time, or by
any other method commonly used in the industry and mutually accept­able to
the parties. The average atmospheric pressure shall be assumed to be 12.3 pounds
Psia. The temperature of Gas flowing through each meter shall be determined by a
recording thermometer, installed by Buyer/Processor at its sole cost and expense
to properly record the temperature of the flowing Gas and the arith­metical
average of the temperature recorded while the Gas is flowing during each meter
chart interval shall be used in correct­ing volumes delivered hereunder to a
temperature base of sixty degrees Fahrenheit (60F) and to a pressure base of
14.65 pounds Psia.

    

    
      	
              2.

            	
              Seller
      agrees that all Gas delivered to Buyer/Processor hereunder
      shall:

            

    

    

    
      	
               
      

            	
              A.

            	
              Contain
      not more than one grain of hydrogen sulfide per one hundred (100} cubic
      feet of Gas, or more than five (5) grains of total sulfur per one hundred
      (100) cubic feet of Gas;

            

    

    

    
      	
               
      

            	
              B.

            	
              Not
      have a maximum temperature greater than one hundred twenty degrees
      Fahrenheit (120°F), or a minimum temperature less than forty degrees
      Fahrenheit (40F); and

            

    

    

    
      	
               
      

            	
              C.

            	
              Be
      commercially free of all objectionable dust or other solid or liquid or
      gaseous matters which might interfere with its merchantability or cause
      injury to or interference with proper operations of Buyer/Processor's
      Facilities through which the Gas flows;
and

            

    

    

    
      	
               
      

            	
              D.

            	
              Shall
      not deviate significantly from the Gas Analysis set forth in Exhibit C
      attached hereto and incorporated herein by reference. In the event
      Seller's Gas contains levels of C02 in excess of that set forth in Exhibit
      C, Buyer/Processor, before rejecting acceptance thereof, first agrees to
      work with Seller on a best efforts basis to alleviate any adverse
      consequences which may be attributable
thereto.

            

    

    

    Buyer/Processor
may test the Gas for adherence to the specifica­tions above set forth, such
testing to be in accordance with generally accepted industry standards and
procedures. If the Gas so delivered by Seller does not meet the specifications
set forth in Exhibit C above referenced, with the exception of C02 content above
provided for, Buyer/Processor, at its option, may refuse to accept delivery of
said Gas into its Facilities.

    
      
         

      

      
        - 10
-

        
          

        

      

      
         

      

    

    ARTICLE
IX

    ALLOCATION OF RESIDUE GAS
AND PLANT PRODUCTS

    

    
      	
              1.

            	
              For
      purposes of determining Plant Product Revenues attributable to Seller's
      Gas, Buyer/Processor shall multiply the volume in MCF's of Gas
      attributable to each of Seller's wells by the GPM (Gallons Per MCF) of
      each Plant Product contained in the well stream. Said GPM content is shown
      on Exhibit C on an estimated basis only and shall be determined by
      chromatagraph analysis taken on spot Gas samples from each of Seller's
      wells and adjusted on an annual basis. The calculated value will be the
      Total Theoretical Plant Product Content of the Seller's Gas. Said Total
      Theoretical Plant Product Content shall be divided by the Total
      Theoretical Plant Product Content of all Gas received and purchased by
      Buyer/Processor to determine the percentage of Total Plant Products
      attributable to each of Seller's wells. Division of revenues from Total
      Plant Products shall be made per the pricing provisions contained
      herein.

            

    

    

    
      	
              2.

            	
              For
      the purpose of determining Residue Gas Revenues attributable to Seller's
      Gas, Buyer/Processor shall divide the volume in MCF's of Gas attributable
      to each of Seller's wells by the total volume in MCF's of all Gas received
      and purchased by Buyer/Processor. This fraction shall be multiplied by the
      total Residue Gas Volume to determine the Residue Gas Volume attributable
      to each of Seller's wells. Division of Residue Gas Revenues between
      Buyer/Processor and Seller shall be determined pursuant to the pricing
      provisions contained herein.

            

    

    

    
      	
              3.

            	
              Buyer/Processor
      will market one hundred percent (100%) of the Plant Products upon terms
      which, in Buyer/Processor's sole judgment, are the best terms then
      available. Buyer/Processor will furnish Seller on a monthly basis with
      reports containing volumes sold by product and the price received
      therefore. Seller shall have the right at reasonable times during normal
      business hours to review the books and records of Buyer/Processor
      pertaining to the sale of Plant Products, Residue Gas and revenues
      received therefrom.

            

    

    

    ARTICLE
X

    PRICE

    

    
      	
              1.

            	
              Seller
      shall receive [*] percent [*] of the Residue Gas Revenues attributable to
      each of Seller's wells until payout of Buyer/Processor's investment in the
      System relating to the gather­ing and processing of Seller's Gas.
      After payout, Seller shall receive [*] percent [*] of the Residue Gas
      Revenues attributable to each of Seller's wells. Total Residue Gas Revenue
      attributable to each of Seller's wells shall be calculated by multiplying
      the Residue Gas Volume attributable to each of Seller's wells by the then
      effective price per MCF being received by Buy­er/Processor. All
      pricing terms and conditions shall be determined pursuant to the terms and
      provisions contained 1n the Residue Gas and Sales and Purchase Agreements)
      between Buyer/Processor and Western Slope Gas Company, dated December 17,
      1982.

            

    

    
      
         

      

      
        - 11
-

        
          

        

      

      
         

      

    

    
      	
              2.

            	
              For
      Plant Products produced and saved at the Plant, Seller shall receive a
      percentage of the value thereof calculated as
  follows:

            

    

    

    (a)  In
the event the GPM of Plant Products content of Seller's Gas is less than that
estimated on Exhibit C, but is equal to or exceeds 5.5 GPM, Seller shall receive
a value equal to [*] percent [*] of the Total plant Product Revenue attributable
to each of seller's wells until payout of Buyer/Processor's investment in the
System. After payout, Seller shall receive [*] percent [*] of the Total Plant
Product Revenue attributable to each of Seller's wells.

    

    (b)  In
the event the GPM content of Seller's Gas is less than 5.5 GPM, Seller shall
receive a value equal [*] percent [*] of the Total Plant Product Revenue above
described before payout, and [*] percent [*] after payout.

    

    As used
above, Total Plant Product Revenue shall be the Plant Product Sales Revenue
received by Buyer/Processor. Total Plant Product Revenue attributable to each of
Seller's wells shall be calculated by multiplying the percentage of Total Plant
Product attributable to each of Seller's wells by the Total Plant Product
Revenue.

    

    
      	
              3.

            	
              System
      payout shall be that point in time when Buyer/Processor's net operating
      income from Seller's Gas equals Buyer/Processor's investment, plus
      interest, attributable to the construction of Seller's System. Net
      operating income will be comprised of Buy-er/Processor's Residue Gas and
      Plant Product Revenues attributable to Seller's Gas, less Plant Operating
      Costs attributable to Sell-er's Gas. Plant Operating Costs attributable to
      Seller's Gas for the purpose of determining payout, shall be shared
      proportionately by Seller by multiplying the total Plant Operating Costs
      by the ratio of Seller's Gas delivered thereto to the total volumes of Gas
      received and purchased by Buyer/Processor at the
  Plant.

            

    

    
      
         

      

      
        - 12
-

        
          

        

      

      
         

      

    

    
      	
              4.

            	
              Buyer/Processor's
      investment attributable to Seller's System shall be determined pursuant to
      the capital account of Seller based upon the components of Seller's System
      and Buyer/Processor's investment, plus interest, attributable thereto.
      Seller shall receive a quarterly statement of the capital account
      identifying the capital costs charged to the account and the revenues
      credited thereto, as the same may be amended from time to time to reflect
      costs of construction of Plant expansion and/or extensions of
      Buyer/Proces­sor's Gathering System to connect additional wells of
      Seller and/or accept additional volumes of Gas from
  Seller.

            

    

    

    
      	
              5.

            	
              Seller
      agrees that it will supply data and information at Buy­er/Processor's
      reasonable request, and otherwise cooperate with Buyer/Processor in any
      regulatory proceeding wherein the price or other provisions set forth
      herein may be the subject of
review.

            

    

    

    
      	
              6.

            	
              It
      shall be the sole obligation of Seller to prepare, file and diligently
      pursue any application required to be filed with appli­cable state and
      federal agencies pursuant to the Natural Gas Policy Act of 1978 or
      subsequent legislation or regulation thereunder for a determination of
      eligibility for maximum lawful price categories. Seller agrees to provide
      Buyer/Processor with copies of such filings within sixty (60) days of
      connection of Seller's wells covered
thereby.

            

    

    

    
      	
              7.

            	
              Should
      Buyer/Processor make payment to Seller based on the price for any category
      of Gas subject to any governmental agency or judicial review of such
      determination, and if it is subsequently determined that the Gas for which
      payment was made was not eligible for the price upon which payment was
      based, or if the price to be paid hereunder for such Gas is determined to
      be in excess of the maximum lawful price permitted by applicable NGPA
      price categories, or if for any reason Buyer/Processor is not permitted to
      receive or retain such prices in its resale rates, then the rate
      thereafter to be paid shall be accordingly reduced and Seller will refund
      to Buyer/Processor any previous excess payments together with interest at
      the rate prescribed in 18 C.F.R. Sec. 273.302 or subsequent
      regulation.

            

    

    

    
      	
              8.

            	
              Seller
      agrees to pay, or cause to be paid, the taxes lawfully levied on the Gas
      delivered hereunder prior to its delivery to Buyer/Processor, as well as
      its proportionate share of taxes, if any, levied upon the Plant Products
      to be marketed by Buyer/Pro­cessor
  hereunder.

            

    

    
      
         

      

      
        - 13
-

        
          

        

      

      
         

      

    

    ARTICLE
XI

    BILLING

    

    
      	
              1.

            	
              After
      delivery of Seller's Gas has commenced, Buyer/Processor shall mail payment
      together with a statement to Seller indicating the quantity of Gas
      delivered during the preceding calendar month; adjustments, if any, made
      by Buyer/Processor; and the amount due and paid for all such Gas, such
      payment and statement to be mailed either on or before the last day of
      each month, for Gas purchased the preceding calendar month, or ten (10)
      days after receipt by Buyer/Processor of payment from the purchaser of the
      Gas from Buy­er/Processor, whichever is later. It shall be the
      obligation of the Seller and Seller agrees to cause proper settlement and
      accoun­ting to be made to all owners of interest in the proceeds from
      the sale of Gas delivered to Buyer/Processor hereunder. Seller hereby
      indemnifies and holds Buyer/Processor harmless of and from any and all
      claims, demands, actions, causes of action, costs, damages and expenses
      related to, arising out of or in any way stemming from such obligation of
      Seller. Buyer/Processor, at its election, may deduct from its payment to
      Seller, sums, if any, due to Buyer/Processor under the terms of this
      Agreement.

            

    

    

    
      	
              2.

            	
              Each
      party hereto shall have, at its expense, the right at all times to examine
      the books and records of the other party, during normal working hours, to
      the extent necessary to verify the accura­cy of any statement, charge,
      computation, or demand made under or pursuant to the Agreement. Each party
      agrees to keep records and books of account in accordance with generally
      accepted accounting principles in the industry. Any statement shall be
      final as to both parties unless questioned within two (2) years after
      payment thereof has been made.

            

    

    

    ARTICLE
XII

    REGULATORY
BODIES

    

    
      	
              1.

            	
              This
      Agreement is subject to all present and future valid laws and lawful
      orders of all regulatory bodies now or hereafter having jurisdiction of
      the parties, or either of them; and should either of the parties, by force
      of such law or regulation imposed at any time during the term of this
      Agreement, be ordered or required to do any act inconsistent with the
      provisions of this Agreement, the Agreement shall continue nevertheless
      and shall be deemed modified to conform with the requirements of such law
      or regulation.

            

    

    
      
         

      

      
        - 14
-

        
          

        

      

      
         

      

    

    ARTICLE
XIII

    FORCE
MAJEURE

    

    
      	
              1.

            	
              Except
      for Buyer/Processor's obligations to make payment for Gas delivered
      hereunder, neither party hereto shall be liable for any failure to perform
      the terms of this Agreement when such failure is due to "force majeure" as
      hereinafter defined.

            

    

    

    The term
"force majeure" as employed in this Agreement shall mean acts of God, strikes,
lockouts or industrial disputes or disturbances, arrests and restraints from
rulers or people, interruptions by government or court orders, present and
future valid orders of any regulatory body having proper jurisdiction, acts of
the public enemy, warss riots, blockades, insurrections, inability to secure
materials, including inability to secure materials by reason of allocations
promulgated by authorized governmental agencies, epidemics, landslides,
lightning, earthquakes, fires, storms, floods, washouts, explosions, breakage or
accident to machinery or lines of pipe, freezing of wells or pipelines,
inability to obtain easements or rights-of-way, the making of repairs or
alterations to pipelines or plants, or any other cause whether of the kind
herein enumerated or otherwise, not reasonably within the control of the party
claiming "force majeure", the same shall, so far as possible, be remedied with
all reasonable dispatch. The settlement of strikes or lockouts or industrial
disputes or disturbances shall be entirely within the discretion of the party
having the difficulty, and the above requirement that any "force majeure" shall
be remedied with all reasonable dispatch, shall not require the settle­ment
of strikes, lockouts or industrial disputes or disturbances by acceding to the
demands of any opposing party therein when such course is inadvisable in the
discretion of the party having the difficulty.

    

    ARTICLE
XIV

    WARRANTY OF TITLE TO
GAS

    

    
      	
              1.

            	
              Seller
      hereby warrants title to the Gas sold and delivered hereun­der and the
      right of Seller to sell the same; and the Seller warrants that all such
      Gas is owned by Seller, or that Seller has the right to market said Gas
      free from all liens and adverse claims, including liens to secure payments
      of production taxes, severance taxes, and other taxes. Seller agrees to
      indemnify Buyer/Processor and save it harmless from all suits, actions,
      debts, accounts, damages, costs, losses and expenses arising from or out
      of adverse claims of any and all persons, firms, or corpo­rations to
      said Gas or to royalties, overriding royalties, taxes, license fees, or
      charges thereon, which are applicable before the title to the Gas passes
      to Buyer/Processor. Buyer/Processor, at any time thereafter, when it shall
      appear to Buyer/Process or by reason of receipt of written notice of claim
      or dispute that the ownership or title to all or part of the Leases, or
      the Gas produc­ed therefrom, may be in a party or parties other than
      Seller or upon learning of any other claims, liens, taxes, royalties,
      fees, expenses or other adverse claims, may retain as security for the
      performance of Seller's obligations with respect thereto, the entire
      purchase price of the Gas until Buyer/Processor has been satisfied as to
      the amount of such claim or ownership claimed, and thereafter up to the
      amount of such ownership interest or claim until it has been finally
      determined and satisfied or until Seller shall have furnished a bond to
      Buyer/Processor in an amount and with sureties satisfactory to
      Buyer/Processor, conditioned upon the protection of Buyer/Processor with
      respect to such ownership or
claim.

            

    

    
      
         

      

      
        - 15
-

        
          

        

      

      
         

      

    

    ARTICLE
XV

    SELLER'S
REPRESENTATIVE

    

    Seller
hereby appoints Aceite Energy Corporation , the Operator of the wells drilled or
to be drilled upon the Leases dedicated hereunder and in which Seller owns an
interest, as its Representative with respect to all matters under this
Agreement, including but not limited to the following:

    

    
      	
              1.

            	
              To
      give and receive all notices;

            

    

    

    
      	
              2.

            	
              To
      make and witness any tests to be made of the Gas and measuring equipment
      and adjustments to such equipment;

            

    

    

    
      	
              3.

            	
              To
      deliver the quantities of Gas deliverable
  hereunder;

            

    

    

    
      	
              4.

            	
              To
      receive payments for such Gas and Plant Products processed therefrom,
      allocating, prorating and distributing such payments among the various
      parties Seller;

            

    

    

    
      	
              5.

            	
              To
      obtain, execute and deliver to Buyer/Processor such division order title
      opinions and division orders as may be required by Buyer/Processor
      hereunder; and

            

    

    

    
      	
              6.

            	
              To
      comply with the requirements, rules and regulations of any duly
      constituted authority having
jurisdiction.

            

    

    
      
         

      

      
        - 16
-

        
          

        

      

      
         

      

    

    Buyer/Processor
may act, and shall be fully protected in acting, in reliance upon any and all
acts and things done and performed by or agreements made with respect to all
matters dealt with herein by said Representative on behalf of Seller as fully
and with the same effect as though Seller had done, performed, made or executed
the same, and Buyer/Process or shall not be required to see to the application
of any monies paid to said Representative.

    

    Seller
may change its Representative designated above, or designate a new
Representative from time to time by delivery of written notice of change and
designation of Representative to Buyer/Processor. The Representative so
designated shall have and may exercise all power and authority therein granted
with like effect as though named as such Representative herein in the first
instance.

    

    ARTICLE
XVI

    NOTICES

    

    Any
notice or notices, request, demands, statements or payments provided for 1n this
Agreement shall be in writing and deemed to be delivered to Seller when
addressed to Seller's Representative, and to Buyer/Processor when addressed to
Buyer/Processor and deposited in the United States Mail, first class, postage
prepaid at their respective addresses as set out below, or at such address as
either party may from time to time designate as the address for such purpose by
registered or certified Tetter addressed to the other party.

     

    
      	
              TO:

            	
              Seller's
      Representative

            

    

    Aceite
Energy Corporation

    1900
Grant Street

    Suite
1050

    Denver,
Colorado 80202

    Attn:
Dearal Beddo

    

    
      	
              TO:

            	
              BUYER/PROCESSOR

            

    

    Natural
Gas Associates

    1200
Trinity Place

    1801
Broadway - P.O. Box 5660

    Denver,
Colorado 80217

    Attn: J.
C. deGraffenried

    

    

    ARTICLE
XVII

    EASEMENTS

    

    
      	
              1.

            	
              To
      the extent that it may contractually or lawfully do so under its leasehold
      interest without impairing its own similar right, Seller hereby assigns
      and transfers to Buyer/Processor any easement across the Seller's
      Lease(s), and across any adjoining lands in which Seller may have an
      interest, for the purposes of installing, using, inspecting, repairing,
      operating, replacing, and/or removing Buyer/Processor's pipe, meters,
      lines, and other equipment used or useful in the performance of this
      Agreement. It is intended that any property of Buyer/Processor placed in
      or upon any of such land shall remain the personal property of
      Buyer/Processor, subject to removal by it upon the expiration or
      termination of this Agreement for any reason. Buyer/Processor shall have a
      reasonable time after the expiration or termination of this Agreement to
      remove same. Buyer/Processor shall indemnify and hold Seller harmless of
      and from any and all claims and damages for all injuries to persons,
      including death, or damage to property arising out of or incident to
      Buyer/Processor's use of the easement hereunder transferred, only in the
      event said claim or damage shall be the result of negligence legally
      imputable to Buyer/Processor; its employees, agents, and
      representatives.

            

    

    
      
         

      

      
        - 17
-

        
          

        

      

      
         

      

    

    ARTICLE
XVIII

    TERM

    

    
      	
              1.

            	
              This
      Agreement shall be effective from the date hereof and shall continue and
      remain in full force and effect for the economic life of the Facilities,
      unless earlier terminated by mutual Agreement between the parties hereto.
      Suspension of Plant operations as defined herein shall not constitute or
      provide a basis for termina­tion of this
  Agreement.

            

    

    

    ARTICLE
XIX

    DEFAULTS

    

    
      	
              1.

            	
              It
      is covenanted and agreed that if either party shall fail to perform any of
      the covenants or obligations imposed upon it under and by virtue of this
      Agreement, the other party may terminate this Agreement by proceeding as
      follows:

            

    

    

    
      	
               
      

            	
              A.

            	
              The
      party not in default shall cause a written notice to be served on the
      other party in default, stating specifically the cause for terminating
      this Agreement, and declaring it to be the intention of the party giving
      notice to terminate the same; thereupon, the party in default shall have
      thirty (30) days after the service of the aforesaid notice in which to
      remedy or remove the cause or causes stated in the notice for terminating
      the Agreement. If within said thirty (30) days the party in default does
      so remove and remedy said cause or causes, and fully indemnifies the party
      not in default for any and all consequences of such breach, then such
      notice shall be withdrawn and this entire Agreement shall continue in full
      force and effect.

            

    

    
      
         

      

      
        - 18
-

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              B.

            	
              In
      case the party in default does not remedy and remove the cause or causes,
      or does not indemnify the party giving the notice for any and all
      consequences of such breach, within said period of thirty (30) days, then
      this Agreement shall become null and void from and after the expiration of
      said period.

            

    

    

    
      	
               
      

            	
              C.

            	
              Any
      cancellation of this Agreement pursuant to the provisions of this Article
      shall be without prejudice to the right of Seller to collect any amounts
      then due it for Gas delivered and Plant Products processed therefrom to
      the time of cancellation, and without waiver of any remedy to which the
      party not in default may be entitled for violations of this
      Agreement.

            

    

    

    ARTICLE
XX

    UNECONOMIC WEIL CONNECTIONS
AND UNECONOMIC OPERATIONS OF PLANT

    

    
      	
              1.

            	
              The
      Buyer/Processor will either install, or cause to be installed a System to
      connect and receive Gas from Seller's wells, which, in Buyer/Processor's
      sols opinion, is economically feasible to gather. If in Buyer/Processor's
      sole opinion it is uneconomic to connect one of Seller's wells to
      Buyer/Processor's Gathering System, Buy­er/Processor shall be under no
      obligation to do so, or to accept any Gas produced from said well. If
      Buyer/Processor elects not to construct a System and connect a well,
      Buyer/Processor nevertheless may, upon Seller's request, accept Gas from
      any such well or lease if Seller shall acquire and assign without charge
      to Buyer/Pro­cessor, a measuring station site on Buyer/Processor's
      existing Gathering System at a mutually agreeable point, together with all
      necessary rights of ingress and egress thereto, and shall bear the cost of
      constructing, operating, and maintaining all facilities necessary to
      deliver the Gas from such well into Buyer/Processor's Gathering System at
      said mutually agreeable point. Should Seller elect not to deliver Gas from
      such well, Buyer/Processor shall release from this Agreement such well and
      the acreage attributable
thereto.

            

    

    
      
         

      

      
        - 19
-

        
          

        

      

      
         

      

    

    Buyer/Processor
will install or cause to be installed a System to receive Seller's Gas from
Seller's wells, which, in Buyer/Proces­sor's opinion are economically
feasible to gather. An economic well shall be defined as a well which will
produce a stabilized flow after six (6) months of [*] MCF per day of Gas per mile of
pipeline installed by Buyer/Processor to receive Seller's Gas. Should
Buyer/Processor connect Seller's well and said well produces a stabilized flow
after six (6) months of less than [*] MCF per day per mile of pipeline
installed by Buyer/Processor to receive Seller's Gas, Seller shall indemnify
Buyer/Processor for all costs of said connection, adjusted for actual length of
pipeline and proportional to the ratio of actual stabilized volume at the end of
six (6) months to [*] MCF per day. The
terms of said indemnification shall be negotiated between Buyer/Processor and
Seller,

    

    Should
Buyer/Processor and Seller determine prior to connection of Seller's well that
said well will not meet the criteria for an economic well connection,
Buyer/Processor shall install the neces­sary System required to connect
Seller's well to Buyer/Processor's Gathering System upon receiving a written
indemnification from Seller of Buyer/Processor's actual cost for said System
pursuant to the terms above.

    

    
      	
              2.

            	
              If,
      in the opinion of Buyer/Processor, the Plant is or becomes uneconomic to
      operate due to its volume, quality, plant product content, governmental
      regulation or any other cause, Buyer/Pro­cessor may either modify or
      suspend Plant operations, in which case Buyer/Processor shall not be
      obligated to take delivery of, or may cease processing the Gas from
      Seller's welIs, so long as such condition exists. For the purposes hereof,
      "uneconomic operation" shall be defined as circumstances under which
      Buyer/Processor's share of net operating revenues of the Plant is
      insufficient to offset actual Plant operating costs. Should said
      modification or suspension of operation result in Seller's wells being
      shut-in for a period in excess of ninety (90) consecutive days, Seller, at
      its option, may elect to terminate this Agreement. Upon receipt of such
      written notice of termination from Seller, both parties shall be released
      from any further duties and obligations hereunder except for payment for
      Gas purchased, sold, processed, and/or transported hereunder prior to the
      effective date of such
termination.

            

    

    
      
         

      

      
        - 20
-

        
          

        

      

      
         

      

    

    
      	
              3.

            	
              During
      periods of uneconomic operation of the Plant and/or suspen­sion of
      operation of portions thereof. Buyer/Processor, at the request of the
      Seller, shall place back in service and operate such suspended portions of
      the Plant as may be necessary to accept and process Seller's Gas. In
      consideration thereof, Seller agrees to reimburse Buyer/Processor, in the
      same proportion as the ratio of the Gas volumes supplied by Seller bear to
      the total Gas volumes supplied to the Plant by other third-party sellers,
      for any losses (costs of Plant operations in excess of revenues
      attributable to Plant operations after deducting payments to all
      contributing producers for Gas delivered to and processed by the Plant)
      incurred by Buyer/Processor during such continued uneconomic operations.
      Buyer/Processor may, at its option, elect to sell the Plant rather than
      operate the same under the terms of this paragraph. In such event, Seller
      shall be given notice thereof and first right of refusal to purchase its
      proportionate share of the Plant from Buy­er/Processor based upon
      Seller's then dedicated capacity thereof upon terms to be negotiated
      between the parties.

            

    

    

    ARTICLE
XXI

    OPTIONS

    

    
      	
              1.

            	
              Crude
      Oil Purchase Option: Seller agrees to grant to Associated Natural Gas,
      Inc., as an independent contractor, the first right of refusal to purchase
      all crude oil and/or condensate produced from wells drilled on the Leases
      dedicated hereunder and which Seller owns, has an interest in, or is
      authorized to market, such purchase to be at a price equal to the highest
      published posted price of a major oil company for the area in
      question.

            

    

    

    Seller
shall notify Associated Natural Gas, Inc. in writing when Seller has crude oil
and/or condensate available on a well by well basis. Upon receipt of such
notice, Associated Natural Gas, Inc. shall have fifteen (15) days within which
to exercise its option to purchase the crude oil and/or condensate. In the event
Associated Natural
Gas, Inc. fails to exercise such option within the fifteen (15) day period,
Seller may market its crude oil and/or condensate production to any other
purchaser.

    

    In the
event Associated Natural Gas, Inc. exercises its option to purchase the crude
oil and/or condensate offered by Seller, the parties agree to enter into a Crude
Oil Purchase Agreement to be provided by Associated Natural Gas, Inc. to
Seller.

    
      
         

      

      
        - 21
-

        
          

        

      

      
         

      

    

    ARTICLE
XXII

    SHRINKAGE

    

    Buyer/Processor
agrees to use ordinary care in transporting the Gas produced by Seller and
purchased and gathered by Buyer/Processor hereun­der to its point of
delivery at the Plant, and after processing such Gas, deliver the Gas to its
purchaser at the tailgate of said Plant. However, the parties understand and
agree that certain volumetric gains and losses in the Gas will occur and shall
be shared by and among Seller and other third-party sellers, whose Gas is also
being purchased by Buyer/Processor and transported to the Plant, in the
proportion that each party delivers Gas into Buyer/Processor's Gathering System
at their respective Point(s) of Delivery.

    

    ARTICLE
XXIII

    SPECIAL
PROVISIONS

    

    After
initial start-up of the Plant referenced herein, Buyer/Processor agrees to
construct or cause to be constructed such additions to Sell­er's System as
may be necessary to connect each of Seller's wells drilled thereafter, such
connection to be made and completed on a best efforts basis within [*] days of
receipt of written notice from Seller that Seller has completed logging said
wells. Seller agrees to have said wells operational and ready for production
within [*] days of Buyer/Processor's completion of connection thereof. In the
event Buyer/Processor is unable to connect said wells within the time period
referenced, Seller, at its option, pursuant to written notice to
Buyer/Processor, may request Buyer/Processor to release the acreage attributable
to said wells from this Agreement, in which event Buyer/Processor shall utilize
its best efforts to cause such acreage to be released from the Residue Gas Sales
and Purchase Agreement referenced herein. The acreage attributable to any of
Seller's wells to be relea­sed under this provision shall be determined in
accordance with the State of Colorado approved well spacing in effect at the
time of Sell­er's request for the particular area and production zone
completed.

    
      
         

      

      
        - 22
-

        
          

        

      

      
         

      

    

    ARTICLE
XXIV

    MISCELLANEOUS

    

    
      	
              1.

            	
              No
      waiver by either Seller or Buyer/Processor of any default of the other
      under this Agreement shall operate as a waiver of any future default,
      whether of like or different character or nature, nor shall any failure to
      exercise any right hereunder be considered as a waiver of such right in
      the future.

            

    

    

    
      	
              2.

            	
              The
      parties hereto assume full responsibility and liability for the
      maintenance and operation of their respective properties and agree to
      indemnify and save harmless the other party from all liability and expense
      on account of any damages, claims or actions arising from any act or
      accident in connection with the installation, presence, maintenance or
      operation of the property or equipment of the indemnifying party;
      provided, however, that neither party shall be indemnified against damages
      resulting from its own negligence.

            

    

    

    
      	
              3.

            	
              Respecting
      the rights of third parties
hereunder:

            

    

    

    
      	
               
      

            	
              A.

            	
              This
      Agreement shall be binding upon and inure to the benefit of the parties
      hereto, their successors, assigns, heirs, administrators and/or executors.
      Either party may assign his or its right, title, and interest in, to and
      under this Agreement, including, without limitation, any and all renewals,
      extensions, amendments, and/or supplements hereto; provided, however, that
      no such assignment shall in any way operate to enlarge, alter, or change
      any obligation of the other party or parties hereto. No assignment shall
      be effective or binding until a copy of same has been furnished to the
      other party,

            

    

    

    
      	
               
      

            	
              B.

            	
              Nothing
      in this Agreement, expressed or implied, confers any rights or remedies on
      any person or entity not a party hereto other than successors and assigns,
      or heirs, administrators or executors of the parties
    hereto.

            

    

    
      
         

      

      
        - 23
-

        
          

        

      

      
         

      

    

    
      	
              4.

            	
              Seller
      agrees that Buyer/Processor, its successors and assigns, shall have the
      right, but not the obligation, at any time to redeem for Seller, its
      successors and assigns, by payment of any taxes, deeds of trust, judgments
      or other liens on the Leases described in Exhibit "A" hereto, on Seller's
      Gas Reserves or the production therefrom, in the event of default of
      payment by Seller, and be subrogated to the rights of the holder or
      holders thereof. Seller further agrees that any such redemption and
      payment by Buyer/Pro­cessor for Seller's account shall be applied by
      way of a set-off against the purchase price which Buyer/Processor would
      otherwise pay to Seller under Article X of this Agreement, such set-off to
      continue until all payments by Buyer/Processor under this Agree­ment,
      plus interest, have been fully recouped by
  Buyer/Processor.

            

    

    

    
      	
              5.

            	
              Seller
      expressly does not by the terms of this Agreement, sell, transfer or
      assign unto Buyer/Processor any title or interest whatsoever in the Leases
      or any pipe, meters, lines or other equip­ment of any nature owned or
      used by Seller in the operation of its wells and the
    Leases.

            

    

    

    
      	
              6.

            	
              Any
      notice, request, demand, statement, or payment provided for in this
      Agreement, except as otherwise herein provided, shall be given in writing,
      delivered in person or sent by U. S. Mail, postage prepaid to the parties
      at the respective addresses herein refer­enced, or at such other
      addresses as may be hereafter furnished by one party to the other party in
      writing.

            

    

    

    
      	
              7.

            	
              It
      is agreed that this Agreement may be ratified and adopted by any owner of
      an interest in the Leases subject hereto, or any leases with which the
      Leases subject hereto may be pooled or unitized, by execution and delivery
      to Buyer/Processor of a separate instrument in writing, ratifying and
      adopting this Agreement insofar as said owner's interest in any such lands
      or leases is concerned, whereup­on such owner shall become a party
      Seller under this Agreement with like force and effect and to the same
      extent as though such owner had executed this Agreement at the time of its
      original execution and delivery; and all the terms and provisions of this
      Agreement shall thereupon become binding upon Buyer/Processor and any such
      interest owner.

            

    

    

    
      	
              8.

            	
              Each
      Seller executing or ratifying this Agreement makes and enters into this
      Agreement severally and not jointly with other sellers, and they are not
      acting as partners, joint venturers, or otherwise jointly in this
      transaction, and nothing herein contained or provided shall operate to
      create, or be construed as creating, any such relationship. It is
      essentially provided that there shall never be any joint liability against
      the parties designated herein as Seller and that no single party Seller
      shall be liable for the acts or omissions of any other single party
      Seller.

            

    

    
      
         

      

      
        - 24
-

        
          

        

      

      
         

      

    

    
      	
              9.

            	
              This
      Agreement constitutes the entire agreement and understanding between the
      parties hereto and supersedes and renders null and void and of no further
      force and effect any prior understandings, nego­tiations or agreements
      between the parties relating to the subject matter hereof. No provision of
      this Agreement may be changed, modified, waived or discharged orally, and
      no change, modification, waiver or amendment of any provision will be
      effective except by written instrument to be executed and approved by the
      parties hereto.

            

    

    

    
      	
              10.

            	
              This
      Agreement shall be construed and governed by the laws of the State of
      Colorado.

            

    

    
      
         

      

      
        - 25
-

        
          

        

      

      
         

      

    

    IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day
and year first above written.

    

    BUYER/PROCESSOR
- NATURAL GAS ASSOCIATES,, A PARTNERSHIP BY: ASSOCIATED NATURAL GAS, INC.,
MANAGING PARTNER

    

    

    
      	
              BY:

            	/s/
      J.C. deGraffenried	 	 
      	 
      
	 
      	
              J.C.
      deGraffenried, President

            	 	 
      	 
      
	 
      	 
      	 	 
      	 
      
	
              ATTEST:

            	 	
              SELLER
      (Corporation):

            
	 
      	 
      	 	
              ACEITE
      ENERGY CORPORATION

            
	 
      	 
      	 	 
      	 
      
	 
      	 
      	 	 
      	 
      
	
              BY:

            	/s/
      Michael Beddo	 	
              BY:

            	/s/
      Dearal Beddo
	 
      	
              MICHAEL
      BEDDO, SECRETARY

            	 	 
      	
              DEARAL
      BEDDO, PRESIDENT

            
	 
      	 
      	 	 
      	 
      
	 
      	 
      	 	 
      	 
      
	 
      	 
      	 	
              SELLER
      (Limited Partnership):

            
	 
      	 
      	 	
              WALKER
      EXPLORATORY PROGRAM 1982-A LIMITED

            
	 
      	 
      	 	 
      	 
      
	 
      	 
      	 	 
      	 
      
	 
      	 
      	 	
              BY:

            	
              /s/
      George Lindahl

            
	 
      	 
      	 	 
      	
              Vice
      President, GENERAL PARTNER

            
	 
      	 
      	 	 
      	 
      
	 
      	 
      	 	 
      	
              George
      L. Lindahl, III

              Walker
      Energy Group

              V.P.
      Oil & Gas Operations

            
	 
      	 
      	 	 
      	 
      
	 
      	 
      	 	
              SELLER
      (Corporation)

            
	
              ATTEST:

            	 	
              CREEK
      CATTLE COMPANY

            
	 
      	 
      	 	 
      	 
      
	
              BY:

            	/s/
      Burk
      Whittenburg	 	
              BY:

            	
              /s/
      Bart E Lalkf

            
	 
      	
              ASSISTANT
      SECRETARY

            	 	 
      	
              PRESIDENT

            
	 
      	 
      	 	 
      	 
      

    

    

    
      	
              STATE
      OF COLORADO

            	
              )

            
	 
      	
              )
      SS.

            
	
              CITY
      AND COUNTY OF DENVER

            	
              )

            

    

    

    Before
me, Dorothy
Seele, a Notary Public in and for said County and State, on this 17th day of Nov., 1983,
personally appeared J.C. deGraffenried,
known to me to be the President of Associated Natural Gas, Inc., a Colorado
corporation, the Managing Partner of Natural Gas Associates, a Colorado
partnership, on behalf of said partnership and acknowledged to me that he
executed this Agreement for the uses and purposes therein set
forth.

    

    Given
under my hand and seal of office this 17th day of November, 1983

    

    
      	 
      	 
      	
              s/ Dorothy
      Seele

            
	 
      	 
      	
              NOTARY
      PUBLIC

            
	 
      	 
      	
              10501
      Kline Way

            
	
              MY
      COMMISSION EXPIRES:

            	 
      	
              Westminster,
      Co 80030

            
	 
      	 
      	 
      
	
              March
      21, 1987

            	 
      	 
      

    

    
      
         

      

      
        - 26
-

        
          

        

      

      
         

      

    

     

    
      	
              STATE
      OF COLORADO

            	
              )

            
	 
      	
              )
      SS.

            
	
              CITY
      AND COUNTY OF DENVER

            	
              )

            

    

    

    Before
me, Belinda
Shanbacher, a .Notary Public in and for said County and State, on this
14th day of
October, 1983,
personally appeared Dearal Beddo and
Michael Beddo,
known to me to be the President and Secretary, respectively, of Aceite Energy
Corporation, a Colorado corporation, on behalf of said corporation and
acknowledged to me that they executed this Agreement for the consider­ations
end purposes therein set forth.

    

    Given
under my hand and seal of office this 14th day of October, 1983

    

    
      	 
      	 
      	
              /s/ Belinda Shanbacher

            
	 
      	 
      	
              NOTARY
      PUBLIC

            
	 
      	 
      	 
      
	
              MY
      COMMISSION EXPIRES:

            	 
      	 
      
	 
      	 
      	 
      
	
              9-14-85

            	 
      	 
      

    

    

    

    
      	
              STATE
      OF NEW YORK

            	
              )

            
	 
      	
              )
      SS.

            
	
              CITY
      AND COUNTY OF (illegible)

            	
              )

            

    

    

    Before
me, Nancy
Divito, a Notary Public, in and for said County and State, on
this 7th day
of Nov. 1983, personally appeared George A. Undent,
known to me to be the general partner of Walker Exploratory Program 1982-A
Limited, a New York limited partnership, on behalf of said limited partnership,
and acknowledged to me that he executed the same as his free act and deed and
for consider­ations and purposes therein expressed, and as the act and deed
of said partnership and in the capacity therein stated.

    

    Given
under my hand and seal of office this 7th day of November,

    

    
      	 
      	 
      	
              /s/ Nancy Divito

            
	 
      	 
      	
              NOTARY
      PUBLIC

            
	 
      	 
      	
              Nancy
      Divito

            
	
              MY
      COMMISSION EXPIRES:

            	 
      	
              Notary
      Public, State of New York

            
	 
      	 
      	
              No.
      43-4729848

            
	 
      	 
      	
              (illegible)

            
	 
      	 
      	
              Commission
      Expires March 30, 198(illegible)

            

    

    

    

    
      	
              STATE
      OF TEXAS

            	
              )

            
	 
      	
              )
      SS.

            
	
              CITY
      AND COUNTY OF POTTER

            	
              )

            

    

    

    Before
me, Gilda J.
McFarland, a Notary Public in and for said County and State, on this
14th day of
November, 1983,
personally appeared Basil E. Walker, Jr.,
and Burt
Whittenburg known to me to be the
President and Secretary, respectively, of Creek Cattle Company, a Texas
corporation, on behalf of said corporation and acknowl­edged to me that they
executed this Agreement for the considerations and purposes therein set
forth.

    

    Given
under my hand and seal of office this 14th day of November

    

    
      	 
      	 
      	
              /s/
      Gilda J. McFarland

            
	 
      	 
      	
              NOTARY
      PUBLIC

            
	 
      	 
      	 
      
	
              MY
      COMMISSION EXPIRES:

            	 
      	 
      
	 
      	 
      	 
      
	
              June 1, 1985

            	 
      	 
      

    

    
      
         

      

      
        - 27
-

        
          

        

      

      
         

      

    

    LEASE
SCHEDULE

    EXHIBIT
“A" PAGE 1
STATE OF Colorado COUNTY OF
Weld

    

    
      	 
      	 	 
      	 	 
      	 	 
      	 	
              RECORDED

            
	
              LEASE
      NO.

            	 	
              LESSOR

            	 	
              LESSEE

            	 	
              DATE

            	 	
              DESCRIPTION

            	 	
              ACRES

            	 	
              BOOK

            	 	
              PAGE

            	 	
              REC

            
	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      
	 
      	 	
              L.F.
      Ranch Co.

            	 	
              Mel
      C. Bedinger

            	 	
              7/02/64

            	 	
              T3N,
      R64W

              Section
      2: S1/2

              Section
      12: S1/2

              Section
      13: All

              Section
      24: S1/2, NW1/4

              Section
      25: All

            	 	
              320

              320

              640

              480

              640

            	 	
              518

            	 	 
      	 	
              1440221

            
	 
      	 	 
      	 	 
      	 	 
      	 	
              T3N,
      R63W

              Section
      6: 5E 1/4, E1/2 SW 1/4, SW 1/2 NE1/4 SE1/4 NW1/4

              Section
      30: W1/2

            	 	
              320

               

              320

            	 	 
      	 	 
      	 	 
      
	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      
	 
      	 	
              Two
      E Ranch

            	 	
              Mel
      C. Bedinger

            	 	
              9/08/64

            	 	
              T3N,
      R64W

              Section
      4: All

              Section
      10: N1/2

              Section
      22: NW1/4 T4N, R64W

              Section
      33: All

              Section
      34: S1/2 (No "J" Sand) NW 1/4

            	 	
              320

              320

              280

               

              320

            	 	
              523

            	 	 
      	 	
              1444837

            
	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      
	 
      	 	
              Alfred
      G. Heyde & Mary M. Heyder husband & wife

            	 	
              Caribou
      Energy Inc.

            	 	
              1/21/83

            	 	
              T3N,
      R64W

              Section
      26: NE1/4

            	 	
              160

            	 	
              988

            	 	 
      	 	
              1917128
      1560586

            
	 
      	 	
               
      

            	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      
	 
      	 	
              Two
      E Ranches, Inc.

            	 	
              T.S.
      Pace

            	 	
              2/16/70

            	 	
              T3N,
      R64W

              Section
      26: NW1/4

            	 	
              160

            	 	
              639

            	 	 
      	 	 
      
	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      
	
              1511-A

            	 	
              Carolyn
      N. & Robert D. Koerner

            	 	
              Buddy
      Baker

            	 	
              12/03/79

            	 	
              T3N,
      R64W

              Section
      24: NE1/4

            	 	
              160

            	 	
              897

            	 	 
      	 	
              1819261

            
	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      
	
              1511-B

            	 	
              Nancy
      S. & Theodore van Ravenswaay

               

            	 	
              Buddy
      Baker

               

            	 	
              2/12/80

            	 	
              T3N,
      R64W

              Section
      24: NE1/4

            	 	
              160

            	 	
              898

            	 	 
      	 	
              1819859

            

    

    
      
         

      

      
        - 28
-

        
          

        

      

      
         

      

    

    LEASE
SCHEDULE

    EXHIBIT
“A-1” (Leases to be earned) PAGE 1 STATE OF Colorado COUNTY OF
Weld

    

    
      	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	
              RECORDED

            
	
              LEASE
      NO.

            	 	
              LESSOR

            	 	
              LESSEE

            	 	
              DATE

            	 	
              DESCRIPTION

            	 	
              ACRES

            	 	
              BOOK

            	 	
              PAGE

            	 	
              REC
      #

            
	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      
	 
      	 	
              L.F.
      Ranch Col.

            	 	
              Mel
      C. Bedinger

            	 	
              7/02/64

            	 	
              T3N,
      R63W

              Section  8 :  E1/2

              Section
      18 :  SW1/4, N1/2 SE1/4

            	 	
               

              320

              240

               

            	 	
              518

            	 	 
      	 	
              1440221

               

            
	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      
	 
      	 	
              State
      of Colorado

            	 	
              Donald
      C- Slawson

            	 	
              3/1679

            	 	
              T3N,
      R63W

              Section
      18 :  S1/2 SE1/4

            	 	
               

              80

            	 	
              863

            	 	 
      	 	
              1784595

            
	 
      	 	
               
      

            	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      
	 
      	 	
              Two
      E Ranch

            	 	
              Mel
      C. Bedinger

            	 	
              9/08/64

            	 	
              T3N,
      R64W

              Section:
      11: N1/2, except for 40 acres in the NE1/4 NE 1/4

              Section
      19: SW1/2

              Section
      20: SW1/4, E1/2

            	 	
              280

               

              160

              480

            	 	
              523

            	 	 
      	 	
              1444837

            
	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      
	 
      	 	
              L.F.
      Ranch CO.

            	 	
              Aceite
      Energy Corp

            	 	
              6/09/83

            	 	
              T3N,
      R64W

              Section
      11: 40 acres in the NE1/4 NE 1/4

            	 	
              40

            	 	
              Unrecorded
      at this
      time

            
	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      	 	 
      
	
              61375

            	 	
              Champlin
      Petroleum Company

            	 	
              Amoco
      Production Company

            	 	
              3/08/77

            	 	
              T3N,
      R64W

              Section
      23: S1/2

            	 	
              320

            	 	
              794

            	 	 
      	 	
              1716303

            

    

    
      
         

      

      
        - 29
-

        
          

        

      

      
         

      

    

    RECORDED
EXEMPTION NO. ________

    

    

    
      
         

      

      
        - 30
-

        
          

        

      

      
         

      

    

    
    

    EXHIBIT "C"

    
INLET GAS ANALYSIS

KERSEY PLANT

     

     

    
      	   	 	 	
               

            	
              Mole
      %

            	 	
              GPM

            
	 	 	 	 	 	 	 
	
              Hydrogen
      Sulfide

            	 	
              (H2S)

            	 
      	
              0.00

            	 	
              —

            
	
              Nitrogen

            	 	
              [N2)

            	 
      	
              0.21

            	 	
              —

            
	
              Carbon
      Dioxide

            	 	
              (C02)

            	 
      	
              2.50

            	 	
              —

            
	
              Methane

            	 	
              (C1)

            	 
      	
              74.08

            	 	
              —

            
	
              Ethane

            	 	
              (C2)

            	 
      	
              14.07

            	 	
              3.739

            
	
              Propane

            	 	
              (C3)

            	 
      	
              5.74

            	 	
              1.570

            
	
              Iso-Butane

            	 	
              (iC4)

            	 
      	
              0.80

            	 	
              .261

            
	
              Normal-Butane

            	 	
              (nC4)

            	 
      	
              1.64

            	 	
              .513

            
	
              Iso-Pentane

            	 	
              (iC5)

            	 
      	
              0.38

            	 	
              .137

            
	
              Normal-Pentane

            	 	
              {nC5)

            	 
      	
              0.35

            	 	
              .126

            
	
              Hexanes
      plus

            	 	
              (C6+)

            	 
      	
              0.23

            	 	
              .098

            
	 	 	 	 	 	 	 
	 
      	 	
               

            	 
      	
              100.00

            	 	
              6.444

            

    

     

     

     - 31 -

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00145-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00145-of-00352.parquet"}]]