AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 21, 2016
Registration No. 333-207560
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 5
to
Form S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
NOBLE MIDSTREAM PARTNERS LP
(Exact Name of Registrant as Specified in Its Charter)
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Delaware
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4932
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47-3011449
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(State or Other Jurisdiction of
Incorporation or Organization)
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(Primary Standard Industrial
Classification Code Number)
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(I.R.S. Employer
Identification Number)
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1001 Noble Energy Way
Houston, Texas 77070
(281) 872-3100
(Address, including Zip Code, and Telephone Number, including Area Code, of Registrant’s Principal Executive Offices)
John F. Bookout, IV
Chief Financial Officer
1001 Noble Energy Way
Houston, Texas 77070
(281) 872-3100
(Name, Address, including Zip Code, and Telephone Number,
including Area Code, of Agent for Service)
Copies to:
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G. Michael O’Leary
George Vlahakos
Andrews Kurth LLP
600 Travis, Suite 4200
Houston, Texas 77002
(713) 220-4200
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Douglas E. McWilliams
Julian J. Seiguer
Vinson & Elkins L.L.P.
1001 Fannin St., Suite 2500
Houston, Texas 77002
(713) 758-2222
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Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415
under the Securities Act of 1933, check the following box.
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If
this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement
for the same offering.
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If this Form is a post-effective amendment
filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.
¨
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.
¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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x
(Do not check if a smaller reporting company)
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Smaller reporting company
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The information in this prospectus is not complete and may be changed. We may not sell these
securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where
the offer or sale is not permitted.
Subject to Completion, dated July 21, 2016
PROSPECTUS
Noble Midstream Partners LP
Common Units
Representing
Limited Partner Interests
This is the initial public offering of common units representing limited partner interests in Noble Midstream Partners LP. We were formed by Noble Energy, Inc., or
Noble, and no public market currently exists for our common units. We are offering common units in this offering. We expect that the initial public offering price will be
between $ and $ per common unit. Our common units have been approved for listing on the New
York Stock Exchange under the symbol “NBLX.” We are an “emerging growth company” as that term is used in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act.
As a result of certain laws and regulations to which we are or may in the future become subject, we may require owners of our common units to certify that they are both U.S. citizens and subject to U.S. federal
income taxation on our income. If you are not an eligible holder at the time of any requested certification in the future, your common units may be subject to redemption.
Investing in our common units involves risk. Please read “
Risk Factors
” beginning on page 27.
These risks include the following:
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We derive substantially all of our revenue from Noble. If Noble changes its business strategy, alters its current drilling and development plan on our dedicated
acreage, or otherwise significantly reduces the volumes of crude oil, natural gas, saltwater or fresh water with respect to which we perform midstream services, our revenue would decline and our business, financial condition, results of operations,
cash flows and ability to make distributions to our unitholders would be materially and adversely affected.
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On a pro forma basis, we would not have generated sufficient distributable cash flow to make the payment of the aggregate annualized minimum quarterly
distribution on all of our units for the year ended December 31, 2015 and the twelve months ended March 31, 2016.
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We may not generate sufficient distributable cash flow to make the payment of the minimum quarterly distribution to our unitholders.
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Our general partner and its affiliates, including Noble, have conflicts of interest with us and limited fiduciary duties to us and our unitholders, and they may
favor their own interests to our detriment and that of our unitholders. Additionally, we have no control over the business decisions and operations of Noble, and Noble is under no obligation to adopt a business strategy that favors us.
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Unitholders have very limited voting rights and, even if they are dissatisfied, they will have limited ability to remove our general partner.
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There is no existing market for our common units, and a trading market that will provide you with adequate liquidity may not develop. The price of our common
units may fluctuate significantly, and you could lose all or part of your investment.
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Our tax treatment depends on our status as a partnership for federal income tax purposes. If the Internal Revenue Service were to treat us as a corporation for
federal income tax purposes, which would subject us to entity-level taxation, or if we were otherwise subjected to a material amount of entity-level taxation, then our distributable cash flow to our unitholders would be substantially reduced.
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Our unitholders’ share of our income will be taxable to them for federal income tax purposes even if they do not receive any cash distributions from us.
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Per Common Unit
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Total
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Price to the public
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$
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$
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Underwriting discounts and commissions
(1)
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$
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$
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Proceeds to Noble Midstream Partners LP (before expenses)
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$
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$
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(1)
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Excludes an aggregate structuring fee equal to % of the gross proceeds from this offering payable to Barclays Capital Inc. and Robert W. Baird &
Co. Incorporated. Please read “Underwriting.”
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We have granted the underwriters a 30-day option to purchase up to an
additional common units from us on the same terms and conditions as set forth above if the underwriters sell more than
common units in this offering.
Neither the Securities and Exchange Commission
nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The underwriters expect to deliver the common units on or about
, 2016.
Lead Book-Running Managers
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Barclays
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Baird
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J.P. Morgan
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Prospectus
dated , 2016
TABLE OF CONTENTS
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ii
iii
You should rely only on the information contained in this prospectus or in any free writing prospectus prepared by us or on behalf of
us or to which we have referred you. We have not, and the underwriters have not, authorized any other person to provide you with information different from that contained in this prospectus and any free writing prospectus. If anyone provides you
with different or inconsistent information, you should not rely on it. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where an offer or sale is not permitted. The information in this prospectus
is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of our common units. Our business, financial condition, results of operations and prospects may have changed since that date.
Through and including
, 2016 (the 25th day after the date of this prospectus), federal securities laws may require all dealers that effect transactions
in these securities, whether or not participating in this offering, to deliver a prospectus. This requirement is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment
or subscription.
This prospectus contains forward-looking statements that are subject to a number of risks and uncertainties,
many of which are beyond our control. Please read “Risk Factors” and “Forward-Looking Statements.”
Industry and Market Data
The data included in this prospectus regarding the midstream crude oil and natural gas industry, including descriptions of trends in the market, are based on a variety of sources, including independent
industry publications, government publications and other published independent sources and publicly available information, as well as our good faith estimates, which have been derived from management’s knowledge and experience in our industry.
Although we have not independently verified the accuracy or completeness of the third-party information included in this prospectus, based on management’s knowledge and experience, we believe that the third-party sources are reliable and that
the third-party information included in this prospectus or in our estimates is accurate and complete as of the dates presented.
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PROSPECTUS SUMMARY
This summary highlights selected information contained elsewhere in this prospectus. You should carefully read the entire prospectus,
including “Risk Factors” and the historical and unaudited pro forma financial statements and related notes included elsewhere in this prospectus before making an investment decision. Unless otherwise indicated, the information in this
prospectus assumes (i) an initial public offering price of $ per common unit (the mid-point of the price range set forth on the cover page of this prospectus) and
(ii) that the underwriters do not exercise their option to purchase additional common units. You should read “Risk Factors” beginning on page 27 for more information about important factors that you should consider before
purchasing our common units.
Unless the context otherwise requires, references in this prospectus to “Noble
Midstream,” the “Partnership,” “we,” “our,” “us,” or like terms, when used in a historical context, refer to Noble Midstream Partners LP Predecessor, our predecessor for accounting purposes, also referred
to as “our Predecessor,” and when used in the present tense or prospectively, refer to Noble Midstream Partners LP and its subsidiaries. References in this prospectus to “our general partner” refer to Noble Midstream GP LLC.
References in this prospectus to “Noble” refer collectively to Noble Energy, Inc. (NYSE:NBL) and its subsidiaries, other than us, our subsidiaries and our general partner. We have provided definitions for some of the terms we use to
describe our business and industry and other terms used in this prospectus in the “Glossary of Terms” beginning on page B-1 of this prospectus.
Noble Midstream Partners LP
Overview
We are a growth-oriented Delaware master limited partnership formed by our sponsor, Noble, to own, operate, develop and acquire a wide
range of domestic midstream infrastructure assets. We currently provide crude oil, natural gas, and water-related midstream services for Noble in the Denver-Julesburg, or DJ Basin, in Colorado, through long-term, fixed-fee contracts. Our areas of
focus are in the DJ Basin, one of the premier liquid hydrocarbon basins in the United States, and in the Delaware Basin within the prolific Permian Basin in Texas.
Noble intends for us to become its primary vehicle for domestic midstream operations in the onshore United States outside of the Marcellus Shale in the northeastern United States. We have acreage
dedications spanning approximately 300,000 acres in the DJ Basin (with over 265,000 dedicated acres from Noble and the balance from a third party) and an additional 40,000 acres in Reeves County in the Delaware Basin for which we are currently, or
intend to, provide crude oil, natural gas, and water-related midstream services under long-term, fixed fee contracts. In addition to our existing operations and acreage dedications, Noble has granted us rights of first refusal, or ROFRs, on a
combination of midstream assets retained, developed or acquired by Noble and services not already dedicated to us in the DJ Basin, Eagle Ford Shale in Texas and Delaware Basin, including approximately 85,000 additional acres in the DJ Basin,
approximately 31,000 acres in Webb and Dimmit Counties in South Texas, including the Eagle Ford Shale, and approximately 40,000 acres in the Delaware Basin. Noble has also granted us a ROFR on certain future acquired acreage that is onshore in the
United States outside of the Marcellus Shale. See “Business—Rights of First Refusal on Assets and Services.”
We believe we are well positioned to (i) develop our infrastructure in a manner and on a timeline that will allow us to handle increasing
volumes that we anticipate will result from Noble’s drilling programs on these dedicated properties, and (ii) attract third-party customers in the DJ Basin, Delaware Basin and future areas of operation as we continue to expand our existing and
build out new midstream systems and facilities. During the second quarter of 2016, we secured our first third party customer in the DJ Basin with a 33,000 net acre dedication for crude oil gathering and water services through a series of long-term,
fee-based commercial arrangements with services expected to commence in the third quarter of 2017. We intend to continue to seek
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similar commercial arrangements with others by leveraging our existing midstream footprint. We anticipate that our strategically located midstream infrastructure assets, as well as our
relationship with Noble, will continue to position us as a leading midstream service provider.
The commercial agreements that
we have in place are all fee-based and include dedications of production in the DJ Basin and the Delaware Basin, each with an initial term ending in either 2030 or 2032. See “Business—Our Acreage Dedication.” These long-term,
fee-based commercial agreements are intended to mitigate direct commodity price exposure and enhance the stability of our cash flows.
DJ Basin Overview
Noble is our primary customer and one of the largest producers of liquids in the DJ Basin, where it produced, on average, 118 MBoe/d of
crude oil, condensate, natural gas and NGLs in the three months ended March 31, 2016, with 66% of such volumes being crude oil and NGLs.
Noble commenced horizontal drilling in the DJ Basin in 2010 in order to increase recoveries of liquid-rich hydrocarbons. This shift to a horizontal drilling program has created an opportunity for more
efficient gathering of crude oil, natural gas, NGLs and water, which is the core of our business. Noble continues to refine a number of drilling and completion techniques to increase efficiencies and ultimate recovery while enhancing the overall
value of its DJ Basin position. Noble accelerated its extended reach lateral well program to approximately 63% of wells drilled in the first quarter of 2016. In the three months ended March 31, 2016, the majority of Noble’s wells in the DJ
Basin were completed using enhanced slickwater completion techniques, requiring increased volumes of fresh water to be delivered to the drill site, further strengthening Noble’s demand for our water services. During the quarter ended March 31,
2016, Noble spud 24 horizontal wells, of which 15 were extended reach lateral wells, and 36 wells initiated production. Since January 2010, Noble has spud nearly 1,100 horizontal wells, covering over five million lateral feet.
The table below shows Noble’s DJ Basin drilling activities for the periods presented.
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Year Ended
December 31,
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Year
to Date
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2013
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2014
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2015
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March 31, 2016
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Number of horizontal wells spud
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285
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303
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171
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24
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Approximate average lateral feet per horizontal well
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4,400
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5,600
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6,200
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7,300
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The graph below shows Noble’s net DJ Basin production and drilling activity from
January 1, 2010 through March 31, 2016, and demonstrates the impact that the horizontal drilling program has had on Noble’s DJ Basin production. A number of factors impact Noble’s production and drilling activity, including the
number of drilling rigs that Noble operates on its acreage. See “Risk Factors—Risks Related to Our Business.”
Our midstream operations in the DJ Basin were established in order to service Noble’s growing
production associated with its horizontal drilling program. Since our operations began in October 2013, Noble’s overall horizontal production in the DJ Basin has grown from an average of 64 net Mboe/d for the three months ended December 31,
2013 to 96 net Mboe/d for the three months ended March 31, 2016, an increase of 48%, which represents a compound annual growth rate of approximately 19% over the time period.
In the areas of the DJ Basin where Noble is focused and where we have infrastructure, Noble’s combined volumes associated with its horizontal drilling program averaged nearly 65 net MBoe/d in the
three months ended March 31, 2016, up 34% compared to the three months ended March 31, 2015. We provide crude oil and natural gas gathering services with respect to the majority of Noble’s horizontal production in these areas, and, as a result,
our gathered volumes averaged 63 MBoe/d in the three months ended March 31, 2016, up 100% compared to the three months ended March 31, 2015. For the three months ended March 31, 2016, our gathered volumes represented approximately 51% of
Noble’s DJ Basin gross horizontal production, up from approximately 25% for the three months ended March 31, 2015. Our acreage dedications from Noble along with our commercial agreements and operating footprint will allow us to capture the
majority of incremental production volumes associated with Noble’s horizontal drilling program in these areas and throughout the DJ Basin.
The graph below shows Noble’s gross horizontal production in the DJ Basin from January 1, 2010 through March 31, 2016, along with our gathered volumes since our operations initiated in the fourth
quarter of 2013. Noble’s crude oil and natural gas volumes produced prior to the fourth quarter of 2013 were not connected to our assets; as Noble continues to develop its acreage in the DJ Basin and legacy production continues to decline, we
anticipate that we will continue to service an increasing percentage of Noble’s volumes in the DJ Basin.
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Texas Overview
Noble entered the Delaware Basin and Eagle Ford Shale in 2015 through its merger with Rosetta Resources Inc. Noble currently holds approximately 88,000 net acres in these areas, of which Noble has
dedicated to us approximately 40,000 net acres in the Delaware Basin for crude oil and produced water services. Noble has already demonstrated improvements in well performance in the year since acquiring this acreage with the application of its
unconventional completion expertise. We are working with Noble in the Delaware Basin to implement a centralized facility concept and to apply the expertise and knowledge refined over the last several years in the DJ Basin to the Delaware Basin. The
infrastructure will support crude oil and produced water related services which is expected to generate revenue in the Delaware Basin by the second quarter of 2017 and coincides with the expiration or termination of existing water dedications.
The Delaware Basin has significantly evolved over the last several years with multi-bench development, completion
improvements and longer laterals, transforming it into one of the most commercial basins in the US. These advancements supported economic development through the recent price cycle. For example, the Southern Delaware Basin has experienced a
significant growth in activity since 2012, with monthly crude oil and natural gas production in Reeves County, Texas increasing 485% from January 2012 through April 2016 according to the Railroad Commission of Texas. As producers continue to refine
horizontal drilling techniques, the Delaware Basin is expected to experience further growth with additional improvements in completion design and development optimization.
Our Assets, ROFRs and ROFOs
Through our
development companies, we operate and own interests in crude oil gathering pipelines, crude oil treating facilities, natural gas gathering pipelines, a centralized gathering facility, or CGF and future assets currently under development. In the DJ
Basin, we also provide Noble with water-related services that are critical to Noble’s upstream operations, including the storage and distribution of fresh water for use in drilling and
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completion operations and collecting, cleaning and disposing of flowback and produced water, which we refer to collectively as saltwater, through our interests in pipelines and facilities (or
under contracts with third parties).
The majority of our existing facilities are located in two areas of Weld County,
Colorado, that we refer to as the Wells Ranch integrated development plan area, or Wells Ranch IDP, and the East Pony integrated development plan area, or East Pony IDP. In the DJ Basin, Noble operates through integrated development plans, or IDP
areas, through a comprehensive design for well pad facilities that support horizontal drilling allowing us to efficiently gather production and provide other related midstream services to these areas with reduced truck traffic, emissions and overall
surface footprint. Each IDP area consists of a large block of Noble’s contiguous acreage, allowing us to build and operate midstream infrastructure that we believe is more efficient in terms of capital invested per mile of pipe and service
provided.
In addition to our assets in the Wells Ranch IDP and East Pony IDP, we have dedications with respect to development
that is expected to occur in the future from Noble and a third party, a ROFR from Noble on certain assets and services and a right of first offer, or ROFO, from Noble with respect to its retained interests in the development companies through which
we conduct our midstream services. We believe that our assets and the ROFR and ROFO agreements granted to us by Noble will continue to position us as a leading midstream service provider.
Our Assets
Substantially all of our current cash flows are generated by our assets owned by the Colorado River DevCo LP in which we own an initial 80% controlling interest. We expect these assets to be key
contributors to our growth as Noble continues to increase its production in the DJ Basin through the execution of its horizontal drilling plan.
The majority of the assets owned by Colorado River DevCo LP consist of gathering systems in the Wells Ranch IDP that collect crude oil, natural gas and saltwater from facilities located at or near the
wellhead and provide gathering to the Wells Ranch CGF or other delivery points within the IDP area. At the Wells Ranch CGF, we provide certain integral services, including separation, treatment, cleaning and storage of the incoming liquid stream
into pipeline-quality crude oil and saltwater suitable for disposal operations. At the tailgate of the Wells Ranch CGF, we deliver the hydrocarbons to a third party for additional transportation, gathering and processing and we collect and clean the
saltwater and prepare it for treating and disposal. We expect these systems and others that we may develop will continue to provide us and Noble many benefits, including increased capital and operating efficiencies. Our assets servicing the Wells
Ranch IDP include:
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approximately 35 miles of liquids pipelines that carry both crude oil and saltwater to the Wells Ranch CGF, which has storage capacity for up to 96,000
Bbls of crude oil and 32,000 Bbls of saltwater as of March 31, 2016, and these liquids pipelines had, during the three months ended March 31, 2016:
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average daily throughput of approximately 26,000 Bbl/d of crude oil (increased 54% from 16,800 Bbl/d during the first quarter of 2015); and
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average daily throughput of approximately 10,300 Bbl/d of saltwater (increased 181% from 3,700 Bbl/d during the first quarter of 2015);
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approximately 30 miles of natural gas gathering pipelines servicing the Wells Ranch IDP, which had average daily throughput of approximately 75,700
Mcf/d during the three months ended March 31, 2016 (increased 10% from 69,600 Mcf/d during the first quarter of 2015);
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approximately 20 miles of fresh water pipelines servicing the Wells Ranch IDP that delivered an average of approximately 37,500 Bbl/d of fresh water
during the three months ended March 31, 2016 (increased 1,978% from 1,800 Bbl/d during the first quarter of 2015) and storage capacity of approximately 500,000 Bbls of fresh water as of March 31, 2016.
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In addition to our assets servicing the Wells Ranch IDP, the Colorado River DevCo LP owns the following assets:
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approximately 25 miles of crude oil gathering pipelines servicing the East Pony IDP, which came online in March 2015 and which had average daily
throughput of approximately 24,100 Bbl/d of crude oil during the three months ended March 31, 2016; and
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the Briggsdale and Platteville crude oil treating facilities, which have an annual operating capacity of 2,740,000 Bbls and 1,825,000 Bbls,
respectively.
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The remainder of our assets are held by five development companies in which we own
initial controlling interests in the percentages as set forth in the parentheticals below. We believe this tiered ownership structure will allow us to maintain flexibility to adjust to Noble’s development decisions. The following are
descriptions of our five development companies:
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Green River DevCo LP (25%) has assets located in the Mustang IDP, consisting of a fresh water storage pond with a storage capacity of approximately
230,000 Bbls of water, rights-of-way and surface rights on which we are constructing additional components of the fresh water system and on which we plan to construct crude oil, natural gas and additional water infrastructure in order to provide
services under our dedications. We anticipate the first centralized facility servicing the Mustang IDP and the related gathering infrastructure to be in operation by the end of 2017.
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Blanco River DevCo LP (25%) has dedications from Noble for crude oil gathering and produced water services in the Delaware Basin. Construction of the
crude oil and produced water infrastructure required to support Noble’s planned development in the Delaware Basin will begin in 2016. We anticipate the gathering system and initial facility to be in operation during the second quarter of 2017.
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Laramie River DevCo LP (100%) has dedications from Noble and a third party for crude oil gathering and water services in the Greeley Crescent IDP. We
are in the process of obtaining rights of way and procuring long lead items for a third party crude oil trunk line running from central Greeley Crescent to multiple downstream outlets near Platteville, CO, which will service third party dedicated
acreage as well as potential Noble production on its remaining acreage within this IDP area in the future. Construction of this infrastructure will begin in 2016, and we anticipate the gathering systems to be in operation by mid-2017.
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San Juan River DevCo LP (25%) has assets in the East Pony IDP, which consist of rights-of-way, surface rights and fresh water systems consisting of
approximately 10 miles of fresh water pipelines and a storage capacity of approximately 550,000 Bbls of fresh water as of March 31, 2016 and a dedication from Noble for all water services in the East Pony IDP. We currently do not provide produced
water services, but may do so in the future.
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Gunnison River DevCo LP (5%) has assets in the Bronco IDP, which consist of dedications from Noble for crude oil gathering and water services.
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We also own a 3.33% ownership interest in White Cliffs Pipeline, L.L.C., or White Cliffs LLC, which
entitles us to distributions based on our pro rata share of monthly net cash flow generated by the operation of the White Cliffs Pipeline. The White Cliffs Pipeline system consists of two 527-mile crude oil pipelines that extend
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from the DJ Basin to the Cushing, Oklahoma market that had a capacity of approximately 150,000 Bbl/d of crude oil as of March 31, 2016 and completed an expansion of the pipeline’s crude oil
capacity to approximately 215,000 Bbl/d during the second quarter of 2016. See “Business—Our Assets, ROFRs and ROFO—Our Assets.”
The following table provides a summary of our assets, services and dedicated net acreage (as of June 30, 2016, unless otherwise indicated) along with our ownership of these assets as of the closing of
this offering.
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DevCo
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Areas Served
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NBLX Dedicated Service
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Current Status
of Asset
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Dedicated Net
Acreage
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NBLX
Ownership
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Colorado River DevCo LP
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• Wells Ranch IDP
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• Crude Oil Gathering
• Natural Gas
Gathering
• Water Services
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• Operational
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• 79,000
(4)
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80%
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• East Pony IDP
• All Noble DJ Basin
Acreage
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• Crude Oil Gathering
• Crude Oil
Treating
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• Operational
• Operational
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• 44,000
• N/A
(1)
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Green River DevCo LP
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Mustang
IDP
(2)
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• Crude Oil Gathering
• Natural Gas
Gathering
• Water Services
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• Under Construction
• Under Construction
• Partially Operational
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75,000
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25%
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Blanco River DevCo
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Delaware Basin
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• Crude Oil Gathering
• Produced Water Services
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Planning
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40,000
(5)
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25%
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Laramie River DevCo LP
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Greeley Crescent IDP
(3)
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• Crude Oil Gathering
• Water Services
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Under Construction
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65,000
(3)
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100%
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San Juan River DevCo LP
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East Pony IDP
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• Water Services (currently only fresh water services provided)
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Operational
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44,000
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25%
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Gunnison River DevCo LP
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Bronco IDP
(2)
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• Crude Oil Gathering
• Water Services
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Future Development
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36,000
(4)
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5%
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(1)
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The fee for crude oil treating services is not acreage based. We receive a monthly fee for each Noble-operated well producing in paying quantities in the DJ Basin that
is not connected to our crude oil gathering systems during each month, which was 4,400 wells as of March 31, 2016.
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(2)
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We currently have limited midstream infrastructure assets in the Mustang IDP and no midstream infrastructure assets in the Bronco IDP. Our assets in these IDP areas
currently consist primarily of dedications to us from Noble for future production in these IDP areas. In the Mustang IDP, we also own one fresh water storage pond and certain rights-of-way and surface rights. See “Business—Our Assets,
ROFRs and ROFO.” We anticipate the first centralized facility servicing the Mustang IDP and related gathering infrastructure to be in service by the end of 2017.
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(3)
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Our assets in this IDP area currently consist of dedications to us from Noble and an unaffiliated third party. See “Business—Our Assets, ROFRs and ROFO.”
On May 3, 2016, Noble announced a sale of approximately 33,000 net acres to such third party, which acreage is in the Greeley Crescent IDP. On June 14, 2016, the first closing in respect of such sale closed pursuant to which the non-producing
acreage was conveyed out of Noble and the second closing is expected to occur in the future. As a result of the first closing and the acreage that Noble retained, all of the acreage in the Greeley Crescent IDP remains subject to the dedications in
favor of us for crude oil gathering, produced water services and fresh water services.
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(4)
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On June 15, 2016, Noble entered into an acreage swap pursuant to which Noble will increase its holdings in the Wells Ranch IDP by approximately 11,700 net acres in
exchange for reducing its interest in the Bronco IDP by approximately 13,500 net acres. Upon completion, all of the outbound acreage in the Bronco IDP was released from the prior dedications to us, and the inbound acreage in the Wells Ranch IDP
became dedicated to us. After giving effect to this acreage swap, the dedication in the Wells Ranch IDP is approximately 79,000 net acres and our dedication in the Bronco IDP is approximately 36,000 net acres.
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7
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(5)
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Includes acreage currently dedicated to other providers for produced water services and committed to us upon expiration of existing dedications. The majority of these
dedications will expire or are expected to be terminated by Noble by the time our planned infrastructure is operational in 2017.
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Rights of First Refusal
Noble has granted us a ROFR on the right to provide midstream services on certain acreage described below and on the right to acquire certain midstream assets. The following describes how these ROFRs are
applicable in our primary geographic areas:
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•
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East Pony Natural Gas Gathering and Northern Colorado Natural Gas Processing.
The services ROFR gives us the right to provide natural gas
processing and natural gas gathering services on approximately 44,000 net acres located in East Pony IDP in the event Noble elects to obtain such services from a third party. Today, Noble provides these services for itself, using the assets
described below. Noble has granted us a ROFR on the right to buy these assets in the event Noble elects to sell them:
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¡
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Approximately 233 miles of natural gas gathering pipelines, which had average daily throughput of approximately 39,600 Mcf/d during the three months
ended March 31, 2016 (increased 25% from 31,700 Mcf/d during the first quarter of 2015).
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¡
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Two natural gas processing plants, Lilli and Keota, with combined existing processing capacity of 48,000 Mcf/d. Keota is permitted for an 15,000 Mcf/d
expansion to handle approximately 45,000 Mcf/d (bringing total combined processing capacity to 63,000 Mcf/d). Daily processing volumes for Lilli and Keota combined averaged approximately 34,100 Mcf/d during the three months ended March 31, 2016
(increased 83% from 18,600 Mcf/d during the first quarter of 2015).
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•
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Eagle Ford Shale.
The services ROFR gives us the right to provide crude oil gathering, natural gas gathering and water services on
approximately 31,000 net acres in Dimmit and Webb Counties in the event Noble elects to offer these to a third party. Additionally, Noble has granted us a ROFR on the right to buy its existing assets that provide these services, which consist of
centralized facilities and crude oil and natural gas gathering systems that had an average daily throughput of approximately 43.6 MBoe/d during the three months ending March 31, 2016 that service some of Noble’s contiguous acreage in the Eagle
Ford Shale.
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|
•
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DJ Basin.
The services ROFR gives us the right to provide crude oil gathering, natural gas gathering and water services on approximately
85,000 net acres in the DJ Basin that are not already dedicated to us, and with respect to the acreage already under dedications for certain services, the right to provide the other midstream services in our areas of specialty, if they become
available.
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•
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Delaware Basin.
The services ROFR gives us the right to provide natural gas gathering, natural gas processing and fresh water services on
the same acreage that is dedicated to us for crude oil and produced water gathering, which is approximately 40,000 net acres in the Delaware Basin.
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•
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Future acquired acreage in the onshore United States.
The services ROFR gives us the right to provide crude oil gathering, natural gas
gathering and water services on all acreage that Noble acquires after the date of the Closing that is onshore in the United States (outside of the Marcellus Shale).
|
Please read “Business — Acreage Dedication — Right of First Refusal on Assets and Services” for additional
information regarding our rights of first refusal.
Rights of First Offer
Noble has granted us a ROFO with respect to its retained interests in the development companies through which we conduct our midstream
services. Please read “Business — Acreage Dedication — Right of First Offer on Retained Interests” for additional information regarding our rights of first offer.
8
The following table provides a summary of the ROFR assets and ROFR services and the net
acreage covered by our ROFR, to the extent known as of June 30, 2016, granted to us by Noble.
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Areas Served
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NBLX Dedicated Service
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Current Status
of Asset
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Dedicated Net
Acreage
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|
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Northern Colorado
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• Natural Gas Processing
• Natural Gas Gathering
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Operational
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N/A
|
|
|
|
|
|
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Eagle Ford Shale
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• Crude Oil Gathering
• Natural Gas Gathering
• Water Services
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Operational
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31,000
|
|
|
|
|
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DJ Basin (other than
dedicated above)
|
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To the extent not already covered in dedication in the prior chart:
• Crude Oil Gathering
• Natural Gas Gathering
• Water Services
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N/A
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85,000
|
|
|
|
|
|
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Delaware Basin
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|
• Natural Gas Processing
• Natural Gas Gathering
• Fresh Water Services
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Planning
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40,000
(1)
|
|
|
|
|
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All future-acquired onshore acreage in U.S. (outside of Marcellus Shale)
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• Crude Oil
Gathering
• Natural Gas Gathering
• Water Services
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N/A
|
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N/A
|
|
(1)
|
Includes acreage currently dedicated to other providers for produced water services and committed to us upon expiration of existing dedications. The majority of these
dedications will expire or are expected to be terminated by Noble by the time our planned infrastructure is operational in 2017.
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Business Strategies
Our principal business
objectives are to generate stable cash flows and increase the quarterly cash distributions that we pay to our unitholders over time while ensuring the ongoing stability of our business by providing outstanding service to our upstream customers. We
expect to achieve these objectives through the following business strategies:
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•
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Acting as the primary provider of midstream services in Noble’s dedicated areas
. Our midstream infrastructure currently serves
Noble’s production on its substantial acreage in the DJ Basin, from which Noble produced an average of 118 MBoe/d of crude oil, condensate, natural gas and NGLs during the first quarter of 2016, 65 Mboe/d of which was attributable to
Noble’s horizontal drilling program in our current areas of operation, Wells Ranch IDP and East Pony IDP. We provide crude oil and natural gas gathering services on the majority of Noble’s horizontal production in these areas, and, as a
result, our gathered volumes averaged 63 MBoe/d for the quarter, up 100% compared to the first quarter of 2015. Our acreage dedications from Noble along with our operating footprint will allow us to capture the majority of incremental production
volumes associated with Noble’s horizontal drilling program in these areas and throughout the DJ Basin. In addition, we plan to service Noble’s Delaware Basin acreage after the expiration or termination of certain pre-existing dedications
to third parties and installation of appropriate infrastructure. We expect Noble’s production volumes to grow from its future horizontal drilling activities, which we anticipate will help us maintain and grow throughput on our crude oil,
natural gas and saltwater midstream infrastructure and increase demand for our fresh water services. We are strategically positioned to expand our delivery of midstream services within the areas dedicated to us as Noble executes on its drilling and
development plans.
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|
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•
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Pursuing accretive acquisitions from Noble
. After this offering, Noble will be the sole owner of our general partner and will own
a % limited partner interest in us, consisting of common units and all of our subordinated units and incentive distribution rights and its retained
non-controlling
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9
|
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interests in our operating assets and dedications. Noble has granted us a right of first offer, or ROFO, on its retained interests in the development companies that hold our assets and has
granted us ROFRs to provide certain midstream services and to acquire certain midstream assets onshore in the United States (other than in the Marcellus Shale). We expect Noble to be strongly incentivized to help us grow our business, including by
offering us the opportunity to acquire midstream assets it has retained, develops or acquires in the future and elects to sell.
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|
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•
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Attracting additional third-party business
. In addition to becoming an integral provider of midstream services for Noble’s
production in the DJ Basin and Delaware Basin, we intend to continue to market our services to, and pursue strategic relationships with, third-party producers over the long term. We believe that our portfolio of assets and our execution and
operational capabilities will position us favorably to compete for additional third-party production. For example, we recently contracted with an unaffiliated third party customer in the DJ Basin through a series of commercial arrangements with
expected services to commence in 2017.
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|
|
•
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Focusing on long-term, fixed-fee arrangements to mitigate direct commodity price exposure and enhance the stability of our cash flows
.
Our commercial agreements are structured as long-term, fixed-fee arrangements, and we intend to continue to pursue additional long-term, fixed-fee arrangements with Noble and third parties. The commercial agreements that we have in place are all
fee-based and establish dedications in our favor with an initial term ending in either 2030 or 2032. We will pursue additional long-term commitments from customers, which may include throughput-based charges, reservation-based charges, or acreage
dedications. None of our existing commercial agreements contain minimum volume commitments.
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Competitive Strengths
We believe we are well-positioned to successfully execute our business strategies because of the following competitive strengths:
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|
•
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|
Strategic relationship with Noble
. We have a strategic relationship with Noble, one of the leading producers of crude oil, condensate,
natural gas and NGLs in North America. As the owner of our general partner, all of our incentive distribution rights, a % limited partner interest in us and its retained, non-controlling interests in the development
companies that hold our assets, we believe Noble will be incentivized to promote and support our business plan and to pursue projects that enhance the overall value of our business. Through our long-term commercial agreements with Noble, we have a
well-capitalized, investment grade commercial counterparty initially responsible for all of our revenues and expect that our additional third party customer will contribute to our revenue by the third quarter of 2017. In addition, Noble has granted
us substantial dedications, a ROFR on significant midstream assets, a ROFR on the right to provide future midstream services in areas key to Noble’s development and a ROFO on its retained interests in the development companies that hold our
assets. See “Business—Our Acreage Dedication” and “Business—Right of First Refusal on Assets and Services.” We believe that our relationship with Noble will provide us with a stable base of cash flows and significant
growth opportunities.
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•
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Strategically located assets
. Our initial midstream infrastructure assets are located on and around Noble’s significant, contiguous
acreage in the DJ Basin and serve Noble’s current and future production on this acreage. Both the DJ Basin and the Delaware Basin, where we will begin to construct midstream infrastructure assets during the second half of 2016, have been focus
areas for extensive industry activity over the last several years. We expect producers, including Noble, to continue to invest substantial capital to develop crude oil and natural gas production in these regions, which will in turn require
substantial investment in midstream infrastructure. Noble’s concentrated development is intended to centrally locate production and midstream infrastructure rather than replicate services and infrastructure at each wellhead, which we believe
will allow us to efficiently gather Noble’s production
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10
|
|
from centralized wellhead equipment. In addition, we believe our customers’ contiguous acreage in the DJ Basin and Delaware Basin will provide us opportunities to deliver fresh water in
connection with well completion activities and collect, clean and dispose of saltwater. We believe that our existing footprint, coupled with our long-term dedications, positions us to capitalize on midstream growth opportunities on and around our
customers’ contiguous acreage in the DJ Basin and Delaware Basin.
|
|
|
•
|
|
Long-term, fixed-fee contracts to support cash flows
. We service Noble’s liquids-rich production in the DJ Basin pursuant to
long-term, fixed-fee contracts. For the twelve months ended March 31, 2016, Noble represented all of our gathered volumes. We have secured dedications from Noble under which we will provide our crude oil, natural gas and water services and we have
secured dedications from an unaffiliated third party under which we will provide crude oil gathering and water services, in both cases, pursuant to fixed-fee contracts, inclusive of automatic year-over-year fee increases, with initial terms expiring
in 2030 for DJ Basin dedications and 2032 for Delaware Basin dedications. We believe that Noble’s horizontal drilling activity and potential new third-party customers will drive the stable growth of our midstream operations. Our contract
structure mitigates our direct exposure to commodity price risk and will likely contribute to long-term cash flow stability.
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|
•
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Financial flexibility and strong capital structure
. At the closing of this offering, we expect to have
$ million of availability under our new, undrawn revolving credit facility, which can be increased by an additional $ million as long as we are in
compliance with the covenants contained in our credit agreement and subject to requisite commitments from existing or new lenders. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Capital
Resources and Liquidity—Revolving Credit Facility.” We believe that our available borrowing capacity and our expected ability to access debt and equity capital markets provide us with the financial flexibility necessary to execute our
business and growth strategies.
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•
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|
Experienced management and operating teams
. Our executive management team has combined experience of over 65 years in designing,
acquiring, building, operating, financing and otherwise managing large-scale midstream and other energy assets. In addition, through our omnibus agreement and operational services and secondment agreement with Noble, we employ engineering,
construction and operations teams that have significant experience in designing, constructing and operating large scale midstream and other energy assets.
|
Noble Energy, Inc.
Overview
Noble is a global independent oil and natural gas exploration and production company, with total proved reserves
of 1.4 billion Boe at year-end 2015. Noble’s diverse resource base includes positions in four premier unconventional U.S. onshore plays - the DJ Basin, Delaware Basin, Eagle Ford Shale and Marcellus Shale - and offshore in the U.S. Gulf of
Mexico, Eastern Mediterranean and West Africa. Noble is listed on the NYSE under the symbol “NBL” and had a market capitalization of approximately $15.5 billion as of July 20, 2016.
Noble is one of the largest producers of liquids in the DJ Basin, where it produced, on average, 115 MBoe/d of crude oil, condensate,
natural gas and NGLs during 2015, with 67% of such volumes being crude oil and NGLs. Noble’s sales volumes in the DJ Basin increased to 118 MBoe/d in the three months ended March 31, 2016, with 66% of such volumes being crude oil and NGLs.
Noble entered the Delaware Basin and Eagle Ford Shale in 2015 through its merger with Rosetta Resources Inc. Noble
currently holds 88,000 net acres in these areas, of which Noble has dedicated to us 40,000 net acres in the Delaware Basin, certain of which acres are subject to preexisting dedications with respect to produced water services that expire or will be
terminated in 2017 and 2018. We are constructing infrastructure to provide crude
11
oil and water midstream services by the end of the third quarter of 2017. Noble has already demonstrated improvements in well performance in the year since acquiring the position with the
application of its unconventional completion expertise. The unique combination of an operated and consolidated acreage position has enabled the redesign of the field optimized for long lateral development. As a result of this redesign the current
operated undrilled average lateral length is approximately 7,000 feet. Noble has partnered with us in the Delaware Basin to implement the central facility development and to take advantage of the expertise and knowledge developed over the last
several years in the DJ Basin. The remainder of Noble’s acreage in Texas will continue to be serviced under existing arrangements, subject to the ROFR Noble has granted to us.
Our Relationship with Noble
One of our principal strengths is our relationship with Noble. In connection with the completion of this offering, we will
(i) issue common units and subordinated units to Noble, representing an
aggregate % limited partner interest in us (or an aggregate % limited partner interest in us if the underwriters exercise in full their option to purchase additional common units),
(ii) issue a non-economic general partner interest in us to our general partner and issue all of our incentive distribution rights to Noble and (iii) use a portion of the net proceeds from this offering to make a distribution of
approximately $ million to Noble. Please read “—The Offering,” “Use of Proceeds,” “Security Ownership of Certain Beneficial Owners and Management” and “Certain Relationships and
Related Party Transactions—Distributions and Payments to Our General Partner and Its Affiliates.”
Given
Noble’s significant ownership interest in us following this offering and its intent to use us as its primary domestic midstream service provider in areas that have not previously been dedicated to other ventures, we believe that Noble will be
incentivized to promote and support the successful execution of our business strategies; however, we can provide no assurances that we will benefit from our relationship with Noble. While our relationship with Noble is a significant strength, it is
also a source of potential risks and conflicts. Please read “Risk Factors—Risks Inherent in an Investment in Us” and “Conflicts of Interest and Duties.”
Our Emerging Growth Company Status
As a company
with less than $1.0 billion in revenue during its last fiscal year, we qualify as an “emerging growth company” as defined in the JOBS Act. As an emerging growth company, we may, for up to five years, take advantage of specified exemptions
from reporting and other regulatory requirements that are otherwise applicable generally to public companies. These exemptions include:
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•
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the presentation of only two years of audited financial statements and only two years of related Management’s Discussion and Analysis of Financial
Condition and Results of Operations in this prospectus;
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•
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deferral of the auditor attestation requirement on the effectiveness of our system of internal control over financial reporting;
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•
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exemption from the adoption of new or revised financial accounting standards until they would apply to private companies;
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•
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exemption from compliance with any new requirements adopted by the Public Company Accounting Oversight Board requiring mandatory audit firm rotation or
a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer; and
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|
•
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|
reduced disclosure about executive compensation arrangements.
|
We may take advantage of these provisions until we are no longer an emerging growth company, which will occur on the earliest of
(i) the last day of the fiscal year following the fifth anniversary of this offering, (ii) the
12
last day of the fiscal year in which we have more than $1.0 billion in annual revenue, (iii) the date on which we issue more than $1.0 billion of non-convertible debt over a three-year
period and (iv) the date on which we are deemed to be a “large accelerated filer,” as defined in Rule 12b-2 promulgated under the Securities Exchange Act of 1934, as amended, or the Exchange Act.
We have elected to take advantage of all of the applicable JOBS Act provisions, except that we will elect to opt out of the exemption
that allows emerging growth companies to extend the transition period for complying with new or revised financial accounting standards (this election is irrevocable).
Accordingly, the information that we provide you may be different than what you may receive from other public companies in which you hold equity interests.
Risk Factors
An investment in our common units involves risks associated with our business, our partnership structure and the tax characteristics of our common units. Below is a summary of certain key risk factors
that you should consider in evaluating an investment in our common units. However, this list is not exhaustive. Please read “Risk Factors” and “Forward-Looking Statements.”
Risks Related to Our Business
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•
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|
We derive substantially all of our revenue from Noble. If Noble changes its business strategy, alters its current drilling and development plan on our
dedicated acreage, or otherwise significantly reduces the volumes of crude oil, natural gas, saltwater or fresh water with respect to which we perform midstream services, our revenue would decline and our business, financial condition, results of
operations, cash flows and ability to make distributions to our unitholders would be materially and adversely affected.
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•
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On a pro forma basis, we would not have generated sufficient distributable cash flow to make the payment of the aggregate annualized minimum quarterly
distribution on all of our units for the year ended December 31, 2015 or the twelve months ended March 31, 2016.
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•
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We may not generate sufficient distributable cash flow to make the payment of the minimum quarterly distribution to our unitholders.
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•
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The assumptions underlying the forecast of distributable cash flow that we include in “Cash Distribution Policy and Restrictions on
Distributions” are inherently uncertain and subject to significant business, economic, financial, regulatory and competitive risks that could cause our actual distributable cash flow to differ materially from our forecast.
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•
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We cannot predict the rate at which our customers will develop acreage that is dedicated to us or the areas they will decide to develop.
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Risks Inherent in an Investment in Us
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•
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Our general partner and its affiliates, including Noble, have conflicts of interest with us and limited fiduciary duties to us and our unitholders, and
they may favor their own interests to our detriment and that of our unitholders. Additionally, we have no control over the business decisions and operations of Noble, and Noble is under no obligation to adopt a business strategy that favors us.
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•
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Our partnership agreement requires that we distribute all of our available cash, which could limit our ability to grow and make acquisitions.
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•
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Our partnership agreement replaces our general partner’s fiduciary duties to holders of our common units with contractual standards governing its
duties.
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13
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•
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Affiliates of our general partner and Noble may compete with us, and neither our general partner nor its affiliates have any obligation to present
business opportunities to us except with respect to dedications contained in our commercial agreements and rights of first refusal and rights of first offer contained in our omnibus agreement.
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•
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There is no existing market for our common units, and a trading market that will provide you with adequate liquidity may not develop. The price of our
common units may fluctuate significantly, and you could lose all or part of your investment.
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•
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For as long as we are an “emerging growth company,” we will not be required to comply with certain disclosure requirements that apply to
other public companies.
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Tax Risks
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•
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Our tax treatment depends on our status as a partnership for federal income tax purposes. If the Internal Revenue Service, or IRS, were to treat us as
a corporation for federal income tax purposes, which would subject us to entity-level taxation, or if we were otherwise subjected to a material amount of entity-level taxation, then our distributable cash flow to our unitholders would be
substantially reduced.
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•
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The tax treatment of publicly traded partnerships or an investment in our units could be subject to potential legislative, judicial or administrative
changes and differing interpretations, possibly on a retroactive basis.
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•
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Our unitholders’ share of our income will be taxable to them for federal income tax purposes even if they do not receive any cash distributions
from us.
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The Transactions
We were formed in December 2014 by Noble. In connection with this offering, Noble will contribute to us the percentages of the development
companies we do not currently own that will operate our assets described under “Certain Relationships and Related Party Transactions—Agreements with our Affiliates in Connection with the Transactions—Contribution Agreement.”
In addition, in connection with this offering, we will:
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•
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issue common units and
subordinated units to Noble, representing an aggregate % limited partner interest in us;
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•
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issue all of our incentive distribution rights to Noble;
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•
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issue common units to the public, representing
a % limited partner interest in us, and we will apply the net proceeds as described under “Use of Proceeds;”
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•
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enter into a new $ million revolving credit facility;
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•
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have long-term, fixed-fee commercial agreements with Noble;
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•
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enter into an omnibus agreement with Noble and our general partner; and
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•
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enter into an operational services and secondment agreement with Noble.
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The number of common units to be issued to Noble includes
common units that will be issued at the expiration of the underwriters’ option to purchase additional common units, assuming that the underwriters do not exercise the
option. Any exercise of the underwriters’ option to purchase additional common units would reduce the common units shown as held by Noble by the number to be purchased by the underwriters in connection with such exercise. If and to the extent
the underwriters exercise their option to purchase additional
14
common units, the number of common units purchased by the underwriters pursuant to any exercise will be sold to the public, and any remaining common units not purchased by the underwriters
pursuant to any exercise of the option will be issued to Noble at the expiration of the option period for no additional consideration. Any additional common units issued to Noble upon the expiration of the underwriters’ option to purchase
additional common units will be issued pursuant to the exemption from registration provided under Section 4(a)(2) of the Securities Act. We will use any net proceeds from the exercise of the underwriters’ option to purchase additional
common units to make a cash distribution to Noble.
Ownership and Organizational Structure
After giving effect to the transactions described above, assuming the underwriters’ option to purchase additional common units from
us is not exercised, our partnership interests will be held as follows:
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Public common units
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%
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Noble common units
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%
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Noble subordinated units
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%
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Noble incentive distribution rights
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%
(1)
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General partner interest
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%
(2)
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Total
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100.0
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%
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(1)
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Incentive distribution rights represent a variable interest in distributions and thus are not expressed as a fixed percentage. Please read “Provisions of Our
Partnership Agreement Relating to Cash Distributions—Incentive Distribution Rights.” Distributions with respect to the incentive distribution rights will be classified as distributions with respect to equity interests. All of our incentive
distribution rights will be issued to Noble.
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(2)
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Our general partner owns a non-economic general partner interest in us. Please read “Provisions of Our Partnership Agreement Relating to Cash
Distributions—Distributions of Available Cash—General Partner Interest.”
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15
The following simplified diagram depicts our organizational structure after giving
effect to the transactions described above.
Management of Noble Midstream Partners LP
We are managed and operated by the board of directors and executive officers of Noble Midstream GP LLC, our general partner. Noble is the
sole owner of our general partner and has the right to appoint the entire board of directors of our general partner, including the independent directors appointed in accordance with the listing standards of the NYSE. Unlike shareholders in a
publicly traded corporation, our unitholders will not be
16
entitled to elect our general partner or the board of directors of our general partner. Many of the executive officers and directors of our general partner also currently serve in senior
leadership positions at Noble. Please read “Management—Directors and Executive Officers of Noble Midstream GP LLC.”
In order to maintain operational flexibility, our operations will be conducted through, and our operating assets will be owned by, our development companies. We may, in certain circumstances, contract
with third parties to provide personnel in support of our operations. However, neither we nor our subsidiaries will have any employees. Our general partner has the sole responsibility for providing the personnel necessary to conduct our operations,
whether through directly hiring employees or by obtaining the services of personnel employed by Noble. In addition, pursuant to the operational services and secondment agreement that will be entered into at the closing of this offering, certain of
Noble’s employees will be seconded to our general partner to provide certain management and all operational services with respect to our business under the direction and control of our general partner. All of the personnel that will conduct our
business immediately following the closing of this offering will be employed or contracted by our general partner and its affiliates, including Noble, but we sometimes refer to these individuals in this prospectus as our employees because they
provide services directly to us.
Principal Executive Offices and Internet Address
Our principal executive offices are located at 1001 Noble Energy Way, Houston, Texas, 77070, and our telephone number is
(281) 872-3100. Following the completion of this offering, our website will be located at
www.NBLMidstream.com
. We expect to make our periodic reports and other information filed with or furnished to the U.S. Securities and Exchange
Commission, or the SEC, available, free of charge, through our website, as soon as reasonably practicable after those reports and other information are electronically filed with or furnished to the SEC. Information on our website or any other
website is not incorporated by reference into this prospectus and does not constitute a part of this prospectus.
Summary of Conflicts of Interest and Duties
Under our partnership agreement, our general partner has a duty to manage us in a manner it believes is not adverse to the interests of our partnership. However, because our general partner is a wholly
owned subsidiary of Noble, the officers and directors of our general partner have a duty to manage the business of our general partner in a manner that is in the best interests of Noble. As a result of this relationship, conflicts of interest may
arise in the future between us or our unitholders, on the one hand, and our general partner or its affiliates, including Noble, on the other hand. For example, our general partner will be entitled to make determinations that affect the amount of
cash distributions we make to the holders of common units, which in turn has an effect on whether Noble, as the initial holder of our incentive distribution rights, receives incentive cash distributions. In addition, our general partner may cause us
to borrow funds in order to permit the payment of cash distributions, even if the purpose or effect of the borrowing is to make a distribution on the subordinated units, to make incentive distributions or to accelerate expiration of the
subordination period. All of these actions are permitted under our partnership agreement and will not be a breach of any duty (fiduciary or otherwise) of our general partner. Please read “Conflicts of Interest and Duties.”
Delaware law provides that a Delaware limited partnership may, in its partnership agreement, expand, restrict or eliminate the fiduciary
duties otherwise owed by the general partner to limited partners and the partnership. As permitted by Delaware law, our partnership agreement contains various provisions replacing the fiduciary duties that would otherwise be owed by our general
partner with contractual standards governing the duties of the general partner and contractual methods of resolving conflicts of interest. The effect of these provisions is to restrict the remedies available to unitholders for actions that might
otherwise constitute breaches of our general partner’s fiduciary duties. Our partnership agreement also provides that affiliates of our general
17
partner, including Noble and its affiliates, are not restricted from competing with us, and neither our general partner nor its affiliates have any obligation to present business opportunities to
us except with respect to dedications contained in our commercial agreements and rights of first refusal contained in our omnibus agreement. By purchasing a common unit, the purchaser agrees to be bound by the terms of our partnership agreement,
and, pursuant to the terms of our partnership agreement, each holder of common units consents to various actions and potential conflicts of interest contemplated in our partnership agreement that might otherwise be considered a breach of fiduciary
or other duties under Delaware law. Please read “Conflicts of Interest and Duties—Duties of Our General Partner” and “Certain Relationships and Related Party Transactions.”
18
The Offering
|
Common units offered to the public
|
common units (or common units if the
underwriters exercise in full their option to purchase additional common units from us).
|
|
Units outstanding after this offering
|
common units and subordinated units, each
representing an aggregate % limited partner interest in us.
|
|
|
The number of common units outstanding after this offering includes common units that are
available to be issued to the underwriters pursuant to their option to purchase additional common units from us. The number of common units purchased by the underwriters pursuant to any exercise of the option will be sold to the public. If the
underwriters do not exercise their option to purchase additional common units, in whole or in part, any remaining common units not purchased by the underwriters pursuant to the option will be issued to Noble at the expiration of the option period
for no additional consideration. Accordingly, any exercise of the underwriters’ option, in whole or in part, will not affect the total number of common units outstanding or the amount of cash needed to pay the minimum quarterly distribution on
all units.
|
|
Use of proceeds
|
We expect to receive net proceeds of approximately $ million from the sale of
common units offered by this prospectus, based on an assumed initial public offering price of $ per
common unit (the mid-point of the price range set forth on the cover page of this prospectus), after deducting underwriting discounts and commissions, the structuring fee and
estimated offering expenses. Our estimate assumes the underwriters’ option to purchase additional common units is not exercised. We intend to use the net proceeds from this offering (i) to make a distribution of approximately
$ million to Noble; (ii) to pay approximately $ million of origination fees
related to our new revolving credit facility; and (iii) for general partnership purposes. Please read “Use of Proceeds.”
|
|
|
If the underwriters exercise in full their option to purchase additional common units, we expect to receive additional net proceeds of approximately
$ million, after deducting underwriting discounts and commissions and the structuring fee. We will use any net proceeds from the exercise of the underwriters’ option to purchase additional common
units to make a cash distribution to Noble.
|
|
Cash distributions
|
We intend to make a minimum quarterly distribution of $ per unit to the extent we have sufficient cash at the end of each quarter after
establishment of cash reserves and payment of fees and expenses, including payments to our general partner. We refer to this cash as “available cash.” Our ability to pay the minimum quarterly distribution is subject to various restrictions
and other factors described in more detail under the caption “Cash Distribution Policy and Restrictions on Distributions.”
|
19
|
|
We do not expect to make distributions for the period that began on
, 2016 and ends on the day prior to the closing of this offering. We will adjust the amount of our first distribution for the
period from the closing of this offering through , 2016 based on the number of days in that period.
|
|
|
In general, we will pay any cash distributions we make each quarter in the following manner:
|
|
|
•
|
|
first
, 100% to the holders of common units, until each common unit has received a minimum quarterly distribution of
$ plus any arrearages from prior quarters;
|
|
|
•
|
|
second
, 100% to the holders of subordinated units, until each subordinated unit has received a minimum quarterly distribution of
$ ; and
|
|
|
•
|
|
third
, 100% to all unitholders, pro rata, until each unit has received a distribution of $ .
|
|
|
If cash distributions to our unitholders exceed $ per unit in any quarter, Noble, as the initial holder of our
incentive distribution rights, will receive increasing percentages, up to 50%, of the cash we distribute in excess of that amount. We refer to these distributions as “incentive distributions.” In certain circumstances, Noble has the right
to reset the target distribution levels described above to higher levels based on our cash distributions at the time of the exercise of this reset election. Please read “Provisions of Our Partnership Agreement Relating to Cash
Distributions—Incentive Distribution Rights.”
|
|
|
If we do not have sufficient available cash at the end of each quarter, we may, but are under no obligation to, borrow funds to pay the minimum quarterly distribution
to our unitholders.
|
|
|
Pro forma distributable cash flow that was generated during the year ended December 31, 2015 and the twelve months ended March 31, 2016, was approximately $51.3
million and $62.1 million, respectively. The amount of distributable cash flow we must generate to pay the minimum quarterly distribution for four quarters on our common units and subordinated units to be outstanding immediately after this offering
is approximately $ million (or an average of approximately $ million per quarter). As a result, for each of the year ended December 31, 2015 and the
twelve months ended March 31, 2016, on a pro forma basis, we would not have generated sufficient distributable cash flow to pay the aggregate annualized minimum quarterly distribution on all of our common units and subordinated units. Please
read “Cash Distribution Policy and Restrictions on Distributions—Unaudited Pro Forma EBITDA and Distributable Cash Flow for the Year Ended December 31, 2015 and Twelve Months Ended March 31, 2016.”
|
20
|
|
We believe, based on our financial forecast and related assumptions included in “Cash Distribution Policy and Restrictions on Distributions—Estimated EBITDA
and Distributable Cash Flow for the Twelve Months Ending September 30, 2017,” that we will generate sufficient distributable cash flow to pay the aggregate minimum quarterly distributions of
$ million on all of our common units and subordinated units for the twelve months ending September 30, 2017. However, we do not have a legal obligation to pay distributions at our minimum
quarterly distribution rate or at any other rate except as provided in our partnership agreement, and there is no guarantee that we will make quarterly cash distributions to our unitholders. Please read “Cash Distribution Policy and
Restrictions on Distributions.”
|
|
Subordinated units
|
Following the completion of this offering, Noble will own all of our subordinated units. The principal difference between our common units and subordinated units is that for any quarter during
the subordination period, the subordinated units will not be entitled to receive any distribution until the common units have received the minimum quarterly distribution for such quarter plus any arrearages in the payment of the minimum quarterly
distribution from prior quarters during the subordination period. Subordinated units will not accrue arrearages.
|
|
Conversion of subordinated units
|
The subordination period will end on the first business day after the date that we have earned and paid distributions of at least
(i) $ (the annualized minimum quarterly distribution) on each of the outstanding common units and subordinated units for each of three consecutive, non-overlapping four quarter periods ending
on or after or (ii) $ (150% of the annualized minimum quarterly distribution) on
each of the outstanding common units and subordinated units and the distributions on the incentive distribution rights for any four-quarter period ending on or after September 30, 2017, in each case provided there are no arrearages in payment
of the minimum quarterly distributions on our common units at that time.
|
|
|
When the subordination period ends, each outstanding subordinated unit will convert into one common unit, and common units will no longer be entitled to arrearages.
Please read “Provisions of Our Partnership Agreement Relating to Cash Distributions—Subordinated Units and Subordination Period.”
|
|
Issuance of additional partnership interests
|
Our partnership agreement authorizes us to issue an unlimited number of additional partnership interests and options, rights, warrants and appreciation rights relating to the partnership
interests for any partnership purpose at any time and from time to time to such persons for such consideration and on such terms and conditions as our general partner shall determine in its sole discretion, all without the approval of any limited
partners. Our unitholders will not have preemptive or participation rights to purchase their pro rata share of
|
21
|
|
any additional units issued. Please read “Units Eligible for Future Sale” and “Our Partnership Agreement—Issuance of Additional Partnership Interests.”
|
|
Limited voting rights
|
Our general partner will manage and operate us. Unlike the holders of common stock in a corporation, our unitholders will have only limited voting rights on matters affecting our business. Our
unitholders will have no right to elect our general partner or its directors on an annual or other continuing basis. Our general partner may not be removed unless such removal is both (i) for cause and (ii) approved by a vote of the holders of at
least 66 2/3% of the outstanding units, including any units owned by our general partner and its affiliates, voting together as a single class. Following the completion of this offering, Noble will own % of our total
outstanding units on an aggregate basis (or % of our total outstanding units on an aggregate basis if the underwriters exercise in full their option to purchase additional common units). As a result, our public
unitholders initially will not have the ability to remove our general partner. Please read “Our Partnership Agreement—Voting Rights.”
|
|
Limited call right
|
If at any time our general partner and its affiliates own more than 80% of the outstanding common units, our general partner has the right, but not the obligation, to purchase all of the
remaining common units at a price equal to the greater of (i) the average of the daily closing price of our common units over the 20 trading days preceding the date that is three business days before notice of exercise of the call right is first
mailed and (ii) the highest per-unit price paid by our general partner or any of its affiliates for common units during the 90-day period preceding the date such notice is first mailed. Following the completion of this offering and assuming the
underwriters’ option to purchase additional common units from us is not exercised, our general partner and its affiliates will own approximately % of our common units (excluding any common units purchased by the
directors, director nominee and executive officers of our general partner and certain other individuals as selected by general partner under our directed unit program). At the end of the subordination period (which could occur as early as the
quarter ending ), assuming no additional issuances of common units by us (other
than upon the conversion of the subordinated units) and the underwriters’ option to purchase additional common units from us is not exercised, our general partner and its affiliates will own % of our outstanding common
units (excluding any common units purchased by the directors, director nominee and executive officers of our general partner, and certain other individuals as selected by our general partner under our directed unit program) and therefore would not
be able to exercise the call right at that time. Please read “Our Partnership Agreement—Limited Call Right.”
|
22
|
Possible redemption of ineligible holders
|
As a result of certain laws and regulations to which we are or may in the future become subject, we may require owners of our common units to certify that they are both U.S. citizens and subject
to U.S. federal income taxation on our income. Units held by persons who our general partner determines are not “eligible holders” at the time of any requested certification in the future may be subject to redemption. “Eligible
holders” are limited partners whose (or whose owners’) (i) U.S. federal income tax status or lack of proof of U.S. federal income tax status does not have and is not reasonably likely to have, as determined by our general partner, a
material adverse effect on the rates that can be charged to customers by us or our subsidiaries with respect to assets that are subject to regulation by the Federal Energy Regulatory Commission or similar regulatory body and (ii) nationality,
citizenship or other related status does not create and is not reasonably likely to create, as determined by our general partner, a substantial risk of cancellation or forfeiture of any property in which we have an interest.
|
|
|
The aggregate redemption price for redeemable interests will be an amount equal to the current market price (the date of determination of which will be the date fixed
for redemption) of limited partner interests of the class to be so redeemed multiplied by the number of limited partner interests of each such class included among the redeemable interests. For these purposes, the “current market price”
means, as of any date for any class of limited partner interests, the average of the daily closing prices per limited partner interest of such class for the 20 consecutive trading days immediately prior to such date. The redemption price will be
paid in cash or by delivery of a promissory note, as determined by our general partner. The units held by any person the general partner determines is not an eligible holder will not be entitled to voting rights.
|
|
|
Please read “Our Partnership Agreement—Possible Redemption of Ineligible Holders.”
|
|
Estimated ratio of taxable income to distributions
|
We estimate that if you own the common units you purchase in this offering through the record date for distributions for the period ending
, you will be allocated, on a cumulative basis, an amount of federal taxable income for that period that will be 20% or less of
the cash distributed to you with respect to that period. For example, if you receive an annual distribution of $ per unit, we estimate that your average allocable federal taxable income per year will
be no more than approximately $ per unit. Thereafter, the ratio of allocable taxable income to cash distributions to you could substantially increase. Please read “Material Federal Income Tax
Consequences—Tax Consequences of Unit Ownership—Ratio of Taxable Income to Distributions.”
|
23
|
Material federal income tax consequences
|
For a discussion of the material federal income tax consequences that may be relevant to prospective unitholders who are individual citizens or residents of the United States, please read
“Material Federal Income Tax Consequences.”
|
|
Directed unit program
|
At our request, the underwriters have reserved for sale, at the initial public offering price, up to % of the common units being offered by this prospectus for sale to
the directors, director nominee and executive officers of our general partner and certain other individuals as selected by our general partner. We do not know if these persons will choose to purchase all or any portion of these reserved common
units, but any purchases they do make will reduce the number of common units available to the general public. Please read “Underwriting—Directed Unit Program.”
|
|
Exchange listing
|
Our common units have been approved for listing on the NYSE under the symbol “NBLX.”
|
24
Summary Historical and Pro Forma Financial Data
The following table presents summary historical financial data of Noble Midstream Partners LP Predecessor, our predecessor for accounting
purposes, or our Predecessor, and summary unaudited pro forma financial data of Noble Midstream Partners LP for the periods and as of the dates indicated. The following summary historical financial data of our Predecessor consists of all of the
assets and operations of our Predecessor on a 100% basis. In connection with the completion of this offering, Noble will contribute to us the percentages of the midstream systems described under “Certain Relationships and Related Party
Transactions—Agreements with our Affiliates in Connection with the Transactions—Contribution Agreement.” However, as required by U.S. generally accepted accounting principles, or GAAP, we will continue to consolidate 100% of the
assets and operations of our development companies in our financial statements.
The summary historical financial data of
our Predecessor as of and for the year ended December 31, 2015 and as of March 31, 2016 and for the three months ended March 31, 2016 are derived from the audited and unaudited financial statements of our Predecessor appearing
elsewhere in this prospectus. The following table should be read together with, and is qualified in its entirety by reference to, the historical audited and unaudited interim and pro forma financial statements and the accompanying notes included
elsewhere in this prospectus. The table should also be read together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
The summary unaudited pro forma financial data presented in the following table for the year ended December 31, 2015 and the three
months ended March 31, 2016 are derived from the unaudited pro forma condensed combined financial statements included elsewhere in this prospectus. The unaudited pro forma condensed combined balance sheet assumes the offering and the related
transactions occurred as of March 31, 2016, and the unaudited pro forma condensed combined statements of operations for the year ended December 31, 2015 and the three months ended March 31, 2016 assume the offering and the related
transactions occurred as of January 1, 2015. These transactions include, and the unaudited pro forma condensed combined financial statements give effect to, the following:
|
|
•
|
|
Our ownership of the percentages of the development companies that operate our assets as described under “Certain Relationships and Related Party
Transactions—Agreements with our Affiliates in Connection with the Transactions—Contribution Agreement;”
|
|
|
•
|
|
our long-term, fixed-fee commercial agreements with Noble;
|
|
|
•
|
|
our entry into a new $ million revolving credit facility;
|
|
|
•
|
|
our entry into an operational services and secondment agreement and omnibus agreement with Noble;
|
|
|
•
|
|
the consummation of this offering and our issuance of (i) common units to the
public, (ii) a non-economic general partner interest to our general partner and (iii) common units,
subordinated units and all our incentive distribution rights to Noble; and
|
|
|
•
|
|
the application of the net proceeds of this offering as described in “Use of Proceeds.”
|
25
The unaudited pro forma condensed combined financial statements do not give effect to
(i) an estimated $6.7 million in incremental general and administrative expenses that we expect to incur annually as a result of being a publicly traded partnership, (ii) variable general and administrative costs we will incur under the
operational services and secondment agreement that we will enter into with Noble as of the closing of this offering or (iii) reimbursable costs that will be due to Noble under the omnibus agreement to be entered into with Noble as of the
closing of this offering.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noble Midstream Partners
LP Predecessor
Historical
|
|
|
Noble Midstream Partners
LP Pro Forma
|
|
|
|
|
Year Ended
December 31,
|
|
|
Three
Months Ended
March 31,
|
|
|
Year Ended
December 31,
2015
|
|
|
Three
Months Ended
March 31,
2016
|
|
|
|
|
2015
|
|
|
2014
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
|
|
(in thousands, except per unit data)
|
|
|
Statement of Operations Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Midstream Services—Related Party
|
|
$
|
87,837
|
|
|
$
|
2,086
|
|
|
$
|
32,123
|
|
|
$
|
12,852
|
|
|
$
|
108,467
|
|
|
$
|
32,123
|
|
|
Income from Investments
|
|
|
4,621
|
|
|
|
3,798
|
|
|
|
1,293
|
|
|
|
1,236
|
|
|
|
4,621
|
|
|
|
1,293
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenues
|
|
|
92,458
|
|
|
|
5,884
|
|
|
|
33,416
|
|
|
|
14,088
|
|
|
|
113,088
|
|
|
|
33,416
|
|
|
Costs and Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct Operating
|
|
|
16,933
|
|
|
|
8,538
|
|
|
|
5,888
|
|
|
|
2,670
|
|
|
|
27,449
|
|
|
|
5,888
|
|
|
Depreciation, Depletion and Amortization
|
|
|
6,891
|
|
|
|
11,315
|
|
|
|
2,144
|
|
|
|
1,345
|
|
|
|
6,891
|
|
|
|
2,144
|
|
|
General and Administrative
|
|
|
2,771
|
|
|
|
6,734
|
|
|
|
2,654
|
|
|
|
545
|
|
|
|
9,621
|
|
|
|
2,654
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating Expense
|
|
|
26,595
|
|
|
|
26,587
|
|
|
|
10,686
|
|
|
|
4,560
|
|
|
|
43,961
|
|
|
|
10,686
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income (Loss)
|
|
|
65,863
|
|
|
|
(20,703
|
)
|
|
|
22,730
|
|
|
|
9,528
|
|
|
|
69,127
|
|
|
|
22,730
|
|
|
Other Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Expense, Net of Amount Capitalized
|
|
|
4,595
|
|
|
|
3,566
|
|
|
|
910
|
|
|
|
515
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other Expense
|
|
|
4,595
|
|
|
|
3,566
|
|
|
|
910
|
|
|
|
515
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) Before Income Taxes
|
|
|
61,268
|
|
|
|
(24,269
|
)
|
|
|
21,820
|
|
|
|
9,013
|
|
|
|
69,127
|
|
|
|
22,730
|
|
|
Income Tax Provision (Benefit)
|
|
|
23,226
|
|
|
|
(9,178
|
)
|
|
|
8,310
|
|
|
|
3,409
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) including non-controlling interests
|
|
$
|
38,042
|
|
|
$
|
(15,091
|
)
|
|
$
|
13,510
|
|
|
$
|
5,604
|
|
|
$
|
69,127
|
|
|
$
|
22,730
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to non-controlling interests
(1)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
18,101
|
|
|
|
4,973
|
|
|
Net income attributable to Noble Midstream Partners LP
|
|
$
|
38,042
|
|
|
$
|
(15,091
|
)
|
|
$
|
13,510
|
|
|
$
|
5,604
|
|
|
$
|
51,026
|
|
|
$
|
17,757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per limited partner unit (basic and diluted):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common units
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subordinated units
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data (at period end):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Property, Plant and Equipment, Net
|
|
$
|
250,933
|
|
|
$
|
195,513
|
|
|
$
|
254,452
|
|
|
|
|
|
|
|
|
|
|
$
|
254,452
|
|
|
Total Assets
|
|
|
305,318
|
|
|
|
216,512
|
|
|
|
300,399
|
|
|
|
|
|
|
|
|
|
|
|
300,399
|
|
|
Net Parent Investment/Partners’ Capital
|
|
|
263,539
|
|
|
|
213,673
|
|
|
|
255,866
|
|
|
|
|
|
|
|
|
|
|
|
277,316
|
|
|
Statement of Cash Flows Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by (Used in) Operating Activities
|
|
$
|
69,394
|
|
|
$
|
(12,534
|
)
|
|
$
|
14,599
|
|
|
$
|
8,292
|
|
|
|
|
|
|
|
|
|
|
Net Cash Used in Investing Activities
|
|
|
(54,461
|
)
|
|
|
(79,904
|
)
|
|
|
(11,661
|
)
|
|
|
(19,884
|
)
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by Financing Activities
|
|
|
11,679
|
|
|
|
92,438
|
|
|
|
(21,257
|
)
|
|
|
21,522
|
|
|
|
|
|
|
|
|
|
|
Other Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
expenditures
(2)
|
|
$
|
53,259
|
|
|
$
|
80,466
|
|
|
|
11,906
|
|
|
|
19,371
|
|
|
|
|
|
|
|
|
|
|
EBITDA
(3)
|
|
|
72,754
|
|
|
|
(9,388
|
)
|
|
|
24,874
|
|
|
|
10,873
|
|
|
$
|
76,018
|
|
|
$
|
24,874
|
|
|
EBITDA attributable to Noble Midstream Partners LP
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56,180
|
|
|
|
19,381
|
|
|
(1)
|
Represents 20%, 75%, 0%, 95%, 75% and 75% non-controlling interests in the development companies that hold our operating assets that have been
retained by Noble as described under “Certain Relationships and Related Party Transactions—Agreements with our Affiliates in Connection with the Transactions—Contribution Agreement.”
|
|
(2)
|
Represents additions to property, plant and equipment within the combined statement of cash flows.
|
|
(3)
|
For our definition of the non-GAAP financial measure of EBITDA and a reconciliation of EBITDA to our most directly comparable financial measures calculated and
presented in accordance with GAAP, please read “Selected Historical and Pro Forma Financial Data—Non-GAAP Financial Measure.”
|
26
RISK FACTORS
Limited partner interests are inherently different from the capital stock of a corporation, although many of the business risks to
which we are subject are similar to those that would be faced by a corporation engaged in a similar business. You should carefully consider the following risk factors together with all of the other information included in this prospectus, including
the matters addressed under “Forward-Looking Statements,” in evaluating an investment in our common units.
If any of the following risks were to occur, our business, financial condition, results of operations, cash flows and ability to make
cash distributions could be materially adversely affected. In that case, we may not be able to pay the minimum quarterly distribution on our common units, the trading price of our common units could decline and you could lose all or part of your
investment.
Risks Related to Our Business
We derive substantially all of our revenue from Noble. If Noble changes its business strategy, alters its current drilling and
development plan on our dedicated acreage, or otherwise significantly reduces the volumes of crude oil, natural gas, saltwater or fresh water with respect to which we perform midstream services, our revenue would decline and our business, financial
condition, results of operations, cash flows and ability to make distributions to our unitholders would be materially and adversely affected.
Substantially all of our commercial agreements are with Noble or its affiliates. Accordingly, because we expect to initially derive substantially all of our revenue from our commercial agreements with
Noble, we are subject to the operational and business risks of Noble, the most significant of which include the following:
|
|
•
|
|
a reduction in or slowing of Noble’s drilling and development plan on our dedicated acreage, which would directly and adversely impact demand for
our midstream services;
|
|
|
•
|
|
the volatility of crude oil, natural gas and NGL prices, which could have a negative effect on Noble’s drilling and development plan on our
dedicated acreage or Noble’s ability to finance its operations and drilling and completion costs on our dedicated acreage;
|
|
|
•
|
|
the availability of capital on an economic basis to fund Noble’s exploration and development activities;
|
|
|
•
|
|
drilling and operating risks, including potential environmental liabilities, associated with Noble’s operations on our dedicated acreage;
|
|
|
•
|
|
downstream processing and transportation capacity constraints and interruptions, including the failure of Noble to have sufficient contracted
processing or transportation capacity; and
|
|
|
•
|
|
adverse effects of increased or changed governmental and environmental regulation or enforcement of existing regulation.
|
In addition, we are indirectly subject to the business risks of Noble generally and other factors, including, among others:
|
|
•
|
|
Noble’s financial condition, credit ratings, leverage, market reputation, liquidity and cash flows;
|
|
|
•
|
|
Noble’s ability to maintain or replace its reserves;
|
|
|
•
|
|
adverse effects of governmental and environmental regulation on Noble’s upstream operations; and
|
|
|
•
|
|
losses from pending or future litigation.
|
Further, we have no control over Noble’s business decisions and operations, and Noble is under no obligation to adopt a business strategy that is favorable to us. Thus, we are subject to the risk of
cancellation of planned development, breach of commitments with respect to future dedications; and other non-payment or non-performance by Noble, including with respect to our commercial agreements, which do not contain minimum
27
volume commitments. For example, the number of drilling rigs that Noble is operating in the DJ Basin decreased from nine rigs in the fourth quarter of 2014 to three rigs in the fourth quarter of
2015 to two rigs in the first quarter of 2016. A further decrease in the number of drilling rigs that Noble operates on our dedicated acreage could result in lower throughput on our midstream infrastructure. Furthermore, we cannot predict the extent
to which Noble’s businesses would be impacted if conditions in the energy industry were to deteriorate nor can we estimate the impact such conditions would have on Noble’s ability to execute its drilling and development plan on our
dedicated acreage or to perform under our commercial agreements. Any material non-payment or non-performance by Noble under our commercial agreements would have a significant adverse impact on our business, financial condition, results of operations
and cash flows and could therefore materially adversely affect our ability to make cash distributions to our unitholders at the minimum quarterly distribution rate or at all. Our long-term commercial agreements with Noble carry initial terms ending
in either 2030 or 2032, and there is no guarantee that we will be able to renew or replace these agreements on equal or better terms, or at all, upon their expiration. Our ability to renew or replace our commercial agreements following their
expiration at rates sufficient to maintain our current revenues and cash flows could be adversely affected by activities beyond our control, including the activities of our competitors and Noble.
In addition to our commercial agreements with Noble, we expect to begin developing infrastructure for crude oil and water related
services for an unaffiliated, non-investment grade third party customer, with expected services to commence in 2017. We may engage in significant business with this or other new third party customers or enter into material commercial contracts with
customers for which we do not have material commercial arrangements or commitments today and who may not have investment grade credit ratings. To the extent we derive substantial income from or commit to capital projects to service new or existing
customers, each of the risks indicated above would apply to such arrangements and customers.
In the event any customer,
including Noble, elects to sell acreage that is dedicated to us to a third party, the third party’s financial condition could be materially worse than the customer with whom we have contracted, and thus we could be subject to the nonpayment or
nonperformance by the third party.
In the event a customer, including Noble, elects to
sell acreage that is dedicated to us to a third party, the third party’s financial condition could be materially worse than the original contracting customer. In such a case, we may be subject to risks of loss resulting from nonpayment or
nonperformance by the third party, which risks may increase during periods of economic uncertainty. Furthermore, the third party may be subject to their own operating and regulatory risks, which increases the risk that they may default on their
obligations to us. Any material nonpayment or nonperformance by the third party could reduce our ability to make distributions to our unitholders.
Contracts with customers, including Noble, are subject to additional risk in the event of a bankruptcy proceeding.
To the extent any of our customers is in financial distress or commences bankruptcy proceedings, our contracts with them, including provisions relating to dedications of production, may be subject to
renegotiation or rejection under applicable provisions of the United States Bankruptcy Code. If a contract with a customer is altered or rejected in bankruptcy proceedings, we could lose some or all of the expected revenues associated with that
contract, which could cause the market price of our common units to decline.
On a pro forma basis, we would not
have generated sufficient distributable cash flow to make the payment of the aggregate annualized minimum quarterly distribution on all of our units for the year ended December 31, 2015 or the twelve months ended March 31, 2016.
We must generate approximately $ million of distributable cash
flow to make the payment of the minimum quarterly distribution for four quarters on all of our common units and subordinated units that will be outstanding immediately following this offering. The amount of pro forma distributable cash flow
generated during
28
each of the year ended December 31, 2015 and the twelve months ended March 31, 2016 would not have been sufficient to pay the full minimum quarterly distribution on our common units and
subordinated units during those periods. Specifically, while the amount of pro forma distributable cash flow generated during the year ended December 31, 2015 would have been sufficient to pay the full minimum quarterly distribution on the
common units, it would only have been sufficient to make a distribution of approximately $ per subordinated unit per quarter (approximately $ per
subordinated unit on an annualized basis), or approximately % of the minimum quarterly distribution. While the amount of pro forma distributable cash flow generated during the twelve months ended March 31, 2016 would
have been sufficient to pay the full minimum quarterly distribution on the common units, it would have only been sufficient to make a distribution of approximately $ per subordinated unit per quarter
(approximately $ per subordinated unit on an annualized basis), or approximately % of the minimum quarterly distribution. For a calculation of our ability to make cash
distributions to our unitholders based on our pro forma results for the year ended December 31, 2015 and the twelve months ended March 31, 2016, please read “Cash Distribution Policy and Restrictions on Distributions.” If we are
unable to generate sufficient distributable cash flow in future periods, we may not be able to make the payment of the full minimum quarterly distribution or any amount on our common units or subordinated units, in which event the market price of
our common units may decline materially.
We may not generate sufficient distributable cash flow to make the payment of
the minimum quarterly distribution to our unitholders.
In order to make the payment of the minimum quarterly
distribution of $ per unit per quarter, or $ per unit on an annualized basis, we must generate distributable cash flow of approximately
$ million per quarter, or approximately $ million per year, based on the number of common units and subordinated units to be outstanding
immediately after the completion of this offering. We may not generate sufficient distributable cash flow to make the payment of the minimum quarterly distribution to our unitholders. We currently expect to fund a portion of the quarterly
distribution that we expect to make to our unitholders in the quarter of 2016 with excess distributable cash flow generated in
the quarters of 2016 and potentially with borrowings under our revolving credit facility.
The amount of cash we can distribute on our units principally depends upon the amount of cash we generate from our operations, which will
fluctuate from quarter to quarter based on, among other things:
|
|
•
|
|
the volumes of natural gas we gather, the volumes of crude oil we gather, the volumes of saltwater we collect, clean or dispose of and the volumes of
fresh water we distribute and store and the number of wells that have access to our crude oil treating facilities;
|
|
|
•
|
|
market prices of crude oil, natural gas and NGLs and their effect on our customers’ drilling and development plan on our dedicated acreage and the
volumes of hydrocarbons that are produced on our dedicated acreage and for which we provide midstream services;
|
|
|
•
|
|
our customers’ ability to fund its drilling and development plan on our dedicated acreage;
|
|
|
•
|
|
downstream processing and transportation capacity constraints and interruptions, including the failure of our customers to have sufficient contracted
processing or transportation capacity;
|
|
|
•
|
|
the levels of our operating expenses, maintenance expenses and general and administrative expenses;
|
|
|
•
|
|
regulatory action affecting: (i) the supply of, or demand for, crude oil, natural gas, NGLs and water, (ii) the rates we can charge for our
midstream services, (iii) the terms upon which we are able to contract to provide our midstream services, (iv) our existing gathering and other commercial agreements or (v) our operating costs or our operating flexibility;
|
|
|
•
|
|
the rates we charge third parties, if any, for our midstream services;
|
|
|
•
|
|
prevailing economic conditions; and
|
|
|
•
|
|
adverse weather conditions.
|
29
In addition, the actual amount of distributable cash flow that we generate will also depend
on other factors, some of which are beyond our control, including:
|
|
•
|
|
the level and timing of our capital expenditures;
|
|
|
•
|
|
our debt service requirements and other liabilities;
|
|
|
•
|
|
our ability to borrow under our debt agreements to fund our capital expenditures and operating expenditures and to pay distributions;
|
|
|
•
|
|
fluctuations in our working capital needs;
|
|
|
•
|
|
restrictions on distributions contained in any of our debt agreements;
|
|
|
•
|
|
the cost of acquisitions, if any;
|
|
|
•
|
|
the fees and expenses of our general partner and its affiliates (including Noble) that we are required to reimburse;
|
|
|
•
|
|
the amount of cash reserves established by our general partner; and
|
|
|
•
|
|
other business risks affecting our cash levels.
|
The assumptions underlying the forecast of distributable cash flow that we include in “Cash Distribution Policy and Restrictions on Distributions” are inherently uncertain and subject to
significant business, economic, financial, regulatory and competitive risks that could cause our actual distributable cash flow to differ materially from our forecast.
The forecast of distributable cash flow set forth in “Cash Distribution Policy and Restrictions on Distributions” includes our
forecast of our results of operations and distributable cash flow for the twelve months ending September 30, 2017. Our ability to pay the full minimum quarterly distribution in the forecast period is based on a number of assumptions that may
not prove to be correct and that are discussed in “Cash Distribution Policy and Restrictions on Distributions.” Our financial forecast has been prepared by management, and we have neither received nor requested an opinion or report on it
from our or any other independent auditor.
The forecast of our expenses and revenues include estimates of expenses to
be incurred and revenues to be received attributable to providing services to our customers that will require us to build out our infrastructure assets, and a failure to timely construct and develop these assets may result in expenses or revenues
that differ materially from our forecast.
The forecast of our expenses and revenues include estimates of expenses to
be incurred and revenues to be received. In order to realize any potential revenues from an expansion into new areas or the addition of new customers, we will need to construct new pipelines and facilities in an area where we do not currently have
existing facilities or acquire such pipelines and facilities from competitors. The construction of new facilities may require us to obtain new rights-of-way, surface use agreements or other real estate agreements prior to constructing new pipelines
or facilities. Additionally, we may be unable to timely obtain such rights-of-way to connect new crude oil, natural gas and water sources to our existing infrastructure. Any delay in construction or increased cost resulting from the addition to our
assets could result in increased expenses, decreased revenues and, in certain cases, a termination of the dedication impacting the affected acreage.
30
The demand for our midstream services, and therefore our cash flow, is affected by
crude oil and natural gas prices, which fluctuate based on factors that are out of our control.
The level and pace
of our customers’ exploration and production activity is, in part, driven by commodity prices for crude oil and natural gas. Because our customers’ demand for our midstream services is tied to their production levels, we are also
indirectly exposed to commodity price risk. Beginning in the fourth quarter of 2014, crude oil and natural gas prices significantly declined and remained low through the end of 2015. High and low daily average prices for monthly contracts for crude
oil and high and low contract expirations prices for natural gas during the year ended December 31, 2015 and the six months ended June 30, 2016 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Settlement
Price for Prompt
Month Contracts
|
|
|
|
|
High
|
|
|
Low
|
|
|
Year Ended December 31, 2015
|
|
|
|
|
|
|
|
|
|
NYMEX
|
|
|
|
|
|
|
|
|
|
Crude Oil—WTI (Per Bbl)
|
|
$
|
59.83
|
|
|
$
|
37.33
|
|
|
Natural Gas—Henry Hub (Per MMBtu)
|
|
|
3.19
|
|
|
|
2.03
|
|
|
|
|
|
|
Six Months Ended June 30, 2016
|
|
|
|
|
|
|
|
|
|
NYMEX
|
|
|
|
|
|
|
|
|
|
Crude Oil—WTI (Per Bbl)
|
|
$
|
48.85
|
|
|
$
|
30.62
|
|
|
Natural Gas—Henry Hub (Per MMBtu)
|
|
|
2.37
|
|
|
|
1.71
|
|
A reduction in rig count, combined with reduction of cash flow resulting from lower commodity
prices, a reduction in our customers available capital and lack of availability of debt or equity financing could result in a significant reduction of our customers’ spending for crude oil and natural gas drilling and development activity,
which could result in a lower utilization rate of our midstream systems. If we are not able to obtain new supplies of crude oil and natural gas to replace the declines resulting from reductions in drilling and development activity, the utilization
rates of our midstream assets will decline, which could have a material adverse effect on our business, results of operations, financial position and cash flows and our ability to make cash distributions.
Because of the natural decline in production from existing wells, our success, in part, depends on our ability to maintain or
increase hydrocarbon throughput volumes on our midstream systems, which depends on our customers’ levels of development and completion activity on our dedicated acreage.
The level of crude oil and natural gas volumes handled by our midstream systems depends on the level of production from crude oil and
natural gas wells dedicated to our midstream systems, which may be less than expected and which will naturally decline over time. In order to maintain or increase throughput levels on our midstream systems, we must obtain production from wells
completed by Noble and any third party customers on acreage dedicated to our midstream systems or execute agreements with other third parties in our areas of operation.
We have no control over Noble’s or other producers’ levels of development and completion activity in our areas of operation, the amount of reserves associated with wells connected to our systems
or the rate at which production from a well declines. In addition, we have no control over Noble or other producers or their exploration and development decisions, which may be affected by, among other things:
|
|
•
|
|
the availability and cost of capital;
|
|
|
•
|
|
prevailing and projected crude oil, natural gas and NGL prices;
|
|
|
•
|
|
demand for crude oil, natural gas and NGLs;
|
|
|
•
|
|
geologic considerations;
|
31
|
|
•
|
|
changes in the strategic importance our customers assign to development in the DJ Basin or the Delaware Basin as opposed to its other operations, which
could adversely affect the financial and operational resources our customers are willing to devote to development of our dedicated acreage;
|
|
|
•
|
|
increased levels of taxation related to the exploration and production of crude oil, natural gas and NGLs in our areas of operation;
|
|
|
•
|
|
environmental or other governmental regulations, including the availability of permits, the regulation of hydraulic fracturing and a governmental
determination that multiple facilities are to be treated as a single source for air permitting purposes; and
|
|
|
•
|
|
the costs of producing crude oil, natural gas and NGLs and the availability and costs of drilling rigs and other equipment.
|
Due to these and other factors, even if reserves are known to exist in areas served by our midstream
assets, producers, including Noble, may choose not to develop those reserves. If producers choose not to develop their reserves, or they choose to slow their development rate, in our areas of operation, utilization of our midstream systems will be
below anticipated levels. Our inability to provide increased services resulting from reductions in development activity, coupled with the natural decline in production from our current dedicated acreage, would result in our inability to maintain the
then-current levels of utilization of our midstream assets, which could materially adversely affect our business, financial condition, results of operations, cash flows and ability to make cash distributions.
If Noble does not maintain its drilling activities on our dedicated acreage, the demand for our fresh water services could be
reduced, which could have a material adverse effect on our results of operations, cash flows and ability to make distributions to our unitholders.
The fresh water services we provide to Noble assist in Noble’s drilling activities. If Noble does not maintain its drilling activities on our dedicated acreage, its demand for our fresh water
services will be reduced regardless of whether we continue to provide our other midstream services on Noble’s production. If the demand for our fresh water services declines for this or any other reason, our results of operations, cash flows
and ability to make distributions to our unitholders could be materially adversely affected. As we begin to provide fresh water services to a third party, which are expected to commence in 2017, the same risks will pertain to such third party.
Substantially all of our assets are controlling ownership interests in our development companies. Because our
interests in our development companies represent almost all of our cash-generating assets, our cash flow will depend entirely on the performance of our development companies and their ability to distribute cash to us.
We have a holding company structure, and the primary source of our earnings and cash flow consists exclusively of the earnings of and cash
distributions from our development companies. Therefore, our ability to make quarterly distributions to our unitholders will be almost entirely dependent upon the performance of our development companies and their ability to distribute funds to us.
We are the sole member of the general partner of each of our development companies, and we control and manage our development companies through our ownership of our development companies’ respective general partners.
The limited partnership agreement governing each development company requires that the general partner of such development company cause
such development company to distribute all of its available cash each quarter, less the amounts of cash reserves that such general partner determines are necessary or appropriate in its reasonable discretion to provide for the proper conduct of such
development company’s business.
The amount of cash each development company generates from its operations will fluctuate
from quarter to quarter based on events and circumstances and the actual amount of cash each development company will have available for distribution to its partners, including us, also will depend on certain factors. For a description of the
32
events, circumstances and factors that may affect the cash distributions from our development companies please read “—We may not generate sufficient distributable cash flow to make the
payment of the minimum quarterly distribution to our unitholders.”
Our midstream assets are currently exclusively
located in the DJ Basin in Colorado, making us vulnerable to risks associated with operating in a single geographic area.
Our midstream assets are currently located exclusively in the DJ Basin in Colorado. As a result of this concentration, we will be disproportionately exposed to the impact of regional supply and demand
factors, delays or interruptions of production from wells in this area caused by governmental regulation, market limitations, water shortages, drought related conditions or other weather-related conditions or interruption of the processing or
transportation of crude oil and natural gas. If any of these factors were to impact the DJ Basin more than other producing regions, our business, financial condition, results of operations and ability to make cash distributions could be adversely
affected relative to other midstream companies that have a more geographically diversified asset portfolio.
Certain
proposed ballot measures considered in Colorado seek to vastly expand the right of local governments to regulate, dictate location parameters of future crude oil and natural gas exploration and development activities, and/or limit or prohibit crude
oil and natural gas production and development activities in their jurisdictions. If these measures are approved and implemented, they could have material adverse effects on our operations in Colorado and the value of our DJ Basin assets and
development activities.
Certain interest groups in Colorado opposed to crude oil and natural gas development
generally, and hydraulic fracturing in particular, have advanced various ballot initiatives designed to significantly limit or prevent crude oil and natural gas development. Recently, the state of Colorado approved for signature gathering four
ballot measures which would adversely impact our Colorado operations. The measures would grant local communities certain additional rights to self-governance, including ability to ban certain businesses from operating in their jurisdictions,
establish a constitutional right to a healthy environment and obligate local governments to protect the environment, grant local governments control over crude oil and gas development and require that all new crude oil and gas facilities be located
2,500 feet from occupied structures and an expansive list of landscape features called “areas of special concern.” All of these measures are available for signature gathering and the proponents have until August 8, 2016 to gather the
requisite number of signatures to qualify for the November 2016 ballot.
If any initiative or legislation of this nature is
implemented and survives legal challenge, significant additional limitations or prohibitions could be placed on crude oil and natural gas production and development within certain areas of Colorado or the state as a whole. This could adversely
affect the cost, manner, and feasibility of development activities in Colorado, particularly those involving hydraulic fracturing, and significantly and adversely affect the value of our assets, impede our growth and trigger a substantial impairment
of these assets.
We cannot predict the rate at which our customers will develop acreage that is dedicated to us or the
areas they will decide to develop.
Our acreage dedication and commitments from Noble cover midstream services in a
number of areas that are at the early stages of development, in areas that Noble is still determining whether to develop, and in areas where we may have to acquire operating assets from third parties. In addition, Noble owns acreage in areas that
are not dedicated to us. We cannot predict which of these areas Noble will determine to develop and at what time. Noble may decide to explore and develop areas in which we have a smaller operating interest in the midstream assets that service that
area, or where the acreage is not dedicated to us, rather than areas in which we have a larger operating interest in the midstream assets that service that area. Noble’s decision to develop acreage that is not dedicated to us or that we have a
smaller operating interest in may adversely affect our business, financial condition, results of operations, cash flows and ability to make cash distributions. Likewise, we have no ability to influence when or where an unaffiliated third party
customer elects to develop acreage that is dedicated to us.
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While we have been granted a right of first refusal to provide
midstream services on certain acreage in the DJ Basin and Eagle Ford Shale that Noble currently owns and on all acreage that Noble acquires onshore in the United States (other than in the Marcellus Shale), portions of this acreage may be subject to
preexisting dedications that may require Noble to use third parties for midstream services.
Although Noble has granted
us a ROFR to provide the midstream services covered by our commercial agreements as well as natural gas processing on all of the dedicated acreage where not all of such services are currently provided, on all of its currently owned acreage in the DJ
Basin that has not yet been dedicated, on certain of its currently owned acreage in the Eagle Ford Shale and on all of its future acquired acreage onshore in the United States (other than in the Marcellus Shale), portions of this acreage may be
subject to preexisting dedications, rights of first refusal, rights of first offer and other preexisting encumbrances that require Noble to use third parties for midstream services, and, as a result, Noble may be precluded from offering us the
opportunity to provide these midstream services on this acreage. Because do not have visibility to which acreage Noble may, acquire or divest, and what existing dedications, rights of first refusal, rights of first offer or other overriding rights
may exist on such acreage, we are unable to predict the value, if any, of our ROFR to provide midstream services on Noble’s acreage onshore in the United States.
We may not be able to economically accept an offer from Noble for us to provide services or purchase assets with respect to which we have a right of first refusal.
Noble is required to offer us, prior to contracting for such opportunity with a third party, the opportunity to provide the midstream
services covered by our commercial agreements, which includes crude oil gathering, natural gas gathering, produced water gathering, fresh water services and crude oil treating, as well as services of a type provided at natural gas processing plants
on certain acreage located in the United States that Noble currently owns or in the future acquires or develops. In addition, Noble is required to offer us, prior to contracting for such opportunity with a third party, the ownership interest in any
midstream assets that are located on the acreage for which Noble has granted us a ROFR to provide services. The acreage and assets subject to this ROFR may be located in areas far from our existing infrastructure or may otherwise be undesirable in
the context of our business. In addition, we can make no assurances that the terms at which Noble offers us the opportunity to provide these services or purchase these assets will be acceptable to us. Furthermore, another midstream service provider
or third party may be willing to accept an offer from Noble that we are unwilling to accept. Our inability to take advantage of the opportunities with respect to such acreage or assets could adversely affect our growth strategy or our ability to
maintain or increase our cash distribution level.
We may be unable to grow by acquiring the
non-controlling interests in our development companies owned by Noble or midstream assets retained, acquired or developed by Noble, which could limit our ability to increase our distributable cash flow.
Part of our strategy for growing our business and increasing distributions to our unitholders is dependent upon our ability to make
acquisitions that increase our distributable cash flow. Part of the acquisition component of our growth strategy is based upon our expectation of future divestitures by Noble to us of retained, acquired or developed midstream assets and portions of
its retained, non-controlling interests in our development companies. We have only a ROFO pursuant to our omnibus agreement that requires Noble to allow us to make an offer with respect to Noble’s retained non-controlling interests in our
development companies to the extent Noble elects to sell these interests. In addition, Noble has granted us a ROFR with respect to opportunities to (1) provide services covered by our commercial agreements as well as services of a type provided at
natural gas processing plants on certain acreage located in the United State that Noble currently owns or in the future acquires or develops and (2) purchase ownership interests in any assets currently owned by Noble, or in the future developed
or acquired by Noble, for the purpose of providing the services described in (1); provided, that, such assets are located onshore in the United States and are not used to provide services with respect to production from the Marcellus Shale. Noble is
under no obligation to sell its retained interests in our development companies or offer to sell us additional assets, we are under no obligation to buy any additional interests or assets from Noble and we do not
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know when or if Noble will decide to sell its retained interests in our development companies or make any offers to sell assets to us. We may never purchase all or any portion of the
non-controlling interests in our development companies or any of Noble’s retained, acquired or developed midstream assets onshore in the United States (other than in the Marcellus Shale) for several reasons, including the following:
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Noble may choose not to sell these non-controlling interests or assets;
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we may not accept offers for these assets or make acceptable offers for these equity interests;
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we and Noble may be unable to agree to terms acceptable to both parties;
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we may be unable to obtain financing to purchase these non-controlling interests or assets on acceptable terms or at all; or
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we may be prohibited by the terms of our debt agreements (including our credit facility) or other contracts from purchasing some or all of these
non-controlling interests or assets, and Noble may be prohibited by the terms of its debt agreements or other contracts from selling some or all of these non-controlling interests or assets. If we or Noble must seek waivers of such provisions or
refinance debt governed by such provisions in order to consummate a sale of these non-controlling interests or assets, we or Noble may be unable to do so in a timely manner or at all.
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We do not know when or if Noble will decide to sell all or any portion of its non-controlling interests or will offer us any portion of
its assets, and we can provide no assurance that we will be able to successfully consummate any future acquisition of all or any portion of such non-controlling interests in our development companies or assets. Furthermore, if Noble reduces its
ownership interest in us, it may be less willing to sell to us its retained non-controlling interests in our development companies or its retained assets. In addition, except for our ROFO and ROFR, there are no restrictions on Noble’s ability
to transfer its non-controlling interests in our development companies or its retained assets to a third party or non-controlled affiliate. If we do not acquire all or a significant portion of the non-controlling interests in our development
companies held by Noble or midstream assets from Noble, our ability to grow our business and increase our cash distributions to our unitholders may be significantly limited.
We may not be able to attract dedications of additional third-party volumes, in part because our industry is highly competitive,
which could limit our ability to grow and increase our dependence on Noble.
Part of our long-term growth strategy
includes diversifying our customer base by identifying additional opportunities to offer services to third parties in our areas of operation. To date and over the near term, substantially all of our revenues have been and will be earned from Noble
relating to its operated wells on our dedicated acreage. Our ability to increase throughput on our midstream systems and any related revenue from third parties is subject to numerous factors beyond our control, including competition from third
parties and the extent to which we have available capacity when requested by third parties. Any lack of available capacity on our systems for third-party volumes will detrimentally affect our ability to compete effectively with third-party systems
for crude oil and natural gas from reserves associated with acreage other than our then-current dedicated acreage. In addition, some of our competitors for third-party volumes have greater financial resources and access to larger supplies of crude
oil and natural gas than those available to us, which could allow those competitors to price their services more aggressively than we do.
Our efforts to attract additional third parties as customers may be adversely affected by our relationship with Noble and the fact that a substantial majority of the capacity of our midstream systems will
be necessary to service its production on our dedicated acreage and our desire to provide services pursuant to fee-based agreements. As a result, we may not have the capacity to provide services to additional third parties and/or potential
third-party customers may prefer to obtain services pursuant to other forms of contractual arrangements under which we would be required to assume direct commodity exposure. In addition, potential third-party
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customers who are significant producers of crude oil and natural gas may develop their own midstream systems in lieu of using our systems. All of these competitive pressures could have a material
adverse effect on our business, results of operations, financial condition, cash flows and ability to make cash distributions to our unitholders.
To maintain and grow our business, we will be required to make substantial capital expenditures. If we are unable to obtain needed capital or financing on satisfactory terms, our ability to make
cash distributions may be diminished or our financial leverage could increase.
In order to maintain and grow our
business, we will need to make substantial capital expenditures to fund our share of growth capital expenditures associated with our operating interests in our development companies, to purchase or construct new midstream systems, or to fulfill our
commitments to service acreage committed to us by our customers. If we do not make sufficient or effective capital expenditures, we will be unable to maintain and grow our business and, as a result, we may be unable to maintain or raise the level of
our future cash distributions over the long term. To fund our capital expenditures, we will be required to use cash from our operations, incur debt or sell additional common units or other equity securities. Using cash from our operations will
reduce cash available for distribution to our unitholders. Our ability to obtain bank financing or our ability to access the capital markets for future equity or debt offerings may be limited by our financial condition at the time of any such
financing or offering and the covenants in our existing debt agreements, as well as by general economic conditions, contingencies and uncertainties that are beyond our control. Also, due to our relationship with Noble, our ability to access the
capital markets, or the pricing or other terms of any capital markets transactions, may be adversely affected by any impairment to the financial condition of Noble or adverse changes in Noble’s credit ratings. Any material limitation on our
ability to access capital as a result of such adverse changes to Noble could limit our ability to obtain future financing under favorable terms, or at all, or could result in increased financing costs in the future. Similarly, material adverse
changes affecting Noble could negatively impact our unit price, limiting our ability to raise capital through equity issuances or debt financing, or could negatively affect our ability to engage in, expand or pursue our business activities, or could
also prevent us from engaging in certain transactions that might otherwise be considered beneficial to us. We will also rely on Noble to make its portion of capital expenditures on our assets, and to the extent that Noble is unable or unwilling to
make these capital expenditures, we may not be able to grow at our expected rate or at all.
Even if we are successful in
obtaining the necessary funds to support our growth plan, the terms of such financings could limit our ability to pay distributions to our unitholders. In addition, incurring additional debt may significantly increase our interest expense and
financial leverage, and issuing additional limited partner interests may result in significant unitholder dilution and would increase the aggregate amount of cash required to maintain the then current distribution rate, which could materially
decrease our ability to pay distributions at the then prevailing distribution rate. While we have historically received funding from Noble, none of Noble, our general partner or any of their respective affiliates is committed to providing any direct
or indirect financial support to fund our growth.
The amount of cash we have available for distribution to our
unitholders depends primarily on our cash flow and not solely on our profitability, which may prevent us from making distributions, even during periods in which we record net income.
The amount of cash we have available for distribution depends primarily upon our cash flow and not solely on our profitability, which will
be affected by non-cash items. As a result, we may make cash distributions during periods when we record a net loss for financial accounting purposes, and conversely, we might fail to make cash distributions during periods when we record net income
for financial accounting purposes.
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Increased competition from other companies that provide midstream services, or from
alternative fuel sources, could have a negative impact on the demand for our services, which could adversely affect our financial results.
Our ability to renew or replace existing contracts at rates sufficient to maintain current revenues and cash flows could be adversely affected by the activities of our competitors. Our systems compete for
third-party customers primarily with other crude oil and natural gas gathering systems and fresh and saltwater service providers. Some of our competitors have greater financial resources and may now, or in the future, have access to greater supplies
of crude oil and natural gas than we do. Some of these competitors may expand or construct gathering systems that would create additional competition for the services we would provide to third-party customers. In addition, potential third-party
customers may develop their own gathering systems instead of using ours. Moreover, Noble and its affiliates are not limited in their ability to compete with us outside of our dedicated area. See “Conflicts of Interest and Duties.”
Further, hydrocarbon fuels compete with other forms of energy available to end-users, including electricity and coal.
Increased demand for such other forms of energy at the expense of hydrocarbons could lead to a reduction in demand for our services.
All of these competitive pressures could make it more difficult for us to retain our existing customers or attract new customers as we seek to expand our business, which could have a material adverse
effect on our business, financial condition, results of operations and ability to make quarterly cash distributions to our unitholders. In addition, competition could intensify the negative impact of factors that decrease demand for natural gas in
the markets served by our systems, such as adverse economic conditions, weather, higher fuel costs and taxes or other governmental or regulatory actions that directly or indirectly increase the cost or limit the use of natural gas.
Our construction of new midstream assets may not result in revenue increases and may be subject to regulatory, environmental,
political, contractual, legal and economic risks, which could adversely affect our cash flows, results of operations and financial condition and, as a result, our ability to distribute cash to unitholders.
The construction of additions or modifications to our existing systems and the expansion into new production areas to service Noble or our
third party customer involve numerous regulatory, environmental, political and legal uncertainties beyond our control, may require the expenditure of significant amounts of capital, and we may not be able to construct in certain locations due to
setback requirements or expand certain facilities that are deemed to be part of a single source. Regulations clarifying when crude oil and natural gas sites should be aggregated for purposes of air permitting were proposed in 2016, and compliance
with such regulations could increase our costs. Financing may not be available on economically acceptable terms or at all. As we build infrastructure to meet our customers’ needs, we may not be able to complete such projects on schedule, at the
budgeted cost or at all.
Our revenues may not increase immediately (or at all) upon the expenditure of funds on a particular
project. For instance, to accommodate development plans of our unaffiliated third party customer, we will begin to make capital expenditures in the second half of 2016, with construction of new infrastructure to meet our obligations under our
commercial agreements continuing through 2017, and we may not receive any material increases in revenues until the project is completed or at all, for any number of reasons including if the development schedule of such customer is not executed as
planned. We may construct facilities to capture anticipated future production growth from Noble or another customer in an area where such growth does not materialize. As a result, new midstream assets may not be able to attract enough throughput to
achieve our expected investment return, which could adversely affect our business, financial condition, results of operations, cash flows and ability to make cash distributions.
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Further, our investments in the Delaware Basin may not result in increased revenue or
such revenue may be delayed if Noble, for any reason, including with our consent, does not terminate the existing dedications to third parties in a timely manner. In addition, in preparation for providing services to Noble in the Delaware Basin to
acreage previously serviced under dedications to third parties or to acreage not yet developed, we will begin making capital investments in the second half of 2016, and we may not succeed in developing sufficient infrastructure to be in a position
to take over the midstream operations required to service this acreage as the existing dedications to third party providers expire. If we fail to complete our capital improvements prior to the expiration of such existing dedications, or fail to
secure required permits, rights of way or other access, Noble may extend the term of its existing dedications to incumbent third party providers to accommodate our delays, or may be released entirely from dedications to us. In these cases, we may
not receive revenues until such extended terms expire or at all. We cannot predict what terms, including length of extension, our customers can secure with other providers or predict whether they would exercise their rights to be released from our
dedications. In these circumstances, we may expend significant capital developing infrastructure for which we do not generate revenue.
The construction of additions to our existing assets may require us to obtain new rights-of-way, surface use agreements or other real estate agreements prior to constructing new pipelines or facilities.
We may be unable to timely obtain such rights-of-way to connect new crude oil, natural gas and water sources to our existing infrastructure or capitalize on other attractive expansion opportunities. Additionally, it may become more expensive for us
to obtain new rights-of-way or to expand or renew existing rights-of-way, leases or other agreements, and our fees may only be increased above the annual year-over-year increase by mutual agreement between us and our customer. If the cost of
renewing or obtaining new agreements increases, our cash flows could be adversely affected.
We are subject to
regulation by multiple governmental agencies, which could adversely impact our business, results of operations and financial condition.
We are subject to regulation by multiple federal, state and local governmental agencies. Proposals and proceedings that affect the midstream industry are regularly considered by Congress, as well as by
state legislatures and federal and state regulatory commissions, agencies and courts. We cannot predict when or whether any such proposals or proceedings may become effective or the magnitude of the impact changes in laws and regulations may have on
our business. However, additions to the regulatory burden on our industry can increase our cost of doing business and affect our profitability.
The rates of our regulated assets are subject to review and reporting by federal regulators, which could adversely affect our revenues.
Currently, only the crude oil gathering system servicing the East Pony IDP transports crude oil in interstate commerce. Pipelines that
transport crude oil in interstate commerce are, among other things, subject to rate regulation by the Federal Energy Regulatory Commission, or the FERC, unless such rate requirements are waived. We applied for and received a waiver of the
FERC’s tariff requirements. This temporary waiver is subject to revocation. We are required to inform the FERC of any change in circumstances upon which the waiver was granted. Should the pipeline’s circumstances change, the FERC could
find that transportation on the East Pony IDP no longer qualifies for a waiver. In the event that the FERC were to determine that the crude oil gathering system servicing the East Pony IDP no longer qualified for the waiver, we would likely be
required to comply with the tariff and reporting requirements, including filing a tariff with the FERC and providing a cost justification for the transportation rates, and providing service to all potential shippers, without undue discrimination. A
revocation of the temporary waiver for this pipeline could adversely affect the results of our revenues.
We may also be
required to respond to requests for information from government agencies, including compliance audits conducted by the FERC.
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Federal and state legislative and regulatory initiatives relating to pipeline safety
that require the use of new or more stringent safety controls or result in more stringent enforcement of applicable legal requirements could subject us to increased capital costs, operational delays and costs of operation.
The Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011, also known as the Pipeline Safety and Job Creations Act, is the
most recent federal legislation to amend the Natural Gas Pipeline Safety Act of 1968, or NGPSA, and the Hazardous Liquids Pipeline Safety Act of 1979, or HLPSA, which are pipeline safety laws, requiring increased safety measures for natural gas and
hazardous liquids pipelines. Among other things, the Pipeline Safety and Job Creations Act directs the Secretary of Transportation to promulgate regulations relating to expanded integrity management requirements, automatic or remote-controlled valve
use, excess flow valve use, leak detection system installation, material strength testing, and verification of the maximum allowable pressure of certain pipelines. The Pipeline Safety and Job Creations Act also increases the maximum penalty for
violation of pipeline safety regulations from $100,000 to $200,000 per violation per day of violation and from $1.0 million to $2.0 million for a related series of violations. In addition, in 2016, the Pipeline and Hazardous Materials Safety
Administration, or PHMSA, announced a proposal to expand integrity management requirements and impose new pressure testing requirements on regulated pipelines. The proposal would also significantly expand the regulation of gathering lines,
subjecting previously unregulated pipelines to requirements regarding damage prevention, corrosion control, public education programs, maximum allowable operating pressure limits, and other requirements. The safety enhancement requirements and other
provisions of the Pipeline Safety and Job Creations Act as well as any implementation of PHMSA, rules thereunder could require us to install new or modified safety controls, pursue additional capital projects, or conduct maintenance programs on an
accelerated basis, any or all of which tasks could result in our incurring increased operating costs that could have a material adverse effect on our results of operations or financial position.
Our ownership interest in White Cliffs LLC could require us to make capital contributions from time to time, which could have a
material adverse effect on our business, financial condition, results of operations, cash flows and ability to make distributions to our unitholders.
We currently own a 3.33% non-operating interest in White Cliffs LLC. Because we do not operate or control White Cliffs LLC, we do not have control over decisions to make maintenance and growth capital
expenditures on the White Cliffs Pipeline. Furthermore, White Cliffs LLC is subject to many of the same environmental and regulatory risks that our assets are subject to, including regulation by the FERC. To the extent that the operator of White
Cliffs LLC decides to make capital expenditures for White Cliffs LLC or White Cliffs LLC becomes subject to regulatory assessments, we could be required to contribute additional capital to White Cliffs LLC, which could have a material adverse effect
on our business, financial condition, results of operations, cash flows and ability to make distributions to our unitholders.
If third-party pipelines or other facilities interconnected to our midstream systems become partially or fully unavailable, or if the volumes we gather or treat do not meet the quality requirements
of such pipelines or facilities, our business, financial condition, results of operations, cash flows and ability to make distributions to our unitholders could be adversely affected.
Our midstream systems are connected to other pipelines or facilities, the majority of which are owned by third parties. The continuing
operation of such third-party pipelines or facilities is not within our control. If any of these pipelines or facilities becomes unable to transport, treat or process natural gas or crude oil, or if the volumes we gather or transport do not meet the
quality requirements of such pipelines or facilities, our business, financial condition, results of operations, cash flows and ability to make distributions to our unitholders could be adversely affected.
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Our exposure to commodity price risk may change over time and we cannot guarantee the
terms of any existing or future agreements for our midstream services with third parties or with Noble.
We currently
generate the majority of our revenues pursuant to fee-based agreements under which we are paid based on volumetric fees, rather than the underlying value of the commodity. Consequently, our existing operations and cash flows have little direct
exposure to commodity price risk. However, Noble is exposed to commodity price risk, and extended reduction in commodity prices could reduce the production volumes available for our midstream services in the future below expected levels. Although we
intend to maintain
fee-based
pricing terms on both new contracts and existing contracts for which prices have not yet been set, our efforts to negotiate such terms may not be successful, which could have a
materially adverse effect on our business.
Restrictions in our new revolving credit facility could adversely affect our
business, financial condition, results of operations and ability to make quarterly cash distributions to our unitholders.
We expect to enter into a new revolving credit facility prior to or in connection with the closing of this offering. We expect our new revolving credit facility will limit our ability to, among other
things:
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make certain investments and acquisitions;
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incur certain liens or permit them to exist;
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enter into certain types of transactions with affiliates;
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merge or consolidate with another company; and
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We expect our new revolving credit facility will also contain covenants requiring us to maintain certain financial ratios.
The provisions of our new revolving credit facility may affect our ability to obtain future financing and to pursue attractive business opportunities and our flexibility in planning for, and reacting to,
changes in business conditions. In addition, a failure to comply with the provisions of our new revolving credit facility could result in a default or an event of default that could enable our lenders to declare the outstanding principal of that
debt, together with accrued and unpaid interest, to be immediately due and payable. If the payment of our debt is accelerated, our assets may be insufficient to repay such debt in full, and our unitholders could experience a partial or total loss of
their investment. Please read “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Capital Resources and Liquidity.”
Increased regulation of hydraulic fracturing could result in reductions or delays in crude oil and natural gas production by our customers, which could reduce the throughput on our gathering and
other midstream systems, which could adversely impact our revenues.
We do not conduct hydraulic fracturing operations,
but substantially all of Noble’s crude oil and natural gas production on our dedicated acreage is developed from unconventional sources that require hydraulic fracturing as part of the completion process. The majority of our fresh water
services business is related to the storage and transportation of water for use in hydraulic fracturing. Hydraulic fracturing is a well stimulation process that utilizes large volumes of water and sand combined with fracturing chemical additives
that are pumped at high pressure to crack open previously impenetrable rock to release hydrocarbons. Hydraulic fracturing is typically regulated by state oil and gas commissions and similar agencies. Some states and local governments, including
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those in which we operate, have adopted, and other states are considering adopting, regulations that could impose more stringent disclosure or well construction requirements on hydraulic
fracturing operations, or otherwise seek to ban some or all of these activities. Recently, however, several federal agencies have asserted jurisdiction over the process. For example, the Environmental Protection Agency, or EPA, has moved forward
with various regulatory actions, including the issuance of new regulations requiring green completions for hydraulically fractured wells, emission requirements for certain midstream equipment, and an Advanced Notice of Proposed Rulemaking seeking
comment on its intent to develop regulations under the Toxic Substances and Control Act to require companies to disclose information regarding the chemicals used in hydraulic fracturing. Also, in June 2016, the EPA finalized rules which prohibit the
discharge of wastewater from hydraulic fracturing operations to publicly owned wastewater treatment plants. Certain environmental groups have also suggested that additional laws may be needed to more closely and uniformly regulate the hydraulic
fracturing process. We cannot predict whether any such legislation will be enacted and if so, what its provisions would be. Additional levels of regulation and permits required through the adoption of new laws and regulations at the federal, state
or local level could lead to delays, increased operating costs and process prohibitions that could reduce the volumes of crude oil and natural gas that move through our gathering systems and decrease demand for our water services, which in turn
could materially adversely impact our revenues.
We, Noble or any third-party customers may incur significant
liability under, or costs and expenditures to comply with, environmental and worker health and safety regulations, which are complex and subject to frequent change.
As an owner and operator of gathering systems, we are subject to various federal, state and local laws and regulations relating to the discharge of materials into, and protection of, the environment and
worker health and safety. Numerous governmental authorities, such as the EPA and analogous state agencies, have the power to enforce compliance with these laws and regulations and the permits issued under them, oftentimes requiring costly response
actions. These laws and regulations may impose numerous obligations that are applicable to our and our customers’ operations, including the acquisition of permits to conduct regulated activities, the incurrence of capital or operating
expenditures to limit or prevent releases of materials from our or our customers’ operations, the imposition of specific standards addressing worker protection, and the imposition of substantial liabilities and remedial obligations for
pollution or contamination resulting from our and our customers’ operations. Failure to comply with these laws, regulations and permits may result in joint and several or strict liability or the assessment of administrative, civil and criminal
penalties, the imposition of remedial obligations, or the issuance of injunctions or administrative orders limiting or preventing some or all of our operations. Private parties, including the owners of the properties through which our gathering
systems pass, may also have the right to pursue legal actions to enforce compliance, as well as to seek damages for non-compliance, with environmental laws and regulations or for personal injury or property damage. We may not be able to recover all
or any of these costs from insurance. In addition, we may experience a delay in obtaining or be unable to obtain required permits, which may cause us to lose potential and current customers, interrupt our operations and limit our growth and
revenues, which in turn could affect the amount of cash we have available for distribution. We cannot provide any assurance that changes in or additions to public policy regarding the protection of the environment and worker health and safety will
not have a significant impact on our operations and the amount of cash we have available for distribution.
Our operations
also pose risks of environmental liability due to leakage, migration, releases or spills to surface or subsurface soils, surface water or groundwater. Certain environmental laws impose strict as well as joint and several liability for costs required
to remediate and restore sites where hazardous substances, hydrocarbons or solid wastes have been stored or released. We may be required to remediate contaminated properties currently or formerly operated by us regardless of whether such
contamination resulted from the conduct of others or from consequences of our own actions that were in compliance with all applicable laws at the time those actions were taken. In addition, claims for damages to persons or property, including
natural resources, may result from the environmental, health and safety impacts of our operations. Moreover, public interest in the protection of the environment has increased dramatically in recent years. The trend of more expansive and stringent
environmental legislation and regulations applied to the crude oil and natural gas
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industry could continue, potentially resulting in increased costs of doing business and consequently affecting the amount of cash we have available for distribution. Please read
“Business—Regulation of Operations.”
Climate change laws and regulations restricting emissions of
greenhouse gases could result in increased operating costs and reduced demand for the crude oil and natural gas that we gather while potential physical effects of climate change could disrupt Noble’s and our other customers’ production and
cause us to incur significant costs in preparing for or responding to those effects.
In response to findings that
emissions of carbon dioxide, methane and other greenhouse gases, or GHGs, present an endangerment to public health and the environment, the EPA has adopted regulations under existing provisions of the federal Clean Air Act, or CAA, that, among other
things, establish Prevention of Significant Deterioration, or PSD, construction and Title V operating permit reviews for certain large stationary sources that emit GHGs. Facilities required to obtain PSD permits for their GHG emissions also will be
required to meet “best available control technology” standards that will be established by the states or, in some cases, by the EPA on a case-by-case basis. These EPA rulemakings could adversely affect our operations and restrict or delay
our ability to obtain air permits for new or modified sources. In addition, the EPA has adopted rules requiring the monitoring and reporting of GHG emissions from specified onshore crude oil and natural gas production sources in the U.S. on an
annual basis.
Climate and related energy policy, laws and regulations could change quickly, and substantial uncertainty
exists about the nature of many potential developments that could impact the sources and uses of energy. In December 2015, the United States and 194 other participating countries adopted the Paris Agreement, which calls for each participating
country to establish their own nationally determined standards for reducing carbon output. The Paris Agreement is intended to succeed the Kyoto Protocol and must be ratified by the 55 countries that produce 55% of the world’s GHGs before it
becomes fully effective. Towards that end, the United States committed to achieve an economy-wide target of reducing its GHG emissions by 26-28% less than the 2005 level in 2025 and to use best efforts to reach a 28% reduction. To obtain those
reductions, the EPA has been proposing and issuing various rules, including a rule issued in May 2016 to control methane air emissions from crude oil and natural gas sources. These regulations could result in increased costs for our operations and
for the operations our customers. Many states also are pursuing climate requirements either directly or indirectly through such measures as alternative fuel mandates. These measures may reduce the future demand for our products, particularly crude
oil. And, in February 2014, Colorado’s Air Quality Control Commission approved comprehensive changes to rules governing crude oil and natural gas activities in the state, including the nation’s first-ever regulations designed to detect and
reduce methane emissions.
Although it is not possible at this time to predict how legislation or new regulations that
may be adopted to address GHG emissions would impact our business, any such future laws and regulations imposing reporting obligations on, or limiting emissions of GHGs from, our equipment and operations could require us to incur costs to reduce
emissions of GHGs associated with our operations. Substantial limitations on GHG emissions could also adversely affect demand for the crude oil and natural gas we gather. Finally, it should be noted that some scientists have concluded that
increasing concentrations of GHGs in the Earth’s atmosphere may produce climate changes that have significant physical effects, such as increased frequency and severity of storms, floods and other climatic events; if any such effects were to
occur, they could have an adverse effect on our operations or our customer’s exploration and production operations, which in turn could affect demand for our services. Please read “Business—Regulation of Operations.”
Certain plant or animal species are or could be designated as endangered or threatened, which could have a material impact on our
and Noble’s operations.
The federal Endangered Species Act, or ESA, restricts activities that may affect
endangered or threatened species or their habitats. Many states have analogous laws designed to protect endangered or threatened species. Such protections, and the designation of previously undesignated species under such laws, may affect our and
Noble’s operations by imposing additional costs, approvals and accompanying delays.
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A change in the jurisdictional characterization of some of our assets by federal,
state or local regulatory agencies or a change in policy by those agencies may result in increased regulation of our assets, which may cause our operating expenses to increase, limit the rates we charge for certain services and decrease the amount
of cash we have available for distribution.
Although the FERC has not made a formal determination with respect to the
facilities we consider to be natural gas gathering pipelines, we believe that our natural gas gathering pipelines meet the traditional tests that the FERC has used to determine that a pipeline is a gathering pipeline and are therefore not subject to
FERC jurisdiction. The distinction between FERC-regulated transmission services and federally unregulated gathering services, however, has been the subject of substantial litigation, and the FERC determines whether facilities are gathering
facilities on a case-by-case basis, so the classification and regulation of our gathering facilities is subject to change based on future determinations by the FERC, the courts or Congress. If the FERC were to consider the status of an individual
facility and determine that the facility or services provided by it are not exempt from FERC regulation under the NGA and that the facility provides interstate service, the rates for, and terms and conditions of, services provided by such facility
would be subject to regulation by the FERC under the NGA or the Natural Gas Policy Act, or NGPA. Such regulation could decrease revenue, increase operating costs, and, depending upon the facility in question, adversely affect our results of
operations and cash flows. In addition, if any of our facilities were found to have provided services or otherwise operated in violation of the NGA or NGPA, this could result in the imposition of substantial civil penalties, as well as a requirement
to disgorge revenues collected for such services in excess of the maximum rates established by the FERC.
Our natural gas
gathering pipelines are exempt from the jurisdiction of the FERC under the NGA, but FERC regulation may indirectly impact gathering services. The FERC’s policies and practices across the range of its crude oil and natural gas regulatory
activities, including, for example, its policies on interstate open access transportation, ratemaking, capacity release, and market center promotion may indirectly affect intrastate markets. In recent years, the FERC has pursued pro-competitive
policies in its regulation of interstate crude oil and natural gas pipelines. However, we cannot assure you that the FERC will continue to pursue this approach as it considers matters such as pipeline rates and rules and policies that may indirectly
affect the natural gas gathering services.
Natural gas gathering may receive greater regulatory scrutiny at the state level;
therefore, our natural gas gathering operations could be adversely affected should they become subject to the application of state regulation of rates and services. Our gathering operations could also be subject to safety and operational regulations
relating to the design, construction, testing, operation, replacement and maintenance of gathering facilities. We cannot predict what effect, if any, such changes might have on our operations, but we could be required to incur additional capital
expenditures and increased costs depending on future legislative and regulatory changes.
In addition, certain of our crude
oil gathering pipelines do not provide interstate services and therefore are not subject to regulation by the FERC pursuant to the ICA. The distinction between FERC-regulated interstate pipeline transportation, on the one hand, and intrastate
pipeline transportation, on the other hand, also is a fact-based determination. The classification and regulation of these crude oil gathering pipelines are subject to change based on future determinations by the FERC, federal courts, Congress or by
regulatory commissions, courts or legislatures in the states in which our crude oil gathering pipelines are located. We cannot provide assurance that the FERC will not in the future, either at the request of other entities or on its own initiative,
determine that some or all of our gathering pipeline systems and the services we provide on those systems are within the FERC’s jurisdiction. If it was determined that more or all of our crude oil gathering pipeline systems are subject to the
FERC’s jurisdiction under the ICA, and are not otherwise exempt from any applicable regulatory requirements, the imposition of possible cost-of-service rates and common carrier requirements on those systems could adversely affect the results of
our operations on those systems.
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Our business involves many hazards and operational risks, some of which may not be
fully covered by insurance. The occurrence of a significant accident or other event that is not fully insured could curtail our operations and have a material adverse effect on our ability to make cash distributions and, accordingly, the market
price for our common units.
Our operations are subject to all of the hazards inherent in the gathering of crude oil,
natural gas and saltwater and the delivery and storage of fresh water, including:
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damage to pipelines, centralized gathering facilities, pump stations, related equipment and surrounding properties caused by design, installation,
construction materials or operational flaws, natural disasters, acts of terrorism or acts of third parties;
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leaks of crude oil, natural gas or NGLs or losses of crude oil, natural gas or NGLs as a result of the malfunction of, or other disruptions associated
with, equipment or facilities;
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fires, ruptures and explosions; and
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other hazards that could also result in personal injury and loss of life, pollution and suspension of operations.
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Any of these risks could adversely affect our ability to conduct operations or result in substantial loss to us as a result of claims
for:
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injury or loss of life;
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damage to and destruction of property, natural resources and equipment;
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pollution and other environmental damage;
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regulatory investigations and penalties;
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suspension of our operations; and
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repair and remediation costs.
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We may elect not to obtain insurance for any or all of these risks if we believe that the cost of available insurance is excessive relative to the risks presented. In addition, pollution and environmental
risks generally are not fully insurable. The occurrence of an event that is not fully covered by insurance could have a material adverse effect on our business, financial condition, results of operations, cash flows and ability to make cash
distributions.
We do not own in fee any of the land on which our pipelines and facilities are located, which could
result in disruptions to our operations.
We do not own in fee any of the land on which our midstream systems have been
constructed. Our only interests in these properties are rights granted under surface use agreements, rights-of-way, surface leases or other easement rights, which may limit or restrict our rights or access to or use of the surface estates.
Accommodating these competing rights of the surface owners may adversely affect our operations. In addition, we are subject to the possibility of more onerous terms or increased costs to retain necessary land use if we do not have valid
rights-of-way, surface leases or other easement rights or if such usage rights lapse or terminate. We may obtain the rights to construct and operate our pipelines on land owned by third parties and governmental agencies for a specific period of
time. Our loss of these rights, through our inability to renew rights-of-way, surface leases or other easement rights or otherwise, could have a material adverse effect on our business, financial condition, results of operations, cash flows and
ability to make cash distributions.
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A shortage of equipment and skilled labor could reduce equipment availability and
labor productivity and increase labor and equipment costs, which could have a material adverse effect on our business and results of operations.
Our gathering and other midstream services require special equipment and laborers who are skilled in multiple disciplines, such as equipment operators, mechanics and engineers, among others. If we
experience shortages of necessary equipment or skilled labor in the future, our labor and equipment costs and overall productivity could be materially and adversely affected. If our equipment or labor prices increase or if we experience materially
increased health and benefit costs for employees, our business and results of operations could be materially and adversely affected.
The loss of key personnel could adversely affect our ability to operate.
We depend on the services of a relatively small group of our general partner’s senior management. We do not maintain, nor do we plan to obtain, any insurance against the loss of any of these
individuals. The loss of the services of our general partner’s senior management, including Terry R. Gerhart, our Chief Executive Officer, John F. Bookout, IV, our Chief Financial Officer, Dustin A. Hatley, our Chief Accounting
Officer, and John C. Nicholson, our Chief Operating Officer could have a material adverse effect on our business, financial condition, results of operations, cash flows and ability to make cash distributions.
We do not have any officers or employees and rely on officers of our general partner and employees of Noble.
We are managed and operated by the board of directors and executive officers of our general partner. Our general partner has no employees
and relies on the employees of Noble to conduct our business and activities.
Noble conducts businesses and activities of its
own in which we have no economic interest. As a result, there could be material competition for the time and effort of the officers and employees who provide services to both our general partner and Noble. If our general partner and the officers and
employees of Noble do not devote sufficient attention to the management and operation of our business and activities, our business, financial condition, results of operations, cash flows and ability to make cash distributions could be materially
adversely affected.
Debt we incur in the future may limit our flexibility to obtain financing and to pursue other
business opportunities.
Our future level of debt could have important consequences to us, including the following:
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our ability to obtain additional financing, if necessary, for working capital, capital expenditures (including building additional gathering pipelines
needed for required connections and building additional centralized gathering facilities pursuant to our gathering agreements) or other purposes may be impaired or such financing may not be available on favorable terms;
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our funds available for operations, future business opportunities and distributions to unitholders will be reduced by that portion of our cash flow
required to make interest payments on our debt;
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we may be more vulnerable to competitive pressures or a downturn in our business or the economy generally; and
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our flexibility in responding to changing business and economic conditions may be limited.
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Our ability to service our debt will depend upon, among other things, our future financial and operating performance, which will be
affected by prevailing economic conditions and financial, business, regulatory and other factors, some of which are beyond our control. If our operating results are not sufficient to service any
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future indebtedness, we will be forced to take actions such as reducing distributions, reducing or delaying our business activities, investments or capital expenditures, selling assets or issuing
equity. We may not be able to effect any of these actions on satisfactory terms or at all.
Increases in interest rates
could adversely affect our business.
We will have exposure to increases in interest rates. After the consummation of
this offering on a pro forma basis, we do not expect to have any outstanding indebtedness. However, in connection with the completion of this offering we expect to enter into a new revolving credit facility. Assuming our average debt level of
$ million, comprised of funds drawn on our new revolving credit facility, an increase of one percentage point in the interest rates will result in an increase in annual interest expense of
$ million. As a result, our results of operations, cash flows and financial condition and, as a result, our ability to make cash distributions to our unitholders, could be materially adversely affected
by significant increases in interest rates.
Terrorist attacks or cyber-attacks could have a material adverse effect on
our business, financial condition or results of operations.
Terrorist attacks or cyber-attacks may significantly
affect the energy industry, including our operations and those of Noble and our other potential customers, as well as general economic conditions, consumer confidence and spending and market liquidity. Strategic targets, such as energy-related
assets, may be at greater risk of future attacks than other targets in the United States. Our insurance may not protect us against such occurrences. Consequently, it is possible that any of these occurrences, or a combination of them, could have a
material adverse effect on our business, financial condition and results of operations.
A cyber incident could result
in information theft, data corruption, operational disruption and/or financial loss.
The oil and gas industry has
become increasingly dependent on digital technologies to conduct day-to-day operations including certain midstream activities. For example, software programs are used to manage gathering and transportation systems and for compliance reporting. The
use of mobile communication devices has increased rapidly. Industrial control systems such as SCADA (supervisory control and data acquisition) now control large scale processes that can include multiple sites and long distances, such as oil and gas
pipelines.
We depend on digital technology, including information systems and related infrastructure as well as cloud
applications and services, to process and record financial and operating data and to communicate with our employees and business partners. Our business partners, including vendors, service providers, and financial institutions, are also dependent on
digital technology. The technologies needed to conduct midstream activities make certain information the target of theft or misappropriation.
As dependence on digital technologies has increased, cyber incidents, including deliberate attacks or unintentional events, also has increased. A cyber attack could include gaining unauthorized access to
digital systems for purposes of misappropriating assets or sensitive information, corrupting data, or causing operational disruption, or result in denial-of-service on websites. SCADA-based systems are potentially vulnerable to targeted cyber
attacks due to their critical role in operations.
Our technologies, systems, networks, and those of our business partners may
become the target of cyber attacks or information security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of proprietary and other information, or other disruption of our business
operations. In addition, certain cyber incidents, such as surveillance, may remain undetected for an extended period.
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A cyber incident involving our information systems and related infrastructure, or that of
our business partners, could disrupt our business plans and negatively impact our operations in the following ways, among others:
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a cyber attack on a vendor or service provider could result in supply chain disruptions which could delay or halt development of additional
infrastructure, effectively delaying the start of cash flows from the project;
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a cyber attack on downstream pipelines could prevent us from delivering product at the tailgate of our facilities, resulting in a loss of revenues;
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a cyber attack on a communications network or power grid could cause operational disruption resulting in loss of revenues;
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a deliberate corruption of our financial or operational data could result in events of non-compliance which could lead to regulatory fines or
penalties; and
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business interruptions could result in expensive remediation efforts, distraction of management, damage to our reputation, or a negative impact on the
price of our units.
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Our implementation of various controls and processes, including globally incorporating
a risk-based cyber security framework, to monitor and mitigate security threats and to increase security for our information, facilities and infrastructure is costly and labor intensive. Moreover, there can be no assurance that such measures will be
sufficient to prevent security breaches from occurring. As cyber threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any
information security vulnerabilities.
Risks Inherent in an Investment in Us
Our general partner and its affiliates, including Noble, have conflicts of interest with us and our partnership agreement eliminates
their default fiduciary duties to us and our unitholders and replaces them with contractual standards that may allow our general partner and its affiliates to favor their own interests to our detriment and that of our unitholders. Additionally, we
have no control over the business decisions and operations of Noble, and Noble is under no obligation to adopt a business strategy that favors us.
Following the completion of this offering, Noble will directly own an aggregate % limited partner interest in us (or an aggregate % limited
partner interest in us if the underwriters exercise in full their option to purchase additional common units). In addition, Noble will own and control our general partner. Although our general partner has a duty to manage us in a manner that is not
adverse to the interests of our partnership, the directors and officers of our general partner also have a duty to manage our general partner in a manner that is in the best interests of its owner, Noble. Conflicts of interest may arise between
Noble and its affiliates, including our general partner, on the one hand, and us and our unitholders, on the other hand. In resolving these conflicts, the general partner may favor its own interests and the interests of its affiliates, including
Noble, over the interests of our common unitholders. These conflicts include, among others, the following situations:
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neither our partnership agreement nor any other agreement requires Noble to pursue a business strategy that favors us or utilizes our assets, which
could involve decisions by Noble to increase or decrease crude oil or natural gas production on our dedicated acreage, pursue and grow particular markets or undertake acquisition opportunities for itself. Noble’s directors and officers have a
fiduciary duty to make these decisions in the best interests of the stockholders of Noble;
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Noble may be constrained by the terms of its debt instruments from taking actions, or refraining from taking actions, that may be in our best
interests;
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our partnership agreement replaces the fiduciary duties that would otherwise be owed by our general partner with contractual standards governing its
duties and limits our general partner’s liabilities and the remedies available to our unitholders for actions that, without the limitations, might constitute breaches of fiduciary duty under applicable Delaware law;
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except in limited circumstances, our general partner has the power and authority to conduct our business without unitholder approval;
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our general partner will determine the amount and timing of, among other things, cash expenditures, borrowings and repayments of indebtedness, the
issuance of additional partnership interests, the creation, increase or reduction in cash reserves in any quarter and asset purchases and sales, each of which can affect the amount of cash that is available for distribution to unitholders;
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our general partner will determine the amount and timing of any capital expenditures and whether a capital expenditure is classified as a maintenance
capital expenditure, which reduces operating surplus, or an expansion capital expenditure, which does not reduce operating surplus. This determination can affect the amount of cash that is distributed to our unitholders and to our general partner,
the amount of adjusted operating surplus generated in any given period and the ability of the subordinated units to convert into common units;
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our general partner will determine which costs incurred by it are reimbursable by us;
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our general partner may cause us to borrow funds in order to permit the payment of cash distributions, even if the purpose or effect of the borrowing
is to make a distribution on the subordinated units, to make incentive distributions or to accelerate expiration of the subordination period;
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our partnership agreement permits us to classify up to $ million as operating surplus, even if it
is generated from asset sales, non-working capital borrowings or other sources that would otherwise constitute capital surplus. This cash may be used to fund distributions on our subordinated units or to Noble in respect of the incentive
distribution rights;
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our partnership agreement does not restrict our general partner from causing us to pay it or its affiliates for any services rendered to us or entering
into additional contractual arrangements with any of these entities on our behalf;
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our general partner intends to limit its liability regarding our contractual and other obligations;
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our general partner may exercise its right to call and purchase all of the common units not owned by it and its affiliates if it and its affiliates own
more than 80% of the common units;
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our general partner controls the enforcement of obligations owed to us by our general partner and its affiliates, including our gathering agreements
with Noble, the ROFR and ROFO;
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our general partner decides whether to retain separate counsel, accountants or others to perform services for us; and
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Noble, or any transferee holding incentive distribution rights, may elect to cause us to issue common units to it in connection with a resetting of the
target distribution levels related to its incentive distribution rights, without the approval of the conflicts committee of the board of directors of our general partner, which we refer to as our conflicts committee, or our common unitholders. This
election could result in lower distributions to our common unitholders in certain situations.
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Neither our
partnership agreement nor our omnibus agreement will prohibit Noble or any other affiliates of our general partner from owning assets or engaging in businesses that compete directly or indirectly with us. Under the terms of our partnership
agreement, the doctrine of corporate opportunity, or any analogous doctrine, will not apply to our general partner or any of its affiliates, including Noble and executive officers and directors of our general partner. Any such person or entity that
becomes aware of a potential transaction, agreement,
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arrangement or other matter that may be an opportunity for us will not have any duty to communicate or offer such opportunity to us. Any such person or entity will not be liable to us or to any
limited partner for breach of any fiduciary duty or other duty by reason of the fact that such person or entity pursues or acquires such opportunity for itself, directs such opportunity to another person or entity or does not communicate such
opportunity or information to us. Consequently, Noble and other affiliates of our general partner may acquire, construct or dispose of additional midstream assets in the future without any obligation to offer us the opportunity to purchase any of
those assets (except to the extent the ROFR or ROFO pertain to such assets). As a result, competition from Noble and other affiliates of our general partner could materially and adversely impact our results of operations and distributable cash flow.
This may create actual and potential conflicts of interest between us and affiliates of our general partner and result in less than favorable treatment of us and our unitholders. Please read “Certain Relationships and Related Party
Transactions—Agreements with our Affiliates in Connection with the Transactions—Omnibus Agreement” and “Conflicts of Interest and Duties.”
Our partnership agreement requires that we distribute all of our available cash, which could limit our ability to grow and make acquisitions.
Our partnership agreement requires that we distribute all of our available cash to our unitholders. As a result, we expect to rely
primarily upon external financing sources, including commercial bank borrowings and the issuance of debt and equity securities, to fund our acquisitions and expansion capital expenditures. Therefore, to the extent we are unable to finance our growth
externally, our cash distribution policy will significantly impair our ability to grow. In addition, because we will distribute all of our available cash, our growth may not be as fast as that of businesses that reinvest their available cash to
expand ongoing operations. To the extent we issue additional partnership interests in connection with any acquisitions or expansion capital expenditures, the payment of distributions on those additional partnership interests may increase the risk
that we will be unable to maintain or increase our per unit distribution level. There are no limitations in our partnership agreement on our ability to issue additional partnership interests, including partnership interests ranking senior to our
common units as to distributions or in liquidation or that have special voting rights and other rights, and our common unitholders will have no preemptive or other rights (solely as a result of their status as common unitholders) to purchase any
such additional partnership interests. The incurrence of additional commercial bank borrowings or other debt to finance our growth strategy would result in increased interest expense, which, in turn, may reduce the amount of cash that we have
available to distribute to our unitholders.
Our general partner will be required to deduct estimated maintenance
capital expenditures from our operating surplus, which may result in less cash available for distribution to unitholders from operating surplus than if actual maintenance capital expenditures were deducted.
Maintenance capital expenditures are those capital expenditures made to maintain, over the long term, our operating capacity or operating
income. Our partnership agreement requires our general partner to deduct estimated, rather than actual, maintenance capital expenditures from operating surplus in determining cash available for distribution from operating surplus. The amount of
estimated maintenance capital expenditures deducted from operating surplus will be subject to review and change by our general partner’s board of directors at least once a year, provided that any change is approved by the conflicts committee of
our general partner’s board of directors. Our partnership agreement does not cap the amount of maintenance capital expenditures that our general partner may estimate. In years when our estimated maintenance capital expenditures are higher than
actual maintenance capital expenditures, the amount of cash available for distribution to unitholders from operating surplus will be lower than if actual maintenance capital expenditures had been deducted from operating surplus. On the other hand,
if our general partner underestimates the appropriate level of estimated maintenance capital expenditures, we will have more cash available for distribution from operating surplus in the short term but will have less cash available for distribution
from operating surplus in future periods when we have to increase our estimated maintenance capital expenditures to account for the previous underestimation.
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Our partnership agreement replaces our general partner’s fiduciary duties to
holders of our common units with contractual standards governing its duties.
Delaware law provides that a Delaware
limited partnership may, in its partnership agreement, expand, restrict or eliminate the fiduciary duties otherwise owed by the general partner to limited partners and the partnership, provided that the partnership agreement may not eliminate the
implied contractual covenant of good faith and fair dealing. This implied covenant is a judicial doctrine utilized by Delaware courts in connection with interpreting ambiguities in partnership agreements and other contracts, and does not form the
basis of any separate or independent fiduciary duty in addition to the express contractual duties set forth in our partnership agreement. Under the implied contractual covenant of good faith and fair dealing, a court will enforce the reasonable
expectations of the partners where the language in the partnership agreement does not provide for a clear course of action.
As permitted by Delaware law, our partnership agreement contains provisions that eliminate the fiduciary standards to which our general
partner would otherwise be held by state fiduciary duty law and replaces those duties with several different contractual standards. For example, our partnership agreement permits our general partner to make a number of decisions in its individual
capacity, as opposed to in its capacity as our general partner, free of any duties to us and our unitholders. This provision entitles our general partner to consider only the interests and factors that it desires and relieves it of any duty or
obligation to give any consideration to any interest of, or factors affecting, us, our affiliates or our limited partners. By purchasing a common unit, a unitholder is treated as having consented to the provisions in our partnership agreement,
including the provisions discussed above. Please read “Conflicts of Interest and Duties—Duties of Our General Partner.”
Our partnership agreement restricts the remedies available to holders of our units and for actions taken by our general partner that might otherwise constitute breaches of fiduciary duty.
Our partnership agreement contains provisions that restrict the remedies available to unitholders for actions taken by
our general partner that might otherwise constitute breaches of fiduciary duty under state fiduciary duty law. For example, our partnership agreement:
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provides that whenever our general partner makes a determination or takes, or declines to take, any other action in its capacity as our general
partner, our general partner is required to make such determination, or take or decline to take such other action, in good faith, meaning that it subjectively believed that the determination or the decision to take or decline to take such action was
not adverse to the interests of our partnership, and will not be subject to any other or different standard imposed by our partnership agreement, Delaware law, or any other law, rule or regulation, or at equity;
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provides that our general partner will not have any liability to us or our unitholders for decisions made in its capacity as a general partner so long
as it acted in good faith;
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provides that our general partner and its officers and directors will not be liable for monetary damages to us or our limited partners resulting from
any act or omission unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that our general partner or its officers and directors, as the case may be, acted in bad faith or engaged in fraud
or willful misconduct or, in the case of a criminal matter, acted with knowledge that the conduct was criminal; and
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provides that our general partner will not be in breach of its obligations under our partnership agreement or its fiduciary duties to us or our limited
partners if a transaction with an affiliate or the resolution of a conflict of interest is approved in accordance with, or otherwise meets the standards set forth in, our partnership agreement.
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In connection with a situation involving a transaction with an affiliate or a conflict of interest, our partnership agreement provides
that any determination by our general partner must be made in good faith, and that our conflicts committee and the board of directors of our general partner are entitled to a presumption that
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they acted in good faith. In any proceeding brought by or on behalf of any limited partner or the partnership, the person bringing or prosecuting such proceeding will have the burden of
overcoming such presumption. Please read “Conflicts of Interest and Duties.”
Cost reimbursements, which will
be determined in our general partner’s sole discretion, and fees due our general partner and its affiliates for services provided will be substantial and will reduce the amount of cash we have available for distribution to you.
Under our partnership agreement, we are required to reimburse our general partner and its affiliates for all costs
and expenses that they incur on our behalf for managing and controlling our business and operations. Except to the extent specified under our omnibus agreement and operational services and secondment agreement, our general partner determines the
amount of these expenses. Under the terms of the omnibus agreement, we will be required to reimburse Noble for the provision of certain administrative support services to us. Under our operational services and secondment agreement, we will be
required to reimburse Noble for the provision of certain operation services and related management services in support of our operations. Our general partner and its affiliates also may provide us other services for which we will be charged fees as
determined by our general partner. The costs and expenses for which we will reimburse our general partner and its affiliates may include salary, bonus, incentive compensation and other amounts paid to persons who perform services for us or on our
behalf and expenses allocated to our general partner by its affiliates. The costs and expenses for which we are required to reimburse our general partner and its affiliates are not subject to any caps or other limits. Please read “Cash
Distribution Policy and Restrictions on Distributions—Estimated EBITDA and Distributable Cash Flow for the Twelve Months Ending September 30, 2017.” Payments to our general partner and its affiliates will be substantial and will reduce the
amount of cash we have available to distribute to unitholders.
Unitholders have very limited voting rights and,
even if they are dissatisfied, they will have limited ability to remove our general partner.
Unlike the holders of
common stock in a corporation, unitholders have only limited voting rights on matters affecting our business and, therefore, limited ability to influence management’s decisions regarding our business. For example, unlike holders of stock in a
public corporation, unitholders will not have “say-on-pay” advisory voting rights. Unitholders did not elect our general partner or the board of directors of our general partner and will have no right to elect our general partner or the
board of directors of our general partner on an annual or other continuing basis. The board of directors of our general partner is chosen by its sole member, which is owned by Noble. Furthermore, if the unitholders are dissatisfied with the
performance of our general partner, they will have little ability to remove our general partner. As a result of these limitations, the price at which our common units will trade could be diminished because of the absence or reduction of a takeover
premium in the trading price.
Our general partner may not be removed unless such removal is both
(i) for cause and (ii) approved by a vote of the holders of at least 66
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% of the outstanding units, including any units owned by our general partner and its affiliates, voting together as a
single class. “Cause” is narrowly defined under our partnership agreement to mean that a court of competent jurisdiction has entered a final, non-appealable judgment finding our general partner liable to us or any limited partner for
actual fraud or willful misconduct in its capacity as our general partner. Cause does not include most cases of charges of poor management of the business. Following the completion of this offering, Noble will
own % of our total outstanding common units and subordinated units on an aggregate basis (or % of our total outstanding common units and
subordinated units on an aggregate basis if the underwriters exercise in full their option to purchase additional common units). As a result, our public unitholders will have limited ability to remove our general partner.
Furthermore, unitholders’ voting rights are further restricted by the partnership agreement provision providing that any units held
by a person that owns 20% or more of any class of units then outstanding, other than our general partner, its affiliates, their transferees, and persons who acquired such units with the prior approval of the board of directors of our general
partner, cannot vote on any matter.
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Our partnership agreement also contains provisions limiting the ability of unitholders to
call meetings or to acquire information about our operations, as well as other provisions limiting the unitholders’ ability to influence the manner or direction of management.
Our general partner interest or the control of our general partner may be transferred to a third party without unitholder consent.
Our general partner may transfer its general partner interest in us to a third party in a merger or in a sale of all
or substantially all of its assets without the consent of the unitholders. Furthermore, there is no restriction in our partnership agreement on the ability of Noble to transfer its membership interest in our general partner to a third party. The new
owner of our general partner would then be in a position to replace the board of directors and officers of our general partner with its own choices.
The incentive distribution rights held by Noble may be transferred to a third party without unitholder consent.
Noble may transfer our incentive distribution rights to a third party at any time without the consent of our unitholders. If Noble transfers our incentive distribution rights to a third party but retains
its ownership of our general partner interest, it may not have the same incentive to grow our partnership and increase quarterly distributions to unitholders over time as it would if it had retained ownership of our incentive distribution rights.
For example, a transfer of incentive distribution rights by Noble could reduce the likelihood of Noble selling or contributing additional midstream assets to us, as Noble would have less of an economic incentive to grow our business, which in turn
would impact our ability to grow our asset base.
We may issue an unlimited number of additional partnership interests
without unitholder approval, which would dilute unitholder interests.
At any time, we may issue an unlimited number of
general partner interests or limited partner interests of any type without the approval of our unitholders and our unitholders will have no preemptive or other rights (solely as a result of their status as unitholders) to purchase any such general
partner interests or limited partner interests. Further, there are no limitations in our partnership agreement on our ability to issue equity securities that rank equal or senior to our common units as to distributions or in liquidation or that have
special voting rights and other rights. The issuance by us of additional common units or other equity securities of equal or senior rank will have the following effects:
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our unitholders’ proportionate ownership interest in us will decrease;
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the amount of cash we have available to distribute on each unit may decrease;
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the ratio of taxable income to distributions may increase;
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the relative voting strength of each previously outstanding unit may be diminished; and
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the market price of our common units may decline.
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The issuance by us of additional general partner interests may have the following effects, among others, if such general partner interests are issued to a person who is not an affiliate of Noble:
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management of our business may no longer reside solely with our current general partner; and
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affiliates of the newly admitted general partner may compete with us, and neither that general partner nor such affiliates will have any obligation to
present business opportunities to us except with respect to rights of first refusal contained in our omnibus agreement.
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Noble may sell units in the public or private markets, and such sales could have an
adverse impact on the trading price of the common units.
After the completion of this offering, assuming that the
underwriters do not exercise their option to purchase additional common units, Noble will hold common units and
subordinated units. All of the subordinated units will convert into common units at the end of the subordination period and may convert earlier under certain circumstances.
Additionally, we have agreed to provide Noble with certain registration rights under applicable securities laws. Please read “Units Eligible for Future Sale.” The sale of these units in the public or private markets could have an adverse
impact on the price of the common units or on any trading market that may develop.
Our general partner’s
discretion in establishing cash reserves may reduce the amount of cash we have available to distribute to unitholders.
Our partnership agreement requires our general partner to deduct from operating surplus the cash reserves that it determines are necessary
to fund our future operating expenditures. In addition, the partnership agreement permits the general partner to reduce available cash by establishing cash reserves for the proper conduct of our business, to comply with applicable law or agreements
to which we are a party, or to provide funds for future distributions to partners. These cash reserves will affect the amount of cash we have available to distribute to unitholders.
Affiliates of our general partner, including Noble, may compete with us, and neither our general partner nor its affiliates have
any obligation to present business opportunities to us except with respect to dedications contained in our commercial agreements and rights of first refusal and rights of first offer contained in our omnibus agreement.
None of our partnership agreement, our omnibus agreement, our commercial agreements or any other agreement in effect as of the date of
this offering will prohibit Noble or any other affiliates of our general partner from owning assets or engaging in businesses that compete directly or indirectly with us. Under the terms of our partnership agreement, the doctrine of corporate
opportunity, or any analogous doctrine, will not apply to our general partner or any of its affiliates, including Noble and executive officers and directors of our general partner. Any such person or entity that becomes aware of a potential
transaction, agreement, arrangement or other matter that may be an opportunity for us will not have any duty to communicate or offer such opportunity to us except with respect to dedications contained in our commercial agreements and rights of first
refusal and rights of first offer contained in our omnibus agreement. Any such person or entity will not be liable to us or to any limited partner for breach of any fiduciary duty or other duty by reason of the fact that such person or entity
pursues or acquires such opportunity for itself, directs such opportunity to another person or entity or does not communicate such opportunity or information to us. Consequently, Noble and other affiliates of our general partner may acquire,
construct or dispose of additional midstream assets in the future without any obligation to offer us the opportunity to purchase any of those assets. As a result, competition from Noble and other affiliates of our general partner could materially
and adversely impact our results of operations and distributable cash flow.
Our general partner has a limited call
right that may require you to sell your common units at an undesirable time or price.
If at any time our general
partner and its affiliates own more than 80% of our then-outstanding common units, our general partner will have the right, but not the obligation, which it may assign to any of its affiliates or to us, to acquire all, but not less than all, of the
common units held by unaffiliated persons at a price not less than their then current market price. As a result, you may be required to sell your common units at an undesirable time or price and may not receive any return on your investment. You may
also incur a tax liability upon a sale of your units. Following the completion of this offering and assuming the underwriters’ option to purchase additional common units from us is not exercised, our general partner and its affiliates will own
approximately % of our common
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units (excluding any common units purchased by the directors, director nominee and executive officers of our general partner and certain other individuals as selected by our general partner under
our directed unit program). At the end of the subordination period (which could occur as early as the quarter ending September 30, 2017), assuming no additional issuances of common units by us (other than upon the conversion of the subordinated
units) and the underwriters’ option to purchase additional common units from us is not exercised, our general partner and its affiliates will own approximately % of our outstanding common
units (excluding any common units purchased by the directors, director nominee and executive officers of our general partner and certain other individuals as selected by our general partner under our directed unit program) and therefore would not be
able to exercise the call right at that time. Please read “Our Partnership Agreement—Limited Call Right.”
Unitholders may have to repay distributions that were wrongfully distributed to them.
Under certain circumstances, unitholders may have to repay amounts wrongfully distributed to them. Under Section 17-607 of the
Delaware Revised Uniform Limited Partnership Act, or the Delaware Act, we may not make a distribution to you if the distribution would cause our liabilities to exceed the fair value of our assets. Delaware law provides that for a period of three
years from the date of the impermissible distribution, limited partners who received the distribution and who knew at the time of the distribution that it violated Delaware law will be liable to the limited partnership for the distribution amount.
Transferees of common units are liable for the obligations of the transferor to make contributions to the partnership that are known to the transferee at the time of the transfer and for unknown obligations if the liabilities could be determined
from our partnership agreement. Liabilities to partners on account of their partnership interest and liabilities that are non-recourse to the partnership are not counted for purposes of determining whether a distribution is permitted.
There is no existing market for our common units, and a trading market that will provide you with adequate liquidity may not
develop. The price of our common units may fluctuate significantly, and you could lose all or part of your investment.
Prior to this offering, there has been no public market for our common units. After this offering, there will be only publicly traded
common units, assuming the underwriters’ option to purchase additional common units from us is not exercised. In addition, following the completion of this offering, Noble will
own common units and subordinated units, representing an
aggregate % limited partner interest (or
common units and subordinated units, representing an aggregate % limited partner interest, if the underwriters exercise in full their option to purchase additional common
units). We do not know the extent to which investor interest will lead to the development of an active trading market or how liquid that market might be. You may not be able to resell your common units at or above the initial public offering price.
Additionally, the lack of liquidity may result in wide bid-ask spreads, contribute to significant fluctuations in the market price of the common units and limit the number of investors who are able to buy the common units.
The initial public offering price for the common units offered hereby will be determined by negotiations between us and the
representatives of the underwriters and may not be indicative of the market price of the common units that will prevail in the trading market. The market price of our common units may decline below the initial public offering price.
Noble, or any transferee holding incentive distribution rights, may elect to cause us to issue common units to it in connection
with a resetting of the target distribution levels related to its incentive distribution rights, without the approval of our conflicts committee or our common unitholders. This election could result in lower distributions to our common unitholders
in certain situations.
Noble, as the initial holder of our incentive distribution rights, has the right, at any time
when there are no subordinated units outstanding and it has received distributions on its incentive distribution rights at the highest level to which it is entitled (50%) for each of the prior four consecutive fiscal quarters, to reset the
initial target
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distribution levels at higher levels based on our distributions at the time of the exercise of the reset election. Following a reset election, the minimum quarterly distribution will be adjusted
to equal the reset minimum quarterly distribution, and the target distribution levels will be reset to correspondingly higher levels based on percentage increases above the reset minimum quarterly distribution.
If Noble elects to reset the target distribution levels, it will be entitled to receive a number of common units. The number of common
units to be issued to Noble will be equal to that number of common units that would have entitled their holder to an average aggregate quarterly cash distribution in the prior two quarters equal to the average of the distributions on the incentive
distribution rights in such two quarters. We anticipate that Noble would exercise this reset right in order to facilitate acquisitions or internal growth projects that would not be sufficiently accretive to cash distributions per common unit without
such conversion. It is possible, however, that Noble could exercise this reset election at a time when it is experiencing, or expects to experience, declines in the cash distributions it receives related to its incentive distribution rights and may,
therefore, desire to be issued common units rather than retain the right to receive distributions based on the initial target distribution levels. This risk could be elevated if our incentive distribution rights have been transferred to a third
party. As a result, a reset election may cause our common unitholders to experience a reduction in the amount of cash distributions that they would have otherwise received had we not issued new common units in connection with resetting the target
distribution levels. Additionally, Noble has the right to transfer all or any portion of our incentive distribution rights at any time, and such transferee will have the same rights as Noble relative to resetting target distributions if our general
partner concurs that the tests for resetting target distributions have been fulfilled. Please read “Provisions of Our Partnership Agreement Relating to Cash Distributions—Noble’s Right to Reset Incentive Distribution Levels.”
Units held by persons who our general partner determines are not “eligible holders” at the time of any
requested certification in the future may be subject to redemption.
As a result of certain laws and regulations to
which we are or may in the future become subject, we may require owners of our common units to certify that they are both U.S. citizens and subject to U.S. federal income taxation on our income. Units held by persons who our general partner
determines are not “eligible holders” at the time of any requested certification in the future may be subject to redemption. “Eligible holders” are limited partners whose (or whose owners’) (i) U.S. federal income tax
status or lack of proof of U.S. federal income tax status does not have and is not reasonably likely to have, as determined by our general partner, a material adverse effect on the rates that can be charged to customers by us or our subsidiaries
with respect to assets that are subject to regulation by the Federal Energy Regulatory Commission or similar regulatory body and (ii) nationality, citizenship or other related status does not create and is not reasonably likely to create, as
determined by our general partner, a substantial risk of cancellation or forfeiture of any property in which we have an interest. The aggregate redemption price for redeemable interests will be an amount equal to the current market price (the date
of determination of which will be the date fixed for redemption) of limited partner interests of the class to be so redeemed multiplied by the number of limited partner interests of each such class included among the redeemable interests. For these
purposes, the “current market price” means, as of any date for any class of limited partner interests, the average of the daily closing prices per limited partner interest of such class for the 20 consecutive trading days immediately prior
to such date. The redemption price will be paid in cash or by delivery of a promissory note, as determined by our general partner. The units held by any person the general partner determines is not an eligible holder will not be entitled to voting
rights. Please read “Our Partnership Agreement—Possible Redemption of Ineligible Holders.”
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Our partnership agreement will designate the Court of Chancery of the State of
Delaware as the exclusive forum for certain types of actions and proceedings that may be initiated by our unitholders, which would limit our unitholders’ ability to choose the judicial forum for disputes with us or our general partner’s
directors, officers or other employees. Our partnership agreement also provides that any unitholder bringing an unsuccessful action will be obligated to reimburse us for any costs we have incurred in connection with such unsuccessful action.
Our partnership agreement will provide that, with certain limited exceptions, the Court of Chancery of the State of
Delaware (or, if such court does not have subject matter jurisdiction thereof, any other court located in the State of Delaware with subject matter jurisdiction) shall be the exclusive forum for any claims, suits, actions or proceedings
(i) arising out of or relating in any way to our partnership agreement (including any claims, suits or actions to interpret, apply or enforce the provisions of our partnership agreement or the duties, obligations or liabilities among our
partners, or obligations or liabilities of our partners to us, or the rights or powers of, or restrictions on, our partners or us), (ii) brought in a derivative manner on our behalf, (iii) asserting a claim of breach of a duty owed by any
of our, or our general partner’s, directors, officers, or other employees, or owed by our general partner, to us or our partners, (iv) asserting a claim against us arising pursuant to any provision of the Delaware Act or (v) asserting
a claim against us governed by the internal affairs doctrine.
If any person brings any of the aforementioned claims, suits,
actions or proceedings (including any claims, suits, actions or proceedings arising out of this offering) and such person does not obtain a judgment on the merits that substantially achieves, in substance and amount, the full remedy sought, then
such person shall be obligated to reimburse us and our affiliates for all fees, costs and expenses of every kind and description, including but not limited to all reasonable attorneys’ fees and other litigation expenses, that the parties may
incur in connection with such claim, suit, action or proceeding. In addition, our partnership agreement provides that each limited partner irrevocably waives the right to trial by jury in any such claim, suit, action or proceeding. By purchasing a
common unit, a limited partner is irrevocably consenting to these limitations and provisions regarding claims, suits, actions or proceedings and submitting to the exclusive jurisdiction of the Court of Chancery of the State of Delaware (or such
other court) in connection with any such claims, suits, actions or proceedings. These provisions may have the effect of discouraging lawsuits against us and our general partner’s directors and officers. Please read “Our Partnership
Agreement—Applicable Law; Exclusive Forum.”
The NYSE does not require a publicly traded limited partnership
like us to comply with certain of its corporate governance requirements.
Our common units have been approved for
listing on the NYSE. Because we will be a publicly traded limited partnership, the NYSE does not require us to have a majority of independent directors on our general partner’s board of directors or to establish a compensation committee or a
nominating and corporate governance committee. Additionally, any future issuance of additional common units or other securities, including to affiliates, will not be subject to the NYSE’s shareholder approval rules that apply to a corporation.
Accordingly, unitholders will not have the same protections afforded to certain corporations that are subject to all of the NYSE corporate governance requirements. Please read “Management—Management of Noble Midstream Partners LP.”
If we fail to establish and maintain effective internal control over financial reporting, our ability to accurately
report our financial results could be adversely affected.
We are not currently required to comply with the SEC’s
rules implementing Section 404 of the Sarbanes- Oxley Act of 2002, and are therefore not required to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose. Upon becoming a publicly traded
partnership, we will be required to comply with the SEC’s rules implementing Sections 302 and 404 of the Sarbanes-Oxley Act of 2002, which will require our management to certify financial and other information in our quarterly and annual
reports and provide an annual management report on the effectiveness of our internal control over financial reporting. Though we will be required to disclose material changes made to our internal controls and procedures
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on a quarterly basis, we will not be required to make our first annual assessment of our internal control over financial reporting pursuant to Section 404 until the year following our first
annual report required to be filed with the SEC. To comply with the requirements of being a publicly traded partnership, we may need to implement additional internal controls, reporting systems and procedures and hire additional accounting, finance
and legal staff. Furthermore, while we generally must comply with Section 404 of the Sarbanes-Oxley Act of 2002 for our fiscal year ending December 31, 2017, we are not required to have our independent registered public accounting firm attest to the
effectiveness of our internal controls until our first annual report subsequent to our ceasing to be an “emerging growth company” within the meaning of Section 2(a)(19) of the Securities Act. Accordingly, we may not be required to have our
independent registered public accounting firm attest to the effectiveness of our internal controls until our annual report for the fiscal year ending December 31, 2019. Once it is required to do so, our independent registered public accounting firm
may issue a report that is adverse in the event it is not satisfied with the level at which our controls are documented, designed, operated or reviewed.
If we fail to develop or maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud. As a result, current and potential unitholders
could lose confidence in our financial reporting, which would harm our business and the trading price of our units.
Effective
internal controls are necessary for us to provide reliable financial reports, prevent fraud and operate successfully as a public company. If we cannot provide reliable financial reports or prevent fraud, our reputation and operating results would be
harmed. We cannot be certain that our efforts to develop and maintain our internal controls will be successful, that we will be able to maintain adequate controls over our financial processes and reporting in the future or that we will be able to
comply with our obligations under Section 404 of the Sarbanes-Oxley Act of 2002. Any failure to develop or maintain effective internal controls, or difficulties encountered in implementing or improving our internal controls, could harm our operating
results or cause us to fail to meet our reporting obligations. Ineffective internal controls could also cause investors to lose confidence in our reported financial information, which would likely have a negative effect on the trading price of our
units.
For as long as we are an “emerging growth company,” we will not be required to comply with certain
disclosure requirements that apply to other public companies.
We are classified as an “emerging growth
company” under the JOBS Act. For as long as we are an “emerging growth company,’ which may be up to five full fiscal years, unlike other public companies, we will not be required to, among other things, (1) provide an
auditor’s attestation report on management’s assessment of the effectiveness of our system of internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act, (2) comply with any new requirements
adopted by the Public Company Accounting Oversight Board requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and the financial
statements of the issuer, (3) provide certain disclosure regarding executive compensation required of larger public companies or (4) hold nonbinding advisory votes on executive compensation. We will remain an “emerging growth
company” for up to five years, although we will lose that status sooner if we have more than $1.0 billion of revenues in a fiscal year, become a large accelerated filer or issue more than $1.0 billion of non-convertible debt over a three-year
period.
To the extent that we rely on any of the exemptions available to “emerging growth companies,” you will
receive less information about our executive compensation and internal control over financial reporting than issuers that are not “emerging growth companies.” If some investors find our common units to be less attractive as a result, there
may be a less active trading market for our common units and our trading price may be more volatile.
We will incur
increased costs as a result of being a publicly-traded partnership.
We have no history operating as a publicly-traded
partnership. As a publicly-traded partnership, we will incur significant legal, accounting and other expenses that we did not incur prior to this offering. In addition, the
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Sarbanes-Oxley Act of 2002, as well as rules implemented by the SEC and the NYSE, require publicly-traded entities to adopt various corporate governance practices that will further increase our
costs. Before we are able to make distributions to our unitholders, we must first pay or reserve cash for our expenses, including the costs of being a publicly-traded partnership. As a result, the amount of cash we have available for distribution to
our unitholders will be affected by the costs associated with being a publicly-traded partnership.
Prior to this offering, we
have not filed reports with the SEC. Following this offering, we will become subject to the public reporting requirements of the Exchange Act. We expect these rules and regulations to increase certain of our legal and financial compliance costs and
to make activities more time-consuming and costly. For example, as a result of becoming a publicly-traded partnership, we are required to have at least three independent directors, create an audit committee and adopt policies regarding internal
controls and disclosure controls and procedures, including the preparation of reports on internal controls over financial reporting. In addition, we will incur additional costs associated with our SEC reporting requirements.
We also expect to incur significant expense in order to obtain director and officer liability insurance. Because of the limitations in
coverage for directors, it may be more difficult for us to attract and retain qualified persons to serve on our board or as executive officers.
We estimate that we will incur approximately $6.7 million of incremental costs per year associated with being a publicly-traded partnership; however, it is possible that our actual incremental costs
of being a publicly-traded partnership will be higher than we currently estimate.
If we are deemed an
“investment company” under the Investment Company Act of 1940, it would adversely affect the price of our common units and could have a material adverse effect on our business.
Our initial assets will consist of direct and indirect ownership interests in our development companies as well as ownership interests in
other midstream ventures. If a sufficient amount of our assets, such as our ownership interests in other midstream ventures, now owned or in the future acquired, are deemed to be “investment securities” within the meaning of the Investment
Company Act of 1940, or the Investment Company Act, we would either have to register as an investment company under the Investment Company Act, obtain exemptive relief from the SEC or modify our organizational structure or our contract rights to
fall outside the definition of an investment company. In that event, it is possible that our ownership of these interests, combined with our assets acquired in the future, could result in our being required to register under the Investment Company
Act if we were not successful in obtaining exemptive relief or otherwise modifying our organizational structure or applicable contract rights. Treatment of us as an investment company would prevent our qualification as a partnership for federal
income tax purposes in which case we would be treated as a corporation for federal income tax purposes. As a result, we would pay federal income tax on our taxable income at the corporate tax rate, distributions to you would generally be taxed again
as corporate distributions and none of our income, gains, losses or deductions would flow through to you. Because a tax would be imposed upon us as a corporation, our cash available for distribution to you would be substantially reduced. Therefore,
treatment of us as an investment company would result in a material reduction in the anticipated cash flow and after-tax return to the unitholders, likely causing a substantial reduction in the value of our common units. Please read “Material
Federal Income Tax Consequences—Partnership Status.”
Moreover, registering as an investment company could, among
other things, materially limit our ability to engage in transactions with affiliates, including the purchase of additional interests in our midstream systems from Noble, restrict our ability to borrow funds or engage in other transactions involving
leverage and require us to add additional directors who are independent of us or our affiliates. The occurrence of some or all of these events would adversely affect the price of our common units and could have a material adverse effect on our
business.
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Tax Risks
In addition to reading the following risk factors, please read “Material Federal Income Tax Consequences” for a more complete
discussion of the expected material federal income tax consequences of owning and disposing of common units.
Our tax
treatment depends on our status as a partnership for federal income tax purposes. If the IRS were to treat us as a corporation for federal income tax purposes, which would subject us to entity-level taxation, or if we were otherwise subjected to a
material amount of entity-level taxation, then our distributable cash flow to our unitholders would be substantially reduced.
The anticipated after-tax economic benefit of an investment in the common units depends largely on our being treated as a partnership for federal income tax purposes.
Despite the fact that we are a limited partnership under Delaware law, we will be treated as a corporation for federal income tax
purposes unless we satisfy a “qualifying income” requirement. Based upon our current operations, we believe we satisfy the qualifying income requirement. Failing to meet the qualifying income requirement or a change in current law could
cause us to be treated as a corporation for federal income tax purposes or otherwise subject us to taxation as an entity.
If
we were treated as a corporation for federal income tax purposes, we would pay federal income tax on our taxable income at the corporate tax rate, which is currently a maximum of 35%, and would likely pay state and local income tax at varying rates.
Distributions would generally be taxed again as corporate dividends (to the extent of our current and accumulated earnings and profits), and no income, gains, losses, deductions, or credits would flow through to you. Because a tax would be imposed
upon us as a corporation, our distributable cash flow would be substantially reduced.
In addition, recently enacted
legislation applicable to partnership tax years beginning after 2017 changes the audit procedures for large partnerships and in certain circumstances would permit the IRS to assess and collect taxes (including any applicable penalties and interest)
resulting from partnership-level federal income tax audits directly from us in the year in which the audit is completed. If we are required to make payments of taxes, penalties and interest resulting from audit adjustments, our cash available for
distribution to our unitholders might be substantially reduced.
Moreover, changes in current state law may subject us to
entity-level taxation by individual states. Because of widespread state budget deficits and other reasons, several states are evaluating ways to subject partnerships to entity-level taxation through the imposition of state income, franchise and
other forms of taxation. Imposition of any such taxes may substantially reduce the cash available for distribution to you. Therefore, if we were treated as a corporation for federal income tax purposes or otherwise subjected to a material amount of
entity-level taxation, there would be a material reduction in the anticipated cash flow and after-tax return to our unitholders, likely causing a substantial reduction in the value of our common units.
Our partnership agreement provides that, if a law is enacted or existing law is modified or interpreted in a manner that subjects us to
taxation as a corporation or otherwise subjects us to entity-level taxation for federal, state or local income tax purposes, the minimum quarterly distribution amount and the target distribution levels may be adjusted to reflect the impact of that
law on us.
The tax treatment of publicly traded partnerships or an investment in our units could be subject to
potential legislative, judicial or administrative changes and differing interpretations, possibly on a retroactive basis.
The present federal income tax treatment of publicly traded partnerships, including us, or an investment in our common units may be modified by administrative, legislative or judicial interpretation at
any time. For example, from time to time, the President and members of Congress propose and consider substantive changes to
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the existing federal income tax laws that affect publicly traded partnerships, including elimination of partnership tax treatment for publicly traded partnerships. Any modification to the federal
income tax laws and interpretations thereof may or may not be retroactively applied and could make it more difficult or impossible for us to meet the exception to be treated as a partnership for federal income tax purposes. Please read
“Material Federal Income Tax Consequences—Partnership Status.”
On May 5, 2015, the U.S. Treasury Department
and the IRS released proposed regulations, or the Proposed Regulations, regarding qualifying income under Section 7704(d)(1)(E) of the Code. The U.S. Treasury Department and the IRS have requested comments from industry participants regarding the
standards set forth in the Proposed Regulations. The Proposed Regulations provide an exclusive list of industry-specific activities and certain limited support activities that generate qualifying income, including water-related activities when
provided for use in drilling and hydraulic fracturing activities.
Although the Proposed Regulations adopt a narrow
interpretation of the water-related activities that generate qualifying income, we believe the income that we treat as qualifying satisfies these requirements and our counsel will rely on the Proposed Regulations to treat income from certain of our
water-related activities as qualifying income and to meet the exception for us to be treated as a partnership for federal income tax purposes.
However, the Proposed Regulations could be changed before they are finalized and could take a position that is contrary to our interpretation. In the event that we do not satisfy the standards set forth
in the final regulations for the water-related services or other income that we treat as qualifying, we anticipate being able to continue to treat income from these activities as qualifying income for ten years, provided that the final regulations
include the special transition rules currently available in the Proposed Regulations.
We are unable to predict whether
any of these changes, or other proposals, will ultimately be enacted. Any such changes could negatively impact the value of an investment in our common units. Our partnership agreement provides that if a law is enacted or existing law is modified or
interpreted in a manner that subjects us to taxation as a corporation or otherwise subjects us to entity-level taxation for federal income tax purposes, the minimum quarterly distribution and the target distribution levels may be adjusted to reflect
the impact of that law on us.
Our unitholders’ share of our income will be taxable to them for federal income tax
purposes even if they do not receive any cash distributions from us.
Because a unitholder will be treated as a partner
to whom we will allocate taxable income that could be different in amount than the cash we distribute, a unitholder’s allocable share of our taxable income will be taxable to it, which may require the payment of federal income taxes and, in
some cases, state and local income taxes, on its share of our taxable income even if it receives no cash distributions from us. Our unitholders may not receive cash distributions from us equal to their share of our taxable income or even equal to
the actual tax liability that results from that income.
If the IRS contests the federal income tax positions we take,
the market for our common units may be adversely impacted and the cost of any IRS contest will reduce our distributable cash flow to our unitholders.
The IRS may adopt positions that differ from the conclusions of our counsel expressed in this prospectus or from the positions we take, and the IRS’s positions may ultimately be sustained. It may be
necessary to resort to administrative or court proceedings to sustain some or all of our counsel’s conclusions or the positions we take and such positions may not ultimately be sustained. A court may not agree with some or all of our
counsel’s conclusions or the positions we take. Any contest with the IRS, and the outcome of any IRS contest, may have a materially adverse impact on the market for our common units and the price at which they trade. Moreover, recently enacted
legislation applicable to partnership tax years beginning after 2017 changes the audit procedures
60
for large partnerships and in certain circumstances would permit the IRS to assess and collect taxes (including any applicable penalties and interest) resulting from partnership-level federal
income tax audits directly from us in the year in which the audit is completed. If we are required to make payments of taxes, penalties and interest resulting from audit adjustments, our cash available for distribution to our unitholders might be
substantially reduced. In addition, our costs of any contest with the IRS will be borne indirectly by our unitholders because the costs will reduce our distributable cash flow.
Tax gain or loss on the disposition of our common units could be more or less than expected.
If our unitholders sell common units, they will recognize a gain or loss for federal income tax purposes equal to the difference between
the amount realized and their tax basis in those common units. Because distributions in excess of their allocable share of our net taxable income decrease their tax basis in their common units, the amount, if any, of such prior excess distributions
with respect to the common units a unitholder sells will, in effect, become taxable income to the unitholder if it sells such common units at a price greater than its tax basis in those common units, even if the price received is less than its
original cost. Furthermore, a substantial portion of the amount realized on any sale of your common units, whether or not representing gain, may be taxed as ordinary income due to potential recapture items, including depreciation recapture. Thus, a
unitholder may recognize both ordinary income and capital loss from the sale of common units if the amount realized on a sale of the common units is less than the unitholder’s adjusted basis in common units. In addition, because the amount
realized includes a unitholder’s share of our nonrecourse liabilities, a unitholder that sells common units may incur a tax liability in excess of the amount of cash received from the sale. Please read “Material Federal Income Tax
Consequences—Disposition of Common Units—Recognition of Gain or Loss.”
Tax-exempt entities and
non-U.S. persons face unique tax issues from owning our common units that may result in adverse tax consequences to them.
Investment in common units by tax-exempt entities, such as employee benefit plans and individual retirement accounts (known as IRAs), and non-U.S. persons raises issues unique to them. For example,
virtually all of our income allocated to organizations that are exempt from federal income tax, including IRAs and other retirement plans, will be unrelated business taxable income and will be taxable to them. Distributions to non-U.S. persons will
be reduced by withholding taxes at the highest applicable effective tax rate, and non-U.S. persons will be required to file federal income tax returns and pay tax on their share of our taxable income. If you are a tax-exempt entity or a non-U.S.
person, you should consult a tax advisor before investing in our common units.
We will treat each purchaser of common
units as having the same tax benefits without regard to the actual common units purchased. The IRS may challenge this treatment, which could adversely affect the value of the common units.
Because we cannot match transferors and transferees of common units and because of other reasons, we will adopt depreciation and
amortization positions that may not conform to all aspects of existing Treasury Regulations. A successful IRS challenge to those positions could adversely affect the amount of tax benefits available to you. Andrews Kurth LLP is unable to opine as to
the validity of such filing positions. It also could affect the timing of these tax benefits or the amount of gain from your sale of common units and could have a negative impact on the value of our common units or result in tax return audit
adjustments. Please read “Material Federal Income Tax Consequences—Tax Consequences of Unit Ownership—Section 754 Election.”
61
We will prorate our items of income, gain, loss and deduction for federal income tax
purposes between transferors and transferees of our units each month based upon the ownership of our units on the first day of each month, instead of on the basis of the date a particular unit is transferred. The IRS may challenge this treatment,
which could change the allocation of items of income, gain, loss and deduction among our unitholders.
We will prorate
our items of income, gain, loss and deduction for federal income tax purposes between transferors and transferees of our units each month based upon the ownership of our units on the first day of each month, instead of on the basis of the date a
particular unit is transferred. Although recently issued final Treasury Regulations allow publicly traded partnerships to use a similar monthly simplifying convention to allocate tax items among transferor and transferee unitholders, these Treasury
Regulations do not specifically authorize all aspects of the proration method we currently plan to adopt. Accordingly, Andrews Kurth LLP is unable to opine on the validity of our method of allocating income, gain, loss and deduction among transferor
and transferee unitholders. If the IRS were to successfully challenge our proration method, we may be required to change the allocation of items of income, gain, loss and deduction among our unitholders. Please read “Material Federal Income Tax
Consequences—Disposition of Common Units—Allocations Between Transferors and Transferees.”
A unitholder
whose common units are loaned to a “short seller” to effect a short sale of common units may be considered as having disposed of those common units. If so, he would no longer be treated for federal income tax purposes as a partner with
respect to those common units during the period of the loan and may recognize gain or loss from the disposition.
Because a unitholder whose common units are loaned to a “short seller” to effect a short sale of common units may be considered
as having disposed of the loaned common units, he may no longer be treated for federal income tax purposes as a partner with respect to those common units during the period of the loan to the short seller and the unitholder may recognize gain or
loss from such disposition. Moreover, during the period of the loan to the short seller, any of our income, gain, loss or deduction with respect to those common units may not be reportable by the unitholder and any cash distributions received by the
unitholder as to those common units could be fully taxable as ordinary income. Andrews Kurth LLP has not rendered an opinion regarding the treatment of a unitholder where common units are loaned to a short seller to effect a short sale of common
units; therefore, our unitholders desiring to assure their status as partners and avoid the risk of gain recognition from a loan to a short seller are urged to consult a tax advisor to discuss whether it is advisable to modify any applicable
brokerage account agreements to prohibit their brokers from loaning their common units.
We will adopt certain valuation
methodologies in determining a unitholder’s allocations of income, gain, loss and deduction. The IRS may challenge these methodologies or the resulting allocations, and such a challenge could adversely affect the value of our common units.
In determining the items of income, gain, loss and deduction allocable to our unitholders, in certain circumstances,
including when we issue additional units, we must determine the fair market value of our assets. Although we may from time to time consult with professional appraisers regarding valuation matters, we make many fair market value estimates ourselves
using a methodology based on the market value of our common units as a means to determine the fair market value of our assets. The IRS may challenge these valuation methods and the resulting allocations of income, gain, loss and deduction for
federal income tax purposes.
A successful IRS challenge to these methods or allocations could adversely affect the amount,
character and timing of our taxable income or loss and a unitholder’s distributive share of these items. It also could affect the amount of gain from our unitholders’ sale of common units and could have a negative impact on the value of
our common units or result in audit adjustments to our items of income, gain, loss and deduction and a unitholder’s distributive share of these items without the benefit of additional deductions.
62
The sale or exchange of 50% or more of our capital and profits interests during any
twelve-month period will result in the termination of our partnership for federal income tax purposes.
We will be
considered to have technically terminated our partnership for federal income tax purposes if there is a sale or exchange of 50% or more of the total interests in our capital and profits within a twelve-month period. For purposes of determining
whether the 50% threshold has been met, multiple sales of the same interest will be counted only once. Our technical termination would, among other things, result in the closing of our taxable year for all unitholders, which would result in us
filing two tax returns (and our unitholders could receive two Schedules K-1 if the relief discussed below is not available) for one fiscal year and could result in a deferral of depreciation deductions allowable in computing our taxable income. In
the case of a unitholder reporting on a taxable year other than a fiscal year ending December 31, the closing of our taxable year may also result in more than twelve months of our taxable income or loss being includable in his taxable income
for the year of termination. Our termination currently would not affect our classification as a partnership for federal income tax purposes, but instead we would be treated as a new partnership for federal income tax purposes. If treated as a new
partnership, we must make new tax elections, including a new election under Section 754 of the Internal Revenue Code and could be subject to penalties if we are unable to determine that a termination occurred. Moreover, a technical termination
might either accelerate the application of, or subject us to, any tax legislation enacted before the termination. The IRS has announced a publicly traded partnership technical termination relief program whereby, if a publicly traded partnership that
technically terminated requests publicly traded partnership technical termination relief and such relief is granted by the IRS, among other things, the partnership will only have to provide one Schedule K-1 to unitholders for the year
notwithstanding two partnership tax years. Please read “Material Federal Income Tax Consequences—Disposition of Common Units—Constructive Termination.”
As a result of investing in our common units, you may become subject to state and local taxes and return filing requirements in
jurisdictions where we operate or own or acquire properties.
In addition to federal income taxes, our unitholders will
likely be subject to other taxes, including state and local taxes, unincorporated business taxes and estate, inheritance or intangible taxes that are imposed by the various jurisdictions in which we conduct business or control property now or in the
future, even if they do not live in any of those jurisdictions. Our unitholders will likely be required to file state and local income tax returns and pay state and local income taxes in some or all of these various jurisdictions. Further, our
unitholders may be subject to penalties for failure to comply with those requirements. As we make acquisitions or expand our business, we may control assets or conduct business in additional states that impose a personal income tax. It is your
responsibility to file all federal, state and local tax returns. Our counsel has not rendered an opinion on the state or local tax consequences of an investment in our common units. Please consult your tax advisor.
63
USE OF PROCEEDS
We expect to receive net proceeds of approximately $ million from the sale of
common units offered by this prospectus, based on an assumed initial public offering price of $ per common unit (the
mid-point
of the price range set forth on the cover page of this prospectus), after deducting underwriting discounts and commissions, the structuring fee and estimated offering expenses. Our estimate assumes the
underwriters’ option to purchase additional common units is not exercised. We intend to use the net proceeds from this offering (i) to make a distribution of approximately $ million to
Noble, (ii) to pay approximately $ million of origination fees related to our new revolving credit facility; and (iii) for general partnership purposes.
If and to the extent the underwriters exercise their option to purchase additional common units, the number of common units purchased by
the underwriters pursuant to such exercise will be issued to the public and the remainder of the additional common units, if any, will be issued to Noble at the expiration of
the option period. Any such common units issued to Noble will be issued for no additional consideration. If the underwriters exercise in full their option to purchase additional common units, we expect to receive net proceeds of approximately
$ million, after deducting underwriting discounts and commissions, the structuring fee and estimated offering expenses. We will use any net proceeds from the exercise of the underwriters’
option to purchase additional common units to make a cash distribution to Noble.
If we choose to sell fewer common units in
this offering, the number of common units to be held by Noble after consummation of this offering will be increased by an amount equivalent to such decrease in the number of units sold. Likewise, if we choose to sell more common units in this
offering, the number of common units to be held by Noble after consummation of this offering will be reduced by an amount equivalent to such increase in the number of units sold. Additionally, the initial public offering price may be greater or less
than the assumed initial public offering price. The actual initial public offering price is subject to market conditions and negotiations between us and the underwriters. A $ increase (decrease) in the
assumed initial public offering price of $ per common unit would increase (decrease) the net proceeds to us from this offering by approximately $
million, assuming the number of common units offered by us, as set forth on the cover page of this prospectus, remains the same and assuming the underwriters do not exercise their option to purchase additional common units, and after deducting
underwriting discounts and commissions, the structuring fee and estimated offering expenses. Any such change in the net proceeds to us would increase or decreases, as the case may be, the amount of the distribution to be paid to Noble.
64
CAPITALIZATION
The following table sets forth:
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•
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the historical cash and cash equivalents and capitalization of our Predecessor as of March 31, 2016; and
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•
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our pro forma capitalization as of March 31, 2016, giving effect to the pro forma adjustments described in our unaudited pro forma combined financial
statements included elsewhere in this prospectus, including this offering and the application of the net proceeds from this offering in the manner described under “Use of Proceeds” and the other transactions described under
“Prospectus Summary—The Transactions.”
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The following table assumes that the underwriters do
not exercise their option to purchase additional common units. If and to the extent the underwriters exercise their option to purchase additional common units, the number of common units purchased by the underwriters pursuant to such exercise will
be issued to the public and the remainder of the additional common units, if any, will be issued to Noble at the expiration of the option period. Any such common units will be
issued for no additional consideration.
This table is derived from, should be read together with and is qualified in its
entirety by reference to the historical financial statements and the accompanying notes and the unaudited pro forma combined financial statements and the accompanying notes included elsewhere in this prospectus. You should also read this table in
conjunction with “Prospectus Summary—The Transactions,” “Use of Proceeds,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
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As of March
31,
2016
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Historical
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Pro Forma
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(in thousands)
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Cash and cash equivalents
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$
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8,293
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$
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8,293
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Long-term debt:
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Revolving credit facility
(1)
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$
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—
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$
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—
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Total long-term debt (including current maturities)
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—
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—
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Net parent investment / partners’ capital:
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Net parent investment
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255,866
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277,316
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Held by public:
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Common units
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Held by Noble:
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Common units
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Subordinated units
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General partner interest
(2)
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—
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—
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Total equity
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255,866
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277,316
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Non-controlling interest
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Total partners’ capital
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Total capitalization
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$
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255,866
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$
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277,316
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(1)
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In connection with the completion of this offering, we expect to enter into a new $ million revolving credit
facility. Please read “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Capital Resources and Liquidity—Revolving Credit Facility.”
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(2)
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Upon completion of this offering, our general partner will own a non-economic general partner interest in us.
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65
DILUTION
Dilution is the amount by which the offering price per common unit in this offering will exceed the pro forma net tangible book value per
common unit after the offering. On a pro forma basis as of March 31, 2016, after giving effect to the offering of common units and the related transactions, our net tangible book value was approximately
$ million, or $ per common unit. Purchasers of common units in this offering will experience substantial and immediate dilution in pro forma
net tangible book value per common unit for financial accounting purposes, as illustrated in the following table.
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Assumed initial public offering price per common unit
(1)
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$
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Pro forma net tangible book value per unit before this offering
(2)
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$
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Less: Distribution to Noble
(3)
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Add: Increase in net tangible book value per unit attributable to purchasers in this offering
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Less: Pro forma net tangible book value per unit after this offering
(4)
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Immediate dilution in net tangible book value per common unit to purchasers in this offering
(5)(6)
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$
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(1)
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Represents the mid-point of the price range set forth on the cover page of this prospectus.
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(2)
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Determined by dividing the number of units ( common units and
subordinated units) to be issued to the general partner and its affiliates for their contribution of assets and liabilities to us into the pro forma net tangible book value of
the contributed assets and liabilities of $ million.
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(3)
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Determined by dividing the number of units ( common units and
subordinated units) to be issued to Noble for its contribution of assets and liabilities to us. At the closing of this offering, we intend to make a distribution of
$ million to Noble.
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(4)
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Determined by dividing the number of units to be outstanding after this offering ( common
units and subordinated units) and the application of the related net proceeds into our pro forma net tangible book value, after giving effect to the application of the net
proceeds from this offering, of $ million.
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(5)
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If the initial public offering price were to increase or decrease by $ per common unit, then dilution in net tangible
book value per common unit would equal $ and $ , respectively.
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(6)
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Because the total number of units outstanding following this offering will not be impacted by any exercise of the underwriters’ option to purchase additional
common units and any net proceeds from such exercise will not be retained by us, there will be no change to the dilution in net tangible book value per common unit to purchasers in this offering due to any such exercise of the option.
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The following table sets forth the partnership interests that we will issue and the total consideration
contributed to us by our general partner and its affiliates in respect of their partnership interests and by the purchasers of common units in this offering upon consummation of the transactions contemplated by this prospectus.
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Units Acquired
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Total Consideration
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Number
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%
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Amount
(in millions)
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%
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Noble and its affiliates
(1)(2)(3)
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%
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$
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%
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Purchasers in this offering
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%
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%
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Total
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%
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$
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%
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(1)
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Upon the completion of this offering, Noble will own common units
and subordinated units.
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(2)
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Assumes the underwriters’ option to purchase additional common units is not exercised.
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(3)
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The assets contributed by Noble were recorded at historical cost in accordance with GAAP. Book value of the consideration provided by our general partner and its
affiliates, as of March 31, 2016 was $ million (excludes deferred taxes). At the closing of this offering, we intend to make a distribution of
$ million to Noble.
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66
CASH DISTRIBUTION POLICY AND RESTRICTIONS ON DISTRIBUTIONS
The following discussion of our cash distribution policy should be read in conjunction with the specific assumptions
included in this section. In addition, you should read “Forward-Looking Statements” and “Risk Factors” for information regarding statements that do not relate strictly to historical or current facts and certain risks inherent in
our business.
For additional information regarding our historical and pro forma results of operations, please refer to our
historical financial statements and the accompanying notes and the unaudited pro forma condensed financial statements and the accompanying notes included elsewhere in this prospectus.
General
Rationale for Our Cash Distribution Policy
Our partnership agreement
requires that we distribute all of our available cash quarterly. This requirement forms the basis of our cash distribution policy and reflects a basic judgment that our unitholders will be better served by distributing our available cash rather than
retaining it because, among other reasons, we believe we will generally finance any expansion capital expenditures from external financing sources. Under our current cash distribution policy, we intend to make a minimum quarterly distribution to the
holders of our common units and subordinated units of $ per unit, or $ per unit on an annualized basis, to the extent we have sufficient
available cash after the establishment of cash reserves (including estimated maintenance capital expenditures) and the payment of costs and expenses, including the payment of expenses to our general partner. However, other than the requirement in
our partnership agreement to distribute all of our available cash each quarter, we have no legal obligation to make quarterly cash distributions in this or any other amount, and the board of directors of our general partner has considerable
discretion to determine the amount of our available cash each quarter. In addition, the board of directors of our general partner may change our cash distribution policy at any time, subject to the requirement in our partnership agreement to
distribute all of our available cash quarterly. Generally, our available cash is the sum of (i) all cash on hand at the end of a quarter after the payment of our expenses and the establishment of cash reserves and (ii) if the board of
directors of our general partner so determines, all or any portion of additional cash on hand resulting from working capital borrowings made after the end of the quarter. Because we are not subject to an entity-level federal income tax, we expect to
have more cash to distribute than would be the case if we were subject to federal income tax. If we do not generate sufficient available cash from our operations, we may, but are under no obligation to, borrow funds to pay the minimum quarterly
distribution to our unitholders.
Limitations on Cash Distributions and Our Ability to Change Our Cash Distribution Policy
Although our partnership agreement requires that we distribute all of our available cash quarterly, there is no guarantee that we will
make quarterly cash distributions to our unitholders at our minimum quarterly distribution rate or at any other rate, and we have no legal obligation to do so. Our current cash distribution policy is subject to certain restrictions, as well as the
considerable discretion of the board of directors of our general partner in determining the amount of our available cash each quarter. The following factors will affect our ability to make cash distributions, as well as the amount of any cash
distributions we make:
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•
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We expect that our cash distribution policy will be subject to restrictions on cash distributions under our new revolving credit facility. We expect
that one such restriction would prohibit us from making cash distributions while an event of default has occurred and is continuing under our new revolving credit facility, notwithstanding our cash distribution policy. Please read
“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Capital Resources and Liquidity—Revolving Credit Facility.”
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•
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The amount of cash that we distribute and the decision to make any distribution is determined by the board of directors of our general partner, taking
into consideration the terms of our partnership
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67
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agreement. Specifically, the board of directors of our general partner will have the authority to establish cash reserves to provide for the proper conduct of our business, comply with applicable
law or any agreement to which we are a party or by which we are bound or our assets are subject and provide funds for future cash distributions to our unitholders, and the establishment of or increase in those reserves could result in a reduction in
cash distributions from levels we currently anticipate pursuant to our stated cash distribution policy. Any decision to establish cash reserves made by the board of directors of our general partner in good faith will be binding on our unitholders.
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•
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While our partnership agreement requires us to distribute all of our available cash, our partnership agreement, including the provisions requiring us
to make cash distributions, may be amended. During the subordination period, our partnership agreement may not be amended without the approval of our public common unitholders, except in a limited number of circumstances when our general partner can
amend our partnership agreement without any unitholder approval. Please read “Our Partnership Agreement—Amendment of Our Partnership Agreement—No Unitholder Approval.” However, after the subordination period has ended, our
partnership agreement may be amended with the consent of our general partner and the approval of a majority of the outstanding common units, including common units owned by our general partner and its affiliates. Following the completion of this
offering, Noble will own our general partner, common units and subordinated units,
representing an aggregate % limited partner interest (or common units and subordinated units, representing an aggregate % limited partner
interest, if the underwriters exercise in full their option to purchase additional common units).
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•
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Under Section 17-607 of the Delaware Act, we may not make a distribution if the distribution would cause our liabilities to exceed the fair value
of our assets.
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•
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We may lack sufficient cash to pay distributions to our unitholders due to cash flow shortfalls attributable to a number of operational, commercial or
other factors as well as increases in our operating or general and administrative expenses, principal and interest payments on our debt, tax expenses, working capital requirements and anticipated cash needs. Our available cash is directly impacted
by the cash expenses necessary to run our business and will be reduced dollar-for-dollar to the extent such uses of cash increase. Please read “Provisions of Our Partnership Agreement Relating to Cash Distributions—Distributions of
Available Cash.”
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•
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Our ability to make cash distributions to our unitholders depends on the performance of our development companies and their ability to distribute cash
to us.
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•
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If and to the extent our available cash materially declines from quarter to quarter, we may elect to change our current cash distribution policy and
reduce the amount of our quarterly distributions in order to service or repay our debt or fund expansion capital expenditures.
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To the extent that our general partner determines not to distribute the full minimum quarterly distribution on our common units with respect to any quarter during the subordination period, the common
units will accrue an arrearage equal to the difference between the minimum quarterly distribution and the amount of the distribution actually paid on the common units with respect to that quarter. The aggregate amount of any such arrearages must be
paid on the common units before any distributions of available cash from operating surplus may be made on the subordinated units and before any subordinated units may convert into common units. The subordinated units will not accrue any arrearages.
Please read “Provisions of Our Partnership Agreement Relating to Cash Distributions—Subordinated Units and Subordination Period.”
Our Ability to Grow Is Dependent on Our Ability to Access External Expansion Capital
Our partnership agreement requires us to distribute all of our available cash to our unitholders on a quarterly basis. As a result, we expect that we will rely primarily upon our cash reserves and
external financing sources, including borrowings under our new revolving credit facility and the issuance of debt and equity securities, to fund future acquisitions and other expansion capital expenditures. While we have historically received
funding
68
from Noble, we do not have any commitment from Noble, our general partner or any of their respective affiliates to fund our cash flow deficits or provide other direct or indirect financial
assistance to us following the closing of this offering. Following the completion of this offering, Noble will directly own a % limited partner interest in us (or
a % limited partner interest in us if the underwriters exercise in full their option to purchase additional common units). In addition, Noble will wholly own our general partner and all of our
incentive distribution rights. Given Noble’s significant ownership interests in us following the closing of this offering, we believe Noble will be incentivized to promote and support the successful execution of our business strategies.
To the extent we are unable to finance growth with external sources of capital, the requirement in our partnership agreement
to distribute all of our available cash and our current cash distribution policy may significantly impair our ability to grow. In addition, because we will distribute all of our available cash, our growth may not be as fast as businesses that
reinvest all of their available cash to expand ongoing operations. We expect that our new revolving credit facility will restrict our ability to incur additional debt, including through the issuance of debt securities. Please read “Risk
Factors—Risks Related to Our Business—Restrictions in our new revolving credit facility could adversely affect our business, financial condition, results of operations and ability to make quarterly cash distributions to our
unitholders.” To the extent we issue additional partnership interests, the payment of distributions on those additional partnership interests may increase the risk that we will be unable to maintain or increase our cash distributions per common
unit. There are no limitations in our partnership agreement on our ability to issue additional partnership interests, including partnership interests ranking senior to our common units, and our common unitholders will have no preemptive or other
rights (solely as a result of their status as unitholders) to purchase any such additional partnership interests. If we incur additional debt (under our new revolving credit facility or otherwise) to finance our growth strategy, we will have
increased interest expense, which in turn will reduce the available cash that we have to distribute to our unitholders. Please read “Risk Factors—Risks Related to Our Business—Debt we incur in the future may limit our flexibility to
obtain financing and to pursue other business opportunities.”
Our Minimum Quarterly
Distribution
Upon the consummation of this offering, our partnership agreement will provide for a minimum quarterly
distribution of $ per unit for each whole quarter, or $ per unit on an annualized basis. Our
ability to make cash distributions at the minimum quarterly distribution rate will be subject to the factors described above under “—General—Limitations on Cash Distributions and Our Ability to Change Our Cash Distribution
Policy.” Quarterly distributions, if any, will be made within 45 days after the end of each calendar quarter to holders of record on or about the first day of each such month in which such distributions are made. We do not expect to make
distributions for the period that began on January 1, 2016 and ends on the day prior to the closing of this offering. We will adjust the amount of our first distribution for the period from the closing of this offering
through , 2016 based on the number of days in that period.
The table below sets forth the amount of common units and subordinated units that will be outstanding immediately after this offering,
assuming the underwriters do not exercise their option to purchase additional common units, and the cash available for distribution needed to pay the aggregate minimum quarterly distribution on all of such units for a single fiscal quarter and a
four quarter period:
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|
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|
|
|
|
|
|
|
|
|
|
|
Minimum Quarterly Distributions
|
|
|
|
|
Number of Units
|
|
One Quarter
|
|
|
Annualized
|
|
|
Common units held by the public
(1)
|
|
|
|
$
|
|
|
|
$
|
|
|
|
Common units held by Noble
(1)
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|
|
|
|
|
|
|
|
|
|
|
Subordinated units held by Noble
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Total
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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(1)
|
Assumes no exercise of the underwriters’ option to purchase additional common units. Please read “Use of Proceeds” for a description of the impact of an
exercise of the option on the common unit ownership.
|
69
Noble will initially hold all of our incentive distribution rights, which entitle the holder
to increasing percentages, up to a maximum of 50%, of the cash we distribute in excess of $ per unit per quarter.
During the subordination period, before we make any quarterly distributions to our subordinated unitholders, our common unitholders are
entitled to receive payment of the full minimum quarterly distribution for such quarter plus any arrearages in distributions of the minimum quarterly distribution from prior quarters. Please read “Provisions of Our Partnership Agreement
Relating to Cash Distributions—Subordinated Units and Subordination Period.” We cannot guarantee, however, that we will pay distributions on our common units at our minimum quarterly distribution rate or at any other rate in any quarter.
Although holders of our common units may pursue judicial action to enforce provisions of our partnership agreement, including
those related to requirements to make cash distributions as described above, our partnership agreement provides that any determination made by our general partner in its capacity as our general partner must be made in good faith and that any such
determination will not be subject to any other standard imposed by the Delaware Act or any other law, rule or regulation or at equity. Our partnership agreement provides that, in order for a determination by our general partner to be made in
“good faith,” our general partner must subjectively believe that the determination is not adverse to the interests of our partnership. In making such determination, our general partner may take into account the totality of the
circumstances or the totality of the relationships between the parties involved, including other relationships or transactions that may be particularly favorable or advantageous to us. Please read “Conflicts of Interest and Duties.”
The provision in our partnership agreement requiring us to distribute all of our available cash quarterly may not be modified
without amending our partnership agreement; however, as described above, the actual amount of our cash distributions for any quarter is subject to fluctuations based on the amount of cash we generate from our business, the amount of reserves the
board of directors of our general partner establishes in accordance with our partnership agreement and the amount of available cash from working capital borrowings.
Additionally, the board of directors of our general partner may reduce the minimum quarterly distribution and the target distribution levels if legislation is enacted or modified that results in our
partnership becoming taxable as a corporation or otherwise subject to taxation as an entity for federal, state or local income tax purposes. In such an event, the minimum quarterly distribution and the target distribution levels may be reduced
proportionately by the percentage decrease in our available cash resulting from the estimated tax liability we would incur in the quarter in which such legislation is effective. The minimum quarterly distribution will also be proportionately
adjusted in the event of any distribution, combination or subdivision of common units in accordance with the partnership agreement, or in the event of a distribution of available cash from capital surplus. Please read “Provisions of Our
Partnership Agreement Relating to Cash Distributions—Adjustment to the Minimum Quarterly Distribution and Target Distribution Levels.” The minimum quarterly distribution is also subject to adjustment if the holder(s) of the incentive
distribution rights (initially only our general partner) elect to reset the target distribution levels related to the incentive distribution rights. In connection with any such reset, the minimum quarterly distribution will be reset to an amount
equal to the average cash distribution amount per common unit for the two quarters immediately preceding the reset. Please read “Provisions of Our Partnership Agreement Relating to Cash Distributions—Noble’s Right to Reset Incentive
Distribution Levels.”
In the sections that follow, we present in detail the basis for our belief that we will be
able to fully fund our annualized minimum quarterly distribution of $ per unit for the twelve months ending September 30, 2017. In those sections, we present two tables,
consisting of:
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|
•
|
|
“Unaudited Pro Forma EBITDA and Distributable Cash Flow for the Year Ended December 31, 2015 and Twelve Months Ended March 31, 2016,” in
which we present the amount of EBITDA and distributable cash flow we would have generated on a pro forma basis for the year ended December 31, 2015 and the twelve months ended March 31, 2016, derived from our unaudited pro forma condensed
financial statements that are included in this prospectus, as adjusted to give pro forma effect to this offering and the related formation transactions; and
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70
|
|
•
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|
“Estimated EBITDA and Distributable Cash Flow for the Twelve Months Ending September 30, 2017,” in which we provide our estimated
forecast of our ability to generate sufficient EBITDA and distributable cash flow to pay the minimum quarterly distribution on all common units and subordinated units for the twelve months ending September 30, 2017.
|
Unless otherwise specifically noted, the amounts set forth in the following sections reflect the pro forma
historical and forecasted results attributable to 100% of the assets and operations of our development companies and are not adjusted to reflect Noble’s retained non-controlling interests in our development companies. In connection with the
completion of this offering, Noble will contribute to us controlling interests ranging from 5% to 100% in the development companies that own our operating assets and dedications, and Noble will retain non-controlling interests ranging from
0% to 95% in the development companies that own our operating assets and dedications. Please read “Prospectus Summary—The Transactions” and “Prospectus Summary—Ownership and Organizational Structure.” Following the
completion of this offering, we will consolidate the results of operations of our development companies and then record a non-controlling interest deduction for Noble’s retained interests in our development companies.
Unaudited Pro Forma EBITDA and Distributable Cash Flow for the Year Ended December 31, 2015 and Twelve
Months Ended March 31, 2016
If we had completed the transactions contemplated in this prospectus on January 1,
2015, pro forma distributable cash flow generated for the year ended December 31, 2015 and the twelve months ended March 31, 2016 would have been approximately $51.3 million and $62.1 million, respectively. These amounts would not
have been sufficient to pay the minimum quarterly distribution of $ per unit per quarter ($ per
unit on an annualized basis) on all of our common units and subordinated units for each period. We based the pro forma adjustments upon currently available information and specific estimates and assumptions. The pro forma amounts below do not
purport to present our results of operations had the transactions contemplated in this prospectus actually been completed as of the dates indicated. In addition, distributable cash flow is primarily a cash accounting concept, while our unaudited pro
forma condensed financial statements have been prepared on an accrual basis. As a result, you should view the amount of pro forma distributable cash flow only as a general indication of the amount of distributable cash flow that we might have
generated had we been formed on January 1, 2015.
The following table illustrates, on a pro forma basis, for the
year ended December 31, 2015 and the twelve months ended March 31, 2016, the amount of cash that would have been available for distribution to our unitholders and our general partner, assuming in each case that this offering and the other
transactions contemplated in this prospectus had been consummated on January 1, 2015.
71
Noble Midstream Partners LP
Unaudited Pro Forma EBITDA and Distributable Cash Flow
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|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
2015
|
|
|
Twelve Months
Ended
March 31,
2016
|
|
|
($ in millions, except per unit amounts)
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
Midstream Services Revenue—Related Party
|
|
$
|
108.5
|
|
|
$
|
120.3
|
|
|
Income from Investments
|
|
|
4.6
|
|
|
|
4.7
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenue
|
|
|
113.1
|
|
|
|
125.0
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
Direct Operating
|
|
|
27.5
|
|
|
|
26.8
|
|
|
Depreciation, Depletion and Amortization
|
|
|
6.9
|
|
|
|
7.7
|
|
|
General and Administrative
(1)
|
|
|
9.6
|
|
|
|
8.2
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Expenses
|
|
|
44.0
|
|
|
|
42.7
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income (Loss)
|
|
|
69.1
|
|
|
|
82.3
|
|
|
Interest Expense
(2)
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Before Income Taxes
|
|
|
69.1
|
|
|
|
82.3
|
|
|
Income Tax Benefit
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma Net Income (Loss)
|
|
$
|
69.1
|
|
|
$
|
82.3
|
|
|
Less:
|
|
|
|
|
|
|
|
|
|
Net Income Attributable to Noble-Retained Interests
(3)
|
|
|
18.1
|
|
|
|
19.8
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income Attributable to Noble Midstream Partners LP
|
|
$
|
51.0
|
|
|
$
|
62.5
|
|
|
Add:
|
|
|
|
|
|
|
|
|
|
Net Income Attributable to Noble-Retained Interests
|
|
|
18.1
|
|
|
|
19.8
|
|
|
Depreciation
|
|
|
6.9
|
|
|
|
7.7
|
|
|
Interest Expense
|
|
|
—
|
|
|
|
—
|
|
|
Income Tax Expense
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma EBITDA
|
|
|
76.0
|
|
|
|
90.0
|
|
|
Less:
|
|
|
|
|
|
|
|
|
|
EBITDA Attributable to Noble-Retained Interests
(4)
|
|
|
19.8
|
|
|
|
21.7
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma EBITDA Attributable to Noble Midstream Partners LP
|
|
$
|
56.2
|
|
|
$
|
68.3
|
|
|
|
|
|
|
|
|
|
|
|
|
Less:
|
|
|
|
|
|
|
|
|
|
Cash Interest Expense
(5)
|
|
|
—
|
|
|
|
—
|
|
|
Maintenance Capital Expenditures
(6)
|
|
|
4.9
|
|
|
|
6.2
|
|
|
Expansion Capital Expenditures
(7)
|
|
|
40.5
|
|
|
|
33.7
|
|
|
|
|
|
|
|
|
|
|
|
|
Add:
|
|
|
|
|
|
|
|
|
|
Capital Contributions from Noble to Fund Expansion Capital Expenditures
(8)
|
|
|
40.5
|
|
|
|
33.7
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma Distributable Cash Flow Attributable to Noble Midstream Partners LP
|
|
$
|
51.3
|
|
|
$
|
62.1
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma Cash Distributions:
|
|
|
|
|
|
|
|
|
|
Distributions to Public Common Unitholders
|
|
$
|
|
|
|
$
|
|
|
|
Distributions to Noble:
|
|
|
|
|
|
|
|
|
|
Common Units Held by Noble
|
|
|
|
|
|
|
|
|
|
Subordinated Units Held by Noble
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Distributions to Noble
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate Quarterly Distributions
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess / (Shortfall) of Distributable Cash Flow Over Aggregate Annualized Minimum Quarterly Distribution
|
|
|
|
|
|
|
|
|
|
Percent of Aggregate Annualized Minimum Quarterly Distribution Payable to Common Unitholders
|
|
|
|
%
|
|
|
|
%
|
|
Percent of Aggregate Annualized Minimum Quarterly Distribution Payable to Subordinated Unitholders
|
|
|
|
%
|
|
|
|
%
|
72
|
(1)
|
We expect to incur approximately $6.7 million of estimated annual incremental general and administrative expenses as a result of being a publicly traded partnership.
|
|
(2)
|
Represents non-cash amortization of origination fees and commitment fees on the undrawn portion of our new revolving credit facility that we expect to have in place at
the closing of this offering (assuming no amounts have been drawn on the revolving credit facility).
|
|
(3)
|
Represents net income attributable to Noble’s non-controlling interests in our development companies.
|
|
(4)
|
Represents EBITDA attributable to Noble’s non-controlling interests in our development companies, calculated as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
2015
|
|
|
Twelve Months
Ended
March 31,
2016
|
|
|
Net income attributable to Noble’s non-controlling interest in our operating subsidiaries
|
|
$
|
18.1
|
|
|
$
|
19.8
|
|
|
Add:
|
|
|
|
|
|
|
|
|
|
Depreciation expense attributable to Noble’s non-controlling interest in our operating subsidiaries
|
|
|
1.7
|
|
|
|
1.9
|
|
|
Interest expense attributable to Noble’s non-controlling interest in our operating subsidiaries
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA attributable to Noble’s non-controlling interest in our operating subsidiaries
|
|
$
|
19.8
|
|
|
$
|
21.7
|
|
|
|
|
|
|
|
|
|
|
|
|
(5)
|
Represents commitment fees on the undrawn portion of our new revolving credit facility that we expect to have in place at the closing of this offering (assuming no
amounts have been drawn on the revolving credit facility).
|
|
(6)
|
Represents estimated maintenance capital expenditures attributable to our controlling interests in our development companies. Historically, we did not make a
distinction between maintenance capital expenditures and expansion capital expenditures; however, for the purposes of the presentation of “Unaudited Pro Forma EBITDA and Distributable Cash Flow,” we have estimated that approximately
$4.9 million and $6.2 million of our capital expenditures would have constituted maintenance capital expenditures for the pro forma year ended December 31, 2015 and the twelve months ended March 31, 2016, respectively. The estimated
maintenance capital expenditures attributable to Noble’s retained interests are listed below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
2015
|
|
|
Twelve Months
Ended
March 31,
2016
|
|
|
Maintenance Capital Expenditures Attributable to Noble Midstream Partners LP
|
|
$
|
4.9
|
|
|
$
|
6.2
|
|
|
Maintenance Capital Expenditures Attributable to Noble—Retained Interest
|
|
|
1.1
|
|
|
|
1.6
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Maintenance Capital Expenditures Attributable to Our Development Companies
|
|
$
|
6.0
|
|
|
$
|
7.8
|
|
|
|
|
|
|
|
|
|
|
|
73
|
(7)
|
Represents estimated expansion capital expenditures attributable to our controlling interests in our development companies. The estimated expansion capital expenditures
attributable to Noble’s retained interest are listed below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
2015
|
|
|
Twelve Months
Ended
March 31,
2016
|
|
|
Expansion Capital Expenditures Attributable to Noble Midstream Partners LP
|
|
$
|
40.5
|
|
|
$
|
33.7
|
|
|
Expansion Capital Expenditures Attributable to Noble—Retained Interest
|
|
|
14.6
|
|
|
|
7.9
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Expansion Capital Expenditures Attributable to Our Development Companies
|
|
$
|
55.1
|
|
|
$
|
41.6
|
|
|
|
|
|
|
|
|
|
|
|
|
(8)
|
Expansion capital expenditures have been funded by Noble directly or by choosing to forgo cash distributions.
|
Estimated EBITDA and Distributable Cash Flow for the Twelve Months Ending September 30, 2017
We forecast estimated EBITDA and distributable cash flow attributable to Noble Midstream Partners LP for the twelve months ending
September 30, 2017 will be approximately $63.9 million and $54.9 million, respectively. In order to pay the aggregate annualized minimum quarterly distribution to all of our unitholders for the twelve months ending September 30, 2017, we
must generate EBITDA and distributable cash flow of at least $ million and $ million,
respectively.
We have not historically made public projections as to future operations, earnings or other results. However,
management has prepared the forecast of estimated EBITDA and distributable cash flow for the twelve months ending September 30, 2017, and related assumptions set forth below, to substantiate our belief that we will have sufficient EBITDA and
distributable cash flow to pay the aggregate annualized minimum quarterly distribution to all our unitholders for the twelve months ending September 30, 2017. Please read “—Significant Forecast Assumptions.” Due to the rate of
development of our assets and our dependence on Noble’s exploration and production schedule for our revenue, our cash flows may vary from quarter to quarter. However, we believe that we will generate sufficient cash flow from operations to
support the minimum quarterly distribution during each of the four quarters in the twelve months ending September 30, 2017. This forecast is a forward-looking statement and should be read together with our historical and unaudited pro forma
financial statements and the accompanying notes included elsewhere in this prospectus and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” This forecast was not prepared with a view toward
complying with the published guidelines of the SEC or guidelines established by the American Institute of Certified Public Accountants with respect to prospective financial information, but, in the view of our management, was prepared on a
reasonable basis, reflects the best currently available estimates and judgments, and presents, to the best of management’s knowledge and belief, the assumptions on which we base our belief that we can generate sufficient EBITDA and
distributable cash flow to pay the minimum quarterly distribution to all unitholders and our general partner for the forecasted period. However, this information is not fact and should not be relied upon as being necessarily indicative of our future
results, and readers of this prospectus are cautioned not to place undue reliance on the prospective financial information.
The prospective financial information included in this prospectus has been prepared by, and is the responsibility of, our management. KPMG LLP has neither compiled nor performed any procedures with
respect to the accompanying prospective financial information and, accordingly, KPMG LLP does not express an opinion or any other form of assurance with respect thereto. The KPMG LLP report included in this prospectus relates to our historical
financial information. It does not extend to the prospective financial information and should not be read to do so.
74
When considering our financial forecast, you should keep in mind the risk factors and other
cautionary statements under “Risk Factors.” Any of the risks discussed in this prospectus, to the extent they are realized, could cause our actual results of operations to vary significantly from those that would enable us to generate our
estimated EBITDA and distributable cash flow.
We do not undertake any obligation to release publicly the results of any
future revisions we may make to the forecast or to update this forecast to reflect events or circumstances after the date of this prospectus. Therefore, you are cautioned not to place undue reliance on this prospective financial information.
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|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Twelve
Months
Ending
September
30,
2017
|
|
|
Three Months Ending
|
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|
($ in millions, except per unit amounts)
|
|
|
December 31,
2016
|
|
|
March 31,
2017
|
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|
June 30,
2017
|
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|
September 30,
2017
|
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|
Revenues
|
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|
Midstream Services Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Colorado River DevCo LP
|
|
$
|
99.8
|
|
|
$
|
25.3
|
|
|
$
|
24.9
|
|
|
$
|
23.0
|
|
|
$
|
26.5
|
|
|
Green River DevCo LP
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Gunnison River DevCo LP
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Laramie River DevCo LP
|
|
|
1.4
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1.4
|
|
|
San Juan River DevCo LP
|
|
|
14.8
|
|
|
|
1.1
|
|
|
|
3.4
|
|
|
|
5.7
|
|
|
|
4.8
|
|
|
Blanco River DevCo LP
|
|
|
1.6
|
|
|
|
—
|
|
|
|
0.1
|
|
|
|
0.5
|
|
|
|
1.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Midstream Services Revenue
|
|
$
|
117.6
|
|
|
$
|
26.4
|
|
|
$
|
28.4
|
|
|
$
|
29.1
|
|
|
$
|
33.7
|
|
|
Income from Investments
|
|
|
6.1
|
|
|
|
1.5
|
|
|
|
1.5
|
|
|
|
1.5
|
|
|
|
1.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenue
|
|
$
|
123.8
|
|
|
$
|
27.9
|
|
|
$
|
29.9
|
|
|
$
|
30.7
|
|
|
$
|
35.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct Operating
|
|
$
|
30.9
|
|
|
$
|
6.8
|
|
|
$
|
7.5
|
|
|
$
|
7.9
|
|
|
$
|
8.7
|
|
|
General and Administrative
(1)
|
|
|
13.6
|
|
|
|
3.4
|
|
|
|
3.4
|
|
|
|
3.4
|
|
|
|
3.4
|
|
|
Depreciation, Depletion and Amortization
|
|
|
9.6
|
|
|
|
2.2
|
|
|
|
2.3
|
|
|
|
2.5
|
|
|
|
2.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Expenses
|
|
$
|
54.1
|
|
|
$
|
12.4
|
|
|
$
|
13.2
|
|
|
$
|
13.8
|
|
|
$
|
14.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income
|
|
$
|
69.7
|
|
|
$
|
15.5
|
|
|
$
|
16.8
|
|
|
$
|
16.9
|
|
|
$
|
20.6
|
|
|
Interest Expense
(2)
|
|
|
2.3
|
|
|
|
0.3
|
|
|
|
0.5
|
|
|
|
0.7
|
|
|
|
0.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Before Income Tax Expense
|
|
$
|
67.4
|
|
|
$
|
15.2
|
|
|
$
|
16.3
|
|
|
$
|
16.2
|
|
|
$
|
19.8
|
|
|
Income Tax Expense
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
67.4
|
|
|
$
|
15.2
|
|
|
$
|
16.3
|
|
|
$
|
16.2
|
|
|
$
|
19.8
|
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income Attributable to Noble-Retained Interests
(3)
|
|
$
|
(13.0
|
)
|
|
$
|
(1.9
|
)
|
|
$
|
(2.8
|
)
|
|
$
|
(3.9
|
)
|
|
$
|
(4.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income Attributable to Noble Midstream Partners LP
|
|
$
|
54.4
|
|
|
$
|
13.3
|
|
|
$
|
13.4
|
|
|
$
|
12.3
|
|
|
$
|
15.3
|
|
|
Add:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income Attributable to Noble-Retained Interests
|
|
$
|
13.0
|
|
|
$
|
1.9
|
|
|
$
|
2.8
|
|
|
$
|
3.9
|
|
|
$
|
4.4
|
|
|
Depreciation
|
|
|
9.6
|
|
|
|
2.2
|
|
|
|
2.3
|
|
|
|
2.5
|
|
|
|
2.6
|
|
|
Interest Expense
|
|
|
2.3
|
|
|
|
0.3
|
|
|
|
0.5
|
|
|
|
0.7
|
|
|
|
0.8
|
|
|
Income Tax Expense
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
$
|
79.3
|
|
|
$
|
17.7
|
|
|
$
|
19.0
|
|
|
$
|
19.4
|
|
|
$
|
23.2
|
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA Attributable to Noble-Retained Interests
(4)
|
|
$
|
(15.4
|
)
|
|
$
|
(2.4
|
)
|
|
$
|
(3.4
|
)
|
|
$
|
(4.5
|
)
|
|
$
|
(5.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA Attributable to Noble Midstream Partners LP
|
|
$
|
63.9
|
|
|
$
|
15.3
|
|
|
$
|
15.7
|
|
|
$
|
14.9
|
|
|
$
|
18.1
|
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Interest Expense
(5)
|
|
$
|
(2.3
|
)
|
|
$
|
(0.3
|
)
|
|
$
|
(0.5
|
)
|
|
$
|
(0.7
|
)
|
|
$
|
(0.8
|
)
|
|
Estimated Maintenance Capital Expenditures
(6)
|
|
|
(6.7
|
)
|
|
|
(1.7
|
)
|
|
|
(1.6
|
)
|
|
|
(1.5
|
)
|
|
|
(1.9
|
)
|
|
Expansion Capital Expenditures
(7)
|
|
|
(103.5
|
)
|
|
|
(24.8
|
)
|
|
|
(32.9
|
)
|
|
|
(23.2
|
)
|
|
|
(22.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings to Fund Expansion Capital Expenditures
|
|
|
103.5
|
|
|
|
24.8
|
|
|
|
32.9
|
|
|
|
23.2
|
|
|
|
22.6
|
|
|
Cash Used to Fund Expansion Capital Expenditures
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Distributable Cash Flow Attributable to Noble Midstream Partners LP
|
|
$
|
54.9
|
|
|
$
|
13.3
|
|
|
$
|
13.6
|
|
|
$
|
12.6
|
|
|
$
|
15.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions to Public Common Unitholders
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
Distributions to Noble:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Units Held by Noble
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subordinated Units Held by Noble
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Distributions to Noble
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate Quarterly Distributions
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess (Shortfall) of Distributable Cash Flow Over Minimum Quarterly Distribution
(8)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75
|
(1)
|
Our general and administrative expense will consist of direct general and administrative expenses incurred by us (including $6.7 million of incremental expenses we
expect to incur as a result of becoming a publicly traded partnership) and payments we make to Noble in exchange for the provision of general and administrative services.
|
|
(2)
|
Forecasted interest expense includes (i) interest on amounts outstanding under our new revolving credit facility; (ii) amortization of origination fees and
(iii) commitment fees on the unused portion of our new revolving credit facility.
|
|
(3)
|
Represents net income attributable to Noble’s non-controlling interests in our development companies.
|
|
(4)
|
Represents EBITDA attributable to Noble’s non-controlling interests in our development companies, calculated as follows:
|
|
|
|
|
|
|
|
Net income attributable to Noble’s non-controlling interests in our development companies
|
|
$
|
13.0
|
|
|
Add:
|
|
|
|
|
|
Depreciation expense attributable to Noble’s non-controlling interests in our development companies
|
|
|
2.4
|
|
|
|
|
|
|
|
|
EBITDA attributable to Noble’s non-controlling interests in our development companies
|
|
$
|
15.4
|
|
|
|
|
|
|
|
|
(5)
|
Forecasted cash interest expense includes (i) interest on amounts outstanding under our new revolving credit facility and (ii) commitment fees on the unused
portion of our new revolving credit facility.
|
|
(6)
|
Represents estimated maintenance capital expenditures attributable to our controlling interests in our development companies. The estimated maintenance capital
expenditures attributable to Noble’s retained interests are listed below:
|
|
|
|
|
|
|
|
Maintenance Capital Expenditures Attributable to Noble Midstream Partners LP
|
|
$
|
6.7
|
|
|
Maintenance Capital Expenditures Attributable to Noble—Retained Interest
|
|
|
2.7
|
|
|
|
|
|
|
|
|
Total Maintenance Capital Expenditures Attributable to Our Development Companies
|
|
$
|
9.4
|
|
|
|
|
|
|
|
|
(7)
|
Represents estimated expansion capital expenditures attributable to our controlling interests in our development companies. The estimated expansion capital expenditures
attributable to Noble’s retained interest are listed below:
|
Forecasted Twelve Months Ending
September 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expansion
Capital
Expenditures
Attributable
to Noble Midstream
Partners LP
|
|
|
Expansion
Capital
Expenditures
Attributable
to
Noble—
Retained Interest
|
|
|
Total
Expansion
Capital
Expenditures
|
|
|
Expansion Capital Expenditures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Colorado River DevCo LP
|
|
$
|
38.6
|
|
|
$
|
9.7
|
|
|
$
|
48.3
|
|
|
Green River DevCo LP
|
|
|
7.3
|
|
|
|
21.8
|
|
|
|
29.0
|
|
|
Gunnison River DevCo LP
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Laramie River DevCo LP
|
|
|
47.5
|
|
|
|
—
|
|
|
|
47.5
|
|
|
San Juan River DevCo LP
|
|
|
2.5
|
|
|
|
7.6
|
|
|
|
10.1
|
|
|
Blanco River DevCo LP
|
|
|
7.6
|
|
|
|
22.9
|
|
|
|
30.6
|
|
|
White Cliffs
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Expansion Capital Expenditures
|
|
$
|
103.5
|
|
|
$
|
61.9
|
|
|
$
|
165.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8)
|
We expect to cover the expected shortfall of $ million in the three months
ending , 2016 with the excess of $ million expected
to be earned including the three months ending , 2016, the excess of
$ million expected to be earned during the three months
ending , 2016 and to the extent necessary, with borrowings under our revolving credit facility. We expect to repay any
borrowings made to cover a shortfall in the payment of our minimum quarterly distribution with the expected excess to be earned in future periods. Any additional excess in distributable cash flow is expected to be distributed to the holders of our
common and subordinated units, unless any such excess is reserved by our general partner as described under “Provisions of our Partnership Agreement Relating to Cash Distributions—Distributions of Available Cash—Definition of
Available Cash.”
|
76
Significant Forecast Assumptions
The forecast has been prepared by and is the responsibility of management. The forecast reflects our judgment as of
the date of this prospectus of conditions we expect to exist and the course of action we expect to take during the twelve months ending September 30, 2017. We believe our actual results of operations will approximate those reflected in our
forecast, but we can give no assurance that our forecasted results will be achieved. There will likely be differences between our forecast and our actual results, and those differences could be material. If the forecasted results are not achieved,
we may not be able to make cash distributions on our common units at the minimum quarterly distribution rate or at all.
General
Considerations
Our Predecessor’s historical results of operations include all of the results of operations of
Noble Midstream LP Predecessor on a 100% basis, which includes 100% of the results of our each of our development companies, in which we own percentages varying from 5% to 100%. See “Business—Our Assets, ROFRs and ROFO.” In connection
with the completion of this offering, Noble will contribute to us an 80% controlling interest in Colorado River DevCo LP, a 3.33% ownership interest in White Cliffs LLC, and 25% controlling interest in Green River DevCo LP, a 5% controlling interest
in Gunnison River DevCo LP, a 100% controlling interest in Laramie River DevCo LP, a 25% controlling interest in San Juan River DevCo LP and a 25% controlling interest in the Blanco River DevCo LP. Please read “Management’s Discussion and
Analysis of Financial Condition and Results of Operations—Factors Affecting the Comparability of Our Financial Results” and “Certain Relationships and Related Party Transactions—Agreements with our Affiliates in Connection with
the Transactions—Contribution Agreement.” Substantially all of our revenue will be derived from long-term, fixed-fee gathering agreements with Noble.
77
Results and Volumes
The following table summarizes the pro forma revenues, volumes and EBITDA for our midstream services for the year ended December 31, 2015 and the three months ended March 31, 2016 as well as our
forecast regarding those same amounts for the twelve months ending September 30, 2017. EBITDA excludes general and administrative expenses for comparative purposes.
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|
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Pro Forma
Year Ended
December 31,
2015
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|
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Pro
Forma
Three Months
Ended
March
31,
2016
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Forecasted
Twelve
Months
Ending
September 30,
2017
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Colorado River DevCo
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|
|
|
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|
|
|
|
|
|
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Crude oil gathering volumes (Bbl/d)
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33,979
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|
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50,043
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|
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36,137
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Natural gas gathering volumes (MMBtu/d)
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87,601
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|
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99,784
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|
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137,845
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Fresh water services volumes (Bbl/d)
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29,647
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|
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37,531
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|
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18,645
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Saltwater services volumes (Bbl/d)
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5,153
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|
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10,278
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|
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6,826
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Total Revenues ($ in millions)
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$
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91.0
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|
|
$
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30.0
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$
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99.8
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Pre G&A EBITDA ($ in millions)
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$
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70.0
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$
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24.5
|
|
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$
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78.1
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|
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Laramie River DevCo
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|
|
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|
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Crude oil gathering volumes (Bbl/d)
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|
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n/a
|
|
|
|
n/a
|
|
|
|
76
|
|
|
Fresh water services volumes (Bbl/d)
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|
|
n/a
|
|
|
|
n/a
|
|
|
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2,986
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Saltwater services volumes (Bbl/d)
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|
|
n/a
|
|
|
|
n/a
|
|
|
|
84
|
|
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Total Revenues ($ in millions)
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|
|
n/a
|
|
|
|
n/a
|
|
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$
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1.4
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Pre G&A EBITDA ($ in millions)
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|
$
|
0.0
|
|
|
$
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0.0
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|
|
$
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(0.1
|
)
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|
|
|
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San Juan River DevCo
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|
|
|
|
|
|
|
|
|
|
|
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Fresh water services volumes (Bbl/d)
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20,410
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|
|
|
n/a
|
|
|
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20,632
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Total Revenues ($ in millions)
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$
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17.5
|
|
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$
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0.1
|
|
|
$
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14.8
|
|
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Pre G&A EBITDA ($ in millions)
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|
$
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11.1
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|
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$
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(0.2
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)
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|
$
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9.0
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|
|
|
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Blanco River DevCo
|
|
|
|
|
|
|
|
|
|
|
|
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|
Crude oil gathering volumes (Bbl/d)
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|
|
n/a
|
|
|
|
n/a
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|
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1,669
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Saltwater services volumes (Bbl/d)
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|
|
n/a
|
|
|
|
n/a
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|
|
|
2,519
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Total Revenues ($ in millions)
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|
|
n/a
|
|
|
|
n/a
|
|
|
$
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1.6
|
|
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Pre G&A EBITDA ($ in millions)
|
|
|
n/a
|
|
|
|
n/a
|
|
|
$
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(0.2
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)
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|
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|
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Other
|
|
|
|
|
|
|
|
|
|
|
|
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Total Revenues ($ in millions)
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|
$
|
4.6
|
|
|
$
|
3.3
|
|
|
$
|
6.1
|
|
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Pre G&A EBITDA ($ in millions)
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$
|
4.6
|
|
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$
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3.2
|
|
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$
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6.1
|
|
|
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Total
|
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|
|
|
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|
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|
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Crude oil gathering volumes (Bbl/d)
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33,979
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50,043
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|
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37,882
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Natural gas gathering volumes (MMBtu/d)
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87,601
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|
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99,784
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|
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137,845
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Fresh water services volumes (Bbl/d)
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50,058
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|
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52,350
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|
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42,263
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Saltwater services volumes (Bbl/d)
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|
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5,153
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|
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10,278
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|
|
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9,428
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Total Revenues ($ in millions)
|
|
$
|
113.1
|
|
|
$
|
33.4
|
|
|
$
|
123.8
|
|
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Pre G&A EBITDA ($ in millions)
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|
$
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85.6
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$
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27.5
|
|
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$
|
92.8
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Revenue
We estimate that total revenues for the twelve months ending September 30, 2017 will be approximately $123.8 million compared to approximately $113.1 million for the pro forma year ended
December 31, 2015, primarily due to increased throughput on our gathering systems. As a result of well completions, in addition to production from existing wells on our systems, we estimate that our average daily throughput for the twelve
78
months ending September 30, 2017 will be 37.9 Mbbl/d of crude oil and 137.8 BBtu/d of natural gas. Our forecasted increase in volumes over the year ended December 31, 2015 is based on our
expectation that Noble will complete the drilling and completion activities on our dedicated acreage consistent with their current development plan. Please read “Business—Our Commercial Agreements with Noble.”
Our revenues are, in part, affected by commodity prices, which drive the level and pace of Noble’s exploration and production
activities. See “Risk Factors—Risks Related to Our Business—The demand for our midstream services, and therefore our cash flow, is affected by crude oil and natural gas prices, which fluctuate based on factors that are out of our
control.” Noble’s exploration and production activities are driven by a number of variables that make the determination of the impact on our cash flows of different drilling and development plans difficult. However, we estimate that, if
commodity prices were to fall to a level where Noble halted drilling and development activities in the DJ Basin as of the beginning of the forecast period, we would be able to make the minimum quarterly distribution on our common units for the
forecast period, and would have a shortfall of $ million on our ability to pay the minimum quarterly distribution with respect to our subordinated units.
Operating Expense
We estimate that total operating expense for the twelve months ending September 30, 2017 will be $30.9 million compared to
approximately $27.5 million for the pro forma year ended December 31, 2015 and approximately $26.8 million for the pro forma twelve months ended March 31, 2016. Our increase in operating expense is primarily due to our significantly higher operating
levels, resulting in higher:
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•
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gathering throughput on our dedicated acreage;
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•
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maintenance and contract service costs;
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•
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regulatory and compliance costs;
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•
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operating costs associated with increased pipeline mileage and additional centralized gathering facilities; and
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General and Administrative Expenses
Our general and administrative expenses will consist of (i) direct general and administrative expenses incurred by us, (ii) reimbursements to Noble of certain general and administrative expenses
under the omnibus agreement and the operational services and secondment agreement and (iii) fixed-fee payments we make to Noble for the provision of general and administrative services under our omnibus agreement.
We expect total general and administrative expenses for the twelve months ending September 30, 2017 will be $13.6 million as
compared to $9.6 million for the pro forma year ended December 31, 2015 and approximately $8.2 million for the pro forma twelve months ended March 31, 2016. The forecast period includes the $6.7 million of annual incremental publicly traded
partnership expenses we expect to incur. The increase in general and administrative expenses primarily relates to increased personnel and associated administrative expenses due to our projected growth.
Depreciation
We
estimate that depreciation for the twelve months ending September 30, 2017 will be $9.6 million as compared to approximately $6.9 million for the pro forma year ended December 31, 2015 and approximately $7.7 million for the pro
forma twelve months ended March 31, 2016. Our expected increase is primarily attributable to the effect of depreciation on the new infrastructure constructed and to be constructed during the twelve months ending September 30, 2017.
79
Capital Expenditures
The midstream energy business is capital intensive, requiring the maintenance of existing gathering systems and other midstream assets and facilities and the acquisition or construction and development of
new gathering systems and other midstream assets and facilities. Our partnership agreement will require that we categorize our capital expenditures as either:
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•
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Estimated maintenance capital expenditures
, which are cash expenditures (including expenditures for the construction or development of new
capital assets or the replacement, improvement or expansion of existing capital assets) made to maintain, over the long term, our operating capacity and/or operating income. Examples of maintenance capital expenditures are expenditures to repair,
refurbish and replace pipelines, to maintain equipment reliability, integrity and safety and to comply with environmental laws and regulations. In addition, we designate a portion of our capital expenditures to connect new wells to maintain
gathering throughput as maintenance capital to the extent such capital expenditures are necessary to maintain, over the long term, our operating capacity, operating income or revenue; or
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|
•
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Expansion capital expenditures
, which are cash expenditures to construct new midstream infrastructure and those expenditures incurred in order
to extend the useful lives of our assets, reduce costs, increase revenues or increase system throughput or capacity from current levels, including well connections that increase existing system throughput. Examples of expansion capital expenditures
include the construction, development or acquisition of additional gathering pipelines and centralized gathering facilities, in each case to the extent such capital expenditures are expected to expand our operating capacity, operating income or
revenue. In the future, if we make acquisitions that increase system throughput or capacity, the associated capital expenditures may also be considered expansion capital expenditures.
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We generally categorize specific capital expenditures as either expansion capital expenditures or maintenance capital expenditures based
on the nature of the expenditure. However, a portion of our capital expenditures relate to the connection of our gathering systems to new wells. While these capital expenditures could generally be considered expansion capital expenditures because
they will result in increased throughput or cash flows produced by our midstream systems, we categorize a portion of these capital expenditures as maintenance capital expenditures because they are necessary to offset the natural production declines
Noble will experience on all of its wells over time.
In allocating expenditures between maintenance capital expenditures
and expansion capital expenditures for new well connections during the twelve months ending September 30, 2017, we first estimate the number of new well connections needed to offset the natural production decline and maintain the average
throughput volume on our systems during the forecast period. We then allocate to maintenance capital the estimated new well connection expenditures based on a per well connection cost estimate. We estimate that total capital expenditures
attributable to our development companies for the twelve months ending September 30, 2017 will be $174.9 million ($110.2 million net to our ownership interests in our development companies) and $0 million attributable to our
equity ownership interest in White Cliffs based on the following assumptions.
Because Noble has retained a
non-controlling interest in each of the development companies that hold our assets, Noble will be required to fund its allocable portion of our maintenance and expansion capital expenditures. See “Risk Factors—Risks Inherent in an
Investment in Us—Our general partner and its affiliates, including Noble, have conflicts of interest with us and limited fiduciary duties to us and our unitholders, and they may favor their own interests to our detriment and that of our
unitholders. Additionally, we have no control over the business decisions and operations of Noble, and Noble is under no obligation to adopt a business strategy that favors us.”
We estimate that maintenance capital expenditures will be $9.4 million ($6.7 million net to our ownership interests in our
development companies) for the twelve months ending September 30, 2017. We expect to fund our allocated portion of these maintenance capital expenditures with cash generated by our operations. Because
80
our midstream systems are relatively new, having been substantially built within the last three years, we believe that the capital expenditures necessary to repair, refurbish and replace
pipelines, to maintain equipment reliability, integrity and safety and to comply with environmental laws and regulations during the twelve months ending September 30, 2017 will be relatively low. The majority of our maintenance capital
expenditures included in the forecast period represent that portion of our estimated capital expenditures associated with the connection of new wells to our gathering systems that we believe will be necessary to offset the natural production
declines Noble will experience on all of their wells over time. The methodology we use to categorize these capital expenditures is described above.
Expansion Capital Expenditures
We estimate that expansion
capital expenditures for the twelve months ending September 30, 2017 will be $165.5 million ($103.5 million net to our ownership interests in our development companies, and $0 million attributable to our equity ownership interest
in White Cliffs LLC). During the twelve months ending September 30, 2017, we have assumed that we will fund our allocated portion of expansion capital expenditures with borrowings under our new revolving credit facility. In general, our
expansion capital expenditures are necessary to increase the size and scope of our midstream infrastructure in order to continue servicing Noble’s drilling and completion schedule and increasing production on our dedicated acreage. A majority
of Noble’s planned well completions and production growth on our dedicated acreage during the twelve months ending September 30, 2017 will drive our need for expansion capital expenditures. These expansion capital expenditures are
primarily comprised of the following expansion capital projects that we intend to pursue during the twelve months ending September 30, 2017:
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•
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|
Colorado River DevCo LP: We expect to spend approximately $38.6 million in expansion capital expenditures (net to our ownership interests) related
to well connections and gathering line additions, including $17.0 million related to crude oil gathering, $12.4 million related to natural gas gathering, $1.3 million related to saltwater gathering and $7.9 million related to freshwater delivery.
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|
|
•
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|
Green River DevCo LP: We expect to spend approximately $7.3 million in expansion capital expenditures (net to our ownership interests) related to
well connections and gathering line additions, including $2.6 million related to crude oil gathering, $3.4 million related to natural gas gathering, $0.1 million related to saltwater gathering and $1.2 million related to
freshwater delivery.
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|
|
•
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|
Laramie River DevCo LP: We expect to spend approximately $47.5 million in expansion capital expenditures (net to our ownership interests) related
to well connections and gathering line additions, including $30.4 million related to crude oil gathering, $6.8 million related to natural gas gathering, and $10.3 million related to freshwater delivery.
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|
•
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|
San Juan River DevCo LP: We expect to spend approximately $2.5 million in expansion capital expenditures (net to our ownership interests) related
to freshwater delivery.
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|
•
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|
Blanco River DevCo LP: We expect to spend approximately $7.6 million in expansion capital expenditures (net to our ownership interests) related to
well connections and gathering line additions, including $5.4 million related to crude oil gathering and $2.2 million related to saltwater gathering.
|
Regulatory, Industry and Economic Factors
Our forecast of EBITDA and
distributable cash flow for the twelve months ending September 30, 2017 is also based on the following significant assumptions related to regulatory, industry and economic factors:
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|
•
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Noble will not default under our commercial agreements or reduce, suspend or terminate its obligations, nor will any events occur that would be deemed
a force majeure event, under such agreements;
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•
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the locations of Noble’s planned well development will not be determined uneconomic by us;
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•
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|
there will not be any new federal, state or local regulation, or any interpretation or application of existing regulation, of the portions of the
midstream energy industry in which we operate that will be materially adverse to our business;
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81
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|
•
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|
there will not be any material accidents, weather-related incidents, unscheduled downtime or similar unanticipated events with respect to our assets or
Noble’s development plan;
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•
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there will not be a shortage of skilled labor; and
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•
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there will not be any material adverse changes in the midstream energy industry, commodity prices, capital markets or overall economic conditions.
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82
PROVISIONS OF OUR PARTNERSHIP AGREEMENT RELATING TO CASH
DISTRIBUTIONS
Set forth below is a summary of the significant provisions of our partnership agreement that relate to cash
distributions.
Distributions of Available Cash
General
Our
partnership agreement requires that, within 45 days after the end of each quarter, beginning with the quarter ending , 2016,
we distribute all of our available cash to unitholders of record on the applicable record date. We will adjust the amount of our distribution for the period from the closing of this offering
through , 2016, based on the actual length of the period.
Definition of Available Cash
Available cash generally means, for
any quarter, all cash and cash equivalents on hand at the end of that quarter:
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•
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less
, the amount of cash reserves established by our general partner to:
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•
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provide for the proper conduct of our business (including reserves for our future capital expenditures, future acquisitions and for anticipated future
credit needs);
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•
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comply with applicable law or any loan agreement, security agreement, mortgage, debt instrument or other agreement or obligation to which we or any of
our subsidiaries is a party or by which we or such subsidiary is bound or we or such subsidiary’s assets are subject; or
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•
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provide funds for distributions to our unitholders and to our general partner for any one or more of the next four quarters (
provided
that our
general partner may not establish cash reserves for distributions pursuant to this bullet point if the effect of such reserves will prevent us from distributing the minimum quarterly distribution on all common units and any cumulative arrearages on
such common units for the current quarter);
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•
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plus
, if our general partner so determines, all or any portion of the cash on hand on the date of determination of available cash for the
quarter resulting from working capital borrowings made subsequent to the end of such quarter.
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The purpose
and effect of the last bullet point above is to allow our general partner, if it so decides, to use cash from working capital borrowings made after the end of the quarter but on or before the date of determination of available cash for that quarter
to pay distributions to unitholders. Under our partnership agreement, working capital borrowings are generally borrowings incurred under a credit facility, commercial paper facility or similar financing arrangement that are used solely for working
capital purposes or to pay distributions to our partners and with the intent of the borrower to repay such borrowings within twelve months with funds other than from additional working capital borrowings. Please read “Management’s
Discussion and Analysis of Financial Condition and Results of Operations—Capital Resources and Liquidity—Revolving Credit Facility.”
Intent to Distribute the Minimum Quarterly Distribution
Under our
current cash distribution policy, we intend to make a minimum quarterly distribution to the holders of our common units and subordinated units of $ per unit, or
$ per unit on an annualized basis, to the extent we have sufficient available cash after the establishment of cash reserves and the payment of costs and expenses, including reimbursements of
expenses to our general partner. However, there is no guarantee
83
that we will pay the minimum quarterly distribution on our units in any quarter. The amount of distributions paid under our cash distribution policy and the decision to make any distribution will
be determined by our general partner, taking into consideration the terms of our partnership agreement.
General Partner Interest
Our general partner owns a non-economic general partner interest in us, which does not entitle it to receive cash
distributions. However, our general partner may in the future own common units or other equity securities in us that will entitle it to receive distributions.
Incentive Distribution Rights
Noble currently holds incentive
distribution rights that entitle it to receive increasing percentages, up to a maximum of 50%, of the available cash we distribute from operating surplus (as defined below) in excess of $ per unit
per quarter. The maximum distribution of 50% does not include any distributions that Noble or its affiliates may receive on common units or subordinated units that it owns.
Operating Surplus and Capital Surplus
General
All cash distributed to unitholders will be characterized as either being paid from “operating surplus” or
“capital surplus.” We treat distributions of available cash from operating surplus differently than distributions of available cash from capital surplus.
Operating Surplus
We define operating surplus as:
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•
|
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$ million (as described below);
plus
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•
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all of our cash receipts after the closing of this offering, excluding cash from interim capital transactions (as defined below) and the termination of
hedge contracts,
provided
that cash receipts from the termination of a commodity hedge or interest rate hedge prior to its scheduled settlement or termination date shall be included in operating surplus in equal quarterly installments over
the remaining scheduled life of such commodity hedge or interest rate hedge;
plus
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•
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working capital borrowings made after the end of a quarter but on or before the date of determination of operating surplus for that quarter;
plus
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•
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cash distributions (including incremental distributions on incentive distribution rights) paid in respect of equity issued, other than equity issued in
this offering, to finance all or a portion of expansion capital expenditures in respect of the period from the date that we enter into a binding obligation to commence the construction, development, replacement, improvement or expansion of a capital
asset and ending on the earlier to occur of the date the capital asset commences commercial service and the date that it is abandoned or disposed of;
less
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•
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all of our operating expenditures (as defined below) after the closing of this offering;
less
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•
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the amount of cash reserves established by our general partner to provide funds for future operating expenditures;
less
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•
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all working capital borrowings not repaid within twelve months after having been incurred, or repaid within such twelve-month period with the proceeds
of additional working capital borrowings;
less
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•
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any cash loss realized on disposition of an investment capital expenditure (which is a capital expenditure other than a maintenance capital expenditure
or an expansion capital expenditure).
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84
As described above, operating surplus does not reflect actual cash on hand that is available
for distribution to our unitholders and is not limited to cash generated by operations. For example, it includes a provision that will enable us, if we choose, to distribute as operating surplus up to
$ million of cash we receive in the future from non-operating sources such as asset sales, issuances of securities and long-term borrowings that would otherwise be distributed as capital surplus.
In addition, the effect of including, as described above, certain cash distributions on equity interests in operating surplus will be to increase operating surplus by the amount of any such cash distributions. As a result, we may also distribute as
operating surplus up to the amount of any such cash that we receive from non-operating sources.
The proceeds of working
capital borrowings increase operating surplus and repayments of working capital borrowings are generally operating expenditures (as described below) and thus reduce operating surplus when repayments are made. However, if working capital borrowings,
which increase operating surplus, are not repaid during the twelve-month period following the borrowing, they will be deemed repaid at the end of such period, thus decreasing operating surplus at such time. When such working capital borrowings are
in fact repaid, they will not be treated as a further reduction in operating surplus because operating surplus will have been previously reduced by the deemed repayment.
We define interim capital transactions as (i) borrowings, refinancings or refundings of indebtedness (other than working capital borrowings and items purchased on open account or for a deferred
purchase price in the ordinary course of business) and sales of debt securities, (ii) issuances of equity securities, (iii) sales or other dispositions of assets, other than sales or other dispositions of inventory, accounts receivable and
other assets in the ordinary course of business and sales or other dispositions of assets as part of normal asset retirements or replacements and (iv) capital contributions received.
We define operating expenditures as all of our cash expenditures, including, but not limited to, taxes, reimbursements of expenses of our
general partner and its affiliates, officer, director and employee compensation, debt service payments, payments made in the ordinary course of business under interest rate hedge contracts and commodity hedge contracts (
provided
that payments
made in connection with the termination of any interest rate hedge contract or commodity hedge contract prior to its scheduled settlement or termination date will be included in operating expenditures in equal quarterly installments over the
remaining scheduled life of such interest rate hedge contract or commodity hedge contract and amounts paid in connection with the initial purchase of an interest rate hedge contract or a commodity hedge contract will be amortized over the life of
such interest rate hedge contract or commodity hedge contract), estimated maintenance capital expenditures (as discussed in further detail below), and repayment of working capital borrowings;
provided
,
however
, that operating
expenditures will not include:
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•
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repayments of working capital borrowings where such borrowings have previously been deemed to have been repaid (as described above);
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•
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payments (including prepayments and prepayment penalties) of principal of and premium on indebtedness other than working capital borrowings;
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•
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|
actual maintenance capital expenditures;
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•
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|
expansion capital expenditures;
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•
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|
investment capital expenditures;
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•
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payment of transaction expenses (including taxes) relating to interim capital transactions;
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•
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distributions to our partners;
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•
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repurchases of partnership interests (excluding repurchases we make to satisfy obligations under employee benefit plans); or
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•
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any other expenditures or payments using the proceeds from this offering that are described in “Use of Proceeds.”
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85
Capital Surplus
Capital surplus is defined in our partnership agreement as any distribution of available cash in excess of our cumulative operating surplus. Accordingly, except as described above, capital surplus would
generally be generated by:
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•
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borrowings other than working capital borrowings;
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|
|
•
|
|
sales of our equity and debt securities;
|
|
|
•
|
|
sales or other dispositions of assets, other than inventory, accounts receivable and other assets sold in the ordinary course of business or as part of
ordinary course retirement or replacement of assets; and
|
|
|
•
|
|
capital contributions received.
|
Characterization of Cash Distributions
All available cash
distributed by us on any date from any source will be treated as distributed from operating surplus until the sum of all available cash distributed by us since the closing of this offering equals the operating surplus from the closing of this
offering through the end of the quarter immediately preceding that distribution. We anticipate that distributions from operating surplus generally will not represent a return of capital. However, operating surplus, as defined in our partnership
agreement, includes certain components, including a $ million cash basket, that represent non-operating sources of cash. Consequently, it is possible that all or a portion of specific distributions
from operating surplus may represent a return of capital. Any available cash distributed by us in excess of our cumulative operating surplus will be deemed to be capital surplus under our partnership agreement. Our partnership agreement treats a
distribution of capital surplus as the repayment of the initial unit price from this initial public offering and as a return of capital. We do not anticipate that we will make any distributions from capital surplus.
Capital Expenditures
For purposes of determining operating surplus, maintenance capital expenditures are those capital expenditures required to maintain our long-term operating capacity and/or operating income, and expansion
capital expenditures are those capital expenditures that we expect will expand our operating capacity or operating income over the long term. Examples of maintenance capital expenditures include capital expenditures associated with the replacement
of equipment and well connections, or the construction, development or acquisition of other facilities, to replace expected reductions in hydrocarbons available for gathering, treating, transporting or otherwise handled by our facilities (which we
refer to as operating capacity). Maintenance capital expenditures will also include interest (and related fees) on debt incurred and distributions on equity issued to finance all or any portion of the construction or development of a replacement
asset that is paid in respect of the period that begins when we enter into a binding obligation to commence constructing or developing a replacement asset and ending on the earlier to occur of the date that any such replacement asset commences
commercial service or the date that it is abandoned or disposed of. Capital expenditures made solely for investment purposes will not be considered maintenance capital expenditures.
Because our maintenance capital expenditures can be irregular, the amount of our actual maintenance capital expenditures may differ
substantially from period to period, which could cause similar fluctuations in the amounts of operating surplus, adjusted operating surplus and cash available for distribution to our unitholders if we subtracted actual maintenance capital
expenditures from operating surplus.
Our partnership agreement will require that an estimate of the average quarterly
maintenance capital expenditures necessary to maintain our operating capacity or operating income over the long term be subtracted from operating surplus each quarter as opposed to the actual amounts spent. The amount of estimated maintenance
capital expenditures deducted from operating surplus for those periods will be subject to review and
86
change by our general partner at least once a year, provided that any change is approved by our special committee. The estimate will be made at least annually and whenever an event occurs that is
likely to result in a material adjustment to the amount of our maintenance capital expenditures, such as a major acquisition or the introduction of new governmental regulations that will impact our business. For purposes of calculating operating
surplus, any adjustment to this estimate will be prospective only. For a discussion of the amounts we have allocated toward estimated maintenance capital expenditures, please read “Cash Distribution Policy and Restrictions on
Distributions.”
The use of estimated maintenance capital expenditures in calculating operating surplus will have the
following effects:
|
|
•
|
|
it will reduce the risk that maintenance capital expenditures in any one quarter will be large enough to render operating surplus less than the initial
quarterly distribution to be paid on all the units for the quarter and subsequent quarters;
|
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|
•
|
|
it will increase our ability to distribute as operating surplus cash we receive from non-operating sources; and
|
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|
•
|
|
it will be more difficult for us to raise our distribution above the minimum quarterly distribution and pay incentive distributions on the incentive
distribution rights.
|
Expansion capital expenditures are cash expenditures to construct new midstream
infrastructure and those expenditures incurred in order to extend the useful lives of our assets, reduce costs, increase revenues or increase system throughput or capacity from current levels, including well connections that increase existing system
throughput. Examples of expansion capital expenditures include the construction, development or acquisition of additional gathering pipelines and centralized gathering facilities, in each case to the extent such capital expenditures are expected to
expand our operating capacity, operating income or revenue. In the future, if we make acquisitions that increase system throughput or capacity, the associated capital expenditures may also be considered expansion capital expenditures.
Capital expenditures that are made in part for maintenance capital purposes and in part for expansion capital purposes will be allocated
as maintenance capital expenditures or expansion capital expenditures by our general partner.
Subordinated Units and Subordination Period
General
Our partnership agreement provides that, during the
subordination period (which we define below), the common units will have the right to receive distributions of available cash from operating surplus each quarter in an amount equal to $ per unit,
which amount is defined in our partnership agreement as the minimum quarterly distribution, plus any arrearages in the payment of the minimum quarterly distribution on the common units from prior quarters, before any distributions of available cash
from operating surplus may be made on the subordinated units. Subordinated units are deemed “subordinated” because for a period of time, referred to as the “subordination period,” the subordinated units will not be entitled to
receive any distributions until the common units have received the minimum quarterly distribution plus any arrearages in the payment of the minimum quarterly distribution on the common units from prior quarters. Furthermore, no arrearages will
accrue or be payable on the subordinated units. The practical effect of the subordinated units is to increase the likelihood that, during the subordination period, there will be available cash to be distributed on the common units.
87
Subordination Period
Except as described below, the subordination period will begin on the closing date of this offering and will extend until the first business day following the distribution of available cash in respect of
any quarter beginning after , 2019 that each of the following tests are met:
|
|
•
|
|
distributions of available cash from operating surplus on each of the outstanding common units and subordinated units equaled or exceeded
$ (the annualized minimum quarterly distribution), for each of the three consecutive, non-overlapping four-quarter periods immediately preceding that date;
|
|
|
•
|
|
the adjusted operating surplus (as defined below) generated during each of the three consecutive, non-overlapping four-quarter periods immediately
preceding that date equaled or exceeded the sum of $ (the annualized minimum quarterly distribution) on all of the outstanding common units and subordinated units during those periods on a fully
diluted basis; and
|
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|
•
|
|
there are no arrearages in payment of the minimum quarterly distribution on the common units.
|
Early Termination of the Subordination Period
Notwithstanding the foregoing, the subordination period will automatically terminate on the first business day following the distribution of available cash in respect of any quarter, beginning with the
quarter ending September 30, 2017, that each of the following tests are met:
|
|
•
|
|
distributions of available cash from operating surplus on each of the outstanding common units and subordinated units equaled or exceeded
$ (150% of the annualized minimum quarterly distribution), for the four-quarter period immediately preceding that date;
|
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|
•
|
|
the adjusted operating surplus (as defined below) generated during the four-quarter period immediately preceding that date equaled or exceeded the sum
of (i) $ (150% of the annualized minimum quarterly distribution) on all of the outstanding common units and subordinated units during that period on a fully diluted basis and (ii) the
corresponding distributions on the incentive distribution rights; and
|
|
|
•
|
|
there are no arrearages in payment of the minimum quarterly distribution on the common units.
|
Expiration of the Subordination Period
When the subordination period ends, each outstanding subordinated unit will convert into one common unit and will thereafter participate pro rata with the other common units in distributions of available
cash.
Adjusted Operating Surplus
Adjusted operating surplus is intended to reflect the cash generated from operations during a particular period and therefore excludes net drawdowns of reserves of cash established in prior periods.
Adjusted operating surplus for a period consists of:
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•
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|
operating surplus generated with respect to that period (excluding any amounts attributable to the item described in the first bullet under the caption
“—Operating Surplus and Capital Surplus—Operating Surplus” above);
less
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|
•
|
|
any net increase in working capital borrowings with respect to that period;
less
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|
•
|
|
any net decrease in cash reserves for operating expenditures with respect to that period not relating to an operating expenditure made with respect to
that period;
plus
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|
•
|
|
any net decrease in working capital borrowings with respect to that period;
plus
|
|
|
•
|
|
any net decrease made in subsequent periods to cash reserves for operating expenditures initially established with respect to that period to the extent
such decrease results in a reduction in adjusted operating surplus in subsequent periods;
plus
|
88
|
|
•
|
|
any net increase in cash reserves for operating expenditures with respect to that period required by any debt instrument for the repayment of
principal, interest or premium.
|
Distributions of Available Cash from Operating
Surplus During the Subordination Period
We will make distributions of available cash from operating surplus for any
quarter during the subordination period in the following manner:
|
|
•
|
|
first
, 100% to the common unitholders, pro rata, until we distribute for each outstanding common unit an amount equal to the minimum
quarterly distribution for that quarter;
|
|
|
•
|
|
second
, 100% to the common unitholders, pro rata, until we distribute for each outstanding common unit an amount equal to any arrearages
in payment of the minimum quarterly distribution on the common units for any prior quarters during the subordination period;
|
|
|
•
|
|
third
, 100% to the subordinated unitholders, pro rata, until we distribute for each outstanding subordinated unit an amount equal to the
minimum quarterly distribution for that quarter; and
|
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|
•
|
|
thereafter
, in the manner described in “—Incentive Distribution Rights” below.
|
The preceding discussion is based on the assumptions that we do not issue additional classes of equity securities.
Distributions of Available Cash from Operating Surplus After the Subordination Period
We will make distributions of available cash from operating surplus for any quarter after the subordination period in the following
manner:
|
|
•
|
|
first
, 100% to all common unitholders, pro rata, until we distribute for each outstanding common unit an amount equal to the minimum
quarterly distribution for that quarter; and
|
|
|
•
|
|
thereafter
, in the manner described in “—Incentive Distribution Rights” below.
|
The preceding discussion is based on the assumptions that we do not issue additional classes of equity securities.
Incentive Distribution Rights
Incentive distribution rights represent the right to receive an increasing percentage (15%, 25% and 50%) of quarterly distributions of available cash from operating surplus after the minimum quarterly
distribution and the target distribution levels have been achieved. Noble will initially hold the incentive distribution rights, but may transfer these rights separately from its ownership of the general partner.
If for any quarter:
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•
|
|
we have distributed available cash from operating surplus to the common unitholders and subordinated unitholders in an amount equal to the minimum
quarterly distribution; and
|
|
|
•
|
|
we have distributed available cash from operating surplus on outstanding common units in an amount necessary to eliminate any cumulative arrearages in
payment of the minimum quarterly distribution;
|
then, we will distribute any additional available cash from
operating surplus for that quarter among the unitholders and the holders of the incentive distribution rights in the following manner:
|
|
•
|
|
first
, 100% to all unitholders, pro rata, until each unitholder receives a total of
$ per unit for that quarter (the “first target distribution”);
|
89
|
|
•
|
|
second
, 85% to all unitholders, pro rata, and 15% to the holders of our incentive distribution rights, until each unitholder receives a
total of $ per unit for that quarter (the “second target distribution”);
|
|
|
•
|
|
third
, 75% to all unitholders, pro rata, and 25% to the holders of our incentive distribution rights, until each unitholder receives a
total of $ per unit for that quarter (the “third target distribution”); and
|
|
|
•
|
|
thereafter
, 50% to all unitholders, pro rata, and 50% to the holders of our incentive distribution rights.
|
Percentage Allocations of Available Cash from Operating Surplus
The following table illustrates the percentage allocations of available cash from operating surplus between the unitholders and our
general partner based on the specified target distribution levels. The amounts set forth under “Marginal Percentage Interest in Distributions” are the percentage interests of Noble, as holder of our incentive distribution rights, and the
unitholders in any available cash from operating surplus we distribute up to and including the corresponding amount in the column “Total Quarterly Distribution Per Unit Target Amount.” The percentage interests shown for our unitholders
Noble for the minimum quarterly distribution are also applicable to quarterly distribution amounts that are less than the minimum quarterly distribution. The percentage interests set forth below assume that Noble has not transferred its incentive
distribution rights and that there are no arrearages on common units.
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|
|
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|
Marginal Percentage Interest in
Distributions
|
|
|
|
Total Quarterly
Distribution
Per Unit Target Amount
|
|
|
Unitholders
|
|
|
Noble (as Holder of
the Incentive
Distribution
Rights)
(1)
|
|
|
Minimum Quarterly Distribution
|
|
|
$
|
|
|
|
|
|
|
|
100
|
%
|
|
|
—
|
%
|
|
First Target Distribution
|
|
|
above $
|
|
|
|
up to $
|
|
|
|
100
|
%
|
|
|
—
|
%
|
|
Second Target Distribution
|
|
|
above $
|
|
|
|
up to $
|
|
|
|
85
|
%
|
|
|
15
|
%
|
|
Third Target Distribution
|
|
|
above $
|
|
|
|
up to $
|
|
|
|
75
|
%
|
|
|
25
|
%
|
|
Thereafter
|
|
|
above $
|
|
|
|
|
|
|
|
50
|
%
|
|
|
50
|
%
|
|
(1)
|
Does not account for any common units or subordinated units that Noble owns.
|
Noble’s Right to Reset Incentive Distribution Levels
Noble, as the initial holder of all our incentive distribution rights, has the right under our partnership agreement, subject to certain conditions, to elect to relinquish the right to receive incentive
distribution payments based on the initial target distribution levels and to reset, at higher levels, the minimum quarterly distribution amount and target distribution levels upon which the incentive distribution payments to our general partner
would be set. If Noble transfers all or a portion of the incentive distribution rights in the future, then the holder or holders of a majority of our incentive distribution rights will be entitled to exercise this right. The following discussion
assumes that Noble holds all of the incentive distribution rights at the time that a reset election is made. Noble’s right to reset the minimum quarterly distribution amount and the target distribution levels upon which the incentive
distributions payable to Noble are based may be exercised, without approval of our unitholders or the conflicts committee, at any time when there are no subordinated units outstanding, we have made cash distributions to the holders of the incentive
distribution rights at the highest level of incentive distributions for each of the four consecutive fiscal quarters immediately preceding such time and the amount of each such distribution did not exceed adjusted operating surplus for such quarter.
If Noble and its affiliates are not the holders of a majority of the incentive distribution rights at the time an election is made to reset the minimum quarterly distribution amount and the target distribution levels, then the proposed reset will be
subject to the prior written concurrence of the general partner that the conditions described above have been satisfied. The reset minimum quarterly distribution amount and target distribution levels will be higher than the minimum quarterly
distribution amount and the target distribution levels prior to the reset such that the holder of the
90
incentive distribution rights will not receive any incentive distributions under the reset target distribution levels until cash distributions per unit following this event increase as described
below. We anticipate that Noble would exercise this reset right in order to facilitate acquisitions or internal growth projects that would otherwise not be sufficiently accretive to cash distributions per common unit, taking into account the
existing levels of incentive distribution payments being made.
In connection with the resetting of the minimum quarterly
distribution amount and the target distribution levels and the corresponding relinquishment by Noble of incentive distribution payments based on the target distributions prior to the reset, Noble will be entitled to receive a number of newly issued
common units based on a predetermined formula described below that takes into account the “cash parity” value of the average cash distributions related to the incentive distribution rights received by Noble for the two quarters immediately
preceding the reset event as compared to the average cash distributions per common unit during that two-quarter period.
The
number of common units that Noble (or the then-holder of the incentive distribution rights, if other than our general partner) would be entitled to receive from us in connection with a resetting of the minimum quarterly distribution amount and the
target distribution levels then in effect would be equal to the quotient determined by dividing (x) the average aggregate amount of cash distributions received by Noble or such holder in respect of its incentive distribution rights during the
two consecutive fiscal quarters ended immediately prior to the date of such reset election by (y) the average of the aggregate amount of cash distributed per common unit during each of these two quarters.
Following a reset election, the minimum quarterly distribution amount will be reset to an amount equal to the average cash distribution
amount per common unit for the two fiscal quarters immediately preceding the reset election (which amount we refer to as the “reset minimum quarterly distribution”) and the target distribution levels will be reset to be correspondingly
higher such that we would distribute all of our available cash from operating surplus for each quarter thereafter as follows:
|
|
•
|
|
first
, 100% to all unitholders, pro rata, until each unitholder receives an amount equal to 115% of the reset minimum quarterly
distribution for that quarter;
|
|
|
•
|
|
second
, 85% to all unitholders, pro rata, and 15% to the holders of our incentive distribution rights, until each unitholder receives an
amount per unit equal to 125% of the reset minimum quarterly distribution for the quarter;
|
|
|
•
|
|
third
, 75% to all unitholders, pro rata, and 25% to the holders of our incentive distribution rights, until each unitholder receives an
amount per unit equal to 150% of the reset minimum quarterly distribution for the quarter; and
|
|
|
•
|
|
thereafter
, 50% to all unitholders, pro rata, and 50% to the holders of our incentive distribution rights.
|
91
The following table illustrates the percentage allocations of available cash from operating
surplus between the unitholders and Noble at various cash distribution levels (1) pursuant to the cash distribution provisions of our partnership agreement in effect at the completion of this offering, as well as (2) following a
hypothetical reset of the minimum quarterly distribution and target distribution levels based on the assumption that the average quarterly cash distribution amount per common unit during the two fiscal quarters immediately preceding the reset
election was $ .
|
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|
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|
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|
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|
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|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Unitholders
|
|
|
Noble
(as
holder of
the
Incentive
Distribution
Rights)
|
|
|
Quarterly
Distribution
Per
Unit
Following Hypothetical
Reset
|
|
|
|
|
Quarterly
Distribution Per
Unit
Prior to Reset
|
|
|
|
|
|
Minimum Quarterly Distribution
|
|
|
up to $
|
|
|
|
|
|
|
|
100
|
%
|
|
|
—
|
|
|
|
up to $
|
|
|
|
|
|
|
First Target Distribution
|
|
|
above $
|
|
|
|
up to $
|
|
|
|
100
|
%
|
|
|
—
|
|
|
|
above $
|
|
|
|
up to $
|
|
|
Second Target Distribution
|
|
|
above $
|
|
|
|
up to $
|
|
|
|
85
|
%
|
|
|
15
|
%
|
|
|
above $
|
|
|
|
up to $
|
|
|
Third Target Distribution
|
|
|
above $
|
|
|
|
up to $
|
|
|
|
75
|
%
|
|
|
25
|
%
|
|
|
above $
|
|
|
|
up to $
|
|
|
Thereafter
|
|
|
above $
|
|
|
|
|
|
|
|
50
|
%
|
|
|
50
|
%
|
|
|
above $
|
|
|
|
|
|
|
(a)
|
This amount is 115% of the hypothetical reset minimum quarterly distribution.
|
|
(b)
|
This amount is 125% of the hypothetical reset minimum quarterly distribution.
|
|
(c)
|
This amount is 150% of the hypothetical reset minimum quarterly distribution.
|
The following table illustrates the total amount of available cash from operating surplus that would be distributed to the unitholders and Noble including in respect of incentive distribution rights,
based on an average of the amounts distributed for the two quarters immediately prior to the reset. The table assumes that immediately prior to the reset there would be
common units outstanding and the average distribution to each common unit would be $ per quarter for the two consecutive, non-overlapping quarters prior to the reset.
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarterly
Distribution
Per
Unit Prior to Reset
|
|
|
Cash
Distributions
to Common
Unitholders
Prior to Reset
|
|
|
Noble
(as holder
of the
Incentive Distribution Rights)
|
|
|
Total
Distributions
|
|
|
|
|
|
|
|
|
Minimum Quarterly Distribution
|
|
|
up to $
|
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
First Target Distribution
|
|
|
above $
|
|
|
|
up to $
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Target Distribution
|
|
|
above $
|
|
|
|
up to $
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third Target Distribution
|
|
|
above $
|
|
|
|
up to $
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thereafter
|
|
|
above $
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
92
The following table illustrates the total amount of available cash from operating surplus
that would be distributed to the unitholders and Noble, with respect to the quarter after the reset occurs. The table reflects that, as a result of the reset, there would
be common units outstanding and that the average distribution to each common unit would be $ . The number of common units
issued as a result of the reset was calculated by dividing (x) $ as the average of the amounts received by Noble in respect of its incentive distribution rights for the two consecutive,
non-overlapping quarters prior to the reset as shown in the table above, by (y) the average of the cash distributions made on each common unit per quarter for the two consecutive, non-overlapping quarters prior to the reset as shown in the
table above, or $ .
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarterly
Distribution
Per
Unit After Reset
|
|
|
Cash
Distributions
to Common
Unitholders
After Reset
|
|
|
Cash Distribution to
Noble
After
Reset
|
|
|
Total
Distributions
|
|
|
|
|
|
|
Common
Units
(1)
|
|
|
Incentive
Distribution
Rights
|
|
|
Total
|
|
|
|
Minimum Quarterly Distribution
|
|
|
up to $
|
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
First Target Distribution
|
|
|
above $
|
|
|
|
up to $
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Target Distribution
|
|
|
above $
|
|
|
|
up to $
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third Target Distribution
|
|
|
above $
|
|
|
|
up to $
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thereafter
|
|
|
above $
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents distributions in respect of common units issued upon reset.
|
Noble will be entitled to cause the minimum quarterly distribution amount and the target distribution levels to be reset on more than one occasion,
provided
that it may not make a reset election
except at a time when it has received incentive distributions for the immediately preceding four consecutive fiscal quarters based on the highest level of incentive distributions that it is entitled to receive under our partnership agreement.
Distributions from Capital Surplus
How Distributions from Capital Surplus Will Be Made
We will make
distributions of available cash from capital surplus, if any, in the following manner:
|
|
•
|
|
first
, 100% to all unitholders, pro rata, until we distribute for each common unit that was issued in this offering, an amount of
available cash from capital surplus equal to the initial public offering price in this offering;
|
|
|
•
|
|
second
, 100% to all unitholders, pro rata, until we distribute for each common unit, an amount of available cash from capital surplus
equal to any unpaid arrearages in payment of the minimum quarterly distribution on the outstanding common units; and
|
|
|
•
|
|
thereafter
, as if they were from operating surplus.
|
Effect of a Distribution from Capital Surplus
Our partnership
agreement treats a distribution of capital surplus as the repayment of the initial unit price from this initial public offering, which is a return of capital. The initial public offering price less any distributions of capital surplus per unit and
any distributions of cash in connection with dissolution and liquidation is referred to as the “unrecovered initial unit price.” Each time a distribution of capital surplus is made, the minimum quarterly distribution and the target
distribution levels will be reduced in the same proportion as the corresponding reduction in the unrecovered initial unit price. Because distributions of capital surplus will reduce the minimum quarterly distribution after any of these distributions
are made, the effects of distributions of capital surplus may make it easier for Noble to receive incentive distributions and for the subordinated units to convert into common units. However, any distribution of capital surplus before the
unrecovered initial unit price is reduced to zero cannot be applied to the payment of the minimum quarterly distribution or any arrearages.
93
Once we distribute capital surplus on a unit issued in this offering in an amount equal to
the initial unit price, we will reduce the minimum quarterly distribution and the target distribution levels to zero. Then, after distributing an amount of capital surplus for each common unit equal to any unpaid arrearages of the minimum quarterly
distributions on outstanding common units, we will then make all future distributions from operating surplus, with 50% being paid to the unitholders, pro rata, and 50% to the holder of our incentive distribution rights.
Adjustment to the Minimum Quarterly Distribution and Target Distribution Levels
In addition to adjusting the minimum quarterly distribution and target distribution levels to reflect a distribution of capital surplus,
if we combine our units into fewer units or subdivide our units into a greater number of units, we will proportionately adjust:
|
|
•
|
|
the minimum quarterly distribution;
|
|
|
•
|
|
target distribution levels;
|
|
|
•
|
|
the unrecovered initial unit price; and
|
|
|
•
|
|
the arrearages per common unit in payment of the minimum quarterly distribution on the common units.
|
For example, if a two-for-one split of the common units should occur, the minimum quarterly distribution, the target distribution levels
and the unrecovered initial unit price would each be reduced to 50% of its initial level and each subordinated unit would be split into two units. We will not make any adjustment by reason of the issuance of additional units for cash or property
(including additional common units issued under any compensation or benefit plans).
In addition, if legislation is enacted or
if the official interpretation of existing law is modified by a governmental authority, so that we become taxable as a corporation or otherwise subject to taxation as an entity for federal, state or local income tax purposes, our partnership
agreement specifies that the minimum quarterly distribution and the target distribution levels for each quarter may be reduced by multiplying each distribution level by a fraction, the numerator of which is available cash for that quarter (reduced
by the amount of the estimated tax liability for such quarter payable by reason of such legislation or interpretation) and the denominator of which is the sum of available cash for that quarter (reduced by the amount of the estimated tax liability
for such quarter payable by reason of such legislation or interpretation) plus our general partner’s estimate of our aggregate liability for the quarter for such income taxes payable by reason of such legislation or interpretation. To the
extent that the actual tax liability differs from the estimated tax liability for any quarter, the difference may be accounted for in subsequent quarters.
Distributions of Cash Upon Liquidation
General
If we dissolve in accordance with our partnership agreement, we will sell or otherwise dispose of our assets in a
process called liquidation. We will first apply the proceeds of liquidation to the payment of our creditors. We will distribute any remaining proceeds to the unitholders and our general partner, in accordance with their capital account balances, as
adjusted to reflect any gain or loss upon the sale or other disposition of our assets in liquidation.
The allocations of gain
and loss upon liquidation are intended, to the extent possible, to entitle the holders of outstanding common units to a preference over the holders of outstanding subordinated units upon our liquidation, to the extent required to permit common
unitholders to receive their unrecovered initial unit price plus the minimum quarterly distribution for the quarter during which liquidation occurs plus any unpaid arrearages in payment of the minimum quarterly distribution on the common units.
However, there may not be
94
sufficient gain upon our liquidation to enable the holders of common units to fully recover all of these amounts, even though there may be cash available to distribute to the holders of
subordinated units. Any further net gain recognized upon liquidation will be allocated in a manner that takes into account the incentive distribution rights.
Manner of Adjustments for Gain
The manner of the adjustment for
gain is set forth in our partnership agreement. If our liquidation occurs before the end of the subordination period, we will allocate any gain to our limited partners in the following manner:
|
|
•
|
|
first
, to our general partner to the extent of any negative balance in its capital account;
|
|
|
•
|
|
second
, 100% to the common unitholders, pro rata, until the capital account for each common unit is equal to the sum of:
|
|
|
(1)
|
the unrecovered initial unit price;
|
|
|
(2)
|
the amount of the minimum quarterly distribution for the quarter during which our liquidation occurs; and
|
|
|
(3)
|
any unpaid arrearages in payment of the minimum quarterly distribution;
|
|
|
•
|
|
third
, 100% to the subordinated unitholders, pro rata, until the capital account for each subordinated unit is equal to the sum of:
|
|
|
(1)
|
the unrecovered initial unit price; and
|
|
|
(2)
|
the amount of the minimum quarterly distribution for the quarter during which our liquidation occurs;
|
|
|
•
|
|
fourth
, 100% to all unitholders, pro rata, until we allocate under this paragraph an amount per unit equal to:
|
|
|
(1)
|
the sum of the excess of the first target distribution per unit over the minimum quarterly distribution per unit for each quarter of our existence;
less
|
|
|
(2)
|
the cumulative amount per unit of any distributions of available cash from operating surplus in excess of the minimum quarterly distribution per unit that we
distributed 100% to the unitholders, pro rata, for each quarter of our existence;
|
|
|
•
|
|
fifth
, 85% to all unitholders, pro rata, and 15% to the holders of our incentive distribution rights, until we allocate under this
paragraph an amount per unit equal to:
|
|
|
(1)
|
the sum of the excess of the second target distribution per unit over the first target distribution per unit for each quarter of our existence; less
|
|
|
(2)
|
the cumulative amount per unit of any distributions of available cash from operating surplus in excess of the first target distribution per unit that we distributed 85%
to the unitholders, pro rata, and 15% to the holders of our incentive distribution rights for each quarter of our existence;
|
|
|
•
|
|
sixth
, 75% to all unitholders, pro rata, and 25% to the holders of our incentive distribution rights, until we allocate under this
paragraph an amount per unit equal to:
|
|
|
(1)
|
the sum of the excess of the third target distribution per unit over the second target distribution per unit for each quarter of our existence; less
|
|
|
(2)
|
the cumulative amount per unit of any distributions of available cash from operating surplus in excess of the second target distribution per unit that we distributed
75% to the unitholders, pro rata, and 25% to the holders of our incentive distribution rights for each quarter of our existence; and
|
|
|
•
|
|
thereafter
, 50% to all unitholders, pro rata, and 50% to the holders of our incentive distribution rights.
|
95
The percentages set forth above are based on the assumption that we do not issue additional
classes of equity securities.
If the liquidation occurs after the end of the subordination period, the distinction between
common units and subordinated units will disappear, so that clause (3) of the second bullet point above and all of the fourth bullet point above will no longer be applicable.
Manner of Adjustments for Losses
If our liquidation occurs before
the end of the subordination period, after making allocations of loss to the general partner and the unitholders in a manner intended to offset in reverse order the allocations of gains that have previously been allocated, we will generally allocate
any loss to the holders of our incentive distribution rights and unitholders in the following manner:
|
|
•
|
|
first
, 100% to the holders of subordinated units in proportion to the positive balances in their capital accounts, until the capital
accounts of the subordinated unitholders have been reduced to zero;
|
|
|
•
|
|
second
, 100% to the holders of common units in proportion to the positive balances in their capital accounts, until the capital accounts
of the common unitholders have been reduced to zero; and
|
|
|
•
|
|
thereafter
, 100% to the general partner.
|
The percentages set forth above are based on the assumption that we do not issue additional classes of equity securities.
If the liquidation occurs after the end of the subordination period, the distinction between common units and subordinated units will disappear, so that all of the first bullet point above will no longer
be applicable.
Adjustments to Capital Accounts
Our partnership agreement requires that we make adjustments to capital accounts upon the issuance of additional units. In this regard, our partnership agreement specifies that we allocate any unrealized
and, for tax purposes, unrecognized gain resulting from the adjustments to the unitholders and the holder of our incentive distribution rights in the same manner as we allocate gain upon liquidation. In the event that we make positive adjustments to
the capital accounts upon the issuance of additional units, our partnership agreement requires that we generally allocate any later negative adjustments to the capital accounts resulting from the issuance of additional units or upon our liquidation
in a manner that results, to the extent possible, in the partners’ capital account balances equaling the amount that they would have been if no earlier positive adjustments to the capital accounts had been made. In contrast to the allocations
of gain, and except as provided above, we generally will allocate any unrealized and unrecognized loss resulting from the adjustments to capital accounts upon the issuance of additional units to the unitholders and the holder of our incentive
distribution rights based on their relative percentage ownership of us. In this manner, prior to the end of the subordination period, we generally will allocate any such loss equally with respect to our common units and subordinated units. If we
make negative adjustments to the capital accounts as a result of such loss, future positive adjustments resulting from the issuance of additional units will be allocated in a manner designed to reverse the prior negative adjustments, and special
allocations will be made upon liquidation in a manner that results, to the extent possible, in our unitholders’ capital account balances equaling the amounts they would have been if no earlier adjustments for loss had been made.
96
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
The following table presents selected historical financial data of our Predecessor and selected unaudited pro forma financial data for
Noble Midstream for the periods and as of the dates indicated. The following selected historical financial data of our Predecessor consists of all of the assets and operations of our Predecessor on a 100% basis. In connection with the completion of
this offering, Noble will contribute to us the percentages of the assets described under “Certain Relationships and Related Party Transactions—Agreements with our Affiliates in Connection with the Transactions—Contribution
Agreement.” However, as required by GAAP, we will continue to consolidate 100% of the assets and operations of our development companies in our financial statements.
The selected historical financial data of our Predecessor as of and for the years ended December 31, 2015 and 2014 and as of March 31, 2016 and for the three months ended March 31, 2016 and 2015 are
derived from the audited and unaudited financial statements of our Predecessor appearing elsewhere in this prospectus. The following table should be read together with, and is qualified in its entirety by reference to, the historical audited and pro
forma financial statements and the accompanying notes included elsewhere in this prospectus. The table should also be read together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
The selected unaudited pro forma financial data presented in the following table for the year ended December 31, 2015
and as of and for the three months ended March 31, 2016 are derived from the unaudited pro forma condensed combined financial statements included elsewhere in this prospectus. The unaudited pro forma condensed combined balance sheet assumes the
offering and the related transactions occurred as of March 31, 2016, and the unaudited pro forma condensed combined statements of operations for the year ended December 31, 2015 and the three months ended March 31, 2016 assume the offering and
the related transactions occurred as of January 1, 2015. These transactions include, and the unaudited pro forma condensed combined financial statements give effect to, the following:
|
|
•
|
|
Our ownership of the percentages of the development companies that will operate our assets as described under “Certain Relationships and Related
Party Transactions—Agreements with our Affiliates in Connection with the Transactions—Contribution Agreement;”
|
|
|
•
|
|
our long-term, fixed-fee commercial agreements with Noble;
|
|
|
•
|
|
our entry into a new $ million revolving credit facility;
|
|
|
•
|
|
our entry into an operational services and secondment agreement and omnibus agreement with Noble;
|
|
|
•
|
|
the consummation of this offering and our issuance of (i) common units to the
public, (ii) a non-economic general partner interest to our general partner and (iii) common units,
subordinated units and the incentive distribution rights to Noble; and
|
|
|
•
|
|
the application of the net proceeds of this offering as described in “Use of Proceeds.”
|
97
The unaudited pro forma condensed combined financial statements do not give effect to
(i) an estimated $6.7 million in incremental general and administrative expenses that we expect to incur annually as a result of being a publicly traded partnership, (ii) variable general and administrative costs we will incur under
the operational services and secondment agreement that we will enter into with Noble as of the closing of this offering or (iii) reimbursable costs that will be due to Noble under the omnibus agreement to be entered into with Noble as of the
closing of this offering.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noble Midstream Partners LP
Predecessor Historical
|
|
|
Noble
Midstream
Partners LP Pro Forma
|
|
|
|
|
Year Ended
December
31,
|
|
|
Three Months
Ended March 31,
|
|
|
Year Ended
December 31,
2015
|
|
|
Three
Months Ended
March 31,
2016
|
|
|
|
|
2015
|
|
|
2014
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
|
|
(in thousands, except per unit data)
|
|
|
Statement of Operations Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Midstream Services—Related Party
|
|
$
|
87,837
|
|
|
$
|
2,086
|
|
|
$
|
32,123
|
|
|
$
|
12,852
|
|
|
$
|
108,467
|
|
|
$
|
32,123
|
|
|
Income from Investments
|
|
|
4,621
|
|
|
|
3,798
|
|
|
|
1,293
|
|
|
|
1,236
|
|
|
|
4,621
|
|
|
|
1,293
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenues
|
|
|
92,458
|
|
|
|
5,884
|
|
|
|
33,416
|
|
|
|
14,088
|
|
|
|
113,088
|
|
|
|
33,416
|
|
|
Costs and Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct Operating
|
|
|
16,933
|
|
|
|
8,538
|
|
|
|
5,888
|
|
|
|
2,670
|
|
|
|
27,449
|
|
|
|
5,888
|
|
|
Depreciation, Depletion and Amortization
|
|
|
6,891
|
|
|
|
11,315
|
|
|
|
2,144
|
|
|
|
1,345
|
|
|
|
6,891
|
|
|
|
2,144
|
|
|
General and Administrative
|
|
|
2,771
|
|
|
|
6,734
|
|
|
|
2,654
|
|
|
|
545
|
|
|
|
9,621
|
|
|
|
2,654
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating Expense
|
|
|
26,595
|
|
|
|
26,587
|
|
|
|
10,686
|
|
|
|
4,560
|
|
|
|
43,961
|
|
|
|
10,686
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income (Loss)
|
|
|
65,863
|
|
|
|
(20,703
|
)
|
|
|
22,730
|
|
|
|
9,528
|
|
|
|
69,127
|
|
|
|
22,730
|
|
|
Other Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Expense, Net of Amount Capitalized
|
|
|
4,595
|
|
|
|
3,566
|
|
|
|
910
|
|
|
|
515
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other Expense
|
|
|
4,595
|
|
|
|
3,566
|
|
|
|
910
|
|
|
|
515
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) Before Income Taxes
|
|
|
61,268
|
|
|
|
(24,269
|
)
|
|
|
21,820
|
|
|
|
9,013
|
|
|
|
69,127
|
|
|
|
22,730
|
|
|
Income Tax Provision (Benefit)
|
|
|
23,226
|
|
|
|
(9,178
|
)
|
|
|
8,310
|
|
|
|
3,409
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) including non-controlling interests
|
|
$
|
38,042
|
|
|
$
|
(15,091
|
)
|
|
$
|
13,510
|
|
|
$
|
5,604
|
|
|
$
|
69,127
|
|
|
$
|
22,730
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to non-controlling
interests
(1)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
18,101
|
|
|
|
4,973
|
|
|
Net income attributable to Noble Midstream Partners LP
|
|
$
|
38,042
|
|
|
$
|
(15,091
|
)
|
|
$
|
13,510
|
|
|
$
|
5,604
|
|
|
$
|
51,026
|
|
|
$
|
17,757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per limited partner unit (basic and diluted):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common units
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subordinated units
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data (at period end):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Property, Plant and Equipment, Net
|
|
$
|
250,933
|
|
|
$
|
195,513
|
|
|
$
|
254,452
|
|
|
|
|
|
|
|
|
|
|
$
|
254,452
|
|
|
Total Assets
|
|
|
305,318
|
|
|
|
216,512
|
|
|
|
300,399
|
|
|
|
|
|
|
|
|
|
|
|
300,399
|
|
|
Net Parent Investment/Partners’ Capital
|
|
|
263,539
|
|
|
|
213,673
|
|
|
|
255,866
|
|
|
|
|
|
|
|
|
|
|
|
277,316
|
|
|
Statement of Cash Flows Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by (Used in) Operating Activities
|
|
$
|
69,394
|
|
|
$
|
(12,534
|
)
|
|
$
|
14,599
|
|
|
$
|
8,292
|
|
|
|
|
|
|
|
|
|
|
Net Cash Used in Investing Activities
|
|
|
(54,461
|
)
|
|
|
(79,904
|
)
|
|
|
(11,661
|
)
|
|
|
(19,884
|
)
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by Financing Activities
|
|
|
11,679
|
|
|
|
92,438
|
|
|
|
(21,257
|
)
|
|
|
21,522
|
|
|
|
|
|
|
|
|
|
|
Other Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
(2)
|
|
$
|
53,259
|
|
|
$
|
80,466
|
|
|
|
11,906
|
|
|
|
19,371
|
|
|
|
|
|
|
|
|
|
|
EBITDA
(3)
|
|
|
72,754
|
|
|
|
(9,388
|
)
|
|
|
24,874
|
|
|
|
10,873
|
|
|
$
|
76,018
|
|
|
$
|
24,874
|
|
|
EBITDA attributable to Noble Midstream
Partners LP
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56,180
|
|
|
|
19,381
|
|
|
(1)
|
Represents 20%, 75%, 0%, 95%, 75% and 75% non-controlling interests in the development companies that hold our operating assets that have been
retained by Noble as described under “Certain Relationships and Related Party Transactions—Agreements with our Affiliates in Connection with the Transactions—Contribution Agreement.”
|
|
(2)
|
Represents additions to property, plant and equipment within the combined statement of cash flows.
|
|
(3)
|
For our definition of the non-GAAP financial measure of EBITDA and a reconciliation of EBITDA to our most directly comparable financial measures calculated and
presented in accordance with GAAP, please read “—Non-GAAP Financial Measure.”
|
98
Non-GAAP Financial Measure
We define EBITDA as net income (loss) before income taxes, net interest expense, depreciation, depletion and amortization. EBITDA is used
as a supplemental financial measure by management and by external users of our financial statements, such as investors, industry analysts, lenders and ratings agencies, to assess:
|
|
•
|
|
our operating performance as compared to those of other companies in the midstream energy industry, without regard to financing methods, historical
cost basis or capital structure;
|
|
|
•
|
|
the ability of our assets to generate sufficient cash flow to make distributions to our partners;
|
|
|
•
|
|
our ability to incur and service debt and fund capital expenditures; and
|
|
|
•
|
|
the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities.
|
We believe that the presentation of EBITDA in this prospectus provides information useful to investors in
assessing our financial condition and results of operations. The GAAP measures most directly comparable to EBITDA are net income and net cash provided by operating activities. EBITDA should not be considered an alternative to net income, net cash
provided by (used in) operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. EBITDA excludes some, but not all, items that affect net income or net cash, and these measures may vary from
those of other companies. As a result, EBITDA as presented below may not be comparable to similarly titled measures of other companies.
99
The following table presents a reconciliation of EBITDA to net income and net cash provided
by (used in) operating activities, the most directly comparable GAAP financial measures, on a historical basis and pro forma basis, as applicable, for each of the periods indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noble Midstream Partners
LP
Predecessor Historical
|
|
|
Noble Midstream
Partners LP Pro
Forma
|
|
|
|
|
Year Ended
December 31,
|
|
|
Three Months
Ended March 31,
|
|
|
Year
Ended
December 31,
2015
|
|
|
Three Months
Ended March 31,
2016
|
|
|
|
|
2015
|
|
|
2014
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
|
|
(in thousands, except per unit data)
|
|
|
Reconciliation of EBITDA to Net Income (Loss) and to Net Cash Provided by (Used in) Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
38,042
|
|
|
$
|
(15,091
|
)
|
|
$
|
13,510
|
|
|
$
|
5,604
|
|
|
$
|
69,127
|
|
|
$
|
22,730
|
|
|
Income tax (benefit) provision
|
|
|
23,226
|
|
|
|
(9,178
|
)
|
|
|
8,310
|
|
|
|
3,409
|
|
|
|
—
|
|
|
|
—
|
|
|
Interest expense, net of amount capitalized
|
|
|
4,595
|
|
|
|
3,566
|
|
|
|
910
|
|
|
|
515
|
|
|
|
—
|
|
|
|
—
|
|
|
Depreciation, depletion and amortization
|
|
|
6,891
|
|
|
|
11,315
|
|
|
|
2,144
|
|
|
|
1,345
|
|
|
|
6,891
|
|
|
|
2,144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
$
|
72,754
|
|
|
$
|
(9,388
|
)
|
|
$
|
24,874
|
|
|
$
|
10,873
|
|
|
$
|
76,018
|
|
|
$
|
24,874
|
|
|
Changes in operating assets and liabilities
|
|
|
1,254
|
|
|
|
—
|
|
|
|
(5,123
|
)
|
|
|
(2,123
|
)
|
|
|
|
|
|
|
|
|
|
Interest expense, net of amount capitalized
|
|
|
(4,595
|
)
|
|
|
(3,566
|
)
|
|
|
(910
|
)
|
|
|
(515
|
)
|
|
|
|
|
|
|
|
|
|
Stock based compensation and other
|
|
|
(19
|
)
|
|
|
420
|
|
|
|
(4,242
|
)
|
|
|
57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by (Used in) Operating Activities
|
|
$
|
69,394
|
|
|
$
|
(12,534
|
)
|
|
$
|
14,599
|
|
|
$
|
8,292
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of EBITDA Attributable to Noble Midstream Partners LP to Net Income Attributable to Noble Midstream Partners
LP:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Noble Midstream Partners LP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
51,026
|
|
|
$
|
17,757
|
|
|
Income tax (benefit) provision
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
Depreciation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,154
|
|
|
|
1,624
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA attributable to Noble Midstream Partners LP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
56,180
|
|
|
$
|
19,381
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of EBITDA Attributable to Non-controlling Interests to Net Income Attributable to Non-controlling
Interests:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to non-controlling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
18,101
|
|
|
$
|
4,973
|
|
|
Income tax (benefit) provision
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
Depreciation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,737
|
|
|
|
520
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA attributable to non-controlling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
19,838
|
|
|
$
|
5,493
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion of the financial condition and results of operations of the predecessor of Noble Midstream Partners LP, or our Predecessor, in conjunction with the historical
combined financial statements and notes of our Predecessor and the unaudited pro forma condensed financial statements for Noble Midstream Partners LP included elsewhere in this prospectus. Among other things, those historical, unaudited interim and
unaudited pro forma financial statements include more detailed information regarding the basis of presentation for the following information. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual
results could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the sections entitled “Risk Factors” and
“Forward-Looking Statements” included elsewhere in this prospectus.
Overview
We are a growth-oriented Delaware master limited partnership formed by our sponsor, Noble, to own, operate, develop
and acquire a wide range of domestic midstream infrastructure assets. We currently provide crude oil, natural gas, and water-related midstream services for Noble through long-term, fixed-fee contracts in the DJ Basin. Our operating areas of focus
are in the DJ Basin in Colorado, one of the premier liquid hydrocarbon basins in the United States and in the Delaware Basin, within the prolific Permian Basin in Texas.
Noble intends for us to become its primary vehicle for domestic midstream operations in the onshore United States outside of the Marcellus Shale in the northeastern United States. We have acreage
dedications spanning approximately 300,000 acres in the DJ Basin (with over 265,000 dedicated acres from Noble and the balance from a third party) and an additional 40,000 acres in Reeves County in the Delaware Basin for which we are currently, or
intend to, provide crude oil, natural gas, and water-related midstream services under long-term, fixed fee contracts. In addition to our existing operations and acreage dedications, Noble has granted us rights of first refusal, or ROFRs, on a
combination of midstream assets retained, developed or acquired by Noble and services not already dedicated to us in the DJ Basin, Eagle Ford Shale in Texas and Delaware Basin, including approximately 85,000 additional acres in the DJ Basin,
approximately 31,000 acres in Webb and Dimmit Counties in South Texas, including the Eagle Ford Shale, and approximately 40,000 acres in the Delaware Basin. Noble has also granted us a ROFR on certain future acquired acreage that is onshore in the
United States outside of the Marcellus Shale. See “Business—Rights of First Refusal on Assets and Services.”
The commercial agreements that we have in place are all fee-based and include dedications of production in the DJ Basin and the Delaware
Basin, each with an initial term ending in either 2030 or 2032. See “Business— Our Acreage Dedication.” These long-term, fee-based commercial agreements are intended to mitigate direct commodity price exposure and enhance the
stability of our cash flows.
How We Generate Revenue
Our results are primarily driven by the volumes of crude oil that we gather, natural gas that we gather, fresh water that we deliver and
store and saltwater that we collect, clean or dispose of, and the fees we charge per unit of throughput for our midstream services.
Our crude oil infrastructure assets consist of gathering pipelines and treating facilities, which collectively prepare crude oil for sale. Our natural gas gathering system that services the production
from the Wells Ranch IDP collects wet gas from separator facilities located at or near the wellhead and delivers the wet gas to the Wells Ranch CGF or other delivery points within the IDP areas. At the tailgate of our natural gas gathering
facilities or the Wells Ranch CGF, as applicable, we deliver the natural gas for further gathering and processing by third parties. Our saltwater gathering system gathers and processes liquids produced from operations in the DJ Basin
101
and consists of a combination of separation and storage facilities, and permanent pipelines, as well as pumping stations to transport saltwater to disposal facilities. Our fresh water systems
provide services for both treated saltwater and raw fresh water, for example, that has been withdrawn from a river or ground water. Our crude oil treating facilities treat crude oil that is trucked to the facilities from horizontal and vertical
wells throughout Noble’s DJ Basin acreage to meet pipeline specifications.
We have entered into multiple fee-based
commercial agreements with Noble, each with an initial term ending in either 2030 or 2032, utilizing our infrastructure assets or our planned infrastructure assets to provide an array of essential services critical to Noble’s upstream
operations in the DJ Basin and Delaware Basin. We have also entered into fee-based commercial agreements with a third party for fresh water services, produced water services and crude oil gathering, with expected services to commence in 2017. Our
agreements include substantial acreage dedications. See “Business—Our Acreage Dedication.”
Our investment
in White Cliffs LLC is accounted for under the cost method of investment as we have virtually no influence over partnership operations and financial policies. On a monthly basis, White Cliffs LLC makes cash distributions to its members, including
us. Under the cost method of accounting, we recognize these distributions as earnings to the extent there is net income, and record distributions in excess of our ratable share of earnings as return of investment.
We have indirect exposure to commodity price risk in that persistent low commodity prices may cause Noble or other customers to delay
drilling or shut in production, which would reduce the volumes available for gathering and processing by our infrastructure assets. If either of our customers delays drilling or temporarily shuts in production due to persistently low commodity
prices or for any other reason, we are not assured a certain amount of revenue as our commercial agreements do not contain minimum volume commitments. Please read “Risk Factors—Risks Related to Our Business—Because of the natural
decline in production from existing wells, our success, in part, depends on our ability to maintain or increase hydrocarbon throughput volumes on our midstream systems, which depends on Noble’s levels of development and completion activity on
our dedicated acreage” and “Risk Factors—Risks Related to Our Business—Our construction of new midstream assets may not result in revenue increases and may be subject to regulatory, environmental, political, contractual, legal
and economic risks, which could adversely affect our cash flows, results of operations and financial condition and, as a result, our ability to distribute cash to unitholders.”
Under each of our commercial agreements, the volumetric fees we charge are automatically increased each calendar year by 2.5%. In
addition, each year we will propose a redetermination of the fees charged under our various systems on an annual basis, taking into account, among other things, expected capital expenditures necessary to provide our services under the applicable
development plan. However, if we and Noble (or any other customer) are unable to agree on a fee redetermination (other than the automatic annual adjustment), the prior fee will remain in effect, which in effect allows our customers to unilaterally
exercise control over the decision of whether to change the fee.
How We Evaluate Our
Operations
Our management intends to use a variety of financial and operating metrics to analyze our performance. These
metrics are significant factors in assessing our operating results and profitability and include: (i) throughput volumes; (ii) EBITDA; (iii) distributable cash flow; (iv) capital expenditures and (v) operating expenses.
Throughput Volumes
The amount of revenue we generate primarily depends on the volumes of crude oil, natural gas and water for which we provide midstream services and the number of wells for which our crude oil treating
facilities are available. These volumes are affected primarily by changes in the supply of and demand for crude oil, natural gas and NGLs in the markets served directly or indirectly by our assets, such as the continued low-price commodity
environment that began in the fourth quarter of 2014. Our customers’ willingness to engage in new drilling is
102
determined by a number of factors, the most important of which are the prevailing and projected prices of crude oil, natural gas, the cost to drill and operate a well, expected well performance,
the availability and cost of capital and environmental and government regulations. We generally expect the level of drilling to positively correlate with long-term trends in commodity prices. Similarly, production levels nationally and regionally
generally tend to positively correlate with drilling activity.
In order to meet our contractual obligations under our
commercial agreements in respect of new wells drilled on our dedicated acreage, we will be required to incur capital expenditures to extend our infrastructure assets and facilities to the new wells drilled. We estimate that total expansion capital
expenditures for the twelve months ending September 30, 2017 will be $165.5 million ($103.5 million net to our ownership interests in our development companies and $0 million attributable to our ownership interest in White Cliffs LLC,
which we expect to fund with borrowings under our new revolving credit facility). Noble will be responsible for its proportionate share of the total capital expenditures associated with the ongoing build-out of the midstream systems owned by our
development companies. See “Cash Distribution Policy and Restrictions on Distributions—Significant Forecast Assumptions—Capital Expenditures.”
Noble and a third party customer have dedicated acreage to us based on the services we provide. As of January 1, 2015, Noble has dedicated to us the right to provide certain midstream services,
pursuant to multiple commercial agreements carrying initial terms ending in 2030, subject to preexisting dedications or rights of first refusal, on approximately 300,000 net acres in the Wells Ranch IDP, East Pony IDP, Mustang IDP, Greeley Crescent
IDP, Bronco IDP. Noble has dedicated to us the right to provide crude oil gathering and produced water-related services beginning in 2017 and 2018 pursuant to three commercial agreements carrying initial terms ending in 2032, subject to preexisting
dedications or rights of first refusal, on approximately 40,000 net acres in the Delaware Basin. Our commercial agreements with Noble provide that, in addition to our existing dedicated acreage, any future acreage that is acquired by Noble in these
areas, and that is not subject to a pre-existing third-party commitment, will be included in the dedication to us for midstream services, including gathering and treating. Based on Noble’s dedication to us and previously granted dedications, we
anticipate providing crude oil and water-related midstream services on any wells that Noble elects to drill in the Wells Ranch IDP, East Pony IDP, Mustang IDP, Greeley Crescent IDP, Bronco IDP and Delaware Basin, as well as certain natural gas
gathering services on any wells drilled in the Wells Ranch IDP and Mustang IDP. The number of wells Noble may drill, and timing with respect to these wells, will depend on numerous factors (some of which are beyond their control and all of which are
beyond our control), including commodity prices, weather, government regulation, geologic interpretation and the economic environment.
Because the production rate of a well declines over time, we must continually obtain new supplies of crude oil, natural gas and saltwater to maintain or increase the throughput volumes on our midstream
systems. Because fresh water services are largely dependent on well completion, our ability to provide fresh water services is contingent on our customers drilling and completing new wells. Our ability to maintain or increase existing throughput
volumes and obtain new supplies of crude oil, natural gas and saltwater are impacted by:
|
|
•
|
|
successful drilling activity by our customers on our dedicated acreage and our ability to fund the capital costs required to connect our infrastructure
assets to new wells;
|
|
|
•
|
|
our ability to utilize the remaining uncommitted capacity on, or add additional capacity to, our infrastructure assets;
|
|
|
•
|
|
the level of work-overs and re-completions of wells on existing pad sites to which our infrastructure assets are connected;
|
|
|
•
|
|
our ability to increase throughput volumes on our infrastructure assets by making outlet connections to existing or new third-party pipelines or other
facilities, primarily driven by the anticipated supply of and demand for crude oil, natural gas and water;
|
|
|
•
|
|
our ability to identify and execute organic expansion projects to capture incremental volumes from Noble and third parties;
|
103
|
|
•
|
|
our ability to compete for volumes from successful new wells in the areas in which we operate outside of our dedicated acreage; and
|
|
|
•
|
|
our ability to gather natural gas, gather and treat crude oil and provide water services with respect to hydrocarbons produced on acreage that has been
released from commitments with our competitors.
|
We actively monitor producer activity in the areas served
by our infrastructure assets to pursue new supply opportunities.
EBITDA
We define EBITDA as net income (loss) before income taxes, net interest expense, depreciation and amortization. EBITDA is used as a
supplemental financial measure by management and by external users of our financial statements, such as investors, industry analysts, lenders and ratings agencies, to assess:
|
|
•
|
|
our operating performance as compared to those of other companies in the midstream energy industry, without regard to financing methods, historical
cost basis or capital structure;
|
|
|
•
|
|
the ability of our assets to generate sufficient cash flow to make distributions to our partners;
|
|
|
•
|
|
our ability to incur and service debt and fund capital expenditures; and
|
|
|
•
|
|
the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities.
|
We believe that the presentation of EBITDA in this prospectus provides information useful to investors in
assessing our financial condition and results of operations. The GAAP measures most directly comparable to EBITDA are net income and net cash provided by operating activities. EBITDA should not be considered an alternative to net income, net cash
provided by (used in) operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. EBITDA excludes some, but not all, items that affect net income or net cash, and these measures may vary from
those of other companies. As a result, our EBITDA may not be comparable to similarly titled measures of other companies.
For
a discussion of the non-GAAP financial measure of EBITDA and a reconciliation of EBITDA to its most comparable measures calculated and presented in accordance with GAAP, please read “Selected Historical and Pro Forma Financial
Data—Non-GAAP Financial Measure.”
Distributable Cash Flow
Although we have not quantified distributable cash flow on a historical basis, after the completion of this offering, we intend to use
distributable cash flow, which we define as EBITDA less net cash interest paid and estimated maintenance capital expenditures, to analyze our performance. Distributable cash flow will not reflect changes in working capital balances.
We believe that the presentation of distributable cash flow in this prospectus provides information useful to investors in assessing our
financial condition and results of operations. The GAAP measures most directly comparable to distributable cash flow are net income and net cash provided by operating activities. Distributable cash flow should not be considered an alternative to net
income, net cash provided by operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. Distributable cash flow excludes some, but not all, items that affect net income or net cash provided by
operating activities, and these measures may vary from those of other companies. As a result, our distributable cash flow may not be comparable to similarly titled measures of other companies.
Operating Expense; General and Administrative Expense
Operating Expense
We seek to maximize the profitability of our
operations in part by minimizing, to the extent appropriate, expenses directly tied to operating our assets. Direct labor costs, ad valorem taxes, repair and non-capitalized
104
maintenance costs, integrity management costs, utilities and contract services comprise the most significant portion of our operations and maintenance expense. Many of these expenses remain
relatively stable across broad ranges of throughput volumes, but a portion of these expenses can fluctuate from period to period depending on the mix of activities performed during that period and the timing of these expenses. We will seek to manage
our operating expenditures on our midstream systems by scheduling maintenance over time to avoid significant variability in our maintenance expenditures and minimize their impact on our cash flow.
General and Administrative Expense
In January 2015, Noble began charging us a fixed fee for overhead and support services. Prior to institution of these fees, our Predecessor’s general and administrative expense included an allocation
of charges for the management and operation of our assets by Noble for general and administrative services, such as information technology, treasury, accounting, human resources and legal services and other financial and administrative services.
Following the completion of this offering, Noble will charge us a combination of direct and allocated charges for general and administrative services.
We anticipate incurring approximately $6.7 million of incremental general and administrative expenses attributable to being a publicly traded partnership, which includes expenses associated with annual,
quarterly and current reporting with the SEC; tax return and Schedule K-1 preparation and distribution; Sarbanes-Oxley compliance; listing on the NYSE; independent auditor fees; legal fees; investor relations expenses; transfer agent and registrar
fees; incremental salary and benefits costs of seconded employees; outside director fees; and insurance expenses. These incremental general and administrative expenses and the variable component of the general and administrative costs that we
anticipate incurring under the operational services and secondment agreement and the omnibus agreement, are not reflected in our historical or our pro forma financial statements. Our future general and administrative expense will also include
compensation expense associated with the Noble Midstream Partners LP 2016 Long-Term Incentive Plan.
Factors Affecting the Comparability of Our Financial Results
Our future results of operations may not be comparable to
our Predecessor’s historical results of operations for the reasons described below:
Ownership of Our Assets
Our Predecessor’s historical results of operations include all of the results of operations of Noble’s midstream business in the
DJ Basin on a 100% basis, which includes distributions in respect of our membership interest in White Cliffs LLC, 100% of the results of our operating assets and dedications, as well as 100% of the results of certain ancillary midstream assets that
Noble will retain after the completion of this offering. In connection with the completion of this offering, Noble will contribute to us an 80% controlling interest in the Colorado River DevCo LP, which owns our operating assets other than our
interests in White Cliffs LLC, a 3.33% ownership interest in White Cliffs LLC, and operating interests ranging from 5% to 100% in our dedications. Consequently, our results of operations after the completion of this offering will reflect
less than 100% of the results of our operating assets and dedications.
Revenues
There are differences between the sources of our Predecessor’s revenues prior to January 1, 2015 and the sources of our
Predecessor’s revenues beginning January 1, 2015. The revenues in our Predecessor’s historical combined financial statements for the year ended December 31, 2014 relate to the crude oil treating facilities and distributions
received from White Cliffs LLC. Our remaining infrastructure assets were part of the integrated operations of Noble for which documented intercompany arrangements did not exist. Effective January 1, 2015, we generate revenues under fee-based
arrangements with Noble. Additionally, we amended our commercial agreements with Noble, effective October 1, 2015, which changed some of the rates we charge for our services, and also began providing water life-cycle management functions for which
we invoice Noble at cost plus a
105
markup. We further amended our commercial agreements with Noble and entered into a new agreement with a third party customer in the spring and summer of 2016. Following the closing of this
offering, we will earn revenues under our long-term commercial agreements with Noble and will receive separate fixed fees for the midstream services that we provide. This unaffiliated third party customer is anticipated to contribute to our revenue
by the third quarter of 2017.
Depreciation Expense
As of January 1, 2015 depreciation related to our assets placed in service is calculated using the straight-line method. Historically, Noble has operated midstream assets in support of its U.S.
onshore upstream business as a cost center within the United States reportable segment. Due to the change in the intended use of these assets, Noble changed the method of depreciation from units-of-production to the straight-line method for future
accounting periods. Depreciation will be calculated on a straight-line basis from the first quarter of 2015, the period of change, and in prospective periods, with no cumulative adjustment for prior periods.
General and Administrative Expenses
Our Predecessor’s general and administrative expenses include expenses related to contracts with Noble beginning in January 2015, and amended in January of 2016, increasing the fixed fee portion to
closely match the omnibus agreement we anticipate at the closing of this offering. For periods prior to 2015, general and administrative expenses include allocations for certain functions historically performed by Noble, including allocations of
general corporate services, such as treasury, accounting, human resources and legal services. These allocations were based primarily on direct usage when identifiable or capital expenditures or other relevant allocation drivers during the respective
periods. Following the closing of this offering, we will reimburse Noble under our operational services and secondment agreement for the costs of operational employees, including those who work on construction and design, and their management that
have been seconded to us, our general partner or our subsidiaries in support of our operations. In addition, Noble will charge us a flat annual fee under our omnibus agreement for certain general and administrative services, such as treasury,
accounting and in-house legal services, that Noble will continue to provide to us and we will reimburse Noble for direct out-of-pocket, third-party costs incurred by Noble in providing general and administrative services for our exclusive benefit.
We expect to directly incur certain general and administrative expenses. For more information about the fees we will pay to Noble under our operational services and secondment agreement and omnibus agreement and the services covered by those fees,
please read “Certain Relationships and Related Party Transactions—Agreements with our Affiliates in Connection with the Transactions.” The general and administrative costs and expenses that we will incur directly or that are covered
by the amounts that we will pay to Noble include an expected $6.7 million of incremental annual general and administrative expenses as a result of being a separate publicly traded partnership that are not reflected in our Predecessor’s
historical combined financial statements.
Financing
There are differences in the way we will finance our operations as compared to the way our Predecessor historically financed operations. Historically, our Predecessor’s operations were financed as
part of Noble’s integrated operations and, other than interest under our Predecessor’s affiliate loan facilities with Noble, Noble allocated interest expense to our Predecessor for financing its operations.
Our partnership agreement requires that we distribute all of our available cash to our unitholders. As a result, we expect to rely
primarily upon external financing sources, including commercial bank borrowings and the issuance of debt and equity securities, to fund our acquisitions and expansion capital expenditures. Following the completion of this offering, we intend to have
no debt and an available borrowing capacity of $ million under a new revolving credit facility, which can be increased by an additional
$ million at our option in certain circumstances. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Capital Resources and
Liquidity—Revolving Credit Facility.”
106
Income Taxes
Our Predecessor was part of the integrated operations of Noble. As such, our Predecessor was part of Noble’s consolidated corporate tax return in all state and federal tax jurisdictions in which
Noble and our Predecessor had operations. Following the completion of this offering, we expect to be treated as a partnership for U.S. federal income tax purposes and, therefore, generally will not be liable for entity-level federal income taxes.
Income taxes have been calculated on a separate return basis as if the Predecessor were a stand-alone entity. Unlike the Partnership, however, the Predecessor is included in the Noble U.S. consolidated federal income tax return and U.S. state income
tax returns on a combined basis with Noble, as required.
Other Factors Impacting Our Business
We expect our business to continue to be affected by the following key factors. Our expectations are based on assumptions
made by us and information currently available to us. To the extent our underlying assumptions about, or interpretations of, available information prove to be incorrect, our actual results may vary materially from our expected results.
Supply and Demand for Crude Oil and Natural Gas
We currently generate substantially all of our revenues under fee-based agreements with Noble. We expect these contracts to promote cash flow stability and minimize our direct exposure to commodity price
fluctuations, since we generally do not own any of the crude oil, natural gas, or water that we handle and do not engage in the trading of crude oil or natural gas. However, commodity price fluctuations indirectly influence our activities and
results of operations over the long term, since they can affect production rates and investments by Noble and third parties in the development of new crude oil and natural gas reserves. However, mechanisms under our commercial agreements minimize
our exposure to activity reductions. In particular, the fee recalculation mechanisms under the agreements allow fees to be adjusted annually to provide cash flow stability if both parties agree to the adjustment. Generally, drilling and production
activity will increase as crude oil and natural gas prices increase. The throughput volumes at our assets depend primarily on the volumes of crude oil and natural gas produced by Noble in the DJ Basin and, with respect to fresh water, the number of
wells drilled and completed, which, in turn, is ultimately dependent on Noble’s margins. Noble’s margins depend on many factors, including the price of crude oil and natural gas and operational costs. These prices are volatile and
influenced by numerous factors beyond our or Noble’s control, including the domestic and global supply of and demand for crude oil and natural gas. The commodities trading markets, as well as other supply and demand factors, may also influence
the selling prices of crude oil and natural gas. Furthermore, our ability to execute our growth strategy in the DJ Basin will depend on crude oil and natural gas production in that area, which is also affected by the supply of and demand for crude
oil and natural gas.
Regulatory Compliance
The regulation of crude oil and natural gas gathering and transportation and water services activities by federal and state regulatory agencies has a significant impact on our business. See
“Business—Regulation of Operations.” Our operations are also impacted by new regulations, which have increased the time that it takes to obtain required permits.
Additionally, increased regulation of crude oil and natural gas producers in our areas of operation, including regulation associated with
hydraulic fracturing, could reduce regional supply of crude oil, natural gas and water and therefore throughput on our infrastructure assets. For more information see “Business—Regulation of Operations.”
107
Results of Operations
Year Ended December 31, 2015 Compared to the Year Ended December 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December
31,
|
|
|
Increase /
(Decrease)
from Prior
Year
|
|
|
|
|
2015
|
|
|
2014
|
|
|
|
($ in thousands)
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Midstream Services—Related Party
|
|
$
|
87,837
|
|
|
$
|
2,086
|
|
|
|
4,111
|
%
|
|
Income from Investments
|
|
|
4,621
|
|
|
|
3,798
|
|
|
|
22
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenues
|
|
|
92,458
|
|
|
|
5,884
|
|
|
|
1,471
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct Operating
|
|
|
16,933
|
|
|
|
8,538
|
|
|
|
98
|
%
|
|
Depreciation, Depletion and Amortization
|
|
|
6,891
|
|
|
|
11,315
|
|
|
|
(39
|
)%
|
|
General and Administrative
|
|
|
2,771
|
|
|
|
6,734
|
|
|
|
(59
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating Expenses
|
|
|
26,595
|
|
|
|
26,587
|
|
|
|
(—
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income (Loss)
|
|
|
65,863
|
|
|
|
(20,703
|
)
|
|
|
|
|
|
Other Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest, Net of Amount Capitalized
|
|
|
4,595
|
|
|
|
3,566
|
|
|
|
29
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other Expense
|
|
|
4,595
|
|
|
|
3,566
|
|
|
|
29
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) Before Income Taxes
|
|
|
61,268
|
|
|
|
(24,269
|
)
|
|
|
|
|
|
Income Tax Expense (Benefit)
|
|
|
23,226
|
|
|
|
(9,178
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
38,042
|
|
|
$
|
(15,091
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
. Revenue from midstream operations was approximately $87.8 million for the year
ended December 31, 2015 as compared to $2.1 million for the year ended December 31, 2014. Effective January 1, 2015, we entered into multiple commercial agreements with Noble, for which we receive a volumetric fee for the
midstream services we provide. Revenues for the year ended December 31, 2014 were solely from our crude oil treating facilities. Our remaining midstream infrastructure was part of the integrated operations of Noble and documented
intercompany arrangements did not exist prior to January 1, 2015.
Income from Investments
.
Our investment in White Cliffs LLC is accounted for under the cost method of investment as we have virtually no influence over partnership operations and financial policies. The increase in income from investments is primarily due to an increase in
the distributions from White Cliffs LLC for the year ended December 31, 2015 as compared with the year ended December 31, 2014.
Direct Operating Expense
. Operating expense is comprised of direct labor costs, ad valorem and property taxes, repair and non-capitalized maintenance costs, integrity management costs,
utilities and contract services. These expenses generally remain relatively stable across broad ranges of throughput volumes but can fluctuate from period to period depending on the mix of activities performed during that period and the timing of
these expenses. Total operating expense was approximately $16.9 million for the year ended December 31, 2015 compared to $8.5 million for the year ended December 31, 2014. The $8.4 million increase in operating expense was primarily related to
natural gas gathering, crude oil gathering and fresh water delivery due to the expansion of our infrastructure at Wells Ranch CGF, Wells Ranch gathering system and East Pony IDP crude oil gathering system during 2015.
Depreciation, Depletion and Amortization
. Depreciation, Depletion and Amortization expense decreased $4.3 million to $6.9
million for the year ended December 31, 2015 compared to $11.3 million for the year ended December 31, 2014, primarily as a result of a change in depreciation method. Beginning in January 2015, Noble
108
elected to begin operating the midstream business as if it were a stand-alone business. Historically, Noble has operated the midstream assets in support of the U.S. onshore upstream business as a
cost center within the United States reportable segment. Due to the change in the intended use of these assets, Noble changed the method of depreciation from units-of-production to the straight-line method for future accounting periods.
General and Administrative Expense
. General and administrative expense is primarily a flat fee charged by Noble beginning
in January of 2015. Prior to initiating this fee general and administrative expense was comprised of allocated monthly charges for the management and operation of our assets and certain expenses by Noble including general corporate services, such as
information technology, treasury, accounting, human resources, legal services and other financial and administrative services. These expenses were charged or allocated to us based on the nature of the expenses and our Predecessor’s direct usage
when identifiable or capital expenditures. Total general and administrative expense was $2.8 million for the year ended December 31, 2015 compared to $6.7 million for the year ended December 31, 2014. The decrease was primarily due to our entry into
a fixed overhead services agreement with Noble.
Three Months Ended March 31, 2016 Compared to Three Months Ended March 31,
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
Increase from
Prior
Year
|
|
|
|
|
2016
|
|
|
2015
|
|
|
|
($ in thousands)
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Midstream Services—Related Party
|
|
$
|
32,123
|
|
|
$
|
12,852
|
|
|
|
150
|
%
|
|
Income from Investments
|
|
|
1,293
|
|
|
|
1,236
|
|
|
|
5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenues
|
|
|
33,416
|
|
|
|
14,088
|
|
|
|
137
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct Operating
|
|
|
5,888
|
|
|
|
2,670
|
|
|
|
121
|
%
|
|
Depreciation, Depletion and Amortization
|
|
|
2,144
|
|
|
|
1,345
|
|
|
|
59
|
%
|
|
General and Administrative
|
|
|
2,654
|
|
|
|
545
|
|
|
|
387
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating Expenses
|
|
|
10,686
|
|
|
|
4,560
|
|
|
|
134
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income
|
|
|
22,730
|
|
|
|
9,528
|
|
|
|
|
|
|
Other Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest, Net of Amount Capitalized
|
|
|
910
|
|
|
|
515
|
|
|
|
77
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other Expense
|
|
|
910
|
|
|
|
515
|
|
|
|
77
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Before Income Taxes
|
|
|
21,820
|
|
|
|
9,013
|
|
|
|
142
|
%
|
|
Income Tax Expense
|
|
|
8,310
|
|
|
|
3,409
|
|
|
|
144
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
|
13,510
|
|
|
|
5,604
|
|
|
|
141
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
. Revenue from midstream services increased by $19.3 million for the three months
ended March 31, 2016 as compared to the three months ended March 31, 2015, due to the following:
|
|
•
|
|
Increase of $8.6 million due to a full quarter of crude oil gathering services in East Pony, where we commissioned crude oil gathering lines at the end
of the first quarter of 2015 and increased throughput volumes in our Wells Ranch gathering system;
|
|
|
•
|
|
Increase of $7.8 million due to increased fresh water delivery to the Wells Ranch IDP and initiated fresh water delivery to the Mustang IDP during the
first quarter of 2016;
|
|
|
•
|
|
Increase of $3.2 million related to an increase in natural gas gathering and produced water gathering services in our Wells Ranch gathering system due
to increased throughput on our system; and
|
|
|
•
|
|
Increase of $2.5 million related to water logistic services, crude oil treating and electricity pass-through, which we commenced services in the fourth
quarter of 2015. Water logistics is comprised of water transfer and disposal;
|
109
partially offset by:
|
|
•
|
|
Decrease of $2.8 million in fresh water delivery to the East Pony IDP due to timing of well completion activity by Noble.
|
Income from Investments
. The increase in income from investments is due to an increase in the distributions from White
Cliffs LLC for the three months ended March 31, 2016 as compared with the three months ended March 31, 2015. Our investment in White Cliffs LLC is accounted for under the cost method of investment, for which we recognize revenue to the extent we
receive distributions up to our pro-rata share of net income for the period.
Direct Operating Expense
Direct
Operating expense increased $3.2 million for the three months ended March 31, 2016 compared to the three months ended March 31, 2015 due to:
|
|
•
|
|
Initiated crude oil gathering services in East Pony;
|
|
|
•
|
|
Expansion of operations at our Wells Ranch gathering system; and
|
|
|
•
|
|
Increase in fresh water delivery and water logistics related to water transfer, for which we commenced services in the fourth quarter of 2015;
|
partially offset by:
|
|
•
|
|
Decrease in volumes treated in our crude oil treating facilities.
|
Depreciation, Depletion and Amortization
. Depreciation and Amortization expense increased $0.8 million for the three months
ended March 31, 2016 as compared to the three months ended March 31, 2015. The increase is primarily due to an increase in assets placed in service due to the expansion of the Wells Ranch CGF, commissioning the East Pony IDP crude oil gathering
system and expansion of the Wells Ranch gathering system at the end of the first quarter of 2015 and throughout the remainder of 2015.
General and Administrative Expense
. General and administrative expense increased $2.1 million for the three months ended March 31, 2016 as compared to the three months ended March 31, 2015.
The increase is primarily due to an increase in the fixed overhead services agreement with Noble, effective January 2016, as well as fees related to the 2015 financial audit.
Capital Resources and Liquidity
Liquidity and Financing
Arrangements
Historically, our sources of liquidity were based on cash flow from operations and funding from Noble. During
the year ended December 31, 2015, we entered into commercial agreements with Noble, whereby Noble began paying a monthly fee based on throughput volumes flowing through our infrastructure. Our Predecessor’s historical financial statements
do not include cash or cash equivalents with respect to periods prior to the time we entered into these commercial agreements. In connection with this offering, our cash management system will be administered by Noble on our general partner’s
behalf under our omnibus agreement.
We do not have any commitment from Noble or our general partner or any of their
respective affiliates to fund our cash flow deficits or provide other direct or indirect financial assistance to us following the closing of this offering. We expect our ongoing sources of liquidity following this offering to include cash generated
from operations, borrowings under our new revolving credit facility and, if necessary, the issuance of additional equity or debt securities. We believe that cash generated from these sources will be sufficient to meet our short-term working capital
requirements and long-term capital expenditure requirements and to make quarterly cash distributions.
110
Our partnership agreement requires that we distribute all of our available cash to our
unitholders. As a result, we expect to rely primarily upon external financing sources, including commercial bank borrowings and the issuance of debt and equity securities, to fund our acquisitions and expansion capital expenditures.
We intend to pay a minimum quarterly distribution of $ per unit per quarter, which
equates to an aggregate distribution of approximately $ million per quarter, or approximately $ million per year, based on the number of common units and
subordinated units to be outstanding immediately after completion of this offering. We do not have a legal or contractual obligation to pay distributions quarterly or on any other basis at our minimum quarterly distribution rate or at any other
rate. Please read “Cash Distribution Policy and Restrictions on Distributions.”
Revolving Credit Facility
In connection with the completion of this offering, we intend to enter into a new
$ million revolving credit facility, with a five year maturity. The new revolving credit facility will include a letter of credit sublimit of up to
$ million for issuances of letters of credit. We expect the borrowing capacity on our revolving credit facility may be increased by an additional $
million subject to certain conditions including compliance with the covenants contained in our credit agreement and requisite commitments from existing or new lenders. Our new revolving credit facility will be available to fund working capital and
to finance acquisitions and other capital expenditures.
The borrower under the new revolving credit facility will be Noble
Midstream Services, LLC and all obligations of the borrower under the new revolving credit facility will be guaranteed by the Partnership and all wholly-owned material subsidiaries of the Partnership. The guarantees may be released in the future
upon the occurrence of certain events including the Partnership or the borrower receiving an investment grade debt rating or the Partnership maintaining a four-quarter consolidated EBITDA in excess of
$ million for four consecutive quarters.
Borrowings under our revolving
credit facility will bear interest at a rate equal to an applicable margin plus, at our option, either (a) in the case of base rate borrowings, a rate equal to the highest of (1) the prime rate, (2) the federal funds rate plus 0.5% and (3) the
LIBOR for an interest period of one month plus 1.00% or (b) in the case of LIBOR borrowings, the offered rate per annum for deposits of dollars for the applicable interest period. LIBOR and the applicable margin will be defined in the credit
agreement that evidences our new revolving credit facility. We expect the unused portion of the revolving credit facility will be subject to a commitment fee.
We expect that the closing of the new revolving credit facility will be subject to customary closing conditions, include the closing of this offering. The new revolving credit facility will also contain
customary affirmative and negative covenants and events of default relating to the borrower, the Partnership and their respective subsidiaries. We expect these to include, among other things, limitations on the incurrence of indebtedness and liens,
the making of investments, the sale of assets, transactions with affiliates, merging or consolidating with another company and the making of restricted payments. We expect that the new revolving credit facility will contain specific provisions
limiting the borrower and the Partnership from engaging in certain business activities and events of default relating to certain changes in control, including Noble ceasing to own and control 51% of the voting interests of our general partner. We
expect that dividends and distributions from the borrower and the Partnership will be permitted so long as (1) no event of default exists on the date of the declaration of such divided or distribution or would result from such declaration;
(2) the Partnership is in pro-forma compliance with its consolidated leverage ratio under the new credit facility on the date of such declaration; and (3) such dividend or distribution is made within 60 days of such declaration.
In addition, we expect that the new revolving credit facility will require the Partnership to comply with certain financial covenants
including (1) a consolidated leverage ratio as of the end of each fiscal quarter of less
111
than or equal to 5.00 to 1.00, except following certain acquisitions the consolidated leverage ratio shall be less than or equal to 5.50 to 1.00 and (2) a consolidated interest coverage ratio of
not less than 3.00 to 1.00 as of the end of each fiscal quarter.
Cash Flows
Net cash provided by operating activities, investing activities and financing activities for the years ended 2015 and 2014 and the three
months ended March 31, 2016 and 2015 were as follows:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
Three Months Ended
March 31,
|
|
|
|
|
2015
|
|
|
2014
|
|
|
2016
|
|
|
2015
|
|
|
($ in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities:
|
|
$
|
69,394
|
|
|
$
|
(12,534
|
)
|
|
$
|
14,599
|
|
|
$
|
8,292
|
|
|
Net cash used in investing activities
|
|
$
|
(54,461
|
)
|
|
$
|
(79,904
|
)
|
|
$
|
(11,661
|
)
|
|
$
|
(19,884
|
)
|
|
Net cash provided by (used in) financing activities:
|
|
$
|
11,679
|
|
|
$
|
92,438
|
|
|
$
|
(21,257
|
)
|
|
$
|
21,522
|
|
For the year ended December 31, 2015 as compared to the year ended December 31, 2014:
Net cash provided by operating activities increased by $81.9 million during the year ended December 31, 2014. The
increase was primarily due to an increase in net income due to our entry into revenue agreements in January of 2015, an increase in accounts payable and offset, in part, by an increase in accounts receivable.
Cash used in investing activities decreased $25.4 million for the year ended December 31, 2015 compared to the year ended December 31,
2014. Capital spending was higher in 2014 primarily due to crude oil gathering infrastructure in the East Pony IDP area and the expansion of the Wells Ranch CGF, which was placed in service in early 2015.
Cash provided by financing activities decreased due to a reduction of capital expansion investment by Noble.
For the three months ended March 31, 2016 as compared to the three months ended March 31, 2015:
Net cash provided by operating activities increased by $6.3 million during the three months ended March 31, 2016 compared to the three
months ended March 31, 2015. The increase was primarily due to:
|
|
•
|
|
Increase in net income driven primarily by increased revenues from East Pony IDP crude oil gathering system and Wells Ranch gathering system;
|
|
|
•
|
|
Increase in current income taxes payable; and
|
|
|
•
|
|
Increase in accounts payable;
|
partially offset by:
|
|
•
|
|
Increase in accounts receivable.
|
Cash used in investing activities decreased $8.2 million for the three months ended March 31, 2016 compared to the three months ended March 31, 2015. Capital spending was higher in 2015 primarily due to
construction of crude oil gathering infrastructure in the East Pony IDP and the expansion of the Wells Ranch CGF, which were placed into service at the end of the first quarter of 2015.
Cash provided by financing activities decreased primarily due to a distribution to Noble during the first quarter of 2016, and a lessened
need for Noble funding due to our ability to fund from operations.
112
Capital Expenditures
The midstream energy business is capital intensive, requiring the maintenance of existing gathering systems and other midstream assets and facilities and the acquisition or construction and development of
new gathering systems and other midstream assets and facilities. Our partnership agreement will require that we categorize our capital expenditures as either:
|
|
•
|
|
Maintenance capital expenditures
, which are cash expenditures (including expenditures for the construction or development of new capital
assets or the replacement, improvement or expansion of existing capital assets) made to maintain, over the long term, our operating capacity and/or operating income. Examples of maintenance capital expenditures are expenditures to repair, refurbish
and replace pipelines, to maintain equipment reliability, integrity and safety and to comply with environmental laws and regulations. In addition, we designate a portion of our capital expenditures to connect new wells to maintain gathering
throughput as maintenance capital expenditures to the extent such capital expenditures are necessary to maintain, over the long term, our operating capacity, operating income or revenue; or
|
|
|
•
|
|
Expansion capital expenditures
, which are cash expenditures to acquire additional interests in our midstream assets and construct new
midstream infrastructure and those expenditures incurred to extend the useful lives of our assets, reduce costs, increase revenues or increase system throughput or capacity from current levels, including well connections that increase existing
system throughput. Examples of expansion capital expenditures include the acquisition of additional interests in our midstream assets and the construction, development or acquisition of additional gathering pipelines central gathering facilities, in
each case to the extent such capital expenditures are expected to expand our operating capacity, operating income or revenue. In the future, if we make acquisitions that increase system throughput or capacity, the associated capital expenditures may
also be considered expansion capital expenditures.
|
For the year ended December 31, 2015, the total capital
expenditures of our Predecessor were $62.1 million on a 100% basis, of which $50.9 million were related to gathering assets, and $11.3 million were related to freshwater delivery systems. The gathering asset expenditures were primarily associated
with the construction of the East Pony crude oil gathering system and expansion of the Wells Ranch CGF. Historically, we did not make a distinction between maintenance and expansion capital expenditures. We have estimated, however, that
approximately $5.9 million of these capital expenditures constituted maintenance capital expenditures.
For the year
ended December 31, 2014, the total capital expenditures of our Predecessor were $79.2 million on a 100% basis, of which $65.0 million was related to gathering assets and $14.2 million was related to freshwater delivery assets. The gathering
asset expenditures were primarily associated with the construction of the Wells Ranch CGF, Wells Ranch gathering system and East Pony crude oil gathering system. Historically, we did not make a distinction between maintenance and expansion capital
expenditures. We have estimated, however, that approximately $4.3 million of these capital expenditures constituted maintenance capital expenditures.
For the three months ended March 31, 2016, the total capital expenditures of our Predecessor were $5.6 million on a 100% basis, of which $5.1 million were related to gathering assets, and $0.5 million
were related to freshwater delivery systems. The gathering asset expenditures were primarily associated with the construction of the East Pony crude oil gathering system and expansion of the Wells Ranch CGF. Historically, we did not make a
distinction between maintenance and expansion capital expenditures. We have estimated, however, that approximately $2.4 million of these capital expenditures constituted maintenance capital expenditures.
For the three months ended March 31, 2015, the total capital expenditures of our Predecessor were $26.2 million on a 100% basis, of which
$22.4 million were related to gathering assets, and $3.8 million were related to freshwater delivery systems. The gathering asset expenditures were primarily associated with the construction of the East Pony crude oil gathering system and expansion
of the Wells Ranch CGF. Historically, we did not make a
113
distinction between maintenance and expansion capital expenditures. We have estimated, however, that approximately $1.1 million of these capital expenditures constituted maintenance capital
expenditures.
We estimate that total capital expenditures attributable to our development companies for the twelve months
ending September 30, 2017 will be $57.8 million ($41.5 million net to our ownership interests in our development companies) and $0 million attributable to our equity ownership interest in White Cliffs LLC. We estimate that expansion
capital expenditures for the twelve months ending September 30, 2017 will be $48.9 million ($35.2 million net to our ownership interests in our development companies and $0 million attributable to our equity ownership interest in
White Cliffs LLC), primarily relating to gathering pipeline expansions, including new well pad connections, and expansion or construction of additional centralized gathering facilities. We estimate that maintenance capital expenditures will be
$8.9 million ($6.3 million net to our ownership interests in our development companies) for the twelve months ending September 30, 2017. Please read “Cash Distribution Policy and Restrictions on Distributions—Significant
Forecast Assumptions—Capital Expenditures.”
We anticipate that we will continue to make significant expansion
capital expenditures in the future. Consequently, our ability to develop and maintain sources of funds to meet our capital requirements is critical to our ability to meet our growth objectives. We expect that our future expansion capital
expenditures will be funded by borrowings under our new revolving credit facility and the issuance of debt and equity securities.
Off-Balance Sheet Arrangements
None.
Critical Accounting Policies
Critical accounting policies are those that are important to our financial condition and require management’s most difficult, subjective or complex judgments, and the amount of assets and liabilities
as of the date of the combined financial statements. The revenue and expenses for a period could differ significantly due to changes in these judgments or assumptions. We have evaluated the accounting policies used in the preparation of the
accompanying combined financial statements of our Predecessor and related notes thereto and believe those policies are reasonable and appropriate.
We apply those accounting policies that we believe best reflect the underlying business and economic events, consistent with GAAP. Our more critical accounting policies include those related to property
and equipment and asset retirement obligations. Inherent in such policies are certain key assumptions and estimates. We periodically update the estimates used in the preparation of the financial statements based on our latest assessment of the
current and projected business and general economic environment. Our significant accounting policies are summarized in Note 2 to the audited combined financial statements of our Predecessor appearing elsewhere in this prospectus. We believe the
following to be our most critical accounting policies applied in the preparation of our Predecessor’s financial statements.
We are an “emerging growth company” pursuant to the Jumpstart Our Business Startups Act, or JOBS Act. The JOBS Act provides that an emerging growth company may delay adopting new or revised
accounting standards until such time as those standards apply to private companies. We have elected not to take advantage of this exemption and, therefore, plan to adopt new or revised accounting standards at the time those standards apply to public
companies.
Investments
We account for our investment in partnerships using either the cost method or the equity method. We use the equity method of accounting for investments when we have the ability to exercise significant
influence. We define significant influence as the ability to participate as a member of a board of directors or management and/or participate in policy-making processes.
114
We use the cost method of accounting for investments when we have virtually no ability to
influence financial and operating policies.
Property, Plant and Equipment
Property, plant and equipment is recorded at cost upon acquisition. Expenditures which extend the useful lives of existing property, plant
and equipment are capitalized.
When properties are retired or otherwise disposed, the related cost and accumulated
depreciation are removed from the respective accounts and any profit or loss on disposition is recognized as gain or loss. There were no retirements or disposals during the periods presented.
Prior to 2015, certain assets were accounted for under the successful efforts method of accounting within Noble’s integrated
operations. Under this method, costs to acquire mineral interests in crude oil and natural gas properties, drill and equip exploratory wells that find proved reserves, and drill and equip development wells are capitalized. Capitalized costs of
producing crude oil and natural gas properties, along with support equipment and facilities, are amortized to expense by the unit-of-production method based on proved crude oil, natural gas and NGL reserves on a field-by-field basis, as estimated by
Noble’s qualified petroleum engineers. Noble’s policy is to use quarter-end reserves and add back current period production to compute quarterly depreciation, depletion and amortization expense. Costs of certain gathering facilities
serving a number of properties are depreciated using the straight-line method over the useful lives of the assets ranging from three to thirty years. Upon sale or retirement of depreciable or depletable property, the cost and related accumulated
depreciation, depletion and amortization is eliminated from the accounts and the resulting gain or loss is recognized. Repairs and maintenance are expensed as incurred.
Depreciation, Depletion and Amortization
Depreciation, depletion and
amortization expense totaled $6.9 million for year ended December 31, 2015, and $11.3 million for the year ended December 31, 2014. Depreciation, depletion and amortization expense totaled $2.1 million and $1.3 million for the three months
ended March 31, 2016 and 2015, respectively. The determination of estimated useful lives is a significant element in arriving at the results of operations. If the useful lives of the assets were found to be shorter than originally estimated,
depreciation, depletion and amortization charges would be accelerated. Additional information concerning long-lived assets and related depreciation, depletion and amortization appears in Note 4 of the combined audited financial statements of our
Predecessor appearing elsewhere in this prospectus.
Asset Retirement Obligations
Our asset retirement obligations (ARO) consist of estimated costs of dismantlement, removal, site reclamation and similar activities
associated with our infrastructure assets. We recognize the fair value of a liability for an ARO in the period in which it is incurred, when we have an existing legal obligation associated with the retirement of our infrastructure assets and the
obligation can reasonably be estimated. The associated asset retirement cost is capitalized as part of the carrying cost of the infrastructure asset. The recognition of an ARO requires that management make numerous estimates, assumptions and
judgments regarding such factors as: the existence of a legal obligation for an ARO; estimated probabilities, amounts and timing of settlements; the credit-adjusted risk-free rate to be used; and inflation rates. In periods subsequent to initial
measurement of the ARO, we recognize period-to-period changes in the liability resulting from the passage of time and revisions to either the timing or the amount of the original estimate of undiscounted cash flows. Revisions also result in
increases or decreases in the carrying cost of the asset. Increases in the ARO liability due to passage of time impact net income as accretion expense. The related capitalized cost, including revisions thereto, is charged to expense through
depreciation, depletion and amortization. Asset retirement obligations totaled $3.6 million and $2.8 million at December 31, 2015 and 2014, respectively. Asset retirement obligations totaled $3.7 million at March 31, 2016.
115
Contractual Obligations
The following table details the future projected payments associated with our contractual obligations as of December 31, 2015.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Year
|
|
|
|
|
2016
|
|
|
2017-2018
|
|
|
2019-2020
|
|
|
2021 and
Thereafter
|
|
|
Total
|
|
|
($ in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Retirement Obligations
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,612
|
|
|
$
|
3,612
|
|
|
Surface Lease Obligations (1)
|
|
$
|
52
|
|
|
$
|
104
|
|
|
$
|
104
|
|
|
$
|
613
|
|
|
$
|
873
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
52
|
|
|
$
|
104
|
|
|
$
|
104
|
|
|
$
|
4,225
|
|
|
$
|
4,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Surface lease obligations represent annual payments to landowners under three surface leases.
|
Qualitative and Quantitative Disclosures About Market Risk
Commodity Price Risk
We
currently generate most of our revenues pursuant to fee-based commercial agreements under which we are paid based on the volumes of crude oil, natural gas and water that we gather and handle, rather than the underlying value of the commodity.
Consequently, our existing operations and cash flows have little direct exposure to commodity price risk. Although we intend to enter into similar fee-based gathering agreements with new customers in the future, our efforts to negotiate such terms
may not be successful.
We may acquire or develop additional midstream assets in a manner that increases our exposure to
commodity price risk. Future exposure to the volatility of crude oil, natural gas and NGL prices could have a material adverse effect on our business, financial condition, results of operations, cash flows and ability to make cash distributions to
our unitholders.
Interest Rate Risk
In connection with the completion of this offering we expect to enter into a new revolving credit facility. Assuming our average debt level of
$ million, comprised of funds drawn on our new revolving credit facility, an increase of one percentage point in the interest rates will result in an increase in annual
interest expense of $ million. As a result, our results of operations, cash flows and financial condition and, as a result, our ability to make cash distributions to our
unitholders, could be materially adversely affected by significant increases in interest rates.
Seasonality
Demand for crude oil and natural gas generally decreases during the spring and fall months and increases during the summer and winter
months. However, seasonal anomalies such as mild winters or mild summers sometimes lessen this fluctuation. In addition, certain crude oil and natural gas users utilize natural gas storage facilities and purchase some of their anticipated winter
requirements during the summer. This can also lessen seasonal demand fluctuations. These seasonal anomalies can increase demand for crude oil and natural gas during the summer and winter months and decrease demand for crude oil and natural gas
during the spring and fall months. With respect to our completed midstream systems, we do not expect seasonal conditions to have a material impact on our throughput volumes. Severe or prolonged winters may, however, impact our ability to complete
additional well connections or construction projects, which may impact the rate of our growth. In addition, severe winter weather may also impact or slow the ability of Noble to execute its drilling and development plan.
116
INDUSTRY OVERVIEW
General
We provide, or have contracted to provide, crude oil, natural gas, and water-related midstream services for Noble and our third party customer. The market we serve, which begins at the source of
production and extends through the gathering, processing and treating of hydrocarbons delivering them to takeaway pipelines, is a major component of what is commonly referred to as the “midstream” market.
Crude Oil Midstream Industry
General
The crude oil midstream industry provides the link between the
exploration and production of crude oil from the wellhead and the delivery of crude oil to storage facilities, crude oil pipelines and refineries. Companies generate revenues at various links within the midstream value chain by gathering, treating,
transporting, storing or marketing crude oil. Our crude oil midstream operations currently focus on the gathering, treating and storage of crude oil. The following diagram illustrates the various components of the midstream value chain:
Midstream Services
The services we provide are generally classified into the categories described below.
Gathering
.
Crude oil gathering assets provide the link between crude oil production gathered at the well site or nearby collection points and crude
oil terminals, storage facilities, long-haul crude oil pipelines and refineries. Crude oil gathering assets generally consist of a network of small-diameter pipelines that are connected directly to the well site or central receipt points delivering
into large-diameter trunk lines. Pipeline transportation is generally the lowest cost option for transporting crude oil. Competition in the crude oil gathering industry is typically regional and based on proximity to crude oil producers, as well as
access to viable delivery points. Overall demand for gathering services in a particular area is generally driven by crude oil producer activity in the area. To the extent there are not enough volumes to justify construction of or connection to a
pipeline system, trucking crude oil from a well site to nearby collection points can also be a competitor to crude oil gathering pipeline systems, but is typically not the lowest cost option for transporting crude oil from a producer’s
perspective.
117
Treating
.
Crude oil treating assets process crude
oil to remove basic sediment and water contained in crude oil after production. Crude oil delivery points, including crude oil terminals, storage facilities, long-haul crude oil pipelines and refineries, often have specific requirements for the
amount of sediment and water that can be contained in any crude oil delivered to them. If crude oil does not meet their requirements after being gathered, crude oil treating facilities reduce the sediment and water content to acceptable levels.
Crude oil is delivered to treating facilities by truck, where the basic sediment and water content of the crude oil is analyzed to determine if a truckload requires treatment prior to delivery into downstream delivery points.
Natural Gas Midstream Industry
General
The natural gas midstream industry provides the link between the
exploration and production of natural gas from the wellhead and the delivery of natural gas and its by-products to industrial, commercial and residential end-users. Companies generate revenues at various links within the midstream value chain by
gathering, compressing, processing, treating, fractionating, transporting, storing or marketing natural gas and NGLs. Our natural gas midstream operations currently focus on the gathering of natural gas. The following diagram illustrates the various
components of the midstream value chain:
Midstream Services
The services we provide are generally classified into the categories described below.
Gathering
. At the initial stages of the midstream value chain, a network of typically small diameter pipelines known as gathering systems directly connect to wellheads, pad sites or other
receipt points in the production area. These gathering systems transport natural gas from the wellhead and other receipt points either to compressor stations, treating and processing plants (if the natural gas is wet) or directly to intrastate or
interstate pipelines (if the natural gas is dry).
Gathering systems are typically designed to be highly flexible to provide
different levels of service (such as higher or lower pressure) and scalable to allow for additional production and well connections without significant incremental capital expenditures. Gathering systems are operated at pressures that both meet the
contractual service requirements and maximize the total throughput from all connected wells. Competition in the natural gas gathering industry is typically regional and based on proximity to natural gas producers, as well as access to
118
viable treating and processing plants or intrastate and interstate pipelines. Overall demand for gathering services in a particular area is generally driven by natural gas producer activity in
the area.
Water Services Industry
Fresh Water Distribution and Storage
.
Fresh water, when used in the hydraulic fracturing
process, is integral to the completion of wells for production. Hydraulic fracturing is a well stimulation process that utilizes large volumes of fresh water and sand (or another proppant) combined with fracturing chemical additives that are pumped
at high pressure to crack open previously impenetrable rock and release hydrocarbons. Fresh water refers to water that has been treated and also to water that has been withdrawn from a river or ground water. Although some larger producers have (or
have begun construction of) fresh water systems, many other producers still rely on third-party providers for distribution services. Providers range from independent, dedicated trucking providers to consolidated service companies that provide a full
range of oilfield services, including fresh water distribution.
Saltwater Gathering and Transportation
.
Saltwater accounts for the largest waste stream volume associated with crude oil and natural gas production. Producers often seek to outsource saltwater handling and disposal to third parties in order to preserve capital and engineering time for
drilling. Flowback from the hydraulic fracturing process creates additional water volumes that must be disposed of by producers. In the DJ Basin, wells with longer lateral lengths, increased hydraulic fracturing stages and downspacing of well
locations have contributed to increased flowback volumes.
Market Fundamentals
According to the U.S. Energy Information Administration, or the EIA, both total energy supply and demand are projected
to grow in coming decades. Population is one key determinant of energy consumption through its influence on demand for travel, housing, consumer goods and services. The EIA anticipates the total U.S. population will increase by 18% from 2015 to
2040. The EIA forecasts U.S. energy consumption to increase 11% over the same period. A review of other supply and demand elements follows.
Crude Oil Consumption
Crude oil is a significant component of energy
consumption in the United States. According to the EIA, liquid petroleum consumption accounted for approximately 36% of all energy used in the United States in 2015. Global petroleum liquids consumption is expected to grow 30% from 94 million
barrels a day in 2015 to 122 million barrels per day by 2040. The following charts illustrate expected growth in petroleum and other liquids consumption.
119
Global Petroleum Liquids Consumption: 2015-2040
Source: EIA, Annual Energy Outlook 2016 (June 2016).
Forecasts published by the EIA anticipate continued growth in the long-term global demand for crude oil. These forecasts are supported by
various factors, including: (i) continued global population growth, which has a significant influence on long-term growth in crude oil demand; (ii) GDP growth for both OECD and non-OECD countries; (iii) increased transportation
activity, offset by increased vehicle fuel economy; (iv) increased industrial activity; and (v) the emergence of low-cost tight crude oil shale developments.
Crude Oil Production
Onshore Unconventional Production
Unconventional basins in the United States and Canada are rapidly changing the crude oil market dynamics in North
America. The growth in crude oil production across North America is being driven by new technologies, such as horizontal drilling and hydraulic fracturing, which are unlocking vast quantities of crude oil and natural gas reserves. According to the
EIA, North American onshore production grew at an annual rate of approximately 20% from 2010 to 2013 and is expected to grow at an annual rate of approximately 18% from 2010 to 2015. From 2010 to 2015, tight oil production grew at an annual rate of
approximately 43% and is expected to grow at an annual rate of approximately 1% from 2015 to 2020.
120
The chart below depicts the estimated increase in North American onshore crude oil
production through 2020.
U.S. Lower 48 Onshore Crude Production: 2010-2020
Source: EIA, Annual Energy Outlook 2016 (June 2016).
* Compound Annual Growth Rate
Crude Oil Prices
Average annual U.S. crude oil prices have decreased
significantly since late 2014 as a result of the availability of abundant domestic resources and the application of improved production technologies. Over the past two years, growth in U.S. crude oil production, along with the late-2014 drop in
global crude oil prices, has altered the economics of the crude oil market. Nonetheless, the EIA projects that the average WTI crude oil spot price will increase through 2040, as growing demand leads to the development of more costly resources.
WTI Spot Crude Oil Price ($ per Bbl)
Source: EIA, Annual Energy Outlook 2016 (June 2016).
121
The EIA’s projection of crude oil prices depends on many factors, including
macroeconomic growth rates, changes in worldwide demand for petroleum products, crude oil production, and supplies of other liquid fuels. After 2018, growth in demand from non-OECD countries pushes the WTI price to $129/bbl in 2040 (in 2015
dollars). The increase in crude oil prices supports growth in domestic crude oil production.
Natural Gas Consumption
Natural gas is a significant component of energy consumption in the United States. According to the EIA, natural gas consumption
accounted for approximately 29% of all energy used in the United States in 2015. Natural gas consumption is expected to grow 25% from 28.3 quadrillion BTU in 2015 to 35.4 quadrillion BTU by 2040. The following charts illustrate expected energy
consumption by fuel source in 2040 as compared to 2015.
Forecasts published by the EIA anticipate continued growth in
the long-term domestic demand for natural gas. These forecasts are supported by various factors, including (i) expectations of continued growth in the U.S. gross domestic product, which has a significant influence on long-term growth in natural
gas demand; (ii) an increased likelihood that regulatory and legislative initiatives regarding domestic carbon policy will drive greater demand for cleaner burning fuels such as natural gas; (iii) increased acceptance of the view that
natural gas is a clean and abundant domestic fuel source that can lead to greater energy independence of the United States by reducing its dependence on imported petroleum; (iv) the emergence of low-cost natural gas shale developments; and
(v) continued growth in electricity generation from intermittent renewable energy sources, primarily wind and solar energy, for which natural-gas fired generation is a logical back-up power supply source.
The majority of fuel switching is occurring in electric power generation where coal-fired plants are being replaced with cleaner burning
fuel sources. However, as a result of more rapid increases in generation from natural gas and renewable fuels, coal’s share of the total U.S. generation mix is projected to fall from 33% to 18% from 2015 to 2040. Over the same period, the share
of U.S. generation from natural gas is projected to increase from 33% in 2015 to 38% in 2040.
U.S. Electricity Generation
by Fuel Source: 1990-2040
Source: EIA, Annual Energy Outlook 2016 (June 2016).
In addition to increasing domestic consumption, domestic natural gas consumers will also compete for supply with foreign natural gas
consumers. According to the EIA, the United States is expected to become an overall net exporter of natural gas in 2018. This shift from being a net importer of natural gas to a net exporter of
122
natural gas is driven by the increased use of LNG in markets outside of North America, U.S. natural gas exports to Mexico, strong domestic production, and relatively low U.S. natural gas prices
in comparison with other global markets. The following chart illustrates the trend of overall domestic natural gas net imports shifting to net exports by 2018.
U.S. Net Imports of Natural Gas: 2005-2040
Source: EIA, Annual Energy Outlook 2016 (June 2016).
Natural Gas Production
In response to increased domestic energy consumption, total domestic energy production is projected to grow significantly over the next 25 years. The EIA estimates that total U.S. energy production will
increase by 29%, from 87.3 to 112.2 quadrillion Btu, and natural gas production will increase by 55%, from 28.0 to 43.4 quadrillion Btu, between 2015 and 2040. The chart below shows the total production for fuel sources through 2040.
Energy Production by Domestic Fuel Source: 2015-2040
Source: EIA, Annual Energy Outlook 2016 (June 2016).
123
Domestic natural gas consumption today is satisfied primarily by production from
conventional and unconventional onshore and offshore production in the lower 48 states, and is supplemented by production from historically declining pipeline imports from Canada, imports of LNG from foreign sources and some Alaska production. In
order to maintain current levels of U.S. natural gas supply and to meet the projected increase in demand, new sources of domestic natural gas must continue to be developed to offset natural depletion associated with existing production.
Over the past several years, a fundamental shift in production has emerged with the contribution of natural gas from shale increasing
from 8.1% of total U.S. natural gas gross withdrawals in 2007 to 43.9% in 2014. According to the EIA, during the four-year period from 2009 through 2015, domestic natural gas marketed production increased by 5.1% per annum, largely due to
continued development of shale resources. The emergence of shale plays has resulted primarily from advances in horizontal drilling and hydraulic fracturing technologies, which have allowed producers to extract significant volumes of natural gas from
these plays at cost-advantaged per unit economics versus most conventional plays.
As the depletion of conventional onshore
and offshore resources continues, natural gas from unconventional resource plays is forecasted to fill the void and continue to gain market share from higher-cost sources of natural gas. As shown in the graphic below, natural gas production from the
major shale formations is forecast to provide the majority of the growth in domestically produced natural gas supply, increasing to approximately 69% in 2040 as compared with 50% in 2015. The increase in natural gas production from 2015 to 2040
results primarily from continued exploration and development of shale gas resources. Shale gas is the largest contributor to production growth, while production from tight sands, coalbed methane deposits and offshore waters remains relatively
stable.
U.S. Natural Gas Production by Source: 2015-2040
Source: EIA, Annual Energy Outlook 2016 (June 2016).
The abundance of natural gas shale production as well as the divergence between U.S. domestic and international prices for natural gas
has caused a renewed interest in exporting domestic natural gas through LNG export terminals. While these projects take many years to develop, some domestic producers and foreign consumers view them as attractive opportunities to improve their
respective economics and provide for an alternative source of demand for natural gas.
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Natural Gas Prices
Average annual U.S. natural gas prices have remained relatively low over the past several years as a result of the availability of abundant domestic resources and the application of improved production
technologies. Nonetheless, the EIA projects that growth in demand for natural gas, largely from the electric power and industrial sectors, exports to Mexico and demand for liquefied natural gas exports, will result in upward pressure on prices
through 2040.
Henry Hub Spot Natural Gas Price ($ per million BTU)
Source: EIA, Annual Energy Outlook 2016 (June 2016).
The EIA’s projection of natural gas prices depends on many factors, including macroeconomic growth rates and expected rates of
resource recovery from natural gas wells. Higher rates of economic growth are expected to lead to increased consumption of natural gas, primarily in response to their effects on housing starts, commercial floor space and industrial output.
Furthermore, the rate of resource recovery from crude oil and natural gas wells is expected to have a direct impact on the cost per unit of production and, in turn, prices.
The development of shale gas resources are expected to spur growth in natural gas production, with producers seeing higher prices as a
result of growing demand, especially from both the industrial and electricity generation sectors. Growing LNG exports also support higher natural gas prices in the projection period. U.S. pipeline exports of natural gas—most flowing south to
Mexico—have grown substantially since 2010 and are projected to continue increasing through 2040. According to the EIA, the United States will become a net exporter of natural gas in 2018, driven by LNG exports, increased pipeline exports to
Mexico and reduced imports from Canada.
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Overview of the DJ Basin
General
Since the
implementation of horizontal drilling technology, the DJ Basin has become recognized as a premier U.S. liquids resource play. As Noble’s largest onshore field by proved reserves, average daily production and wells drilled, the DJ Basin was a
key driver of Noble’s increase in production and cash flows through 2015.
The DJ Basin is a structural basin
located in eastern Colorado, southeastern Wyoming, western Kansas, and the Nebraska Panhandle and covers an area of more than 42,000 square miles. The basin has a long history of crude oil and natural gas exploration and production, predominantly
from an area described as the Wattenberg field. According to the EIA, the Wattenberg Field is the fourth largest producing crude oil field and ninth largest producing natural gas field in the United States by 2013 estimated production. While
historically a natural gas-focused field, the Wattenberg is also known for its high liquids content, evidenced by the significant growth in crude oil production from the Niobrara and Codell shale formations. The Niobrara Shale formation is situated
in portions of Colorado, Wyoming, Nebraska, and Kansas as shown below.
DJ Basin
Source: EIA.
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The DJ Basin has experienced a significant ramp in activity since 2012. As depicted
below, monthly crude oil and natural gas production in Weld County, Colorado, increased 181% from January 2012 through March 2016.
Historical Weld County Monthly Crude Oil & Natural Gas Production: January 2012—March 2016
Source: Colorado Oil & Gas Conservation Commission.
History
The history of
crude oil and natural gas production in the DJ Basin dates back to the first discovery that occurred in 1865 at the Florence Field. The first commercial discovery was made in 1901 at the Boulder Field with production coming from the Codell
sandstone. Later, in 1919, the Beecher Island Field began producing natural gas from the Niobrara Chalk. Other large DJ Basin discoveries include the Wellington Field, discovered in 1923, and the Greasewood Field, discovered in 1930. In 1970, the
Wattenberg Field was discovered with production coming from the Muddy/J Sandstone.
Geology
The Niobrara formation is uniformly present across the entire DJ Basin with an average depth of approximately 7,200 feet in the core
Wattenberg Field. The formation consists of chalky benches created from skeletal debris of planktonic organisms deposited in a shallow marine environment. The Niobrara A, B and C benches serve as a source rock that generates crude oil and natural
gas. Including the Codell formation, which is located just below the Niobrara benches, the crude oil and natural gas saturated interval ranges from 300 to 350 feet thick. The Niobrara’s shale and chalk intervals are characterized by high
density porosity of 10% to 14% and low permeability. The formation has a high storage capacity for hydrocarbons and requires multiple wells per section to adequately drain the recoverable crude oil and natural gas, leading operators to test tighter
well spacing. The Codell formation is considered to be a part of the same petroleum system as the Niobrara and has an average depth of approximately 7,300 feet.
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Overview of the Permian Basin
General
The Permian
Basin consists of mature, legacy onshore oil and liquids-rich natural gas reservoirs that span approximately 86,000 square miles in West Texas and New Mexico. It is comprised of three main sub-areas, the Delaware Basin, the Central Basin Platform,
and the Midland Basin. Operators in the Permian Basin have produced more than 29 billion barrels of oil and 75 trillion cubic feet of natural gas over the past 90 years, and the Permian Basin is estimated to contain recoverable oil and natural gas
reserves exceeding that which has already been produced.
Despite declining production from legacy wells, oil production in
the Permian Basin has increased from 850,000 barrels per day in 2007 to over two million barrels per day in March 2016, which was approximately 22% of the total oil produced onshore in the continental United States. According to the EIA, the
increase is largely attributable to increasing production from six low-permeability formations, including the Spraberry, Wolfcamp, Bone Spring, Glorieta, Yeso and Delaware formations, with Spraberry, Wolfcamp and Bone Spring accounting for
approximately three-quarters of the production increase. According to the Baker Hughes, there were 160 rigs operating in the Permian Basin as of July 15, 2016, accounting for 38% of the total rigs operating onshore in the United States.
Permian Basin
Source: EIA
Delaware Basin
The Delaware Basin is a stacked play prospect, where wells
can produce oil and natural gas from several layers of rock in different geological zones. The primary prospective zones for production are located within the Bone Springs and Wolfcamp formations, often referred to as the WolfBone play. Well results
in the Delaware are driven primarily by the over-pressured nature of the Bone Spring and Wolfcamp reservoirs, which enhances the deliverability of horizontal wells.
The Southern Delaware Basin has experienced a significant ramp in activity since 2012. As depicted below, monthly crude oil and natural gas production in Reeves County, Texas increased 485% from January
2012 through March 2016.
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Historical Reeves County Monthly Crude Oil & Natural
Gas Production: January 2012—March 2016
Source: Railroad Commission of Texas.
History
The Permian
Basin of west Texas and southeast New Mexico has produced oil for over 90 years and is still one of the largest petroleum-producing basins in the United States. The first commercial oil wells in the Permian Basin were completed in the early 1920s.
Notable fields discovered in the mid-1920s include the World field in Crockett County, the McCamey field in Upton and Crane counties, and the Yates oilfield in Pecos County.
In the 1970s, Permian oil production reached 2 million barrels per day before declining to 850,000 barrels per day in 2007. Over the past 10 years, the Permian has seen resurgence in activity with the
advent of horizontal drilling and hydraulic fracturing techniques that allow oil and natural gas to be extracted from the complex geological structures of the Permian.
Delaware Basin Geology
The Bone Spring formation is
Leonardian in age and is divided into the 1
st
, 2
nd
, and 3
rd
Bone Spring, each containing a package of carbonate followed by a package of sand. The combined 1
st
and 2
nd
Bone Spring are similar thickness (approximately 1,800 feet to 2,000 feet) in central Reeves County, TX and Lea
County, NM. The 3
rd
Bone Spring is considerably thinner at
approximately 250 feet in Central Reeves County as opposed to over 700 feet in the New Mexico area. Above the
1
st
Bone Spring carbonate, there are the upper and lower
Avalon shales as well as the Avalon carbonate that splits the two shales. The Avalon carbonate is interbedded with dark and carbonaceous shale siltstones that act as a permeability barrier to vertical flow. Sand strata in the Bone Spring formation
were deposited as submarine fan systems. The carbonates are composed of dark and dense carbonaceous wackestone and mudstone that establish an important source rock. The sand intervals of the Bone Spring are composed of dark, thinly bedded,
calcareous shales and siltstones. The entire Bone Spring and Avalon formations average in thickness from 2,500 feet to 3,500 feet. The thickest region of the formation occurs in the eastern portion of the Delaware Basin before it transitions into
the Central Basin Platform.
The Wolfcamp formation is present throughout the entire Permian Basin. The Wolfcamp formation in
the Delaware Basin is a heterogenetic resource of hydrocarbons. The lithology of the Delaware Wolfcamp is characterized by interbedded shale and limestone. The Wolfcamp formation in the northwestern section of the Delaware Basin is composed of light
colored dolostones. In contrast, the rest of the basin’s Wolfcampian strata are dark colored lime packstones, wackestones, and mudstones. The Delaware Wolfcamp has an average thickness of 2,000 feet but can locally exceed 6,000 feet in the
western portion of the basin while the top of the Wolfcamp in the Delaware Basin lies on an average depth ranging from 10,000 to 12,000 feet.
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BUSINESS
Overview
We are a growth-oriented Delaware master limited partnership formed by our sponsor, Noble, to own, operate, develop and acquire a wide range of domestic midstream infrastructure assets. We currently
provide crude oil, natural gas, and water-related midstream services for Noble in the DJ Basin through long-term, fixed-fee contracts. Our areas of focus are in the DJ Basin, one of the premier liquid hydrocarbon basins in the United States, and in
the Delaware Basin within the prolific Permian Basin in Texas.
Noble intends for us to become its primary vehicle for
domestic midstream operations in the onshore United States outside of the Marcellus Shale in the northeastern United States. We have acreage dedications spanning approximately 300,000 acres in the DJ Basin (with over 265,000 dedicated acres from
Noble and the balance from a third party) and an additional 40,000 acres in Reeves County in the Delaware Basin for which we are currently, or intend to, provide crude oil, natural gas, and water-related midstream services under long-term, fixed fee
contracts. In addition to our existing operations and acreage dedications, Noble has granted us rights of first refusal, or ROFRs, on a combination of midstream assets retained, developed or acquired by Noble and services not already dedicated to us
in the DJ Basin, Eagle Ford Shale in Texas and Delaware Basin, including approximately 85,000 additional acres in the DJ Basin, approximately 31,000 acres in Webb and Dimmit Counties in South Texas, including the Eagle Ford Shale, and approximately
40,000 acres in the Delaware Basin. Noble has also granted us a ROFR on certain future acquired acreage that is onshore in the United States outside of the Marcellus Shale. See “Rights of First Refusal on Assets and Services.”
We believe we are well positioned to (i) develop our infrastructure in a manner and on a timeline that will allow us to handle increasing
volumes that we anticipate will result from Noble’s drilling programs on these dedicated properties, and (ii) attract third-party customers in the DJ Basin, Delaware Basin and future areas of operation as we continue to expand our existing and
build out new midstream systems and facilities. During the second quarter of 2016, we secured our first third party customer in the DJ Basin with a 33,000 net acre dedication for crude oil gathering and water services through a series of long-term,
fee-based commercial arrangements with services expected to commence in the third quarter of 2017. We intend to continue to seek similar commercial arrangements with others by leveraging our existing midstream footprint. We anticipate that our
strategically located midstream infrastructure assets, as well as our relationship with Noble, will continue to position us as a leading midstream service provider.
The commercial agreements that we have in place are all fee-based and include dedications of production in the DJ Basin and the Delaware Basin, each with an initial term ending in either 2030 or 2032. See
“—Our Acreage Dedication.” These long-term, fee-based commercial agreements are intended to mitigate direct commodity price exposure and enhance the stability of our cash flows.
DJ Basin Overview
Noble is our primary customer and one of the largest producers of liquids in the DJ Basin, where it produced, on average, 118 MBoe/d of
crude oil, condensate, natural gas and NGLs in the three months ended March 31, 2016, with 66% of such volumes being crude oil and NGLs.
Noble commenced horizontal drilling in the DJ Basin in 2010 in order to increase recoveries of liquid-rich hydrocarbons. This shift to a horizontal drilling program has created an opportunity for more
efficient gathering of crude oil, natural gas, NGLs and water, which is the core of our business. Noble continues to refine a number of drilling and completion techniques to increase efficiencies and ultimate recovery while enhancing the overall
value of its DJ Basin position. Noble accelerated its extended reach lateral well program to approximately 63% of wells drilled in the first quarter of 2016. In the three months ended March 31, 2016, the majority of Noble’s wells in the DJ
Basin were completed using enhanced slickwater completion techniques, requiring increased
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volumes of fresh water to be delivered to the drill site, further strengthening Noble’s demand for our water services. During the quarter ended March 31, 2016, Noble spud 24 horizontal
wells, of which 15 were extended reach lateral wells, and 36 wells initiated production. Since January 2010, Noble has spud nearly 1,100 horizontal wells, covering over five million lateral feet.
The table below shows Noble’s DJ Basin drilling activities for the periods presented.
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Year Ended December 31,
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Year to Date
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2013
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2014
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2015
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March 31, 2016
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Number of horizontal wells spud
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285
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303
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171
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24
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Approximate average lateral feet per horizontal well
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4,400
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5,600
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6,200
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7,300
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The graph below shows Noble’s net DJ Basin production and drilling activity from January 1,
2010 through March 31, 2016, and demonstrates the impact that the horizontal drilling program has had on Noble’s DJ Basin production. A number of factors impact Noble’s production and drilling activity, including the number of drilling
rigs that Noble operates on its acreage. See “Risk Factors—Risks Related to Our Business.”
Our midstream operations in the DJ Basin were established in order to service Noble’s growing
production associated with its horizontal drilling program. Since our operations began in October 2013, Noble’s overall horizontal production in the DJ Basin has grown from an average of 64 net Mboe/d for the three months ended December 31,
2013 to 96 net Mboe/d for the three months ended March 31, 2016, an increase of 48%, which represents a compound annual growth rate of approximately 19% over the time period.
In the areas of the DJ Basin where Noble is focused and where we have infrastructure, Noble’s combined volumes associated with its horizontal drilling program averaged nearly 65 net MBoe/d in the
three months ended March 31, 2016, up 34% compared to the three months ended March 31, 2015. We provide crude oil and natural gas gathering services with respect to the majority of Noble’s horizontal production in these areas, and, as a result,
our gathered volumes averaged 63 MBoe/d in the three months ended March 31, 2016, up 100% compared to the three months ended March 31, 2015. For the three months ended March 31, 2016, our gathered volumes represented approximately 51% of
Noble’s DJ Basin gross horizontal production, up from approximately 25% for the three months ended March 31, 2015. Our acreage dedications from Noble along with
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our commercial agreements and operating footprint will allow us to capture the majority of incremental production volumes associated with Noble’s horizontal drilling program in these areas
and throughout the DJ Basin.
The graph below shows Noble’s gross horizontal production in the DJ Basin from January 1,
2010 through March 31, 2016, along with our gathered volumes since our operations initiated in the fourth quarter of 2013. Noble’s crude oil and natural gas volumes produced prior to the fourth quarter of 2013 were not connected to our assets;
as Noble continues to develop its acreage in the DJ Basin and legacy production continues to decline, we anticipate that we will continue to service an increasing percentage of Noble’s volumes in the DJ Basin.
Texas Overview
Noble entered the Delaware Basin and Eagle Ford Shale in 2015 through its merger with Rosetta Resources Inc. Noble currently holds approximately 88,000 net acres in these areas, of which Noble has
dedicated to us approximately 40,000 net acres in the Delaware Basin for crude oil and produced water services. Noble has already demonstrated improvements in well performance in the year since acquiring this acreage with the application of its
unconventional completion expertise. We are working with Noble in the Delaware Basin to implement a centralized facility concept and to apply the expertise and knowledge refined over the last several years in the DJ Basin to the Delaware Basin. The
infrastructure will support crude oil and produced water related services which is expected to generate revenue in the Delaware Basin by the second quarter of 2017 and coincides with the expiration or termination of existing water dedications.
The Delaware Basin has significantly evolved over the last several years with multi-bench development, completion
improvements and longer laterals, transforming it into one of the most commercial basins in the US. These advancements supported economic development through the recent price cycle. For example, the Southern Delaware Basin has experienced a
significant growth in activity since 2012, with monthly crude oil and natural gas production in Reeves County, Texas increasing 485% from January 2012 through April 2016 according to the Railroad Commission of Texas. As producers continue to refine
horizontal drilling techniques, the Delaware Basin is expected to experience further growth with additional improvements in completion design and development optimization.
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Our Assets, ROFRs and ROFOs
Through our development companies, we operate and own interests in crude oil gathering pipelines, crude oil treating facilities, natural
gas gathering pipelines, a centralized gathering facility, or CGF and future assets currently under development. In the DJ Basin, we also provide Noble with water-related services that are critical to Noble’s upstream operations, including the
storage and distribution of fresh water for use in drilling and completion operations and collecting, cleaning and disposing of flowback and produced water, which we refer to collectively as saltwater, through our interests in pipelines and
facilities (or under contracts with third parties).
The majority of our existing facilities are located in two areas of Weld
County, Colorado, that we refer to as the Wells Ranch integrated development plan area, or Wells Ranch IDP, and the East Pony integrated development plan area, or East Pony IDP. In the DJ Basin, Noble operates through integrated development plans,
or IDP areas, through a comprehensive design for well pad facilities that support horizontal drilling allowing us to efficiently gather production and provide other related midstream services to these areas with reduced truck traffic, emissions and
overall surface footprint. Each IDP area consists of a large block of Noble’s contiguous acreage, allowing us to build and operate midstream infrastructure that we believe is more efficient in terms of capital invested per mile of pipe and
service provided.
In addition to our assets in the Wells Ranch IDP and East Pony IDP, we have dedications with respect to
development that is expected to occur in the future from Noble and a third party, a ROFR from Noble on certain assets and services and a right of first offer, or ROFO, from Noble with respect to its retained interests in the development companies
through which we conduct our midstream services. We believe that our assets and the ROFR and ROFO agreements granted to us by Noble will continue to position us as a leading midstream service provider.
Our Assets
Substantially all of our current cash flows are generated by our assets owned by the Colorado River DevCo LP in which we own an initial
80% controlling interest. We expect these assets to be key contributors to our growth as Noble continues to increase its production in the DJ Basin through the execution of its horizontal drilling plan.
The majority of the assets owned by Colorado River DevCo LP consist of gathering systems in the Wells Ranch IDP that collect crude oil,
natural gas and saltwater from facilities located at or near the wellhead and provide gathering to the Wells Ranch CGF or other delivery points within the IDP area. At the Wells Ranch CGF, we provide certain integral services, including separation,
treatment, cleaning and storage of the incoming liquid stream into pipeline-quality crude oil and saltwater suitable for disposal operations. At the tailgate of the Wells Ranch CGF, we deliver the hydrocarbons to a third party for additional
transportation, gathering and processing and we collect and clean the saltwater and prepare it for treating and disposal. We expect these systems and others that we may develop will continue to provide us and Noble many benefits, including increased
capital and operating efficiencies. Our assets servicing the Wells Ranch IDP include:
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•
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approximately 35 miles of liquids pipelines that carry both crude oil and saltwater to the Wells Ranch CGF, which has storage capacity for up to 96,000
Bbls of crude oil and 32,000 Bbls of saltwater as of March 31, 2016, and these liquids pipelines had, during the three months ended March 31, 2016:
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average daily throughput of approximately 26,000 Bbl/d of crude oil (increased 54% from 16,800 Bbl/d during the first quarter of 2015); and
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o
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average daily throughput of approximately 10,300 Bbl/d of saltwater (increased 181% from 3,700 Bbl/d during the first quarter of 2015);
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•
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approximately 30 miles of natural gas gathering pipelines servicing the Wells Ranch IDP, which had average daily throughput of approximately 75,700
Mcf/d during the three months ended March 31, 2016 (increased 10% from 69,600 Mcf/d during the first quarter of 2015);
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•
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approximately 20 miles of fresh water pipelines servicing the Wells Ranch IDP that delivered an average of approximately 37,500 Bbl/d of fresh water
during the three months ended March 31, 2016 (increased 1,978% from 1,800 Bbl/d during the first quarter of 2015) and storage capacity of approximately 500,000 Bbls of fresh water as of March 31, 2016.
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In addition to our assets servicing the Wells Ranch IDP, the Colorado River DevCo LP owns the following assets:
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•
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approximately 25 miles of crude oil gathering pipelines servicing the East Pony IDP, which came online in March 2015 and which had average daily
throughput of approximately 24,100 Bbl/d of crude oil during the three months ended March 31, 2016; and
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•
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the Briggsdale and Platteville crude oil treating facilities, which have an annual operating capacity of 2,740,000 Bbls and 1,825,000 Bbls,
respectively.
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The remainder of our assets are held by five development companies in which we own initial
controlling interests in the percentages as set forth in the parentheticals below. We believe this tiered ownership structure will allow us to maintain flexibility to adjust to Noble’s development decisions. The following are descriptions of
our five development companies:
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Green River DevCo LP (25%) has assets located in the Mustang IDP, consisting of a fresh water storage pond with a storage capacity of approximately
230,000 Bbls of water, rights-of-way and surface rights on which we are constructing additional components of the fresh water system and on which we plan to construct crude oil, natural gas and additional water infrastructure in order to provide
services under our dedication
s. We anticipate the first centralized facility servicing the Mustang IDP and the related gathering infrastructure to be in operation by the end of 2017.
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•
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Blanco River DevCo LP (25%) has dedications from Noble for crude oil gathering and produced water services in the Delaware Basin. Construction of the
crude oil and produced water infrastructure required to support Noble’s planned development in the Delaware Basin will begin in 2016. We anticipate the gathering system and initial facility to be in operation during the second quarter of 2017.
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•
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Laramie River DevCo LP (100%) has dedications from Noble and a third party for crude oil gathering and water services in the Greeley Crescent IDP. We
are in the process of obtaining rights of way and procuring long lead items for a third party crude oil trunk line running from central Greeley Crescent to multiple downstream outlets near Platteville, CO, which will service third party dedicated
acreage as well as potential Noble production on its remaining acreage within this IDP area in the future. Construction of this infrastructure will begin in 2016, and we anticipate the gathering systems to be in operation by mid-2017.
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San Juan River DevCo LP (25%) has assets in the East Pony IDP, which consist of rights-of-way, surface rights and fresh water systems consisting of
approximately 10 miles of fresh water pipelines and a storage capacity of approximately 550,000 Bbls of fresh water as of March 31, 2016 and a dedication from Noble for all water services in the East Pony IDP. We currently do not provide produced
water services, but may do so in the future.
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Gunnison River DevCo LP (5%) has assets in the Bronco IDP, which consist of dedications from Noble for crude oil gathering and water services.
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We also own a 3.33% ownership interest in White Cliffs Pipeline, L.L.C., or White Cliffs LLC, which
entitles us to distributions based on our pro rata share of monthly net cash flow generated by the operation of the White Cliffs Pipeline. The White Cliffs Pipeline system consists of two 527-mile crude oil pipelines that extend
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from the DJ Basin to the Cushing, Oklahoma market that had a capacity of approximately 150,000 Bbl/d of crude oil as of March 31, 2016 and completed an expansion of the pipeline’s crude oil
capacity to approximately 215,000 Bbl/d during the second quarter of 2016. See “—Our Assets, ROFRs and ROFO—Our Assets.”
The following table provides a summary of our assets, services and dedicated net acreage (as of June 30, 2016, unless otherwise indicated) along with our ownership of these assets as of the closing of
this offering.
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DevCo
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Areas Served
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NBLX Dedicated Service
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Current Status
of Asset
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Dedicated Net
Acreage
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NBLX
Ownership
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Colorado River DevCo LP
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• Wells Ranch IDP
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• Crude Oil Gathering
• Natural Gas
Gathering
• Water Services
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• Operational
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• 79,000
(4)
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80%
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• East Pony IDP
• All Noble DJ Basin
Acreage
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• Crude Oil Gathering
• Crude Oil
Treating
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• Operational
• Operational
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• 44,000
• N/A
(1)
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Green River DevCo LP
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Mustang IDP
(2)
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• Crude Oil Gathering
• Natural Gas
Gathering
• Water Services
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• Under Construction
• Under Construction
• Partially Operational
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75,000
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25%
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Blanco River DevCo
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Delaware Basin
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• Crude Oil Gathering
• Produced Water Services
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Planning
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40,000
(5)
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25%
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Laramie River DevCo LP
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Greeley Crescent IDP
(3)
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• Crude Oil Gathering
• Water Services
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Under Construction
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65,000
(3)
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100%
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San Juan River DevCo LP
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East Pony IDP
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• Water Services (currently only fresh water services provided)
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Operational
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44,000
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25%
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Gunnison River DevCo LP
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Bronco IDP
(2)
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• Crude Oil Gathering
• Water Services
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Future Development
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36,000
(4)
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5%
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(1)
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The fee for crude oil treating services is not acreage based. We receive a monthly fee for each Noble-operated well producing in paying quantities in the DJ Basin that
is not connected to our crude oil gathering systems during each month, which was 4,400 wells as of March 31, 2016.
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(2)
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We currently have limited midstream infrastructure assets in the Mustang IDP and no midstream infrastructure assets in the Bronco IDP. Our assets in these IDP areas
currently consist primarily of dedications to us from Noble for future production in these IDP areas. In the Mustang IDP, we also own one fresh water storage pond and certain rights-of-way and surface rights. See “Business—Our Assets,
ROFRs and ROFO.” We anticipate the first centralized facility servicing the Mustang IDP and related gathering infrastructure to be in service by the end of 2017.
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(3)
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Our assets in this IDP area currently consist of dedications to us from Noble and an unaffiliated third party. See “Business—Our Assets, ROFRs and ROFO.”
On May 3, 2016, Noble announced a sale of approximately 33,000 net acres to such third party, which acreage is in the Greeley Crescent IDP. On June 14, 2016, the first closing in respect of such sale closed pursuant to which the non-producing
acreage was conveyed out of Noble and the second closing is expected to occur in the future. As a result of the first closing and the acreage that Noble retained, all of the acreage in the Greeley Crescent IDP remains subject to the dedications in
favor of us for crude oil gathering, produced water services and fresh water services.
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(4)
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On June 15, 2016, Noble entered into an acreage swap pursuant to which Noble will increase its holdings in the Wells Ranch IDP by approximately 11,700 net acres in
exchange for reducing its interest in the Bronco IDP by approximately 13,500 net acres. Upon completion, all of the outbound acreage in the Bronco IDP was released from the prior dedications to us, and the inbound acreage in the Wells Ranch IDP
became dedicated to us. After giving effect to this acreage swap, the dedication in the Wells Ranch IDP is approximately 79,000 net acres and our dedication in the Bronco IDP is approximately 36,000 net acres.
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(5)
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Includes acreage currently dedicated to other providers for produced water services and committed to us upon expiration of existing dedications. The majority of these
dedications will expire or are expected to be terminated by Noble by the time our planned infrastructure is operational in 2017.
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Rights of First Refusal
Noble has granted us a ROFR on the right to
provide midstream services on certain acreage described below and on the right to acquire certain midstream assets. The following describes how these ROFRs are applicable in our primary geographic areas:
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•
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East Pony Natural Gas Gathering and Northern Colorado Natural Gas Processing.
The services ROFR gives us the right to provide natural gas
processing and natural gas gathering services on approximately 44,000 net acres located in East Pony IDP in the event Noble elects to obtain such services from a third party. Today, Noble provides these services for itself, using the assets
described below. Noble has granted us a ROFR on the right to buy these assets in the event Noble elects to sell them:
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•
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Approximately 233 miles of natural gas gathering pipelines, which had average daily throughput of approximately 39,600 Mcf/d during the three months
ended March 31, 2016 (increased 25% from 31,700 Mcf/d during the first quarter of 2015).
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•
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Two natural gas processing plants, Lilli and Keota, with combined existing processing capacity of 48,000 Mcf/d. Keota is permitted for an 15,000 Mcf/d
expansion to handle approximately 45,000 Mcf/d (bringing total combined processing capacity to 63,000 Mcf/d). Daily processing volumes for Lilli and Keota combined averaged approximately 34,100 Mcf/d during the three months ended March 31, 2016
(increased 83% from 18,600 Mcf/d during the first quarter of 2015).
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•
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Eagle Ford Shale.
The services ROFR gives us the right to provide crude oil gathering, natural gas gathering and water services on
approximately 31,000 net acres in Dimmit and Webb Counties located in the event Noble elects to offer these to a third party facilities and crude oil and natural gas gathering systems that had an average daily throughput of approximately 43.6 MBoe/d
during the three months ending March 31, 2016 that service some of Noble’s contiguous acreage in the Eagle Ford Shale.
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•
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DJ Basin.
The services ROFR gives us the right to provide crude oil gathering, natural gas gathering and water services on approximately
85,000 net acres the DJ Basin that are not already dedicated to us, and with respect to the acreage already under dedications for certain services, the right to provide the other midstream services in our areas of specialty, if they become
available.
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•
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Delaware Basin
.
The services ROFR gives us the right to provide natural gas gathering, natural gas processing and fresh water
services on the same acreage that is dedicated to us for crude oil and produced water gathering, which is approximately 40,000 net acres in the Delaware Basin.
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•
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Future acquired acreage in the onshore United States.
The services ROFR gives us the right to provide crude oil gathering, natural gas
gathering and water services on all acreage that Noble acquires after the date of the Closing that is onshore in the United States (outside the Marcellus Shale).
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Please read “—Acreage Dedication — Right of First Refusal on
Assets and Services” for additional information regarding our rights of first refusal.
Rights of First Offer
Noble has granted us a ROFO with respect to its retained interests in the development companies through which we
conduct our midstream services. Please read “Acreage Dedication — Right of First Offer on Retained Interests” for additional information regarding our rights of first offer.
136
The following table provides a summary of the ROFR assets and ROFR services and and the
net acreage covered by our ROFR, to the extent known as of June 30, 2016, granted to us by Noble.
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Areas Served
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NBLX Dedicated Service
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Current Status
of Asset
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Dedicated Net
Acreage
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Northern Colorado
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• Natural Gas Processing
• Natural Gas Gathering
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Operational
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N/A
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Eagle Ford Shale
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• Crude Oil Gathering
• Natural Gas Gathering
• Water Services
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Operational
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31,000
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DJ Basin (other than
dedicated above)
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To the extent not already covered in
dedication in the prior chart:
• Crude Oil
Gathering
• Natural Gas Gathering
• Water Services
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N/A
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85,000
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Delaware Basin
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• Natural Gas Processing
• Natural Gas Gathering
• Fresh Water Services
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Planning
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40,000
(1)
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All future-acquired
onshore acreage in U.S. (outside of Marcellus Shale)
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• Crude Oil Gathering
• Natural Gas Gathering
• Water Services
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N/A
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N/A
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(1)
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Includes acreage currently dedicated to other providers and committed to us upon expiration of existing dedications. The majority of these dedications will expire or
are expected to be terminated by Noble by the time our planned infrastructure is operational in 2017.
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Business Strategies
Our principal business objectives are to generate stable cash flows and increase the quarterly
cash distributions that we pay to our unitholders over time while ensuring the ongoing stability of our business by providing outstanding service to our upstream customers. We expect to achieve these objectives through the following business
strategies:
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•
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Acting as the primary provider of midstream services in Noble’s dedicated areas
. Our midstream infrastructure currently serves
Noble’s production on its substantial acreage in the DJ Basin, from which Noble produced an average of 118 MBoe/d of crude oil, condensate, natural gas and NGLs during the first quarter of 2016, 65 Mboe/d of which was attributable to
Noble’s horizontal drilling program in our current areas of operation, Wells Ranch IDP and East Pony IDP. We provide crude oil and natural gas gathering services on the majority of Noble’s horizontal production in these areas, and, as a
result, our gathered volumes averaged 63 MBoe/d for the quarter, up 100% compared to the first quarter of 2015. Our acreage dedications from Noble along with our operating footprint will allow us to capture the majority of incremental production
volumes associated with Noble’s horizontal drilling program in these areas and throughout the DJ Basin. In addition, we plan to service Noble’s Delaware Basin acreage after the expiration or termination of certain pre-existing dedications
to third parties and installation of appropriate infrastructure. We expect Noble’s production volumes to grow from its future horizontal drilling activities, which we anticipate will help us maintain and grow throughput on our crude oil,
natural gas and saltwater midstream infrastructure and increase demand for our fresh water services. We are strategically positioned to expand our delivery of midstream services within the areas dedicated to us as Noble executes on its drilling and
development plans.
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•
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Pursuing accretive acquisitions from Noble
. After this offering, Noble will be the sole owner of our general partner and
will own a % limited partner interest in us, consisting of common units and all of our subordinated units and incentive distribution rights and its retained
non-controlling interests in our operating assets and dedications. Noble has granted us a right of first offer, or ROFO, on its retained
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137
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interests in the development companies that hold our assets and has granted us ROFRs to provide certain midstream services and to acquire certain midstream assets onshore in the United States
(other than in the Marcellus Shale). We expect Noble to be strongly incentivized to help us grow our business, including by offering us the opportunity to acquire midstream assets it has retained, develops or acquires in the future and elects to
sell.
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•
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Attracting additional third-party business
. In addition to becoming an integral provider of midstream services for Noble’s
production in the DJ Basin and Delaware Basin, we intend to continue to market our services to, and pursue strategic relationships with, third-party producers over the long term. We believe that our portfolio of assets and our execution and
operational capabilities will position us favorably to compete for additional third-party production. For example, we recently contracted with an unaffiliated third party customer in the DJ Basin through a series of commercial arrangements with
expected services to commence in 2017.
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•
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Focusing on long-term, fixed-fee arrangements to mitigate direct commodity price exposure and enhance the stability of our cash flows
.
Our commercial agreements are structured as
long-term,
fixed-fee arrangements, and we intend to continue to pursue additional long-term, fixed-fee arrangements with Noble and third parties. The commercial
agreements that we have in place are all fee-based and establish dedications in our favor with an initial term ending in either 2030 or 2032. We will pursue additional long-term commitments from customers, which may include throughput-based charges,
reservation-based charges, or acreage dedications. None of our existing commercial agreements contain minimum volume commitments.
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Competitive Strengths
We believe we are
well-positioned to successfully execute our business strategies because of the following competitive strengths:
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•
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Strategic relationship with Noble
. We have a strategic relationship with Noble, one of the leading producers of crude oil, condensate,
natural gas and NGLs in North America. As the owner of our general partner, all of our incentive distribution rights, a % limited partner interest in us and its retained, non-controlling interests in the development
companies that hold our assets, we believe Noble will be incentivized to promote and support our business plan and to pursue projects that enhance the overall value of our business. Through our long-term commercial agreements with Noble, we have a
well-capitalized, investment grade commercial counterparty initially responsible for all of our revenues and expect that our additional third party customer will contribute to our revenue by the third quarter of 2017. In addition, Noble has granted
us substantial dedications, a ROFR on significant midstream assets, a ROFR on the right to provide future midstream services in areas key to Noble’s development and a ROFO on its retained interests in the development companies that hold our
assets. We believe that our relationship with Noble will provide us with a stable base of cash flows and significant growth opportunities.
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•
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Strategically located assets
. Our initial midstream infrastructure assets are located on and around Noble’s significant, contiguous
acreage in the DJ Basin and serve Noble’s current and future production on this acreage. Both the DJ Basin and the Delaware Basin, where we will begin to construct midstream infrastructure assets during the second half of 2016, have been focus
areas for extensive industry activity over the last several years. We expect producers, including Noble, to continue to invest substantial capital to develop crude oil and natural gas production in these regions, which will in turn require
substantial investment in midstream infrastructure. Noble’s concentrated development is intended to centrally locate production and midstream infrastructure rather than replicate services and infrastructure at each wellhead, which we believe
will allow us to efficiently gather Noble’s production from centralized wellhead equipment. In addition, we believe our customers’ contiguous acreage in the DJ Basin and Delaware Basin will provide us opportunities to deliver fresh water
in connection with well completion activities and collect, clean and dispose of saltwater. We believe that our existing footprint, coupled with our long-term dedications, positions us to capitalize on midstream growth opportunities on and around our
customers’ contiguous acreage in the DJ Basin and Delaware Basin.
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138
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•
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Long-term, fixed-fee contracts to support cash flows
. We service Noble’s liquids-rich production in the DJ Basin pursuant to
long-term, fixed-fee contracts. For the twelve months ended March 31, 2016, Noble represented all of our gathered volumes. We have secured dedications from Noble under which we will provide our crude oil, natural gas and water services and we have
secured dedications from an unaffiliated third party under which we will provide crude oil gathering and water services, in both cases, pursuant to fixed-fee contracts, inclusive of automatic year-over-year fee increases, with initial terms expiring
in 2030 for DJ Basin dedications and 2032 for Delaware Basin dedications. We believe that Noble’s horizontal drilling activity and potential new third-party customers will drive the stable growth of our midstream operations. Our contract
structure mitigates our direct exposure to commodity price risk and will likely contribute to long-term cash flow stability.
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•
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Financial flexibility and strong capital structure
. At the closing of this offering, we expect to have
$ million of availability under our new, undrawn revolving credit facility, which can be increased by an additional $ million as long as we are in
compliance with the covenants contained in our credit agreement and subject to requisite commitments from existing or new lenders. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Capital
Resources and Liquidity—Revolving Credit Facility.” We believe that our available borrowing capacity and our expected ability to access debt and equity capital markets provide us with the financial flexibility necessary to execute our
business and growth strategies.
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•
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Experienced management and operating teams
. Our executive management team has combined experience of over 65 years in designing,
acquiring, building, operating, financing and otherwise managing large-scale midstream and other energy assets. In addition, through our omnibus agreement and operational services and secondment agreement with Noble, we employ engineering,
construction and operations teams that have significant experience in designing, constructing and operating large scale midstream and other energy assets.
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Noble Energy, Inc.
Overview
Noble is a global independent oil and natural gas exploration
and production company, with total proved reserves of 1.4 billion Boe at year-end 2015. Noble’s diverse resource base includes positions in four premier unconventional U.S. onshore plays—the DJ Basin, Delaware Basin, Eagle Ford Shale and
Marcellus Shale—and offshore in the U.S. Gulf of Mexico, Eastern Mediterranean and West Africa. Noble is listed on the NYSE under the symbol “NBL” and had a market capitalization of approximately $15.5 billion as of July 20, 2016.
Noble is one of the largest producers of liquids in the DJ Basin, where it produced, on average, 115 MBoe/d of crude
oil, condensate, natural gas and NGLs during 2015, with 67% of such volumes being crude oil and NGLs. Noble’s sales volumes in the DJ Basin increased to 118 MBoe/d in the three months ended March 31, 2016, with 66% of such volumes being crude
oil and NGLs.
Noble entered the Delaware Basin and Eagle Ford Shale in 2015 through its merger with Rosetta Resources
Inc. Noble currently holds 88,000 net acres in these areas, of which Noble has dedicated to us 40,000 net acres in the Delaware Basin, certain of which acres are subject to preexisting dedications with respect to produced water services that expire
or will be terminated in 2017 and 2018. We are constructing infrastructure to provide crude oil and water midstream services by the end of the third quarter of 2017. Noble has already demonstrated improvements in well performance in the year since
acquiring the position with the application of its unconventional completion expertise. The unique combination of an operated and consolidated acreage position has enabled the redesign of the field optimized for long lateral development. As a result
of this redesign the current operated undrilled average lateral length is approximately 7,000 feet. Noble has partnered with us in the Delaware Basin to implement the central facility development and to take advantage of the expertise and knowledge
developed over the last several years in the DJ Basin. The remainder of Noble’s acreage in Texas will continue to be serviced under existing arrangements, subject to the ROFR Noble has granted to us.
139
Our Relationship with Noble
One of our principal strengths is our relationship with Noble. In connection with the completion of this offering, we will (i) issue
common units and subordinated units to Noble, representing an aggregate %
limited partner interest in us (or an aggregate % limited partner interest in us if the underwriters exercise in full their option to purchase additional common units), (ii) issue a non-economic general partner interest
in us to our general partner and issue all of our incentive distribution rights to Noble and (iii) use a portion of the net proceeds from this offering to make a distribution of approximately $
million to Noble. Please read “—The Offering,” “Use of Proceeds,” “Security Ownership of Certain Beneficial Owners and Management” and “Certain Relationships and Related Party Transactions—Distributions
and Payments to Our General Partner and Its Affiliates.”
Given Noble’s significant ownership interest in us
following this offering and its intent to use us as its primary domestic midstream service provider in areas that have not previously been dedicated to other ventures, we believe that Noble will be incentivized to promote and support the successful
execution of our business strategies; however, we can provide no assurances that we will benefit from our relationship with Noble. While our relationship with Noble is a significant strength, it is also a source of potential risks and conflicts.
Please read “Risk Factors—Risks Inherent in an Investment in Us” and “Conflicts of Interest and Duties.”
Our Midstream Operations
Areas of Operation
140
DJ Basin
All of our existing operating assets are located in Weld County in northern Colorado. The majority of our assets are strategically located to service Noble’s production from the Wells Ranch IDP and
East Pony IDP. In addition, Noble has dedicated future production from the Mustang IDP, Greeley Crescent IDP and Bronco IDP in the DJ Basin and a third party has dedicated future production from the Greeley Crescent IDP to us for the provision
of certain midstream services. In the aggregate, these areas cover approximately 300,000 net acres. As of March 31, 2016, approximately $279 million has been invested in the infrastructure that we operate.
Wells Ranch
.
The Wells Ranch IDP describes an area in Weld County, Colorado, that includes
approximately 79,000 net acres operated by Noble. Noble has dedicated this acreage to us for crude oil services, certain natural gas gathering services and water services. Our assets that service the Wells Ranch IDP include crude oil, natural gas,
fresh water and saltwater infrastructure. The gathering systems servicing this area are connected to the Wells Ranch CGF, which is located in the northern portion of the Wells Ranch IDP. Our fresh water distribution systems collect fresh water from
multiple sources, store the water, and deliver water on demand to hydraulic fracturing operations. In addition, on June 15, 2016, Noble entered into an acreage swap pursuant to which Noble increased its holdings in the Wells Ranch IDP by
approximately 11,700 net acres in exchange for reducing its interest in the Bronco IDP as further detailed below. Assuming this transaction closes as anticipated in the definitive documentation, it will result in Noble operating approximately 79,000
net acres in the Wells Ranch IDP, all of which will be dedicated to us for the services we currently provide to Noble in the Wells Ranch IDP.
East Pony
.
The East Pony IDP describes an area in Weld County, Colorado, that includes approximately 44,000 net acres operated by
Noble. Noble has dedicated this acreage to us for crude oil gathering and water services. Our assets that service the East Pony IDP include crude oil gathering systems and a fresh water system.
Mustang
.
The Mustang IDP describes an area in Weld County, Colorado, that includes approximately 75,000 net
acres operated by Noble. We own a fresh water storage pond and hold surface rights and rights-of-way in this area that will permit crude oil gathering, certain natural gas gathering services and additional water services. We have completed
construction of one fresh water storage pond and anticipate commencing construction of crude oil gathering pipelines, fresh additional water infrastructure, natural gas gathering pipelines, saltwater gathering lines, and other water infrastructure
in this area if and when Noble begins production in this area.
Greeley Crescent
.
The Greeley
Crescent IDP describes an area in Weld County, Colorado, that includes approximately 65,000 net acres originally dedicated to us by Noble as the operator on such acreage at the time of the initial dedication. On June 14, 2016, Noble consummated the
divestment of approximately 33,000 undeveloped net acres within the Greeley Crescent IDP. The acreage included in the divestiture remains dedicated to us for crude oil gathering, produced water services and fresh water services.
Bronco
. The Bronco IDP describes an area in Weld County, Colorado, that includes approximately 50,000 net acres operated by
Noble. Noble has dedicated this acreage to us for crude oil gathering and water services. On June 15, 2016, Noble entered into definitive documentation regarding an acreage swap pursuant to which Noble will decrease its holdings in the Bronco IDP by
approximately 13,500 net acres in exchange for increasing its interest in the Wells Ranch IDP as further detailed above. Assuming this transaction closes as anticipated in the definitive documentation, it will result in Noble operating approximately
36,000 net acres in the Bronco IDP.
Additional DJ Basin Services
.
The two crude oil treating
facilities, further described below, are located in or near IDP areas. As these facilities treat crude oil that is trucked to them, these facilities serve vertical and horizontal wells throughout the DJ Basin.
141
Delaware Basin.
Noble has dedicated to us, for crude oil gathering and produced water services, 40,000 net acres in the Delaware Basin some of this acreage is subject to preexisting dedications expiring between 2017 and
2018.
142
Midstream Infrastructure Assets
Crude Oil Gathering and Treating
Our existing crude oil gathering systems include approximately 60 miles of pipeline, 35 miles of which
service the Wells Ranch IDP. Our crude oil gathering assets also include 96,000 Bbls of storage capacity at the Wells Ranch CGF. The 35-mile pipeline in the Wells Ranch IDP is a shared crude oil and saltwater gathering pipeline.
143
The Wells Ranch CGF separates the incoming liquid stream into pipeline-quality crude oil
and saltwater suitable for disposal operations. The liquids entering the Wells Ranch CGF from the liquid gathering pipelines are a mixture of crude oil, saltwater and a small quantity of natural gas. The liquids are separated in the Wells Ranch CGF.
Crude oil is sent to the crude oil storage tanks and saltwater are further cleaned and sent to the saltwater storage tanks. The Wells Ranch CGF has the capacity to store up to 96,000 Bbls of crude oil. At the Wells Ranch CGF, we are able to recover
gas vapors from the crude oil and deliver this natural gas to Noble for delivery to downstream third parties.
144
To service the East Pony IDP, we gather crude oil meeting pipeline specifications and
deliver it through approximately 25 miles of pipeline directly into the northern extension of the Wattenberg Oil Trunkline and the Northeast Colorado Lateral of the Pony Express Pipeline. Crude oil gathering of production from the East Pony IDP is
subject to FERC jurisdiction. See “—Regulation of Operations.” We began gathering crude oil in our system in March 2015.
The table below sets forth our crude oil gathering operations as of and for the dates indicated.
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Year Ended
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Three Months Ended
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As of
March 31, 2016
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December 31, 2015
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March 31, 2016
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Horizontal Wells
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Throughput
Capacity (Bbl/d)
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Average Daily
Throughput
(Bbl/d)
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Throughput
Capacity
(Bbl/d)
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Average Daily
Throughput
(Bbl/d)
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Number of
Wells
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Approx.
Average
Lateral Feet
per Well
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Wells Ranch IDP
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45,000
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17,400
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45,000
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26,000
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317
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5,400
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East Pony IDP
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85,000
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16,600
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85,000
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24,300
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174
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4,500
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145
We also operate two crude oil treating facilities, the Platteville and the Briggsdale
facilities. These facilities service each of the IDP areas and additional wells that fall outside of these areas. The permits under which we operate the Platteville and Briggsdale facilities permit approximately 1,825,000 Bbls and 2,740,000 Bbls,
respectively, of crude oil to be treated during any given year. Crude oil is delivered to the facilities by truck. If treatment is required, the crude oil is directed to, and received by, the treating facility to process the crude oil to meet
pipeline specification. For access to and the services provided at the crude oil treating facilities, Noble pays monthly fees based on the number of producing vertical wells and producing horizontal wells located in the DJ Basin that are not
connected to our gathering system, whether such wells fall within or outside of an IDP area.
The table below sets forth our
crude oil treating operations as of March 31, 2016.
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Annual
Operating
Capacity (Bbls)
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Number of Wells Subject to
Fee
(1)
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Vertical
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Horizontal
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Platteville
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1,825,000
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3,900
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500
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Briggsdale
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2,740,000
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(1)
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We receive a monthly fee for each Noble-operated well producing in paying quantities in the DJ Basin that is not connected to our crude oil gathering system.
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We expect to build out crude oil gathering systems in Greeley Crescent IDP, Mustang IDP and the Delaware
Basin to meet Noble’s capacity needs as it develops additional wells in each area.
146
Natural Gas Gathering
As of March 31, 2016, our natural gas infrastructure assets consisted of the Wells Ranch CGF and
an approximately 30-mile natural gas pipeline system servicing production from the Wells Ranch IDP. The natural gas gathering system that services the production from the Wells Ranch IDP collects wet gas from separator facilities located at or near
the wellhead and delivers the wet gas to the Wells Ranch CGF or other delivery points within the Wells Ranch IDP. At the tailgate of our natural gas gathering facilities or the Wells Ranch CGF, as applicable, we deliver the natural gas for further
gathering and processing by third parties. In April 2015, we completed an expansion of the natural gas gathering system that increased capacity from 75,000 Mcf/d to 150,000 Mcf/d.
The table below sets forth our natural gas gathering operations as of and for the dates indicated.
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Year Ended
December 31,
2015
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Three Months Ended
March 31,
2016
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As of
March 31, 2016
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Horizontal Wells
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Throughput
Capacity
(Mcf/d)
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|
Average
Daily
Throughput
(Mcf/d)
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|
Throughput
Capacity
(Mcf/d)
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|
Average
Daily
Throughput
(Mcf/d)
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Number of
Wells
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Approx.
Average
Lateral Feet
per Well
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Wells Ranch IDP
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150,000
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67,400
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150,000
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75,700
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318
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5,100
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147
Our Wells Ranch CGF provides condensate separation and flash gas recovery. Condensate
recovered from the natural gas that is gathered to the Wells Ranch CGF is stored on location and gas that is flashed from the crude oil is recovered, compressed and redelivered to downstream third parties with the gathered natural gas volumes.
Water Gathering and Distribution Systems
We provide Noble with water-related services that are integral to Noble’s upstream operations
through our interests in pipelines and facilities (or under contracts with third parties) that store and distribute fresh water and collect, clean or dispose of saltwater. The majority of our midstream water assets are currently located in the Wells
Ranch IDP and are linked to the Wells Ranch CGF. The fresh water we deliver in the Wells Ranch IDP is a critical component to Noble’s ability to hydraulically fracture wells. At the tailgate of the Wells Ranch CGF, the saltwater that we collect
and separate is prepared for cleaning, treating and disposal.
We expect to build out water-related systems in Greeley
Crescent IDP, Mustang IDP and the Delaware Basin to meet Noble’s capacity needs as it develops additional wells in each area.
148
Saltwater
Our current saltwater gathering system in the Wells Ranch IDP gathers and processes liquids produced from operations and consists of a
combination of separation and storage facilities, and permanent pipelines, as well as pumping stations to transport saltwater to disposal facilities. We operate an approximately 35-mile gathering pipeline system (which is a shared crude oil and
saltwater gathering pipeline) servicing the Wells Ranch IDP. Crude oil and saltwater are separated and measured at facilities at or near the wellhead and recombined and delivered into our gathering system. At the Wells Ranch CGF, the incoming crude
oil and saltwater liquid stream is separated, stored, and treated before the crude oil is delivered to a third-party pipeline. The saltwater that we collect and clean is treated for disposal at Noble’s election. The Wells Ranch CGF has the
capacity to store up to 32,000 Bbls of saltwater while awaiting delivery to a disposal facility. We enter into and manage contracts with third party providers of any saltwater services that we do not perform ourselves. In accordance with our
existing arrangements, we expect to expand our existing water services capacity.
The table below sets forth our
saltwater operations servicing the Wells Ranch IDP as of and for the dates indicated.
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Year Ended
December 31,
2015
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Three Months Ended
March 31,
2016
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As of
March 31, 2016
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Horizontal Wells
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Throughput
Capacity
(Bbl/d)
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Average Daily
Throughput
(Bbl/d)
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Throughput
Capacity
(Bbl/d)
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Average Daily
Throughput
(Bbl/d)
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Number of
Wells
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Approx.
Average
Lateral Feet
per Well
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Wells Ranch IDP
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15,000
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5,200
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15,000
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10,300
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317
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5,400
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Fresh Water Systems
Our fresh water systems provide services for both treated saltwater and raw fresh water that has been withdrawn from a river or ground
water, for example. Our fresh water services include distribution and storage services that are integral to Noble’s well drilling and completion operations in the DJ Basin.
Our fresh water systems contain an approximately 30-mile fresh water distribution system made up of permanent buried pipelines, 10 miles
of which service the East Pony IDP and 20 miles of which service the Wells Ranch IDP. In addition, our fresh water systems include fresh water storage facilities in Wells Ranch, East Pony and Mustang IDPs, temporary pipelines and pumping stations to
transport fresh water throughout the pipeline networks. These systems are designed to deliver water on demand to hydraulic fracturing operations and reduce the costs of transporting water long distances by reducing or eliminating most trucking
costs. The fresh water systems provide storage capacity that segregates raw fresh water from saltwater that has been treated.
Through our fresh water systems, we provide services to Noble, which continues to hold title to the water. When Noble needs water for
well development and completion operations, Noble either transports the water to temporary storage facilities near the applicable well(s) or we deliver the water in our delivery system as described above. We do not own the water nor own or operate
fresh water sources, but instead our services are focused on the storage and distribution of the fresh water delivered to us by Noble.
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The table below sets forth our fresh water services in the Wells Ranch IDP, East Pony IDP
and Mustang IDP as of and for the dates indicated.
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Year Ended
December 31,
2015
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Twelve Months Ended
March 31,
2016
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Distribution
Capacity (Bpm)
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Average Daily
Throughput
(Bbl/d)
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Storage
Capacity
(Bbls)
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Distribution
Capacity (Bpm)
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Average Daily
Throughput
(Bbl/d)
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Storage
Capacity
(Bbls)
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Wells Ranch IDP
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160
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29,600
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500,000
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160
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37,500
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500,000
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East Pony IDP
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160
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20,400
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550,000
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160
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—
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550,000
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Mustang IDP
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—
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(1)
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—
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(1)
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230,000
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—
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(1)
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14,800
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230,000
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(1)
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Consists of a fresh water system from Noble owned water wells to a storage pond. Volumetric fee for the fresh water distributed from this pond is collected as the water
is distributed from the pond by truck or third party temporary pipeline.
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Access to
Downstream Markets
Crude Oil
. After we gather or treat crude oil, the crude oil is redelivered to Noble and
subsequent downstream crude oil pipelines and markets. Depending upon our specific system, after we gather or treat crude oil, Noble can further transport crude oil to one or more of the following: White Cliffs Pipeline to Cushing, Oklahoma; the
Pony Express Pipeline to Cushing, Oklahoma; or to rail terminal(s) which can access the Gulf Coast, East Coast or West Coast markets.
Natural Gas
. With respect to natural gas produced from the Wells Ranch IDP, the gathering that we provide concludes at a handful of points of delivery to a third party, with the primary
delivery point located at the tailgate of the Wells Ranch CGF. We deliver the gathered natural gas to Noble at the interconnection points of our system with third party systems. Noble continues the transportation of this natural gas downstream by
immediately delivering the natural gas that we gathered to a third party for either further gathering or for processing, followed by additional third-party transportation. First sales of the natural gas may occur at the terminus of our system or at
the terminus of the third party pipelines. Residue gas downstream of the third-party processing plants that our assets interconnect with may access the Front Range, Cheyenne Hub, and Mid-Continent markets via the Colorado Interstate Gas High Plains
and A/B pipelines or the Xcel Energy pipeline, depending on the specific processing plant the residue is allocated to.
NGLs
. NGLs originating from natural gas that we gather from the Wells Ranch IDP that is processed by a downstream third-party processor can be delivered to the Bushton/Conway, Kansas NGL
markets through the Overland Pass Pipeline or the DCP Wattenberg Pipeline or the Mt. Belvieu, Texas NGL market through the Front Range and Texas Express Pipelines, depending upon the location of the allocated NGL’s by the third party
processor.
Our Acreage Dedication
We believe that Noble’s extensive acreage position in Weld County, Colorado, and sizeable position in the Delaware Basin of Texas
provide a strong platform to support our current operations and future growth. As of March 31, 2016, Noble held approximately 400,000 net acres in the DJ Basin. Noble has achieved substantial production growth in Weld County, Colorado, over the last
five years. From 2010 through March 31, 2016, Noble spud nearly 1,100 horizontal wells in Weld County, Colorado, while operating over 6,000 vertical wells. Effective June 14, 2016, Noble sold approximately 33,000 net acres, subject to dedications in
favor of us for crude oil gathering, produced water services and fresh water services. In the aggregate, we have dedications in our favor covering approximately 300,000 net acres. Certain of the Delaware Basin acreage is subject to preexisting
dedications for produced water services expiring or being terminated between 2017 and 2018.
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DJ Basin Dedications
Noble has dedicated acreage to us based on the services we provide. As of January 1, 2015, Noble has dedicated to us the right to
provide certain services, for an initial term ending in 2030, on available net acreage in the Wells Ranch IDP, East Pony IDP, Mustang IDP, Greeley Crescent IDP and Bronco IDP areas. Our commercial agreements with Noble provide that, in addition to
our existing dedicated acreage, any future acreage that is acquired by Noble in these IDP areas (including the acreage that Noble will receive when the acreage swap entered into June 15, 2016 and further described above is consummated), and that is
not subject to a pre-existing third-party commitment, will be included in the dedication to us for midstream services, including gathering, processing and treating. Similarly, our commercial agreements contain dedications in the form of covenants
running with the lease; therefore, a sale of acreage to a third party does not, absent our consent, result in a release of the dedication. Our first unaffiliated third party customer was obtained in this manner, pursuant to Noble’s divestment
that was consummated in part on June 14, 2016. Based on Noble’s dedication to us and previously granted dedications, we anticipate providing crude oil and water-related midstream services on any wells that Noble or this third party elects to
drill in the Wells Ranch IDP, East Pony IDP, Mustang IDP, Greeley Crescent IDP and Bronco IDP, as well as certain natural gas gathering services on any wells drilled in the Wells Ranch IDP and Mustang IDP. The number of wells our customers may
drill, and timing with respect to these wells, will depend on numerous factors (some of which are beyond their control and all of which are beyond our control), including commodity prices, weather, government regulation, geologic interpretation and
the economic environment.
Delaware Basin Dedication
Noble has dedicated to us the right to provide crude oil gathering and produced water services on 40,000 net acres in the Delaware Basin
for an initial term ending in 2032. Noble’s dedication of this Delaware Basin acreage to us is subject to various preexisting dedications. The majority of these dedications will expire or are expected to be terminated by Noble by the time our
planned infrastructure is operational in 2017.
Dedications for Crude Oil and Water Services
Our dedicated acreage of approximately 300,000 net acres in Weld County, Colorado (with approximately 33,000 net acres sold, effective
June 14, 2016 from Noble to a third party, subject to dedications in favor of us for crude oil gathering, produced water services and fresh water services), and our dedicated acreage of approximately 40,000 net acres in the Delaware Basin (subject
to pre-existing dedications with respect to produced water services that expire in 2017 and 2018) will give us access to a highly contiguous, liquids-rich block of acreage for crude oil and water services. Substantially all of this dedicated acreage
is held by production. The dedicated acreage could be reduced, however, under certain circumstances. See “—Releases from Dedication.” To the extent that Noble is operator on this acreage, production owned or controlled by Noble will
be dedicated to us for all crude oil and water-related midstream services.
Stacked Dedications for Natural Gas Services
Prior to our formation, Noble and its predecessors-in-interest dedicated certain natural gas gathering and processing
services with respect to production from the Wells Ranch IDP and the Mustang IDP to third parties. These third parties have the right to gather natural gas beginning at the Wells Ranch CGF or at other receipt points that have been established
between Noble and such third parties. Even while honoring these prior dedications to such third parties, Noble has dedicated certain natural gas gathering services to us with respect to production from the Wells Ranch IDP and Mustang IDP. We deliver
the natural gas that has passed through our systems back to Noble at the interconnection points with such third-party pipelines and Noble delivers the natural gas to such third parties.
As a result, Noble has dedicated production from approximately 79,000 net acres in the Wells Ranch IDP and approximately 75,000 net acres
in the Mustang IDP to us for these natural gas gathering services. All natural gas
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gathering and processing services with respect to the production from these IDP areas that occurs downstream of the Wells Ranch CGF or other agreed points of interconnection with such third
parties will continue to be dedicated to the applicable third parties until such prior dedication is terminated or otherwise waived.
Releases from Dedication
If we have an uncured default of any of our material obligations under any of our commercial agreements with Noble for more than 90 days, if we fail to timely complete the construction of the facilities
necessary to provide the requested midstream services that we are required by the commercial agreements to provide to Noble, or if certain events of force majeure persist for 120 days, the affected acreage will be permanently released from the
dedication to us and Noble will be free to engage a third party to provide the midstream services that we failed to provide in a timely fashion. Additionally, under certain of our commercial agreements with Noble, if a governmental authority’s
regulation results in subjecting us to certain additional legal requirements or regulations, we may be able terminate the commercial agreement. Any permanent releases of Noble’s acreage from the dedication could materially adversely affect our
business, financial condition, results of operations, cash flows and ability to make cash distributions. Additionally, our commercial agreements with third parties may provide for additional situations in which acreage dedicated to us could be
released.
Our commercial agreements provide that in certain situations the acreage dedicated by Noble can be temporarily
or permanently released from our dedication. For more information see “—Our Commercial Agreements with Noble.”
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Right of First Refusal on Assets and Services
Assets ROFR
Noble has granted us ROFRs on a combination of midstream assets retained, developed or acquired by Noble in the DJ Basin, Eagle Ford Shale
and Delaware Basin and on any onshore acreage that Noble acquires in the United States (outside of the Marcellus Shale) after the closing. In the East Pony IDP, Noble owns two natural gas processing plants with combined nameplate capacity of
approximately 60 MMcf/d as well as the natural gas gathering system feeding those two natural gas processing plants that are covered by the ROFR.
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Noble has also granted us a ROFR with respect to midstream assets located on 31,000 net
acres that Noble currently owns in Dimmit and Webb counties located in the Eagle Ford Shale, which include centralized facilities and crude oil and natural gas gathering systems having an average daily throughput of approximately 43.6 Mboe/d during
the three months ending March 31, 2016.
Noble is under no obligation to
offer to sell us any assets pursuant to the ROFR (unless and until it otherwise intends to sell or otherwise dispose of such assets). We are under no obligation to buy any assets from Noble, and we do not know when or if Noble will make any offers
to sell assets to us. Please read “Certain Relationships and Related Party Transactions—Agreements with our Affiliates in Connection with the Transactions—Omnibus Agreement.”
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Services ROFR
Noble has granted us a ROFR to provide crude oil gathering, natural gas gathering and water services on 31,000 net acres in the Eagle Ford
Shale, 85,000 net acres in the DJ Basin not otherwise dedicated and on all acreage that Noble acquires onshore in the United States (other than in the Marcellus Shale) to the extent such acreage or assets are not subject to a third party dedications
or purchase rights.
On certain acreage dedicated to us for midstream services, Noble has also granted us a ROFR to provide
additional services. In the Bronco IDP and on the portion of the Greeley Crescent IDP that Noble retains, Noble has granted us a ROFR to provide gas gathering services, which is subject to a preexisting dedication. In the East Pony IDP, Noble has
granted us a ROFR to provide natural gas gathering and natural gas processing services. In the Delaware Basin, Noble has granted us a ROFR to provide natural gas gathering and natural gas processing services, which are subject to preexisting
dedications
Noble is only required to offer the services in these areas to the extent that Noble elects to seek a third party
service provider. Our rights with respect to the midstream services opportunities described above are subject to all preexisting dedications, rights of first refusal, rights of first offer and other preexisting encumbrances. Because our ROFR is
contingent on factors outside of our control, we are unable to estimate the midstream services, if any, that Noble will offer to us to provide in the future pursuant to these arrangements. Please read “Risk Factors—Risks Related to Our
Business—We may not be able to economically accept an offer form Noble for us to provide services or purchase assets with respect to which we have a right of first refusal.”
General
While we believe our ROFR with
respect to the assets and services above is a significant positive attribute, it may also be a source of potential conflicts of interest. After the completion of this offering, Noble will own our general partner, and there will be substantial
overlap between the officers and directors of our general partner and the officers and directors of Noble. Please read “Risk Factors—Risks Inherent in an Investment in Us” and “Conflicts of Interest and Duties.”
Right of First Offer on Retained Interests
Noble has granted us a ROFO with respect to its retained interests in the development companies through which we conduct our midstream
services. Pursuant to our ROFO, before Noble can offer any of its retained interests in our development companies to any third party, Noble must allow us to make an offer to purchase these interests. We believe that the ROFO on Noble’s retained
interests in our development companies will provide us an opportunity to develop organic growth with potentially lower development capital costs. We are under no obligation to purchase any of Noble’s retained interests in our development
companies, and Noble is only under an obligation to permit us to make an offer on these interests to the extent that Noble elects to sell these midstream assets to a third party. Please read “Risk Factors—Risks Related to our
Business—We may be unable to grow by acquiring the non-controlling interests in our development companies owned by Noble or midstream assets retained, acquired or developed by Noble, which could limit our ability to increase distributable cash
flow.” and “Certain Relationships and Related Party Transactions—Agreements with our Affiliates in Connection with the Transactions—Omnibus Agreement.”
Our Commercial Agreements with Noble
General
Our assets are physically connected to, and integral to the
operation of, Noble’s crude oil and natural gas production and fresh and saltwater requirements in the DJ Basin. We expect that the assets we will develop in the Greeley Crescent IDP to service our unaffiliated third party customer and in the
Delaware Basin to further service Noble will likewise be integral to these producers in these areas. We have entered into multiple long-term, fee-based commercial agreements, with annual price escalation clauses and annual rate redeterminations,
subject to the agreement of both us and our customers, to provide Noble and our third party customer with crude oil and water-related services and to provide Noble, in addition, certain natural gas gathering services. Our commercial agreements with
Noble are the source of substantially all of the revenues we generate from our midstream operations and we anticipate that we will begin to collect revenue from a third party in the third quarter of 2017.
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Each of our commercial agreements with Noble covering its DJ Basin acreage was
originally entered into January 1, 2015 and expires in 2030. As our third party customer took its interest in our commercial agreements by assignment from Noble, its dedication for crude oil and water-related services will expire in 2030. Each
of our commercial agreements with Noble covering its Delaware Basin acreage was originally entered into in the summer of 2016 and expires in 2032. Upon the expiration of the initial term, each agreement will automatically renew for subsequent
one-year periods unless terminated by either us or our customer no later than 90 days prior to the end of the initial term or any subsequent one-year term thereafter. Our commercial agreements are subject to existing dedications and provide
generally that our dedications will run with the land and be binding on any transferee.
Development Plans
Under each of our commercial agreements, our customers are obligated to provide us with a detailed development plan with respect to the
expected production activities on our dedicated acreage. The development plans are intended to help us coordinate with our customers in order to maximize efficient development and utilization of our facilities that will service the acreage covered
by these agreements. To that end, updated development reports are delivered quarterly and cover the two year period following the month in which the development report is delivered. In addition, each report must also include our customers’
general long-term drilling and production expectations on the dedicated acreage for the five years following the date of the report. Based on the development reports delivered to us, we must provide our customers with a midstream system plan, which
will describe how we plan to develop the system to meet the anticipated production.
How We Generate Revenue
As described below, we receive fees under our commercial agreements based on the type and scope of the midstream services we provide and
based on the midstream system we use to provide our services.
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Crude Oil Gathering
. Under the applicable crude oil gathering agreement, we receive a volumetric fee per Bbl for the crude oil gathering
services we provide.
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•
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Crude Oil Treating Agreement
. Under the crude oil treating agreement, we receive a monthly fee for the crude oil treating services we
provide based on each well operated by Noble that is producing in paying quantities that is not connected to our crude oil gathering systems during such month.
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•
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Natural Gas Gathering Agreement
. Under the natural gas gathering agreement, we receive a volumetric fee per MMBtu for the natural gas
gathering services we provide.
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•
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Saltwater Services Agreement
. Under the saltwater services agreement, we receive a fee for collecting, cleaning or otherwise disposing of
water produced from operating crude oil and natural gas wells in the dedication area. The fee is comprised of a volumetric component for services we provide directly and a second volumetric fee for services that we provide through contracts with
third parties.
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•
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Fresh Water Services Agreement
. Under the fresh water services agreement, we receive a fee for delivering fresh water. The fee is
comprised of a volumetric component and a pass through component. The cost of storing the fresh water is embedded in the delivery fee.
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Under each of our commercial agreements, the fees we charge our customers (other than pass through fees) are automatically increased each calendar year by 2.5%. In addition, each year we will propose a
redetermination of the fees charged under our various systems on an annual basis, taking into account, among other things, expected capital expenditures necessary to provide our services under the applicable development plan. However, if we and our
customer are unable to agree on a fee redetermination (other than the automatic annual adjustment), the prior fee will remain in effect, which in effect allows our customers to unilaterally exercise control over the decision of whether to change the
fee.
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Expansion Commitments
Under each of our commercial agreements, the development companies that own our assets must design and construct midstream systems to timely support the upstream development of the acreage we service.
These systems are required to be brought on line in time to meet our customers’ anticipated well completion schedule. If we are delayed in completing the facilities necessary to meet our customers’ needs, the affected acreage or drilling
unit may be permanently released from our dedication. However, delays resulting from force majeure or our customers’ alteration of its development plan may not result in releases of acreage. In these instances, and others, our customers may
enter into short-term agreements with third parties to obtain the necessary services. Additionally, in the event a third party is the producer under the commercial agreement, our commercial agreements provide that the development companies that own
our assets have the discretion to agree to build out and modify midstream systems.
Interruption and Temporary Release
In addition to the permanent release of dedicated acreage described under “Our Acreage Dedication—Releases from
Dedication,” our commercial agreements provide for a temporary release of dedicated acreage in certain situations, which include the occurrence and continuation of an uncured default of any of our material obligations that has been uncured for
more than 60 days, an interruption or curtailment in our receipt of our customers’ natural gas, crude oil or produced water or an interruption or curtailment in our provision of midstream services that continues for a period of 30 consecutive
days. In the event of a temporary release, our customer can temporarily release from the applicable dedication the affected volumes for a period lasting until the first day of the month following notice that the default, interruption or curtailment
has ended. However, if our customer has contracted with a third party to provide replacement services during the default, interruption, or curtailment, the release may continue for up to six months after such default, interruption, or curtailment
has ended. Any temporary releases of acreage from our dedication could materially adversely affect our business, financial condition, results of operations, cash flows and ability to make cash distributions.
Our customers’ and our obligations under each of the commercial agreements may also be suspended or reduced upon the occurrence of a
force majeure event. As defined in each of our commercial agreements, force majeure events include any event that (1) is not within the reasonable control of the party claiming suspension and (2) by the exercise of due diligence the party
claiming suspension is unable to avoid or overcome in a reasonable manner. A force majeure event includes, but is not restricted to:
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wars (declared or undeclared), insurrections, hostilities or riots;
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floods, droughts, fires, storms, storm warnings, landslides, lightning, earthquakes or washouts;
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industrial disturbances, acts of a public enemy, acts of terror, sabotage, blockades or epidemics;
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arrests and restraints of rulers and peoples;
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explosions, breakage or accidents to machinery or pipelines;
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hydrate obstruction or blockages of any kind in pipelines;
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freezing of wells or delivery facilities, partial or entire failure of wells, and other events beyond the reasonable control of Noble that affect the
timing of production or production levels;
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certain action or restraint by any governmental authority;
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delays or failures by a governmental authority to grant permits, licenses or other similar consents applicable to a specific midstream asset, so long
as we have used our commercially reasonable efforts to make any required filings with such governmental authority relating to such permits, licenses or other similar consents; and
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delays or failures by us to obtain easements and rights of way, surface leases and other real property interests related to our midstream assets from
third parties, so long as we have used our commercially reasonable efforts to obtain such easements and rights of way, surface leases and other real property interests.
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Acreage Dedication
Each of our commercial agreements contains substantial
acreage dedications for the services covered by the agreements. See “—Our Acreage Dedication.”
Title to Our Properties
Many of our real estate interests in land were acquired pursuant to easements,
rights-of-way, permits, surface use agreements, joint use agreements, licenses and other grants or agreements from landowners, lessors, easement holders, governmental authorities, or other parties controlling the surface or subsurface estates of
such land, or, collectively, Real Estate Agreements, that were issued to or entered into by Noble, one of its affiliates or one of their predecessors-in-interest and transferred to us in December of 2015. Since that time, we have been acquiring
additional Real Estate Agreements in our own name or by transfer from Noble. The Real Estate Agreements and related interests that we have taken by assignment were acquired without any material challenge known to us relating to the title to the land
upon which the assets are located, and we believe that we have satisfactory rights and interests to conduct our operations on such lands. We have no knowledge of any challenge to the underlying title of any material real estate interests held by us
or to our title to any material real property agreements, and we believe that we have satisfactory title to all of our material real estate interests.
We hold various rights and interests to receive, deliver and handle water in connection with Noble’s production operations, or, collectively, Water Interests, that also were obtained by Noble or its
predecessor in interest and transferred to us. Pursuant to these Water Interests, Noble retains title to the water. In the future, we will also acquire additional Water Interests in our own name or by transfer from Noble as necessary to conduct such
operations. We are not aware of any challenges to any Water Interests or to the use of any water or water rights related to Water Interests. With respect to our third party customer, we will not take title to the water that we handle and will only
have the right to receive, deliver and handle such water.
Under our omnibus agreement, Noble will indemnify us for any
failure to have certain real estate interests, Real Estate Agreements or Water Interests necessary to own and operate our assets in substantially the same manner that they were owned and operated prior to the closing of this offering. Noble’s
indemnification obligation will be limited to losses for which we notify Noble prior to the third anniversary of the closing of this offering and will be subject to a $500,000 aggregate deductible before we are entitled to indemnification. Some of
our Real Estate Agreements and Water Interests may continue to be held by Noble or its affiliates until we have made the appropriate filings in the jurisdictions in which such assets are located and have obtained any consents, approvals and notices
that are not obtained or provided prior to transfer. We will make these filings and notices and seek to obtain these consents upon completion of this offering.
Seasonality
Demand for crude oil and natural gas
generally decreases during the spring and fall months and increases during the summer and winter months. However, seasonal anomalies such as mild winters or mild summers sometimes lessen this fluctuation. In addition, certain crude oil and natural
gas users utilize natural gas storage facilities and purchase some of their anticipated winter requirements during the summer. This can also lessen seasonal demand fluctuations. These seasonal anomalies can increase demand for crude oil and natural
gas during the summer and winter months and decrease demand for crude oil and natural gas during the spring and fall months. In respect of our completed midstream systems, we do not expect seasonal conditions to have a material impact on our
throughput volumes. Severe or prolonged winters may, however, impact our ability to
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complete additional well connections or construction projects, which may impact the rate of our growth. In addition, severe weather may also impact or slow the ability of Noble to execute its
drilling and development plan and increase operating expenses associated with repairs or anti-freezing operations.
Competition
As a result of our relationship with Noble and the long-term dedications to our midstream assets, we
do not compete with other midstream companies to provide Noble with midstream services to its existing upstream assets in Weld County, Colorado, and we will not compete for Noble’s business as it continues to develop upstream production in Weld
County, Colorado. Although Noble will continue to use third party service providers for certain midstream services in the Delaware Basin until the expiration or termination of certain pre-existing dedications, we will not compete for Noble’s
business in the Delaware Basin after the expiration of such dedications. However, we will face competition in providing services on the acreage that is subject to our ROFR rights because Noble is only required to dedicated such acreage to us if we
are able to offer services to Noble on the same or better terms as the applicable third party service provider.
As we seek to
expand our crude oil and water-related midstream services, we will face a high level of competition, including major integrated crude oil and natural gas companies, interstate and intrastate pipelines, and companies that gather, compress, treat,
process, transport, store or market natural gas. As we seek to expand to provide midstream services to third party producers, we will also face a high level of competition. Competition is often the greatest in geographic areas experiencing robust
drilling by producers and during periods of high commodity prices for crude oil, natural gas or NGLs.
Regulation of Operations
The midstream services we provide are subject to regulations that may affect certain aspects
of our business and the market for our services.
Safety and Maintenance Regulation
We are subject to regulation by the United States Department of Transportation, or DOT, under HLPSA, and comparable state statutes with
respect to design, installation, testing, construction, operation, replacement and management of pipeline facilities. HLPSA covers petroleum and petroleum products, including NGLs and condensate, and requires any entity that owns or operates
pipeline facilities to comply with such regulations, to permit access to and copying of records and to file certain reports and provide information as required by the United States Secretary of Transportation. These regulations include potential
fines and penalties for violations. We believe that we are in compliance in all material respects with these HLPSA regulations.
We are also subject to the NGPSA, and the Pipeline Safety Improvement Act of 2002. The NGPSA regulates safety requirements in the design,
construction, operation and maintenance of natural gas pipeline facilities while the Pipeline Safety Improvement Act establishes mandatory inspections for all United States crude oil and natural gas transportation pipelines and some gathering
pipelines in high-consequence areas within ten years. DOT, through the PHMSA, has developed regulations implementing the Pipeline Safety Improvement Act that requires pipeline operators to implement integrity management programs, including more
frequent inspections and other safety protections in areas where the consequences of potential pipeline accidents pose the greatest risk to people and their property.
The Pipeline Safety and Job Creations Act, enacted in 2012, amended the HLPSA and NGPSA and increased safety regulation. This legislation doubles the maximum administrative fines for safety violations
from $100,000 to $200,000 for a single violation and from $1.0 million to $2.0 million for a related series of violations, and provides that these maximum penalty caps do not apply to civil enforcement actions, establishes additional safety
requirements for newly constructed pipelines, and requires studies of certain safety issues that
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could result in the adoption of new regulatory requirements for existing pipelines, including the expansion of integrity management, use of automatic and remote-controlled shut-off valves, leak
detection systems, sufficiency of existing regulation of gathering pipelines, use of excess flow valves, verification of maximum allowable operating pressure, incident notification, and other pipeline-safety related requirements. PHMSA has
undertaken rulemaking to address many areas of this legislation. For example, in addition, in 2016, PHMSA announced a proposal to expand integrity management requirements and impose new pressure testing requirements on regulated pipelines. The
proposal would also significantly expand the regulation of gathering lines, subjecting previously unregulated pipelines to requirements regarding damage prevention, corrosion control, public education programs, maximum allowable operating pressure
limits, and other requirements. Extending the integrity management requirements to our gathering pipelines would impose additional obligations on us and could add material cost to our operations. In addition, any material penalties or fines issued
to us under these or other statues, rules, regulations or orders could have an adverse impact on our business, financial condition, results of operation and cash flows.
States are largely preempted by federal law from regulating pipeline safety but may assume responsibility for enforcing intrastate pipeline regulations at least as stringent as the federal standards. The
Colorado Public Utilities Commission is the agency vested with intrastate natural gas pipeline regulatory and enforcement authority in Colorado. The Commission’s regulations adopt by reference the minimum federal safety standards for the
transportation of natural gas. We do not anticipate any significant problems in complying with applicable federal and state laws and regulations in Colorado. Our natural gas transmission and regulated gathering pipelines have ongoing inspection and
compliance programs designed to keep the facilities in compliance with pipeline safety and pollution control requirements.
In
addition, we are subject to the requirements of the federal Occupational Safety and Health Act, or OSHA, and comparable state statutes, whose purpose is to protect the health and safety of workers, both generally and within the pipeline industry.
Moreover, the OSHA hazard communication standard, the EPA community right-to-know regulations under Title III of the federal Superfund Amendment and Reauthorization Act and comparable state statutes require that information be maintained concerning
hazardous materials used or produced in our operations and that this information be provided to employees, state and local government authorities and citizens. We and the entities in which we own an interest are also subject to OSHA Process Safety
Management regulations, which are designed to prevent or minimize the consequences of catastrophic releases of toxic, reactive, flammable or explosive chemicals. These regulations apply to any process which involves a chemical at or above specified
thresholds, or any process which involves flammable liquid or gas, pressurized tanks, caverns and wells in excess of 10,000 pounds at various locations. Flammable liquids stored in atmospheric tanks below their normal boiling point without the
benefit of chilling or refrigeration are exempt from these standards. Also, the Department of Homeland Security and other agencies such as the EPA continue to develop regulations concerning the security of industrial facilities, including crude oil
and natural gas facilities. We are subject to a number of requirements and must prepare Federal Response Plans to comply. We must also prepare Risk Management Plans under the regulations promulgated by the EPA to implement the requirements under the
Clean Air Act to prevent the accidental release of extremely hazardous substances. We have an internal program of inspection designed to monitor and enforce compliance with safeguard and security requirements. We believe that we are in compliance in
all material respects with all applicable laws and regulations relating to safety and security.
FERC and State Regulation of Natural Gas
and Crude Oil Pipelines
The FERC’s regulation of crude oil and natural gas pipeline transportation services and
natural gas sales in interstate commerce affects certain aspects of our business and the market for our products and services.
Natural Gas Gathering Pipeline Regulation
Section 1(b) of the Natural Gas Act of 1938, or NGA, exempts natural gas gathering facilities from the jurisdiction of the FERC under the NGA. We believe that our natural gas gathering facilities
meet the traditional
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tests the FERC has used to establish a pipeline’s status as a gathering pipeline and therefore our natural gas gathering facilities should not be subject to FERC jurisdiction. However, the
distinction between FERC-regulated transmission services and federally unregulated gathering services has been the subject of frequent litigation and varying interpretations and the FERC determines whether facilities are gathering facilities on a
case by case basis, so the classification and regulation of our gathering facilities may be subject to change based on future determinations by the FERC, the courts, or Congress. If the FERC were to determine that all or some of our gathering
facilities or the services provided by us are not exempt from FERC regulation, the rates for, and terms and conditions of, services provided by such facilities would be subject to regulation by the FERC, which could in turn decrease revenue,
increase operating costs, and, depending upon the facility in question, adversely affect our results of operations and cash flows.
The Energy Policy Act of 2005, or EPAct 2005, amended the NGA to add an anti-market manipulation provision. Pursuant to the FERC’s rules promulgated under EPAct 2005, it is unlawful for any entity,
directly or indirectly, in connection with the purchase or sale of natural gas subject to the jurisdiction of the FERC, or the purchase or sale of transportation services subject to FERC jurisdiction: (1) to use or employ any device, scheme or
artifice to defraud; (2) to make any untrue statement of material fact or omit a material fact; or (3) to engage in any act or practice that operates as a fraud or deceit upon any person. EPAct 2005 provided the FERC with substantial
enforcement authority, including the power to assess civil penalties of up to $1.0 million per day per violation, to order disgorgement of profits and to recommend criminal penalties. Failure to comply with the NGA, EPAct 2005 and the other federal
laws and regulations governing our business can result in the imposition of administrative, civil and criminal remedies.
Colorado regulation of gathering facilities includes various safety, environmental and ratable take requirements. Our purchasing,
gathering and intrastate transportation operations are subject to Colorado’s ratable take statute, which provides that each person purchasing or taking for transportation crude oil or natural gas from any owner or producer shall purchase or
take ratably, without discrimination in favor of any owner or producer over any other owner or producer in the same common source of supply offering to sell his crude oil or natural gas produced therefrom to such person. This statute has the effect
of restricting our right as an owner of gathering facilities to decide with whom we contract to transport natural gas. The ratable take statute is in the enabling legislation of the Colorado Oil and Gas Conservation Commission, or the COGCC.
The COGCC regulations require operators of natural gas gathering lines to file several forms and provide financial assurance,
and they also impose certain requirements on gathering system waste. Moreover, the COGCC probably retains authority to regulate the installation, reclamation, operation, maintenance, and repair of gathering systems should the agency choose to do so.
Should the COGCC exercise this authority, the consequences for the partnership will depend upon the extent to which the authority is exercised. We cannot predict what effect, if any, the exercise of such authority might have on our operations
Our natural gas gathering facilities are not subject to rate regulation or open access requirements by the Colorado Public
Utilities Commission. However, the Colorado Public Utilities Commission requires us to register as pipeline operators, pay assessment and registration fees, undergo inspections and report annually on the miles of pipeline we operate.
Many of the producing states have adopted some form of complaint-based regulation that generally allows natural gas producers and
shippers to file complaints with state regulators in an effort to resolve grievances relating to natural gas gathering access and rate discrimination. Although Colorado does not have complaint-based regulation, additional rules and legislation
pertaining to these matters are considered or adopted from time to time. We cannot predict what effect, if any, such changes might have on our operations, but we could be required to incur additional capital expenditures and increased costs
depending on future legislative and regulatory changes.
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Crude Oil Pipeline Regulation
Pipelines that transport crude oil in interstate commerce are subject to regulation by the FERC pursuant to the Interstate Commerce Act,
or ICA, the Energy Policy Act of 1992, and related rules and orders. The ICA requires, among other things, that tariff rates for common carrier crude oil pipelines be “just and reasonable” and not unduly discriminatory and that such rates
and terms and conditions of service be filed with the FERC. The ICA permits interested persons to challenge proposed new or changed rates. The FERC is authorized to suspend the effectiveness of such rates for up to seven months, though rates are
typically not suspended for the maximum allowable period. If the FERC finds that the new or changed rate is unlawful, it may require the carrier to pay refunds for the period that the rate was in effect. The FERC also may investigate, upon complaint
or on its own motion, rates that are already in effect and may order a carrier to change its rates prospectively. Upon an appropriate showing, a shipper may obtain reparations for damages sustained for a period of up to 2 years prior to the filing
of a complaint. The rates charged for crude oil pipeline services are generally based on a FERC-approved indexing methodology, which allows a pipeline to charge rates up to a prescribed ceiling that changes annually based on the year-to-year change
in the PPI. A rate increase within the indexed rate ceiling is presumed to be just and reasonable unless a protesting party can demonstrate that the rate increase is substantially in excess of the pipeline’s operating costs. During the
five-year period commencing July 1, 2011 and ending June 30, 2016, pipelines have been permitted by the FERC to adjust these indexed rate ceilings annually by the PPI plus 2.65%. On June 30, 2015, the FERC issued its Notice of Inquiry
requesting comments on its five year review of the index level in which the FERC proposes an index level between PPI plus 2.0% and PPI plus 2.4% for the five-year period commencing July 1, 2016. As an alternative to this indexing methodology,
pipelines may also choose to support changes in their rates based on a cost-of-service methodology, by obtaining advance approval to charge “market-based rates,” or by charging “settlement rates” agreed to by all affected
shippers.
Currently, only the crude oil gathering system servicing the East Pony IDP transports crude oil in interstate
commerce. We have been granted a temporary waiver of the tariff and reporting requirements for this crude oil gathering system. Therefore, currently the FERC’s regulation of our crude oil gathering system servicing the East Pony IDP is limited
to requiring us to maintain our books and records consistent with the FERC’s recordkeeping requirements.
In addition to
the crude oil gathering system servicing the East Pony IDP, we own interests in other crude oil gathering pipelines that do not provide interstate services and are not subject to regulation by the FERC. However, the distinction between
FERC-regulated interstate pipeline transportation, on the one hand, and intrastate pipeline transportation, on the other hand, is a fact-based determination. The classification and regulation of these crude oil gathering pipelines are subject to
change based on future determinations by the FERC, federal courts, Congress or by regulatory commissions, courts or legislatures in the states in which the our crude oil gathering pipelines are located. We cannot provide assurance that the FERC will
not in the future, either at the request of other entities or on its own initiative, determine that some or all of our gathering pipeline systems and the services we provide on those systems are within the FERC’s jurisdiction. If it was
determined that some or all of our gathering pipeline systems are subject to the FERC’s jurisdiction under the ICA, and are not otherwise exempt from any applicable regulatory requirements, the imposition of possible cost-of-service rates and
common carrier requirements on those systems could adversely affect the results of our operations on those systems.
Other Crude Oil and Natural Gas Regulation
The State of Colorado is engaged in a number of initiatives that may impact our operations directly or indirectly. To the extent that the State of Colorado adopts new regulations that impact Noble, as our
primary current customer, the impact of these regulations on Noble production activity may result in decreased demand from Noble for the services we provide.
In 2014, by executive order, Colorado Governor Hickenlooper created a 21-member Oil and Gas Task Force (Task Force) made up of representatives of local governments, civic entities, environmental
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industry for the purpose of making recommendations regarding oil and gas development in communities. After 18 months the Task Force, which included a representative from Noble, concluded its
activities on February 27, 2015. Nine recommendations were sent to the governor, seven of which were unanimously supported by members of the Task Force. All nine recommendations have been adopted by legislation or regulation. The COGCC recently
completed work on new rules which govern the siting of large oil and gas operations in urban areas and require greater coordination of drilling operations with local governments. These new rules took effect in March 2016 and we believe there is
strong public support for them to be implemented.
Recently, the State of Colorado approved for signature gathering four
ballot measures which would impact oil and gas operations. Measure 40 would grant local communities self-governance and the opportunity to ban certain businesses from operating in their jurisdictions. Measure 63 would establish a constitutional
right to a healthy environment and provide local governments the obligation to protect the environment. Measure 75 would grant local governments control over oil and gas development, notwithstanding state law. Measure 78 would require that all new
oil and gas facilities be located 2,500 feet from occupied structures and an expansive list of landscape features called “areas of special concern.” If implemented, Measure 78 would significantly and adversely impact future oil and gas
operations and has strong opposition from the oil and gas industry, the governor and the business community.
All of these
measures are available for signature gathering and the proponents have until August 8, 2016 to gather 98,492 signatures to qualify for the November 2016 ballot. If approved, these measures would give local governments in Colorado increased authority
to limit hydraulic fracturing, require greater distances between certain well sites and occupied structures, and would otherwise limit the production and development of crude oil and natural gas in the state.
The adoption of these measures would result in significantly limiting or even potentially preventing the future development of crude oil
and natural gas in areas where we conduct operations. In addition, we may incur additional costs to comply with any such requirements or may experience delays or curtailment in the permitting or pursuit of exploration, development, or production
activities. Furthermore, our drilling activities could possibly be limited or hindered and the amounts that we are ultimately able to produce from our reserves could be adversely affected.
Such compliance costs and delays, curtailments, limitations, or prohibitions could have a material adverse effect on our business,
prospects, results of operations, financial condition, and liquidity and could result in a material impairment of these assets.
Furthermore, in February 2013, the COGCC approved new setback rules for crude oil and natural gas wells and production facilities located in close proximity to occupied buildings. Previously, the COGCC
allowed setback distances of 150 feet in rural areas and 350 feet in high density urban areas. These have been increased to a uniform 500-foot statewide setback from occupied buildings and 1,000 feet from high occupancy building units. The new
setback rules also require operators to utilize increased mitigation measures to limit potential drilling impacts to surface owners and the owners of occupied building units. In addition, the new rules require advance notice to surface owners, the
owners of occupied buildings and local governments prior to the filing of an Application for Permit to Drill or Oil and Gas Location Assessment as well as expanded outreach and communication efforts by an operator.
We continue to monitor proposed and new regulations and legislation in all our operating jurisdictions to assess the potential impact on
our company. Concurrently, we are engaged in extensive public education and outreach efforts with the goal of engaging and educating the general public and communities about the energy, economic and environmental benefits of safe and responsible
crude oil and natural gas development.
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Environmental Matters
General
Our gathering
pipelines, crude oil treating facilities and saltwater facilities are subject to certain federal, state and local laws and regulations governing the emission or discharge of materials into the environment or otherwise relating to the protection of
the environment.
As an owner or operator of these facilities, we comply with these laws and regulations at the federal, state
and local levels. These laws and regulations can restrict or impact our business activities in many ways, such as:
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restricting the way we can handle or dispose of our materials or wastes;
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limiting or prohibiting construction, expansion, modification and operational activities based on National Ambient Air Quality Standards (NAAQS) and in
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requiring remedial action to mitigate pollution conditions caused by our operations or attributable to former operations;
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enjoining, or compelling changes to, the operations of facilities deemed not to be in compliance with permits issued pursuant to such environmental
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requiring noise, lighting, visual impact, odor or dust mitigation, setbacks, landscaping, fencing and other measures; and
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limiting or restricting water use.
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Failure to comply with these laws and regulations may trigger a variety of administrative, civil and criminal enforcement measures, including the assessment of monetary penalties, the imposition of
remedial requirements and the issuance of orders enjoining current and future operations. Certain environmental statutes impose strict joint and several liability for costs required to clean up and restore sites where hazardous substances have been
disposed or otherwise released. Moreover, it is not uncommon for neighboring landowners and other third parties to file claims for property damage or possibly personal injury allegedly caused by the release of substances or other waste products into
the environment.
The trend in environmental regulation is to place more restrictions and limitations on activities that may
affect the environment. Thus, there can be no assurance as to the amount or timing of future expenditures for environmental compliance or remediation, and actual future expenditures may be different from the amounts we currently anticipate. When
possible, we attempt to anticipate future regulatory requirements that might be imposed and plan accordingly to manage the costs of such compliance.
Our producers are subject to various environmental laws and regulations, including the ones described below, and could similarly face suspension of activities or substantial fines and penalties or other
costs resulting from noncompliance with such laws and regulations. Any costs incurred to comply with or fines and penalties imposed related to alleged violations of environmental law that have the potential to impact or curtail production from the
producers utilizing our midstream assets could subsequently reduce throughput on our systems and in turn adversely affect our business and results of operations.
Climate Change and Air Quality Standards
Our operations are subject to the
CAA, and comparable state and local requirements. The CAA contains provisions that may result in the imposition of certain pollution control requirements with respect to air emissions from our operations. We may be required to incur certain capital
expenditures for air pollution control equipment in connection with maintaining or obtaining preconstruction and operating permits and approvals addressing other air emission-related issues.
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For example, in February 2014, Colorado’s Air Quality Control Commission approved
comprehensive changes to rules governing crude oil and natural gas activities in the state, including the nation’s first-ever regulations designed to detect and reduce methane emissions. The EPA is also acting to increase the requirements
associated with methane releases from crude oil and natural gas activities. In May 2016, the EPA finalized new regulations that set methane emission standards for new and modified oil and natural gas production and natural gas processing and
transmission facilities as part of the Administration’s efforts to reduce methane emissions from the oil and natural gas sector by up to 45% from 2012 levels by 2025. The EPA has also announced that it intends to propose similar standards for
existing sources. The EPA also finalized rules in 2016 that clarify when crude oil and natural gas sites should be aggregated for purposes of air permitting, which could increase our compliance and permitting costs. These rules generally include
requirements for pneumatic devices and storage tanks to minimize leaks, as well as requirements for a leak detection and repair program. These regulations could result in increased costs for our operations and for the operations of Noble.
Moreover, on June 2, 2015, the U.S. District Court of Colorado entered as a final judgment a Consent Decree between the
United States, the State of Colorado and Noble to improve air emission control systems at a number of its condensate storage tanks, and certain of these storage tank systems were transferred to the Partnership after the Consent Decree was entered
into and remain subject to such Consent Decree. The Consent Decree requires, in accordance with a schedule (i) the performance of injunctive relief that will—among other things—evaluate, monitor, verify, and report on the adequate design,
operation, and maintenance of certain aspects of tank systems to handle potential peak instantaneous vapor flow rates and (ii) the completion of certain environmental mitigation actions and supplemental environmental projects that may impact certain
tank systems and payment of civil penalties.
Also, in October 2015, the EPA issued final regulations that lower the
National Ambient Air Quality Standard, or NAAQS, for ozone from 75 parts per billion, or ppb, for both the 8-hour primary and secondary standards, to 70 ppb. The EPA intends to designate attainment and nonattainment areas by October 2017, and
states with moderate or higher nonattainment areas must submit state implementation plans by October 2021. Under the 75 ppb ozone NAAQS, Colorado anticipated that its current marginal ozone nonattainment status would be replaced with a moderate
nonattainment designation for ozone in 2016. As a result, Colorado set in motion a process to develop a revised state implementation plan to reduce ozone levels with an expectation that the Air Quality Control Commission would consider adoption of a
revised state implementation plan in late 2016. While the revision to the ozone NAAQS is not directly applicable to our operations, its adoption may require Colorado to further reconsider its current state implementation plan development and enact
additional regulations beyond those currently contemplated to further control emissions of volatile organic compounds and nitrogen oxides from certain sources, which could apply to our operations and result in increased compliance costs. In
addition, the EPA finalized rules in May 2016 to resolve how sources of emissions from the crude oil and natural gas sector should be aggregated under CAA permit programs.
Colorado Air Compliance Order on Consent
In December 2015, we received a proposed Compliance Order on Consent (COC) from the Colorado Department of Public Health and Environment’s Air
Pollution Control Division (APCD) to resolve allegations of noncompliance associated with certain engines subject to various General Permit 02 conditions and/or individual permit conditions as well as certain emission control devices subject to
various individual permit conditions that applied to assets currently owned and operated by both Noble and Noble Midstream Services, LLC, or Operating. In May of 2016, prior to this offering at a time when Noble owned all of the interests in us and
our subsidiaries, including Operating, Noble reached a final resolution with APCD on behalf of itself and Operating and Colorado River DevCo LP, which requires completion of compliance testing, modification of certain permits, payment of a civil
penalty of $44,695.00, and an expenditure of no less than $178,780.00 on an approved Supplement Environmental Project. This resolution is not believed to have a material adverse effect on our financial position, results of operations or cash flows,
and Noble has agreed to fully indemnify us for all matters relating hereto under our omnibus agreement.
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Compliance with these or other new legal requirements could, among other things, require
installation of new emission controls on some of our equipment, result in longer permitting timelines, and significantly increase our capital expenditures and operating costs, which could adversely impact our business.
In response to findings that emissions of carbon dioxide, methane and other GHGs, present an endangerment to public health and the
environment, the EPA has adopted regulations under existing provisions of the CAA, that, among other things, establish PSD, construction and Title V operating permit reviews for certain large stationary sources that emit GHGs. We currently do not
operate any Title V sources, but our facilities could become subject to Title V permitting requirements in the future. Facilities required to obtain PSD permits for their GHG emissions also will be required to meet “best available control
technology” standards that will be established by the states or, in some cases, by the EPA on a case-by-case basis. These EPA rulemakings could adversely affect our operations and restrict or delay our ability to obtain air permits for new or
modified sources. In addition, the EPA has adopted rules requiring the monitoring and reporting of GHG emissions from specified onshore crude oil and natural gas production sources in the U.S. on an annual basis.
Although it is not possible at this time to predict how legislation or new regulations that may be adopted to address GHG emissions would
impact our business, such future laws and regulations imposing reporting obligations on, or limiting emissions of GHGs from, our equipment and operations could require us to incur costs to reduce emissions of GHGs associated with our operations.
Substantial limitations on GHG emissions could also adversely affect demand for the crude oil and natural gas we gather. Finally, it should be noted that some scientists have concluded that increasing concentrations of GHGs in the Earth’s
atmosphere may produce climate changes that have significant physical effects, such as increased frequency and severity of storms, floods and other climatic events; if any such effects were to occur, they could have a materially adverse effect on
our operations or Noble’s exploration and production operations, which in turn could affect demand for our services.
Hazardous
Substances and Waste
Our operations are subject to environmental laws and regulations relating to the management and
release of hazardous substances or solid wastes, including petroleum hydrocarbons. These laws generally regulate the generation, storage, treatment, transportation and disposal of solid and hazardous waste, and may impose strict, joint and several
liability for the investigation and remediation of areas at a facility where hazardous substances may have been released or disposed. For instance, the Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA, also known as
the Superfund law, and comparable state laws impose liability, without regard to fault or the legality of the original conduct, on certain classes of persons that contributed to the release of a hazardous substance into the environment. These
persons include current and prior owners or operators of the site where the release occurred and companies that disposed or arranged for the disposal of the hazardous substances found at the site. Under CERCLA, these persons may be subject to joint
and several strict liability for the costs of cleaning up the hazardous substances that have been released into the environment, for damages to natural resources and for the costs of certain health studies. CERCLA also authorizes the EPA and, in
some instances, third parties to act in response to threats to the public health or the environment and to seek to recover from the responsible classes of persons the costs they incur. Despite the “petroleum exclusion” of CERCLA
Section 101(14) that currently encompasses crude oil and natural gas, we may nonetheless handle hazardous substances within the meaning of CERCLA, or similar state statutes, in the course of our ordinary operations and, as a result, may be
jointly and severally liable under CERCLA for all or part of the costs required to clean up sites at which these hazardous substances have been released into the environment.
We also generate solid wastes, including hazardous wastes that are subject to the requirements of the Resource Conservation and Recovery Act, or RCRA, and comparable state statutes. While RCRA regulates
both solid and hazardous wastes, it imposes strict requirements on the generation, storage, treatment, transportation and disposal of hazardous wastes. Certain petroleum production wastes are excluded from RCRA’s hazardous waste regulations.
However, it is possible that these wastes, which could include wastes currently generated during our operations, will in the future be designated as hazardous wastes and therefore be subject to more
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rigorous and costly disposal requirements. Any such changes in the laws and regulations could have a material adverse effect on our maintenance capital expenditures and operating expenses.
We currently own or lease properties where petroleum hydrocarbons are being or have been handled for many years. Although we
have utilized operating and disposal practices that were standard in the industry at the time, petroleum hydrocarbons or other wastes may have been disposed of or released on or under the properties owned or leased by us or on or under the other
locations where these petroleum hydrocarbons and wastes have been taken for treatment or disposal. In addition, certain of these properties have been operated by third parties whose treatment and disposal or release of petroleum hydrocarbons or
other wastes was not under our control. These properties and wastes disposed thereon may be subject to CERCLA, RCRA and analogous state laws. Under these laws, we could be required to remove or remediate previously disposed wastes (including wastes
disposed of or released by prior owners or operators), to clean up contaminated property (including contaminated groundwater) or to perform remedial operations to prevent future contamination. We are not currently aware of any facts, events or
conditions relating to the application of such requirements that could reasonably have a material impact on our operations or financial condition.
Water
The Federal Water Pollution Control Act of 1972, also referred to as
the Clean Water Act, or CWA, and analogous state laws impose restrictions and strict controls regarding the discharge of pollutants into navigable waters. Pursuant to the CWA and analogous state laws, permits must be obtained to discharge pollutants
into state and federal waters. Provisions of the CWA require authorization from the U.S. Army Corps of Engineers, or the Corps, prior to the placement of dredge or fill material into jurisdictional waters. On June 29, 2015, the EPA and the
Corps published the final rule defining the scope of the EPA’s and Corps’ jurisdiction, known as the “Clean Water Rule.” The rule has been challenged in multiple federal courts; however, at this time, we cannot predict the
outcome of this litigation. To the extent the rule expands the scope of the CWA’s jurisdiction, we could face increased costs and delays with respect to obtaining permits for dredge and fill activities in wetland areas.
The CWA also requires implementation of spill prevention, control and countermeasure plans, also referred to as “SPCC plans,”
in connection with on-site storage of threshold quantities of crude oil. In some instances we may also be required to develop a Facility Response Plan that demonstrates our facility’s preparedness to respond to a worst case crude oil discharge.
The CWA imposes substantial potential civil and criminal penalties for non-compliance. The EPA has promulgated regulations that require us to have permits in order to discharge certain types of stormwater. The EPA recently issued a revised general
stormwater permit for industrial activities that, among other things, enhances provisions related to threatened endangered species eligibility procedures. The EPA has entered into agreements with certain states in which we operate whereby the
permits are issued and administered by the respective states. These permits may require us to monitor and sample the stormwater discharges. State laws for the control of water pollution also provide varying civil and criminal penalties and
liabilities. In 2015, Colorado adopted new rules for crude oil and natural gas developments within floodplains and sampling of groundwater for hydrocarbons and other indicators before and after drilling crude oil and natural gas wells. We believe
that compliance with existing permits and compliance with foreseeable new permit requirements will not have a material adverse effect on our financial condition or results of operations.
The Oil Pollution Act of 1990, or OPA, addresses prevention, containment and cleanup, and liability associated with crude oil pollution.
OPA applies to vessels, offshore platforms, and onshore facilities, including terminals, pipelines, and transfer facilities. OPA subjects owners of such facilities to strict liability for containment and removal costs, natural resource damages, and
certain other consequences of crude oil spills into jurisdictional waters. Any unpermitted release of petroleum or other pollutants from our operations could result in government penalties and civil liability under OPA.
Colorado Water Quality Control Division Matter
In June 2016, we received a Compliance Advisory from the Colorado Department of
Public Health and Environment’s Water Quality Control Division (WQCD) advising
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Noble and Operating of potential violations of the Colorado Water Quality Control Act and its implementing regulations and permits resulting from the WQCD’s inspections on May 24, 2016 of
Noble’s DJ Basin Core Drilling and Production Program and associated Colorado Discharge Permit System (CDPS) Permit No. COR03N580 and Operating’s DJ Basin Midstream assets and associated CDPS Permit No. COR03O059. Given the uncertainty in
administrative actions of this nature, we are unable to predict the ultimate outcome of this action at this time. However, we believe that the resolution of these proceedings through settlement or adverse judgment will not have a material adverse
effect on our financial position, results of operations or cash flows, and Noble has agreed to fully indemnify us for all matters relating hereto under our omnibus agreement.
Hydraulic Fracturing
We do not conduct hydraulic fracturing
operations, but substantially all of Noble’s crude oil and natural gas production on our dedicated acreage is developed from unconventional sources, such as shale, that require hydraulic fracturing as part of the completion process. The
majority of our fresh water services business is related to the storage and transportation of water for use in hydraulic fracturing. Hydraulic fracturing is a well stimulation process that utilizes large volumes of water and sand combined with
fracturing chemical additives that are pumped at high pressure to crack open previously impenetrable rock to release hydrocarbons. Hydraulic fracturing is typically regulated by state oil and gas commissions and similar agencies. Some states and
local governments, including those in which we operate, have adopted, and other states are considering adopting, regulations that could impose more stringent disclosure or well construction requirements on hydraulic fracturing operations, or
otherwise seek to ban some or all of these activities. Recently, however, several federal agencies have asserted jurisdiction over the process. For example, the EPA, has moved forward with various regulatory actions, including the issuance of new
regulations requiring green completions for hydraulically fractured wells, emission requirements for certain midstream equipment, and an Advanced Notice of Proposed Rulemaking seeking comment on its intent to develop regulations under the Toxics
Substances and Control Act to require companies to disclose information regarding the chemicals used in hydraulic fracturing. Also, in June 2016, the EPA finalized rules which to prohibit the discharge of wastewater from hydraulic fracturing
operations to publicly owned wastewater treatment plants. Certain environmental groups have also suggested that additional laws may be needed to more closely and uniformly regulate the hydraulic fracturing process. We cannot predict whether any such
legislation will be enacted and if so, what its provisions would be. Additional levels of regulation and permits required through the adoption of new laws and regulations at the federal, state or local level could lead to delays, increased operating
costs and process prohibitions that could reduce the volumes of crude oil and natural gas that move through our gathering systems and decrease demand for our water services, which in turn could materially adversely impact our revenues.
Endangered Species
The Endangered Species Act, or ESA, and analogous state laws restrict activities that may affect listed endangered or threatened species
or their habitats. If endangered species are located in areas where we operate, our operations or any work performed related to them could be prohibited or delayed or expensive mitigation may be required. While some of our operations may be located
in areas that are designated as habitats for endangered or threatened species, we believe that we are in compliance with the ESA. In addition, as a result of a settlement approved by the U.S. District Court for the District of Columbia on
September 9, 2011, the U.S. Fish and Wildlife Service is required to review and consider the listing of numerous species as endangered under the ESA by no later than the completion of the agency’s 2017 fiscal year. Additional listings
under the ESA and similar state laws could result in the imposition of restrictions on our operations and consequently have a material adverse effect on our business.
National Environmental Policy Act
Our operations on federal lands are
subject to the National Environmental Policy Act, or NEPA. Under NEPA, federal agencies, including the Department of Interior must evaluate major agency actions having the potential to significantly impact the environment. This review can entail a
detailed evaluation including an
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Environmental Impact Statement. This process can result in significant delays and may result in additional limitations and costs associated with projects on federal lands.
Employees
The officers of our general partner will manage our operations and activities. All of the employees required to conduct and support our operations will be employed by Noble and be subject to the
operational services and secondment agreement that we will enter into with Noble. As of December 31, 2015, Noble employed approximately 80 people who will provide direct support to our operations pursuant to the operational services and
secondment agreement. Noble considers its relations with its employees to be satisfactory. Please read “Certain Relationships and Related Transactions—Agreements with our Affiliates in Connection with the Transactions—Operational
Services and Secondment Agreement.”
Insurance
Our business is subject to all of the inherent and unplanned operating risks normally associated with the gathering and treating of water,
crude oil and natural gas and the distribution and storage of water. Such risks include weather, fire, explosion, pipeline disruptions and mishandling of fluids any of which could result in damage to, or destruction of, gathering and storage
facilities and other property, environmental pollution, injury to persons or loss of life. As protection against financial loss resulting from many, but not all of these operating hazards, pursuant to the terms of the omnibus agreement, we will
reimburse Noble for maintaining insurance coverage, including certain physical damage, business interruption, employer’s liability, third party liability and worker’s compensation insurance. Our general partner believes this insurance is
appropriate and consistent with industry practice. We cannot, however, assure you that this insurance will be adequate to protect us from all material expenses related to potential future claims for personal and property damage or that these levels
of insurance will be available in the future at economical prices. Our insurance coverage may be provided by an affiliate of Noble or may be shared with Noble. To the extent Noble experiences covered losses under the insurance policies, the limit of
our coverage for potential losses may be decreased.
Legal Proceedings
Our operations are subject to a variety of risks and disputes normally incident to our business. As a result, we may, at any given time,
be a defendant in various legal proceedings and litigation arising in the ordinary course of business. However, we are not currently subject to any material litigation.
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MANAGEMENT
Management of Noble Midstream Partners LP
We are managed by the directors and executive officers of our general partner, Noble Midstream GP LLC. Our general partner is not elected
by our unitholders and will not be subject to re-election by our unitholders in the future. Noble owns all of the membership interests in our general partner and has the right to appoint the entire board of directors of our general partner,
including our independent directors. Our unitholders are not entitled to elect the directors of our general partner’s board of directors or to directly or indirectly participate in our management or operations. Our general partner will be
liable, as general partner, for all of our debts (to the extent not paid from our assets), except for indebtedness or other obligations that are made specifically nonrecourse to it. Whenever possible, we intend to incur indebtedness that is
nonrecourse to our general partner.
At the completion of this offering, we expect that our general partner will have five
directors, including one director nominee who will become a member of our board of directors prior to or in connection with the listing of our common units on the NYSE. In accordance with the NYSE’s phase-in rules, we will have at least three
independent directors within one year following the effective date of the registration statement of which this prospectus forms a part. We expect that our board will determine that Hallie A. Vanderhider, our director nominee who will become a
member of our board of directors prior to or in connection with the listing of our common units on the NYSE, is independent under the independence standards of the NYSE.
In evaluating director candidates, Noble will assess whether a candidate possesses the integrity, judgment, knowledge, experience, skill and expertise that are likely to enhance the ability of our board
of directors to manage and direct our affairs and business, including, when applicable, to enhance the ability of committees of the board of directors of our general partner to fulfill their duties.
Neither we nor our subsidiaries have any employees. Our general partner has the sole responsibility for providing the employees and other
personnel necessary to conduct our business, which we expect to be primarily handled through the omnibus agreement that will be entered into at the closing of this offering. In addition, pursuant to the operational services and secondment agreement
that will be entered into at the closing of this offering, certain of Noble’s employees will be seconded to our general partner to provide operational services and related management services with respect to our business under the direction and
control of our general partner. All of the employees that conduct our business will be employed or contracted by our general partner and its affiliates, including Noble, but we sometimes refer to these individuals in this prospectus as our
employees.
As a publicly traded partnership, we qualify for, and are relying on, certain exemptions from the NYSE’s
corporate governance requirements, including:
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the requirement that a majority of the board of directors of our general partner consist of independent directors;
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the requirement that the board of directors of our general partner have a nominating/corporate governance committee that is composed entirely of
independent directors; and
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the requirement that the board of directors of our general partner have a compensation committee that is composed entirely of independent directors.
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As a result of these exemptions, we do not expect that our general partner’s board of directors will
be comprised of a majority of independent directors. Our board of directors does not currently intend to establish a nominating/corporate governance committee or a compensation committee. Accordingly, unitholders will not have the same protections
afforded to equity holders of companies that are subject to all of the corporate governance requirements of the NYSE.
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We are, however, required to have an audit committee of at least three members, and all of
its members are required to meet the independence and experience standards established by the NYSE and the Exchange Act, subject to certain transitional relief during the one-year period following the effective date of the registration statement of
which this prospectus forms a part. In accordance with the NYSE’s corporate governance standards, we must have at least one independent member on our audit committee who satisfies the independence and experience requirements by the date our
common units are listed on the NYSE, at least a majority of independent members within 90 days of the effective date of the registration statement of which this prospectus forms a part and a fully independent audit committee within one year of such
effective date.
Committees of the Board of Directors
The board of directors of our general partner will have an audit committee, and may have such other committees (including a conflicts
committee) as the board of directors shall determine from time to time.
Audit Committee
We are required to have an audit committee of at least three members, and all of its members are required to meet the independence and
experience standards established by the NYSE and the Exchange Act, subject to certain transitional relief during the one-year period following the effective date of the registration statement of which this prospectus forms a part. The audit
committee of the board of directors of our general partner will assist the board of directors in its oversight of the integrity of our financial statements and our compliance with legal and regulatory requirements and partnership policies and
controls. The audit committee will have the sole authority to (1) retain and terminate our independent registered public accounting firm, (2) approve all auditing services and related fees and the terms thereof performed by our independent
registered public accounting firm and (3) pre-approve any non-audit services and tax services to be rendered by our independent registered public accounting firm. The audit committee will also be responsible for confirming the independence and
objectivity of our independent registered public accounting firm. Our independent registered public accounting firm will be given unrestricted access to the audit committee and our management, as necessary. We expect that Hallie A. Vanderhider will
serve as the initial member of the audit committee. We expect that Hallie A. Vanderhider will satisfy the definition of audit committee financial expert for purposes of the SEC’s rules. Noble will appoint a second member to the audit committee
within 90 days of the effective date of the registration statement of which this prospectus forms a part and appoint a third member to the audit committee within one year following such effective date.
Conflicts Committee
The
board of directors of our general partner has the ability to establish a conflicts committee under our partnership agreement. If established, at least two members of the board of directors of our general partner will serve on the conflicts committee
to review specific matters that may involve conflicts of interest in accordance with the terms of our partnership agreement. The board of directors of our general partner will determine whether to refer a matter to the conflicts committee on a
case-by-case basis. The members of our conflicts committee may not be officers or employees of our general partner or directors, officers or employees of its affiliates (including Noble), and must meet the independence and experience standards
established by the NYSE and the Exchange Act to serve on an audit committee of a board of directors. In addition, the members of our conflicts committee may not own any interest in our general partner or any interest in us or our subsidiaries other
than common units or awards under our long-term incentive plan. If our general partner seeks approval from the conflicts committee, then it will be presumed that, in making its decision, the conflicts committee acted in good faith, and in any
proceeding brought by or on behalf of any limited partner or the partnership challenging such determination, the person bringing or prosecuting such proceeding will have the burden of overcoming such presumption. Please read “Conflicts of
Interest and Duties.”
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Directors, Director Nominee and Executive Officers of Noble
Midstream GP LLC
Directors are appointed by Noble, the owner of our general partner, and hold office until their
successors have been appointed or qualified or until their earlier death, resignation, removal or disqualification. Executive officers are appointed by, and serve at the discretion of, the board of directors. The following table presents information
for the directors, director nominee and executive officers of Noble Midstream GP LLC as of July 15, 2016. Our director nominee will become a member of the board of directors of our general partner prior to or in connection with the listing of our
common units on the NYSE.
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Name
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Age
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Position with Our General Partner
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Terry R. Gerhart
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Chief Executive Officer and Director
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Kenneth M. Fisher
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Chairman of the Board of Directors
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Charles J. Rimer
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Director
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Gary W. Willingham
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Director
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Hallie A. Vanderhider
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58
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Director Nominee
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John F. Bookout, IV
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30
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Chief Financial Officer
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Dustin A. Hatley
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49
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Chief Accounting Officer
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John C. Nicholson
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Chief Operating Officer
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Terry R. Gerhart
was appointed Chief Executive Officer and as a Director of our general
partner in October 2015. Mr. Gerhart has over 32 years of experience in the oil and gas industry. Mr. Gerhart currently serves as Vice President, Global Operations Services for Noble, which he was appointed in September 2015. At Noble, Mr.
Gerhart previously served as Vice President Africa from April 2013 to September 2015, Vice President Eastern Mediterranean Operations from August 2011 to April 2013, and Vice President International Non-Operated Assets and Global Gas Monetization
from December 2009 to August 2011. He began his career with Atlantic Richfield as a petroleum engineer holding various engineering, operations and management positions of increasing importance. He was part of the team that started the US independent
Vastar Resources, worked later as an executive for BP, and then with a technology based exploration start-up company before joining Noble. During his career, he has helped design, construct, operate, and manage upstream oil and gas gathering and
treatment facilities, natural gas processing plants, and offshore production facilities throughout the world. We believe that Mr. Gerhart’s substantial prior experience with Noble and other companies engaged in energy-related businesses will
provide the board of directors with valuable insight.
Kenneth M. Fisher
was appointed as Chairman of the board of
directors of our general partner in October 2015. Mr. Fisher serves as Executive Vice President and Chief Financial Officer of Noble, which he was elected to in April 2014, previously serving as Senior Vice President and Chief Financial Officer
from November 2009. Before joining Noble, Mr. Fisher served in a number of senior leadership roles at Shell from 2002 to 2009, including as Executive Vice President of Finance for Upstream Americas, Director of Strategy & Business Development
for Royal Dutch Shell plc in The Hague, Executive Vice President of Strategy and Portfolio for Global Downstream in London and CFO of Shell Oil Products US responsible for US downstream finance operations including Shell Pipeline Company. Prior to
joining Shell in 2002, Mr. Fisher held senior finance positions within business units of General Electric Company. Mr. Fisher currently serves as a director of CONE Midstream Partners LP. We believe Mr. Fisher’s energy industry and financial
experience provides the board of directors of our general partner with valuable experience in our financial and accounting matters.
Charles J. Rimer
was appointed to the board of directors of our general partner in October 2015. Mr. Rimer currently serves as Senior Vice President of Noble, which he was appointed to in
April 2013, and is currently responsible for Noble’s U.S. onshore operations. He previously served as Vice President of Operations Services for Noble from 2012 and managed Noble’s international West Africa, non-operated and new ventures
division from 2002. His prior roles encompassed the construction, startup, and operations of Noble’s midstream treating and measurement facilities in West Africa. He also was responsible for Noble’s worldwide Major Projects
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Division prior to his current assignment. Prior to joining Noble, he held various positions at ARCO, Vastar and Aspect Resources. We believe Mr. Rimer’s extensive knowledge of the energy
industry and our DJ Basin operations will provide the board of directors of our general partner with valuable experience.
Gary W. Willingham
was appointed to the board of directors of our general partner in October 2015. Mr. Willingham currently
serves as Executive Vice President of Operations for Noble, which he was appointed to in October 2014, and is currently responsible for Noble’s global development, production and facilities operations, drilling, major projects and supply chain
activities. Mr. Willingham previously served as Senior Vice President of Noble’s U.S. onshore operations, which included responsibility for the DJ Basin midstream assets, beginning in April 2013, and prior to that as Vice President of Strategic
Planning, Environmental Analysis and Reserves beginning in 2008. Prior to joining the Company, he held various engineering and commercial positions at ARCO, Vastar Resources and BP America. We believe Mr. Willingham’s familiarity with
Noble’s operations and experience in the energy industry provide the board of directors of our general partner with valuable experience.
Hallie A. Vanderhider
currently serves as the Managing Partner of Catalyst Partners, LLC, which position she has held since May of 2013. Previously, she served as a member of the board of
directors and as the President and Chief Operating Officer at Black Stone Minerals Company, L.P. (“Black Stone”), from October 1, 2007 through May 31 of 2013. She joined Black Stone in 2003 and served as its Executive Vice President and
Chief Financial Officer until being appointed as the President and Chief Operating Officer in 2007. Ms. Vanderhider served as Chief Financial Officer of EnCap Investments L.P. and served in a variety of positions at Damson Oil Corp., including as
Chief Accounting Officer. In addition, she served on the following boards of directors: Mississippi Resources LLC, from August of 2014 to present; PetroLogistics GP LLC, from April 2013 to July 2014; Bright Horizons LLC from October of 2013 to
present and Grey Rock Energy Management LLC from August of 2013 to present. We believe that Ms. Vanderhider’s previous experience with master limited partnerships and the natural resource industry, as well as her knowledge of financial
statements, provide her the necessary skills to be a member of the board of directors of our general partner.
John F. Bookout, IV
was appointed Chief Financial Officer in October 2015. Mr. Bookout joined Noble in July 2014 and has most
recently been responsible for financial management, planning, business development, and mergers and acquisitions related to Noble’s US onshore midstream activities, including the structuring of CONE Midstream Partners, L.P. and the structuring
of this initial public offering. Mr. Bookout also served as an advisor to Noble in the Corporate Finance and Treasury group beginning in July 2014. From September 2009 until joining Noble, Mr. Bookout was an Associate at Global Infrastructure
Partners.
Dustin A. Hatley
was appointed Chief Accounting Officer in October 2015. Mr. Hatley was appointed as
Vice President, Controller and Chief Accounting Officer of Noble on February 1, 2012. He previously served as Noble’s Corporate Controller from February 2011 and served in other progressive positions of responsibility after joining Noble
in March 2005. Prior to joining Noble, Mr. Hatley served as the Chief Accountant and Financial Reporting Manager for ENI Petroleum Co., Inc. in Houston, Texas. Before joining ENI Petroleum, he spent approximately fourteen years in the energy
industry while working in Ernst & Young’s audit practice or working directly for energy industry service companies.
John C. Nicholson
was appointed Chief Operating Officer in October 2015. Mr. Nicholson has eight years of experience in the oil and gas industry and with Noble, having joined Noble in June 2007.
During this time, Mr. Nicholson has held various positions, including most recently serving as an Investor Relations Advisor for Noble from July 2014 until his appointment to Chief Operating Officer and from January 2012 to July 2014 served as
a Project Manager for a deepwater development offshore West Africa.
Board Leadership Structure
Although the chief executive officer of our general partner currently does not also serve as the chairman of the board,
the board of directors of our general partner has no policy with respect to the separation of the offices
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of chairman of the board of directors and chief executive officer. Instead, that relationship will be defined and governed by the amended and restated limited liability company agreement of our
general partner to be entered into in connection with the closing of this offering, which will permit the same person to hold both offices. Directors of the board of directors of our general partner are designated or elected by Noble. Accordingly,
unlike holders of common stock in a corporation, our unitholders will have only limited voting rights on matters affecting our business or governance, subject in all cases to any specific unitholder rights contained in our partnership agreement.
Board Role in Risk Oversight
Our corporate governance guidelines will provide that the board of directors of our general partner is responsible for reviewing the
process for assessing the major risks facing us and the options for their mitigation. This responsibility will be largely satisfied by our audit committee, which is responsible for reviewing and discussing with management and our independent
registered public accounting firm our major risk exposures and the policies management has implemented to monitor such exposures, including our financial risk exposures and risk management policies.
Reimbursement of Expenses
Our partnership agreement requires us to reimburse our general partner for (i) direct and indirect expenses it incurs or payments it makes on our behalf (including salary, bonus, incentive
compensation and other amounts paid to any person, including affiliates of our general partner, to perform services for us or our subsidiaries or for our general partner in the discharge of its duties to us and our subsidiaries) and (ii) all
other expenses reasonably allocable to us or our subsidiaries or otherwise incurred by our general partner in connection with operating our business (including expenses allocated to our general partner by its affiliates). Our general partner is
entitled to determine the expenses that are allocable to us and our subsidiaries. The costs and expenses for which we will reimburse our general partner and its affiliates may include salary, bonus, incentive compensation and other amounts paid to
persons who perform services for us or on our behalf and expenses allocated to our general partner by its affiliates. Please read “Cash Distribution Policy and Restrictions on Distributions—Estimated EBITDA and Distributable Cash Flow for
the Twelve Months Ending September 30, 2017.” The costs and expenses for which we are required to reimburse our general partner and its affiliates are not subject to any caps or other limits. Please read “Certain Relationships and Related
Party Transactions—Distributions and Payments to Our General Partner and Its Affiliates.”
Compensation of Our Officers and Directors
Executive Compensation
We and our general partner were formed in December 2014. Accordingly, our general partner has not accrued any obligations with respect to
management incentive or retirement benefits for its directors or executive officers for the 2014 fiscal year or prior periods. Because our general partner’s executive officers are employed by Noble, compensation of the executive officers will
be set and paid by Noble. Our general partner has not entered into any employment agreements with any of its executive officers. We expect that compensation for our general partner’s executive officers in 2016 will continue to be determined and
structured under Noble’s compensation programs. Under our operational services and secondment agreement with Noble, we will reimburse Noble for the portion of our executive officers’ compensation that is attributable to the management of
the operational aspects of our business. The compensation for the other executive officers is embedded in the flat fee that Noble will charge to us under the omnibus agreement. See “Certain Relationships and Related Party
Transactions—Agreements with our Affiliates in Connection with the Transactions—Operational Services and Secondment Agreement” and “Risk Factors—Risks Related to Our Business—We do not have any officers or employees and
rely on officers of our general partner and employees of Noble.” Following the consummation of this offering, we expect that:
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John F. Bookout, IV, our Chief Financial Officer and John C. Nicholson, our Chief Operating Officer, will devote substantially all of their time
managing our business and affairs;
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Terry R. Gerhart and Dustin A. Hatley, our Chief Executive Officer and Chief Accounting Officer, respectively, are each also an officer of Noble and
will devote the majority of their time to their positions at Noble. As needed, each will also spend time directly managing our business and affairs.
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Our general partner’s executive officers, as well as the employees of Noble who provide services to us, may participate in employee benefit plans and arrangements sponsored by Noble, including plans
that may be established in the future, and certain of such officers and employees of Noble who provide services to us currently hold grants under Noble’s equity incentive plans and will retain these grants after the completion of this offering.
Compensation of Our Directors
The officers or employees of our general partner or Noble who also serve as directors of our general partner will not receive additional compensation for their service as a director of our general
partner. In connection with this offering, directors of our general partner who are not officers or employees of our general partner or Noble, or “non-employee directors,” will receive cash and equity-based compensation for their services
as directors. The non-employee director compensation program will consist of the following:
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an annual retainer of $60,000;
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an additional annual retainer of $20,000 for service for each of the chair of the audit committee and the conflicts committee; and
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an annual equity-based award granted under the LTIP, having a value as of the grant date of approximately $120,000.
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Non-employee directors will also receive reimbursement for out-of-pocket expenses they incur in connection with attending meetings of the
board of directors or its committees. Each director will be indemnified for his or her actions associated with being a director to the fullest extent permitted under Delaware law.
Our Long-Term Incentive Plan
Our general partner intends to adopt the Noble Midstream Partners LP 2016 Long-Term Incentive Plan, or our LTIP, under which our general partner may issue long-term equity based awards to directors,
officers and employees of our general partner or its affiliates, or to any consultants, affiliates of our general partner or other individuals who perform services for us. These awards will be intended to compensate the recipients thereof based on
the performance of our common units and their continued service during the vesting period, as well as to align their long-term interests with those of our unitholders. We will be responsible for the cost of awards granted under our LTIP and all
determinations with respect to awards to be made under our LTIP will be made by the board of directors of our general partner or any committee thereof that may be established for such purpose or by any delegate of the board of directors or such
committee, subject to applicable law, which we refer to as the plan administrator. We currently expect that the board of directors of our general partner or a committee thereof will be designated as the plan administrator. The following description
reflects the terms that are currently expected to be included in the LTIP.
General
The LTIP will provide for the grant, from time to time at the discretion of the board of directors of our general partner or any delegate
thereof, subject to applicable law, of unit awards, restricted units, phantom units, unit options, unit appreciation rights, distribution equivalent rights, profits interest units and other unit-based awards. The purpose of awards under the LTIP is
to provide additional incentive compensation to individuals providing services to us, and to align the economic interests of such individuals with the interests of our unitholders. The LTIP will limit the number of units that may be delivered
pursuant to vested awards to common units, subject to proportionate adjustment in the event of unit splits and similar events. Common units subject to awards that are
cancelled, forfeited, withheld to satisfy exercise prices or tax withholding obligations or otherwise terminated without delivery of the common units will be available for delivery pursuant to other awards.
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Restricted Units and Phantom Units
A restricted unit is a common unit that is subject to forfeiture. Upon vesting, the forfeiture restrictions lapse and the recipient holds
a common unit that is not subject to forfeiture. A phantom unit is a notional unit that entitles the grantee to receive a common unit upon the vesting of the phantom unit or on a deferred basis upon specified future dates or events or, in the
discretion of the plan administrator, cash equal to the fair market value of a common unit. The plan administrator of the LTIP may make grants of restricted units and phantom units under the LTIP that contain such terms, consistent with the LTIP, as
the plan administrator may determine are appropriate, including the period over which restricted units or phantom units will vest. The plan administrator of the LTIP may, in its discretion, base vesting on the grantee’s completion of a period
of service or upon the achievement of specified financial objectives or other criteria or upon a change of control (as defined in the LTIP) or as otherwise described in an award agreement.
Distributions made by us with respect to awards of restricted units may be subject to the same vesting requirements as the restricted
units.
Distribution Equivalent Rights
The plan administrator of the LTIP, in its discretion, may also grant distribution equivalent rights, either as standalone awards or in tandem with other awards. Distribution equivalent rights are rights
to receive an amount in cash, restricted units or phantom units equal to all or a portion of the cash distributions made on units during the period an award remains outstanding.
Unit Options and Unit Appreciation Rights
The LTIP may also permit the
grant of options covering common units. Unit options represent the right to purchase a number of common units at a specified exercise price. Unit appreciation rights represent the right to receive the appreciation in the value of a number of common
units over a specified exercise price, either in cash or in common units. Unit options and unit appreciation rights may be granted to such eligible individuals and with such terms as the plan administrator of the LTIP may determine, consistent with
the LTIP; however, a unit option or unit appreciation right must have an exercise price equal to at least the fair market value of a common unit on the date of grant.
Unit Awards
Awards covering common units may be granted under the LTIP
with such terms and conditions, including restrictions on transferability, as the plan administrator of the LTIP may establish.
Profits
Interest Units
Awards granted to grantees who are partners, or granted to grantees in anticipation of the grantee becoming
a partner or granted as otherwise determined by the plan administrator, may consist of profits interest units. The plan administrator will determine the applicable vesting dates, conditions to vesting and restrictions on transferability and any
other restrictions for profits interest awards.
Other Unit-Based Awards
The LTIP may also permit the grant of “other unit-based awards,” which are awards that, in whole or in part, are valued or based
on or related to the value of a common unit. The vesting of another unit-based award may be based on a participant’s continued service, the achievement of performance criteria or other measures. On vesting or on a deferred basis upon specified
future dates or events, another unit-based award may be paid in cash or in units (including restricted units) or any combination thereof as the plan administrator of the LTIP may determine.
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Source of Common Units
Common units to be delivered with respect to awards may be newly-issued units, common units acquired by us or our general partner in the open market, common units already owned by our general partner or
us, common units acquired by our general partner directly from us or any other person or any combination of the foregoing.
Anti-Dilution
Adjustments and Change in Control
If an “equity restructuring” event occurs that could result in an additional
compensation expense under applicable accounting standards if adjustments to awards under the LTIP with respect to such event were discretionary, the plan administrator of the LTIP will equitably adjust the number and type of units covered by each
outstanding award and the terms and conditions of such award to equitably reflect the restructuring event, and the plan administrator will adjust the number and type of units with respect to which future awards may be granted under the LTIP. With
respect to other similar events, including, for example, a combination or exchange of units, a merger or consolidation or an extraordinary distribution of our assets to unitholders, that would not result in an accounting charge if adjustment to
awards were discretionary, the plan administrator of the LTIP shall have discretion to adjust awards in the manner it deems appropriate and to make equitable adjustments, if any, with respect to the number of units available under the LTIP and the
kind of units or other securities available for grant under the LTIP. Furthermore, upon any such event, including a change in control of us or our general partner, or a change in any law or regulation affecting the LTIP or outstanding awards or any
relevant change in accounting principles, the plan administrator of the LTIP will generally have discretion to (i) accelerate the time of exercisability or vesting or payment of an award, (ii) require awards to be surrendered in exchange
for a cash payment or substitute other rights or property for the award, (iii) provide for the award to assumed by a successor or one of its affiliates, with appropriate adjustments thereto, (iv) cancel unvested awards without payment or
(v) make other adjustments to awards as the plan administrator deems appropriate to reflect the applicable transaction or event.
Termination of Service
The consequences of the termination of a grantee’s membership on the board of directors of our general partner or other service
arrangement will generally be determined by the plan administrator in the terms of the relevant award agreement.
Amendment or Termination
of Long-Term Incentive Plan
The plan administrator of the LTIP, at its discretion, may terminate the LTIP at any time with
respect to the common units for which a grant has not previously been made. The plan administrator of the LTIP also has the right to alter or amend the LTIP or any part of it from time to time or to amend any outstanding award made under the LTIP,
provided that no change in any outstanding award may be made that would materially impair the vested rights of the participant without the consent of the affected participant or result in taxation to the participant under Section 409A of the
Code.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of common units and subordinated units of Noble Midstream
Partners LP that will be issued upon the completion of this offering and the related transactions and held by:
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each unitholder known by us to beneficially hold 5% or more of our outstanding units;
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each director or director nominee of our general partner;
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each named executive officer of our general partner; and
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all of the directors, director nominee and executive officers of our general partner as a group.
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In addition, in connection with the completion of this offering, we will issue a non-economic general partner interest to our general
partner and all of the incentive distribution rights to Noble.
Beneficial ownership is determined under the rules of the SEC
and generally includes voting or investment power with respect to securities. Unless indicated below, to our knowledge, the persons and entities named in the following table have sole voting and sole investment power with respect to all units
beneficially owned by them, subject to community property laws where applicable.
The following table assumes that the
underwriters’ option to purchase additional common units is not exercised. The percentage of total common units and subordinated units to be beneficially owned is based on a total of
common units and subordinated units outstanding immediately following this offering. The following
table does not include any common units that the directors, director nominee and executive officers of our general partner may purchase in this offering through the directed unit program described under “Underwriting.”
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Name of Beneficial Owner(1)
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Common
Units To Be
Beneficially
Owned
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Percentage
of Common
Units To Be
Beneficially
Owned
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Subordinated
Units To Be
Beneficially
Owned
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Percentage
of
Subordinated
Units To Be
Beneficially
Owned
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Percentage
of Total
Common
Units and
Subordinated
Units To
Be
Beneficially
Owned
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Noble Energy, Inc.
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Directors/Named Executive Officers
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Terry R. Gerhart
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Kenneth M. Fisher
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Charles J. Rimer
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Gary W. Willingham
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John F. Bookout, IV
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Dustin A. Hatley
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John C. Nicholson
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Director Nominee
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Hallie A. Vanderhider
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All Directors, Director Nominee and Executive Officers as a group
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(8 persons)
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(1)
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Unless otherwise indicated, the address for all beneficial owners in this table is c/o Noble Midstream GP LLC, 1001 Noble Energy Way, Houston, Texas 77070.
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The following table sets forth, as
of , 2016, the number of shares of Noble common stock beneficially owned by each of the directors, director nominee and
named executive officers of our general partner and all of the directors, director nominee and executive officers of our general partner as a group. The percentage of total shares is based on
shares outstanding as of , 2016. Amounts shown below
include options that are currently exercisable or that may become exercisable within 60 days of , 2016 and the shares underlying
restricted stock awards that will be settled within 60 days of , 2016. Unless otherwise indicated, the named person has the sole
voting and dispositive powers with respect to the shares of Noble common stock set forth opposite such person’s name.
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Name of Beneficial Owner
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Total
Common
Stock
Beneficially
Owned
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Percent of
Total
Outstanding
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Directors/Named Executive Officers
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Terry R. Gerhart
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Kenneth M. Fisher
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Charles J. Rimer
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Gary W. Willingham
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John F. Bookout, IV
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Dustin A. Hatley
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John C. Nicholson
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Director Nominee
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Hallie A. Vanderhider
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All Directors, Director Nominee and Executive Officers as a group
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(8 persons)
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Following the completion of this offering, Noble will own
common units and subordinated units, representing an aggregate % limited
partner interest (or common units and subordinated units, representing an aggregate
% limited partner interest, if the underwriters exercise in full their option to purchase additional common units). In addition, our general partner will own a non-economic general partner interest in us and Noble will own
all of our incentive distribution rights.
Distributions and Payments to Our General Partner and
Its Affiliates
The following table summarizes the distributions and payments to be made by us to our general partner and
its affiliates in connection with the formation, ongoing operation and liquidation of us. These distributions and payments were determined by and among affiliated entities and, consequently, are not the result of arm’s-length negotiations.
Formation/Offering Stage
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The consideration received by our general partner and its affiliates, including Noble, prior to or in connection with
this offering for the contribution of the controlling interests in our development companies to us
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common units (or common units if the
underwriters exercise in full their option to purchase additional common units);
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a distribution of approximately $ million from the net proceeds of this offering (or
$ million if the underwriters exercise in full their option to purchase additional common units);
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the incentive distribution rights; and
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a non-economic general partner interest.
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Post-IPO Operational Stage
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Distributions of available cash to Noble
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We will generally make cash distributions to our unitholders pro rata, including Noble, as holder of an aggregate of
common units and subordinated units. In addition, if distributions exceed the minimum quarterly distribution and target distribution levels, the incentive distribution rights
held by Noble will entitle it to increasing percentages of the distributions, up to 50% of the distributions above the highest target distribution level.
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Assuming we generate sufficient distributable cash flow to make the payment of the full minimum quarterly distribution on all of our outstanding units for four
quarters, Noble would receive an aggregate annual distribution of approximately $ million on its common units and subordinated units (or $ million if the
underwriters exercise in full their option to purchase additional common units).
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Payments to our general partner and its affiliates
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Under our partnership agreement, we are required to reimburse our general partner and its affiliates for all costs and expenses that they incur on our behalf for managing and controlling our
business and operations.
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Under our operational services and secondment agreement, we will reimburse Noble for the secondment to our general partner of certain employees who provide operational
functions and all personnel in the operational chain of management. The costs and expenses for which we will be required to reimburse Noble and its affiliates will not be subject to any caps or other limits. Please read “—Agreements with
our Affiliates in Connection with the Transactions—Operational Services and Secondment Agreement” below and “Management—Compensation of Our Officers and Directors.”
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Under our omnibus agreement, we pay to Noble a fixed fee for the cost of the general and administrative expenses that we anticipate to receive, which fee is subject to
annual redeterminations. In addition, to the extent Noble incurs direct, third-party out-of-pocket general and administrative costs for our exclusive benefit, we will reimburse Noble for such amounts, and we are responsible for directly incurring
certain other general and administrative expenses, such as our tax advisors who specialize in master limited partnerships, lawyers and accounting firms. These services will be consistent in nature and quality to the services of such type previously
provided by Noble in connection with our assets. Please read “—Agreements with our Affiliates in Connection with the Transactions—Omnibus Agreement”
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Withdrawal or removal of our general partner
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If our general partner withdraws or is removed, its non-economic general partner interest will either be sold to the new general partner for cash or converted into common units, in each case for
an amount equal to the fair market value of those interests. Please read “Our Partnership Agreement—Withdrawal or Removal of Our General Partner.”
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Liquidation Stage
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Liquidation
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Upon our liquidation, the partners, including our general partner, will be entitled to receive liquidating distributions according to their respective capital account balances.
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Agreements with our Affiliates in Connection with the Transactions
We and other parties will enter into the various agreements that will affect the transactions contemplated by this offering, including the
vesting of assets in, and the assumption of liabilities by, us and our subsidiaries, and the application of the proceeds from this offering. While not the result of arm’s-length negotiations, we believe the terms of all of our initial
agreements with Noble and its affiliates will be, and specifically intend the rates to be, generally no less favorable to either party than those that could have been negotiated with unaffiliated parties with respect to similar services. All of the
transaction expenses incurred in connection with these transactions, including the expenses associated with transferring assets into our subsidiaries, will be paid for with the proceeds from this offering.
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Omnibus Agreement
At the closing of this offering, we will enter into an omnibus agreement with Noble and our general partner that will address the following matters:
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our payment of an annual general and administrative fee, initially in the amount of $6.85 million (prorated for the first year of service), for
the provision of certain services by Noble and its affiliates;
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our ROFRs on existing and future acquired assets and the right to provide certain services, including:
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East Pony Natural Gas Gathering and Northern Colorado Gas Processing
. The right to provide natural gas processing and natural gas gathering
services on approximately 44,000 net acres located in East Pony IDP, the right to acquire approximately 233 mules of natural gas gathering pipelines and two natural gas processing plants,
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Eagle Ford Shale
. The right to provide crude oil gathering, natural gas gathering and water services on approximately 31,000 net acres in Dimmit
and Webb Counties and certain crude oil and natural gas gathering systems that service some of Noble’s continuous acreage in the Eagle Ford Shale,
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DJ Basin
. The right to provide crude oil gathering, natural gas gathering and water services on approximately 85,000 net acres in the DJ Basin,
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Delaware Basin
. The right to provide natural gas gathering, natural gas processing and fresh water services on the same acreage that is
dedicated to us for oil and produced water gathering, which is 40,000 net acres in Delaware Basin, and
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Future acquired acreage in the onshore United States
. The right to provide crude oil gathering, natural gas gathering and water services on all
acreage that Noble acquires after the date of the Closing that is onshore United States (outside the Marcellus Shale);
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our ROFO to acquire Noble’s retained interests in each of our development companies; and
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an indemnity by Noble for certain environmental and other liabilities, and our obligation to indemnify Noble for events and conditions associated with
the operations of our assets that occur after the closing of this offering and for environmental liabilities related to our assets to the extent Noble is not required to indemnify us.
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If Noble ceases to control our general partner, either party may terminate the omnibus agreement, provided that the indemnification
obligations will remain in full force and effect in accordance with their terms. The ROFR and ROFO contained in our omnibus agreement will terminate on the earlier of 15 years from the closing of this offering, the date that Noble no longer controls
our general partner and on the written agreement of all parties.
Payment of general and administrative support fee
and reimbursement of expenses
. We will pay Noble a flat fee, initially in the amount of $6.85 million per year (payable in equal monthly installments and prorated for the first year of service), for the provision of certain general and
administrative services for our benefit, including: executive services; financial and administrative services (including treasury and accounting); information technology;
in-house
legal services; corporate
health, safety and environmental services; facility services; human resources services; procurement services; corporate engineering services, including asset integrity and regulatory services; logistical services; asset oversight; business
development services; investor relations; tax matters; and public company reporting services.
Once per year, Noble will
submit a good faith estimate of the general and administrative services fee based on the services that Noble anticipates providing to us during the following year. The board of directors of our general partner will have the opportunity to review the
proposed general and administrative fee for the upcoming year and submit disputes to Noble. If Noble and the board of directors of our general partner are unable to agree
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on the amount of the general and administrative fee for any year, Noble and the Partnership will submit their calculations of the fee to an independent auditing firm for review. The determination
of the independent auditing firm will be final and binding on Noble and the Partnership with respect to all items included in the general and administrative fee.
Under the omnibus agreement, we will also reimburse Noble for all direct, third-party out-of-pocket costs incurred by Noble in providing these services for our exclusive benefit. This reimbursement will
be in addition to our reimbursement of our general partner and its affiliates for certain costs and expenses incurred on our behalf for managing and controlling our business and operations as required by our partnership agreement.
Right of first refusal
. Under the omnibus agreement, until the earlier of 15 years from the closing of this offering and the date
that Noble no longer controls our general partner, if Noble decides to sell, transfer or otherwise dispose of all or any part of the natural gas gathering and natural gas processing facilities that currently service the East Pony IDP or midstream
assets located on 31,000 net acres that Noble currently owns in the Eagle Ford Shale, Noble will offer us the opportunity to acquire such assets. In addition, Noble has granted us a ROFR on existing and future acquired assets and the right to
provide the following services:
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East Pony Natural Gas Gathering and Northern Colorado Gas Processing.
The services ROFR gives us the right to provide natural gas
processing and natural gas gathering services on approximately 44,000 net acres located in East Pony IDP in the event Noble elected to obtain such services from a third party. Today, Noble provides these services for itself, using the assets
described below. Noble has granted us a ROFR on the right to buy these assets in the event Noble elects to sell them:
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Approximately 233 miles of natural gas gathering pipelines, which had average daily throughput of approximately 39,600 Mcf/d during the three months
ended March 31, 2016 (increased 25% from 31,700 Mcf/d during the first quarter of 2015).
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Two natural gas processing plants, Lilli and Keota, with combined existing processing capacity of 48,000 Mcf/d. Keota is permitted for an 15,000 Mcf/d
expansion to handle approximately 45,000 Mcf/d (bringing total combined processing capacity to 63,000 Mcf/d). Daily processing volumes for Lilli and Keota combined averaged approximately 34,100 Mcf/d during the three months ended March 31, 2016
(increased 83% from 18,600 Mcf/d during the first quarter of 2015).
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Eagle Ford Shale.
The services ROFR gives us the right to provide crude oil gathering, natural gas gathering and water services on
approximately 31,000 net acres in Dimmit and Webb Counties in the event Noble elected to offer these to a third party facilities and crude oil and natural gas gathering systems that had an average daily throughput of approximately 43.6 MBoe/d during
the three months ending March 31, 2016 that service some of Noble’s contiguous acreage in the Eagle Ford Shale.
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DJ Basin.
The services ROFR gives us the right to provide crude oil gathering, natural gas gathering and water services on approximately
85,000 net acres in the DJ Basin that are not already dedicated to us, and with respect to the acreage already under dedications for certain services, the right to provide the other midstream services in our area of specialty, if they become
available.
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Delaware Basin.
The services ROFR gives us the right to provide natural gas gathering, natural gas processing and fresh water services on
the same acreage that is dedicated to us for oil and produced water gathering, which is 40,000 net acres in the Delaware Basin.
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Future acquired acreage in the onshore United States.
The services ROFR gives us the right to provide crude oil gathering, natural gas
gathering and water services on all acreage that Noble acquires after the date of the Closing that is onshore in the United States (outside of the Marcellus Shale).
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The consummation and timing of any acquisition by us of the assets or any provision of midstream services subject to the ROFR will depend
upon, among other things, Noble’s decision to sell any of the assets subject to the ROFR or Noble’s decision to obtain midstream services in the acreage or areas subject to the ROFR and our
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ability to reach an agreement with Noble on price and other terms. Accordingly, we can provide no assurance whether, when or on what terms we will be able to successfully consummate any future
acquisitions or expansions of our services pursuant to our ROFR. Please read “Risk Factors—Risks Related to Our Business—We may be unable to grow by acquiring the non-controlling interests in our development companies owned by Noble
or midstream assets retained, acquired or developed by Noble, which could limit our ability to increase our distributable cash flow.”, “Risk Factors—Risks Related to our Business—While we have been granted a right of first
refusal to provide midstream services on all acreage that Noble has or acquires onshore in the United States (other than in the Marcellus Shale), portions of this acreage may be subject to preexisting dedications, rights of first refusal, rights of
first offer and other preexisting encumbrances that may require Noble to use third parties for midstream services.”, “Risk Factors—Risks Related to our Business—We may not be able to economically accept an offer from Noble for us
to provide services with respect to which we have a right of first refusal.” and “Certain Relationships and Related Party Transactions—Agreements with our Affiliates in Connection with the Transactions—Commercial
Agreements.”
Right of first offer
. Under the omnibus agreement, until the earlier of 15 years from the
closing of this offering and the date that Noble no longer controls our general partner, if Noble decides to sell any of its retained interests in each of our development companies, Noble must first allow us to make an offer to purchase these
interests.
The consummation and timing of any acquisition by us of the interests covered by our ROFO will depend upon, among
other things, Noble’s decision to sell any of the interests covered by the ROFO and our ability to reach an agreement with Noble on price and other terms. Accordingly, we can provide no assurance whether, when or on what terms we will be able
to successfully consummate any future acquisitions pursuant to our ROFO. Please read “Risk Factors—Risks Related to our Business—We may be unable to grow by acquiring the non-controlling interests in our development companies owned by
Noble or midstream assets retained, acquired or developed by Noble, which could limit our ability to increase distributable cash flow.”
Indemnification
. Under the omnibus agreement, Noble will indemnify us for all known and certain unknown environmental liabilities that are associated with the ownership or operation of our assets
and due to occurrences before the closing of this offering. Indemnification for any unknown environmental liabilities will be limited to liabilities due to occurrences before the closing of this offering and identified prior to the third anniversary
of the closing of this offering, and will be subject to a deductible of $500,000 per claim before we are entitled to indemnification. For purposes of calculating the deductible, a “claim” will include all liabilities that arise from a
discrete act or event. There is no limit on the amount for which Noble will indemnify us under the omnibus agreement once we meet the deductible, if applicable. Noble will also indemnify us for failure to obtain certain consents, licenses and
permits necessary to conduct our business, including the cost of curing any such condition, in each case that are identified prior to the third anniversary of the closing of this offering, and will be subject to an aggregate deductible of $500,000
before we are entitled to indemnification.
Noble will also indemnify us for liabilities relating to:
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the consummation of the transactions contemplated by our contribution agreements or the assets contributed to us, other than environmental liabilities,
that arise out of the ownership or operation of the assets prior to the closing of this offering;
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events and conditions associated with any assets retained by Noble;
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litigation matters attributable to the ownership or operation of the contributed assets prior to the closing of this offering, which will be subject to
an aggregate deductible of $500,000 before we are entitled to indemnification (other than currently pending legal actions, which are not subject to a deductible);
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the failure to have any consent, license, permit or approval necessary for us to own or operate the contributed assets in substantially the same manner
as owned or operated by Noble prior to this offering; and
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all tax liabilities attributable to the assets contributed to us arising prior to the closing of this offering or otherwise related to Noble’s
contribution of those assets to us in connection with this offering.
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We have agreed to indemnify Noble for
events and conditions associated with the ownership or operation of our assets that occur after the closing of this offering and for environmental liabilities related to our assets to the extent Noble is not required to indemnify us as described
above. There is no limit on the amount for which we will indemnify Noble under the omnibus agreement.
Operational Services and
Secondment Agreement
We and our general partner will also enter into an operational services and secondment
agreement with Noble setting forth the operational services arrangements described below. Our parent will second certain operational, construction, design and management employees and contractors of Noble to our general partner, the Partnership and
the Partnership’s subsidiaries (collectively the “Partnership Parties”) to provide management, maintenance and operational functions with respect to our assets. During their period of secondment, the seconded personnel will be under
the direct management and supervision of the Partnership Parties.
The Partnership Parties will reimburse Noble for the
cost of the seconded employees and contractors, including their wages and benefits. If a seconded employee or contractor does not devote 100% of his or her time to providing services to the Partnership Parties, then we will reimburse Noble for only
a prorated portion of such employee’s overall wages and benefits, and the costs associated with contractors based on the percentage of the employee’s or contractor’s time spent working for the Partnership Parties. The Partnership
Parties will reimburse Noble on a monthly basis or at other intervals that Noble and the general partner may agree from time to time.
The operational services and secondment agreement will have an initial term of 15 years and will automatically extend for successive renewal terms of one year each, unless terminated by either party upon
at least 30 days’ prior written notice before the end of the initial term or any renewal term. In addition, the Partnership Parties may terminate the agreement at any time upon written notice stating the date of termination or reduce the level
of services under the agreement at any time upon 30 days’ prior written notice.
Commercial Agreements
At the closing of this offering, we will have long-term agreements with Noble for the provision of midstream services. For more
information about our operational agreements with Noble, please read “Business—Our Commercial Agreements with Noble—How We Generate Revenue.”
Contribution Agreement
At the closing of this offering, we will
enter into a contribution, conveyance and assumption agreement, which we refer to as our contribution agreement, with Noble, our general partner and certain other affiliates of Noble pursuant to which our development companies will hold the assets
comprising our operating assets and dedications and we will hold controlling interests in the development companies that own our operating assets and dedications as follows:
Noble Midstream Services, LLC, a Delaware limited liability company, or Operating, owns 100% of the membership interests in each of Colorado River DevCo GP LLC, a Delaware limited liability company, or
Colorado River DevCo GP, Green River DevCo GP LLC, a Delaware limited liability company, or Green River DevCo GP, Gunnison River DevCo GP LLC, a Delaware limited liability company, or Gunnison River DevCo GP, Laramie River DevCo GP LLC, a Delaware
limited liability company, or Laramie River DevCo GP, San Juan River DevCo GP LLC, a Delaware limited liability company, or San Juan River DevCo GP, Blanco River DevCo GP LLC, a Delaware limited liability company, or Blanco River DevCo GP, and
together with Colorado River DevCo GP, Green River DevCo GP, Gunnison River DevCo GP, Laramie River DevCo GP and San Juan River DevCo GP, the
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DevCo General Partners. Colorado River DevCo GP is the sole general partner of Colorado River DevCo LP, a Delaware limited partnership, and owns a 80% general partner interest in Colorado
River DevCo LP. Green River DevCo GP is the sole general partner of Green River DevCo LP, a Delaware limited partnership, and owns a 25% general partner interest in Green River DevCo LP. Gunnison River DevCo GP is the sole general partner of
Gunnison River DevCo LP, a Delaware limited partnership, and owns a 5% general partner interest in Gunnison River DevCo LP. Laramie River DevCo GP is the sole general partner of Laramie River DevCo LP, a Delaware limited partnership, and owns
a 100% general partner interest in Laramie River DevCo LP. San Juan River DevCo GP is the sole general partner of San Juan River DevCo LP, a Delaware limited partnership, and owns a 25% general partner interest in San Juan River DevCo LP.
Blanco River DevCo GP is the sole general partner of Blanco River DevCo LP, a Delaware limited partnership, and owns a 25% general partner interest in Blanco River DevCo LP. Colorado River DevCo LP, Green River DevCo LP, Gunnison River DevCo LP,
Laramie River DevCo LP, San Juan River DevCo LP and Blanco River DevCo LP are collectively referred to herein as the DevCo Limited Partnerships. Noble owns a 20% limited partner interest in Colorado River DevCo LP, a 75% limited partner
interest in Green River DevCo LP, a 95% limited partner interest in Gunnison River DevCo LP, a 75% limited partner interest in San Juan River DevCo LP and a 75% limited partner interest in Blanco River DevCo LP. Operating owns a 100%
limited partner interest in Laramie River DevCo LP.
Pursuant to the partnership agreement of each DevCo Limited Partnership,
the general partner interest held by the applicable DevCo General Partner (and, ultimately, us through our direct control of Operating and indirect control of the applicable DevCo General Partner upon the completion of this offering) entitles such
DevCo General Partner to voting control over, and the exclusive right to manage, the day-to-day operations, business and affairs of the applicable DevCo Limited Partnership. Although the limited partner interest in each DevCo Limited Partnership
provides the holder (currently, Noble, except for Laramie River DevCo LP, for which the limited partner is Operating) economic rights to profits, losses, gains, deductions and credits in proportion to such holder’s percentage interest in the
applicable DevCo Limited Partnership, the limited partner interests in each DevCo Limited Partnership do not entitle the holder to any rights with respect to controlling and managing the day-to-day operations, business and affairs of the applicable
DevCo Limited Partnership or the ability to remove the general partner.
Noble or one of its subsidiaries has contributed 100%
of the assets shown on the table under “Business—Our Existing Assets—Dedications” to the applicable DevCo Limited Partnerships shown in that table. Furthermore, in connection with the closing of this offering, Noble will
contribute to us 100% of the membership interests in Operating pursuant to the contribution agreement. As a result, after the closing of this offering, we will (a) directly own 100% of the membership interests in Operating, (b) indirectly
own (through our ownership interest in Operating) 100% of the membership interests in each of the DevCo General Partners, (c) indirectly own (through our indirect ownership interest in Colorado River DevCo GP) a 80% general partner
interest in Colorado River DevCo LP, (d) indirectly own (through our indirect ownership interest in Green River DevCo GP) a 25% general partner interest in Green River DevCo LP, (e) indirectly own (through our indirect ownership
interest in Gunnison River DevCo GP) a 5% general partner interest in Gunnison River DevCo LP, (f) indirectly own 100% of Laramie River DevCo LP, (g) indirectly own (through our indirect ownership interest in San Juan River DevCo GP)
a 25% general partner interest in San Juan River DevCo LP and (h) indirectly own (through our indirect ownership interest in Blanco River DevCo GP) a 25% general partner interest in Blanco River DevCo LP. Furthermore, through our direct control
of Operating and indirect control of the DevCo General Partners, we will control and manage the day to day operations, business and affairs of the DevCo Limited Partnerships. Please read “Business—Our Assets, ROFRs and ROFO” and
“Prospectus Summary—Ownership and Organizational Structure.”
Procedures for
Review, Approval and Ratification of Related Person Transactions
The board of directors of our general partner will adopt
a code of business conduct and ethics in connection with the completion of this offering that will provide that the board of directors of our general partner or its authorized committee will review on at least a quarterly basis all transactions with
related persons that are required to be disclosed under SEC rules and, when appropriate, initially authorize or ratify all such transactions.
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If the board of directors of our general partner or its authorized committee considers ratification of a transaction with a related person and determines not to so ratify, then the code of
business conduct and ethics will provide that our management will make all reasonable efforts to cancel or annul the transaction.
The code of business conduct and ethics will provide that, in determining whether or not to recommend the initial approval or ratification of a transaction with a related person, the board of directors of
our general partner or its authorized committee should consider all of the relevant facts and circumstances available, including (if applicable) but not limited to: (i) whether there is an appropriate business justification for the transaction;
(ii) the benefits that accrue to us as a result of the transaction; (iii) the terms available to unrelated third parties entering into similar transactions; (iv) the impact of the transaction on a director’s independence (in the
event the related person is a director, an immediate family member of a director or an entity in which a director or an immediate family member of a director is a partner, shareholder, member or executive officer); (v) the availability of other
sources for comparable products or services; (vi) whether it is a single transaction or a series of ongoing, related transactions; and (vii) whether entering into the transaction would be consistent with the code of business conduct and
ethics.
The code of business conduct and ethics described above will be adopted in connection with the completion of this
offering and, therefore, the transactions described above were not reviewed under such policy.
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CONFLICTS OF INTEREST AND DUTIES
Conflicts of Interest
Conflicts of interest exist and may arise in the future as a result of the relationships between our general partner and its affiliates, including Noble, on the one hand, and us and our unaffiliated
limited partners, on the other hand. The directors and executive officers of our general partner have duties to manage our general partner in a manner that is in the best interests of its owners. At the same time, our general partner has a duty to
manage us in a manner that is not adverse to the interests of our partnership.
Whenever a conflict of interest arises between
our general partner or its affiliates, on the one hand, and us or any other partner, on the other hand, our general partner will resolve that conflict. Our general partner may seek the approval of such resolution from the conflicts committee of the
board of directors of our general partner, or special approval, or from our unitholders, or unitholder approval, but our general partner is not required to do so. There is no requirement under our partnership agreement that our general partner seek
special approval or unitholder approval for the resolution of any conflict of interest, and, under our partnership agreement, our general partner may decide to seek such approval or resolve a conflict of interest in any other way permitted by our
partnership agreement, as described below, in its sole discretion. The board of directors of our general partner will decide whether to refer a matter to the conflicts committee or to our unitholders on a case-by-case basis. In determining whether
to refer a matter to the conflicts committee or to our unitholders for approval, the board of directors of our general partner will consider a variety of factors, including the nature of the conflict, the size of the transaction and dollar amount
involved, the identity of the parties involved and any other factors the board of directors deems relevant in determining whether it will seek special approval or unitholder approval. Whenever our general partner makes a determination to seek
special approval, to seek unitholder approval or to adopt a resolution or course of action that has not received special approval or unitholder approval, then our general partner will be entitled, to the fullest extent permitted by law, to make such
determination free of any duty or obligation whatsoever to our partnership or any limited partner, and our general partner will not, to the fullest extent permitted by law, be required to act in good faith or pursuant to any other standard or duty
imposed by our partnership agreement or under the Delaware Act or any other law, rule or regulation or at equity, and our general partner in making such determination will be permitted to do so in its sole and absolute discretion. For a more
detailed discussion of the duties applicable to our general partner, please read “—Duties of Our General Partner.”
Whenever a potential conflict of interest exists or arises, any resolution or course of action by our general partner or its affiliates in respect of such conflict of interest will be permitted and deemed
approved by all partners, and will not constitute a breach of our partnership agreement or of any duty stated or implied by law or equity, if the resolution or course of action in respect of such conflict of interest is:
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approved by special approval, which our partnership agreement defines as approval by a majority of the members of the conflicts committee, acting in
good faith; or
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approved by a vote of a majority of the outstanding common units, excluding any common units owned by our general partner or any of its affiliates.
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If our general partner seeks special approval from the conflicts committee, then it will be presumed that,
in making its decision, the conflicts committee acted in good faith, and in any proceeding brought by or on behalf of any limited partner or the partnership challenging such determination, the person bringing or prosecuting such proceeding will have
the burden of overcoming such presumption. If our general partner does not seek special approval or unitholder approval, then our general partner, the board of directors of our general partner or any committee of the board of directors of our
general partner (including the conflicts committee), as applicable, will make such determination or take or decline to take any action in good faith, and none of our general partner, the board of directors of our general partner or any committee of
the board of directors of our general partner (including the conflicts committee), as applicable, will be subject to any fiduciary duty or other duty or obligation, or any other, different or higher standard under our partnership agreement or under
the Delaware Act or any other law, rule or regulation or at equity. Under our partnership agreement, it will be presumed that, in
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making its decision, our general partner, the board of directors of our general partner or any committee of the board of directors of our general partner (including the conflicts committee), as
applicable, acted in good faith, and in any proceeding brought by or on behalf of any limited partner or the partnership challenging such determination, the person bringing or prosecuting such proceeding will have the burden of overcoming such
presumption. Unless the resolution of a conflict is specifically provided for in our partnership agreement, our general partner or the conflicts committee of our general partner’s board of directors may consider any factors it determines in
good faith to consider when resolving a conflict. A determination or the taking or declining to take an action will be deemed to be in “good faith” for purposes of our partnership agreement unless the person or persons making such
determination or taking or declining to take such action subjectively believed that such determination, other action or failure to act was adverse to the interests of the partnership. In taking such action, such person may take into account the
totality of the circumstances or the totality of the relationships between the parties involved, including other relationships or transactions that may be particularly favorable or advantageous to us. If that person has the required subjective
belief, then the decision or action will be conclusively deemed to be in good faith for all purposes under our partnership agreement.
It is possible, but we believe it is unlikely, that our general partner would approve a matter that the conflicts committee has previously declined to approve or declined to recommend that the full board
of directors approve. If the conflicts committee does not approve or does not recommend that the full board of directors approve a matter that has been presented to it, then, unless the board of directors of our general partner has delegated
exclusive authority to the conflicts committee, the board of directors of our general partner may subsequently approve the matter. In such a case, although the matter will not have received “special approval” under our partnership
agreement, the board of directors of our general partner could still determine to resolve the conflict of interest solely under the good faith standard. In making any such determination, the board of directors of our general partner may take into
account the totality of the relationships between the parties involved, including other transactions that may be particularly favorable or advantageous to us. Please read “Management—Committees of the Board of Directors—Conflicts
Committee” for information about the conflicts committee of our general partner’s board of directors.
Conflicts of
interest could arise in the situations described below, among others.
Affiliates of our general partner, including Noble, may compete
with us, and neither our general partner nor its affiliates have any obligation to present business opportunities to us except with respect to dedications contained in our commercial agreements and rights of first refusal and rights of first offer
contained in our omnibus agreement.
Our partnership agreement provides that our general partner will be restricted
from engaging in any business activities other than acting as our general partner (or as general partner or managing member of another entity of which we are a partner or member) or those activities incidental to its ownership of interests in us.
However, affiliates of our general partner, including Noble, are not prohibited from engaging in other businesses or activities, including those that might compete with us.
Neither our partnership agreement nor our omnibus agreement will prohibit Noble or any other affiliates of our general partner from owning assets or engaging in businesses that compete directly or
indirectly with us. Under the terms of our partnership agreement, the doctrine of corporate opportunity, or any analogous doctrine, will not apply to our general partner or any of its affiliates, including Noble and executive officers and directors
of our general partner. Any such person or entity that becomes aware of a potential transaction, agreement, arrangement or other matter that may be an opportunity for us will not have any duty to communicate or offer such opportunity to us except
with respect to dedications contained in our commercial agreements and rights of first refusal and rights of first offer contained in our omnibus agreement. Any such person or entity will not be liable to us or to any limited partner for breach of
any fiduciary duty or other duty by reason of the fact that such person or entity pursues or acquires such opportunity for itself, directs such opportunity to another person or entity or does not communicate such opportunity or information to us.
Consequently, Noble and other affiliates of our general partner may acquire, construct or dispose of additional midstream assets in the future without any
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obligation under our partnership agreement to offer us the opportunity to purchase any of those assets. As a result, competition from Noble and other affiliates of our general partner could
materially and adversely impact our results of operations and distributable cash flow.
Our general partner is allowed to take into
account the interests of parties other than us, such as Noble, in resolving conflicts of interest.
Our partnership
agreement contains provisions that reduce and modify the standards to which our general partner would otherwise be held by state fiduciary duty law. For example, our partnership agreement permits our general partner to make a number of decisions in
its individual capacity, as opposed to in its capacity as our general partner, free of any duty or obligation to us and our unitholders. This entitles our general partner to consider only the interests and factors that it desires and relieves it of
any duty or obligation to give any consideration to any interest of, or factors affecting, us or any limited partner. Examples of decisions that our general partner may make in its individual capacity include: (i) how to allocate business
opportunities among us and affiliates of our general partner; (ii) whether to exercise its limited call right; (iii) how to exercise its voting rights with respect to any units it owns; (iv) whether to exercise its registration
rights; (v) whether to sell or otherwise dispose of units or other partnership interests that it owns; (vi) whether to elect to reset target distribution levels; (vii) whether to consent to any merger, consolidation or conversion of
the partnership or amendment to our partnership agreement; and (viii) whether to refer or not to refer any potential conflict of interest to the conflicts committee for special approval or to seek or not to seek unitholder approval.
Our partnership agreement replaces the fiduciary duties that would otherwise be owed by our general partner with contractual standards governing
its duties and limits our general partner’s liabilities and the remedies available to our unitholders for actions that, without the limitations, might constitute breaches of fiduciary duty under applicable Delaware law.
In addition to the provisions described above, our partnership agreement contains provisions that restrict the remedies available to our
limited partners for actions that might constitute breaches of fiduciary duty under applicable Delaware law. For example, our partnership agreement:
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permits our general partner to make a number of decisions in its individual capacity, as opposed to in its capacity as our general partner. When acting
in its individual capacity, our general partner is entitled to consider only the interests and factors that it desires, and it has no duty or obligation to give any consideration to any interest of, or factors affecting, us or any limited partner;
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provides that the general partner will have no liability to us or our limited partners for decisions made in its capacity as a general partner so long
as such decisions are made in good faith reliance on the provisions of our partnership agreement;
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generally provides that in a situation involving a transaction with an affiliate or other conflict of interest, any determination by our general
partner must be made in good faith. If an affiliate transaction or the resolution of another conflict of interest does not receive special approval or unitholder approval, then our general partner will make such determination or take or decline to
take any action in good faith, and neither our general partner nor the board of directors of our general partner will be subject to any fiduciary duty or other duty or obligation, or any other, different or higher standard under our partnership
agreement or under the Delaware Act or any other law, rule or regulation or at equity. Under our partnership agreement, it will be presumed that in making its decision, our general partner (including the board of directors of our general partner)
acted in good faith, and in any proceeding brought by or on behalf of any limited partner or us challenging such decision, the person bringing or prosecuting such proceeding will have the burden of overcoming such presumption; and
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provides that our general partner and its officers and directors will not be liable for monetary damages to us or our limited partners resulting from
any act or omission unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that our general partner or
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its officers or directors, as the cases may be, acted in bad faith or engaged in actual fraud or willful misconduct or, in the case of a criminal matter, acted with knowledge that the conduct was
unlawful.
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By purchasing a common unit, a common unitholder will be deemed to have agreed to become bound by
the provisions in our partnership agreement, including the provisions discussed above.
Except in limited circumstances, our general
partner has the power and authority to conduct our business without unitholder approval.
Under our partnership
agreement, our general partner has full power and authority to do all things, other than those items that require unitholder approval, on such terms as it determines to be necessary or appropriate to conduct our business, including, but not limited
to, the following:
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the making of any expenditures, the lending or borrowing of money, the assumption or guarantee of or other contracting for, indebtedness and other
liabilities, the issuance of evidences of indebtedness, including indebtedness that is convertible into our securities, and the incurring of any other obligations;
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the purchase, sale or other acquisition or disposition of our securities, or the issuance of additional options, rights, warrants and appreciation
rights relating to our securities;
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the acquisition, disposition, mortgage, pledge, encumbrance, hypothecation or exchange of any or all of our assets (though subject to any prior
approval required under our partnership agreement);
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the negotiation, execution and performance of any contracts, conveyances or other instruments;
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the distribution of our cash;
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the selection and dismissal of employees (including officers) and agents, outside attorneys, accountants, consultants and contractors and the
determination of their compensation and other terms of employment or hiring;
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the maintenance of insurance for our benefit and the benefit of our partners;
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the formation of, or acquisition of an interest in, the contribution of property to, and the making of loans to, any limited or general partnership,
joint venture, corporation, limited liability company or other entity;
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the control of any matters affecting our rights and obligations, including the bringing and defending of actions at law or in equity, otherwise
engaging in the conduct of litigation, arbitration or mediation and the incurring of legal expense, the settlement of claims and litigation;
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the indemnification of any person against liabilities and contingencies to the extent permitted by law;
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the making of tax, regulatory and other filings, or the rendering of periodic or other reports to governmental or other agencies having jurisdiction
over our business or assets; and
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the entering into of agreements with any of its affiliates to render services to us or to itself in the discharge of its duties as our general partner.
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Our partnership agreement provides that our general partner must act in good faith when making decisions on
our behalf in its capacity as our general partner, and our partnership agreement further provides that in order for a determination to be made in good faith, our general partner must subjectively believe that the determination is not adverse to the
interests of our partnership. In making such determination, our general partner may take into account the totality of the circumstances or the totality of the relationships between the parties involved, including other relationships or transactions
that may be particularly favorable or advantageous to us. When our general partner is acting in its individual capacity, as opposed to in its capacity as our general partner, it may act free of any duty or obligation to us or our limited partners.
Please read “Our Partnership Agreement—Voting Rights” for information regarding matters that require unitholder approval.
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Actions taken by our general partner may affect the amount of cash available for distribution to
unitholders or accelerate the right to convert subordinated units.
The amount of cash that is available for
distribution to unitholders is affected by decisions of our general partner regarding matters such as the amount and timing of:
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borrowings and repayments of indebtedness;
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the issuance of additional partnership interests;
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the creation, increase or reduction in cash reserves in any quarter; and
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asset purchases and sales.
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Our general partner determines the amount and timing of any capital expenditures and whether a capital expenditure is classified as a maintenance capital expenditure, which reduces operating surplus, or
an expansion capital expenditure, which does not reduce operating surplus. This determination can affect the amount of cash that is distributed to our unitholders, the amount of adjusted operating surplus generated in any given period and the
ability of the subordinated units to convert into common units. All of these actions may affect the amount of cash distributed to our unitholders and our general partner and may facilitate the conversion of subordinated units into common units.
Please read “Provisions of Our Partnership Agreement Relating to Cash Distributions.”
In addition, borrowings by us
and our affiliates do not constitute a breach of any duty owed by our general partner to our unitholders, including borrowings that have the purpose or effect of:
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enabling our Noble or its affiliates to receive distributions on any subordinated units or the incentive distribution rights held by them; or
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accelerating the expiration of the subordination period.
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For example, in the event we have not generated sufficient cash from our operations to pay the minimum quarterly distribution on our common units and our subordinated units, our partnership agreement
permits us to borrow working capital funds, which would enable us to make this distribution on all outstanding units. Please read “Provisions of Our Partnership Agreement Relating to Cash Distributions—Subordinated Units and Subordination
Period.”
Our partnership agreement provides that we and our subsidiaries may borrow funds from our general partner and
its affiliates. Our general partner and its affiliates may not borrow funds from us or our development companies.
We will reimburse our
general partner and its affiliates for expenses.
We will reimburse our general partner and its affiliates, including
Noble, for costs incurred in managing and operating us. Our partnership agreement provides that our general partner will determine the expenses that are allocable to us in good faith, and it will charge on a fully allocated cost basis for services
provided to us. Our omnibus agreement and operational services and secondment agreement will also address our payment of annual amounts to, and our reimbursement of, our general partner and its affiliates for these costs and services. Please read
“Certain Relationships and Related Party Transactions.”
Contracts between us, on the one hand, and our general partner and
its affiliates, on the other hand, will not be the result of arm’s-length negotiations.
Our partnership agreement
allows our general partner to determine, in good faith, any amounts to pay itself or its affiliates for any services rendered to us. Our general partner may also enter into additional contractual arrangements with any of its affiliates on our
behalf. Our general partner will determine, in good faith, the terms of any arrangements or transactions entered into after the completion of this offering. While neither our
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partnership agreement nor any of the other agreements, contracts and arrangements between us and our general partner and its affiliates are or will be the result of arm’s-length
negotiations, we believe the terms of all of our initial agreements with our general partner and its affiliates will be, and specifically intend the fees to be, generally no less favorable to either party than those that could have been negotiated
with unaffiliated parties with respect to similar services. Similarly, agreements, contracts or arrangements between us and our general partner and its affiliates, including those providing for the release by us of the ROFRs on assets or acreage or
the dedications granted by Noble, that are entered into following the completion of this offering will not be required to be negotiated on an arm’s-length basis, although, in some circumstances, our general partner may determine that the
conflicts committee may make a determination on our behalf with respect to such arrangements.
As we have historically
derived, and expect to initially derive, substantially all of our revenue from our commercial agreements with Noble, any event, whether in our dedicated acreage or elsewhere, that materially and adversely affects Noble’s business strategies
with respect to drilling on and development of our dedicated acreage or their financial condition, results of operations or cash flows may adversely affect our ability to sustain or increase cash distributions to our unitholders. Further, we have no
control over Noble’s business decisions and operations, and Noble is under no obligation to adopt a business strategy that is favorable to us. Thus, we are subject to the risk of non-payment or non-performance by Noble, including with respect
to our commercial agreements. We cannot predict the extent to which Noble’s businesses would be impacted if conditions in the energy industry were to deteriorate nor can we estimate the impact such conditions would have on Noble’s
decisions with respect to drilling and development on our dedicated acreage or performance under our commercial agreements. In addition, our general partner and its affiliates, including Noble, may have specific conflicts of interest with respect to
the rights of Noble under our commercial agreements. For example, if we fail to timely complete the construction of the facilities necessary to provide midstream services to Noble’s production on our dedicated acreage, Noble has the right to
permanently release the affected acreage from our dedication. Noble is under no obligation to restrict its ability to exercise this (and other) rights under our commercial agreements that may not yield a favorable result for us, and we are subject
to the risk that they will exercise these rights for any number of reasons. Please read “Business—Our Commercial Agreements with Noble.”
Our general partner and its affiliates will have no obligation to permit us to use any facilities or assets of our general partner and its affiliates, except as may be provided in contracts entered into
specifically for such use. There is no obligation of our general partner and its affiliates to enter into any contracts of this kind.
Our general partner intends to limit its liability regarding our contractual and other obligations.
Our general partner intends to limit its liability under contractual arrangements and other obligations so that counterparties to such
agreements have recourse only against our assets and not against our general partner or its assets or any affiliate of our general partner or its assets. Our partnership agreement provides that any action taken by our general partner to limit its
liability is not a breach of our general partner’s fiduciary duties, even if we could have obtained terms that are more favorable without the limitation on liability.
Common units are subject to our general partner’s limited call right.
Our general partner may exercise its right to call and purchase common units, as provided in our partnership agreement, or may assign this right to one of its affiliates or to us. Our general partner may
use its own discretion, free of any duty or liability to us or our unitholders, in determining whether to exercise this right. As a result, a common unitholder may have to sell its common units at an undesirable time or at a price that is less than
the market price on the date of purchase. Please read “Our Partnership Agreement—Limited Call Right.”
Common unitholders
will have no right to enforce obligations of our general partner and its affiliates under agreements with us.
Any
agreements between us, on the one hand, and our general partner and its affiliates, on the other hand, will not grant to the unitholders, separate and apart from us, the right to enforce the obligations of our general partner and its affiliates in
our favor.
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Our general partner decides whether to retain separate counsel, accountants or others to perform
services for us.
The attorneys, independent accountants and others who perform services for us have been retained by
our general partner. Attorneys, independent accountants and others who perform services for us are selected by our general partner or our conflicts committee and may perform services for our general partner and its affiliates. We may retain separate
counsel for ourselves or the holders of common units in the event of a conflict of interest between our general partner and its affiliates, on the one hand, and us or the holders of common units, on the other hand, depending on the nature of the
conflict. We do not intend to do so in most cases.
Noble may elect to cause us to issue common units to it in connection with a
resetting of the target distribution levels related to its incentive distribution rights without the approval of our conflicts committee or our unitholders. This election may result in lower distributions to our common unitholders in certain
situations.
Noble, as the initial holder of all of our incentive distribution rights, has the right, at any time when
there are no subordinated units outstanding and it has received incentive distributions at the highest level to which it is entitled (50%) for each of the prior four consecutive calendar quarters, to reset the initial target distribution levels
at higher levels based on our cash distribution level at the time of the exercise of the reset election. Furthermore, Noble has the right to transfer all or any portion of the incentive distribution rights at any time, and such transferee shall have
the same rights as our Noble relative to resetting target distributions if our general partner concurs that the tests for resetting target distributions have been fulfilled. Following a reset election by Noble, the minimum quarterly distribution
will be reset to an amount equal to the average cash distribution per unit for the two calendar quarters immediately preceding the reset election (such amount is referred to as the “reset minimum quarterly distribution”), and the target
distribution levels will be reset to correspondingly higher levels based on percentage increases above the reset minimum quarterly distribution.
We anticipate that Noble would exercise this reset right in order to facilitate acquisitions or internal growth projects that would not be sufficiently accretive to cash distributions per common unit
without such conversion; however, it is possible that Noble could exercise this reset election at a time when we are experiencing declines in our aggregate cash distributions or at a time when Noble expects that we will experience declines in our
aggregate cash distributions in the foreseeable future. In such situations, Noble may be experiencing, or may expect to experience, declines in the cash distributions it receives related to its incentive distribution rights and may therefore desire
to be issued common units, which are entitled to specified priorities with respect to our distributions and which therefore may be more advantageous for Noble to own in lieu of the right to receive incentive distribution payments based on target
distribution levels that are less certain to be achieved in the then current business environment. As a result, a reset election may cause our common unitholders to experience dilution in the amount of cash distributions that they would have
otherwise received had we not issued common units to Noble in connection with resetting the target distribution levels related to Noble’s incentive distribution rights. Please read “Provisions of Our Partnership Agreement Relating to Cash
Distributions—Incentive Distribution Rights.”
Duties of Our General Partner
Delaware law provides that a Delaware limited partnership may, in its partnership agreement, expand, restrict or
eliminate the fiduciary duties otherwise owed by the general partner to limited partners and the
partnership,
provided
that the partnership agreement may not eliminate the implied contractual covenant of good faith and fair dealing.
This implied covenant is a judicial doctrine utilized by Delaware courts in connection with interpreting ambiguities in partnership agreements and other contracts, and does not form the basis of any separate or independent fiduciary duty in addition
to the express contractual duties set forth in our partnership agreement. Under the implied contractual covenant of good faith and fair dealing, a court will enforce the reasonable expectations of the partners where the language in the partnership
agreement does not provide for a clear course of action.
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As permitted by the Delaware Act, our partnership agreement contains various provisions
replacing the fiduciary duties that might otherwise be owed by our general partner with contractual standards governing the duties of our general partner and contractual methods of resolving conflicts of interest. We have adopted these provisions to
allow our general partner or its affiliates to engage in transactions with us that would otherwise be prohibited by state-law fiduciary standards and to take into account the interests of other parties in addition to our interests when resolving
conflicts of interest. We believe this is appropriate and necessary because the board of directors of our general partner has duties to manage our general partner in a manner that is in the best interests of its owners in addition to not being
adverse to the interests of our partnership. Without these provisions, our general partner’s ability to make decisions involving conflicts of interest would be restricted. These provisions enable our general partner to take into consideration
the interests of all parties involved in the proposed action. These provisions also strengthen the ability of our general partner to attract and retain experienced and capable directors. These provisions disadvantage the common unitholders because
they restrict the rights and remedies that would otherwise be available to such unitholders for actions that, without those limitations, might constitute breaches of fiduciary duty, as described below, and permit our general partner to take into
account the interests of third parties in addition to our interests when resolving conflicts of interest. The following is a summary of the fiduciary duties imposed on general partners of a limited partnership by the Delaware Act in the absence of
partnership agreement provisions to the contrary, the contractual duties of our general partner contained in our partnership agreement that replace the fiduciary duties that would otherwise be imposed by Delaware laws on our general partner and the
rights and remedies of our unitholders with respect to these contractual duties:
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Fiduciary duties are generally considered to include an obligation to act in good faith and with due care and loyalty. The duty of care, in the absence of a provision in a partnership agreement
providing otherwise, would generally require a general partner to act for the partnership in the same manner as a prudent person would act on his own behalf. The duty of loyalty, in the absence of a provision in a partnership agreement providing
otherwise, would generally prohibit a general partner of a Delaware limited partnership from taking any action or engaging in any transaction where a conflict of interest is present unless such transactions were entirely fair to the partnership.
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Partnership agreement modified standards
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Our partnership agreement contains provisions that waive or consent to conduct by our general partner and its affiliates that might otherwise raise issues as to compliance with fiduciary
duties or applicable law. For example, our partnership agreement provides that when our general partner is acting in its capacity as our general partner, as opposed to in its individual capacity, it must act in good faith, meaning that it
subjectively believed that the decision was not adverse to the interests of our partnership, and our general partner will not be subject to any other standard under our partnership agreement or applicable law, other than the implied contractual
covenant of good faith and fair dealing. Our general partner’s decision or action will be conclusively deemed to be in good faith for all purposes under our partnership agreement unless our general partner subjectively believed that such
decision or action was adverse to the interests of the partnership. In taking such action, our general partner may take into account the totality of the circumstances or the totality of the relationships between the parties involved, including other
relationships or transactions that may be particularly favorable or advantageous to us. In addition, when our general partner is acting in its individual capacity, as opposed to in its capacity as our general
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partner, it may act free of any duty or obligation to us or our limited partners. These standards reduce the obligations to which our general partner would otherwise be held. If our general
partner seeks special approval from the conflicts committee, then it will be presumed that, in making its decision, the conflicts committee acted in good faith, and in any proceeding brought by or on behalf of any limited partner or the partnership
challenging such determination, the person bringing or prosecuting such proceeding will have the burden of overcoming such presumption. If our general partner does not seek special approval from our conflicts committee or unitholder approval, then
our general partner will make such determination or take or decline to take any action in good faith, and neither our general partner nor the board of directors of our general partner will be subject to any fiduciary duty or other duty or
obligation, or any other, different or higher standard under our partnership agreement or under the Delaware Act or any other law, rule or regulation or at equity. Under our partnership agreement, it will be presumed that, in making its decision,
our general partner (including the board of directors of our general partner) acted in good faith, and in any proceeding brought by or on behalf of any limited partner or us challenging such approval, the person bringing or prosecuting such
proceeding will have the burden of overcoming such presumption. These standards reduce the obligations to which our general partner would otherwise be held.
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In addition to the other more specific provisions limiting the obligations of our general partner, our partnership agreement further provides that our general partner
and its officers and directors will not be liable for monetary damages to us or our limited partners for errors of judgment or for any acts or omissions unless there has been a final and non-appealable judgment by a court of competent jurisdiction
determining that our general partner or its officers and directors acted in bad faith or engaged in actual fraud or willful misconduct or, in the case of a criminal matter, acted with knowledge that the conduct was unlawful.
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Rights and remedies of unitholders
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The Delaware Act generally provides that a limited partner may institute legal action on behalf of the partnership to recover damages from a third party where a general partner has refused to
institute the action or where an effort to cause a general partner to do so is not likely to succeed. These actions include actions against a general partner for breach of its fiduciary duties, if any, or of the partnership agreement.
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By purchasing our common units, each common unitholder automatically agrees to be bound by the provisions in
our partnership agreement, including the provisions discussed above. This is in accordance with the policy of the Delaware Act favoring the principle of freedom of contract and the enforceability of partnership agreements. The failure of a limited
partner to sign a partnership agreement does not render the partnership agreement unenforceable against that person.
Under
our partnership agreement, we must indemnify our general partner and its officers, directors and managers, to the fullest extent permitted by law, against liabilities, costs and expenses incurred by our general partner or these other persons. We
must provide this indemnification unless there has been a final and non-appealable judgment by a court of competent jurisdiction determining that these persons acted in bad faith or
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engaged in actual fraud or willful misconduct or, in the case of a criminal matter, acted with knowledge that the conduct was unlawful. We also must provide this indemnification for criminal
proceedings when our general partner or these other persons acted with no knowledge that their conduct was unlawful. Thus, our general partner could be indemnified for its negligent acts if it met the requirements set forth above. To the extent that
these provisions purport to include indemnification for liabilities arising under the Securities Act of 1933, as amended, or the Securities Act, in the opinion of the SEC, such indemnification is contrary to public policy and therefore
unenforceable. Please read “Our Partnership Agreement—Indemnification.”
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DESCRIPTION OF OUR COMMON UNITS
Our Common Units
Our common units represent limited partner interests in us. The holders of common units, along with the holders of subordinated units, are entitled to participate in partnership distributions and to
exercise the rights and privileges provided to limited partners under our partnership agreement. Please read “Cash Distribution Policy and Restrictions on Distributions” and “Provisions of Our Partnership Agreement Relating to Cash
Distributions.” For a description of the rights and privileges of limited partners under our partnership agreement, including voting rights, please read “Our Partnership Agreement.”
Transfer Agent and Registrar
Duties
Wells Fargo Shareowner Services will serve as the transfer
agent and registrar for our common units. We will pay all fees charged by the transfer agent for transfers of common units, except for the following that must be paid by our unitholders:
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surety bond premiums to replace lost or stolen certificates, or to cover taxes and other governmental charges in connection therewith;
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special charges for services requested by a holder of a common unit; and
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other similar fees or charges.
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Unless our general partner determines otherwise in respect of some or all of any classes of our partnership interests, our partnership interests will be evidenced by book-entry notation on our partnership
register and not by physical certificates.
There will be no charge to our unitholders for disbursements of our cash
distributions. We will indemnify the transfer agent, its agents and each of their respective stockholders, directors, officers and employees against all claims and losses that may arise out of acts performed or omitted for its activities in that
capacity, except for any liability due to any gross negligence or intentional misconduct of the indemnified person or entity.
Resignation or Removal
The transfer agent may resign, by notice to us, or be removed by us. The resignation or removal of the transfer agent will become effective upon our appointment of a successor transfer agent and registrar
and its acceptance of the appointment. If a successor has not been appointed or has not accepted its appointment within 30 days after notice of the resignation or removal, our general partner may act as the transfer agent and registrar until a
successor is appointed.
Transfer of Common Units
By transfer of common units in accordance with our partnership agreement, each transferee of common units shall be admitted as a limited
partner with respect to the common units transferred when such transfer and admission are reflected in our books and records. Each transferee:
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represents that the transferee has the capacity, power and authority to become bound by our partnership agreement;
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automatically agrees to be bound by the terms and conditions of, and is deemed to have executed, our partnership agreement; and
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gives the consents and approvals contained in our partnership agreement, such as the approval of all transactions and agreements entered into in
connection with our formation and this offering.
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A transferee will become a substituted limited partner of our partnership for the
transferred common units automatically upon the recording of the transfer on our books and records. Our general partner will cause any transfers to be recorded on our books and records from time to time as necessary to accurately reflect the
transfers but no less frequently than quarterly.
We may, at our discretion, treat the nominee holder of a common unit as the
absolute owner. In that case, the beneficial holder’s rights are limited solely to those that it has against the nominee holder as a result of any agreement between the beneficial owner and the nominee holder.
Common units are securities and are transferable according to the laws governing the transfer of securities. In addition to other rights
acquired upon transfer, the transferor gives the transferee the right to become a substituted limited partner in our partnership for the transferred common units.
Until a common unit has been transferred on our books, we and the transfer agent may treat the record holder of the common unit as the absolute owner for all purposes, except as otherwise required by law
or securities exchange regulations.
Exchange Listing
Our common units have been approved for listing on the NYSE under the symbol “NBLX.”
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OUR PARTNERSHIP AGREEMENT
The following is a summary of the material provisions of our partnership agreement. The form of our partnership agreement is included in
this prospectus as Appendix A. We will provide prospective investors with a copy of our partnership agreement upon request at no charge.
We summarize the following provisions of our partnership agreement elsewhere in this prospectus:
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with regard to distributions of available cash, please read “Provisions of Our Partnership Agreement Relating to Cash Distributions”;
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with regard to the duties of our general partner, please read “Conflicts of Interest and Duties”;
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with regard to the authority of our general partner to manage our business and activities, please read “Management”;
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with regard to the transfer of common units, please read “Description of Our Common Units—Transfer of Common Units”; and
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with regard to allocations of taxable income and taxable loss, please read “Material Federal Income Tax Consequences.”
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Organization and Duration
Our partnership was organized on December 23, 2014 and will have a perpetual existence unless terminated pursuant to the terms of our
partnership agreement.
Purpose
Under our partnership agreement, the purpose and nature of the business to be conducted by us shall be to engage directly or
indirectly in any business activity that is approved by our general partner, in its sole discretion, and that lawfully may be conducted by a limited partnership organized pursuant to the Delaware Act;
provided, however
, that our general
partner shall not cause us to engage, directly or indirectly, in any business activity that our general partner determines would be reasonably likely to cause us to be treated as an association taxable as a corporation or otherwise taxable as an
entity for U.S. federal income tax purposes.
Although our general partner has the ability to cause us and our
subsidiaries to engage in activities other than those related to the midstream energy business, our general partner currently has no plans to do so and may decline to do so free of any duty or obligation whatsoever to us or the limited partners,
including any duty to act in the best interests of us or our limited partners, other than the implied contractual covenant of good faith and fair dealing. In general, our general partner is authorized to perform all acts it determines to be
necessary or appropriate to carry out our purposes and to conduct our business.
Capital
Contributions
Unitholders are not obligated to make additional capital contributions, except as described below under
“—Limited Liability.”
Voting Rights
The following is a summary of the unitholder vote required for the matters specified below. Matters that require the approval of a
“unit majority” require:
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during the subordination period, the approval of a majority of the outstanding common units, excluding those common units held by our general partner
and its affiliates, and a majority of the outstanding subordinated units, voting as separate classes; and
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after the subordination period, the approval of a majority of the outstanding common units.
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Following the completion of this offering, Noble will have the ability to ensure passage of,
as well as the ability to ensure the defeat of, any amendment that requires a unit majority by virtue of their ownership of an aggregate common units and
subordinated units, representing an aggregate % limited partner interest (or
common units and subordinated units, representing an aggregate % limited partner interest, if the underwriters exercise in full their option to purchase
additional common units).
In voting their common units and subordinated units, our general partner and its affiliates will
have no duty or obligation whatsoever to us or the limited partners, including any duty to act in the best interests of us or the limited partners, other than the implied contractual covenant of good faith and fair dealing.
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Issuance of additional partnership interests
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No approval rights.
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Amendment of our partnership agreement
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Certain amendments may be made by the general partner without the approval of the unitholders. Other amendments generally require the approval of a unit majority. Please read
“—Amendment of Our Partnership Agreement.”
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Merger of our partnership or the sale of all or substantially all of our assets
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Unit majority. Please read “—Merger, Consolidation, Conversion, Sale or Other Disposition of Assets.”
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Dissolution of our partnership
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Unit majority. Please read “—Termination and Dissolution.”
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Continuation of our business upon dissolution
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Unit majority. Please read “—Termination and Dissolution.”
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Withdrawal of the general partner
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Under most circumstances, the approval of unitholders holding at least a majority of the outstanding common units, excluding common units held by our general partner and its affiliates, is
required for the withdrawal of the general partner prior to the tenth anniversary of the closing of this offering, in a manner which would cause a dissolution of our partnership. Please read “—Withdrawal or Removal of Our General
Partner.”
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Removal of the general partner
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Not less than 66
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% of the outstanding units, voting as a single class, including units held by our general partner and its affiliates, for
cause. Please read “—Withdrawal or Removal of Our General Partner.”
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Transfer of the general partner interest
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Our general partner may transfer all, but not less than all, of its general partner interest in us without a vote of our unitholders to an affiliate or another person in connection with its
merger or consolidation with or into, or sale of all or substantially all of its assets to, such person. The approval of a majority of the outstanding common units, excluding common units held by our general partner and its affiliates, is required
in other circumstances for a transfer of the general partner interest to a third party prior to the tenth anniversary of the closing of this offering. Please read “—Transfer of General Partner Interest.”
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Transfer of incentive distribution rights
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Noble may transfer any or all of its incentive distribution rights to an affiliate or another person without a vote of our unitholders. Please read “—Transfer of Incentive Distribution
Rights.”
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Reset of incentive distribution levels
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No approval right.
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Transfer of ownership interests in our general partner
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No approval right. Please read “—Transfer of Ownership Interests in Our General Partner.”
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Limited Liability
Assuming that a limited
partner does not participate in the control of our business within the meaning of the Delaware Act and that it otherwise acts in conformity with the provisions of our partnership agreement, its liability under the Delaware Act will be limited,
subject to possible exceptions, to the amount of capital it is obligated to contribute to us for its common units plus its share of any undistributed profits and assets. If it were determined, however, that the right, or exercise of the right of, by
the limited partners as a group to:
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remove or replace our general partner for cause;
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approve some amendments to our partnership agreement; or
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take other action under our partnership agreement;
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constituted “participation in the control” of our business for the purposes of the Delaware Act, then the limited partners could be held personally liable for our obligations under the laws of
Delaware, to the same extent as our general partner. This liability would extend to persons who transact business with us who reasonably believe that a limited partner is a general partner. Neither our partnership agreement nor the Delaware Act
specifically provides for legal recourse against our general partner if a limited partner were to lose limited liability through any fault of our general partner. While this does not mean that a limited partner could not seek legal recourse, we know
of no precedent for this type of a claim in Delaware case law.
Under the Delaware Act, a limited partnership may not make a
distribution to a partner if, after the distribution, all liabilities of the limited partnership, other than liabilities to partners on account of their limited partner interests and liabilities for which the recourse of creditors is limited to
specific property of the partnership, would exceed the fair value of the assets of the limited partnership, except that the fair value of property that is subject to a liability for which the recourse of creditors is limited is included in the
assets of the limited partnership only to the extent that the fair value of that property exceeds that liability. For the purpose of determining the fair value of the assets of a limited partnership, the Delaware Act provides that the fair value of
property subject to liability for which recourse of creditors is limited shall be included in the assets of the limited partnership only to the extent that the fair value of that property exceeds the nonrecourse liability. The Delaware Act provides
that a limited partner who receives a distribution and knew at the time of the distribution that the distribution was in violation of the Delaware Act shall be liable to the limited partnership for the amount of the distribution for three years.
Under the Delaware Act, a substituted limited partner of a limited partnership is liable for the obligations of its assignor to make contributions to the partnership, except that such person is not obligated for liabilities unknown to it at the time
it became a limited partner and that could not be ascertained from the partnership agreement.
Our development companies
conduct business in Colorado and Texas. We may have subsidiaries that conduct business in other states in the future. Maintenance of our limited liability as a partner or member of our subsidiaries may require compliance with legal requirements in
the jurisdictions in which such subsidiaries conduct business, including qualifying such entities to do business in such locations.
Limitations on the liability of members or limited partners for the obligations of a limited liability company or limited partnership have not been clearly established in many jurisdictions. If, by virtue
of our ownership interests in our development companies or otherwise, it were determined that we were conducting business in any state without compliance with the applicable limited partnership or limited liability company statute, or that the right
or exercise of the right by the limited partners as a group to remove or replace our general partner for cause,
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to approve some amendments to our partnership agreement, or to take other action under our partnership agreement constituted “participation in the control” of our business for purposes
of the statutes of any relevant jurisdiction, then the limited partners could be held personally liable for our obligations under the law of that jurisdiction to the same extent as our general partner under the circumstances. We will operate in a
manner that our general partner considers reasonable and necessary or appropriate to preserve the limited liability of the limited partners.
Issuance of Additional Partnership Interests
Our
partnership agreement authorizes us to issue an unlimited number of additional partnership interests for the consideration and on the terms and conditions determined by our general partner without the approval of the unitholders.
It is possible that we will fund acquisitions through the issuance of additional common units, subordinated units or other partnership
interests. Holders of any additional common units we issue will be entitled to share equally with the then-existing common unitholders in our distributions. In addition, the issuance of additional common units or other partnership interests may
dilute the value of the interests of the then-existing common unitholders in our net assets.
In accordance with Delaware law
and the provisions of our partnership agreement, we may also issue additional partnership interests that, as determined by our general partner, may have rights to distributions or special voting rights to which the common units are not entitled. In
addition, our partnership agreement does not prohibit our current or future subsidiaries from issuing equity interests, which may effectively rank senior to the common units.
Our general partner will have the right, which it may from time to time assign in whole or in part to any of its affiliates, to purchase common units, subordinated units or other partnership interests or
to make additional capital contributions to us whenever, and on the same terms that, we issue partnership interests to persons other than our general partner and its affiliates, to the extent necessary to maintain the percentage interest of our
general partner and its affiliates, including such interest represented by common and subordinated units, that existed immediately prior to each issuance. The common unitholders will not have preemptive rights under our partnership agreement to
acquire additional common units or other partnership interests.
Amendment of Our Partnership
Agreement
General
Amendments to our partnership agreement may be proposed only by our general partner. However, our general partner will have no duty or obligation to propose any amendment and may decline to do so free of
any duty or obligation whatsoever to us or our limited partners, including any duty to act in the best interests of us or the limited partners, other than the implied contractual covenant of good faith and fair dealing. In order to adopt a proposed
amendment, other than the amendments discussed below, our general partner is required to seek written approval of the holders of the number of units required to approve the amendment or call a meeting of the limited partners to consider and vote
upon the proposed amendment. Except as described below, an amendment must be approved by a unit majority.
Prohibited Amendments
No amendment may be made that would, among other actions:
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enlarge the obligations of any limited partner without its consent, unless such is deemed to have occurred as a result of an amendment approved by at
least a majority of the type or class of limited partner interests so affected; or
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enlarge the obligations of, restrict in any way any action by or rights of, or reduce in any way the amounts distributable, reimbursable or otherwise
payable by us to our general partner or any of its affiliates without its consent, which consent may be given or withheld at its option.
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The provisions of our partnership agreement preventing the amendments having the effects described in any of the clauses above can be amended upon the approval of the holders of at least 90% of the
outstanding units voting together as a single class (including units owned by our general partner and its affiliates). Following the completion of this offering, Noble will own an aggregate of
common units and subordinated units, representing an aggregate % limited
partner interest (or common units and subordinated units, representing an
aggregate % limited partner interest, if the underwriters exercise in full their option to purchase additional common units).
No Unitholder Approval
Our general partner may generally make amendments
to our partnership agreement without the approval of any limited partner to reflect:
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a change in our name, the location of our principal office, our registered agent or our registered office;
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the admission, substitution, withdrawal or removal of partners in accordance with our partnership agreement;
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a change that our general partner determines to be necessary or appropriate to qualify or continue our qualification as a limited partnership or a
partnership in which the limited partners have limited liability under the laws of any state or to ensure that neither we nor any of our subsidiaries will be treated as an association taxable as a corporation or otherwise taxed as an entity for
federal income tax purposes;
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an amendment that is necessary, in the opinion of our counsel, to prevent us or our general partner or its directors, officers, agents or trustees,
from in any manner, being subjected to the provisions of the Investment Company Act of 1940, the Investment Advisors Act of 1940, or “plan asset” regulations adopted under the Employee Retirement Income Security Act of 1974, or ERISA, each
as amended, whether or not substantially similar to plan asset regulations currently applied or proposed by the U.S. Department of Labor;
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an amendment that (i) sets forth the designations, preferences, rights, powers and duties of any class or series of partnership interests or
(ii) our general partner determines to be necessary, appropriate or advisable in connection with the authorization or issuance of additional partnership interests;
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any amendment expressly permitted in our partnership agreement to be made by our general partner acting alone;
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an amendment effected, necessitated or contemplated by a merger agreement or plan of conversion that has been approved under the terms of our
partnership agreement;
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any amendment that our general partner determines to be necessary or appropriate to reflect and account for the formation by us of, or our investment
in, any corporation, partnership or other entity, in connection with our conduct of activities permitted by our partnership agreement;
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a change in our fiscal year or taxable year and any other changes that our general partner determines to be necessary or appropriate as a result of
such change;
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mergers with, conveyances to or conversions into another limited liability entity that is newly formed and has no assets, liabilities or operations at
the time of the merger, conveyance or conversion other than those it receives by way of the merger, conveyance or conversion; or
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any other amendments substantially similar to any of the matters described in the clauses above.
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In addition, our general partner may make amendments to our partnership agreement without
the approval of any limited partner if our general partner determines that those amendments:
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do not adversely affect in any material respect the limited partners considered as a whole or any particular class of partnership interests as compared
to other classes of partnership interests;
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are necessary or appropriate to satisfy any requirements, conditions or guidelines contained in any opinion, directive, order, ruling or regulation of
any federal or state agency or judicial authority or contained in any federal or state statute;
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are necessary or appropriate to facilitate the trading of limited partner interests or to comply with any rule, regulation, guideline or requirement of
any securities exchange on which the limited partner interests are or will be listed or admitted to trading;
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are necessary or appropriate for any action taken by our general partner relating to splits or combinations of units under the provisions of our
partnership agreement; or
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are required to effect the intent expressed in this prospectus or the intent of the provisions of our partnership agreement or are otherwise
contemplated by our partnership agreement.
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Opinion of Counsel and Unitholder Approval
For amendments that do not require unitholder approval, our general partner will not be required to obtain an opinion of counsel to the
effect that an amendment will not affect the limited liability of any limited partner under Delaware law. No other amendments to our partnership agreement will become effective without the approval of holders of at least 90% of the outstanding units
voting as a single class unless we first obtain such an opinion of counsel.
In addition to the above restrictions, any
amendment that would have a material adverse effect on the rights or preferences of any type or class of partnership interests in relation to other classes of partnership interests will require the approval of at least a majority of the type or
class of partnership interests so affected. Any amendment that would reduce the percentage of units required to take any action, other than to remove our general partner for cause or call a meeting of unitholders, must be approved by the written
consent or the affirmative vote of limited partners whose aggregate outstanding units constitute not less than the percentage sought to be reduced. Any amendment that would increase the percentage of units required to remove our general partner for
cause must be approved by the written consent or the affirmative vote of limited partners whose aggregate outstanding units constitute not less than 90% of outstanding units. Any amendment that would increase the percentage of units required to call
a meeting of unitholders must be approved by the written consent or the affirmative vote of limited partners whose aggregate outstanding units constitute at least a majority of the outstanding units.
Merger, Consolidation, Conversion, Sale or Other Disposition of Assets
A merger, consolidation or conversion of our partnership requires the prior consent of our general partner. However, our general partner
will have no duty or obligation to consent to any merger, consolidation or conversion and may decline to do so free of any duty or obligation whatsoever to us or the limited partners, including any duty to act in the best interest of us or the
limited partners, other than the implied contractual covenant of good faith and fair dealing.
In addition, our partnership
agreement generally prohibits our general partner, without the prior approval of the holders of a unit majority, from causing us to, among other things, sell, exchange or otherwise dispose of all or substantially all of our assets in a single
transaction or a series of related transactions. Our general partner may, however, mortgage, pledge, hypothecate, or grant a security interest in all or substantially all of our assets without that approval. Our general partner may also sell any or
all of our assets under a foreclosure or other realization upon those encumbrances without that approval. Finally, our general partner may consummate any merger with another limited liability entity without the prior approval of our unitholders if
we are the surviving
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entity in the transaction, our general partner has received an opinion of counsel regarding limited liability and tax matters, the transaction would not result in an amendment to our partnership
agreement requiring unitholder approval, each of our units will be an identical unit of our partnership following the transaction and the partnership interests to be issued by us in such merger do not exceed 20% of our outstanding partnership
interests immediately prior to the transaction.
If the conditions specified in our partnership agreement are satisfied, our
general partner may convert us or any of our subsidiaries into a new limited liability entity or merge us or any of our subsidiaries into, or convey all of our assets to, a newly formed entity if the sole purpose of that conversion, merger or
conveyance is to effect a mere change in our legal form into another limited liability entity, our general partner has received an opinion of counsel regarding limited liability and tax matters, and our general partner determines that the governing
instruments of the new entity provide the limited partners and our general partner with the same rights and obligations as contained in our partnership agreement. The unitholders are not entitled to dissenters’ rights of appraisal under our
partnership agreement or applicable Delaware law in the event of a conversion, merger or consolidation, a sale of substantially all of our assets or any other similar transaction or event.
Termination and Dissolution
We will continue as a limited partnership until dissolved and terminated under our partnership agreement. We will dissolve upon:
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the withdrawal or removal of our general partner or any other event that results in its ceasing to be our general partner other than by reason of a
transfer of its general partner interest in accordance with our partnership agreement or withdrawal or removal followed by approval and admission of a successor;
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the election of our general partner to dissolve us, if approved by the holders of units representing a unit majority;
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the entry of a decree of judicial dissolution of our partnership; or
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there being no limited partners, unless we are continued without dissolution in accordance with the Delaware Act.
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Upon a dissolution under the first clause above, the holders of a unit majority may also elect, within specific time limitations, to
continue our business on the same terms and conditions described in our partnership agreement by appointing as a successor general partner an entity approved by the holders of units representing a unit majority, subject to our receipt of an opinion
of counsel to the effect that:
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the action would not result in the loss of limited liability of any limited partner; and
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neither our partnership nor any of our subsidiaries would be treated as an association taxable as a corporation or otherwise be taxable as an entity
for federal income tax purposes upon the exercise of that right to continue (to the extent not already so treated or taxed).
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Liquidation and Distribution of Proceeds
Upon
our dissolution, unless we are continued as a new limited partnership, the liquidator authorized to wind up our affairs will, acting with all of the powers of our general partner that are necessary or appropriate to, liquidate our assets and apply
the proceeds of the liquidation as described in “Provisions of Our Partnership Agreement Relating to Cash Distributions—Distributions of Cash Upon Liquidation.” The liquidator may defer liquidation or distribution of our assets for a
reasonable period of time or distribute assets to partners in kind if it determines that a sale would be impractical or would cause undue loss to our partners.
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Withdrawal or Removal of Our General Partner
Except as described below, our general partner has agreed not to withdraw voluntarily as our general partner prior to the tenth
anniversary of the closing of this offering, without obtaining the approval of the holders of at least a majority of the outstanding common units, excluding common units held by our general partner and its affiliates, and by giving 90 days’
written notice and furnishing an opinion of counsel regarding limited liability and tax matters. On or after the tenth anniversary of the closing of this offering, our general partner may withdraw as general partner without first obtaining
approval of any unitholder by giving 90 days’ written notice, and that withdrawal will not constitute a violation of our partnership agreement. Notwithstanding the information above, our general partner may withdraw without unitholder approval
upon 90 days’ written notice to the limited partners if at least 50% of the outstanding units are held or controlled by one person and its affiliates other than our general partner and its affiliates. In addition, our partnership agreement
permits our general partner in some instances to sell or otherwise transfer all of its general partner interest in us without the approval of the unitholders. Please read “—Transfer of General Partner Interest” and
“—Transfer of Incentive Distribution Rights.”
Upon voluntary withdrawal of our general partner by giving
notice to the other partners, the holders of a unit majority may select a successor to that withdrawing general partner. If a successor is not elected, or is elected but an opinion of counsel regarding limited liability and tax matters cannot be
obtained, we will be dissolved, wound up and liquidated, unless within a specified period after that withdrawal, the holders of a unit majority agree to continue our business by appointing a successor general partner. Please read
“—Termination and Dissolution.”
Our general partner may not be removed unless that
removal is both (i) for cause and (ii) approved by the vote of the holders of not less than 66
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% of our outstanding units, voting together as a single class, including units held by our general partner and its
affiliates, and we receive an opinion of counsel regarding limited liability and tax matters. Any removal of our general partner is also subject to the approval of a successor general partner by the vote of the holders of a majority of the
outstanding common units, voting as a separate class, and subordinated units, voting as a separate class. “Cause” is narrowly defined under our partnership agreement to mean that a court of competent jurisdiction has entered a final,
non-appealable judgment finding the general partner liable to our partnership or any limited partner for actual fraud or willful misconduct in its capacity as our general partner. Cause does not include most cases of charges of poor management of
the business. The ownership of more than
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% of the outstanding units by our general partner and its affiliates would give them the practical ability to prevent our general partner’s removal. Following the completion of this offering, Noble
will own an aggregate of common units and subordinated units, representing an
aggregate % limited partner interest (or common units and
subordinated units, representing an aggregate % limited partner interest, if the underwriters exercise in full their option to purchase additional common units).
In the event of removal of our general partner or withdrawal of our general partner where that withdrawal violates our partnership
agreement, a successor general partner will have the option to purchase the general partner interest of the departing general partner for a cash payment equal to the fair market value of those interests. Under all other circumstances where our
general partner withdraws, the departing general partner will have the option to require the successor general partner to purchase the general partner interest of the departing general partner for fair market value. In each case, this fair market
value will be determined by agreement between the departing general partner and the successor general partner. If no agreement is reached, an independent investment banking firm or other independent expert selected by the departing general partner
and the successor general partner will determine the fair market value. Or, if the departing general partner and the successor general partner cannot agree upon an expert, then an expert chosen by agreement of the experts selected by each of them
will determine the fair market value.
If the option described above is not exercised by either the departing general partner
or the successor general partner, the departing general partner will become a limited partner and its general partner interest will automatically convert into common units pursuant to a valuation of those interests as determined by an investment
banking firm or other independent expert selected in the manner described in the preceding paragraph.
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In addition, we will be required to reimburse the departing general partner for all amounts
due the departing general partner, including, without limitation, all employee-related liabilities, including severance liabilities, incurred for the termination of any employees employed by the departing general partner or its affiliates for our
benefit.
Transfer of General Partner Interest
Except for transfer by our general partner of all, but not less than all, of its general partner interest to (1) an affiliate of our
general partner (other than an individual), or (2) another entity as part of the merger or consolidation of our general partner with or into such entity or the transfer by our general partner of all or substantially all of its assets to such
entity, our general partner may not transfer all or any part of its general partner interest to another person prior to the tenth anniversary of the closing of this offering without the approval of the holders of at least a majority of the
outstanding common units, excluding common units held by our general partner and its affiliates. As a condition of this transfer, the transferee must assume, among other things, the rights and duties of our general partner, agree to be bound by the
provisions of our partnership agreement, and furnish an opinion of counsel regarding limited liability and tax matters.
Our
general partner and its affiliates may at any time transfer units to one or more persons, without unitholder approval, except that they may not transfer subordinated units to us.
Transfer of Ownership Interests in Our General Partner
At any time, Noble may sell or transfer all or part of its membership interest in our general partner, to an affiliate or third party
without the approval of our unitholders.
Transfer of Incentive Distribution Rights
At any time, Noble may sell or transfer its incentive distribution rights to an affiliate or third party without the
approval of the unitholders.
Change of Management Provisions
Our partnership agreement contains specific provisions that are intended to discourage a person or group from attempting to remove Noble
Midstream GP LLC as our general partner or otherwise change our management. If any person or group other than our general partner and its affiliates acquires beneficial ownership of 20% or more of any class of units, that person or group loses
voting rights on all of its units. This loss of voting rights does not apply to any person or group that acquires the units from our general partner or its affiliates and any transferees of that person or group who are notified by our general
partner that they will not lose their voting rights or to any person or group who acquires the units with the prior approval of the board of directors of our general partner. Please read “—Withdrawal or Removal of Our General
Partner.”
Limited Call Right
If at any time our general partner and its affiliates own more than 80% of the then-issued and outstanding limited partner interests of
any class, our general partner will have the right, which it may assign in whole or in part to any of its affiliates or to us, to acquire all, but not less than all, of the limited partner interests of such class held by unaffiliated persons as of a
record date to be selected by our general partner, on at least 10, but not more than 60, days’ written notice.
The
purchase price in the event of this purchase is the greater of:
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the highest cash price paid by either our general partner or any of its affiliates for any limited partner interests of the class purchased within the
90 days preceding the date on which our general partner first mails notice of its election to purchase those limited partner interests; and
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the current market price calculated in accordance with our partnership agreement as of the date three business days before the date the notice is
mailed.
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As a result of our general partner’s right to purchase outstanding limited partner
interests, a holder of limited partner interests may have his limited partner interests purchased at a price that may be lower than market prices at various times prior to such purchase or lower than a unitholder may anticipate the market price to
be in the future. The tax consequences to a unitholder of the exercise of this limited call right are the same as a sale by that unitholder of his common units in the market. Please read “Material Federal Income Tax
Consequences—Disposition of Common Units.”
Possible Redemption of Ineligible Holders
Non-Taxpaying Holders; Redemption
Our general partner may request proof of the U.S. federal income tax status of our limited partners. We may redeem the units held by any person who our general partner determines is not subject to U.S.
federal income taxation on the income generated by the partnership or fails to comply with the procedures instituted by our general partner to obtain proof of such person’s federal income tax status. The redemption price in the case of such a
redemption will be the average of the daily closing prices per unit for the 20 consecutive trading days immediately prior to the date set for redemption.
Non-Citizen Assignees; Redemption
Our general partner may request proof of
the nationality, citizenship or other related status of our limited partners. We may redeem the units held by any person whose nationality, citizenship or other related status our general partner determines creates substantial risk of cancellation
or forfeiture of any property that we have an interest in or who fails to comply with the procedures instituted by our general partner to obtain proof of nationality, citizenship or other related status. The redemption price in the case of such a
redemption will be the average of the daily closing prices per unit for the 20 consecutive trading days immediately prior to the date set for redemption.
Meetings; Voting
Except as described below
regarding a person or group owning 20% or more of any class of units then outstanding, record holders of units on the record date will be entitled to notice of, and to vote at, meetings of our limited partners and to act upon matters for which
approvals may be solicited.
Our general partner does not anticipate that any meeting of unitholders will be called in the
foreseeable future. Any action that is required or permitted to be taken by the unitholders may be taken either at a meeting of the unitholders or, if authorized by our general partner, without a meeting if consents in writing describing the action
so taken are signed by holders of the number of units that would be necessary to authorize or take that action at a meeting where all limited partners were present and voted. Meetings of the unitholders may be called by our general partner or by
unitholders owning at least 20% of the outstanding units of the class for which a meeting is proposed. Unitholders may vote either in person or by proxy at meetings. The holders of a majority in voting power of the outstanding units of the class or
classes for which a meeting has been called, represented in person or by proxy, will constitute a quorum unless any action by the unitholders requires approval by holders of a greater percentage of the units, in which case the quorum will be the
greater percentage. For all matters presented to the limited partners at a meeting at which a quorum is present for which no minimum or other vote of the limited partners is specifically required pursuant to our partnership agreement, the rules and
regulations of any national securities exchange on which the common units are admitted to trading, or applicable law or pursuant to any regulation applicable to us or our partnership interests, a majority of the votes cast by the limited partners
holding outstanding units will be deemed to constitute the act of all limited partners (with abstentions and broker non-votes being deemed to not have been cast with respect to such matter). On any matter where a minimum or other vote of limited
partners is provided by any provision of our partnership agreement or required by the rules or regulations of any national securities exchange on which the common units are admitted to
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trading, or applicable law or pursuant to any regulation applicable to us or our partners interests, such minimum or other vote will be the vote of the limited partners required to approve such
matter (with the effect of abstentions and broker non-votes to be determined based on the vote of the limited partners required to approve such matter,
provided
that if the effect of abstentions and broker non-votes is not specified by the
applicable rule, regulation or law, and there is no prevailing interpretation of such effect, then abstentions and broker non-votes will be deemed not to have been cast with respect to such matter). The general partner interest does not entitle our
general partner to any vote other than its rights as general partner under our partnership agreement, will not be entitled to vote on any action required or permitted to be taken by the unitholders and will not count toward or be considered
outstanding when calculating required votes, determining the presence of a quorum, or for similar purposes.
Each record
holder of a unit has a vote according to its percentage interest in us, although additional limited partner interests having special voting rights could be issued. Please read “—Issuance of Additional Partnership Interests.” However,
if at any time any person or group, other than our general partner and its affiliates, a direct transferee of our general partner and its affiliates or a transferee of such direct transferee, who is notified by our general partner that it will not
lose its voting rights, acquires, in the aggregate, beneficial ownership of 20% or more of any class of units then outstanding, that person or group will lose voting rights on all of its units and the units may not be voted on any matter and will
not be considered to be outstanding when sending notices of a meeting of unitholders, calculating required votes, determining the presence of a quorum, or for other similar purposes. Common units held in nominee or street name account will be voted
by the broker or other nominee in accordance with the instruction of the beneficial owner unless the arrangement between the beneficial owner and its nominee provides otherwise. Except as our partnership agreement otherwise provides, subordinated
units will vote together with common units as a single class. Any notice, demand, request, report or proxy material required or permitted to be given or made to record holders of common units under our partnership agreement will be delivered to the
record holder by us or by the transfer agent.
Status as Limited Partner
By transfer of common units in accordance with our partnership agreement, each transferee of common units shall be admitted as a limited
partner with respect to the common units transferred when such transfer and admission is reflected in our register. Except as described under “—Limited Liability,” the common units will be fully paid, and unitholders will not be
required to make additional contributions.
Indemnification
Under our partnership agreement, in most circumstances, we will indemnify the following persons, to the fullest extent permitted by law,
from and against all losses, claims, damages or similar events:
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any departing general partner;
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any person who is or was an affiliate of our general partner or any departing general partner;
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any person who is or was a director, officer, managing member, manager, general partner, fiduciary or trustee of us or our subsidiaries, an affiliate
of us or our subsidiaries or any entity set forth in the preceding three bullet points;
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any person who is or was serving as director, officer, managing member, manager, general partner, fiduciary or trustee of another person owing a
fiduciary duty to us or any of our subsidiaries at the request of our general partner or any departing general partner or any of their affiliates, excluding any such person providing, on a fee-for-service basis, trustee, fiduciary of custodial
services; and
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any person designated by our general partner because such person’s status, service or relationship expose such person to potential claims or suits
relating to our or our subsidiaries’ business and affairs.
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Any indemnification under these provisions will only be out of our assets. Unless it
otherwise agrees, our general partner will not be personally liable for, or have any obligation to contribute or lend funds or assets to us to enable us to effectuate, indemnification. We will purchase insurance against liabilities asserted against
and expenses incurred by persons for our activities, regardless of whether we would have the power to indemnify the person against such liabilities under our partnership agreement.
Reimbursement of Expenses
Our partnership agreement requires us to reimburse our general partner for all direct and indirect expenses it incurs or payments it makes on our behalf and all other expenses allocable to us or otherwise
incurred by our general partner in connection with operating our business. These expenses include salary, bonus, incentive compensation and other amounts paid to persons who perform services for us or on our behalf and expenses allocated to our
general partner by its affiliates. Our general partner is entitled to determine in good faith the expenses that are allocable to us. The expenses for which we are required to reimburse our general partner are not subject to any caps or other limits.
Please read “Certain Relationships and Related Party Transactions—Agreements with our Affiliates in the Connection with the Transactions—Omnibus Agreement.”
Books and Reports
Our general partner is
required to keep appropriate books of our business at our principal offices. The books will be maintained for financial reporting purposes on an accrual basis. For fiscal and tax reporting purposes, our fiscal year is the calendar year.
We will mail or make available to record holders of common units, within 90 days after the close of each fiscal year, an annual report
containing audited financial statements and a report on those financial statements by our independent public accountants. Except for our fourth quarter, we will also mail or make available summary financial information within 45 days after the close
of each quarter (or such shorter period as required by the SEC).
We will furnish each record holder of a unit with
information reasonably required for tax reporting purposes within 90 days after the close of each calendar year. This information is expected to be furnished in summary form so that some complex calculations normally required of partners can be
avoided. Our ability to furnish this summary information to unitholders will depend on the cooperation of unitholders in supplying us with specific information. Every unitholder will receive information to assist such unitholder in determining its
federal and state tax liability and filing its federal and state income tax returns, regardless of whether such unitholder supplies us with information.
Right to Inspect Our Books and Records
Our
partnership agreement provides that a limited partner can, for a purpose reasonably related to its interest as a limited partner, upon reasonable written demand stating the purpose of such demand and at its own expense, have furnished to such
limited partner:
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a current list of the name and last known address of each record holder;
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copies of our partnership agreement and our certificate of limited partnership and all amendments thereto; and
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certain information regarding the status of our business and financial condition.
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Our general partner may, and intends to, keep confidential from the limited partners trade secrets or other information the disclosure of
which our general partner determines is not in our best interests or that we are required by law or by agreements with third parties to keep confidential. Our partnership agreement limits the right to information that a limited partner would
otherwise have under Delaware law.
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Registration Rights
Under our partnership agreement, we have agreed to register for resale under the Securities Act and applicable state securities laws any
common units, subordinated units or other partnership interests proposed to be sold by our general partner or any of its affiliates, other than individuals, or their assignees if an exemption from the registration requirements is not otherwise
available. We are obligated to pay all expenses incidental to the registration, excluding underwriting discounts and commissions. Please read “Units Eligible for Future Sale.”
Applicable Law; Exclusive Forum
Our partnership agreement is governed by Delaware law.
Our partnership agreement
will provide that the Court of Chancery of the State of Delaware (or, if such court does not have subject matter jurisdiction thereof, any other court located in the State of Delaware with subject matter jurisdiction) shall be the exclusive forum
for any claims, suits, actions or proceedings (i) arising out of or relating in any way to our partnership agreement (including any claims, suits or actions to interpret, apply or enforce the provisions of our partnership agreement or the
duties, obligations or liabilities among our partners, or obligations or liabilities of our partners to us, or the rights or powers of, or restrictions on, our partners or us), (ii) brought in a derivative manner on our behalf,
(iii) asserting a claim of breach of a duty owed by any of our, or our general partner’s, directors, officers, or other employees, or owed by our general partner, to us or our partners, (iv) asserting a claim against us arising
pursuant to any provision of the Delaware Act or (v) asserting a claim against us governed by the internal affairs doctrine. Although we believe this provision benefits us by providing increased consistency in the application of Delaware law in
the types of lawsuits to which it applies, the provision may have the effect of discouraging lawsuits against our directors and officers. The enforceability of similar choice of forum provisions in other companies’ certificates of incorporation
or similar governing documents have been challenged in legal proceedings, and it is possible that, in connection with any action, a court could find the choice of forum provisions contained in our partnership agreement to be inapplicable or
unenforceable in such action.
If any limited partner, our general partner or any person holding any beneficial interest in us
(whether through a broker, dealer, bank, trust company or clearing corporation) brings any of the claims, suits, actions or proceedings described in items (i) through (v) (including any claims, suits, actions or proceedings arising out of this
offering) of the preceding paragraph and such person does not obtain a judgment on the merits that substantially achieves, in substance and amount (if the extent of such achievement is disputed, then as determined by the Court of Chancery of the
State of Delaware or such other court with subject matter jurisdiction of such claim, suit, action or proceeding), the full remedy sought, then such limited partner, our general partner or person holding any beneficial interest in us will be
obligated to reimburse us and our affiliates (including our general partner, the directors of our general partner and the owner of our general partner) for all fees, costs and expenses of every kind and description, including but not limited to all
reasonable attorneys’ fees and other litigation expenses, that the parties may incur in connection with such claim, suit, action or proceeding. We and our “affiliates,” as defined in our partnership agreement included in Appendix A to
this prospectus (including our general partner, the directors and officers of our general partner and Noble) would be entitled to recover all of their fees, costs and expenses in any such action, and such losing party would be severally liable for
all such fees, costs and expenses. These provisions apply to all claims brought by the persons described in this paragraph, including claims under the federal securities laws, to the extent permitted by applicable law. In addition, our partnership
agreement provides that each limited partner irrevocably waives the right to trial by jury in any such claim, suit, action or proceeding.
By purchasing a common unit, a limited partner is irrevocably consenting to these limitations and provisions regarding claims, suits, actions or proceedings and submitting to the exclusive jurisdiction of
the Court of Chancery of the State of Delaware (or, if such court does not have subject matter jurisdiction thereof, any other court located in the State of Delaware with subject matter jurisdiction) in connection with any such claims, suits,
actions or proceedings.
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UNITS ELIGIBLE FOR FUTURE SALE
Following the completion of this offering and assuming that the underwriters do not exercise their option to purchase additional common
units, our general partner and its affiliates will hold an aggregate of common units and subordinated
units. All of the subordinated units will convert into common units at the end of the subordination period. All of the common units and subordinated units held by our general partner and its affiliates are subject to lock-up restrictions described
below. The sale of these units could have an adverse impact on the price of our common units or on any trading market that may develop.
Rule 144
The common units sold in this offering
will generally be freely transferable without restriction or further registration under the Securities Act, other than any units purchased in this offering by officers and directors of our general partner under the directed unit program, which will
be subject to the lock-up restrictions described below. None of the directors or officers of our general partner own any common units prior to this offering; however, they may purchase common units through the directed unit program or otherwise.
Additionally, any common units owned by an “affiliate” of ours may not be resold publicly except in compliance with the registration requirements of the Securities Act or under an exemption under Rule 144 of the Securities Act, or Rule
144, or otherwise. Rule 144 permits securities acquired by an affiliate of the issuer to be sold into the market in an amount that does not exceed, during any three-month period, the greater of:
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1.0% of the total number of our common units outstanding; or
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the average weekly reported trading volume of our common units for the four weeks prior to the sale.
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At the closing of this offering, the following common units will be restricted and may not be resold publicly except in compliance with
the registration requirements of the Securities Act, Rule 144 or otherwise.
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common units owned by our general partner and its affiliates; and
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any units acquired by our general partner or any of its affiliates, including the directors and executive officers of our general partner under the
directed unit program.
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Sales under Rule 144 are also subject to specific manner of sale provisions, holding
period requirements, notice requirements and the availability of current public information about us. A person who is not deemed to have been an affiliate of ours at any time during the three months preceding a sale, and who has beneficially owned
his common units for at least six months (provided we are in compliance with the current public information requirement) or one year (regardless of whether we are in compliance with the current public information requirement), would be entitled to
sell those common units under Rule 144 without regard to the volume limitations, manner of sale provisions and notice requirements of Rule 144.
Our Partnership Agreement and Registration Rights
Our partnership agreement authorizes us to issue an unlimited number of additional partnership interests and options, rights, warrants and
appreciation rights relating to the partnership interests for any partnership purpose at any time and from time to time to such persons for such consideration and on such terms and conditions as our general partner shall determine in its sole
discretion, all without the approval of any partners. Any issuance of additional common units or other limited partner interests would result in a corresponding decrease in the proportionate ownership interest in us represented by, and could
adversely affect the cash distributions to and market price of, common units then outstanding. Please read “Our Partnership Agreement—Issuance of Additional Partnership Interests.”
Under our partnership agreement, our general partner and its affiliates, other than individuals, have the right to cause us to register
under the Securities Act and applicable state securities laws the offer and sale of any units
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that they hold. Subject to the terms and conditions of our partnership agreement, these registration rights allow our general partner and its affiliates or their assignees holding any common
units or other limited partner interests to require registration of any of these common units or other limited partner interests and to include any of these common units or other limited partner interests in a registration by us of other partnership
interests, including common units offered by us or by any unitholder. Our general partner and its affiliates will continue to have these registration rights for two years after Noble Midstream GP LLC ceases to be our general partner. In connection
with any registration of this kind, we will indemnify each unitholder participating in the registration and its officers, directors and controlling persons from and against any liabilities under the Securities Act or any applicable state securities
laws arising from the registration statement or prospectus. We will bear all costs and expenses incidental to any registration, excluding any underwriting discounts and commissions. Except as described below, our general partner and its affiliates
may sell their common units or other limited partner interests in private transactions at any time, subject to compliance with applicable laws.
Lock-Up Agreements
Our general partner’s
executive officers and directors, our general partner and Noble have agreed that for a period of 180 days from the date of this prospectus they will not, without the prior written consent of Barclays Capital Inc. dispose of any common units or any
securities convertible into or exchangeable for our common units. Participants in our directed unit program will be subject to similar restrictions. Please read “Underwriting” for a description of these lock-up provisions.
Registration Statement on Form S-8
We intend to file a registration statement on Form S-8 under the Securities Act following this offering to register all common units
issued or reserved for issuance under our LTIP. We expect to file this registration statement as soon as practicable. Common units covered by the registration statement on Form S-8 will be eligible for sale in the public market, subject to
applicable vesting requirements and the terms of applicable lock-up agreements described above.
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MATERIAL FEDERAL INCOME TAX CONSEQUENCES
This section is a summary of the material U.S. federal income tax consequences that may be relevant to prospective unitholders who are
individual citizens or residents of the U.S. and, unless otherwise noted in the following discussion, is the opinion of Andrews Kurth LLP, counsel to our general partner and us, insofar as it relates to legal conclusions with respect to matters of
U.S. federal income tax law. This section is based upon current provisions of the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code, existing and proposed Treasury regulations promulgated under the Internal Revenue Code, or the
Treasury Regulations, and current administrative rulings and court decisions, all of which are subject to change. Later changes in these authorities may cause the tax consequences to vary substantially from the consequences described below. Unless
the context otherwise requires, references in this section to “us” or “we” are references to Noble Midstream Partners LP and our operating subsidiaries.
The following discussion does not comment on all federal income tax matters affecting us or our unitholders and does not describe the application of the alternative minimum tax that may be applicable to
certain unitholders. Moreover, the discussion focuses on unitholders who are individual citizens or residents of the U.S. and has only limited application to corporations, estates, entities treated as partnerships for U.S. federal income tax
purposes, trusts, nonresident aliens, U.S. expatriates and former citizens or long-term residents of the United States or other unitholders subject to specialized tax treatment, such as banks, insurance companies and other financial institutions,
tax-exempt institutions, foreign persons (including, without limitation, controlled foreign corporations, passive foreign investment companies and non-U.S. persons eligible for the benefits of an applicable income tax treaty with the United States),
individual retirement accounts (IRAs), real estate investment trusts (REITs) or mutual funds, dealers in securities or currencies, traders in securities, U.S. persons whose “functional currency” is not the U.S. dollar, persons holding
their units as part of a “straddle,” “hedge,” “conversion transaction” or other risk reduction transaction, and persons deemed to sell their units under the constructive sale provisions of the Internal Revenue Code. In
addition, the discussion only comments to a limited extent on state, local and foreign tax consequences. Accordingly, we encourage each prospective unitholder to consult his own tax advisor in analyzing the state, local and foreign tax consequences
particular to him of the ownership or disposition of common units and potential changes in applicable tax laws.
We will rely
on opinions of Andrews Kurth LLP regarding our characterization as a partnership for tax purposes. An opinion of counsel represents only that counsel’s best legal judgment and does not bind the IRS or the courts. Accordingly, the opinions and
statements made herein may not be sustained by a court if contested by the IRS. Any contest of this sort with the IRS may materially and adversely impact the market for common units and the prices at which common units trade. In addition, the costs
of any contest with the IRS, principally legal, accounting and related fees, will result in a reduction in cash available for distribution to our unitholders and thus will be borne indirectly by our unitholders. Furthermore, the tax treatment of us,
or of an investment in us, may be significantly modified by future legislative or administrative changes or court decisions. Any modifications may or may not be retroactively applied.
All statements as to matters of federal income tax law and legal conclusions with respect thereto, but not as to factual matters,
contained in this section, unless otherwise noted, are the opinion of Andrews Kurth LLP and are based on the accuracy of the representations made by us, as discussed below.
For the reasons described below, Andrews Kurth LLP has not rendered an opinion with respect to the following specific federal income tax issues: (i) the treatment of a unitholder whose common units
are loaned to a short seller to cover a short sale of common units (please read “—Tax Consequences of Unit Ownership—Treatment of Short Sales”); (ii) whether our monthly convention for allocating taxable income and losses is
permitted by existing Treasury Regulations (please read “—Disposition of Common Units—Allocations Between Transferors and Transferees”) and (iii) whether our method for taking into account Section 743 adjustments is
sustainable in certain cases (please read “—Tax Consequences of Unit Ownership—Section 754 Election” and “—Uniformity of Units”).
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Partnership Status
A partnership is not a taxable entity and incurs no federal income tax liability. Instead, each partner of a partnership is required to
take into account his share of items of income, gain, loss and deduction of the partnership in computing his federal income tax liability, regardless of whether cash distributions are made to him by the partnership. Distributions by a partnership to
a partner are generally not taxable to the partnership or the partner unless the amount of cash distributed to him is in excess of the partner’s adjusted basis in his partnership interest. Section 7704 of the Internal Revenue Code provides
that publicly-traded partnerships will, as a general rule, be taxed as corporations. However, an exception, referred to as the “Qualifying Income Exception,” exists with respect to publicly-traded partnerships of which 90% or more of the
gross income for every taxable year consists of “qualifying income.” Qualifying income includes income and gains derived from the transportation, processing, storage and marketing of crude oil, natural gas and products thereof. Other types
of qualifying income include interest (other than from a financial business), dividends, gains from the sale of real property and gains from the sale or other disposition of capital assets held for the production of income that otherwise constitutes
qualifying income.
We estimate that less than 5% of our current gross income is not qualifying income; however, this estimate
could change from time to time. Based upon and subject to this estimate, the factual representations made by us and our general partner and a review of the applicable legal authorities, including the Proposed Regulations, Andrews Kurth LLP is of the
opinion that at least 90% of our current gross income constitutes qualifying income.
The IRS has made no determination as to
our status or the status of our operating subsidiaries for federal income tax purposes or whether our operations generate “qualifying income” under Section 7704 of the Internal Revenue Code. Instead, we will rely on the opinion of
Andrews Kurth LLP on such matters. It is the opinion of Andrews Kurth LLP that, based upon the Internal Revenue Code, its regulations, published revenue rulings and court decisions and the representations described below that:
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we will be classified as a partnership for federal income tax purposes; and
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each of our operating subsidiaries will be treated as a partnership or will be disregarded as an entity separate from us for federal income tax
purposes.
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In rendering its opinion, Andrews Kurth LLP has relied on factual representations made by us and
our general partner. The representations made by us and our general partner upon which Andrews Kurth LLP has relied include:
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neither we nor any of the operating subsidiaries has elected or will elect to be treated as a corporation; and
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for each taxable year, more than 90% of our gross income has been and will be income of the type that Andrews Kurth LLP has opined or will opine is
“qualifying income” within the meaning of Section 7704(d) of the Internal Revenue Code and applicable Proposed Regulations.
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We believe that these representations have been true in the past and expect that these representations will continue to be true in the future.
If we fail to meet the Qualifying Income Exception, other than a failure that is determined by the IRS to be inadvertent and that is
cured within a reasonable time after discovery (in which case the IRS may also require us to make adjustments with respect to our unitholders or pay other amounts), we will be treated as if we had transferred all of our assets, subject to
liabilities, to a newly formed corporation, on the first day of the year in which we fail to meet the Qualifying Income Exception, in return for stock in that corporation, and then distributed that stock to the unitholders in liquidation of their
interests in us. This deemed contribution and liquidation should be tax-free to unitholders and us so long as we, at that time, do not have liabilities in excess of the tax basis of our assets. Thereafter, we would be treated as a corporation for
federal income tax purposes.
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The present federal income tax treatment of publicly-traded partnerships, including us, or
an investment in our common units may be modified by administrative, legislative or judicial interpretation at any time. For example, from time to time, members of the U.S. Congress and the U.S. President propose and consider substantive changes to
the existing federal income tax laws that affect publicly-traded partnerships, including the elimination of partnership tax treatment for publicly-traded partnerships.
On May 5, 2015, the U.S. Treasury Department and the IRS released Proposed Regulations regarding qualifying income under Section 7704(d)(1)(E) of the Code. The U.S. Treasury Department and the IRS have
requested comments from industry participants regarding the standards set forth in the Proposed Regulations. The Proposed Regulations provide an exclusive list of industry-specific activities and certain limited support activities that generate
qualifying income, including water-related activities when provided for use in drilling and hydraulic fracturing activities.
Although the Proposed Regulations adopt a narrow interpretation of the water-related activities that generate qualifying income, we
believe the income that we treat as qualifying satisfies these requirements and, in providing the opinion described above, our counsel will rely on the Proposed Regulations to treat income from certain of our water-related activities as qualifying
income and to meet the exception for us to be treated as a partnership for federal income tax purposes.
However, the
Proposed Regulations could be changed before they are finalized and could take a position that is contrary to our interpretation. In the event that we do not satisfy the standards set forth in the final regulations for the water-related services or
other income that we treat as qualifying, we anticipate being able to continue to treat income from these activities as qualifying income for ten years, provided that the final regulations include the special transition rules currently available in
the Proposed Regulations.
Any modification to the federal income tax laws and interpretations thereof may or may not be
retroactively applied and could make it more difficult or impossible to meet the exception for us to be treated as a partnership for federal income tax purposes. We are unable to predict whether any such changes will ultimately be enacted. However,
it is possible that a change in law could affect us, and any such changes could negatively impact the value of an investment in our common units.
If we were treated as an association taxable as a corporation in any taxable year, either as a result of a failure to meet the Qualifying Income Exception or otherwise, our items of income, gain, loss and
deduction would be reflected only on our tax return rather than being passed through to our unitholders, and our net income would be taxed to us at corporate rates. In addition, any distribution made to a unitholder would be treated as taxable
dividend income, to the extent of our current and accumulated earnings and profits, or, in the absence of earnings and profits, a nontaxable return of capital, to the extent of the unitholder’s tax basis in his common units, or taxable capital
gain, after the unitholder’s tax basis in his common units is reduced to zero. Accordingly, taxation as a corporation would result in a material reduction in a unitholder’s cash flow and after-tax return and thus would likely result in a
substantial reduction of the value of the units.
The discussion below is based on Andrews Kurth LLP’s opinion that we
will be classified as a partnership for federal income tax purposes.
Limited Partner Status
Unitholders of Noble Midstream Partners LP will be treated as partners of Noble Midstream Partners LP for federal income
tax purposes. Also, unitholders whose common units are held in street name or by a nominee and who have the right to direct the nominee in the exercise of all substantive rights attendant to the ownership of their common units will be treated as
partners of Noble Midstream Partners LP for federal income tax purposes.
A beneficial owner of common units whose units have
been transferred to a short seller to complete a short sale would appear to lose his status as a partner with respect to those units for federal income tax purposes. Please read “—Tax Consequences of Unit Ownership—Treatment of Short
Sales.”
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Income, gains, losses or deductions would not appear to be reportable by a unitholder who is
not a partner for federal income tax purposes, and any cash distributions received by a unitholder who is not a partner for federal income tax purposes would therefore appear to be fully taxable as ordinary income. These holders are urged to consult
their tax advisors with respect to the tax consequences to them of holding common units in Noble Midstream Partners LP. The references to “unitholders” in the discussion that follows are to persons who are treated as partners in Noble
Midstream Partners LP for federal income tax purposes.
Tax Consequences of Unit Ownership
Flow-Through of Taxable Income
Subject to the discussion below under “—Entity-Level Collections” and “—Administrative Matters—Information Returns and Audit Procedures,” we will not pay any federal
income tax. Instead, each unitholder will be required to report on his income tax return his share of our income, gains, losses and deductions without regard to whether we make cash distributions to him. Consequently, we may allocate income to a
unitholder even if he has not received a cash distribution. Each unitholder will be required to include in income his allocable share of our income, gains, losses and deductions for our taxable year ending with or within his taxable year. Our
taxable year ends on December 31.
Treatment of Distributions
Distributions by us to a unitholder generally will not be taxable to the unitholder for federal income tax purposes, except to the extent
the amount of any such cash distribution exceeds his tax basis in his common units immediately before the distribution. Our cash distributions in excess of a unitholder’s tax basis generally will be considered to be gain from the sale or
exchange of the common units, taxable in accordance with the rules described under “—Disposition of Common Units.” Any reduction in a unitholder’s share of our liabilities for which no partner, including the general partner,
bears the economic risk of loss, known as “nonrecourse liabilities,” will be treated as a distribution by us of cash to that unitholder. To the extent our distributions cause a unitholder’s “at-risk” amount to be less than
zero at the end of any taxable year, he must recapture any losses deducted in previous years. Please read “—Limitations on Deductibility of Losses.”
A decrease in a unitholder’s percentage interest in us because of our issuance of additional common units will decrease his share of our nonrecourse liabilities, and thus will result in a
corresponding deemed distribution of cash. This deemed distribution may constitute a non-pro rata distribution. A non-pro rata distribution of money or property may result in ordinary income to a unitholder, regardless of his tax basis in his common
units, if the distribution reduces the unitholder’s share of our “unrealized receivables,” including depreciation recapture or substantially appreciated “inventory items,” each as defined in the Internal Revenue Code, and
collectively, “Section 751 Assets.” To that extent, the unitholder will be treated as having been distributed his proportionate share of the Section 751 Assets and then having exchanged those assets with us in return for the non-pro
rata portion of the actual distribution made to him. This latter deemed exchange will generally result in the unitholder’s realization of ordinary income, which will equal the excess of (1) the non-pro rata portion of that distribution
over (2) the unitholder’s tax basis (often zero) for the share of Section 751 Assets deemed relinquished in the exchange.
Ratio of Taxable Income to Distributions
We estimate that a purchaser of common units in this offering who owns those common units from the date of closing of this offering through the record date for distributions for the period ending
, will be allocated, on a cumulative basis, an amount of federal taxable income for that period that will be 20% or less of the
cash distributed with respect to that period. Thereafter, we anticipate that the ratio of allocable taxable income to cash distributions to the unitholders will increase. Our estimate is based upon many assumptions regarding our business operations,
including assumptions as to our revenues, capital expenditures, cash flow, net working capital and anticipated cash distributions. These estimates and assumptions are subject to, among other things, numerous
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business, economic, regulatory, legislative, competitive and political uncertainties beyond our control. Further, the estimates are based on current tax law and tax reporting positions that we
will adopt and with which the IRS could disagree. Accordingly, we cannot assure you that these estimates will prove to be correct.
The actual percentage of distributions that will constitute taxable income could be higher or lower than expected, and any differences could be material and could materially affect the value of the common
units. For example, the ratio of allocable taxable income to cash distributions to a purchaser of common units in this offering will be greater, and perhaps substantially greater, than our estimate with respect to the period described above if:
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gross income from operations exceeds the amount required to make minimum quarterly distributions on all units, yet we only distribute the minimum
quarterly distributions on all units; or
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we make a future offering of common units and use the proceeds of the offering in a manner that does not produce substantial additional deductions
during the period described above, such as to repay indebtedness outstanding at the time of this offering or to acquire property that is not eligible for depreciation or amortization for federal income tax purposes or that is depreciable or
amortizable at a rate significantly slower than the rate applicable to our assets at the time of this offering.
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Basis of
Common Units
A unitholder’s initial tax basis for his common units will be the amount he paid for the common units
plus his share of our nonrecourse liabilities. That basis will be increased by his share of our income and by any increases in his share of our nonrecourse liabilities. That basis will be decreased, but not below zero, by distributions from us, by
the unitholder’s share of our losses, by any decreases in his share of our nonrecourse liabilities and by his share of our expenditures that are not deductible in computing taxable income and are not required to be capitalized. A unitholder
will have no share of our debt that is recourse to our general partner to the extent of the general partner’s “net value” as defined in Treasury Regulations under Section 752 of the Internal Revenue Code, but will have a share,
generally based on his share of profits, of our nonrecourse liabilities. Please read “—Disposition of Common Units—Recognition of Gain or Loss.”
Limitations on Deductibility of Losses
The deduction by a unitholder of
his share of our losses will be limited to the tax basis in his units and, in the case of an individual unitholder, estate, trust, or corporate unitholder (if more than 50% of the value of the corporate unitholder’s stock is owned directly or
indirectly by or for five or fewer individuals or some tax-exempt organizations) to the amount for which the unitholder is considered to be “at risk” with respect to our activities, if that is less than his tax basis. A common unitholder
subject to these limitations must recapture losses deducted in previous years to the extent that distributions cause his at-risk amount to be less than zero at the end of any taxable year. Losses disallowed to a unitholder or recaptured as a result
of these limitations will carry forward and will be allowable as a deduction to the extent that his at-risk amount is subsequently increased, provided such losses do not exceed such common unitholder’s tax basis in his common units. Upon the
taxable disposition of a unit, any gain recognized by a unitholder can be offset by losses that were previously suspended by the at-risk limitation but may not be offset by losses suspended by the basis limitation. Any loss previously suspended by
the at-risk limitation in excess of that gain would no longer be utilizable.
In general, a unitholder will be at risk to the
extent of the tax basis of his units, excluding any portion of that basis attributable to his share of our nonrecourse liabilities, reduced by (i) any portion of that basis representing amounts otherwise protected against loss because of a
guarantee, stop loss agreement or other similar arrangement and (ii) any amount of money he borrows to acquire or hold his units, if the lender of those borrowed funds owns an interest in us, is related to the unitholder or can look only to the
units for repayment. A unitholder’s at-risk amount will increase or decrease as the tax basis of the unitholder’s units increases or decreases, other than tax basis increases or decreases attributable to increases or decreases in his share
of our nonrecourse liabilities.
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In addition to the basis and at-risk limitations on the deductibility of losses, the passive
loss limitations generally provide that individuals, estates, trusts and some closely held C corporations and personal service corporations can deduct losses from passive activities, which are generally trade or business activities in which the
taxpayer does not materially participate, only to the extent of the taxpayer’s income from those passive activities. The passive loss limitations are applied separately with respect to each publicly-traded partnership. Consequently, any passive
losses we generate will only be available to offset our passive income generated in the future and will not be available to offset income from other passive activities or investments, including our investments or a unitholder’s investments in
other publicly-traded partnerships, or the unitholder’s salary, active business or other income. Passive losses that are not deductible because they exceed a unitholder’s share of income we generate may be deducted in full when he disposes
of his entire investment in us in a fully taxable transaction with an unrelated party. The passive loss limitations are applied after other applicable limitations on deductions, including the at-risk rules and the basis limitation.
A unitholder’s share of our net income may be offset by any of our suspended passive losses, but it may not be offset by any other
current or carryover losses from other passive activities, including those attributable to other publicly-traded partnerships.
Limitations
on Interest Deductions
The deductibility of a non-corporate taxpayer’s “investment interest expense” is
generally limited to the amount of that taxpayer’s “net investment income.” Investment interest expense includes:
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interest on indebtedness properly allocable to property held for investment;
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our interest expense attributed to portfolio income; and
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the portion of interest expense incurred to purchase or carry an interest in a passive activity to the extent attributable to portfolio income.
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The computation of a unitholder’s investment interest expense will take into account interest on any
margin account borrowing or other loan incurred to purchase or carry a unit. Net investment income includes gross income from property held for investment and amounts treated as portfolio income under the passive loss rules, less deductible
expenses, other than interest, directly connected with the production of investment income, but generally does not include gains attributable to the disposition of property held for investment or (if applicable) qualified dividend income. The IRS
has indicated that the net passive income earned by a publicly-traded partnership will be treated as investment income to its unitholders. In addition, the unitholder’s share of our portfolio income will be treated as investment income.
Entity-Level Collections
If we are required or elect under applicable law to pay any federal, state, local or foreign income tax on behalf of any current or former unitholder or our general partner, we are authorized to pay those
taxes from our funds and treat that payment, if made, as a distribution of cash to the unitholder or as a general expense of the partnership. Where the tax is payable on behalf of all unitholders or we cannot determine the specific unitholder on
whose behalf the tax is payable, we are authorized to treat the payment as a distribution to all current unitholders. Payments by us as described above could give rise to an overpayment of tax on behalf of an individual unitholder in which event the
unitholder would be required to file a claim in order to obtain a credit or refund. Unitholders are urged to consult their tax advisors to determine the consequences to them of any payment we make on their behalf.
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Allocation of Income, Gain, Loss and Deduction
In general, our items of income, gain, loss and deduction will be allocated among our unitholders in accordance with their percentage
interests in us. At any time that distributions are made to the common units in excess of distributions to the subordinated units or we make incentive distributions, gross income will be allocated to the recipients to the extent of these
distributions.
Specified items of our income, gain, loss and deduction will be allocated to account for (i) any
difference between the tax basis and fair market value of our assets at the time of this offering and (ii) any difference between the tax basis and fair market value of any property contributed to us that exists at the time of such
contribution, together referred to in this discussion as the “Contributed Property.” The effect of these allocations, referred to as “Section 704(c) Allocations,” to a unitholder purchasing common units from us in this offering
will be essentially the same as if the tax bases of our assets were equal to their fair market values at the time of this offering. In the event we issue additional common units or engage in certain other transactions in the future, “reverse
Section 704(c) Allocations,” similar to the Section 704(c) Allocations described above, will be made to all of our unitholders immediately prior to such issuance or other transactions to account for the difference between the
“book” basis for purposes of maintaining capital accounts and the fair market value of all property held by us at the time of such issuance or future transaction. In addition, items of recapture income will be allocated to the extent
possible to the unitholder who was allocated the deduction giving rise to the treatment of that gain as recapture income in order to minimize the recognition of ordinary income by some unitholders. Finally, although we do not expect that our
operations will result in the creation of negative capital accounts, if negative capital accounts nevertheless result, items of our income and gain will be allocated in an amount and manner sufficient to eliminate the negative balance as quickly as
possible.
An allocation of items of our income, gain, loss or deduction, other than an allocation required by the Internal
Revenue Code to eliminate the difference between a partner’s “book” capital account, credited with the fair market value of Contributed Property, and “tax” capital account, credited with the tax basis of Contributed
Property, referred to in this discussion as the “Book-Tax Disparity,” will generally be given effect for federal income tax purposes in determining a partner’s share of an item of income, gain, loss or deduction only if the allocation
has “substantial economic effect.” In any other case, a partner’s share of an item will be determined on the basis of his interest in us, which will be determined by taking into account all the facts and circumstances, including:
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his relative contributions to us;
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the interests of all the partners in profits and losses;
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the interest of all the partners in cash flow; and
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the rights of all the partners to distributions of capital upon liquidation.
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Andrews Kurth LLP is of the opinion that, with the exception of the issues described in “—Section 754 Election” and
“—Disposition of Common Units—Allocations Between Transferors and Transferees,” allocations under our partnership agreement will be given effect for federal income tax purposes in determining a partner’s share of an item of
income, gain, loss or deduction.
Treatment of Short Sales
A unitholder whose units are loaned to a “short seller” to cover a short sale of units may be considered as having disposed of those units. If so, he would no longer be treated for tax purposes
as a partner with respect to those units during the period of the loan and may recognize gain or loss from the disposition. As a result, during this period:
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any of our income, gain, loss or deduction with respect to those units would not be reportable by the unitholder;
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any cash distributions received by the unitholder as to those units would be fully taxable; and
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while not entirely free from doubt, all of these distributions would appear to be ordinary income.
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Because there is no direct or indirect controlling authority on the issue relating to partnership interests, Andrews Kurth LLP has not
rendered an opinion regarding the tax treatment of a unitholder whose common units are loaned to a short seller to cover a short sale of common units; therefore, unitholders desiring to assure their status as partners and avoid the risk of gain
recognition from a loan to a short seller are urged to consult a tax advisor to discuss whether it is advisable to modify any applicable brokerage account agreements to prohibit their brokers from borrowing and loaning their units. The IRS has
previously announced that it is studying issues relating to the tax treatment of short sales of partnership interests. Please read “—Disposition of Common Units—Recognition of Gain or Loss.”
Tax Rates
Under current
law, the highest marginal U.S. federal income tax rate applicable to ordinary income of individuals is 39.6% and the highest marginal U.S. federal income tax rate applicable to long-term capital gains (generally, capital gains on certain assets held
for more than twelve months) of individuals is 20%. Such rates are subject to change by new legislation at any time.
In
addition, a 3.8% net investment income tax, or NIIT, is imposed on certain net investment income earned by individuals, estates and trusts. For these purposes, net investment income generally includes a unitholder’s allocable share of our
income and gain realized by a unitholder from a sale of units. In the case of an individual, the tax will be imposed on the lesser of (i) the unitholder’s net investment income and (ii) the amount by which the unitholder’s
modified adjusted gross income exceeds $250,000 (if the unitholder is married and filing jointly or a surviving spouse), $125,000 (if the unitholder is married and filing separately) or $200,000 (in any other case). In the case of an estate or
trust, the tax will be imposed on the lesser of (i) undistributed net investment income and (ii) the excess adjusted gross income over the dollar amount at which the highest income tax bracket applicable to an estate or trust begins.
Section 754 Election
We will make the election permitted by Section 754 of the Internal Revenue Code. That election is irrevocable without the consent of the IRS unless there is a constructive termination of the
partnership. Please read “—Disposition of Common Units—Constructive Termination.” The election will generally permit us to adjust a common unit purchaser’s tax basis in our assets (“inside basis”) under
Section 743(b) of the Internal Revenue Code to reflect his purchase price. This election does not apply with respect to a person who purchases common units directly from us. The Section 743(b) adjustment belongs to the purchaser and not to
other unitholders. For purposes of this discussion, the inside basis in our assets with respect to a unitholder will be considered to have two components: (1) his share of our tax basis in our assets (“common basis”) and (2) his
Section 743(b) adjustment to that basis.
We will adopt the remedial allocation method as to all our properties. Where
the remedial allocation method is adopted, the Treasury Regulations under Section 743 of the Internal Revenue Code require a portion of the Section 743(b) adjustment that is attributable to recovery property that is subject to depreciation
under Section 168 of the Internal Revenue Code and whose book basis is in excess of its tax basis to be depreciated over the remaining cost recovery period for the property’s unamortized Book-Tax Disparity. Under Treasury Regulation
Section 1.167(c)-1(a)(6), a Section 743(b) adjustment attributable to property subject to depreciation under Section 167 of the Internal Revenue Code, rather than cost recovery deductions under Section 168, is generally required
to be depreciated using either the straight-line method or the 150% declining balance method. Under our partnership agreement, our general partner is authorized to take a position to preserve the uniformity of units even if that position is not
consistent with these and any other Treasury Regulations. Please read “—Uniformity of Units.”
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We intend to depreciate the portion of a Section 743(b) adjustment attributable to
unrealized appreciation in the value of Contributed Property, to the extent of any unamortized Book-Tax Disparity, using a rate of depreciation or amortization derived from the depreciation or amortization method and useful life applied to the
property’s unamortized Book-Tax Disparity, or treat that portion as non-amortizable to the extent attributable to property which is not amortizable. This method is consistent with the methods employed by other publicly-traded partnerships but
is arguably inconsistent with Treasury Regulation Section 1.167(c)-1(a)(6), which is not expected to directly apply to a material portion of our assets. To the extent this Section 743(b) adjustment is attributable to appreciation in value
in excess of the unamortized Book-Tax Disparity, we will apply the rules described in the Treasury Regulations and legislative history. If we determine that this position cannot reasonably be taken, we may take a depreciation or amortization
position under which all purchasers acquiring units in the same month would receive depreciation or amortization, whether attributable to common basis or a Section 743(b) adjustment, based upon the same applicable rate as if they had purchased
a direct interest in our assets. This kind of aggregate approach may result in lower annual depreciation or amortization deductions than would otherwise be allowable to some unitholders. Please read “—Uniformity of Units.” A
unitholder’s tax basis for his common units is reduced by his share of our deductions (whether or not such deductions were claimed on an individual’s income tax return) so that any position we take that understates deductions will
overstate the common unitholder’s basis in his common units, which may cause the unitholder to understate gain or overstate loss on any sale of such units. Please read “—Disposition of Common Units—Recognition of Gain or
Loss.” Andrews Kurth LLP is unable to opine as to whether our method for taking into account Section 743 adjustments is sustainable for property subject to depreciation under Section 167 of the Internal Revenue Code or if we use an
aggregate approach as described above, as there is no direct or indirect controlling authority addressing the validity of these positions. Moreover, the IRS may challenge our position with respect to depreciating or amortizing the
Section 743(b) adjustment we take to preserve the uniformity of the units. If such a challenge were sustained, the gain from the sale of units might be increased without the benefit of additional deductions.
A Section 754 election is advantageous if the transferee’s tax basis in his units is higher than the units’ share of the
aggregate tax basis of our assets immediately prior to the transfer. In that case, as a result of the election, the transferee would have, among other items, a greater amount of depreciation deductions and his share of any gain or loss on a sale of
our assets would be less. Conversely, a Section 754 election is disadvantageous if the transferee’s tax basis in his units is lower than those units’ share of the aggregate tax basis of our assets immediately prior to the transfer.
Thus, the fair market value of the units may be affected either favorably or unfavorably by the election. A basis adjustment is required regardless of whether a Section 754 election is made in the case of a transfer of an interest in us if we
have a substantial built-in loss immediately after the transfer, or if we distribute property and have a substantial basis reduction. Generally, a built-in loss or a basis reduction is substantial if it exceeds $250,000.
The calculations involved in the Section 754 election are complex and will be made on the basis of assumptions as to the value of
our assets and other matters. For example, the allocation of the Section 743(b) adjustment among our assets must be made in accordance with the Internal Revenue Code. The IRS could seek to reallocate some or all of any Section 743(b)
adjustment allocated by us to our tangible assets to goodwill instead. Goodwill, as an intangible asset, is generally nonamortizable or amortizable over a longer period of time or under a less accelerated method than our tangible assets. We cannot
assure you that the determinations we make will not be successfully challenged by the IRS and that the deductions resulting from them will not be reduced or disallowed altogether. Should the IRS require a different basis adjustment to be made, and
should, in our opinion, the expense of compliance exceed the benefit of the election, we may seek permission from the IRS to revoke our Section 754 election. If permission is granted, a subsequent purchaser of units may be allocated more income
than he would have been allocated had the election not been revoked.
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Tax Treatment of Operations
Accounting Method and Taxable Year
We use the year ending December 31 as our taxable year and the accrual method of accounting for federal income tax purposes. Each unitholder will be required to include in income his share of our
income, gain, loss and deduction for our taxable year ending within or with his taxable year. In addition, a unitholder who has a taxable year ending on a date other than December 31 and who disposes of all of his units following the close of
our taxable year but before the close of his taxable year must include his share of our income, gain, loss and deduction in income for his taxable year, with the result that he will be required to include in income for his taxable year his share of
more than twelve months of our income, gain, loss and deduction. Please read “—Disposition of Common Units—Allocations Between Transferors and Transferees.”
Tax Basis, Depreciation and Amortization
The tax basis of our assets will
be used for purposes of computing depreciation and cost recovery deductions and, ultimately, gain or loss on the disposition of those assets. If we dispose of depreciable property by sale, foreclosure or otherwise, all or a portion of any gain,
determined by reference to the amount of depreciation deductions previously taken, may be subject to the recapture rules and taxed as ordinary income rather than capital gain. Similarly, a unitholder who has taken cost recovery or depreciation
deductions with respect to property we own will likely be required to recapture some or all of those deductions as ordinary income upon a sale of its interest in us. Please read “—Tax Consequences of Unit Ownership—Allocation of
Income, Gain, Loss and Deduction.”
The costs we incur in selling our units (called “syndication expenses”)
must be capitalized and cannot be deducted currently, ratably or upon our termination. There are uncertainties regarding the classification of costs as organization expenses, which may be amortized by us, and as syndication expenses, which may not
be amortized by us. The underwriting discounts and commissions we incur will be treated as syndication expenses.
Valuation and Tax Basis
of Our Properties
The federal income tax consequences of the ownership and disposition of units will depend in part on
our estimates of the relative fair market values, and the tax bases, of our assets. Although we may from time to time consult with professional appraisers regarding valuation matters, we will make many of the relative fair market value estimates and
tax basis determinations ourselves. These estimates and determinations of basis are subject to challenge and will not be binding on the IRS or the courts. If the estimates of fair market value or basis are later found to be incorrect, the character
and amount of items of income, gain, loss or deductions previously reported by unitholders might change, and unitholders might be required to adjust their tax liability for prior years and incur interest and penalties with respect to those
adjustments.
Disposition of Common Units
Recognition of Gain or Loss
Gain or loss will be recognized on a sale of units equal to the difference between the amount realized and the unitholder’s tax basis for the units sold. A unitholder’s amount realized will be
measured by the sum of the cash or the fair market value of other property received by him plus his share of our nonrecourse liabilities. Because the amount realized includes a unitholder’s share of our nonrecourse liabilities, the gain
recognized on the sale of units could result in a tax liability in excess of any cash received from the sale.
Prior
distributions from us that in the aggregate were in excess of cumulative net taxable income for a common unit and, therefore, decreased a unitholder’s tax basis in that common unit will, in effect, become taxable income if the common unit is
sold at a price greater than the unitholder’s tax basis in that common unit, even if the price received is less than his original cost.
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Except as noted below, gain or loss recognized by a unitholder, other than a
“dealer” in units, on the sale or exchange of a unit will generally be taxable as capital gain or loss. Capital gain recognized by an individual on the sale of units held for more than twelve months will generally be taxed at the U.S.
federal income tax rate applicable to long-term capital gains. However, a portion of this gain or loss, which will likely be substantial, will be separately computed and taxed as ordinary income or loss under Section 751 of the Internal Revenue
Code to the extent attributable to “unrealized receivables,” including depreciation recapture, or to “inventory items” we own. Ordinary income attributable to unrealized receivables, inventory items and depreciation recapture may
exceed net taxable gain realized upon the sale of a unit and may be recognized even if there is a net taxable loss realized on the sale of a unit. Thus, a unitholder may recognize both ordinary income and a capital loss upon a sale of units. Capital
losses may offset capital gains and no more than $3,000 of ordinary income, in the case of individuals, and may only be used to offset capital gains in the case of corporations. Both ordinary income and capital gain recognized on a sale of units may
be subject to the NIIT in certain circumstances. Please read “—Tax Consequences of Unit Ownership—Tax Rates.”
The IRS has ruled that a partner who acquires interests in a partnership in separate transactions must combine those interests and maintain a single adjusted tax basis for all those interests. Upon a sale
or other disposition of less than all of those interests, a portion of that tax basis must be allocated to the interests sold using an “equitable apportionment” method, which generally means that the tax basis allocated to the interest
sold equals an amount that bears the same relation to the partner’s tax basis in his entire interest in the partnership as the value of the interest sold bears to the value of the partner’s entire interest in the partnership. Treasury
Regulations under Section 1223 of the Internal Revenue Code allow a selling unitholder who can identify common units transferred with an ascertainable holding period to elect to use the actual holding period of the common units transferred.
Thus, according to the ruling discussed above, a common unitholder will be unable to select high or low basis common units to sell as would be the case with corporate stock, but, according to the Treasury Regulations, he may designate specific
common units sold for purposes of determining the holding period of units transferred. A unitholder electing to use the actual holding period of common units transferred must consistently use that identification method for all subsequent sales or
exchanges of common units. A unitholder considering the purchase of additional units or a sale of common units purchased in separate transactions is urged to consult his tax advisor as to the possible consequences of this ruling and application of
the Treasury Regulations.
Specific provisions of the Internal Revenue Code affect the taxation of some financial products and
securities, including partnership interests, by treating a taxpayer as having sold an “appreciated” partnership interest, one in which gain would be recognized if it were sold, assigned or terminated at its fair market value, if the
taxpayer or related persons enter(s) into:
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an offsetting notional principal contract; or
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a futures or forward contract;
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in each case, with respect to the partnership interest or substantially identical property.
Moreover, if a taxpayer has previously entered into a short sale, an offsetting notional principal contract or a futures or forward contract with respect to the partnership interest, the taxpayer will be
treated as having sold that position if the taxpayer or a related person then acquires the partnership interest or substantially identical property. The Secretary of the Treasury is also authorized to issue regulations that treat a taxpayer that
enters into transactions or positions that have substantially the same effect as the preceding transactions as having constructively sold the financial position.
Allocations Between Transferors and Transferees
In general, our taxable
income and losses will be determined annually, will be prorated on a monthly basis and will be subsequently apportioned among the unitholders in proportion to the number of units owned by each
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of them as of the opening of the applicable exchange on the first business day of the month, which we refer to in this prospectus as the “Allocation Date.” However, gain or loss
realized on a sale or other disposition of our assets other than in the ordinary course of business will be allocated among the unitholders on the Allocation Date in the month in which that gain or loss is recognized. As a result, a unitholder
transferring units may be allocated income, gain, loss and deduction realized after the date of transfer.
Although recently
issued final Treasury Regulations allow publicly-traded partnerships to use a similar monthly simplifying convention to allocate tax items among transferor and transferee unitholders, these regulations do not specifically authorize all aspects of
the proration method we currently plan to adopt. Accordingly, Andrews Kurth LLP is unable to opine on the validity of our method of allocating income, gain, loss and deductions among transferor and transferee unitholders. If the IRS were to
successfully challenge our proration method, we may be required to change the allocation of items of income, gain, loss and deduction among our unitholders. We are authorized to revise our method of allocation between transferor and transferee
unitholders, as well as unitholders whose interests vary during a taxable year, to conform to these Treasury Regulations.
A
unitholder who owns units at any time during a quarter and who disposes of them prior to the record date set for a cash distribution for that quarter will be allocated items of our income, gain, loss and deductions attributable to that quarter
through the month of disposition but will not be entitled to receive that cash distribution.
Notification Requirements
A unitholder who sells any of his units is generally required to notify us in writing of that sale within 30 days after the sale (or, if
earlier, January 15 of the year following the sale). A purchaser of units who purchases units from another unitholder is also generally required to notify us in writing of that purchase within 30 days after the purchase. Upon receiving such
notifications, we are required to notify the IRS of that transaction and to furnish specified information to the transferor and transferee. Failure to notify us of a purchase may, in some cases, lead to the imposition of penalties. However, these
reporting requirements do not apply to a sale by an individual who is a citizen of the U.S. and who effects the sale or exchange through a broker who will satisfy such requirements.
Constructive Termination
We will be considered to have technically
terminated our partnership for federal income tax purposes if there is a sale or exchange of 50% or more of the total interests in our capital and profits within a twelve-month period. For purposes of determining whether the 50% threshold has been
met, multiple sales of the same interest will be counted only once. Our technical termination would, among other things, result in the closing of our taxable year for all unitholders, which would result in us filing two tax returns (and our
unitholders could receive two schedules K-1 if the relief discussed below is not available) for one fiscal year and could result in a deferral of depreciation deductions allowable in computing our taxable income. In the case of a unitholder
reporting on a taxable year other than a fiscal year ending December 31, the closing of our taxable year may also result in more than twelve months of our taxable income or loss being includable in his taxable income for the year of
termination. Our termination currently would not affect our classification as a partnership for federal income tax purposes, but instead we would be treated as a new partnership for federal income tax purposes. If treated as a new partnership, we
must make new tax elections, including a new election under Section 754 of the Internal Revenue Code, and could be subject to penalties if we are unable to determine that a termination occurred. Moreover, a technical termination might either
accelerate the application of, or subject us to, any tax legislation enacted before the termination. The IRS has announced a publicly-traded partnership technical termination relief program whereby, if a
publicly-traded
partnership that technically terminated requests publicly-traded partnership technical termination relief and such relief is granted by the IRS, among other things, the partnership will only
have to provide one Schedule K-1 to unitholders for the year notwithstanding two partnership tax years.
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Uniformity of Units
Because we cannot match transferors and transferees of units, we must maintain uniformity of the economic and tax characteristics of the
units to a purchaser of these units. In the absence of uniformity, we may be unable to completely comply with a number of federal income tax requirements, both statutory and regulatory. A lack of uniformity can result from a literal application of
Treasury Regulation Section 1.167(c)-1(a)(6). Any non-uniformity could have a negative impact on the value of the units. Please read “—Tax Consequences of Unit Ownership—Section 754 Election.” We intend to depreciate the
portion of a Section 743(b) adjustment attributable to unrealized appreciation in the value of Contributed Property, to the extent of any unamortized Book-Tax Disparity, using a rate of depreciation or amortization derived from the depreciation
or amortization method and useful life applied to the property’s unamortized Book-Tax Disparity, or treat that portion as nonamortizable, to the extent attributable to property the common basis of which is not amortizable, consistent with the
regulations under Section 743 of the Internal Revenue Code, even though that position may be inconsistent with Treasury Regulation Section 1.167(c)-1(a)(6), which is not expected to directly apply to a material portion of our assets.
Please read “—Tax Consequences of Unit Ownership—Section 754 Election.” To the extent that the
Section 743(b) adjustment is attributable to appreciation in value in excess of the unamortized Book-Tax Disparity, we will apply the rules described in the Treasury Regulations and legislative history. If we determine that this position cannot
reasonably be taken, we may adopt a depreciation and amortization position under which all purchasers acquiring units in the same month would receive depreciation and amortization deductions, whether attributable to common basis or a
Section 743(b) adjustment, based upon the same applicable rate as if they had purchased a direct interest in our assets. If this position is adopted, it may result in lower annual depreciation and amortization deductions than would otherwise be
allowable to some unitholders and risk the loss of depreciation and amortization deductions not taken in the year that these deductions are otherwise allowable. This position will not be adopted if we determine that the loss of depreciation and
amortization deductions will have a material adverse effect on the unitholders. If we choose not to utilize this aggregate method, we may use any other reasonable depreciation and amortization method to preserve the uniformity of the intrinsic tax
characteristics of any units that would not have a material adverse effect on the unitholders. In either case, and as stated above under “—Tax Consequences of Unit Ownership—Section 754 Election,” Andrews Kurth LLP has not
rendered an opinion with respect to these methods. Moreover, the IRS may challenge any method of depreciating the Section 743(b) adjustment described in this paragraph. If this challenge were sustained, the uniformity of units might be
affected, and the gain from the sale of units might be increased without the benefit of additional deductions. Please read “—Disposition of Common Units—Recognition of Gain or Loss.”
Tax-Exempt Organizations and Other Investors
Ownership of units by employee benefit plans, other tax-exempt organizations, non-resident aliens, foreign corporations and other foreign
persons raises issues unique to those investors and, as described below to a limited extent, may have substantially adverse tax consequences to them. If you are a tax-exempt entity or a non-U.S. person, you should consult your tax advisor before
investing in our common units. Employee benefit plans and most other organizations exempt from federal income tax, including individual retirement accounts and other retirement plans, are subject to federal income tax on unrelated business taxable
income. Virtually all of our income allocated to a unitholder that is a tax-exempt organization will be unrelated business taxable income and will be taxable to it.
Non-resident aliens and foreign corporations, trusts or estates that own units will be considered to be engaged in business in the U.S. because of the ownership of units. As a consequence, they will be
required to file federal tax returns to report their share of our income, gain, loss or deduction and pay federal income tax at regular rates on their share of our net income or gain, unless exempted or further limited by an income tax treaty.
Moreover, under rules applicable to publicly-traded partnerships, our quarterly distribution to foreign unitholders will be subject to withholding at the highest applicable effective tax rate. Each foreign unitholder must obtain a
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taxpayer identification number from the IRS and submit that number to our transfer agent on a Form W-8BEN, W-8BEN-E or applicable substitute form in order to obtain credit for these withholding
taxes. A change in applicable law may require us to change these procedures.
In addition, because a foreign corporation that
owns units will be treated as engaged in a U.S. trade or business, that corporation may be subject to the U.S. branch profits tax at a rate of 30%, in addition to regular federal income tax, on its share of our earnings and profits, as adjusted for
changes in the foreign corporation’s “U.S. net equity,” that is effectively connected with the conduct of a U.S. trade or business. That tax may be reduced or eliminated by an income tax treaty between the U.S. and the country in
which the foreign corporate unitholder is a “qualified resident.” In addition, this type of unitholder is subject to special information reporting requirements under Section 6038C of the Internal Revenue Code.
A foreign unitholder who sells or otherwise disposes of a common unit will be subject to U.S. federal income tax on gain realized from
the sale or disposition of that unit to the extent the gain is effectively connected with a U.S. trade or business of the foreign unitholder. Under a ruling published by the IRS, interpreting the scope of “effectively connected income,” a
foreign unitholder would be considered to be engaged in a trade or business in the U.S. by virtue of the U.S. activities of the partnership, and part or all of that unitholder’s gain would be effectively connected with that unitholder’s
indirect U.S. trade or business. Moreover, under the Foreign Investment in Real Property Tax Act, a foreign unitholder generally will be subject to U.S. federal income tax upon the sale or disposition of a common unit if (i) he owned (directly
or constructively applying certain attribution rules) more than 5% of our common units at any time during the five-year period ending on the date of such disposition and (ii) 50% or more of the fair market value of all of our assets consisted
of U.S. real property interests at any time during the shorter of the period during which such unitholder held the common units or the five-year period ending on the date of disposition. More than 50% of our assets may consist of U.S. real property
interests. Therefore, foreign unitholders may be subject to federal income tax on gain from the sale or disposition of their units.
Administrative Matters
Information Returns and Audit
Procedures
We intend to furnish to each unitholder, within 90 days after the close of each calendar year, specific tax
information, including a Schedule K-1, which describes his share of our income, gain, loss and deduction for our preceding taxable year. In preparing this information, which will not be reviewed by counsel, we will take various accounting and
reporting positions, some of which have been mentioned earlier, to determine each unitholder’s share of income, gain, loss and deduction. We cannot assure you that those positions will yield a result that conforms to the requirements of the
Internal Revenue Code, Treasury Regulations or administrative interpretations of the IRS. Neither we nor Andrews Kurth LLP can assure prospective unitholders that the IRS will not successfully contend in court that those positions are impermissible.
Any challenge by the IRS could negatively affect the value of the units.
The IRS may audit our federal income tax information
returns. Partnerships generally are treated as separate entities for purposes of federal tax audits, judicial review of administrative adjustments by the IRS and tax settlement proceedings. The tax treatment of partnership items of income, gain,
loss and deduction are determined in a partnership proceeding rather than in separate proceedings with the partners. Adjustments to items of our income, gain, loss or deduction resulting from an IRS audit may require each unitholder to adjust a
prior year’s tax liability, and possibly may result in an audit of his return. Any audit of a unitholder’s return could result in adjustments not related to our returns as well as those related to our returns. Moreover, recently enacted
legislation applicable to our tax years beginning after 2017 changes the audit procedures for large partnerships and in certain circumstances would permit the IRS to assess and collect taxes (including any applicable penalties and interest)
resulting from partnership-level federal income tax audits directly from us in the year in which the audit is completed. If we are required to make payments of taxes, penalties and interest resulting from audit adjustments, our cash available for
distribution to our unitholders might be substantially reduced. Pursuant to this new legislation, we will designate a person (our general partner) to act as the partnership representative who shall
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have the sole authority to act on behalf of the partnership with respect to dealings with the IRS under these new audit procedures.
Current law requires that one partner be designated as the “Tax Matters Partner” for these purposes. Our partnership agreement
names our general partner as our Tax Matters Partner.
The Tax Matters Partner will make some elections on our behalf and on
behalf of unitholders. In addition, the Tax Matters Partner can extend the statute of limitations for assessment of tax deficiencies against unitholders for items in our returns. The Tax Matters Partner may bind a unitholder with less than a 1%
profits interest in us to a settlement with the IRS unless that unitholder elects, by filing a statement with the IRS, not to give that authority to the Tax Matters Partner. The Tax Matters Partner may seek judicial review, by which all the
unitholders are bound, of a final partnership administrative adjustment and, if the Tax Matters Partner fails to seek judicial review, judicial review may be sought by any unitholder having at least a 1% interest in profits or by any group of
unitholders having in the aggregate at least a 5% interest in profits. However, only one action for judicial review will go forward, and each unitholder with an interest in the outcome may participate.
A unitholder must file a statement with the IRS identifying the treatment of any item on his federal income tax return that is not
consistent with the treatment of the item on our return. Intentional or negligent disregard of this consistency requirement may subject a unitholder to substantial penalties.
Nominee Reporting
Persons who hold an interest in us as a nominee for
another person are required to furnish to us:
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the name, address and taxpayer identification number of the beneficial owner and the nominee;
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whether the beneficial owner is:
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a person that is not a U.S. person;
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a foreign government, an international organization or any wholly-owned agency or instrumentality of either of the foregoing; or
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the amount and description of units held, acquired or transferred for the beneficial owner; and
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specific information including the dates of acquisitions and transfers, means of acquisitions and transfers, and acquisition cost for purchases, as
well as the amount of net proceeds from dispositions.
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Brokers and financial institutions are required to
furnish additional information, including whether they are U.S. persons and specific information on units they acquire, hold or transfer for their own account. A penalty of $250 per failure, up to a maximum of $3,000,000 per calendar year, is
imposed by the Internal Revenue Code for failure to report that information to us. The nominee is required to supply the beneficial owner of the units with the information furnished to us.
Accuracy-Related Penalties
An additional tax equal to 20% of the amount of
any portion of an underpayment of tax that is attributable to one or more specified causes, including negligence or disregard of rules or regulations, substantial understatements of income tax and substantial valuation misstatements, is imposed by
the Internal Revenue Code. No penalty will be imposed, however, for any portion of an underpayment if it is shown that there was a reasonable cause for that portion and that the taxpayer acted in good faith regarding that portion.
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For individuals, a substantial understatement of income tax in any taxable year exists
if the amount of the understatement exceeds the greater of 10% of the tax required to be shown on the return for the taxable year or $5,000. The amount of any understatement subject to penalty generally is reduced if any portion is attributable to a
position adopted on the return:
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for which there is, or was, “substantial authority”; or
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as to which there is a reasonable basis and the pertinent facts of that position are disclosed on the return.
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If any item of income, gain, loss or deduction included in the distributive shares of unitholders might result in that kind of an
“understatement” of income for which no “substantial authority” exists, we must disclose the pertinent facts on our return. In addition, we will make a reasonable effort to furnish sufficient information for unitholders to make
adequate disclosure on their returns and to take other actions as may be appropriate to permit unitholders to avoid liability for this penalty. More stringent rules apply to “tax shelters,” which we do not believe includes us, or any of
our investments, plans or arrangements.
A substantial valuation misstatement exists if (a) the value of any
property, or the adjusted basis of any property, claimed on a tax return is 150% or more of the amount determined to be the correct amount of the valuation or adjusted basis, (b) the price for any property or services (or for the use of
property) claimed on any such return with respect to any transaction between persons described in Internal Revenue Code Section 482 is 200% or more (or 50% or less) of the amount determined under Section 482 to be the correct amount of
such price, or (c) the net Internal Revenue Code Section 482 transfer price adjustment for the taxable year exceeds the lesser of $5 million or 10% of the taxpayer’s gross receipts. No penalty is imposed unless the portion of the
underpayment attributable to a substantial valuation misstatement exceeds $5,000. If the valuation claimed on a return is 200% or more than the correct valuation or certain other thresholds are met, the penalty imposed increases to 40%. We do not
anticipate making any valuation misstatements.
In addition, the 20% accuracy-related penalty also applies to any portion
of an underpayment of tax that is attributable to transactions lacking economic substance. To the extent that such transactions are not disclosed, the penalty imposed is increased to 40%. Additionally, there is no reasonable cause defense to the
imposition of this penalty to such transactions.
We do not anticipate that any accuracy-related penalties will be
assessed against us.
Reportable Transactions
If we were to engage in a “reportable transaction,” we (and possibly you and others) would be required to make a detailed disclosure of the transaction to the IRS. A transaction may be a
reportable transaction based upon any of several factors, including the fact that it is a type of tax avoidance transaction publicly identified by the IRS as a “listed transaction” or that it produces certain kinds of losses for
partnerships, individuals, S corporations, and trusts in excess of $2 million in any single year, or $4 million in any combination of six successive tax years. Our participation in a reportable transaction could increase the likelihood that our
federal income tax information return (and possibly your tax return) would be audited by the IRS. Please read “—Information Returns and Audit Procedures.”
Moreover, if we were to participate in a reportable transaction with a significant purpose to avoid or evade tax, or in any listed transaction, you may be subject to the following additional consequences:
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accuracy-related penalties with a broader scope, significantly narrower exceptions, and potentially greater amounts than described above at
“—Accuracy-Related Penalties”;
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for those persons otherwise entitled to deduct interest on federal tax deficiencies, nondeductibility of interest on any resulting tax liability; and
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in the case of a listed transaction, an extended statute of limitations.
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We do not expect to engage in any “reportable transactions.”
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State, Local, Foreign and Other Tax Considerations
In addition to federal income taxes, unitholders may be subject to other taxes, including state, local and foreign income taxes,
unincorporated business taxes, and estate, inheritance or intangibles taxes that may be imposed by the various jurisdictions in which we conduct business or own property now or in the future or in which the unitholder is a resident. We currently own
property or do business in a substantial number of states, virtually all of which impose a personal income tax and many impose an income tax on corporations and other entities. We may also own property or do business in other states in the future.
Although an analysis of those various taxes is not presented here, each prospective unitholder should consider their potential impact on his investment in us.
Although you may not be required to file a return and pay taxes in some jurisdictions because your income from that jurisdiction falls below the filing and payment requirement, you will be required to
file income tax returns and to pay income taxes in many of the jurisdictions in which we do business or own property and may be subject to penalties for failure to comply with those requirements. Some of the jurisdictions may require us, or we may
elect, to withhold a percentage of income from amounts to be distributed to a unitholder who is not a resident of the jurisdiction. Withholding, the amount of which may be greater or less than a particular unitholder’s income tax liability to
the jurisdiction, generally does not relieve a nonresident unitholder from the obligation to file an income tax return. Amounts withheld will be treated as if distributed to unitholders for purposes of determining the amounts distributed by us.
Please read “—Tax Consequences of Unit Ownership—Entity-Level Collections.”
It is the responsibility of each
unitholder to investigate the legal and tax consequences, under the laws of pertinent jurisdictions, of its investment in us. We urge each prospective unitholder to consult, and depend on, its own tax counsel or other advisor with regard to those
matters. Further, it is the responsibility of each unitholder to file all state, local and foreign, as well as U.S. federal tax returns, that may be required of it. Andrews Kurth LLP has not rendered an opinion on the state, local, alternative
minimum tax or non-U.S. tax consequences of an investment in us.
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INVESTMENT IN NOBLE MIDSTREAM PARTNERS LP BY EMPLOYEE BENEFIT
PLANS
An investment in our common units by an employee benefit plan is subject to additional considerations because the
investments of these plans are subject to the fiduciary responsibility and prohibited transaction provisions of ERISA and the prohibited transaction restrictions imposed by Section 4975 of the Internal Revenue Code and may be subject to
provisions under certain other laws or regulations that are similar to ERISA or the Internal Revenue Code, or Similar Laws. For these purposes the term “employee benefit plan” includes, but is not limited to, qualified pension,
profit-sharing and stock bonus plans, certain Keogh plans, certain simplified employee pension plans, IRAs and tax deferred annuities established or maintained by an employer or employee organization, and entities whose underlying assets are
considered to include “plan assets” of any such plan, account or arrangement, each, a Plan. This summary is based on the provisions of ERISA and the Internal Revenue Code, and the related regulations and administrative and judicial
interpretations, as of the date hereof. This summary does not purport to be complete, and no assurance can be given that future legislation, court decisions or administrative regulations, rulings or pronouncements will not significantly modify the
requirements summarized herein. Any such changes may be retroactive and thereby apply to transactions entered into before the date of their enactment or release.
General Fiduciary Matters
ERISA and the
Internal Revenue Code impose certain duties on persons who are fiduciaries of an a Plan that is subject to Title I of ERISA or Section 4975 of the Internal Revenue Code, or an ERISA Plan, and prohibit certain transactions involving the assets
of an ERISA Plan and its fiduciaries or other interested parties. Under ERISA and the Internal Revenue Code, any person who exercises any discretionary authority or control over the administration of an ERISA Plan or the management or disposition of
the assets of an ERISA Plan, or who renders investment advice for a fee or other compensation to an ERISA Plan, is generally considered to be a fiduciary of the ERISA Plan. In considering an investment in our common units, among other things,
consideration should be given to:
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whether the investment is prudent under Section 404(a)(1)(B) of ERISA and any other applicable Similar Laws;
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whether, in making the investment, the employee benefit plan will satisfy the diversification requirements of Section 404(a)(1)(C) of ERISA and
any other applicable Similar Laws;
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whether the investment is permitted under the terms of the applicable documents governing the Plan;
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whether making the investment will comply with the delegation of control and prohibited transaction provisions under Section 406 of ERISA,
Section 4975 of the Internal Revenue Code and any other applicable Similar Laws (please read the discussion under “—Prohibited Transaction Issues” below);
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whether in making the investment, the Plan will be considered to hold, as plan assets, (1) only the investment in our common units or (2) an
undivided interest in our underlying assets (please read the discussion under “—Plan Asset Issues” below); and
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whether the investment will result in recognition of unrelated business taxable income by the employee benefit plan and, if so, the potential after-tax
investment return. Please read “Material Federal Income Tax Consequences—Tax-Exempt Organizations and Other Investors.”
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The person with investment discretion with respect to the assets of a Plan, often called a fiduciary, should determine whether an investment in our common units is authorized by the appropriate governing
instruments and is a proper investment for the Plan.
Governmental plans (as defined in Section 3(32) of ERISA) and certain
church plans (as defined in Section 3(33) of ERISA) and non-U.S. plans (as defined in Section 4(b)(4) of ERISA), while generally not subject to the fiduciary responsibility provisions of ERISA or the provisions of Section 4975 of the Internal
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Revenue Code, may nevertheless be subject to local, state or other federal or non-U.S. laws that are substantially similar to ERISA and the Internal Revenue Code. Fiduciaries of any such Plans
should consult with their counsel before acquiring our common units.
Prohibited Transaction
Issues
Section 406 of ERISA and Section 4975 of the Internal Revenue Code (which also applies to IRAs that are
not considered part of an employee benefit plan) prohibit ERISA Plans from engaging in specified transactions involving “plan assets” with parties that are “parties in interest” under ERISA or “disqualified persons”
under the Internal Revenue Code with respect to the ERISA Plan, unless an exemption is applicable. A party in interest or disqualified person who engages in a non-exempt prohibited transaction may be subject to excise taxes and other penalties and
liabilities under ERISA and the Internal Revenue Code. In addition, the fiduciary of the ERISA Plan that engaged in such a prohibited transaction may be subject to excise taxes, penalties and liabilities under ERISA and the Internal Revenue Code.
Plan Asset Issues
In addition to considering whether the purchase of our common units is a prohibited transaction, a fiduciary of a Plan should consider whether the Plan will, by investing in our common units, be deemed to
own an undivided interest in our assets, with the result that our general partner also would be a fiduciary of the Plan and our operations would be subject to the regulatory restrictions of ERISA, including its prohibited transaction rules, as well
as the prohibited transaction rules of the Internal Revenue Code and any other applicable Similar Laws.
The Department of
Labor regulations provide guidance with respect to whether the assets of an entity in which Plans acquire equity interests would be deemed “plan assets” under certain circumstances. Under these regulations, an entity’s underlying
assets generally would not be considered to be “plan assets” if, among other things:
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the equity interests acquired by employee benefit plans are publicly offered securities—i.e., the equity interests are part of a class of securities that are
widely held by 100 or more investors independent of the issuer and each other, “freely transferable” (as defined in the applicable Department of Labor regulations) and either part of a class of securities registered pursuant to certain
provisions of the federal securities laws or sold to the plan as part of a public offering under certain conditions;
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the entity is an “operating company”—i.e., it is primarily engaged in the production or sale of a product or service other than the investment of capital
either directly or through a majority-owned subsidiary or subsidiaries; or
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there is no significant investment by benefit plan investors, which is defined to mean that, immediately after the most recent acquisition of an equity interest in any
entity by an employee benefit plan, less than 25% of the total value of each class of equity interest, disregarding certain interests held by our general partner, its affiliates and certain other persons, is held by the employee benefit plans and
IRAs referred to above and entities whose underlying assets are considered to include “plan assets” of any such plans or IRAs.
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With respect to an investment in our common units, we believe that our assets should not be considered “plan assets” under these regulations because it is expected that the investment will
satisfy the requirements in (1) and (2) above and may also satisfy the requirements in (3) above (although we do not monitor the level of investment by benefit plan investors as required for compliance with (3)).
The foregoing discussion of issues arising for employee benefit plan investments under ERISA, the Internal Revenue Code and applicable
Similar Laws is general in nature and is not intended to be all inclusive, nor should it be construed as legal advice. Plan fiduciaries contemplating a purchase of our common units should consult with their own counsel regarding the consequences of
such purchase under ERISA, the Internal Revenue Code and Similar Laws in light of the serious penalties, excise taxes and liabilities imposed on persons who engage in prohibited transactions or other violations.
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UNDERWRITING
Barclays Capital Inc., Robert W. Baird & Co. Incorporated and J.P. Morgan Securities LLC are acting as the representatives of the
underwriters and the joint book-running managers of this offering. Under the terms of an underwriting agreement, which will be filed as an exhibit to the registration statement, each of the underwriters named below has severally agreed to purchase
from us the respective number of common units shown opposite its name below:
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Underwriters
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Number of
Common
Units
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Barclays Capital Inc.
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Robert W. Baird & Co. Incorporated
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J.P. Morgan Securities LLC
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Total
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The underwriting agreement provides that the underwriters’ obligation to purchase common units
depends on the satisfaction of the conditions contained in the underwriting agreement including:
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the obligation to purchase all of the common units offered hereby (other than those common units covered by their option to purchase additional common
units as described below), if any of the common units are purchased;
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the representations and warranties made by us to the underwriters are true;
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there is no material change in our business or the financial markets; and
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we deliver customary closing documents to the underwriters.
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Commissions and Expenses
The following table
summarizes the underwriting discounts and commissions we will pay to the underwriters. These amounts are shown assuming both no exercise and full exercise of the underwriters’ option to purchase additional common units. The underwriting fee is
the difference between the initial price to the public and the amount the underwriters pay to us for the common units.
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No Exercise
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Full Exercise
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Per common unit
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$
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$
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Total
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$
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$
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In addition, we will pay an aggregate structuring fee of % of the gross proceeds
of this offering (including any proceeds from the exercise of the option to purchase additional common units) to Barclays Capital Inc. and Robert W. Baird & Co. Incorporated for evaluation, analysis and structuring of this offering. We have
agreed to reimburse the underwriters for expenses related to the review by the Financial Industry Regulatory Authority (“FINRA”) of the terms of this offering, including up to $20,000 in expenses for counsel.
The representatives have advised us that the underwriters propose to offer the common units directly to the public at the public offering
price on the cover of this prospectus and to selected dealers, which may include the underwriters, at such offering price less a selling concession not in excess of $ per common unit. After the
offering, the representatives may change the offering price and other selling terms.
The expenses of the offering that are
payable by us are estimated to be approximately $ (excluding underwriting discounts, structuring fees and commissions).
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Option to Purchase Additional Common Units
We have granted the underwriters an option exercisable for 30 days after the date of this prospectus to purchase, from time to time, in
whole or in part, up to an aggregate of additional common units from us at the public offering price less underwriting discounts and commissions. This option may be exercised
to the extent the underwriters sell more than common units in connection with this offering. To the extent that this option is exercised, each underwriter will be obligated, subject to certain conditions, to purchase its pro rata portion of these
additional common units based on the underwriter’s percentage underwriting commitment in the offering as indicated in the table at the beginning of this Underwriting Section. Any remaining common units not purchased by the underwriters pursuant
to exercise of the option to purchase additional common units will be issued to Noble at the expiration of the option period for no additional consideration, and these common units will be issued pursuant to the exemption from registration provided
under Section 4(a)(2) of the Securities Act.
Lock-Up Agreements
We, Noble, our general partner, the directors and executive officers of our general partner and holders of more than 5% of our outstanding
common units, have agreed that, for a period of 180 days after the date of this prospectus, we and they will not directly or indirectly, without the prior written consent of Barclays Capital Inc., (1) offer for sale, sell, pledge, or otherwise
dispose of (or enter into any transaction or device that is designed to, or could be expected to, result in the disposition by any person at any time in the future of) any common units (including, without limitation, common units that may be deemed
to be beneficially owned by us or them in accordance with the rules and regulations of the SEC and common units that may be issued upon exercise of any options or warrants) or securities convertible into or exercisable or exchangeable for common
units (other than the common units issued pursuant to employee benefit plans or other employee compensation plans existing on the date of this prospectus), or sell or grant options, rights or warrants with respect to any common units or securities
convertible into or exchangeable for common units (other than the grant of options pursuant to option plans existing on the date of this prospectus), (2) enter into any swap or other derivatives transaction that transfers to another, in whole
or in part, any of the economic benefits or risks of ownership of common units, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of common units or other securities, in cash or otherwise,
(3) make any demand for or exercise any right or file or cause to be filed a registration statement, including any amendments thereto, with respect to the registration of any common units or securities convertible, exercisable or exchangeable
into common units or any of our other securities (other than any registration statement on Form S-8), or (4) publicly disclose the intention to do any of the foregoing.
Barclays Capital Inc., in its sole discretion, may release the common units and other securities subject to the lock-up agreements described above in whole or in part at any time. When determining whether
or not to release common units and other securities from lock-up agreements, Barclays Capital Inc. will consider, among other factors, the holder’s reasons for requesting the release, the number of common units and other securities for which
the release is being requested and market conditions at the time.
As described below under “—Directed Unit
Program,” any common units sold in the Directed Unit Program to our directors or officers shall be subject to the lock-up agreement described above. Any participants in the Directed Unit Program who purchase more than $100,000 of common units
under the program will be subject to a 180-day lock up with respect to any common units sold to them pursuant to that program. Any other participants in the Directed Unit Program will be subject to a 30-day lock-up. These lock ups will have similar
restrictions as the lock-up agreement described above.
Directed Unit Program
At our request, the underwriters have reserved up to % of the common units for sale at the initial public offering
price to persons who are directors, officers or employees of our general partner and its affiliates and certain other persons associated with us, as designated by us, through a directed unit program. The number of
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common units available for sale to the general public will be reduced by the number of directed units purchased by participants in the program. Except for certain of the officers and directors of
our general partner who have entered into lock-up agreements, each person buying common units through the directed unit program has agreed that, for a period of 30 days from the date of this prospectus, or 180 days for participants who purchase more
than $100,000 of common units, he or she will not, without the prior written consent of Barclays Capital Inc., dispose of or hedge any common units or any securities convertible into or exchangeable for our common units with respect to units
purchased in the program. For certain officers and directors of our general partner purchasing common units through the directed unit program, the lock-up agreements described above shall govern with respect to their purchases. Barclays Capital Inc.
in its sole discretion may release any of the securities subject to these lock-up agreements at any time, which, in the case of officers and directors of our general partner, shall be with notice. Any directed units not purchased will be offered by
the underwriters to the general public on the same basis as all other common units offered. We have agreed to indemnify the underwriters against certain liabilities and expenses, including liabilities under the Securities Act, in connection with the
sales of the directed units.
Offering Price Determination
Prior to this offering, there has been no public market for our common units. The initial public offering price was negotiated between the
representatives and us. In determining the initial public offering price of our common units, the representatives considered:
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the history and prospects for the industry in which we compete;
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our financial information;
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the ability of our management and our business potential and earning prospects;
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the prevailing securities markets at the time of this offering; and
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the recent market prices of, and the demand for, publicly traded common units of generally comparable companies.
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Indemnification
We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act, and to contribute to payments that the underwriters may be required to make for
these liabilities.
Stabilization, Short Positions and Penalty Bids
The representatives may engage in stabilizing transactions, short sales and purchases to cover positions created by short sales, and
penalty bids or purchases for the purpose of pegging, fixing or maintaining the price of the common units, in accordance with Regulation M under the Exchange Act:
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Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum.
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A short position involves a sale by the underwriters of common units in excess of the number of common units the underwriters are obligated to purchase
in the offering, which creates the syndicate short position. This short position may be either a covered short position or a naked short position. In a covered short position, the number of common units involved in the sales made by the underwriters
in excess of the number of common units they are obligated to purchase is not greater than the number of common units that they may purchase by exercising their option to purchase additional common units. In a naked short position, the number of
common units involved is greater than the number of common units in their option to purchase additional common units. The underwriters may close out any short position by either exercising their option to purchase additional common units or
purchasing common
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units in the open market. In determining the source of common units to close out the short position, the underwriters will consider, among other things, the price of common units available for
purchase in the open market as compared to the price at which they may purchase common units through their option to purchase additional common units. A naked short position is more likely to be created if the underwriters are concerned that there
could be downward pressure on the price of the common units in the open market after pricing that could adversely affect investors who purchase in the offering.
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Syndicate covering transactions involve purchases of common units in the open market after the distribution has been completed in order to cover
syndicate short positions.
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Penalty bids permit the representatives to reclaim a selling concession from a syndicate member when common units originally sold by the syndicate
member is purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions.
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These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of the
common units or preventing or retarding a decline in the market price of the common units. As a result, the price of the common units may be higher than the price that might otherwise exist in the open market. These transactions may be effected on
the NYSE or otherwise and, if commenced, may be discontinued at any time.
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Neither we nor any of the
underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the common units. In addition, neither we nor any of the underwriters make any
representation that the representatives will engage in these stabilizing transactions or that any transaction, once commenced, will not be discontinued without notice.
Listing on the New York Stock Exchange
Our
common units have been approved for listing on the NYSE under the symbol “NBLX.” The underwriters have undertaken to sell the minimum number of common units to the minimum number of beneficial owners necessary to meet the NYSE’s
distribution requirements for trading.
Stamp Taxes
If you purchase common units offered in this prospectus, you may be required to pay stamp taxes and other charges under the laws and
practices of the country of purchase, in addition to the offering price listed on the cover page of this prospectus.
Other Relationships
The underwriters and certain of their affiliates are full service financial institutions engaged
in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. The underwriters and
certain of their affiliates have, from time to time, performed, and may in the future perform, various commercial and investment banking and financial advisory services for us and our affiliates, including Noble, and to persons and entities with
relationships with us and our affiliates, for which they received or may in the future receive customary fees and expenses. We anticipate that affiliates of Barclays Capital Inc. and J.P. Morgan Securities LLC, will be lenders under our new
revolving credit facility and will receive origination fees funded by a portion of the proceeds of this offering. Please see “Use of Proceeds.” Additionally, affiliates of certain of the underwriters are lenders under Noble’s
revolving credit facility.
In the ordinary course of their various business activities, the underwriters and certain of their
respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their
customers, and such investment and securities activities may involve securities or instruments of the
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issuer or its affiliates. If the underwriters or their respective affiliates have a lending relationship with us, certain of those underwriters or their affiliates routinely hedge, and certain
other of those underwriters or their affiliates may hedge, their credit exposure to us consistent with their customary risk management policies. Typically, the underwriters and their affiliates would hedge such exposure by entering into transactions
which consist of either the purchase of credit default swaps or the creation of short positions in our securities or the securities of our affiliates, including potentially the common units offered hereby. Any such credit default swaps or short
positions could adversely affect future trading prices of the common units offered hereby. The underwriters and certain of their affiliates may also communicate independent investment recommendations, market color or trading ideas or publish or
express independent research views in respect of such securities or instruments and may at any time hold, or recommend to clients that they acquire, long or short positions in such securities and instruments.
Direct Participation Plan Requirements
Because FINRA views the common units offered hereby as interests in a direct participation program, the offering is being made in
compliance with FINRA Rule 2310. Investor suitability with respect to the common units should be judged similarly to the suitability with respect to other securities that are listed for trading on a national securities exchange.
Selling Restrictions
This prospectus does not constitute an offer to sell to, or a solicitation of an offer to buy from, anyone in any country or jurisdiction (i) in which such an offer or solicitation is not authorized,
(ii) in which any person making such offer or solicitation is not qualified to do so or (iii) in which any such offer or solicitation would otherwise be unlawful. No action has been taken that would, or is intended to, permit a public
offer of the common units or possession or distribution of this prospectus or any other offering or publicity material relating to the common units in any country or jurisdiction (other than the United States) where any such action for that purpose
is required. Accordingly, each underwriter has undertaken that it will not, directly or indirectly, offer or sell any common units or have in its possession, distribute or publish any prospectus, form of application, advertisement or other document
or information in any country or jurisdiction except under circumstances that will, to the best of its knowledge and belief, result in compliance with any applicable laws and regulations and all offers and sales of common units by it will be made on
the same terms.
Singapore
This prospectus has not been and will not be registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the
offer or sale, or invitation for subscription or purchase, of the common units may not be circulated or distributed, nor may the common units be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly
or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore, or SFA, (ii) to a relevant person pursuant to Section 275(1), or
any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275, of the SFA, or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.
Where the common units are subscribed or purchased under Section 275 of the SFA by a relevant person which is:
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(1)
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a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share
capital of which is owned by one or more individuals, each of whom is an accredited investor; or
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(2)
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a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an
accredited investor, securities (as defined in Section 239(1) of the SFA) of that corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation
or that trust has acquired the common units pursuant to an offer made under Section 275 of the SFA except:
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(a)
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to an institutional investor or to a relevant person defined in Section 275(2) of the SFA, or to any person arising from an offer referred to in
Section 275(1A) or Section 276(4)(i)(B) of the SFA;
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(b)
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where no consideration is or will be given for the transfer;
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(c)
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where the transfer is by operation of law;
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(d)
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as specified in Section 276(7) of the SFA; or
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(e)
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as specified in Regulation 32 of the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005 of Singapore.
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Hong Kong
Our common
units may not be offered or sold in Hong Kong by means of this prospectus or any other document other than to (a) professional investors as defined in the Securities and Futures Ordinance of Hong Kong (Cap. 571, Laws of Hong Kong), or SFO, and
any rules made under the SFO, or (b) in other circumstances which do not result in this prospectus being deemed to be a “prospectus,” as defined in the Companies Ordinance of Hong Kong (Cap. 32, Laws of Hong Kong), or CO, or which do
not constitute an offer to the public within the meaning of the CO or the SFO; and no person has issued or had in possession for the purposes of issue, or will issue or has in possession for the purposes of issue, whether in Hong Kong or elsewhere,
any advertisement, invitation or document relating to our common units which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong)
other than with respect to our common units which are or are intended to be disposed of only to persons outside Hong Kong or only to professional investors as defined in the SFO.
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VALIDITY OF THE COMMON UNITS
The validity of the common units and certain tax and other legal matters will be passed upon for us by Andrews Kurth LLP, Houston, Texas.
Certain legal matters in connection with our common units offered hereby will be passed upon for the underwriters by Vinson & Elkins L.L.P., Houston, Texas.
EXPERTS
The combined financial statements of
Noble Midstream Partners LP Predecessor as of December 31, 2015 and 2014, and for each of the years then ended, have been included herein, in reliance upon the report of KPMG LLP, independent registered public accounting firm, appearing elsewhere
herein, and upon the authority of said firm as experts in accounting and auditing.
The audit report covering the December 31,
2015 financial statements refers to a change to the straight-line method of depreciation.
The balance sheet of Noble
Midstream Partners LP as of April 30, 2016, has been included herein, in reliance upon the report of KPMG LLP, independent registered public accounting firm, appearing elsewhere herein, and upon the authority of said firm as experts in accounting
and auditing.
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WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form S-1 relating to the common units offered by this prospectus. This prospectus,
which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement. For further information regarding us and the common units offered by this prospectus, we refer you to the full
registration statement, including its exhibits and schedules, filed under the Securities Act. The registration statement, of which this prospectus constitutes a part, including its exhibits and schedules, may be inspected and copied at the
SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Copies of the materials may also be obtained from the SEC at prescribed rates by writing to the Public Reference Room. You may obtain information on the operation of the
Public Reference Room by calling the SEC at 1-800-SEC-0330.
The SEC maintains a website at
www.sec.gov
that
contains reports, information statements and other information regarding issuers that file electronically with the SEC. Our registration statement, of which this prospectus constitutes a part, can be downloaded from the SEC’s website.
After the completion of this offering, we will file with or furnish to the SEC periodic reports and other
information. These reports and other information may be inspected and copied at the Public Reference Room maintained by the SEC or obtained from the SEC’s website as provided above. Following the completion of this offering, our website will be
located at
www.NBLMidstream.com.
We intend to make our periodic reports and other information filed with or furnished to the SEC available, free of charge, through our website, as soon as reasonably
practicable after those reports and
other information are electronically filed with or furnished to the SEC. Information on our website or any other website is not incorporated by reference into this prospectus and does not constitute a part of this prospectus.
We intend to furnish or make available to our unitholders annual reports containing our audited financial statements prepared in
accordance with GAAP. We also intend to furnish or make available to our unitholders quarterly reports containing our unaudited interim financial information, including the information required by Form 10-Q, for the first three fiscal quarters of
each fiscal year.
Noble is subject to the information requirements of the Exchange Act and, in accordance therewith,
files reports and other information with the SEC. You may read Noble’s filings on the SEC’s website and at the Public Reference Room described above or Noble’s website at
www.nobleenergyinc.com
. Noble’s common stock trades
on the NYSE under the symbol “NBL.” Information on Noble’s website is not incorporated by reference into this prospectus and does not constitute a part of this prospectus.
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FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. Statements that are predictive in nature, that depend upon or refer to future events
or conditions or that include the words “believe,” “expect,” “anticipate,” “intend,” “estimate” and other expressions that are predictions of or indicate future events and trends and that do not
relate to historical matters identify forward-looking statements. Our forward-looking statements include statements about our business strategy, our industry, our future profitability, our expected capital expenditures and the impact of such
expenditures on our performance, the costs of being a publicly traded partnership and our capital programs. All statements in this prospectus about our forecast of distributable cash flow and our forecasted results for the twelve months ending
September 30, 2017 constitute forward-looking statements.
A forward-looking statement may include a statement of
the assumptions or bases underlying the forward-looking statement. We believe that we have chosen these assumptions or bases in good faith and that they are reasonable. You are cautioned not to place undue reliance on any forward-looking statements.
You should also understand that it is not possible to predict or identify all such factors and should not consider the following list to be a complete statement of all potential risks and uncertainties. Factors that could cause our actual results to
differ materially from the results contemplated by such forward-looking statements include:
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Noble’s ability to meet their drilling and development plans;
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changes in general economic conditions;
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competitive conditions in our industry;
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actions taken by third-party operators, gatherers, processors and transporters;
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the demand for crude oil and natural gas gathering and processing services;
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our ability to successfully implement our business plan;
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our ability to complete internal growth projects on time and on budget;
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the price and availability of debt and equity financing;
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the availability and price of crude oil and natural gas to the consumer compared to the price of alternative and competing fuels;
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competition from the same and alternative energy sources;
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energy efficiency and technology trends;
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operating hazards and other risks incidental to our midstream services;
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natural disasters, weather-related delays, casualty losses and other matters beyond our control;
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defaults by Noble under our gathering and processing agreements;
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changes in availability and cost of capital;
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changes in our tax status;
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the effect of existing and future laws and government regulations;
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the effects of future litigation; and
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certain factors discussed elsewhere in this prospectus.
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You should not place undue reliance on our forward-looking statements. Although forward-looking statements reflect our good faith beliefs at the time they are made, forward-looking statements involve
known
242
and unknown risks, uncertainties and other factors, including the factors described under “Risk Factors,” which may cause our actual results, performance or achievements to differ
materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new
information, future events, changed circumstances or otherwise, unless required by law.
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I
NDEX TO FINANCIAL STATEMENTS
Noble Midstream Partners LP
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Unaudited Pro Forma Condensed Combined Financial Statements
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Introduction
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F-2
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Unaudited Pro Forma Condensed Combined Statement of Operations for the Year Ended December 31,
2015
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F-4
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Unaudited Pro Forma Condensed Combined Statement of Operations for the Three Months Ended March
31, 2016
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F-5
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Unaudited Pro Forma Condensed Combined Balance Sheet as of March 31, 2016
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F-6
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Notes to Unaudited Pro Forma Condensed Combined Financial Statements
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F-7
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Noble Midstream Partners LP Predecessor
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Historical Financial Statements
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Combined Statements of Operations and
Comprehensive Income
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F-9
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Combined Balance Sheets as of March 31, 2016 (Supplemental Pro Forma) and December 31,
2015
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F-10
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Combined Statements of Changes in Parent Net Investment as of March 31, 2016
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F-11
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Combined Statements of Cash Flows for the Three Months Ended March 31, 2016 and 2015
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F-12
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Notes to Combined Financial Statements
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F-13
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Report of Independent Registered Public Accounting Firm
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F-18
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Combined Statements of Operations and Comprehensive Income (Loss) for the Years Ended December
31, 2015 and 2014
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F-19
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Combined Balance Sheets as of December 31, 2015 and 2014
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F-20
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Combined Statements of Changes in Parent Net Investment as of December 31, 2015 and 2014
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F-21
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Combined Statements of Cash Flows for the Years Ended December 31, 2015 and 2014
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F-22
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Notes to Combined Financial Statements
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F-23
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Noble Midstream Partners LP
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Report of Independent Registered Public Accounting Firm
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F-32
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Balance Sheet as of April 30, 2016
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F-33
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Notes to Balance Sheet
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F-34
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F-1
NOBLE MIDSTREAM PARTNERS LP
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
Introduction
Set forth below are the unaudited
pro forma condensed combined balance sheet as of March 31, 2016 and the unaudited pro forma condensed combined statements of operations for the year ended December 31, 2015 and the three months ended March 31, 2016 (together with the notes to
the unaudited pro forma condensed combined financial statements, the “pro forma financial statements”) of Noble Midstream Partners LP (the “Partnership,” “we,” “us” or “our”). Our pro forma financial
statements have been derived from the historical combined financial statements of Noble Midstream Partners LP Predecessor, our predecessor for accounting purposes (our “Predecessor”), which are included elsewhere in this prospectus.
The Predecessor’s business includes the contributed assets, liabilities and results of operations of (i) crude
oil and natural gas gathering systems located in the DJ Basin in northern Colorado, (ii) crude oil treating facilities in the DJ Basin in northern Colorado, (iii) fresh water storage and delivery and saltwater collection, gathering,
cleaning and disposal systems in the DJ Basin in northern Colorado and (iv) a 3.33% non-controlling member interest in White Cliffs Pipeline, L.L.C. also located in the DJ Basin (the “White Cliffs Interest”) (collectively, the
“Contributed Businesses”).
We will own and operate the businesses of our Predecessor effective as of the closing of
this offering. The contribution of our Predecessor’s business to us will be recorded at historical cost as it is considered to be a reorganization of entities under common control. Upon completion of this offering, we will own controlling
interests in the development companies that own our operating assets ranging from 5% to 100%. The pro forma financial statements have been prepared on the basis that we will be treated as a partnership for U.S. federal income tax purposes.
The pro forma financial statements have been derived from the audited and unaudited historical combined financial
statements of our Predecessor. The historical financial statements of the Predecessor are set forth elsewhere in this prospectus, and the pro forma financial statements for the Partnership should be read in conjunction with, and are qualified in
their entirety by reference to, such historical financial statements and the related notes contained therein. The pro forma adjustments are based upon currently available information and certain estimates and assumptions, and actual results may
differ from the pro forma adjustments. However, management believes that these estimates and assumptions provide a reasonable basis for presenting the significant effects of the contemplated transactions and that the pro forma adjustments are
factually supportable and give appropriate effect to those estimates and assumptions.
The pro forma adjustments have been
prepared as if the transactions to be effected at the closing of the offering had taken place on March 31, 2016, in the case of the unaudited pro forma condensed combined balance sheet, and as of January 1, 2015, in the case of the unaudited
pro forma condensed combined statements of operations for the year ended December 31, 2015 and the three months ended March 31, 2016. The pro forma financial statements have been presented for informational purposes only. The pro forma
financial statements may not be indicative of the results that actually would have occurred if we had assumed the operations of our Predecessor on the dates indicated, or the results that will be obtained in the future.
The pro forma financial statements give pro forma effect to the matters described in the accompanying notes, including:
|
|
•
|
|
Noble’s contribution of the Contributed Businesses to us, including the percentages of the development companies that will operate our assets
described under “Certain Relationships and Related Party Transactions—Agreements with our Affiliates in Connection with the Transactions—Contribution Agreement;”
|
|
|
•
|
|
the recognition of incremental revenues under our amended commercial agreements, effective October 1, 2015;
|
|
|
•
|
|
the recognition of incremental expenses for providing water life-cycle management functions set forth in the amended commercial agreements, effective
October 1, 2015;
|
F-2
|
|
•
|
|
our entry into a new $ million revolving credit facility;
|
|
|
•
|
|
our entry into an omnibus agreement with Noble;
|
|
|
•
|
|
the consummation of this offering and our issuance of (i) common units to the
public (assuming the underwriters’ option to purchase additional common units from us is not exercised) and (ii)
common units, subordinated units, a non-economic general partner interest in us and all of our
incentive distribution rights (“IDRs”) to Noble; and
|
|
|
•
|
|
the application of the net proceeds of this offering as described in “Use of Proceeds.”
|
The pro forma financial statements do not give effect to an estimated $6.7 million in incremental general and administrative expenses
that we expect to incur annually as a result of being a publicly traded partnership, including costs associated with annual and quarterly reports to unitholders, preparation and distribution of our financial statements, tax return and Schedule K-1
preparation and distribution expenses, investor relations activities, registrar and transfer agent fees, incremental director and officer liability insurance premiums and independent director compensation. The pro forma financial statements also do
not give effect to variable general and administrative costs we will incur under the omnibus agreement and the operational services and secondment agreement that we will enter into with Noble as of the closing of this offering. As a result, the pro
forma financial statements may not be indicative of the results that actually would have occurred if the matters described above had occurred on the dates indicated or that would be obtained in the future.
F-3
Noble Midstream Partners LP
Unaudited Pro Forma Condensed Combined Statements of Operations
Year Ended December 31, 2015
(thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical
|
|
|
Pro Forma
Adjustments
|
|
|
|
|
|
Pro
Forma
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues—Related Party
|
|
$
|
87,837
|
|
|
$
|
20,630
|
|
|
|
(a
|
)
|
|
$
|
108,467
|
|
|
Income from Investments
|
|
|
4,621
|
|
|
|
—
|
|
|
|
|
|
|
|
4,621
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenues
|
|
|
92,458
|
|
|
|
20,630
|
|
|
|
|
|
|
|
113,088
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct Operating
|
|
|
16,933
|
|
|
|
10,516
|
|
|
|
(a
|
)
|
|
|
27,449
|
|
|
Depreciation
|
|
|
6,891
|
|
|
|
—
|
|
|
|
|
|
|
|
6,891
|
|
|
General and Administrative
|
|
|
2,771
|
|
|
|
6,850
|
|
|
|
(b
|
)
|
|
|
9,621
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Expenses
|
|
|
26,595
|
|
|
|
17,366
|
|
|
|
|
|
|
|
43,961
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income (Loss)
|
|
|
65,863
|
|
|
|
3,264
|
|
|
|
|
|
|
|
69,127
|
|
|
Interest Expense
|
|
|
4,595
|
|
|
|
(4,595
|
)
|
|
|
(c
|
)
|
|
|
—
|
|
|
Income Tax Expense (Benefit)
|
|
|
23,226
|
|
|
|
(23,226
|
)
|
|
|
(d
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
|
38,042
|
|
|
|
31,085
|
|
|
|
|
|
|
|
69,127
|
|
|
Net income attributable to non-controlling interests
|
|
|
—
|
|
|
|
18,101
|
|
|
|
(e
|
)
|
|
|
18,101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Noble Midstream Partners LP
|
|
$
|
38,042
|
|
|
$
|
12,984
|
|
|
|
|
|
|
$
|
51,026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma general partners interest in net income attributable to Noble Midstream Partners LP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma limited partners’ interest in net income attributable to Noble Midstream Partners LP:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common units
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subordinated units
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma net income per limited partner unit (basic and diluted)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common units
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subordinated units
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma weighted average number of limited partner units outstanding (basic and diluted)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common units
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subordinated units
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited pro forma condensed combined
financial statements
F-4
Noble Midstream Partners LP
Unaudited Pro Forma Condensed Combined Statements of Operations
Three Months Ended March 31, 2016
(thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical
|
|
|
Pro Forma
Adjustments
|
|
|
Pro
Forma
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues—Related Party
|
|
$
|
32,123
|
|
|
$
|
—
|
|
|
$
|
32,123
|
|
|
Income from Investments
|
|
|
1,293
|
|
|
|
—
|
|
|
|
1,293
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenues
|
|
|
33,416
|
|
|
|
—
|
|
|
|
33,416
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct Operating
|
|
|
5,888
|
|
|
|
—
|
|
|
|
5,888
|
|
|
Depreciation
|
|
|
2,144
|
|
|
|
—
|
|
|
|
2,144
|
|
|
General and Administrative
|
|
|
2,654
|
|
|
|
—
|
|
|
|
2,654
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Expenses
|
|
|
10,686
|
|
|
|
—
|
|
|
|
10,686
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income (Loss)
|
|
|
22,730
|
|
|
|
—
|
|
|
|
22,730
|
|
|
Interest Expense
|
|
|
910
|
|
|
|
(910
|
)(c)
|
|
|
—
|
|
|
Income Tax Expense (Benefit)
|
|
|
8,310
|
|
|
|
(8,310
|
)(d)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
|
13,510
|
|
|
|
9,220
|
|
|
|
22,730
|
|
|
Net income attributable to non-controlling interests
|
|
|
—
|
|
|
|
4,973
|
(e)
|
|
|
4,973
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Noble Midstream Partners LP
|
|
$
|
13,510
|
|
|
$
|
4,247
|
|
|
|
17,757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma general partners interest in net income attributable to Noble Midstream Partners LP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma limited partners’ interest in net income attributable to Noble Midstream Partners LP:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common units
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subordinated units
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma net income per limited partner unit (basic and diluted)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common units
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subordinated units
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma weighted average number of limited partner units outstanding (basic and diluted)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common units
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subordinated units
|
|
|
|
|
|
|
|
|
|
|
|
|
F-5
Noble Midstream Partners LP
Unaudited Pro Forma Condensed Combined Balance Sheet
As of March 31, 2016
(thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical
|
|
|
Pro Forma
Adjustments
|
|
|
Pro
Forma
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents
|
|
$
|
8,293
|
|
|
$
|
|
(f)
|
|
$
|
8,293
|
|
|
Other Current Assets
|
|
|
23,130
|
|
|
|
—
|
|
|
|
23,130
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Assets
|
|
|
31,423
|
|
|
|
—
|
|
|
|
31,423
|
|
|
Property, Plant and Equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Property, Plant and Equipment, Gross
|
|
|
279,344
|
|
|
|
—
|
|
|
|
279,344
|
|
|
Less: Accumulated Depreciation
|
|
|
(24,892
|
)
|
|
|
—
|
|
|
|
(24,892
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Property, Plant and Equipment, Net
|
|
|
254,452
|
|
|
|
—
|
|
|
|
254,452
|
|
|
Investments
|
|
|
12,034
|
|
|
|
—
|
|
|
|
12,034
|
|
|
Other Assets
|
|
|
2,490
|
|
|
|
|
(g)
|
|
|
2,490
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
300,399
|
|
|
$
|
—
|
|
|
$
|
300,399
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND NET PARENT INVESTMENT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts Payable—Related Party
|
|
$
|
1,703
|
|
|
$
|
—
|
|
|
$
|
1,703
|
|
|
Other Current Liabilities
|
|
|
21,286
|
|
|
|
(4,317
|
)(d)
|
|
|
16,969
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Liabilities
|
|
|
22,989
|
|
|
|
(4,317
|
)
|
|
|
18,672
|
|
|
Long-Term Debt
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Deferred Tax Liability
|
|
|
17,133
|
|
|
|
(17,133
|
)(d)
|
|
|
—
|
|
|
Asset Retirement Obligations
|
|
|
3,654
|
|
|
|
—
|
|
|
|
3,654
|
|
|
Other Long-Term Liabilities
|
|
|
757
|
|
|
|
—
|
|
|
|
757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
44,533
|
|
|
|
(21,450
|
)
|
|
|
23,083
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net parent investment / partners’ capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net parent investment
|
|
|
255,866
|
|
|
|
21,450
|
(h)
|
|
|
277,316
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common unitholders—Public
|
|
|
—
|
|
|
|
|
(i)
|
|
|
|
|
|
Common unitholders—Noble
|
|
|
—
|
|
|
|
|
(h)
|
|
|
|
|
|
Subordinated unitholders—Noble
|
|
|
—
|
|
|
|
|
(h)
|
|
|
|
|
|
General Partner—Noble
|
|
|
—
|
|
|
|
|
(i)
|
|
|
|
|
|
Noncontrolling interest—Noble
|
|
|
—
|
|
|
|
|
(h)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net parent investment / partners’ capital
|
|
|
255,866
|
|
|
|
21,450
|
|
|
|
277,316
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Net Parent Investment
|
|
$
|
300,399
|
|
|
$
|
—
|
|
|
$
|
300,399
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited pro forma condensed combined financial
statements
F-6
Noble Midstream Partners LP
Notes to Unaudited Pro Forma Condensed Financial Statements
|
1.
|
Pro Forma Adjustments and Assumptions
|
The pro forma adjustments are based on currently available information and certain estimates and assumptions and, therefore, the actual effects of these transactions will differ from the pro forma
adjustments. We have only included adjustments that are directly attributable to the transactions, factually supportable and, with respect to the statements of operations, expected to have a continuing impact on the combined results. A general
description of these transactions and adjustments is provided as follows:
|
|
(a)
|
Represents the pro forma adjustment to revenues associated with the Partnership’s execution of amended long-term, fixed-fee commercial agreements with Noble,
effective October 1, 2015. The increase to revenue is calculated using the fees under the amended commercial agreements applied to the historical volumes for the period January 1, 2015 through September 30, 2015. The amended commercial agreements
also expanded water services provided to Noble effective October 1, 2015, for which we incurred additional operating costs. The increase to pro forma direct operating expense is due to the incremental operating cost of providing expanded water
services for the period from January 1, 2015 to September 30, 2015. No pro forma adjustment for the period October 1, 2015 through December 31, 2015 was necessary as revenues and expenses were calculated in accordance with the amended commercial
agreements.
|
|
|
(b)
|
Represents the fixed-fee portion of additional general and administrative expenses incurred under our omnibus agreement.
|
|
|
(c)
|
Represents the pro forma adjustment to interest expense associated with our allocated portion of Noble’s interest expense and the amortization of origination fees
and the commitment fee associated with the new revolving credit facility over the five year expected term of the facility. As of the date of the offering, we do not expect to draw on the revolving credit facility.
|
|
|
(d)
|
We will not be subject to income taxes as a publicly traded partnership. As such, this adjustment removes our historical taxes.
|
|
|
(e)
|
Represents the 20%, 75%, 95%, 0%, 75% and 75% non-controlling interests in Colorado River DevCo LP, Green River DevCo LP, Gunnison River DevCo LP, Laramie River DevCo
LP, San Juan River DevCo LP and Blanco River DevCo LP, respectively, retained by Noble, that have been calculated for each of the periods presented.
|
|
|
(f)
|
Represents the net adjustments to cash and cash equivalents, as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
|
Gross proceeds from initial public offering
|
|
$
|
—
|
|
|
Underwriters’ discount and fees
|
|
|
—
|
|
|
Expenses and costs of initial public offering
|
|
|
—
|
|
|
Payment of debt issuance costs (see note c)
|
|
|
—
|
|
|
Distribution of proceeds to Noble
|
|
|
—
|
|
|
|
|
|
|
|
|
Cash and cash equivalents pro forma adjustment
|
|
$
|
—
|
|
|
|
(g)
|
Represents the capitalization of origination fees and the commitment fee associated with the new revolving credit facility.
|
|
|
(h)
|
Represents the elimination of Noble’s net investment in us after giving effect to Noble’s contribution to us of 80%, 25%, 5%, 100%, 25% and 25% controlling
interests in Colorado River DevCo LP, Green River DevCo LP, Gunnison River DevCo LP, Laramie River DevCo LP, San Juan River DevCo LP and Blanco River DevCo LP, respectively. The adjustment also represents the distribution of the remaining IPO
proceeds of $ million to Noble.
|
F-7
Noble Midstream Partners LP
Notes to Unaudited Pro Forma Condensed Financial Statements
|
|
(i)
|
Represents net adjustments to the public common unitholders’ partners’ capital, as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
|
Gross proceeds from initial public offering (see note f)
|
|
$
|
—
|
|
|
Underwriters’ discount and fees (see note f)
|
|
|
—
|
|
|
Expenses and costs of initial public offering (see note f)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
$
|
—
|
|
|
2.
|
Pro Forma Net Income per Unit
|
Pro forma net income per unit is determined by dividing pro forma net income that would have been allocated, in accordance with the net income and loss allocation provisions of the partnership agreement,
to the common and subordinated unitholders under the two-class method by the number of common units and subordinated units expected to be outstanding at the completion of this offering. For purposes of this calculation, we assumed (1) the
minimum quarterly distribution was made to all unitholders for each quarter during the periods presented and (2) the number of units outstanding was common units and
subordinated units. The common and subordinated unitholders represent an aggregate 100% limited partner interest in us. All units were assumed to have been outstanding since
January 1, 2015. Basic and diluted pro forma net income per unit are equivalent as there are no dilutive units at the date of closing of the initial public offering of the common units of the Partnership. Pursuant to the partnership agreement,
to the extent that the quarterly distributions exceed certain target levels, the general partner is entitled to receive certain incentive distributions that will result in more net income proportionately being allocated to the general partner than
to the holders of common units and subordinated units. The pro forma net income per unit calculations assume that no incentive distributions were made to the general partner because no such distributions would have been paid based upon on the
assumption that distributions declared equal the minimum quarterly distribution.
F-8
Noble Midstream Partners LP Predecessor
Combined Statements of Operations and Comprehensive Income
(in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
|
|
2016
|
|
|
2015
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
Midstream Services—Related Party
|
|
$
|
32,123
|
|
|
$
|
12,852
|
|
|
Income from Investments
|
|
|
1,293
|
|
|
|
1,236
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenues
|
|
|
33,416
|
|
|
|
14,088
|
|
|
Costs and Expenses
|
|
|
|
|
|
|
|
|
|
Direct Operating
|
|
|
5,888
|
|
|
|
2,670
|
|
|
Depreciation and Amortization
|
|
|
2,144
|
|
|
|
1,345
|
|
|
General and Administrative
|
|
|
2,654
|
|
|
|
545
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating Expenses
|
|
|
10,686
|
|
|
|
4,560
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income
|
|
|
22,730
|
|
|
|
9,528
|
|
|
Other Expense
|
|
|
|
|
|
|
|
|
|
Interest Expense, Net of Amount Capitalized
|
|
|
910
|
|
|
|
515
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other Expense
|
|
|
910
|
|
|
|
515
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Before Income Taxes
|
|
|
21,820
|
|
|
|
9,013
|
|
|
Income Tax Provision
|
|
|
8,310
|
|
|
|
3,409
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income and Comprehensive Income
|
|
$
|
13,510
|
|
|
$
|
5,604
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited combined financial statements
F-9
Noble Midstream Partners LP Predecessor
Combined Balance Sheets
(in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Pro Forma
March 31,
2016
|
|
|
March 31,
2016
|
|
|
December 31,
2015
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents
|
|
$
|
8,293
|
|
|
$
|
8,293
|
|
|
$
|
26,612
|
|
|
Accounts Receivable—Related Party
|
|
|
23,053
|
|
|
|
23,053
|
|
|
|
13,250
|
|
|
Other Current Assets
|
|
|
77
|
|
|
|
77
|
|
|
|
83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Assets
|
|
|
31,423
|
|
|
|
31,423
|
|
|
|
39,945
|
|
|
Property, Plant and Equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Property, Plant and Equipment, Gross
|
|
|
279,344
|
|
|
|
279,344
|
|
|
|
273,722
|
|
|
Accumulated Depreciation and Amortization
|
|
|
(24,892
|
)
|
|
|
(24,892
|
)
|
|
|
(22,789
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Property, Plant and Equipment, Net
|
|
|
254,452
|
|
|
|
254,452
|
|
|
|
250,933
|
|
|
Investments
|
|
|
12,034
|
|
|
|
12,034
|
|
|
|
12,279
|
|
|
Deferred Charges
|
|
|
2,490
|
|
|
|
2,490
|
|
|
|
2,161
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
300,399
|
|
|
$
|
300,399
|
|
|
$
|
305,318
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND PARENT NET INVESTMENT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts Payable—Related Party
|
|
$
|
1,703
|
|
|
$
|
1,703
|
|
|
$
|
4,735
|
|
|
Accounts Payable—Trade
|
|
|
15,569
|
|
|
|
15,569
|
|
|
|
18,356
|
|
|
Due to Affiliate
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Other Current Liabilities
|
|
|
1,400
|
|
|
|
5,717
|
|
|
|
1,154
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Liabilities
|
|
|
18,672
|
|
|
|
22,989
|
|
|
|
24,245
|
|
|
Deferred Tax Liability
|
|
|
—
|
|
|
|
17,133
|
|
|
|
13,140
|
|
|
Asset Retirement Obligations
|
|
|
3,654
|
|
|
|
3,654
|
|
|
|
3,612
|
|
|
Other Long-Term Liabilities
|
|
|
757
|
|
|
|
757
|
|
|
|
782
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
23,083
|
|
|
|
44,533
|
|
|
|
41,779
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Net Equity—Parent Net Investment
|
|
|
277,316
|
|
|
|
255,866
|
|
|
|
263,539
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Parent Net Investment
|
|
$
|
300,399
|
|
|
$
|
300,399
|
|
|
$
|
305,318
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited combined financial statements
F-10
Noble Midstream Partners LP Predecessor
Combined Statements of Changes in Parent Net Investment
(in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
Total Net Equity—Net
Parent Investment
|
|
|
Balance at December 31, 2015
|
|
$
|
263,539
|
|
|
Net Income
|
|
|
13,510
|
|
|
Contributions from Parent
|
|
|
297
|
|
|
Distributions to Parent
|
|
|
(21,480
|
)
|
|
|
|
|
|
|
|
Balance at March 31, 2016
|
|
$
|
255,866
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited combined financial statements
F-11
Noble Midstream Partners LP Predecessor
Combined Statements of Cash Flows
(in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
|
|
2016
|
|
|
2015
|
|
|
Cash Flows From Operating Activities
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
13,510
|
|
|
$
|
5,604
|
|
|
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities
|
|
|
|
|
|
|
|
|
|
Depreciation, Depletion and Amortization
|
|
|
2,144
|
|
|
|
1,345
|
|
|
Deferred Income Taxes
|
|
|
3,993
|
|
|
|
3,409
|
|
|
Stock Based Compensation
|
|
|
75
|
|
|
|
57
|
|
|
Changes in Operating Assets and Liabilities
|
|
|
|
|
|
|
|
|
|
(Increase) in Accounts Receivable—Related Party
|
|
|
(9,803
|
)
|
|
|
(5,112
|
)
|
|
(Increase) Decrease in Other Current Assets
|
|
|
6
|
|
|
|
(104
|
)
|
|
Increase in Current Income Taxes Payable
|
|
|
4,153
|
|
|
|
—
|
|
|
Increase in Accounts Payable
|
|
|
464
|
|
|
|
2,889
|
|
|
Other Operating Assets and Liabilities, Net
|
|
|
57
|
|
|
|
204
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by Operating Activities
|
|
|
14,599
|
|
|
|
8,292
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities
|
|
|
|
|
|
|
|
|
|
Additions to Property, Plant and Equipment
|
|
|
(11,906
|
)
|
|
|
(19,371
|
)
|
|
Additions to Investments
|
|
|
(35
|
)
|
|
|
(854
|
)
|
|
Distributions from Investments
|
|
|
280
|
|
|
|
341
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Used in Investing Activities
|
|
|
(11,661
|
)
|
|
|
(19,884
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities
|
|
|
|
|
|
|
|
|
|
Distributions to Parent
|
|
|
(21,480
|
)
|
|
|
—
|
|
|
Contributions from Parent, net
|
|
|
223
|
|
|
|
21,522
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by (Used) in Financing Activities
|
|
|
(21,257
|
)
|
|
|
21,522
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (Decrease) in Cash and Cash Equivalents
|
|
|
(18,319
|
)
|
|
|
9,930
|
|
|
Cash and Cash Equivalents at Beginning of Period
|
|
|
26,612
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents at End of Period
|
|
$
|
8,293
|
|
|
$
|
9,930
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited combined financial statements
F-12
Noble Midstream Partners LP Predecessor
Notes to Combined Financial Statements
Note 1. Description of Business and Basis of Presentation
These combined financial
statements constitute the contributed business of our accounting predecessor (the “Predecessor,” “we” or “our”) from Noble Energy, Inc. (“Noble”) to a newly formed partnership, Noble Midstream Partners LP (the
“Partnership”), and have been prepared in connection with the initial public offering (the “Offering”) of common units representing limited partner interests in the Partnership.
The Predecessor business includes the contributed assets, liabilities and results of operations of (i) crude oil and natural gas gathering systems
located in the DJ Basin in northern Colorado (ii) crude oil treating facilities in the DJ Basin in northern Colorado (iii) fresh water storage and delivery and saltwater collection in the DJ Basin in northern Colorado and (iv) a 3.33%
non-controlling member interest in White Cliffs Pipeline, L.L.C. also located in the DJ Basin (the “White Cliffs Interest”) (collectively, the “Contributed Businesses”).
The Contributed Businesses were operated and held by a wholly owned subsidiary of Noble during the periods presented in the accompanying combined financial statements. It is anticipated that controlling
interests in the Contributed Businesses will be transferred by Noble to the Partnership, in connection with the Offering.
The combined
financial statements of the Predecessor have been prepared in accordance with accounting principles generally accepted in the US (“US GAAP”) for interim financial information. Accordingly, they do not include all of the information and
notes required by US GAAP for complete financial statements. Operating results for the three months ended March 31, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016.
These combined financial statements should be read in conjunction with the audited combined financial statements and accompanying notes for the year
ended December 31, 2015, included elsewhere in this prospectus.
The accompanying combined statements of operations include expenses related
to contracts with Noble beginning in January of 2015. See Note 2. Transactions with Affiliates. The combined financial statements include an allocation for interest expense. This allocation was based on capital expenditures during the respective
periods. We believe the assumptions underlying the accompanying combined financial statements, including the assumptions regarding allocation of expenses from Noble, are reasonable. Nevertheless, the accompanying combined financial statements may
not include all of the expenses that would have been incurred and may not reflect our results of operations, financial position and cash flows had we been a stand-alone company during the periods presented. Because a direct ownership relationship
did not exist among the businesses comprising the Predecessor, the net investment in the Predecessor is shown as Parent Net Investment, in lieu of owner’s equity, in the combined financial statements.
F-13
Noble Midstream Partners LP Predecessor
Notes to Combined Financial Statements
Note 2. Transactions with Affiliates
Revenues
We generate a substantial portion of our revenues from commercial agreements with Noble. Additional detail related to our related party revenue is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
|
|
2016
|
|
|
2015
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
Midstream Services—Related Party
|
|
|
|
|
|
|
|
|
|
Crude Oil, Natural Gas and Produced Water Gathering
|
|
$
|
21,574
|
|
|
$
|
8,788
|
|
|
Water Delivery
|
|
|
8,875
|
|
|
|
3,063
|
|
|
Crude Oil Treating
|
|
|
1,275
|
|
|
|
1,001
|
|
|
Electricity Charges
|
|
|
399
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Midstream Services—Related Party
|
|
$
|
32,123
|
|
|
$
|
12,852
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
We have historically been operated as part of the consolidated operations of Noble and a substantial
portion of our transactions are with Noble and its affiliates. Noble provides substantial labor and overhead support for us. In January of 2016, we amended our agreement with Noble, increasing the amount we pay as a fixed fee for certain overhead
support functions. For the three months ended March 31, 2016, our general and administrative charges totaled $2.7 million, of which $1.7 million was related to the fixed overhead fee as compared to $0.5 million for the three months ended March 31,
2015, of which $0.4 million was related to the fixed overhead fee.
Note 3. Property, Plant and Equipment
Property, plant and equipment, at cost, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2016
|
|
|
December 31,
2015
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
Crude Oil, Natural Gas and Produced Water Gathering Systems and Facilities
|
|
$
|
187,902
|
|
|
$
|
169,365
|
|
|
Water Delivery System
|
|
|
46,988
|
|
|
|
44,150
|
|
|
Crude Oil Treating Facilities
|
|
|
20,099
|
|
|
|
20,099
|
|
|
Construction-in-Progress
|
|
|
24,355
|
|
|
|
40,108
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Property, Plant and Equipment, at Cost
|
|
|
279,344
|
|
|
|
273,722
|
|
|
Accumulated Depreciation
|
|
|
(24,892
|
)
|
|
|
(22,789
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Property, Plant and Equipment, Net
|
|
$
|
254,452
|
|
|
$
|
250,933
|
|
|
|
|
|
|
|
|
|
|
|
Note 4. Asset Retirement Obligations
AROs consist primarily of estimated costs of dismantlement, removal, site reclamation and similar activities associated with our equipment and facilities. Changes in ARO are as follows:
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
|
|
2016
|
|
|
(in thousands)
|
|
|
|
|
Asset Retirement Obligations, Beginning Balance
|
|
$
|
3,612
|
|
|
Accretion Expense
(1)
|
|
|
42
|
|
|
|
|
|
|
|
|
Asset Retirement Obligations, Ending Balance
|
|
$
|
3,654
|
|
|
|
|
|
|
|
F-14
Noble Midstream Partners LP Predecessor
Notes to Combined Financial Statements
|
(1)
|
Accretion expense is included in depreciation, depletion and amortization
expense in the combined statements of
operations.
|
Note 5. Income Taxes
Income taxes have been prepared on a separate return basis as if the Predecessor was a stand-alone entity. The Predecessor, however, is included in Noble’s U.S. consolidated federal income tax return
and also files some U.S. state income tax returns on a combined basis with Noble. All income before income taxes for the periods presented was earned in the United States.
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
|
|
2016
|
|
|
2015
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
Current
|
|
$
|
4,317
|
|
|
$
|
—
|
|
|
Deferred
|
|
|
3,993
|
|
|
|
3,409
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Income Tax Provision
|
|
|
8,310
|
|
|
|
3,409
|
|
|
|
|
|
|
|
|
|
|
|
Our effective tax rate (ETR) for the three months ended March 31, 2016 is comparable with the three months ended March
31, 2015.
A reconciliation of the federal statutory tax rate to the effective tax rate is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
|
|
2016
|
|
|
2015
|
|
|
(percentages)
|
|
|
|
|
|
|
|
Federal Statutory Rate
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
Effect of
|
|
|
|
|
|
|
|
|
|
State Taxes, Net of Federal Benefit
|
|
|
3.1
|
%
|
|
|
2.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Effective Rate
|
|
|
38.1
|
%
|
|
|
37.8
|
%
|
|
|
|
|
|
|
|
|
|
|
Income Taxes Payable of $4.3 million and $0.2 million as of March 31, 2016 and December 31, 2015, respectively, are
included within Other Current Liabilities.
Note 6. Concentration of Credit Risk
Noble accounted for 96% and 91% of our revenues for the three months ended March 31, 2016 and 2015, respectively.
Note 7. Supplemental Cash Flow Information
We accrued $7.0 million and $9.9 million related to midstream capital expenditures as of March 31, 2016 and 2015, respectively.
Note 8. Segments
Our operations are located in the U.S. and are organized into the
following reporting segments: Gathering Systems, Water Delivery, Investments in Midstream Entities, and Partnership and Other. Our reportable segments comprise the structure used by our Chief Operating Decision Maker (“CODM”) to make key
operating decisions and assess performance.
F-15
Noble Midstream Partners LP Predecessor
Notes to Combined Financial Statements
Partnership expenses include general expenses associated with managing all reportable segments.
Partnership assets consist primarily of cash, accounts receivable and deferred tax assets.
Summarized financial information concerning the
Partnership’s reportable segments is shown in the following tables:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gathering
Systems
|
|
|
Water
Delivery
|
|
|
Investments
in Midstream
Entities
|
|
|
Partnership
and Other
|
|
|
Combined
|
|
|
Three Months Ended March 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues—Related Party
|
|
$
|
23,248
|
|
|
$
|
8,875
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
32,123
|
|
|
Income from Investments
|
|
|
—
|
|
|
|
—
|
|
|
|
1,293
|
|
|
|
—
|
|
|
|
1,293
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenues
|
|
|
23,248
|
|
|
|
8,875
|
|
|
|
1,293
|
|
|
|
—
|
|
|
|
33,416
|
|
|
Income (Loss) before Income Taxes
|
|
|
19,860
|
|
|
|
4,321
|
|
|
|
1,293
|
|
|
|
(3,654
|
)
|
|
|
21,820
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues—Related Party
|
|
$
|
9,789
|
|
|
$
|
3,063
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
12,852
|
|
|
Income from Investments
|
|
|
—
|
|
|
|
—
|
|
|
|
1,236
|
|
|
|
—
|
|
|
|
1,236
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenues
|
|
|
9,789
|
|
|
|
3,063
|
|
|
|
1,236
|
|
|
|
—
|
|
|
|
14,088
|
|
|
Income (Loss) before Income Taxes
|
|
|
6,264
|
|
|
|
2,730
|
|
|
|
1,236
|
|
|
|
(1,217
|
)
|
|
|
9,013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
|
205,360
|
|
|
|
49,092
|
|
|
|
12,034
|
|
|
|
33,913
|
|
|
|
300,399
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
|
201,744
|
|
|
|
49,189
|
|
|
|
12,279
|
|
|
|
42,106
|
|
|
|
305,318
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 9. Unaudited Supplemental Pro Forma Information
Unaudited supplemental pro forma balance sheet and net income (loss) per unit have been presented in accordance with SEC Staff Accounting Bulletin Topic 1.B.3. The supplemental pro forma balance sheet
gives effect to the distribution of approximately $ million to Noble to be paid upon completion of the Offering. Accordingly, the Partnership is deemed to have used $ million of net proceeds of the Offering of common units to pay the distribution,
which is evidenced by a due to affiliate reflected in the supplemental condensed combined pro forma balance sheet.
The Predecessor had net
income of $13.5 million for the three months ended March 31, 2016. Supplemental pro forma net income (loss) per limited partner unit assumes additional common units were issued to give effect to the distribution described above. The supplemental pro
forma net income per limited partner unit assumes common units, which includes the common units that would have been required to be issued in connection with the offering in order to pay the distribution, and subordinated units were outstanding for
the three months ended March 31, 2016. The number of common units deemed to have been sold in the Offering in order to pay the distribution described above is . This number was calculated by dividing the total $ million distribution in excess of
earnings for the three months ended March 31, 2016 by the initial public offering price of $ per unit (the mid-point of the price range set forth on the cover page of this prospectus after deducting underwriting discounts, the structuring fee and
estimated offering expenses).
The Predecessor had net income of $38.0 million for the year ended December 31, 2015. Supplemental pro
forma net income per limited partner unit assumes additional common units were issued to give effect to the distribution described above. The supplemental pro forma net loss per limited partner unit assumes common units, which includes the common
units that would have been required to be issued in connection with this
F-16
Noble Midstream Partners LP Predecessor
Notes to Combined Financial Statements
offering in order to pay the distribution, and subordinated units were outstanding for the year ended December 31, 2015. The number of common units deemed to have been sold in the Offering
in order to pay the distribution described above is . This number was calculated by dividing the total $ million distribution in excess of earnings for the year ended December 31, 2015 by the initial public offering price of $ per unit (the
mid-point of the price range set forth on the cover page of this prospectus after deducting underwriting discounts, the structuring fee and estimated offering expenses). There were no potential common units outstanding to be considered in the pro
forma diluted earnings per unit calculation for either period presented.
F-17
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors
Noble
Energy, Inc.:
We have audited the accompanying combined balance sheets of Noble Midstream Partners LP Predecessor (the
Predecessor) as of December 31, 2015 and 2014, and the related combined statements of operations and comprehensive income, changes in parent net investment and cash flows for the years then ended. These combined financial statements are the
responsibility of the Predecessor’s management. Our responsibility is to express an opinion on these combined financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of
Noble Midstream Partners LP Predecessor as of December 31, 2015 and 2014, and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.
As discussed in Note 2 to the financial statements, effective January 1, 2015, the Predecessor elected to change its method of accounting
for computing depreciation under the units-of-production method to the straight-line method for certain assets. That change is a change in accounting estimate effected by and inseparable from the change in accounting principle.
/s/ KPMG LLP
KPMG LLP
Houston, Texas
April 1, 2016
F-18
Noble Midstream Partners LP Predecessor
Combined Statements of Operations and Comprehensive Income (Loss)
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
|
|
2015
|
|
|
2014
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
Midstream Services—Related Party
|
|
$
|
87,837
|
|
|
$
|
2,086
|
|
|
Income from Investments
|
|
|
4,621
|
|
|
|
3,798
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenues
|
|
|
92,458
|
|
|
|
5,884
|
|
|
Costs and Expenses
|
|
|
|
|
|
|
|
|
|
Direct Operating
|
|
|
16,933
|
|
|
|
8,538
|
|
|
Depreciation, Depletion and Amortization
|
|
|
6,891
|
|
|
|
11,315
|
|
|
General and Administrative
|
|
|
2,771
|
|
|
|
6,734
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating Expenses
|
|
|
26,595
|
|
|
|
26,587
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income (Loss)
|
|
|
65,863
|
|
|
|
(20,703
|
)
|
|
Other Expense
|
|
|
|
|
|
|
|
|
|
Interest Expense, Net of Amount Capitalized
|
|
|
4,595
|
|
|
|
3,566
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other Expense
|
|
|
4,595
|
|
|
|
3,566
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) Before Income Taxes
|
|
|
61,268
|
|
|
|
(24,269
|
)
|
|
Income Tax Provision (Benefit)
|
|
|
23,226
|
|
|
|
(9,178
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) and Comprehensive Income (Loss)
|
|
$
|
38,042
|
|
|
$
|
(15,091
|
)
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an
integral part of these combined financial statements
F-19
Noble Midstream Partners LP Predecessor
Combined Balance Sheets
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2015
|
|
|
December 31,
2014
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents
|
|
$
|
26,612
|
|
|
$
|
—
|
|
|
Accounts Receivable—Related Party
|
|
|
13,250
|
|
|
|
—
|
|
|
Other Current Assets
|
|
|
83
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Assets
|
|
|
39,945
|
|
|
|
—
|
|
|
Property, Plant and Equipment
|
|
|
|
|
|
|
|
|
|
Total Property, Plant and Equipment, Gross
|
|
|
273,722
|
|
|
|
211,586
|
|
|
Accumulated Depreciation, Depletion and Amortization
|
|
|
(22,789
|
)
|
|
|
(16,073
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total Property, Plant and Equipment, Net
|
|
|
250,933
|
|
|
|
195,513
|
|
|
Investments
|
|
|
12,279
|
|
|
|
11,077
|
|
|
Deferred Tax Asset
|
|
|
—
|
|
|
|
9,922
|
|
|
Deferred Charges
|
|
|
2,161
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
305,318
|
|
|
$
|
216,512
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND PARENT NET INVESTMENT
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
|
Accounts Payable—Related Party
|
|
$
|
4,735
|
|
|
$
|
—
|
|
|
Accounts Payable—Trade
|
|
|
18,356
|
|
|
|
—
|
|
|
Other Current Liabilities
|
|
|
1,154
|
|
|
|
—
|
|
|
Due to Affiliate
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Liabilities
|
|
|
24,245
|
|
|
|
—
|
|
|
Deferred Tax Liability
|
|
|
13,140
|
|
|
|
—
|
|
|
Asset Retirement Obligations
|
|
|
3,612
|
|
|
|
2,839
|
|
|
Other Long-Term Liabilities
|
|
|
782
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
41,779
|
|
|
|
2,839
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies
|
|
|
|
|
|
|
|
|
|
Total Net Equity—Parent Net Investment
|
|
|
263,539
|
|
|
|
213,673
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Parent Net Investment
|
|
$
|
305,318
|
|
|
$
|
216,512
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these combined financial statements
F-20
Noble Midstream Partners LP Predecessor
Combined Statements of Changes in Parent Net Investment
(in thousands)
|
|
|
|
|
|
|
|
|
Total Net Equity—Net
Parent Investment
|
|
|
Balance at December 31, 2013
|
|
$
|
137,179
|
|
|
Net Loss
|
|
|
(15,091
|
)
|
|
Contributions from Parent
|
|
|
91,585
|
|
|
|
|
|
|
|
|
Balance at December 31, 2014
|
|
$
|
213,673
|
|
|
Net Income
|
|
|
38,042
|
|
|
Contributions from Parent
|
|
|
11,824
|
|
|
|
|
|
|
|
|
Balance at December 31, 2015
|
|
$
|
263,539
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these combined financial statements
F-21
Noble Midstream Partners LP Predecessor
Combined Statements of Cash Flows
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
|
|
2015
|
|
|
2014
|
|
|
Cash Flows From Operating Activities
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
38,042
|
|
|
$
|
(15,091
|
)
|
|
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by (Used in) Operating Activities
|
|
|
|
|
|
|
|
|
|
Depreciation, Depletion and Amortization
|
|
|
6,891
|
|
|
|
11,315
|
|
|
Deferred Income Taxes
|
|
|
23,062
|
|
|
|
(9,182
|
)
|
|
Stock Based Compensation
|
|
|
145
|
|
|
|
424
|
|
|
Changes in Operating Assets and Liabilities
|
|
|
|
|
|
|
|
|
|
(Increase) in Accounts Receivable—Related Party
|
|
|
(13,250
|
)
|
|
|
—
|
|
|
(Increase) in Other Current Assets
|
|
|
(83
|
)
|
|
|
—
|
|
|
Increase in Current Income Taxes Payable
|
|
|
164
|
|
|
|
—
|
|
|
Increase in Accounts Payable
|
|
|
14,812
|
|
|
|
—
|
|
|
Other Operating Assets and Liabilities, Net
|
|
|
(389
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by (Used) in Operating Activities
|
|
|
69,394
|
|
|
|
(12,534
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities
|
|
|
|
|
|
|
|
|
|
Additions to Property, Plant and Equipment
|
|
|
(53,259
|
)
|
|
|
(80,466
|
)
|
|
Additions to Investments
|
|
|
(2,294
|
)
|
|
|
—
|
|
|
Distributions from Investments
|
|
|
1,092
|
|
|
|
562
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Used in Investing Activities
|
|
|
(54,461
|
)
|
|
|
(79,904
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities
|
|
|
|
|
|
|
|
|
|
Contributions from Parent, Net
|
|
|
11,679
|
|
|
|
92,438
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided By Financing Activities
|
|
|
11,679
|
|
|
|
92,438
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in Cash and Cash Equivalents
|
|
|
26,612
|
|
|
|
—
|
|
|
Cash and Cash Equivalents at Beginning of Period
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents at End of Period
|
|
$
|
26,612
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these combined financial statements
F-22
Noble Midstream Partners LP Predecessor
Notes to Combined Financial Statements
Note 1. Description of Business and Basis of Presentation
These combined financial
statements constitute the contributed business of our accounting predecessor (the “Predecessor,” “we” or “our”) from Noble Energy, Inc. (“Noble”) to a newly formed partnership, Noble Midstream Partners LP (the
“Partnership”), and have been prepared in connection with the initial public offering (the “Offering”) of common units representing limited partner interests in the Partnership
The Predecessor business includes the contributed assets, liabilities and results of operations of (i) crude oil and natural gas gathering systems
located in the DJ Basin in northern Colorado (ii) crude oil treating facilities in the DJ Basin in northern Colorado (iii) fresh water storage and delivery and saltwater collection in the DJ Basin in northern Colorado and (iv) a 3.33%
non-controlling member interest in White Cliffs Pipeline, L.L.C. also located in the DJ Basin (the “White Cliffs Interest”) (collectively, the “Contributed Businesses”).
The Contributed Businesses were operated and held by a wholly owned subsidiary of Noble during the periods presented in the accompanying combined financial statements. It is anticipated that controlling
interests in the Contributed Businesses will be transferred by Noble to the Partnership, in connection with the Offering.
The combined
financial statements of the Predecessor have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) on the basis of Noble’s historical ownership of the Contributed Businesses.
The accompanying combined statements of operations include expenses related to contracts with Noble beginning in January 2015. See Note 3.
Transactions with Affiliates. For periods prior to 2015, the combined financial statements include allocations for certain functions historically performed by Noble, including allocations of general corporate services, such as treasury, accounting,
human resources and legal services. These allocations were based primarily on direct usage when identifiable or capital expenditures or other relevant allocation drivers during the respective periods. We believe the assumptions underlying the
accompanying combined financial statements, including the assumptions regarding allocation of expenses from Noble, are reasonable. Nevertheless, the accompanying combined financial statements may not include all of the expenses that would have been
incurred and may not reflect our results of operations, financial position and cash flows had we been a stand-alone company during the periods presented. Because a direct ownership relationship did not exist among the businesses comprising the
Predecessor, the net investment in the Predecessor is shown as Parent Net Investment, in lieu of owner’s equity, in the combined financial statements. No goodwill is included in our combined financial statements as none of the goodwill held by
Noble at December 31, 2014 is associated with the historical basis of the Contributed Business.
Noble used a centralized approach to the cash
management and financing of the Predecessor’s operations prior to January 1, 2015. The Predecessor had no bank accounts prior to January 1, 2015 and, as such, the cash generated by our operations was directly received by Noble, and
Noble funded our operating and investing activities as needed. Accordingly, the cash and cash equivalents held by Noble were not allocated to us prior to January 1, 2015. We have reflected cash management and financing activities performed by
Noble as a component of parent net investment on our accompanying combined balance sheet as of December 31, 2014, and as contributions from parent, net on our accompanying combined statements of cash flows for the year ended December 31, 2014.
Note 2. Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with GAAP requires us to make a number of estimates and assumptions relating to the reported amounts of assets and liabilities
and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues
F-23
Noble Midstream Partners LP Predecessor
Notes to Combined Financial Statements
and expenses during the reporting period. Items subject to estimates and assumptions include the useful lives of property and equipment, obligations for environmental liabilities, allocations
of expenses from Noble, and deferred tax assets and liabilities, among others. Although management believes these amounts are reasonable, actual results could differ from these estimates.
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include unrestricted cash on hand and investments with
original maturities of three months or less at the time of purchase.
Property, Plant and Equipment
Property, plant and
equipment primarily consists of gathering pipelines, facilities and related equipment, which are stated at the lower of historical cost less accumulated depreciation, or fair value, if impaired. We capitalize construction-related direct labor,
material costs and the interest related to construction. Maintenance and repair costs are expensed as incurred. Prior to January 1, 2015, certain assets were accounted for under the successful efforts method of accounting within Noble’s
accounting policies. Under this method, costs to acquire mineral interests in crude oil and natural gas properties, drill and equip exploratory wells that find proved reserves, and drill and equip development wells are capitalized. Capitalized costs
of producing crude oil and natural gas properties, along with support equipment and facilities, are amortized to expense by the unit-of-production method based on proved crude oil, natural gas and NGL reserves on a field-by-field basis, as estimated
by Noble’s qualified petroleum engineers. Noble’s policy is to use quarter-end reserves and add back current period production to compute quarterly depreciation, depletion and amortization expense. Costs of certain gathering facilities or
processing plants serving a number of properties are depreciated using the straight-line method over the useful lives of the assets ranging from three to thirty years. Upon sale or retirement of depreciable or depletable property, the cost and
related accumulated depreciation, depletion and amortization are eliminated from the accounts and the resulting gain or loss is recognized.
Although Noble has historically operated the midstream assets in support of the U.S. onshore upstream business as a cost center within the U.S.
reportable segment, beginning in January 2015, Noble began operating the midstream business as a stand-alone business. However, the midstream business will continue to be consolidated by Noble and reported within Noble’s consolidated financial
statements. Due to the change in the intended use of these assets, Noble changed the method of depreciation from units-of-production to the straight-line method for future accounting periods. This change is a change in accounting estimate that is
effected by a change in accounting principle. When the two are inseparable, the change is accounted for as a change in accounting estimate. Depreciation will be calculated on a straight-line basis prospectively from the first quarter of 2015, the
period of change, and in prospective periods. For assets that were converted from the unit-of-production method, their respective asset lives will be 30 years from the date originally placed into service. As of December 31, 2015 our assets have
remaining useful lives ranging from 23 to 30 years.
Property and equipment included assets under construction of $40.1 million and $42.0
million at December 31, 2015 and December 31, 2014, respectively.
Capitalization of Interest
We capitalize interest costs
associated with the development and construction of significant assets or projects to bring them to a condition and location necessary for their intended use. Interest is capitalized using an interest rate equivalent to the weighted average rate
Noble pays on long-term debt. Capitalized interest is included in Property, plant and equipment and is depreciated over the life of the asset. Capitalized interest totaled $2.5 million and $1.6 million for the years ended December 31, 2015 and 2014,
respectively.
Investments
We use the cost method of accounting for investments in entities that we do not control or exert
significant influence over. We carry the investments at cost on our combined balance sheet and recognize
F-24
Noble Midstream Partners LP Predecessor
Notes to Combined Financial Statements
dividends on our combined statement of operations when received. Dividends received in excess of earnings are recorded as a return of capital on the combined balance sheet. We account for our
investment in the White Cliffs Interest under the cost method of accounting for investments because we have virtually no influence over partnership operations and financial policies.
Asset Retirement Obligations
Asset retirement obligations (“AROs”) consist of estimated costs of dismantlement, removal, site reclamation and similar activities associated with our
equipment and facilities. We recognize the fair value of a liability for an ARO in the period in which it is incurred when we have an existing legal obligation associated with the retirement of our properties that can reasonably be estimated, with
the associated asset retirement cost capitalized as part of the carrying cost of the asset. The asset retirement cost is determined at current costs and is inflated into future dollars using an inflation rate that is based on the consumer price
index. The future projected cash flows are then discounted to their present value using a credit-adjusted risk-free rate. After initial recording, the liability is increased for the passage of time, with the increase being reflected as accretion
expense and included in our depreciation, depletion and amortization expense in the combined statement of operations. Subsequent adjustments in the cost estimate are reflected in the liability and the amounts continue to be amortized over the useful
life of the related long-lived asset.
Deferred Charges
We defer incremental costs directly attributable to the Offering, and as
of December 31, 2015 we had deferred $2.2 million of associated charges. These charges will be netted against gross proceeds of the Offering, once completed. Alternatively, if we decide not to continue towards the Offering or the Offering is
postponed or significantly delayed, these costs will be expensed in the period in which we elected not to proceed with the Offering or due to the assessment of current facts and circumstances. These costs are primarily comprised of legal, accounting
and printing fees associated with drafting the registration statement.
Parent Net Investment
In the accompanying combined balance
sheets, parent net investment represents Noble’s historical investment in us, our accumulated net results, and the net effect of transactions with, and allocations from, Noble.
Revenue Recognition
Beginning in January 2015, we earn substantially all of our revenues from our commercial agreements we have entered into with Noble. We recognize revenues when persuasive
evidence of an arrangement exists, delivery has occurred or services have been rendered, price is fixed or determinable and collectability is reasonably assured.
We recognized related party revenues of $87.8 million and $2.1 million from Noble during the year ended December 31, 2015 and 2014, respectively.
Income Taxes
We are not a separate taxable entity for U.S. federal and state tax purposes, and our results are included in the consolidated income tax returns of Noble. The provision for income
taxes and income tax assets and liabilities were determined as if we were a stand-alone taxpayer for all periods presented. Deferred income taxes are determined using the liability method and reflect temporary differences between the financial
statement carrying amount and income tax basis of assets and liabilities recorded using the currently enacted statutory income tax rates. Regular assessments are made of the likelihood of those deferred tax assets being realized. If it is more
likely than not that some or all of the deferred tax assets will not be realized, a valuation allowance is recorded to reduce the deferred tax assets to the amount expected to be realized. Following the Offering, our operations will be treated as a
partnership for federal and state income tax purposes, with each partner being separately taxed on its share of taxable income.
Comprehensive Income (Loss)
There are no differences between net income (loss) and comprehensive income (loss) due to the absence of items of
other comprehensive income (loss) in the periods presented.
F-25
Noble Midstream Partners LP Predecessor
Notes to Combined Financial Statements
Recently Issued Accounting Standards
Income Taxes
In November 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2015-17 (ASU 2015-17):
Income Taxes (Topic 940)
, effective for
annual and interim reporting periods beginning after December 15, 2016, with early adoption permitted. ASU 2015-17 requires that all deferred tax liabilities and assets, as well as any related valuation allowance, be classified in the balance sheet
as noncurrent. This guidance may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. We elected to early adopt ASU 2015-17 as of December 31, 2015 with prospective application. See
Note 7. Income Taxes.
Consolidation
In February 2015, the FASB issued Accounting Standards Update No. 2015-02 (ASU
2015-02):
Consolidation—Amendments to the Consolidation Analysis
, effective for annual and interim periods beginning after December 15, 2015. ASU 2015-02 changes the guidance as to whether an entity is a variable interest entity
(VIE) or a voting interest entity and how related parties are considered in the VIE model. We are currently evaluating the provisions of ASU 2015-02 and assessing the impact, if any, it may have on our financial position and results of operations.
Revenue Recognition
In May 2014, the FASB issued Accounting Standards Update No. 2014-09 (ASU 2014-09), which creates Topic 606,
Revenue from Contracts with Customers
, and supersedes the revenue recognition requirements in Topic 605,
Revenue Recognition
, including most industry-specific revenue recognition guidance throughout the Industry Topics of the
Codification. In addition, ASU 2014-09 supersedes the cost guidance in Subtopic 605-35,
Revenue Recognition—Construction—Type and Production—Type Contracts
, and creates new Subtopic 340-40, Other Assets and Deferred
Costs—Contracts with Customers.
In summary, the core principle of Topic 606 is that an entity recognizes revenue to depict the transfer
of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Additionally, ASU 2014-09 requires enhanced financial statement disclosures
over revenue recognition as part of the new accounting guidance. The standard will be effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. We are currently
evaluating the provisions of ASU 2014-09 and implementation guidance to determine the impact, if any, it may have on our financial position and results of operations.
Note 3. Transactions with Affiliates
Revenues
We generate a substantial portion of
our revenues from commercial agreements with Noble. Additional detail related to our related party revenue is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31
|
|
|
|
|
2015
|
|
|
2014
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
Midstream Services—Related Party
|
|
|
|
|
|
|
|
|
|
Natural Gas, Crude Oil and Produced Water Gathering
|
|
$
|
56,297
|
|
|
$
|
—
|
|
|
Water Delivery
|
|
|
27,097
|
|
|
|
—
|
|
|
Crude Oil Treating
|
|
|
4,443
|
|
|
|
2,086
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Midstream Services—Related Party
|
|
$
|
87,837
|
|
|
$
|
2,086
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
We have historically been operated as part of the consolidated operations of Noble and a substantial
portion of our transactions are with Noble and its affiliates. Noble provides substantial labor and overhead support for us. In January of 2015 we entered into an agreement to pay a fixed fee for certain overhead support
F-26
Noble Midstream Partners LP Predecessor
Notes to Combined Financial Statements
functions. For the year ended December 31, 2015, our general and administrative charges totaled $2.8 million. Prior to entering into this agreement, these allocations were based primarily on
direct usage when identifiable or capital expenditures during the respective periods. Management believes that these allocations are reasonable and reflect the utilization of services provided and benefits received, but may differ from the cost that
would have been incurred had we operated as a stand-alone company for the periods presented. For the year ended December 31, 2014, allocated general and administrative expenses including treasury, tax, accounting, human resources and legal
services totaled $6.7 million. Additionally, Noble allocated interest expense to us based on capital expenditures for the periods presented.
Note 4. Property, Plant and Equipment
Property, plant and equipment, at cost, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2015
|
|
|
December 31,
2014
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
Crude Oil, Natural Gas and Produced Water Gathering Systems and Facilities
|
|
$
|
169,365
|
|
|
$
|
109,530
|
|
|
Water Delivery System
|
|
|
44,150
|
|
|
|
39,952
|
|
|
Crude Oil Treating Facilities
|
|
|
20,099
|
|
|
|
20,123
|
|
|
Construction-in-Progress
|
|
|
40,108
|
|
|
|
41,981
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Property, Plant and Equipment, at Cost
|
|
|
273,722
|
|
|
|
211,586
|
|
|
Accumulated Depreciation
|
|
|
(22,789
|
)
|
|
|
(16,073
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Property, Plant and Equipment, Net
|
|
$
|
250,933
|
|
|
$
|
195,513
|
|
|
|
|
|
|
|
|
|
|
|
Note 5. Asset Retirement Obligations
AROs consist primarily of estimated costs of dismantlement, removal, site reclamation and similar activities associated with our equipment and facilities. Changes in ARO are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
|
|
2015
|
|
|
2014
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
Asset Retirement Obligations, Beginning Balance
|
|
$
|
2,839
|
|
|
$
|
2,704
|
|
|
Liabilities Incurred
|
|
|
599
|
|
|
|
—
|
|
|
Accretion Expense
(1)
|
|
|
174
|
|
|
|
135
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Retirement Obligations, Ending Balance
|
|
$
|
3,612
|
|
|
$
|
2,839
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Accretion expense is included in depreciation, depletion and amortization expense in the combined statements of operations.
|
For the years ended December 31, 2015 and 2014, liabilities incurred were related to our central gathering facility in Weld County, Colorado.
Note 6. Stock-Based Compensation
Certain Noble employees supporting our operations were granted stock-based compensation awards under Noble stock option and restricted stock plans.
Expenses associated with these Noble stock-based compensation awards were included in the Predecessor’s combined statements of operations during the respective years. In 2015, we
F-27
Noble Midstream Partners LP Predecessor
Notes to Combined Financial Statements
recognized $145 thousand of expense related to Noble stock compensation awards. In 2014, we recognized $424 thousand of expense related to Noble stock compensation awards.
Noble’s stock-based compensation plans may grant stock options and stock appreciation rights and award restricted stock and cash awards to our
officers or other employees and those of our subsidiaries. Stock options are issued with an exercise price equal to the fair market value of Noble’s common stock on the date of grant, and are subject to such other terms and conditions as may be
determined by the Compensation, Benefits, and Stock Option Committee (the “Committee”) of Noble’s Board of Directors. Unless granted by the Committee for a shorter term, the options expire 10 years from the grant date. Option grants
generally vest ratably over a three-year period.
Restricted stock awards with a time-vested restriction vest over a three year period (20%
after year one, an additional 30% after year two and the remaining 50% after year three) or over a two year period (40% after year one and the remaining 60% after year two). Restricted stock awards with a performance-vested restriction cliff vest
after a three year period if Noble achieves certain levels of total shareholder return relative to a pre-determined industry peer group.
Stock Option Grants
The fair value of
each stock option granted was estimated on the date of grant using a Black-Scholes-Merton option valuation model that used the assumptions described below:
|
|
•
|
|
Expected term
. The expected term represents the period of time that options granted are expected to be outstanding, which is the grant date to
the date of expected exercise or other expected settlement for options granted. The hypothetical midpoint scenario considers Noble’s actual exercise and post-vesting cancellation history and expectations for future periods, which assumes that
all vested, outstanding options are settled halfway between the current date and their expiration date.
|
|
|
•
|
|
Expected volatility
. The expected volatility represents the extent to which Noble’s stock price is expected to fluctuate between the grant
date and the expected term of the award. Historical volatility of Noble’s common stock relates to a period equal to the expected term of the option prior to the date of grant. Historical volatility produces an estimate that is representative of
Noble’s expectations about the future volatility of Noble’s common stock over the expected term.
|
|
|
•
|
|
Risk-free rate
. The risk-free rate is the implied yield available on US Treasury securities with a remaining term equal to the expected term of
the option. The risk-free rate is based on a weighting of five and seven year US Treasury securities as of the date of grant.
|
|
|
•
|
|
Dividend yield
. The dividend yield represents the value of Noble’s stock’s annualized dividend as compared to Noble’s
stock’s average price for the three-year period ended prior to the date of grant. It is calculated by dividing one full year of Noble’s expected dividends by Noble’s average stock price over the three-year period ended prior to the
date of grant.
|
The assumptions used in valuing Noble’s stock options granted were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
(weighted averages)
|
|
2015
|
|
|
2014
|
|
|
Expected Term (in Years)
|
|
|
6.0
|
|
|
|
5.9
|
|
|
Expected Volatility
|
|
|
32.6
|
%
|
|
|
35.1
|
%
|
|
Risk-Free Rate
|
|
|
1.4
|
%
|
|
|
1.8
|
%
|
|
Expected Dividend Yield
|
|
|
1.2
|
%
|
|
|
1.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Grant-Date Fair Value
|
|
$
|
13.93
|
|
|
$
|
20.31
|
|
|
|
|
|
|
|
|
|
|
|
F-28
Noble Midstream Partners LP Predecessor
Notes to Combined Financial Statements
Restricted Stock Awards
Awards of time-vested restricted stock (shares subject to service
conditions) are valued at the price of Noble’s common stock at the date of award. The fair values of performance based restricted stock awards are estimated on the grant date of award using a Monte Carlo valuation model that uses the
assumptions in the following table. The Monte Carlo model is based on random projections of stock price paths and must be repeated numerous times to achieve a probabilistic assessment. Expected volatility represents the extent to which Noble’s
stock price is expected to fluctuate between now and the award’s anticipated term. The calculation uses the historical volatility of Noble’s common stock for the three-year period ended prior to the date of award. The risk-free rate is
based on a three-year period for U.S. Treasury securities as of the year ended prior to the date of award.
The assumptions used in valuing
Noble’s performance based restricted stock awards granted were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
|
|
2015
|
|
|
2014
|
|
|
Number of Simulations
|
|
|
500,000
|
|
|
|
500,000
|
|
|
Expected Volatility
|
|
|
30
|
%
|
|
|
30
|
%
|
|
Risk-Free Rate
|
|
|
0.8
|
%
|
|
|
0.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Award-Date Fair Value
|
|
$
|
35.53
|
|
|
$
|
41.22
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2015, $82 thousand of compensation cost related to unvested stock options granted under Noble’s
stock option plan remained to be recognized. The cost is expected to be recognized over a weighted-average period of 0.8 years.
Note 7.
Income Taxes
Income taxes have been prepared on a separate return basis as if the Predecessor was a stand-alone entity. The Predecessor,
however, is included in Noble’s U.S. consolidated federal income tax return and also files some U.S. state income tax returns on a combined basis with Noble. All income before income taxes for the periods presented was earned in the United
States.
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December
31,
|
|
|
|
|
2015
|
|
|
2014
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
Current Taxes
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
—
|
|
|
$
|
—
|
|
|
State
|
|
|
164
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current
|
|
|
164
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred Taxes
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
21,289
|
|
|
|
(8,494
|
)
|
|
State
|
|
|
1,773
|
|
|
|
(688
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total Deferred
|
|
|
23,062
|
|
|
|
(9,182
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total Income Tax Provision
|
|
$
|
23,226
|
|
|
$
|
(9,178
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Effective Tax Rate
|
|
|
37.9
|
%
|
|
|
37.8
|
%
|
|
|
|
|
|
|
|
|
|
|
F-29
Noble Midstream Partners LP Predecessor
Notes to Combined Financial Statements
A reconciliation of the federal statutory tax rate to the effective tax rate is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
|
|
2015
|
|
|
2014
|
|
|
(percentages)
|
|
|
|
|
|
|
|
Federal Statutory Rate
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
Effect of
|
|
|
|
|
|
|
|
|
|
State Taxes, Net of Federal Benefit
|
|
|
2.9
|
%
|
|
|
2.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Effective Rate
|
|
|
37.9
|
%
|
|
|
37.8
|
%
|
|
|
|
|
|
|
|
|
|
|
The components of deferred tax assets and liabilities are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
(in thousands)
|
|
2015
|
|
|
2014
|
|
|
Deferred Tax Assets
|
|
|
|
|
|
|
|
|
|
Loss Carryforwards
|
|
$
|
8,267
|
|
|
$
|
18,839
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Deferred Tax Assets
(1)
|
|
|
8,267
|
|
|
|
18,839
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred Tax Liabilities
|
|
|
|
|
|
|
|
|
|
Property, Plant and Equipment, Principally Due to Differences in Depreciation, Amortization
|
|
|
(21,407
|
)
|
|
|
(8,917
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total Deferred Tax Liability
(1)
|
|
|
(21,407
|
)
|
|
|
(8,917
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net Deferred Tax Asset (Liability)
|
|
$
|
(13,140
|
)
|
|
$
|
9,922
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
As discussed in Note 2. Summary of Significant Accounting Policies, we have elected to early adopt and apply the presentation requirements of ASU 2015-17, Balance Sheet
Classification of Deferred Taxes, as of December 31, 2015. Prior periods have not been retrospectively adjusted.
|
At December
31, 2015, we had net operating losses (NOL) of $21.4 million that, if unused, will begin to expire in 2034. The realization of the deferred tax asset related to the NOL is dependent upon generating sufficient taxable income in the applicable
jurisdictions. We believe future revenue will generate sufficient taxable income to utilize the NOL and a valuation allowance will not be required.
Note 8. Concentration of Credit Risk
Noble accounted for 95% and 35% of our revenues for
the years ended December 31, 2015 and 2014, respectively.
Note 9. Supplemental Cash Flow Information
We accrued $13.3 million and $5.0 million related to midstream capital expenditures as of December 31, 2015 and 2014, respectively.
Note 10. Commitments and Contingencies
Legal Proceedings
For the periods
presented, we were part of Noble’s integrated business. In the ordinary course of business, Noble is from time to time party to various judicial and administrative proceedings. Noble regularly assesses the need
F-30
Noble Midstream Partners LP Predecessor
Notes to Combined Financial Statements
for accounting recognition or disclosure of these contingencies. In the case of a known contingency, Noble accrues a liability when the loss is probable and the amount is reasonably estimable. If
a range of amounts can be reasonably estimated and no amount within the range is a better estimate than any other amount, then the minimum of the range is accrued. As of December 31, 2015 and 2014, Noble did not have accrued liabilities for any
legal contingencies related to us. Based on currently available information, we believe it is remote that the outcome of known matters would have a material adverse impact on our combined financial condition, results of operations or cash flows.
Note 11. Segments
Our
operations are located in the U.S. and are organized into the following reporting segments: Gathering Systems, Water Delivery, Investments in Midstream Entities, and Partnership and Other. Our reportable segments comprise the structure used by our
Chief Operating Decision Maker (“CODM”) to make key operating decisions and assess performance. The accounting policies of the segments are identical to those described in Note 2. Summary of Significant Accounting Policies of these
combined financial statements.
Partnership expenses include general expenses associated with managing all reportable segments. Partnership
assets consist primarily of cash, accounts receivable and deferred tax assets.
Summarized financial information concerning the
Partnership’s reportable segments is shown in the following tables:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gathering
Systems
|
|
|
Water
Delivery
|
|
|
Investments
in Midstream
Entities
(1)
|
|
|
Partnership
and Other
|
|
|
Combined
|
|
|
Year Ended December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues—Related Party
|
|
$
|
60,740
|
|
|
$
|
27,097
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
87,837
|
|
|
Income from Investments
|
|
|
—
|
|
|
|
—
|
|
|
|
4,621
|
|
|
|
—
|
|
|
|
4,621
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenues
|
|
|
60,740
|
|
|
|
27,097
|
|
|
|
4,621
|
|
|
|
—
|
|
|
|
92,458
|
|
|
Income (Loss) before Income Taxes
|
|
|
41,646
|
|
|
|
22,899
|
|
|
|
4,621
|
|
|
|
(7,898
|
)
|
|
|
61,268
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues—Related Party
|
|
$
|
2,086
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,086
|
|
|
Income from Investments
|
|
|
—
|
|
|
|
—
|
|
|
|
3,798
|
|
|
|
—
|
|
|
|
3,798
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenues
|
|
|
2,086
|
|
|
|
—
|
|
|
|
3,798
|
|
|
|
—
|
|
|
|
5,884
|
|
|
Income (Loss) before Income Taxes
|
|
|
(13,381
|
)
|
|
|
(2,303
|
)
|
|
|
3,798
|
|
|
|
(12,383
|
)
|
|
|
(24,269
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
|
201,744
|
|
|
|
49,189
|
|
|
|
12,279
|
|
|
|
42,106
|
|
|
|
305,318
|
|
|
Additions to Long-Lived Assets
|
|
|
50,858
|
|
|
|
11,278
|
|
|
|
—
|
|
|
|
—
|
|
|
|
62,136
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
|
156,302
|
|
|
|
39,211
|
|
|
|
11,077
|
|
|
|
9,922
|
|
|
|
216,512
|
|
|
Additions to Long-Lived Assets
|
|
|
64,947
|
|
|
|
14,242
|
|
|
|
—
|
|
|
|
—
|
|
|
|
79,189
|
|
|
(1)
|
Total Assets includes $2.3 million of additions to investments, offset by $1.1 million of distributions from investments during the year ended December 31, 2015
|
F-31
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Partners of Noble Midstream Partners LP:
We have audited the accompanying balance sheet of Noble Midstream Partners LP (the Partnership) as of April 30, 2016. This balance sheet is the responsibility of the Partnership’s management. Our
responsibility is to express an opinion on this balance sheet based on our audit.
We conducted our audit in accordance with
the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall balance sheet presentation. We believe that our audit provide a reasonable basis for our opinion.
In
our opinion, the balance sheet referred to above presents fairly, in all material respects, the financial position of Noble Midstream Partners LP as of April 30, 2016, in conformity with U.S. generally accepted accounting principles.
/s/ KPMG LLP
KPMG LLP
Houston, Texas
May 12, 2016
F-32
Noble Midstream Partners LP
Balance Sheet
|
|
|
|
|
|
|
|
|
April 30, 2016
|
|
|
Assets
|
|
|
|
|
|
Cash
|
|
$
|
1,000
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
1,000
|
|
|
|
|
|
|
|
|
Partners’ Capital
|
|
|
|
|
|
Limited Partner
|
|
|
980
|
|
|
General Partner
|
|
|
20
|
|
|
|
|
|
|
|
|
Total Partners’ Capital
|
|
$
|
1,000
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements
F-33
Noble Midstream Partners LP
Notes to Balance Sheet
Note 1. Description of Business and Basis of Presentation
Noble Midstream Partners LP (“we” or the “Partnership”) is a Delaware limited partnership, which was formed on December 23, 2014 but has not yet commenced operations. Noble
Midstream Partners GP LLC (the “General Partner”) is a limited liability company formed on December 23, 2014 to become the General Partner of the Partnership.
On December 23, 2014, in connection with the formation of the Partnership, Noble Midstream Partners LP issued to (i) Noble Midstream Partners GP LLC a 1% General Partner interest in the
Partnership for $20 and (ii) to Noble Midstream Services, LLC, a 99% limited partner interest in the Partnership for $980.
Note 2.
Subsequent Events
We have evaluated subsequent events through the date of issuance of the balance sheet. Any material
subsequent events that have occurred during this time have been properly recognized or disclosed in the balance sheet or notes to the financial statement.
F-34
APPENDIX A
FORM OF
FIRST AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
NOBLE MIDSTREAM PARTNERS LP
A Delaware Limited Partnership
Dated as of
[ ], 2016
TABLE OF CONTENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
|
|
|
Article I DEFINITIONS
|
|
A-1
|
|
|
|
|
|
|
|
|
Section 1.1
|
|
Definitions
|
|
A-1
|
|
|
|
|
|
|
|
|
Section 1.2
|
|
Construction
|
|
A-21
|
|
|
|
|
Article II ORGANIZATION
|
|
A-21
|
|
|
|
|
|
|
|
|
Section 2.1
|
|
Formation
|
|
A-21
|
|
|
|
|
|
|
|
|
Section 2.2
|
|
Name
|
|
A-21
|
|
|
|
|
|
|
|
|
Section 2.3
|
|
Registered Office; Registered Agent; Principal Office; Other Offices
|
|
A-21
|
|
|
|
|
|
|
|
|
Section 2.4
|
|
Purpose and Business
|
|
A-21
|
|
|
|
|
|
|
|
|
Section 2.5
|
|
Powers
|
|
A-22
|
|
|
|
|
|
|
|
|
Section 2.6
|
|
Term
|
|
A-22
|
|
|
|
|
|
|
|
|
Section 2.7
|
|
Title to Partnership Property
|
|
A-22
|
|
|
|
|
Article III RIGHTS OF LIMITED PARTNERS
|
|
A-22
|
|
|
|
|
|
|
|
|
Section 3.1
|
|
Limitation of Liability
|
|
A-22
|
|
|
|
|
|
|
|
|
Section 3.2
|
|
Management of Business
|
|
A-22
|
|
|
|
|
|
|
|
|
Section 3.3
|
|
Rights of Limited Partners.
|
|
A-23
|
|
|
|
|
Article IV CERTIFICATES; RECORD HOLDERS; TRANSFER OF PARTNERSHIP INTERESTS; REDEMPTION OF PARTNERSHIP
INTERESTS
|
|
A-24
|
|
|
|
|
|
|
|
|
Section 4.1
|
|
Certificates
|
|
A-24
|
|
|
|
|
|
|
|
|
Section 4.2
|
|
Mutilated, Destroyed, Lost or Stolen Certificates.
|
|
A-24
|
|
|
|
|
|
|
|
|
Section 4.3
|
|
Record Holders
|
|
A-25
|
|
|
|
|
|
|
|
|
Section 4.4
|
|
Transfer Generally
|
|
A-25
|
|
|
|
|
|
|
|
|
Section 4.5
|
|
Registration and Transfer of Limited Partner Interests
|
|
A-26
|
|
|
|
|
|
|
|
|
Section 4.6
|
|
Transfer of the General Partner’s General Partner Interest
|
|
A-27
|
|
|
|
|
|
|
|
|
Section 4.7
|
|
Transfer of Incentive Distribution Rights
|
|
A-27
|
|
|
|
|
|
|
|
|
Section 4.8
|
|
Restrictions on Transfers
|
|
A-27
|
|
|
|
|
|
|
|
|
Section 4.9
|
|
Eligibility Certificates; Ineligible Holders
|
|
A-28
|
|
|
|
|
|
|
|
|
Section 4.10
|
|
Redemption of Partnership Interests of Ineligible Holders
|
|
A-29
|
|
|
|
|
Article V CAPITAL CONTRIBUTIONS AND ISSUANCE OF PARTNERSHIP INTERESTS
|
|
A-30
|
|
|
|
|
|
|
|
|
Section 5.1
|
|
Organizational Contributions
|
|
A-30
|
|
|
|
|
|
|
|
|
Section 5.2
|
|
Contributions by Limited Partners
|
|
A-31
|
|
|
|
|
|
|
|
|
Section 5.3
|
|
Interest and Withdrawal
|
|
A-31
|
|
|
|
|
|
|
|
|
Section 5.4
|
|
Capital Accounts
|
|
A-31
|
|
|
|
|
|
|
|
|
Section 5.5
|
|
Issuances of Additional Partnership Interests and Derivative Partnership Interests
|
|
A-34
|
|
|
|
|
|
|
|
|
Section 5.6
|
|
Conversion of Subordinated Units
|
|
A-35
|
|
|
|
|
|
|
|
|
Section 5.7
|
|
Limited Preemptive Right
|
|
A-35
|
|
|
|
|
|
|
|
|
Section 5.8
|
|
Splits and Combinations
|
|
A-35
|
|
|
|
|
|
|
|
|
Section 5.9
|
|
Fully Paid and Non-Assessable Nature of Limited Partner Interests
|
|
A-36
|
|
|
|
|
|
|
|
|
Section 5.10
|
|
Issuance of Common Units in Connection with Reset of Incentive Distribution Rights
|
|
A-36
|
A-i
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
|
|
|
Article VI ALLOCATIONS AND DISTRIBUTIONS
|
|
A-37
|
|
|
|
|
|
|
|
|
Section 6.1
|
|
Allocations for Capital Account Purposes
|
|
A-37
|
|
|
|
|
|
|
|
|
Section 6.2
|
|
Allocations for Tax Purposes
|
|
A-45
|
|
|
|
|
|
|
|
|
Section 6.3
|
|
Requirement and Characterization of Distributions; Distributions to Record Holders
|
|
A-46
|
|
|
|
|
|
|
|
|
Section 6.4
|
|
Distributions of Available Cash from Operating Surplus
|
|
A-47
|
|
|
|
|
|
|
|
|
Section 6.5
|
|
Distributions of Available Cash from Capital Surplus
|
|
A-48
|
|
|
|
|
|
|
|
|
Section 6.6
|
|
Adjustment of Minimum Quarterly Distribution and Target Distribution Levels
|
|
A-48
|
|
|
|
|
|
|
|
|
Section 6.7
|
|
Special Provisions Relating to the Holders of Subordinated Units
|
|
A-48
|
|
|
|
|
|
|
|
|
Section 6.8
|
|
Special Provisions Relating to the Holders of Incentive Distribution Rights
|
|
A-49
|
|
|
|
|
|
|
|
|
Section 6.9
|
|
Entity-Level Taxation
|
|
A-49
|
|
|
|
|
Article VII MANAGEMENT AND OPERATION OF BUSINESS
|
|
A-50
|
|
|
|
|
|
|
|
|
Section 7.1
|
|
Management
|
|
A-50
|
|
|
|
|
|
|
|
|
Section 7.2
|
|
Certificate of Limited Partnership
|
|
A-52
|
|
|
|
|
|
|
|
|
Section 7.3
|
|
Restrictions on the General Partner’s Authority to Sell Assets of the Partnership Group
|
|
A-52
|
|
|
|
|
|
|
|
|
Section 7.4
|
|
Reimbursement of and Other Payments to the General Partner
|
|
A-52
|
|
|
|
|
|
|
|
|
Section 7.5
|
|
Outside Activities
|
|
A-53
|
|
|
|
|
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Section 7.6
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Loans from the General Partner; Loans or Contributions from the Partnership or Group Members
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A-54
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Section 7.7
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Indemnification
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A-55
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Section 7.8
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Liability of Indemnitees
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A-56
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Section 7.9
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Standards of Conduct; Resolution of Conflicts of Interest and Replacement of Duties
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A-56
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Section 7.10
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Other Matters Concerning the General Partner and Other Indemnitees
.
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A-59
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Section 7.11
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Purchase or Sale of Partnership Interests
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A-59
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Section 7.12
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Registration Rights of the General Partner and Its Affiliates
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A-59
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Section 7.13
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Reliance by Third Parties
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A-63
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Section 7.14
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Replacement of Fiduciary Duties
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A-63
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Article VIII BOOKS, RECORDS, ACCOUNTING AND REPORTS
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A-63
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Section 8.1
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Records and Accounting
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A-63
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Section 8.2
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Fiscal Year
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A-64
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Section 8.3
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Reports
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A-64
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Article IX TAX MATTERS
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A-64
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Section 9.1
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Tax Returns and Information
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A-64
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Section 9.2
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Tax Elections
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A-64
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Section 9.3
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Tax Controversies
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A-65
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Section 9.4
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Withholding
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A-65
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Article X ADMISSION OF PARTNERS
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A-65
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Section 10.1
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Admission of Limited Partners
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A-65
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Section 10.2
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Admission of Successor General Partner
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A-66
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Section 10.3
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Amendment of Agreement and Certificate of Limited Partnership
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A-66
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A-ii
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Page
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Article XI WITHDRAWAL OR REMOVAL OF PARTNERS
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A-67
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Section 11.1
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Withdrawal of the General Partner
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A-67
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Section 11.2
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Removal of the General Partner
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A-68
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Section 11.3
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Interest of Departing General Partner and Successor General Partner
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A-68
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Section 11.4
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Withdrawal of Limited Partners
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A-69
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Article XII DISSOLUTION AND LIQUIDATION
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A-70
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Section 12.1
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Dissolution
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A-70
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Section 12.2
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Continuation of the Business of the Partnership After Dissolution
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A-70
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Section 12.3
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Liquidator
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A-71
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Section 12.4
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Liquidation
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A-71
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Section 12.5
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Cancellation of Certificate of Limited Partnership
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A-72
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Section 12.6
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Return of Contributions
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A-72
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Section 12.7
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Waiver of Partition
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A-72
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Section 12.8
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Capital Account Restoration
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A-72
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Article XIII AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS; RECORD DATE
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A-72
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Section 13.1
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Amendments to be Adopted Solely by the General Partner
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A-72
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Section 13.2
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Amendment Procedures
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A-73
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Section 13.3
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Amendment Requirements
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A-74
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Section 13.4
|
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Special Meetings
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A-74
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Section 13.5
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Notice of a Meeting
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A-75
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Section 13.6
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Record Date
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A-75
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Section 13.7
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Postponement and Adjournment
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A-75
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Section 13.8
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Waiver of Notice; Approval of Meeting
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A-75
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Section 13.9
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Quorum and Voting
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A-75
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Section 13.10
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Conduct of a Meeting
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A-76
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Section 13.11
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Action Without a Meeting
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A-76
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Section 13.12
|
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Right to Vote and Related Matters
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A-77
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Article XIV MERGER, CONSOLIDATION OR CONVERSION
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A-77
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Section 14.1
|
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Authority
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A-77
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Section 14.2
|
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Procedure for Merger, Consolidation or Conversion
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A-77
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Section 14.3
|
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Approval by Limited Partners
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A-79
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Section 14.4
|
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Certificate of Merger or Certificate of Conversion
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A-80
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Section 14.5
|
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Effect of Merger, Consolidation or Conversion
|
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A-80
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Article XV RIGHT TO ACQUIRE LIMITED PARTNER INTERESTS
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A-81
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Section 15.1
|
|
Right to Acquire Limited Partner Interests
|
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A-81
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Article XVI GENERAL PROVISIONS
|
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A-82
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Section 16.1
|
|
Addresses and Notices; Written Communications
|
|
A-82
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Section 16.2
|
|
Further Action
|
|
A-82
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A-iii
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Page
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Section 16.3
|
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Binding Effect
|
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A-82
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Section 16.4
|
|
Integration
|
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A-82
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Section 16.5
|
|
Creditors
|
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A-83
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Section 16.6
|
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Waiver
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A-83
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Section 16.7
|
|
Third-Party Beneficiaries
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A-83
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Section 16.8
|
|
Counterparts
|
|
A-83
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Section 16.9
|
|
Applicable Law; Forum; Venue and Jurisdiction; Attorneys’ Fee; Waiver of Trial by Jury
|
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A-83
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|
|
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Section 16.10
|
|
Invalidity of Provisions
|
|
A-84
|
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|
|
|
|
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|
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Section 16.11
|
|
Consent of Partners
|
|
A-84
|
|
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|
|
|
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Section 16.12
|
|
Facsimile and Email Signatures
|
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A-84
|
A-iv
FIRST AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP OF NOBLE MIDSTREAM PARTNERS LP
THIS FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF NOBLE MIDSTREAM PARTNERS LP, dated as of
[ ], 2016, is entered into by and between NOBLE MIDSTREAM GP LLC, a Delaware limited liability company, as the General Partner,
and NBL MIDSTREAM, LLC, a Delaware limited liability company (“
NBL Midstream
”), as a Limited Partner, together with any other Persons who become Partners in the Partnership or parties hereto as provided herein. In consideration of
the covenants, conditions and agreements contained herein, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1
Definitions
.
The following definitions shall be for all purposes, unless otherwise clearly indicated to the contrary, applied to the terms used in this
Agreement.
“
Acquisition
” means any transaction in which any Group Member acquires (through an
asset acquisition, stock acquisition, merger or other form of investment) control over all or a portion of the assets, properties or business of another Person for the purpose of increasing, over the long term, the operating capacity, operating
income or revenue of the Partnership Group from the operating capacity, operating income or revenue of the Partnership Group existing immediately prior to such transaction. For purposes of this definition, “long term” generally refers to a
period of time greater than twelve months.
“
Additional Book Basis
” means, with respect to any
Adjusted Property, the portion of the Carrying Value of such Adjusted Property that is attributable to positive adjustments made to such Carrying Value as determined in accordance with the provisions set forth below in this definition of Additional
Book Basis. For purposes of determining the extent to which Carrying Value constitutes Additional Book Basis:
(a) Any
negative adjustment made to the Carrying Value of an Adjusted Property as a result of either a Book-Down Event or a Book-Up Event shall first be deemed to offset or decrease that portion of the Carrying Value of such Adjusted Property that is
attributable to any prior positive adjustments made thereto pursuant to a Book-Up Event or Book-Down Event.
(b)
If Carrying Value that constitutes Additional Book Basis is reduced as a result of a Book-Down Event (an “
Additional Book Basis Reduction
”) and the Carrying Value of other property is increased as a result of such Book-Down
Event (a “
Carrying Value Increase
”), then any such Carrying Value Increase shall be treated as Additional Book Basis in an amount equal to the lesser of (i) the amount of such Carrying Value Increase and (ii) the
amount determined by proportionately allocating to the Carrying Value Increases resulting from such Book-Down Event by the lesser of (A) the aggregate Additional Book Basis Reductions resulting from such Book-Down Event and (B) the amount
by which the Aggregate Remaining Net Positive Adjustments after such Book-Down Event exceeds the remaining Additional Book Basis attributable to all of the Partnership’s Adjusted Property after such Book-Down Event (determined without regard to
the application of this
clause (b)
to such Book-Down Event).
“
Additional Book Basis
Derivative Items
” means any Book Basis Derivative Items that are computed with reference to Additional Book Basis. To the extent that the Additional Book Basis attributable to all of the Partnership’s Adjusted Property as of the
beginning of any taxable period exceeds the Aggregate Remaining Net Positive Adjustments as of the beginning of such period (the “
Excess Additional Book Basis
”), the Additional Book Basis Derivative Items for
such period shall be reduced by the amount that bears the same ratio to the amount of Additional Book Basis Derivative Items determined without regard to this sentence as the Excess Additional Book Basis bears to the Additional Book Basis as of the
beginning of such period. With respect to a Disposed of Adjusted Property, the Additional Book Basis Derivative Items shall be the amount of Additional
A-1
Book Basis taken into account in computing gain or loss from the disposition of such Disposed of Adjusted Property;
provided
that the provisions of the immediately
preceding sentence shall apply to the determination of the Additional Book Basis Derivative Items attributable to Disposed of Adjusted Property.
“
Adjusted Capital Account
” means, with respect to any Partner, the balance in such Partner’s Capital Account at the end of each taxable period of the Partnership, after giving
effect to the following adjustments:
(a) Credit to such Capital Account any amounts that such Partner is obligated to
restore under the standards set by Treasury Regulation Section 1.704-1(b)(2)(ii)(c), including any amount that such Partner is deemed obligated to restore pursuant to the penultimate sentences of Treasury Regulation Sections 1.704-2(g)(1) and
1.704-2(i)(5); and
(b) Debit to such Capital Account the items described in Treasury Regulation Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6).
The foregoing definition of Adjusted Capital Account is
intended to comply with the provisions of Treasury Regulation Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith. The “Adjusted Capital Account” of a Partner in respect of any Partnership Interest shall be
the amount that such Adjusted Capital Account would be if such Partnership Interest was the only interest in the Partnership held by such Partner from and after the date on which such Partnership Interest was first issued.
“
Adjusted Operating Surplus
” means, with respect to any period, (a) Operating Surplus generated with respect
to such period
less
(b) (i) the amount of any net increase in Working Capital Borrowings (or the Partnership’s proportionate share of any net increase in Working Capital Borrowings in the case of Subsidiaries that
are not wholly owned) with respect to such period and (ii) the amount of any net decrease in cash reserves (or the Partnership’s proportionate share of any net decrease in cash reserves in the case of Subsidiaries that are not wholly
owned) for Operating Expenditures with respect to such period not relating to an Operating Expenditure made with respect to such period, and
plus
(c) (i) the amount of any net decrease in Working Capital Borrowings (or
the Partnership’s proportionate share of any net decrease in Working Capital Borrowings in the case of Subsidiaries that are not wholly owned) with respect to such period, (ii) the amount of any net decrease made in subsequent periods in
cash reserves for Operating Expenditures initially established with respect to such period to the extent such decrease results in a reduction in Adjusted Operating Surplus in subsequent periods pursuant to clause (b)(ii) above and (iii) the
amount of any net increase in cash reserves (or the
Partnership’s proportionate share of any net increase in cash reserves in the case of Subsidiaries that are not wholly owned) for Operating Expenditures with respect to such period
required by any debt instrument for the repayment of principal, interest or premium. Adjusted Operating Surplus does not include that portion of Operating Surplus included in clause (a)(i) of the definition of “Operating Surplus.”
“
Adjusted Property
” means any property the Carrying Value of which has been adjusted pursuant to
Section 5.4(d)
.
“
Affiliate
” means, with respect to any Person, any other Person that
directly or indirectly through one or more intermediaries controls, is controlled by or is under common control with, the Person in question. As used herein, the term “control” means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.
“
Aggregate Quantity of IDR Reset Common Units
” has the meaning given such term in
Section 5.10(a)
.
“
Aggregate Remaining Net Positive Adjustments
” means, as of the end of any taxable period, the sum of the
Remaining Net Positive Adjustments of all the Partners.
“
Agreed Allocation
” means any
allocation, other than a Required Allocation, of an item of income, gain, loss or deduction pursuant to the provisions of
Section 6.1
, including a Curative Allocation (if appropriate to the context in which the term “Agreed
Allocation” is used).
A-2
“
Agreed Value
” of (a) a Contributed Property means the fair
market value of such Contributed Property at the time of contribution and (b) an Adjusted Property means the fair market value of such Adjusted Property on the date of the Revaluation Event, in each case as determined by the General Partner.
“
Agreement
” means this First Amended and Restated Agreement of Limited Partnership of Noble
Midstream Partners LP, as it may be amended, supplemented or restated from time to time, including pursuant to any Supplemental Terms Annex.
“
Associate
” means, when used to indicate a relationship with any Person, (a) any corporation or organization of which such Person is a director, officer, manager, general
partner or managing member or is, directly or indirectly, the owner of 20% or more of any class of voting stock or other voting interest, (b) any trust or other estate in which such Person has at least a 20% beneficial interest or as to which
such Person serves as trustee or in a similar fiduciary capacity and (c) any relative or spouse of such Person, or any relative of such spouse, who has the same principal residence as such Person.
“
Available Cash
” means, with respect to any Quarter ending prior to the Liquidation Date:
(a) the sum of:
(i) all cash and cash equivalents of the Partnership Group (or the Partnership’s proportionate share of cash and cash equivalents in the case of Subsidiaries that are not wholly owned) on hand at the
end of such Quarter; and
(ii) if the General Partner so determines, all or any portion of additional cash and
cash equivalents of the Partnership Group (or the Partnership’s proportionate share of cash and cash equivalents in the case of Subsidiaries that are not wholly owned) on hand on the date of determination of Available Cash with respect to such
Quarter resulting from Working Capital Borrowings made subsequent to the end of such Quarter; less
(b) the amount of any cash
reserves established by the General Partner (or the Partnership’s proportionate share of cash reserves in the case of Subsidiaries that are not wholly owned) to:
(i) provide for the proper conduct of the business of the Partnership Group (including reserves for future capital
expenditures and for anticipated future credit needs of the Partnership Group) subsequent to such Quarter;
(ii) comply with applicable law or any loan agreement, security agreement, mortgage, debt instrument or other agreement or
obligation to which any Group Member is a party or by which it is bound or its assets are subject; or
(iii)
provide funds for distributions under
Section 6.4
or
Section 6.5
in respect of any one or more of the next four Quarters;
provided, however
, that the General Partner may not establish cash reserves pursuant to subclause (iii) above if the effect of such reserves would be that the Partnership is unable to
distribute the Minimum Quarterly Distribution on all Common Units, plus any Cumulative Common Unit Arrearage on all Common Units, with respect to such Quarter;
provided, further
, that disbursements made by a Group Member or cash reserves
established, increased or reduced after the end of such Quarter but on or before the date of determination of Available Cash with respect to such Quarter shall be deemed to have been made, established, increased or reduced, for purposes of
determining Available Cash within such Quarter if the General Partner so determines.
Notwithstanding the foregoing,
“Available Cash” with respect to the Quarter in which the Liquidation Date occurs and any subsequent Quarter shall equal zero.
“
Board of Directors
” means the board of directors or board of managers of the General Partner if the General Partner is a corporation or limited liability company, or the board of
directors or board of managers of the general partner of the General Partner if the General Partner is a limited partnership, as applicable.
A-3
“
Book Basis Derivative Items
” means any item of income, deduction,
gain or loss that is computed with reference to the Carrying Value of an Adjusted Property (
e.g.
, depreciation, depletion, or gain or loss with respect to an Adjusted Property).
“
Book-Down Event
” means a Revaluation Event that gives rise to a Revaluation Loss.
“
Book-Tax Disparity
” means with respect to any item of Contributed Property or Adjusted Property, as of the date
of any determination, the difference between the Carrying Value of such Contributed Property or Adjusted Property and the adjusted basis thereof for U.S. federal income tax purposes as of such date. A Partner’s share of the Partnership’s
Book-Tax Disparities in all of its Contributed Property and Adjusted Property will be reflected by the difference between such Partner’s Capital Account balance as maintained pursuant to
Section 5.4
and the hypothetical balance of
such Partner’s Capital Account computed as if it had been maintained strictly in accordance with U.S. federal income tax accounting principles.
“
Book-Up Event
” means a Revaluation Event that gives rise to a Revaluation Gain.
“
Business Day
” means Monday through Friday of each week, except that a legal holiday recognized as such by the government of the United States of America, the State of Colorado or
the State of Texas shall not be regarded as a Business Day.
“
Capital Account
” means the
capital account maintained for a Partner pursuant to
Section 5.4
. The “Capital Account” of a Partner in respect of any Partnership Interest shall be the amount that such Capital Account would be if such Partnership Interest was
the only interest in the Partnership held by such Partner from and after the date on which such Partnership Interest was first issued.
“
Capital Contribution
” means (a) any cash, cash equivalents or the Net Agreed Value of Contributed Property that a Partner contributes to the Partnership or that is
contributed or deemed contributed to the Partnership on behalf of a Partner (including, in the case of an underwritten offering of Units, the amount of any underwriting discounts or commissions) or (b) current distributions that a Partner is
entitled to receive but otherwise waives.
“
Capital Improvement
” means (a) the
construction of new capital assets by a Group Member, (b) the replacement, improvement or expansion of existing capital assets by a Group Member or (c) a capital contribution by a Group Member to a Person that is not a Subsidiary in which
a Group Member has, or after such capital contribution will have, directly or indirectly, an equity interest, to fund such Group Member’s pro rata share of the cost of the construction of new, or the replacement, improvement or expansion of
existing, capital assets by such Person, in each case if and to the extent such construction, replacement, improvement or expansion is made to increase, over the long term, the operating capacity, operating income or revenue of the Partnership
Group, in the case of
clause (a)
and
clause (b)
, or such Person, in the case of
clause (c)
, from the operating capacity, operating income or revenue of the Partnership Group or such Person, as the case may be, existing
immediately prior to such construction, replacement, improvement, expansion or capital contribution. For purposes of this definition, “long term” generally refers to a period of time greater than twelve months.
“
Capital Surplus
” means Available Cash distributed by the Partnership in excess of Operating Surplus, as
described in
Section 6.3(a)
.
“
Carrying Value
” means (a) with respect to a
Contributed Property or an Adjusted Property, the Agreed Value of such property reduced (but not below zero) by all depreciation, amortization and other cost recovery deductions charged to the Partners’ Capital Accounts in respect of such
property and (b) with respect to any other Partnership property, the adjusted basis of such property for U.S. federal income tax purposes, all as of the time of determination. The Carrying Value of any property shall be adjusted from time to
time in accordance with
A-4
Section 5.4(d)
and to reflect changes, additions or other adjustments to the Carrying Value for dispositions and acquisitions of Partnership properties, as deemed appropriate by
the General Partner.
“
Cause
” means a court of competent jurisdiction has entered a final,
non-appealable judgment finding the General Partner liable to the Partnership or any Limited Partner for actual fraud or willful misconduct in its capacity as a general partner of the Partnership.
“
Certificate
” means a certificate, in such form (including in global form if permitted by applicable rules and
regulations of The Depository Trust Company or its successors and assigns) as may be adopted by the General Partner, issued by the Partnership and evidencing ownership of Partnership Interests. The initial form of Certificate approved by the General
Partner for Common Units is attached as
Exhibit A
to this Agreement.
“
Certificate of Limited
Partnership
” means the Certificate of Limited Partnership of the Partnership filed with the Secretary of State of the State of Delaware as referenced in
Section 7.2
, as such Certificate of Limited Partnership may be amended,
supplemented or restated from time to time.
“
Citizenship Eligible Holder
” means a Limited
Partner whose nationality, citizenship or other related status the General Partner determines, upon receipt of an Eligibility Certificate or other requested information, does not or would not create under any federal, state or local law or
regulation to which a Group Member is subject, a substantial risk of cancellation or forfeiture of any property, including any governmental permit, endorsement or other authorization, in which a Group Member has an interest.
“
claim
” or “
claims
” (for purposes of
Section 7.12(g)
) has the meaning given such term in
Section 7.12(g)
.
“
Closing Date
” means the first date on which Common Units are sold by
the Partnership to the IPO Underwriters pursuant to the provisions of the IPO Underwriting Agreement.
“
Closing Price
” for any day, with respect to Limited Partner Interests of a particular class, means the last sale
price on such day, regular way, or in case no such sale takes place on such day, the average of the last closing bid and ask prices on such day, regular way, in either case as reported on the principal National Securities Exchange on which such
Limited Partner Interests are listed or admitted to trading or, if such Limited Partner Interests of such class are not listed or admitted to trading on any National Securities Exchange, the average of the high bid and low ask prices on such day in
the over-the-counter market, as reported by such other system then in use, or, if on any such day such Limited Partner Interests of such class are not quoted by any such organization, the average of the closing bid and ask prices on such day as
furnished by a professional market maker making a market in such Limited Partner Interests of such class selected by the General Partner, or if on any such day no market maker is making a market in such Limited Partner Interests of such class, the
fair value of such Limited Partner Interests on such day as determined by the General Partner.
“
Code
” means the U.S. Internal Revenue Code of 1986, as amended and in effect from time to time. Any reference
herein to a specific section or sections of the Code shall be deemed to include a reference to any corresponding provision of any successor law.
“
Combined Interest
” has the meaning given such term in
Section 11.3(a)
.
“
Commences Commercial Service
” means the date upon which a Capital Improvement is first put into or commences commercial service by a Group Member following completion of
construction, replacement, improvement or expansion and testing, as applicable.
“
Commission
”
means the United States Securities and Exchange Commission.
“
Common Unit
” means a Limited
Partner Interest having the rights and obligations specified with respect to Common Units in this Agreement. The term “Common Unit” does not include a Subordinated Unit prior to its conversion into a Common Unit pursuant to the terms
hereof.
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“
Common Unit Arrearage
” means, with respect to any Common Unit,
whenever issued, as to any Quarter within the Subordination Period, the excess, if any, of (a) the Minimum Quarterly Distribution with respect to a Common Unit in respect of such Quarter over (b) the sum of all Available Cash distributed
with respect to a Common Unit in respect of such Quarter pursuant to
Section 6.4(a)(i)
.
“
Conflicts Committee
” means any committee of the Board of Directors (whether designated as a “Conflicts
Committee” or otherwise) composed of two or more directors, each of whom (a) is not an officer or employee of the General Partner, (b) is not an officer, director or employee of any Affiliate of the General Partner (other than Group
Members), (c) is not a holder of any ownership interest in the General Partner or its Affiliates or the Partnership Group other than (i) Common Units and (ii) awards that are granted to such director in his or her capacity as a
director under any long-term incentive plan, equity compensation plan or similar plan implemented by the General Partner or the Partnership and (d) is determined by the Board of Directors to be independent under the independence standards for
directors who serve on an audit committee of a board of directors established by the Exchange Act and the rules and regulations of the Commission thereunder and by the National Securities Exchange on which the Common Units are listed or admitted to
trading (or if no such National Securities Exchange, the New York Stock Exchange).
“
Construction
Debt
” means debt incurred to fund (a) all or a portion of a Capital Improvement or replacement asset, (b) interest payments (including periodic net payments under related interest rate swap agreements) and related fees on other
Construction Debt or (c) distributions (including incremental Incentive Distributions) on Construction Equity.
“
Construction Equity
” means equity issued to fund (a) all or a portion of a Capital Improvement or
replacement asset, (b) interest payments (including periodic net payments under related interest rate swap agreements) and related fees on Construction Debt or (c) distributions (including incremental Incentive Distributions) on other
Construction Equity. Construction Equity does not include equity issued in the Initial Public Offering.
“
Construction Period
” means the period beginning on the date that a Group Member enters into a binding obligation
to commence a Capital Improvement and ending on the earlier to occur of the date that such Capital Improvement Commences Commercial Service and the date that the Group Member abandons or disposes of such Capital Improvement.
“
Contributed Property
” means each property or other asset, in such form as may be permitted by the Delaware Act,
but excluding cash, contributed to the Partnership. Once the Carrying Value of a Contributed Property is adjusted pursuant to
Section 5.4(d)
, such property or other asset shall no longer constitute a Contributed Property, but shall be
deemed an Adjusted Property.
“
Contribution Agreement
” means that certain Contribution,
Conveyance and Assumption Agreement, effective as of the Closing Date, by and among Noble, the Organizational Limited Partner, NBL Midstream, the General Partner, the Partnership and certain other Persons party thereto, together with the additional
conveyance documents and instruments contemplated or referenced thereunder, as such may be amended, supplemented or restated from time to time.
“
Cumulative Common Unit Arrearage
” means, with respect to any Common Unit, whenever issued, and as of the end of any Quarter, the excess, if any, of (a) the sum of the Common
Unit Arrearages with respect to an Initial Common Unit for each of the Quarters within the Subordination Period ending on or before the last day of such Quarter over (b) the sum of any distributions theretofore made pursuant to
Section 6.4(a)(ii)
and the second sentence of
Section 6.5
with respect to an Initial Common Unit (including any distributions to be made in respect of the last of such Quarters).
“
Curative Allocation
” means any allocation of an item of income, gain, deduction, loss or credit pursuant to the
provisions of
Section 6.1(d)(xi)
.
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“
Current Market Price
” means, as of any date for any class of
Limited Partner Interests, the average of the daily Closing Prices per Limited Partner Interest of such class for the 20 consecutive Trading Days immediately prior to such date.
“
Deferred Issuance
” has the meaning given such term in
Section 5.2(c)
“
Delaware Act
” means the Delaware Revised Uniform Limited Partnership Act, 6 Del C. Section 17-101,
et seq.
, as amended, supplemented or restated from time to time, and any successor to such statute.
“
Departing General Partner
” means a former General Partner from and after the effective date of any withdrawal or
removal of such former General Partner pursuant to
Section 11.1
or
Section 11.2
.
“
Derivative Partnership Interests
” means any options, rights, warrants, appreciation rights, tracking, profit and
phantom interests and other derivative securities relating to, convertible into or exchangeable for Partnership Interests.
“
Disposed of Adjusted Property
” has the meaning given such term in
Section 6.1(d)(xii)(B)
.
“
Economic Risk of Loss
” has the meaning set forth in Treasury Regulation
Section 1.752-2(a).
“
Eligibility Certificate
” means a certificate the General Partner may request a Limited Partner to execute as to
such Limited Partner’s (or such Limited Partner’s beneficial owners’) federal income tax status or nationality, citizenship or other related status for the purpose of determining whether such Limited Partner is an Ineligible
Holder.
“
Estimated Incremental Quarterly Tax Amount
” has the meaning given such term in
Section 6.9
.
“Estimated Maintenance Capital Expenditures”
means an estimate made in good faith
by the General Partner (with the concurrence of the Conflicts Committee) of the average quarterly Maintenance Capital Expenditures that the Partnership will need to incur over the long term to maintain the operating capacity and/or operating income,
in each case to the extent the General Partner (with the concurrence of the Conflicts Committee) deems appropriate at the time such estimate is made, of the Partnership Group (including the Partnership’s proportionate share of the average
quarterly Maintenance Capital Expenditures of its Subsidiaries that are not wholly owned) existing at the time the estimate is made. The estimate will be made at least annually and whenever an event occurs that is likely to result in a material
adjustment to the amount of future Estimated Maintenance Capital Expenditures. The Partnership shall disclose to its Partners any change in the amount of Estimated Maintenance Capital Expenditures in its reports made in accordance with
Section 8.3
to the extent not previously disclosed. Any adjustments to Estimated Maintenance Capital Expenditures shall be prospective only.
“
Event Issue Value
” means, with respect to any Common Unit as of any date of determination, (i) in the case of a Revaluation Event that includes the issuance of Common Units
pursuant to a public offering and solely for cash, the price paid for such Common Units (before deduction for any underwriters’ discounts and commissions), or (ii) in the case of any other Revaluation Event, the Closing Price of the Common
Units on the date of such Revaluation Event or, if the General Partner determines that a value for the Common Unit other than such Closing Price more accurately reflects the Event Issue Value, the value determined by the General Partner.
“
Event of Withdrawal
” has the meaning given such term in
Section 11.1(a)
.
“
Excess Additional Book Basis
” has the meaning given such term in the definition of
“Additional Book Basis Derivative Items.”
“
Excess Distribution
” has the meaning
given such term in
Section 6.1(d)(iii)(A)
.
“
Excess Distribution Unit
” has the meaning
given such term in
Section 6.1(d)(iii)(A)
.
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“
Exchange Act
” means the Securities Exchange Act of 1934, as
amended, supplemented or restated from time to time, and any successor to such statute.
“
Expansion
Capital Expenditures
” means cash expenditures for Acquisitions or Capital Improvements and shall not include Maintenance Capital Expenditures or Investment Capital Expenditures. Expansion Capital Expenditures shall include interest
(including periodic net payments under related interest rate swap agreements) and related fees paid during the Construction Period on Construction Debt to fund Expansion Capital Expenditures. Where cash expenditures are made in part for Expansion
Capital Expenditures and in part for other purposes, the General Partner shall determine the allocation between the amounts paid for each.
“
Final Subordinated Units
” has the meaning given such term in
Section 6.1(d)(x)(A)
.
“
First Liquidation Target Amount
” has the meaning given such term in
Section 6.1(c)(i)(D)
.
“
First Target Distribution
” means $ per Unit per Quarter (or, with respect to the period commencing on the Closing Date and ending on
December 31, 2015, it means the product of $ multiplied by a fraction, the numerator of which is the number of days in such period and the denominator of which is 92), subject to adjustment in
accordance with
Section 5.10
,
Section 6.6
and
Section 6.9
.
“
Fully Diluted
Weighted Average Basis
” means, when calculating the number of Outstanding Units for any period, a basis that includes (a) the weighted average number of Outstanding Units during such period
plus
(b) all
Partnership Interests and Derivative Partnership Interests (i) that are convertible into or exercisable or exchangeable for Units or for which Units are issuable, in each case that are senior to or
pari passu
with the
Subordinated Units, (ii) whose conversion, exercise or exchange price, if any, is less than the Current Market Price on the date of such calculation, (iii) that may be converted into or exercised or exchanged for such Units prior to or
during the Quarter immediately following the end of the period for which the calculation is being made without the satisfaction of any contingency beyond the control of the holder other than the payment of consideration and the compliance with
administrative mechanics applicable to such conversion, exercise or exchange and (iv) that were not converted into or exercised or exchanged for such Units during the period for which the calculation is being made;
provided,
however
, that for purposes of determining the number of Outstanding Units on a Fully Diluted Weighted Average Basis when calculating whether the Subordination Period has ended or Subordinated Units are entitled to convert into Common
Units pursuant to
Section 5.6
, such Partnership Interests and Derivative Partnership Interests shall be deemed to have been Outstanding Units only for the four Quarters that comprise the last four Quarters of the measurement period;
provided, further
, that if
consideration will be paid to any Group Member in connection with such conversion, exercise or exchange, the number of Units to be included in such calculation shall be that number equal to the
difference between (x) the number of Units issuable upon such conversion, exercise or exchange and (y) the number of Units that such consideration would purchase at the Current Market Price.
“
General Partner
” means Noble Midstream GP LLC, a Delaware limited liability company, and its successors and
permitted assigns that are admitted to the Partnership as general partner of the Partnership, in its capacity as general partner of the Partnership (except as the context otherwise requires).
“
General Partner Interest
” means the non-economic management interest of the General Partner in the Partnership
(in its capacity as a general partner without reference to any Limited Partner Interest held by it) and includes any and all rights, powers and benefits to which the General Partner is entitled as provided in this Agreement, together with all
obligations of the General Partner to comply with the terms and provisions of this Agreement. The General Partner Interest does not include any rights to profits or losses or any rights to receive distributions from operations or upon the
liquidation or winding-up of the Partnership.
“
Gross Liability Value
” means, with respect to
any Liability of the Partnership described in Treasury Regulation Section 1.752-7(b)(3)(i), the amount of cash that a willing assignor would pay to a willing assignee to assume such Liability in an arm’s-length transaction.
A-8
“
Group
” means two or more Persons that have, or with or through any
of their respective Affiliates or Associates have, any contract, arrangement, understanding or relationship for the purpose of acquiring, holding, voting (except voting pursuant to a revocable proxy or consent given to such Person in response to a
proxy or consent solicitation made to 10 or more Persons), exercising investment power over or disposing of any Partnership Interests.
“
Group Member
” means a member of the Partnership Group.
“
Group Member Agreement
” means the partnership agreement of any Group Member, other than the Partnership, that is a limited or general partnership, the limited liability company
agreement of any Group Member that is a limited liability company, the certificate of incorporation and bylaws or similar organizational documents of any Group Member that is a corporation, the joint venture agreement or similar governing document
of any Group Member that is a joint venture and the governing or organizational or similar documents of any other Group Member that is a Person other than a limited or general partnership, limited liability company, corporation or joint venture, in
each case, as such may be amended, supplemented or restated from time to time.
“
Hedge
Contract
” means any exchange, swap, forward, cap, floor, collar, option or other similar agreement or arrangement entered into for the purpose of reducing the exposure of a Group Member to fluctuations in interest rates, the price of
hydrocarbons, basis differentials or currency exchange rates in their operations or financing activities and not for speculative purposes.
“
Holder
” means any of the following:
(a) the
General Partner who is the Record Holder of Registrable Securities;
(b) any Affiliate of the General Partner who is the
Record Holder of Registrable Securities (other than natural persons who are Affiliates of the General Partner by virtue of being officers, directors or employees of the General Partner or any of its Affiliates);
(c) any Person who has been the General Partner within the prior two years and who is the Record Holder of Registrable Securities;
(d) any Person who has been an Affiliate of the General Partner within the prior two years and who is the Record Holder of
Registrable Securities (other than natural persons who were Affiliates of the General Partner by virtue of being officers, directors or employees of the General Partner or any of its Affiliates); and
(e) a transferee and current Record Holder of Registrable Securities to whom the transferor of such Registrable Securities, who
was a Holder at the time of such transfer, assigns its rights and obligations under this Agreement;
provided
, such transferee agrees in writing to be bound by the terms of this Agreement and provides its name and address to the Partnership
promptly upon such transfer.
“
IDR Reset Common Units
” has the meaning given such term in
Section 5.10(a)
.
“
IDR Reset Election
” has the meaning given such term in
Section
5.10(a)
.
“
Incentive Distribution Right
” means a Limited Partner Interest having the rights
and obligations specified with respect to Incentive Distribution Rights in this Agreement (and no other rights otherwise available to or other obligations of a holder of a Partnership Interest).
“
Incentive Distributions
” means any amount of cash distributed to the holders of the Incentive Distribution
Rights pursuant to
Section 6.4(a)(v)
,
(vi)
and
(vii)
and
Section 6.4(b)(iii)
,
(iv)
and
(v)
.
“
Incremental Income Taxes
” has the meaning given such term in
Section 6.9
.
“
Indemnified Persons
” has the meaning given such term in
Section 7.12(g)
.
A-9
“
Indemnitee
” means (a) the General Partner, (b) any
Departing General Partner, (c) any Person who is or was an Affiliate of the General Partner or any Departing General Partner, (d) any Person who is or was a
manager, managing member, general partner, director, officer, fiduciary or
trustee of (i) any Group Member, the General Partner or any Departing General Partner or (ii) any Affiliate of any Group Member, the General Partner or any Departing General Partner, (e) any Person who is or was serving at the request
of the General Partner or any Departing General Partner or any Affiliate of the General Partner or any Departing General Partner as a manager, managing member, general partner, director, officer, fiduciary or trustee of another Person owing a
fiduciary or contractual duty or standard of care to any Group Member;
provided
, that a Person shall not be an Indemnitee by reason of providing, on a fee-for-services basis, trustee, fiduciary or custodial services and
(f) any Person the General Partner designates as an “Indemnitee” for purposes of this Agreement because such Person’s status, service or relationship exposes such Person to potential claims, demands, suits or proceedings relating
to the Partnership Group’s business and affairs.
“
Ineligible Holder
” means a Limited
Partner who is not a Citizenship Eligible Holder or a Rate Eligible Holder.
“
Initial Common
Units
” means the Common Units sold in the Initial Public Offering.
“
Initial Limited
Partners
” means NBL Midstream (with respect to the Common Units, Subordinated Units and Incentive Distribution Rights received by it as described in
Section 5.2(a)
) and the IPO Underwriters upon the issuance by the Partnership
of Common Units as described in
Section 5.2(b)
in connection with the Initial Public Offering.
“
Initial Public Offering
” means the initial offering and sale of Common Units to the public (including the offer
and sale of Common Units pursuant to the Over-Allotment Option), as described in the IPO Registration Statement.
“
Initial Unit Price
” means (a) with respect to the Common Units and the Subordinated Units, the initial
public offering price per Common Unit at which the Common Units were first offered to the public for sale as set forth on the cover page of the IPO Prospectus or (b) with respect to any other class or series of Units, the price per Unit at
which such class or series of Units is initially sold by the Partnership, as determined by the General Partner, in each case adjusted as the General Partner determines to be appropriate to give effect to any distribution, subdivision or combination
of Units.
“
Interim Capital Transactions
” means the following transactions if they occur prior
to the Liquidation Date: (a) borrowings, refinancings or refundings of indebtedness (other than Working Capital Borrowings and other than for items purchased on open account or for a deferred purchase price in the ordinary course of business)
by any Group Member and sales of debt securities of any Group Member; (b) issuances of equity interests of any Group Member (including the Common Units sold to the IPO Underwriters in the Initial Public Offering) to anyone other than the
Partnership Group; (c) sales or other voluntary or involuntary dispositions of any assets of any Group Member other than (i) sales or other dispositions of inventory, accounts receivable and other assets in the ordinary course of business
and (ii) sales or other dispositions of assets as part of normal retirements or replacements; and (d) capital contributions received by a Group Member.
“
Investment Capital Expenditures
” means capital expenditures other than Maintenance Capital Expenditures and Expansion Capital Expenditures.
“
IPO Prospectus
” means the final prospectus relating to the Initial Public Offering dated
[ ], 2016 and filed by the Partnership with the Commission pursuant to Rule 424 of the Securities Act on
[ ], 2016.
A-10
“
IPO Registration Statement
” means the Registration Statement on
Form S-1 (File No. 333-207560, as it has been or as it may be amended or supplemented from time to time,
filed by the Partnership with the Commission under the Securities Act to register the offering and sale of the Common Units in the
Initial Public Offering.
“
IPO Underwriter
” means each Person named as an underwriter in
Exhibit A to the IPO Underwriting Agreement who purchases Common Units pursuant thereto.
“
IPO
Underwriting Agreement
” means that certain Underwriting Agreement dated as of [ ], 2016 among the IPO Underwriters, NBL Midstream, the General Partner and the
Partnership, providing for the purchase of Common Units by the IPO Underwriters.
“
Liability
”
means any liability or obligation of any nature, whether accrued, contingent or otherwise.
“
Limited Partner
” means, unless the context otherwise requires, each Initial Limited Partner, each
additional Person that becomes a Limited Partner pursuant to the terms of this Agreement and any Departing General Partner upon the change of its status from General Partner to Limited Partner pursuant to
Section 11.3
, in each case, in
such Person’s capacity as a limited partner of the Partnership;
provided, however
, that when the term “Limited Partner” is used herein in the context of any vote or other approval, including
Articles XIII
and
XIV
,
such term shall not, solely for such purpose, include any holder of any Incentive Distribution Right (solely with respect to its Incentive Distribution Rights and not with respect to any other Limited Partner Interest held by such Person) except as
may otherwise be required by law.
“
Limited Partner Interest
” means an equity interest of a
Limited Partner in the Partnership, which may be evidenced by Common Units, Subordinated Units, Incentive Distribution Rights or other Partnership Interests (other than a General Partner Interest) or a combination thereof (but excluding Derivative
Partnership Interests), and includes any and all benefits to which such Limited Partner is entitled as provided in this Agreement, together with all obligations of such Limited Partner pursuant to the terms and provisions of this Agreement.
“
Liquidation Date
” means (a) in the case of an event giving rise to the dissolution of the
Partnership of the type described in
clauses (a)
and
(d)
of the third sentence of
Section 12.1
, the date on which the applicable time period during which the holders of Outstanding Units have the right to elect to
continue the business of the Partnership has expired without such an election being made and (b) in the case of any other event giving rise to the dissolution of the Partnership, the date on which such event occurs.
“
Liquidation Gain
” has the meaning set forth in the definition of Net Termination Gain.
“
Liquidation Loss
” has the meaning set forth in the definition of Net Termination Loss.
“
Liquidator
” means one or more Persons selected pursuant to
Section 12.3
to perform the functions described
in
Section 12.4
as liquidating trustee of the Partnership within the meaning of the Delaware Act.
“
Maintenance Capital Expenditure
” means cash expenditures (including expenditures for the construction of new
capital assets or the replacement, improvement or expansion of existing capital assets) by a Group Member made to maintain, over the long term, the operating capacity or operating income of the Partnership Group. Maintenance Capital Expenditures
shall not include Expansion Capital Expenditures or Investment Capital Expenditures. Maintenance Capital Expenditures shall include interest (and related fees) on Construction Debt to fund the replacement assets and paid in respect of the
Construction Period and the amount of cash distributions paid in respect of Construction Equity to fund the construction or development of replacement assets (and incremental Incentive Distributions in respect thereof) and paid in respect of the
Construction Period. For purposes of this definition, “long term” generally refers to a period of time greater than twelve months.
“
Merger Agreement
” has the meaning given such term in
Section 14.1
.
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“
Minimum Quarterly Distribution
” means
$ per Unit per Quarter (or with respect to the period commencing on the Closing Date and ending on
, 2016, it means the product of $ multiplied by a fraction, the numerator of
which is the number of days in such period and the denominator of which is 92), subject to adjustment in accordance with
Section 5.10
,
Section 6.6
and
Section 6.9
.
“
National Securities Exchange
” means an exchange registered with the Commission under Section 6(a) of the
Exchange Act (or any successor to such Section).
“
NBL Midstream
” has the meaning given such
term in the preamble.
“
Net Agreed Value
” means (a) in the case of any Contributed Property, the
Agreed Value of such Contributed Property reduced by any Liabilities either assumed by the Partnership upon such contribution or to which such Contributed Property is subject when contributed and (b) in the case of any property distributed to a
Partner by the Partnership, the Partnership’s Carrying Value of such property (as adjusted pursuant to
Section 5.4(d)(ii))
at the time such property is distributed, reduced by any Liabilities either assumed by such Partner upon such
distribution or to which such property is subject at the time of distribution.
“
Net
Income
” means, for any taxable period, the excess, if any, of the Partnership’s items of income and gain (other than those items taken into account in the computation of Net Termination Gain or Net Termination Loss) for such
taxable period over the Partnership’s items of loss and deduction (other than those items taken into account in the computation of Net Termination Gain or Net Termination Loss) for such taxable period. The items included in the calculation of
Net Income shall be determined in accordance with
Section 5.4
and shall not include any items specially allocated under
Section 6.1(d)
;
provided, however
, that the determination of the items that have been specially
allocated under
Section 6.1(d)
shall be made without regard to any reversal of such items under
Section 6.1(d)(xii)
.
“
Net Loss
” means, for any taxable period, the excess, if any, of the Partnership’s items of loss and deduction (other than those items taken into account in the computation of
Net Termination Gain or Net Termination Loss) for such taxable period over the Partnership’s items of income and gain (other than those items taken into account in the computation of Net Termination Gain or Net Termination Loss) for such
taxable
period. The items included in the
calculation of Net Loss shall be determined in accordance with
Section 5.4
and shall not include any items specially allocated under
Section 6.1(d)
;
provided,
however
, that the determination of the items that have been specially allocated under
Section 6.1(d)
shall be made without regard to any reversal of such items under
Section 6.1(d)(xii)
.
“
Net Positive Adjustments
” means, with respect to any Partner, the excess, if any, of the total positive
adjustments over the total negative adjustments made to the Capital Account of such Partner pursuant to Book-Up Events and Book-Down Events.
“
Net Termination Gain
” means, as applicable, (a) the sum, if positive, of all items of income, gain, loss or deduction (determined in accordance with
Section 5.4
(b)) that are recognized (i) after the Liquidation Date (“
Liquidation Gain
”) or (ii) upon the sale, exchange or other disposition of all or substantially all of the assets of the
Partnership Group, taken as a whole, in a single transaction or a series of related transactions (excluding any disposition to a member of the Partnership Group) (“
Sale Gain
”), or (b) the excess, if any, of
the aggregate amount of Unrealized Gain over the aggregate amount of Unrealized Loss deemed recognized by the Partnership pursuant to
Section 5.4(d)
on the date of a Revaluation Event (“
Revaluation
Gain
”);
provided, however
, the items included in the determination of Net Termination Gain shall not include any items of income, gain or loss specially allocated under
Section 6.1(d)
; and
provided, further
, that Sale Gain and Revaluation Gain shall not include any items of income, gain, loss or deduction that are recognized during any portion of the taxable period during which such Sale Gain or Revaluation Gain
occurs.
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“
Net Termination Loss
” means, as applicable, (a) the sum, if
negative, of all items of income, gain, loss or deduction (determined in accordance with
Section 5.4
(b)) that are recognized (i) after the Liquidation Date (“
Liquidation Loss
”) or (ii) upon
the sale, exchange or other disposition of all or substantially all of the assets of
the Partnership Group, taken as a whole, in a single transaction or a series of related transactions (excluding any disposition to a member of the
Partnership Group) (“
Sale Loss
”), or (b)the excess, if any, of the aggregate amount of Unrealized Loss over the aggregate amount of Unrealized Gain deemed recognized by the Partnership pursuant to
Section 5.4(d)
on the date of a Revaluation Event (“
Revaluation Loss
”);
provided, however
, items included in the determination of Net Termination Loss shall not include any items
of income, gain or loss specially allocated under
Section 6.1(d)
; and
provided, further
, that Sale Loss and Revaluation Loss shall not include any items of income, gain, loss or deduction that are recognized during
any portion of the taxable period during which such Sale Loss or Revaluation Loss occurs.
“
Noble
” means Noble Energy, Inc., a Delaware corporation.
“
Noncompensatory Option
” has the meaning set forth in Treasury Regulation
Section 1.721-2(f).
“
Nonrecourse Built-in Gain
”
means with respect to any Contributed Properties or Adjusted Properties that are subject to a mortgage or pledge securing a Nonrecourse Liability, the amount of any taxable gain that would be allocated to the Partners pursuant to
Section 6.2(b)
if such properties were disposed of in a taxable transaction in full satisfaction of such liabilities and for no other consideration.
“
Nonrecourse Deductions
” means any and all items of loss, deduction or expenditure (including any expenditure described in Section 705(a)(2)(B) of the Code) that, in
accordance with the principles of Treasury Regulation Section 1.704-2(b), are attributable to a Nonrecourse Liability.
“
Nonrecourse Liability
” has the meaning set forth in Treasury Regulation
Section 1.752-1(a)(2).
“
Notice
” means a written request from a Holder pursuant to
Section 7.12
which shall (a) specify the
Registrable Securities intended to be registered, offered and sold by such Holder, (b) describe the nature or method of the proposed offer and sale of Registrable Securities and (c) contain the undertaking of such Holder to provide all
such information and materials and take all action as may be required or appropriate in order to permit the Partnership to comply with all applicable requirements and obligations in connection with the registration and disposition of such
Registrable Securities pursuant to
Section 7.12
.
“
Notice of Election to Purchase
” has the
meaning given such term in
Section 15.1(b)
.
“
Omnibus Agreement
” means that certain
Omnibus Agreement, effective as of the Closing Date, among Noble, the Organizational Limited Partner, NBL Midstream, the General Partner, the Partnership and the other Persons party thereto from time to time, as such agreement may be amended,
supplemented or restated from time to time.
“
Operational Services and Secondment Agreement
”
means that certain Operational Services and Secondment Agreement, effective as of the Closing Date, among Noble, the Partnership, the General Partner and the other Persons party thereto from time to time, as such agreement may be amended,
supplemented or restated from time to time.
“
Operating Expenditures
” means all Partnership
Group cash expenditures (or the Partnership’s proportionate share of expenditures in the case of Subsidiaries that are not wholly owned), including taxes, compensation of employees, officers and directors of the General Partner, reimbursement
of expenses of the General Partner and its Affiliates, debt service payments, Estimated Maintenance Capital Expenditures, repayment of Working Capital Borrowings and payments made in the ordinary course of business under any Hedge Contracts, subject
to the following:
(a) repayments of Working Capital Borrowings deducted from Operating Surplus pursuant to
clause
(b)(iii)
of the definition of “Operating Surplus” shall not constitute Operating Expenditures when actually repaid;
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(b) payments (including prepayments and prepayment penalties) of principal of and premium on
indebtedness other than Working Capital Borrowings shall not constitute Operating Expenditures;
(c) Operating Expenditures
shall not include (i) Expansion Capital Expenditures, (ii) actual Maintenance Capital Expenditures, (iii) Investment Capital Expenditures, (iv) payment of transaction expenses (including taxes) relating to Interim Capital
Transactions, (v) distributions to Partners, (vi) repurchases of Partnership Interests, other than repurchases of Partnership Interests by the Partnership to satisfy obligations under employee benefit plans or reimbursement of expenses of
the General Partner for purchases of Partnership Interests by the General Partner to satisfy obligations under employee benefit plans or (vii) any other expenditures or payments using the proceeds of the Initial Public Offering as described
under “Use of Proceeds” in the IPO Prospectus. Where cash expenditures are made in part for Maintenance Capital Expenditures and in part for other purposes, the General Partner shall determine the allocation between the amounts paid for
each; and
(d) (i) amounts paid in connection with the initial purchase of a Hedge Contract shall be amortized over the life
of such Hedge Contract and (ii) payments made in connection with the termination of any Hedge Contract prior to the expiration of its scheduled settlement or termination date shall be included in equal quarterly installments over the remaining
scheduled life of such Hedge Contract.
“
Operating Surplus
” means, with respect to any period ending
prior to the Liquidation Date, on a cumulative basis and without duplication,
(a) the sum of (i) $45.0
million, (ii) all cash receipts of the Partnership Group (or the Partnership’s proportionate share of cash receipts in the case of Subsidiaries that are not wholly owned) for the period beginning on the Closing Date and ending on the last
day of such period, but excluding cash receipts from Interim Capital Transactions and the termination of Hedge Contracts (provided that cash receipts from the termination of a Hedge Contract prior to its scheduled settlement or termination date
shall be included in Operating Surplus in equal quarterly installments over the remaining scheduled life of such Hedge Contract), (iii) all cash receipts of the Partnership Group (or the Partnership’s proportionate share of cash receipts
in the case of Subsidiaries that are not wholly owned) after the end of such period but on or before the date of determination of Operating Surplus with respect to such period resulting from Working Capital Borrowings and (iv) the amount of
cash distributions from Operating Surplus paid during the Construction Period (including incremental Incentive Distributions) on Construction Equity to fund Expansion Capital Expenditures,
less
(b) the sum of (i) Operating Expenditures for the period beginning on the Closing Date and ending on the last day of such
period, (ii) the amount of cash reserves (or the Partnership’s proportionate share of cash reserves in the case of Subsidiaries that are not wholly owned) established by the General Partner to provide funds for future Operating
Expenditures; (iii) all Working Capital Borrowings not repaid within twelve months after having been incurred, or repaid within such 12-month period with the proceeds of additional Working Capital Borrowings and (iv) any cash loss realized
on disposition of an Investment Capital Expenditure;
provided, however
, that disbursements made (including contributions to a Group Member or disbursements on behalf of a Group Member) or cash reserves established, increased or reduced after
the end of such period but on or before the date of determination of Available Cash with respect to such period shall be deemed to have been made, established, increased or reduced, for purposes of determining Operating Surplus, within such period
if the General Partner so determines.
Notwithstanding the foregoing, (x) “Operating Surplus” with
respect to the Quarter in which the Liquidation Date occurs and any subsequent Quarter shall equal zero; (y) cash receipts from an Investment Capital Expenditure shall be treated as cash receipts only to the extent they are a return on
principal, but in no event shall a return of principal be treated as cash receipts; and (z) cash received from any equity interest in a Person that is not a Subsidiary of a Group Member and for which the Partnership accounts using the equity
method shall not exceed the Partnership’s proportionate share of the Person’s Operating Surplus (calculated as if the pertinent definitions hereof applied to such Person from the date the Partnership acquired its interest without any
basket similar to clause (a)(i) above).
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“
Opinion of Counsel
” means a written opinion of counsel (who may be
regular counsel to the Partnership or the General Partner or any of its Affiliates) acceptable to the General Partner or to such other person selecting such counsel or obtaining such opinion.
“
Option Closing Date
” means the date or dates on which any Common Units are sold by the Partnership to the IPO
Underwriters upon exercise of the Over-Allotment Option.
“
Organizational Limited Partner
”
means Noble Midstream Services, LLC, a Delaware limited liability company.
“
Original General Partner
Interest
” has the meaning given such term in Section 5.1.
“
Original Limited Partner Interest
” has
the meaning given such term in Section 5.1.
“
Outstanding
” means, with respect to Partnership Interests, all
Partnership Interests that are issued by the Partnership and reflected as outstanding in the Partnership Register as of the date of determination;
provided, however
, that if at any time any Person or Group (other than the General Partner or
its Affiliates) beneficially owns 20% or more of the Outstanding Partnership Interests of any class, all Partnership Interests owned by or for the benefit of such Person or Group shall not be entitled to be voted on any matter and shall not be
considered to be Outstanding when sending notices of a meeting of Limited Partners to vote on any matter (unless otherwise required by law), calculating required votes, determining the presence of a quorum or for other similar purposes under this
Agreement, except that Partnership Interests so owned shall be considered to be Outstanding for purposes of
Section 11.1(b)(iv)
(such Partnership Interests shall not, however, be treated as a separate class or group of Partnership
Interests for purposes of this Agreement or the Delaware Act);
provided, further
, that the foregoing limitation shall not apply to (i) any Person or Group who acquired 20% or more of the Outstanding Partnership Interests of any class
directly from the General Partner or its Affiliates (other than the Partnership), (ii) any Person or Group who acquired 20% or more of the Outstanding Partnership Interests of any class directly or indirectly from a Person or Group described in
clause (i)
,
provided
, that, upon or prior to such acquisition, the General Partner shall have notified such Person or Group in writing that such limitation shall not apply, or (iii) any Person or Group who acquired 20% or more of
any Partnership Interests issued by the Partnership with the prior approval of the Board of Directors.
“
Over-Allotment Option
” means the option to purchase additional Common Units granted to the IPO Underwriters by
the Partnership pursuant to the IPO Underwriting Agreement.
“
Partner Nonrecourse Debt
” has the
meaning set forth in Treasury Regulation
Section 1.704-2(b)(4).
“
Partner Nonrecourse Debt Minimum Gain
” has the meaning set forth in Treasury Regulation
Section 1.704-2(i)(2).
“
Partner Nonrecourse Deductions
” means any and all items of loss,
deduction or expenditure (including any expenditure described in Section 705(a)(2)(B) of the Code) that, in accordance with the principles of Treasury Regulation Section 1.704-2(i), are attributable to a Partner Nonrecourse Debt.
“
Partners
” means the General Partner and the Limited Partners.
“
Partnership
” means Noble Midstream Partners LP, a Delaware limited partnership.
“
Partnership Group
” means, collectively, the Partnership and its Subsidiaries.
“
Partnership Interest
” means any equity interest, including any class or series of equity interest, in the
Partnership, which shall include any Limited Partner Interests but shall exclude the General Partner Interest and any Derivative Partnership Interests.
“
Partnership Minimum Gain
” means that amount determined in accordance with the principles of Treasury Regulation Sections 1.704-2(b)(2) and 1.704-2(d).
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“
Partnership Register
” means a register maintained on behalf of the
Partnership by the General Partner, or, if the General Partner so determines, by the Transfer Agent as part of the Transfer Agent’s books and transfer
records, with respect to each class of Partnership Interests in which all Record
Holders and transfers of such class of Partnership Interests are registered or otherwise recorded.
“
Per Unit Capital Amount
” means, as of any date of determination, the Capital Account, stated on a per Unit
basis, underlying any Unit held by a Person other than the General Partner or any Affiliate of the General Partner who holds Units.
“
Percentage Interest
” means, as of any date of determination, (a) as to any Unitholder with respect to Units, the product obtained by multiplying (i) 100% less the
percentage applicable to
clause (b)
below by (ii) the quotient obtained by dividing (A) the number of Units held by such Unitholder by (B) the total number of Outstanding Units, and (b) as to the holders of other
Partnership Interests issued by the Partnership in accordance with
Section 5.5
, the percentage calculated in accordance with the method established as a part of such issuance. The Percentage Interest with respect to an Incentive
Distribution Right and the General Partner Interest, in each case, shall at all times be zero.
“
Person
” means an individual or a corporation, firm, limited liability company, partnership, joint venture,
trust, estate, unincorporated organization, association, government agency or political subdivision thereof or other entity.
“
Plan of Conversion
” has the meaning given such term in
Section 14.1
.
“
Privately Placed Units
” means any Common Units issued for cash or property other than pursuant to a public offering.
“
Pro Rata
” means (a) when used with respect to Units or any class thereof, apportioned among all designated
Units in accordance with their relative Percentage Interests, (b) when used with respect to Partners or Record Holders, apportioned among all Partners or Record Holders in accordance with their relative Percentage Interests, (c) when used
with respect to holders of Incentive Distribution Rights, apportioned among all holders of Incentive Distribution Rights in accordance with the relative number or percentage of Incentive Distribution Rights held by each such holder and (d) when
used with respect to Holders who have requested to include Registrable Securities in a Registration Statement pursuant to
Section 7.12(a)
or
Section 7.12(b)
, apportioned among all such Holders in accordance with the relative
number of Registrable Securities held by each such holder and included in the Notice relating to such request
.
“
Purchase Date
” means the date determined by the General Partner as the date for purchase of all Outstanding
Limited Partner Interests of a certain class (other than Limited Partner Interests owned by the General Partner and its Affiliates) pursuant to
Article XV
.
“
Quarter
” means, unless the context requires otherwise, a fiscal quarter of the Partnership, or, with respect to the fiscal quarter of the Partnership which includes the Closing
Date, the portion of such fiscal quarter after the Closing Date.
“
Rate Eligible Holder
” means
a Limited Partner subject to U.S. federal income taxation on the income generated by the Partnership. A Limited Partner that is an entity not subject to U.S. federal income taxation on the income generated by the Partnership shall be deemed a Rate
Eligible Holder so long as all of the entity’s beneficial owners are subject to such taxation.
“
Recapture Income
” means any gain recognized by the Partnership (computed without regard to any adjustment
required by Section 734 or Section 743 of the Code) upon the disposition of any property or asset of the Partnership, which gain is characterized as ordinary income because it represents the recapture of deductions previously taken with
respect to such property or asset.
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“
Record Date
” means the date established by the General Partner or
otherwise in accordance with this Agreement for determining (a) the identity of the Record Holders entitled to receive notice of, or entitled to
exercise rights in respect of, any lawful action of Limited Partners (including voting) or
(b) the identity of Record Holders entitled to receive any report or distribution or to participate in any offer.
For the avoidance of doubt, Section 13.6 of the Agreement shall not apply to any Record Date set by the General Partner for
purposes of determining the identity of Record Holders entitled to receive any report or distribution or participate in any offer.
“
Record Holder
” means (a) with respect to any class of Partnership Interests for which a Transfer Agent has been appointed, the Person in whose name a Partnership Interest of
such class is registered in the records of the Transfer Agent and in the Partnership Register as of the Partnership’s close of business on a particular Business Day or (b) with respect to other classes of Partnership Interests, the Person
in whose name any such other Partnership Interest is registered in the Partnership Register that the General Partner has caused to be kept as of the Partnership’s close of business on a particular Business Day.
“
Redeemable Interests
” means any Partnership Interests for which a redemption notice has been given, and has not
been withdrawn, pursuant to
Section 4.10
.
“
Registrable Security
” means
any Partnership Interest other than the General Partner Interest;
provided, however
, that any Registrable Security shall cease to be a Registrable Security: (a) at the time a Registration Statement covering such Registrable Security is
declared effective by the Commission, or otherwise becomes effective under the Securities Act, and such Registrable Security has been sold or disposed of pursuant to such Registration Statement; (b) at the time such Registrable Security may be
disposed of without restriction pursuant to Rule 144 (or any successor or similar rule or regulation under the Securities Act); (c) when such Registrable Security is held by a Group Member and (d) at the time such Registrable Security has
been sold in a private transaction in which the transferor’s rights under
Section 7.12
have not been assigned to the transferee of such securities.
“
Registration Statement
” has the meaning given such term in
Section 7.12(a)
.
“
Remaining Net Positive Adjustments
” means, as of the end of any taxable period, (a) with respect to the Unitholders holding Common Units or Subordinated Units, the excess of
(i) the Net Positive Adjustments of the Unitholders holding Common Units or Subordinated Units as of the end of such period over (ii) the sum of those Unitholders’ Share of Additional Book Basis Derivative Items for each prior taxable
period and (b) with respect to the holders of Incentive Distribution Rights, the excess of (i) the Net Positive Adjustments of the holders of Incentive Distribution Rights as of the end of such period over (ii) the sum of the Share of
Additional Book Basis Derivative Items of the holders of the Incentive Distribution Rights for each prior taxable period.
“
Required Allocations
” means any allocation of an item of income, gain, loss or deduction pursuant to
Section 6.1(d)(i)
,
Section 6.1(d)(ii)
,
Section 6.1(d)(iv)
,
Section 6.1(d)(v)
,
Section 6.1(d)(vi)
,
Section 6.1(d)(vii)
or
Section 6.1(d)(ix)
.
“
Reset MQD
” has the meaning given such term in
Section 5.10(e)
.
“
Reset Notice
” has the meaning given such term in
Section 5.10(b)
.
“
Revaluation Event
” means an event that results in adjustment of the Carrying Value of each Partnership property pursuant to
Section 5.4(d)
.
“
Revaluation Gain
” has the meaning set forth in the definition of Net Termination Gain.
“
Revaluation Loss
” has the meaning set forth in the definition of Net Termination Loss.
“
Sale Gain
” has the meaning set forth in the definition of Net Termination Gain.
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“
Sale Loss
” has the meaning set forth in the definition of Net
Termination Loss.
“
Second Liquidation Target Amount
” has the meaning given such term in
Section 6.1(c)(i)(E)
.
“
Second Target Distribution
” means
$ per Unit per Quarter (or, with respect to the period commencing on the Closing Date and ending on
, 2016, it means the product of $ multiplied by a fraction, the numerator of
which is equal to the number of days in such period and the denominator of which is 92), subject to adjustment in accordance with
Section 5.10
,
Section 6.6
and
Section 6.9
.
“
Securities Act
” means the Securities Act of 1933, as amended, supplemented or restated from time to time, and
any successor to such statute.
“
Selling Holder
” means a Holder who is selling Registrable
Securities pursuant to the procedures in
Section 7.12
.
“
Share of Additional Book Basis
Derivative Items
” means in connection with any allocation of Additional Book Basis Derivative Items for any taxable period, (a) with respect to the Unitholders holding Common Units or Subordinated Units, the amount that bears the same
ratio to such Additional Book Basis Derivative Items as the Unitholders’ Remaining Net Positive Adjustments as of the end of such taxable period bear to the Aggregate Remaining Net Positive Adjustments as of that time, and (b) with respect
to the Partners holding Incentive Distribution Rights, the amount that bears the same ratio to such Additional Book Basis Derivative Items as the Remaining Net Positive Adjustments of the Partners holding the Incentive Distribution Rights as of the
end of such taxable period bear to the Aggregate Remaining Net Positive Adjustments as of that time.
“
Special Approval
” means approval by a majority of the members of the Conflicts Committee acting in good
faith.
“
Subordinated Unit
” means a Limited Partner Interest having the rights and obligations
specified with respect to Subordinated Units in this Agreement. The term “Subordinated Unit” does not include a Common Unit. A Subordinated Unit that is convertible into a Common Unit shall not constitute a Common Unit until such
conversion occurs.
“
Subordination Period
” means the period commencing on the Closing Date and
expiring on the first to occur of the following dates:
(a) the first Business Day following the distribution of
Available Cash to Partners pursuant to
Section 6.3(a)
in respect of any Quarter beginning with the Quarter ending [ ],
in respect of which (i) (A) distributions of Available Cash from Operating Surplus on each of the Outstanding Common Units, Subordinated Units and any other
Outstanding Units that are senior or equal in right of distribution to the Subordinated Units, in each case with respect to each of the three consecutive, non-overlapping four-Quarter periods immediately preceding such date equaled or exceeded the
sum of the Minimum Quarterly Distribution on all Outstanding Common Units, Subordinated Units and any other Outstanding Units that are senior or equal in right of distribution to the Subordinated Units, in each case in respect of such periods and
(B) the Adjusted Operating Surplus for each of the three consecutive, non-overlapping four-Quarter periods immediately preceding such date equaled or exceeded the sum of the Minimum Quarterly Distribution on all of the Common Units,
Subordinated Units and any other Units that are senior or equal in right of distribution to the Subordinated Units, in each case that were Outstanding during such periods on a Fully Diluted Weighted Average Basis, and (ii) there are no
Cumulative Common Unit Arrearages.
(b) the first Business Day following the distribution of Available Cash to Partners
pursuant to
Section 6.3(a)
in respect of any Quarter beginning with the Quarter ending [ ],
in respect of which (i) (A) distributions of Available Cash from Operating Surplus on each of the Outstanding Common Units,
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Subordinated Units and any other Outstanding Units that are senior or equal in right of distribution to the Subordinated Units, in each case with respect to the four-Quarter period immediately
preceding such date equaled or exceeded 150% of the Minimum Quarterly Distribution on all of the Outstanding Common Units, Subordinated Units and any other Outstanding Units that are senior or equal in right of distribution to the Subordinated
Units, in each case in respect of such period, and (B) the Adjusted Operating Surplus for the four-Quarter period immediately preceding such date equaled or exceeded 150% of the sum of the Minimum Quarterly Distribution on all of the Common
Units, Subordinated Units and any other Units that are senior or equal in right of distribution to the Subordinated Units, in each case that were Outstanding during such period on a Fully Diluted Weighted Average Basis, plus the corresponding
Incentive Distributions and (ii) there are no Cumulative Common Unit Arrearages.
“
Subsidiary
”
means, with respect to any Person, (a) a corporation of which more than 50% of the voting power of shares entitled (without regard to the occurrence of any contingency) to vote in the election of directors or other governing body of such
corporation is owned, directly or indirectly, at the date of determination, by such Person, by one or more Subsidiaries of such Person or a combination thereof, (b) a partnership (whether general or limited) in which such Person or a Subsidiary
of such Person is, at the date of determination, a general or limited partner of such partnership, but only if more than 50% of the general partner interests of such partnership is owned, directly or indirectly, at the date of determination, by such
Person, by one or more Subsidiaries of such Person or a combination thereof or (c) any other Person (other than a corporation or a partnership) in which such Person, one or more Subsidiaries of such Person, or a combination thereof, directly or
indirectly, at the date of determination, has (i) at least a majority ownership interest or (ii) the power to elect or direct the election of a majority of the directors or other governing body of such Person.
“
Supplemental Terms Annex
” has the meaning given such term in
Section 5.5(b)
.
“
Surviving Business Entity
” has the meaning given such term in
Section 14.2(b)
.
“
Target Distributions
” means, collectively, the First Target Distribution, Second Target Distribution and Third
Target Distribution.
“
Tax Matters Partner
” has the meaning given such term in
Section
9.3
.
“
Tenth Anniversary
” means
[ ], 2026.
“
Third Target Distribution
” means $ per Unit per Quarter (or, with respect to the period commencing on the Closing Date and ending on
, 2016, it means the product of $ multiplied by a fraction, the numerator of
which is equal to the number of days in such period and the denominator of which is 92), subject to adjustment in accordance with
Section 5.10
,
Section 6.6
and
Section 6.9
.
“
Trading Day
” means a day on which the principal National Securities Exchange on which the referenced Partnership
Interests of any class are listed or admitted to trading is open for the transaction of business or, if such Partnership Interests are not listed or admitted to trading on any National Securities Exchange, a day on which banking institutions in New
York City are not legally required to be closed.
“
Transaction Documents
” has the meaning given
such term in
Section 7.1(b)
.
“
Transfer
” has the meaning given such term in
Section 4.4(a)
.
“
Transfer Agent
” means such bank, trust company or other
Person (including the General Partner or one of its Affiliates) as may be appointed from time to time by the General Partner to act as registrar and transfer agent for any class of Partnership Interests in accordance with the Exchange Act and the
rules of the National Securities Exchange on which such Partnership Interests are listed or admitted to trading (if any);
provided,
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however
, that, if no such Person is appointed as registrar and transfer agent for any class of Partnership Interests, the General Partner shall act as registrar and transfer agent for such
class of Partnership Interests.
“
Treasury Regulation
” means the United States Treasury
regulations promulgated under the Code.
“
Underwritten Offering
” means (a) an offering
pursuant to a Registration Statement in which Partnership Interests are sold to an underwriter on a firm commitment basis for reoffering to the public (other than the Initial Public Offering), (b) an offering of Partnership Interests pursuant
to a Registration Statement that is a “bought deal” with one or more investment banks and (c) an “at-the-market” offering pursuant to a Registration Statement in which Partnership Interests are sold to the public through one
or more investment banks or managers on a best efforts basis.
“
Unit
” means a Partnership
Interest that is designated by the General Partner as a “Unit” and shall include Common Units and Subordinated Units but shall not include (i) the General Partner Interest or (ii) Incentive Distribution Rights.
“
Unit Majority
” means (i) during the Subordination Period, at least a majority of the Outstanding Common
Units (excluding Common Units owned by the General Partner and its Affiliates), voting as a separate class, and at least a majority of the Outstanding Subordinated Units, voting as a separate class, and (ii) after the end of the Subordination
Period, at least a majority of the Outstanding Common Units.
“
Unitholders
” means the Record
Holders of Units.
“
Unpaid MQD
” has the meaning given such term in
Section 6.1(c)(i)(B)
.
“
Unrealized Gain
” attributable to any item of Partnership property means, as of any date of
determination, the excess, if any, of (a) the fair market value of such property as of such date (as determined under
Section 5.4(d)
) over (b) the Carrying Value of such property as of such date (prior to any adjustment to be
made pursuant to
Section 5.4(d)
as of such date).
“
Unrealized Loss
” attributable
to any item of Partnership property means, as of any date of determination, the excess, if any, of (a) the Carrying Value of such property as of such date (prior to any adjustment to be made pursuant to
Section 5.4(d)
as of such
date) over (b) the fair market value of such property as of such date (as determined under
Section 5.4(d)
).
“
Unrecovered Initial Unit Price
” means at any time, with respect to a Unit, the Initial Unit Price less the sum
of all distributions constituting Capital Surplus theretofore made in respect of an Initial Common Unit and any distributions of cash (or the Net Agreed Value of any distributions in kind) in connection with the dissolution and liquidation of the
Partnership theretofore made in respect of an Initial Common Unit, adjusted as the General Partner determines to be appropriate to give effect to any distribution, subdivision or combination of such Units.
“
Unrestricted Person
” means (a) each Indemnitee, (b) each Partner, (c) each Person who is or was a
member, partner, director, officer, employee or agent of any Group Member, a General Partner or any Departing General Partner or any Affiliate of any Group Member, a General Partner or any Departing General Partner and (d) any Person the
General Partner designates as an “Unrestricted Person” for purposes of this Agreement from time to time.
“
U.S. GAAP
” means United States generally accepted accounting principles, as in effect from time to time,
consistently applied.
“
Withdrawal Opinion of Counsel
” has the meaning given such term in
Section 11.1(b)
.
“
Working Capital Borrowings
” means borrowings incurred pursuant to a
credit facility, commercial paper facility or similar financing arrangement that are used solely for working capital purposes or to pay distributions
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to the Partners; provided that when such borrowings are incurred it is the intent of the borrower to repay such borrowings within twelve months from the date of such borrowings other than
from additional Working Capital Borrowings.
Section 1.2
Construction
. Unless the context requires
otherwise: (a) any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa; (b) references to Articles
and Sections refer to Articles and Sections of this Agreement; (c) the terms “include,” “includes,” “including” or words of like import shall be deemed to be followed by the words “without limitation” and
(d) the terms “hereof,” “herein” or “hereunder” refer to this Agreement as a whole and not to any particular provision of this Agreement. The table of contents and headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. The General Partner has the power to construe and interpret this Agreement and to act upon any such construction or interpretation. To the
fullest extent permitted by law, any construction or interpretation of this Agreement by the General Partner, any action taken pursuant thereto and any determination made by the General Partner in good faith shall, in each case, be conclusive and
binding on all Record Holders, each other Person or Group who acquires an interest in a Partnership Interest and all other Persons for all purposes.
ARTICLE II
ORGANIZATION
Section 2.1
Formation
. The General Partner and the Organizational Limited Partner previously formed the Partnership as
a limited partnership pursuant to the provisions of the Delaware Act. The parties hereby amend and restate the original Agreement of Limited Partnership of Noble Midstream Partners LP in its entirety. This amendment and restatement shall become
effective on the date of this Agreement. Except as expressly provided to the contrary in this Agreement, the rights, duties and Liabilities of the Partners and the administration, dissolution and termination of the Partnership shall be governed by
the Delaware Act. All Partnership Interests shall constitute personal property of the owner thereof for all purposes.
Section 2.2
Name
. The name of the Partnership shall be “
Noble Midstream Partners
LP
”. Subject to applicable law, the Partnership’s business may be conducted under any other name or names as determined by the General Partner, including the name of the General Partner. The words “Limited
Partnership,” “L.P.,” “Ltd.” or similar words or letters shall be included in the Partnership’s name where necessary for the purpose of complying with the laws of any jurisdiction that so requires. The General Partner
may change the name of the Partnership at any time and from time to time and shall notify the Limited Partners of such change in the next regular communication to the Limited Partners.
Section 2.3
Registered Office; Registered Agent; Principal Office; Other Offices
. Unless and until changed by the
General Partner, the registered office of the Partnership in the State of Delaware shall be located at 1209 Orange Street, Wilmington, New Castle County, Delaware 19801, and the registered agent for service of process on the Partnership in the State
of Delaware at such registered office shall be The Corporation Trust Company. The principal office of the Partnership shall be located at 1001 Noble Energy Way, Houston, Texas 77070, or such other place as the General Partner may from time to time
designate by notice to the Limited Partners. The Partnership may maintain offices at such other place or places within or outside the State of Delaware as the General Partner determines to be necessary or appropriate. The address of the General
Partner shall be 1001 Noble Energy Way, Houston, Texas 77070, or such other place as the General Partner may from time to time designate by notice to the Limited Partners.
Section 2.4
Purpose and Business
. The purpose and nature of the business to be conducted by the Partnership shall be to (a) engage directly in, or enter into or form, hold and
dispose of any corporation, partnership, joint venture, limited liability company or other arrangement to engage indirectly in, any business
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activity that is approved by the General Partner and that lawfully may be conducted by a limited partnership organized pursuant to the Delaware Act and, in connection therewith, to exercise all
of the rights and powers conferred upon the Partnership pursuant to the agreements relating to such business activity and (b) do anything necessary or appropriate in furtherance of the foregoing, including the making of capital contributions or
loans to a Group Member;
provided
,
however
, that the General Partner shall not cause the Partnership to engage, directly or indirectly, in any business activity that the General Partner determines would be reasonably likely to cause
the Partnership to be treated as an association taxable as a corporation or otherwise taxable as an entity for U.S. federal income tax purposes. To the fullest extent permitted by law, the General Partner shall have no duty or obligation to propose
or approve the conduct by the Partnership of any business and may decline to do so free of any fiduciary duty or obligation whatsoever to the Partnership or any Limited Partner and, in declining to so propose or approve, shall not be required to act
in good faith or pursuant to any other standard imposed by this Agreement, any Group Member Agreement, any other agreement contemplated hereby or under the Delaware Act or any other law, rule or regulation or at equity, and the General Partner in
determining whether to propose or approve the conduct by the Partnership of any business shall be permitted to do so in its sole and absolute discretion.
Section 2.5
Powers
. The Partnership shall be empowered to do any and all acts and things necessary, appropriate, proper, advisable, incidental to or convenient for the furtherance and
accomplishment of the purposes and business described in
Section 2.4
and for the protection and benefit of the Partnership.
Section 2.6
Term
. The term of the Partnership commenced upon the filing of the Certificate of Limited Partnership in accordance with the Delaware Act and shall continue until the
dissolution of the Partnership in accordance with the provisions of
Article XII
. The existence of the Partnership as a separate legal entity shall continue until the cancellation of the Certificate of Limited Partnership as provided in the
Delaware Act.
Section 2.7
Title to Partnership Property
. Title to Partnership property,
whether real, personal or mixed and whether tangible or intangible, shall be deemed to be owned by the Partnership as an entity, and no Partner, individually or collectively, shall have any ownership interest in such Partnership property or any
portion thereof. Title to any or all of the Partnership property may be held in the name of the Partnership, the General Partner, one or more Affiliates of the General Partner or one or more nominees of the General Partner or its Affiliates, as the
General Partner may determine. The General Partner hereby declares and warrants that any Partnership property for which record title is held in the name of the General Partner or one or more Affiliates of the General Partner or one or more nominees
of the General Partner or its Affiliates shall be held by the General Partner or such Affiliate or nominee for the use and benefit of the Partnership in accordance with the provisions of this Agreement;
provided
,
however
,
that the General Partner shall use reasonable efforts to cause record title to such assets (other than those assets in respect of which the General Partner determines that the expense and difficulty of conveyancing makes transfer of record title
to the Partnership impracticable) to be vested in the Partnership or one or more of the Partnership’s designated Affiliates as soon as reasonably practicable;
provided, further
, that, prior to the withdrawal or removal of
the General Partner or as soon thereafter as practicable, the General Partner shall use reasonable efforts to effect the transfer of record title to the Partnership and, prior to any such transfer, will provide for the use of such assets in a manner
satisfactory to any successor General Partner. All Partnership property shall be recorded as the property of the Partnership in its books and records, irrespective of the name in which record title to such Partnership property is held.
ARTICLE III
RIGHTS OF LIMITED PARTNERS
Section 3.1
Limitation of
Liability
. The Limited Partners shall have no liability under this Agreement except as expressly provided in this Agreement or the Delaware Act.
Section 3.2
Management of Business
. No Limited Partner, in its capacity as such, shall participate in the operation, management or control (within the meaning of the Delaware Act) of
the Partnership’s business,
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transact any business in the Partnership’s name or have the power to sign documents for or otherwise bind the Partnership. No action taken by any Affiliate of the General Partner or any
officer, director, employee, manager, member, general partner, agent or trustee of the General Partner or any of its Affiliates, or any officer, director, employee, manager, member, general partner, agent or trustee of a Group Member, in its
capacity as such, shall be deemed to be participating in the control of the business of the Partnership by a limited partner of the Partnership (within the meaning of Section 17-303(a) of the Delaware Act) nor shall any such action affect,
impair or eliminate the limitations on the liability of the Limited Partners under this Agreement.
Section 3.3
Rights of Limited Partners.
(a) Each Limited Partner shall have the right, for a purpose reasonably related to
such Limited Partner’s interest as a Limited Partner in the Partnership, upon reasonable written demand stating the purpose of such demand, and at such Limited Partner’s own expense:
(i) to obtain from the General Partner either (A) the Partnership’s most recent filings with the Commission on
Form 10-K and any subsequent filings on Form 10-Q or Form 8-K or (B) if the Partnership is no longer subject to the reporting requirements of the Exchange Act, the information specified in, and meeting the requirements of, Rule 144A(d)(4) under
the Securities Act (or any successor rule or regulation under the Securities Act);
provided
, that the foregoing materials shall be deemed to be available to a Limited Partner in satisfaction of the requirements of this
Section 3.3(a)(i)
if posted on or accessible through the Partnership’s or the Commission’s website;
(ii) to obtain a current list of the name and last known business, residence or mailing address of each Partner; and
(iii) to obtain a copy of this Agreement and the Certificate of Limited Partnership and all amendments thereto.
(b) To the fullest extent permitted by law, the rights to information granted the Limited Partners pursuant to
Section 3.3(a)
and Section 8.3 replace in their entirety any rights to information provided for in Section 17-305(a) of the Delaware Act, and each of the Limited Partners, each other Person or Group who acquires an interest in a
Partnership Interest and each other Person bound by this Agreement hereby agrees to the fullest extent permitted by law that they do not have any rights as Limited Partners, interest holders or otherwise to receive any information either pursuant to
Sections 17-305(a) of the Delaware Act or otherwise except for the information identified in
Section 3.3(a)
and Section 8.3.
(c) The General Partner may keep confidential from the Limited Partners, for such period of time as the General Partner deems reasonable, (i) any information that the General Partner reasonably
believes to be in the nature of trade secrets or (ii) other information the disclosure of which the General Partner in good faith believes (A) is not in the best interests of the Partnership Group, (B) could damage the Partnership
Group or its business or (C) that any Group Member is required by law or by agreement with any third party to keep confidential (other than agreements with Affiliates of the Partnership the primary purpose of which is to circumvent the
obligations set forth in this
Section 3.3
).
(d) Notwithstanding any other provision of this Agreement or
Section 17-305 of the Delaware Act, each of the Limited Partners, each other Person or Group who acquires an interest in a Partnership Interest and each other Person bound by this Agreement hereby agrees to the fullest extent permitted by law
that they do not have rights to receive information from the Partnership or any Indemnitee for the purpose of determining whether to pursue litigation or assist in pending litigation against the Partnership or any Indemnitee relating to the affairs
of the Partnership except pursuant to the applicable rules of discovery relating to litigation commenced by such Person or Group.
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ARTICLE IV
CERTIFICATES; RECORD HOLDERS; TRANSFER OF PARTNERSHIP INTERESTS; REDEMPTION OF PARTNERSHIP INTERESTS
Section 4.1
Certificates
. Record Holders of Partnership Interests and, where appropriate, Derivative Partnership Interests, shall be recorded in the Partnership Register and ownership
of such interests shall be evidenced by a physical certificate or book entry notation in the Partnership Register. Notwithstanding anything to the contrary in this Agreement, unless the General Partner shall determine otherwise in respect of some or
all of any or all classes of Partnership Interests, Partnership Interests shall not be evidenced by physical certificates. Certificates, if any, shall be executed on behalf of the Partnership by any one senior officer of the General Partner
(including, as applicable, the Chief Executive Officer, President, Chief Financial Officer or any Vice President) and the Secretary, any Assistant Secretary or any other officer or officers of the General Partner as the Board of Directors may
authorize to execute Certificates (collectively, the “
Authorized Officers
”) acting on behalf of the General Partner, and shall bear the legend set forth in
Section 4.8(f)
. The signatures of such Authorized
Officers upon a Certificate may, to the extent permitted by law, be facsimiles. In case any officer who has signed or whose signature has been placed upon such Certificate shall have ceased to hold the applicable office before such Certificate is
issued, it may be issued by the Partnership with the same effect as if he or she were such officer at the date of its issuance. If a Transfer Agent has been appointed for a class of Partnership Interests, no Certificate for such class of Partnership
Interests shall be valid for any purpose until it has been countersigned by the Transfer Agent;
provided
,
however
, that, if the General Partner elects to cause the Partnership to issue Partnership Interests of such class in global
form, the Certificate shall be valid upon receipt of a certificate from the Transfer Agent certifying that the Partnership Interests have been duly registered in accordance with the directions of the Partnership. Subject to the requirements of
Section 6.7(b)
and
Section 6.7(c)
, if Common Units are evidenced by Certificates, on or after the date on which Subordinated Units are converted into Common Units pursuant to the terms of
Section 5.6
, the Record
Holders of such Subordinated Units (a) if the Subordinated Units are evidenced by Certificates, may exchange such Certificates for Certificates evidencing the Common Units into which such Record Holder’s Subordinated Units converted or
(b) if the Subordinated Units are not evidenced by Certificates, shall be issued Certificates evidencing the Common Units into which such Record Holders’ Subordinated Units converted. With respect to any Partnership Interests that are
represented by physical certificates, the General Partner may determine that such Partnership Interests will no longer be represented by physical certificates and may, upon written notice to the holders of such Partnership Interests and subject to
applicable law, take whatever actions it deems necessary or appropriate to cause such Partnership Interests to be registered in book entry or global form and may cause such physical certificates to be cancelled or deemed cancelled.
Section 4.2
Mutilated, Destroyed, Lost or Stolen Certificates.
(a) If any mutilated Certificate is surrendered to the Transfer Agent, the Authorized Officers, acting on behalf of the General Partner,
acting on behalf of the Partnership shall execute, and the Transfer Agent shall countersign and deliver in exchange therefor, a new Certificate evidencing the same number and type of Partnership Interests as the Certificate so surrendered.
(b) The Authorized Officers, acting on behalf of the General Partner, acting on behalf of the Partnership shall execute and
deliver, and the Transfer Agent shall countersign, a new Certificate in place of any Certificate previously issued that is no longer available due to loss, destruction or theft, if the Record Holder of the Certificate:
(i) makes proof by affidavit, in form and substance satisfactory to the General Partner, that a previously issued
Certificate has been lost, destroyed or stolen;
(ii) requests the issuance of a new Certificate at a time when
the General Partner does not have actual knowledge that the Certificate has been acquired by a purchaser for value in good faith and without notice of an adverse claim;
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(iii) if requested by the General Partner, delivers to the General Partner a
bond, in form and substance satisfactory to the General Partner, with surety or sureties and with fixed or open penalty as the General Partner may direct, to indemnify the Partnership, the Limited Partners, the General Partner and the Transfer Agent
against any claim that may be made on account of the alleged loss, destruction or theft of the Certificate; and
(iv) satisfies any other reasonable requirements imposed by the General Partner or the Transfer Agent.
If a Limited Partner fails to notify the General Partner within a reasonable period of time after such Limited Partner has notice of the
loss, destruction or theft of a Certificate, and a transfer of the Limited Partner Interests represented by the Certificate is registered before the Partnership, the General Partner or the Transfer Agent receives such notification, to the fullest
extent permitted by law, such Limited Partner shall be precluded from making any claim against the Partnership, the General Partner or the Transfer Agent for such transfer or for a new Certificate.
(c) As a condition to the issuance of any new Certificate under this
Section 4.2
, the General Partner may require the payment
of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Transfer Agent) reasonably connected therewith.
Section 4.3
Record Holders
. The names and addresses of holders of a Partnership Interest as they appear in the
Partnership Register shall be the official list of Record Holders of the Partnership Interests for all purposes. The Partnership and the General Partner shall be entitled to recognize the Record Holder as the Partner with respect to any Partnership
Interest and, accordingly, shall not be bound to recognize any equitable or other claim to, or interest in, such Partnership Interest on the part of any other Person or Group, regardless of whether the Partnership or the General Partner shall have
actual or other notice thereof, except as otherwise provided by law or any applicable rule, regulation, guideline or requirement of any National Securities Exchange on which such Partnership Interests are listed or admitted to trading. Without
limiting the foregoing, when a Person (such as a broker, dealer, bank, trust company or clearing corporation or an agent of any of the foregoing) is acting as nominee, agent or in some other representative capacity for another Person or Group in
acquiring and/or holding Partnership Interests, as between the Partnership on the one hand, and such other Person on the other hand, such representative Person shall be the Limited Partner with respect to such Partnership Interest upon becoming the
Record Holder in accordance with
Section 10.1(b)
and have the rights and obligations of a Limited Partner hereunder as and to the extent provided herein, including
Section 10.1(c)
.
Section 4.4
Transfer Generally
.
(a) The term “
transfer
,
” when used in this Agreement with respect to a Partnership Interest, shall be deemed to refer to a transaction (i) by which the General
Partner assigns all or any part of its General Partner Interest to another Person and includes a sale, assignment, gift, pledge, encumbrance, hypothecation, mortgage, exchange or any other disposition by law or otherwise or (ii) by which the
holder of a Limited Partner Interest assigns all or a part of such Limited Partner Interest to another Person who is or becomes a Limited Partner as a result thereof, and includes a sale, assignment, gift, exchange or any other disposition by law or
otherwise, excluding a pledge, encumbrance, hypothecation or mortgage but including any transfer upon foreclosure of any pledge, encumbrance, hypothecation or mortgage.
(b) No Partnership Interest shall be transferred, in whole or in part, except in accordance with the terms and conditions set forth in this
Article IV
. Any transfer or purported transfer of a
Partnership Interest not made in accordance with this
Article IV
shall be null and void, and the Partnership shall have no obligation to effect any such transfer or purported transfer.
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(c) Nothing contained in this Agreement shall be construed to prevent or limit a disposition
by any stockholder, member, partner or other owner of the General Partner or any Limited Partner of any or all of such Person’s shares of stock, membership interests, partnership interests or other ownership interests in the General Partner or
such Limited Partner and the term “transfer” shall not include any such disposition.
Section 4.5
Registration and Transfer of Limited Partner Interests
.
(a) The General Partner shall maintain, or cause to
be maintained by the Transfer Agent in whole or in part, the Partnership Register on behalf of the Partnership.
(b) The
General Partner shall not recognize any transfer of Limited Partner Interests evidenced by Certificates until the Certificates evidencing such Limited Partner Interests are duly endorsed and surrendered for registration of transfer. No charge shall
be imposed by the General Partner for such transfer;
provided
,
however
, that as a condition to the issuance of any new Certificate under this
Section 4.5
, the General Partner may require the payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed with respect thereto. Upon surrender of a Certificate for registration of transfer of any Limited Partner Interests evidenced by a Certificate, and subject to the provisions of this
Section 4.5(b)
, the Authorized Officers, acting on behalf of the General Partner, acting on behalf of the Partnership, shall execute and deliver, and in the case of Certificates evidencing Limited Partner Interests for which a Transfer
Agent has been appointed, the Transfer Agent shall countersign and deliver, in the name of the holder or the designated transferee or transferees, as required pursuant to the holder’s instructions, one or more new Certificates evidencing the
same aggregate number and type of Limited Partner Interests as was evidenced by the Certificate so surrendered. Upon the proper surrender of a Certificate, such transfer shall be recorded in the Partnership Register. Notwithstanding this paragraph,
if the General Partner has determined that Certificates will no longer be issued with respect to any class of Limited Partner Interests, then the General Partner shall be under no obligation to deliver replacement Certificates to a transferee of a
Limited Partner Interest of such class and shall cancel the returned Certificate upon the surrender of same by the transferor and shall only be required to reflect the transfer in the Partnership Register.
(c) Upon the receipt by the General Partner or the Transfer Agent of a duly endorsed certificate or, in the case of uncertificated
Limited Partner Interests for which a Transfer Agent has been appointed, the Transfer Agent of proper transfer instructions from the Record Holder of uncertificated Limited Partner Interests, such transfer shall be recorded in the Partnership
Register.
(d) Except as provided in
Section 4.9
, by acceptance of any Limited Partner Interests pursuant to a
transfer in accordance with this
Article IV
, each transferee of a Limited Partner Interest (including any nominee, agent or representative acquiring such Limited Partner Interests for the account of another Person or Group) (i) shall be
admitted to the Partnership as a Limited Partner with respect to the Limited Partner Interests so transferred to such Person when any such transfer or admission is reflected in the Partnership Register and such Person becomes the Record Holder of
the Limited Partner Interests so transferred, (ii) shall become bound, and shall be deemed to have agreed to be bound, by the terms of this Agreement, (iii) shall be deemed to represent that the transferee has the capacity, power and
authority to enter into this Agreement, and (iv) shall be deemed to make the consents, acknowledgements and waivers contained in this Agreement, all with or without execution of this Agreement by such Person. The transfer of any Limited Partner
Interests and the admission of any new Limited Partner shall not constitute an amendment to this Agreement.
(e) Subject to
(i) the foregoing provisions of this
Section 4.5
, (ii)
Section 4.3
, (iii)
Section 4.8
, (iv)
Section 4.9
, (v) with respect to any class or series of Limited Partner Interests, the
provisions of any statement of designations or an amendment to this Agreement (including any Supplemental Terms Annex) establishing such class or series, (vi) any contractual provisions binding on any Limited Partner and (vii) provisions
of applicable law including the Securities Act, Limited Partner Interests shall be freely transferable.
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(f) The General Partner and its Affiliates shall have the right at any time to transfer
their Subordinated Units and Common Units (whether issued upon conversion of the Subordinated Units or otherwise) to one or more Persons.
Section 4.6
Transfer of the General Partner’s General Partner Interest
.
(a) Subject to
Section 4.6(c)
below, prior to the Tenth Anniversary, the General Partner shall not transfer all or any part of its General Partner Interest to a Person unless such transfer
(i) has been approved by the prior written consent or vote of the holders of at least a majority of the Outstanding Common Units (excluding Common Units owned by the General Partner and its Affiliates) or (ii) is of all, but not less than
all, of its General Partner Interest to (A) an Affiliate of the General Partner (other than an individual) or (B) another Person (other than an individual) in connection with the merger or consolidation of the General Partner with or into
such other Person or the transfer by the General Partner of all or substantially all of its assets to such other Person.
(b)
Subject to
Section 4.6(c)
below, on or after the Tenth Anniversary, the General Partner may transfer all or any part of its General Partner Interest without the approval of any Limited Partner or any other Person.
(c) Notwithstanding anything herein to the contrary, no transfer by the General Partner of all or any part of its General Partner
Interest to another Person shall be permitted unless (i) the transferee agrees to assume the rights and duties of the General Partner under this Agreement and to be bound by the provisions of this Agreement, (ii) the Partnership receives
an Opinion of Counsel that such transfer would not result in the loss of limited liability of any Limited Partner under the Delaware Act or cause the Partnership to be treated as an association taxable as a corporation or otherwise to be taxed as an
entity for U.S. federal income tax purposes (to the extent not already so treated or taxed) and (iii) such transferee also agrees to purchase all (or the appropriate portion thereof, if applicable) of the partnership or membership interest
owned by the General Partner as the general partner or managing member, if any, of each other Group Member. In the case of a transfer pursuant to and in compliance with this
Section 4.6
, the transferee or successor (as the case may be)
shall, subject to compliance with the terms of
Section 10.2
, be admitted to the Partnership as the General Partner effective immediately prior to the transfer of the General Partner Interest, and the business of the Partnership shall
continue without dissolution.
Section 4.7
Transfer of Incentive Distribution Rights
. The General Partner
or any other holder of Incentive Distribution Rights may transfer any or all of its Incentive Distribution Rights without the approval of any Limited Partner or any other Person.
Section 4.8
Restrictions on Transfers
.
(a) Except as provided in
Section 4.8(e)
, notwithstanding the other provisions of this
Article IV
, no transfer of any
Partnership Interests shall be made if such transfer would (i) violate the then applicable federal or state securities laws or rules and regulations of the Commission, any state securities commission or any other governmental authority with
jurisdiction over such transfer, (ii) terminate the existence of the Partnership under the laws of the jurisdiction of its formation or (iii) cause the Partnership to be treated as an association taxable as a corporation or otherwise to be
taxed as an entity for U.S. federal income tax purposes (to the extent not already so treated or taxed). The Partnership may issue stop transfer instructions to any Transfer Agent in order to implement any restriction on transfer contemplated by
this Agreement.
(b) The General Partner may impose restrictions on the transfer of Partnership Interests if it
receives an Opinion of Counsel that such restrictions are necessary to (i) avoid a significant risk of the Partnership becoming taxable as a corporation or otherwise becoming taxable as an entity for U.S. federal income tax purposes (to the
extent not already so treated or taxed) or (ii) preserve the uniformity of the Limited Partner Interests (or any class or classes thereof). The General Partner may impose such restrictions by amending this Agreement;
provided
,
however
, that any amendment that would result in the delisting or suspension of trading of any class of Limited
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Partner Interests on the principal National Securities Exchange on which such class of Limited Partner Interests is then listed or admitted to trading must be approved, prior to such
amendment being effected, by the holders of at least a majority of the Outstanding Limited Partner Interests of such class.
(c) The transfer of an IDR Reset Common Unit that was issued in connection with an IDR Reset Election pursuant to
Section 5.10
shall be subject to the restrictions imposed by
Section 6.8(b)
and
Section 6.8(c)
.
(d) The transfer of a Subordinated Unit or a Common Unit resulting
from the conversion of a Subordinated Unit shall be subject to the restrictions imposed by
Section 6.7(b)
and
Section 6.7(c)
.
(e) Except for
Section 4.9
, nothing in this Agreement shall preclude the settlement of any transactions involving Partnership Interests entered into through the facilities of any National
Securities Exchange on which such Partnership Interests are listed or admitted to trading.
(f) Each certificate or book entry
evidencing Partnership Interests shall bear a conspicuous legend in substantially the following form:
THE HOLDER OF THIS SECURITY ACKNOWLEDGES
FOR THE BENEFIT OF NOBLE MIDSTREAM PARTNERS LP THAT THIS SECURITY MAY NOT BE TRANSFERRED IF SUCH TRANSFER (AS DEFINED IN THE PARTNERSHIP AGREEMENT) WOULD (A) VIOLATE THE THEN APPLICABLE FEDERAL OR STATE SECURITIES LAWS OR RULES AND REGULATIONS
OF THE SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY OTHER GOVERNMENTAL AUTHORITY WITH JURISDICTION OVER SUCH TRANSFER, (B) TERMINATE THE EXISTENCE OF NOBLE MIDSTREAM PARTNERS LP UNDER THE LAWS OF THE STATE OF
DELAWARE OR (C) CAUSE NOBLE MIDSTREAM PARTNERS LP TO BE TREATED AS AN ASSOCIATION TAXABLE AS A CORPORATION OR OTHERWISE TO BE TAXED AS AN ENTITY FOR U.S. FEDERAL INCOME TAX PURPOSES (TO THE EXTENT NOT ALREADY SO TREATED OR TAXED). THE GENERAL
PARTNER OF NOBLE MIDSTREAM PARTNERS LP MAY IMPOSE ADDITIONAL RESTRICTIONS ON THE TRANSFER OF THIS SECURITY IF IT RECEIVES AN OPINION OF COUNSEL THAT SUCH RESTRICTIONS ARE NECESSARY TO (A) AVOID A SIGNIFICANT RISK OF NOBLE MIDSTREAM PARTNERS LP
BECOMING TAXABLE AS A CORPORATION OR OTHERWISE BECOMING TAXABLE AS AN ENTITY FOR U.S. FEDERAL INCOME TAX PURPOSES (TO THE EXTENT NOT ALREADY SO TREATED OR TAXED) OR (B) PRESERVE THE UNIFORMITY OF THE LIMITED PARTNER INTERESTS IN NOBLE MIDSTREAM
PARTNERS LP (OR ANY CLASS OR CLASSES THEREOF). THIS SECURITY MAY BE SUBJECT TO ADDITIONAL RESTRICTIONS ON ITS TRANSFER PROVIDED IN THE PARTNERSHIP AGREEMENT. COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER
OF RECORD OF THIS SECURITY TO THE SECRETARY OF THE GENERAL PARTNER AT THE PRINCIPAL EXECUTIVE OFFICES OF THE PARTNERSHIP. EXCEPT AS SET FORTH IN SECTION 4.9 OF THE PARTNERSHIP AGREEMENT, THE RESTRICTIONS SET FORTH ABOVE SHALL NOT PRECLUDE THE
SETTLEMENT OF ANY TRANSACTIONS INVOLVING THIS SECURITY ENTERED INTO THROUGH THE FACILITIES OF ANY NATIONAL SECURITIES EXCHANGE ON WHICH THIS SECURITY IS LISTED OR ADMITTED TO TRADING.
Section 4.9
Eligibility Certificates; Ineligible Holders
.
(a) The General Partner may upon demand or on a regular basis require Limited Partners, and transferees of Limited Partner Interests in
connection with a transfer, to execute an Eligibility Certificate or provide other information as is necessary for the General Partner to determine if any such Limited Partners or transferees are Ineligible Holders.
(b) If any Limited Partner or any transferee of Limited Partner Interests (or their respective beneficial owners) fails to furnish to the
General Partner within 30 days of its request an Eligibility Certificate and other
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information related thereto, or if upon receipt of such Eligibility Certificate or other requested information the General Partner determines that a Limited Partner or a transferee of a Limited
Partner is an Ineligible Holder, the Limited Partner Interests owned by such Limited Partner shall be subject to redemption in accordance with the provisions of
Section 4.10
or the General Partner may refuse to effect the transfer of the
Limited Partner Interests to such transferee. In addition, the General Partner shall be substituted for any Limited Partner that is an Ineligible Holder as the Limited Partner in respect of the Ineligible Holder’s Limited Partner Interests.
(c) The General Partner shall, in exercising, or abstaining from exercising, voting rights in respect of Limited Partner
Interests held by it on behalf of Ineligible Holders, distribute the votes or abstentions in the same manner and in the same ratios as the votes of Limited Partners (including the General Partner and its Affiliates) in respect of Limited Partner
Interests other than those of Ineligible Holders are distributed, either casting votes for or against or abstaining as to the matter.
(d) Upon dissolution of the Partnership, an Ineligible Holder shall have no right to receive a distribution in kind pursuant to
Section 12.4
but shall be entitled to the cash equivalent
thereof, and the Partnership shall provide cash in exchange for an assignment of the Ineligible Holder’s share of any distribution in kind. Such payment and assignment shall be treated for Partnership purposes as a purchase by the Partnership
from the Ineligible Holder of its Limited Partner Interests (representing the right to receive its share of such distribution in kind).
(e) At any time after an Ineligible Holder can and does certify that it no longer is an Ineligible Holder, it may, upon application to the General Partner, request that with respect to any Limited Partner
Interests of such Ineligible Holder not redeemed pursuant to
Section 4.10
, such Ineligible Holder upon approval of the General Partner, shall no longer constitute an Ineligible Holder and the General Partner shall cease to be the Limited
Partner in respect of such Limited Partner Interests.
(f) If at any time a transferee of a Partnership Interest fails to
furnish an Eligibility Certificate or any other information requested by the General Partner pursuant to
Section 4.9
within 30 days of such request, or if upon receipt of such Eligibility Certificate or other information the General
Partner determines, with the advice of counsel, that such transferee is an Ineligible Holder, the Partnership may, unless the transferee establishes to the satisfaction of the General Partner that such transferee is not an Ineligible Holder,
prohibit and void the transfer, including by placing a stop order with the Transfer Agent.
Section 4.10
Redemption
of Partnership Interests of Ineligible Holders
.
(a) If at any time a Limited Partner fails to furnish an
Eligibility Certificate or any other information requested within the period of time specified in
Section 4.9
, or if upon receipt of such Eligibility Certificate or other information the General Partner determines that a Limited Partner
is an Ineligible Holder, the Partnership may, unless the Limited Partner establishes to the satisfaction of the General Partner that such Limited Partner is not an Ineligible Holder or has transferred his Limited Partner Interests to a Person who is
not an Ineligible Holder and who furnishes an Eligibility Certificate to the General Partner prior to the date fixed for redemption as provided below, redeem the Limited Partner Interest of such Limited Partner as follows:
(i) The General Partner shall, not later than the 30th day before the date fixed for redemption, give notice of redemption
to the Limited Partner, at such Limited Partner’s last address designated in the Partnership Register or on the records of the Transfer Agent, by registered or certified mail, postage prepaid. The notice shall be deemed to have been given when
so mailed. The notice shall specify the Redeemable Interests, the date fixed for redemption, the place of payment, that payment of the redemption price will be made upon redemption of the Redeemable Interests (or, if later in the case of Redeemable
Interests evidenced by Certificates, upon surrender of the Certificate evidencing the Redeemable Interests) and that on and after the date fixed for redemption no further allocations or distributions to which such Limited Partner would otherwise be
entitled in respect of the Redeemable Interests will accrue or be made.
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(ii) The aggregate redemption price for Redeemable Interests shall be an
amount equal to the Current Market Price (the date of determination of which shall be the date fixed for redemption) of Limited Partner Interests of the class to be so redeemed multiplied by the number of Limited Partner Interests of each such class
included among the Redeemable Interests. The redemption price shall be paid, as determined by the General Partner, in cash or by delivery of a promissory note of the Partnership in the principal amount of the redemption price, bearing interest at
the rate of 5% annually and payable in three equal annual installments of principal together with accrued interest, commencing one year after the redemption date.
(iii) The Limited Partner or such Limited Partner’s duly authorized representative shall be entitled to receive the
payment for the Redeemable Interests at the place of payment specified in the notice of redemption on the redemption date (or, if later in the case of Redeemable Interests evidenced by Certificates, upon surrender by or on behalf of the Limited
Partner or transferee at the place specified in the notice of redemption, of the Certificate evidencing the Redeemable Interests, duly endorsed in blank or accompanied by an assignment duly executed in blank).
(iv) After the redemption date, Redeemable Interests shall no longer constitute issued and Outstanding Limited Partner
Interests.
(b) The provisions of this
Section 4.10
shall also be applicable to Limited Partner Interests held by
a Limited Partner as nominee, agent or representative of a Person determined to be an Ineligible Holder.
(c) Nothing in this
Section 4.10
shall prevent the recipient of a notice of redemption from transferring his Limited Partner Interest before the redemption date if such transfer is otherwise permitted under this Agreement and the transferor provides notice
of such transfer to the General Partner. Upon receipt of notice of such a transfer, the General Partner shall withdraw the notice of redemption, provided the transferee of such Limited Partner Interest certifies to the satisfaction of the General
Partner that such transferee is not an Ineligible Holder. If the transferee fails to make such certification within 30 days after the request and, in any event, before the redemption date, such redemption shall be effected from the transferee on the
original redemption date.
ARTICLE V
CAPITAL CONTRIBUTIONS AND ISSUANCE OF PARTNERSHIP INTERESTS
Section 5.1
Organizational Contributions
. In connection with the formation of the Partnership under the
Delaware Act, the General Partner made an initial Capital Contribution to the Partnership in the amount of $20.00 for a 1% General Partner Interest in the Partnership (the “
Original General Partner
Interest
”
)
and was admitted as the General Partner of the Partnership, and the Organizational Limited Partner made an initial Capital Contribution to the Partnership in the amount of
$980.00 for a 99% Limited Partner Interest in the Partnership (the “
Original Limited Partner Interest
”) and was admitted as a Limited Partner of the Partnership. As of the Closing Date, pursuant to the
Contribution Agreement and this Agreement, (i) the Organizational Limited Partner distributed to NBL Midstream the Original Limited Partner Interest, NBL Midstream was admitted as a Limited Partner, immediately thereafter the Organizational
Limited Partner ceased to be a limited partner of the Partnership and the Partnership was continued without dissolution, (ii) the General Partner was issued a non-economic management interest in the Partnership (represented by the General Partner
Interest), (iii) the Original General Partner Interest and the Original Limited Partner Interest were redeemed in exchange for the return of the initial Capital Contributions made with respect to such interests, and (iv) 99% of any interest or
other profit that may have resulted from the investment or other use of such initial Capital Contributions was allocated and distributed to NBL Midstream, and the balance thereof was allocated and distributed to the General Partner. The General
Partner hereby continues as the general partner of the Partnership with a non-economic management interest in the Partnership and NBL Midstream hereby continues as a Limited Partner, in each case with respect to the portion of its interest that was
not redeemed.
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Section 5.2
Contributions by Limited Partners
.
(a) On the Closing Date, pursuant to and as described in the Contribution Agreement, NBL Midstream contributed to the Partnership, as a
Capital Contribution, 100% of the membership interests in the Organizational Limited Partner in exchange for (i) [ ] Common Units,
(ii) [ ] Subordinated Units, (iii) the Incentive Distribution Rights, and (iv) the right to receive a cash distribution from the Partnership as set forth in the
Contribution Agreement.
(b) On the Closing Date and pursuant to the IPO Underwriting Agreement, each IPO Underwriter
contributed cash to the Partnership in exchange for the issuance by the Partnership of Common Units to each IPO Underwriter, all as set forth in the Contribution Agreement. Notwithstanding any other provision of this Agreement, but subject to the
last sentence of Section 6.3(a), the Partnership is hereby authorized to distribute to NBL Midstream any net cash proceeds from the sale of Option Units (as defined in the Contribution Agreement) upon the exercise of the Over-Allotment Option in
accordance with the Contribution Agreement.
(c) Upon each exercise, if any, of the Over-Allotment Option, each IPO
Underwriter shall contribute cash to the Partnership on the applicable Option Closing Date in exchange for the issuance by the Partnership of Common Units to each IPO Underwriter, all as set forth in the IPO Underwriting Agreement. Any Common Units
subject to the Over-Allotment Option that are not purchased by the IPO Underwriters pursuant to the Over-Allotment Option, if any (the “
Deferred Issuance
”), will be issued to NBL Midstream at the expiration of the
Over-Allotment Option period for no additional consideration, all as set forth in the IPO Underwriting Agreement.
(d) Except
for the Capital Contributions made or to be made pursuant to
Section 5.2(a)
through
Section 5.2(c)
and for Capital Contributions required to be made by or on behalf of a Person acquiring Partnership Interests or Derivative
Partnership Interests in connection with future issuances in accordance with
Section 5.5
, no Limited Partner will be required to make any additional Capital Contribution to the Partnership pursuant to this Agreement.
Section 5.3
Interest and Withdrawal
. No interest shall be paid by the Partnership on Capital Contributions. No Partner
shall be entitled to the withdrawal or return of its Capital Contribution, except to the extent, if any, that distributions made pursuant to this Agreement or upon termination of the Partnership may be considered as such by law and then only to the
extent provided for in this Agreement. Except to the extent expressly provided in this Agreement, no Partner shall have priority over any other Partner either as to the return of Capital Contributions or as to profits, losses or distributions. Any
such return shall be a compromise to which all Partners agree within the meaning of Section 17-502(b) of the Delaware Act.
Section 5.4
Capital Accounts
.
(a) The Partnership shall maintain for each Partner (or a beneficial owner of Partnership Interests held by a nominee, agent or representative in any case in which the nominee, agent or representative has
furnished the identity of such owner to the Partnership in accordance with Section 6031(c) of the Code or any other method acceptable to the General Partner) owning a Partnership Interest a separate Capital Account with respect to such
Partnership Interest in accordance with the rules of Treasury Regulation Section 1.704-1(b)(2)(iv). Such Capital Account shall be increased by (i) the amount of all Capital Contributions made by the Partner with respect to such Partnership
Interest and (ii) all items of Partnership income and gain computed in accordance with
Section 5.4(b)
and allocated with respect to such Partnership Interest pursuant to
Section 6.1
, and decreased by (x) the amount
of cash or Net Agreed Value of all actual and deemed distributions of cash or property made to the Partner with respect to such Partnership Interest, and (y) all items of Partnership deduction and loss computed in accordance with
Section 5.4(b)
and allocated with respect to such Partnership Interest pursuant to
Section 6.1
.
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(b) For purposes of computing the amount of any item of income, gain, loss or deduction that
is to be allocated pursuant to
Article VI
and is to be reflected in the Partners’ Capital Accounts, the determination, recognition and classification of any such item shall be the same as its determination, recognition and classification
for U.S. federal income tax purposes (including any method of depreciation, cost recovery or amortization used for that purpose);
provided
, that:
(i) Solely for purposes of this
Section 5.4
, the Partnership shall be treated as owning directly its proportionate share (as determined by the General Partner based upon the provisions of the
applicable Group Member Agreement or governing, organizational or similar documents) of all property owned by (x) any other Group Member that is classified as a partnership for U.S. federal income tax purposes and (y) any other
partnership, limited liability company, unincorporated business or other entity classified as a partnership for U.S. federal income tax purposes of which a Group Member is, directly or indirectly, a partner, member or other equity holder.
(ii) All fees and other expenses incurred by the Partnership to promote the sale of (or to sell) a Partnership
Interest that can neither be deducted nor amortized under Section 709 of the Code, if any, shall, for purposes of Capital Account maintenance, be treated as an item of deduction at the time such fees and other expenses are incurred and shall be
allocated among the Partners pursuant to
Section 6.1
.
(iii) The computation of all items of
income, gain, loss and deduction shall be made (x) except as otherwise provided in this Agreement and Treasury Regulation Section 1.704-1(b)(2)(iv)(m), without regard to any election under Section 754 of the Code that may be made by
the Partnership, and (y) as to those items described in Section 705(a)(1)(B) or 705(a)(2)(B) of the Code, without regard to the fact that such items are not includable in gross income or are neither currently deductible nor capitalized for
U.S. federal income tax purposes.
(iv) To the extent an adjustment to the adjusted tax basis of any
Partnership property pursuant to Section 734(b) of the Code (including pursuant to Treasury Regulation Section 1.734-2(b)(1)) is required, pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(m), to be taken into account in
determining Capital Accounts, the amount of such adjustment in the Capital Accounts shall be treated as an item of gain or loss.
(v) In the event the Carrying Value of Partnership property is adjusted pursuant to
Section 5.4(d)
, any Unrealized Gain resulting from such adjustment shall be treated as an item of gain, and
any Unrealized Loss resulting from such adjustment shall be treated as an item of loss.
(vi) Any income, gain
or loss attributable to the taxable disposition of any Partnership property shall be determined as if the adjusted basis of such property as of such date of disposition were equal in amount to the property’s Carrying Value as of such date.
(vii) Any deductions for depreciation, cost recovery or amortization attributable to any Contributed Property
or Adjusted Property shall be determined under the rules prescribed by Treasury Regulation Section 1.704-3(d)(2) as if the adjusted basis of such property were equal to the Carrying Value of such property.
(viii) The Gross Liability Value of each Liability of the Partnership described in Treasury Regulation
Section 1.752-7(b)(3)(i) shall be adjusted at such times as provided in this Agreement for an adjustment to the Carrying Values of Partnership property. The amount of any such adjustment shall be treated for purposes hereof as an item of loss
(if the adjustment increases the Carrying Value of such Liability of the Partnership) or an item of gain (if the adjustment decreases the Carrying Value of such Liability of the Partnership).
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(c) (i) Except as otherwise provided in this
Section 5.4(c)
, a transferee of a
Partnership Interest shall succeed to a Pro Rata portion of the Capital Account of the transferor relating to the Partnership Interest so transferred.
(ii) Subject to
Section 6.7(b)
, immediately prior to the transfer of a Subordinated Unit or a Subordinated Unit that has converted into a Common Unit pursuant to
Section 5.6
by a
holder thereof (in each case, other than a transfer to an Affiliate of the holder thereof unless the General Partner elects to have this
Section 5.5(c)(ii)
apply to such transfer), the Capital Account maintained for such Person with
respect to such transferred Units will (A) first, be allocated to the Units to be transferred in an amount equal to the product of (x) the number of such Units to be transferred and (y) the Per Unit Capital Amount for an Initial
Common Unit, and (B) second, any remaining balance in such Capital Account will be retained by the transferor, regardless of whether it has retained any Units. Following any such allocation, the transferor’s Capital Account, if any,
maintained with respect to the Subordinated Units or retained Common Units resulting from conversion of Subordinated Units, if any, will have a balance equal to the amount allocated under
clause (B)
above, and the transferee’s
Capital Account established with respect to the transferred Units will have a balance equal to the amount allocated under
clause (A)
above.
(iii) Subject to
Section 6.8(b)
, immediately prior to the transfer of an IDR Reset Common Unit by a holder thereof (other than a transfer to an Affiliate of the holder thereof unless the
General Partner elects to have this
Section 5.5(c)(iii)
apply to such transfer), the Capital Account maintained for such Person with respect to its IDR Reset Common Units will (A) first, be allocated to the IDR Reset Common Units to
be transferred in an amount equal to the product of (x) the number of such IDR Reset Common Units to be transferred and (y) the Per Unit Capital Amount for an Initial Common Unit, and (B) second, any remaining balance in such Capital
Account will be retained by the transferor, regardless of whether it has retained any IDR Reset Common Units. Following any such allocation, the transferor’s Capital Account, if any, maintained with respect to the retained IDR Reset Common
Units, if any, will have a balance equal to the amount allocated under
clause (B)
above, and the transferee’s Capital Account established with respect to the transferred IDR Reset Common Units will have a balance equal to the amount
allocated under
clause (A)
above.
(d) (i) Consistent with Treasury Regulation
Section 1.704-1(b)(2)(iv)(f) and 1.704-1(b)(2)(iv)(h)(2), on an issuance of additional Partnership Interests for cash or Contributed Property, the issuance of a Noncompensatory Option, the issuance of Partnership Interests as consideration for
the provision of services, the issuance of IDR Reset Common Units pursuant to
Section 5.10
, or the conversion of the Combined Interest to Common Units pursuant to
Section 11.3(b)
, the Carrying Value of each Partnership
property immediately prior to such issuance shall be adjusted upward or downward to reflect any Unrealized Gain or Unrealized Loss attributable to such Partnership property;
provided
,
however
, that in the event of the issuance of a
Partnership Interest pursuant to the exercise of a Noncompensatory Option where the right to share in Partnership capital represented by such Partnership Interest differs from the consideration paid to acquire and exercise such option, the Carrying
Value of each Partnership property immediately after the issuance of such Partnership Interest shall be adjusted upward or downward to reflect any Unrealized Gain or Unrealized Loss attributable to such Partnership property and the Capital Accounts
of the Partners shall be adjusted in a manner consistent with Treasury Regulation Section 1.704-1(b)(2)(iv)(s);
provided further
, that in the event of an issuance of Partnership Interests for a
de minimis
amount of cash or
Contributed Property, in the event of an issuance of a Noncompensatory Option to acquire a de minimis Partnership Interest, or in the event of an issuance of a
de minimis
amount of Partnership Interests as consideration for the provision of
services, the General Partner may determine that such adjustments are unnecessary for the proper administration of the Partnership. In determining such Unrealized Gain or Unrealized Loss, the aggregate fair market value of all Partnership property
(including cash or cash equivalents) immediately prior to the issuance of additional Partnership Interests (or, in the case of a Revaluation Event resulting from the exercise of a Noncompensatory Option, immediately after the issuance of the
Partnership Interest acquired pursuant to the exercise of such Noncompensatory Option) shall be determined by the General Partner using such method of valuation as it may adopt. In making its determination of the fair market values of individual
properties, the General Partner may first determine an aggregate value for the assets of the Partnership that takes into account the current trading price of the Common Units, the fair market value of all other
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Partnership Interests at such time and the value of Partnership Liabilities. The General Partner may allocate such aggregate value among the individual properties of the Partnership (in such
manner as it determines appropriate). Absent a contrary determination by the General Partner, the aggregate fair market value of all Partnership property (including, without limitation, cash or cash equivalents) immediately prior to a Revaluation
Event shall be the value that would result in the Capital Account for each Common Unit that is Outstanding prior to such Revaluation Event being equal to the Event Issue Value.
(ii) In accordance with Treasury Regulation Section 1.704- 1(b)(2)(iv)(f), immediately prior to any distribution to a
Partner of any Partnership property (other than a distribution of cash that is not in redemption or retirement of a Partnership Interest), the Carrying Value of all Partnership property shall be adjusted upward or downward to reflect any Unrealized
Gain or Unrealized Loss attributable to such Partnership property. In determining such Unrealized Gain or Unrealized Loss the aggregate fair market value of all Partnership property (including cash or cash equivalents) immediately prior to a
distribution shall (A) in the case of a distribution other than one made pursuant to
Section 12.4
, be determined in the same manner as that provided in
Section 5.4(d)(i)
or (B) in the case of a liquidating
distribution pursuant to
Section 12.4
, be determined by the Liquidator using such method of valuation as it may adopt.
Section 5.5
Issuances of Additional Partnership Interests and Derivative Partnership Interests
.
(a) The Partnership may issue additional Partnership Interests (other than General Partner Interests) and Derivative Partnership Interests for any Partnership purpose at any time and from time to time to
such Persons for such consideration and on such terms and conditions as the General Partner shall determine, all without the approval of any Limited Partners.
(b) Each additional Partnership Interest authorized to be issued by the Partnership pursuant to
Section 5.5(a)
may be issued in one or more classes, or one or more series of any
such classes, with such designations, preferences, rights, powers and duties (which may be senior to existing classes and series of Partnership Interests), as shall be fixed by the General Partner, including (i) the right to share in
Partnership profits and losses or items thereof; (ii) the right to share in Partnership distributions; (iii) the rights upon dissolution and liquidation of the Partnership; (iv) whether, and the terms and conditions upon which, the
Partnership may, or shall be required to, redeem the Partnership Interest; (v) whether such Partnership Interest is issued with the privilege of conversion or exchange and, if so, the terms and conditions of such conversion or exchange;
(vi) the terms and conditions upon which each Partnership Interest will be issued, evidenced by Certificates and assigned or transferred; (vii) the method for determining the Percentage Interest as to such Partnership Interest and
(viii) the right, if any, of each such Partnership Interest to vote on Partnership matters, including matters relating to the relative rights, preferences and privileges of such Partnership Interest. The designations, powers, duties, rights and
preferences of any additional class of Partnership Interests issued pursuant to this
Section 5.5
may be set forth in an amendment to, or amendment and restatement of, this Agreement or in an annex to this Agreement (a
“
Supplemental Terms Annex
”), the provisions of which shall supplement and, to the extent inconsistent with any other provision of this Agreement, supersede and amend the provisions hereof. To the extent that more than one
Supplemental Terms Annex is in effect at any time and the terms of such Supplemental Terms Annexes conflict with each other, then the terms set forth in the most recently adopted Supplemental Terms Annex shall control.
(c) The General Partner shall take all actions that it determines to be necessary or appropriate in connection with (i) each
issuance of Partnership Interests and Derivative Partnership Interests pursuant to
Section 5.2
or this
Section 5.5
, including Common Units issued in connection with the Deferred Issuance, (ii) the conversion of the
Combined Interest into Units pursuant to the terms of this Agreement, (iii) the issuance of Common Units pursuant to
Section 5.10
, (iv) reflecting admission of such additional Limited Partners in the Partnership Register as the
Record Holders of such Limited Partner Interests and (v) all additional issuances of Partnership Interests and Derivative Partnership Interests. The General Partner shall determine the relative rights, powers and duties of the holders of the
Units or other Partnership Interests or Derivative Partnership Interests being so issued. The General Partner shall do all things necessary to comply with the Delaware Act and is authorized and directed to do all things that it determines to be
necessary or appropriate in connection with any future issuance of
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Partnership Interests or Derivative Partnership Interests or in connection with the conversion of the Combined Interest into Units pursuant to the terms of this Agreement, including compliance
with any statute, rule, regulation or guideline of any federal, state or other governmental agency or any National Securities Exchange on which the Units or other Partnership Interests are listed or admitted to trading.
(d) No fractional Units shall be issued by the Partnership.
Section 5.6
Conversion of Subordinated Units
.
(a) All
of the Subordinated Units shall convert into Common Units on a one-for-one basis on the expiration of the Subordination Period.
(b) A Common Unit that has been issued upon conversion of a Subordinated Unit shall be subject to the provisions of
Section 6.7
.
Section 5.7
Limited Preemptive Right
.
Except as provided in this
Section 5.7
and in
Section 5.10
or as otherwise provided in a separate agreement by the Partnership, no Person shall have any preemptive, preferential or other similar right with respect to the issuance of any Partnership
Interest, whether unissued, held in the treasury or hereafter created. Other than with respect to the issuance of Partnership Interests in connection with the Initial Public Offering, the General Partner shall have the right, which it may from time
to time assign in whole or in part to any of its Affiliates, to purchase Partnership Interests from the Partnership whenever, and on the same terms that, the Partnership issues Partnership Interests to Persons other than the General Partner and its
Affiliates, to the extent necessary to maintain the Percentage Interests of the General Partner and its Affiliates equal to that which existed immediately prior to the issuance of such Partnership Interests.
Section 5.8
Splits and Combinations
.
(a) Subject to
Section 5.8(d)
,
Section 6.6
and
Section 6.9
(dealing with adjustments of distribution levels), the Partnership may make a Pro Rata distribution of
Partnership Interests to all Record Holders or may effect a subdivision or combination of Partnership Interests so long as, after any such event, each Partner shall have the same Percentage Interest in the Partnership as before such event, and any
amounts calculated on a per Unit basis (including any Common Unit Arrearage or Cumulative Common Unit Arrearage) or stated as a number of Units (including the number of Subordinated Units that may convert prior to the end of the Subordination
Period) are proportionately adjusted.
(b) Whenever such a distribution, subdivision or combination of Partnership Interests
is declared, the General Partner shall select a date as of which the distribution, subdivision or combination shall be effective and shall send notice thereof at least 20 days prior to such distribution date to each Record Holder as of a date that
is not less than 10 days prior to the date of such notice (or such shorter periods as required by applicable law). The General Partner also may cause a firm of independent public accountants selected by it to calculate the number of Partnership
Interests to be held by each Record Holder after giving effect to such distribution, subdivision or combination. The General Partner shall be entitled to rely on any certificate, letter or other official medium of communication provided by such firm
as conclusive evidence of the accuracy of such calculation.
(c) Promptly following any such distribution, subdivision or
combination, the Partnership may issue Certificates or uncertificated Partnership Interests to the Record Holders of Partnership Interests as of the applicable Record Date representing the new number of Partnership Interests held by such Record
Holders, or the General Partner may adopt such other procedures that it determines to be necessary or appropriate to reflect such changes. If any such combination results in a smaller total number of Partnership Interests Outstanding, the
Partnership shall require, as a condition to the delivery to a Record Holder of Partnership Interests represented by Certificates, the surrender of any Certificate held by such Record Holder immediately prior to such Record Date.
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(d) The Partnership shall not issue fractional Units upon any distribution, subdivision or
combination of Units. If a distribution, subdivision or combination of Units would result in the issuance of fractional Units but for the provisions of
Section 5.5(d)
and this
Section 5.8(d)
, each fractional Unit shall be
rounded to the nearest whole Unit, with fractional Units equal to or greater than a 0.5 Unit being rounded to the next higher Unit.
Section 5.9
Fully Paid and Non-Assessable Nature of Limited Partner Interests
.
All Limited Partner Interests issued pursuant to, and in accordance with the requirements of, this
Article V
shall be fully paid and non-assessable Limited Partner Interests in the Partnership, except as such non-assessability may be affected by Sections 17-303(a), 17-607 or 17-804 of the Delaware Act.
Section 5.10
Issuance of Common Units in Connection with Reset of Incentive Distribution Rights
.
(a) Subject to the provisions of this
Section 5.10
, the holder of the Incentive Distribution Rights (or, if there is more
than one holder of the Incentive Distribution Rights, the holders of a majority in interest of the Incentive Distribution Rights) shall have the right, at any time when there are no Subordinated Units Outstanding and the Partnership has made a
distribution pursuant to
Section 6.4(b)(v)
for each of the four most recently completed Quarters and the amount of each such distribution did not exceed Adjusted Operating Surplus for such Quarter, to make an election (the
“
IDR Reset Election
”) to cause the Minimum Quarterly Distribution and the Target Distributions to be reset in accordance with the provisions of
Section
5.10(e)
and, in connection therewith, the holder or holders
of the Incentive Distribution Rights will become entitled to receive their respective proportionate share of a number of Common Units (the “
IDR Reset Common Units
”) derived by dividing (i) the average amount of the
aggregate cash distributions made by the Partnership for the two full Quarters immediately preceding the giving of the Reset Notice in respect of the Incentive Distribution Rights by (ii) the average of the cash distributions made by the
Partnership in respect of each Common Unit for the two full Quarters immediately preceding the giving of the Reset Notice (the number of Common Units determined by such quotient is referred to herein as the “
Aggregate Quantity of IDR
Reset Common Units
”). If at the time of any IDR Reset Election the General Partner and its Affiliates are not the holders of a majority in interest of the Incentive Distribution Rights, then the IDR Reset Election shall be subject to
the prior written concurrence of the General Partner that the conditions described in the immediately preceding sentence have been satisfied. The making of the IDR Reset Election in the manner specified in this
Section 5.10
shall cause
the Minimum Quarterly Distribution and the Target Distributions to be reset in accordance with the provisions of
Section 5.10(e)
and, in connection therewith, the holder or holders of the Incentive Distribution Rights will become
entitled to receive IDR Reset Common Units on the basis specified above, without any further approval required by the General Partner or the Unitholders other than as set forth in this
Section 5.10(a)
, at the time specified in
Section 5.10(c)
unless the IDR Reset Election is rescinded pursuant to
Section 5.10(d)
.
(b) To exercise
the right specified in
Section 5.10(a)
, the holder of the Incentive Distribution Rights (or, if there is more than one holder of the Incentive Distribution Rights, the holders of a majority in interest of the Incentive Distribution
Rights) shall deliver a written notice (the “
Reset Notice
”) to the Partnership. Within 10 Business Days after the receipt by the Partnership of such Reset Notice, the Partnership shall deliver a written notice to the holder
or holders of the Incentive Distribution Rights of the Partnership’s determination of the Aggregate Quantity of IDR Reset Common Units that each holder of Incentive Distribution Rights will be entitled to receive.
(c) The holder or holders of the Incentive Distribution Rights will be entitled to receive the Aggregate Quantity of IDR Reset
Common Units on the fifteenth Business Day after receipt by the Partnership of the Reset Notice;
provided
,
however
, that the issuance of IDR Reset Common Units to the holder or holders of the Incentive Distribution Rights shall not
occur prior to the approval of the listing or admission for trading of such IDR Reset Common Units by the principal National Securities Exchange upon which the Common Units are then listed or admitted for trading if any such approval is required
pursuant to the rules and regulations of such National Securities Exchange.
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(d) If the principal National Securities Exchange upon which the Common Units are then
traded has not approved the listing or admission for trading of the IDR Reset Common Units to be issued pursuant to this
Section 5.10
on or before the 30th calendar day following the Partnership’s receipt of the Reset Notice and
such approval is required by the rules and regulations of such National Securities Exchange, then the holder of the Incentive Distribution Rights (or, if there is more than one holder of the Incentive Distribution Rights, the holders of a majority
in interest of the Incentive Distribution Rights) shall have the right to either rescind the IDR Reset Election or elect to receive other Partnership Interests having such terms as the General Partner may approve, with the approval of the Conflicts
Committee, that will provide (i) the same economic value, in the aggregate, as the Aggregate Quantity of IDR Reset Common Units would have had at the time of the Partnership’s receipt of the Reset Notice, as determined by the General
Partner, and (ii) for the subsequent conversion of such Partnership Interests into Common Units within not more than 12 months following the Partnership’s receipt of the Reset Notice upon the satisfaction of one or more conditions that are
reasonably acceptable to the holder of the Incentive Distribution Rights (or, if there is more than one holder of the Incentive Distribution Rights, the holders of a majority in interest of the Incentive Distribution Rights).
(e) The Minimum Quarterly Distribution and the Target Distributions shall be adjusted at the time of the issuance of IDR Reset Common
Units or other Partnership Interests pursuant to this
Section 5.10
such that (i) the Minimum Quarterly Distribution shall be reset to equal the average cash distribution amount per Common Unit for the two Quarters immediately prior
to the Partnership’s receipt of the Reset Notice (the “
Reset MQD
”), (ii) the First Target Distribution shall be reset to equal 115% of the Reset MQD, (iii) the Second Target Distribution shall be reset to equal
125% of the Reset MQD and (iv) the Third Target Distribution shall be reset to equal 150% of the Reset MQD.
(f) Upon the
issuance of IDR Reset Common Units pursuant to
Section 5.10(a)
, the Capital Account maintained with respect to the Incentive Distribution Rights will (i) first, be allocated to IDR Reset Common Units in an amount equal to the
product of (A) the Aggregate Quantity of IDR Reset Common Units and (B) the Per Unit Capital Amount for an Initial Common Unit, and (ii) second, as to any remaining balance in such Capital Account, be retained by the holder of the
Incentive Distribution Rights. If there is not sufficient capital associated with the Incentive Distribution Rights to allocate the full Per Unit Capital Amount for an Initial Common Unit to the IDR Reset Common Units in accordance with
clause
(i)
of this
Section 5.10(f)
, the IDR Reset Common Units shall be subject to
Section 6.1(d)(x)(B)
and
(D)
.
ARTICLE VI
ALLOCATIONS AND DISTRIBUTIONS
Section 6.1
Allocations for Capital Account Purposes
.
Subject to the terms of any Supplemental Terms Annex, for
purposes of maintaining the Capital Accounts and in determining the rights of the Partners among themselves, the Partnership’s items of income, gain, loss and deduction (computed in accordance with
Section 5.4(b))
for each taxable
period shall be allocated among the Partners as provided herein below.
(a)
Net Income
. After giving effect to
the special allocations in Section 6.1(d), Net Income for each taxable period (including a pro rata part of all items of income, gain, loss and deduction taken into account in computing Net Income for such taxable period) shall be allocated as
follows:
(i) First, to the General Partner until the aggregate amount of Net Income allocated to the
General Partner pursuant to this
Section 6.1(a)(i)
for the current and all previous taxable periods is equal to the aggregate amount of Net Loss allocated to the General Partner pursuant to
Section 6.1(b)
(ii)
for all
previous taxable periods; and
(ii) The balance, if any, 100% to the Unitholders, Pro Rata.
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(b)
Net Loss
. After giving effect to the special allocations in Section 6.1(d), Net
Loss for each taxable period (including a pro rata part of each item of income, gain, loss and deduction taken into account in computing Net Loss for such taxable period) shall be allocated as follows:
(i) First, to the Unitholders, Pro Rata;
provided
, that Net Loss shall not be allocated to a Unitholder pursuant to
this
Section 6.1(b)
(i)
to the extent that such allocation would cause such Unitholder to have a deficit balance in its Adjusted Capital Account at the end of such taxable period (or increase any existing deficit balance in its
Adjusted Capital Account); and
(ii) The balance, if any, 100% to the General Partner.
(c)
Net Termination Gains and Losses
. Net Termination Gain or Net Termination Loss occurring during a taxable period shall
be allocated in the manner set forth in this
Section 6.1(c)
. All allocations under this
Section 6.1(c)
shall be made after Capital Account balances have been adjusted by all other allocations provided under this
Section 6.1
and after all distributions of Available Cash provided under
Section 6.4
and
Section 6.5
have been made;
provided, however
, that solely for purposes of this
Section 6.1(c)
, Capital
Accounts shall not be adjusted for distributions made pursuant to
Section 12.4
;
provided further
, that Net Termination Gain or Net Termination Loss attributable to (i) Liquidation Gain or Liquidation Loss shall be allocated
on the last day of the taxable period during which such Liquidation Gain or Liquidation Loss occurred, (ii) Sale Gain or Sale Loss shall be allocated as of the time of the sale or disposition giving rise to such Sale Gain or Sale Loss and
allocated to the Partners consistent with the second proviso set forth in
Section 6.2(f)
and (iii) Revaluation Gain or Revaluation Loss shall be allocated on the date of the Revaluation Event giving rise to such Revaluation Gain or
Revaluation Loss.
(i) Except as provided in
Section 6.1(c)(iv)
and subject to the
provisions set forth in the last sentence of this
Section 6.1(c)(i)
, Net Termination Gain (including a pro rata part of each item of income, gain, loss, and deduction taken into account in computing Net Termination Gain) shall be
allocated in the following order and priority:
(A) First, to each Unitholder having a deficit balance in its
Adjusted Capital Account, in the proportion that such deficit balance bears to the total deficit balances in the Adjusted Capital Accounts of all Unitholders, until each such Unitholder has been allocated Net Termination Gain equal to any such
deficit balance in its Adjusted Capital Account;
(B) Second, to all Unitholders holding Common Units, Pro
Rata, until the Capital Account in respect of each Common Unit then Outstanding is equal to the sum of (1) its Unrecovered Initial Unit Price, (2) if the Net Termination Gain is attributable to Liquidation Gain, the Minimum Quarterly
Distribution for the Quarter during which the Liquidation Date occurs, reduced by any distribution pursuant to
Section 6.4(a)(i)
or
Section 6.4(b)(i)
with respect to each such Common Unit for such Quarter (the amount
determined pursuant to this
clause (2)
is hereinafter referred to as the “
Unpaid MQD
”) and (3) any then existing Cumulative Common Unit Arrearage;
(C) Third, if such Net Termination Gain is recognized (or is deemed to be recognized) prior to the conversion of the last
Outstanding Subordinated Unit into a Common Unit, to all Unitholders holding Subordinated Units, Pro Rata, until the Capital Account in respect of each Subordinated Unit then Outstanding equals the sum of (1) its Unrecovered Initial Unit Price,
determined for the taxable period (or portion thereof) to which this allocation of gain relates, and (2) if the Net Termination Gain is attributable to Liquidation Gain, the Minimum Quarterly Distribution for the Quarter during which the
Liquidation Date occurs, reduced by any distribution pursuant to
Section 6.4(a)(iii)
with respect to each such Subordinated Unit for such Quarter;
(D) Fourth, to all Unitholders, Pro Rata, until the Capital Account in respect of each Common Unit then Outstanding is equal to the sum of (1) its Unrecovered Initial Unit Price,
(2) the Unpaid MQD, (3) any then existing Cumulative Common Unit Arrearage, and (4) the excess of (aa) the First Target Distribution less the Minimum Quarterly Distribution for each Quarter after the Closing Date or the date of the
most recent IDR Reset Election, if any, over (bb) the cumulative per Unit amount of any
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distributions of Available Cash that is deemed to be Operating Surplus made pursuant to
Section 6.4(a)(iv)
and
Section 6.4(b)(ii)
with respect to each such Common
Unit for such period (the sum of
subclauses (1)
,
(2)
,
(3)
and
(4)
is hereinafter referred to as the “
First Liquidation Target Amount
”);
(E) Fifth, 15% to the holders of the Incentive Distribution Rights, Pro Rata, and 85% to all Unitholders,
Pro Rata, until the Capital Account in respect of each Common Unit then Outstanding is equal to the sum of (1) the First Liquidation Target Amount, and (2) the excess of (aa) the Second Target Distribution less the First Target
Distribution for each Quarter after the Closing Date or the date of the most recent IDR Reset Election, if any, over (bb) the cumulative per Unit amount of any distributions of Available Cash that is deemed to be Operating Surplus made pursuant to
Section 6.4(a)(v)
and
Section 6.4(b)(iii)
with respect to each such Common Unit for such period (the sum of
subclauses (1)
and
(2)
is hereinafter referred to as the “
Second Liquidation
Target Amount
”);
(F) Sixth, 25% to the holders of the Incentive Distribution
Rights, Pro Rata, and 75% to all Unitholders, Pro Rata, until the Capital Account in respect of each Common Unit then Outstanding is equal to the sum of (1) the Second Liquidation Target Amount, and (2) the excess of (aa) the Third Target
Distribution less the Second Target Distribution for each Quarter after the Closing Date or the date of the most recent IDR Reset Election, if any, over (bb) the cumulative per Unit amount of any distributions of Available Cash that is deemed to be
Operating Surplus made pursuant to
Section 6.4(a)(vi)
and
Section 6.4(b)(iv)
with respect to each such Common Unit for such period; and
(G) Finally, 50% to the holders of the Incentive Distribution Rights, Pro Rata, and 50% to all Unitholders, Pro Rata.
Notwithstanding the foregoing provisions in this
Section 6.1(c)(i)
, the General Partner may adjust the amount of any Net Termination Gain arising in connection with a Revaluation Event that is
allocated to the holders of Incentive Distribution Rights in a manner that will result (1) in the Capital Account for each Common Unit that is Outstanding prior to such Revaluation Event being equal to the Event Issue Value and (2) to the
greatest extent possible, the Capital Account with respect to the Incentive Distribution Rights that are Outstanding prior to such Revaluation Event being equal to the amount of Net Termination Gain that would be allocated to the holders of the
Incentive Distribution Rights pursuant to this
Section 6.1(c)(i)
if (i) the Capital Accounts with respect to all Partnership Interests that were Outstanding immediately prior to such Revaluation Event were equal to zero and
(ii) the aggregate Carrying Value of all Partnership property equaled the aggregate amount of all of the Partnership’s Liabilities.
(ii) Except as otherwise provided by
Section 6.1(c)(iii)
or
Section 6.1(c)(iv)
, Net Termination Loss shall be allocated:
(A) First, if Subordinated Units remain Outstanding, to all Unitholders holding Subordinated Units, Pro Rata, until the
Adjusted Capital Account in respect of each Subordinated Unit then Outstanding has been reduced to zero; and
(B) Second, to all Unitholders holding Common Units, Pro Rata, until the Adjusted Capital Account in respect of each
Common Unit then Outstanding has been reduced to zero; and
(C) The balance, if any, 100% to the General
Partner.
(iii) Net Termination Loss attributable to Revaluation Loss and deemed recognized prior to the
conversion of the last Outstanding Subordinated Unit and prior to the Liquidation Date shall be allocated:
(A)
First, to all Unitholders, Pro Rata, until the Capital Account in respect of each Common Unit then Outstanding equals the Event Issue Value;
provided
that Net Termination Loss shall not be allocated pursuant to this
Section 6.1(c)(iii)(A)
to the extent such allocation would cause any Unitholder to have a deficit balance in its Adjusted Capital Account at the end of such taxable period (or increase any existing deficit in its Adjusted Capital
Account);
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(B) Second, to all Unitholders holding Subordinated Units, Pro Rata;
provided,
that Net Termination Loss shall not be allocated pursuant to this
Section 6.1(c)(iii)(B)
to the extent such allocation would cause any Unitholder to have a deficit balance in its Adjusted Capital Account at the end of
such taxable period (or increase any existing deficit in its Adjusted Capital Account); and
(C) The balance,
if any, 100% to the General Partner.
(iv) If (A) a Net Termination Loss has been allocated pursuant to
Section 6.1(c)(iii)
, (B) a Net Termination Gain or Net Termination Loss subsequently occurs (other than as a result of a Revaluation Event) prior to the conversion of the last Outstanding Subordinated Unit, and (C) after
tentatively making all allocations of such Net Termination Gain or Net Termination Loss provided for in
Section 6.1(c)(i)
or
Section 6.1(c)(ii)
, as applicable, the Capital Account in respect of each Common Unit does not equal
the amount such Capital Account would have been if
Section 6.1(c)(iii)
had not been part of this Agreement and all prior allocations of Net Termination Gain and Net Termination Loss had been made pursuant to
Section 6.1(c)(i)
or
Section 6.1(c)(ii)
, as applicable, then items of income, gain, loss and deduction included in such Net Termination Gain or Net Termination Loss, as applicable, shall be specially allocated to all Unitholders in a manner that will, to
the maximum extent possible, cause the Capital Account in respect of each Common Unit to equal the amount such Capital Account would have been if all allocations of Net Termination Gain and Net Termination Loss had been made pursuant to
Section 6.1(c)(i)
or
Section 6.1(c)(ii)
, as applicable.
(d)
Special Allocations
.
Notwithstanding any other provision of this
Section 6.1
, the following special allocations shall be made for each taxable period:
(i)
Partnership Minimum Gain Chargeback
. Notwithstanding any other provision of this
Section 6.1
, if there is a net decrease in Partnership Minimum Gain during any Partnership
taxable period, each Partner
shall be allocated items of Partnership income and gain for such period (and, if necessary, subsequent periods) in the manner and amounts provided in Treasury Regulation Sections 1.704-2(f)(6), 1.704-2(g)(2)
and 1.704-2(j)(2)(i), or any successor provision. For purposes of this
Section 6.1(d)
, each Partner’s Adjusted
Capital Account balance shall be determined, and the allocation of gross income or gain required hereunder
shall be effected, prior to the application of any other allocations pursuant to this
Section 6.1(d)
with respect to such taxable period (other than an allocation pursuant to
Section 6.1(d)(vi)
and
Section 6.1(d)(vii)
). This
Section 6.1(d)(i)
is intended to comply with the Partnership Minimum Gain chargeback requirement in Treasury Regulation Section 1.704-2(f) and shall be interpreted consistently therewith.
(ii)
Chargeback of Partner Nonrecourse Debt Minimum Gain
. Notwithstanding the other
provisions of this
Section 6.1
(other than
Section 6.1(d)(i)
), except as provided in Treasury Regulation Section 1.704-2(i)(4), if there is a net decrease in Partner Nonrecourse Debt Minimum Gain during any Partnership
taxable period, any Partner with a share of Partner Nonrecourse Debt Minimum Gain at the beginning of such taxable period shall be allocated items of Partnership income and gain for such period (and, if necessary, subsequent periods) in the manner
and amounts provided in Treasury Regulation Sections 1.704-2(i)(4) and 1.704-2(j)(2)(ii), or any successor provision. For purposes of this
Section 6.1(d)
, each Partner’s Adjusted Capital Account balance shall be determined, and the
allocation of gross income or gain required hereunder shall be effected, prior to the application of any other allocations pursuant to this
Section 6.1(d)
, other than an allocation pursuant to
Section 6.1(d)(i)
,
Section 6.1(d)(vi)
and
Section 6.1(d)(vii)
, with respect to such taxable period. This
Section 6.1(d)(ii)
is intended to comply with the chargeback of items of income and gain requirement in Treasury Regulation
Section 1.704-2(i)(4) and shall be interpreted consistently therewith.
(iii)
Priority
Allocations.
(A) If the amount of cash or the Net Agreed Value of any property distributed
(except cash or property distributed pursuant to
Section 12.4
) with respect to a Unit for a taxable period exceeds the amount of cash or the Net Agreed Value of property distributed with respect to another Unit for the same taxable
period (the amount of the excess, an “
Excess Distribution
” and the Unit with respect to
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which the greater distribution is paid, an “
Excess Distribution Unit
”), then there shall be allocated gross income and gain to each Unitholder receiving an Excess
Distribution with respect to the Excess Distribution Unit until the aggregate amount of such items allocated with respect to such Excess Distribution Unit pursuant to this
Section 6.1(d)(iii)(A)
for the current taxable period and all
previous taxable periods is equal to the amount of the Excess Distribution.
(B) After the
application of
Section 6.1(d)(iii)(A)
, all or any portion of the remaining items of Partnership gross income or gain for the taxable period, if any, shall be allocated to the holders of Incentive Distribution Rights, Pro Rata, until the
aggregate amount of such items allocated to the holders of Incentive Distribution Rights pursuant to this
Section 6.1(d)(iii)(B)
for the current taxable period and all previous taxable periods is equal to the cumulative amount of all
Incentive Distributions made to the holders of Incentive Distribution Rights from the Closing Date to a date 45 days after the end of the current taxable period.
(iv)
Qualified Income Offset
. In the event any Partner unexpectedly receives any adjustment, allocation or
distribution described in Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6), items of Partnership gross income and gain shall be specially allocated to such Partner in an amount and manner
sufficient to eliminate, to the extent required by the Treasury Regulations promulgated under Section 704(b) of the Code, the deficit balance, if any, in its Adjusted Capital Account created by such adjustments, allocations or distributions as
quickly as possible;
provided, however
, that an allocation pursuant to this
Section 6.1(d)(iv)
shall be made only if and to the extent that such Partner would have a deficit balance in its Adjusted Capital Account after all other
allocations provided for in this
Section 6.1
have been tentatively made as if this
Section 6.1(d)(iv)
were not in this Agreement.
(v)
Gross Income Allocation
. In the event any Partner has a deficit balance in its Capital Account at the end of any taxable period in excess of the sum of (A) the amount such Partner is
required to restore pursuant to the provisions of this Agreement and (B) the amount such Partner is deemed obligated to restore pursuant to Treasury Regulation Sections 1.704-2(g) and 1.704-2(i)(5), such Partner shall be specially allocated
items of Partnership gross income and gain in the amount of such excess as quickly as possible;
provided, however
, that an allocation pursuant to this
Section 6.1(d)(v)
shall be made only if and to the extent that such Partner
would have a deficit balance in its Adjusted Capital Account after all other allocations provided for in this
Section 6.1
have been tentatively made as if
Section 6.1(d)(iv)
and this
Section 6.1(d)(v)
were not in
this Agreement.
(vi)
Nonrecourse Deductions
. Nonrecourse Deductions for any taxable period shall
be allocated to the Partners Pro Rata. If the General Partner determines that the Partnership’s Nonrecourse Deductions should be allocated in a different ratio to satisfy the safe harbor requirements of the Treasury Regulations promulgated
under Section 704(b) of the Code, the General Partner is authorized to revise the prescribed ratio to the numerically closest ratio that satisfies such requirements.
(vii)
Partner Nonrecourse Deductions
. Partner Nonrecourse Deductions for any taxable period shall be
allocated 100% to the Partner that bears the Economic Risk of Loss with respect to the Partner Nonrecourse Debt to which such Partner Nonrecourse Deductions are attributable in accordance with Treasury Regulation Section 1.704-2(i). If more
than one Partner bears the Economic Risk of Loss with respect to a Partner Nonrecourse Debt, the Partner Nonrecourse Deductions attributable thereto shall be allocated between or among such Partners in accordance with the ratios in which they share
such Economic Risk of Loss.
(viii)
Nonrecourse Liabilities
. For purposes of Treasury
Regulation Section 1.752-3(a)(3), the Partners agree that Nonrecourse Liabilities of the Partnership in excess of the sum of (A) the amount of Partnership Minimum Gain and (B) the total amount of Nonrecourse Built-in Gain shall be
allocated first, to any Partner that contributed property to the Partnership in proportion to and to the extent of the amount by which each such Partner’s share of any Section 704(c) built-in gains exceeds such Partner’s share of
Nonrecourse Built-in Gain, and second, among the Partners Pro Rata.
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(ix)
Code Section 754 Adjustments
. To the extent an
adjustment to the adjusted tax basis of any Partnership property pursuant to Section 734(b) of the Code (including pursuant to Treasury Regulation Section 1.734-2(b)(1)) is required, pursuant to Treasury Regulation
Section 1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital Accounts as a result of a distribution to a Partner in complete liquidation of such Partner’s interest in the Partnership, the amount of such adjustment to the
Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis) taken into account pursuant to
Section 5.4
, and such item of gain or loss shall be
specially allocated to the Partners in a manner consistent with the manner in which their Capital Accounts are required to be adjusted pursuant to such Section of the Treasury Regulations.
(x)
Economic Uniformity
.
(A) At the election of the General Partner with respect to any taxable period ending upon, or after, the termination of the Subordination Period, all or a portion of the remaining items of Partnership
gross income or gain for such taxable period, after taking into account allocations pursuant to
Section 6.1(d)(iii)
, shall be allocated 100% to each Partner holding Subordinated Units that are Outstanding as of the termination of the
Subordination Period (“
Final
Subordinated Units
”) in the proportion of the number of Final Subordinated Units held by such Partner to the total number of Final Subordinated Units then Outstanding, until each
such Partner has been allocated an amount of gross income or gain that increases the Capital Account maintained with respect to such Final Subordinated Units to an amount that after taking into account the other allocations of income, gain, loss and
deduction to be made with respect to such taxable period will equal the product of (1) the number of Final Subordinated Units held by such Partner and (2) the Per Unit Capital Amount for a Common Unit. The purpose of this allocation is to
establish uniformity between the Capital Accounts underlying Final Subordinated Units and the Capital Accounts underlying Common Units held by Persons other than the General Partner and its Affiliates immediately prior to the conversion of such
Final Subordinated Units into Common Units. This allocation method for establishing such economic uniformity will be available to the General Partner only if the method for allocating the Capital Account maintained with respect to the Subordinated
Units between the transferred and retained Subordinated Units pursuant to
Section 5.4(c)(ii)
does not otherwise provide such economic uniformity to the Final Subordinated Units.
(B) Prior to making any allocations pursuant to
Section 6.1(d)(xii)(C)
, if a Revaluation Event occurs during
any taxable period of the Partnership ending upon, or after, the issuance of IDR Reset Common Units pursuant to
Section 5.10
, then after the application of
Section 6.1(d)(x)(A)
, any Unrealized Gains and Unrealized Losses
shall be allocated among the Partners in a manner that to the nearest extent possible results in the Capital Accounts maintained with respect to such IDR Reset Common Units issued pursuant to
Section 5.10
equaling the product of
(1) the Aggregate Quantity of IDR Reset Common Units and (2) the Per Unit Capital Amount for an Initial Common Unit.
(C) Prior to making any allocations pursuant to
Section 6.1(d)(xii)(C)
, if a Revaluation Event occurs, then after the application of
Section 6.1(d)(x)(A)
-
(B)
, any remaining
Unrealized Gains and Unrealized Losses shall be allocated to the holders of (A) Outstanding Privately Placed Units, Pro Rata, or (B) Outstanding Common Units (other than Privately Placed Units), Pro Rata, as applicable, in a manner that to
the nearest extent possible results in the Capital Accounts maintained with respect to each Privately Placed Unit equaling the Per Unit Capital Amount for an Initial Common Unit.
(D) With respect to any taxable period during which an IDR Reset Common Unit is transferred to any Person who is not an
Affiliate of the transferor, all or a portion of the remaining items of Partnership gross income or gain for such taxable period shall be allocated 100% to the transferor Partner of such transferred IDR Reset Common Unit until such transferor
Partner has been allocated an amount of gross income or gain that increases the Capital Account maintained with respect to such transferred IDR Reset Common Unit to an amount equal to the Per Unit Capital Amount for an Initial Common Unit.
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(E) For the proper administration of the Partnership and for the
preservation of uniformity of the Limited Partner Interests (or any class or classes thereof), the General Partner shall (1) adopt such conventions as it deems appropriate in determining the amount of depreciation, amortization and cost
recovery deductions; (2) make special allocations of income, gain, loss, deduction, Unrealized Gain or Unrealized Loss; and (3) without the consent of any Limited Partner or any other Person, amend the provisions of this Agreement as
appropriate (x) to reflect the proposal or promulgation of Treasury Regulations under Section 704(b) or Section 704(c) of the Code or (y) otherwise to preserve or achieve uniformity of the Limited Partner Interests (or any class
or classes thereof) that are publicly traded as a single class. The General Partner may adopt such conventions, make such allocations and make such amendments to this Agreement as provided in this
Section 6.1(d)(x)(E)
only if it
determines that such conventions, allocations or amendments would not have a material adverse effect on the Partners, the holders of any class or classes of Outstanding Limited Partner Interests or the Partnership.
(xi)
Curative Allocation.
(A) Notwithstanding any other provision of this
Section 6.1
, other than the Required Allocations, the General Partner shall take the Required Allocations into account in making the Agreed
Allocations so that, to the extent possible, the net amount of items of gross income, gain, loss and deduction allocated to each Partner pursuant to the Required Allocations and the Agreed Allocations, together, shall be equal to the net amount of
such items that would have been allocated to each such Partner under the Agreed Allocations had the Required Allocations and the related Curative Allocation not otherwise been provided in this
Section 6.1
. In exercising its discretion
under this
Section 6.1(d)(xi)(A)
, the General Partner may take into account future Required Allocations that, although not yet made, are likely to offset other Required Allocations previously made. Allocations pursuant to this
Section 6.1(d)(xi)(A)
shall only be made with respect to Required Allocations to the extent the General Partner determines that such allocations will otherwise be inconsistent with the economic agreement among the Partners.
(B) The General Partner shall, with respect to each taxable period, (1) apply the provisions of
Section 6.1(d)(xi)(A)
in whatever order is most likely to minimize the economic distortions that might otherwise result from the Required Allocations, and (2) divide all allocations pursuant to
Section 6.1(d)(xi)(A)
among the Partners in a manner that is likely to minimize such economic distortions.
(xii)
Corrective and Other Allocations
. In the event of any allocation of Additional Book Basis Derivative Items or a Net Termination Loss, the following rules shall apply:
(A) The General Partner shall allocate Additional Book Basis Derivative Items consisting of depreciation, amortization,
depletion or any other form of cost recovery (other than Additional Book Basis Derivative Items included in Net Termination Gain or Net Termination Loss) with respect to any Adjusted Property to the Unitholders, Pro Rata, and the holders of
Incentive Distribution Rights, all in the same proportion as the Net Termination Gain or Net Termination Loss resulting from the Revaluation Event that gave rise to such Additional Book Basis Derivative Items was allocated to them pursuant to
Section 6.1(c)
.
(B) If a sale or other taxable disposition of an Adjusted Property,
including, for this purpose, inventory (“
Disposed of Adjusted Property
”) occurs other than in connection with an event giving rise to Sale Gain or Sale Loss, the General Partner shall allocate (1) items of gross income
and gain (x) away from the holders of Incentive Distribution Rights and (y) to the Unitholders, or (2) items of deduction and loss (x) away from the Unitholders and (y) to the holders of Incentive Distribution Rights, to the
extent that the Additional Book Basis Derivative Items with respect to the Disposed of Adjusted Property (determined in accordance with the last sentence of the definition of Additional Book Basis Derivative Items) treated as having been allocated
to the Unitholders pursuant to this
Section 6.1(d)(xii)(B)
exceed their Share of Additional Book Basis Derivative Items with respect to such Disposed of Adjusted Property. For purposes of this
Section 6.1(d)(xii)(B)
, the
Unitholders shall
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be treated as having been allocated Additional Book Basis Derivative Items to the extent that such Additional Book Basis Derivative Items have reduced the amount of income that would
otherwise have been allocated to the Unitholders under the Partnership Agreement (
e.g.
, Additional Book Basis Derivative Items taken into account in computing cost of goods sold would reduce the amount of book
income otherwise available for allocation among the Partners). Any allocation made pursuant to this
Section 6.1(d)(xii)(B)
shall be made after all of the other Agreed Allocations have been made as if this
Section 6.1(d)(xii)
were not in this Agreement and, to the extent necessary, shall require the reallocation of items that have been allocated pursuant to such other Agreed Allocations.
(C) Net Termination Loss in an amount equal to the lesser of (1) such Net Termination Loss and (2) the Aggregate
Remaining Net Positive Adjustments shall be allocated in such manner as is determined by the General Partner that, to the extent possible, the Capital Account balances of the Partners will equal the amount they would have been had no prior Book-Up
Events occurred, and any remaining Net Termination Loss shall be allocated pursuant to
Section 6.1(c)
hereof. In allocating Net Termination Loss pursuant to this
Section 6.1(d)(xii)(C)
, the General Partner shall attempt, to
the extent possible, to cause the Capital Accounts of the Unitholders, on the one hand, and holders of the Incentive Distribution Rights, on the other hand, to equal the amount they would equal if (i) the Carrying Values of the
Partnership’s property had not been previously adjusted in connection with any prior Book-Up Events, (ii) Unrealized Gain and Unrealized Loss (or, in the case of a liquidation, Liquidation Gain or Liquidation Loss) with respect to such
Partnership Property were determined with respect to such unadjusted Carrying Values, and (iii) any resulting Net Termination Gain had been allocated pursuant to
Section 6.1(c)(i)
(including, for the avoidance of doubt, taking into
account the provisions set forth in the last sentence of
Section 6.1(c)(i)
).
(D) In making the
allocations required under this
Section 6.1(d)(xii)
, the General Partner may apply whatever conventions or other methodology it determines will satisfy the purpose of this
Section 6.1(d)(xii)
. Without limiting the foregoing,
if an Adjusted Property is contributed by the Partnership to another entity classified as a partnership for U.S. federal income tax purposes (the “
lower tier partnership
”), the General Partner may make allocations similar to
those described in
Section 6.1(d)(xii)(A)
,
(B)
, and
(C)
to the extent the General Partner determines such allocations are necessary to account for the Partnership’s allocable share of income, gain, loss and
deduction of the lower tier partnership that relate to the contributed Adjusted Property in a manner that is consistent with the purpose of this
Section 6.1(d)(xii)
.
(xiii)
Special Curative Allocation in Event of Liquidation Prior to Conversion of the Last Outstanding Subordinated
Unit
. Notwithstanding any other provision of this
Section 6.1
(other than the Required Allocations), if (1) the Liquidation Date occurs prior to the conversion of the last Outstanding Subordinated Unit and (2) after having
made all other allocations provided for in this
Section 6.1
for the taxable period in which the Liquidation Date occurs, the Capital Account in respect of each Common Unit does not equal the amount such Capital Account would have been if
Section 6.1(c)(iii)
and
Section 6.1(c)(iv)
had not been part of this Agreement and all prior allocations of Net Termination Gain and Net Termination Loss had been made pursuant to
Section 6.1(c)(i)
or
Section 6.1(c)(ii)
, as applicable, then items of income, gain, loss and deduction for such taxable period shall be reallocated among all Unitholders in a manner determined appropriate by the General Partner so as to cause, to the maximum
extent possible, the Capital Account in respect of each Common Unit to equal the amount such Capital Account would have been if all prior allocations of Net Termination Gain and Net Termination Loss had been made pursuant to
Section 6.1(c)(i)
or
Section 6.1(c)(ii)
, as applicable. For the avoidance of doubt, the reallocation of items set forth in the immediately preceding sentence provides that, to the extent necessary to achieve the Capital
Account balances described above, (x) items of income and gain that would otherwise be included in Net Income or Net Loss, as the case may be, for the taxable period in which the Liquidation Date occurs shall be reallocated from the Unitholders
holding Subordinated Units to Unitholders holding Common Units and (y) items of deduction and loss that would otherwise be included in Net Income or Net Loss, as the case may be, for the taxable period in which the Liquidation Date occurs shall
be reallocated from Unitholders
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holding Common Units to the Unitholders holding Subordinated Units. In the event that (1) the Liquidation Date occurs on or before the date (not including any extension of time prescribed by
law) for the filing of the Partnership’s U.S. federal income tax return for the taxable period immediately prior to the taxable period in which the Liquidation Date occurs and (2) the reallocation of items for the taxable period in which
the Liquidation Date occurs as set forth above in this
Section 6.1(d)(xiii)
fails to achieve the Capital Account balances described above, items of income, gain, loss and deduction that would otherwise be included in the Net Income or
Net Loss, as the case may be, for such prior taxable period shall be reallocated among the Unitholders in a manner that will, to the maximum extent possible and after taking into account all other allocations made pursuant to this
Section 6.1(d)(xiii)
, cause the Capital Account in respect of each Common Unit to equal the amount such Capital Account would have been if all prior allocations of Net Termination Gain and Net Termination Loss had been made pursuant to
Section 6.1(c)(i)
or
Section 6.1(c)(ii)
, as applicable.
Section 6.2
Allocations for
Tax Purposes
.
(a) Except as otherwise provided herein, for U.S. federal income tax purposes, each item
of income, gain, loss and deduction shall be allocated among the Partners in the same manner as its correlative item of “book” income, gain, loss or deduction is allocated pursuant to
Section 6.1
.
(b) In an attempt to eliminate Book-Tax Disparities attributable to a Contributed Property or Adjusted Property, items of income, gain,
loss, depreciation, amortization and cost recovery deductions shall be allocated for U.S. federal income tax purposes among the Partners in the manner provided under Section 704(c) of the Code, and the Treasury Regulations promulgated under
Section 704(b) and 704(c) of the Code, as determined appropriate by the General Partner (taking into account the General Partner’s discretion under
Section 6.1(d)(x)(E));
provided
, that in all events the General Partner
shall apply the “remedial allocation method” in accordance with the principles of Treasury Regulation Section 1.704-3(d).
(c) The General Partner may determine to depreciate or amortize the portion of an adjustment under Section 743(b) of the Code attributable to unrealized appreciation in any Adjusted Property (to the
extent of the unamortized Book-Tax Disparity) using a predetermined rate derived from the depreciation or amortization method and useful life applied to the unamortized Book-Tax Disparity of such property, despite any inconsistency of such approach
with Treasury Regulation Section 1.167(c)-l(a)(6) or any successor regulations thereto. If the General Partner determines that such reporting position cannot reasonably be taken, the General Partner may adopt depreciation and amortization
conventions under which all purchasers acquiring Limited Partner Interests in the same month would receive depreciation and amortization deductions, based upon the same applicable rate as if they had purchased a direct interest in the
Partnership’s property. If the General Partner chooses not to utilize such aggregate method, the General Partner may use any other depreciation and amortization conventions to preserve the uniformity of the intrinsic tax characteristics of any
Limited Partner Interests, so long as such conventions would not have a material adverse effect on the Limited Partners or the Record Holders of any class or classes of Limited Partner Interests.
(d) In accordance with Treasury Regulation Sections 1.1245-1(e) and 1.1250-1(f), any gain allocated to the Partners upon the sale or
other taxable disposition of any Partnership property shall, to the extent possible, after taking into account other required allocations of gain pursuant to this
Section 6.2
, be characterized as Recapture Income in the same proportions
and to the same extent as such Partners (or their predecessors in interest) have been allocated any deductions directly or indirectly giving rise to the treatment of such gains as Recapture Income.
(e) All items of income, gain, loss, deduction and credit recognized by the Partnership for U.S. federal income tax purposes and
allocated to the Partners in accordance with the provisions hereof shall be determined without regard to any election under Section 754 of the Code that may be made by the Partnership;
provided
,
however
, that such allocations,
once made, shall be adjusted (in the manner determined by the General Partner) to take into account those adjustments permitted or required by Sections 734 and 743 of the Code.
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(f) Each item of Partnership income, gain, loss and deduction shall, for U.S. federal income
tax purposes, be determined for each taxable period and prorated on a monthly basis and shall be allocated to the Partners as of the opening of the National Securities Exchange on which Partnership Interests are listed or admitted to trading on the
first Business Day of each month;
provided
,
however
, such items for the period beginning on the Closing Date and ending on the last day of the month in which the Closing Date occurs shall be allocated to the Partners as of the closing
of the National Securities Exchange on which Partnership Interests are listed or admitted to trading on the last Business Day of the next succeeding month; and
provided
,
further
, that gain or loss on a sale or other disposition of any
assets of the Partnership or any other extraordinary item of income, gain, loss or deduction as determined by the General Partner, shall be allocated to the Partners as of the opening of the National Securities Exchange on which Partnership
Interests are listed or admitted to trading on the first Business Day of the month in which such item is recognized for U.S. federal income tax purposes. The General Partner may revise, alter or otherwise modify such methods of allocation to the
extent permitted or required by Section 706 of the Code and the regulations or rulings promulgated thereunder.
(g)
Allocations that would otherwise be made to a Limited Partner under the provisions of this
Article VI
shall instead be made to the beneficial owner of Limited Partner Interests held by a nominee, agent or representative in any case in which
such nominee, agent or representative has furnished the identity of such owner to the Partnership in accordance with Section 6031(c) of the Code or any other method determined by the General Partner.
(h) If, as a result of an exercise of a Noncompensatory Option, a Capital Account reallocation is required under Treasury Regulation
Section 1.704-1(b)(2)(iv)(s)(3), the General Partner shall make corrective allocations pursuant to Treasury Regulation Section 1.704-1(b)(4)(x).
Section 6.3
Requirement and Characterization of Distributions; Distributions to Record Holders
.
(a) Within 45 days following the end of each Quarter commencing with the Quarter ending on
[ ], 2016, an amount equal to 100% of Available Cash with respect to such Quarter shall be distributed in accordance with this
Article VI
by the Partnership to the Partners as of the Record Date selected by the General Partner. The Record Date for determining the Partners entitled to the first distribution of Available Cash shall not be prior to the final closing of
the Over-Allotment Option or the Deferred Issuance. All amounts of Available Cash distributed by the Partnership on any date from any source shall be deemed to be Operating Surplus until the sum of all amounts of Available Cash theretofore
distributed by the Partnership to the Partners pursuant to
Section 6.4
equals the Operating Surplus from the Closing Date through the close of the immediately preceding Quarter. Any remaining amounts of Available Cash distributed by the
Partnership on such date shall, except as otherwise provided in
Section 6.5
, be deemed to be “
Capital Surplus
.” Distributions and redemption payments, if any, by the Partnership shall be subject to the Delaware
Act notwithstanding any other provision of this Agreement.
(b) Notwithstanding
Section 6.3(a)
(but subject to the
last sentence of
Section 6.3(a)
), in the event of the dissolution and liquidation of the Partnership, all cash received during or after the Quarter in which the Liquidation Date occurs shall be applied and distributed solely in
accordance with, and subject to the terms and conditions of,
Section 12.4
.
(c) The General Partner may treat
taxes paid by the Partnership on behalf of, or amounts withheld with respect to, all or less than all of the Partners, as an advance of a distribution of Available Cash to such Partners, as determined appropriate under the circumstances by the
General Partner.
(d) Each distribution in respect of a Partnership Interest shall be paid by the Partnership, directly or
through the Transfer Agent or through any other Person or agent, only to the Record Holder of such Partnership Interest as of the Record Date set for such distribution. Such payment shall constitute full payment and satisfaction of the
Partnership’s liability in respect of such payment, regardless of any claim of any Person who may have an interest in such payment by reason of an assignment or otherwise.
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Section 6.4
Distributions of Available Cash from Operating Surplus
.
(a)
During the Subordination Period
. Available Cash with respect to any Quarter within the Subordination Period
that is deemed to be Operating Surplus pursuant to the provisions of
Section 6.3
or
Section 6.5
shall be distributed as follows, except as otherwise required in respect of additional Partnership Interests or Derivative
Partnership Interests issued pursuant to
Section 5.5(b)
:
(i) First, to all Unitholders holding Common
Units, Pro Rata, until there has been distributed in respect of each Common Unit then Outstanding an amount equal to the Minimum Quarterly Distribution for such Quarter;
(ii) Second, to all Unitholders holding Common Units, Pro Rata, until there has been distributed in respect of each Common
Unit then Outstanding an amount equal to the Cumulative Common Unit Arrearage existing with respect to such Quarter;
(iii) Third, to all Unitholders holding Subordinated Units, Pro Rata, until there has been distributed in respect of each Subordinated Unit then Outstanding an amount equal to the Minimum Quarterly
Distribution for such Quarter;
(iv) Fourth, to all Unitholders, Pro Rata, until there has been distributed in
respect of each Unit then Outstanding an amount equal to the excess of the First Target Distribution over the Minimum Quarterly Distribution for such Quarter;
(v) Fifth, (A) 15% to the holders of the Incentive Distribution Rights, Pro Rata, and (B) 85% to all Unitholders, Pro Rata, until there has been distributed in respect of each Unit then
Outstanding an amount equal to the excess of the Second Target Distribution over the First Target Distribution for such Quarter;
(vi) Sixth, (A) 25% to the holders of the Incentive Distribution Rights, Pro Rata, and (B) 75% to all Unitholders, Pro Rata, until there has been distributed in respect of each Unit then
Outstanding an amount equal to the excess of the Third Target Distribution over the Second Target Distribution for such Quarter; and
(vii) Thereafter, (A) 50% to the holders of the Incentive Distribution Rights, Pro Rata, and (B) 50% to all Unitholders, Pro Rata;
provided
,
however
, that if the Minimum Quarterly Distribution, the First Target Distribution, the Second Target Distribution and the Third Target Distribution have been reduced to zero
pursuant to the second sentence of
Section 6.6(a)
, the distribution of Available Cash that is deemed to be Operating Surplus with respect to any Quarter will be made solely in accordance with
Section 6.4(a)(vii)
.
(b)
After the Subordination Period
. Available Cash with respect to any Quarter after the Subordination Period that is
deemed to be Operating Surplus pursuant to the provisions of
Section 6.3
or
Section 6.5
shall be distributed as follows, except as otherwise required in respect of additional Partnership Interests issued pursuant to
Section 5.5(b)
:
(i) First, to all Unitholders, Pro Rata, until there has been distributed in
respect of each Unit then Outstanding an amount equal to the Minimum Quarterly Distribution for such Quarter;
(ii) Second, to all Unitholders, Pro Rata, until there has been distributed in respect of each Unit then Outstanding an
amount equal to the excess of the First Target Distribution over the Minimum Quarterly Distribution for such Quarter;
(iii) Third, (A) 15% to the holders of the Incentive Distribution Rights, Pro Rata, and (B) 85% to all Unitholders, Pro Rata, until there has been distributed in respect of each Unit then
Outstanding an amount equal to the excess of the Second Target Distribution over the First Target Distribution for such Quarter;
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(iv) Fourth, (A) 25% to the holders of the Incentive Distribution
Rights, Pro Rata, and (B) 75% to all Unitholders, Pro Rata, until there has been distributed in respect of each Unit then Outstanding an amount equal to the excess of the Third Target Distribution over the Second Target Distribution for such
Quarter; and
(v) Thereafter, (A) 50% to the holders of the Incentive Distribution Rights, Pro Rata, and
(B) 50% to all Unitholders, Pro Rata;
provided
,
however
, that if the Minimum Quarterly Distribution, the First Target
Distribution, the Second Target Distribution and the Third Target Distribution have been reduced to zero pursuant to the second sentence of
Section 6.6(a)
, the distribution of Available Cash that is deemed to be Operating Surplus with
respect to any Quarter will be made solely in accordance with
Section 6.4(b)(v)
.
Section 6.5
Distributions of Available Cash from Capital Surplus
.
Available Cash that is deemed to be Capital Surplus pursuant to the provisions of
Section 6.3(a)
shall be distributed, unless the provisions of
Section 6.3
require otherwise, to the Unitholders, Pro Rata, until a hypothetical holder of a Common Unit acquired on the Closing Date has received with respect to such Common Unit distributions of Available Cash that are deemed to be
Capital Surplus in an aggregate amount equal to the Initial Unit Price. Available Cash that is deemed to be Capital Surplus shall then be distributed to all Unitholders holding Common Units, Pro Rata, until there has been distributed in respect of
each Common Unit then Outstanding an amount equal to the Cumulative Common Unit Arrearage. Thereafter, all Available Cash shall be distributed as if it were Operating Surplus and shall be distributed in accordance with
Section 6.4
.
Section 6.6
Adjustment of Minimum Quarterly Distribution and Target Distribution Levels
.
(a) The Minimum Quarterly Distribution, Target Distributions, Common Unit Arrearages and Cumulative Common Unit
Arrearages shall be proportionately adjusted in the event of any distribution, combination or subdivision (whether effected by a distribution payable in Units or otherwise) of Units or other Partnership Interests in accordance with
Section 5.8
. In the event of a distribution of Available Cash that is deemed to be from Capital Surplus, the then applicable Minimum Quarterly Distribution and Target Distributions shall be adjusted proportionately downward in the same
proportion that the distribution had to the fair market value of the Common Units immediately prior to the announcement of the distribution. If the Common Units are publicly traded on a National Securities Exchange, then the fair market value will
be the Current Market Price before the ex-dividend date, and if the Common Units are not publicly traded, then the fair market value for the purposes of the immediately preceding sentence will be determined by the Board of Directors.
(b) The Minimum Quarterly Distribution, First Target Distribution, Second Target Distribution and Third Target Distribution, shall also
be subject to adjustment pursuant to
Section 5.10
and
Section 6.9
.
Section 6.7
Special
Provisions Relating to the Holders of Subordinated Units
.
(a) Except with respect to the right to vote on or
approve matters requiring the vote or approval of a percentage of the holders of Outstanding Common Units and the right to participate in allocations of income, gain, loss and deduction and distributions made with respect to Common Units, the holder
of a Subordinated Unit shall have all of the rights and obligations of a Unitholder holding Common Units hereunder;
provided
,
however
, that immediately upon the conversion of Subordinated Units into Common Units pursuant to
Section 5.6
, the Unitholder holding Common Units resulting from the conversion of Subordinated Units shall possess all of the rights and obligations of a Unitholder holding Common Units hereunder with respect to such Common Units
resulting from the conversion of Subordinated Units, including the right to vote as a Common Unitholder and the right to participate in allocations of income, gain, loss and deduction and distributions made with respect to Common Units;
provided
,
however
, that such Common Units resulting from the conversion of Subordinated Units shall remain subject to the provisions of
Section 5.4(c)(ii)
,
Section 6.1(d)(x)(A)
,
Section 6.7(b)
and
Section 6.7(c)
.
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(b) A Unitholder shall not be permitted to transfer a Subordinated Unit or a Common Unit
resulting from the conversion of a Subordinated Unit pursuant to
Section 5.6
(other than a transfer to an Affiliate) if the remaining balance in the transferring Unitholder’s Capital Account with respect to the retained Subordinated
Units or retained Common Units resulting from the conversion of Subordinated Units would be negative after giving effect to the allocation under
Section 5.4(c)(ii)(B)
.
(c) The holder of a Common Unit that has resulted from the conversion of a Subordinated Unit pursuant to
Section 5.6
shall
not be issued a Common Unit Certificate pursuant to
Section 4.1
(if the Common Units are represented by Certificates) and shall not be permitted to transfer such Common Unit to a Person that is not an Affiliate of the holder until such
time as the General Partner determines, based on advice of counsel, that each such Common Unit should have, as a substantive matter, like intrinsic economic and federal income tax characteristics, in all material respects, to the intrinsic economic
and federal income tax characteristics of an Initial Common Unit. In connection with the condition imposed by this
Section 6.7(c),
the General Partner may take whatever steps are required to provide economic uniformity to such Common
Units in preparation for a transfer of such Common Units, including the application of
Section 5.4(c)(ii)
,
Section 6.1(d)(x)
and
Section 6.7(b)
;
provided
,
however
, that no such steps may be taken
that would have a material adverse effect on the Unitholders holding Common Units.
Section 6.8
Special Provisions
Relating to the Holders of Incentive Distribution Rights
.
(a) Notwithstanding anything to the contrary set
forth in this Agreement, the holders of the Incentive Distribution Rights (1) shall (x) possess the rights and obligations provided in this Agreement with respect to a Limited Partner pursuant to
Article III
and
Article VII
and (y) have a Capital Account as a Partner pursuant to
Section 5.4
and all other provisions related thereto and (2) shall not (x) be entitled to vote on any matters requiring the approval or vote of the holders of
Outstanding Units, except as provided by law, (y) be entitled to any distributions other than as provided in
Section 6.4(a)(v)
,
(vi)
and
(vii),
Section 6.4(b)(iii),
(iv)
and
(v),
and
Section 12.4
or (z) be allocated items of income, gain, loss or deduction other than as specified in this
Article VI
;
provided
,
however
, that for the avoidance of doubt, the foregoing shall not preclude the
Partnership from making any other payments or distributions in connection with other actions permitted by this Agreement.
(b)
A Unitholder shall not be permitted to transfer an IDR Reset Common Unit (other than a transfer to an Affiliate) if the remaining balance in the transferring Unitholder’s Capital Account with respect to the retained IDR Reset Common Units would
be negative after giving effect to the allocation under
Section 5.4(c)(iii)
.
(c) A holder of an IDR Reset Common
Unit that was issued in connection with an IDR Reset Election pursuant to
Section 5.10
shall not be issued a Common Unit Certificate pursuant to
Section 4.1
(if the Common Units are evidenced by Certificates) or evidence of
the issuance of uncertificated Common Units, and shall not be permitted to transfer such Common Unit to a Person that is not an Affiliate of such holder, until such time as the General Partner determines, based on advice of counsel, that each such
IDR Reset Common Unit should have, as a substantive matter, like intrinsic economic and federal income tax characteristics, in all material respects, to the intrinsic economic and federal income tax characteristics of an Initial Common Unit. In
connection with the condition imposed by this
Section 6.8(c)
, the General Partner may take whatever steps are required to provide economic uniformity to such IDR Reset Common Units in preparation for a transfer of such IDR Reset Common
Units, including the application of
Section 5.4(c)(iii)
,
Section 6.1(d)(x)(B)
, or
Section 6.1(d)(x)(D)
;
provided
,
however
, that no such steps may be taken that would have a material adverse effect on
the Unitholders holding Common Units.
Section 6.9
Entity-Level Taxation
.
If legislation is enacted
or the official interpretation of existing legislation is modified by a governmental authority, which after giving effect to such enactment or modification, results in a Group Member becoming subject to federal, state or local or non-U.S. income or
withholding taxes in excess of the amount of such taxes due from the Group Member prior to such enactment or modification (including, for the avoidance of doubt, any increase in the rate of such taxation applicable to the Group Member),
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then the General Partner may, in its sole and absolute discretion, reduce the Minimum Quarterly Distribution and the Target Distributions by the amount of income or withholding taxes that are
payable by reason of any such new legislation or interpretation (the “
Incremental Income Taxes
”), or any portion thereof selected by the General Partner, in the manner provided in this
Section 6.9
. If the
General Partner elects to reduce the Minimum Quarterly Distribution and the Target Distributions for any Quarter with respect to all or a portion of any Incremental Income Taxes, the General Partner shall estimate for such Quarter the Partnership
Group’s aggregate liability (the “
Estimated Incremental Quarterly Tax Amount
”) for all (or the relevant portion of) such Incremental Income Taxes; provided that any difference between such estimate
and the actual liability for Incremental Income Taxes (or the relevant portion thereof) for such Quarter may, to the extent determined by the General Partner, be taken into account in determining the Estimated Incremental Quarterly Tax Amount with
respect to each Quarter in which any such difference can be determined. For each such Quarter, the Minimum Quarterly Distribution, First Target Distribution, Second Target Distribution and Third Target Distribution, shall be the product obtained by
multiplying (a) the amounts therefor that are set out herein prior to the application of this
Section 6.9
times (b) the quotient obtained by dividing (i) Available Cash with respect to such Quarter by (ii) the sum of
Available Cash with respect to such Quarter and the Estimated Incremental Quarterly Tax Amount for such Quarter, as determined by the General Partner. For purposes of the foregoing, Available Cash with respect to a Quarter will be deemed reduced by
the Estimated Incremental Quarterly Tax Amount for that Quarter.
ARTICLE VII
MANAGEMENT AND OPERATION OF BUSINESS
Section 7.1
Management
.
(a) The General Partner shall
conduct, direct and manage all activities of the Partnership. Except as otherwise expressly provided in this Agreement, all management powers over the business and affairs of the Partnership shall be exclusively vested in the General Partner, and no
Limited Partner, in its capacity as such, shall have any management power over the business and affairs of the Partnership. In addition to the powers now or hereafter granted to a general partner of a limited partnership under applicable law or that
are granted to the General Partner under any other provision of this Agreement, the General Partner, subject to
Section 7.3
, shall have full power and authority to do all things and on such terms as it determines to be necessary or
appropriate to conduct the business of the Partnership, to exercise all powers set forth in
Section 2.5
and to effectuate the purposes set forth in
Section 2.4
, including the following:
(i) the making of any expenditures, the lending or borrowing of money, the assumption or guarantee of, or other
contracting for, indebtedness and other Liabilities, the issuance of evidences of indebtedness, including indebtedness that is convertible into or exchangeable for Partnership Interests, and the incurring of any other obligations;
(ii) the making of tax, regulatory and other filings, or rendering of periodic or other reports to governmental or other
agencies having jurisdiction over the business or assets of the Partnership;
(iii) the acquisition,
disposition, mortgage, pledge, encumbrance, hypothecation or exchange of any or all of the assets of the Partnership or the merger or other combination of the Partnership with or into another Person (the matters described in this
clause
(iii)
being subject, however, to any prior approval that may be required by
Section 7.3
and
Article XIV
);
(iv) the use of the assets of the Partnership (including cash on hand) for any purpose consistent with the terms of this Agreement, including the financing of the conduct of the operations of the
Partnership Group; subject to
Section 7.6(a),
the lending of funds to other Persons (including other Group Members); the repayment or guarantee of obligations of any Group Member; and the making of capital contributions to any Group
Member;
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(v) the negotiation, execution and performance of any contracts, conveyances
or other instruments (including instruments that limit the liability of the Partnership under contractual arrangements to all or particular assets of the Partnership, with the other party to the contract to have no recourse against the General
Partner or its assets other than its interest in the Partnership, even if the same results in the terms of the transaction being less favorable to the Partnership than would otherwise be the case);
(vi) the distribution of cash held by the Partnership;
(vii) the selection and dismissal of officers, employees, agents, internal and outside attorneys, accountants, consultants
and contractors and the determination of their compensation and other terms of employment or hiring;
(viii)
the maintenance of insurance for the benefit of the Partnership Group, the Partners and Indemnitees;
(ix) the
formation of, or acquisition of an interest in, and the contribution of property and the making of loans to, any further limited or general partnerships, joint ventures, corporations, limited liability companies or other Persons (including the
acquisition of interests in, and the contributions of property to, any Group Member from time to time) subject to the restrictions set forth in
Section 2.4
;
(x) the control of any matters affecting the rights and obligations of the Partnership, including the bringing and
defending of actions at law or in equity and otherwise engaging in the conduct of litigation, arbitration or mediation and the incurring of legal expense and the settlement of claims and litigation;
(xi) the indemnification of any Person against Liabilities and contingencies to the extent permitted by law;
(xii) the entering into of listing agreements with any National Securities Exchange and the delisting of some or all of
the Limited Partner Interests from, or requesting that trading be suspended on, any such exchange (subject to any prior approval that may be required under
Section 4.8
);
(xiii) the purchase, sale or other acquisition or disposition of Partnership Interests, or the issuance of Derivative
Partnership Interests;
(xiv) the undertaking of any action in connection with the Partnership’s
participation in the management of any Group Member; and
(xv) the entering into of agreements with any of its
Affiliates to render services to a Group Member or to itself in the discharge of its duties as General Partner of the Partnership.
(b) Notwithstanding any other provision of this Agreement, any Group Member Agreement, the Delaware Act or any applicable law, rule or regulation, each Record Holder and each other Person who may acquire
an interest in a Partnership Interest or that is otherwise bound by this Agreement hereby (i) approves, ratifies and confirms the execution, delivery and performance by the parties thereto of this Agreement and the Group Member Agreement of
each other Group Member, the IPO Underwriting Agreement, the Omnibus Agreement, the Contribution Agreement, the Operational Services and Secondment Agreement and the other agreements described in or filed as exhibits to the IPO Registration
Statement that are related to the transactions contemplated by the IPO Registration Statement (collectively, the “
Transaction Documents
”) (in each case other than this Agreement, without giving effect to any amendments,
supplements or restatements thereof entered into after the date such Person becomes bound by the provisions of this Agreement); (ii) agrees that the General Partner (on its own or on behalf of the Partnership) is authorized to execute, deliver
and perform the agreements referred to in
clause i)
of this sentence and the other agreements, acts, transactions and matters described in or contemplated by the IPO Registration Statement on behalf of the Partnership without any further
act, approval or vote of the Partners or the other Persons who may acquire an interest in Partnership Interests or are otherwise bound by this Agreement; and (iii) agrees that the execution, delivery or performance by the General Partner, any
Group Member or any Affiliate of any of them of this Agreement or any agreement authorized or permitted under this Agreement (including the exercise by the General Partner or any Affiliate of the General Partner of the
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rights accorded pursuant to
Article XV
) shall not constitute a breach by the General Partner of any duty that the General Partner may owe the Partnership or the Limited Partners or any
other Persons under this Agreement (or any other agreements) or of any duty existing at law, in equity or otherwise.
Section 7.2
Certificate of Limited Partnership
.
The General Partner has caused the Certificate of
Limited Partnership to be filed with the Secretary of State of the State of Delaware as required by the Delaware Act. The General Partner shall use all reasonable efforts to cause to be filed such other certificates or documents that the General
Partner determines to be necessary or appropriate for the formation, continuation, qualification and operation of a limited partnership (or a partnership in which the limited partners have limited liability) in the State of Delaware or any other
state in which the Partnership may elect to do business or own property. To the extent the General Partner determines such action to be necessary or appropriate, the General Partner shall file amendments to and restatements of the Certificate of
Limited Partnership and do all things to maintain the Partnership as a limited partnership (or a partnership or other entity in which the limited partners have limited liability) under the laws of the State of Delaware or of any other state in which
the Partnership may elect to do business or own property. Subject to the terms of
Section 3.3(a)
, the General Partner shall not be required, before or after filing, to deliver or mail a copy of the Certificate of Limited Partnership, any
qualification document or any amendment thereto to any Limited Partner.
Section 7.3
Restrictions on the General
Partner’s Authority to Sell Assets of the Partnership Group
.
Except as provided in
Article XII
and
Article XIV
, the General Partner may not sell, exchange or otherwise dispose of all or substantially all of
the assets of the Partnership Group, taken as a whole, in a single transaction or a series of related transactions (including by way of merger, consolidation or other combination or sale of ownership interests of the Partnership’s Subsidiaries)
without the approval of holders of a Unit Majority;
provided
,
however
, that this provision shall not preclude or limit the General Partner’s ability to mortgage, pledge, hypothecate or grant a security interest in all or
substantially all of the assets of the Partnership Group and shall not apply to any forced sale of any or all of the assets of the Partnership Group pursuant to the foreclosure of, or other realization upon, any such encumbrance.
Section 7.4
Reimbursement of and Other Payments to the General Partner
.
(a) Except as provided in this
Section 7.4
, and elsewhere in this Agreement or in the Omnibus Agreement or the Operational
Services and Secondment Agreement, the General Partner shall not be compensated for its services as a general partner or member of any Group Member.
(b) Except as may be otherwise provided in the Omnibus Agreement or the Operational Services and Secondment Agreement, the General Partner shall be reimbursed on a monthly basis, or such other basis as
the General Partner may determine, for (i) all direct and indirect expenses it incurs or payments it makes on behalf of the Partnership Group (including salary, bonus, incentive compensation and other amounts paid to any Person, including
Affiliates of the General Partner, to perform services for the Partnership Group or for the General Partner in the discharge of its duties to the Partnership Group) and (ii) all other expenses allocable to the Partnership Group or otherwise
incurred by the General Partner or its Affiliates in connection with managing and operating the Partnership Group’s business and affairs (including expenses allocated to the General Partner by its Affiliates). The General Partner shall
determine the expenses that are allocable to the Partnership Group. Reimbursements pursuant to this
Section 7.4
shall be in addition to any reimbursement to the General Partner as a result of indemnification pursuant to
Section 7.7
. Any allocation of expenses to the Partnership by the General Partner in a manner consistent with its or its Affiliates’ past business practices shall be deemed to have been made in good faith.
(c) The General Partner, without the approval of the Limited Partners (who shall have no right to vote in respect thereof), may propose
and adopt on behalf of the Partnership employee benefit plans, employee programs and employee practices (including plans, programs and practices involving the issuance of Partnership Interests or Derivative Partnership Interests), or cause the
Partnership to issue Partnership Interests or Derivative
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Partnership Interests in connection with, or pursuant to, any employee benefit plan, employee program or employee practice maintained or sponsored by the General Partner or any of its Affiliates,
in each case for the benefit of officers, employees, consultants and directors of the General Partner or any of its Affiliates, in respect of services performed, directly or indirectly, for the benefit of the Partnership Group. The Partnership
agrees to issue and sell to the General Partner or any of its Affiliates any Partnership Interests or Derivative Partnership Interests that the General Partner or such Affiliates are obligated to provide to any officers, employees, consultants and
directors pursuant to any such employee benefit plans, employee programs or employee practices. Expenses incurred by the General Partner in connection with any such plans, programs and practices (including the net cost to the General Partner or such
Affiliates of Partnership Interests or Derivative Partnership Interests purchased by the General Partner or such Affiliates from the Partnership to fulfill options or awards under such plans, programs and practices) shall be reimbursed in accordance
with
Section 7.4(b)
. Any and all obligations of the General Partner under any employee benefit plans, employee programs or employee practices adopted by the General Partner as permitted by this
Section 7.4(c)
shall constitute
obligations of the General Partner hereunder and shall be assumed by any successor General Partner approved pursuant to
Section 11.1
or
Section 11.2
or the transferee of or successor to all of the General Partner’s
General Partner Interest pursuant to
Section 4.6
.
(d) The General Partner and its Affiliates may charge any
member of the Partnership Group a management fee to the extent necessary to allow the Partnership Group to reduce the amount of any state franchise or income tax or any tax based upon the revenues or gross margin of any member of the Partnership
Group if the tax benefit produced by the payment of such management fee or fees exceeds the amount of such fee or fees.
(e)
The General Partner and its Affiliates may enter into an agreement to provide services to any Group Member for a fee or otherwise than for cost.
Section 7.5
Outside Activities
.
(a) The General
Partner, for so long as it is the General Partner of the Partnership, (i) agrees that its sole business will be to act as a general partner or managing member, as the case may be, of the Partnership and any other partnership or limited
liability company of which the Partnership is, directly or indirectly, a partner or member and to undertake activities that are ancillary or related thereto (including being a Limited Partner in the Partnership) and (ii) shall not engage in any
business or activity or incur any debts or Liabilities except in connection with or incidental to (A) its performance as general partner or managing member, if any, of one or more Group Members or as described in or contemplated by the IPO
Registration Statement, (B) the acquiring, owning or disposing of debt securities or equity interests in any Group Member, (C) the guarantee of, and mortgage, pledge or encumbrance of any or all of its assets in connection with, any
indebtedness of any Group Member or (D) the performance of its obligations under the Omnibus Agreement.
(b) Each
Unrestricted Person (other than the General Partner) shall have the right to engage in businesses of every type and description and other activities for profit and to engage in and possess an interest in other business ventures of any and every type
or description, whether in businesses engaged in or anticipated to be engaged in by any Group Member, independently or with others, including business interests and activities in direct competition with the business and activities of any Group
Member, and none of the same shall constitute a breach of this Agreement or any duty otherwise existing at law, in equity or otherwise to any Group Member or any Partner or any other Person bound by this Agreement;
provided
, that such
Unrestricted Person does not engage in such business or activity using confidential or proprietary information provided by or on behalf of the Partnership to such Unrestricted Person. None of any Group Member, any Limited Partner or any other Person
shall have any rights by virtue of this Agreement, any Group Member Agreement or the partnership relationship established hereby in any business ventures of any Unrestricted Person.
(c) Subject to the terms of
Section 7.5(a)
and
Section 7.5(b)
, but otherwise notwithstanding anything to the
contrary in this Agreement, (i) the engaging in competitive activities by any Unrestricted Person (other than the
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General Partner) in accordance with the provisions of this
Section 7.5
is hereby approved by the Partnership and all Partners and all other Persons bound by this Agreement,
(ii) it shall be deemed not to be a breach of any duty or any other obligation of any type whatsoever of the General Partner or any other Unrestricted Person for the Unrestricted Persons (other than the General Partner) to engage in such
business interests and activities in preference to or to the exclusion of the Partnership and (iii) the Unrestricted Persons shall have no obligation hereunder or as a result of any duty otherwise existing at law, in equity or otherwise to
present business opportunities to the Partnership. Notwithstanding anything to the contrary in this Agreement or any duty otherwise existing at law or in equity, the doctrine of corporate opportunity, or any analogous doctrine, shall not apply to
any Unrestricted Person (including the General Partner). No Unrestricted Person (including the General Partner) who acquires knowledge of a potential transaction, agreement, arrangement or other matter that may be an opportunity for the Partnership
shall have any duty to communicate or offer such opportunity to the Partnership, and such Unrestricted Person (including the General Partner) shall not be liable to the Partnership, to any Limited Partner or any other Person bound by this Agreement
for breach of any duty by reason of the fact that such Unrestricted Person (including the General Partner) pursues or acquires for itself, directs such opportunity to another Person or does not communicate such opportunity or information to the
Partnership;
provided,
that such Unrestricted Person does not engage in such business or activity using confidential or proprietary information provided by or on behalf of the Partnership to such Unrestricted Person.
(d) The General Partner and each of its Affiliates may acquire Units or other Partnership Interests in addition to those acquired on the
Closing Date and, except as otherwise provided in this Agreement, shall be entitled to exercise, at their option, all rights relating to all Units and/or other Partnership Interests acquired by them. The term “Affiliates” when used in this
Section 7.5(d)
with respect to the General Partner shall not include any Group Member.
Section 7.6
Loans from the General Partner; Loans or Contributions from the Partnership or Group Members
.
(a)
The General Partner or any of its Affiliates may lend to any Group Member, and any Group Member may borrow from the General Partner or any of its Affiliates, funds needed or desired by such Group Member for such periods of time and in such amounts
as the General Partner may determine;
provided, however
, that in any such case the lending party may not charge the borrowing party interest at a rate greater than the rate that would be charged the borrowing party or impose terms less
favorable to the borrowing party than would be charged or imposed on the borrowing party by unrelated lenders on comparable loans made on an arm’s-length basis (without reference to the lending party’s financial abilities or guarantees),
all as determined by the General Partner. The borrowing party shall reimburse the lending party for any costs (other than any additional interest costs) incurred by the lending party in connection with the borrowing of such funds. For purposes of
this
Section 7.6(a)
and
Section 7.6(b)
, the term “Group Member” shall include any Affiliate of a Group Member that is controlled by the Group Member.
(b) The Partnership may lend or contribute to any Group Member, and any Group Member may borrow from the Partnership, funds on terms and
conditions determined by the General Partner. No Group Member may lend funds to the General Partner or any of its Affiliates (other than another Group Member), except for short-term cash management purposes.
(c) No borrowing by any Group Member or the approval thereof by the General Partner shall be deemed to constitute a breach of any duty,
expressed or implied, of the General Partner or its Affiliates to the Partnership or the Limited Partners or any other Person bound by this Agreement existing hereunder, or existing at law, in equity or otherwise, by reason of the fact that the
purpose or effect of such borrowing is directly or indirectly to (i) enable distributions to the General Partner or its Affiliates (in their capacities as Limited Partners) to exceed the General Partner’s Percentage Interest (in its
capacity as a Limited Partner) of the total amount distributed to all Partners or (ii) hasten the expiration of the Subordination Period or the conversion of any Subordinated Units into Common Units.
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Section 7.7
Indemnification
.
(a) To the fullest extent permitted by law but subject to the limitations expressly provided in this Agreement, all Indemnitees shall be
indemnified and held harmless by the Partnership from and against any and all losses, claims, damages, liabilities, joint or several, expenses (including legal fees and expenses), judgments, fines, penalties, interest, settlements or other amounts
arising from any and all threatened, pending or completed claims, demands, actions, suits or proceedings, whether civil, criminal, administrative or investigative, and whether formal or informal and including appeals, in which any Indemnitee may be
involved, or is threatened to be involved, as a party or otherwise, by reason of its status as an Indemnitee and acting (or refraining to act) in such capacity on behalf of or for the benefit of the Partnership;
provided
, that the Indemnitee
shall not be indemnified and held harmless pursuant to this Agreement if there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that, in respect of the matter for which the Indemnitee is seeking
indemnification pursuant to this Agreement, the Indemnitee acted in bad faith or engaged in intentional fraud, willful misconduct or, in the case of a criminal matter, acted with knowledge that the Indemnitee’s conduct was unlawful; provided,
further, no indemnification pursuant to this
Section 7.7
shall be available to any Affiliate of the General Partner (other than a Group Member), or to any other Indemnitee, with respect to any such Affiliate’s obligations pursuant
to the Transaction Documents. Any indemnification pursuant to this
Section 7.7
shall be made only out of the assets of the Partnership, it being agreed that the General Partner shall not be personally liable for such indemnification and
shall have no obligation to contribute or loan any monies or property to the Partnership to enable it to effectuate such indemnification.
(b) To the fullest extent permitted by law, expenses (including legal fees and expenses) incurred by an Indemnitee who is indemnified pursuant to
Section 7.7(a)
in defending any claim, demand,
action, suit or proceeding shall, from time to time, be advanced by the Partnership prior to a final and non-appealable judgment entered by a court of competent jurisdiction determining that, in respect of the matter for which the Indemnitee is
seeking indemnification pursuant to this
Section 7.7
, the Indemnitee is not entitled to be indemnified upon receipt by the Partnership of any undertaking by or on behalf of the Indemnitee to repay such amount if it shall be ultimately
determined that the Indemnitee is not entitled to be indemnified as authorized by this
Section 7.7
.
(c) The
indemnification provided by this
Section 7.7
shall be in addition to any other rights to which an Indemnitee may be entitled under this Agreement or any other agreement, pursuant to any vote of the holders of Outstanding Limited Partner
Interests, as a matter of law, in equity or otherwise, both as to actions in the Indemnitee’s capacity as an Indemnitee and as to actions in any other capacity (including any capacity under the IPO Underwriting Agreement), and shall continue as
to an Indemnitee who has ceased to serve in such capacity and shall inure to the benefit of the heirs, successors, assigns, executors and administrators of the Indemnitee.
(d) The Partnership may purchase and maintain (or reimburse the General Partner or its Affiliates for the cost of) insurance, on behalf of the General Partner, its Affiliates and such other Persons as the
General Partner shall determine, against any liability that may be asserted against, or expense that may be incurred by, such Person in connection with the Partnership’s activities or such Person’s activities on behalf of the Partnership,
regardless of whether the Partnership would have the power to indemnify such Person against such liability under the provisions of this Agreement.
(e) For purposes of this
Section 7.7
, the Partnership shall be deemed to have requested an Indemnitee to serve as fiduciary of an employee benefit plan whenever the performance by it of its
duties to the Partnership also imposes duties on, or otherwise involves services by, it to the plan or participants or beneficiaries of the plan; excise taxes assessed on an Indemnitee with respect to an employee benefit plan pursuant to applicable
law shall constitute “fines” within the meaning of
Section 7.7(a)
; and action taken or omitted by it with respect to any employee benefit plan in the performance of its duties for a purpose reasonably believed by it to be in
the best interest of the participants and beneficiaries of the plan shall be deemed to be for a purpose that is in the best interests of the Partnership.
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(f) In no event may an Indemnitee subject the Limited Partners to personal liability by
reason of the indemnification provisions set forth in this Agreement.
(g) An Indemnitee shall not be denied indemnification
in whole or in part under this
Section 7.7
because the Indemnitee had an interest in the transaction with respect to which the indemnification applies if the transaction was otherwise permitted by the terms of this Agreement.
(h) The provisions of this
Section 7.7
are for the benefit of the Indemnitees and their heirs, successors, assigns, executors
and administrators and shall not be deemed to create any rights for the benefit of any other Persons.
(i) No amendment,
modification or repeal of this
Section 7.7
or any provision hereof shall in any manner terminate, reduce or impair the right of any past, present or future Indemnitee to be indemnified by the Partnership, nor the obligations of the
Partnership to indemnify any such Indemnitee under and in accordance with the provisions of this
Section 7.7
as in effect immediately prior to such amendment, modification or repeal with respect to claims arising from or relating to
matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claims may arise or be asserted.
Section 7.8
Liability of Indemnitees
.
(a)
Notwithstanding anything to the contrary set forth in this Agreement, no Indemnitee shall be liable for monetary damages to the Partnership, the Limited Partners or any other Persons who are bound by this Agreement for losses sustained or
liabilities incurred as a result of any act or omission of an Indemnitee unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that, in respect of the matter in question, the Indemnitee
acted in bad faith or engaged in intentional fraud, willful misconduct or, in the case of a criminal matter, acted with knowledge that the Indemnitee’s conduct was unlawful.
(b) The General Partner may exercise any of the powers granted to it by this Agreement and perform any of the duties imposed upon it
hereunder either directly or by or through its agents, and the General Partner shall not be responsible for any misconduct or negligence on the part of any such agent appointed by the General Partner in good faith.
(c) To the extent that, at law or in equity, an Indemnitee has duties (including fiduciary duties) and liabilities relating thereto to
the Partnership, to the Partners or to any such other Persons who are bound by this Agreement, the General Partner and any other Indemnitee acting in connection with the Partnership’s business or affairs shall not be liable to the Partnership
or to such Partners or to any such other Persons who are bound by this Agreement for its good faith reliance on the provisions of this Agreement.
(d) Any amendment, modification or repeal of this
Section 7.8
or any provision hereof shall be prospective only and shall not in any way affect the limitations on the liability of the
Indemnitees under this
Section 7.8
as in effect immediately prior to such amendment, modification or repeal with respect to claims arising from or relating to matters occurring, in whole or in part, prior to such amendment, modification
or repeal, regardless of when such claims may arise or be asserted.
Section 7.9
Standards of Conduct; Resolution
of Conflicts of Interest and Replacement of Duties
.
(a) Whenever the General Partner makes a
determination or takes or declines to take any action, or any Affiliate of the General Partner causes the General Partner to do so, in its capacity as the general partner of the Partnership as opposed to in its individual capacity, whether under
this Agreement, any Group Member Agreement or any other agreement contemplated hereby or otherwise, then, unless a lesser standard is provided for in this Agreement, or the determination, action or failure to act has been approved as provided in
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Section 7.9(b)(i)
or
Section 7.9(b)(ii),
the General Partner, or such Affiliate causing it to do so, shall make such determination or take or decline to take such action
in good faith. Whenever the Board of Directors, any committee of the Board of Directors (including the Conflicts Committee) or any Affiliate of the General Partner makes a determination or takes or declines to take any action, whether under this
Agreement, any Group Member Agreement or any other agreement contemplated hereby or otherwise, then, unless a lesser standard is provided for in this Agreement or the determination, action or failure to act has been approved as provided in
Section 7.9(b)(i)
or
Section 7.9(b)(ii)
, the Board of Directors, any committee of the Board of Directors (including the Conflicts Committee) or any Affiliate of the General Partner shall make such determination or take or
decline to take such action in good faith. The foregoing and other lesser standards governing any determination, action or failure to act provided for in this Agreement are the sole and exclusive standards governing any such determinations, actions
and failures to act of the General Partner, the Board of Directors, any committee of the Board of Directors (including the Conflicts Committee) and any Affiliate of the General Partner, and none of the General Partner, the Board of Directors, any
committee of the Board of Directors (including the Conflicts Committee) or any Affiliate of the General Partner shall be subject to any fiduciary duty or other duty or obligation, or any other, different or higher standard (all of which duties,
obligations and standards are hereby eliminated, waived and disclaimed), under this Agreement, any Group Member Agreement or any other agreement contemplated hereby or otherwise, or under the Delaware Act or any other law, rule or regulation or at
equity. Any such determination, action or failure to act by the General Partner, the Board of Directors of the General Partner or any committee thereof (including the Conflicts Committee) or any Affiliate of the General Partner will be deemed to be
in good faith unless the General Partner, the Board of Directors of the General Partner or any committee thereof (including the Conflicts Committee) or any Affiliate of the General Partner subjectively believed such determination, action or failure
to act was adverse to the interests of the Partnership. The subjective belief of a majority of the members of the Board of Directors (or any committee thereof) that voted on, or provided written consent to, any determination, action or failure to
act of the Board of Directors (or any committee thereof) as to whether a determination, action or failure to act was adverse to the interests of the Partnership shall constitute the subjective belief of the Board of Directors (or any committee
thereof). In any proceeding brought by or on behalf of the Partnership, any Limited Partner, any Person who acquires an interest in a Partnership Interest or any other Person who is bound by this Agreement challenging such determination, action or
failure to act, the Person bringing or prosecuting such proceeding shall have the burden of proving that such determination, action or failure to act was not in good faith or such other applicable lesser standard under this Agreement.
(b) Unless a lesser standard is otherwise provided in this Agreement or any Group Member Agreement, whenever a potential conflict of
interest exists or arises between the General Partner or any of its Affiliates, on the one hand, and the Partnership, any Group Member or any Partner, on the other hand, any resolution or course of action by the General Partner or its Affiliates in
respect of such conflict of interest shall be permitted and deemed approved by all Partners, and shall not constitute a breach of this Agreement, any Group Member Agreement, or any agreement contemplated herein or therein or of any duty stated or
implied by law or equity, if the resolution or course of action in respect of such conflict of interest is (i) approved by Special Approval or (ii) approved by the vote of a majority of the Outstanding Common Units (excluding Common Units
owned by the General Partner and its Affiliates). The General Partner shall be authorized but not required in connection with its resolution of such conflict of interest to seek Special Approval or Unitholder approval of such resolution, and the
General Partner may also adopt a resolution or course of action in respect of any such conflict of interest that has not received Special Approval or Unitholder approval. If the General Partner does not submit the resolution or course of action in
respect of such conflict of interest as provided in either
clause
(i) or
clause (ii)
of the first sentence of this
Section 7.9(b)
, then any such resolution or course of action shall be governed by
Section 7.9(a)
. Whenever the General Partner makes a determination whether or not to refer any potential conflict of interest to the Conflicts Committee for Special Approval, whether or not to seek Unitholder approval or whether or not
to adopt a resolution or course of action that has not received Special Approval or Unitholder approval, then the General Partner shall be entitled, to the fullest extent permitted by law, to make such determination free of any duty or obligation
whatsoever to the Partnership or any Limited Partner or any other Person bound by this Agreement, and the General Partner shall not, to the fullest extent permitted by law, be
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required to act in good faith or pursuant to any other standard or duty imposed by this Agreement, any Group Member Agreement, any other agreement contemplated hereby or otherwise or under the
Delaware Act or any other law, rule or regulation or at equity, and the General Partner in making such determination shall be permitted to do so in its sole and absolute discretion. If Special Approval is sought, then it shall be presumed that, in
making its determination, the Conflicts Committee acted in good faith, and if the Board of Directors determines that a director satisfies the eligibility requirements to be a member of the Conflicts Committee, then it shall be presumed that, in
making its determination, the Board of Directors acted in good faith. In any proceeding brought by any Limited Partner or by or on behalf of such Limited Partner or any other Limited Partner or the Partnership or by or on behalf of any Person who
acquires an interest in a Partnership Interest or any other Person bound by this Agreement challenging any action, failure to act or determination by the Conflicts Committee with respect to any matter referred to the Conflicts Committee for Special
Approval, or challenging any determination by the Board of Directors that a director satisfies the eligibility requirements to be a member of the Conflicts Committee, the Person bringing or prosecuting such proceeding shall have the burden of
overcoming the presumption that the Conflicts Committee or the Board of Directors, as applicable, did not act in good faith. Notwithstanding anything to the contrary in this Agreement or any duty otherwise existing at law or equity, the conflicts of
interest described in the IPO Registration Statement are hereby approved by all Partners and shall not constitute a breach of this Agreement or any such duty.
(c) Whenever the General Partner makes a determination or takes or declines to take any action, or any Affiliate of the General Partner causes the General Partner to do so, in its individual capacity as
opposed to in its capacity as the general partner of the Partnership, whether under this Agreement, any Group Member Agreement or any other agreement contemplated hereby or otherwise, then (i) the General Partner, or such Affiliate causing it
to do so, is entitled, to the fullest extent permitted by law, to make such determination or to take or decline to take such action free of any duty (including any fiduciary duty) or obligation whatsoever to the Partnership, any Limited Partner, any
other Person who acquires an interest in a Partnership Interest or any other Person who is bound by this Agreement, (ii) the General Partner, or such Affiliate causing it to do so, shall not, to the fullest extent permitted by law, be required
to act in good faith or pursuant to any other standard imposed by this Agreement, any Group Member Agreement, any other agreement contemplated hereby or otherwise or under the Delaware Act or any other law, rule or regulation or at equity and
(iii) the Person or Persons making such determination or taking or declining to take such action shall be permitted to do so in their sole and absolute discretion. By way of illustration and not of limitation, whenever the phrases “at its
option,” “its sole and absolute discretion” or some variation of those phrases, are used in this Agreement, they indicate that the General Partner is acting in its individual capacity. For the avoidance of doubt, whenever the General
Partner votes or transfers its Partnership Interests, or refrains from voting or transferring its Partnership Interests, it shall be acting in its individual capacity.
(d) The General Partner’s organizational documents may provide that determinations to take or decline to take any action in its individual, rather than representative, capacity may or shall be
determined by its members, if the General Partner is a limited liability company, stockholders, if the General Partner is a corporation, or the members or stockholders of the General Partner’s general partner, if the General Partner is a
general or limited partnership.
(e) Notwithstanding anything to the contrary in this Agreement, the General Partner and its
Affiliates shall have no duty or obligation, express or implied, to (i) sell or otherwise dispose of, or approve the sale or disposition of, any asset of the Partnership Group other than in the ordinary course of business or (ii) permit
any Group Member to use any facilities or assets of the General Partner and its Affiliates, except as may be provided in contracts entered into from time to time specifically dealing with such use. Any determination by either the General Partner or
any of its Affiliates to enter into such contracts shall, in each case, be at its option.
(f) The Limited Partners, any other
Person who acquires an interest in a Partnership Interest and any other Person bound by this Agreement hereby authorize the General Partner, on behalf of the Partnership as a partner or member of a Group Member, to approve actions by the general
partner or managing member of such Group Member similar to those actions permitted to be taken by the General Partner pursuant to this
Section 7.9
.
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(g) For the avoidance of doubt, whenever the Board of Directors, any member of the Board of
Directors, any committee of the Board of Directors (including the Conflicts Committee) and any member of any such committee, the officers of the General Partner or any Affiliates of the General Partner (including any Person making a determination or
acting for or on behalf of such Affiliate of the General Partner) make a determination on behalf of or recommendation to the General Partner, or cause the General Partner to take or omit to take any action, whether in the General Partner’s
capacity as the General Partner or in its individual capacity, the standards of care applicable to the General Partner shall apply to such Persons, and such Persons shall be entitled to all benefits and rights (but not the obligations) of the
General Partner hereunder, including eliminations, waivers and modifications of duties (including any fiduciary duties) to the Partnership, any of its Partners or any other Person who acquires an interest in a Partnership Interest or any other
Person bound by this Agreement, and the protections and presumptions set forth in this Agreement.
Section 7.10
Other Matters Concerning the General Partner and Other Indemnitees
.
(a) The General Partner and any
other Indemnitee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture or other paper or document believed by it
to be genuine and to have been signed or presented by the proper party or parties.
(b) The General Partner and any other
Indemnitee may consult with legal counsel, accountants, appraisers, management consultants, investment bankers and other consultants and advisors selected by it, and any act taken or omitted to be taken in reliance upon the advice or opinion
(including an Opinion of Counsel) of such Persons as to matters that the General Partner or such Indemnitee, respectively, reasonably believes to be within such Person’s professional or expert competence shall be conclusively presumed to have
been taken or omitted to be taken in good faith and in accordance with such advice or opinion.
(c) The General Partner shall
have the right, in respect of any of its powers or obligations hereunder, to act through any of its duly authorized officers, a duly appointed attorney or attorneys-in-fact or the duly authorized officers of the Partnership or any Group Member.
Section 7.11
Purchase or Sale of Partnership Interests
.
The General Partner may cause the
Partnership to purchase or otherwise acquire Partnership Interests or Derivative Partnership Interests;
provided
that, except as permitted pursuant to
Section 4.10
or approved by the Conflicts Committee, the General Partner may
not cause any Group Member to purchase Subordinated Units during the Subordination Period. As long as Partnership Interests are held by any Group Member, such Partnership Interests shall not be considered Outstanding for any purpose, except as
otherwise provided herein. The General Partner or any Affiliate of the General Partner may also purchase or otherwise acquire and sell or otherwise dispose of Partnership Interests for its own account, subject to the provisions of
Article IV
and
Article X
.
Section 7.12
Registration Rights of the General Partner and Its
Affiliates
.
(a)
Demand Registration
. Upon receipt of a Notice from any Holder at any time after
the 180th day after the Closing Date, the Partnership shall file with the Commission as promptly as reasonably practicable a registration statement under the Securities Act (each, a “
Registration Statement
”)
providing for the resale of the Registrable Securities identified in such Notice, which may, at the option of the Holder giving such Notice, be a Registration Statement that provides for the resale of the Registrable Securities from time to time
pursuant to Rule 415 under the Securities Act. The Partnership shall use commercially reasonable efforts to cause such Registration Statement to become effective as soon as reasonably practicable after the initial filing of the Registration
Statement and to remain effective and available for the resale of the Registrable Securities by the Selling Holders named therein until the earlier of (i) six months following such Registration Statement’s effective date and (ii) the
date on which all Registrable Securities covered by such Registration Statement have been sold. In the event one or more Holders request in a Notice to dispose of a number of Registrable Securities that such Holder
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or Holders reasonably anticipates will result in gross proceeds of at least $30 million in the aggregate pursuant to a Registration Statement in an Underwritten Offering, the Partnership shall
retain underwriters that are reasonably acceptable to such Selling Holders in order to permit such Selling Holders to effect such disposition through an Underwritten Offering;
provided
,
however
, that the Partnership shall have the
exclusive right to select the bookrunning managers. The Partnership and such Selling Holders shall enter into an underwriting agreement in customary form that is reasonably acceptable to the Partnership and take all reasonable actions as are
requested by the managing underwriters to facilitate the Underwritten Offering and sale of Registrable Securities therein. No Holder may participate in the Underwritten Offering unless it agrees to sell its Registrable Securities covered by the
Registration Statement on the terms and conditions of the underwriting agreement and completes and delivers all necessary documents and information reasonably required under the terms of such underwriting agreement. In the event that the managing
underwriter of such Underwritten Offering advises the Partnership and the Holder in writing that in its opinion the inclusion of all or some Registrable Securities would adversely and materially affect the timing or success of the Underwritten
Offering, the amount of Registrable Securities that each Selling Holder requested be included in such Underwritten Offering shall be reduced on a Pro Rata basis to the aggregate amount that the managing underwriter deems will not have such material
and adverse effect. Any Holder may withdraw from such Underwritten Offering by notice to the Partnership and the managing underwriter;
provided
, such notice is delivered prior to the launch of such Underwritten Offering.
(b)
Piggyback Registration
. At any time after the 180th day after the Closing Date, if the Partnership shall propose to
file a Registration Statement (other than pursuant to a demand made pursuant to
Section 7.12(a))
for an offering of Partnership Interests for cash (other than an offering relating solely to an employee benefit plan, an offering relating
to a transaction on Form S-4 or an offering on any registration statement that does not permit secondary sales), the Partnership shall notify all Holders of such proposal at least five Business Days before the proposed filing date. The Partnership
shall use commercially reasonable efforts to include such number of Registrable Securities held by any Holder in such Registration Statement as each Holder shall request in a Notice received by the Partnership within two Business Days of such
Holder’s receipt of the notice from the Partnership. If the Registration Statement for which the Partnership gives notice under this
Section 7.12(b)
is for an Underwritten Offering, then any Holder’s ability to include its
desired amount of Registrable Securities in such Registration Statement shall be conditioned on such Holder’s inclusion of all such Registrable Securities in the Underwritten Offering;
provided
, that, in the event that the managing
underwriter of such Underwritten Offering advises the Partnership and the Holder in writing that in its opinion the inclusion of all or some Registrable Securities would adversely and materially affect the timing or success of the Underwritten
Offering, the amount of Registrable Securities that each Selling Holder requested be included in such Underwritten Offering shall be reduced on a Pro Rata basis to the aggregate amount that the managing underwriter deems will not have such
material and adverse effect. In connection with any such Underwritten Offering, the Partnership and the Selling Holders involved shall enter into an underwriting agreement in customary form that is reasonably acceptable to the Partnership and
take all reasonable actions as are requested by the managing underwriters to facilitate the Underwritten Offering and sale of Registrable Securities therein. No Holder may participate in the Underwritten Offering unless it agrees to sell its
Registrable Securities covered by the Registration Statement on the terms and conditions of the underwriting agreement and completes and delivers all necessary documents and information reasonably required under the terms of such underwriting
agreement. Any Holder may withdraw from such Underwritten Offering by notice to the Partnership and the managing underwriter;
provided
, such notice is delivered prior to the launch of such Underwritten Offering. The Partnership shall have the
right to terminate or withdraw any Registration Statement or Underwritten Offering initiated by it under this
Section 7.12(b)
prior to the effective date of the Registration Statement or the pricing date of the Underwritten Offering, as
applicable.
(c)
Sale Procedures
. In connection with its obligations under this
Section 7.12
, the
Partnership shall:
(i) furnish to each Selling Holder (A) as far in advance as reasonably practicable
before filing a Registration Statement or any supplement or amendment thereto, upon request, copies of reasonably complete drafts of all such documents proposed to be filed (including exhibits and each document incorporated by reference therein to
the extent then required by the rules and regulations of the Commission), and provide each such Selling Holder the opportunity to object to any information pertaining
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to such Selling Holder and its plan of distribution that is contained therein and make the corrections reasonably requested by such Selling Holder with respect to such information prior to filing
a Registration Statement or supplement or amendment thereto and (B) such number of copies of such Registration Statement and the prospectus included therein and any supplements and amendments thereto as such Persons may reasonably request in
order to facilitate the public sale or other disposition of the Registrable Securities covered by such Registration Statement;
provided
,
however
, that the Partnership will not have any obligation to provide any document pursuant to
clause (B)
hereof that is available on the Commission’s website;
(ii) if applicable, use its
commercially reasonable efforts to register or qualify the Registrable Securities covered by a Registration Statement under the securities or blue sky laws of such jurisdictions as the Selling Holders or, in the case of an Underwritten Offering, the
managing underwriter, shall reasonably request;
provided
,
however
, that the Partnership shall not be required to qualify generally to transact business in any jurisdiction where it is not then required to so qualify or to take any
action that would subject it to general service of process in any jurisdiction where it is not then so subject;
(iii) promptly notify each Selling Holder and each underwriter, at any time when a prospectus is required to be delivered
under the Securities Act, of (A) the filing of a Registration Statement or any prospectus or prospectus supplement to be used in connection therewith, or any amendment or supplement thereto, and, with respect to such Registration Statement or
any post-effective amendment thereto, when the same has become effective and (B) any written comments from the Commission with respect to any Registration Statement or any document incorporated by reference therein and any written request by
the Commission for amendments or supplements to a Registration Statement or any prospectus or prospectus supplement thereto;
(iv) immediately notify each Selling Holder and each underwriter, at any time when a prospectus is required to be delivered under the Securities Act, of (A) the occurrence of any event or existence
of any fact (but not a description of such event or fact) as a result of which the prospectus or prospectus supplement contained in a Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements therein not misleading (in the case of the prospectus contained therein, in the light of the circumstances under which a statement is made), (B) the issuance or
threat of issuance by the Commission of any stop order suspending the effectiveness of a Registration Statement, or the initiation of any proceedings for that purpose or (C) the receipt by the Partnership of any notification with respect to the
suspension of the qualification of any Registrable Securities for sale under the applicable securities or blue sky laws of any jurisdiction. Following the provision of such notice, subject to
Section 7.12(f),
the Partnership agrees to,
as promptly as practicable, amend or supplement the prospectus or prospectus supplement or take other appropriate action so that the prospectus or prospectus supplement does not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing and to take such other reasonable action as is necessary to remove a stop order, suspension,
threat thereof or proceedings related thereto; and
(v) enter into customary agreements and take such other
actions as are reasonably requested by the Selling Holders or the underwriters, if any, in order to expedite or facilitate the disposition of the Registrable Securities, including the provision of comfort letters and legal opinions as are customary
in such securities offerings.
(d)
Suspension
. Each Selling Holder, upon receipt of notice from the Partnership of the
happening of any event of the kind described in
Section 7.12(c)(iv)
, shall forthwith discontinue disposition of the Registrable Securities by means of a prospectus or prospectus supplement until such Selling Holder’s receipt of the
copies of the supplemented or amended prospectus contemplated by such subsection, or until it is advised in writing by the Partnership that the use of the prospectus may be resumed, and receipt of copies of any additional or supplemental filings
incorporated by reference in the prospectus.
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(e)
Expenses
. Except as set forth in an underwriting agreement for the applicable
Underwritten Offering or as otherwise agreed between a Selling Holder and the Partnership, all costs and expenses of a Registration Statement filed or an Underwritten Offering that includes Registrable Securities pursuant to this
Section 7.12
(other than underwriting discounts and commissions on Registrable Securities and fees and expenses of counsel and advisors to Selling Holders) shall be paid by the Partnership.
(f)
Delay Right
. Notwithstanding anything to the contrary herein, if the General Partner determines that the Partnership’s
compliance with its obligations in this
Section 7.12
would be detrimental to the Partnership because such registration would (x) materially interfere with a significant acquisition, reorganization or other similar transaction
involving the Partnership, (y) require premature disclosure of material information that the Partnership has a bona fide business purpose for preserving as confidential or (z) render the Partnership unable to comply with requirements under
applicable securities laws, then the Partnership shall have the right to postpone compliance with such obligations for a period of not more than six months;
provided
,
however
, that such right may not be exercised more than twice in any
24 month period.
(g)
Indemnification
.
(i) In addition to and not in limitation of the Partnership’s obligation under
Section 7.7
, the
Partnership shall, to the fullest extent permitted by law, but subject to the limitations expressly provided in this Agreement, indemnify and hold harmless each Selling Holder, its officers, directors and each Person who controls the Holder (within
the meaning of the Securities Act) and any agent thereof (collectively, “
Indemnified Persons
”) from and against any and all losses, claims, damages, liabilities, joint or several, expenses (including legal fees and expenses),
judgments, fines, penalties, interest, settlements or other amounts arising from any and all claims, demands, actions, suits or proceedings, whether civil, criminal, administrative or investigative, in which any Indemnified Person may be involved,
or is threatened to be involved, as a party or otherwise, under the Securities Act or otherwise (hereinafter referred to in this
Section 7.12(g)
as a “
claim
” and in the plural as “
claims
”)
based upon, arising out of or resulting from any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement, preliminary prospectus, final prospectus or issuer free writing prospectus under which any
Registrable Securities were registered or sold by such Selling Holder under the Securities Act, or arising out of, based upon or resulting from the omission or alleged omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading;
provided
,
however
, that the Partnership shall not be liable to any Indemnified Person to the extent that any such claim arises out of, is based upon or results from an untrue
statement or alleged untrue statement or omission or alleged omission made in such Registration Statement, preliminary prospectus, final prospectus or issuer free writing prospectus in reliance upon and in conformity with written information
furnished to the Partnership by or on behalf of such Indemnified Person specifically for use in the preparation thereof.
(ii) Each Selling Holder shall, to the fullest extent permitted by law, indemnify and hold harmless the Partnership, the General Partner, the General Partner’s officers and directors and each Person
who controls the Partnership or the General Partner (within the meaning of the Securities Act) and any agent thereof to the same extent as the foregoing indemnity from the Partnership to the Selling Holders, but only with respect to information
regarding such Selling Holder furnished in writing by or on behalf of such Selling Holder expressly for inclusion in a Registration Statement, preliminary prospectus, final prospectus or free writing prospectus relating to the Registrable Securities
held by such Selling Holder.
(iii) The provisions of this
Section 7.12(g)
shall be in addition to
any other rights to indemnification or contribution that a Person entitled to indemnification under this
Section 7.12(g)
may have pursuant to law, equity, contract or otherwise.
(h)
Specific Performance
. Damages in the event of breach of
Section 7.12
by a party hereto may be difficult, if
not impossible, to ascertain, and it is therefore agreed that each party, in addition to and without limiting any other remedy or right it may have, will have the right to seek an injunction or other equitable relief in any court of competent
jurisdiction, enjoining any such breach, and enforcing specifically the terms and provisions hereof,
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and each of the parties hereto hereby waives, to the fullest extent permitted by law, any and all defenses it may have on the ground of lack of jurisdiction or competence of the court to
grant such an injunction or other equitable relief. The existence of this right will not preclude any such party from pursuing any other rights and remedies at law or in equity that such party may have.
Section 7.13
Reliance by Third Parties
.
Notwithstanding anything to the contrary in this Agreement, any
Person dealing with the Partnership shall be entitled to assume that the General Partner and any officer or representative of the General Partner authorized by the General Partner to act on behalf of and in the name of the Partnership has full power
and authority to encumber, sell or otherwise use in any manner any and all assets of the Partnership and to enter into any authorized contracts on behalf of the Partnership, and such Person shall be entitled to deal with the General Partner or any
such officer or representative as if it were the Partnership’s sole party in interest, both legally and beneficially. Each Limited Partner hereby waives, to the fullest extent permitted by law, any and all defenses or other remedies that may be
available against such Person to contest, negate or disaffirm any action of the General Partner or any such officer or representative in connection with any such dealing. In no event shall any Person dealing with the General Partner or any such
officer or representative be obligated to ascertain that the terms of this Agreement have been complied with or to inquire into the necessity or expedience of any act or action of the General Partner or any such officer or representative. Each and
every certificate, document or other instrument executed on behalf of the Partnership by the General Partner or such officer or representative shall be conclusive evidence in favor of any and every Person relying thereon or claiming thereunder that
(a) at the time of the execution and delivery of such certificate, document or instrument, this Agreement was in full force and effect, (b) the Person executing and delivering such certificate, document or instrument was duly authorized
and empowered to do so for and on behalf of the Partnership and (c) such certificate, document or instrument was duly executed and delivered in accordance with the terms and provisions of this Agreement and is binding upon the Partnership.
Section 7.14
Replacement of Fiduciary Duties
.
Notwithstanding any other provision of this
Agreement, to the extent that, at law or in equity, the General Partner or any other Indemnitee would have duties (including fiduciary duties) to the Partnership, to another Partner, to any Person who acquires an interest in a Partnership Interest
or to any other Person bound by this Agreement, all such duties (including fiduciary duties) are hereby eliminated, to the fullest extent permitted by law, and replaced with the duties or standards expressly set forth herein. The elimination of
duties (including fiduciary duties) to the Partnership, each of the Partners, each other Person who acquires an interest in a Partnership Interest and each other Person bound by this Agreement and replacement thereof with the duties or standards
expressly set forth herein are approved by the Partnership, each of the Partners, each other Person who acquires an interest in a Partnership Interest and each other Person bound by this Agreement.
ARTICLE VIII
BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 8.1
Records and
Accounting
.
The General Partner shall keep or cause to be kept at the principal office of the Partnership appropriate books and records with respect to the Partnership’s business, including all books and records necessary
to provide to the Limited Partners any information required to be provided pursuant to
Section 3.3(a)
. Any books and records maintained by or on behalf of the Partnership in the regular course of its business, including the Partnership
Register, books of account and records of Partnership proceedings, may be kept on, or be in the form of, computer disks, hard drives, punch cards, magnetic tape, photographs, micrographics or any other information storage device;
provided
,
that the books and records so maintained are convertible into clearly legible written form within a reasonable period of time. The books of the Partnership shall be maintained, for financial reporting purposes, on an accrual basis in accordance with
U.S. GAAP. The Partnership shall not be required to keep books maintained on a cash basis, and the General Partner shall be permitted to calculate cash-based measures, including Operating Surplus and Adjusted Operating Surplus, by making such
adjustments to its accrual basis books to account for non-cash items and other adjustments as the General Partner determines to be necessary or appropriate.
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Section 8.2
Fiscal Year
.
The fiscal year of the Partnership
shall be a fiscal year ending December 31.
Section 8.3
Reports
.
(a) Whether or not the Partnership is subject to the requirement to file reports with the Commission, as soon as practicable, but in no
event later than 90 days after the close of each fiscal year of the Partnership (or such shorter period as required by the Commission), the General Partner shall cause to be mailed or made available, by any reasonable means (including by posting on
or making accessible through the Partnership’s or the Commission’s website), to each Record Holder of a Unit as of a date selected by the General Partner, an annual report containing financial statements of the Partnership for such fiscal
year of the Partnership, presented in accordance with U.S. GAAP, including a balance sheet and statements of operations, Partnership equity and cash flows, such statements to be audited by a firm of independent public accountants selected by the
General Partner, and such other information as may be required by applicable law, regulation or rule of the Commission or any National Securities Exchange on which the Units are listed or admitted to trading, or as the General Partner determines to
be necessary or appropriate.
(b) Whether or not the Partnership is subject to the requirement to file reports with the
Commission, as soon as practicable, but in no event later than 45 days after the close of each Quarter (or such shorter period as required by the Commission) except the last Quarter of each fiscal year, the General Partner shall cause to be mailed
or made available, by any reasonable means (including by posting on or making accessible through the Partnership’s or the Commission’s website), to each Record Holder of a Unit, as of a date selected by the General Partner, a report
containing unaudited financial statements of the Partnership and such other information as may be required by applicable law, regulation or rule of the Commission or any National Securities Exchange on which the Units are listed or admitted to
trading, or as the General Partner determines to be necessary or appropriate.
ARTICLE IX
TAX MATTERS
Section 9.1
Tax Returns and Information
.
The Partnership shall timely file all returns of the Partnership that are required for federal, state and local income tax
purposes on the basis of the accrual method and the taxable period or year that it is required by law to adopt, from time to time, as determined by the General Partner. In the event the Partnership is required to use a taxable period other than a
year ending on December 31, the General Partner shall use reasonable efforts to change the taxable period of the Partnership to a year ending on December 31. The tax information reasonably required by Record Holders for federal, state and
local income tax reporting purposes with respect to a taxable period shall be furnished to them within 90 days of the close of the calendar year in which the Partnership’s taxable period ends. The classification, realization and recognition of
income, gain, losses and deductions and other items shall be on the accrual method of accounting for U.S. federal income tax purposes.
Section 9.2
Tax Elections
.
(a) The Partnership shall
make the election under Section 754 of the Code in accordance with applicable regulations thereunder, subject to the reservation of the right to seek to revoke any such election upon the General Partner’s determination that such revocation
is in the best interests of the Limited Partners. Notwithstanding any other provision herein contained, for the purposes of computing the adjustments under Section 743(b) of the Code, the General Partner shall be authorized (but not required)
to adopt a convention whereby the price paid by a transferee of a Limited Partner Interest will be deemed to be the lowest quoted closing price of the Limited Partner Interests on any National Securities Exchange on which such Limited Partner
Interests are listed or admitted to trading during the calendar month in which such transfer is deemed to occur pursuant to
Section 6.2(f)
without regard to the actual price paid by such transferee.
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(b) Except as otherwise provided herein, the General Partner shall determine whether the
Partnership should make any other elections permitted by the Code.
Section 9.3
Tax
Controversies
.
Subject to the provisions hereof, the General Partner is designated as the “tax matters partner” (as defined in Section 6231(a)(7) of the Code) (the “
Tax Matters
Partner
”) and is authorized and required to represent the Partnership (at the Partnership’s expense) in connection with all examinations of the Partnership’s affairs by tax authorities, including resulting
administrative and judicial proceedings, and to expend Partnership funds for professional services and costs associated therewith. Each Partner agrees to cooperate with the Tax Matters Partner and to do or refrain from doing any or all things
reasonably required by the Tax Matters Partner to conduct such proceedings. Each Partner agrees that notice of or updates regarding tax controversies shall be deemed conclusively to have been given or made by the Tax Matters Partner if the
Partnership has either (a) filed the information for which notice is required with the Commission via its Electronic Data Gathering, Analysis and Retrieval system and such information is publicly available on such system or (b) made the
information for which notice is required available on any publicly available website maintained by the Partnership, whether or
not such Partner remains a Partner in the Partnership at the time such information is made publicly available.
With respect to tax returns filed for taxable years beginning on or after December 31, 2017, the General Partner (or its
designee) will be designated as the “partnership representative” in accordance with the rules prescribed pursuant to Section 6223 of the Code and shall have the sole authority to act on behalf of the Partnership in connection with all
examinations of the Partnership’s affairs by tax authorities, including resulting administrative and judicial proceedings, and to expend Partnership funds for professional services and costs associated therewith. The General Partner (or its
designee) shall exercise, in its sole discretion, any and all authority of the “partnership representative” under the Code, including, without limitation, (i) binding the Partnership and its Partners with respect to tax matters and (ii)
determining whether to make any available election under Section 6226 of the Code. The General Partner shall amend the provisions of this Agreement as appropriate to reflect the proposal or promulgation of Treasury Regulations implementing the
partnership audit, assessment and collection rules adopted by the Bipartisan Budget Act of 2015, including any amendments to those rules.
Section 9.4
Withholding
.
Notwithstanding any other
provision of this Agreement, the General Partner is authorized to take any action that may be required to cause the Partnership and other Group Members to comply with any withholding requirements established under the Code or any other federal,
state or local law including pursuant to Sections 1441, 1442, 1445 and 1446 of the Code, or established by any foreign law. To the extent that the Partnership is required or elects to withhold and pay over to any taxing authority any amount
resulting from the allocation or distribution of income or from a distribution to any Partner (including by reason of Section 1446 of the Code), the General Partner may treat the amount withheld as a distribution of cash pursuant to
Section 6.3
or
Section 12.4(c)
in the amount of such withholding from such Partner.
ARTICLE X
ADMISSION OF PARTNERS
Section 10.1
Admission of Limited Partners
.
(a) Upon
the issuance by the Partnership of Common Units, Subordinated Units and Incentive Distribution Rights to NBL Midstream and the IPO Underwriters in connection with the Initial Public Offering as described in
Article V
, such Persons shall, by
acceptance of such Limited Partner Interests, and upon becoming the Record Holders of such Limited Partner Interests, continue as, or be admitted to the Partnership as Initial Limited Partners in respect of the Common Units, Subordinated Units or
Incentive Distribution Rights issued to them and be bound by this Agreement, all with or without execution of this Agreement by such Persons.
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(b) By acceptance of any Limited Partner Interests transferred in accordance with
Article
IV
or acceptance of any Limited Partner Interests issued pursuant to
Article V
or pursuant to a merger, consolidation or conversion pursuant to
Article XIV
, each transferee of, or other such Person acquiring, a Limited Partner
Interest (including any nominee, agent or representative acquiring such Limited Partner Interests for the account of another Person or Group, who shall be subject to
Section 10.1(c)
below) (i) except as provided in
Section
4.9
, shall be admitted to the Partnership as a Limited Partner with respect to the Limited Partner Interests so transferred or issued to such Person when such Person becomes the Record Holder of the Limited Partner Interests so transferred or
acquired, (ii) shall become bound, and shall be deemed to have agreed to be bound, by the terms of this Agreement, (iii) shall be deemed to represent that the transferee or acquirer has the capacity, power and authority to enter into this
Agreement, and (iv) shall be deemed to make any consents, acknowledgements or waivers contained in this Agreement, all with or without execution of this Agreement by such Person. The transfer of any Limited Partner Interests and the admission
of any new Limited Partner shall not constitute an amendment to this Agreement. A Person may become a Limited Partner without the consent or approval of any of the Partners. A Person may not become a Limited Partner without acquiring a Limited
Partner Interest and becoming the Record Holder of such Limited Partner Interest. The rights and obligations of a Person who is an Ineligible Holder shall be determined in accordance with
Section 4.9
.
(c) With respect to any Limited Partner that holds Units representing Limited Partner Interests for another Person’s account (such
as a broker, dealer, bank, trust company or clearing corporation, or an agent of any of the foregoing), in whose name such Units are registered, such Limited Partner shall, in exercising the rights of a Limited Partner in respect of such Units on
any matter, and unless the arrangement between such Persons provides otherwise, take all action as a Limited Partner by virtue of being the Record Holder of such Units at the direction of the Person who is the beneficial owner, and the Partnership
shall be entitled to assume such Limited Partner is so acting without further inquiry.
(d) The name and mailing address of
each Record Holder shall be listed in the Partnership Register maintained for such purpose by the Partnership or the Transfer Agent. The General Partner shall update the Partnership Register from time to time as necessary to reflect accurately the
information therein (or shall cause the Transfer Agent to do so, as applicable).
(e) Any transfer of a Limited Partner
Interest shall not entitle the transferee to share in the profits and losses, to receive distributions, to receive allocations of income, gain, loss, deduction or credit or any similar item or to any other rights to which the transferor was entitled
until the transferee becomes a Limited Partner pursuant to
Section 10.1(b)
.
Section 10.2
Admission of
Successor General Partner
.
A successor General Partner approved pursuant to
Section 11.1
or
Section 11.2
or the transferee of or successor to all of the General Partner Interest pursuant to
Section 4.6
who is proposed to be admitted as a successor General Partner shall be admitted to the Partnership as the General Partner, effective immediately prior to (a) the withdrawal or removal of the predecessor or transferring
General Partner pursuant to
Section 11.1
or
Section 11.2
or (b) the transfer of the General Partner Interest pursuant to
Section 4.6
;
provided
,
however
, that no such successor shall be admitted
to the Partnership until compliance with the terms of
Section 4.6
has occurred and such successor has executed and delivered such other documents or instruments as may be required to effect such admission. Any such successor is hereby
authorized to and shall, subject to the terms hereof, carry on the business of the members of the Partnership Group without dissolution.
Section 10.3
Amendment of Agreement and Certificate of Limited Partnership
.
To effect the admission to the Partnership of any Partner, the General Partner shall take all steps
necessary or appropriate under the Delaware Act to amend the Partnership Register to reflect such admission and, if necessary, to prepare as soon as practicable an amendment to this Agreement and, if required by law, the General Partner shall
prepare and file an amendment to the Certificate of Limited Partnership.
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ARTICLE XI
WITHDRAWAL OR REMOVAL OF PARTNERS
Section 11.1
Withdrawal of
the General Partner
.
(a) The General Partner shall be deemed to have withdrawn from the
Partnership upon the occurrence of any one of the following events (each such event herein referred to as an “
Event of Withdrawal
”):
(i) The General Partner voluntarily withdraws from the Partnership by giving written notice to the other Partners;
(ii) The General Partner transfers all of its General Partner Interest pursuant to
Section 4.6
;
(iii) The General Partner is removed pursuant to
Section 11.2
;
(iv) The General Partner (A) makes a general assignment for the benefit of creditors; (B) files a voluntary
bankruptcy petition for relief under Chapter 7 of the United States Bankruptcy Code; (C) files a petition or answer seeking for itself a liquidation, dissolution or similar relief (but not a reorganization) under any law; (D) files an
answer or other pleading admitting or failing to contest the material allegations of a petition filed against the General Partner in a proceeding of the type described in
clauses (A)
through
(C)
of this
Section 11.1(a)(iv)
or (E) seeks, consents to or acquiesces in the appointment of a trustee (but not a debtor-in-possession), receiver or liquidator of the General Partner or of all or any substantial part of its properties;
(v) A final and non-appealable order of relief under Chapter 7 of the United States Bankruptcy Code is entered
by a court with appropriate jurisdiction pursuant to a voluntary or involuntary petition by or against the General Partner; or
(vi) (A) if the General Partner is a corporation, a certificate of dissolution or its equivalent is filed for the General Partner, or 90 days expire after the date of notice to the General Partner of
revocation of its charter without a reinstatement of its charter, under the laws of its state of incorporation; (B) if the General Partner is a partnership or a limited liability company, the dissolution and commencement of winding up of the
General Partner; (C) if the General Partner is acting in such capacity by virtue of being a trustee of a trust, the termination of the trust; (D) if the General Partner is a natural person, his death or adjudication of incompetency and
(E) otherwise upon the termination of the General Partner.
If an Event of Withdrawal specified in
Section 11.1(a)(iv)
,
(v)
or
(vi)(A)
,
(vi)(B)
,
(vi)(C)
or
(vi)(E)
occurs, the withdrawing General Partner shall give notice to the Limited Partners within 30 days after such occurrence. The Partners hereby agree that only the
Events of Withdrawal described in this
Section 11.1
shall result in the withdrawal of the General Partner from the Partnership.
(b) Withdrawal of the General Partner from the Partnership upon the occurrence of an Event of Withdrawal shall not constitute a breach of this Agreement under the following circumstances:
(i) at any time during the period beginning on the Closing Date and ending at 12:00 midnight, Eastern Time, on the Tenth Anniversary, the General Partner voluntarily withdraws by giving at least 90 days’ advance notice of its intention to
withdraw to the Limited Partners; provided, that prior to the effective date of such withdrawal, the withdrawal is approved by
Unitholders holding at least a majority of the Outstanding Common Units (excluding Common Units owned
by
the General Partner and its Affiliates) and the General Partner delivers to the Partnership an Opinion of Counsel (“
Withdrawal Opinion of Counsel
”) that such withdrawal (following the selection of the
successor General Partner) would not result in the loss of the limited liability under the Delaware Act of any Limited Partner or cause any Group Member to be treated as an association taxable as a corporation or otherwise to be taxed as an entity
for U.S. federal income tax purposes (to the extent not already so treated or taxed); (ii) at any time after 12:00 midnight, Eastern Time, on the Tenth Anniversary, the General Partner voluntarily withdraws by giving at least 90 days’
advance notice to the Limited Partners, such withdrawal to take effect on the date specified in such
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notice; (iii) at any time that the General Partner ceases to be the General Partner pursuant to
Section 11.1(a)(ii)
or is removed pursuant to
Section 11.2
or
(iv) notwithstanding
clause (i)
of this sentence, at any time that the General Partner voluntarily withdraws by giving at least 90 days’ advance notice of its intention to withdraw to the Limited Partners, such withdrawal to
take effect on the date specified in the notice, if at the time such notice is given one Person and its Affiliates (other than the General Partner and its Affiliates) own beneficially or of record or control at least 50% of the Outstanding Units.
The withdrawal of the General Partner from the Partnership upon the occurrence of an Event of Withdrawal shall also constitute the withdrawal of the General Partner as general partner or managing member, if any, to the extent applicable, of the
other Group Members. If the General Partner gives a notice of withdrawal pursuant to
Section 11.1(a)(i)
, the holders of a Unit Majority, may, prior to the effective date of such withdrawal, elect a successor General Partner. The Person
so elected as successor General Partner shall automatically become the successor general partner or managing member, to the
extent applicable, of the other Group Members of which the General Partner is a general partner or a managing
member. If, prior to the effective date of the General Partner’s withdrawal, a successor is not elected by the Unitholders as provided herein or the Partnership does not receive a Withdrawal Opinion of Counsel, the Partnership shall be
dissolved in accordance with
Section 12.1
unless the business of the Partnership is continued pursuant to
Section 12.2
. Any successor General Partner elected in accordance with the terms of this
Section 11.1
shall
be subject to the provisions of
Section 10.2
.
Section 11.2
Removal of
the General Partner
.
The General Partner may not be removed unless such removal is both (i) for Cause and (ii) approved by the Unitholders holding at least 66
2
/
3
% of the Outstanding Units (including Units held by the General Partner and its Affiliates) voting as a single class. Any such action by such holders for removal of the General Partner must also provide
for the election of a successor General Partner by the Unitholders holding a majority of the Outstanding Common Units, voting as a separate class, and Unitholders holding a majority of the Outstanding Subordinated Units (if any Subordinated Units
are then Outstanding), voting as a separate class, including, in each case, Units held by the General Partner and its Affiliates. Such removal shall be effective immediately following the admission of a successor General Partner pursuant to
Section 10.2
. The removal of the General Partner shall also automatically constitute the removal of the General Partner as general partner or managing member, to the extent applicable, of the other Group Members of which the General
Partner is a general partner or a managing member. If a Person is elected as a successor General Partner in accordance with the terms of this
Section 11.2
, such Person shall, upon admission pursuant to
Section 10.2
,
automatically become a successor general partner or managing member, to the extent applicable, of the other Group Members of which the General Partner is a general partner or a managing member. The right of the holders of Outstanding Units to remove
the General Partner shall not exist or be exercised unless the Partnership has received an opinion opining as to the matters covered by a Withdrawal Opinion of Counsel. Any successor General Partner elected in accordance with the terms of this
Section 11.2
shall be subject to the provisions of
Section 10.2
.
Section 11.3
Interest of Departing General Partner and Successor General Partner
.
(a) In the event
of withdrawal of the General Partner under circumstances where such withdrawal does not violate this Agreement, if a successor General Partner is elected in accordance with the terms of
Section 11.1
, then the Departing General Partner
shall have the option, exercisable prior to the effective date of the withdrawal of such Departing General Partner, to require such successor General Partner to purchase such Departing General
Partner’s or its Affiliates’
economic general partner interests (or equivalent interests), if
any, in the other Group Members and all of its or its Affiliates’ Incentive Distribution Rights (collectively, the “
Combined Interest
”) in
exchange for an amount in cash equal to the fair market value of such Combined Interest, such amount to be determined and payable as of the effective date of the Departing General Partner’s withdrawal. If the General Partner is removed by the
Unitholders pursuant to
Section 11.2
or if the General Partner withdraws under circumstances where such withdrawal violates this Agreement and (i) if a successor General Partner is elected in accordance with the terms of
Section 11.1
or
Section 11.2
, as applicable, or (ii) if the business of the Partnership is continued pursuant to
Section 12.2
and the successor General Partner is not the former General Partner, then
such successor General Partner shall have the option, exercisable prior to the effective date of the withdrawal or
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removal of such Departing General Partner (or, in the event the business of the Partnership is continued, prior to the date the business of the Partnership is continued), to purchase the
Combined Interest for such fair market value of such Combined Interest. In any event described in the preceding sentences of this
Section 11.3(a)
the Departing General Partner shall be entitled to receive all reimbursements due such
Departing General Partner pursuant to
Section 7.4
, including any employee-related liabilities (including severance liabilities), incurred in connection with the termination of any employees employed by the Departing General Partner or
its Affiliates (other than any Group Member) for the benefit of the Partnership or the other Group Members.
For purposes of
this
Section 11.3(a)
, the fair market value of the Combined Interest shall be determined by agreement between the Departing General Partner and its successor or, failing agreement within 30 days after the effective date of such Departing
General Partner’s withdrawal or removal, by an independent investment banking firm or other independent expert selected by the Departing General Partner and its successor, which, in turn, may rely on other experts, and the determination of
which shall be conclusive as to such matter. If such parties cannot agree upon one independent investment banking firm or other independent expert within 45 days after the effective date of such withdrawal or removal, then the Departing General
Partner shall designate an independent investment banking firm or other independent expert, the Departing General Partner’s successor shall designate an independent investment banking firm or other independent expert, and such firms or experts
shall mutually select a third independent investment banking firm or independent expert, which third independent investment banking firm or other independent expert shall determine the fair market value of the Combined Interest. In making its
determination, such third independent investment banking firm or other independent expert may consider the then current trading price of Units on any National Securities Exchange on which Units are then listed or admitted to trading, the value of
the Partnership’s assets, the rights and obligations of the Departing General Partner, the value of the Incentive Distribution Rights and other factors it may deem relevant.
(b) If the Combined Interest is not purchased in the manner set forth in
Section 11.3(a),
the Departing General Partner (or
its transferee) shall become a Limited Partner and its Combined Interest shall be converted into Common Units pursuant to a valuation made by an investment banking firm or other independent expert selected pursuant to
Section 11.3(a)
,
without reduction in such Partnership Interest (but subject to proportionate dilution by reason of the admission of its successor). Any successor General Partner shall indemnify the Departing General Partner (or its transferee) as to all debts and
liabilities of the Partnership arising on or after the date on which the Departing General Partner (or its transferee) becomes a Limited Partner. For purposes of this Agreement, conversion of the Combined Interest of the Departing General Partner to
Common Units will be characterized as if the Departing General Partner (or its transferee) contributed its Combined Interest to the Partnership in exchange for the newly issued Common Units.
(c) If a successor General Partner is elected in accordance with the terms of
Section 11.1
or
Section 11.2
(or if
the business of the Partnership is continued pursuant to
Section 12.2
and the successor General Partner is not the former General Partner) and the option described in
Section 11.3(a)
is not exercised by the party entitled to
do so, the successor General Partner shall cause this Agreement to be amended to reflect that, from and after the date of such successor General Partner’s admission, the successor General Partner’s interest in all Partnership distributions
and allocations, if any, shall be its Percentage Interest.
Section 11.4
Withdrawal of Limited Partners
.
No Limited Partner shall have any right to withdraw from the Partnership;
provided, however
, that when a transferee of a Limited Partner’s Limited Partner Interest becomes a Record Holder of the Limited Partner Interest so
transferred, such transferring Limited Partner shall cease to be a Limited Partner with respect to the Limited Partner Interest so transferred.
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ARTICLE XII
DISSOLUTION AND LIQUIDATION
Section 12.1
Dissolution
. The Partnership shall not be dissolved by the admission of additional Limited Partners or by the admission of a successor General Partner in accordance with the terms of this Agreement. Upon the withdrawal or
removal of the General Partner, if a successor General Partner is elected pursuant to
Section 11.1
,
Section 11.2
or
Section 12.2
, to the fullest extent permitted by law, the Partnership shall not be dissolved and
such successor General Partner shall continue the business of the Partnership. The Partnership shall dissolve, and (subject to
Section 12.2
) its affairs shall be wound up, upon:
(a) an Event of Withdrawal of the General Partner as provided in
Section 11.1(a)
(other than
Section 11.1(a)(ii)
),
unless (i) a successor General Partner is elected and a Withdrawal Opinion of Counsel is received as provided in
Section 11.1(b)
or
Section 11.2
and such successor is admitted to the Partnership pursuant to
Section 10.2
or (ii) the holders of a Unit Majority elect to continue the business of the Partnership and to appoint a successor General Partner pursuant to
Section 12.2
;
(b) an election to dissolve the Partnership by the General Partner that is approved by the holders of a Unit Majority;
(c) the entry of a decree of judicial dissolution of the Partnership pursuant to the provisions of the Delaware Act;
(d) at any time there are no Limited Partners, unless the Partnership is continued without dissolution in accordance with the Delaware
Act; or
(e) the conveyance of all the Partnership’s assets to another limited liability entity in accordance with
Section 14.3(d)
.
Section 12.2
Continuation of the Business of the Partnership After Dissolution
. Upon
(a) an Event of Withdrawal caused by the withdrawal or removal of the General Partner as provided in
Section 11.1(a)(i)
or
(iii)
and the failure of the Unitholders to select a successor to such Departing General Partner
pursuant to
Section 11.1
or
Section 11.2
, then, to the maximum extent permitted by law, within 90 days thereafter, or (b) an event constituting an Event of Withdrawal as defined in
Section 11.1(a)(iv)
,
(v)
or
(vi)
, then, to the maximum extent permitted by law, within 180 days thereafter, the holders of a Unit Majority may elect to continue the business of the Partnership on the same terms and conditions set forth in this
Agreement by appointing as a successor General Partner a Person approved by the holders of a Unit Majority. Unless such an election is made within the applicable time period as set forth above, the Partnership shall conduct only activities necessary
to wind up its affairs. If such an election is so made, then:
(i) the Partnership shall continue without
dissolution unless earlier dissolved in accordance with this
Article XII
;
(ii) if the successor General
Partner is not the Departing General Partner, then the interest of the Departing General Partner shall be treated in the manner provided in
Section 11.3
; and
(iii) the successor General Partner shall be admitted to the Partnership as General Partner, effective as of the Event of
Withdrawal, by agreeing in writing to be bound by this Agreement;
provided
,
however
, that the right of the holders of a Unit
Majority to approve a successor General Partner and to continue the business of the Partnership shall not exist and may not be exercised unless the Partnership has received an Opinion of Counsel that (x) the exercise of the right would not
result in the loss of limited liability of any Limited Partner under the Delaware Act and (y) neither the Partnership nor any Group Member would be treated as an association taxable as a corporation or otherwise be taxable as an entity for U.S.
federal income tax purposes upon the exercise of such right to continue (to the extent not already so treated or taxed).
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Section 12.3
Liquidator
. Upon dissolution of the Partnership, unless the
business of the Partnership is continued pursuant to
Section 12.2
, the General Partner (or in the event of dissolution pursuant to
Section 12.1(a)
, the holders of a Unit Majority) shall select one or more Persons to act as
Liquidator. The Liquidator (if other than the General Partner) shall be entitled to receive such compensation for its services as may be approved by holders of at least a majority of the Outstanding Common Units and Subordinated Units, if any,
voting as a single class. The Liquidator (if other than the General Partner) shall agree not to resign at any time without 15 days’ prior notice and may be removed at any time, with or without cause, by notice of removal approved by holders of
at least a majority of the Outstanding Common Units and Subordinated Units, if any, voting as a single class. Upon dissolution, removal or resignation of the Liquidator, a successor and substitute Liquidator (who shall have and succeed to all
rights, powers and duties of the original Liquidator) shall within 30 days thereafter be approved by holders of at least a majority of the Outstanding Common Units and Subordinated Units, if any, voting as a single class. The right to approve a
successor or substitute Liquidator in the manner provided herein shall be deemed to refer also to any such successor or substitute Liquidator approved in the manner herein provided. Except as expressly provided in this
Article XII
, the
Liquidator approved in the manner provided herein shall have and may exercise, without further authorization or consent of any of the parties hereto, all of the powers conferred upon the General Partner under the terms of this Agreement (but subject
to all of the applicable limitations, contractual and otherwise, upon the exercise of such powers, other than the limitation on sale set forth in
Section 7.3
) necessary or appropriate to carry out the duties and functions of the
Liquidator hereunder for and during the period of time required to complete the winding up and liquidation of the Partnership as provided for herein.
Section 12.4
Liquidation
. The Liquidator shall proceed to dispose of the assets of the Partnership, discharge its Liabilities and otherwise wind up its affairs in such manner and over
such period as determined by the Liquidator, subject to Section 17-804 of the Delaware Act and the following:
(a) The
assets may be disposed of by public or private sale or by distribution in kind to one or more Partners on such terms as the Liquidator and such Partner or Partners may agree. If any property is distributed in kind, the Partner receiving the property
shall be deemed for purposes of
Section 12.4(c)
to have received cash equal to its fair market value; and contemporaneously therewith, appropriate cash distributions must be made to the other Partners. The Liquidator may defer
liquidation or distribution of the Partnership’s assets for a reasonable time if it determines that an immediate sale or distribution of all or some of the Partnership’s assets would be impractical or would cause undue loss to the
Partners. The Liquidator may distribute the Partnership’s assets, in whole or in part, in kind if it determines that a sale would be impractical or would cause undue loss to the Partners.
(b) Liabilities of the Partnership include amounts owed to the Liquidator as compensation for serving in such capacity (subject to the
terms of
Section 12.3
) and amounts to Partners otherwise than in respect of their distribution rights under
Article VI
. With respect to any liability that is contingent, conditional or unmatured or is otherwise not yet due and
payable, the Liquidator shall either settle such claim for such amount as it thinks appropriate or establish a reserve of cash or other assets to provide for its payment. When paid, any unused portion of the reserve shall be distributed as
additional liquidation proceeds.
(c) Subject to the terms of any Supplemental Terms Annex, all property and all cash in
excess of that required to satisfy Liabilities as provided in
Section 12.4(b)
shall be distributed to the Partners in accordance with, and to the extent of, the positive balances in their respective Capital Accounts, as determined after
taking into account all Capital Account adjustments (other than those made by reason of distributions pursuant to this
Section 12.4(c)
) for the taxable period of the Partnership during which the liquidation of the Partnership occurs
(with such date of occurrence being determined pursuant to Treasury Regulation Section 1.704-1(b)(2)(ii)(g)), and such distribution shall be made by the end of such taxable period (or, if later, within 90 days after said date of such
occurrence).
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Section 12.5
Cancellation of Certificate of Limited Partnership
. Upon the
completion of the distribution of Partnership cash and property as provided in
Section 12.4
in connection with the liquidation of the Partnership, the Certificate of Limited Partnership and all qualifications of the Partnership as a
foreign limited partnership in jurisdictions other than the State of Delaware shall be canceled and such other actions as may be necessary to terminate the Partnership shall be taken.
Section 12.6
Return of Contributions
. The General Partner shall not be personally liable for, and shall have no obligation
to contribute or loan any monies or property to the Partnership to enable it to effectuate, the return of the Capital Contributions of the Limited Partners or Unitholders, or any portion thereof, it being expressly understood that any such return
shall be made solely from Partnership property.
Section 12.7
Waiver of Partition
. To the maximum extent
permitted by law, each Partner hereby waives any right to partition of the Partnership property.
Section 12.8
Capital Account Restoration
. No Limited Partner shall have any obligation to restore any negative balance in its Capital Account upon liquidation of the Partnership.
ARTICLE XIII
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS; RECORD DATE
Section 13.1
Amendments to be Adopted Solely by the General Partner
. Each Limited Partner agrees that
the General Partner, without the approval of any Limited Partner, may amend any provision of this Agreement and execute, swear to, acknowledge, deliver, file and record whatever documents may be required in connection therewith, to reflect:
(a) a change in the name of the Partnership, the location of the principal place of business of the Partnership, the
registered agent of the Partnership or the registered office of the Partnership;
(b) admission, substitution, withdrawal or
removal of Partners in accordance with this Agreement;
(c) a change that the General Partner determines to be necessary or
appropriate to qualify or continue the qualification of the Partnership as a limited partnership or a partnership in which the Limited Partners have limited liability under the laws of any state or to ensure that the Group Members will not be
treated as associations taxable as corporations or otherwise taxed as entities for U.S. federal income tax purposes;
(d) a
change that the General Partner determines (i) does not adversely affect the Limited Partners considered as a whole or any particular class of Partnership Interests as compared to other classes of Partnership Interests in any material respect
(except as permitted by subsection (g) of this
Section 13.1
); provided that for purposes of determining whether an amendment satisfies the requirements of this Section 13.1(d)(i), the General Partner may in its sole discretion
disregard any adverse effect on any class or classes of Partnership Interests the holders of which have approved such amendment pursuant to
Section 13.3(c)
, (ii) to be necessary or appropriate to (A) satisfy any requirements,
conditions or guidelines contained in any opinion, directive, order, ruling or regulation of any federal or state agency or judicial authority or contained in any federal or state statute (including the Delaware Act) or (B) facilitate the
trading of the Units (including the division of any class or classes of Outstanding Units into different classes to facilitate uniformity of tax consequences within such classes of Units) or comply with any rule, regulation, guideline or requirement
of any National Securities Exchange on which the Units are or will be listed or admitted to trading, (iii) to be necessary or appropriate in connection with action taken by the General Partner pursuant to
Section 5.8
or (iv) is
required to effect the intent expressed in the IPO Registration Statement or the intent of the provisions of this Agreement or is otherwise contemplated by this Agreement;
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(e) a change in the fiscal year or taxable year of the Partnership and any other changes
that the General Partner determines to be necessary or appropriate as a result of a change in the fiscal year or taxable year of the Partnership including, if the General Partner shall so determine, a change in the definition of “Quarter”
and the dates on which distributions are to be made by the Partnership;
(f) an amendment that is necessary, in the Opinion of
Counsel, to prevent the Partnership, the General Partner or its directors, officers, trustees or agents from in any manner being subjected to the provisions of the Investment Company Act of 1940, as amended, the Investment Advisers Act of 1940, as
amended, or “plan asset” regulations adopted under the Employee Retirement Income Security Act of 1974, as amended, regardless of whether such are substantially similar to plan asset regulations currently applied or proposed by the United
States Department of Labor;
(g) an amendment that (i) sets forth the designations, preferences, rights, powers and duties of
any class or series of Partnership Interests or Derivative Partnership Interests issued pursuant to
Section 5.5
or (ii) the General Partner determines to be necessary, appropriate or advisable in connection with the authorization or issuance
of any class or series of Partnership Interests or Derivative Partnership Interests pursuant to
Section 5.5
, including such an amendment effectuated through a Supplemental Terms Annex;
(h) any amendment expressly permitted in this Agreement to be made by the General Partner acting alone;
(i) an amendment effected, necessitated or contemplated by a Merger Agreement or a Plan of Conversion approved in accordance with
Section 14.3
;
(j) an amendment that the General Partner determines to be necessary or appropriate to reflect and
account for the formation by the Partnership of, or investment by the Partnership in, any corporation, partnership, joint venture, limited liability company or other entity, in connection with the conduct by the Partnership of activities permitted
by the terms of
Section 2.4
or
Section 7.1(a)
;
(k) a merger, conveyance or conversion pursuant to
Section 14.3(d)
or
Section 14.3(e)
; or
(l) any other amendments substantially similar to the
foregoing.
Section 13.2
Amendment Procedures
. Amendments to this Agreement may be proposed only by the
General Partner. To the fullest extent permitted by law, the General Partner shall have no duty or obligation to propose or approve any amendment to this Agreement and may decline to do so free of any duty or obligation whatsoever to the
Partnership, any Limited Partner or any other Person bound by this Agreement, and, in declining to propose or approve an amendment to this Agreement, to the fullest extent permitted by law, shall not be required to act in good faith or pursuant to
any other standard imposed by this Agreement, any Group Member Agreement, any other agreement contemplated hereby or otherwise or under the Delaware Act or any other law, rule or regulation or at equity, and the General Partner in determining
whether to propose or approve any amendment to this Agreement shall be permitted to do so in its sole and absolute discretion. An amendment to this Agreement shall be effective upon its approval by the General Partner and, except as otherwise
provided by
Section 13.1
or
Section 13.3
, the holders of a Unit Majority, unless a greater or different percentage of Outstanding Units is required under this Agreement. Each proposed amendment that requires the approval of
the holders of a specified percentage of Outstanding Units shall be set forth in a writing that contains the text of the proposed amendment. If such an amendment is proposed, the General Partner shall seek the written approval of the requisite
percentage of Outstanding Units or call a meeting of the Unitholders to consider and vote on such proposed amendment. The General Partner shall notify all Record Holders upon final adoption of any amendments. The General Partner shall be deemed to
have notified all Record Holders as required by this
Section 13.2
if it has posted or made accessible such amendment through the Partnership’s or the Commission’s website.
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Section 13.3
Amendment Requirements
.
(a) Notwithstanding the provisions of
Section 13.1
and
Section 13.2
, no provision of this Agreement that
establishes a percentage of Outstanding Units required to take any action shall be amended, altered, changed, repealed or rescinded in any respect that would have the effect of (i) in the case of any provision of this Agreement other than
Section 11.2
or
Section 13.4
, reducing such percentage or (ii) in the case of
Section 11.2
or
Section 13.4
, increasing such percentages, unless such amendment is approved by the written consent or
the affirmative vote of holders of Outstanding Units whose aggregate Outstanding Units constitute (x) in the case of a reduction as described in
subclause (a)(i)
hereof, not less than the voting requirement sought to be reduced,
(y) in the case of an increase in the percentage in
Section 11.2
, not less than 90% of the Outstanding Units or (z) in the case of an increase in the percentage in
Section 13.4
, not less than a majority of the
Outstanding Units.
(b) Notwithstanding the provisions of
Section 13.1
and
Section 13.2
, no amendment
to this Agreement may (i) enlarge the obligations of any Limited Partner without its consent, unless such shall be deemed to have occurred as a result of an amendment approved pursuant to
Section 13.3(c)
or (ii) enlarge the
obligations of, restrict in any way any action by or rights of, or reduce in any way the amounts distributable, reimbursable or otherwise payable to, the General Partner or any of its Affiliates without the General Partner’s consent, which
consent may be given or withheld at its option.
(c) Except as provided in
Section 14.3
, and without limitation of
the General Partner’s authority to adopt amendments to this Agreement without the approval of any Limited Partners as contemplated in
Section 13.1
, any amendment that would have a material adverse effect on the rights or preferences
of any class of Partnership Interests in relation to other classes of Partnership Interests must be approved by the holders of not less than a majority of the Outstanding Partnership Interests of the class affected.
(d) Notwithstanding any other provision of this Agreement, except for amendments pursuant to
Section 13.1
and except as
otherwise provided by
Section 14.3(f)
, no amendments shall become effective without the approval of the holders of at least 90% of the Outstanding Units voting as a single class unless the Partnership obtains an Opinion of Counsel to the
effect that such amendment will not affect the limited liability of any Limited Partner under applicable partnership law of the state under whose laws the Partnership is organized.
(e) Except as provided in
Section 13.1
, this
Section 13.3
shall only be amended with the approval of the holders
of at least 90% of the Outstanding Units.
Section 13.4
Special Meetings
. All acts of Limited Partners to
be taken pursuant to this Agreement shall be taken in the manner provided in this
Article XIII
. Special meetings of the Limited Partners may be called by the General Partner or by Limited Partners owning 20% or more of the Outstanding Units
of the class or classes for which a meeting is proposed. Limited Partners shall call a special meeting by delivering to the General Partner one or more requests in writing stating that the signing Limited Partners wish to call a special meeting and
indicating the specific purposes for which the special meeting is to be called and the class or classes of Units for which the meeting is proposed. No business may be brought by any Limited Partner before such special meeting except the business
listed in the related request. Within 60 days after receipt of such a call from Limited Partners or within such greater time as may be reasonably necessary for the Partnership to comply with any statutes, rules, regulations, listing agreements or
similar requirements governing the holding of a meeting or the solicitation of proxies for use at such a meeting, the General Partner shall send or cause to be sent a notice of the meeting to the Limited Partners. A meeting shall be held at a time
and place determined by the General Partner on a date not less than 10 days nor more than 60 days after the time notice of the meeting is given as provided in
Section 16.1
. Limited Partners shall not be permitted to vote on matters that
would cause the Limited Partners to be deemed to be taking part in the management and control of the business and affairs of the Partnership so as to jeopardize the Limited Partners’ limited liability under the Delaware Act or the law of any
other state or jurisdiction in which the Partnership is qualified to do business. If any such vote were to take place, to the fullest extent permitted by law, it shall be deemed null and void to the extent necessary so as not to jeopardize the
Limited Partners’ limited liability under the Delaware Act or the law of any other state in which the Partnership is qualified to do business.
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Section 13.5
Notice of a Meeting
. Notice of a meeting called pursuant to
Section 13.4
shall be given to the Record Holders of the class or classes of Units for which a meeting is proposed in writing by mail or other means of written communication in accordance with
Section 16.1
.
Section 13.6
Record Date
. For purposes of determining the Limited Partners who are Record Holders of the class or
classes of Outstanding Limited Partner Interests entitled to notice of or to vote at a meeting of the Limited Partners or to give approvals without a meeting as provided in
Section 13.11
, the General Partner shall set a Record Date,
which shall not be less than 10 nor more than 60 days before (a) the date of the meeting (unless such requirement conflicts with any rule, regulation, guideline or requirement of any National Securities Exchange on which the Units are listed or
admitted to trading or U.S. federal securities laws, in which case the rule, regulation, guideline or requirement of such National Securities Exchange or U.S. federal securities laws shall govern) or (b) in the event that approvals are sought
without a meeting, the date by which such Limited Partners are requested in writing by the General Partner to give such approvals.
Section 13.7
Postponement and Adjournment
. Prior to the date upon which any meeting of Limited Partners is to be held, the General Partner may postpone such meeting one or more times
for any reason by giving notice to each Limited Partner entitled to vote at the meeting so postponed of the place, date and hour at which such meeting would be held. Such notice shall be given not fewer than two days before the date of such meeting
and otherwise in accordance with this
Article XIII
. When a meeting is postponed, a new Record Date need not be fixed unless such postponement shall be for more than 45 days. Any meeting of Limited Partners may be adjourned by the General
Partner one or more times for any reason, including the failure of a quorum to be present at the meeting with respect to any proposal or the failure of any proposal to receive sufficient votes for approval. No Limited Partner vote shall be required
for any adjournment. A meeting of Limited Partners may be adjourned by the General Partner as to one or more proposals regardless of whether action has been taken on other matters. When a meeting is adjourned to another time or place, notice need
not be given of the adjourned meeting and a new Record Date need not be fixed, if the time and place thereof are announced at the meeting at which the adjournment is taken, unless such adjournment shall be for more than 45 days. At the adjourned
meeting, the Partnership may transact any business which might have been transacted at the original meeting. If the adjournment is for more than 45 days or if a new Record Date is fixed for the adjourned meeting, a notice of the adjourned meeting
shall be given in accordance with this
Article XIII
.
Section 13.8
Waiver of Notice; Approval of
Meeting
. The transactions of any meeting of Limited Partners, however called and noticed, and whenever held, shall be as valid as if it had occurred at a meeting duly held after regular call and notice, if a quorum is present either in
person or by proxy. Attendance of a Limited Partner at a meeting shall constitute a waiver of notice of the meeting, except (i) when the Limited Partner attends the meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or convened and (ii) that attendance at a meeting is not a waiver of any right to disapprove of any matters submitted for consideration or to object to the failure to
submit for consideration any matters required to be included in the notice of the meeting, but not so included, if such objection is expressly made at the beginning of the meeting.
Section 13.9
Quorum and Voting
. Except as otherwise provided by this Agreement or required by the rules or regulations
of any National Securities Exchange on which the Common Units are admitted to trading, or applicable law or pursuant to any regulation applicable to the Partnership or its Partnership Interests, the presence, in person or by proxy, of holders of a
majority in voting power of the Outstanding Units of the class or classes for which a meeting has been called (including Outstanding Units deemed owned by the General Partner) entitled to vote at the meeting shall constitute a quorum at a meeting of
Limited Partners of such class or classes. Abstentions and broker non-votes in respect of such Units shall be deemed to be Units present at such meeting for purposes of establishing a quorum. For all matters presented to the Limited Partners holding
Outstanding Units at a meeting at which a quorum is present for which no minimum or other vote of Limited Partners is required by any other provision of this Agreement, the rules or regulations of any National Securities Exchange on which the Common
Units are admitted to trading, or applicable law or pursuant to any regulation applicable to
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the Partnership or its Partnership Interests, a majority of the votes cast by the Limited Partners holding Outstanding Units shall be deemed to constitute the act of all Limited Partners (with
abstentions and broker non-votes being deemed to not have been cast with respect to such matter). On any matter where a minimum or other vote of Limited Partners holding Outstanding Units is provided by any other provision of this Agreement or
required by the rules or regulations of any National Securities Exchange on which the Common Units are admitted to trading, or applicable law or pursuant to any regulation applicable to the Partnership or its Partnership Interests, such minimum or
other vote shall be the vote of Limited Partners required to approve such matter (with the effect of abstentions and broker non-votes to be determined based on the vote of Limited Partners required to approve such matter; provided that if the effect
of abstentions and broker non-votes is not specified by such applicable rule, regulation or law, and there is no prevailing interpretation of such effect, then abstentions and broker non-votes shall be deemed to not have been cast with respect to
such matter;
provided further
, that, for the avoidance of doubt, with respect to any matter on which this Agreement requires the approval of a specified percentage of the Outstanding Units, abstentions and broker non-votes shall be counted as
votes against such matter). The Limited Partners present at a duly called or held meeting at which a quorum has been established may continue to transact business until adjournment, notwithstanding the exit of enough Limited Partners to leave less
than a quorum.
Section 13.10
Conduct of a Meeting
. The General Partner shall have full power and authority
concerning the manner of conducting any meeting of the Limited Partners or solicitation of approvals in writing, including the determination of Persons entitled to vote, the existence of a quorum, the satisfaction of the requirements of
Section 13.4
, the conduct of voting, the validity and effect of any proxies and the determination of any controversies, votes or challenges arising in connection with or during the meeting or voting. The General Partner shall designate a
Person to serve as chairman of any meeting and shall further designate a Person to take the minutes of any meeting. All minutes shall be kept with the records of the Partnership maintained by the General Partner. The General Partner may make such
other regulations consistent with applicable law and this Agreement as it may deem advisable concerning the conduct of any meeting of the Limited Partners or solicitation of approvals in writing, including regulations in regard to the appointment of
proxies, the appointment and duties of inspectors of votes and approvals, the submission and examination of proxies and other evidence of the right to vote, and the submission and revocation of approvals in writing.
Section 13.11
Action Without a Meeting
. If authorized by the General Partner, any action that may be taken at a
meeting of the Limited Partners may be taken without a meeting if an approval in writing setting forth the action so taken is signed by Limited Partners owning not less than the minimum percentage of the Outstanding Units that would be necessary to
authorize or take such action at a meeting at which all the Limited Partners were present and voted (unless such provision conflicts with any rule, regulation, guideline or requirement of any National Securities Exchange on which the Units are
listed or admitted to trading, in which case the rule, regulation, guideline or requirement of such National Securities Exchange shall govern). Prompt notice of the taking of action without a meeting shall be given to the Limited Partners who have
not approved in writing. The General Partner may specify that any written ballot submitted to Limited Partners for the purpose of taking any action without a meeting shall be returned to the Partnership within the time period, which shall be not
less than 20 days, specified by the General Partner. If a ballot returned to the Partnership does not vote all of the Outstanding Units held by such Limited Partners, the Partnership shall be deemed to have failed to receive a ballot for the
Outstanding Units that were not voted. If approval of the taking of any permitted action by the Limited Partners is solicited by any Person other than by or on behalf of the General Partner, the written approvals shall have no force and effect
unless and until (a) approvals sufficient to take the action proposed are deposited with the Partnership in care of the General Partner, (b) approvals sufficient to take the action proposed are dated as of a date not more than 90 days
prior to the date sufficient approvals are first deposited with the Partnership and (c) an Opinion of Counsel is delivered to the General Partner to the effect that the exercise of such right and the action proposed to be taken with respect to
any particular matter (i) will not cause the Limited Partners to be deemed to be taking part in the management and control of the business and affairs of the Partnership so as to jeopardize the Limited Partners’ limited liability and
(ii) is otherwise permissible under the state statutes then governing the rights, duties and Liabilities of the Partnership and the Partners.
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Section 13.12
Right to Vote and Related Matters
.
(a) Only those Record Holders of the Outstanding Units on the Record Date set pursuant to
Section 13.6
(and also subject to
the limitations contained in the definition of “Outstanding”) shall be entitled to notice of, and to vote at, a meeting of Limited Partners or to act with respect to matters as to which the holders of the Outstanding Units have the right
to vote or to act. All references in this Agreement to votes of, or other acts that may be taken by, the Outstanding Units shall be deemed to be references to the votes or acts of the Record Holders of such Outstanding Units.
(b) With respect to Units that are held for a Person’s account by another Person that is the Record Holder (such as a broker,
dealer, bank, trust company or clearing corporation, or an agent of any of the foregoing), such Record Holder shall, in exercising the voting rights in respect of such Units on any matter, and unless the arrangement between such Persons provides
otherwise, vote such Units in favor of, and at the direction of, the Person who is the beneficial owner, and the Partnership shall be entitled to assume such Record Holder is so acting without further inquiry. The provisions of this
Section 13.12(b)
(as well as all other provisions of this Agreement) are subject to the provisions of
Section 4.3
.
(c) Notwithstanding anything in this Agreement to the contrary, the Record Holder of an Incentive Distribution Right shall not be entitled to vote such Incentive Distribution Right on any Partnership
matter.
ARTICLE XIV
MERGER, CONSOLIDATION OR CONVERSION
Section 14.1
Authority
. The Partnership may merge or consolidate with or into one or more corporations, limited liability companies, statutory trusts or associations, real estate investment trusts, common law trusts or unincorporated businesses,
including a partnership (whether general or limited (including a limited liability limited partnership)) or convert into any such entity, whether such entity is formed under the laws of the State of Delaware or any other state of the United States
of America or any other country, pursuant to a written plan of merger or consolidation (“
Merger Agreement
”) or a written plan of conversion (“
Plan of Conversion
”), as the case may be, in accordance
with this
Article XIV
.
Section 14.2
Procedure for Merger, Consolidation or Conversion
.
(a) Merger, consolidation or conversion of the Partnership pursuant to this
Article XIV
requires the prior consent of the General
Partner;
provided
,
however
, that, to the fullest extent permitted by law, the General Partner shall have no duty or obligation to consent to any merger, consolidation or conversion of the Partnership and may decline to do so free of
any duty or obligation whatsoever to the Partnership, any Limited Partner or any other Person bound by this Agreement and, in declining to consent to a merger, consolidation or conversion, shall not be required to act in good faith or pursuant to
any other standard imposed by this Agreement, any other agreement contemplated hereby or under the Delaware Act or any other law, rule or regulation or at equity, and the General Partner in determining whether to consent to any merger, consolidation
or conversion of the Partnership shall be permitted to do so in its sole and absolute discretion.
(b) If the General Partner
shall determine to consent to the merger or consolidation, the General Partner shall approve the Merger Agreement, which shall set forth:
(i) the name and state or country of domicile of each of the business entities proposing to merge or consolidate;
(ii) the name and state of domicile of the business entity that is to survive the proposed merger or consolidation (the “
Surviving Business Entity
”);
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(iii) the terms and conditions of the proposed merger or consolidation;
(iv) the manner and basis of exchanging or converting the equity interests of each constituent business entity
for, or into, cash, property or interests, rights, securities or obligations of the Surviving Business Entity; and (A) if any general or limited partner interests, securities or rights of any constituent business entity are not to be exchanged
or converted solely for, or into, cash, property or general or limited partner interests, rights, securities or obligations of the Surviving Business Entity, the cash, property or interests, rights, securities or obligations of any general or
limited partnership, corporation, trust, limited liability company, unincorporated business or other entity (other than the Surviving Business Entity) which the holders of such general or limited partner interests, securities or rights are to
receive in exchange for, or upon conversion of their interests, securities or rights and (B) in the case of equity interests represented by certificates, upon the surrender of such certificates, which cash, property or general or limited
partner interests, rights, securities or obligations of the Surviving Business Entity or any general or limited partnership, corporation, trust, limited liability company, unincorporated business or other entity (other than the Surviving Business
Entity), or evidences thereof, are to be delivered;
(v) a statement of any changes in the constituent
documents or the adoption of new constituent documents (the articles or certificate of incorporation, articles of trust, declaration of trust, certificate or agreement of limited partnership, operating agreement or other similar charter or governing
document) of the Surviving Business Entity to be effected by such merger or consolidation;
(vi) the effective
time of the merger, which may be the date of the filing of the certificate of merger pursuant to
Section 14.4
or a later date specified in or determinable in accordance with the Merger Agreement (
provided
,
however
, that if
the effective time of the merger is to be later than the date of the filing of such certificate of merger, the effective time shall be fixed at a date or time certain at or prior to the time of the filing of such certificate of merger and stated
therein); and
(vii) such other provisions with respect to the proposed merger or consolidation that the
General Partner determines to be necessary or appropriate.
(c) If the General Partner shall determine to consent to the
conversion, the General Partner shall approve the Plan of Conversion, which shall set forth:
(i) the name of
the converting entity and the converted entity;
(ii) a statement that the Partnership is continuing its
existence in the organizational form of the converted entity;
(iii) a statement as to the type of entity that
the converted entity is to be and the state or country under the laws of which the converted entity is to be incorporated, formed or organized;
(iv) the manner and basis of exchanging or converting the equity interests of each constituent business entity for, or into, cash, property or interests, rights, securities or obligations of the converted
entity;
(v) in an attachment or exhibit, the certificate of limited partnership of the Partnership;
(vi) in an attachment or exhibit, the certificate of limited partnership, articles of incorporation or other
organizational documents of the converted entity;
(vii) the effective time of the conversion, which may be the
date of the filing of the certificate of conversion or a later date specified in or determinable in accordance with the Plan of Conversion (provided, that if the effective time of the conversion is to be later than the date of the filing of such
certificate of conversion, the effective time shall be fixed at a date or time certain at or prior to the time of the filing of such certificate of conversion and stated therein); and
(viii) such other provisions with respect to the proposed conversion that the General Partner determines to be necessary
or appropriate.
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Section 14.3
Approval by Limited Partners
.
(a) Except as provided in
Section 14.3(d)
and
Section 14.3(e)
, the General Partner, upon its approval of the
Merger Agreement or the Plan of Conversion, as the case may be, shall direct that the Merger Agreement or the Plan of Conversion, as applicable, be submitted to a vote of Limited Partners, whether at a special meeting or by written consent, in
either case in accordance with the requirements of
Article XIII
. A copy or a summary of the Merger Agreement or the Plan of Conversion, as the case may be, shall be included in or enclosed with the notice of a special meeting or the written
consent and, subject to any applicable requirements of Regulation 14A pursuant to the Exchange Act or successor provision, no other disclosure regarding the proposed merger, consolidation or conversion shall be required.
(b) Except as provided in
Section 14.3(d)
and
Section 14.3(e)
, the Merger Agreement or the Plan of Conversion, as
the case may be, shall be approved upon receiving the affirmative vote or consent of the holders of a Unit Majority unless the Merger Agreement or the Plan of Conversion, as the case may be, effects an amendment to any provision of this Agreement
that, if contained in an amendment to this Agreement adopted pursuant to
Article XIII
, would require for its approval the vote or consent of a greater percentage of the Outstanding Units or of any class of Limited Partners, in which case such
greater percentage vote or consent shall be required for approval of the Merger Agreement or the Plan of Conversion, as the case may be.
(c) Except as provided in
Section 14.3(d)
and
Section 14.3(e)
, after such approval by vote or consent of the Limited Partners, and at any time prior to the filing of the
certificate of merger or certificate of conversion pursuant to
Section 14.4
, the merger, consolidation or conversion may be abandoned pursuant to provisions therefor, if any, set forth in the Merger Agreement or the Plan of Conversion,
as the case may be.
(d) Notwithstanding anything else contained in this
Article XIV
or in this Agreement, the General
Partner is permitted, without Limited Partner approval, to convert the Partnership or any Group Member into a new limited liability entity, to merge the Partnership or any Group Member into, or convey all of the Partnership’s assets to, another
limited liability entity that shall be newly formed and shall have no assets, Liabilities or operations at the time of such conversion, merger or conveyance other than those it receives from the Partnership or other Group Member if (i) the
General Partner has received an Opinion of Counsel that the conversion, merger or conveyance, as the case may be, would not result in the loss of limited liability under the laws of the jurisdiction governing the other limited liability entity (if
that jurisdiction is not Delaware) of any Limited Partner as compared to its limited liability under the Delaware Act or cause the Partnership to be treated as an association taxable as a corporation or otherwise to be taxed as an entity for U.S.
federal income tax purposes (to the extent not already so treated or taxed), (ii) the sole purpose of such conversion, merger or conveyance is to effect a mere change in the legal form of the Partnership into another limited liability entity
and (iii) the General Partner determines that the governing instruments of the new entity provide the Limited Partners and the General Partner with substantially the same rights and obligations as are herein contained.
(e) Additionally, notwithstanding anything else contained in this
Article XIV
or in this Agreement, the General Partner is
permitted, without Limited Partner approval, to merge or consolidate the Partnership with or into another limited liability entity if (i) the General Partner has received an Opinion of Counsel that the merger or consolidation, as the case may
be, would not result in the loss of the limited liability of any Limited Partner under the laws of the jurisdiction governing the other limited liability entity (if that jurisdiction is not Delaware) as compared to its limited liability under the
Delaware Act or cause the Partnership to be treated as an association taxable as a corporation or otherwise to be taxed as an entity for U.S. federal income tax purposes (to the extent not already so treated or taxed), (ii) the merger or
consolidation would not result in an amendment to this Agreement, other than any amendments that could be adopted pursuant to
Section 13.1
, (iii) the Partnership is the Surviving Business Entity in such merger or consolidation,
(iv) each Unit Outstanding immediately prior to the effective date of the merger or consolidation is to be an identical Unit of the Partnership after the effective date of the merger or consolidation and (v) the number of Partnership
Interests to be issued by the Partnership in such merger or consolidation does not exceed 20% of the Partnership Interests (other than Incentive Distribution Rights) Outstanding immediately prior to the effective date of such merger or
consolidation.
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(f) Pursuant to Section 17-211(g) of the Delaware Act, an agreement of merger or
consolidation approved in accordance with this
Article XIV
may (i) effect any amendment to this Agreement or (ii) effect the adoption of a new partnership agreement for the Partnership if it is the Surviving Business Entity. Any
such amendment or adoption made pursuant to this
Section 14.3
shall be effective at the effective time or date of the merger or consolidation.
Section 14.4
Certificate of Merger or Certificate of Conversion
. Upon the required approval by the General Partner and the Unitholders of a Merger Agreement or the Plan of Conversion,
as the case may be, a certificate of merger or certificate of conversion or other filing, as applicable, shall be executed and filed with the Secretary of State of the State of Delaware or the appropriate filing office of any other jurisdiction, as
applicable, in conformity with the requirements of the Delaware Act or other applicable law.
Section 14.5
Effect
of Merger, Consolidation or Conversion
.
(a) At the effective time of the merger or consolidation:
(i) all of the rights, privileges and powers of each of the business entities that has merged or consolidated, and all
property, real, personal and mixed, and all debts due to any of those business entities and all other things and causes of action belonging to each of those business entities, shall be vested in the Surviving Business Entity and after the merger or
consolidation shall be the property of the Surviving Business Entity to the extent they were of each constituent business entity;
(ii) the title to any real property vested by deed or otherwise in any of those constituent business entities shall not revert and is not in any way impaired because of the merger or consolidation;
(iii) all rights of creditors and all liens on or security interests in property of any of those constituent
business entities shall be preserved unimpaired; and
(iv) all debts, Liabilities and duties of those
constituent business entities shall attach to the Surviving Business Entity and may be enforced against it to the same extent as if the debts, Liabilities and duties had been incurred or contracted by it.
(b) At the effective time of the conversion:
(i) the Partnership shall continue to exist, without interruption, but in the organizational form of the converted entity rather than in its prior organizational form;
(ii) all rights, title, and interests to all real estate and other property owned by the Partnership shall continue to be
owned by the converted entity in its new organizational form without reversion or impairment, without further act or deed, and without any transfer or assignment having occurred, but subject to any existing liens or other encumbrances thereon;
(iii) all Liabilities of the Partnership shall continue to be Liabilities of the converted entity in its new
organizational form without impairment or diminution by reason of the conversion;
(iv) all rights of creditors
or other parties with respect to or against the prior interest holders or other owners of the Partnership in their capacities as such in existence as of the effective time of the conversion will continue in existence as to those Liabilities and may
be pursued by such creditors and obligees as if the conversion did not occur;
(v) a proceeding pending by or
against the Partnership or by or against any of Partners in their capacities as such may be continued by or against the converted entity in its new organizational form and by or against the prior Partners without any need for substitution of
parties; and
(vi) the Partnership Interests that are to be converted into partnership interests, shares,
evidences of ownership or other securities in the converted entity as provided in the Plan of Conversion shall be so converted, and Partners shall be entitled only to the rights provided in the Plan of Conversion.
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ARTICLE XV
RIGHT TO ACQUIRE LIMITED PARTNER INTERESTS
Section 15.1
Right
to Acquire Limited Partner Interests
.
(a) Notwithstanding any other provision of this Agreement, if at any
time the General Partner and its Affiliates hold more than
[ ]
% of the total Limited Partner Interests of any class then Outstanding, the General Partner shall then have the right, which right it may assign and transfer
in whole or in part to the Partnership or any Affiliate of the General Partner, exercisable at its option, to purchase all, but not less than all, of such Limited Partner Interests of such class then Outstanding held by Persons other than the
General Partner and its Affiliates, at the greater of (x) the Current Market Price as of the date three Business Days prior to the date that the notice described in
Section 15.1(b)
is mailed and (y) the highest price paid by
the General Partner or any of its Affiliates for any such Limited Partner Interest of such class purchased during the 90-day period preceding the date that the notice described in
Section 15.1(b)
is mailed.
(b) If the General Partner, any Affiliate of the General Partner or the Partnership elects to exercise the right to
purchase Limited Partner Interests granted pursuant to
Section 15.1(a)
, the General Partner shall deliver to the applicable Transfer Agent or exchange agent notice of such election to purchase (the “
Notice of Election to
Purchase
”) and shall cause the Transfer Agent or exchange agent to mail a copy of such Notice of Election to Purchase to the Record Holders of Limited Partner Interests of such class (as of a Record Date selected by the General
Partner), together with such information as may be required by law, rule or regulation, at least 10, but not more than 60, days prior to the Purchase Date. Such Notice of Election to Purchase shall also be filed and distributed as may be required by
the Commission or any National Securities Exchange on which such Limited Partner Interests are listed or admitted to trading. The Notice of Election to Purchase shall specify the Purchase Date and the price (determined in accordance with
Section 15.1(a)
) at which Limited Partner Interests will be purchased and state that the General Partner, its Affiliate or the Partnership, as the case may be, elects to purchase such Limited Partner Interests, upon surrender of
Certificates representing such Limited Partner Interests, in the case of Limited Partner Interests evidenced by Certificates, or instructions agreeing to such redemption in exchange for payment, at such office or offices of the Transfer Agent or
exchange agent as the Transfer Agent or exchange agent may specify, or as may be required by any National Securities Exchange on which such Limited Partner Interests are listed or admitted to trading. Any such Notice of Election to Purchase mailed
to a Record Holder of Limited Partner Interests at such Record Holder’s address as reflected in the Partnership Register shall be conclusively presumed to have been given regardless of whether the owner receives such notice. On or prior to the
Purchase Date, the General Partner, its Affiliate or the Partnership, as the case may be, shall deposit with the Transfer Agent or exchange agent cash in an amount sufficient to pay the aggregate purchase price of all of such Limited Partner
Interests to be purchased in accordance with this
Section 15.1
. If the Notice of Election to Purchase shall have been duly given as aforesaid at least 10 days prior to the Purchase Date, and if on or prior to the Purchase Date the
deposit described in the preceding sentence has been made for the benefit of the holders of Limited Partner Interests subject to purchase as provided herein, then from and after the Purchase Date, notwithstanding that any Certificate or redemption
instructions shall not have been surrendered for purchase or provided, respectively, all rights of the holders of such Limited Partner Interests (including any rights pursuant to
Article IV
,
Article V
,
Article VI
and
Article
XII
) shall thereupon cease, except the right to receive the purchase price (determined in accordance with
Section 15.1(a)
) for Limited Partner Interests therefor, without interest, upon surrender to the Transfer Agent or exchange
agent of the Certificates representing such Limited Partner Interests, in the case of Limited Partner Interests evidenced by Certificates, or instructions agreeing to such redemption, and such Limited Partner Interests shall thereupon be deemed to
be transferred to the General Partner, its Affiliate or the Partnership, as the case may be, on the Partnership Register, and the General Partner or any Affiliate of the General Partner, or the Partnership, as the case may be, shall be deemed to be
the Record Holder of all such Limited Partner Interests from and after the Purchase Date and shall have all rights as the Record Holder of such Limited Partner Interests (including all rights as owner of such Limited Partner Interests pursuant to
Article IV
,
Article V
,
Article VI
and
Article XII
).
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(c) In the case of Limited Partner Interests evidenced by Certificates, at any time from and
after the Purchase Date, a holder of an Outstanding Limited Partner Interest subject to purchase as provided in this
Section 15.1
may surrender such holder’s Certificate evidencing such Limited Partner Interest to the Transfer Agent
or exchange agent in exchange for payment of the amount described in
Section 15.1(a)
therefor, without interest thereon, in accordance with procedures set forth by the General Partner.
ARTICLE XVI
GENERAL PROVISIONS
Section 16.1
Addresses and Notices; Written Communications
.
(a) Any notice, demand, request, report or proxy materials required or permitted to be given or made to a Partner under this Agreement
shall be in writing and shall be deemed given or made when delivered in person or when sent by first class United States mail or by other means of written communication to the Partner at the address described below. Except as otherwise provided
herein, any notice, payment or report to be given or made to a Partner hereunder shall be deemed conclusively to have been given or made, and the obligation to give such notice or report or to make such payment shall be deemed conclusively to have
been fully satisfied, upon sending of such notice, payment or report to the Record Holder of such Partnership Interests at such Record Holder’s address as shown in the Partnership Register, regardless of any claim of any Person who may have an
interest in such Partnership Interests by reason of any assignment or otherwise. Notwithstanding the foregoing, if (i) a Partner shall consent to receiving notices, demands, requests, reports or proxy materials via electronic mail or by the
Internet or (ii) the rules of the Commission shall permit any report or proxy materials to be delivered electronically or made available via the Internet, any such notice, demand, request, report or proxy materials shall be deemed given or made
when delivered or made available via such mode of delivery. An affidavit or certificate of making of any notice, payment or report in accordance with the provisions of this
Section 16.1
executed by the General Partner, the Transfer Agent
or the mailing organization shall be prima facie evidence of the giving or making of such notice, payment or report. If any notice, payment or report addressed to a Record Holder at the address of such Record Holder appearing in the Partnership
Register is returned by the United States Postal Service marked to indicate that the United States Postal Service is unable to deliver it, such notice, payment or report and any subsequent notices, payments and reports shall be deemed to have been
duly given or made without further mailing (until such time as such Record Holder or another Person notifies the Transfer Agent or the Partnership of a change in such Record Holder’s address) if they are available for the Partner at the
principal office of the Partnership for a period of one year from the date of the giving or making of such notice, payment or report to the other Partners. Any notice to the Partnership shall be deemed given if received by the General Partner at the
principal office of the Partnership designated pursuant to
Section 2.3
. The General Partner may rely and shall be protected in relying on any notice or other document from a Partner or other Person if believed by it to be genuine.
(b) The terms “in writing,” “written communications,” “written notice” and words of similar
import shall be deemed satisfied under this Agreement by use of email and other forms of electronic communication.
Section 16.2
Further Action
. The parties shall execute and deliver all documents, provide all information and take or
refrain from taking action as may be necessary or appropriate to achieve the purposes of this Agreement.
Section 16.3
Binding Effect
. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their heirs, executors, administrators, successors, legal representatives and permitted assigns.
Section 16.4
Integration
. This Agreement constitutes the entire agreement among the parties hereto pertaining to the
subject matter hereof and supersedes all prior agreements and understandings pertaining thereto.
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Section 16.5
Creditors
. None of the provisions of this Agreement shall be
for the benefit of, or shall be enforceable by, any creditor of the Partnership.
Section 16.6
Waiver
. No
failure by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon a breach thereof shall constitute waiver of any such breach of any other
covenant, duty, agreement or condition.
Section 16.7
Third-Party Beneficiaries
. Each Partner agrees that
(a) any Indemnitee shall be entitled to assert rights and remedies hereunder as a third-party beneficiary hereto with respect to those provisions of this Agreement affording a right, benefit or privilege to such Indemnitee and (b) any
Unrestricted Person shall be entitled to assert rights and remedies hereunder as a third-party beneficiary hereto with respect to those provisions of this Agreement affording a right, benefit or privilege to such Unrestricted Person.
Section 16.8
Counterparts
. This Agreement may be executed in counterparts, all of which together shall constitute an
agreement binding on all the parties hereto, notwithstanding that all such parties are not signatories to the original or the same counterpart. Each party shall become bound by this Agreement immediately upon affixing its signature hereto or, in the
case of a Person acquiring a Limited Partner Interest, pursuant to
Section 10.1(a)
or
Section 10.1(b)
without execution hereof.
Section 16.9
Applicable Law; Forum; Venue and Jurisdiction; Attorneys’ Fee; Waiver of Trial by Jury
.
(a) This Agreement shall be construed in accordance with and governed by the laws of the State of Delaware, without regard to the principles of conflicts of law.
(b) (Each of the Partners and each Person or Group holding any beneficial interest in the Partnership (whether through a broker, dealer,
bank, trust company or clearing corporation or an agent of any of the foregoing or otherwise):
(i) irrevocably
agrees that any claims, suits, actions or proceedings (A) arising out of or relating in any way to this Agreement (including any claims, suits or actions to interpret, apply or enforce the provisions of this Agreement or the duties or
Liabilities among Partners or of Partners to the Partnership, or the rights or powers of, or restrictions on, the Partners or the Partnership), (B) brought in a derivative manner on behalf of the Partnership, (C) asserting a claim of
breach of a duty (including any fiduciary duty) owed by any director, officer or other employee of the Partnership or the General Partner, or owed by the General Partner, to the Partnership or the Partners, (D) asserting a claim arising
pursuant to any provision of the Delaware Act or (E) asserting a claim governed by the internal affairs doctrine shall be exclusively brought in the Court of Chancery of the State of Delaware, in each case regardless of whether such claims,
suits, actions or proceedings sound in contract, tort, fraud or otherwise, are based on common law, statutory, equitable, legal or other grounds, or are derivative or direct claims; provided, however, that any claims, suits, actions or proceedings
over which the Court of Chancery of the State of Delaware does not have jurisdiction shall be brought in any other court in the State of Delaware having jurisdiction;
(ii) irrevocably submits to the exclusive jurisdiction of the courts of the State of Delaware in connection with any such
claim, suit, action or proceeding;
(iii) agrees not to, and waives any right to, assert in any such claim,
suit, action or proceeding that (A) it is not personally subject to the jurisdiction of the courts of the State of Delaware or of any other court to which proceedings in the courts of the State of Delaware may be appealed, (B) such claim,
suit, action or proceeding is brought in an inconvenient forum or (C) the venue of such claim, suit, action or proceeding is improper;
(iv) expressly waives any requirement for the posting of a bond by a party bringing such claim, suit, action or proceeding;
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(v) consents to process being served in any such claim, suit, action or
proceeding by mailing, certified mail, return receipt requested, a copy thereof to such party at the address in effect for notices hereunder, and agrees that such services shall constitute good and sufficient service of process and notice thereof;
provided
,
however
, that nothing in this
clause (v)
shall affect or limit any right to serve process in any other manner permitted by law;
(vi) agrees that if such Partner, Person or Group does not obtain a judgment on the merits that substantially achieves, in
substance and amount, the full remedy sought in any such claim, suit, action or proceeding sought by such Partner, Person or Group, then such Partner, Person or Group shall be obligated to reimburse the Partnership and its Affiliates for all fees,
costs and expenses of every kind and description, including but not limited to all reasonable attorneys’ fees and other litigation expenses, that the Partnership and its Affiliates may incur in connection with such claim, suit, action or
proceeding; and
(vii) IRREVOCABLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY SUCH CLAIM, SUIT, ACTION OR
PROCEEDING.
Section 16.10
Invalidity of Provisions
. If any provision or part of a provision of this
Agreement (including when read together with each Supplemental Terms Annex then in effect) is or becomes for any reason, invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions and/or
parts thereof contained herein shall not be affected thereby, and this Agreement shall, to the fullest extent permitted by law, be reformed and construed as if such invalid, illegal or unenforceable provision, or part of a provision, had never been
contained herein, and such provision and/or part of a provision shall be reformed so that it would be valid, legal and enforceable to the maximum extent possible.
Section 16.11
Consent of Partners
. Each Partner hereby expressly consents and agrees that, whenever in this Agreement it is specified that an action may be taken upon the affirmative
vote or consent of less than all of the Partners, such action may be so taken upon the concurrence of less than all of the Partners and each Partner shall be bound by the results of such action.
Section 16.12
Facsimile and Email Signatures
. The use of facsimile signatures and signatures delivered by email in
portable document format (.pdf) or other similar electronic format affixed in the name and on behalf of the Transfer Agent on Certificates representing Common Units is expressly permitted by this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first
written above.
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GENERAL PARTNER:
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NOBLE MIDSTREAM GP LLC
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By:
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Name:
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Title:
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Signature Page to First Amended and Restated Agreement of
Limited Partnership of Noble Midstream Partners LP
A-85
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LIMITED PARTNER
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NBL MIDSTREAM, LLC
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By:
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Name:
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Title:
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Signature Page to First Amended and Restated Agreement of
Limited Partnership of Noble Midstream Partners LP
A-86
EXHIBIT A
to the First Amended and Restated
Agreement of Limited Partnership of
Noble Midstream Partners LP
Certificate Evidencing Common Units
Representing Limited Partner
Interests in
Noble Midstream Partners LP
In accordance with Section 4.1 of the First Amended and Restated Agreement of Limited
Partnership of Noble Midstream Partners LP, as amended, supplemented or restated from time to time (the “
Partnership Agreement
”), Noble Midstream Partners LP, a Delaware limited partnership (the
“
Partnership
”), hereby certifies that (the “
Holder
”) is the registered owner of Common Units representing limited partner
interests in the Partnership (the “
Common Units
”) transferable in the records of the Partnership, in person or by duly authorized attorney, upon surrender of this Certificate properly endorsed. The rights, preferences and
limitations of the Common Units are set forth in, and this Certificate and the Common Units represented hereby are issued and shall in all respects be subject to the terms and provisions of, the Partnership Agreement. Copies of the Partnership
Agreement are on file at, and will be furnished without charge on delivery of written request to the Partnership at, the principal office of the Partnership located at 1001 Noble Energy Way, Houston, Texas 77070. Capitalized terms used herein but
not defined shall have the meanings given them in the Partnership Agreement.
THE HOLDER OF THIS SECURITY
ACKNOWLEDGES FOR THE BENEFIT OF NOBLE MIDSTREAM PARTNERS LP THAT THIS SECURITY MAY NOT BE TRANSFERRED IF SUCH TRANSFER (AS DEFINED IN THE PARTNERSHIP AGREEMENT) WOULD (A) VIOLATE THE THEN APPLICABLE FEDERAL OR STATE SECURITIES LAWS OR RULES AND
REGULATIONS OF THE SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY OTHER GOVERNMENTAL AUTHORITY WITH JURISDICTION OVER SUCH TRANSFER, (B) TERMINATE THE EXISTENCE OF NOBLE MIDSTREAM PARTNERS LP UNDER THE LAWS OF THE
STATE OF DELAWARE OR (C) CAUSE NOBLE MIDSTREAM PARTNERS LP TO BE TREATED AS AN ASSOCIATION TAXABLE AS A CORPORATION OR OTHERWISE TO BE TAXED AS AN ENTITY FOR U.S. FEDERAL INCOME TAX PURPOSES (TO THE EXTENT NOT ALREADY SO TREATED OR TAXED). THE
GENERAL PARTNER OF NOBLE MIDSTREAM PARTNERS LP MAY IMPOSE ADDITIONAL RESTRICTIONS ON THE TRANSFER OF THIS SECURITY IF IT RECEIVES AN OPINION OF COUNSEL THAT SUCH RESTRICTIONS ARE NECESSARY TO (A) AVOID A SIGNIFICANT RISK OF NOBLE MIDSTREAM
PARTNERS LP BECOMING TAXABLE AS A CORPORATION OR OTHERWISE BECOMING TAXABLE AS AN ENTITY FOR U.S. FEDERAL INCOME TAX PURPOSES (TO THE EXTENT NOT ALREADY SO TREATED OR TAXED) OR (B) PRESERVE THE UNIFORMITY OF THE LIMITED PARTNER INTERESTS IN
NOBLE MIDSTREAM PARTNERS LP (OR ANY CLASS OR CLASSES THEREOF). THIS SECURITY MAY BE SUBJECT TO ADDITIONAL RESTRICTIONS ON ITS TRANSFER PROVIDED IN THE PARTNERSHIP AGREEMENT. COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE
BY THE HOLDER OF RECORD OF THIS SECURITY TO THE SECRETARY OF THE GENERAL PARTNER AT THE PRINCIPAL EXECUTIVE OFFICES OF THE PARTNERSHIP. EXCEPT AS SET FORTH IN SECTION 4.9 OF THE PARTNERSHIP AGREEMENT. THE RESTRICTIONS SET FORTH ABOVE SHALL NOT
PRECLUDE THE SETTLEMENT OF ANY TRANSACTIONS INVOLVING THIS SECURITY ENTERED INTO THROUGH THE FACILITIES OF ANY NATIONAL SECURITIES EXCHANGE ON WHICH THIS SECURITY IS LISTED OR ADMITTED TO TRADING.
The Holder, by accepting this Certificate, is deemed to have (i) requested admission as, and agreed to become, a Limited Partner and
to have agreed to comply with and be bound by and to have executed the
A-87
Partnership Agreement, (ii) represented and warranted that the Holder has all right, power and authority and, if an individual, the capacity necessary to enter into the Partnership Agreement
and (iii) made the waivers and given the consents and approvals contained in the Partnership Agreement.
This Certificate
shall not be valid for any purpose unless it has been countersigned and registered by the Transfer Agent. This Certificate shall be governed by and construed in accordance with the laws of the State of Delaware.
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Dated:
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NOBLE MIDSTREAM PARTNERS LP
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By:
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NOBLE MIDSTREAM GP LLC,
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its general partner
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By:
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By:
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Countersigned and Registered by:
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as a Transfer Agent
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By:
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Authorized Signature
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A-88
[Reverse of Certificate]
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face of this Certificate, shall be construed as follows according to applicable laws or regulations:
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TEN COM—as tenants in common
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UNIF GIFT/TRANSFERS MIN ACT—
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TEN ENT—as tenants by the entireties
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Custodian
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JT TEN—
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as joint tenants with right of survivorship and not as tenants in common
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(Cust)
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(Minor)
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under Uniform Gifts/Transfers to CD Minors
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Act:
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(State)
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Additional abbreviations, though not in the above list, may also be used.
A-89
ASSIGNMENT OF COMMON UNITS OF
NOBLE MIDSTREAM PARTNERS LP
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FOR VALUE RECEIVED,
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hereby assigns, conveys, sells and transfers unto
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(Please print or typewrite name and address of assignee)
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(Please insert Social Security or other identifying number of assignee)
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Common Units representing limited partner interests evidenced by this Certificate, subject to the
Partnership Agreement, and does hereby irrevocably constitute and appoint as its attorney-in-fact with full power of substitution to transfer the same in the records of Noble
Midstream Partners LP.
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Dated:
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NOTE: The signature to any endorsement hereon must correspond with the name as written upon the face of this Certificate in every particular, without
alteration, enlargement or change.
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(Signature)
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(Signature)
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THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED
SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE
17Ad-15
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No transfer of the Common Units evidenced hereby will be registered in the records of the Partnership,
unless the Certificate evidencing the Common Units to be transferred is surrendered for registration or transfer.
A-90
APPENDIX B Glossary of Terms
Bbl or barrel:
One stock tank barrel, or 42 U.S. gallons liquid volume, used in reference to crude oil, NGLs
or other liquid hydrocarbons.
Bbl/d:
Bbl per day.
BBtu:
One billion British thermal units.
BBtu/d:
BBtu per day.
Bcfe:
One billion cubic feet of natural gas equivalent with one barrel of crude oil or NGLs converted to six thousand cubic feet of natural gas.
Bcfe/d:
Bcfe per day.
Bench:
Development at different geologic strata.
Boe:
Barrels of crude oil equivalent.
Boe/d:
Boe per day.
Bpm:
Barrels per month.
Brent:
Brent
Crude, a crude oil pricing benchmark.
Btu:
British thermal units.
DJ Basin:
Denver-Julesburg Basin, a geologic structural basin centered in eastern Colorado.
DOT:
The U.S. Department of Transportation.
EIA:
The U.S. Energy Information Administration.
EPA:
The U.S. Environmental Protection Agency.
FERC:
The U.S. Federal Energy Regulatory Commission.
field:
The general area encompassed by one or more crude oil or natural gas reservoirs or pools that are located on a
single geologic feature, that are otherwise closely related to the same geologic feature (either structural or stratigraphic).
hydrocarbon:
An organic compound containing only carbon and hydrogen.
IRS:
The Internal Revenue Service.
MBbl:
One thousand barrels.
MBbl/d:
One thousand barrels per day.
MBoe:
Thousand barrels of crude oil equivalent.
MBoe/d:
MBoe per day.
Mcf:
One thousand cubic feet of natural gas.
Mcf/d:
One thousand cubic feet per day.
B-1
MMBoe:
One million barrels of crude oil equivalent.
MMBtu:
One million British thermal units.
MMBbl:
One million barrels.
MMBbl/d:
One million barrels per day.
MMcf:
One million cubic feet of natural gas.
MMcfe:
One million cubic feet equivalent, determined using a ratio of six Mcf of natural gas to one barrel of crude oil or
NGLs.
MMcf/d:
One million cubic feet per day.
MMcfe/d:
One million cubic feet equivalent per day.
natural gas:
Hydrocarbon gas found in the earth, composed of methane, ethane, butane, propane and other gases.
NGLs:
Natural gas liquids, which consist primarily of ethane, propane, isobutane, normal butane and
natural gasoline.
NYMEX:
New York Mercantile Exchange.
OECD:
Organisation for Economic Co-operation and Development
SEC:
The U.S. Securities and Exchange Commission.
PHMSA:
Pipeline and Hazardous Materials Safety Administration.
throughput:
The volume of product transported or passing through a pipeline, plant, terminal or other facility.
WTI:
West Texas Intermediate, a crude oil pricing benchmark.
B-2
Noble Midstream Partners LP
Common Units
Representing Limited Partner Interests
Prospectus
, 2016
Lead Book-Running Managers
Barclays
Baird
J.P. Morgan
Through and including
, 2016 (the 25th day after the date of this prospectus), federal securities laws may require all dealers that effect transactions
in these securities, whether or not participating in this offering, to deliver a prospectus. This requirement is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment
or subscription.
Part II
Information Not Required in Prospectus
Item 13. Other Expenses of Issuance and
Distribution
Set forth below are the expenses (other than underwriting discounts and commissions and the structuring fee)
expected to be incurred in connection with the issuance and distribution of the securities registered hereby. With the exception of the SEC registration fee, the FINRA filing fee and the NYSE listing fee, the amounts set forth below are estimates.
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SEC registration fee
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$
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30,400
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FINRA filing fee
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45,800
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NYSE listing fee
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125,000
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Printing and engraving expenses
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800,000
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Fees and expenses of legal counsel
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1,300,000
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Accounting fees and expenses
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700,000
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Transfer agent and registrar fees
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6,500
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Miscellaneous
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42,300
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Total
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$
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3,050,000
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Item 14. Indemnification of Directors and Officers
The section of the prospectus entitled “Our Partnership Agreement—Indemnification” discloses that we will generally
indemnify officers, directors and affiliates of the general partner to the fullest extent permitted by the law against all losses, claims, damages or similar events and is incorporated herein by this reference. Reference is also made to the
underwriting agreement to be filed as an exhibit to this registration statement in which Noble Midstream Partners LP and certain of its affiliates will agree to indemnify the underwriters against certain liabilities, including liabilities under the
Securities Act, and to contribute to payments that may be required to be made in respect of these liabilities. Subject to any terms, conditions or restrictions set forth in the partnership agreement, Section 17-108 of the Delaware Act empowers
a Delaware limited partnership to indemnify and hold harmless any partner or other persons from and against all claims and demands whatsoever. Noble has purchased insurance covering the general partner’s officers and directors against
liabilities asserted and expenses incurred in connection with their activities as officers and directors of the general partner or any of its direct or indirect subsidiaries.
Item 15. Recent Sales of Unregistered Securities
On December 23,
2014, in connection with the formation of the partnership, Noble Midstream Partners LP issued to Noble Midstream GP LLC a 1% general partner interest in the partnership for $20.00 and a 99% limited partner interest in the partnership for $980.00 in
an offering exempt from registration under Section 4(2) of the Securities Act. There have been no other sales of unregistered securities within the past three years.
II-1
Item 16. Exhibits
The following documents are filed as exhibits to this registration statement:
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Exhibit
number
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Description
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1.1
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Form of Underwriting Agreement (including form of Lock-Up Agreement)
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3.1*
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Certificate of Limited Partnership of Noble Midstream Partners LP (previously filed as Exhibit 3.1 to the Noble Midstream Partners LP Registration Statement on Form S-1
(333-207560) filed on October 22, 2015)
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3.2*
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Amendment to the Certificate of Limited Partnership of Noble Midstream Partners LP (previously filed as Exhibit 3.2 to the Noble Midstream Partners LP Registration Statement on
Form S-1
(333-207560)
filed on October 22, 2015)
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3.3*
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Amendment to the Certificate of Limited Partnership of Noble Midstream Partners LP
(previously filed as Exhibit 3.3 to Amendment No. 1 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on November
6, 2015)
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3.4
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Form of First Amended and Restated Agreement of Limited Partnership of Noble Midstream Partners LP (included as Appendix A to the Prospectus)
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3.5*
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Certificate of Formation of Noble Midstream GP LLC (previously filed as Exhibit 3.4 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on
October 22, 2015)
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3.6*
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Amendment to Certificate of Formation of Noble Midstream GP LLC (previously filed as Exhibit 3.5 to the Noble Midstream Partners LP Registration Statement on Form S-1
(333-207560)
filed on October 22, 2015)
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3.7*
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Form of First Amended and Restated Limited Liability Company Agreement of Noble Midstream GP LLC (previously filed as Exhibit 3.7 to Amendment No. 1 to the Noble Midstream
Partners LP Registration Statement on Form S-1 (333-207560) filed on November 6, 2015)
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5.1*
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Opinion of Andrews Kurth LLP as to the legality of the securities being registered (previously filed as Exhibit 5.1 to Amendment No. 2 to the Noble Midstream Partners LP
Registration Statement on Form S-1
(333-207560)
filed on November 12, 2015)
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8.1*
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Opinion of Andrews Kurth LLP relating to tax matters (previously filed as Exhibit 8.1 to Amendment No. 2 to the Noble Midstream Partners LP Registration Statement on
Form S-1
(333-207560)
filed on November 12, 2015)
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10.1
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Form of Contribution, Conveyance and Assumption Agreement
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10.2#*
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Form of Noble Midstream Partners LP 2016 Long-Term Incentive Plan (previously filed as Exhibit 10.2 to Amendment No. 1 to the Noble Midstream Partners LP Registration
Statement on Form S-1 (333-207560) filed on November 6, 2015)
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10.3
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Form of Omnibus Agreement
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10.4
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Form of Operational Services and Secondment Agreement
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10.5*
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Form of Credit Agreement (previously filed as Exhibit 10.5 to Amendment No. 1 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on
November 6, 2015)
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10.6**
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Second Amended and Restated Agreement Terms and Conditions Relating to Gas Gathering Services (previously filed as Exhibit 10.6 to Amendment No. 4 to the Noble Midstream Partners
LP Registration Statement on Form S-1 (333-207560) filed on May 12, 2016)
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10.7†*
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Amended and Restated Gas Gathering Agreement, Agreement Addendum 01, effective as of October 1, 2015, among Noble Energy, Inc., Noble Midstream Services, LLC and Colorado River
DevCo LP (previously filed as Exhibit 10.7 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on October 22, 2015)
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II-2
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Exhibit
number
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Description
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10.7.1†**
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Second Amended and Restated Gas Gathering Agreement, Agreement Addendum 01, effective as of March 31, 2016, among Noble Energy, Inc. and Colorado River DevCo LP (previously filed
as Exhibit 10.8 to Amendment No. 4 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on May 12, 2016)
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10.7.2
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Form of Amendment 01 to that certain Second Amended and Restated Gas Gathering Agreement, together with Agreement Addendum 01, effective as of September 1, 2016, among Noble
Energy, Inc. and Colorado River DevCo LP
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10.8*
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Amended and Restated Gas Gathering Agreement, Agreement Addendum 03, effective as of October 1, 2015, among Noble Energy, Inc., Noble Midstream Services, LLC and Green River
DevCo LP (previously filed as Exhibit 10.8 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on October 22, 2015)
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10.8.1†**
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Second Amended and Restated Gas Gathering Agreement, Agreement Addendum 03, effective as of March 31, 2016, among Noble Energy, Inc. and Green River DevCo LP (previously filed as
Exhibit 10.10 to Amendment No. 4 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on May 12, 2016)
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10.8.1.1
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Form of Amendment 01 to that certain Second Amended and Restated Gas Gathering Agreement, together with Agreement Addendum 03, effective as of September 1, 2016, among Noble
Energy, Inc. and Green River DevCo LP
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10.8.2**
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Second Amended and Restated Gas Gathering Agreement, Agreement Addendum XX, effective as of March 31, 2016, among Noble Energy, Inc. and Noble Midstream Services, LLC (previously
filed as Exhibit 10.11 to Amendment No. 4 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on May 12, 2016)
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10.9*
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Agreement Terms and Conditions Relating to Crude Oil Treating Services (previously filed as Exhibit 10.9 to the Noble Midstream Partners LP Registration Statement on Form S-1
(333-207560)
filed on October 22, 2015)
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10.10†*
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Second Amended and Restated Crude Oil Treating Agreement, Agreement Addendum 01, effective as of October 1, 2015, among Noble Energy, Inc., Noble Midstream Services, LLC and
Colorado River DevCo LP (previously filed as Exhibit 10.10 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on October 22, 2015)
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10.11**
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Second Amended and Restated Agreement Terms and Conditions Relating to Produced Water Services (previously filed as Exhibit 10.14 to Amendment No. 4 to the Noble Midstream
Partners LP Registration Statement on Form S-1 (333-207560) filed on May 12, 2016)
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10.12*
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Amended and Restated Produced Water Services Agreement, Agreement Addendum 01, effective as of October 1, 2015, among Noble Energy, Inc., Noble Midstream Services, LLC and
Colorado River DevCo LP (previously filed as Exhibit 10.12 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on October 22, 2015)
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10.12.1†*
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Amendment 01 to Amended and Restated Produced Water Services Agreement, Agreement Addendum 01, effective as of January 1, 2016, among Noble Energy, Inc., Noble Midstream
Services, LLC and Colorado River DevCo LP (previously filed as Exhibit 10.12.1 to Amendment No. 3 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on April 1, 2016)
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10.12.2†**
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Second Amended and Restated Produced Water Services Agreement, Agreement Addendum 01,
effective as of March 31, 2016, among Noble Energy, Inc. and Colorado River DevCo LP (previously filed as Exhibit 10.16 to Amendment No. 4 to the Noble
Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on May 12, 2016)
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II-3
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Exhibit
number
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Description
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10.12.3
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Form of Amendment 01 to that certain Second Amended and Restated Produced Water Services Agreement, together with Agreement Addendum 01, effective as of September 1, 2016, among
Noble Energy, Inc. and Colorado River DevCo LP
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10.13†*
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Amended and Restated Produced Water Services Agreement, Agreement Addendum 02, effective as of October 1, 2015, among Noble Energy, Inc., Noble Midstream Services, LLC and San
Juan River DevCo LP (previously filed as Exhibit 10.13 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on October 22, 2015)
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10.13.1†**
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Second Amended and Restated Produced Water Services Agreement, Agreement Addendum 02, effective as of March 31, 2016, among Noble Energy, Inc. and San Juan River DevCo LP
(previously filed as Exhibit 10.18 to Amendment No. 4 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on May 12, 2016)
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10.13.2
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Form of Amendment 01 to that certain Second Amended and Restated Produced Water Services Agreement, together with Agreement Addendum 02, effective as of September 1, 2016, among
Noble Energy, Inc. and San Juan River DevCo LP
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10.14*
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Amended and Restated Produced Water Services Agreement, Agreement Addendum 03, effective as of October 1, 2015, among Noble Energy, Inc., Noble Midstream Services, LLC and Green
River DevCo LP (previously filed as Exhibit 10.14 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on October 22, 2015)
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10.14.1**
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Second Amended and Restated Produced Water Services Agreement, Agreement Addendum 03, effective as of March 31, 2016, among Noble Energy, Inc. and Green River DevCo LP
(previously filed as Exhibit 10.20 to Amendment No. 4 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on May 12, 2016)
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10.14.2
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Form of Amendment 01 to that certain Second Amended and Restated Produced Water Services Agreement, together with Agreement Addendum 03, effective as of September 1, 2016, among
Noble Energy, Inc. and Green River DevCo LP
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10.15*
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Amended and Restated Produced Water Services Agreement, Agreement Addendum 04, effective as of October 1, 2015, among Noble Energy, Inc., Noble Midstream Services, LLC and
Gunnison River DevCo LP (previously filed as Exhibit 10.15 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on October 22, 2015)
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10.15.1**
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Second Amended and Restated Produced Water Services Agreement, Agreement Addendum 04, effective as of March 31, 2016, among Noble Energy, Inc. and Gunnison River DevCo LP
(previously filed as Exhibit 10.22 to Amendment No. 4 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on May 12, 2016)
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10.15.2
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Form of Amendment 01 to that certain Second Amended and Restated Produced Water Services Agreement, together with Agreement Addendum 04, effective as of September 1, 2016, among
Noble Energy, Inc. and Gunnison River DevCo LP
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10.16*
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Amended and Restated Produced Water Services Agreement, Agreement Addendum 05, effective as of October 1, 2015, among Noble Energy, Inc., Noble Midstream Services, LLC and
Laramie River DevCo LP (previously filed as Exhibit 10.16 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on October 22, 2015)
|
|
|
|
|
10.16.1**
|
|
Second Amended and Restated Produced Water Services Agreement, Agreement Addendum 05, effective as of March 31, 2016, among Noble Energy, Inc. and Laramie River DevCo LP
(previously filed as Exhibit 10.24 to Amendment No. 4 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on May 12, 2016)
|
|
|
|
|
10.16.1.1
|
|
Form of Amendment 01 to that certain Second Amended and Restated Produced Water Services Agreement, together with Agreement Addendum 05, effective as of September 1, 2016, among
Noble Energy, Inc. and Laramie River DevCo LP
|
II-4
|
|
|
|
|
Exhibit
number
|
|
Description
|
|
|
|
|
10.16.2**
|
|
Second Amended and Restated Produced Water Services Agreement, Agreement Addendum XX, effective as of March 31, 2016, among Noble Energy, Inc. and Noble Midstream Services, LLC
(previously filed as Exhibit 10.25 to Amendment No. 4 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on May 12, 2016)
|
|
|
|
|
10.17**
|
|
Second Amended and Restated Agreement Terms and Conditions Relating to Fresh Water Services (previously filed as Exhibit 10.26 to Amendment No. 4 to the Noble Midstream Partners
LP Registration Statement on Form S-1 (333-207560) filed on May 12, 2016)
|
|
|
|
|
10.18†*
|
|
Amended and Restated Fresh Water Services Agreement, Agreement Addendum 01, effective as of October 1, 2015, among Noble Energy, Inc., Noble Midstream Services, LLC and Colorado
River DevCo LP (previously filed as Exhibit 10.18 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on October 22, 2015)
|
|
|
|
|
10.18.1†**
|
|
Second Amended and Restated Fresh Water Services Agreement, Agreement Addendum 01, effective as of March 31, 2016, among Noble Energy, Inc. and Colorado River DevCo LP
(previously filed as Exhibit 10.28 to Amendment No. 4 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on May 12, 2016)
|
|
|
|
|
10.18.2
|
|
Form of Amendment 01 to that certain Second Amended and Restated Fresh Water Services Agreement, together with Agreement Addendum 01, effective as of September 1, 2016, among
Noble Energy, Inc. and Colorado River DevCo LP
|
|
|
|
|
10.19†*
|
|
Amended and Restated Fresh Water Services Agreement, Agreement Addendum 02, effective as of October 1, 2015, among Noble Energy, Inc., Noble Midstream Services, LLC and San Juan
River DevCo LP (previously filed as Exhibit 10.19 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on October 22, 2015)
|
|
|
|
|
10.19.1†**
|
|
Second Amended and Restated Fresh Water Services Agreement, Agreement Addendum 02, effective as of March 31, 2016, among Noble Energy, Inc. and San Juan River DevCo LP
(previously filed as Exhibit 10.30 to Amendment No. 4 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on May 12, 2016)
|
|
|
|
|
10.19.2
|
|
Form of Amendment 01 to that certain Second Amended and Restated Fresh Water Services Agreement, together with Agreement Addendum 02, effective as of September 1, 2016, among
Noble Energy, Inc. and San Juan River DevCo LP
|
|
|
|
|
10.20†*
|
|
Amended and Restated Fresh Water Services Agreement, Agreement Addendum 03, effective as of October 1, 2015, among Noble Energy, Inc., Noble Midstream Services, LLC and Green
River DevCo LP (previously filed as Exhibit 10.20 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on October 22, 2015)
|
|
|
|
|
10.20.1†**
|
|
Second Amended and Restated Fresh Water Services Agreement, Agreement Addendum 03, effective as of March 31, 2016, among Noble Energy, Inc. and Green River DevCo LP (previously
filed as Exhibit 10.32 to Amendment No. 4 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on May 12, 2016)
|
|
|
|
|
10.20.2
|
|
Form of Amendment 01 to that certain Second Amended and Restated Fresh Water Services Agreement, together with Agreement Addendum 03, effective as of September 1, 2016, among
Noble Energy, Inc. and Green River DevCo LP
|
|
|
|
|
10.21*
|
|
Amended and Restated Fresh Water Services Agreement, Agreement Addendum 04, effective as of October 1, 2015, among Noble Energy, Inc., Noble Midstream Services, LLC and Gunnison
River DevCo LP (previously filed as Exhibit 10.21 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on October 22, 2015)
|
II-5
|
|
|
|
|
Exhibit
number
|
|
Description
|
|
|
|
|
10.21.1**
|
|
Second Amended and Restated Fresh Water Services Agreement, Agreement Addendum 04, effective as of March 31, 2016, among Noble Energy, Inc. and Gunnison River DevCo LP
(previously filed as Exhibit 10.34 to Amendment No. 4 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on May 12, 2016)
|
|
|
|
|
10.21.2
|
|
Form of Amendment 01 to that certain Second Amended and Restated Fresh Water Services Agreement, together with Agreement Addendum 04, effective as of September 1, 2016, among
Noble Energy, Inc. and Gunnison River DevCo LP
|
|
|
|
|
10.22*
|
|
Amended and Restated Fresh Water Services Agreement, Agreement Addendum 05, effective as of October 1, 2015, among Noble Energy, Inc., Noble Midstream Services, LLC and Laramie
River DevCo LP (previously filed as Exhibit 10.22 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on October 22, 2015)
|
|
|
|
|
10.22.1**
|
|
Second Amended and Restated Fresh Water Services Agreement, Agreement Addendum 05, effective as of March 31, 2016, among Noble Energy, Inc. and Laramie River DevCo LP (previously
filed as Exhibit 10.36 to Amendment No. 4 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on May 12, 2016)
|
|
|
|
|
10.22.1.1
|
|
Form of Amendment 01 to that certain Second Amended and Restated Fresh Water Services Agreement, together with Agreement Addendum 05, effective as of September 1, 2016, among
Noble Energy, Inc. and Laramie River DevCo LP
|
|
|
|
|
10.22.2**
|
|
Second Amended and Restated Fresh Water Services Agreement, Agreement Addendum XX, effective as of March 31, 2016, among Noble Energy, Inc. and Noble Midstream Services, LLC
(previously filed as Exhibit 10.37 to Amendment No. 4 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on May 12, 2016)
|
|
|
|
|
10.23**
|
|
Second Amended and Restated Terms and Conditions Relating to Crude Oil Gathering Services (previously filed as Exhibit 10.38 to Amendment No. 4 to the Noble Midstream Partners LP
Registration Statement on Form S-1 (333-207560) filed on May 12, 2016)
|
|
|
|
|
10.24†*
|
|
Amended and Restated Crude Oil Gathering Agreement, Agreement Addendum 01, effective as of October 1, 2015, among Noble Energy, Inc., Noble Midstream Services, LLC and Colorado
River DevCo LP (previously filed as Exhibit 10.24 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on October 22, 2015)
|
|
|
|
|
10.24.1†**
|
|
Second Amended and Restated Crude Oil Gathering Agreement, Agreement Addendum 01, effective as of March 31, 2016, among Noble Energy, Inc. and Colorado River DevCo LP (previously
filed as Exhibit 10.40 to Amendment No. 4 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on May 12, 2016)
|
|
|
|
|
10.24.2
|
|
Form of Amendment 01 to that certain Second Amended and Restated Crude Oil Gathering Agreement, together with Agreement Addendum 01, effective as of September 1, 2016, among
Noble Energy, Inc. and Colorado River DevCo LP
|
|
|
|
|
10.25†*
|
|
Amended and Restated Crude Oil Gathering Agreement, Agreement Addendum 02, effective as of October 1, 2015, among Noble Energy, Inc., Noble Midstream Services, LLC and Colorado
River DevCo LP (previously filed as Exhibit 10.25 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on October 22, 2015)
|
|
|
|
|
10.25.1†**
|
|
Second Amended and Restated Crude Oil Gathering Agreement, Agreement Addendum 02, effective as of March 31, 2016, among Noble Energy, Inc. and Colorado River DevCo LP (previously
filed as Exhibit 10.42 to Amendment No. 4 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on May 12, 2016)
|
II-6
|
|
|
|
|
Exhibit
number
|
|
Description
|
|
|
|
|
10.25.2
|
|
Form of Amendment 01 to that certain Second Amended and Restated Crude Oil Gathering Agreement, together with Agreement Addendum 02, effective as of September 1, 2016, among
Noble Energy, Inc. and Colorado River DevCo LP
|
|
|
|
|
10.26*
|
|
Amended and Restated Crude Oil Gathering Agreement, Agreement Addendum 03, effective as of October 1, 2015, among Noble Energy, Inc., Noble Midstream Services, LLC and Green
River DevCo LP (previously filed as Exhibit 10.26 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on October 22, 2015)
|
|
|
|
|
10.26.1**
|
|
Second Amended and Restated Crude Oil Gathering Agreement, Agreement Addendum 03, effective as of March 31, 2016, among Noble Energy, Inc. and Green River DevCo LP (previously
filed as Exhibit 10.44 to Amendment No. 4 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on May 12, 2016)
|
|
|
|
|
10.26.2
|
|
Form of Amendment 01 to that certain Second Amended and Restated Crude Oil Gathering Agreement, together with Agreement Addendum 03, effective as of September 1, 2016, among
Noble Energy, Inc. and Green River DevCo LP
|
|
|
|
|
10.27*
|
|
Amended and Restated Crude Oil Gathering Agreement, Agreement Addendum 04, effective as of October 1, 2015, among Noble Energy, Inc., Noble Midstream Services, LLC and Gunnison
River DevCo LP (previously filed as Exhibit 10.27 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on October 22, 2015)
|
|
|
|
|
10.27.1**
|
|
Second Amended and Restated Crude Oil Gathering Agreement, Agreement Addendum 04, effective as of March 31, 2016, among Noble Energy, Inc. and Gunnison River DevCo LP (previously
filed as Exhibit 10.46 to Amendment No. 4 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on May 12, 2016)
|
|
|
|
|
10.27.2
|
|
Form of Amendment 01 to that certain Second Amended and Restated Crude Oil Gathering Agreement, together with Agreement Addendum 04, effective as of September 1, 2016, among
Noble Energy, Inc. and Gunnison River DevCo LP
|
|
|
|
|
10.28*
|
|
Amended and Restated Crude Oil Gathering Agreement, Agreement Addendum 05, effective as of October 1, 2015, among Noble Energy, Inc., Noble Midstream Services, LLC and Laramie
River DevCo LP (previously filed as Exhibit 10.28 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on October 22, 2015)
|
|
|
|
|
10.28.1**
|
|
Second Amended and Restated Crude Oil Gathering Agreement, Agreement Addendum 05, effective as of March 31, 2016, among Noble Energy, Inc. and Laramie River DevCo LP (previously
filed as Exhibit 10.48 to Amendment No. 4 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on May 12, 2016)
|
|
|
|
|
10.28.1.1
|
|
Form of Amendment 01 to that certain Second Amended and Restated Crude Oil Gathering Agreement, together with Agreement Addendum 05, effective as of September 1, 2016, among
Noble Energy, Inc. and Laramie River DevCo LP
|
|
|
|
|
10.28.2**
|
|
Second Amended and Restated Crude Oil Gathering Agreement, Agreement Addendum XX, effective as of March 31, 2016, among Noble Energy, Inc. and Noble Midstream Services, LLC
(previously filed as Exhibit 10.49 to Amendment No. 4 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on May 12, 2016)
|
|
|
|
|
10.29*
|
|
Form of Agreement of Limited Partnership of Colorado River DevCo LP (previously filed as Exhibit 10.29 to Amendment No. 1 to the Noble Midstream Partners LP Registration
Statement on Form S-1 (333-207560) filed on November 6, 2015)
|
|
|
|
|
10.30*
|
|
Form of Agreement of Limited Partnership of Green River DevCo LP (previously filed as Exhibit 10.30 to Amendment No. 1 to the Noble Midstream Partners LP Registration Statement
on Form S-1 (333-207560) filed on November 6, 2015)
|
II-7
|
|
|
|
|
Exhibit
number
|
|
Description
|
|
|
|
|
10.31*
|
|
Form of Agreement of Limited Partnership of Gunnison River DevCo LP (previously filed as Exhibit 10.31 to Amendment No. 1 to the Noble Midstream Partners LP Registration
Statement on Form S-1 (333-207560) filed on November 6, 2015)
|
|
|
|
|
10.32*
|
|
Form of Agreement of Limited Partnership of Laramie River DevCo LP (previously filed as Exhibit 10.32 to Amendment No. 1 to the Noble Midstream Partners LP Registration Statement
on Form S-1 (333-207560) filed on November 6, 2015)
|
|
|
|
|
10.33*
|
|
Form of Agreement of Limited Partnership of San Juan River DevCo LP (previously filed as Exhibit 10.33 to Amendment No. 1 to the Noble Midstream Partners LP Registration
Statement on Form S-1 (333-207560) filed on November 6, 2015)
|
|
|
|
|
10.34
|
|
Form of Agreement of Limited Partnership of Blanco River DevCo LP
|
|
|
|
|
10.35
|
|
Form of Texas Agreement Terms and Conditions Relating to Crude Oil Gathering Services
|
|
|
|
|
10.36†
|
|
Form of Texas Oil Gathering Agreement, Agreement Addendum 01, effective as of September 1, 2016, between Rosetta Resources Operating LP and Blanco River DevCo LP
|
|
|
|
|
10.37
|
|
Form of Texas Agreement Terms and Conditions Relating to Produced Water Services
|
|
|
|
|
10.38†
|
|
Form of Texas Produced Water Services Agreement, Agreement Addendum 01, effective as of September 1, 2016, between Rosetta Resources Operating LP and Blanco River DevCo
LP
|
|
|
|
|
21.1
|
|
List of Subsidiaries of Noble Midstream Partners LP
|
|
|
|
|
23.1
|
|
Consent of KPMG LLP
|
|
|
|
|
23.2
|
|
Consent of KPMG LLP
|
|
|
|
|
23.3*
|
|
Consent of Andrews Kurth LLP (contained in Exhibit 5.1)
|
|
|
|
|
23.4*
|
|
Consent of Andrews Kurth LLP (contained in Exhibit 8.1)
|
|
|
|
|
23.5
|
|
Consent of Director Nominee
|
|
|
|
|
24.1*
|
|
Powers of Attorney (contained on the signature page to this Registration Statement)
|
|
**
|
Filed previously and herewith.
|
|
#
|
Compensatory plan, contract or arrangement.
|
|
†
|
Confidential treatment has been requested for certain portions thereof pursuant to a Confidential Treatment Request filed with the Securities and Exchange Commission.
Such provisions have been filed separately with the Securities and Exchange Commission.
|
Item 17. Undertakings
The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting
agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
II-8
The undersigned registrant hereby undertakes that,
(1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) That, for the purpose of determining liability under the Securities Act of 1933 to any
purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than
registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall
be
deemed to be part of and included in the registration statement as of the date it is first used after effectiveness.
Provided, however
, that no statement made in a registration statement or prospectus that is part of the
registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to
such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
(4) That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial
distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities
to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such
purchaser:
(a) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be
filed pursuant to Rule 424;
(b) If the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule
424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration
statement as of the date it is first used after effectiveness.
Provided, however,
that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed
incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in
the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use;
(c) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
(d) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned
registrant or its securities provided by or on behalf of the undersigned registrant; and
(e) Any other communication that is
an offer in the offering made by the undersigned registrant to the purchaser.
II-9
The undersigned registrant undertakes to send to each common unitholder, at least on an
annual basis, a detailed statement of any transactions with Noble Midstream GP LLC, our general partner, or its affiliates and of fees, commissions, compensation and other benefits paid, or accrued to Noble Midstream GP LLC or its affiliates for the
fiscal year completed, showing the amount paid or accrued to each recipient and the services performed.
The registrant
undertakes to provide to the common unitholders the financial statements required by Form 10-K for the first full fiscal year of operations of the registrant.
II-10
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City of Houston, State of Texas, on July 21, 2016.
|
|
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|
|
NOBLE MIDSTREAM PARTNERS LP
|
|
|
|
|
By:
|
|
Noble Midstream GP LLC,
|
|
|
|
its general partner
|
|
|
|
|
|
By:
|
|
/s/ Terry R. Gerhart
|
|
|
|
Terry R. Gerhart
|
|
|
|
Chief Executive Officer
|
Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration
Statement has been signed below by the following persons in the capacities indicated on July 21, 2016.
|
|
|
|
|
|
|
|
/s/ Terry R. Gerhart
Terry R. Gerhart
|
|
Chief Executive Officer and Director
(Principal Executive Officer)
|
|
|
|
|
*
John F. Bookout, IV
|
|
Chief Financial Officer
(Principal Financial Officer)
|
|
|
|
|
*
Dustin A. Hatley
|
|
Chief Accounting Officer
(Principal Accounting Officer)
|
|
|
|
|
*
Kenneth M. Fisher
|
|
Chairman of the Board of Directors
|
|
|
|
|
*
Charles J. Rimer
|
|
Director
|
|
|
|
|
*
Gary W. Willingham
|
|
Director
|
* Terry R. Gerhart hereby signs this Amendment No. 5 to the Registration Statement on behalf of
the indicated persons for whom he is attorney-in-fact on July 21, 2016, pursuant to powers of attorney previously included with the Registration Statement on Form S-1 of Noble Midstream Partners LP filed on October 22, 2015 with the Securities and
Exchange Commission.
|
|
|
|
|
|
|
|
By:
|
|
/s/ Terry R. Gerhart
|
|
|
|
Terry R. Gerhart
Attorney-in-fact
|
II-11
Exhibit Index
|
|
|
|
|
Exhibit
number
|
|
Description
|
|
|
|
|
1.1
|
|
Form of Underwriting Agreement (including form of Lock-Up Agreement)
|
|
|
|
|
3.1*
|
|
Certificate of Limited Partnership of Noble Midstream Partners LP (previously filed as Exhibit 3.1 to the Noble Midstream Partners LP Registration Statement on Form S-1
(333-207560) filed on October 22, 2015)
|
|
|
|
|
3.2*
|
|
Amendment to the Certificate of Limited Partnership of Noble Midstream Partners LP (previously filed as Exhibit 3.2 to the Noble Midstream Partners LP Registration Statement on
Form S-1
(333-207560)
filed on October 22, 2015)
|
|
|
|
|
3.3*
|
|
Amendment to the Certificate of Limited Partnership of Noble Midstream Partners LP (previously filed as Exhibit 3.3 to Amendment No. 1 to the Noble Midstream Partners LP
Registration Statement on Form S-1 (333-207560) filed on November 6, 2015)
|
|
|
|
|
3.4
|
|
Form of First Amended and Restated Agreement of Limited Partnership of Noble Midstream Partners LP (included as Appendix A to the Prospectus)
|
|
|
|
|
3.5*
|
|
Certificate of Formation of Noble Midstream GP LLC (previously filed as Exhibit 3.4 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on
October 22, 2015)
|
|
|
|
|
3.6*
|
|
Amendment to Certificate of Formation of Noble Midstream GP LLC (previously filed as Exhibit 3.5 to the Noble Midstream Partners LP Registration Statement on Form S-1
(333-207560) filed on October 22, 2015)
|
|
|
|
|
3.7*
|
|
Form of First Amended and Restated Limited Liability Company Agreement of Noble Midstream GP LLC (previously filed as Exhibit 3.7 to Amendment No. 1 to the Noble Midstream
Partners LP Registration Statement on Form S-1 (333-207560) filed on November 6, 2015)
|
|
|
|
|
5.1*
|
|
Opinion of Andrews Kurth LLP as to the legality of the securities being registered (previously filed as Exhibit 5.1 to Amendment No. 2 to the Noble Midstream Partners LP
Registration Statement on Form S-1 (333-207560) filed on November 12, 2015)
|
|
|
|
|
8.1*
|
|
Opinion of Andrews Kurth LLP relating to tax matters (previously filed as Exhibit 8.1 to Amendment No. 2 to the Noble Midstream Partners LP Registration Statement on Form S-1
(333-207560)
filed on November 12, 2015)
|
|
|
|
|
10.1
|
|
Form of Contribution, Conveyance and Assumption Agreement
|
|
|
|
|
10.2#*
|
|
Form of Noble Midstream Partners LP 2016 Long-Term Incentive Plan (previously filed as Exhibit 10.2 to Amendment No. 1 to the Noble Midstream Partners LP Registration Statement
on Form S-1 (333-207560) filed on November 6, 2015)
|
|
|
|
|
10.3
|
|
Form of Omnibus Agreement
|
|
|
|
|
10.4
|
|
Form of Operational Services and Secondment Agreement
|
|
|
|
|
10.5*
|
|
Form of Credit Agreement (previously filed as Exhibit 10.5 to Amendment No. 1 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on November
6, 2015)
|
|
|
|
|
10.6**
|
|
Second Amended and Restated Agreement Terms and Conditions Relating to Gas Gathering Services (previously filed as Exhibit 10.6 to Amendment No. 4 to the Noble Midstream Partners
LP Registration Statement on Form S-1 (333-207560) filed on May 12, 2016)
|
|
|
|
|
10.7†*
|
|
Amended and Restated Gas Gathering Agreement, Agreement Addendum 01, effective as of October 1, 2015, among Noble Energy, Inc., Noble Midstream Services, LLC and Colorado River
DevCo LP (previously filed as Exhibit 10.7 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on October 22, 2015)
|
II-12
|
|
|
|
|
Exhibit
number
|
|
Description
|
|
|
|
|
10.7.1†**
|
|
Second Amended and Restated Gas Gathering Agreement, Agreement Addendum 01, effective as of March 31, 2016, among Noble Energy, Inc. and Colorado River DevCo LP (previously filed
as Exhibit 10.8 to Amendment No. 4 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on May 12, 2016)
|
|
|
|
|
10.7.2
|
|
Form of Amendment 01 to that certain Second Amended and Restated Gas Gathering Agreement, together with Agreement Addendum 01, effective as of September 1, 2016, among Noble
Energy, Inc. and Colorado River DevCo LP
|
|
|
|
|
10.8*
|
|
Amended and Restated Gas Gathering Agreement, Agreement Addendum 03, effective as of October 1, 2015, among Noble Energy, Inc., Noble Midstream Services, LLC and Green River
DevCo LP (previously filed as Exhibit 10.8 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on October 22, 2015)
|
|
|
|
|
10.8.1†**
|
|
Second Amended and Restated Gas Gathering Agreement, Agreement Addendum 03, effective as of March 31, 2016, among Noble Energy, Inc. and Green River DevCo LP (previously filed as
Exhibit 10.10 to Amendment No. 4 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on May 12, 2016)
|
|
|
|
|
10.8.1.1
|
|
Form of Amendment 01 to that certain Second Amended and Restated Gas Gathering Agreement, together with Agreement Addendum 03, effective as of September 1, 2016, among Noble
Energy, Inc. and Green River DevCo LP
|
|
|
|
|
10.8.2**
|
|
Second Amended and Restated Gas Gathering Agreement, Agreement Addendum XX, effective as of March 31, 2016, among Noble Energy, Inc. and Noble Midstream Services, LLC (previously
filed as Exhibit 10.11 to Amendment No. 4 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on May 12, 2016)
|
|
|
|
|
10.9*
|
|
Agreement Terms and Conditions Relating to Crude Oil Treating Services (previously filed as Exhibit 10.9 to the Noble Midstream Partners LP Registration Statement on Form S-1
(333-207560) filed on October 22, 2015)
|
|
|
|
|
10.10†*
|
|
Second Amended and Restated Crude Oil Treating Agreement, Agreement Addendum 01, effective as of October 1, 2015, among Noble Energy, Inc., Noble Midstream Services, LLC and
Colorado River DevCo LP (previously filed as Exhibit 10.10 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on October 22, 2015)
|
|
|
|
|
10.11**
|
|
Second Amended and Restated Agreement Terms and Conditions Relating to Produced Water Services (previously filed as Exhibit 10.14 to Amendment No. 4 to the Noble Midstream
Partners LP Registration Statement on Form S-1 (333-207560) filed on May 12, 2016)
|
|
|
|
|
10.12*
|
|
Amended and Restated Produced Water Services Agreement, Agreement Addendum 01, effective as of October 1, 2015, among Noble Energy, Inc., Noble Midstream Services, LLC
and Colorado River DevCo LP (previously filed as Exhibit 10.12 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on October 22, 2015)
|
|
|
|
|
10.12.1†*
|
|
Amendment 01 to Amended and Restated Produced Water Services Agreement, Agreement Addendum 01, effective as of January 1, 2016, among Noble Energy, Inc., Noble
Midstream Services, LLC and Colorado River DevCo LP (previously filed as Exhibit 10.12.1 to Amendment No. 3 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on April 1, 2016)
|
|
|
|
|
10.12.2†**
|
|
Second Amended and Restated Produced Water Services Agreement, Agreement Addendum 01, effective as of March 31, 2016, among Noble Energy, Inc. and Colorado River DevCo LP
(previously filed as Exhibit 10.16 to Amendment No. 4 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on May 12, 2016)
|
II-13
|
|
|
|
|
Exhibit
number
|
|
Description
|
|
|
|
|
10.12.3
|
|
Form of Amendment 01 to that certain Second Amended and Restated Produced Water Services Agreement, together with Agreement Addendum 01, effective as of September 1, 2016, among
Noble Energy, Inc. and Colorado River DevCo LP
|
|
|
|
|
10.13†*
|
|
Amended and Restated Produced Water Services Agreement, Agreement Addendum 02, effective as of October 1, 2015, among Noble Energy, Inc., Noble Midstream Services, LLC and San
Juan River DevCo LP (previously filed as Exhibit 10.13 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on October 22, 2015)
|
|
|
|
|
10.13.1†**
|
|
Second Amended and Restated Produced Water Services Agreement, Agreement Addendum 02, effective as of March 31, 2016, among Noble Energy, Inc. and San Juan River DevCo LP
(previously filed as Exhibit 10.18 to Amendment No. 4 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on May 12, 2016)
|
|
|
|
|
10.13.2
|
|
Form of Amendment 01 to that certain Second Amended and Restated Produced Water Services Agreement, together with Agreement Addendum 02, effective as of September 1, 2016, among
Noble Energy, Inc. and San Juan River DevCo LP
|
|
|
|
|
10.14*
|
|
Amended and Restated Produced Water Services Agreement, Agreement Addendum 03, effective as of October 1, 2015, among Noble Energy, Inc., Noble Midstream Services, LLC and Green
River DevCo LP (previously filed as Exhibit 10.14 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on October 22, 2015)
|
|
|
|
|
10.14.1**
|
|
Second Amended and Restated Produced Water Services Agreement, Agreement Addendum 03, effective as of March 31, 2016, among Noble Energy, Inc. and Green River DevCo LP
(previously filed as Exhibit 10.20 to Amendment No. 4 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on May 12, 2016)
|
|
|
|
|
10.14.2
|
|
Form of Amendment 01 to that certain Second Amended and Restated Produced Water Services Agreement, together with Agreement Addendum 03, effective as of September 1, 2016, among
Noble Energy, Inc. and Green River DevCo LP
|
|
|
|
|
10.15*
|
|
Amended and Restated Produced Water Services Agreement, Agreement Addendum 04, effective as of October 1, 2015, among Noble Energy, Inc., Noble Midstream Services, LLC and
Gunnison River DevCo LP (previously filed as Exhibit 10.15 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on October 22, 2015)
|
|
|
|
|
10.15.1**
|
|
Second Amended and Restated Produced Water Services Agreement, Agreement Addendum 04, effective as of March 31, 2016, among Noble Energy, Inc. and Gunnison River DevCo LP
(previously filed as Exhibit 10.22 to Amendment No. 4 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on May 12, 2016)
|
|
|
|
|
10.15.2
|
|
Form of Amendment 01 to that certain Second Amended and Restated Produced Water Services Agreement, together with Agreement Addendum 04, effective as of September 1, 2016, among
Noble Energy, Inc. and Gunnison River DevCo LP
|
|
|
|
|
10.16*
|
|
Amended and Restated Produced Water Services Agreement, Agreement Addendum 05, effective as of October 1, 2015, among Noble Energy, Inc., Noble Midstream Services, LLC and
Laramie River DevCo LP (previously filed as Exhibit 10.16 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on October 22, 2015)
|
|
|
|
|
10.16.1**
|
|
Second Amended and Restated Produced Water Services Agreement, Agreement Addendum 05, effective as of March 31, 2016, among Noble Energy, Inc. and Laramie River DevCo LP
(previously filed as Exhibit 10.24 to Amendment No. 4 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on May 12, 2016)
|
|
|
|
|
10.16.1.1
|
|
Form of Amendment 01 to that certain Second Amended and Restated Produced Water Services Agreement, together with Agreement Addendum 05, effective as of September 1, 2016, among
Noble Energy, Inc. and Laramie River DevCo LP
|
II-14
|
|
|
|
|
Exhibit
number
|
|
Description
|
|
|
|
|
10.16.2**
|
|
Second Amended and Restated Produced Water Services Agreement, Agreement Addendum XX, effective as of March 31, 2016, among Noble Energy, Inc. and Noble Midstream Services, LLC
(previously filed as Exhibit 10.25 to Amendment No. 4 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on May 12, 2016)
|
|
|
|
|
10.17**
|
|
Second Amended and Restated Agreement Terms and Conditions Relating to Fresh Water Services (previously filed as Exhibit 10.26 to Amendment No. 4 to the Noble Midstream Partners
LP Registration Statement on Form S-1 (333-207560) filed on May 12, 2016)
|
|
|
|
|
10.18†*
|
|
Amended and Restated Fresh Water Services Agreement, Agreement Addendum 01, effective as of October 1, 2015, among Noble Energy, Inc., Noble Midstream Services, LLC and Colorado
River DevCo LP (previously filed as Exhibit 10.18 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on October 22, 2015)
|
|
|
|
|
10.18.1†**
|
|
Second Amended and Restated Fresh Water Services Agreement, Agreement Addendum 01, effective as of March 31, 2016, among Noble Energy, Inc. and Colorado River DevCo LP
(previously filed as Exhibit 10.28 to Amendment No. 4 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on May 12, 2016)
|
|
|
|
|
10.18.2
|
|
Form of Amendment 01 to that certain Second Amended and Restated Fresh Water Services Agreement, together with Agreement Addendum 01, effective as of September 1, 2016, among
Noble Energy, Inc. and Colorado River DevCo LP
|
|
|
|
|
10.19†*
|
|
Amended and Restated Fresh Water Services Agreement, Agreement Addendum 02, effective as of October 1, 2015, among Noble Energy, Inc., Noble Midstream Services, LLC and San Juan
River DevCo LP (previously filed as Exhibit 10.19 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on October 22, 2015)
|
|
|
|
|
10.19.1†**
|
|
Second Amended and Restated Fresh Water Services Agreement, Agreement Addendum 02, effective as of March 31, 2016, among Noble Energy, Inc. and San Juan River DevCo LP
(previously filed as Exhibit 10.30 to Amendment No. 4 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on May 12, 2016)
|
|
|
|
|
10.19.2
|
|
Form of Amendment 01 to that certain Second Amended and Restated Fresh Water Services Agreement, together with Agreement Addendum 02, effective as of September 1, 2016, among
Noble Energy, Inc. and San Juan River DevCo LP
|
|
|
|
|
10.20†*
|
|
Amended and Restated Fresh Water Services Agreement, Agreement Addendum 03, effective as of October 1, 2015, among Noble Energy, Inc., Noble Midstream Services, LLC and Green
River DevCo LP (previously filed as Exhibit 10.20 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on October 22, 2015)
|
|
|
|
|
10.20.1†**
|
|
Second Amended and Restated Fresh Water Services Agreement, Agreement Addendum 03, effective as of March 31, 2016, among Noble Energy, Inc. and Green River DevCo LP (previously
filed as Exhibit 10.32 to Amendment No. 4 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on May 12, 2016)
|
|
|
|
|
10.20.2
|
|
Form of Amendment 01 to that certain Second Amended and Restated Fresh Water Services Agreement, together with Agreement Addendum 03, effective as of September 1, 2016, among
Noble Energy, Inc. and Green River DevCo LP
|
|
|
|
|
10.21*
|
|
Amended and Restated Fresh Water Services Agreement, Agreement Addendum 04, effective as of October 1, 2015, among Noble Energy, Inc., Noble Midstream Services, LLC and Gunnison
River DevCo LP (previously filed as Exhibit 10.21 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on October 22, 2015)
|
II-15
|
|
|
|
|
Exhibit
number
|
|
Description
|
|
|
|
|
10.21.1**
|
|
Second Amended and Restated Fresh Water Services Agreement, Agreement Addendum 04, effective as of March 31, 2016, among Noble Energy, Inc. and Gunnison River DevCo LP
(previously filed as Exhibit 10.34 to Amendment No. 4 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on May 12, 2016)
|
|
|
|
|
10.21.2
|
|
Form of Amendment 01 to that certain Second Amended and Restated Fresh Water Services Agreement, together with Agreement Addendum 04, effective as of September 1, 2016, among
Noble Energy, Inc. and Gunnison River DevCo LP
|
|
|
|
|
10.22*
|
|
Amended and Restated Fresh Water Services Agreement, Agreement Addendum 05, effective as of October 1, 2015, among Noble Energy, Inc., Noble Midstream Services, LLC and Laramie
River DevCo LP (previously filed as Exhibit 10.22 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on October 22, 2015)
|
|
|
|
|
10.22.1**
|
|
Second Amended and Restated Fresh Water Services Agreement, Agreement Addendum 05, effective as of March 31, 2016, among Noble Energy, Inc. and Laramie River DevCo LP (previously
filed as Exhibit 10.36 to Amendment No. 4 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on May 12, 2016)
|
|
|
|
|
10.22.1.1
|
|
Form of Amendment 01 to that certain Second Amended and Restated Fresh Water Services Agreement, together with Agreement Addendum 05, effective as of September 1, 2016, among
Noble Energy, Inc. and Laramie River DevCo LP
|
|
|
|
|
10.22.2**
|
|
Second Amended and Restated Fresh Water Services Agreement, Agreement Addendum XX, effective as of March 31, 2016, among Noble Energy, Inc. and Noble Midstream Services, LLC
(previously filed as Exhibit 10.37 to Amendment No. 4 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on May 12, 2016)
|
|
|
|
|
10.23**
|
|
Second Amended and Restated Terms and Conditions Relating to Crude Oil Gathering Services (previously filed as Exhibit 10.38 to Amendment No. 4 to the Noble Midstream Partners LP
Registration Statement on Form S-1 (333-207560) filed on May 12, 2016)
|
|
|
|
|
10.24†*
|
|
Amended and Restated Crude Oil Gathering Agreement, Agreement Addendum 01, effective as of October 1, 2015, among Noble Energy, Inc., Noble Midstream Services, LLC and Colorado
River DevCo LP (previously filed as Exhibit 10.24 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on October 22, 2015)
|
|
|
|
|
10.24.1†**
|
|
Second Amended and Restated Crude Oil Gathering Agreement, Agreement Addendum 01, effective as of March 31, 2016, among Noble Energy, Inc. and Colorado River DevCo LP (previously
filed as Exhibit 10.40 to Amendment No. 4 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on May 12, 2016)
|
|
|
|
|
10.24.2
|
|
Form of Amendment 01 to that certain Second Amended and Restated Crude Oil Gathering Agreement, together with Agreement Addendum 01, effective as of September 1, 2016, among
Noble Energy, Inc. and Colorado River DevCo LP
|
|
|
|
|
10.25†*
|
|
Amended and Restated Crude Oil Gathering Agreement, Agreement Addendum 02, effective as of October 1, 2015, among Noble Energy, Inc., Noble Midstream Services, LLC and Colorado
River DevCo LP (previously filed as Exhibit 10.25 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on October 22, 2015)
|
|
|
|
|
10.25.1†**
|
|
Second Amended and Restated Crude Oil Gathering Agreement, Agreement Addendum 02, effective as of March 31, 2016, among Noble Energy, Inc. and Colorado River DevCo LP (previously
filed as Exhibit 10.42 to Amendment No. 4 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on May 12, 2016)
|
|
|
|
|
10.25.2
|
|
Form of Amendment 01 to that certain Second Amended and Restated Crude Oil Gathering Agreement, together with Agreement Addendum 02, effective as of September 1, 2016, among
Noble Energy, Inc. and Colorado River DevCo LP
|
II-16
|
|
|
|
|
Exhibit
number
|
|
Description
|
|
|
|
|
10.26*
|
|
Amended and Restated Crude Oil Gathering Agreement, Agreement Addendum 03, effective as of October 1, 2015, among Noble Energy, Inc., Noble Midstream Services, LLC and Green
River DevCo LP (previously filed as Exhibit 10.26 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on October 22, 2015)
|
|
|
|
|
10.26.1**
|
|
Second Amended and Restated Crude Oil Gathering Agreement, Agreement Addendum 03, effective as of March 31, 2016, among Noble Energy, Inc. and Green River DevCo LP (previously
filed as Exhibit 10.44 to Amendment No. 4 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on May 12, 2016)
|
|
|
|
|
10.26.2
|
|
Form of Amendment 01 to that certain Second Amended and Restated Crude Oil Gathering Agreement, together with Agreement Addendum 03, effective as of September 1, 2016, among
Noble Energy, Inc. and Green River DevCo LP
|
|
|
|
|
10.27*
|
|
Amended and Restated Crude Oil Gathering Agreement, Agreement Addendum 04, effective as of October 1, 2015, among Noble Energy, Inc., Noble Midstream Services, LLC and Gunnison
River DevCo LP (previously filed as Exhibit 10.27 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on October 22, 2015)
|
|
|
|
|
10.27.1**
|
|
Second Amended and Restated Crude Oil Gathering Agreement, Agreement Addendum 04, effective as of March 31, 2016, among Noble Energy, Inc. and Gunnison River DevCo LP (previously
filed as Exhibit 10.46 to Amendment No. 4 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on May 12, 2016)
|
|
|
|
|
10.27.2
|
|
Form of Amendment 01 to that certain Second Amended and Restated Crude Oil Gathering Agreement, together with Agreement Addendum 04, effective as of September 1, 2016, among
Noble Energy, Inc. and Gunnison River DevCo LP
|
|
|
|
|
10.28*
|
|
Amended and Restated Crude Oil Gathering Agreement, Agreement Addendum 05, effective as of October 1, 2015, among Noble Energy, Inc., Noble Midstream Services, LLC and Laramie
River DevCo LP (previously filed as Exhibit 10.28 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on October 22, 2015)
|
|
|
|
|
10.28.1**
|
|
Second Amended and Restated Crude Oil Gathering Agreement, Agreement Addendum 05, effective as of March 31, 2016, among Noble Energy, Inc. and Laramie River DevCo LP (previously
filed as Exhibit 10.48 to Amendment No. 4 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on May 12, 2016)
|
|
|
|
|
10.28.1.1
|
|
Form of Amendment 01 to that certain Second Amended and Restated Crude Oil Gathering Agreement, together with Agreement Addendum 05, effective as of September 1, 2016, among
Noble Energy, Inc. and Laramie River DevCo LP
|
|
|
|
|
10.28.2**
|
|
Second Amended and Restated Crude Oil Gathering Agreement, Agreement Addendum XX, effective as of March 31, 2016, among Noble Energy, Inc. and Noble Midstream Services, LLC
(previously filed as Exhibit 10.49 to Amendment No. 4 to the Noble Midstream Partners LP Registration Statement on Form S-1 (333-207560) filed on May 12, 2016)
|
|
|
|
|
10.29*
|
|
Form of Agreement of Limited Partnership of Colorado River DevCo LP (previously filed as Exhibit 10.29 to Amendment No. 1 to the Noble Midstream Partners LP Registration
Statement on Form S-1 (333-207560) filed on November 6, 2015)
|
|
|
|
|
10.30*
|
|
Form of Agreement of Limited Partnership of Green River DevCo LP (previously filed as Exhibit 10.30 to Amendment No. 1 to the Noble Midstream Partners LP Registration Statement
on Form S-1 (333-207560) filed on November 6, 2015)
|
|
|
|
|
10.31*
|
|
Form of Agreement of Limited Partnership of Gunnison River DevCo LP (previously filed as Exhibit 10.31 to Amendment No. 1 to the Noble Midstream Partners LP Registration
Statement on Form S-1 (333-207560) filed on November 6, 2015)
|
II-17
|
|
|
|
|
Exhibit
number
|
|
Description
|
|
|
|
|
10.32*
|
|
Form of Agreement of Limited Partnership of Laramie River DevCo LP (previously filed as Exhibit 10.32 to Amendment No. 1 to the Noble Midstream Partners LP Registration Statement
on Form S-1 (333-207560) filed on November 6, 2015)
|
|
|
|
|
10.33*
|
|
Form of Agreement of Limited Partnership of San Juan River DevCo LP (previously filed as Exhibit 10.33 to Amendment No. 1 to the Noble Midstream Partners LP Registration
Statement on Form S-1 (333-207560) filed on November 6, 2015)
|
|
|
|
|
10.34
|
|
Form of Agreement of Limited Partnership of Blanco River DevCo LP
|
|
|
|
|
10.35
|
|
Form of Texas Agreement Terms and Conditions Relating to Crude Oil Gathering Services
|
|
|
|
|
10.36†
|
|
Form of Texas Oil Gathering Agreement, Agreement Addendum 01, effective as of September 1, 2016, between Rosetta Resources Operating LP and Blanco River DevCo LP
|
|
|
|
|
10.37
|
|
Form of Texas Agreement Terms and Conditions Relating to Produced Water Services
|
|
|
|
|
10.38†
|
|
Form of Texas Produced Water Services Agreement, Agreement Addendum 01, effective as of September 1, 2016, between Rosetta Resources Operating LP and Blanco River DevCo
LP
|
|
|
|
|
21.1
|
|
List of Subsidiaries of Noble Midstream Partners LP
|
|
|
|
|
23.1
|
|
Consent of KPMG LLP
|
|
|
|
|
23.2
|
|
Consent of KPMG LLP
|
|
|
|
|
23.3*
|
|
Consent of Andrews Kurth LLP (contained in Exhibit 5.1)
|
|
|
|
|
23.4*
|
|
Consent of Andrews Kurth LLP (contained in Exhibit 8.1)
|
|
|
|
|
23.5
|
|
Consent of Director Nominee
|
|
|
|
|
24.1*
|
|
Powers of Attorney (contained on the signature page to this Registration Statement)
|
|
**
|
Filed previously and herewith.
|
|
#
|
Compensatory plan, contract or arrangement.
|
|
†
|
Confidential treatment has been requested for certain portions thereof pursuant to a Confidential Treatment Request filed with the Securities and Exchange Commission.
Such provisions have been filed separately with the Securities and Exchange Commission.
|
II-18
Exhibit 1.1
NOBLE MIDSTREAM PARTNERS LP
[
●
] Common Units
Representing Limited Partner Interests
UNDERWRITING AGREEMENT
[●], 2016
B
ARCLAYS
C
APITAL
I
NC
.
R
OBERT
W. B
AIRD
& C
O
. I
NCORPORATED
J.P. M
ORGAN
S
ECURITIES
LLC,
As
Representatives of the several
Underwriters named in Schedule I attached hereto,
c/o Barclays Capital Inc.
745 Seventh Avenue
New York, New York 10019
Ladies and Gentlemen:
Noble Midstream Partners LP, a Delaware limited partnership (the “
Partnership
”), proposes to sell [●]
common units (the “
Firm Units
”) representing limited partner interests in the Partnership (the “
Common Units
”). In addition, the Partnership proposes to grant the underwriters (the
“
Underwriters
”) named in Schedule I attached to this agreement (this “
Agreement
”) an option to purchase up to [●] additional Common Units on the terms set forth in Section 2 (the
“
Option Units
”). The Firm Units and the Option Units, if purchased, are hereinafter collectively called the “
Units
.” This Agreement is to confirm the agreement concerning the purchase of the Units from
the Partnership by the Underwriters.
It is understood and agreed by all parties hereto that the Partnership was recently formed to own,
operate, develop and acquire midstream energy assets, as described more particularly in the Preliminary Prospectus (as defined herein). It is further understood and agreed to by all parties that as of the date hereof:
|
|
(a)
|
Noble Energy, Inc., a Delaware corporation (“
Noble
”), directly owns a 100% membership interest in Noble Energy US Holdings, LLC, a Delaware limited liability company (“
US
Holdings
”);
|
|
|
(b)
|
US Holdings directly owns a 100% membership interest in NBL Midstream, LLC, a Delaware limited liability company (“
NBL Midstream
”);
|
|
|
(c)
|
NBL Midstream directly owns a 100% membership interest in Noble Midstream Services, LLC, a Delaware limited liability company (“
Midstream Services
”);
|
|
|
(d)
|
Midstream Services directly owns a 100% membership interest in Noble Midstream GP LLC, a Delaware limited liability company and the sole general partner of the Partnership with a 1.0% general partner interest in the
Partnership (the “
General Partner
”);
|
|
|
(e)
|
Midstream Services directly owns a 99% limited partner interest in the Partnership;
|
|
|
(f)
|
Midstream Services directly owns a membership interest in White Cliffs Pipeline, L.L.C., a Delaware limited liability company (“
White Cliffs
”);
|
|
|
(g)
|
Midstream Services directly owns a 100% membership interest in:
|
|
|
i
|
Colorado River DevCo GP LLC, a Delaware limited liability company (“
Colorado River DevCo GP
”), which owns a 75% general partner interest in Colorado River DevCo LP, a Delaware limited partnership
(“
Colorado River Devco
”);
|
|
|
ii
|
Green River DevCo GP LLC, a Delaware limited liability company (“
Green River DevCo GP
”), which owns a 10% general partner interest in Green River DevCo LP, a Delaware limited partnership
(“
Green River DevCo
”);
|
|
|
iii
|
Gunnison River DevCo GP LLC, a Delaware limited liability company (“
Gunnison River DevCo GP
”), which owns a 5% general partner interest in Gunnison River DevCo LP, a Delaware limited partnership
(“
Gunnison River DevCo
”);
|
|
|
iv
|
Laramie River DevCo GP LLC, a Delaware limited liability company (“
Laramie River DevCo GP
”), which owns a 5% general partner interest in Laramie River DevCo LP, a Delaware limited partnership
(“
Laramie River DevCo
”);
|
|
|
v
|
San Juan River DevCo GP LLC, a Delaware limited liability company (“
San Juan
River
DevCo GP
”), which owns a 5% general partner interest in San Juan River DevCo LP, a
Delaware limited partnership (“
San Juan River DevCo
”); and
|
|
|
vi
|
Blanco River DevCo GP LLC, a Delaware limited liability company (“
Blanco River DevCo GP
”), which owns a 1% general partner interest in Blanco River DevCo LP, a Delaware limited partnership
(“
Blanco River DevCo
”)
|
|
|
(h)
|
Midstream Services directly owns:
|
|
|
i
|
a 25% limited partner interest in Colorado River DevCo;
|
|
|
ii
|
a 90% limited partner interest in Green River DevCo;
|
|
|
iii
|
a 95% limited partner interest in Gunnison River DevCo;
|
2
|
|
iv
|
a 95% limited partner interest in Laramie River DevCo;
|
|
|
v
|
a 95% limited partner interest in San Juan River DevCo; and
|
|
|
vi
|
a 99% limited partner interest in Blanco River DevCo.
|
|
|
(i)
|
Colorado River DevCo and Noble are a party to: (i) Amended and Restated Gas Gathering Agreement, Agreement Addendum 01, effective as of October 1, 2015, among Noble Energy, Inc., Noble Midstream Services, LLC and
Colorado River DevCo LP, (ii) Second Amended and Restated Gas Gathering Agreement, Agreement Addendum 01, effective as of March 31, 2016, among Noble Energy, Inc. and Colorado River DevCo LP, (iii) Amendment 01 to that certain Second Amended and
Restated Gas Gathering Agreement, together with Agreement Addendum 01, effective as of September 1, 2016, among Noble Energy, Inc. and Colorado River DevCo LP, (iv) Second Amended and Restated Crude Oil Treating Agreement, Agreement Addendum 01,
effective as of October 1, 2015, among Noble Energy, Inc., Noble Midstream Services, LLC and Colorado River DevCo LP, (v) Amended and Restated Produced Water Services Agreement, Agreement Addendum 01, effective as of October 1, 2015, among Noble
Energy, Inc., Noble Midstream Services, LLC and Colorado River DevCo LP, (vi) Amendment 01 to Amended and Restated Produced Water Services Agreement, Agreement Addendum 01, effective as of January 1, 2016, among Noble Energy, Inc., Noble Midstream
Services, LLC and Colorado River DevCo LP, (vii) Second Amended and Restated Produced Water Services Agreement, Agreement Addendum 01, effective as of March 31, 2016, among Noble Energy, Inc. and Colorado River DevCo LP, (viii) Amendment 01 to that
certain Second Amended and Restated Produced Water Services Agreement, together with Agreement Addendum 01, effective as of September 1, 2016, among Noble Energy, Inc. and Colorado River DevCo LP, (ix) Amended and Restated Fresh Water Services
Agreement, Agreement Addendum 01, effective as of October 1, 2015, among Noble Energy, Inc., Noble Midstream Services, LLC and Colorado River DevCo LP, (x) Second Amended and Restated Fresh Water Services Agreement, Agreement Addendum 01,
effective as of March 31, 2016, among Noble Energy, Inc. and Colorado River DevCo LP, (xi) Amendment 01 to that certain Second Amended and Restated Fresh Water Services Agreement, together with Agreement Addendum 01, effective as of
September 1, 2016, among Noble Energy, Inc. and Colorado River DevCo LP, (xii) Amended and Restated Crude Oil Gathering Agreement, Agreement Addendum 01, effective as of October 1, 2015, among Noble Energy, Inc., Noble Midstream
Services, LLC and Colorado River DevCo LP, (xiii) Second Amended and Restated Crude Oil Gathering Agreement, Agreement Addendum 01, effective as of March 31, 2016, among Noble Energy, Inc. and Colorado River DevCo LP, (xiv) Amendment 01 to
that certain Second Amended and Restated Crude Oil Gathering Agreement, together with Agreement Addendum 01, effective as of September 1, 2016, among Noble Energy, Inc. and Colorado River DevCo LP, (xv) Amended and Restated Crude Oil Gathering
Agreement, Agreement Addendum 02, effective as of October 1, 2015, among Noble Energy, Inc., Noble Midstream Services, LLC and Colorado River DevCo LP, (xvi) Second Amended and Restated Crude Oil Gathering Agreement, Agreement Addendum 02,
effective as of March 31, 2016, among Noble Energy, Inc. and Colorado River DevCo LP, (xvii) Amendment 01 to that certain Second Amended and Restated Crude Oil Gathering Agreement, together with Agreement Addendum 02, effective as of
September 1, 2016, among Noble Energy, Inc. and Colorado River DevCo LP, each substantially in the form filed as exhibits to the Registration Statement and including terms and conditions related to any of the foregoing (collectively, the
“
Colorado River DevCo Agreements
”), pursuant to which Colorado River DevCo provides services to Noble;
|
|
|
(j)
|
Green River DevCo and Noble are a party to: (i) Amended and Restated Gas Gathering Agreement, Agreement Addendum
03, effective as of October 1, 2015, among Noble Energy, Inc., Noble Midstream Services, LLC and Green
|
3
|
|
River DevCo LP, (ii) Second Amended and Restated Gas Gathering Agreement, Agreement Addendum 03, effective as of March 31, 2016, among Noble Energy, Inc. and Green River DevCo LP,
(iii) Amendment 01 to that certain Second Amended and Restated Fresh Water Services Agreement, together with Agreement Addendum 03, effective as of September 1, 2016, among Noble Energy, Inc. and Green River DevCo LP , (iv) Amended
and Restated Produced Water Services Agreement, Agreement Addendum 03, effective as of October 1, 2015, among Noble Energy, Inc., Noble Midstream Services, LLC and Green River DevCo LP, (v) Second Amended and Restated Produced Water Services
Agreement, Agreement Addendum 03, effective as of March 31, 2016, among Noble Energy, Inc. and Green River DevCo LP, (vi) Amendment 01 to that certain Second Amended and Restated Produced Water Services Agreement, together with Agreement
Addendum 03, effective as of September 1, 2016, among Noble Energy, Inc. and Green River DevCo LP, (vii) Amended and Restated Fresh Water Services Agreement, Agreement Addendum 03, effective as of October 1, 2015, among Noble Energy, Inc.,
Noble Midstream Services, LLC and Green River DevCo LP, (viii) Second Amended and Restated Fresh Water Services Agreement, Agreement Addendum 03, effective as of March 31, 2016, among Noble Energy, Inc. and Green River DevCo LP, (ix) Amendment
01 to that certain Second Amended and Restated Fresh Water Services Agreement, together with Agreement Addendum 03, effective as of September 1, 2016, among Noble Energy, Inc. and Green River DevCo LP, (x) Amended and Restated Crude Oil
Gathering Agreement, Agreement Addendum 03, effective as of October 1, 2015, among Noble Energy, Inc., Noble Midstream Services, LLC and Green River DevCo LP, (xi) Second Amended and Restated Crude Oil Gathering Agreement, Agreement Addendum 03,
effective as of March 31, 2016, among Noble Energy, Inc. and Green River DevCo LP, (xii) Amendment 01 to that certain Second Amended and Restated Crude Oil Gathering Agreement, together with Agreement Addendum 03, effective as of
September 1, 2016, among Noble Energy, Inc. and Green River DevCo LP, each substantially in the form filed as exhibits to the Registration Statement and including terms and conditions related to any of the foregoing (collectively, the
“
Green River DevCo Agreements
”), pursuant to which Green River DevCo provides services to Noble;
|
|
|
(k)
|
Gunnison River DevCo and Noble are a party to: (i) Amended and Restated Produced Water Services Agreement, Agreement Addendum 04, effective as of October 1, 2015, among Noble Energy, Inc., Noble Midstream Services, LLC
and Gunnison River DevCo LP, (ii) Second Amended and Restated Produced Water Services Agreement, Agreement Addendum 04, effective as of March 31, 2016, among Noble Energy, Inc. and Gunnison River DevCo LP, (iii) Amendment 01 to that certain
Second Amended and Restated Produced Water Services Agreement, together with Agreement Addendum 04, effective as of September 1, 2016, among Noble Energy, Inc. and Gunnison River DevCo LP, (iv) Amended and Restated Fresh Water Services
Agreement, Agreement Addendum 04, effective as of October 1, 2015, among Noble Energy, Inc., Noble Midstream Services, LLC and Gunnison River DevCo LP, (v) Second Amended and Restated Fresh Water Services Agreement, Agreement Addendum 04,
effective as of March 31, 2016, among Noble Energy, Inc. and Gunnison River DevCo LP, (vi) Amendment 01 to that certain Second Amended and Restated Fresh Water Services Agreement, together with Agreement Addendum 04, effective as of
September 1, 2016, among Noble Energy, Inc. and Gunnison River DevCo LP, (vii) Amended and Restated Crude Oil Gathering Agreement, Agreement Addendum 04, effective as of October 1, 2015, among Noble Energy, Inc., Noble Midstream
Services, LLC and Gunnison River DevCo LP, (viii) Second Amended and Restated Crude Oil Gathering Agreement, Agreement Addendum 04, effective as of March 31, 2016, among Noble Energy, Inc. and Gunnison River DevCo LP and
(ix) Amendment 01 to that certain Second Amended and Restated Crude Oil Gathering Agreement, together with Agreement Addendum 04, effective as of September 1, 2016, among Noble Energy, Inc. and Gunnison River DevCo LP, each substantially
in the form filed as exhibits to the Registration Statement and including terms and conditions related to any of the foregoing (collectively, the “
Gunnison River DevCo Agreements
”), pursuant to which Gunnison River DevCo
provides services to Noble;
|
|
|
(l)
|
Laramie River DevCo and Noble are a party to: (i) Amended and Restated Produced Water Services Agreement,
Agreement Addendum 05, effective as of October 1, 2015, among Noble Energy, Inc., Noble Midstream Services,
|
4
|
|
LLC and Laramie River DevCo LP, (ii) Second Amended and Restated Produced Water Services Agreement, Agreement Addendum 05, effective as of March 31, 2016, among Noble Energy, Inc. and Laramie
River DevCo LP, (iii) Amendment 01 to that certain Second Amended and Restated Produced Water Services Agreement, together with Agreement Addendum 05, effective as of September 1, 2016, among Noble Energy, Inc. and Laramie River DevCo LP,
(iv) Amended and Restated Fresh Water Services Agreement, Agreement Addendum 05, effective as of October 1, 2015, among Noble Energy, Inc., Noble Midstream Services, LLC and Laramie River DevCo LP, (v) Second Amended and Restated
Fresh Water Services Agreement, Agreement Addendum 05, effective as of March 31, 2016, among Noble Energy, Inc. and Laramie River DevCo LP, (vi) Amendment 01 to that certain Second Amended and Restated Fresh Water Services Agreement,
together with Agreement Addendum 05, effective as of September 1, 2016, among Noble Energy, Inc. and Laramie River DevCo LP, (vii) Amended and Restated Crude Oil Gathering Agreement, Agreement Addendum 05, effective as of October 1,
2015, among Noble Energy, Inc., Noble Midstream Services, LLC and Laramie River DevCo LP, (viii) Second Amended and Restated Crude Oil Gathering Agreement, Agreement Addendum 05, effective as of March 31, 2016, among Noble Energy, Inc. and
Laramie River DevCo LP and (ix) Amendment 01 to that certain Second Amended and Restated Crude Oil Gathering Agreement, together with Agreement Addendum 05, effective as of September 1, 2016, among Noble Energy, Inc. and Laramie River
DevCo LP, each substantially in the form filed as exhibits to the Registration Statement and including terms and conditions related to any of the foregoing (collectively, the “
Laramie River DevCo Agreements
”), pursuant to
which Laramie River DevCo provides services to Noble;
|
|
|
(m)
|
San Juan River DevCo and Noble are a party to: (i) Amended and Restated Produced Water Services Agreement, Agreement Addendum 02, effective as of October 1, 2015, among Noble Energy, Inc., Noble Midstream Services, LLC
and San Juan River DevCo LP, (ii) Second Amended and Restated Produced Water Services Agreement, Agreement Addendum 02, effective as of March 31, 2016, among Noble Energy, Inc. and San Juan River DevCo LP, (iii) Amendment 01 to that certain
Second Amended and Restated Produced Water Services Agreement, together with Agreement Addendum 02, effective as of September 1, 2016, among Noble Energy, Inc. and San Juan River DevCo LP, (iv) Amended and Restated Fresh Water Services
Agreement, Agreement Addendum 02, effective as of October 1, 2015, among Noble Energy, Inc., Noble Midstream Services, LLC and San Juan River DevCo LP, (v) Second Amended and Restated Fresh Water Services Agreement, Agreement Addendum 02,
effective as of March 31, 2016, among Noble Energy, Inc. and San Juan River DevCo LP and (vi) Amendment 01 to that certain Second Amended and Restated Fresh Water Services Agreement, together with Agreement Addendum 02, effective as of
September 1, 2016, among Noble Energy, Inc. and San Juan River DevCo LP, each substantially in the form filed as exhibits to the Registration Statement and including terms and conditions related to any of the foregoing (collectively, the
“
San Juan River DevCo Agreements
”), pursuant to which San Juan River DevCo provides services to Noble;
|
|
|
(n)
|
Blanco River DevCo and Noble are a party to: (i) Texas Crude Oil Gathering Agreement, Agreement Addendum 01, effective as of September 1, 2016, between Rosetta Resources Operating LP and Blanco River DevCo LP,
(ii) Texas Agreement Terms and Conditions Relating to Produced Water Services and (iii) Texas Produced Water Services Agreement, Agreement Addendum 01, effective as of September 1, 2016, between Rosetta Resources Operating LP and Blanco
River DevCo LP, each substantially in the form filed as exhibits to the Registration Statement and including terms and conditions related to any of the foregoing (collectively, the “
Blanco River DevCo Agreements
”), pursuant
to which Blanco River DevCo provides services to Noble; and
|
|
|
(o)
|
Midstream Services and Noble are a party to: (i) Second Amended and Restated Gas Gathering Agreement, Agreement
Addendum XX, effective as of March 31, 2016, among Noble Energy, Inc. and Noble Midstream Services, LLC, (ii) Second Amended and Restated Produced Water Services Agreement, Agreement Addendum XX, effective as of March 31, 2016, among Noble Energy,
Inc. and Noble Midstream Services, LLC, (iii) Second Amended and Restated Fresh Water Services Agreement, Agreement
|
5
|
|
Addendum XX, effective as of March 31, 2016, among Noble Energy, Inc. and Noble Midstream Services, LLC and (iv) Second Amended and Restated Crude Oil Gathering Agreement, Agreement Addendum XX,
effective as of March 31, 2016, among Noble Energy, Inc. and Noble Midstream Services, LLC, each filed as exhibits to the Registration Statement and including terms and conditions related to any of the foregoing (collectively, the
“
Midstream Services DevCo Agreements
”), pursuant to which Midstream Services provides services to Noble.
|
It is further understood and agreed to by the parties hereto that the following transactions have occurred or will occur on or immediately
prior to the Initial Delivery Date (as defined below):
|
|
(a)
|
Noble, NBL Midstream, the General Partner, the Partnership, Midstream Services, Colorado River DevCo GP, Green River DevCo GP, San Juan River DevCo GP, Blanco River DevCo GP and Blanco River DevCo, will enter into a
Contribution, Conveyance and Assumption Agreement substantially in the form filed as an exhibit to the Registration Statement (the “
Contribution Agreement
”), pursuant to which:
|
(i) Midstream Services will contribute to Colorado River DevCo GP a 5% limited partner interest in Colorado River DevCo and such limited
partner interest will convert to a general partner interest in Colorado River DevCo such that after giving effect to such contribution Colorado River DevCo GP will hold a 80% general partner interest and Midstream Services will hold a 20% limited
partner interest in Colorado River DevCo;
(ii) Midstream Services will contribute to Green River DevCo GP a 15% limited partner interest
in Green River DevCo and such limited partner interest will convert to a general partner interest in Green River DevCo such that after giving effect to such contribution Green River DevCo GP will hold a 25% general partner interest and Midstream
Services will hold a 75% limited partner interest in Green River DevCo;
(iii) Midstream Services will contribute to San Juan River DevCo
GP a 20% limited partner interest in San Juan River DevCo and such limited partner interest will convert to a general partner interest in San Juan River DevCo such that after giving effect to such contribution San Juan River DevCo GP will hold a 25%
general partner interest and Midstream Services will hold a 75% limited partner interest in San Juan River DevCo;
(iv) Midstream Services
will contribute to Blanco River DevCo, through Blanco River DevCo GP, such that after giving effect to the contributions Blanco River DevCo GP will hold a 25% general partner interest in Blanco River DevCo and Midstream Services will hold a 75%
limited partner interest in Blanco River DevCo;
(v) Midstream Services will distribute to NBL Midstream its (A) 100% member interest in
the General Partner, (B) 99% limited partner interest in the Partnership, (C) 20% limited partner interest in Colorado River DevCo, (D) 75% limited partner interest in Green River DevCo, (E) 95% limited partner interest in Gunnison River DevCo, (F)
95% limited partner interest in Laramie River DevCo, (G) 75% limited partner interest in San Juan River DevCo, and (H) 75% limited partner interest in Blanco River DevCo;
(vi) Midstream Services will distribute certain retained assets to affiliates of Noble;
(vii) the Partnership will redeem the 1% general partner interest in the General Partner and the General Partner will be issued a non-economic
general partner interest; and
(viii) NBL Midstream will contribute to the Partnership 100% of the membership interests in Midstream
Services in exchange for (A) [●] common and [●] subordinated units representing limited partnership interests in the Partnership (collectively, the “
Sponsor Units
”), (B) all of the incentive distribution right of
the Partnership (the “
Incentive Distribution Rights
”) and (C) the right to receive a portion of the net proceeds of the offering of the Firm Units;
6
|
|
(b)
|
Midstream Services will enter into a new $[
] million revolving credit agreement substantially in the form filed as an exhibit to the Registration Statement
(the “
New Credit Agreement
”);
|
|
|
(c)
|
the Partnership, the General Partner, NBL Midstream, Midstream Services and Noble will enter into an omnibus agreement, substantially in the form filed as an exhibit to the Registration Statement
(the “
Omnibus Agreement
”), with Noble;
|
|
|
(d)
|
the General Partner and the Partnership will enter into an operational services agreement, substantially in the form filed as an exhibit to the Registration Statement (the “
Operational Services and
Secondment Agreement
”), with Noble (or one of Noble’s wholly owned subsidiaries) pursuant to which Noble (or one of its wholly owned subsidiaries) will provide certain operational services to the Partnership in support of its
gathering pipelines, central gathering facilities and crude oil treating facilities;
|
|
|
(e)
|
each of the Limited Liability Company Agreement of the General Partner and the Agreement of Limited Partnership of the Partnership shall have been amended and restated to the extent necessary to reflect the foregoing
transactions and the other matters reflected therein;
|
|
|
(f)
|
the public offering of the Firm Units contemplated hereby (the “
Offering
”) will be consummated, and the net proceeds thereof will be delivered to the Partnership; and
|
|
|
(g)
|
the Partnership will use the net proceeds received from the Offering as provided in the “Use of Proceeds” section of the Registration Statement;
|
all on the terms contemplated by the Preliminary Prospectus. The transactions contemplated in items (a) through (g) above are referred to herein as the
“
Transactions
.” The “
Transaction Documents
” shall mean the Contribution Agreement, New Credit Agreement, Omnibus Agreement, the Colorado River DevCo Agreements, the Green River DevCo Agreements, the
Gunnison River DevCo Agreements, the Laramie River DevCo Agreements, the San Juan River DevCo Agreements, the Blanco River DevCo Agreements, the Midstream Services DevCo Agreements and Operational Services and Secondment Agreement.
The Partnership, the General Partner and NBL Midstream are referred to collectively as the “
Partnership Parties
.” US
Holdings and the Partnership Parties are referred to collectively as the “
Noble Parties
.” Colorado River DevCo, Green River DevCo, Gunnison River DevCo, Laramie River DevCo, San Juan River DevCo and Blanco River DevCo are
referred to collectively as the “
Development Companies
.” Colorado River DevCo GP, Green River DevCo GP, Gunnison River DevCo GP, Laramie River DevCo GP, San Juan River DevCo GP and Blanco River DevCo GP are referred to
collectively as the “
GP Subsidiaries
”. Midstream Services, the Development Companies and the GP Subsidiaries are referred to collectively as the “
Subsidiaries
.” The Noble Parties and the Subsidiaries
are referred to collectively as the “
Partnership Entities
.”
7
1.
Representations, Warranties and Agreements of the Partnership Parties
. The
Partnership Parties represent, warrant and agree that:
(a)
Registration Statement
. A registration statement on Form
S-1 (File No. 333- 207560) relating to the Units has (i) been prepared by the Partnership in conformity with the requirements of the Securities Act of 1933, as amended (the “
Securities Act
”), and the rules and
regulations of the Securities and Exchange Commission (the “
Commission
”) thereunder; (ii) been filed with the Commission under the Securities Act; and (iii) become effective under the Securities Act. Copies of
such registration statement and any amendment thereto have been delivered by the Partnership to you as the representatives (the “
Representatives
”) of the Underwriters. As used in this Agreement:
(i) “
Applicable Time
” means [●] [a.m.][p.m.] (New York City time) on [●], 2016;
(ii) “
Effective Date
” means the date and time as of which such registration statement, or the most
recent post-effective amendment thereto, was declared effective by the Commission;
(iii) “
Issuer Free Writing
Prospectus
” means any “issuer free writing prospectus” as defined in Rule 433 under the Securities Act, relating to the Units in the form filed or required to be filed with the Commission or, if not required to be filed, in
the form retained in the Partnership’s records pursuant to Rule 433(g) under the Securities Act;
(iv)
“
Preliminary Prospectus
” means any preliminary prospectus relating to the Units included in such registration statement or filed with the Commission pursuant to Rule 424(b) under the Securities Act;
(v) “
Pricing Disclosure Package
” means, as of the Applicable Time, the most recent Preliminary
Prospectus, together with the information included in Schedule II hereto and each Issuer Free Writing Prospectus filed or used by the Partnership on or before the Applicable Time, other than a road show that is an Issuer Free Writing Prospectus but
is not required to be filed under Rule 433 under the Securities Act;
(vi) “
Prospectus
” means the
final prospectus relating to the Units, as filed with the Commission pursuant to Rule 424(b) under the Securities Act;
(vii) “
Registration Statement
” means such registration statement, as amended as of the Effective Date,
including any Preliminary Prospectus or the Prospectus, all exhibits to such registration statement and including the information deemed by virtue of Rule 430A under the Securities Act to be part of such registration statement as of the Effective
Date;
8
(viii) “
Testing-the-Waters Communication
” means any oral
or written communication with potential investors undertaken in reliance on Section 5(d) of the Securities Act; and
(ix)
“
Written Testing-the-Waters Communication
” means any Testing-the-Waters Communication that is a written communication within the meaning of Rule 405 under the Securities Act.
Any reference to the “
most recent Preliminary Prospectus
” shall be deemed to refer to the latest Preliminary Prospectus
included in the Registration Statement or filed pursuant to Rule 424(b) under the Securities Act prior to or on the date hereof. [Any reference herein to the term “Registration Statement” shall be deemed to include the abbreviated
registration statement to register additional Common Units under Rule 462(b) under the Securities Act (the “
Rule 462(b) Registration Statement
”).]
(b)
No Stop Order
. The Commission has not issued an order preventing or suspending the use of the Registration
Statement, any Preliminary Prospectus or the Prospectus or suspending the effectiveness of the Registration Statement, and no proceeding for the purpose or pursuant to Section 8A of the Securities Act has been instituted or, to the Partnership
Parties’ knowledge, threatened by the Commission.
(c)
Emerging Growth Company Status
. From the time of initial
confidential submission of the Registration Statement to the Commission through the date hereof, the Partnership has been and will be an “emerging growth company,” as defined in Section 2(a) of the Securities Act (an “
Emerging
Growth Company
”).
(d)
Testing-the-Waters Communications
. The Partnership (i) has not engaged in any
Testing-the-Waters Communication other than Testing-the-Waters Communications with the consent of the Representatives with entities that are qualified institutional buyers within the meaning of Rule 144A under the Securities Act or institutions that
are accredited investors within the meaning of Rule 501 under the Securities Act and (ii) has not authorized anyone other than the Representatives to engage in Testing-the-Waters Communications. The Partnership has not distributed or approved
for distribution any Written Testing-the-Waters Communications other than those listed on Schedule V hereto.
(e)
Ineligible Issuer
. (A) At the earliest time after the filing of the Registration Statement that the Partnership or another offering participant made a
bona fide
offer (within the meaning of Rule 164(h)(2) under the Securities Act)
of the Units and (B) as of the date hereof (with such date being used as the determination date for purposes of this clause (B)), the Partnership was not and is not an “ineligible issuer” (as defined in Rule 405 under the Securities Act,
without taking into account any determination by the Commission pursuant to Rule 405 under the Securities Act that it is not necessary that the Partnership be considered an ineligible issuer), including, without limitation, for purposes of Rules 164
and 433 under the Securities Act with respect to the offering of the Units as contemplated by the Registration Statement.
9
(f)
Form of Documents
. The Registration Statement conformed and will
conform in all material respects on the Effective Date and on the applicable Delivery Date, and any amendment to the Registration Statement filed after the date hereof will conform in all material respects when filed, to the requirements of the
Securities Act and the rules and regulations thereunder. The most recent Preliminary Prospectus conformed, and the Prospectus will conform when filed with the Commission pursuant to Rule 424(b) under the Securities Act and on the applicable
Delivery Date, in all material respects to the requirements of the Securities Act and the rules and regulations thereunder.
(g)
No Material Misstatements or Omissions in the Registration Statement
. The Registration Statement did not, as of the
Effective Date, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading;
provided
that no representation or warranty is made as
to information contained in or omitted from the Registration Statement in reliance upon and in conformity with written information furnished to the Partnership through the Representatives by or on behalf of any Underwriter specifically for inclusion
therein, which information is specified in Section 8(e).
(h)
No Material Misstatements or Omissions in the
Prospectus
. The Prospectus will not, as of its date or as of the applicable Delivery Date, contain an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
provided
that no representation or warranty is made as to information contained in or omitted from the Prospectus in reliance upon and in conformity with written information furnished
to the Partnership through the Representatives by or on behalf of any Underwriter specifically for inclusion therein, which information is specified in Section 8(e).
(i)
No Material Misstatements or Omissions in the Pricing Disclosure Package
. The Pricing Disclosure Package did not, as
of the Applicable Time, contain an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading;
provided
that no
representation or warranty is made as to information contained in or omitted from the Pricing Disclosure Package in reliance upon and in conformity with written information furnished to the Partnership through the Representatives by or on behalf of
any Underwriter specifically for inclusion therein, which information is specified in Section 8(e).
(j)
No Material
Misstatements or Omissions in Issuer Free Writing Prospectus
. Each Issuer Free Writing Prospectus listed in Schedule III hereto, when taken together with the Pricing Disclosure Package, did not, as of the Applicable Time, contain an untrue
statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not
10
misleading;
provided
that no representation or warranty is made as to information contained in or omitted from such Issuer Free Writing Prospectus listed in Schedule III hereto in reliance
upon and in conformity with written information furnished to the Partnership through the Representatives by or on behalf of any Underwriter specifically for inclusion therein, which information is specified in Section 8(e).
(k)
No Material Misstatements or Omissions in Written Testing-the-Waters Communications
. Each Written
Testing-the-Waters Communication did not, as of the Applicable Time, when taken together with the Pricing Disclosure Package, contain an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading;
provided
that no representation or warranty is made as to information contained in or omitted from such Written Testing-the-Waters Communication listed on Schedule
V hereto in reliance upon and in conformity with written information furnished to the Partnership through the Representatives by or on behalf of any Underwriter specifically for inclusion therein, which information is specified in Section 8(e); and
the Partnership has filed publicly on EDGAR at least 21 calendar days prior to any road show (as defined in Rule 433 under the Securities Act), any confidentially submitted registration statement and registration statement amendments relating to the
offer and sale of the Units.
(l)
Public Filing of Confidential Submissions
. The Partnership has filed publicly
on EDGAR at least 21 calendar days prior to any road show (as defined in Rule 433 under the Securities Act), any confidentially submitted registration statement and registration statement amendments relating to the offer and sale of the Units.
(m)
Issuer Free Writing Prospectuses Conform to the Requirements of the Securities Act
. Each Issuer Free Writing
Prospectus conformed or will conform in all material respects to the requirements of the Securities Act and the rules and regulations thereunder on the date of first use, and the Partnership has complied with all prospectus delivery and any filing
requirements applicable to such Issuer Free Writing Prospectus pursuant to the Securities Act and rules and regulations thereunder. The Partnership has not made any offer relating to the Units that would constitute an Issuer Free Writing
Prospectus without the prior written consent of the Representatives, except as set forth on Schedule IV hereto. The Partnership has retained in accordance with the Securities Act and the rules and regulations thereunder all Issuer Free Writing
Prospectuses that were not required to be filed pursuant to the Securities Act and the rules and regulations thereunder. Each Issuer Free Writing Prospectus, as of its date and at all subsequent times through the completion of the Offering of
the Units, did not, does not and will not include any information that conflicted, conflicts or will conflict with the information contained in the Registration Statement, any Preliminary Prospectus not superseded or modified or the Prospectus. The
Partnership has taken all actions necessary so that any road show (as defined in Rule 433 under the Securities Act) in connection with the offering of the Units will not be required to be filed pursuant to the Securities Act and the rules and
regulations thereunder.
11
(n)
Forward-Looking and Supporting Information
. Each of the statements
made by the Partnership in the Registration Statement and the Pricing Disclosure Package and to be made in the Prospectus (and any supplements thereto) within the coverage of Rule 175(b) under the Securities Act, including (but not limited to) any
statements with respect to projected results of operations, estimated cash available for distributions and future cash distributions of the Partnership, and any statements made in support thereof or related thereto under the heading “Cash
Distribution Policy and Restrictions on Distributions” or the anticipated ratio of taxable income to distributions, was made or will be made with a reasonable basis and in good faith.
(o)
Formation and Qualification of NBL Midstream
. NBL Midstream represents and warrants that it has been duly organized,
is validly existing and in good standing as a limited liability company under the laws of the State of Delaware with limited liability company power and authority to own, lease and operate its properties and to conduct its business as described in
the Registration Statement, the Pricing Disclosure Package and the Prospectus and enter into and perform its obligations under this Agreement. NBL Midstream is duly qualified as a foreign limited liability company to transact business and is in good
standing in the each other jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure so to qualify and be in good standing could not in the
aggregate, reasonably be expected to (i) have a material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Partnership and the Subsidiaries considered as one enterprise,
whether or not arising in the ordinary course of business (a “
Material Adverse Effect
”), (ii) materially impair the ability of any of the Partnership Entities to consummate the Transactions or any other transactions provided
for in this Agreement or the Transaction Documents or (iii) subject the limited partners of the Partnership to any material liability or disability. NBL Midstream has all power and authority necessary to enter into and perform its obligations under
the Transaction Documents to which it is a party.
(p)
Formation and Qualification of the Partnership, the General
Partner and the Subsidiaries
. Each of the Partnership, the General Partner and each of the Subsidiaries has been duly organized, is validly existing and in good standing as a limited partnership, limited liability company, corporation or other
business entity under the laws of the jurisdiction of its incorporation or formation, as applicable, and, after giving effect to the Transactions, has the power and authority to own, lease and operate its properties and conduct its business as
described in the Registration Statement and the Pricing Disclosure Package and is duly qualified to do business as a foreign limited partnership, limited liability company, corporation or other business entity in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure so to qualify and be in good standing would not (i) result in a Material Adverse Effect, (ii) materially impair
the ability of any of the Partnership Entities to consummate the Transactions or any other transactions provided for in this Agreement or the Transaction Documents or (iii) subject the limited partners of the Partnership to any material liability or
disability. Each of the Partnership, the General Partner and each of the Subsidiaries has all power and authority necessary to enter into and perform its obligations under the Transaction Documents to which it is a party.
12
(q)
General Partner
. The General Partner has, and at each Delivery Date
will have, full limited liability company power and authority to serve as general partner of the Partnership in all material respects as disclosed in the Registration Statement, the Pricing Disclosure Package or the Prospectus.
(r)
General Partner of the Development Companies.
The GP Subsidiaries have, and at each Delivery Date will have, full
limited liability company power and authority to serve as the general partners of the Development Companies in all material respects as disclosed in the Registration Statement, the Pricing Disclosure Package or the Prospectus.
(s)
Ownership of the General Partner
. At each applicable Delivery Date, after giving effect to the Transactions, NBL
Midstream will own a 100% membership interest in the General Partner; such membership interest will have been duly authorized and validly issued in accordance with the Limited Liability Company Agreement of the General Partner (such agreement,
together with any amendments and/or restatements thereof on or prior to the applicable Delivery Date, the “
GP LLC Agreement
”) and will be fully paid (to the extent required under the GP LLC Agreement) and nonassessable
(except as such nonassessability may be affected by Sections 18-607 and 18-804 of the Delaware Limited Liability Company Act (the “
Delaware LLC Act
”)); and such membership interest will be owned free and clear of all liens,
encumbrances, security interests, equities, charges or other claims (“
Liens
”), except for restrictions on transferability that may be imposed by federal or state securities laws or contained in the GP LLC Agreement or as
described in the Registration Statement, the Pricing Disclosure Package or the Prospectus.
(t)
Ownership of the General
Partner Interest in the Partnership
. At each applicable Delivery Date, after giving effect to the Transactions, the General Partner will be the sole general partner of the Partnership, with a non-economic general partner interest in the
Partnership (the “
General Partner Interest
”); such General Partner Interest will have been duly authorized and validly issued in accordance with the Agreement of Limited Partnership of the Partnership (such agreement,
together with any amendments and/or restatements thereof on or prior to the applicable Delivery Date, the “
Partnership Agreement
”); and the General Partner will own such General Partner Interest free and clear of all Liens,
except for restrictions on transferability that may be imposed by federal or state securities laws or contained in the Partnership Agreement or as described in the Registration Statement, the Pricing Disclosure Package or the Prospectus.
(u)
Ownership of the Incentive Distribution Rights
. At each applicable Delivery Date, after giving effect to the
Transactions, NBL Midstream will own all of the Incentive Distribution Rights; the Incentive Distribution Rights and the limited partner interests represented thereby will have been duly authorized and validly issued in accordance with the
Partnership Agreement and will be fully paid (to the extent required under the Partnership Agreement) and nonassessable (except as such nonassessability
13
may be affected by Sections 17-303, 17-607 and 17-804 of the Delaware Revised Uniform Limited Partnership Act (the “
Delaware LP Act
”)); and NBL Midstream will own such
Incentive Distribution Rights free and clear of all Liens, except for restrictions on transferability that may be imposed by federal or state securities laws or contained in the Partnership Agreement or as described in the Registration Statement,
the Pricing Disclosure Package or the Prospectus.
(v)
Ownership of the Sponsor Units
. At each applicable Delivery
Date, after giving effect to the Transactions, NBL Midstream will own all of the Sponsor Units; the Sponsor Units and the limited partner interests represented thereby will have been duly authorized and validly issued in accordance with the
Partnership Agreement and will be fully paid (to the extent required under the Partnership Agreement) and nonassessable (except as such nonassessability may be affected by Sections 17-303, 17-607 and 17-804 of the Delaware LP Act); and NBL Midstream
will own such Sponsor Units free and clear of all Liens, except for restrictions on transferability that may be imposed by federal or state securities laws or contained in the Partnership Agreement or as described in the Registration Statement, the
Pricing Disclosure Package or the Prospectus.
(w)
Duly Authorized and Validly Issued Units
. At each applicable
Delivery Date, the Units to be sold by the Partnership to the Underwriters and the limited partner interests represented thereby will have been duly authorized in accordance with the Partnership Agreement and, when issued and delivered to the
Underwriters against payment therefor in accordance with the terms hereof, will be validly issued, fully paid (to the extent required under the Partnership Agreement) and nonassessable (except as such nonassessability may be affected by Sections
17-303, 17-607 and 17-804 of the Delaware LP Act). Other than the Sponsor Units and the Incentive Distribution Rights, the Units will be the only limited partner interests of the Partnership issued or outstanding at the Initial Delivery Date and at
each Option Unit Delivery Date, as applicable.
(x)
Ownership of Midstream Services
. At each applicable Delivery
Date, and after giving effect to the Transactions, the Partnership will own a 100% membership interest in Midstream Services; such membership interest has been duly authorized and validly issued in accordance with the limited liability company
agreement of Midstream Services, as in effect at such time (the “
Midstream Services Limited Liability Company Agreement
”), and is fully paid (to the extent required by the Midstream Services Limited Liability Company
Agreement) and nonassessable (except as such nonassessability may be affected by Sections 18-607 and 18-804 of the Delaware LLC Act); the Partnership will own all such membership interests free and clear of all Liens, other than those created or
arising under the Midstream Services Limited Liability Company Agreement or the New Credit Agreement.
(y)
Ownership of
GP Subsidiaries
. At each applicable Delivery Date, and after giving effect to the Transactions, Midstream Services will own a 100% membership interest in each of the GP Subsidiaries; such membership interests have been duly authorized and
validly issued in accordance with the limited liability company agreements of the GP Subsidiaries, as in effect at such time (the “
GP Subsidiaries Limited Liability Company Agreements
”), and are fully paid (to the extent
required by
14
the GP Subsidiaries Limited Liability Company Agreements) and nonassessable (except as such nonassessability may be affected by Sections 18-607 and 18-804 of the Delaware LLC Act); the
Partnership will own all such membership interests free and clear of all Liens, other than those created or arising under the GP Subsidiaries Limited Liability Company Agreements or the New Credit Agreement.
(z)
Ownership of Development Companies
. At each applicable Delivery Date, and after giving effect to the Transactions,
(i) Colorado River DevCo GP will own a 80% general partner interest and NBL Midstream will own a 20% limited partner interest in Colorado River DevCo, (ii) Green River DevCo GP will own a 25% general partner interest and NBL Midstream will own a 75%
limited partner interest in Colorado River DevCo, (iii) Gunnison River DevCo GP will own a 5% general partner interest and NBL Midstream will own a 95% limited partner interest in Gunnison River DevCo, (iv) Laramie River DevCo GP will own a 5%
general partner interest and Midstream Services will own a 95% limited partner interest in Laramie River DevCo, (v) San Juan River DevCo GP will own a 25% general partner interest and NBL Midstream will own a 75% limited partner interest in San Juan
River DevCo, and (vi) Blanco River DevCo GP will own a 25% general partner interest and NBL Midstream will own a 75% limited partner interest in Blanco River DevCo; such membership interests will have been duly authorized and validly issued in
accordance with the agreements of limited partnership of the Development Companies, as in effect at such time (the “
Development Company Agreements of Limited Partnership
”), and fully paid (to the extent required by the
Development Company Agreements of Limited Partnership) and nonassessable (except as such nonassessability may be affected by Sections 17-303, 17-607 and 17-804 of the Delaware LP Act); the GP Subsidiaries, Midstream Services and NBL Midstream will
own all such membership interests free and clear of all Liens, other than those created or arising under federal or state securities laws, the Development Company Agreements of Limited Partnership or the New Credit Agreement.
(aa)
Ownership of White Cliffs
. At each applicable Delivery Date, and after giving effect to the Transactions, Midstream
Services will own a 3.33% membership interest in White Cliffs; to the knowledge of the Partnership, such membership interest has been duly authorized and validly issued in accordance with the limited liability company agreement of White Cliffs, as
in effect at such time (the “
White Cliffs Limited Liability Company Agreement
”)the Partnership will own all such membership interests free and clear of all Liens, other than those created or arising under federal or state
securities laws, the White Cliffs Limited Liability Company Agreement, as in effect at such time, or the New Credit Agreement.
(bb)
No Other Subsidiaries
. At each applicable Delivery Date, after giving effect to the Transaction, the General
Partner will not own or control, directly or indirectly, any equity or long-term debt securities of any corporation, partnership, limited liability company, joint venture, association or other entity, other than the Partnership, the Subsidiaries and
White Cliffs. At each applicable Delivery Date, after giving effect to the Transactions, the Partnership will not own or control, directly or indirectly, any equity or long-term debt of any corporation, partnership, limited liability company,
joint venture, association or other entity, other than the Subsidiaries and White Cliffs.
15
(cc)
Distribution Restrictions
. After giving effect to the Transactions,
Midstream Services will not be prohibited, directly or indirectly, under any agreement or other instrument to which it is a party or to which it is subject, from paying any distributions to the Partnership, from making any other distribution on its
equity interests, from repaying to the Partnership any loans or advances to Midstream Services from the Partnership or from transferring any of its property or assets to the Partnership or any other subsidiary of the Partnership, except for (a)
restrictions on distributions under the laws of the State of Delaware, (b) restrictions described in the Pricing Disclosure Package and the Prospectus or (c) as described in or contemplated by the New Credit Agreement.
(dd)
Description of the Units
. The Units, when issued and delivered in accordance with the terms of the Partnership
Agreement and this Agreement against payment therefor as provided therein and herein, and the Sponsor Units, the General Partner Interest and the Incentive Distribution Rights, when issued and delivered in accordance with the terms of the
Partnership Agreement and the Contribution Agreement, will conform in all material respects to the respective statements relating thereto contained in the Registration Statement, the Pricing Disclosure Package or the Prospectus and will be
substantially in the form filed as exhibit to the Registration Statement.
(ee)
No Options, Preemptive Rights,
Registration Rights or Other Rights
. Except as set forth in the Partnership Agreement and the Omnibus Agreement, there are no profits interests or other equity interest, options, warrants, preemptive rights, rights of first refusal or other
rights to subscribe for or to purchase, nor any restriction upon voting or transfer of, any equity securities of the Partnership, the General Partner or any of the Subsidiaries, in each case pursuant to the certificates of limited partnership or
formation or any other organizational documents of any such person (“
Organizational Documents
”) or any agreement or instrument to which any of the Partnership Entities is a party or by which any of them may be bound. Neither
the filing of the Registration Statement nor the offering or other sale of the Units as contemplated by this Agreement gives rise to any rights for or relating to the registration of any Common Units of the Partnership or other securities of the
Partnership, the General Partner or any of the Subsidiaries.
(ff)
Authority and Authorization
. Each of the
Partnership Parties has all requisite power and authority to execute and deliver this Agreement and to perform its respective obligations hereunder. The Partnership has all requisite limited partnership power and authority to issue, sell and deliver
(i) the Units to be sold by it, in accordance with and upon the terms and conditions set forth in this Agreement, the Partnership Agreement, the Registration Statement, the Pricing Disclosure Package and the Prospectus and (ii) the Sponsor Units and
the Incentive Distribution Rights, in accordance with and upon the terms and conditions set forth in the Partnership Agreement and the Contribution Agreement. At each Delivery Date, all limited partnership, limited liability company and corporate
action, as the case may be, required to be taken by (i) any of the Partnership Parties or any of their respective unitholders, members, partners or securityholders for the authorization, issuance, sale and delivery of the Units, the Sponsor Units
and the Incentive Distribution Rights, or (ii) any of the Partnership Entities or any of their respective unitholders, members, partners or
16
securityholders for the execution and delivery of the Transaction Documents that such Partnership Entity party thereto and the consummation of the Transactions and any other transactions
contemplated by this Agreement or the Transaction Documents, shall have been validly taken.
(gg)
Authorization,
Execution and Delivery of the Underwriting Agreement
. This Agreement has been duly authorized and validly executed and delivered by or on behalf of each of the Partnership Parties.
(hh)
Authorization, Execution, Delivery and Enforceability of Certain Agreements
. At each applicable Delivery Date:
(i) each of the Transaction Documents will have been duly authorized, executed and delivered by the Partnership Entity party
thereto and will be a valid and legally binding agreement of such Partnership Entity, enforceable against such Partnership Entity in accordance with its terms;
(ii) the Partnership Agreement will have been duly authorized, executed and delivered by the General Partner and NBL Midstream
and will be a valid and legally binding agreement of the General Partner and NBL Midstream, enforceable against the General Partner and NBL Midstream in accordance with its terms;
(iii) the GP LLC Agreement will have been duly authorized, executed and delivered by NBL Midstream and will be a valid and
legally binding agreement of NBL Midstream, enforceable against NBL Midstream in accordance with its terms;
(iv) the
Midstream Services Limited Liability Company Agreement will have been duly authorized, executed and delivered by the Partnership and will be valid and legally binding agreements of the Partnership, enforceable against the Partnership in accordance
with its terms; and
(v) each of the GP Subsidiaries Limited Liability Company Agreements and the Development Company
Agreements of Limited Partnership will have been duly authorized, executed and delivered by the parties thereto and will be valid and legally binding agreements of such parties, enforceable against such parties in accordance with their terms;
provided
, that, with respect to each such agreement, the enforceability thereof may be limited by (A) applicable bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws relating to or affecting creditors’ rights and remedies generally and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at
law) and (B) public policy, applicable law relating to fiduciary duties and indemnification and an implied covenant of good faith and fair dealing.
(ii)
Legal Sufficiency of Contribution Agreement
. The Contribution Agreement, dated December 1, 2015, by and among
Noble, NBL Midstream, the General Partner, the Partnership, Midstream Services, the GP Subsidiaries (except Blanco River DevCo GP) and the Development Companies (except Blanco River DevCo) (the “
Initial
17
Contribution Agreement
”) and the Contribution Agreement was or will be, as applicable, legally sufficient to transfer or convey all of the right, title and interest of the
transferors stated therein and the ownership interests, assets and rights purported to be transferred thereby, as contemplated by the Registration Statement, the Pricing Disclosure Package and the Prospectus, subject to the conditions, reservations,
encumbrances and limitations contained in the Initial Contribution Agreement and the Contribution Agreement and described in the Registration Statement, the Pricing Disclosure Package and the Prospectus. Midstream Services holds, or will succeed
upon execution and delivery of the Contribution Agreement and consummation of the transactions contemplated thereby, directly or indirectly in all material respects the business, assets, properties, liabilities and operations reflected in the
financial statements included in the Registration Statement, the Pricing Disclosure Package and the Prospectus.
(jj)
No
Conflicts
. (i) None of the General Partner, the Partnership or any of the Subsidiaries is (i) in violation of its governing documents or (ii) is in default in the performance or observance of any obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, loan agreement, note, lease or other instrument to which it is a party or by which it or any of them or their properties may be bound (collectively, “
Agreements and
Instruments
”), except in the case of clause (ii) where the consequences of such violation or default would result in a Material Adverse Effect or would not reasonably be expected to materially impair the ability of any of the
Partnership Parties to consummate the Transactions or any other transactions provided for in this Agreement or the Transaction Documents; and (ii) the execution, delivery and performance of this Agreement or any Transaction Document and the
consummation of the transactions (including the Transactions) contemplated in this Agreement, the Transaction Documents and in the Registration Statement, the Pricing Disclosure Package and the Prospectus (including the issuance and sale of the
Units and the use of the proceeds from the sale of the Units as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus under the caption “Use of Proceeds”) and compliance by the Partnership Parties with
their obligations hereunder (A) have been duly authorized by all necessary corporate, limited partner and limited liability company action of the Partnership Parties (B) do not and will not conflict with or constitute a breach of, or default or
Repayment Event (as defined below) under, or result in the creation or imposition of any Liens (other than Liens arising under or in connection with New Credit Agreement) upon any property or assets of the Partnership or any Subsidiary (including
the Contributed Assets) pursuant to, the Agreements and Instruments, (C) will not result in any violation of the provisions of the governing documents of the General Partner, the Partnership or any Subsidiary or (D) will not result in any violation
of any applicable law, statute, rule, regulation, judgment, order, writ or decree of any government, government instrumentality or court, domestic or foreign, having jurisdiction over the General Partner, the Partnership or any Subsidiary or any of
their assets, properties or operations, except in the case of clauses (ii)(A), (B), and (D) for any such conflicts, violations, breaches, defaults or Liens that, individually or in the aggregate, have not materially impaired and will not materially
impair the ability of any of the Partnership Parties or any Subsidiary to consummate the Transactions or any other transactions provided for in this Agreement or the Transaction Documents. As used herein, a “Repayment Event” means any
event or condition which gives the holder of any
18
note, debenture or other evidence of indebtedness (or any person acting on such holder’s behalf) the right to require the repurchase, redemption or repayment of all or a portion of such
indebtedness by the Partnership Parties or any Subsidiary.
(kk)
No Consents
. No filing with, or authorization,
approval, consent, license, order, registration, qualification or decree of, any court or governmental authority or agency is necessary or required in connection with (i) the offering, issuance or sale of the Units hereunder or the consummation of
the transactions contemplated by this Agreement, (ii) the consummation of the Transactions contemplated by the Transaction Documents, (iii) the due authorization, execution, delivery or performance of this Agreement or the Transaction Documents by
the Partnership Entities party thereto, or (iv) the application of the proceeds from the sale of the Units as described under “Use of Proceeds” in the Pricing Disclosure Package, except for the registration of the Units under the
Securities Act and such consents, approvals, authorizations, orders, filings, registrations or qualifications as may be required under the Exchange Act, and applicable state securities laws and/or the bylaws and rules of the Financial Industry
Regulatory Authority (the “
FINRA
”) in connection with the purchase and sale of the Units by the Underwriters.
(ll)
Historical Financial Statements
. The historical financial statements (including the related notes and supporting
schedules) included in the Registration Statement, the Pricing Disclosure Package and the Prospectus (and any amendment or supplement thereto) comply as to form in all material respects with the applicable accounting requirements of the Securities
Act and present fairly the consolidated financial position of the entities purported to be shown thereby as of the dates indicated and the results of operations and cash flows of the entities purported to be shown therein for the periods specified.
Said historical financial statements have been prepared in conformity with generally accepted accounting principles in the United States (“
GAAP
”) applied on a consistent basis, except as described therein, throughout the
periods specified. The summary historical financial and operating data included under the caption “Prospectus Summary—Summary Historical and Pro Forma Financial Data” in the Registration Statement, the Pricing Disclosure Package and
the Prospectus (and any amendment or supplement thereto) and the selected historical financial and operating data set forth under the caption “Selected Historical and Pro Forma Financial Data” included in the Registration Statement, the
Pricing Disclosure Package and the Prospectus (and any amendment or supplement thereto) is accurately presented in all material respects and prepared on a basis consistent with the audited and unaudited historical consolidated financial statements
from which they have been derived, except as described therein. The other financial information of the Partnership (or its predecessor for accounting purposes), including non-GAAP financial measures contained in the Registration Statement, the
Pricing Disclosure Package and the Prospectus has been derived from the accounting records of the Partnership Entities or their predecessors for accounting purposes, fairly presents in all material respects the information purported to be shown
thereby and complies with Regulation G of the Exchange Act and Item 10 of Regulation S-K of the Securities Act, to the extent applicable. There are no financial statements (historical or pro forma) that are required to be included in the
Registration Statement, the Pricing Disclosure Package or the Prospectus that are not so included as required and
19
neither the Partnership Parties nor the Subsidiaries have any material liabilities or obligations, direct or contingent (including any off balance sheet obligations), not described in the
Registration Statement (excluding the exhibits thereto), the Pricing Disclosure Package or the Prospectus.
(mm)
Pro
Forma Financial Statements
. The pro forma financial statements included in the Registration Statement, the Pricing Disclosure Package and the Prospectus include assumptions that provide a reasonable basis for presenting the significant effects
directly attributable to the transactions and events described therein, the related pro forma adjustments give appropriate effect to those assumptions, and the pro forma adjustments reflect an appropriate application of those adjustments to the
historical financial statement amounts in the pro forma financial statements included in the Registration Statement, the Pricing Disclosure Package and the Prospectus. The pro forma financial statements included in the Registration Statement, the
Pricing Disclosure Package and the Prospectus comply as to form in all material respects with the applicable requirements of Regulation S-X under the Securities Act.
(nn)
Independent Registered Public Accounting Firm
. KPMG LLP, who has certified certain financial statements of the
Partnership and its predecessor as part of the Registration Statement, the most recent Preliminary Prospectus and the Prospectus, is an independent registered public accounting firm with respect to the Partnership within the meaning of the
Securities Act and the applicable rules and regulations thereunder and the Public Company Accounting Oversight Board (United States).
(oo)
Internal Controls
. The General Partner, the Partnership and the Subsidiaries maintain systems of “internal
control over financial reporting” (as defined in Rule 13a-15(f) of the Exchange Act) that comply with the requirements of the Exchange Act and have been designed by, or under the supervision of, their respective principal executive and
principal financial officers, or persons performing similar functions, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP,
including, but not limited to, internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as
necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the
recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. As of the date of the most recent balance sheet of the Partnership and its consolidated
subsidiaries reviewed or audited by KPMG LLP, there were no material weaknesses or significant deficiencies in the Partnership’s internal controls. Except as disclosed in the Registration Statement, the Pricing Disclosure Package and the
Prospectus, none of the Partnership Parties is aware of (A) any material weakness in its internal control over financial reporting or (B) change in internal control over financial reporting that has materially affected, or is reasonably likely to
materially affect, the Partnership’s internal control over financial reporting. The Partnership’s auditors have been advised of: (i) all significant deficiencies and material weaknesses in the design or
20
operation of internal controls over financial reporting which have adversely affected or are reasonably likely to adversely affect the Partnership’s ability to record, process, summarize and
report financial information; and (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in the Partnership’s internal controls over financial reporting.
(pp)
Disclosure Controls and Procedures
. To the extent required by Rule 13a-15 under the Exchange Act, the Partnership
has established and maintains an effective system of “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that complies with the requirements of the Exchange Act; the Partnership’s
“disclosure controls and procedures” are reasonably designed to ensure that all information (both financial and non-financial) required to be disclosed by the Partnership in the reports to be filed or submitted under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified in the Exchange Act, and that all such information is accumulated and communicated to the Partnership’s management as appropriate to allow timely decisions regarding
required disclosure and to make the certifications of the Chief Executive Officer and Chief Financial Officer of the General Partner required under the Exchange Act with respect to such reports.
(qq)
Sarbanes-Oxley Act of 2002
. Solely to the extent that the Sarbanes-Oxley Act of 2002, as amended, and the rules and
regulations promulgated by the Commission and the New York Stock Exchange thereunder (the “
Sarbanes-Oxley Act
”) is applicable to the Partnership, there is and has been no failure on the part of the Partnership and any of the
Partnership’s directors or officers, in their capacities as such, to comply with any provision of the Sarbanes-Oxley Act.
(rr)
No Material Changes
. Since the respective dates of which information is given in the Registration Statement, the
Pricing Disclosure Package and the Prospectus, except as may otherwise be stated in therein or contemplated thereby, none of the Partnership Entities or, to the Partnership Parties’ knowledge, White Cliffs has (i) sustained any loss or
interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, (ii) issued or granted any securities, (iii) incurred any
material liability or obligation, direct or contingent, other than liabilities and obligations that were incurred in the ordinary course of business, (iv) entered into any material transaction not in the ordinary course of business, or
(v) declared or paid any distribution or dividend on its equity interests, and since such date, there has not been any change in the equity interests or long-term debt of any of the Partnership Entities or any of its subsidiaries or any adverse
change, or any development involving a prospective adverse change, in or affecting the condition (financial or otherwise), results of operations, partners’ equity, properties, management, business or prospects of the Partnership Entities taken
as a whole, in each case except as could not, in the aggregate, reasonably be expected to have a Material Adverse Effect.
(ss)
Title to Properties
. Each of the Partnership, the General Partner and the Subsidiaries has, or at each
Delivery Date, after giving effect to the Transactions, will have, legal, valid and defensible title to all of their interests in all real and personal
21
property owned by them, in each case free and clear of all Liens and defects of any kind, except (a) such as are described in the Registration Statement, the Pricing Disclosure Package and the
Prospectus or (b) those that do not materially affect or interfere with the use made and proposed to be made of such properties taken as a whole. Any property held under lease or sublease by the Partnership, the General Partner or any of the
Subsidiaries is held, or at each Delivery Date, after giving effect to the Transactions, will be held, under valid, subsisting and enforceable leases or subleases with such exceptions as are not material and do not interfere with the use made and
proposed to be made of such properties taken as a whole by the Partnership, the General Partner and the Subsidiaries or except such as are described in the Registration Statement, the Pricing Disclosure Package and the Prospectus. None of the
Partnership, the General Partner nor any of the Subsidiaries has any notice or knowledge of any claim of any sort that has been, or may be, asserted by anyone adverse to the Partnership’s, the General Partner’s or any of the
Subsidiaries’ rights as lessee or sublessee under any lease or sublease described above, or affecting or questioning the Partnership’s, the General Partner’s or any of the Subsidiaries’ rights to the continued possession of the
leased or subleased premises under any such lease or sublease in conflict with the terms thereof except for such claims that would not result in a Material Adverse Effect.
(tt)
Rights of Way
. Each of the Partnership, the General Partner and the Subsidiaries has, or at each Delivery Date,
after giving effect to the Transactions, will have, such consents, easements, rights-of-way, permits or licenses from each person (collectively, “
rights-of-way
”) as are necessary to conduct its business in the manner
described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, subject to the limitations described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, if any, except for (i) qualifications,
reservations and encumbrances with respect thereto that could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect and (ii) such rights-of-way that, if not obtained, could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect; and each of the Partnership, the General Partner and the Subsidiaries has, or at each Delivery Date, after giving effect to the Transactions, will have, fulfilled and performed, in
all material respects, its obligations with respect to such rights-of-way and no event has occurred that allows, or after notice or lapse of time would allow, revocation or termination thereof or would result in any impairment of the rights of the
holder of any such rights-of-way, except for such revocations, terminations and impairments that could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(uu)
Permits
. None the Partnership, the General Partner nor any of the Subsidiaries is in violation of any law,
ordinance, governmental rule or regulation or court decree to which it may be subject or has failed to obtain any license, permit, franchise or other governmental authorization necessary to the ownership of its property or to the conduct of its
business, which violation or failure would have a Material Adverse Effect; and the Partnership, the General Partner and the Subsidiaries own, or at each Delivery Date, after giving effect to the Transactions, will own, or possess or have obtained
all governmental licenses, permits, consents, orders, approvals and other authorizations and have properly filed with the appropriate authorities all notices,
22
applications and other documents necessary to lease or own their respective properties and to carry on their respective businesses as presently conducted, except where the failure to possess such
licenses or authorizations or make such filings would not have a Material Adverse Effect. No event has occurred that would prevent the Permits from being renewed or reissued or which allows, or after notice or lapse of time would allow,
revocation or termination thereof or results in any impairment of the rights of the holder of any such Permit. None of the Partnership Parties or any of the Subsidiaries has received any notice of proceedings relating to the revocation or
modification of any such Permits or has any reason to believe that any such Permits will not be renewed in the ordinary course.
(vv)
Intellectual Property
. Each of the Partnership and the Subsidiaries own or possess, or can acquire on
reasonable terms, adequate patents, patent rights, licenses, inventions, copyrights,
know-how
(including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems
or procedures), trademarks, service marks, trade names or other intellectual property (collectively, “
Intellectual Property
”) necessary to carry on the business now operated by them, and none of NBL Midstream, the Partnership
nor any of the Subsidiaries has received any notice or is otherwise aware of any infringement of or conflict with asserted rights of others with respect to any Intellectual Property or of any facts or circumstances that would render any Intellectual
Property invalid or inadequate to protect the interest of the Partnership or any of the Subsidiaries therein, and which infringement or conflict (if the subject of any unfavorable decision, ruling or finding) or invalidity or inadequacy, singly or
in the aggregate, would result in a Material Adverse Effect.
(ww)
Legal Proceedings
. There is no action, suit,
proceeding, inquiry or investigation before or brought by any court or governmental agency or body, domestic or foreign, now pending, or, to the knowledge of the Partnership Parties, threatened, against or affecting Noble, US Holdings, NBL
Midstream, the General Partner, the Partnership Parties or any Subsidiary, which (1) could reasonably be expected to result in a Material Adverse Effect, (2) could reasonably be expected to materially and adversely affect the properties or
assets of the Partnership and the Subsidiaries taken as a whole or (3) could reasonably be expected to materially and adversely affect the consummation of the transactions contemplated in this Agreement, the Transactions contemplated in the
Transaction Documents or the performance by the Partnership Parties of the obligations contemplated hereunder and thereunder. The aggregate of all pending legal or governmental proceedings to which the General Partner, the Partnership or any
Subsidiary is a party or of which any of their respective property or assets is the subject that are not described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, including ordinary routine litigation incidental to
the business, could not reasonably be expected to result in a Material Adverse Effect.
(xx)
Contracts to be Described
or Filed
. There are no contracts or other documents required to be described in the Registration Statement, the Pricing Disclosure Package or the Prospectus or filed as exhibits to the Registration Statement that are not described and, if
applicable, filed as required. The statements made in the Pricing Disclosure Package, insofar as they purport to constitute summaries of the terms of the
23
contracts and other documents described and, if applicable, filed, constitute accurate summaries of the terms of such contracts and documents in all material respects. The Partnership Parties
have no knowledge that any other party to any such contract or other document has any intention not to render full performance as contemplated by the terms thereof.
(yy)
Summaries of Law or Agreements
. The statements made in the most recent Preliminary Prospectus under the captions
“Prospectus Summary—Ownership and Organizational Structure,” “Business—Regulation of Operations,” “Business—Environmental Matters” “Certain Relationships and Related Party Transactions,”
“Description of Our Common Units,” “Units Eligible for Future Sale,” “Material Federal Income Tax Consequences” and “Investment in Noble Midstream Partners LP by Employee Benefit Plans,” insofar as they
purport to constitute summaries of the terms of statutes, rules or regulations, legal or governmental proceedings or contracts and other documents, constitute accurate summaries of the terms of such statutes, rules and regulations, legal and
governmental proceedings and contracts and other documents in all material respects.
(zz)
Insurance
. Each of
the Partnership and the Subsidiaries has or is, or at each Delivery Date, after giving effect to the Transactions, will have or will be, covered by insurance from insurers that have (or whose reinsurers have) recognized financial responsibility and
such insurance is in such amounts and covering such risks as is adequate for the conduct of their respective businesses and the value of their respective properties and as is customary for companies engaged in similar businesses in similar
industries. All policies of insurance covering the Partnership and the Subsidiaries are, or at each Delivery Date, after giving effect to the Transactions, will be, in full force and effect; each of the Partnership and the Subsidiaries is, or
at each Delivery Date, after giving effect to the Transactions, will be, in compliance with the terms of such policies in all material respects; and none of the Partnership or any of the Subsidiaries has received notice from any insurer or agent of
such insurer that capital improvements or other expenditures are required or necessary to be made in order to continue such insurance; there are no claims by any of the Partnership or any of the Subsidiaries under any such policy or instrument as to
which any insurance company is denying liability or defending under a reservation of rights clause; and none of the Partnership or any of the Subsidiaries has any reason to believe that it will not be able to renew its existing insurance coverage as
and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(aaa)
No Undisclosed Relationships
. Except as described in Pricing Disclosure Package, no relationship, direct
or indirect, exists between or among any Partnership Entity, on the one hand, and the directors, officers, unitholders, stockholders, customers or suppliers of any Partnership Entity, on the other hand, that is required to be described in the
Pricing Disclosure Package which is not so described. There are no outstanding personal loans, advances (except normal advances for business expenses in the ordinary course of business) or guarantees of indebtedness by any Partnership Entity to
or for the benefit of any of the executive officers, directors or managers of any Partnership Entity or their respective family members.
24
(bbb)
No Labor Dispute
. No labor dispute with the employees of the
Noble that are working on behalf of General Partner, the Partnership or any Subsidiary pursuant to the Omnibus Agreement, Operational Services and Secondment Agreement or otherwise, exists or, to the knowledge of the Partnership Parties, is imminent
that would result in a Material Adverse Effect.
(ccc)
Environmental Compliance
. Except as described in the
Registration Statement, the Pricing Disclosure Package and the Prospectus, (A) neither the Partnership nor any of the Subsidiaries is in violation of any federal, state, local or foreign statute, law, rule, regulation, ordinance, code, policy or
rule of common law or any judicial or administrative interpretation thereof, including any judicial or administrative order, consent, decree or judgment, relating to pollution or protection of human health, the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or subsurface strata) or wildlife, including, without limitation, laws and regulations relating to the release or threatened release of chemicals, pollutants, contaminants, wastes,
toxic substances, hazardous substances or petroleum or petroleum products (collectively, “
Hazardous Materials
”) or to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials (collectively, “
Environmental Laws
”), (B) the Partnership and the Subsidiaries have all permits, authorizations and approvals required under any applicable Environmental Laws and are each in compliance
with their requirements, (C) there are no pending or threatened administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation, investigation or proceedings relating to any
Environmental Law against the Partnership or any of the Subsidiaries, other than such proceedings regarding which it is reasonably believed no monetary sanctions of $100,000 or more will be imposed, and (D) there are no events or circumstances that
would reasonably be expected to form the basis of an order for clean-up or remediation, or an action, suit or proceeding by any private party or governmental body or agency, against or affecting the Partnership or any of the Subsidiaries relating to
Hazardous Materials or any Environmental Laws, except, in the case of (A), (B) or (D), as would not, singly or in the aggregate, result in a Material Adverse Effect.
(ddd)
FERC.
White Cliffs is operated as a “common carrier” subject to regulation by the Federal Energy
Regulatory Commission (“
FERC
”) under the Interstate Commerce Act. To the knowledge of Noble and the Partnership Entities, there are no administrative or regulatory proceedings pending or threatened against White Cliffs the
result of which are reasonably likely to materially change, alter or modify the rates, charges or fees for transportation services related to any FERC-regulated line or any other terms or conditions of service currently in effect under any tariffs
issued by White Cliffs.
(eee)
Tax Returns
. The Partnership Parties and the Subsidiaries have filed all
federal, state, local and foreign tax returns required to be filed through the date hereof, subject to permitted extensions, and have paid all taxes due, except as would not,
25
individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, and no tax deficiency has been determined adversely to the Partnership Parties or the Subsidiaries, nor
do any of the Partnership Parties or the Subsidiaries have any knowledge of any tax deficiencies that have been, or could reasonably be expected to be asserted against the Partnership Parties or the Subsidiaries, that could, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
(fff)
ERISA
. (i) Each “employee benefit
plan” (within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“
ERISA
”)) for which the Partnership Parties or any Subsidiary or any trade or business (whether or not
incorporated) which is considered a single employer with a Partnership Party or any Subsidiary within the meaning of Section 414 of the Internal Revenue Code of 1986, as amended (the “
Code
”) (such an entity, an
“
ERISA Affiliate
”)) would have any actual or potential liability (each a “
Plan
”) has been maintained in material compliance with its terms and with the requirements of all applicable statutes, rules
and regulations including ERISA and the Code; (ii) no prohibited transaction, within the meaning of Section 406 of ERISA or Section 4975 of the Code or any similar applicable law, has occurred with respect to any Plan, excluding transactions
effected pursuant to a statutory or administrative exemption; (iii) no Partnership Party, any Subsidiary or any ERISA Affiliate of any of the foregoing (A) sponsors, maintains, contributes to or is required to contribute to any plan subject to Title
IV of ERISA, Section 302 of ERISA or Section 412 of the Code or a “multiemployer plan” within the meaning of Section 4001(a)(3) of ERISA; or (B) would reasonably be expected to have any material liability with respect to any plan described
in the preceding clause (A) that any such entity has sponsored, maintained, or contributed to or was required to contribute to during the past six (6) years; and (iv) each Plan that is intended to be qualified under Section 401(a) of the Code is so
qualified and nothing has occurred, whether by action or by failure to act, which could reasonably be expected to cause the loss of such qualification.
(ggg)
Statistical and Market-Related Data
. The statistical and market-related data included in the Registration
Statement, the Pricing Disclosure Package, the Prospectus are based on or derived from sources that the Partnership believes to be reliable and accurate in all material respects, and the Partnership has obtained written consent to the use of such
data from such sources to the extent required.
(hhh)
Investment Company
. Neither the Partnership nor any of the
Subsidiaries is, and as of the applicable Delivery Date and, after giving effect to the offer and sale of the Units and the application of the proceeds therefrom as described under “Use of Proceeds” in the most recent Preliminary
Prospectus and the Prospectus, none of them will be, (i) an “investment company” or a company “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940, as amended (the
“
Investment Company Act
”), and the rules and regulations of the Commission thereunder, or (ii) a “business development company” (as defined in Section 2(a)(48) of the Investment Company Act).
(iii)
No Brokers
. Except as described in the Registration Statement and the most recent Preliminary Prospectus,
none of the Partnership Parties or any Subsidiary is a
26
party to any contract, agreement or understanding with any person (other than this Agreement) that would give rise to a valid claim against any of them or the Underwriters for a brokerage
commission, finder’s fee or like payment in connection with the offering and sale of the Units.
(jjj)
Private
Placement
. The sale and issuance of the Sponsor Units and the Incentive Distribution Rights to NBL Midstream and the General Partner Interest to the General Partner are exempt from the registration requirements of the Securities Act and
securities laws of any state having jurisdiction with respect thereto, and none of the Partnership Parties has taken or will take any action that would cause the loss of such exemption. None of the Partnership Parties has sold or issued any
securities that would be integrated with the offering of the Units contemplated by this Agreement pursuant to the Securities Act, the rules and regulations thereunder or the interpretations thereof by the Commission.
(kkk)
Absence of Manipulation
. Neither the Partnership nor any affiliate of the Partnership has taken, nor will the
Partnership or any affiliate take, directly or indirectly, any action that is designed to or that has constituted or that would be expected to cause or result in the stabilization or manipulation of the price of any security of the Partnership to
facilitate the sale of the Units.
(lll)
NYSE Listing of Common Units
. The Units have been approved for
listing, subject to official notice of issuance and evidence of satisfactory distribution on, The New York Stock Exchange.
(mmm)
Distribution of Offering Materials
. The Partnership has not distributed and, prior to the later to occur of
any Delivery Date and completion of the distribution of the Units, will not distribute any offering material in connection with the offering and sale of the Units other than any Preliminary Prospectus, the Prospectus, any Issuer Free Writing
Prospectus to which the Representatives have consented in accordance with Section 1(m) or 5(a)(vi), and any Issuer Free Writing Prospectus set forth on Schedule IV hereto and, in connection with the Directed Unit Program described in Section 3, the
enrollment materials prepared by Barclays Capital Inc. (the “
DUP Underwriter
”)
on behalf of the Partnership.
(nnn)
No Employment Law Violations
. None of the Partnership Parties or any of the Subsidiaries is in violation of
or has received notice of any violation with respect to any federal or state law relating to discrimination in the hiring, promotion or pay of employees, nor any applicable federal or state wage and hour laws, nor any state law precluding the denial
of credit due to the neighborhood in which a property is situated, the violation of any of which could reasonably be expected to have a Material Adverse Effect.
(ooo)
Anti-Corruption
.
(i) None of the General Partner, the Partnership or the Subsidiaries nor, to the Partnership Parties’ knowledge, any
director, officer, agent, employee or
27
affiliate of the General Partner, the Partnership or the Subsidiaries has taken any action, directly or indirectly, that would result in a violation of the Foreign Corrupt Practices Act of 1977,
as amended, and the rules and regulations thereunder (the “
FCPA
”), including, without limitation, making use of the mails or any means or instrumentality of interstate commerce corruptly in furtherance of an offer, payment,
promise to pay or authorization of the payment of any money, or other property, gift, promise to give, or authorization of the giving of anything of value to any “foreign official” (as such term is defined in the FCPA) or any foreign
political party or official thereof or any candidate for foreign political office, in contravention of the FCPA, or of the Bribery Act 2010 of the United Kingdom, and the General Partner, the Partnership or the Subsidiaries and, to the knowledge of
the Partnership Parties, their affiliates have conducted their businesses in compliance with the FCPA and have instituted and maintain policies and procedures designed to ensure, and which are reasonably expected to continue to ensure, continued
compliance therewith.
(ii) The operations of the General Partner, the Partnership and the Subsidiaries are and have been
conducted at all times in compliance in all material respects with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money laundering statutes of all
applicable jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines issued, administered or enforced by any court, arbitrator, regulatory body, administrative agency, governmental body or other
authority or agency that, in each case, are applicable to the business and operations of the Partnership and the Subsidiaries (collectively, the “
Money Laundering Laws
”). No action, suit or proceeding by or before any court,
arbitrator, regulatory body, administrative agency, governmental body or other authority or agency involving the General Partner, the Partnership or the Subsidiaries with respect to the Money Laundering Laws is pending or, to the Partnership
Parties’ knowledge, threatened
(ppp)
OFAC
. None of the General Partner, the Partnership or the Subsidiaries
nor, to the Partnership Parties’ knowledge, any director, officer, agent, employee or affiliate of the General Partner, the Partnership or the Subsidiaries is currently subject to any U.S. sanctions administered by the Office of Foreign Assets
Control of the U.S. Treasury Department (“
OFAC
”). The Partnership will not directly or indirectly use the proceeds from the sale of the Units, or lend, contribute or otherwise make available such proceeds, to any subsidiary,
joint venture partner or other person or entity in any manner that, to the General Partner’s, the Partnership or the Subsidiaries’ knowledge, would result in a violation of any economic sanctions imposed by the United States (including any
administered or enforced by OFAC, the U.S. Department of State, or the Bureau of Industry and Security of the U.S. Department of Commerce), the United Nations Security Council, the European Union, or the United Kingdom (including sanctions
administered or controlled by Her Majesty’s Treasury) (collectively, “
Sanctions
” and such persons, “
Sanctioned Persons
”).
(qqq)
Sanctions
. None of the General Partner, the Partnership or the Subsidiaries nor, to the knowledge of the
Partnership Parties, any director, officer, agent, employee or affiliate of the General Partner, the Partnership or any of the Subsidiaries, is
28
a person that is, or is 50% or more owned or otherwise controlled by a person that is: (i) the subject of any Sanctions; or (ii) located, organized or resident in Burma (Myanmar), Cuba, Iran,
North Korea, Sudan, and Syria (collectively, “
Sanctioned Countries
” and each, a “
Sanctioned Country
”). Except as has been disclosed to the Underwriters or is not material to the analysis under any
Sanctions, none of the General Partner, the Partnership or any Subsidiary has engaged in any dealings or transactions with or for the benefit of a Sanctioned Person, or with or in a Sanctioned Country, in the preceding 3 years, nor does the General
Partner, the Partnership or any of the Subsidiaries have any plans to initiate any dealings or transactions with Sanctioned Persons, or with or in Sanctioned Countries.
(rrr)
Directed Unit Program
. Each Preliminary Prospectus, the Prospectus and each Issuer Free Writing Prospectus
comply, and any further amendments or supplements thereto will comply, with any applicable laws or regulations of foreign jurisdictions in which such Preliminary Prospectus, Prospectus or such Issuer Free Writing Prospectus, as amended or
supplemented, if applicable, are distributed in connection with the Directed Unit Program. No consent, approval, authorization or order of, or filing, registration or qualification with, any court or governmental agency or body, other than such as
have been obtained, is required under the securities laws and regulations of any foreign jurisdiction in which the Directed Units are offered or sold outside the United States. The Partnership has not offered, or caused the DUP Underwriter to offer,
Units to any person pursuant to the Directed Unit Program with the specific intent to unlawfully influence (i) a customer or supplier of the Partnership to alter the customer’s or supplier’s level or type of business with the
Partnership or (ii) a trade journalist or publication to write or publish favorable information about the Partnership, its business or its products.
Any certificate signed by any officer of the General Partner and delivered to the Representatives or counsel for the Underwriters in
connection with the offering of the Units shall be deemed a representation and warranty by the Partnership, as to matters covered thereby, to each Underwriter.
2.
Purchase of the Units by the Underwriters.
On the basis of the representations, warranties and covenants contained in, and subject
to the terms and conditions of, this Agreement, the Partnership agrees to sell [●] Firm Units to the several Underwriters, and each of the Underwriters, severally and not jointly, agrees to purchase the number of Firm Units set forth
opposite that Underwriter’s name in Schedule I hereto. The respective purchase obligations of the Underwriters with respect to the Firm Units shall be rounded among the Underwriters to avoid fractional units, as the Representatives may
determine.
In addition, the Partnership grants to the Underwriters an option to purchase up to [●] additional Option Units.
Such option is exercisable in the event that the Underwriters sell more Common Units than the number of Firm Units in the offering and as set forth in Section 4 hereof. Each Underwriter agrees, severally and not jointly, to purchase the number of
Option Units (subject to such adjustments to eliminate fractional units as the Representatives may determine) that bears the same proportion to the total number of Option Units to be sold on such Delivery Date as the number of Firm Units set forth
in Schedule I hereto opposite the name of such Underwriter bears to the total number of Firm Units.
29
The purchase price payable by the Underwriters for both the Firm Units and any Option Units is
$[●] per Unit.
The Partnership is not obligated to deliver any of the Firm Units or Option Units to be delivered on the applicable
Delivery Date, except upon payment for all such Units to be purchased on such Delivery Date as provided herein.
3.
Offering of Units
by the Underwriters
. Upon authorization by the Representatives of the release of the Firm Units, the several Underwriters propose to offer the Firm Units for sale upon the terms and conditions to be set forth in the Prospectus.
It is understood that up to [●] of the Firm Units (the “
Directed Units
”) will initially be reserved by the
several Underwriters for offer and sale upon the terms and conditions to be set forth in the most recent Preliminary Prospectus and in accordance with the rules and regulations of FINRA to the DUP Offerees who have heretofore delivered to the DUP
Underwriter offers or indications of interest to purchase Firm Units in form satisfactory to the DUP Underwriter (such program, the “
Directed Unit Program
”) and that any allocation of such Firm Units among such persons will
be made in accordance with timely directions received by the DUP Underwriter from the Partnership;
provided
that under no circumstances will the DUP Underwriter or any Underwriter be liable to the Partnership or to any such person for any
action taken or omitted in good faith in connection with such Directed Unit Program. It is further understood that any Directed Units not affirmatively reconfirmed for purchase by any participant in the Directed Unit Program (“
Directed
Unit Participant
”) by [8]:00 A.M., New York City time, on the date hereof or otherwise are not purchased by such persons will be offered by the Underwriters to the public upon the terms and conditions set forth in the Prospectus. As
used herein, “
DUP Offeree
” means certain persons selected by Noble who have assisted in the establishment of the Partnership and who are intended to continue to support the Partnership after the Offering, the officers and
directors of the General Partner, the directors of Noble and the officers on Noble that hold the title of Vice President or more senior.
4.
Delivery of and Payment for the Units.
Delivery of and payment for the Firm Units shall be made at [10:00] A.M., New York City
time, on the third full business day following the date of this Agreement or at such other date or place as shall be determined by agreement between the Representatives and the Partnership. This date and time are sometimes referred to as the
“
Initial Delivery Date
”. Delivery of the Firm Units shall be made to the Representatives for the account of each Underwriter against payment by the several Underwriters through the Representatives and of the aggregate
purchase price of the Firm Units being sold by the Partnership to or upon the order of the Partnership of the purchase price by wire transfer in immediately available funds to the accounts specified by the Partnership. Time shall be of the essence,
and delivery at the time and place specified pursuant to this Agreement is a further condition of the obligation of each Underwriter hereunder. The Partnership shall deliver the Firm Units through the facilities of The Depository Trust Company
(“
DTC
”) unless the Representatives shall otherwise instruct.
The option granted in Section 2 will expire 30 days
after the date of this Agreement and may be exercised in whole or from time to time in part by written notice being given to the Partnership by the Representatives;
provided
that if such date falls on a day that is
30
not a business day, the option granted in Section 2 will expire on the next succeeding business day. Such notice shall set forth the aggregate number of Option Units as to which the option
is being exercised, the names in which the Option Units are to be registered, the denominations in which the Option Units are to be issued and the date and time, as determined by the Representatives, when the Option Units are to be delivered;
provided, however
, that this date and time shall not be earlier than the Initial Delivery Date nor earlier than the second business day after the date on which the option shall have been exercised nor later than the fifth business day after
the date on which the option shall have been exercised. Each date and time the Option Units are delivered is sometimes referred to as an “
Option Unit Delivery Date
”, and the Initial Delivery Date and any Option Unit Delivery
Date are sometimes each referred to as a “
Delivery Date
”.
Delivery of the Option Units by the Partnership and
payment for the Option Units by the several Underwriters through the Representatives shall be made at [10:00] A.M., New York City time, on the date specified in the corresponding notice described in the preceding paragraph or at such other date
or place as shall be determined by agreement between the Representatives and the Partnership. On each Option Unit Delivery Date, the Partnership shall deliver or cause to be delivered the Option Units to the Representatives for the account of each
Underwriter against payment by the several Underwriters through the Representatives and of the aggregate purchase price of the Option Units being sold by the Partnership to or upon the order of the Partnership of the purchase price by wire transfer
in immediately available funds to the accounts specified by the Partnership. Time shall be of the essence, and delivery at the time and place specified pursuant to this Agreement is a further condition of the obligation of each Underwriter
hereunder. The Partnership shall deliver the Option Units through the facilities of DTC unless the Representatives shall otherwise instruct.
5.
Further Agreements of the Partnership Parties and the Underwriters
. (a) Each of the Partnership Parties, jointly and severally,
agrees:
(i)
Preparation of Prospectus
. To prepare the Prospectus in a form approved by the Representatives and to
file such Prospectus pursuant to Rule 424(b) under the Securities Act not later than the Commission’s close of business on the second business day following the execution and delivery of this Agreement; to make no further amendment or any
supplement to the Registration Statement or the Prospectus prior to the last Delivery Date except as provided herein; to advise the Representatives, promptly after it receives notice thereof, of the time when any amendment or supplement to the
Registration Statement or the Prospectus has been filed and to furnish the Representatives with copies thereof; to advise the Representatives, promptly after it receives notice thereof, of the issuance by the Commission of any stop order or of any
order preventing or suspending the use of the Prospectus or any Issuer Free Writing Prospectus, of the suspension of the qualification of the Units for offering or sale in any jurisdiction, of the initiation or threatening of any proceeding or
examination for any such purpose or of any request by the Commission for the amending or supplementing of the Registration Statement, the Prospectus or any Issuer Free Writing Prospectus or for additional information; and, in the event of the
issuance of any stop order or of any order preventing or suspending the use of the Prospectus or any Issuer Free Writing Prospectus or suspending any such qualification, to use promptly its best efforts to obtain its withdrawal.
31
(ii)
Copies of Registration Statement
. To furnish promptly to each of
the Representatives and to counsel for the Underwriters an electronically signed copy of the Registration Statement as originally filed with the Commission, and each amendment thereto filed with the Commission, including all consents and exhibits
filed therewith.
(iii)
Copies of Documents
. To deliver promptly to the Representatives such number of the
following documents as the Representatives shall reasonably request: (A) conformed copies of the Registration Statement as originally filed with the Commission and each amendment thereto (in each case excluding exhibits other than this
Agreement), (B) each Preliminary Prospectus, the Prospectus and any amended or supplemented Prospectus, (C) each Issuer Free Writing Prospectus, and (D) any Written Testing the Waters Communication; and, if the delivery of a prospectus is required
at any time after the date hereof in connection with the offering or sale of the Units or any other securities relating thereto and if at such time any events shall have occurred as a result of which the Prospectus as then amended or supplemented
would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made when such Prospectus is delivered, not
misleading, or, if for any other reason it shall be necessary to amend or supplement the Prospectus in order to comply with the Securities Act, to notify the Representatives and, upon their request, to file such document and to prepare and furnish
without charge to each Underwriter and to any dealer in securities as many copies as the Representatives may from time to time reasonably request of an amended or supplemented Prospectus that will correct such statement or omission or effect such
compliance.
(iv)
Filing of Amendment or Supplement
. To file promptly with the Commission any amendment or
supplement to the Registration Statement or the Prospectus that may, in the judgment of the Partnership or the Representatives, be required by the Securities Act or requested by the Commission.
(v)
Copies of Amendment or Supplement
. Prior to filing with the Commission any amendment or supplement to the
Registration Statement or the Prospectus, to furnish a copy thereof to the Representatives and counsel for the Underwriters and obtain the consent of the Representatives to the filing.
(vi)
Issuer Free Writing Prospectus
. Not to make any offer relating to the Units that would constitute an Issuer
Free Writing Prospectus without the prior written consent of the Representatives.
(vii)
Rule 433
. To comply
with all applicable requirements of Rule 433 under the Securities Act with respect to any Issuer Free Writing Prospectus. If at any time after the date hereof any events shall have occurred as a result of which any Issuer Free Writing
Prospectus, as then amended or supplemented, would conflict with the information in the Registration Statement, the most recent Preliminary Prospectus or the
32
Prospectus or would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, or, if for any other reason it shall be necessary to amend or supplement any Issuer Free Writing Prospectus, to notify the Representatives and, upon their request, to file such document and to prepare and
furnish without charge to each Underwriter as many copies as the Representatives may from time to time reasonably request of an amended or supplemented Issuer Free Writing Prospectus that will correct such conflict, statement or omission or effect
such compliance.
(viii)
Earnings Statement
. As soon as practicable after the Effective Date (it being understood
that the Partnership shall have until at least 410 days or, if the fourth quarter following the fiscal quarter that includes the Effective Date is the last fiscal quarter of the Partnership’s fiscal year, 455 days after the end of the
Partnership’s current fiscal quarter), to make generally available to the Partnership’s security holders and to deliver to the Representatives an earnings statement of the Partnership (which need not be audited) complying with Section
11(a) of the Securities Act and the rules and regulations thereunder (including, at the option of the Partnership, Rule 158).
(ix)
Blue Sky Laws
. Promptly from time to time to take such action as the Representatives may reasonably request to
qualify the Units for offering and sale under the securities or Blue Sky laws and such other jurisdictions as the Representatives may request and to comply with such laws so as to permit the continuance of sales and dealings therein in such
jurisdictions for as long as may be necessary to complete the distribution of the Units;
provided
that in connection therewith the Partnership shall not be required to (i) qualify as a foreign entity in any jurisdiction in which it would not
otherwise be required to so qualify, (ii) file a general consent to service of process in any such jurisdiction, or (iii) subject itself to taxation in any jurisdiction in which it would not otherwise be subject.
(x)
Lock-Up Period
. For a period commencing on the date hereof and ending on the 180th day after the date of the
Prospectus (the “
Lock-Up Period
”), not to, directly or indirectly, (A) offer for sale, sell, pledge, or otherwise dispose of (or enter into any transaction or device that is designed to, or could be expected to, result in the
disposition by any person at any time in the future of) any Common Units or securities convertible into or exercisable or exchangeable for Common Units (other than (a) the Units, (b) Common Units issued pursuant to employee benefit plans, qualified
option plans or other employee compensation plans existing on the date hereof (including, without limitation, Common Units issued pursuant to the long-term incentive plan of the Partnership), or (c) the Sponsor Units and Incentive Distribution
Rights in connection with the Transactions), or sell or grant options, rights or warrants with respect to any Common Units or securities convertible into or exchangeable for Common Units (other than the grant of such options, rights or warrants
pursuant to employee benefit plans, qualified option plans or other employee compensation plans existing on the date hereof), (B) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the
economic benefits or risks of ownership of such Common Units, whether any such transaction described in clause (A) or (B) above is to be settled by delivery of Common
33
Units or other securities, in cash or otherwise, (C) file or cause to be filed a registration statement, including any amendments thereto, with respect to the registration of any Common Units or
securities convertible, exercisable or exchangeable into Common Units or any other securities of the Partnership (other than any registration statement on Form S-8), or (D) publicly disclose the intention to do any of the foregoing, in each case
without the prior written consent of Barclays Capital Inc., on behalf of the Underwriters.
(xi)
Use of Proceeds
.
The Partnership agrees to apply the net proceeds from the sale of the Units being sold by the Partnership substantially in accordance with the description as set forth in the Prospectus under the caption “Use of Proceeds.”
(xii)
Rule 463
. The Partnership agrees to file with the Commission such information on Form 10-Q or Form 10-K
as may be required by Rule 463 under the Securities Act.
(xiii)
Rule 462(b)
. If the Partnership elects to rely
upon Rule 462(b) under the Securities Act, the Partnership shall file a Rule 462(b) Registration Statement with the Commission in compliance with Rule 462(b) under the Securities Act by 10:00 P.M., Washington, D.C. time, on the date of this
Agreement, and the Partnership shall at the time of filing pay the Commission the filing fee for the Rule 462(b) Registration Statement.
(xiv)
Lock-Up Agreements
. Each of the Partnership Parties, jointly and severally, agrees that the General Partner and
the Partnership shall cause each officer and director of the General Partner that has been appointed to such role as of the date of this Agreement to deliver, on or prior to the date of this Agreement, a letter substantially in the form of
Exhibit A
hereto, providing for a lock-up period covering the Lock-Up Period, (the persons described in this Section (a)(xiv), the “
Restricted Personnel
”). The letters delivered by the Restricted Personnel
are the “
Lock-Up Agreements
”.
(xv) Foreign Directed Units. To comply with all applicable
securities and other applicable laws, rules and regulations in each foreign jurisdiction in which the Directed Units are offered in connection with the Directed Unit Program.
(xvi)
Emerging Growth Company Status
. The Partnership will promptly notify the Representatives if the Partnership ceases
to be an Emerging Growth Company at any time prior to the later of (A) the time when a prospectus relating to the offering or sale of the Units or any other securities relating thereto is not required by the Securities Act to be delivered (whether
physically or through compliance with Rule 172 under the Securities Act or any similar rule) and (B) completion of the Lock-Up Period.
(xvii)
Testing-the-Waters Communications
. If at any time following the distribution of any Written Testing-the-Waters
Communication there occurred or occurs an event or development as a result of which such Written Testing-the-Waters Communication included or would include an untrue statement of a material fact or omitted or would omit to state a material fact
necessary in order to make the statements therein, in the light of the circumstances existing at that subsequent time, not misleading,
34
the Partnership will promptly notify the Representatives and will promptly amend or supplement, at its own expense, such Written Testing-the-Waters Communication to eliminate or correct
such untrue statement or omission. The Partnership will promptly notify the Representatives of (A) any distribution by the Partnership of Written Testing-the-Waters Communications and (B) any request by the Commission for information concerning
the Written Testing-the-Waters Communications.
(xviii)
Stabilization
. The Partnership Parties will not take,
directly or indirectly, any action designed to or that has constituted or that reasonably would be expected to cause or result in the stabilization or manipulation of the price of any security of the Partnership in connection with the offering of
the Units.
(xix)
Necessary Actions
. The Partnership Parties will do and perform all things required or necessary to
be done and performed under this Agreement by it prior to each Delivery Date, and satisfy all conditions precedent to the Underwriters’ obligations hereunder to purchase the Units.
(b)
Permitted Issuer Information
. Each Underwriter severally agrees that such Underwriter shall not include any “issuer
information” (as defined in Rule 433 under the Securities Act) in any “free writing prospectus” (as defined in Rule 405 under the Securities Act) used or referred to by such Underwriter without the prior consent of the Partnership
(any such issuer information with respect to whose use the Partnership has given its consent, “
Permitted Issuer Information
”);
provided
that (i) no such consent shall be required with respect to any such issuer
information contained in any document filed by the Partnership with the Commission prior to the use of such free writing prospectus, and (ii) “issuer information”, as used in this Section 5(b), shall not be deemed to include information
prepared by or on behalf of such Underwriter on the basis of or derived from issuer information.
6.
Expenses.
The Partnership
agrees, whether or not the transactions contemplated by this Agreement are consummated or this Agreement is terminated, to pay all expenses, costs, fees and taxes incident to and in connection with its obligations under this Agreement, including (a)
the authorization, issuance, sale and delivery of the Units and any stamp duties or other taxes payable in that connection, and the preparation and printing of certificates for the Units; (b) the preparation, printing and filing under the Securities
Act of the Registration Statement (including any exhibits thereto), any Preliminary Prospectus, the Prospectus, any Issuer Free Writing Prospectus, any Written Testing the Waters Communication, and any amendment or supplement thereto; (c) the
distribution of the Registration Statement (including any exhibits thereto), any Preliminary Prospectus, the Prospectus, any Issuer Free Writing Prospectus, any Written Testing the Waters Communication, and any amendment or supplement thereto, all
as provided in this Agreement; (d) the production and distribution of this Agreement, any supplemental agreement among Underwriters, and any other related documents in connection with the offering, purchase, sale and delivery of the Units; (e) any
required review by the FINRA of the terms of sale of the Units (including related fees and expenses of one set of counsel to the Underwriters in an amount that is not greater than $20,000); (f) the listing of the Units on the New York Stock Exchange
or any other exchange; (g) the qualification of the Units under the securities laws of the several jurisdictions as provided in Section 5(a)(ix) and the preparation, printing and distribution of a Blue Sky Memorandum (including related fees and
35
expenses of one set of counsel to the Underwriters); (h) the preparation, printing and distribution of one or more versions of the Preliminary Prospectus and the Prospectus for distribution in
Canada, including in the form of a Canadian “wrapper” (including related fees and expenses of one set of Canadian counsel to the Underwriters); (i) the offer and sale of the Units by the Underwriters in connection with the Directed Unit
Program, to the extent that such expenses arise solely from the Directed Unit Program, the costs and expenses of preparation, printing and distribution of the Directed Unit Program material and all stamp duties or other taxes incurred by the
Underwriters in connection with the Directed Unit Program; (j) the costs and expenses of the Partnership and any of the General Partner’s officers, directors, counsel or other representatives in connection with the investor presentations on any
road show or any Written Testing the Waters Communication, undertaken in connection with the marketing of the Units, including, without limitation, expenses associated with any electronic road show, travel and lodging expenses of the representatives
and officers of the General Partner and the cost of Noble operating the aircrafts that it owns (“
Noble Aircraft
”) in connection with the road show; provided that the Underwriters shall pay their own costs and expenses
associated with the road show, including transportation (except to the extent of sharing a Noble Aircraft), lodging and other expenses incurred by the Underwriters on their own behalf in connection with the road show and other presentations to
prospective purchasers of the Common Units; and (k) all other costs and expenses incident to the performance of the obligations of the Partnership under this Agreement;
provided
that, except as provided in this Section 6 and in Section 11,
the Underwriters shall pay their own costs and expenses, including the costs and expenses of their counsel, any transfer taxes on the Units which they may sell and the expenses of advertising any offering of the Units made by the Underwriters.
7.
Conditions of Underwriters’ Obligations
. The respective obligations of the Underwriters hereunder are subject to the
accuracy, when made and on each Delivery Date, of the representations and warranties of the Partnership Parties contained herein, to the performance by the Partnership Parties of their respective obligations hereunder, and to each of the following
additional terms and conditions:
(a)
Filing of Prospectus; No Stop Order
. The Prospectus shall have been
timely filed with the Commission in accordance with Section 5(a)(i). The Partnership shall have complied with all filing requirements applicable to any Issuer Free Writing Prospectus used or referred to after the date hereof; no stop order
suspending the effectiveness of the Registration Statement or preventing or suspending the use of the Prospectus or any Issuer Free Writing Prospectus shall have been issued and no proceeding or examination for such purpose shall have been initiated
or threatened by the Commission; and any request of the Commission for inclusion of additional information in the Registration Statement or the Prospectus or otherwise shall have been complied with. If the Partnership has elected to rely upon
Rule 462(b) under the Securities Act, the Rule 462(b) Registration Statement shall have become effective by 10:00 P.M., Washington, D.C. time, on the date of this Agreement.
(b)
No Misstatements or Omissions
. No Underwriter shall have discovered and disclosed to the Partnership on or
prior to such Delivery Date that the Registration Statement, the Prospectus or the Pricing Disclosure Package, or any amendment or supplement thereto, contains an untrue statement of a fact which, in the opinion of
36
Vinson & Elkins L.L.P., counsel for the Underwriters (“
Underwriters’ Counsel
”), is material or omits to state a fact which, in the opinion of such counsel, is
material and is required to be stated therein or is necessary to make the statements therein not misleading (in the case of the Prospectus and the Pricing Disclosure Package, in light of the circumstances under which such statements were made).
(c)
Authorization and Validity
. All limited partnership, limited liability company, corporate or other proceedings and
other legal matters incident to the authorization, form and validity of this Agreement, the Units, the Registration Statement, the Prospectus and any Issuer Free Writing Prospectus, and all other legal matters relating to this Agreement and the
transactions contemplated hereby shall be reasonably satisfactory in all material respects to Underwriters’ Counsel, and the Partnership shall have furnished to Underwriters’ Counsel all documents and information that they may reasonably
request to enable them to pass upon such matters.
(d)
Partnership Counsel Opinions
. Andrews Kurth LLP,
Richards, Layton & Finger, P.A. and Holland & Hart LLP shall have furnished to the Representatives their written opinions, as counsel to the Partnership, addressed to the Underwriters and dated such Delivery Date, or letters entitling
the Underwriters to rely on written opinions addressed to third parties, in form and substance reasonably satisfactory to the Representatives, substantially in the forms attached hereto as
Exhibit B-1
,
Exhibit B-2
,
Exhibit B-3
and
Exhibit B-4
hereto.
(e)
Underwriters’ Counsel Opinion
. The Representatives shall have
received from Underwriters’ Counsel, such opinion or opinions, dated such Delivery Date, with respect to the issuance and sale of the Units, the Registration Statement, the Prospectus and the Pricing Disclosure Package and other related matters
as the Representatives may reasonably require, and the Partnership shall have furnished to Underwriters’ Counsel such documents as they reasonably request for the purpose of enabling them to pass upon such matters.
(f)
Comfort Letters
. At the time of execution of this Agreement, the Representatives shall have received from KPMG
LLP a letter, in form and substance satisfactory to the Representatives, addressed to the Underwriters and dated the date hereof (i) confirming that they are independent public accountants within the meaning of the Securities Act and are in
compliance with the applicable requirements relating to the qualification of accountants under Rule 2-01 of Regulation
S-X
of the Commission, and (ii) stating, as of the date hereof (or, with respect to
matters involving changes or developments since the respective dates as of which specified financial information is given in the most recent Preliminary Prospectus, as of a date not more than three days prior to the date hereof), the conclusions and
findings of such firm with respect to the financial information and other matters ordinarily covered by accountants’ “comfort letters” to underwriters in connection with registered public offerings.
(g)
Bring-Down Comfort Letter
. With respect to the letter of KPMG LLP referred to in the preceding paragraph and
delivered to the Representatives concurrently with the execution of this Agreement (the “
initial letter
”), the Partnership shall have
37
furnished to the Representatives a letter (the “
bring-down letter
”) of such accountants, addressed to the Underwriters and dated such Delivery Date (i) confirming
that they are independent public accountants within the meaning of the Securities Act and are in compliance with the applicable requirements relating to the qualification of accountants under Rule 2-01 of Regulation S-X of the Commission,
(ii) stating, as of the date of the bring-down letter (or, with respect to matters involving changes or developments since the respective dates as of which specified financial information is given in the Prospectus, as of a date not more than
three days prior to the date of the bring-down letter), the conclusions and findings of such firm with respect to the financial information and other matters covered by the initial letter, and (iii) confirming in all material respects the
conclusions and findings set forth in the initial letter.
(h)
Officers’ Certificate
. The Partnership
shall have furnished to the Representatives a certificate, dated such Delivery Date, of the Chief Executive Officer and Chief Financial Officer of the General Partner as to such matters as the Representatives may reasonably request, including,
without limitation, a statement:
(i) That the representations, warranties and agreements of the Partnership in
Section 1 are true and correct on and as of such Delivery Date, and the Partnership has complied with all its agreements contained herein and satisfied all the conditions on its part to be performed or satisfied hereunder at or prior to such
Delivery Date;
(ii) That no stop order suspending the effectiveness of the Registration Statement has been issued; and no
proceedings or examination for that purpose have been instituted or, to the knowledge of such officers, threatened;
(iii)
That they have examined the Registration Statement, the Prospectus and the Pricing Disclosure Package, and, in their opinion, (A) (1) the Registration Statement, as of the Effective Date, (2) the Prospectus, as of its date and on the applicable
Delivery Date, and (3) the Pricing Disclosure Package, as of the Applicable Time, did not and do not contain any untrue statement of a material fact and did not and do not omit to state a material fact required to be stated therein or necessary to
make the statements therein (except in the case of the Registration Statement, in the light of the circumstances under which they were made) not misleading, and (B) since the Effective Date, no event has occurred that should have been set forth in a
supplement or amendment to the Registration Statement, the Prospectus or any Issuer Free Writing Prospectus that has not been so set forth;
(iv) To the effect of Section 7(i) (
provided
that no representation with respect to the judgment of the Representatives
need be made).
(i)
No Material Change
. Except as described in the Pricing Disclosure Package, (i) none of the
General Partner, the Partnership or the Subsidiaries shall have sustained, since the date of the latest audited financial statements included in the most recent Preliminary Prospectus, any loss or interference with its business from fire,
38
explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, or (ii) since such date there shall not have
been any change in the equity interests or long-term debt of any of the General Partner, the Partnership, the Subsidiaries or any change, or any development involving a prospective change, in or affecting the condition (financial or otherwise),
results of operations, partners’ equity, properties, management, business or prospects of the General Partner, the Partnership or the Subsidiaries taken as a whole, the effect of which, in any such case described in clause (i) or (ii), is,
individually or in the aggregate, in the judgment of the Representatives, so material and adverse as to make it impracticable or inadvisable to proceed with the public offering or the delivery of the Units being delivered on such Delivery Date on
the terms and in the manner contemplated in the Prospectus.
(j)
Reserved
.
(k)
No Other Change
. Subsequent to the execution and delivery of this Agreement there shall not have occurred any
of the following: (i) (A) trading in securities generally on any securities exchange that has registered with the Commission under Section 6 of the Exchange Act (including the New York Stock Exchange, The NASDAQ Global Select Market, The NASDAQ
Global Market or The NASDAQ Capital Market), or (B) trading in any securities of the Partnership on any exchange or in the over-the-counter market, shall have been suspended or materially limited or the settlement of such trading generally shall
have been materially disrupted or minimum prices shall have been established on any such exchange or such market by the Commission, by such exchange or by any other regulatory body or governmental authority having jurisdiction, (ii) a general
moratorium on commercial banking activities shall have been declared by federal or state authorities, (iii) the United States shall have become engaged in hostilities, there shall have been an escalation in hostilities involving the United States or
there shall have been a declaration of a national emergency or war by the United States, or (iv) there shall have occurred such a material adverse change in general economic, political or financial conditions, including, without limitation, as a
result of terrorist activities after the date hereof (or the effect of international conditions on the financial markets in the United States shall be such), as to make it, in the judgment of the Representatives, impracticable or inadvisable to
proceed with the public offering or delivery of the Units being delivered on such Delivery Date on the terms and in the manner contemplated in the Prospectus.
(l)
NYSE Listing
. The New York Stock Exchange shall have approved the Units for listing, subject only to official
notice of issuance and evidence of satisfactory distribution.
(m)
FINRA
. FINRA has confirmed that it has not
raised any objections with respect to the fairness and reasonableness of the underwriting terms and arrangements relating to the offering of the Units.
(n)
Lock-Up Agreements
. The Lock-Up Agreements between the Representatives and the officers and directors of the
General Partner, delivered to the Representatives on or before the date of this Agreement, shall be in full force and effect on such Delivery Date.
(o)
Other Certificates
. On or prior to each Delivery Date, the Partnership shall have furnished to the Underwriters
such further certificates and documents as the Representatives may reasonably request.
39
All opinions, letters, evidence and certificates mentioned above or elsewhere in this Agreement
shall be deemed to be in compliance with the provisions hereof only if they are in form and substance reasonably satisfactory to counsel for the Underwriters.
8.
Indemnification and Contribution.
(a) The Partnership Parties hereby agree, jointly and severally, to indemnify and hold harmless each Underwriter (except for
any defaulting Underwriter), its affiliates, directors, officers and employees and the agents of each Underwriter who have or who are alleged to have participated in the distribution of the Units as underwriters (collectively, the
“
selling agents
”) and each person, if any, who controls any Underwriter (except for any defaulting Underwriter) within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, from and against any
loss, claim, damage or liability, joint or several, or any action in respect thereof (including, but not limited to, any loss, claim, damage, liability or action relating to purchases and sales of Units), to which that Underwriter, affiliate,
director, officer, employee, selling agent or controlling person may become subject, under the Securities Act or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged
untrue statement of a material fact contained in (A) any Preliminary Prospectus, the Registration Statement, the Prospectus or in any amendment or supplement thereto, (B) any Issuer Free Writing Prospectus or in any amendment or supplement thereto,
(C) any Permitted Issuer Information used or referred to in any “free writing prospectus” (as defined in Rule 405 under the Securities Act) used or referred to by any Underwriter, (D) any materials or information provided to investors by,
or with the approval of, the Partnership in connection with the marketing of the offering of the Units, including any road show (as defined in Rule 433 under the Securities Act) not constituting an Issuer Free Writing Prospectus and any Written
Testing the Waters Communication (“
Marketing Materials
”), (E) any Blue Sky application or other document prepared or executed by the Partnership (or based upon any written information furnished by the Partnership for use
therein) specifically for the purpose of qualifying any or all of the Units under the securities laws of any state or other jurisdiction (any such application, document or information being hereinafter called a “
Blue Sky
Application
”) or (F) any Written Testing the Waters Communication or (ii) the omission or alleged omission to state in any Preliminary Prospectus, the Registration Statement, the Prospectus, any Issuer Free Writing Prospectus or in any
amendment or supplement thereto or in any Permitted Issuer Information, any Marketing Materials or any Blue Sky Application, any material fact required to be stated therein or necessary to make the statements therein (except in the case of the
Registration Statement, in the light of the circumstances under which they were made) not misleading, and shall reimburse each Underwriter and each such affiliate, director, officer, employee, selling agent or
40
controlling person promptly upon demand for any legal or other expenses reasonably incurred by that Underwriter, affiliate, director, officer, employee, selling agent or controlling person in
connection with investigating or defending or preparing to defend against any such loss, claim, damage, liability or action as such expenses are incurred;
provided
,
however
, that none of the Partnership Parties shall be liable in any
such case to the extent that any such loss, claim, damage, liability or action arises out of, or is based upon, any untrue statement or alleged untrue statement or omission or alleged omission made in any Preliminary Prospectus, the Registration
Statement, the Prospectus, any Issuer Free Writing Prospectus or in any such amendment or supplement thereto or in any Permitted Issuer Information, any Marketing Materials or any Blue Sky Application, in reliance upon and in conformity with written
information furnished to the Partnership through the Representatives by or on behalf of any Underwriter specifically for inclusion therein, which information consists solely of the information specified in Section 8(e)). The foregoing indemnity
agreement is in addition to any liability which any Partnership Party may otherwise have to any Underwriter or to any affiliate, director, officer, employee, selling agent or controlling person of that Underwriter.
(b) Each Underwriter, severally and not jointly, shall indemnify and hold harmless each Partnership Party, their respective
directors (including any person who, with his or her consent, is named in the Registration Statement as about to become a director of the General Partner), officers and employees, and each person, if any, who controls such Partnership Party within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof, to which such Partnership Party or any such director,
officer, employee or controlling person may become subject, under the Securities Act or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration Statement, the Prospectus, any Issuer Free Writing Prospectus or in any amendment or supplement thereto or in any Marketing Materials or Blue Sky Application, or (ii) the
omission or alleged omission to state in any Preliminary Prospectus, the Registration Statement, the Prospectus, any Issuer Free Writing Prospectus or in any amendment or supplement thereto or in any Marketing Materials or Blue Sky Application, any
material fact required to be stated therein or necessary to make the statements therein (except in the case of the Registration Statement, in the light of the circumstances under which they were made) not misleading, but in each case only to the
extent that the untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Partnership through the Representatives by or on behalf of that
Underwriter specifically for inclusion therein, which information is limited to the information set forth in Section 8(e)). The foregoing indemnity agreement is in addition to any liability that any Underwriter may otherwise have to any Partnership
Party or any such director, officer, employee or controlling person.
(c) Promptly after receipt by an indemnified party
under this Section 8 of notice of any claim or the commencement of any action, the indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under this Section 8, notify the indemnifying party in
writing of the claim or the commencement of that action;
41
provided
,
however
, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have under this Section 8 except to the extent it has been
materially prejudiced (through the forfeiture of substantive rights and defenses) by such failure and,
provided
,
further
, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have to an
indemnified party otherwise than under this Section 8. If any such claim or action shall be brought against an indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party. After notice from the indemnifying party to
the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under this Section 8 for any legal or other expenses subsequently incurred by the indemnified
party in connection with the defense thereof other than reasonable costs of investigation;
provided, however
, that the indemnified party shall have the right to employ counsel to represent jointly the indemnified party and those other
indemnified parties and their respective directors, officers, employees and controlling persons who may be subject to liability arising out of any claim in respect of which indemnity may be sought under this Section 8 if (i) the indemnified party
and the indemnifying party shall have so mutually agreed; (ii) the indemnifying party has failed within a reasonable time to retain counsel reasonably satisfactory to the indemnified party; (iii) the indemnified party and its directors, officers,
employees and controlling persons shall have reasonably concluded that there may be legal defenses available to them that are different from or in addition to those available to the indemnifying party (it being understood, however, that the
indemnifying party shall not be liable for the expense of more than one separate counsel for the indemnified parties and their respective directors, officers, employees, selling agents and controlling persons (in addition to any local counsel); or
(iv) the named parties in any such proceeding (including any impleaded parties) include both the indemnified parties or their respective directors, officers, employees or controlling persons, on the one hand, and the indemnifying party, on the other
hand, and representation of both sets of parties by the same counsel would be inappropriate due to actual or potential differing interests between them, and in any such event the fees and expenses of such separate counsel shall be paid by the
indemnifying party. No indemnifying party shall (x) without the prior written consent of the indemnified parties (which consent shall not be unreasonably withheld), settle or compromise or consent to the entry of any judgment with respect
to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such
settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding and does not include a statement as to, or an admission of fault, culpability or a
failure to act by or on behalf of any indemnified party, or (y) be liable for any settlement of any such action effected without its written consent (which consent shall not be unreasonably withheld), but if settled with the consent of the
indemnifying party or if there be a final judgment for the plaintiff in any such action, the indemnifying party agrees to indemnify and hold harmless any indemnified party from and against any loss or liability by reason of such
42
settlement or judgment. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and
expenses of counsel as contemplated by Section 8(a) or (b) hereof, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30
days after receipt by such indemnifying party of the aforesaid request and (ii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request or disputed in good faith the indemnified party’s
entitlement to such reimbursement prior to the date of such settlement.
(d) If the indemnification provided for in this
Section 8 shall for any reason be unavailable to or insufficient to hold harmless an indemnified party under Section 8(a), 8(b) or 8(f) in respect of any loss, claim, damage or liability, or any action in respect thereof, referred to therein, then
each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability, or action in respect thereof, (i) in such
proportion as shall be appropriate to reflect the relative benefits received by the Partnership, on the one hand, and the Underwriters, on the other, from the offering of the Units, or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Partnership, on the one hand, and the Underwriters, on the other, with
respect to the statements or omissions that resulted in such loss, claim, damage or liability, or action in respect thereof, as well as any other relevant equitable considerations. The relative benefits received by the Partnership, on the one hand,
and the Underwriters, on the other, with respect to such offering shall be deemed to be in the same proportion as the total net proceeds from the offering of the Units purchased under this Agreement (before deducting expenses) received by the
Partnership, as set forth in the table on the cover page of the Prospectus, on the one hand, and the total underwriting discounts and commissions received by the Underwriters with respect to the Units purchased under this Agreement, as set forth in
the table on the cover page of the Prospectus, on the other hand. The relative fault shall be determined by reference to whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact
relates to information supplied by the Partnership Parties or the Underwriters, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such statement or omission. The Partnership Parties
and the Underwriters agree that it would be just and equitable if contributions pursuant to this Section 8(d) were to be determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method
of allocation that does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, damage or liability, or action in respect thereof, referred to above in
this Section 8(d) shall be deemed to include, for purposes of this Section 8(d), any legal expenses of one set of counsel or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 8(d), in no event shall an Underwriter be required to contribute any amount in excess of the amount by which the total underwriting discounts and commissions received by such Underwriter with
respect to
43
the offering of the Units exceeds the amount of any damages that such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters’
obligations to contribute as provided in this Section 8(d) are several in proportion to their respective underwriting obligations and not joint.
(e) The Underwriters severally confirm and the Partnership Parties acknowledge and agree that the statements regarding delivery
of units by the Underwriters set forth on the cover page of, and the concession and reallowance figures and the paragraph relating to stabilization by the Underwriters appearing under the caption “Underwriting” in, the most recent
Preliminary Prospectus and the Prospectus are correct and constitute the only information furnished in writing to the Partnership by or on behalf of the Underwriters specifically for inclusion in any Preliminary Prospectus, the Registration
Statement, the Prospectus, any Issuer Free Writing Prospectus or in any amendment or supplement thereto or in any Marketing Materials.
(f) The Partnership Parties shall indemnify and hold harmless each Underwriter (including its affiliates, directors, officers,
employees and selling agents) and each person, if any, who controls Barclays Capital Inc. within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act (“
DUP Managers
”), from and against any loss,
claim, damage or liability or any action in respect thereof to which DUP Managers may become subject, under the Securities Act or otherwise, insofar as such loss, claim, damage, liability or action (i) arises out of, or is based upon, any untrue
statement or alleged untrue statement of a material fact contained in any material prepared by or with the approval of the Partnership for distribution to Directed Unit Participants in connection with the Directed Unit Program or any omission or
alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) arises out of, or is based upon, the failure of the Directed Unit Participant to pay for and accept
delivery of Directed Units that the Directed Unit Participant agreed to purchase and have been orally confirmed for purchase by such Directed Unit Participant by 8:00 a.m. New York City Time on the first business day after the date of this
Agreement, or (iii) is otherwise related to the Directed Unit Program;
provided
that the Partnership Parties shall not be liable under this clause (iii) for any loss, claim, damage, liability or action that is determined in a final judgment
by a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of the DUP Managers.
9.
Defaulting Underwriters
.
(a) If, on any Delivery Date, any Underwriter defaults in its obligations to purchase the
Units that it has agreed to purchase under this Agreement, the remaining non-defaulting Underwriters may in their discretion arrange for the purchase of such Units by the non-defaulting Underwriters or other persons satisfactory to the Partnership
on the terms contained in this Agreement. If, within 36 hours after any such default by any Underwriter, the
44
non-defaulting Underwriters do not arrange for the purchase of such Units, then the Partnership shall be entitled to a further period of 36 hours within which to procure other persons
satisfactory to the non-defaulting Underwriters to purchase such Units on the terms specified in this Agreement. In the event that within the respective prescribed periods, the non-defaulting Underwriters notify the Partnership that they have so
arranged for the purchase of such Units, or the Partnership notifies the non-defaulting Underwriters that it has so arranged for the purchase of such Units, either the non-defaulting Underwriters or the Partnership may postpone such Delivery Date
for up to seven full business days in order to effect any changes that in the opinion of counsel for the Partnership or Underwriters’ Counsel may be necessary in the Registration Statement, the Prospectus or in any other document or
arrangement, and the Partnership agrees to promptly prepare any amendment or supplement to the Registration Statement, the Prospectus or in any such other document or arrangement that effects any such changes. As used in this Agreement, the term
“Underwriter” includes, for all purposes of this Agreement unless the context requires otherwise, any party not listed in Schedule I hereto that, pursuant to this Section 9, purchases Units that a defaulting Underwriter agreed but
failed to purchase.
(b) If, after giving effect to any arrangements for the purchase of the Units of a defaulting
Underwriter or Underwriters by the non-defaulting Underwriters and the Partnership as provided in paragraph (a) above, the total number of Units that remains unpurchased does not exceed one-eleventh of the total number of all the Units, then the
Partnership shall have the right to require each non-defaulting Underwriter to purchase the total number of Unit that such Underwriter agreed to purchase hereunder plus such Underwriter’s
pro
rata
share (based on the total number
of Units that such Underwriter agreed to purchase hereunder) of the Units of such defaulting Underwriter or Underwriters for which such arrangements have not been made;
provided
that the non-defaulting Underwriters shall not be obligated to
purchase more than 110% of the total number of Units that it agreed to purchase on such Delivery Date pursuant to the terms of Section 2.
(c) If, after giving effect to any arrangements for the purchase of the Units of a defaulting Underwriter or Underwriters by
the non-defaulting Underwriters and the Partnership as provided in paragraph (a) above, the total number of Units that remains unpurchased exceeds one-eleventh of the total number of all the Units, or if the Partnership shall not exercise the right
described in paragraph (b) above, then this Agreement shall terminate without liability on the part of the non-defaulting Underwriters. Any termination of this Agreement pursuant to this Section 9 shall be without liability on the part of the
Partnership, except that the Partnership will continue to be liable for the payment of expenses as set forth in Sections 6 and 11 and except that the provisions of Section 8 shall not terminate and shall remain in effect.
(d) Nothing contained herein shall relieve a defaulting Underwriter of any liability it may have to the Partnership or any
non-defaulting Underwriter for damages caused by its default.
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10.
Termination.
The obligations of the Underwriters hereunder may be terminated by
the Representatives by notice given to and received by the Partnership prior to delivery of and payment for the Firm Units if, prior to that time, any of the events described in Sections 7(i) or 7(k) shall have occurred or if the Underwriters shall
decline to purchase the Units for any reason permitted under this Agreement.
11.
Reimbursement of Underwriters’
Expenses.
If (a) the Partnership shall fail to tender the Units for delivery to the Underwriters for any reason, or (b) the Underwriters shall decline to purchase the Units for any reason permitted under this Agreement, the Partnership will
reimburse the Underwriters for all reasonable out-of-pocket expenses (including fees and disbursements of one set of counsel for the Underwriters) incurred by the Underwriters in connection with this Agreement and the proposed purchase of the Units,
and upon demand the Partnership shall pay the full amount thereof to the Representatives. If this Agreement is terminated pursuant to Section 9 by reason of the default of one or more Underwriters or the purchase of the Units is not consummated
as a result of the occurrence of any of the events described in Section 7(k) (other than an event specified in Section 7(k)(i)(B)), the Partnership shall not be obligated to reimburse any defaulting Underwriter on account of those expenses.
12.
Research Analyst Independence.
Each Partnership Party acknowledges that the Underwriters’ research analysts and research
departments are required to be independent from their respective investment banking divisions and are subject to certain regulations and internal policies, and that such Underwriters’ research analysts may hold views and make statements or
investment recommendations and/or publish research reports with respect to the Partnership and/or the offering that differ from the views of their respective investment banking divisions. Each of the Partnership Parties hereby waives and releases,
to the fullest extent permitted by law, any claims that any of the Partnership Parties may have against the Underwriters with respect to any conflict of interest that may arise from the fact that the views expressed by their independent research
analysts and research departments may be different from or inconsistent with the views or advice communicated to any of the Partnership Parties by such Underwriters’ investment banking divisions. The Partnership Parties acknowledge that each of
the Underwriters is a full service securities firm and as such from time to time, subject to applicable securities laws, may effect transactions for its own account or the account of its customers and hold long or short positions in debt or equity
securities of the companies that may be the subject of the transactions contemplated by this Agreement.
13.
No Fiduciary
Duty
. Each of the Partnership Parties acknowledges and agrees that in connection with this offering, the sale of the Units or any other services the Underwriters may be deemed to be providing hereunder, notwithstanding any preexisting
relationship, advisory or otherwise, between the parties or any oral representations or assurances previously or subsequently made by the Underwriters: (a) no fiduciary or agency relationship between the any of the Partnership Parties and any
other person, on the one hand, and the Underwriters, on the other, exists; (b) the Underwriters are not acting as advisors, expert or otherwise, to any of the Partnership Parties, including, without limitation, with respect to the determination of
the public offering price of the Units, and such relationship between the Partnership Parties, on the one hand, and the Underwriters, on the other, is entirely and solely commercial, based on arms-length negotiations; (c) any duties and obligations
that the Underwriters may have to any of the Partnership Parties shall be limited to those duties and
46
obligations specifically stated herein; and (d) the Underwriters and their respective affiliates may have interests that differ from those of the Partnership Parties. Each of the Partnership
Parties hereby waives any claims that any of the Partnership Parties may have against the Underwriters with respect to any breach of fiduciary duty in connection with this offering.
14.
Notices, etc.
All statements, requests, notices and agreements hereunder shall be in writing, and:
(a) if to the Underwriters, shall be delivered or sent by mail or facsimile transmission to (i) Barclays Capital Inc., 745
Seventh Avenue, New York, New York 10019, Attention: Syndicate Registration (Fax: (646) 834-8133), with a copy, in the case of any notice pursuant to Section 8(c)), to the Director of Litigation, Office of the General Counsel, Barclays Capital Inc.,
745 Seventh Avenue, New York, New York 10019, (ii) Robert W. Baird & Co. Incorporated, 777 East Wisconsin Ave., Suite 2800, Milwaukee, Wisconsin 53202 (Fax: (414) 298-7800), and (iii) J.P. Morgan Securities LLC, 383 Madison Avenue, New
York, New York 10179, Attention: Equity Syndicate Desk (Fax: (212) 622-8358);
(b) if to any of the Partnership Parties,
shall be delivered or sent by mail or facsimile transmission to the address of the Partnership set forth in the Registration Statement, Attention: Terry Gerhart, Chief Executive Officer.
Any such statements, requests, notices or agreements shall take effect at the time of receipt thereof. The Partnership Parties shall be entitled to act
and rely upon any request, consent, notice or agreement given or made on behalf of the Underwriters by Barclays Capital Inc. on behalf of the Representatives.
15.
Persons Entitled to Benefit of Agreement
. This Agreement shall inure to the benefit of and be binding upon the Underwriters,
the Partnership Entities and their respective successors. This Agreement and the terms and provisions hereof are for the sole benefit of only those persons, except that (a) the representations, warranties, indemnities and agreements of the
Partnership Parties contained in this Agreement shall also be deemed to be for the benefit of the directors, officers and employees of the Underwriters and each person or persons, if any, who control any Underwriter within the meaning of
Section 15 of the Securities Act, and (b) the indemnity agreement of the Underwriters contained in Section 8(b) of this Agreement shall be deemed to be for the benefit of the directors of the General Partner, the officers of the General
Partner who have signed the Registration Statement and any person controlling the Partnership within the meaning of Section 15 of the Securities Act. Nothing in this Agreement is intended or shall be construed to give any person, other
than the persons referred to in this Section 15, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision contained herein.
16.
Survival.
The respective indemnities, representations, warranties and agreements of the Partnership Parties and the
Underwriters contained in this Agreement or made by or on behalf of them, respectively, pursuant to this Agreement, shall survive the delivery of and payment for the Units and shall remain in full force and effect, regardless of any investigation
made by or on behalf of any of them or any person controlling any of them.
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17.
Definition of the Terms “Business Day”, “Affiliate” and
“Subsidiary”
. For purposes of this Agreement, (a) “
business day
” means each Monday, Tuesday, Wednesday, Thursday or Friday that is not a day on which banking institutions in New York are generally authorized or
obligated by law or executive order to close, and (b) “
affiliate
” and “
subsidiary
” have the meanings set forth in Rule 405 under the Securities Act.
18.
Governing Law
.
This Agreement shall be governed by and construed in accordance with the laws of the State of New York.
19.
Waiver of Jury Trial
. The Partnership Parties and the Underwriters hereby irrevocably waive, to the fullest extent
permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.
20.
Counterparts.
This Agreement may be executed in one or more counterparts and, if executed in more than one counterpart, the
executed counterparts shall each be deemed to be an original but all such counterparts shall together constitute one and the same instrument.
21.
Headings.
The headings herein are inserted for convenience of reference only and are not intended to be part of, or to affect
the meaning or interpretation of, this Agreement.
(Signature Page Follows)
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If the foregoing correctly sets forth the agreement among the Partnership Parties and the
Underwriters, please indicate your acceptance in the space provided for that purpose below.
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Very truly yours,
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NBL Midstream, LLC
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By:
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Name:
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Charles J. Rimer
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Title:
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President
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Signature Page to
Underwriting Agreement
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Noble Midstream Partners LP
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By:
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Noble Midstream GP LLC,
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its general partner
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By:
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Name:
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Terry R. Gerhart
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Title:
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Chief Executive Officer
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Noble Midstream GP LLC
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By:
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Name:
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Terry R. Gerhart
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Title:
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Chief Executive Officer
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Noble Midstream Services, LLC
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By:
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Name:
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Terry R. Gerhart
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Title:
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Chief Executive Officer
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Signature Page to
Underwriting Agreement
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Accepted:
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B
ARCLAYS
C
APITAL
I
NC
.
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R
OBERT
W. B
AIRD
& C
O
. I
NCORPORATED
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J.P. M
ORGAN
S
ECURITIES
LLC
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For themselves and as Representatives
of the several Underwriters named
in Schedule I hereto
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By B
ARCLAYS
C
APITAL
I
NC
.
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By:
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Authorized Representative
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By R
OBERT
W. B
AIRD
& C
O
. I
NCORPORATED
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By:
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Authorized Representative
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By J.P. M
ORGAN
S
ECURITIES
LLC
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By:
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Authorized Representative
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Signature Page to
Underwriting Agreement
SCHEDULE I
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Underwriters
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Number of Firm Units
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Barclays Capital Inc.
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Robert W. Baird & Co. Incorporated
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J.P. Morgan Securities LLC
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Total
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SCHEDULE II
ORALLY CONVEYED PRICING INFORMATION
1.
[
Public offering price
]
$[●]
2. [
Number of units offered
]
[●]
SCHEDULE III
ISSUER FREE WRITING PROSPECTUSES – ROAD SHOW MATERIALS
[Insert list of certain road show materials]
SCHEDULE IV
ISSUER FREE WRITING PROSPECTUS
[Insert list of all “Issuer Free Writing Prospectuses”, if any]
SCHEDULE V
WRITTEN TESTING THE WATERS COMMUNICATIONS
[Insert list of all “Written Testing the Waters Communications”, if any]
EXHIBIT A
LOCK-UP LETTER AGREEMENT
B
ARCLAYS
C
APITAL
I
NC
.
R
OBERT
W. B
AIRD
& C
O
. I
NCORPORATED
J.P. M
ORGAN
S
ECURITIES
LLC
As
Representatives of the several
Underwriters named in Schedule I,
c/o Barclays Capital Inc.
745 Seventh Avenue
New York, New York 10019
Ladies and Gentlemen:
The undersigned understands that you and certain other firms (the “
Underwriters
”) propose to enter into an
Underwriting Agreement (the “
Underwriting Agreement
”) providing for the purchase by the Underwriters of common units representing limited partner interests (the “
Common Units
”) of Noble Midstream
Partners LP, a Delaware limited partnership (the “
Partnership
”), and that the Underwriters propose to reoffer the Units to the public (the “
Offering
”).
In consideration of the execution of the Underwriting Agreement by the Underwriters, and for other good and valuable consideration, the
undersigned hereby irrevocably agrees that, without the prior written consent of Barclays Capital Inc., on behalf of the Underwriters, the undersigned will not, directly or indirectly, (1) offer for sale, sell, pledge, or otherwise dispose of (or
enter into any transaction or device that is designed to, or could be expected to, result in the disposition by any person at any time in the future of) any Common Units (including, without limitation, Common Units that may be deemed to be
beneficially owned by the undersigned in accordance with the rules and regulations of the Securities and Exchange Commission and Common Units that may be issued upon exercise of any options or warrants) or securities convertible into or exercisable
or exchangeable for Common Units, (2) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of Common Units, whether any such transaction described in
clause (1) or (2) above is to be settled by delivery of Common Units or other securities, in cash or otherwise,
(3) make any demand for or exercise any right or cause to be filed a registration statement, including any amendments
thereto, with respect to the registration of any Common Units or securities convertible into or exercisable or exchangeable for Common Units or any other securities of the Partnership, or (4) publicly disclose the intention to do any of the
foregoing for a period commencing on the date hereof and ending on the 180th day after the date of the final prospectus relating to the Units, as filed with the Securities and Exchange Commission pursuant to Rule 424(b) under the Securities Act of
1933, as amended, relating to the Offering (such period, the “
Lock-Up Period
”).
Exhibit A-1
The foregoing paragraph shall not apply to (a) bona fide gifts, sales or other dispositions of
Common Units, in each case that are made exclusively between and among the undersigned or members of the undersigned’s family, or affiliates of the undersigned, including its partners (if a partnership) or members (if a limited liability
company);
provided
that it shall be a condition to any transfer pursuant to this clause (a) that (i) the transferee/donee agrees to be bound by the terms of this Lock-Up Letter Agreement (including, without limitation, the restrictions set
forth in the preceding sentence) to the same extent as if the transferee/donee were a party hereto, (ii) each party (donor, donee, transferor or transferee) shall not be required by law (including without limitation the disclosure requirements of
the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended (the “
Exchange Act
”) to make, and shall agree to not voluntarily make, any filing or public announcement of the transfer or
disposition prior to the expiration of the Lock-Up Period, and (iii) the undersigned notifies Barclays Capital Inc. at least two business days prior to the proposed transfer or disposition, (b) the exercise of warrants or the exercise of options
granted pursuant to the Partnership’s option/incentive plans or otherwise outstanding on the date hereof;
provided
, that the restrictions shall apply to Common Units issued upon such exercise or conversion, and (c) the establishment of
any contract, instruction or plan that satisfies all of the requirements of Rule 10b5-1 (a “
Rule 10b5-1 Plan
”) under the Exchange Act;
provided
,
however
, that no sales of Common Units or securities convertible
into, or exchangeable or exercisable for, Common Units, shall be made pursuant to a Rule 10b5-1 Plan prior to the expiration of the Lock-Up Period (as the same may be extended pursuant to the provisions hereof);
provided
further
, that
the Partnership is not required to report the establishment of such Rule 10b5-1 Plan in any public report or filing with the Commission under the Exchange Act during the Lock-Up Period and does not otherwise voluntarily effect any such public filing
or report regarding such Rule 10b5-1 Plan.
In furtherance of the foregoing, the Partnership and its transfer agent are hereby authorized
to decline to make any transfer of securities if such transfer would constitute a violation or breach of this Lock-Up Letter Agreement.
It is understood that, if the Partnership notifies the Underwriters that it does not intend to proceed with the Offering, if the Underwriting
Agreement does not become effective on or before September 30, 2016, or if the Underwriting Agreement (other than the provisions thereof which survive termination) shall terminate or be terminated prior to payment for and delivery of the Units, the
undersigned shall automatically and without further action be released from its obligations under this Lock-Up Letter Agreement concurrently with the Underwriter becoming aware of such event.
The undersigned understands that the Partnership and the Underwriters will proceed with the Offering in reliance on this Lock-Up Letter
Agreement.
Whether or not the Offering actually occurs depends on a number of factors, including market conditions. Any Offering
will only be made pursuant to an Underwriting Agreement, the terms of which are subject to negotiation between the Partnership and the Underwriters.
[Signature page follows]
Exhibit A-2
The undersigned hereby represents and warrants that the undersigned has full power and authority
to enter into this Lock-Up Letter Agreement. Any obligations of the undersigned shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned.
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Very truly yours,
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By:
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Name:
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Title:
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Exhibit A-3
EXHIBIT B-1
FORM OF OPINION OF ANDREWS KURTH LLP
1. Each of the Partnership Entities is validly existing as a limited partnership or limited liability company, as the case may be, and is in good standing
under the laws of the State of Delaware. The General Partner, the Partnership and each of the Subsidiaries is in good standing under the laws of the State of Colorado.
2. Noble is validly existing as a corporation and in good standing under the laws of the State of Delaware. Noble has the corporate power and authority under
the laws of the State of Delaware to carry on its business and own its properties as described in the Registration Statement and the Prospectus.
3. Each
of the Partnership Entities has the limited partnership or limited liability company power and authority, as the case may be, under the laws of the State of Delaware to (i) execute and deliver, and incur and perform all of its obligations under the
Underwriting Agreement, the Contribution Agreement, the Omnibus Agreement, the Operational Services and Secondment Agreement, the Colorado River DevCo Agreements, the Green River DevCo Agreements, the Gunnison River DevCo Agreements, the Laramie
River DevCo Agreements, the San Juan River DevCo Agreements, the Blanco River DevCo Agreements, the Midstream Services DevCo Agreements (collectively the “Specified Documents”) to which it is a party and (ii) carry on its business and own
its properties as described in the Registration Statement and Prospectus. The General Partner has the power and authority under the laws of the State of Delaware to serve as the general partner of the Partnership in all material respects.
4. NBL Midstream is the sole member of the General Partner, with a 100% membership interest in the General Partner; such membership interest has been duly
authorized and validly issued in accordance with the GP LLC Agreement and is fully paid (to the extent required by the GP LLC Agreement) and nonassessable (except as such nonassessability may be affected by Sections 18-607 and 18-804 of the Delaware
LLC Act); and NBL Midstream owns such membership interest free and clear of all liens in respect of which a financing statement under the Uniform Commercial Code of the State of Delaware naming the NBL Midstream as debtor is on file in the office of
the Secretary of State of the State of Delaware.
5. NBL Midstream owns all of the Incentive Distribution Rights (as defined in the Partnership
Agreement); such Incentive Distribution Rights have been duly authorized and validly issued in accordance with Partnership Agreement.
6. The General
Partner is the sole general partner of the Partnership, with a noneconomic general partner interest in the Partnership; such general partner interest has been duly authorized and validly issued in accordance with the Partnership Agreement; and the
General Partner owns such general partner interest free and clear of all liens in respect of which a financing statement under the Uniform Commercial Code of the State of Delaware naming the General Partner as debtor is on file in the office of the
Secretary of State of the State of Delaware.
Exhibit B-1-1
7. The Partnership is the sole member of Midstream Services, with a 100% membership interest in Midstream
Services; such membership interest has been duly authorized and validly issued in accordance with the Midstream Services Limited Liability Company Agreement and is fully paid (to the extent required by the Midstream Services Limited Liability
Company Agreement) and nonassessable (except as such nonassessability may be affected by Sections 18-607 and 18-804 of the Delaware LLC Act); and the Partnership owns such membership interest free and clear of all liens in respect of which a
financing statement under the Uniform Commercial Code of the State of Delaware naming the Issuer as debtor is on file in the office of the Secretary of State of the State of Delaware.
8. Midstream Services is the sole member of Colorado River DevCo GP, with a 100% membership interest in Colorado River DevCo GP; such membership interest has
been duly authorized and validly issued in accordance with the Colorado River DevCo GP LLC Agreement; and Midstream Services owns such membership interest free and clear of all liens in respect of which a financing statement under the Uniform
Commercial Code of the State of Delaware naming Midstream Services as debtor is on file in the office of the Secretary of State of the State of Delaware other than those liens that are created in connection with the New Credit Agreement.
9. Midstream Services is the sole member of Green River DevCo GP, with a 100% membership interest in Green River DevCo GP; such membership interest has been
duly authorized and validly issued in accordance with the Green River DevCo GP LLC Agreement; and Midstream Services owns such membership interest free and clear of all liens in respect of which a financing statement under the Uniform Commercial
Code of the State of Delaware naming Midstream Services as debtor is on file in the office of the Secretary of State of the State of Delaware other than those liens that are created in connection with the New Credit Agreement.
10. Midstream Services is the sole member of Gunnison River DevCo GP, with a 100% membership interest in Gunnison River DevCo GP; such membership interest has
been duly authorized and validly issued in accordance with the Gunnison River DevCo GP LLC Agreement; and Midstream Services owns such membership interest free and clear of all liens in respect of which a financing statement under the Uniform
Commercial Code of the State of Delaware naming Midstream Services as debtor is on file in the office of the Secretary of State of the State of Delaware other than those liens that are created in connection with the New Credit Agreement.
11. Midstream Services is the sole member of Laramie River DevCo GP, with a 100% membership interest in Laramie River DevCo GP; such membership interest has
been duly authorized and validly issued in accordance with the Laramie River DevCo GP LLC Agreement; and Midstream Services owns such membership interest free and clear of all liens in respect of which a financing statement under the Uniform
Commercial Code of the State of Delaware naming Midstream Services as debtor is on file in the office of the Secretary of State of the State of Delaware other than those liens that are created in connection with the New Credit Agreement.
Exhibit B-3-2
12. Midstream Services is the sole member of San Juan River DevCo GP, with a 100% membership interest in San Juan
River DevCo GP; such membership interest has been duly authorized and validly issued in accordance with the San Juan River DevCo GP LLC Agreement; and Midstream Services owns such membership interest free and clear of all liens in respect of which a
financing statement under the Uniform Commercial Code of the State of Delaware naming Midstream Services as debtor is on file in the office of the Secretary of State of the State of Delaware other than those liens that are created in connection with
the New Credit Agreement.
13. Midstream Services is the sole member of Blanco River DevCo GP, with a 100% membership interest in Blanco River DevCo GP;
such membership interest has been duly authorized and validly issued in accordance with the Blanco River DevCo GP LLC Agreement; and Midstream Services owns such membership interest free and clear of all liens in respect of which a financing
statement under the Uniform Commercial Code of the State of Delaware naming Midstream Services as debtor is on file in the office of the Secretary of State of the State of Delaware other than those liens that are created in connection with the New
Credit Agreement.
14. Colorado River DevCo GP (i) has the full power and authority under the laws of the State of Delaware to act as the general partner
of Colorado River DevCo in all material respects as described in the Registration Statement and the Prospectus and (ii) owns a 80% general partner interest in Colorado River DevCo; such general partner interest has been duly authorized and validly
issued in accordance with the Colorado River DevCo LP Agreement; and Colorado River DevCo GP owns such general partner interest free and clear of all liens in respect of which a financing statement under the Uniform Commercial Code of the State of
Delaware naming Colorado River DevCo GP as debtor is on file in the office of the Secretary of State of the State of Delaware other than those liens that are created in connection with the New Credit Agreement.
15. Green River DevCo GP (i) has the full power and authority under the laws of the State of Delaware to act as the general partner of Green River DevCo in
all material respects as described in the Registration Statement and the Prospectus and (ii) owns a 25% general partner interest in Green River DevCo; such general partner interest has been duly authorized and validly issued in accordance with the
Green River DevCo LP Agreement; and Green River DevCo GP owns such general partner interest free and clear of all liens in respect of which a financing statement under the Uniform Commercial Code of the State of Delaware naming Green River DevCo GP
as debtor is on file in the office of the Secretary of State of the State of Delaware other than those liens that are created in connection with the New Credit Agreement.
16. Gunnison River DevCo GP (i) has the full power and authority under the laws of the State of Delaware to act as the general partner of Gunnison River DevCo
in all material respects as described in the Registration Statement and the Prospectus and (ii) owns a 5% general partner interest in Gunnison River DevCo; such general partner interest has been duly authorized and validly issued in accordance with
the Gunnison River DevCo LP Agreement; and Gunnison River DevCo GP owns such general partner interest free and clear of all liens in respect of which a financing statement under the Uniform Commercial Code of the State of Delaware naming
Exhibit B-3-3
Gunnison River DevCo GP as debtor is on file in the office of the Secretary of State of the State of Delaware other than those liens that are created in connection with the New Credit Agreement.
17. Laramie River DevCo GP (i) has the full power and authority under the laws of the State of Delaware to act as the general partner of Laramie River
DevCo in all material respects as described in the Registration Statement and the Prospectus and (ii) owns a 5% general partner interest in Laramie River DevCo; such general partner interest has been duly authorized and validly issued in accordance
with the Laramie River DevCo LP Agreement; and Laramie River DevCo GP owns such general partner interest free and clear of all liens in respect of which a financing statement under the Uniform Commercial Code of the State of Delaware naming Laramie
River DevCo GP as debtor is on file in the office of the Secretary of State of the State of Delaware other than those liens that are created in connection with the New Credit Agreement.
18. San Juan River DevCo GP (i) has the full power and authority under the laws of the State of Delaware to act as the general partner of San Juan River DevCo
in all material respects as described in the Registration Statement and the Prospectus and (ii) owns a 25% general partner interest in San Juan River DevCo; such general partner interest has been duly authorized and validly issued in accordance with
the San Juan River DevCo LP Agreement; and San Juan River DevCo GP owns such general partner interest free and clear of all liens in respect of which a financing statement under the Uniform Commercial Code of the State of Delaware naming San Juan
River DevCo GP as debtor is on file in the office of the Secretary of State of the State of Delaware other than those liens that are created in connection with the New Credit Agreement.
19. Blanco River DevCo GP (i) has the full power and authority under the laws of the State of Delaware to act as the general partner of Blanco River DevCo in
all material respects as described in the Registration Statement and the Prospectus and (ii) owns a 25% general partner interest in Blanco River DevCo; such general partner interest has been duly authorized and validly issued in accordance with the
Blanco River DevCo LP Agreement; and Blanco River DevCo GP owns such general partner interest free and clear of all liens in respect of which a financing statement under the Uniform Commercial Code of the State of Delaware naming Blanco River DevCo
GP as debtor is on file in the office of the Secretary of State of the State of Delaware other than those liens that are created in connection with the New Credit Agreement.
20. The Underwriting Agreement has been duly authorized, executed and delivered by the Partnership Parties. Each of the Specified Documents has been duly
authorized, executed and delivered by the Noble Parties party thereto.
21. The Operational Services and Secondment Agreement constitutes a valid and
binding agreement of the Partnership, the General Partner and Noble, and is enforceable against the Partnership, the General Partner and Noble in accordance with its terms.
22. As of the date hereof, immediately after the issuance and sale of the Units to the Underwriters pursuant to the Underwriting Agreement, the issued and
outstanding limited partner interests in the Partnership consist of (i) [●] Common Units and [●] subordinated units representing limited partner interests in the Partnership issued to NBL Midstream (collectively,
Exhibit B-3-4
the “
Sponsor Units
”), (ii) [●] Common Units constituting the Units and (iii) the Incentive Distribution Rights. The Sponsor Units and the Incentive Distribution
Rights, and the limited partner interests represented thereby, have been duly authorized and validly issued in accordance with the First Amended and Restated Partnership Agreement and are fully paid, and NBL Midstream has no obligation, solely by
reason of its ownership of such Sponsor Units, to make any contributions to the Partnership or any further payments for its ownership of such Sponsor Units, and no personal liability, solely by reason of its ownership of such Sponsor Units, to
creditors of the Partnership for any of its debts, liabilities or other obligations. The Sponsor Units and the Incentive Distribution Rights owned by NBL Midstream are owned free and clear of liens in respect of which a financing statement
under the Uniform Commercial Code of the State of Delaware naming NBL Midstream as debtor is on file in the office of the Secretary of State of the State of Delaware.
23. The Units to be issued and sold to the Underwriters by the Partnership pursuant to the Underwriting Agreement, and the limited partner interests
represented thereby, have been duly authorized in accordance with the Partnership Agreement and, when issued and delivered to the Underwriters against payment therefor in accordance with the terms of this Agreement, will be validly issued, and
purchasers of the Units will have no obligation, solely by reason of their ownership of such Units, to make any contributions to the Partnership or any further payments for their purchase of such Units, and such purchasers will have no personal
liability, solely by reason of their ownership of such Units, to creditors of the Partnership for any of its debts, liabilities or other obligations.
24.
Each of (i) the issuance and sale of the Units and (ii) the issuance of the Sponsor Units and the Incentive Distribution Rights to NBL Midstream, have been duly authorized by all necessary limited liability company or limited partnership action, as
applicable, of the General Partner and the Partnership.
25. Except as disclosed in the Registration Statement or the Prospectus, (i) there are no
options, warrants or other rights to purchase, or any restrictions upon the voting or transfer of, agreements or other obligations to issue or rights to convert any securities into or exchange any securities into or exchange any securities for any
equity interest of any Partnership Entity under any Organizational Document of such Partnership Entity or any applicable agreement listed as an exhibit to the Registration Statement (“Applicable Agreements”), (ii) there are no preemptive
rights or similar rights to subscribe for or purchase any equity interest in any Partnership Entity under any Organizational Document or any Applicable Agreement and (iii) no Person has the right, which has not been waived, under any Organizational
Document or Applicable Agreement to require the registration under the Securities Act of any sale of securities issued by the Partnership, by reason of the filing or effectiveness of the Registration Statement.
26. None of (i) the execution and delivery by the Partnership Parties of the Underwriting Agreement (ii) the consummation by the Partnership of the issuance
and sale of the Units pursuant to the Underwriting Agreement, or (iii) the execution or delivery by each of the applicable Partnership Entities of, or the incurrence or performance by each of the applicable Partnership Entities of its respective
obligations under, the Underwriting Agreement the Operational Services and Secondment Agreement, the Omnibus Agreement and the Contribution
Exhibit B-3-5
Agreement to which it is a party, in accordance with its terms, (A) constituted, constitutes or will constitute a violation of Organizational Documents of any of the Partnership Entities (B)
constituted, constitutes or will constitute a breach or violation of, or a default (or an event which, with notice or lapse of time or both, would constitute such a default), under any Applicable Agreement, (C) resulted, results or will result in
the creation of any security interest in, or lien upon, any of the property or assets of any Partnership Entity pursuant to any Applicable Agreement (other than liens arising under or in connection with the New Credit Agreement), (D) resulted,
results or will result in any violation of (i) applicable laws of the State of New York, (ii) applicable laws of the United States of America, (iii) the Delaware LP Act or (iv) the Delaware LLC Act, or (E) resulted, results or will result in the
contravention of any applicable order.
27. No Governmental Approval or Filing, which has not been obtained or made and is not in full force and effect,
is required to authorize, or is required for, the execution and delivery of the Underwriting Agreement by the Partnership Parties, (ii) the consummation of the issuance and sale of the Units pursuant to the Underwriting Agreement or (iii) the
execution and delivery of the Specified Documents by each of the Partnership Entities party thereto, or the incurrence or performance of its obligations thereunder. As used in this paragraph, “
Governmental Approval or Filing
”
means any consent, approval, license, authorization or validation of, or filing, recording or registration with, any executive, legislative, judicial, administrative or regulatory body of the State of Delaware or the United States of America,
pursuant to (i) applicable laws of the United States of America or (ii) the Delaware LP Act, or (iii) the Delaware LLC Act.
28. The statements in the
Registration Statement and the Prospectus under the captions “Cash Distribution Policy and Restrictions on Distributions,” “Provisions of Our Partnership Agreement Relating to Cash Distributions,” “Certain Relationships and
Related Party Transactions,” “Conflicts of Interest and Duties,” “Description of the Common Units,” “Our Partnership Agreement” and “Investment in Noble Midstream Partners LP by Employee Benefit Plans,”
insofar as such statements purport to summarize certain provisions of documents and legal matters referred to therein and reviewed by us as described above, fairly summarize such provisions and legal matters in all material respects.
29. The Units, the Sponsor Units and the Incentive Distribution Rights conform in all material respects to the descriptions thereof contained in the
Registration Statement and the Prospectus.
30. Such counsel’s opinion that is filed as Exhibit 8.1 to the Registration Statement is confirmed, and
the Underwriters may rely upon such opinion as if it were addressed to them.
31. None of the General Partner, the Partnership or the Subsidiaries is and,
immediately after giving effect to the issuance and sale of the Units occurring today and the application of proceeds therefrom as described in the Registration Statement and the Prospectus, none will be, an “
investment company
”
within the meaning of said term as used in the Investment Company Act of 1940, as amended.
Exhibit B-3-6
EXHIBIT B-2
FORM OF RELIANCE LETTER
Please be advised that, subject to all of the conditions, qualifications, assumptions and other limitations set forth in paragraph 5 of such
counsel’s opinion (the “Opinion”) rendered to the Lenders party to the Credit Agreement, dated [●], 2015, among Noble Midstream Services, LLC, as Borrower, the Partnership, as Parent, the Lenders party thereto and JPMorgan Chase
Bank, N.A., as Administrative Agent, a Swing Line Lender and an L/C , may be relied upon by the Underwriters in their capacity as Underwriters in the Partnership’s offering of common units representing limited partner interests in the
Partnership (the “Common Units”), with the same effect as if the Opinion had been addressed to the Underwriters.
Exhibit B-3-1
EXHIBIT B-3
FORM OF OPINION OF RICHARDS, LAYTON & FINGER, P.A.
1. Each of Colorado River DevCo, Green River DevCo, Gunnison River DevCo, Laramie River DevCo, San Juan River DevCo and Blanco River DevCo has
been duly formed and is validly existing in good standing as a limited partnership under the laws of the State of Delaware.
2. Each of
the Colorado River DevCo GP, Green River DevCo GP, Gunnison River DevCo GP, Laramie River DevCo GP, San Juan River DevCo GP and Blanco River DevCo GP has been duly formed and is validly existing in good standing as a limited liability company under
the laws of the State of Delaware.
3. The Partnership Agreement constitutes a valid and binding agreement of the General Partner, and is
enforceable against the General Partner, in its capacity as general partner of the Partnership, in accordance with its terms.
4. The GP
LLC Agreement constitutes a valid and binding agreement of NBL Midstream, and is enforceable against NBL Midstream, in its capacity as a member of the General Partner, in accordance with its terms.
5. The Midstream Services Limited Liability Company Agreement constitutes a valid and binding agreement of the Partnership, and is enforceable
against the Partnership, in its capacity as a member of Midstream Services, in accordance with its terms.
6. The Colorado River DevCo GP
Limited Liability Company Agreement constitutes a valid and binding agreement of the Operating Company, and is enforceable against Midstream Services, in its capacity as a member of Colorado River DevCo GP, in accordance with its terms.
7. The Colorado River DevCo Agreement of Limited Partnership constitutes a valid and binding agreement of Colorado River DevCo GP and NBL
Midstream, and is enforceable against Colorado River DevCo GP and NBL Midstream, each in its capacity as a partner of Colorado River DevCo, in accordance with its terms.
8. The Green River DevCo GP Limited Liability Company Agreement constitutes a valid and binding agreement of Midstream Services, and is
enforceable against Midstream Services, in its capacity as a member of Green River DevCo GP, in accordance with its terms.
9. The Green
River DevCo Agreement of Limited Partnership constitutes a valid and binding agreement of Green River DevCo GP and NBL Midstream, and is enforceable against Green River DevCo GP and NBL Midstream, each in its capacity as a partner of Green River
DevCo, in accordance with its terms.
Exhibit B-3-1
10. The Gunnison River DevCo GP Limited Liability Company Agreement constitutes a valid and
binding agreement of Midstream Services, and is enforceable against Midstream Services, in its capacity as a member of Gunnison River DevCo GP, in accordance with its terms.
11. The Gunnison River DevCo Agreement of Limited Partnership constitutes a valid and binding agreement of Gunnison River DevCo GP and NBL
Midstream, and is enforceable against Gunnison River DevCo GP and NBL Midstream, each in its capacity as a partner of Gunnison River DevCo, in accordance with its terms.
12. The Laramie River DevCo GP Limited Liability Company Agreement constitutes a valid and binding agreement of Midstream Services, and is
enforceable against Midstream Services, in its capacity as a member of Laramie River DevCo GP, in accordance with its terms.
13. The
Laramie River DevCo Agreement of Limited Partnership constitutes a valid and binding agreement of Laramie River DevCo GP and NBL Midstream, and is enforceable against Laramie River DevCo GP and Midstream Services, each in its capacity as a partner
of Laramie River DevCo, in accordance with its terms.
14. The San Juan River DevCo GP Limited Liability Company Agreement constitutes a
valid and binding agreement of Midstream Services, and is enforceable against Midstream Services, in its capacity as a member of San Juan River DevCo GP, in accordance with its terms.
15. The San Juan River DevCo Agreement of Limited Partnership constitutes a valid and binding agreement of San Juan River DevCo GP and NBL
Midstream, and is enforceable against San Juan River DevCo GP and NBL Midstream, each in its capacity as a partner of San Juan River DevCo, in accordance with its terms.
16. The Blanco River DevCo GP Limited Liability Company Agreement constitutes a valid and binding agreement of Midstream Services, and is
enforceable against Midstream Services, in its capacity as a member of Blanco River DevCo GP, in accordance with its terms.
17. The
Blanco River DevCo Agreement of Limited Partnership constitutes a valid and binding agreement of Blanco River DevCo GP and NBL Midstream, and is enforceable against Blanco River DevCo GP and NBL Midstream, each in its capacity as a partner of Blanco
River DevCo, in accordance with its terms.
18. The Omnibus Agreement constitutes a valid and binding agreement of Noble, NBL Midstream,
Midstream Services, the General Partner and the Partnership, and is enforceable against Noble, NBL Midstream, Midstream Services, the General Partner and the Partnership, in accordance with its terms.
Exhibit B-3-2
19. The Contribution Agreement constitutes a valid and binding agreement of the Partnership, the
General Partner, Noble, NBL Midstream, Midstream Services, Colorado River DevCo GP, Green River DevCo GP, Gunnison River DevCo GP, Laramie River DevCo GP, San Juan River DevCo GP and Blanco River DevCo GP and is enforceable against the Partnership,
the General Partner, Noble, NBL Midstream, Midstream Services, Colorado River DevCo GP, Green River DevCo GP, Gunnison River DevCo GP, Laramie River DevCo GP, San Juan River DevCo GP and Blanco River DevCo GP in accordance with its terms.
Exhibit B-3-3
EXHIBIT B-4
FORM OF OPINION OF HOLLAND & HART LLP
1. Each of the Colorado River DevCo Agreements, Green River DevCo Agreements, Gunnison River DevCo Agreements, Laramie River DevCo Agreements,
San Juan River DevCo Agreements, Blanco River DevCo Agreements and Midstream Services DevCo Agreements (collectively, the “Commercial Agreements”) is a valid and binding agreement of each of Midstream Services and the counterparty, and is
enforceable by Midstream Services against counterparty in accordance with its terms.
2. No consent, approval, authorization or order of,
or filing with, any governmental agency or body or court of the State of Colorado is required in connection with the execution and delivery of any Commercial Agreement by Midstream Services.
The execution and delivery of the Commercial Agreements by Midstream Services will not violate any law of the State of Colorado known to us to be generally
applicable to transactions of the type contemplated by the Commercial Agreements.
Exhibit B-4-1
Exhibit 10.1
FORM OF CONTRIBUTION, CONVEYANCE AND ASSUMPTION AGREEMENT
This
CONTRIBUTION, CONVEYANCE AND ASSUMPTION AGREEMENT
, dated as of
[ ], 2016 (this “
Agreement
”), is by and among
NOBLE MIDSTREAM PARTNERS LP
, a Delaware limited partnership
(the “
Partnership
”),
NOBLE MIDSTREAM GP LLC
, a Delaware limited liability company and the general partner of the Partnership (the “
General Partner
”),
NOBLE ENERGY, INC
., a Delaware corporation
(“
Noble
”),
NOBLE MIDSTREAM SERVICES, LLC
, a Delaware limited liability company (“
Opco
”),
NBL MIDSTREAM, LLC
, a Delaware limited liability company (“
NBL Midstream
”),
NBL MIDSTREAM
HOLDINGS, LLC
, a Delaware limited liability company (“
NBL Midstream Holdings
”),
COLORADO RIVER DEVCO GP LLC
, a Delaware limited liability company (“
Colorado River GP
”),
GREEN RIVER DEVCO GP LLC
, a
Delaware limited liability company (“
Green River GP
”),
SAN JUAN RIVER DEVCO GP LLC
, a Delaware limited liability company (“
San Juan River GP
”),
BLANCO RIVER DEVCO LP
, a Delaware limited partnership
(“
Blanco River LP
”) and
BLANCO RIVER DEVCO GP LLC
, a Delaware limited liability company (“
Blanco River GP
”) (each, a “
Party
” and collectively, the “
Parties
”).
RECITALS
WHEREAS
, the General Partner and Opco have caused the formation of the Partnership pursuant to the Delaware Revised Uniform Limited
Partnership Act (as amended from time to time, the “
Delaware Partnership Act
”) for the purpose of owning, operating, developing and acquiring domestic midstream infrastructure assets, as well as engaging in any business activity
that is approved by the General Partner and that lawfully may be conducted by a limited partnership organized under the Delaware Partnership Act;
WHEREAS
, in order to accomplish the objectives and purposes in the first recital above, each of the following actions has been taken on
or prior to the date hereof:
1. Opco and its wholly owned subsidiary Colorado River GP formed Colorado River DevCo LP, a Delaware limited
partnership (“
Colorado River LP
”), and contributed an aggregate of $1,000 to Colorado River LP in exchange for a 99% limited partner interest and 1% general partner interest in Colorado River LP, respectively;
2. Opco and its wholly owned subsidiary Green River GP formed Green River DevCo LP, a Delaware limited partnership (“
Green River
LP
”), and contributed an aggregate of $1,000 to Green River LP in exchange for a 99% limited partner interest and 1% general partner interest in Green River LP, respectively;
3. Opco and its wholly owned subsidiary Gunnison River DevCo GP, a Delaware limited liability company (“
Gunnison River GP
”),
formed Gunnison River DevCo LP, a Delaware limited partnership (“
Gunnison River LP
”), and contributed an aggregate of $1,000 to Gunnison River LP in exchange for a 99% limited partner interest and 1% general partner interest in
Gunnison River LP, respectively;
4. Opco and its wholly owned subsidiary Laramie River DevCo GP LLC, a Delaware limited liability
company (“
Laramie River GP
”), formed Laramie River DevCo LP, a Delaware limited partnership (“
Laramie River LP
”), and contributed an aggregate of $1,000 to Laramie River LP in exchange for a 99% limited partner
interest and 1% general partner interest in Laramie River LP, respectively; and
5. Opco and its wholly owned subsidiary San Juan River GP
formed San Juan River DevCo LP, a Delaware limited partnership (“
San Juan River LP
”), and contributed an aggregate of $1,000 to San Juan River LP in exchange for a 99% limited partner interest and 1% general partner interest in San
Juan River LP, respectively;
6. Opco contributed to Colorado River LP all right, title and interest in and to all of Opco’s interest
in and to (a) the crude oil, natural gas and produced water gathering system and assets servicing the Wells Ranch IDP (as described on
Exhibit A
), (b) the central gathering facility servicing the Wells Ranch IDP, (c) the fresh
water storage and delivery system assets servicing the Wells Ranch IDP, (d) the crude oil gathering system assets servicing the East Pony IDP, (e) the Plattesville crude oil treating facility assets, (f) the Briggsdale crude oil
treating facility assets, (g) Real Estate Agreements (as defined herein) to the extent the same relate to (a)-(f) with a portion of the assets listed in (a)-(g) conveyed by Opco on behalf of Colorado River GP such that Colorado River
GP holds a 75% general partner interest and Opco holds a 25% limited partner interest in Colorado River LP;
7. Opco contributed to Green
River LP all right, title and interest in and to all of Opco’s interest in each Real Estate Agreement related to the Mustang IDP (as described on
Exhibit A
), which such Real Estate Agreements related to fresh water systems being
constructed and to crude oil, natural gas and additional water infrastructure that is planned in the Mustang IDP (collectively, the “
Mustang IDP Assets
”), with a portion of the Mustang IDP Assets conveyed by Opco on behalf of Green
River GP such that Green River GP holds a 10% general partner interest and Opco holds a 90% limited partner interest in Green River LP;
8. Opco contributed to Gunnison River LP all right, title and interest in and to a 4% limited partner interest in Gunnison River LP held by
Opco, which converted to a general partner interest in Gunnison River LP such that Gunnison River GP holds a 5% general partner interest and Opco holds a 95% limited partner interest in Gunnison River LP;
9. Opco contributed to Laramie River LP all right, title and interest in and to a 4% limited partner interest in Laramie River LP held by
Opco, which converted to a general partner interest in Laramie River LP such that Laramie River GP holds a 5% general partner interest and Opco holds a 95% limited partner interest in Laramie River LP;
10. Opco contributed to San Juan River LP all right, title and interest in and to (a) the fresh water storage and delivery system assets
servicing the East Pony IDP and (b) all of Opco’s interest in Real Estate Agreements to the extent the same relate to produced water facilities and a fresh water system, which are being constructed and will consist of pipelines, ponds and
storage capacity in the East Pony IDP (collectively, the “East Pony IDP Assets”), with a portion of the East Pony IDP Assets conveyed by Opco on behalf of San Juan River GP such that San Juan River GP holds a 5% general partner interest
and Opco holds a 95% limited partner interest in San Juan River LP;
2
11. Opco distributed to NBL Midstream, who in turn contributed to NBL Midstream Holdings, LLC, a
Delaware limited liability company (“
NBLMH
”), all right, title and interest in and to all of Opco’s interest in (a) the natural gas gathering system servicing the East Pony IDP, (b) the Keota gas processing plant
servicing the East Pony IDP, (c) the Keota LNG plant, (d) the Lilli gas processing plant servicing the greater East Pony IDP, (e) Non-System Pipelines located in Northern Colorado and (f) Real Estate Agreements to the extent the
same relate to (a)-(e); and
12. Opco and its wholly owned subsidiary Blanco River GP formed Blanco River LP and contributed an aggregate
$1,000 to Blanco River LP in exchange for a 99% limited partner interest and a 1% general partner interest in Blanco River LP, respectively.
WHEREAS
, concurrently with the consummation of the transactions contemplated hereby, each of the matters provided for in
Article
II
will occur in accordance with its respective terms;
WHEREAS
, the boards of directors, members or partners of the Parties
have taken or caused to be taken all corporate, limited liability company and partnership action, as the case may be, required to approve the transactions contemplated by this Agreement.
NOW, THEREFORE
, in consideration of the mutual covenants, representations, warranties and agreements herein contained, the Parties
agree as follows:
ARTICLE I
DEFINITIONS
Capitalized terms used but
not otherwise defined herein shall have the respective meanings ascribed to such terms below:
“
Affiliate
” has the meaning assigned to it
in the First Amended and Restated Agreement of Limited Partnership of the Partnership
“
Blanco River LP Agreement
” means the Agreement of
Limited Partnership Agreement of Blanco River LP, dated as of June 6, 2016.
“
Closing Date
” means the date on which the closing of
the Offering occurs.
“
Colorado LP Agreement
” means the Agreement of Limited Partnership of Colorado River LP, dated as of
August 20, 2015.
“
Common Units
” has the meaning given such term under the LP Agreement.
“
DE Basin Assets
” has such meaning ascribed to it in
Section 2.4
of this Agreement.
“
Deferred Issuance
” has the meaning given such term under the LP Agreement.
3
“
DevCo LP Interests
” means, collectively, the (i) 20% limited partner interest in Colorado
River LP, (ii) 75% limited partner interest in Green River LP, (iii) 95% limited partner interest in Gunnison River LP, (iv) 75% limited partner interest in San Juan River LP, and (v) 75% limited partner interest in Blanco River
LP, in each case owned by Opco after giving effect to
Sections 2.1
through
2.4
, but prior to the consummation of the other transactions contemplated hereby.
“
DevCos
” means, collectively, Colorado River LP, Green River LP, Gunnison River LP, San Juan River LP and Blanco River LP.
“
Effective Time
” means 12:01 a.m. Eastern Time on [the Closing Date].
“
Firm Units
” means the
[
] Common Units to be issued and sold to the Underwriters pursuant to the Underwriting Agreement.
“
Green River LP Agreement
” means the Agreement of Limited Partnership of Green River LP, dated as of August 20, 2015.
“
IDP
” means integrated development plan area.
[“
Incentive Distribution Right
” has the meaning set forth in the LP Agreement.]
“
IPO Proceeds
” has such meaning ascribed to it in
Section 2.9
of this Agreement.
“
Laramie River LP Agreement
” means the Agreement of Limited Partnership of Laramie River, dated as of August 20, 2015.
“
LP Agreement
” means the First Amended and Restated Agreement of Limited Partnership of the Partnership.
“
Noble Entities
” means Noble and each of its Affiliates.
“
Non-System Pipelines
” means those pipelines that do not comprise a part of the assets contributed to the Partnership, the DevCos or Laramie
River LP, as applicable.
“
Offering
” means the initial offering and sale of Common Units to the public (including the offer and sale of
Common Units pursuant to the Over-Allotment Option), as described in the Registration Statement.
[“
Option Period
” means the period from
the Closing Date to the date that is [thirty days] after the Closing Date.]
“
Option Units
” means up to an additional
[
] Common Units that the Underwriters may purchase from the Partnership pursuant to the Over-Allotment Option
“
Original General Partner Interest
” has the meaning set forth in the LP Agreement.
“
Original Limited Partner Interest
” has the meaning set forth in the LP Agreement.
4
“
Over-Allotment Option
” means the option granted to the Underwriters by the Partnership pursuant
to Section 2 of the Underwriting Agreement.
“
Real Estate Agreements
” means the easements, rights-of-way, permits, use by special
review, surface use agreements, joint use agreements, licenses and other agreements (including agreements that may be in negotiation or in process by a Party and are ultimately executed by a Party) from landowners, lessors, easement holders,
governmental authorities, or other parties controlling the surface or subsurface estates of such land.
“
Registration Statement
” means
the Registration Statement on Form S-1 filed with the United States Securities and Exchange Commission (Registration No. 333-207560), as amended.
“
San Juan River LP Agreement
” means the Agreement of Limited Partnership of Laramie River, dated as of August 20, 2015.
“
Structuring Fee
” has such meaning ascribed to it in
Section 2.10
of this Agreement.
“
Transaction Expenses
” has such meaning ascribed to it in
Section 2.10
of this Agreement.
“
Underwriters
” means, collectively, each member of the underwriting syndicate named as an underwriter in
Schedule I
to the
Underwriting Agreement.
“
Underwriting Agreement
” means the Underwriting Agreement, dated
[ ], by and among NBL Midstream, the Partnership, the General Partner, Opco and Barclays Capital Inc., Robert W. Baird &
Co. Incorporated and J.P. Morgan Securities LLC, as representatives of the Underwriters.
ARTICLE II
CONTRIBUTIONS, ACKNOWLEDGMENTS AND DISTRIBUTIONS
The following transactions set forth in
Sections 2.1
through
2.6
shall be completed immediately prior to the Effective Time:
2.1
Contribution of Colorado River Interest
. Opco hereby contributes to Colorado River GP all right, title and interest in and to a 5% limited
partner interest in Colorado River LP (the “
Colorado River Interest
”) held by Opco, which, notwithstanding any provision of the Colorado River LP Agreement to the contrary, is converted to a general partner interest in Colorado
River LP such that after giving effect to this
Section 2.1
, Colorado River GP will hold a 80% general partner interest and Opco will hold a 20% limited partner interest in Colorado River LP, and Colorado River GP hereby accepts the
rights, title and interest to the Colorado River Interest as a capital contribution.
2.2
Contribution of Green River Interest
. Opco hereby
contributes to Green River GP all right, title and interest in and to a 15% limited partner interest in Green River LP (the “
Green River Interest
”) held by Opco, which, notwithstanding any provision of the Green River LP Agreement
to the contrary, is converted to a general partner interest in Green River LP such that after giving effect to this
Section 2.2
, Green River GP will hold a 25% general partner interest and Opco will hold a 75% limited partner interest in
Green River LP, and Green River GP hereby accepts the rights, title and interest to the Green River Interest as a capital contribution.
5
2.3
Contribution of San Juan Interest
. Opco hereby contributes to San Juan River GP all right,
title and interest in and to a 20% limited partner interest in San Juan River LP (the “
San Juan River Interest
”) held by Opco, which, notwithstanding any provision of the San Juan River LP Agreement to the contrary, is converted to
a general partner interest in San Juan River LP such that after giving effect to this
Section 2.3
, San Juan River GP will hold a 25% general partner interest and Opco will hold a 75% limited partner interest in San Juan River LP, and San
Juan River GP hereby accepts the rights, title and interest to the Green River Interest as a capital contribution.
2.4
Contribution of Assets to
Blanco River LP
. Opco hereby contributes to Blanco River LP all right, title and interest in and to Real Estate Agreements related to the Delaware Basin, which Real Estate Agreements are related to crude oil gathering and produced water
gathering infrastructure, to the extent that such assets and infrastructure is constructed or operated in the Delaware Basin (collectively, the “
DE Basin Assets
”) (a portion of the DE Basin Assets is being conveyed by Opco on behalf
of Blanco River GP such that after giving effect to this
Section 2.4
, Blanco River GP will hold a 25% general partner interest and Opco will hold a 75% limited partner interest in Blanco River LP) and Blanco River LP hereby accepts the
rights, title and interest to the DE Basin Assets as capital contributions. Notwithstanding any provision of the Blanco River LP Agreement to the contrary, in consideration of the foregoing capital contributions, Blanco River LP hereby issues
sufficient partnership interests in Blanco River LP to Opco and Blanco River GP such that following such contributions and issuances, Blanco River GP holds a 25% general partner interest in Blanco River LP and Opco holds a 75% limited partner
interest in Blanco River LP and Opco and Blanco River GP shall be bound by the Blanco River LP Agreement and continue as limited partner and general partner, as applicable, with respect to the portion of its respective interest in Blanco River LP.
2.5
Distribution of General Partner, Partnership Limited Partner Interests and DevCo LP Interests
. Opco hereby distributes to NBL
Midstream (i) its 100% member interest in the General Partner, (ii) its 99% limited partner interest in the Partnership and (iii) the DevCo LP Interests; and NBL Midstream hereby accepts such general partner interest, limited partner interests and
DevCo LP Interests, and NBL Midstream shall be bound by the limited liability company agreement of the General Partner, the LP Agreement and the applicable agreement of limited partnership of each of the DevCos, as applicable, and continue as sole
member or limited partner with respect to the portion of its respective interest in each such DevCo, as applicable, until the completion of the transactions set forth in Section 2.5.
2.6
Contribution of DevCo LP Interests
. NBL Midstream hereby contributes to NBL Midstream Holdings, as a capital contribution, the DevCo
LP Interests; and NBL Midstream Holdings hereby accepts such DevCo LP Interests, and NBL Midstream Holdings shall be bound by the applicable agreement of limited partnership of each of the DevCos, as applicable, and continue as sole member or
limited partner with respect to the portion of its respective interest in each such DevCo, as applicable.
Each of the following transactions set forth in
Sections 2.7 through 2.11 shall be completed as of the Effective Time in the order set forth herein:
6
2.7
Redemption of the Original General Partner Interest
. The General Partner and NBL Midstream
amend and restate the Agreement of Limited Partnership of the Partnership, dated as of December 23, 2014, and, upon the execution of the LP Agreement, dated as of the Closing Date, the General Partner will be issued a non-economic general
partner interest in the Partnership. The Partnership hereby redeems the Original General Partner Interest acquired by the General Partner upon formation of the Partnership, and hereby refunds and distributes to the General Partner $20, along with
any interest or other profit that resulted from the investment or other use of such initial contribution.
2.8
Contribution of Opco to the
Partnership
. NBL Midstream hereby contributes to the Partnership all right, title and interest in and to all of the outstanding limited liability company interests in Opco (the “
Opco Interests
”) in exchange for
(a) [
] Common Units representing an approximate [__]% limited partner interest (based on an aggregate of
[
] Common Units and Subordinated Units to be outstanding after the completion of the Offering) in the Partnership (the “
Sponsor Common Units
”),
(b) [
] Subordinated Units representing a [__]% limited partner interest (based on an aggregate of
[
] Common Units and Subordinated Units to be outstanding after the completion of the Offering) in the Partnership (the “
Sponsor Subordinated Units
”),
(c) all of the limited partner interests in the Partnership classified as “Incentive Distribution Rights” under the LP Agreement and (d) the right to receive a cash distribution from the Partnership in the amount of approximately
$[
] million from the net proceeds from the sale of the Firm Units and the Option Units in the Offering, and the Partnership hereby accepts such Opco Interests as a capital contribution from NBL
Midstream. Upon NBL Midstream’s contribution of such Opco Interests to the Partnership, (i) the Partnership shall be the sole member of Opco, (ii) NBL Midstream shall and does hereby cease to be a member of Opco and shall thereupon
cease to have or exercise any right or power as a member of Opco and (iii) Opco shall be and hereby is continued without dissolution.
2.9
Public Cash Contribution
. The Parties acknowledge that, in connection with the Offering, public investors, through the Underwriters, shall make a capital contribution to the Partnership of
$[ ] million in cash (the “
IPO Proceeds
”) in exchange for [ ] Common Units (the “
Firm Units
”)
representing an aggregate [ ]% limited partner interest in the Partnership, and new limited partners are being admitted to the Partnership in connection therewith.
2.10
Payment of Transaction Expenses by the Partnership and Distribution of Proceeds by the Partnership
. The Parties acknowledge (a) the
payment by the Partnership, in connection with the closing of the Offering, of transaction expenses of approximately $[ ] million (the “
Transaction Expenses
”), excluding underwriting
discounts of $[ ] in the aggregate but including a structuring fee of [ ]% of the gross proceeds of the Offering payable to certain of the Underwriters (the “
Structuring
Fee
”), and (b) the distribution by the Partnership to NBL Midstream of $[ ], and, if applicable, when available, the net proceeds from the exercise of the
Underwriters’ Over-Allotment Option.
7
2.12
Redemption of the Original Limited Partner Interest from the Partnership and Return of Initial Capital
Contribution
. The Partnership hereby redeems the Original Limited Partner Interest acquired by NBL Midstream in
Section 2.5
and hereby refunds and distributes to NBL Midstream $980, made in connection with the formation of the
Partnership, along with any interest or other profit that resulted from the investment or other use of such initial contribution.
ARTICLE III
EXERCISE OF
OVER-ALLOTMENT OPTION
If the Over-Allotment Option is exercised in whole or in part, the Underwriters will contribute additional cash
to the Partnership in exchange for up to an additional [ ] Common Units representing an aggregate [ ]% limited partner interest in the Partnership (the
“
Option Units
”) at the Offering price per Common Unit set forth in the Registration Statement, net of underwriting discounts and the Structuring Fee. Upon any exercise of the Over-Allotment Option, the Partnership will distribute to
NBL Midstream any net cash proceeds from the sale of such Option Units. Upon the expiration of the Option Period, any Option Units not purchased by the Underwriters pursuant to the Underwriting Agreement will be issued as a Deferred Issuance to NBL
Midstream as part of the contribution transactions described in
Section 2.8
.
ARTICLE IV
FURTHER ASSURANCES
From
time to time after the date hereof, and without any further consideration, each of the Parties shall execute, acknowledge and deliver all such additional instruments, notices and other documents, and will do all such other acts and things, all in
accordance with applicable law, as may be necessary or appropriate to more fully and effectively carry out the purposes and intent of this Agreement. Without limiting the generality of the foregoing, the Parties acknowledge that the Parties have
used their good faith efforts to identify all of the assets contributed to the DevCos and NBLMH as required in connection with this Agreement, including in the recitals hereto. However, due to the age of some of the assets and the difficulties in
locating appropriate data with respect to some of the assets, it is possible that assets intended to be contributed ultimately to the DevCos and NBLMH were not identified and therefore are not included in the assets described herein. It is the
express intent of the Parties that the DevCos and NBLMH own all assets necessary to operate the assets that are identified in this Agreement, including in the recitals hereto. To the extent that any assets were not identified but are necessary to
the operation of the assets that are so identified in this Agreement, including in the recitals hereto, then the intent of the Parties is that all such unidentified assets are intended to be conveyed to the DevCos and NBLMH pursuant to this
Agreement. If any such assets are identified at a later date, the Parties shall take all appropriate action required in order to convey such assets to any applicable DevCo or NBLMH. Further, to the extent that any assets that are conveyed to any
DevCo or NBLMH hereunder are later identified by the Parties as assets that the Parties did not intend to convey to any DevCo or NBLMH, the Parties shall take all appropriate action required to convey such assets to the appropriate Noble Entity.
8
Without limiting any liabilities or remedies of the Parties applicable under this Agreement or
any other agreements, if and to the extent that the valid, complete and perfected transfer or assignment of any assets by any Party to any other Party or the acquisition of any assets from any Party by any other Party would be a violation of
applicable law or require any additional consents, approvals or notifications in connection with the transfer of such that have not been obtained or made by the Effective Time, then, unless the Parties shall otherwise mutually determine, the
transfer or assignment of such assets shall be automatically deemed deferred and any such purported transfer or assignment shall be null and void until such time as all legal impediments are removed or such consents, approvals and notifications have
been obtained or made. Notwithstanding the foregoing, in such event the Parties shall (a) hold such assets for the benefit of the applicable Party, (b) not transfer or assign such assets, in whole or in part, other than with the prior
consent of the intended transferee, and (c) use their respective reasonable best efforts to assure that the intended transferee receives all of the benefits of the assets attempted to have been transferred to such member until such time as the
attempted transfer is complete, and the intended transferee shall bear all costs associated with such assets (except costs associated with the attempted transfer or perfecting such transfer, and subject to offset of any benefits of the assets not
received by the intended transferee against associated costs incurred by the Parties) as if the transfer had been valid and complete.
ARTICLE V
ORDER OF
COMPLETION AND EFFECTIVENESS OF TRANSACTIONS; LIMITATIONS
5.1
Order of Completion of Transactions
. The transactions provided for in
Articles II
shall be completed in the order and at the times set forth in
Articles II
.
5.2
Effectiveness of
Transactions
. Notwithstanding anything contained in this Agreement to the contrary, none of the provisions of
Article II
shall be operative or have any effect until at least the Effective Time, at which respective time all such
applicable provisions shall be effective and operative in accordance with
Section 5.1
without further action by any Party.
5.3
Limitations
. Distributions made or to be made hereunder shall be subject to the Delaware Partnership Act and the Delaware Limited Liability Company Act, as applicable, notwithstanding any other provision of this Agreement.
ARTICLE VI
MISCELLANEOUS
6.1
Costs
.
Except for the Transaction Expenses set forth in
Section 2.10
, Nobel shall pay all expenses, fees and costs, including, but not limited to, all sales, use and similar taxes arising out of the contributions, distributions, conveyances and
deliveries to be made under
Article II
and shall pay all documentary, filing and recording, transfer, deed and conveyance taxes and fees required in connection therewith. In addition, Noble shall be responsible for all costs, liabilities and
expenses (including court costs and reasonable attorneys’ fees) incurred in connection with the implementation of any conveyance or delivery pursuant to
Article IV
(to the extent related to any of the contributions, distributions,
conveyances and deliveries to be made under
Article II
).
9
6.2
Headings; References; Interpretation
. All Article and Section headings in this Agreement are
for convenience only and shall not be deemed to control or affect the meaning or construction of any of the provisions hereof. The words “hereof,” “herein” and “hereunder” and words of similar import, when used in this
Agreement, shall refer to this Agreement as a whole, and not to any particular provision of this Agreement. All references herein to Articles and Sections shall, unless the context requires a different construction, be deemed to be references to the
Articles and Sections of this Agreement. All personal pronouns used in this Agreement, whether used in the masculine, feminine or neuter gender, shall include all other genders, and the singular shall include the plural and vice versa. The use
herein of the word “including” following any general statement, term or matter shall not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or
matters, whether or not non-limiting language (such as “without limitation,” “but not limited to” or other words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or matters
that could reasonably fall within the broadest possible scope of such general statement, term or matter.
6.3
Successors and Assigns
. This
Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns.
6.4
No Third Party
Rights
. The provisions of this Agreement are intended to bind the Parties as to each other and are not intended to and do not create rights in any other person or confer upon any other person any benefits, rights or remedies, and no person
is or is intended to be a third party beneficiary of any of the provisions of this Agreement.
6.5
Counterparts
. This Agreement may be
executed in any number of counterparts with the same effect as if all Parties had signed the same document. All counterparts shall be construed together and shall constitute one and the same instrument.
6.6
Applicable Law
. This Agreement shall be construed in accordance with and governed by the laws of the State of Delaware, without regard to
the principles of conflicts of law. EACH OF THE PARTIES HERETO AGREES THAT THIS AGREEMENT INVOLVES AT LEAST U.S. $100,000.00 AND THAT THIS AGREEMENT HAS BEEN ENTERED INTO IN EXPRESS RELIANCE UPON 6 Del. C. § 2708. EACH OF THE PARTIES HERETO
IRREVOCABLY AND UNCONDITIONALLY AGREES (i) TO BE SUBJECT TO THE JURISDICTION OF THE COURTS OF THE STATE OF DELAWARE AND OF THE FEDERAL COURTS SITTING IN THE STATE OF DELAWARE, AND (ii) TO THE EXTENT SUCH PARTY IS NOT OTHERWISE SUBJECT TO
SERVICE OF PROCESS IN THE STATE OF DELAWARE, TO APPOINT AND MAINTAIN AN AGENT IN THE STATE OF DELAWARE AS SUCH PARTY’S AGENT FOR ACCEPTANCE OF LEGAL PROCESS AND TO NOTIFY THE OTHER PARTIES OF THE NAME AND ADDRESS OF SUCH AGENT.
6.7
Severability
. If any of the provisions of this Agreement are held by any court of competent jurisdiction to contravene, or to be invalid
under, the laws of any political body having jurisdiction over the subject matter hereof, such contravention or invalidity shall not invalidate the entire Agreement. Instead, this Agreement shall be construed as if it did not contain the particular
provision or provisions held to be invalid and an equitable adjustment shall be made and necessary provision added so as to give effect to the intention of the Parties as expressed in this Agreement at the time of execution of this Agreement.
10
6.8
Amendment or Modification
. This Agreement may be amended or modified from time to time only by
the written agreement of all the Parties. Each such instrument shall be reduced to writing and shall be designated on its face as an amendment to this Agreement.
6.9
Integration
. This Agreement and the instruments referenced herein and in the exhibits attached hereto supersede all previous understandings
or agreements among the parties, whether oral or written, with respect to the subject matter of this Agreement and such instruments. This Agreement and such instruments contain the entire understanding of the Parties with respect to the subject
matter hereof and thereof. There are no unwritten oral agreements between the parties. No understanding, representation, promise or agreement, whether oral or written, is intended to be or shall be included in or from part of this Agreement unless
it is contained in a written amendment hereto executed by the parties hereto after the date of this Agreement.
6.10
Deed; Bill of Sale;
Assignment
. To the extent required and permitted by applicable law, this Agreement shall also constitute a “deed,” “bill of sale” or “assignment” of the assets and interests referenced herein.
[Remainder of page intentionally left blank]
11
IN WITNESS WHEREOF, the Parties to this Agreement have caused it to be duly executed as of the date first above
written.
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NOBLE MIDSTREAM PARTNERS LP
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By:
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Noble Midstream GP LLC,
its general
partner
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By:
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Name:
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Terry R. Gerhart
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Title:
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Chief Executive Officer
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Signature Page to
Contribution, Conveyance and Assumption Agreement
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NOBLE MIDSTREAM GP LLC
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By:
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Name:
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Terry R. Gerhart
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Title:
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Chief Executive Officer
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Signature Page to
Contribution, Conveyance and Assumption Agreement
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NOBLE MIDSTREAM SERVICES, LLC
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By:
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Name:
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Terry R. Gerhart
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Title:
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Chief Executive Officer
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Signature Page to
Contribution, Conveyance and Assumption Agreement
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NBL MIDSTREAM, LLC
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By:
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Name:
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Charles J. Rimer
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Title:
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President
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Signature Page to
Contribution, Conveyance and Assumption Agreement
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COLORADO RIVER DEVCO GP LLC
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By: Noble Midstream Services, LLC, its sole member
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By:
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Name:
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Terry R. Gerhart
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Title:
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Chief Executive Officer
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Signature Page to
Contribution, Conveyance and Assumption Agreement
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GREEN RIVER DEVCO GP LLC
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By: Noble Midstream Services, LLC, its sole member
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By:
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Name:
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Terry R. Gerhart
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Title:
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Chief Executive Officer
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Signature Page to
Contribution, Conveyance and Assumption Agreement
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LARAMIE RIVER DEVCO GP LLC
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By: Noble Midstream Services, LLC, its sole member
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By:
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Name:
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Terry R. Gerhart
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Title:
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Chief Executive Officer
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Signature Page to
Contribution, Conveyance and Assumption Agreement
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SAN JUAN RIVER DEVCO GP LLC
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By: Noble Midstream Services, LLC, its sole member
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By:
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Name:
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Terry R. Gerhart
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Title:
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Chief Executive Officer
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Signature Page to
Contribution, Conveyance and Assumption Agreement
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BLANCO RIVER DEVCO LP
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By:
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Blanco River DevCo GP LLC, its general partner
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By:
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Noble Midstream Services, LLC, its sole member
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By:
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Name:
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Terry R. Gerhart
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Title:
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Chief Executive Officer
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Signature Page to
Contribution, Conveyance and Assumption Agreement
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BLANCO RIVER DEVCO GP LLC
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By: Noble Midstream Services, LLC, its sole member
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By:
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Name:
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Terry R. Gerhart
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Title:
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Chief Executive Officer
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Signature Page to
Contribution, Conveyance and Assumption Agreement
Exhibit A
Integrated Development Plan Areas
East Pony IDP
The East Pony IDP describes
an area in Weld County, Colorado covering the following Sections, Townships and Ranges:
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Township
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Range
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Section(s)
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T9N
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R58W
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ALL
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T9N
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R59W
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ALL
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T8N
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R59W
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ALL
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Mustang IDP
The Mustang IDP describes an area in Weld County, Colorado covering the following Sections, Townships and Ranges:
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Township
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Range
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Section(s)
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T4N
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R64W
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1-3, 10-15, 22-27, 32-36
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T4N
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R63W
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2-11, 14-23, 26-35
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T3N
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R63W
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4-9, 16-21, 28-33
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T3N
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R64W
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ALL
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T3N
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R65W
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1-3, 10-15, 22-27, 34-36
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T2N
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R64W
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ALL
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T2N
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R63W
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3-9, 16-21, 28-33
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T3N
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R65W
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21, 28
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Wells Ranch IDP
The Wells Ranch IDP describes an area in Weld County, Colorado covering the following Sections, Townships and Ranges:
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Township
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Range
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Section(s)
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T7N
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R64W
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31-36
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T7N
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R63W
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31-36
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T7N
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R62W
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31
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T6N
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R64W
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ALL
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T6N
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R63W
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ALL
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T6N
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R62W
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2-11, 14-23, 26-35
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T5N
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R62W
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2-11, 14-23
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T5N
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R63W
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ALL
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T5N
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R64W
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1-6, 10-15, 22-27, 34-36
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Northern Colorado
The phrase “Northern Colorado” refers to the East Pony IDP together with the following areas in Weld County, Colorado, covering the following
Sections, Townships and Ranges:
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Township
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Range
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Section(s)
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T7N
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59W
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ALL
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T7N
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62W
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ALL (other than 31)
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T7N
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63W
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ALL
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T7N
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64W
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ALL
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T8N
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63W
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ALL
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T8N
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R58W
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ALL
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T8N
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R60W
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ALL
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T8N
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R61W
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ALL
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T8N
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R62W
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ALL
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T9N
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R60W
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ALL
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T9N
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R61W
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ALL
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10N
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58W
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S/2
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10N
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60W
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ALL
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10N
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61W
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ALL
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Exhibit 10.3
FORM OF
OMNIBUS
AGREEMENT
by and between
NOBLE ENERGY, INC.
NOBLE ENERGY SERVICES INC.
NBL MIDSTREAM, LLC
NOBLE MIDSTREAM SERVICES, LLC
NOBLE MIDSTREAM GP LLC
and
NOBLE MIDSTREAM PARTNERS
LP
dated as of
[ ], 2016
TABLE OF CONTENTS
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Page
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ARTICLE I DEFINITIONS
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1
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1.1
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Definitions
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1
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1.2
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Rules of Construction
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8
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ARTICLE II INDEMNIFICATION
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9
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2.1
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Environmental Indemnification
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9
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2.2
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Right-of-Way Indemnification
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10
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2.3
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Additional Indemnification
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11
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2.4
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Indemnification Procedures
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12
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2.5
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Limitations Regarding Indemnification
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14
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2.6
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Exclusive Remedy
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14
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ARTICLE III SERVICES; REIMBURSEMENT
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14
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3.1
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General and Administrative Services
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14
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3.2
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Administrative Fee
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15
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3.3
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Reimbursement of General and Administrative Expenses
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16
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3.4
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Transition Services
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16
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ARTICLE IV RIGHT OF FIRST REFUSAL AND RIGHT OF FIRST OFFER
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17
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4.1
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Right of First Refusal to Purchase Certain Assets
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17
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4.2
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ROFR Procedures
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17
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4.3
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Right of First Offer
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22
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4.4
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ROFO Procedures
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22
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ARTICLE V ACCESS RIGHTS
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24
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5.1
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Access Rights
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24
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ARTICLE VI MISCELLANEOUS
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24
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6.1
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Confidentiality
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24
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6.2
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Choice of Law; Mediation; Submission to Jurisdiction
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25
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6.3
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Entire Agreement
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26
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6.4
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Termination of Agreement
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26
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6.5
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Amendment or Modification
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27
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6.6
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Assignment
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27
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6.7
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Counterparts
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27
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6.8
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Severability
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27
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6.9
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Further Assurances
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27
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6.10
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Rights of Limited Partners
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27
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SCHEDULES
:
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Schedule A
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ROFR Acreage
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Schedule B
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General and Administrative Services
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Schedule C
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Reserved
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Schedule D
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Reserved
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Schedule E
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Property Access Rights
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i
OMNIBUS AGREEMENT
This OMNIBUS AGREEMENT (as amended, modified, supplemented or restated from time to time in accordance with the terms hereof, this
“Agreement
”) is entered into on, and effective as of, the Closing Date (as defined herein) by and between Noble Energy, Inc., a Delaware corporation (“
Noble
”), Noble Energy Services Inc., a Delaware corporation
(“
NESI
”), NBL Midstream, LLC, a Delaware limited liability company (“
NBL Midstream
”), Noble Midstream Services, LLC, a Delaware limited liability company (“
OpCo
”), Noble Midstream GP LLC, a Delaware
limited liability company (the “
General Partner
”), and Noble Midstream Partners LP, a Delaware limited partnership (the “
Partnership
” and, together with Noble, NBL Midstream, OpCo and the General Partner, the
“
Parties
” and each a “
Party
”).
RECITALS
1. Capitalized terms used in this Agreement are defined in
Article I
.
2. The Parties desire by their execution of this Agreement to evidence their understanding, as more fully set forth in
Article II
, with
respect to certain indemnification obligations of the Parties to each other.
3. The Parties desire by their execution of this Agreement
to evidence their understanding, as more fully set forth in
Article III
, with respect to (i) the amount to be paid by the Partnership for general and administrative services relating to operating the Partnership’s business to be
performed by Noble and its Affiliates (including the General Partner) for and on behalf of the Partnership Group, (ii) the reimbursement of expenses incurred by Noble and its Affiliates on behalf of the Partnership Group and (iii) the reimbursement
of costs incurred by Noble and its Affiliates on behalf of the Partnership Group for certain transition services.
4. The Parties desire
by their execution of this Agreement to evidence their understanding, as more fully set forth in
Article IV
, with respect to the amendment and restatement of the Partnership Group’s right of first refusal to purchase the ROFR Assets and
the right of first offer to purchase the ROFO Equity.
5. The Parties desire by their execution of this Agreement to evidence their
understanding, as more fully set forth in
Article V
, with respect to the amendment and restatement of the Partnership Group’s right to access and use certain items of real and personal property owned by Noble.
In consideration of the premises and the covenants, conditions and agreements contained herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
ARTICLE I
DEFINITIONS
1.1
Definitions
. As used in this Agreement, the following terms shall have the meanings set forth below:
“
Acceptance
Deadline
” means the First ROFR Asset Acceptance Deadline, the Second ROFR Asset Acceptance Deadline or the ROFR Services Acceptance Deadline, as applicable.
1
“
Administrative Fee
” is defined in
Section 3.2(a)
.
“
Affiliate
” is defined in the Partnership Agreement;
provided
that, for the purposes of this Agreement, any Person
that is a Partnership Group Member shall be deemed not an Affiliate of Noble and its Subsidiaries (other than the Partnership Group).
“
Agreement
” is defined in the introductory paragraph of this Agreement.
“
Closing Date
” means the closing date of the Partnership’s IPO.
“
Confidential Information
” means (1) all information contained in (and the existence of) each Services Notice and Disposition
Notice and (2) any proprietary or confidential information that is competitively sensitive material or otherwise of value to a Party or its Affiliates and not generally known to the public, including trade secrets, scientific or technical
information, design, invention, process, procedure, formula, improvements, product planning information, marketing strategies, financial information, information regarding operations, consumer and/or customer relationships, consumer and/or customer
identities and profiles, sales estimates, business plans, and internal performance results relating to the past, present or future business activities of a Party or its Affiliates and the consumers, customers, clients and suppliers of any of the
foregoing. Confidential Information includes such information as may be contained in or embodied by documents, substances, engineering and laboratory notebooks, reports, data, specifications, computer source code and object code, flow charts,
databases, drawings, pilot plants or demonstration or operating facilities, diagrams, specifications, bills of material, equipment, prototypes and models, and any other tangible manifestation (including data in computer or other digital format) of
the foregoing;
provided, however,
that Confidential Information does not include information that a Receiving Party can show (a) has been published or has otherwise become available to the general public as part of the public domain without
breach of this Agreement, (b) has been furnished or made known to the Receiving Party without any obligation to keep it confidential by a Third Party under circumstances which are not known to the Receiving Party to involve a breach of the Third
Party’s obligations to a Party or (c) was developed independently of information furnished or made available to the Receiving Party as contemplated under this Agreement.
“
Contribution Agreement
” means the Contribution, Conveyance and Assumption Agreement, dated as of the Closing Date, by and
between the General Partner, the Partnership, Noble NBL Midstream, NBL Midsteam Holdings, LLC and the other Partnership Group Members party thereto, with the additional conveyance documents and instruments contemplated or referenced thereunder, as
such may be amended, supplemented or restated from time to time.
“
Covered Environmental Losses
” is defined in
Section
2.1(a)
.
“
Covered Property Losses
” is defined in
Section 2.2
.
“
Deductible
” is defined in
Section 2.5(a)
.
2
“
Disclosing Party
” is defined in
Section 6.1(a)
.
“
Disposition Notice
” is defined in
Section 4.2(a)
.
“
Environmental Laws
” means all federal, state and local laws, statutes, rules, regulations, orders, judgments, ordinances,
codes, injunctions, decrees, Environmental Permits and other legally enforceable requirements and rules of common law now or hereinafter in effect relating to (a) pollution or protection of human health, natural resources, wildlife and the
environment or workplace health or safety, including the federal Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. §§9601
et seq.
, the Resource Conservation and Recovery Act of
1976, as amended, 42 U.S.C. §§6901
et seq.
, the Clean Air Act, as amended, 42 U.S.C. §§7401
et seq.
, the Federal Water Pollution Control Act, as amended, 33 U.S.C. §§1251
et seq.
, the Toxic
Substances Control Act, as amended, 15 U.S.C. §§2601
et seq.
, the Oil Pollution Act of 1990, 33 U.S.C. §§2701
et seq.
, the Safe Drinking Water Act of 1974, as amended, 42 U.S.C. §§300f
et seq.
, the
Hazardous Materials Transportation Act of 1994, as amended, 49 U.S.C. §§5101
et seq.
, and other environmental conservation and protection laws and the Occupational Safety and Health Act of 1970, 29 U.S.C. §§651
et
seq.
, and the regulations promulgated pursuant thereto, and any state or local counterparts, each as amended from time to time and (b) the generation, manufacture, processing, distribution, use, treatment, storage, transport or handling of any
Hazardous Substances.
“
Environmental Permit
” means any permit, approval, identification number, license, registration,
certification, consent, exemption, variance or other authorization required under or issued pursuant to any applicable Environmental Law, including applications for renewal of such permits in which the application allows for continued operation
under the terms of an expired permit.
“
First ROFR Asset Acceptance Deadline
” is defined in
Section 4.2(a)
.
“
General and Administrative Services
” is defined in
Section 3.1(a)
.
“
General Partner
” is defined in the introductory paragraph of this Agreement.
“
Governmental Authority
” means any federal, state, tribal, foreign or local governmental entity, authority, department, court
or agency, including any political subdivision thereof, exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory or taxing authority or power of any nature, and including any arbitrating body,
commission or quasi-governmental authority or self-regulating organization of competent authority exercising or enlisted to exercise similar power or authority.
“
Hazardous Substance
” means (a) any substance, whether solid, liquid, gaseous, semi-solid, or any combination thereof, that
is designated, defined or classified as a hazardous waste, solid waste, hazardous material, pollutant, contaminant or toxic or hazardous substance, or terms of similar meaning, or that is otherwise regulated under any Environmental Law, including
any hazardous substance as defined under the Comprehensive Environmental Response, Compensation, and Liability Act, as amended, and including asbestos and lead-containing paints or coatings, radioactive materials, polychlorinated biphenyls and
greenhouse gases and (b) petroleum, oil, gasoline, natural gas, fuel oil, motor oil, waste oil, diesel fuel, jet fuel and other refined petroleum hydrocarbons.
3
“
Identification Deadline
” means the third anniversary of the Closing Date.
“
Indemnified Party
” means the Party entitled to indemnification in accordance with
Article II
.
“
Indemnifying Party
” means the Party from whom indemnification may be sought in accordance with
Article II
.
“
IPO
” means the initial public offering of common units representing limited partner interests in the Partnership.
“
Limited Partner
” is defined in the Partnership Agreement.
“
Losses
” means any losses, damages, liabilities, claims, demands, causes of action, judgments, settlements, fines, penalties,
costs and expenses (including court costs and reasonable attorney’s and expert’s fees) of any and every kind or character, known or unknown, fixed or contingent.
“
Mediation Notice
” is defined in
Section 6.2(b)
.
“
NBL Midstream
” is defined in the introductory paragraph of this Agreement.
“
NEI Invoice Delivery Date
” is defined in
Section 3.2(d)(i)
.
“
NESI
” is defined in the introductory paragraph of this Agreement.
“
Noble
” is defined in the introductory paragraph of this Agreement. The term “Noble” shall include any successor by
merger to the ultimate parent company of Noble Energy Group.
“N
oble Energy Group
” means Noble and all of its
Subsidiaries (other than the General Partner and the Partnership Group).
“
Noble Energy Group Member
” means any member of
the Noble Energy Group.
“
Offer Price
” is defined in
Section
4.2(a)
.
“
OpCo
” is defined in the introductory paragraph of this Agreement.
“
Operational Services and Secondment Agreement
” means that certain Operational Services Agreement, dated as of the Closing
Date, by and among the Partnership, the General Partner, Noble, NESI and the other Persons party thereto from time to time, as such agreement may be amended, supplemented or restated from time to time.
“
Original Lease
” is defined in
Section 2.3(c)
.
“
Partnership
” is defined in the introductory paragraph of this Agreement.
4
“
Partnership Agreement
” means the First Amended and Restated Agreement of
Limited Partnership of the Partnership, dated as of the Closing Date, as it may be amended, modified, supplemented or restated from time to time in accordance with the terms thereof.
“
Partnership Assets
” means all assets, or portions thereof, conveyed, contributed or otherwise Transferred or intended to be
conveyed, contributed or otherwise Transferred pursuant to the Contribution Agreement to any Partnership Group Member, or owned by, leased by or necessary for the operation of the business, properties or assets of any Partnership Group Member as of
the Closing Date.
“
Partnership Change of Control
” means Noble ceases to possess, directly or indirectly, the power to
direct or cause the direction of the management and policies of the General Partner, whether through ownership of voting securities, by contract or otherwise.
“
Partnership Group
” means the Partnership and its consolidated Subsidiaries.
“
Partnership Group Member
” means any member of the Partnership Group.
“
Partnership Invoice Payment Date
” is defined in
Section 3.2(d)(ii)
.
“
Partnership Interest
” is defined in the Partnership Agreement.
“
Partnership Parties
” has the meaning given to such term in the Operational Services and Secondment Agreement.
“
Party
” and “
Parties
” are defined in the introductory paragraph of this Agreement.
“
Person
” means an individual or a corporation, firm, limited liability company, partnership, joint venture, trust,
unincorporated organization, association, government agency or political subdivision thereof or other entity.
“
Property Access
Rights
” means the access rights of the Partnership Group on certain real and personal property retained by Noble following the consummation of the IPO, such real and personal property set forth on
Schedule E
.
“
Proposed Provider
” is defined in
Section 4.2(b)
.
“
Proposed ROFO Transaction
” is defined in
Section 4.4(a).
“
Proposed Service Acreage
” is defined in
Section 4.2(b)
.
“
Proposed Services
” is defined in
Section 4.2(b)
.
“
Proposed Transferee
” is defined in
Section 4.2(a)
.
“
Receiving Party
” is defined in
Section 6.1(a)
.
“
Registration Statement
” means the Registration Statement on Form S-1 (File No. 333-207560) filed by the Partnership and
relating to the IPO.
5
“
Remaining Vendor Contracts
” means each contract between a Noble Energy Group
Member and a Third Party vendor of goods or services that (i) is used or useful in connection with the Partnership Group’s assets and the services provided under the Revenue Agreements and (ii) has not prior to the Closing Date been amended,
assigned or otherwise modified to cause a Partnership Group Member to be a party to such contract with the applicable vendor.
“
Representative
” is defined in
Section 6.1(a)
.
“
Retained Assets
” means all assets, or portions thereof owned by any of the members of the Noble Energy Group that were not
directly or indirectly conveyed, contributed or otherwise Transferred to the Partnership Group in connection with the IPO.
“
Revenue Agreement
” means, collectively, the following, as the same may be amended, amended and restated, supplemented or
otherwise modified, including by the entry into new or additional Agreement Addenda in respect of any of the following:
|
|
•
|
|
those certain Second Amended and Restated Fresh Water Services Agreements, dated effective as of March 31, 2016, consisting of the Second Amended and Restated Agreement Terms and Conditions Relating to Fresh Water
Services last updated as of March 31, 2016, and each Second Amended and Restated Agreement Addendum thereto executed from time to time by Noble or its Affiliates and OpCo or one or more of its Subsidiaries;
|
|
|
•
|
|
those certain Second Amended and Restated Gas Gathering Agreements, dated effective as of March 31, 2016, consisting of the Second Amended and Restated Agreement Terms and Conditions Relating to Gas Gathering
Services last updated as of March 31, 2016, and each Second Amended and Restated Agreement Addendum thereto executed from time to time by Noble or its Affiliates and OpCo or one or more of its Subsidiaries;
|
|
|
•
|
|
those certain Second Amended and Restated Crude Oil Gathering Agreements, dated effective as of March 31, 2016, consisting of the Second Amended and Restated Agreement Terms and Conditions Relating to Crude Oil
Gathering Services last updated as of March 31, 2016, and each Second Amended and Restated Agreement Addendum thereto executed from time to time by Noble or its Affiliates and OpCo or one or more of its Subsidiaries;
|
|
|
•
|
|
those certain Third Amended and Restated Crude Oil Treating Agreements, dated effective as of [●], [●], consisting of the Third Amended and Restated Agreement Terms and Conditions Relating to Crude Oil
Treating Services last updated as of [●], [●], and each Third Amended and Restated Agreement Addendum thereto executed from time to time by Noble or its Affiliates and OpCo or one or more of its Subsidiaries;
|
|
|
•
|
|
those certain Second Amended and Restated Produced Water Services Agreements, dated effective as of
March 31, 2016, consisting of the Second Amended and Restated Agreement Terms and Conditions Relating to Produced
|
6
|
|
Water Services last updated as of March 31, 2016, and each Second Amended and Restated Agreement Addendum thereto executed from time to time by Noble or its Affiliates and OpCo or one or
more of its Subsidiaries;
|
|
|
•
|
|
those certain Texas Crude Oil Gathering Agreements, dated effective as of September 1, 2016, consisting of the Texas Agreement Terms and Conditions Relating to Crude Oil Gathering last updated as of September 1, 2016,
and each Agreement Addendum thereto executed from time to time by Rosetta Resources Operating LP or its Affiliates and OpCo or one or more of its Subsidiaries; and
|
|
|
•
|
|
those certain Texas Produced Water Services Agreements, dated effective as of September 1, 2016, consisting of the Texas Agreement Terms and Conditions Relating to Produced Water Services last updated as of September 1,
2016, and each Agreement Addendum thereto executed from time to time by Rosetta Resources Operating LP or its Affiliates and OpCo or one or more of its Subsidiaries.
|
“
Rights Termination Date
” means the earliest to occur of (a) fifteen years following the Closing Date, (b) a Partnership
Change of Control or (c) a termination of this Agreement pursuant to
Section 6.4
.
“
ROFO Equity
” means any equity
interests that a Noble Energy Group Member holds in a Subsidiary of the Partnership. For the avoidance of doubt, as of the date of this Agreement, all ROFO Equity is held by NBL Midstream.
“
ROFO Notice
” is defined in
Section 4.4(a).
“
ROFO Response
” is defined in
Section 4.4(a).
“
ROFR Acreage
” means, with respect to oil and gas assets, (i) all leasehold acreage and fee acreage currently owned by
Noble Energy Group in the areas of Dimmit, Reeves and Webb Counties, Texas to the extent described on
Exhibit A
, (ii) all leasehold acreage and fee acreage currently owned or in the future acquired by Noble Energy Group in Weld
County, Colorado and the Utica Shale in Pennsylvania and West Virginia and (iii) all leasehold acreage and fee acreage currently owned or in the future acquired by Noble Energy Group onshore in the continental United States of America (outside
of the Marcellus formation);
provided
that any acreage specifically released in a written instrument signed by the Partnership subsequent to the date hereof are excluded from the definition of ROFR Acreage.
“
ROFR Assets
” means the ownership interests of a Noble Energy Group Member in any assets currently owned or in the future
developed or acquired that satisfy all of the following criterion: such assets are (i) owned by a Noble Energy Group Member at the time of the proposed Transfer for the purpose of providing ROFR Services, (ii) are located on ROFR Acreage,
(iii) not used by any Noble Energy Group Member at the time of the proposed Transfer to provide services to or with respect to production from the Marcellus formation and (iv) are of a type that are useful in the provision of ROFR Services.
“
ROFR Notice
” means a Disposition Notice or a Services Notice, as applicable.
7
“
ROFR Services
” means (1) those midstream services that are of the type covered
by a Revenue Agreement, as of the Closing Date, which, for the avoidance of doubt, include oil gathering, gas gathering, produced water services, fresh water services and oil treating and (2) services of a type provided at gas processing plants
and LNG facilities.
“
ROFR Services Acceptance Deadline
” is defined in
Section 4.2(b)
.
“
Sale Assets
” is defined in
Section 4.2(a)
.
“
Second ROFR Asset Acceptance Deadline
” is defined in
Section
4.2(a)
.
“
Service Rate
” is defined in
Section
4.2(b)
.
“
Services Contract
” is defined in
Section
4.2(b)
.
“
Services Notice
” is defined in
Section
4.2(b)
.
“
Subsidiary
” is defined in the Partnership Agreement.
“
Third Party
” means a Person that is not a Partnership Group Member, and additionally, for the purposes of
Article IV
,
a Person that is not a Noble Energy Group Member.
“
Transfer
” including the correlative terms
“
Transferring
” or “
Transferred
” means (i) any direct or indirect transfer, assignment, sale, gift, pledge, hypothecation or other encumbrance, or any other disposition (whether voluntary, involuntary or by operation
of law) and (ii) any dedication of services and any commitment or similar contractual arrangement that would have the effect of excluding the Partnership from the opportunity to provide the applicable services. For the avoidance of doubt, a
Transfer of equity interests in an entity that holds a ROFR Asset shall constitute a Transfer.
“
Wells Ranch CGF
Indemnity
” is defined in
Section 2.3(c)
.
“
Wells Ranch CGF Surface Lease
” is defined in
Section
2.3(c)
.
1.2
Rules of Construction
. Unless expressly provided for elsewhere in this Agreement, this Agreement shall be
interpreted in accordance with the following provisions:
(a) If a word or phrase is defined, its other grammatical forms have a
corresponding meaning.
(b) The headings contained in this Agreement are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
(c) A reference to any Party to this Agreement or another agreement or document includes such
Party’s successors and assigns.
(d) The words “hereof,” “herein” and “hereunder” and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and article, section, subsection and schedule references are to this Agreement unless otherwise specified.
8
(e) The words “including,” “include,” “includes” and all variations
thereof shall mean “including without limitation.”
(f) The word “or” shall have the inclusive meaning represented by
the phrase “and/or.”
(g) The words “shall” and “will” have equal force and effect.
(h) The schedules identified in this Agreement are incorporated herein by reference and made a part of this Agreement.
(i) References to “$” or to “dollars” shall mean the lawful currency of the United States of America.
ARTICLE II
INDEMNIFICATION
2.1
Environmental Indemnificatio
n
.
(a) To the fullest extent permitted by law, Noble shall indemnify, defend and hold harmless
each Partnership Group Member from and against any Losses suffered or incurred by such Partnership Group Member, directly or indirectly, by reason of or arising out of:
(i) any violation of Environmental Laws associated with or arising from the ownership or operation of the Partnership Assets
prior to the Closing Date;
(ii) any environmental event, condition or matter associated with or arising from the ownership
or operation of the Partnership Assets as in effect prior to the Closing Date (including the presence of Hazardous Substances on, under, about or migrating to or from the Partnership Assets or the disposal or the release of Hazardous Substances
generated by operation of the Partnership Assets at locations not constituting Partnership Assets), including (A) the cost and expense of any investigation, assessment, evaluation, monitoring, containment, cleanup, repair, restoration,
remediation, risk-based closure activities or other corrective action required or necessary under Environmental Laws and (B) the cost and expense of the preparation and implementation of any closure, remedial, corrective action or other plans
required or necessary under Environmental Laws as in effect prior to the Closing Date; and
(iii) any environmental event,
condition or matter associated with or arising from the Retained Assets, whether occurring before, on or after the Closing Date and whether occurring under Environmental Laws as in effect prior to, at or after the Closing Date;
provided
,
however
, that with respect to any violation of Environmental Laws subject to
Section 2.1(a)(i)
or any
environmental event, condition or matter subject to
Section 2.1(a)(ii)
, Noble will
9
be obligated to indemnify such Partnership Group Member only to the extent that such violation or environmental event, condition or matter (x) was caused by the consummation of the transactions
contemplated by the Contribution Agreement or commenced, occurred or existed before the Closing Date under Environmental Laws as in effect prior to the Closing Date and (y) Noble is notified in writing of such violation or environmental event,
condition or matter prior to the Identification Deadline. For the avoidance of doubt, Noble shall have no indemnification obligations under
Sections
2.1(a)(
i
)
and
2.1(a)(ii)
with respect to any
claims based on additions to or modifications of Environmental Laws enacted or promulgated after the Closing Date. Losses subject to indemnification in this
Section
2.1(a)(
i
)
are referred to collectively as
“
Covered Environmental Losses
.”
(b) To the fullest extent permitted by law, the Partnership shall indemnify, defend and
hold harmless the Noble Energy Group from and against any Losses suffered or incurred by such Partnership Group Member, directly or indirectly, by reason of or arising out of:
(i) any violation of Environmental Laws associated with or arising from the ownership or operation of the Partnership Assets
occurring on or after the Closing Date; and
(ii) any environmental event, condition or matter associated with or arising
from the ownership or operation of the Partnership Assets occurring on or after the Closing Date (including the presence of Hazardous Substances on, under, about or migrating to or from the Partnership Assets or the disposal or the release of
Hazardous Substances generated by operation of the Partnership Assets at locations not constituting Partnership Assets), including (A) the cost and expense of any investigation, assessment, evaluation, monitoring, containment, cleanup, repair,
restoration, remediation, risk-based closure activities or other corrective action required or necessary under Environmental Laws as in effect on or after the Closing Date and (B) the cost or expense of the preparation and implementation of any
closure, remedial, corrective action or other plans required or necessary under Environmental Laws as in effect on or after the Closing Date;
and
regardless of whether such violation included under
Section 2.1(b)(i)
or such environmental event, condition or matter included under
Section 2.1(b)(ii)
occurred before or after the Closing Date, in each case, to the
extent that any of the foregoing are not Covered Environmental Losses (without giving effect to the Deductible).
2.2
Right-of-Way
Indemnification.
Noble shall indemnify, defend and hold harmless each Partnership Group Member from and against any Losses suffered or incurred by such Partnership Group Member by reason of or arising out of the following (“
Covered
Property Losses
”):
(a) the failure of such Partnership Group Member to hold valid and indefeasible rights granted under surface
use agreements, rights-of-way, surface leases, other easement rights or other real property interests in and to the lands on which any of the Partnership Assets conveyed or contributed to such Partnership Group Member on the Closing Date is located
as described in the Registration Statement, and such failure (i) renders such Partnership Group Member liable to a Third Party or unable to use or operate the Partnership Assets in substantially
10
the same manner that the Partnership Assets were used and operated by Noble immediately prior to the Closing Date or (ii) renders such Partnership Group Member unable to use the applicable real
property interest for its intended purpose;
(b) the failure of such Partnership Group Member to have the consents, licenses and permits
necessary to allow (i) any pipeline included in the Partnership Assets to cross the roads, waterways, railroads and other areas upon which any such pipeline is located as of the Closing Date or (ii) the Transfer of any of the Partnership
Assets to the Partnership Group, in each case, where such failure renders the Partnership Group liable to a Third Party or unable to use or operate the Partnership Assets in substantially the same manner that the Partnership Assets were used and
operated as described in the Registration Statement; and
(c) the cost of curing any condition set forth in
Section
2.2(a)
or
(b)
that does not allow any Partnership Assets to be operated in accordance with prudent industry practice;
provided, however
, in each case, to the extent Noble is notified in writing of any of the foregoing prior to the Identification Deadline and in each
case other than in respect of which the Partnership has indemnified Noble for the Wells Ranch CGF Indemnity.
2.3
A
dditional
Indemnification.
(a) In addition to and not in limitation of the indemnification provided under
Section 2.1(a)
and
Section
2.2,
to the fullest extent permitted by law, Noble shall indemnify, defend and hold harmless each Partnership Group Member from and against any Losses suffered or incurred by such Partnership Group Member by reason of or arising out of:
(i) (A) the consummation of the transactions contemplated by the Contribution Agreement or (B) events and conditions
associated with the ownership or operation of the Partnership Assets and with respect to this subsection (B) only, occurring before the Closing Date (other than Covered Environmental Losses which are provided for under
Section
2.1
and Covered Property Losses which are provided for under
Section
2.2
);
(ii) any litigation matters
attributable to the ownership or operation of the Partnership Assets prior to the Closing Date and any obligations arising out of incidents or events related to fire, explosion or other similar extraordinary event on or near the Partnership Assets
prior to the Closing Date;
(iii) events and conditions associated with the Retained Assets, whether occurring before, on
or after the Closing Date;
(iv) all federal, state and local Tax liabilities attributable to the ownership or operation of
the Partnership Assets on or prior to the Closing Date, including under Treasury Regulation Section 1.1502-6, as it may be amended (or any similar provision of state or local law), and any such Tax liabilities that may result from the
consummation of the transactions contemplated by the Contribution Agreement; and
(v) the failure of any Partnership Group
Member to have on the Closing Date any consent, license, permit or approval necessary to allow such Partnership Group Member to own or operate the Partnership Assets in substantially the same manner that the Partnership Assets were owned or operated
immediately prior to the Closing Date.
11
(b) The Partnership shall indemnify, defend and hold harmless Noble Energy Group from and against
any Losses suffered or incurred by any Noble Energy Group Member by reason of or arising out of events and conditions to the extent associated with the ownership or operation of the Partnership Assets and to the extent occurring after the Closing
Date (other than Covered Environmental Losses which are provided for under
Section
2.2(a)
and Losses for which the Partnership is indemnifying Noble under
Section
2.1(b)
), unless such indemnification would
not be permitted by any Partnership Group Member under the Partnership Agreement.
(c) The Partnership shall indemnify, defend and hold
harmless the Noble Energy Group from and against any Losses suffered or incurred by any Noble Energy Group Member by reason of or arising out of events and conditions, regardless of whether occurring prior to or following the Closing Date (the
“
Wells Ranch CGF Indemnity
”), to the extent associated with the Surface Lease, dated as of May 18, 2012, by and between Noble, Wells Ranch, LLLP and the other persons named as “Owners” thereunder, covering approximately 61
acres in Weld County, Colorado (the “
Original Lease
”), as assigned, amended or otherwise modified by that certain Partial Assignment of Surface Lease with Wattenberg Holding, LLC, dated October 22, 2012, pursuant to which a portion
of Noble’s interest in the Surface Lease was assigned to such assignee, as further assigned, amended or otherwise modified by that certain Amendment to Surface Lease, dated June 18, 2013, pursuant to which certain payment terms appearing in the
Surface Lease were modified, as further assigned, amended or otherwise modified by that certain First Amendment to Surface Lease, dated July 3, 2013, pursuant to which certain terms of the Surface Lease were modified, as further assigned, amended or
otherwise modified by that certain Amendment 03 to Surface Lease, dated effective as of January 1, 2015, pursuant to which OpCo became a party to the Original Lease (such Original Lease, and all amendments prior to the date hereof and as such
Original Lease may be further assigned, amended or otherwise modified from time to time, the “
Wells Ranch CGF Surface Lease
”). In consideration of this Wells Ranch CGF Indemnity, Noble hereby agrees that it will not sell,
assign, transfer or otherwise modify the Wells Ranch CGF Surface Lease from and after the date hereof without the prior written consent of OpCo.
(d) The Partnership shall indemnify, defend and hold harmless the Noble Energy Group from and against any Losses suffered or incurred by any
Noble Energy Group Member by reason of or arising out of events and conditions associated with the Partnership’s exercise of the Property Access Rights.
2.4
Indemnification Procedures
.
(a) The Indemnified Party agrees that within a reasonable period of time after it becomes aware of facts giving rise to a claim for
indemnification under this
Article II
, it will provide notice thereof in writing to the Indemnifying Party, specifying the nature of and specific basis for such claim.
12
(b) The Indemnifying Party shall have the right to control all aspects of the defense of (and any
counterclaims with respect to) any claims brought against the Indemnified Party that are covered by the indemnification under this
Article II
, including the selection of counsel, determination of whether to appeal any decision of any court
and the settling of any such claim or any matter or any issues relating thereto;
provided, however
, that no such settlement for only the payment of money shall be entered into without the consent of the Indemnified Party unless it includes a
full release of the Indemnified Party from such claim;
provided, further
, that no such settlement containing any form of injunctive or similar relief shall be entered into without the prior written consent of the Indemnified Party, which
consent shall not be unreasonably delayed or withheld.
(c) The Indemnified Party agrees to cooperate in good faith and in a commercially
reasonable manner with the Indemnifying Party with respect to all aspects of the defense of and pursuit of any counterclaims relating to any claims covered by the indemnification under this
Article II
, including the prompt furnishing to the
Indemnifying Party of any correspondence or other notice relating thereto that the Indemnified Party may receive, permitting the name of the Indemnified Party to be utilized in connection with such defense and counterclaims (
provided
, that
the Indemnified Party has an opportunity to review the use of its name and does not reasonably object to such use), the making available to the Indemnifying Party of any files, records or other information of the Indemnified Party that the
Indemnifying Party considers relevant to such defense and counterclaims, the making available to the Indemnifying Party of any employees of the Indemnified Party and the granting to the Indemnifying Party of reasonable access rights to the
properties and facilities of the Indemnified Party;
provided, however
, that in connection therewith the Indemnifying Party agrees to use reasonable efforts to minimize the impact thereof on the operations of the Indemnified Party and further
agrees to maintain the confidentiality of all files, records and other information furnished by the Indemnified Party pursuant to this
Section 2.4
. The obligation of the Indemnified Party to cooperate with the Indemnifying Party as set
forth in the immediately preceding sentence shall not be construed as imposing upon the Indemnified Party an obligation to hire and pay for counsel in connection with the defense of any claims and pursuit of any counterclaims with respect to any
claims covered by the indemnification set forth in this
Article II
;
provided, however
, that the Indemnified Party may, at its own option, cost and expense, hire and pay for counsel in connection with any such defense and counterclaims.
The Indemnifying Party agrees to keep any such counsel hired by the Indemnified Party informed as to the status of any such defense or counterclaim, but the Indemnifying Party shall have the right to retain sole control over such defense and
counterclaims so long as the Indemnified Party is still seeking indemnification hereunder.
(d) In determining the amount of any loss,
cost, damage or expense for which the Indemnified Party is entitled to indemnification under this Agreement, the gross amount of the indemnification will be reduced by (i) any insurance proceeds realized by the Indemnified Party, and such
correlative insurance benefit shall be net of any incremental insurance premium that becomes due and payable by the Indemnified Party as a result of such claim and (ii) all amounts recovered by the Indemnified Party under contractual indemnities
from third Persons.
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2.5
Limitations Regarding Indemnification
.
(a) Noble shall not be obligated to indemnify, defend and hold harmless any Partnership Group Member under this Agreement until such time as
the total aggregate amount of Losses incurred by the Partnership Group exceeds $500,000 (the “
Deductible
”), in the aggregate for all types of Losses, at which time Noble shall be obligated to indemnify the Partnership Group for the
amount of such Losses in excess of the Deductible.
(b) For the avoidance of doubt, (i) there is no monetary cap on the amount of
indemnity coverage provided by any Indemnifying Party under this
Article II
, and (ii) the Partnership’s indemnification obligations under this agreement shall be reduced on a dollar for dollar basis pro rata relative to Noble’s
direct or indirect ownership interest in the Partnership Group Member that owns or leases or otherwise controls the Partnership Assets with respect to which an indemnification obligation for Losses exists.
(c) NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, IN NO EVENT SHALL ANY PARTY’S INDEMNIFICATION OBLIGATION HEREUNDER COVER OR INCLUDE
CONSEQUENTIAL, INDIRECT, INCIDENTAL, PUNITIVE, EXEMPLARY, SPECIAL OR SIMILAR DAMAGES OR LOST PROFITS (INCLUDING ANY DIMINUTION IN VALUE OF ANY PARTY’S RESPECTIVE INVESTMENT IN THE PARTNERSHIP) SUFFERED, DIRECTLY OR INDIRECTLY, BY ANY OTHER
PARTY ENTITLED TO INDEMNIFICATION UNDER THIS AGREEMENT, EXCEPT AS A REIMBURSEMENT FOR ANY SUCH DAMAGES AS ARE PAID TO A GOVERNMENTAL AUTHORITY OR OTHER THIRD PARTY.
2.6
Exclusive Remedy
. Notwithstanding anything to the contrary contained in this Agreement, from and after the Closing Date,
Section
2.1
,
Section 2.2
and
Section 2.3
contain the Parties’ exclusive remedy against each other with respect to breaches of the covenants of the Parties set forth in
Article II
. Except for (a) the remedies contained in
Section 2.1
,
Section 2.2
and
Section 2.3
, (b) any other remedies available to the Parties at law or in equity for breaches of provisions of this Agreement other than
Article II
and (c) the remedies available at law
or in equity in connection with any other document delivered by a Party in connection with the transactions contemplated hereby (including pursuant to the Contribution Agreement), from and after the Closing Date, to the fullest extent permitted by
applicable law each of the Parties releases, remises and forever discharges the other and its Affiliates and all such Persons’ equity holders, partners, members, officers, directors, employees, agents, advisors and representatives from any and
all Losses in law or in equity, known or unknown, which such Parties might now or subsequently may have, based on, relating to or arising out of this Agreement or the transactions contemplated hereby.
ARTICLE III
SERVICES;
REIMBURSEMENT
3.1
General and Administrative Services
.
(a) Noble agrees to provide, and agrees to cause its Affiliates to provide, to the General Partner, for the Partnership Group’s benefit,
the centralized general and administrative services that Noble and its Affiliates have traditionally provided in connection with the ownership and operation of the Partnership Assets, which consist of the services set forth on
Schedule B
(the
“
General and Administrative Services
”).
14
(b) Absent the written agreement of the Parties to the contrary, the Parties agree that the
General and Administrative Services will be received by the General Partner, for the benefit of the Partnership Group, at the places of business of the General Partner and its subsidiaries.
(c) The Parties acknowledge that the Administrative Fee, together with the other costs and expenses of the General and Administrative Services
described herein, will be allocated among the Partnership Group Members (which for the avoidance of doubt, includes each of the Subsidiaries of the Partnership that own the real property interests and physical assets of the Partnership Group
Members) based on any reasonable allocation methodology as determined by the General Partner.
(d) For the avoidance of doubt, the General
and Administrative Services provided by Noble pursuant to this
Article III
will be in addition to, and not in duplication of, the services that will be provided to the Partnership Parties by Noble and NESI under the Operational
Services and Secondment Agreement and the functions performed by the employees seconded to the Partnership Parties under the Operational Services and Secondment Agreement, and neither Noble nor NESI shall not be entitled to reimbursement under this
Agreement for any costs or expenses for which Noble or NESI is entitled to payment or reimbursement under the Operational Services and Secondment Agreement.
3.2
Administrative Fee
.
(a) As consideration for Noble’s and its Affiliates’ provision of the General and Administrative Services, the Partnership Group
will pay to Noble an annual flat fee that will initially be equal to $6,850,000 per year (and prorated for the portion of year following the consummation of the IPO) (the “
Administrative Fee
”), which will be payable in monthly
installments. The Parties acknowledge that the fixed fee reflects the costs expected to be incurred by Noble and its Affiliates in providing the General and Administrative Services (other than those costs for which Noble and its Affiliates are
entitled to reimbursement pursuant to
Section
3.3
below). The Parties further acknowledge and agree that it is the intent of the Parties that the General and Administrative Services be provided based on an arm’s-length
standard and that the Administrative Fee is intended to reflect such standard. For the avoidance of doubt, the Parties further acknowledge and agree that the Administrative Fee will cover the fully burdened cost of the General and Administrative
Services provided by Noble and its Affiliates to the Partnership Group, as well as any third-party costs actually incurred by Noble and its Affiliates on behalf of the Partnership Group in providing such General and Administrative Services (other
than those costs for which Noble and its Affiliates are entitled to reimbursement pursuant to
Section
3.3
), including all sales, use, excise, value added or similar taxes, if any, that may be applicable from time to time
with respect to the General and Administrative Services provided by Noble and its Affiliates to the Partnership Group pursuant to
Section
3.1
.
(b) If any officer of the General Partner is not covered by the amount paid under the Operational Services and Secondment Agreement, then the
Partnership Group shall be allocated an amount in consideration for the services of such employees of Noble Energy Group in their capacities as officers of the General Partner and the Partnership Group Members and such allocated amount shall be
included in the Administrative Fee.
15
(c) Concurrently with the annual rate redetermination process under the Revenue Agreements, Noble
shall submit to the Board of Directors of the General Partner its good faith estimate of the cost of the General and Administrative Services to be provided to the Partnership Group for the coming 12-month period, which may be adjusted to reflect,
among other things, the contribution, acquisition or disposition of assets to or by the Partnership Group or to reflect any change in the cost of providing General and Administrative Services to the Partnership Group due to changes in any law, rule
or regulation applicable to Noble and its Affiliates or the Partnership Group, including any interpretation of such laws, rules or regulations. The Board of Directors of the General Partner shall review the proposed Administrative Fee and shall
submit any disputes to Noble as promptly as reasonably practicable. If Noble and the Board of Directors of the General Partner are unable to agree on the Administrative Fee for any year, Noble and the Partnership shall submit the proposed
Administrative Fee and supporting documentation to an independent auditing firm for review, and the determination of the independent auditing firm with respect to all items included in the Administrative Fee shall be binding on Noble and the
Partnership.
(d) The Administrative Fee shall be invoiced and paid as follows:
(i) Within 20 days following the end of each month (or the next succeeding business day) beginning with the first full month
after the Closing Date and continuing through the termination of this Agreement pursuant to
Section 6.4
(the “
NEI Invoice Delivery Date
”), Noble will submit to the Partnership Group an invoice of the amounts due for such
month for the Administrative Fee. Each invoice will be as detailed as the General Partner may require, acting reasonably, including (if requested) support of amounts set forth in the invoice and such other supporting detail as requested.
(ii) The Partnership Group will pay the Administrative Fee within 10 days after the receipt of the invoice therefor (the
“
Partnership Invoice Payment Date
”). The Partnership Group shall not offset any amounts owing to it by Noble or any of its Affiliates against the Administrative Fee payable hereunder.
3.3
Reimbursement of General and Administrative Expenses.
In addition to the Administrative Fee payable under
Section
3.2
, to the extent that Noble and its Affiliates incur direct third-party expenses for the exclusive benefit of the Partnership Group, the Partnership Group will reimburse Noble and its Affiliates for such
additional out-of-pocket costs and expenses actually incurred (so long as such amounts are invoiced within three months of incurrence).
3.4
Transition Services.
Following the consummation of the IPO, Noble shall use commercially reasonable efforts to amend, assign or
otherwise modify the Remaining Vendor Contracts such that a Partnership Group Member is directly contracting with the applicable Third Party vendor under such Remaining Vendor Contracts. Until such time as Noble is able to enter into the
amendments referenced in the foregoing sentence, Noble shall make payments to the vendors under the Remaining Vendor Contracts, and the Partnership shall reimburse Noble for
16
any such payments made on its behalf. Noble shall provide an invoice to OpCo of all payments made pursuant to the Remaining Vendor Contracts by the NEI Invoice Delivery Date for the
applicable month, and OpCo shall reimburse Noble for all such payments on or before the Partnership Invoice Payment Date for the applicable month.
ARTICLE IV
RIGHT OF
FIRST REFUSAL AND RIGHT OF FIRST OFFER
4.1
Right of First Refusal to Purchase Certain Assets
.
(a) Beginning on the date hereof and terminating on the Rights Termination Date, Noble hereby grants to the Partnership a right of first
refusal on (i) any proposed Transfer of any ROFR Assets by any Noble Energy Group Member (other than a grant of a security interest to a bona fide third-party lender or a Transfer to any Noble Energy Group Member;
provided
that such Noble
Energy Group Member shall remain bound by this
Section 4.1(a)
with respect to the ROFR Assets); and (ii) the provision of ROFR Services to any Noble Energy Group Member on the ROFR Acreage.
(b) The Parties acknowledge that all potential Transfers of ROFR Assets pursuant to this
Section 4.1
are subject to obtaining any
and all required written consents of Third Parties, including Governmental Authorities.
(c) The Partnership shall have the right, in its
sole discretion, to assign its rights under this
Section
4.1
to any Affiliate of the Partnership.
4.2
ROFR
Procedures and Exceptions.
(a)
Asset Sale Procedures.
The following sets forth the procedure for
Noble to undertake to honor the right of first refusal with respect to the ROFR Assets. Noble’s actions described in this
Section 4.2(a)
shall be taken by Noble, or Noble shall cause the applicable Noble Energy Group Member to take
such actions.
(i) If Noble proposes to Transfer one or more ROFR Assets to any Third Party, then Noble shall promptly give
written notice (a “
Disposition Notice
”) thereof to the Partnership. The Disposition Notice shall set forth the following information in respect of the proposed Transfer: (1) the name and address of any prospective acquirors
(collectively, the “
Proposed Transferee
”), (2) the ROFR Assets subject to the Disposition Notice (the “
Sale Assets
”), (3) the purchase price offered by such Proposed Transferee or, if no Proposed Transferee has
been identified, a commercially reasonable price in the opinion of Noble, in either case including any non-cash consideration (either price described in this clause (3), the “
Offer Price
”), (4) reasonable detail concerning any
non-cash portion of the Offer Price, if any, to allow the Partnership to reasonably determine the fair market value of such non-cash consideration, and a statement of the estimate of the fair market value of any non-cash consideration in the opinion
of Noble (such term in this
Section 4.2
to refer, collectively, to both Noble and the Noble Energy Group Member Transferring the applicable ROFR Asset), and (5) all other material terms and conditions of the Transfer that are then
known to Noble and its Affiliates. To the extent a Proposed Transferee’s offer consists of consideration other than cash (or in addition to cash) the Offer Price shall be deemed equal to the amount of any such cash plus the fair market value of
such non-cash consideration.
17
(ii) The Partnership will provide written notice of either (1) its intent to
dispute the Offer Price, as provided in
Section 4.2(a)(iii)
below or (2) its decision regarding the exercise or non-exercise of its right of first refusal to purchase the Sale Assets within 60 days after its receipt of the Disposition
Notice (the “
First ROFR Asset Acceptance Deadline
”). Failure to provide such notice on or prior to the First ROFR Asset Acceptance Deadline shall be deemed to constitute an affirmative decision not to purchase the Sale Assets.
(iii) In the event (1) the Offer Price contains non-cash consideration and the Partnership’s determination of the fair
market value of such non-cash consideration described in the Disposition Notice (to be determined by the Partnership on or prior to the First ROFR Asset Acceptance Deadline) is less than the fair market value of such consideration as determined by
Noble in the Disposition Notice and (2) the Partnership and Noble are unable to mutually agree upon the fair market value of such non-cash consideration on or prior to the date that is 15 days after the First ROFR Asset Acceptance Deadline, Noble
and the Partnership shall engage a mutually agreed upon valuation firm to determine the fair market value of the non-cash consideration. If the Partnership and Noble do not agree on the appointment of such valuation firm, each of the Partnership and
Noble shall appoint an independent third party and shall instruct such third party, together with the independent third party appointed by the other Party, to select a valuation firm to perform the valuation hereunder. Such valuation firm shall be
instructed to notify the Partnership and Noble of its decision within 30 days after all material information is submitted thereto, which decision shall be final and binding. The fees of the valuation firm will be split equally between Noble and the
Partnership. The Partnership will provide written notice of its decision regarding the exercise of its right of first refusal to purchase the Sale Assets to Noble within 15 days after the valuation firm has submitted its determination (the
“
Second ROFR Asset Acceptance Deadline
”). Failure to provide such notice on or prior to the Second ROFR Asset Acceptance Deadline shall be deemed to constitute an affirmative decision by the Partnership not to purchase the Sale
Assets, subject to
Section 4.2(f)
.
(iv) If the Partnership fails to exercise a right during any applicable
period set forth in this
Section 4.2(a)
, the Partnership shall be deemed to have waived its right with respect to such proposed disposition of the Sale Assets (subject to
Section 4.2(f))
, but such waiver shall not extend to
any ROFR Assets that were not Sale Assets.
(b)
Services Procedures
. The following sets forth the procedure for Noble to undertake
to honor the right of first refusal with respect to ROFR Services. Noble’s actions described in this
Section 4.2(b)
shall be taken by Noble or Noble shall cause the applicable Noble Energy Group Member to take such actions.
(i) If a Noble Energy Group Member proposes to (x) contract with any Third Party for the provision of ROFR Services to such
Noble Energy Group Member on specified acreage that is ROFR Acreage or (y) continue, extend or renew any existing
18
contract other than a Revenue Agreement for the provision of ROFR Services to such Noble Energy Group Member on acreage that is ROFR Acreage (either contract described in clauses (x) or (y), a
“
Services Contract
”), then Noble shall promptly give written notice (a “
Services Notice
”) thereof to the Partnership. The Services Notice shall set forth the following information in respect of the Services
Contract: (1) the name and address of any prospective provider of ROFR Services (collectively, the “
Proposed Provider
”), (2) a detailed description of the services subject to the Services Notice (the “
Proposed
Services
”), (3) the rate proposed to be charged by such Proposed Provider or, if no Proposed Provider has been identified, a commercially reasonable price in the opinion of the Noble Energy Group (either price described in this clause (3),
the “
Service Rate
”), (4) a description of the area in which the Proposed Services are required (the “
Proposed Service Acreage
”), (5) the in-service date required by the applicable Noble Energy Group Member, (6)
reasonable detail of any required capital commitments or the build costs to acquire or build any assets necessary to provide the Proposed Services that have been proposed by the Proposed Provider, or, if no Proposed Provider has been identified,
commercially reasonable capital commitments or build costs to acquire or build any assets necessary to provide the Proposed Services in the opinion of the Noble Energy Group; and (7) all other material terms and conditions that have been negotiated
between such Noble Energy Group Member and such Proposed Provider, or, if no Proposed Provider has been identified, any other commercially reasonable terms and conditions in the opinion of the Noble Energy Group.
(ii) The Partnership will provide written notice of its decision regarding the exercise or non-exercise of its right of first
refusal to provide the Proposed Services within 60 days after its receipt of the Services Notice (the “
ROFR Services Acceptance Deadline
”). Failure to provide such notice prior to the ROFR Services Acceptance Deadline shall be
deemed to constitute an affirmative decision not to provide the Proposed Services with respect to the Proposed Service Acreage, subject to
Section 4.2(f)
.
(iii) If the Partnership fails to exercise a right during any applicable period set forth in this
Section 4.2(b),
the Partnership shall be deemed to have waived its rights to provide the Proposed Services on the Proposed Service Acreage (subject to
Section 4.2(f)
), but such waiver shall not extend to ROFR Services that were not described in the
Services Notice and shall not extend to ROFR Acreage that was not included in the Proposed Service Acreage.
(c) If the Partnership
chooses to exercise its right of first refusal under
Section 4.2(a)
, the Partnership and Noble shall enter into a definitive agreement for the purchase of the Sale Assets, which shall include the relevant terms included in the
Disposition Notice and other reasonable and customary closing terms and conditions, including the following:
(i) with
respect to any Sale Assets, the Partnership will agree to deliver cash for the Offer Price (unless the Partnership and Noble agree that consideration will be paid by means of non-cash consideration);
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(ii) Noble will represent that it has good and indefeasible title to the Sale
Assets, subject to all recorded matters and all physical conditions in existence on the closing date for the purchase of the Sale Assets, plus any other such matters as the Partnership may approve, which approval will not be unreasonably withheld.
If the Partnership desires to obtain any title insurance with respect to the Sale Assets, the full cost and expense of obtaining the same (including the cost of title examination, document duplication and policy premium) shall be borne by the
Partnership;
(iii) Noble will grant to the Partnership the right, exercisable at the Partnership’s risk and expense,
to make such surveys, tests and inspections of the Sale Assets, and perform other diligence with respect to the Sale Assets, as the Partnership may deem desirable, so long as such surveys, tests, inspections or diligence do not damage the Sale
Assets or interfere with the activities of Noble and its Affiliates (other than the Partnership Group) thereon and so long as the Partnership has furnished Noble with evidence that adequate liability insurance is in full force and effect;
(iv) The Partnership will have the right to terminate its obligation to purchase the Sale Assets under this Article if the
results of any searches, surveys, tests, inspections or diligence conducted pursuant to
Section 4.2(c)(ii)
or
Section 4.2(c)(iii)
above are, in the reasonable opinion of the Partnership, unsatisfactory;
(v) the closing date for the purchase of the Sale Assets shall occur no later than 120 days following receipt by Noble of
written notice by the Partnership of its intention to exercise its option to purchase the Sale Assets pursuant to
Section
4.2(a)
;
(vi) Noble shall execute, have acknowledged and deliver to the Partnership a special warranty deed, assignment of easement, or
comparable document, as appropriate, in the applicable jurisdiction, on the closing date for the purchase of the Sale Assets constituting real property interests, conveying such Sale Assets to the Partnership free and clear of all encumbrances
created by Noble and its Affiliates other than those set forth in
Section 4.2(c)(ii)
above;
(vii) Noble shall
execute, have acknowledged and deliver to the Partnership a bill of sale and any other documents reasonably requested by the Partnership on the closing date for the purchase of the Sale Assets other than real property interests, conveying such Sale
Assets to the Partnership free and clear of all encumbrances created by Noble and its Affiliates other than those set forth in
Section 4.2(c)(ii)
above; and
(viii) neither Noble nor the Partnership shall have any obligation to sell or buy the Sale Assets if any of the material
consents referred to in
Section 4.1(b)
have not been obtained.
(d) If the Partnership chooses to exercise its right of first
refusal under
Section 4.2(b)
, the Partnership and Noble shall enter into a definitive agreement for the provision of the Proposed Services on the Proposed Service Acreage on the terms described in the Services Notice provided in accordance
with
Section 4.2(b)
.
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(e) Noble and the Partnership shall cooperate in good faith in obtaining all necessary approvals,
waivers and consents from Third Parties, including Governmental Authorities, required in connection with the exercise of the Partnership’s rights under this
Article IV
.
(f) If (i) the Transfer to any Third Party of any Sale Assets is not consummated on terms substantially similar to the terms set forth in the
Disposition Notice or (ii) the entry into a definitive agreement providing for the provision of Proposed Services by a Third Party has not occurred on terms substantially similar to the terms set forth in the Services Notice, in each case within the
later of (A) 120 days after the last applicable Acceptance Deadline, and (B) 10 days after the satisfaction of all approval or filing requirements with Governmental Authorities, if any, the ROFR Notice shall be deemed to lapse, and no member of
the Noble Energy Group may Transfer any of the Sale Assets or contract with a Third Party to provide the Proposed Services, as applicable, described in the ROFR Notice without complying again with the provisions of this
Article IV
, and any
purported Transfer to such Third Party or contract for Proposed Services with a Third Party not in compliance with this Article IV shall be null and void.
(g) If, after the Partnership has waived its rights pursuant to this
Article IV
or has allowed an Acceptance Deadline to lapse without
the exercise of its rights pursuant to this
Article IV
, any Noble Energy Group Member proposes to Transfer Sale Assets to a Third Party or contract for the provision of Proposed Services by a Third Party, and such transaction is proposed on
terms materially more favorable to such Third Party than those set forth in the applicable ROFR Notice, such ROFR Notice shall be deemed ineffective, and no member of the Noble Energy Group may effect such Transfer of Sale Assets or contract for
such provision of Proposed Services, as applicable, without complying again with the provisions of this
Article IV
.
(h)
Notwithstanding anything provided herein, the Noble Energy Group shall be allowed to comply with all preexisting dedications, preferential transfer rights, rights of first refusal (or similar encumbrance) and contracts for service that are in
existence on the date that this Agreement becomes effective and on the date that the applicable acreage or asset is acquired by Noble Energy Group (so long as such dedication or contract was not entered into in contemplation of such acquisition).
For the avoidance of doubt, to the extent a preexisting encumbrance in favor of a Beneficiary Prohibits Noble from obtaining the applicable ROFR Service from an “affiliate” or Transferring the applicable ROFR Asset to an
“affiliate”, Noble may enter into a Services Contract or applicable Transfer documentation without offering the applicable opportunity to the Partnership Group. As used in this paragraph:
(i) “
Beneficiary
” refers to a Person that is not a Noble Energy Group Member or an Partnership Group Member
that is the beneficiary of an encumbrance granted by a Noble Energy Group Member;
(ii) “
Prohibit
”
includes: (x) an express prohibition, (y) requirements that would cause Noble to be in default of a preexisting encumbrance if Noble contracted with an “affiliate”, and (z) requirements that would cause Noble to lose any material benefit
of the applicable encumbrance as a result of contracting with an “affiliate”;
21
(iii) an “
affiliate
” of Noble shall include the Partnership
Group Members so long as the Beneficiary would consider the Partnership Group Members to be “affiliates”; and
(iv) an example of a “
loss of material benefit
” includes: a situation where a preexisting right of first
refusal would permit Noble to contract with an unaffiliated third party but such right of first refusal would convert to a dedication in favor of the Beneficiary in the event that Noble attempted to contract with an “affiliate”.
(i) Each of the applicable Noble Energy Group Member and the Partnership shall use commercially reasonable efforts to do or cause to be done
all things that may be reasonably necessary to effectuate the consummation of any transactions between a Noble Energy Group Member and a Partnership Group Member contemplated by this
Section
4.2
, including causing its
respective Affiliates to execute, deliver and perform all documents, notices, amendments, certificates, and consents required in connection therewith.
4.3
Right of First Offer.
(a) Noble, on behalf of itself and the Noble Energy Group, hereby grants to the Partnership Group a right of first offer, exercisable at any
time prior to the Rights Termination Date, to purchase all or any part of the ROFO Equity to the extent that Noble proposes to Transfer all or any part of any ROFO Equity;
provided, however
, that Noble may Transfer all or any part of any ROFO
Equity to a Noble Energy Group Member that agrees in writing that such ROFO Equity remains subject to the provisions of this
Section 4.3
and such Noble Energy Group Member assumes the obligations of Noble under this
Section 4.3
with respect to such ROFO Equity, and such Transfer shall not be subject to the Partnership Group’s right of first offer.
(b) The
Parties acknowledge that any Transfer of all or any part of any ROFO Equity pursuant to the Partnership’s right of first offer is subject to the terms of all existing agreements with respect to the ROFO Equity and shall be subject to and
conditioned on the obtaining of any and all necessary consents of securityholders, Governmental Authorities, lenders or other Third Parties;
provided, however
, that Noble hereby represents and warrants that, to its knowledge after reasonable
investigation, there are no terms in such agreements that would materially impair the rights granted to the Partnership Group pursuant to this
Section 4.3
with respect to any ROFO Equity.
(c) The Partnership shall have the right, in its sole discretion, to assign its rights under this
Section 4.3
to any Affiliate of the
Partnership.
4.4
ROFO Procedures.
The following sets forth the procedure for Noble and the applicable Noble Energy Group Member to
undertake to honor the right of first offer on the ROFO Equity. Noble’s actions described in this
Section 4.4
shall be taken by Noble, or Noble shall cause the applicable Noble Energy Group Member to take such actions.
(a) If the applicable Noble Energy Group Member proposes to Transfer all or any part of any ROFO Equity to a Third Party prior to the Rights
Termination Date (a “
Proposed
ROFO Transaction
”), the applicable Noble Energy Group Member shall, prior to entering into any such Proposed ROFO Transaction, first give notice in writing to the Partnership (the
22
“
ROFO Notice
”) of its intention to enter into such Proposed ROFO Transaction. The ROFO Notice shall include any material terms, conditions and details that would be necessary for
the Partnership to make a responsive offer to enter into the Proposed ROFO Transaction with the applicable Noble Energy Group Member, which terms, conditions and details shall at a minimum include any terms, conditions or details that the applicable
Noble Energy Group Member would propose to provide to non-Affiliates in connection with the Proposed ROFO Transaction. If the Partnership determines to purchase the ROFO Equity, the Partnership shall have 60 days following receipt of the ROFO
Notice to propose an offer to enter into the Proposed ROFO Transaction with the applicable Noble Energy Group Member (the “
ROFO Response
”). The ROFO Response shall set forth the terms and conditions (including the purchase price the
Partnership proposes to pay for the ROFO Equity and the other terms of the purchase) pursuant to which the Partnership would be willing to enter into a binding agreement for the Proposed ROFO Transaction. If no ROFO Response is delivered by the
Partnership within such 60-day period, then the Partnership shall be deemed to have waived its right of first offer with respect to such ROFO Equity subject to
Section 4.3
.
(b) Unless the ROFO Response is rejected pursuant to written notice delivered by the applicable Noble Energy Group Member to the Partnership
within 60 days after the delivery to the applicable Noble Energy Group Member of the ROFO Response, such ROFO Response shall be deemed to have been accepted by the applicable Noble Energy Group Member, and the applicable Noble Energy Group Member
shall enter into a definitive agreement with the Partnership providing for the consummation of the Proposed ROFO Transaction upon the terms set forth in the ROFO Response. Unless the applicable Noble Energy Group Member and the Partnership otherwise
agree, the terms of the definitive agreement will include reasonable and customary terms and conditions, including the following:
(i) the Partnership will deliver the agreed purchase price (in cash, Partnership Interests, an interest-bearing promissory note
or any combination thereof);
(ii) the closing date for the purchase of the ROFO Equity shall occur no later than 120 days
following receipt by the applicable Noble Energy Group Member of the ROFO Response pursuant to
Section 4.3(a)
;
(iii) each of the applicable Noble Energy Group Member and the Partnership shall use commercially reasonable efforts to do or
cause to be done all things that may be reasonably necessary or advisable to effectuate the consummation of any transactions between a Noble Energy Group Member and a Partnership Group Member contemplated by this
Section 4.4
, including
causing its respective Affiliates to execute, deliver and perform all documents, notices, amendments, certificates, instruments and consents required in connection therewith; and
(iv) neither the applicable Noble Energy Group Member nor the Partnership shall have any obligation to consummate the Proposed
ROFO Transaction if any consent referred to in
Section 4.3
has not been obtained.
(c) If the Partnership has not timely delivered
a ROFO Response as specified in this
Section 4.4
with respect to a Proposed ROFO Transaction that is subject to a ROFO Notice, the
23
applicable Noble Energy Group Member shall be free to enter into a Proposed ROFO Transaction with any Third Party on terms and conditions no more favorable to such Third Party than those set
forth in the ROFO Notice. If the applicable Noble Energy Group Member rejects a ROFO Response with respect to any Proposed ROFO Transaction, the applicable Noble Energy Group Member shall be free to enter into a Proposed ROFO Transaction with any
Third Party (i) on terms and conditions (excluding those relating to price) that are not more favorable in the aggregate to such Third Party than those proposed by the Partnership Group in the ROFO Response and (ii) at a price equal to no less than
100% of the price offered by the Partnership in the ROFO Response to the applicable Noble Energy Group Member. If a Proposed ROFO Transaction with a Third Party is not consummated as provided in this
Section 4.4(c)
within the later of
(A) 180 days after the expiration of the 60-day period set forth in Section 4.4(a) or the applicable Noble Energy Group Member’s delivery of notice rejecting the ROFO Response, as applicable, and (B) 10 days after the satisfaction of all
approval or filing requirements with Governmental Authorities, if any, the ROFO Notice shall be deemed to lapse, and no member of the Noble Energy Group may enter into a Proposed ROFO Transaction with a Third Party without complying again with the
provisions of this Article IV, and any purported consummation of a Proposed ROFO Transaction with a Third Party not in compliance with this Article IV shall be null and void.
ARTICLE V
ACCESS RIGHTS
5.1
Access Rights.
For the term of this Agreement, Noble hereby grants the Partnership Group access and use rights with
respect to certain items of real and personal property related to the Retained Assets set forth on
Schedule E
, and such rights shall include automation services.
ARTICLE VI
MISCELLANEOUS
6.1
Confidentiality
.
(a) From and after the Closing Date, each Party (each, a “
Receiving Party
”) in possession of
another Party’s (each, a “
Disclosing Party
”) Confidential Information shall (i) hold, and shall cause its Subsidiaries and Affiliates and its and their directors, officers, employees, agents, consultants, advisors, and other
representatives (each, a “
Representative
” and, collectively, “
Representatives
”) to hold, all Confidential Information of each Disclosing Party in strict confidence, with at least the same degree of care that applies
to such Receiving Party’s confidential and proprietary information, (ii) not use such Confidential Information, except as expressly permitted by such Disclosing Party and (iii) not release or disclose such Confidential Information to any other
Person, except its Representatives or except as required by applicable law. Each Party shall be responsible for any Losses resulting from a breach of this
Section
6.1
by any of its Representatives.
(b) Notwithstanding
Section
6.1(a)
, if a Receiving Party becomes legally compelled or obligated to disclose
Confidential Information of a Disclosing Party by a Governmental Authority or applicable law, or is required to disclose such Confidential Information pursuant to
24
the listing standards of any applicable national securities exchange on which the Receiving Party’s securities are listed or quoted, the Receiving Party shall promptly advise, to the fullest
extent permitted by law, the Disclosing Party of such requirement or obligation to disclose Confidential Information as soon as the Receiving Party becomes aware that such a requirement to disclose might become effective in order that, where
possible, the Disclosing Party may seek a protective order or such other remedy as the Disclosing Party may consider appropriate in the circumstances. The Receiving Party shall disclose only that portion of the Disclosing Party’s Confidential
Information that it is required or obligated to disclose and shall cooperate with the Disclosing Party in allowing the Disclosing Party to obtain such protective order or other relief.
(c) Each Party acknowledges that a Disclosing Party would not have an adequate remedy at law for the breach by a Receiving Party of any one or
more of the covenants contained in this
Section
6.1
and agrees that, in the event of such breach, the Disclosing Party may, in addition to the other remedies that may be available to it, apply to a court for an injunction
to prevent breaches of this
Section
6.1
and to enforce specifically the terms and provisions of this
Section
6.1
. Notwithstanding any other provision hereof, to the extent permitted by applicable
law, the provisions of this
Section
6.1
shall survive the termination of this Agreement for a period of two years.
6.2
Choice of Law; Mediation; Submission to Jurisdiction
.
(a) This Agreement shall be subject to and governed by the laws of the State of Delaware, excluding any conflicts-of-law rule or principle
that might refer the construction or interpretation of this Agreement to the laws of another state. EACH OF THE PARTIES HERETO AGREES THAT THIS AGREEMENT INVOLVES AT LEAST U.S. $100,000.00 AND THAT THIS AGREEMENT HAS BEEN ENTERED INTO IN EXPRESS
RELIANCE UPON 6 Del. C. § 2708. EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES (i) TO BE SUBJECT TO THE JURISDICTION OF THE COURTS OF THE STATE OF DELAWARE AND OF THE FEDERAL COURTS SITTING IN THE STATE OF DELAWARE AND (ii)
TO THE EXTENT SUCH PARTY IS NOT OTHERWISE SUBJECT TO SERVICE OF PROCESS IN THE STATE OF DELAWARE, TO APPOINT AND MAINTAIN AN AGENT IN THE STATE OF DELAWARE AS SUCH PARTY’S AGENT FOR ACCEPTANCE OF LEGAL PROCESS AND TO NOTIFY THE OTHER PARTIES OF
THE NAME AND ADDRESS OF SUCH AGENT.
(b) If the Parties cannot resolve any dispute or claim arising under this Agreement, then no earlier
than 10 days nor more than 60 days following written notice to the other Parties, any Party may initiate mandatory, non-binding mediation hereunder by giving a notice of mediation (a “
Mediation Notice
”) to the other Parties to the
dispute or claim. In connection with any mediation pursuant to this
Section
6.2
, the mediator shall be jointly appointed by the Parties to the dispute or claim and the mediation shall be conducted in Houston, Texas unless
otherwise agreed by the Parties to the dispute or claim. All costs and expenses of the mediator appointed pursuant to this
Section
6.2
shall be shared equally by the Parties to the dispute or claim. The then-current Model
ADR Procedures for Mediation of Business Disputes of the Center for Public Resources, Inc., either as written or as modified by mutual agreement of the Parties to the dispute or claim, shall govern any mediation pursuant to this
Section
6.2
. In the mediation, each Party to the dispute or claim shall be represented by one or more senior representatives who shall have
25
authority to resolve any disputes. If a dispute or claim has not been resolved within 30 days after the receipt of the Mediation Notice by a Party, then any Party to the dispute or claim may
refer the resolution of the dispute or claim to litigation.
(c) Subject to
Section
6.2(b)
, to the fullest
extent permitted by law, each Party agrees that it shall bring any action or proceeding in respect of any claim arising out of or related to this Agreement, whether in tort or contract or at law or in equity, exclusively in any federal or state
courts located in Delaware and (i) irrevocably submits to the exclusive jurisdiction of such courts, (ii) waives any objection to laying venue in any such action or proceeding in such courts, (iii) waives any objection that such courts are an
inconvenient forum or do not have jurisdiction over it and (iv) agrees that, to the fullest extent permitted by law, service of process upon it may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar
form of mail), postage prepaid, to it at its address specified in
Section
6.2(d)
. The foregoing consents to jurisdiction and service of process shall not, to the fullest extent permitted by applicable law, constitute
general consents to service of process in the State of Delaware for any purpose except as provided herein and shall not be deemed to confer rights on any Person other than the Parties.
(d) All notices or requests or consents provided for by, or permitted to be given pursuant to, this Agreement must be in writing and must be
given by (a) United States mail, addressed to the Person to be notified, postage prepaid and registered or certified with return receipt requested or (b) delivering such notice in person. Notice given by personal delivery or mail shall be effective
upon actual receipt. All notices to be sent to a Party pursuant to this Agreement shall be sent to or made at the address set forth below or at such other address as such Party may stipulate to the other Parties in the manner provided in this
Section
6.2
. If to any Noble Energy Group Member:
Noble Energy, Inc.
1001 Noble Energy Way
Houston,
Texas 77070
Attention: Arnold J. Johnson, with a copy to Aaron C. Carlson
If to any Partnership Group Member:
Noble Midstream Partners LP
1001
Noble Energy Way
Houston, Texas 77070
Attention: Kirk A. Moore, with a copy to Christine M. McMillan
6.3
Entire Agreement
. This Agreement and the Contribution Agreement constitute the entire agreement of the Parties relating to the
matters contained herein, superseding all prior contracts or agreements, whether oral or written, relating to the matters contained herein.
6.4
Termination of Agreement
. This Agreement, other than the provisions set forth in
Section
2.1
hereof and
this
Article VI
, may be terminated (a) by the written agreement of all of the Parties or (b) by Noble or the Partnership upon a Partnership Change of Control by written notice given to the other Parties to this Agreement, upon which
termination shall be effective at
26
the later of such Partnership Change of Control and the date specified in such written notice. For the avoidance of doubt, the Parties’ indemnification obligations under
Article II
and the terms of this
Article VI
shall, to the fullest extent permitted by law, survive the termination of this Agreement in accordance with their respective terms.
6.5
Amendment or Modification
. This Agreement may be amended or modified from time to time only by an agreement in writing, signed by
(1) Noble, acting on behalf of itself and each other Noble Energy Group Member, (2) the Partnership, acting on behalf of itself and each other Partnership Group Member and (3) any other Party hereto directly impacted by such amendment or
modification in a manner different from the other Parties. Notwithstanding the foregoing, the Partnership may release any ROFR Acreage in a written instrument signed by the Partnership.
6.6
Assignment
. No Party shall have the right to assign its rights or obligations under this Agreement without the consent of the other
Parties;
provided, however
, that the General Partner and any Partnership Group Member may make a collateral assignment of this Agreement solely to secure financing for the Partnership Group.
6.7
Counterparts
. This Agreement may be executed in any number of counterparts with the same effect as if all signatory parties had
signed the same document and shall be construed together and shall constitute one and the same instrument. Delivery of an executed signature page of this Agreement by facsimile transmission or in portable document format (.pdf) (or similar
electronic format) shall be effective as delivery of a manually executed counterpart hereof.
6.8
Severability
. If any
provision of this Agreement shall be held invalid or unenforceable by a Governmental Authority of competent jurisdiction, the remainder of this Agreement shall remain in full force and effect.
6.9
Further Assurances
. In connection with this Agreement and all transactions contemplated by this Agreement, each Party hereto
agrees to execute and deliver such additional documents and instruments and to perform such additional acts as may be necessary or appropriate to effectuate, carry out and perform all of the terms, provisions and conditions of this Agreement and all
such transactions.
6.10
Rights of Limited Partners
. The provisions of this Agreement are enforceable solely by the Parties to this
Agreement, and no Limited Partner or other interest holder of the Partnership shall have the right, separate and apart from the Partnership, to enforce any provision of this Agreement or to compel any Party to this Agreement to comply with the terms
of this Agreement.
[Remainder of page intentionally left blank.]
27
IN
WITNESS WHEREOF
, the Parties have executed this Agreement on, and effective as
of, the Closing Date.
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NOBLE ENERGY, INC.
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By:
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Name:
|
|
Kenneth M. Fisher
|
|
Title:
|
|
Executive Vice President and Chief Financial Officer
|
Signature Page to
Omnibus Agreement
|
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NOBLE ENERGY SERVICES INC.
|
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By:
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Name:
|
|
Kenneth M. Fisher
|
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Title:
|
|
Executive Vice President and Chief Financial Officer
|
Signature Page to
Omnibus Agreement
|
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NBL MIDSTREAM, LLC
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By:
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Name:
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Charles J. Rimer
|
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Title:
|
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President
|
Signature Page to
Omnibus Agreement
|
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NOBLE MIDSTREAM SERVICES, LLC
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By:
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Name:
|
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Terry R. Gerhart
|
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Title:
|
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Chief Executive Officer
|
Signature Page to
Omnibus Agreement
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NOBLE MIDSTREAM PARTNERS LP
|
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By:
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Noble Midstream GP LLC
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By:
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Name:
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Terry R. Gerhart
|
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Title:
|
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Chief Executive Officer
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Signature Page to
Omnibus Agreement
|
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NOBLE MIDSTREAM GP LLC
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By:
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Name:
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Terry R. Gerhart
|
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Title:
|
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Chief Executive Officer
|
Signature Page to
Omnibus Agreement
Schedule A
ROFR Acreage
|
1.
|
The Dedicated Area, as such term is defined in each Texas Revenue Agreement.
|
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2.
|
The acreage shown below:
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Schedule A-1
Schedule B
General and Administrative Services
|
1.
|
Management services of employees of the Noble Energy Group, including Noble stock based compensation expense (as distinguished from General Partner stock based compensation expense, which remains an obligation of the
Partnership and not included in the Administrative Fee).
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2.
|
Financial and administrative (including treasury, accounting and internal audit)
|
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3.
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Preparing and submitting invoices
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4.
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Information technology
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5.
|
In-house legal services (for the avoidance of doubt, external counsel hired by the Partnership directly shall be paid by the Partnership directly and therefore such amounts shall not be included in the Administrative
Fee)
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6.
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Health, environmental, safety and security (including third-party security services)
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10.
|
Procurement, inventory and other vendor contracts
|
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11.
|
Real property/land rights (provided that to the extent possible, the Partnership Group shall obtain the rights of way and use agreements directly from third parties who hold the surface rights to the applicable real
property)
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13.
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Government relations, governmental compliance and public affairs
|
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14.
|
Analytical & engineering (including asset integrity and regulatory services)
|
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20.
|
Asset oversight, such as operational management and supervision
|
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21.
|
Public company reporting services
|
Schedule B-1
Schedule C
Reserved.
Schedule C-1
Schedule D
Reserved
Schedule D-1
Schedule E
Property Access Rights
|
1.
|
Offices in Denver and Greeley, Colorado, and in Houston, Texas
|
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2.
|
Operational control center in Greeley, Colorado
|
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3.
|
All safety & training facilities and
|
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4.
|
Automation and measurement facilities and equipment.
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Schedule E-1
Exhibit 10.4
FORM OF OPERATIONAL SERVICES AND SECONDMENT AGREEMENT
This Operational Services and Secondment Agreement (this “
Agreement
”), dated as of [●], 2016 (the “
Effective
Date
”), is entered into among Noble Energy, Inc., a Delaware corporation (“
Noble
”), Noble Energy Services Inc., a Delaware corporation (“
NESI
”), Noble Midstream GP LLC, a Delaware limited liability company
(the
“General Partner
”), Noble Midstream Partners LP, a Delaware limited partnership (the “
Partnership
”) and Noble Midstream Services LLC, a Delaware limited liability company (“
OpCo
”). Noble, the
General Partner, the Partnership and OpCo are sometimes herein referred to individually as a “
Party
” and collectively as the “
Parties
.”
RECITALS:
WHEREAS, the
General Partner is the general partner of the Partnership that through OpCo and its Subsidiaries is engaged in the business of crude oil gathering and treating; natural gas gathering; fresh water distribution and storage; and produced water
collection, cleaning, recycling and disposal; and other related assets and businesses;
WHEREAS, Noble has expertise in the management,
construction, design, maintenance and operation of midstream infrastructure assets, including crude oil gathering pipelines, crude oil treating facilities, natural gas gathering pipelines, centralized gathering facilities, fresh water distribution
and storage systems, and produced water pipelines and cleaning, recycling and disposal facilities;
WHEREAS, Noble can make available, or
cause to be made available, to the Partnership Parties the personnel necessary to perform such management, construction, design, maintenance and operational functions with respect to assets owned by the Midstream Group (as defined below); and
WHEREAS, the Parties desire that Noble provide, or cause to be provided, to the Partnership Parties personnel necessary to manage, construct,
design, maintain and operate the Midstream Group’s assets and, in connection therewith, that Noble second, or cause to be seconded, certain personnel to the Partnership Parties.
NOW THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.1
Definitions
. Capitalized terms used and not otherwise defined in this Agreement shall have the following respective meanings, unless context clearly requires otherwise:
“
Affiliate
” means, with respect to any Person, any other Person that directly or indirectly through one or more
intermediaries’ controls, is controlled by or is under common control with, the Person in question. As used herein, the term “control” means the possession, direct or indirect, of the power to direct or cause the direction of the
management and policies of a Person, whether through ownership of voting securities, by contract or otherwise. For purposes of this Agreement, none of the Midstream Group shall be deemed to be an Affiliate of Noble nor shall Noble be deemed to be an
Affiliate of any of the Midstream Group.
1
“
Agreement
” shall mean this Operational Services and Secondment Agreement,
together with all Exhibits attached hereto, as the same may be amended, supplemented or restated from time to time in accordance with the provisions hereof.
“
Allocation Percentage
” has the meaning set forth in
Section 3.3
.
“
Benefit Plans
” means the following employee benefit plans: deferred compensation, profit sharing, retirement, retiree
medical, 401(k), cafeteria, medical, and disability plans and any insurance programs which benefit the Seconded Employees or their dependents, including workers’ compensation insurance, life insurance, accidental death and dismemberment
insurance, long-term disability insurance, business travel and accident insurance, and EAP.
“
Business Day
” means Monday
through Friday of each week, except that a legal holiday recognized as such by the government of the United States of America, the State of Colorado or the State of Texas shall not be regarded as a Business Day.
“
EAP
” means Employee Assistance Program.
“
Effective Date
” has the meaning set forth in the introductory paragraph to this Agreement.
“
ERISA
” means the Employee Retirement Income Security Act of 1974, as amended.
“
ERISA Affiliate
” means any entity that would be treated as a single employer with Noble under Sections 414(b), (c) or (m) of
the Code or Section 4001(b)(1) of ERISA.
“
General Partner
” has the meaning set forth in the introductory paragraph to
this Agreement; provided that such term shall include its successors and permitted assigns that are admitted to the Partnership as general partner of the Partnership, in its capacity as general partner of the Partnership (except as the context
otherwise requires).
“
Losses
” means any and all costs, expenses (including reasonable attorneys’ fees), claims,
demands, losses, liabilities, obligations, actions, lawsuits and other proceedings, judgments and awards.
“
Midstream
Group
” means, collectively, the Partnership, OpCo and its Subsidiaries.
“
NESI
” has the meaning set forth in the
introductory paragraph to this Agreement.
“
Noble
” has the meaning set forth in the introductory paragraph to this
Agreement.
“
Noble Entities
” means Noble, NESI and all of their direct and indirect Subsidiaries, other than any of the
Partnership Parties.
“
OpCo
” has the meaning set forth in the introductory paragraph to this Agreement.
“Omnibus Agreement”
means that certain Omnibus Agreement, dated effective as of the Effective Date, among Noble, NESI, the
General Partner, the Partnership and the other Persons party thereto from time to time, as such agreement may be amended, supplemented or restated from time to time.
“
Partnership
” has the meaning set forth in the introductory paragraph to this Agreement.
2
“
Partnership Agreement
” means the First Amended and Restated Agreement of
Limited Partnership of the Partnership, dated as of the Effective Date, as the same may be amended, supplemented or restated from time to time.
“
Partnership Parties
” means the General Partner and the Midstream Group.
“
Party
” has the meaning set forth in the introductory paragraph to this Agreement.
“
Period of Secondment
” has the meaning set forth in
Section 2.4
.
“
Person
” means an individual or a corporation, firm, limited liability company, partnership, joint venture, trust, estate,
unincorporated organization, association, government agency or political subdivision thereof or other entity.
“
Seconded
Contractors
” has the meaning set forth in
Section 2.5
.
“
Seconded Contractor Expenses
” has the meaning
set forth in
Section 3.2(b)
.
“
Seconded Employee Expenses
” has the meaning set forth in
Section 3.2(a)
.
“
Seconded Employees
” has the meaning set forth in
Section 2.4
.
“
Seconded Person Expenses
” has the meaning set forth in
Section 3.2(b)
.
“
Seconded Persons
” means, collectively, the Seconded Employees and the Seconded Contractors.
“
Secondment
” means each assignment of any Seconded Persons to the Partnership Parties from Noble in accordance with the terms
of this Agreement.
“
Services
” has the meaning set forth in
Section 2.1
.
“
Services Reimbursement
” has the meaning set forth in
Section 3.1
.
“
Subsidiary
” means, with respect to any Person, (a) a corporation of which more than 50% of the voting power of shares
entitled (without regard to the occurrence of any contingency) to vote in the election of directors or other governing body of such corporation is owned, directly or indirectly, at the date of determination, by such Person, by one or more
Subsidiaries of such Person or a combination thereof, (b) a partnership (whether general or limited) in which such Person or a Subsidiary of such Person is, at the date of determination, a general or limited partner of such partnership, but only if
more than 50% of the general partner interests of such partnership is owned, directly or indirectly, at the date of determination, by such Person, by one or more Subsidiaries of such Person or a combination thereof or (c) any other Person (other
than a corporation or a partnership) in which such Person, one or more Subsidiaries of such Person, or a combination thereof, directly or indirectly, at the date of determination, has (i) at least a majority ownership interest or (ii) the power to
elect or direct the election of a majority of the directors or other governing body of such Person. For purposes of this Agreement, none of the Midstream Group shall be deemed to be a Subsidiary of Noble nor shall Noble or NESI be deemed to be a
Subsidiary of any of the Midstream Group.
3
ARTICLE 2
SECONDMENT
2.1
Noble shall provide, or cause to be provided, to the Partnership Parties the Seconded Persons to (a) perform the activities related to the Partnership Parties’ respective obligations under each of the agreements listed in
Exhibit A
and
(b) otherwise perform the day-to-day management of the business conducted, or to be conducted, by the Partnership Parties, as described in
Exhibit A
and (c) to design, build, construct and otherwise install the infrastructure required by (or
necessary or convenient to provide the services required under) the agreements listed in
Exhibit A
((a) through (c) collectively referred to herein as the “
Services
”).
2.2
Subject to Noble’s right to be reimbursed for such expenses in accordance with this Agreement, Noble shall pay (or shall cause
NESI to pay) all expenses incurred by it in connection with the retention of the Seconded Persons, including, but not limited to, Seconded Employee compensation, salaries, wages and overhead and administrative expenses, charged to or incurred by
Noble or NESI, and, if applicable, social security taxes, workers compensation insurance, retirement and insurance benefits and other such expenses. Any Seconded Employees retained by the Noble Entities may be union or non-union employees, and the
Noble Entities shall have the sole right to negotiate the terms and provisions of any labor or other agreements with the unions to which such employees belong.
2.3
Noble shall provide, or cause to be provided, such suitably qualified and experienced Seconded Persons as Noble is able to make
available to the Partnership Parties, and the Partnership Parties shall have the right to approve such Seconded Persons.
2.4
During the term of this Agreement, Noble or NESI shall second employees of the Noble Entities that provide the Services to the Partnership Parties. Each employee who Noble or NESI seconds to the Partnership Parties shall, during the time that such
employee is seconded to the Partnership Parties under this Agreement (the “
Period of Secondment
”), be referred to individually herein as a “
Seconded Employee
” and, collectively, as the “
Seconded
Employees
.”
2.5
During the term of this Agreement, Noble shall second, or cause to be seconded, contractors of the Noble
Entities that provide the Services to the Partnership Parties. Each such contractor shall, during the Period of Secondment, be referred to individually herein as a “
Seconded Contractor
” and, collectively, as the “
Seconded
Contractors
,” and together with the Seconded Employees, the “
Seconded Persons
.”
2.6
The Seconded
Employees will remain at all times employees of the Noble Entities, but, in addition, during the Period of Secondment, they will also be joint employees of the Partnership Parties. For the avoidance of doubt, the Parties acknowledge that Seconded
Persons may, during the Period of Secondment, be called upon to perform services for both the Partnership Parties and the Noble Entities. The Noble Entities retain the right to terminate the Secondment of any Seconded Persons for any reason at any
time or to discharge the Seconded Employees with respect to their employment with the Noble Entities. The Partnership Parties will have the right to terminate the Secondment to it of any Seconded Persons for any reason at any time, upon prior
written notice to Noble, but at no time will the Partnership Parties have the right to terminate any Seconded Employee’s employment by a Noble Entity or a Seconded Contractor’s independent contractor relationship with a Noble Entity. Upon
the termination of the Secondment of any Seconded Persons, such Seconded Persons will cease performing Services for the Partnership Parties.
2.7
In the course and scope of performing any job functions for the Partnership Parties, each Seconded Employee will report into the
Partnership Parties’ management structure, and will be under the
4
direct management, supervision and control of the Partnership Parties with respect to such Seconded Employee’s performance of the Services, with Seconded Contractors remaining at the
direction of the respective contractor. No Seconded Persons shall have the authority or apparent authority to act on behalf of any Noble Entity in connection with the performance of the Services during any Period of Secondment.
2.8
Those Seconded Employees who serve as supervisors or managers and who are called upon to oversee the work of other Seconded
Employees providing or to otherwise provide management support on behalf of the Parties are designated by the Partnership Parties as supervisors to act on the behalf of the Partnership Parties in supervising the Seconded Employees pursuant to
Section 2.7 above. Any such Seconded Employee will be acting on the behalf of the Partnership Parties when supervising the work of the Seconded Employees or when they are otherwise providing management or executive support on behalf of the
Partnership Parties.
2.9
Noble shall, or shall cause a Noble Entity to, obtain workers’ compensation coverage as defined and
required by law on behalf of both the Noble Entities and the Partnership Parties.
2.10
The Partnership Parties may terminate any
of the Services performed by Seconded Persons on thirty (30) days’ prior written notice to Noble. In the event the Partnership Parties, or any of them, terminates such Services, the Partnership Parties shall pay Noble the Services Reimbursement
(as defined below) for the last month (or portion thereof) in which it received such terminated Services. Upon payment thereof, the Partnership Parties shall have no further Services payment obligations to Noble pursuant to this Agreement with
respect to such terminated Services.
2.11
No member of the Partnership Parties shall be deemed to be a participating employer in
any Benefit Plans during the Period of Secondment. Subject to the Partnership Parties’ reimbursement obligations hereunder, Noble (or another Noble Entity) shall remain solely responsible for all obligations and liabilities arising under the
express terms of the Benefit Plans, and the Seconded Employees will be covered under the Benefit Plans subject to and in accordance with their respective terms and conditions, as they may be amended from time to time. Noble and its ERISA Affiliates
may amend or terminate any Benefit Plans in whole or in part at any time (subject to the applicable provisions of any collective bargaining agreement covering Seconded Employees, if any). During the Period of Secondment, no member of the Partnership
Parties shall assume any Benefit Plans or have any obligations, liabilities or rights arising under the express terms of the Benefit Plans, in each case except for cost reimbursement pursuant to this Agreement.
ARTICLE 3
EXPENSE
REIMBURSEMENT
3.1
The Partnership Parties shall reimburse Noble or NESI, as applicable, for all reimbursable expenses under
Section 3.2 incurred by the Noble Entities with respect to Seconded Persons, as applicable (including, where applicable, former Seconded Employees), in connection with the performance of the Services during the preceding period (the
“
Services Reimbursement
”). The Services Reimbursement shall be made on a monthly basis or at such other intervals as the Parties may agree from time to time.
3.2
(a) The Services Reimbursement with respect to Seconded Employees for each period during the Period of Secondment shall include all
reasonable costs and expenses (including administrative costs) incurred for such period by Noble Entities for the Seconded Employees (including, where applicable, former Seconded Employees), including but not limited to the following costs and
expenses set forth below:
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(i)
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salary, wages and cash bonuses (including payroll and withholding taxes associated therewith);
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5
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(ii)
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amounts paid with respect any Seconded Employee’s paid leave of absence;
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(iii)
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contributions made by a Noble Entity towards any Benefit Plans;
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(iv)
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the value of equity-related compensation granted to Seconded Employees during the Period of Secondment;
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(v)
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any other employee benefit or compensation arrangement customarily provided to all employees by Noble for which Noble incurs costs with respect to Seconded Employees; and
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(vi)
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business travel expenses and other business expenses reimbursed in the normal course by Noble, such as subscriptions to business-related periodicals and dues to professional business organizations.
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The costs and expenses described in this Section 3.2(a) are referred to as “
Seconded Employee Expenses
.” Where it is not reasonably
practicable to determine the amount of such a cost or expense, the Partnership Parties and Noble shall mutually agree on the method of determining or estimating such cost or expense. If the actual amount of any cost or expense, once known, varies
from the estimate used for billing purposes hereunder, the difference, once determined, shall be reflected as either a credit or additional charge in the next monthly invoice issued by a Noble Entity, or in such manner as may be otherwise agreed
between Noble and the GP. Notwithstanding the foregoing, the Parties agree that to determine the value of a Second Employee’s non-wage benefits described in subsections (iii) and (v) of this Section 3.2(a), they will apply an agreed percentage
benefit load, based on the value of employee benefits provided to all employees of the Noble Entities.
(b) The Services Reimbursement with respect to
Seconded Contractors for each period during the Period of Secondment shall include, on a pass-through basis, all costs and expenses attributable to the performance of the Services incurred for such period by Noble Entities with respect to the
Seconded Contractors. The costs and expenses described in this Section 3.2(b) are referred to as “
Seconded Contractor Expenses,
” and together with the Seconded Employee Expenses, the “
Seconded Person Expenses
.”
3.3
With respect to those Seconded Persons who perform services for both the Noble Entities and the Partnership Parties, the Parties
will determine in good faith the percentage of such Seconded Person’s time spent providing services to the Partnership Parties (the “
Allocation Percentage
”). For each month, or other time interval agreed to by the Parties,
during the Period of Secondment, the amount of the Services Reimbursement payable by the Partnership Parties with respect to each Seconded Person shall be calculated by multiplying the Seconded Person Expenses for such Seconded Person times the
Allocation Percentage for such Seconded Person; provided, however, that travel expenses and other expenses incurred with respect to and/or reimbursable to a Seconded Person shall be paid by the Party for whom the Seconded Person was working at the
time they were incurred, except that expenses related to activities that benefit both the Partnership Parties and Noble Entities (e.g. some types of training) shall be shared by the affected Parties in accordance with the Allocation Percentage (or
such other allocation as may be agreed between the affected Parties).
3.4
The Partnership Parties and Noble acknowledge and agree
that Noble shall be responsible for paying the Seconded Employee Expenses (or providing the employee benefits with respect thereto, as
6
applicable) to the Seconded Employees and that the Noble Entities may be responsible for paying the Seconded Contractor Expenses to the respective contractor, but that the Partnership Parties
shall be responsible for reimbursing the Noble Entities for the Seconded Person Expenses (as part of the Services Reimbursement) to the extent provided under Section 3.2 of this Agreement.
3.5
This Agreement does not address the reimbursement of any costs or expenses associated with Services other than the Services
Reimbursement. To the extent that a Noble Entity incurs any out-of-pocket expenses (other than the Services Reimbursement) in connection with the provision of Services, such Noble Entity may be entitled to reimbursement therefor under the terms of
the Partnership Agreement, the Omnibus Agreement or other documentation.
ARTICLE 4
ALLOCATION; RECORDS
Noble
will use commercially reasonable efforts to (i) establish the Allocation Percentage and to the document the basis for such allocation and (ii) maintain a schedule reflecting the direct and indirect costs of the Seconded Person Expenses based on the
Services that the Seconded Persons have provided to the Partnership Parties. The Partnership Parties will use commercially reasonable efforts to keep and maintain books/records reflecting the hours worked in connection with each of the Seconded
Persons. Each Party will have the right to audit such records maintained by the other during regular business hours and on reasonable prior notice.
ARTICLE 5
TERM
The term of this Agreement will commence on the Effective Date and will continue for an initial period of fifteen (15) years (the
“
Initial Term
”). Upon the expiration of the Initial Term, the term of this Agreement shall automatically extend for successive one year extension terms, unless either Party provides at least thirty (30) days’ prior
written notice to the other Party prior to the expiration of the Initial Term or any extension term that the Party wishes for this Agreement to expire at the end of the Initial Term or the then-current extension term, as applicable. Upon proper
notice by a Party to the other Party, in accordance with this
Article 5
, that the Party wishes for this Agreement to expire on the expiration of the applicable period, this Agreement shall not automatically extend, but shall instead expire
upon the expiration of the applicable period and only those provisions that, by their terms, expressly survive this Agreement shall so survive. Notwithstanding the foregoing, the Partnership Parties may terminate this Agreement at any time upon
written notice to Noble stating the date of termination and only those provisions that, by their terms, expressly survive this Agreement shall so survive.
ARTICLE 6
GENERAL
PROVISIONS
6.1
Entire Agreement
. This Agreement constitutes and expresses the entire agreement between the
Parties with respect to the subject matter hereof. All previous discussions, promises, representations and understandings relative thereto are hereby merged in and superseded by this Agreement.
6.2
Choice of Law
. This Agreement shall be governed by and construed in accordance with the laws of the State of
Texas without regard to principles of conflict of laws.
7
6.3
Amendment
. Any actions or agreement by the Parties to amend, modify or
supplement this Agreement, in whole or in part, shall be binding upon the Parties, so long as such modification shall be in writing and shall be executed by all Parties with the same formality with which this Agreement was executed.
6.4
Waiver
. Any term or provision of this Agreement may be waived, or the time for its performance may be extended,
by the Party or Parties entitled to the benefit thereof. Any such waiver shall be validly and sufficiently given for the purposes of this Agreement if, as to any Party, it is in writing signed by an authorized representative of such Party. The
failure of any Party to enforce at any time any provision of this Agreement shall not be construed to be a waiver of such provision, or in any way to affect the validity of this Agreement or any part hereof or the right of any Party thereafter to
enforce each and every such provision. No waiver of any breach of this Agreement shall be held to constitute a waiver of any other or subsequent breach.
6.5
Partial Invalidity
. Wherever possible, each provision hereof shall be interpreted in such a manner as to be
effective and valid under applicable law, but in case any one or more of the provisions contained herein shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such provision or provisions shall be ineffective to the
extent, but only to the extent, of such invalidity, illegality or unenforceability without invalidating the remainder of such provision or provisions or any other provisions hereof, unless such a construction would be unreasonable.
6.6
Binding Effect
. This Agreement shall be binding upon and inure to the benefit of the Parties and their
successors and permitted assigns. The successors and permitted assigns hereunder shall include any permitted assignee under
Section 6.10
as well as the successors in interest to such permitted assignee (whether by merger, liquidation
(including successive mergers or liquidations) or otherwise).
6.7
Third Party Beneficiaries
. The provisions of
this Agreement are solely for the benefit of the Noble Entities and the Partnership Parties and their respective successors and permitted assigns and shall not confer upon any third party any remedy, claim, liability, reimbursement or other
right. In furtherance but not in limitation of the foregoing: (i) nothing in this Agreement shall be deemed to provide any Seconded Employee or Seconded Contractor with a right to continued Secondment or employment; and (ii) nothing in this
Agreement shall be deemed to constitute an amendment to any Benefit Plans or limit in any way the right of Noble and/or its ERISA Affiliates to amend, modify or terminate, in whole or in part, any Benefit Plans which may be in effect from time to
time.
6.8
Notices
. All notices, requests and other communications required or permitted hereunder shall be in
writing and shall be deemed duly given or delivered (i) when delivered personally, (ii) if sent by first class United States mail, when sent or (iii) if sent by private courier when received; and shall be addressed as follows:
if to a Noble Entity:
Noble
Energy, Inc.
1001 Noble Energy Way
Houston, TX 77070
Attention: General Counsel
if to a member of the Partnership Parties:
Noble Midstream GP LLC
1001
Noble Energy Way
Houston, TX 77070
Attention: Chief Executive Officer
8
if to Noble or a member of the Partnership Parties, with a copy to:
Noble Energy, Inc.
Charles
Varnell
1625 Broadway, Suite 2000
Denver, CO 80202
A Party may
change its address for the purposes of notices hereunder by giving notice to the other Party specifying such changed address in the manner specified in this
Section 6.8
.
6.9
Relationship of the Parties
. Nothing in this Agreement will constitute the Midstream Group, Noble or their respective
Affiliates as members of any partnership, joint venture, association, syndicate or other entity.
6.10
Assignment
. No
Party will, without the prior written consent of the other Parties, which consent shall not be unreasonably withheld, assign, mortgage, pledge or otherwise convey this Agreement or any of its rights or duties hereunder;
provided
,
however
, that any Party may assign or convey this Agreement without the prior written consent of any other Party to an Affiliate. Collateral assignment of this Agreement shall be an assignment for all purposes, requiring the consent of the
other Parties.
6.11
Counterparts
. This Agreement may be executed in any number of counterparts, each of which will
be deemed to be an original, and all of which together shall constitute one and the same Agreement. Each Party may execute this Agreement by signing any such counterpart.
6.12
Time of the Essence
. Time is of the essence in the performance of this Agreement.
6.13
Signatories Duly Authorized
. Each of the signatories to this Agreement represents that he is duly authorized to
execute this Agreement on behalf of the entities for which he is signing, and that such signature is sufficient to bind the Party or other entity purportedly represented.
(Signature pages follow)
9
IN WITNESS WHEREOF, the Parties have caused this Agreement to be signed by their authorized
representatives as of the date first above written.
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NOBLE ENERGY, INC.
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By:
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Gary W. Willingham
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Executive Vice President
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NOBLE ENERGY SERVICES INC.
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By:
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Gary W. Willingham
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Executive Vice President
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NOBLE MIDSTREAM GP LLC
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By:
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Terry R. Gerhart
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Chief Executive Officer
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NOBLE MIDSTREAM PARTNERS LP
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By: Noble Midstream GP LLC, its general partner
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By:
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Terry R. Gerhart
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Chief Executive Officer
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NOBLE MIDSTREAM SERVICES, LLC
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on behalf of itself and each of its subsidiaries
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By:
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Terry R. Gerhart
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Chief Executive Officer
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Signature Page to
Operational Services and Secondment Agreement
EXHIBIT A
Services
The Services include, but
are not limited to:
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•
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Operation of the assets of the Midstream Group members in accordance with prudent industry practice pursuant to each of the following agreements:
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•
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those certain Second Amended and Restated Fresh Water Services Agreements, dated effective as of March 31, 2016, consisting of the Second Amended and Restated Agreement Terms and Conditions Relating to Fresh Water
Services last updated as of March 31, 2016, and each Second Amended and Restated Agreement Addendum thereto executed from time to time by Noble or its Affiliates (or another Producer) and OpCo or one or more of its Subsidiaries;
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•
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those certain Second Amended and Restated Gas Gathering Agreements, dated effective as of March 31, 2016, consisting of the Second Amended and Restated Agreement Terms and Conditions Relating to Gas Gathering
Services last updated as of March 31, 2016, and each Second Amended and Restated Agreement Addendum thereto executed from time to time by Noble or its Affiliates (or another Producer) and OpCo or one or more of its Subsidiaries;
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•
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those certain Second Amended and Restated Crude Oil Gathering Agreements, dated effective as of March 31, 2016, consisting of the Second Amended and Restated Agreement Terms and Conditions Relating to Crude Oil
Gathering Services last updated as of March 31, 2016, and each Second Amended and Restated Agreement Addendum thereto executed from time to time by Noble or its Affiliates (or another Producer) and OpCo or one or more of its Subsidiaries;
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•
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those certain Third Amended and Restated Crude Oil Treating Agreements, dated effective as of [
●
], [
●
], consisting of the Third Amended and Restated
Agreement Terms and Conditions Relating to Crude Oil Treating Services last updated as of [
●
],[
●
], and each Third Amended and Restated Agreement Addendum thereto executed from time
to time by Noble or its Affiliates (or another Producer) and OpCo or one or more of its Subsidiaries;
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•
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those certain Second Amended and Restated Produced Water Services Agreements, dated effective as of March 31, 2016, consisting of the Second Amended and Restated Agreement Terms and Conditions Relating to Produced
Water Services last updated as of March 31, 2016, and each Second Amended and Restated Agreement Addendum thereto executed from time to time by Noble or its Affiliates (or another Producer) and OpCo or one or more of its Subsidiaries;
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•
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those certain Texas Produced Water Services Agreements, dated effective as of September 1, 2016, consisting of the Agreement Terms and Conditions Relating to Produced Water Services and each Agreement Addendum
thereto executed from time to time by Noble or its Affiliates (or another Producer) and OpCo or one or more of its Subsidiaries; and
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•
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those certain Texas Crude Oil Gathering Agreements, dated effective as of September 1, 2016, consisting of the Agreement Terms and Conditions Relating to Crude Oil Gathering and each Agreement Addendum thereto
executed from time to time by Noble or its Affiliates (or another Producer) and OpCo or one or more of its Subsidiaries.
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•
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such other operational functions that are necessary to develop and execute the operational aspects of the business of the Partnership Parties.
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Exhibit 10.6
Execution Version
When Recorded, Mail To:
Attn: DJ Land Manager
1625 Broadway, Suite 2200
Denver, CO 80202
SECOND AMENDED AND RESTATED
GAS GATHERING AGREEMENT
consisting of the
SECOND
AMENDED AND RESTATED
AGREEMENT TERMS AND CONDITIONS RELATING TO
GAS GATHERING SERVICES
taken together with the applicable
SECOND AMENDED AND RESTATED
AGREEMENT ADDENDUM
now or
in the future effective
TABLE OF CONTENTS
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Page
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ARTICLE 1 DEFINITIONS
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2
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Section 1.1
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Definitions
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2
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Section 1.2
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Other Terms
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13
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Section 1.3
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References and Rules of Construction
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13
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ARTICLE 2 PRODUCT DEDICATION AND REAL PROPERTY DEDICATION
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14
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Section 2.1
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Producer’s Dedications
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14
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Section 2.2
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Conflicting Dedications
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14
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Section 2.3
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Producer’s Reservation
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15
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Section 2.4
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Releases from Dedication
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15
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Section 2.5
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Covenants Running with the Land
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17
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Section 2.6
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Recording of Agreement
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18
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ARTICLE 3 SYSTEM EXPANSION AND CONNECTION OF WELLS
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18
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Section 3.1
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Development Report; System Plan; Meetings
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18
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Section 3.2
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Expansion of System and Connection of Separator Facilities
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22
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Section 3.3
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Temporary Services
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23
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Section 3.4
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Cooperation
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23
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Section 3.5
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Grant of Access; Real Property Rights
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23
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ARTICLE 4 MEASUREMENT DEVICES
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25
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Section 4.1
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Measurement Devices
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25
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Section 4.2
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Measurement Procedures
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27
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Section 4.3
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Product Meter Adjustments
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29
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ARTICLE 5 TENDER, NOMINATION, AND GATHERING OF PRODUCTION
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29
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Section 5.1
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Limitations on Service to Third Parties
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29
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Section 5.2
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Tender of Dedicated Production
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29
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Section 5.3
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Services; Service Standard
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29
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Section 5.4
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Nominations, Scheduling, Balancing and Curtailment
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30
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Section 5.5
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Suspension/Shutdown of Service
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33
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Section 5.6
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Marketing and Transportation
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33
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Section 5.7
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No Prior Flow of Product in Interstate Commerce
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33
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ARTICLE 6 FEES
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34
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Section 6.1
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Fees
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34
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Section 6.2
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Fee Adjustments
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34
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Second Amended and
Restated
Gas Gathering Agreement
- i -
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Section 6.3
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Treatment of Byproducts, L&U, Fuel and Related Matters
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35
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ARTICLE 7 QUALITY AND PRESSURE SPECIFICATIONS
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36
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|
|
|
|
Section 7.1
|
|
Quality Specifications
|
|
|
36
|
|
|
Section 7.2
|
|
Failure to Meet Specifications
|
|
|
37
|
|
|
Section 7.3
|
|
Indemnification Regarding Quality
|
|
|
37
|
|
|
|
|
|
ARTICLE 8 TERM
|
|
|
38
|
|
|
|
|
|
|
Section 8.1
|
|
Term
|
|
|
38
|
|
|
Section 8.2
|
|
Effect of Termination or Expiration of the Term
|
|
|
38
|
|
|
|
|
|
ARTICLE 9 TITLE AND CUSTODY
|
|
|
38
|
|
|
|
|
|
|
Section 9.1
|
|
Title
|
|
|
38
|
|
|
Section 9.2
|
|
Custody
|
|
|
38
|
|
|
|
|
|
ARTICLE 10 BILLING AND PAYMENT
|
|
|
39
|
|
|
|
|
|
|
Section 10.1
|
|
Statements
|
|
|
39
|
|
|
Section 10.2
|
|
Payments
|
|
|
40
|
|
|
Section 10.3
|
|
Adequate Assurances
|
|
|
40
|
|
|
Section 10.4
|
|
Audit
|
|
|
41
|
|
|
|
|
|
ARTICLE 11 REMEDIES
|
|
|
41
|
|
|
|
|
|
|
Section 11.1
|
|
Suspension of Performance; Temporary Release from Dedication
|
|
|
41
|
|
|
Section 11.2
|
|
No Election
|
|
|
42
|
|
|
Section 11.3
|
|
DIRECT DAMAGES
|
|
|
42
|
|
|
|
|
|
ARTICLE 12 FORCE MAJEURE
|
|
|
42
|
|
|
|
|
|
|
Section 12.1
|
|
Force Majeure
|
|
|
42
|
|
|
Section 12.2
|
|
Extension Due to Force Majeure
|
|
|
43
|
|
|
|
|
|
ARTICLE 13 CHANGE IN LAW; UNECONOMIC SERVICE
|
|
|
43
|
|
|
|
|
|
|
Section 13.1
|
|
Changes in Applicable Law
|
|
|
43
|
|
|
Section 13.2
|
|
Unprofitable Operations and Rights of Termination
|
|
|
43
|
|
|
|
|
|
ARTICLE 14 REGULATORY STATUS
|
|
|
45
|
|
|
|
|
|
|
Section 14.1
|
|
Non-Jurisdictional System
|
|
|
45
|
|
|
Section 14.2
|
|
Government Authority Modification
|
|
|
45
|
|
Second Amended and
Restated
Gas Gathering Agreement
- ii -
|
|
|
|
|
|
|
|
|
|
|
|
ARTICLE 15 INDEMNIFICATION AND INSURANCE
|
|
|
45
|
|
|
|
|
|
|
Section 15.1
|
|
Reciprocal Indemnity
|
|
|
45
|
|
|
Section 15.2
|
|
Indemnification Regarding Third Parties
|
|
|
46
|
|
|
Section 15.3
|
|
Penalties
|
|
|
46
|
|
|
Section 15.4
|
|
Insurance
|
|
|
46
|
|
|
|
|
|
ARTICLE 16 ASSIGNMENT
|
|
|
47
|
|
|
|
|
|
|
Section 16.1
|
|
Assignment of Rights and Obligations under this Agreement
|
|
|
47
|
|
|
Section 16.2
|
|
Pre-Approved Assignments
|
|
|
48
|
|
|
Section 16.3
|
|
Change of Control
|
|
|
48
|
|
|
|
|
|
ARTICLE 17 OTHER PROVISIONS
|
|
|
48
|
|
|
|
|
|
|
Section 17.1
|
|
Relationship of the Parties
|
|
|
48
|
|
|
Section 17.2
|
|
Notices
|
|
|
48
|
|
|
Section 17.3
|
|
Entire Agreement; Conflicts
|
|
|
49
|
|
|
Section 17.4
|
|
Waivers; Rights Cumulative
|
|
|
49
|
|
|
Section 17.5
|
|
Amendment
|
|
|
49
|
|
|
Section 17.6
|
|
Governing Law; Arbitration
|
|
|
50
|
|
|
Section 17.7
|
|
Parties in Interest
|
|
|
50
|
|
|
Section 17.8
|
|
Preparation of Agreement
|
|
|
50
|
|
|
Section 17.9
|
|
Severability
|
|
|
50
|
|
|
Section 17.10
|
|
Counterparts
|
|
|
50
|
|
|
Section 17.11
|
|
Confidentiality
|
|
|
51
|
|
|
|
|
EXHIBITS
|
|
|
EXHIBIT A
|
|
SERVICE AREA
|
|
|
|
|
|
EXHIBIT B
|
|
DOWNTIME FEE REDUCTION
|
|
|
|
|
|
EXHIBIT C
|
|
OPERATING PRESSURE FEE REDUCTION
|
|
|
|
|
|
EXHIBIT D
|
|
INSURANCE
|
|
|
|
|
Second Amended and
Restated
Gas Gathering Agreement
- iii -
SECOND AMENDED AND RESTATED
AGREEMENT TERMS AND CONDITIONS RELATING TO
GAS GATHERING SERVICES
These SECOND AMENDED AND RESTATED AGREEMENT TERMS AND CONDITIONS RELATING TO GAS GATHERING SERVICES (these “
Agreement Terms and
Conditions
”) (i) shall be effective with respect to each signatory of each Agreement Addendum as of the Effective Date specified in the applicable Agreement Addendum (defined below), (ii) were last updated as of March 31,
2016, (iii) are incorporated into and made a part of each Agreement Addendum, and (iv) taken together with the applicable Agreement Addendum shall constitute one Agreement, separate and apart from any other Agreement governed by these
Agreement Terms and Conditions.
Recitals:
|
|
A.
|
Producer owns rights, title and interests in certain oil and gas leases and other interests located within the Service Area (defined below) that require services related to the gathering of hydrocarbons.
|
|
|
B.
|
Producer wishes to obtain such gathering services from each Midstream Co (defined below) that executes and delivers a Midstream Agreement Addendum (defined below) pursuant to these Agreement Terms and Conditions, as
modified by the applicable Midstream Agreement Addendum.
|
|
|
C.
|
Producer desires to dedicate all gas it Controls (defined below) that is attributable to its right, title, and interest in certain oil and gas leases and other interests located within the Dedication Area (defined
below) to the Individual System (defined below).
|
|
|
D.
|
Each Midstream Co that executes and delivers a Midstream Agreement Addendum owns and operates an Individual System that gathers gas from certain oil and gas leases and other interests.
|
|
|
E.
|
OpCo (defined below) owns, directly or indirectly, the Controlling equity interests in each Original Midstream Co (defined below) and intends to assist all of the Original Midstream Cos to, collectively, provide all of
the Services (defined below) required by Producer hereunder, as provided in the OpCo Agreement Addendum (defined below).
|
Agreements:
NOW,
THEREFORE, in consideration of the foregoing Recitals, which are incorporated herein, the mutual agreements in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, OpCo, Midstream
Co, and Producer hereby agree as follows:
Second Amended and
Restated
Gas Gathering Agreement
- 1 -
Article 1
Definitions
Section 1.1
Definitions
. As used in this Agreement, the following capitalized terms shall have the meanings ascribed to them
below:
“Abandonment Date” has the meaning given to it in
Section 3.2(d)
.
“
Additional/Accelerated Well
” has the meaning given to it in
Section 3.2(c)
.
“
Adequate Assurance of Performance
” has the meaning given to it in
Section 10.3
.
“
Adjustment Year
” has the meaning given to it in
Section 6.2(a)(ii)
.
“
Affiliate
” means, with respect to any Person, any other Person that directly, or indirectly through one or more
intermediaries, Controls, or is Controlled by, or is under common Control with, such Person. The following sentence shall not apply to the term “Affiliate” as used in
Section 2.2(b)
or the definition of “Conflicting
Dedication”: Producer and its subsidiaries (other than OpCo and its subsidiaries), on the one hand, and OpCo and its subsidiaries, on the other, shall not be considered Affiliates of each other for purposes of this Agreement.
“
Agreement
” means the applicable Agreement Addendum taken together with these Agreement Terms and Conditions, as modified by
such Agreement Addendum.
“
Agreement Addendum
” means each Midstream Agreement Addendum and OpCo Agreement Addendum.
“
Agreement Addenda
” shall be the collective reference to each Agreement Addendum then in effect.
“
Agreement
Terms and Conditions
” has the meaning given to it in the introductory paragraph.
“
Beneficiary
” has the meaning
given to it in
Section 4.1(g)
.
“
Btu
” means the amount of heat required to raise the temperature of one pound
of water one degree Fahrenheit at a pressure of 14.73 Psia and determined on a gross, dry basis.
“
Business Day
” means a
Day (other than a Saturday or Sunday) on which federal reserve banks are open for business.
“
Cancellation Date
” has the
meaning given to it in
Section 3.1(c)
.
“
Claiming Party
” has the meaning given to it in the definition of
“Force Majeure”.
“
Communications
” has the meaning given to it in
Section 17.2
.
“
Conditional Amount
” has the meaning set forth in
Section 10.1(a)
.
Second Amended and
Restated
Gas Gathering Agreement
- 2 -
“
Conflicting Dedication
” means any gathering agreement, commitment, or
arrangement (including any volume commitment) that requires Producer’s owned or Controlled Product to be gathered on any gathering system or similar system other than the System, including any such agreement, commitment, or arrangement
burdening properties hereinafter acquired by Producer in the Dedication Area. No dedication of acreage shall constitute a Conflicting Dedication if Producer’s requirement under such dedication is to deliver Product from the tailgate of the
System or any other point that is a Delivery Point hereunder. A right of first refusal in favor of an entity other than Original Producer, OpCo, or any of their Affiliates shall be deemed to be a “Conflicting Dedication” if Affiliates of
Original Producer are prohibited from providing Services pursuant to the applicable agreement creating such right of first refusal.
“
Control
” (including the term “
Controlled
”) means (a) with respect to any Person, the possession,
direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting shares, by contract, or otherwise and (b) with respect to any Product, such Product produced
from the Dedication Area and owned by a Third Party or an Affiliate and with respect to which Producer has the contractual right or obligation (pursuant to a marketing, agency, operating, unit, or similar agreement) to market such Product and
Producer elects or is obligated to market such Product on behalf of the applicable Third Party or Affiliate.
“
Credit-Worthy
Person
” means a Person with a senior unsecured and credit-unenhanced long term debt rating equivalent to A- or better as determined by at least two rating agencies, one of which must be either Standard & Poor’s or Moody’s
(or if either one or both are not available, equivalent ratings from alternate rating sources reasonably acceptable to Midstream Co).
“
Crude Oil
” means crude oil produced from oil or gas wells in the Dedication Area and Controlled by Producer, in its natural
form, which may include Flash Gas naturally produced therewith.
“
Crude Oil Gathering System
” means the Crude Oil
gathering system used to provide Crude Oil gathering services to Producer.
“
Day
” means a period of time from 7:00 a.m.
Mountain Time on a calendar day until 7:00 a.m. Mountain Time on the succeeding calendar day. The term “
Daily
” shall have the correlative meaning.
“
Dedicated Production
” means (a) Product owned by Producer and produced from the Dedicated Properties, (b) Product
owned by an Affiliate of Producer and produced from a Well operated by Producer within the Dedication Area, (c) Product produced within the Dedication Area that is owned by a Third Party and under the Control of Producer, and (d) Purchased
Dedicated Production. Notwithstanding the foregoing, (i) any Product that was released pursuant to the Releases of Dedication shall not be included in this definition of “Dedicated Production,” (ii) any Product that is
permanently released pursuant to
Section 2.4(a)
or otherwise shall cease to be included in this definition of “Dedicated Production” immediately upon the effectiveness of such permanent release, and (iii) in the event of
an assignment by a Producer (“X”) to an assignee (“Y”) that is permitted under
Article 16
, any Product that is so assigned shall cease to be included in X’s Dedicated Production and shall solely be included in
Y’s Dedicated Production as of the effective date of such assignment.
Second Amended and
Restated
Gas Gathering Agreement
- 3 -
“
Dedicated Properties
” means the interests held by Producer or its Affiliates in
the oil and gas leases, mineral interests, and other similar interests as of the Effective Date or acquired by Producer or its Affiliates after the Effective Date that relate to land within the Dedication Area. Notwithstanding the foregoing,
(a) any interest that was released pursuant to the Releases of Dedication shall not be included in this definition of “Dedicated Properties,” (b) any interest that is permanently released pursuant to
Section 2.4(a)
or
otherwise shall cease to be included in this definition of “Dedicated Properties” immediately upon the effectiveness of such permanent release and (c) in the event of an assignment by a Producer (“X”) to an assignee
(“Y”) that is permitted under Article 16, any interest that is so assigned shall cease to be included in X’s Dedicated Properties and shall solely be included in Y’s Dedicated Properties as of the effective date of such
assignment.
“
Dedications
” means the Product Dedication and the Real Property Dedication together, and
“
Dedication
” means the Product Dedication or the Real Property Dedication, as applicable.
“
Dedication
Area
” means, with respect to this Agreement, the area described on the applicable Midstream Agreement Addendum. Notwithstanding the foregoing, (a) any acreage that was released pursuant to the Releases of Dedication shall not be
included in this definition of “Dedication Area,” (b) any acreage that is permanently released pursuant to
Section 2.4(a)
or otherwise shall cease to be included in this definition of “Dedication Area”
immediately upon the effectiveness of such permanent release and (c) in the event of an assignment by a Producer (“X”) to an assignee (“Y”) that is permitted under Article 16, any acreage that is so assigned shall cease to
be included in X’s Dedication Area and shall solely be included in Y’s Dedication Area as of the effective date of such assignment.
“
Delivery Point
” means the point at which custody transfers from Midstream Co to or for the account of Producer. The custody
transfer point may include (a) the facilities of a Downstream Facility, (b) with respect to Drip Condensate, oil tanks, (c) the facilities of a gas processing facility, or (d) any other point as may be mutually agreed between the
Parties. The Delivery Points for each Individual System in existence on the Effective Date shall be set forth in writing between Producer and Midstream Co, and additional points may become Delivery Points hereunder upon mutual agreement of the
Parties as construction is completed on additional facilities in satisfaction of the needs identified by Producer and the Parties shall continuously update the list of Delivery Points by mutual agreement.
“
Development Report
” has the meaning given to it in
Section 3.1(a)
.
“
Downstream Facility
” means any pipeline downstream of any Delivery Point on the System.
“
Downtime Event
” means a period during which (a) all or a portion of the Individual System was unavailable to provide
Services for a reason other than (i) Force Majeure, (ii) an event or condition downstream of the Individual System that was not caused by Midstream Co or (iii) planned maintenance for which Midstream Co provided notice as described in
Section 5.5(b)(ii)
, or (b) the pressure of an Individual System is greater than the Target Pressure.
Second Amended and
Restated
Gas Gathering Agreement
- 4 -
“
Downtime Percentage
” means, with respect to any Individual System during a
specified period, an amount equal to the quotient of (a) aggregate of the hours during which such Individual System was unavailable to provide Services during such period divided by (b) the total hours during the applicable period.
“
Drip Condensate
” means that portion of Producer’s owned or Controlled Product that is received into the System (without
manual separation or injection) that condenses in, and is recovered from, the System as a liquid.
“
Effective Date
” has
the meaning given to it in the applicable Agreement Addendum.
“
Escalation Percentage
” means 2.50%.
“
Excluded Amounts
” means Midstream Co’s general and administrative costs and any costs for design or construction of
facilities that can be used to connect other Planned Wells or Planned Separator Facilities in the Development Report that Producer at such time intends to develop.
“
Facility Segment
” means, for any Individual System that is described on the applicable Midstream Agreement Addendum that
includes a description of two or more Facility Segments, the distinct segment of such Individual System that is capable of being operated independently of the remaining portion of the Individual System. With respect to any Individual System that is
not described in the applicable Midstream Agreement Addendum as having multiple Facility Segments, the term Facility Segment shall be synonymous with Individual System.
“
First Development Report
” means the first report delivered by Original Producer to Midstream Co that satisfies the
requirements for a Development Report in
Section 3.1(a)
and
Section 3.1(b)
(an “
Original Report
”) and, in the event that Producer assigns all or any part of the Dedicated Properties to a Producer Assignee,
then with respect to such Producer Assignee, the First Development Report shall not refer to the Original Report but rather to the first Development Report delivered by such Producer Assignee to Midstream Co that satisfies the requirements for such
report in
Section 3.1(a)
and
Section 3.1(b)
.
“
Flash Gas
” means any gas vaporized from Crude Oil
after production that has been collected in the Crude Oil Gathering System and delivered into the Individual System. If at any time Midstream Co is not providing gathering services to Producer in the Dedication Area with respect to Crude Oil, there
will be no Flash Gas delivered into the Individual System.
“
Force Majeure
” means an event that is not within the
reasonable control of the Party claiming suspension (the “
Claiming Party
”), and that by the exercise of reasonable due diligence the Claiming Party is unable to avoid or overcome in a reasonable manner. To the extent meeting the
foregoing requirements, Force Majeure includes: (a) acts of God; (b) wars (declared or undeclared); (c) insurrections, hostilities, riots; (d) floods, droughts, fires, storms, storm warnings, landslides, lightning, earthquakes,
washouts; (e) industrial disturbances, acts of a public enemy, acts of terror, sabotage, blockades, epidemics; (f) arrests and restraints of rulers and peoples; (g) civil disturbances; (h) explosions, breakage or accidents to
machinery or lines of pipe; (i) hydrate obstruction or blockages of any kind in lines of pipe; (j) freezing of wells or
Second Amended and
Restated
Gas Gathering Agreement
- 5 -
delivery facilities, partial or entire failure of wells, and other events beyond the reasonable control of the Claiming Party that affect the timing of production or production levels;
(k) (
reserved
); (l) action or restraint by any Governmental Authority (so long as the Claiming Party has not applied for or assisted in the application for, and has opposed where and to the extent commercially reasonable, such
action or restraint), (m) delays or failures by a Governmental Authority to grant Permits applicable to the System (or any Individual System) so long as the Claiming Party has used its commercially reasonable efforts to make any required
filings with such Governmental Authority relating to such Permits, and (n) delays or failures by the Claiming Party to obtain easements and rights of way, surface leases and other real property interests related to the System (or any Individual
System) from Third Parties, so long as the Claiming Party has used its commercially reasonable efforts to obtain such easements and rights of way, surface leases and other real property interests. The failure of a Claiming Party to settle or prevent
a strike or other labor dispute with employees shall not be considered to be a matter within such Claiming Party’s control.
“
Gallon
” means one U.S. Standard gallon.
“
Governmental Authority
” means any federal, state, local, municipal, tribal or other government; any governmental, regulatory
(including self-regulatory) or administrative agency, commission, body or other authority exercising or entitled to exercise any administrative, executive, judicial, legislative, regulatory or taxing authority or power; and any court or governmental
tribunal, including any tribal authority having or asserting jurisdiction.
“
Gross Heating Value
” means the number of Btu
produced by the combustion, on a dry basis and at a constant pressure, of the amount of Product that would occupy a volume of 1 cubic foot at a temperature of 60 degrees Fahrenheit and at a pressure of 14.73 Psia, with air of the same temperature
and pressure as the Product, when the products of combustion are cooled to the initial temperature of the Product and air and when the water formed by combustion is condensed to the liquid state. Hydrogen sulfide shall be deemed to have no heating
value.
“
Group
” means (a) with respect to Midstream Co, the Midstream Co Group, and (b) with respect to
Producer, the Producer Group.
“
Increase in Fee
” has the meaning given to it in
Section 6.2(b)
.
“
Index
” has the meaning given to it in
Section 5.4(h)
.
“
Individual Fee
” means the rate for each Individual System set forth on the applicable Midstream Agreement Addendum.
“
Individual System
” means the portion of the System beginning at the Receipt Points described on the applicable Midstream
Agreement Addendum and ending at the Delivery Points described on the applicable Midstream Agreement Addendum. The Individual Systems in existence on the Effective Date are more particularly described in the applicable Midstream Agreement Addendum.
Additional Individual Systems may be added to the System from time to time in satisfaction of the needs identified by Producer and evidenced through amendments to the applicable Midstream Agreement Addendum or the execution and delivery of
additional Midstream Agreement Addenda.
Second Amended and
Restated
Gas Gathering Agreement
- 6 -
“
Initial Term
” has the meaning given to it in
Section 8.1
.
“
Interest Rate
” means, on the applicable date of determination, the prime rate (as published in the “Money Rates”
table of
The Wall Street Journal
, eastern edition, or if such rate is no longer published in such publication or such publication ceases to be published, then as published in a similar national business publication as mutually agreed by the
Parties) plus an additional two percentage points (or, if such rate is contrary to any applicable Law, the maximum rate permitted by such applicable Law).
“
Interruption Conditions
” has the meaning given to it in
Section 2.4(b)
.
“
Invoice Month
” has the meaning given to it in
Section 10.1(a)
.
“
Law
” means any applicable statute, law, rule, regulation, ordinance, order, code, ruling, writ, injunction, decree or other
official act of or by any Governmental Authority.
“
Losses
” means any actions, claims, causes of action (including
actions in rem or in personam), settlements, judgments, demands, liens, encumbrances, losses, damages, fines, penalties, interest, costs, liabilities, expenses (including expenses attributable to the defense of any actions or claims and
attorneys’ fees) of any kind or character, including Losses for bodily injury, death, or property damage, whether under judicial proceedings, administrative proceedings or otherwise, and under any theory of tort, contract, breach of contract,
breach of representation or warranty (express or implied) or by reason of the conditions of the premises of or attributable to any Person or Person or any Party or Parties.
“
MAOP
” means maximum allowable operating pressure for the applicable Individual System, or relevant Facility Segment, as
specified in the applicable Midstream Agreement Addendum.
“
Mcf
” means one thousand Standard Cubic Feet.
“
Measurement Device
” means the meter body (which may consist of an orifice meter or ultrasonic meter), Product metering
device, tube, orifice plate, connected pipe, tank strapping, and fittings used in the measurement of Product flow, volume, and Btu content.
“
Measurement Point
” means the Measurement Device that the Parties have agreed in writing will measure the volume of Product
moving through the Individual System.
“
Midstream Agreement Addendum
” means each Agreement Addendum by and between a
Producer and a Midstream Co that expressly states that it is governed by these Agreement Terms and Conditions. “
Midstream Agreement Addenda
” shall be the collective reference to each Agreement Addendum then in effect.
“
Midstream Co
” means the Original Midstream Co, together with its permitted successors and assigns, including any Midstream
Co Assignee.
Second Amended and
Restated
Gas Gathering Agreement
- 7 -
“
Midstream Co Assignee
” means any Third Party to whom Midstream Co assigns its
rights and obligations in accordance with this Agreement.
“
Midstream Co Group
” means Midstream Co, its Affiliates, and
the directors, officers, employees, and agents, of Midstream Co and its Affiliates; provided that all subsidiaries of OpCo that do not hold equity in Midstream Co shall be excluded from this definition.
“
MMBtu
” means one million Btu.
“
Modifications
” has the meaning given to it in
Section 3.1(c)
.
“
Month
” means a period of time from 7:00 a.m. Mountain Time on the first Day of a calendar month until 7:00 a.m. Mountain
Time on the first Day of the next succeeding calendar month. The term “
Monthly
” shall have the correlative meaning.
“
Monthly Loss/ Gain Report
” means, with respect to any Invoice Month, the report delivered pursuant to
Section 10.1(d)
, which shall include statements of the following with respect to such Invoice Month: (a) the System L&U, (b) the System Fuel and Other System Fuel used by Midstream Co in the operation of the Individual
System, (c) the Product actually burned as Process Flare, and (d) to the extent required by a writing signed by Producer and Midstream Co, the Drip Condensate and Flash Gas recovered by Midstream Co and returned to Producer. With respect
to any allocated volumes (specifically, those described in clauses (c) and, if applicable, (d)), the information included shall be of sufficient detail such that Producer may verify that the allocation procedures then in effect for the
applicable Invoice Month were applied.
“
Moody’s
” means Moody’s Investors Service, Inc., or any successor to
its statistical rating business.
“
On-Line Deadline
” has the meaning given to it in
Section 3.2(b)
.
“
OpCo
” means Noble Midstream Services, LLC, together with its permitted successors and assigns.
“
OpCo Agreement Addendum
” means the Agreement Addendum by and between a Producer and OpCo that expressly states that it is
governed by these Agreement Terms and Conditions.
“
Original Midstream Co
” means the entity identified as the
“Midstream Co” in the applicable Midstream Agreement Addendum as of the Effective Date.
“
Original Producer
”
means Noble Energy, Inc.
“
Original Report
” has the meaning set forth in the definition of “First Development
Report.”
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“
Other System Fuel
” means all actual Product measured and used as fuel by
Midstream Co for Other Services. To the extent any Product is used as fuel and is not System Fuel but such fuel has not been measured, such Product shall be System L&U.
“
Other Services
” means services that (i) are not Services, (ii) are provided to Producer, any of its Affiliates or
to any Third Party, and (iii) pertain to the production of oil, other hydrocarbons, water, and waste products from the production of hydrocarbons.
“
Owner
” has the meaning given to it in
Section 4.1(g)
.
“
Party
” or “
Parties
” with respect to each Midstream Agreement Addendum shall mean the applicable Producer
and the applicable Midstream Co. Unless expressly stated otherwise, references to “Parties” shall not refer to all parties to all Agreements governed hereby. Rather, references to “Parties” shall refer only to such Parties as
determined by the applicable Agreement Addendum. References to a “Party” or the “Parties” shall not include OpCo.
“
Period of Five Years
” means, with respect to any report delivered hereunder, the period from the first Day of the fiscal
quarter during which such report is required to be delivered until the fifth anniversary thereof.
“
Period of Two Years
”
means, with respect to any report delivered hereunder, the period beginning on the first Day of the fiscal quarter during which such report is required to be delivered and ending 24 Months after such date.
“
Permits
” means any permit, license, approval, or consent from a Governmental Authority.
“
Person
” means any individual, corporation, company, partnership, limited partnership, limited liability company, trust,
estate, Governmental Authority, or any other entity.
“
Planned Separator Facility
” has the meaning given to it in
Section 3.1(b)
.
“
Planned Well
” has the meaning given to it in
Section 3.1(b)
.
“
Pressure Overage Percentage
” means an amount equal to the quotient of (a) the difference between (i) the actual
arithmetic average operating pressure of an Individual System and (ii) the Target Pressure for such Individual System for the Month divided by (b) the Target Pressure for such Individual System for such Month.
“
Process Flare
” means the Product flared by Midstream Co (a) in its discretion in light of safety, environmental or
maintenance considerations or (b) at the direction of Producer.
“
Producer
” means the Original Producer, together
with its permitted successors and assigns, including any Producer Assignee.
“
Producer Assignee
” means any Person to whom
Original Producer or any subsequent Producer sells, assigns, or otherwise transfers acreage subject to the Dedications.
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“
Produced Water
” means water that is produced as a byproduct of Producer’s
operation of the Wells that are located in the Dedication Area.
“
Producer Group
” means Producer, its Affiliates, and the
directors, officers, employees, and agents of Producer and its Affiliates.
“
Producer Meters
” means any Measurement
Device owned and operated by Producer (or caused to be installed or operated by Producer).
“
Product
” means any mixture
of gaseous hydrocarbons, consisting essentially of methane and heavier hydrocarbons, including Flash Gas and, unless otherwise expressly provided herein, liquefiable hydrocarbons and Drip Condensate, and including inert and noncombustible gases.
“
Product Dedication
” means the dedication and commitment made by Producer pursuant to
Section 2.1(a)
.
“
Psia
” means pounds per square inch absolute.
“
Purchased Dedicated Production
” means Product produced by a Third Party that (a) either (i) has been purchased by
Producer or (ii) the Parties have mutually agreed should be considered “Dedicated Production,” and (b) for which the Parties have agreed upon a Receipt Point for delivery into the Individual System.
“
Real Property Dedication
” means the dedication and commitment made by Producer pursuant to the first sentence in
Section 2.1(b)
.
“
Receipt Point
” means the point at which custody transfers from Producer to Midstream Co.
The custody transfer point may include: (a) the flange at which the applicable Separator Facility or Well connects to the System, (b) the upstream flange at the Measurement Point agreed by the Parties, or (c) any other point as may be
mutually agreed between the Parties. The Receipt Points in existence on the Effective Date shall be set forth in writing between Producer and Midstream Co, and additional points may become Receipt Points hereunder upon mutual agreement of the
Parties as construction is completed on additional facilities in satisfaction of the needs identified by Producer and the Parties shall continuously update the list of Receipt Points by mutual agreement.
“
Redetermination Deadline
” has the meaning given to it in
Section 6.2(a)(ii)
.
“
Redetermination Proposal
” has the meaning given to it in
Section 6.2(a)(i)
.
“
Redetermined Individual Fee
” has the meaning given to it in
Section 6.2(a)(i)
.
“
Reimbursed Amount
” has the meaning given to it in
Section 10.1(a)
.
“
Release Conditions
” has the meaning given to it in
Section 2.4(a)
.
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“
Releases of Dedication
” means those certain releases of dedication, executed by
and among Original Producer, OpCo and certain of OpCo’s subsidiaries, pursuant to
Section 2.4(a)
prior to March 31, 2016.
“
Rules
” has the meaning given to it in
Section 17.6
.
“
Separator Facility
” means the surface facility where the Product produced from one or more Wells in the Dedication Area is
collected and gas and water are separated from the Crude Oil. A Separator Facility may be known by the Original Producer as an econode but may also refer to a well pad or other facility from which Product is delivered into the System.
“
Service Area
” means (a) with respect to the Original Producer, the area described on
Exhibit A
, except that any
acreage that was released pursuant to the Releases of Dedication shall not be included in this definition of “Service Area”, and (b) with respect to any Producer Assignee, the Dedication Area described in such Producer Assignee’s
Agreement Addendum. Any acreage that is permanently released pursuant to
Section 2.4(a)
or otherwise shall cease to be included in the definition of “Service Area” immediately upon the effectiveness of such permanent release.
“
Services
” means: (a) the receipt of Producer’s owned or Controlled Product at the Receipt Points and the
collection of any Drip Condensate; (b) the receipt of Flash Gas into the System, (c) the gathering (and, to the extent stated in
Section 5.4(d)
, compressing) of such Product and the collection of any Drip Condensate in the
Individual System; (d) the redelivery of Product with a Thermal Content specified in
Section 5.3
; (e) the delivery of Drip Condensate into the Crude Oil Gathering System at an appropriate Delivery Point or into Condensate
storage tanks; and (f) the other services to be performed by Midstream Co in respect of such Product as set forth in this Agreement, all in accordance with the terms of this Agreement (including any services with respect to the Thermal Content
of the received or delivered Product and Drip Condensate, metering services, other services to account for System L&U, System Fuel, Other System Fuel, Process Flare, and if agreed upon by Producer and Midstream Co in writing, Flash Gas and Drip
Condensate, that may result in a reduction of or an increase to the redelivered Product pursuant to
Section 5.3
.)
“
Services Fee
” means, collectively, the fees described in
Section 6.1
.
“
Spacing Unit
” means the area fixed for the drilling of one Well by order or rule of any applicable Governmental Authority,
or (if no such order or rule is applicable) the area fixed for the drilling of a Well or Planned Well reasonably established by the pattern of drilling in the applicable area or otherwise established by Producer in its reasonable discretion.
“
Standard & Poor’s
” means Standard & Poor’s Rating Group, a division of McGraw Hill, Inc., or any
successor to its statistical rating business.
“
Standard Cubic Foot
” means that quantity of Product that occupies one
cubic foot of space when held at a base temperature of 60 degrees Fahrenheit and a pressure of 14.73 Psia.
“
State
” means
the state in which the Individual System is located.
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“
System
” means all Individual Systems described in all of the Agreement Addenda,
collectively, including: (a) pipelines; (b) to the extent stated in
Section 5.4(d)
, compression facilities; (c) central processing facilities, (d) controls, (e) Delivery Points, meters and measurement facilities;
(f) owned condensate collection and storage facilities; (g) easements, licenses, rights of way, fee parcels, surface rights and Permits; and (h) all appurtenant facilities, in each case, that are owned, leased or operated by each
Midstream Co to provide Services to Producer or Third Parties, as such gathering system and facilities are modified or extended from time to time to provide Services to Producer pursuant to the terms hereof or to Third Parties, including the
Facility Segments operated under this Agreement by each Midstream Co specified in the Agreement Addenda.
“
System Fuel
”
means all actual Product measured and used as fuel for the System, including Product used as fuel for compressor stations (to the extent stated in
Section 5.4(d)
), stated in MMBtu. To the extent any Product is used as fuel and is not
Other System Fuel but such fuel has not been measured, such Product shall be System L&U.
“
System L&U
” means any
Product, in terms of MMBtu, received into the System that is lost or otherwise not accounted for incident to, or occasioned by, the gathering, compressing (to the extent stated in
Section 5.4(d)
), and redelivery, of Product, including
Product used as fuel to the extent not measured by Midstream Co, Product released through leaks, instrumentation, relief valves, flares and blow downs of pipelines, vessels and equipment, measurement losses or inaccuracies, or is vented, flared or
lost in connection with the operation of a pipeline, including line pack for new facilities; provided that to the extent the Producer instructs Midstream Co to flare gas, such Process Flare shall not constitute System L&U.
“
System Plan
” has the meaning given to it in
Section 3.1(c)
.
“
Target On-Line Date
” means (a) with respect to a Planned Separator Facility or, with respect to a Planned Well that is
not intended to be serviced by a Separator Facility, such Planned Well, in either case, that is described for the first time in the Original Report, the date specified in the Original Report for the applicable Planned Separator Facility or Planned
Well, as applicable, (b) with respect to any Planned Separator Facility or, with respect to any Planned Well that is not intended to be serviced by a Separator Facility, such Planned Well, in either case, that is described in a First
Development Report that is not the Original Report, 24 Months after the date of such First Development Report, unless Midstream Co consents to a shorter time period, and (c) with respect to any Planned Separator Facility or, with respect to any
Planned Well that is not intended to be serviced by a Separator Facility, such Planned Well, in either case, that is not described in the First Development Report, 24 Months after the date of the Development Report that initially reflects the
Planned Separator Facility or Planned Well, as applicable, unless Midstream Co consents to a shorter time period.
“
Target
Pressure
” means, with respect to any Individual System, the pressure set forth on the applicable Midstream Agreement Addendum, which such stated “Target Pressure” shall be the pressure for the applicable Individual System in the
System Plan.
“
Tender
” means the act of Producer’s making Product available or causing Product to be made available
to the System at a Receipt Point. “
Tendered
” shall have the correlative meaning.
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“
Term
” has the meaning given to it in
Section 8.1
.
“
Thermal Content
” means, for Product, the product of the measured volume in Mcfs multiplied by the Gross Heating Value per
Mcf, adjusted to the same pressure base of 14.73 Psia and expressed in MMBtu; and for a liquid, the product of the measured volume in gallons multiplied by the Gross Heating Value per Gallon determined in accordance with the GPA 2145-09 Table of
Physical Properties for Hydrocarbons and GPA 8173 Method for Converting Mass of Natural Gas Liquids and Vapors to Equivalent Liquid Volumes, in each case as revised from time to time.
“
Third Party
” means any Person other than a Party to this Agreement or any Affiliate of a Party to this Agreement.
“
Third Party Assignment
” has the meaning given to it in
Section 16.1(a)
.
“
Transaction Document
” means each agreement entered into pursuant to the agreement terms and conditions related to gas
gathering services, agreement terms and conditions related to oil gathering services, agreement terms and conditions related to produced water services, agreement terms and conditions related to gas processing services, agreement terms and
conditions related to crude oil treating services, and agreement terms and conditions related to fresh water services, now or in the future existing between Producer and Midstream Co.
“
Well
” means a well (i) for the production of hydrocarbons, (ii) that is located in the Dedication Area,
(iii) in which Producer owns an interest, and (iv) for which Producer has a right or obligation to market Product produced thereby through ownership or pursuant to a marketing, agency, operating, unit, or similar agreement.
“
Year
” means a period of time from January 1 of a calendar year through December 31 of the same calendar year;
provided
that the first Year shall commence on the Effective Date and run through December 31 of that calendar year, and the last Year shall commence on January 1 of the calendar year and end on the Day on which this Agreement
terminates.
Section 1.2
Other Terms
. Other capitalized terms used in this Agreement and not defined in
Section 1.1
above have the meanings ascribed to them throughout this Agreement.
Section 1.3
References and Rules of
Construction
. All references in this Agreement to Exhibits, Appendices, Articles, Sections, subsections and other subdivisions refer to the corresponding Exhibits, Appendices, Articles, Sections, subsections and other subdivisions of or to this
Agreement unless expressly provided otherwise. Titles appearing at the beginning of any Articles, Sections, subsections and other subdivisions of this Agreement are for convenience only, do not constitute any part of this Agreement, and shall be
disregarded in construing the language hereof. The words “this Agreement,” “herein,” “hereby,” “hereunder” and “hereof,” and words of similar import refer to this Agreement as a whole, including the
applicable Agreement Addendum and all Exhibits, Appendices, and other attachments to these Agreement Terms and Conditions and the applicable Agreement Addendum, all of which are incorporated herein, and not to any particular Exhibit, Appendix,
Article, Section, subsection or other subdivision unless expressly so limited. The word “including” (in its various forms) means
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“including without limitation.” The word “or” shall mean “and/or” unless a clear contrary intention exists. The word “from” means from and including, the
word “through” means through and including, and the word “until” means until but excluding. All references to “$” or “dollars” shall be deemed references to United States dollars. The words “will”
and “shall” have the same meaning, force, and effect. Each accounting term not defined herein will have the meaning given to it under generally accepted accounting principles. Pronouns in masculine, feminine or neuter genders shall be
construed to state and include any other gender, and words, terms and titles (including terms defined herein) in the singular form shall be construed to include the plural and vice versa, unless the context otherwise requires. References to any Law,
contract or other agreement mean such Law, contract or agreement as it may be amended, supplemented, released, revised, replaced, or otherwise modified from time to time.
Article 2
Product
Dedication and Real Property Dedication
Section 2.1
Producer’s Dedications
.
(a)
Product Dedication
. Subject to
Section 2.2
through
Section 2.4
, during the Term, Producer exclusively
dedicates and commits to deliver to Midstream Co under this Agreement, as and when produced, all of the Dedicated Production and agrees not to deliver any Dedicated Production to any other gatherer, purchaser, marketer, or other Person prior to
delivery to Midstream Co at the Receipt Points.
(b)
Real Property Dedication
. Subject to
Section 2.2
through
Section 2.4
, during the Term, Producer dedicates and commits the Dedicated Properties to Midstream Co for performance of the Services pursuant to this Agreement. Except for the Parties’ performance of their obligations under this
Agreement, no further performance is required by either Party to effectuate the Real Property Dedication.
Section 2.2
Conflicting
Dedications
.
(a) Notwithstanding anything in this Agreement to the contrary, Producer shall have the right to comply with
(i) each of the Conflicting Dedications existing on the Effective Date or, in the case of a Producer Assignee, the effective date of such assignment, and (ii) any other Conflicting Dedication applicable as of the date of acquisition of any
oil and gas leases, mineral interests, and other similar interests within the Dedication Area that are acquired by Producer after the Effective Date and otherwise would have become subject to the Dedications (but not any Conflicting Dedications
entered into in connection with such acquisition). Producer shall have the right to comply with a Conflicting Dedication only until the first Day of the Month following the termination of such Conflicting Dedication. Producer shall not extend or
renew any Conflicting Dedication and shall terminate each Conflicting Dedication as soon as permitted under the underlying contract without causing Producer to incur any costs or expenses deemed unreasonable or inappropriate in the opinion of
Producer and shall not enter into any new Conflicting Dedication.
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(b) Certain Conflicting Dedications contain rights of first refusal or other provisions that
(i) entitle Producer to a release of acreage from such Conflicting Dedication if Producer dedicates the released acreage to a Third Party or (ii) expressly prohibit Producer from dedicating such released acreage to an Affiliate of
Producer. As used herein, the term “
Conflicting Dedication
” shall include both the original right of first refusal (or similar right) and the dedication resulting from an exercise of such right of first refusal (or similar right) so
long as the resulting dedication covers the same acreage as the original Conflicting Dedication.
(c) To the extent Producer claims that a
Conflicting Dedication exists with respect to certain Services on specified Dedicated Properties, Midstream Co shall have the right to review the documentation creating such Conflicting Dedication, subject to confidentiality requirements applicable
to such Conflicting Dedication.
Section 2.3
Producer’s Reservation
. Producer reserves the following rights respecting
Dedicated Production for itself:
(a) to operate (or cause to be operated) Wells producing Dedicated Production in its sole discretion,
including the right to drill new Wells, repair and rework old Wells, temporarily shut in Wells, renew or extend, in whole or in part, any oil and gas lease or term mineral interest, or cease production from or abandon any Well or surrender any
applicable oil and gas lease, in whole or in part, when no longer deemed by Producer to be capable of producing in paying quantities under normal methods of operation;
(b) to use Dedicated Production for lease operations (including reservoir pressure maintenance) and water treatment facility operations
relating to the lands within the Dedication Area;
(c) to deliver such Dedicated Production or furnish such Dedicated Production to
Producer’s lessors and holders of other burdens on production with respect to such Dedicated Production as is required to satisfy the terms of the applicable oil and gas leases or other applicable instruments; and
(d) to pool, communitize or unitize Producer’s interests with respect to Dedicated Production;
provided
that Producer’s
share of Dedicated Production produced from such pooled, communitized, or unitized interests shall be committed and dedicated pursuant to this Agreement.
Section 2.4
Releases from Dedication
.
(a)
Permanent Releases
. Midstream Co shall permanently release from the Dedications: (i) any Dedicated Production from any Well,
Dedicated Properties, or Spacing Unit affected by one or more of the Release Conditions, (ii) any Dedicated Production that would have been delivered to a Separator Facility affected by one or more of the Release Conditions, (iii) any
Dedicated Properties affected by one or more of the Release Conditions and (iv) any Purchased Dedicated Production for which the Individual System has been affected by one or more of the Release Conditions. The “
Release
Conditions
” are:
(i) Midstream Co’s failure to complete the facilities that are described on a System Plan
and that are necessary to connect any Planned Separator Facility or Planned Wells to the System or failure to commence the Services with respect to any Planned Separator Facility or Planned Wells by the applicable On-Line Deadline (so long as such
failure was not the result of Producer’s failure to comply with the then-applicable Development Report);
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(ii) Midstream Co’s election (x) pursuant to
Section 3.1(c)
not to provide Services for any Well or Separator Facility included in a Development Report delivered by a Producer that is not the Original Producer or (y) pursuant to
Section 3.3(b)
not to provide Services for (1) any Well or
Separator Facility for which Producer failed to deliver a Development Report on or before the applicable deadline set forth in
Section 3.1(a)
, (2) any Well or Separator Facility not described in the applicable Development Report, or
(3) any excess volume of Product produced from any Well during any Day that exceeds the volume included in Producer’s estimate set forth in the most recent Development Report delivered to Midstream Co;
(iii) expiration of the Term, as further described in
Section 8.2
;
(iv) written agreement of Producer and Midstream Co, and each Party shall consider in good faith any proposal by the other
Party to permanently release any Dedicated Production or Dedicated Properties;
(v) the occurrence of a Force Majeure of
the type described in clauses (l), (m) or (n) of the definition of “
Force Majeure
” affecting Midstream Co that continues for a period of 120 Days or more;
(vi) Midstream Co’s interruption or curtailment of receipts and deliveries of Product from any Well or Separator Facility
pursuant to
Section 5.5
that continues for 90 Days or more, except to the extent Producer elects to reduce the Individual Fee with respect to any volumes that are affected by a Downtime Event pursuant to
Section 6.2(c)
;
(vii) a default (other than a default of the type covered by
Section 2.4(a)(i)
) by Midstream Co that remains
uncured for 90 Days or more;
(viii) Producer’s rejection of any increase in the Individual Fee pursuant to
Section 13.1(b)
; or
(ix) (x) Midstream Co’s suspension of Services pursuant to
Section 13.2(a)(ii)
that extends for the period of time stated in such Section or (y) Midstream Co’s election not to expand an Individual System pursuant to
Section 13.2(b)
.
Producer may deliver any Dedicated Production released from the Dedications pursuant to this
Section 2.4(a)
to such other
gatherers as it shall determine.
(b)
Temporary Release
. Midstream Co shall temporarily release from the Dedications: (i) any
Dedicated Production from any Well, Dedicated Properties, or Spacing Unit affected by one or more of the Interruption Conditions, (ii) any Dedicated Production that would have been delivered to a Separator Facility affected by one or more of
the Interruption Conditions, (iii) any Dedicated Properties affected by one or more of the Interruption Conditions, and (iv) any Purchased Dedicated Production for which the Individual System has been affected by one or more of the
Interruption Conditions. The “
Interruption Conditions
” are:
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(i) the occurrence and continuation of an uncured default by Midstream Co;
(ii) Midstream Co’s interruption or curtailment of receipts and deliveries of Product pursuant to
Section 5.5
that continues for a period of 30 consecutive Days, except to the extent Producer elects to reduce the Individual Fee with respect to any volumes that are affected by a Downtime Event pursuant to
Section 6.2(c)
;
(iii) Until a permanent release is required under
Section 2.4(a)
or
Section 13.2
, Midstream Co’s
suspension of Services pursuant to
Section 13.2(a)
(and, if
Section 13.2(a)(i)
applies, such temporary release shall continue at the discretion of Midstream Co, subject to the time limits set forth in
Section 13.2(a)(i)
); or
(iv) Midstream Co’s election not to expand an Individual System or System
pursuant to
Section 13.2(b)
.
Producer may make alternative arrangements for the gathering of any Dedicated Production
temporarily released from the Dedications pursuant to this
Section 2.4(b)
. To the extent that an interruption or curtailment can be limited to a Facility Segment, Midstream Co shall so limit such interruption or curtailment, and to the
extent that Midstream Co does so limit such curtailment or interruption, the temporary release permitted by this
Section 2.4(b)
shall only apply to the affected Facility Segment. Such temporary release shall continue until the first Day
of the Month after the Month during which Midstream Co cures the applicable default or the interruption, curtailment, or suspension of Services terminates;
provided
that, if Producer obtained temporary services from a Third Party (pursuant to
a contract that does not give rise to a default under this Agreement) during the pendency of such default, interruption, curtailment, or suspension, such release shall continue until the earlier of (A) the first Day of the Month that is six
Months after the event or condition that gave rise to the interruption, curtailment or other temporary cessation has been corrected and (B) the first Day of the Month after the termination of the applicable contract with such Third Party. For
the avoidance of doubt, the temporary services that Producer may obtain under
Section 3.3
shall not constitute a release under the terms of this Agreement; provided that, if Producer cannot obtain such temporary services without a
temporary release, Midstream Co may in its discretion grant or refuse to grant a temporary release on such terms as reasonably required by Midstream Co (including, for example, conditioning the grant of a temporary release on the establishment of a
termination date for such temporary release).
(c)
Evidence of Release
. At the request of Producer, the Parties shall execute a
release agreement reasonably acceptable to all Parties (which, in the case of a permanent release, shall be in recordable form) reflecting any release of Dedicated Production or Dedicated Properties pursuant to this
Section 2.4
.
Section 2.5
Covenants Running with the Land
. Subject to the provisions of
Section 2.3
and
Section 2.4
,
each of the Dedications (a) is a covenant running with the Dedicated Properties, (b) touches and concerns Producer’s interests in the Dedicated Properties, and
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(c) shall be binding on and enforceable by Midstream Co and its successors and assigns. Except as set forth in
Article 16
, (i) in the event Producer sells, transfers,
conveys, assigns, grants or otherwise disposes of any or all of its interest in the Dedicated Properties, then any such sale, transfer, conveyance, assignment, grant or other disposition shall be made subject to this Agreement and (ii) in the
event Midstream Co sells, transfers, conveys, assigns, grants or otherwise disposes of any or all of its interest in the Individual System, then any such sale, transfer, conveyance, assignment, grant or other disposition shall be made subject to
this Agreement. The Real Property Dedication is not an executory contract under Section 365 of Title 11 of the United States Code (11 U.S.C. § 365).
Section 2.6
Recording of Agreement
. Producer hereby authorizes Midstream Co to record a memorandum of the Agreement in the real
property records of the counties in which the Service Area is located. Midstream Co and Producer agree that until Midstream Co provides notice to the contrary, all payment terms and pricing information shall remain confidential and be redacted from
any filings in the real property records.
Article 3
System Expansion and Connection of Wells
Section 3.1
Development Report; System Plan; Meetings
.
(a)
Development Report
. Original Producer will provide, on or before July 1, 2016, and each Producer Assignee will provide, on or
before the date stated in Section 16.1, Midstream Co with its First Development Report, which shall describe (x) in detail the planned development, drilling, and production activities relating to the Dedicated Production through the end of
the applicable Period of Two Years, and (y) generally the long-term drilling and production expectations for those project areas in which drilling activity is expected to occur during the applicable Period of Five Years, including the
information described in
Section 3.1
(b). On or before each January 1, each April 1, each July 1, and each October 1 of each Year following the date on which the First Development Report is to be delivered, Producer
shall provide to Midstream Co an update of the then-current report (the First Development Report, as updated in accordance with the foregoing and as the then current report may be updated from time to time, the “
Development
Report
”).
(b)
Development Report Content
. With respect to the Dedication Area, the Development Reports shall include
information as to:
(i) the Wells (each, a “
Planned Well
”) and Separator Facilities (each, a
“
Planned Separator Facility
”) that Producer expects to drill or install during the applicable Period of Two Years, including the expected locations, completion dates thereof (which completion dates shall not be earlier than the
applicable Target On-Line Dates), the expected spud dates of such Planned Wells, and dates flow is anticipated to initiate from such Wells;
(ii) the anticipated Daily volumes, pressures and quality characteristics of the production from any Well and Separator
Facility that Producer expects to produce during the applicable Period of Two Years;
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(iii) the Receipt Points and Delivery Points (including proposed receipt points
and delivery points not yet agreed in writing among the Parties) at which Product produced from each Well is to be delivered by or redelivered to Producer during the applicable Period of Two Years;
(iv) the number of Planned Wells and Planned Separator Facilities anticipated to be producing after the Period of Two Years and
before the end of the Period of Five Years, broken out by an appropriate geographic area, such as a development plan area;
(v) the actual lateral length for each Well described in the Period of Two Years, the anticipated lateral length for each
Planned Well described in the Period of Two Years and initial assumptions for the planned lateral length for each Planned Well anticipated to be producing after the Period of Two Years and before the end of the Period of Five Years;
(vi) the number of rigs that Producer intends to operate in the Dedication Area each year during the Period of Five Years
(including sufficient detail regarding the anticipated location of such rigs to allow Midstream Co to determine which Individual System would be impacted by such rig activity);
(vii) with respect to the Period of Two Years, the anticipated date of each frac, the quantity of fresh water required to
complete such frac and an indication of the type of frac to be performed (slick, hybrid gel, gel, etc);
(viii) with
respect to the Period of Two Years, the anticipated date on which Midstream Co may initiate construction or other development activities at the Well or Separator Facility in order to complete the interconnection into the Individual System; and
(ix) such other information as may be reasonably requested by Midstream Co with respect to Wells and Separator Facilities that
Producer intends to drill or from which Producer intends to deliver Product during the Period of Two Years and Period of Five Years.
To
the extent possible, any information Producer is required to provide under this
Section 3.1(b)
with respect to Wells or Separator Facilities shall also include such information related to Planned Wells and Planned Separator Facilities.
In addition, if appropriate to provide a complete and accurate Development Report, any information requested with respect to Planned Wells and Planned Separator Facilities shall also be provided with respect to existing Wells or Separator
Facilities.
(c)
System Plan
. Based on the Development Report and such other information about the expected development of the
Dedicated Properties as shall be provided to Midstream Co by or on behalf of Producer, including as a result of meetings between representatives of Midstream Co and Producer, Midstream Co shall develop and periodically update a plan
(the “
System Plan
”) describing or depicting the modifications, extensions, enhancements, major maintenance and other actions necessary in order for the Individual System to be able to provide
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Gas Gathering Agreement
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timely Services for the Product produced by the Wells and Separator Facilities described in the most recent Development Report (including Planned Wells, Planned Separator Facilities and changes
in anticipated production from existing Wells and Separator Facilities). Without limiting or otherwise altering Midstream Co’s rights under
Section 13.2
, unless the applicable Well or Separator Facility is operated by Original
Producer, Midstream Co may elect, in its sole discretion, not to make such modifications, extensions, enhancements, major maintenance, or other actions to the System (the “
Modifications
”) and not to provide Services for any
Wells or Separator Facilities included in a Development Report delivered by a Producer that is not the Original Producer. If (i) Midstream Co elects to make such Modifications, (ii) Producer thereafter modifies the Development Report or
provides other information (the date on which the modified Development Report or such other information is provided to Midstream Co, the “
Cancellation Date
”) indicating that such Modifications are no longer necessary, and
(iii) as of the Cancellation Date, the actual aggregate costs and expenses (excluding Excluded Amounts) incurred or committed by Midstream Co to make such cancelled Modifications exceeds $100,000.00, then Producer shall reimburse Midstream Co
for all reasonable and documented costs and expenses (other than the Excluded Amounts) incurred or committed by Midstream Co through the Cancellation Date to make such Modifications. The System Plan (or, with respect to the allocation procedures
described in clause (vi), the applicable writing signed by Midstream Co and Producer) shall include information as to:
(i)
each Facility Segment then existing and operational, under construction, or planned and the Individual System of which such Facility Segment is a part;
(ii) all Receipt Points and Delivery Points served or to be served by each such Facility Segment;
(iii) estimated gathering pressures for the 12 Month period beginning on the Target On-Line Date for the applicable Facility
Segment and the Target Pressures and the MAOP for each Individual System included in the Development Report;
(iv) all
compression (to the extent stated in
Section 5.4(d)
) and other major physical facilities located or to be located on or within each such Facility Segment, together with their sizes, operating parameters, capacities, and other relevant
specifications (including the maximum operating pressures of the low pressure gathering lines and the high pressure gathering lines), which sizes, parameters, capacities and other relevant specifications shall be sufficient to (x) connect the
Individual System to the Receipt Points and Delivery Points for all Planned Separator Facilities and (with respect to any Planned Wells not intended to be serviced by a Separator Facility) Planned Wells set forth in the most recent Development
Report, (y) perform the Services for all Dedicated Production projected to be produced from the Dedicated Properties as contemplated by the most recent Development Report, and (z) permit Product to enter the facilities of Downstream
Facilities but at prices no higher than the MAOP;
(v) the anticipated schedule for completing the construction and
installation of the planned Facility Segments and all planned Receipt Points and Delivery Points, in each case, for all Planned Separator Facilities or Planned Wells, as applicable, included in the most recent Development Report;
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(vi) the allocation methodologies to be used by Midstream Co with respect to
System L&U, System Fuel, Other System Fuel, and other allocations hereunder (including, to the extent required by a writing signed by Producer and Midstream Co, allocations with respect to Drip Condensate and Flash Gas) and, with respect to any
System Plan after the initial System Plan, any proposed changes to the allocation methodologies then in effect, which allocation methodologies (A) shall permit allocations to be made by Midstream Co in a commercially reasonable manner;
(B) be based upon the measurements taken and quantities determined for the applicable Month; and (C) may take into account the following factors: throughput volumes, total consumption of System Fuel and Other System Fuel, System L&U,
the Thermal Content of Drip Condensate, the Thermal Content of Flash Gas, the relative effort required to move the applicable product through the facilities of Midstream Co and other factors determined in good faith by Midstream Co; profit shall not
be a component in the allocation of System L&U, System Fuel, Other System Fuel, or if applicable, Flash Gas or Drip Condensate; to the extent required by a writing signed by Producer and Midstream Co, Midstream Co shall allocate, in a manner
that is commercially reasonable and determined by Midstream Co in good faith, to a particular Receipt Point, the Drip Condensate from a Facility Segment, but shall have no obligation to allocate back Flash Gas, System L&U, System Fuel or Other
System Fuel to any particular Receipt Point; and
(vii) other information reasonably requested by Producer that is relevant
to the design, construction, and operation of the System, the relevant Individual System, the relevant Facility Segment, and the relevant Receipt Points and Delivery Points; provided that in no event shall Midstream Co be obligated to supply to
Producer (A) pricing, budget or similar financial information or (B) information that is covered by a confidentiality agreement or confidentiality obligations;
Midstream Co shall deliver the applicable System Plan (including any updated System Plan) to Producer for Producer’s review and comment not later than 30
Days after Producer’s delivery to Midstream Co of the applicable Development Report or amendment thereto.
(d)
Meetings
.
Midstream Co shall make representatives of Midstream Co available to discuss the most recent System Plan with Producer and its representatives at Producer’s written request. Producer shall make representatives of Producer available to discuss
the most recent Development Report with Midstream Co and its representatives at Midstream Co’s written request. The Parties agree that the meetings described in the previous sentences of this clause (d) may occur (and shall, if requested
by either Party) on a Monthly basis. At all such meetings, the Parties shall exchange updated information about their respective plans for the development and expansion of the Dedicated Properties (including amendments to the Development Report) and
the System (including amendments to the System Plan for Producer’s review and comment) and shall have the opportunity to discuss and provide comments on the other Party’s plans.
(e)
Scope and Purpose of Planning Tools
. The Development Report and the System Plan are intended to assist Midstream Co and Producer
with long-term planning and goals. None of the Development Reports nor the System Plans shall amend or modify this Agreement in any way. In the sole discretion of each Person serving as a Midstream Co under a Midstream Agreement Addendum, such
Midstream Co may work with any other Midstream Co to prepare
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Gas Gathering Agreement
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and deliver a System Plan jointly. To the extent that a Development Report or System Plan that satisfies the requirements above is delivered or deemed delivered under any other Transaction
Document, such Development Report or System Plan shall be deemed delivered hereunder.
Section 3.2
Expansion of System and
Connection of Separator Facilities
.
(a)
Service Standards
. Midstream Co shall, at its sole cost and expense, design, construct
(as applicable), and own the Individual System in a good and workmanlike manner and in accordance with the System Plan and this
Section 3.2
. Until such time as Producer has delivered a Development Report, Midstream Co shall have no
obligation under this
Section 3.2(a)
.
(b)
On-Line Deadline
. Subject to
Section 12.2
, Midstream Co shall by
the later of (x) the date that the first Planned Well on a particular Planned Separator Facility (or, with respect to a Planned Well that is not intended to be serviced by a Separator Facility, the date that such Planned Well) is ready for
connection to the System and (y) the applicable Target On-Line Date (such later date, the “
On-Line Deadline
”): (i) have completed (or caused the completion of) the construction of the necessary facilities, in accordance
with the then current System Plan, (A) to connect such Planned Separator Facility or such Planned Well to the System and (B) to connect the System to each planned Delivery Point for such Planned Separator Facility or such Planned Well, as
applicable, and (ii) be ready and able to commence Services with respect to Dedicated Production from such Planned Separator Facility or Planned Well, as applicable.
(c)
Additional/Accelerated Well
. From time to time, Producer may provide notice to Midstream Co that Producer has accelerated the Target
On-Line Date for a Planned Well or Planned Separator Facility (any such Well or Separator Facility, an “
Additional/Accelerated Well
”). Midstream Co will use its commercially reasonable efforts to modify the System Plan and to cause
the necessary gathering facilities to be constructed prior to the On-Line Deadline for such Additional/Accelerated Well. From time to time, Producer may provide notice to Midstream Co that Producer (i) has delayed the Target On-Line Date for a
Planned Well or Planned Separator Facility, (ii) subject to Section 3.2(d), anticipates eliminating a Planned Well or Planned Separator Facility from its development plans and the Development Report, or (iii) anticipates shutting in a
Well or Separator Facility that has been producing. Midstream Co may adjust the System Plan as it determines to be appropriate and commercially reasonable to accommodate such elimination of such Wells and Separator Facilities.
(d)
Cancellation of Planned Wells and Planned Separator Facilities
. If (i) Midstream Co reasonably determines that Producer has
permanently abandoned the drilling or installation of any Planned Well or Planned Separator Facility or Producer notifies Midstream Co that Producer intends to permanently abandon the drilling or installation of any Planned Well or Planned Separator
Facility (whether through the delivery of an updated Development Report or otherwise, the date on which such determination is made, the “
Abandonment Date
”), (ii) Midstream Co had begun to design or construct the Facility
Segment to connect such Planned Well or Planned Separator Facility to the System prior to such Abandonment Date, and (iii) the actual aggregate costs and expenses (excluding Excluded Amounts) incurred or committed by Midstream Co prior to the
Abandonment Date exceeds $100,000.00, then Producer shall reimburse Midstream Co for all reasonable and documented costs and expenses (other than the Excluded Amounts) incurred or committed by Midstream Co prior to such Abandonment Date to design
and construct such Facility Segment.
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Section 3.3
Temporary Services.
(a) Pending the completion of facilities contemplated in a System Plan or that may be required to service Wells in existence as of the
Effective Date, Producer may enter into a contract with a Third Party to provide services with respect to the Dedicated Production that is anticipated to be serviced by the new, modified, or enhanced facilities if the term of such contract does not
exceed six Months (and may be renewed in six-Month increments until such time as Midstream Co has completed the applicable facilities). If any such contract is in effect with respect to any Well, Producer will not be obligated to connect such Well
to the System until the first Day of the Month following expiration of such contract.
(b) If at any time, (i) Producer fails to
deliver a Development Report on or before the applicable deadline set forth in
Section 3.1(a)
, (ii) a Development Report delivered by Producer failed to describe any Well, or (iii) the average rate of production at any Receipt
Point described in the then-applicable Development Report exceeds Producer’s forecast for such Receipt Point set forth in such Development Report, and as a result, Midstream Co has not completed any new, modified, or enhanced facilities
necessary to allow Midstream Co to accept all of the Product Tendered by Producer at a Receipt Point, then (x) within a reasonable time after Midstream Co becomes aware of the need for such new, modified, or enhanced facilities, Midstream Co
shall elect, in its sole discretion, whether to proceed with the development and completion of such facilities by providing notice to Producer, and (y) if Midstream Co elects to proceed with the development and completion of such facilities,
(1) Midstream Co shall cause such facilities to be completed within a reasonable time after such election, and (2) pending the completion of such facilities, Midstream Co may elect (in its reasonable discretion and in exchange for
reasonable compensation) to permit Producer to enter into a contract with a Third Party as provided in
Section 3.3(a)
to provide services with respect to the Dedicated Production that Midstream Co is unable to accept.
Section 3.4
Cooperation
. The Parties shall work (at their own cost and expense) together in good faith to obtain such Permits as
are necessary to drill and complete each Planned Well and construct the required extensions of the System to each Planned Separator Facility (and each Planned Well, as applicable) as expeditiously as reasonably practicable, all as provided in this
Agreement. The Parties shall cooperate with each other and to communicate regularly regarding their efforts to obtain such Permits. Upon request by Producer, Midstream Co shall promptly provide to Producer copies of all Permits obtained by Midstream
Co in order to construct any Facility Segment (or portion of a Facility Segment) of the System.
Section 3.5
Grant of Access; Real
Property Rights
(a)
Producer’s Grant of Access
. Producer hereby grants to Midstream Co, without warranty of title, either
express or implied, to the extent that it may lawfully and is contractually permitted to do so without the incurrence of additional expense, the rights of ingress and egress with respect to, and the right to access, all lands constituting Dedicated
Properties for the purpose of using, maintaining, servicing, inspecting, repairing, and operating all or any portion
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Gas Gathering Agreement
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of the applicable Individual System, including all pipelines, meters and other equipment necessary for the performance by Midstream Co of this Agreement. Such right of access shall not include
any right to install, replace, disconnect, or remove all or any portion of the applicable Individual System, which rights may only be granted pursuant to a separate instrument entered into pursuant to
Section 3.5(f)
.
(b)
Producer Does Not Have Obligation to Maintain
. Producer shall not have a duty to maintain in force and effect any underlying
agreements (such as any lease, easement, or surface use agreement) that the grant of access by Producer to Midstream Co under
Section 3.5(a)
is based upon, and such grant will terminate if Producer loses its rights to the applicable
property, regardless of the reason for such loss of rights.
(c)
Midstream Co’s Grant of Access
. Midstream Co hereby grants to
Producer, without warranty of title, either express or implied, to the extent that it may lawfully and is contractually permitted to do so without the incurrence of additional expense, the rights of ingress and egress with respect to, and the right
to access, all lands covered by the Individual System in order to exercise its rights and obligations hereunder. Such right shall not include any right to install, replace, disconnect, or remove any facilities on such lands, which rights may only be
granted pursuant to a separate instrument entered into pursuant to
Section 3.5(f)
. Producer shall release, protect, defend, indemnify and hold harmless Midstream Co Group from and against all Losses directly or indirectly arising out of
or in connection with bodily injury, death, illness, disease, or loss or damage to property of Midstream Co or any member of Midstream Co Group directly arising from Producer’s exercise of its access rights hereunder, except to the extent such
Losses are caused by the gross negligence or willful misconduct of Midstream Co Group.
(d)
Midstream Co Does Not Have Obligation to
Maintain
. Midstream Co shall not have a duty to maintain in force and effect any underlying agreements that the grant of access by Midstream Co to Producer pursuant to this
Section 3.5(d)
is based upon, and such grant will terminate
if Midstream Co loses its rights to the applicable property, regardless of the reason for such loss of rights.
(e)
No Interference
.
A Party’s exercise of the rights granted to a Party by the other Party pursuant to this
Section 3.5
shall not unreasonably interfere with the granting Party’s operations or with the rights of owners in fee with respect to the
applicable lands, and such rights will be exercised in material compliance with all applicable Laws and the safety and other reasonable access requirements of the granting Party. Each Party obtaining a right of access pursuant to this
Section 3.5
shall have the status of “licensee,” except when such Party is accessing the applicable real property by way of a right-of-way, easement, or other similar real property right granted pursuant to a separate
instrument.
(f)
Real Property Rights
. Each Party shall acquire and maintain all easements, rights of way, surface use, surface
access agreements, and other real property rights from Third Parties necessary to perform its obligations hereunder. To the extent a Party has the contractual right and title to do so, such Party shall provide to the other Party the right of
co-usage on the easements, sub-easements, rights of way, surface use, and other real property rights held by such Party covering lands for which the other Party requires real property rights to perform its
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Gas Gathering Agreement
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obligations hereunder, all at no cost to the providing Party and on terms and conditions mutually acceptable to the Parties in their reasonable discretion. Where a Party does not have the
contractual right to do so, such Party shall provide reasonable assistance to the other Party in obtaining the real property rights with respect to such lands as necessary or desirable to perform its obligations hereunder.
Article 4
Measurement
Devices
Section 4.1
Measurement Devices
.
(a) Midstream Co shall construct, install, own, and operate (or cause to be constructed, installed, and operated) the Measurement Devices
located at the Measurement Points. Midstream Co may, in its discretion, construct, install, own, and operate (or cause to be constructed, installed, and operated) Measurement Devices located at or upstream of the Delivery Points or at or downstream
of the Receipt Points.
(b) Midstream Co shall cause all Measurement Devices that are owned by Midstream Co to be constructed, installed,
and operated in accordance with applicable industry standards and applicable Laws, and as set forth in the current System Plan.
(c)
Producer shall have the right, at its sole expense, to install, own and operate Measurement Devices located at the Measurement Points, Receipt Points and Delivery Points. Producer shall cause Producer Meters to be installed, subsequent to providing
a minimum of 72 hours’ notice to Midstream Co, so as not to interfere with Midstream Co’s Measurement Devices and shall take steps that are reasonable and customary in the industry to mitigate or prevent any Product pulsation problems or
Product quality problems (such as sand or water) that may interfere with Midstream Co’s Measurement Devices at the Measurement Points.
(d) Midstream Co may elect to use a Producer Meter as the Measurement Device for a Measurement Point in lieu of constructing, installing,
owning, and operating a Measurement Device located at such Measurement Point by providing notice to Producer (including by detailing such election in the applicable System Plan). If Midstream Co elects to use such Producer Meter as the Measurement
Device for a Measurement Point, Producer shall provide Midstream Co reasonable access to such Producer Meter, including prior advance notice of, and the ability to witness, the calibration of such Producer Meter.
(e) Producer and Midstream Co shall cause Measurement Devices owned by such Party to be constructed, installed and operated in accordance with
the following depending on the type of meters used:
(i) Orifice Meters – in accordance with AGA Report No. 3,
API 14.3 part 2, GPA 8185, part 2, Orifice Metering of Natural Gas and Other Hydrocarbon Fluids, Fourth Edition, April 2000.
(ii) Electronic Transducers and Flow Computers (solar and otherwise) – in accordance with the applicable American Gas
Association and API MPMS 21.1 standards, including American Gas Association Measurement Committee Report Nos. 3, 5, 6 and 7.
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Gas Gathering Agreement
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(iii) Ultrasonic Meters – in accordance with the American Gas Association
Measurement Committee Report No. 9 (American Gas Association Report No. 9), dated June 1998.
(f) Midstream Co may (but shall not
be obligated to) replace or make any alterations to the Measurement Devices necessary to comply with any subsequent amendments, revisions or modifications of applicable Law or the American Gas Association Reports cited above. With respect to
Producer Meters that Midstream Co has elected to use, Producer may (but shall not be obligated to) replace or make any alterations to the Measurement Devices necessary to comply with any subsequent amendments, revisions or modifications of
applicable Law or the American Gas Association Reports cited above.
(g) The accuracy of all Measurement Devices at the Measurement Points
and Delivery Points, and of all Measurement Devices that serve as “check meters” for any such Measurement Point or Delivery Point Measurement Devices will be verified by the owner of such Measurement Device (the “
Owner
”)
at Monthly intervals and, if requested, in the presence of a representative of the other Party (the “
Beneficiary
”). The Owner shall verify the accuracy of any owned Measurement Device before the next Monthly verification required by
the preceding sentence if the Beneficiary makes a written request for a special test as described below. Notwithstanding the foregoing, when Daily deliveries of Product at any Measurement Point or Delivery Point average 1,000 Mcf per Day or less
during any Month, the Owner may request from the Beneficiary that the accuracy of the Measurement Devices at such Measurement Point or Delivery Point be verified quarterly. If, upon any test, any Measurement Device is found to be inaccurate by 2% or
less, previous readings of such Measurement Device will be considered correct in computing the deliveries of Product under this Agreement; provided that, if such Measurement Device is adjusted to record accurately (within the manufacturer’s
allowance for error), then the previous readings of such Measurement Device will be corrected to zero error for any period during which an inaccurate reading is known to have occurred or such other period as agreed between the Parties. If, upon any
test, any Measurement Device is found to be inaccurate by more than 2% of a recording corresponding to the average hourly flow rate for the period since the last test, such Measurement Device will immediately be adjusted to record accurately (within
the manufacturer’s allowance for error) and any previous recordings of such Measurement Device will be corrected to zero error for any period during which an inaccurate reading is known to have occurred or such other period as agreed between
the Parties. If such period is not known or agreed upon, such correction will be made for a period covering one-half (
1
⁄
2
) of the time elapsed since the date
of the most recent test. If the Beneficiary desires a special test of any Measurement Device, at least 72 hours’ advance written notice will be given to the Owner, and the Parties will cooperate to secure a prompt test of the accuracy of such
Measurement Device. If the Measurement Device so tested is found to be inaccurate by 2% or less, the Owner will have the right to bill the Beneficiary for the costs incurred due to such special test, including any labor and transportation costs, and
the Beneficiary will pay such costs promptly upon invoice therefor.
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Gas Gathering Agreement
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(h) If requested by the Beneficiary, the Measurement Devices owned by Owner shall include a
sufficient number of data ports, and Owner shall permit Beneficiary to connect to such data ports, as shall be required to provide to Beneficiary on a real-time basis all measurement data generated by such measurement equipment. Beneficiary shall be
responsible at its own cost for obtaining equipment and services to connect to such data ports and receive and process such data.
(i) Each
Party shall make the charts and records by which measurements are determined available for the use of the other Party in fulfilling the terms and conditions thereof. Each Party shall, upon written request of the other Party, mail, email or deliver
for checking and calculation all measurement data, including flowing parameters, characteristics, constants, configurations and events in its possession and used in the measurement of Product delivered under this Agreement within 30 Days after the
last chart for each billing period is removed from the meter. Such data shall be returned within 90 Days after the receipt thereof.
(j)
Each Party shall preserve or cause to be preserved for mutual use all test data, charts or other similar records in accordance with the applicable rules and regulations of regulatory bodies having jurisdiction, if any, with respect to the retention
of such records, and, in any event, for at least 24 Months.
(k) So long as the Parties to this Agreement are also parties to a Transaction
Document that covers Crude Oil, the requirements for Measurement Devices in respect of Drip Condensate shall be covered by such Transaction Document. If at any time the Parties to this Agreement are not also party to another Transaction Document
that covers Crude Oil, the Parties shall set forth in the Agreement Addendum or an appropriate amendment to this Agreement the requirements for Measurement Devices pertaining to Drip Condensate; absent such agreement, Midstream Co shall install and
maintain liquids measuring equipment at the Delivery Points that is in accordance with applicable API standards.
Section 4.2
Measurement Procedures
. Midstream Co shall use the Measurement Devices owned by Midstream Co (or if Midstream Co’s rights under
Section 4.1(d)
are exercised, then the Measurement Devices owned by Producer) at the Measurement
Points to determine the volumes of Product passing through the Individual System for purposes of
Article 6
and
Article 10
. Midstream Co shall cause (or if Midstream Co’s rights under
Section 4.1(d)
are exercised,
then Producer shall cause) the measurements of the quantity and quality of all Product measured at the Measurement Points (and at each Receipt Point or Delivery Point at which measurements are taken) to be conducted in accordance with the following:
(a) The unit of volume for measurement will be one Standard Cubic Foot. Such measured volumes, converted to Mcf, will be multiplied by
their Gross Heating Value per Mcf.
(b) The temperature of the Product will be determined by a recording thermometer installed so that it
may record the temperature of the Product flowing through the meters, or such other means of recording temperature as may be mutually agreed upon by the Parties. The average of the record to the nearest one degree Fahrenheit, obtained while Product
is being delivered, will be the applicable flowing Product temperature for the period under consideration.
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(c) The specific gravity of the Product will be determined by a recording gravitometer or
chromatographic device installed and located at a suitable point determined by Producer to record representative specific gravity of the Product being metered or, at Producer’s or its designee’s option, by continuous sampling using
standard type gravity methods. If a recording gravitometer or chromatographic device is used, the gravity to the nearest one-thousandth (0.001) obtained while Product is being delivered will be the specific gravity of the Product sampled for the
recording period. The gravity to the nearest one-thousandth (0.001) will be determined once per Month from a Product analysis. The result will be applied during such Month for the determination of Product volumes delivered. All analyses shall be
determined by a mutually agreed upon Third Party laboratory using GPA 2145, Table of Physical Constants, and GPA 2172, Calculation of Gross Heating Value.
(d) Adjustments to measured Product volumes for the effects of supercompressibility will be made in accordance with accepted American Gas
Association standards. Midstream Co or its designee will obtain appropriate carbon dioxide and nitrogen mole fraction values for the Product delivered as may be required to compute such adjustments in accordance with standard testing procedures. At
Midstream Co’s or its designee’s option, equations for the calculation of supercompressibility will be taken from American Gas Association Report No. 8 Detail, dated December 1985, or API 14.2; Compressibility and Supercompressibility
for Natural Gas and Other Hydrocarbon Products, latest revision.
(e) For purposes of measurement and meter calibration, the atmospheric
pressure for each of the Measurement Points, Receipt Points and Delivery Points (as applicable) will be assumed to be the pressure value determined by Midstream Co for the county elevation in which such point is located pursuant to generally
accepted industry practices irrespective of the actual atmospheric pressure at such points from time to time and shall be consistent throughout the Individual System.
(f) The Gross Heating Value of the Product delivered at the Measurement Points, Receipt Points and Delivery Points (as applicable) will be
determined at least quarterly by means of GPA 2172; provided, however, that when Daily deliveries of Product at any Measurement Point, Receipt Point or Delivery Point average 1,000 Mcf per Day or greater during any Month, the Gross Heating Value of
the Product delivered at such Measurement Point, Receipt Point or Delivery Point will be determined Monthly by a chromatographic analysis of a flow proportional sample taken at a suitable point on the facilities to be representative of the Product
being metered. To the extent possible, the calibration conducted pursuant to
Section 4.2(e)
and the testing conducted pursuant to this
Section 4.2(f)
shall be conducted concurrently or at least with the same test frequency.
(g) Other tests to determine water content, sulfur and other impurities in the Product will be conducted whenever requested by a Party and
will be conducted in accordance with standard industry testing procedures. The Party requested to perform such tests will bear the cost of such tests only if the Product tested is determined not to be within the quality specification set forth
herein or, if applicable, in the applicable Midstream Agreement Addendum. If the Product is within such quality specification, the requesting Party will bear the cost of such tests.
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(h) If, during the Term of this Agreement, a new method or technique is developed with respect to
Product measurement or the determination of the factors used in such Product measurement, such new method or technique may be substituted for the method set forth in this Agreement if the new method or technique is in accordance with accepted
standards of the American Gas Association, American Petroleum Institute and Gas Processor’s Association.
Section 4.3
Product
Meter Adjustments
. If a Measurement Device is out of service or registering inaccurately, the Parties shall determine the quantities of Product received or delivered during such period as follows:
(a) By using the registration of any check meter or meters, if installed and accurately registering; or in the absence of such check meters,
(b) By using a meter operating in parallel with the estimated volume corrected for any differences found when the meters are operating
properly,
(c) By correcting the error if the percentage of error is ascertainable by calibration, tests or mathematical calculation, such
as step change, uncertainty calculation or balance adjustment; or in the absence of check meters and the ability to make corrections under this
Section 4.3(c)
, then,
(d) By estimating the quantity received or delivered by receipts or deliveries during periods under similar conditions when the meter was
registering accurately.
Article 5
Tender, Nomination, and Gathering of Production
Section 5.1
Limitations on Service to Third Parties
. Midstream Co shall obtain Original Producer’s consent prior to offering
services on an Individual System to any Third Party, unless (a) Midstream Co is required by a Governmental Authority to offer service to a Third Party, in which case Midstream Co shall provide Producer prior notice of offering such service to
such Third Party, (b) such Third Party has become a Producer hereunder by virtue of assignment of Dedicated Properties to such Party, or (c) Original Producer has ceased to operate acreage serviced by such Individual System.
Section 5.2
Tender of Dedicated Production
. Subject to
Section 5.3(c)
, (a) each Day during the Term, Producer
shall Tender to the Individual System at each applicable Receipt Point all of the Dedicated Production available to Producer at such Receipt Point and (b) Producer shall have the right to Tender to Midstream Co for Services under this Agreement
Product other than Dedicated Production.
Section 5.3
Services; Service Standard
.
(a)
Services
. Subject to
Section 5.3(c)
, Midstream Co shall (i) provide Services for all Product that
is Tendered by the Producer to Midstream Co at the applicable Receipt Point, (ii) redeliver to Producer or for the benefit of Producer at the relevant Delivery Point (as designated by Producer) such Product with an equivalent Thermal Content
and hydrocarbon constituent composition as the Product received at the Receipt Point (as may be increased by any
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Gas Gathering Agreement
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Flash Gas delivered into the System), less the Thermal Content of Drip Condensate, less System L&U allocated to Producer in accordance with this Agreement, less such Product consumed as Other
System Fuel or System Fuel allocated to Producer in accordance with this Agreement, less such Product consumed as Process Flare, and (iii) cause the System to be able to flow such Product at volumes not less than the current capacity of the
System.
(b)
Services Standard
. Midstream Co shall own and operate the System and perform the Services in a good and workmanlike
manner in accordance with standards customary in the industry.
(c)
Priority of Service
. Midstream Co shall cause (i) Product
delivered by Original Producer to have priority service on the System over Product of any Producer Assignee to the extent not in violation of applicable Law, and (ii) Product delivered by Producer to have priority service on the System over
Product of any Third Party. Midstream Co’s performance of its obligations under
Section 5.3(a)
with respect to any Product (A) of any Producer Assignee, or (B) produced from any Well but not included on a Development
Report or for which new, modified, or enhanced facilities are contemplated in a System Plan, shall at all times be subject to the available capacity on the System at the time that Product is available to be Tendered by Producer at a Receipt Point;
provided, however, that in the case of clause (B), Producer may make alternative arrangements for the Product not received by Midstream Co pursuant to
Section 3.3
.
Section 5.4
Nominations, Scheduling, Balancing and Curtailment
. Nominations, scheduling, and balancing of Product available for,
and interruptions and curtailment of, Services under this Agreement shall be performed in accordance with the following provisions:
(a)
Nominations
. Product shall be received only under a nomination submitted by Producer. For purposes of this Agreement, a nomination is an offer by Producer to Midstream Co of a stated quantity of Product for gathering from all of the Receipt
Points in an Individual System to all of the Delivery Points in the Individual System. Producer shall nominate according to the Downstream Facility’s requirements. Should Producer desire to change the nomination during such Month, such change
to the nomination shall be made in accordance with the nomination procedures of the Downstream Facility. Product shall be delivered by Midstream Co in accordance with confirmation by the Downstream Facility of the nomination or changes to the
nomination.
(b)
Deliveries
. Producer shall cause volumes of Product delivered by Producer and received by Midstream Co at the
Receipt Points (taken in the aggregate for any Individual System) to conform as closely as possible to the volumes nominated by Producer at the Receipt Points (taken in the aggregate for any Individual System) and shall be delivered by Producer to
Midstream Co at hourly rates of flow that are, as nearly as practicable, uniform throughout the Day. Subject to Midstream Co’s operating conditions and contractual requirements, Midstream Co shall cause volumes delivered by Midstream Co to
Producer or for Producer’s account at the Delivery Points (taken in the aggregate for any Individual System) to conform as closely as possible to the volumes nominated by Producer for delivery by Midstream Co that Day at the Delivery Points
(taken in the aggregate for any Individual System), less any deductions applicable to Producer for System L&U, System Fuel and Other System Fuel (and any other
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Gas Gathering Agreement
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adjustments for Drip Condensate or Flash Gas) and any imbalance corrections, except that Midstream Co may conform such volumes to the volumes actually delivered by Producer at Midstream Co’s
Receipt Points (taken in the aggregate for any Individual System) to the extent possible. Midstream Co may temporarily interrupt or curtail receipts or deliveries at any time, and from time to time in accordance with operating conditions on the
applicable Individual System in order to balance receipt or deliveries on the applicable Individual System or to correct any current or anticipated imbalances.
(c)
Consistent Rates
. Producer and Midstream Co shall use commercially reasonable efforts to cause Product to be received and
redelivered under this Agreement at the same rates of flow, as nearly as commercially practicable and subject to changes mandated by the Downstream Facility, and Producer shall not in any manner use the System for storage or peaking purposes.
Producer shall cause Product delivered to Midstream Co under this Agreement during any Day to be delivered at as nearly a constant rate of flow as operating conditions and relevant Downstream Facilities will permit.
(d)
Target Pressures
.
(i)
Pressure of Tendered Product
. Producer shall Tender or cause to be Tendered Product to each applicable Receipt Point
at sufficient pressure to enter the applicable Individual System, but not in excess of the MAOP set forth in the design documents for the applicable Individual System as shown in the applicable Midstream Agreement Addendum (which such maximum
operating pressure shall be sufficient to permit such Product to enter the Individual System and the Downstream Facilities but not higher than the MAOP of the Downstream Facilities). Producer shall have the obligation to ensure that Product is
prevented from entering the System at pressures in excess of such MAOP, and Midstream Co shall have the right to restrict or relieve the flow of Product into the System to protect the System from over pressuring. The Parties shall elect in a writing
signed by Producer and Midstream Co whether Midstream Co shall be required to install compression. Redeliveries of Product by Midstream Co to or for the account of Producer at the applicable Delivery Points shall be at such pressures as may exist
from time to time in the System at the applicable Delivery Point. Midstream Co’s obligation to redeliver Product to a given Delivery Point shall be subject to the operational limitations of the Downstream Facilities receiving such Product,
including the Downstream Facility’s capacity, Product measurement capability, operating pressures and any operational balancing agreements as may be applicable.
(ii)
Maintenance of Pressure on System
. Midstream Co shall use its commercially reasonable efforts to maintain the Daily
arithmetic average operating pressure of the system pressures at the Target Pressure. Except in the event of (A) Force Majeure or an event or condition downstream of the System that was not caused by Producer or Midstream Co, or
(B) maintenance or repairs that result in a suspension, shutdown or curtailment as specified in
Section 5.5
, if, during any Month, (1) the Daily arithmetic average operating pressure of an Individual System exceeds the Target
Pressure for such Individual System, (2) such increase is not a result of Producer’s production exceeding the production forecast in the applicable Development Report and (3) Midstream Co has sufficient production data available to
confirm that the increased
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Gas Gathering Agreement
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pressure is not a result of Producer’s production exceeding such production forecast, then the Individual Fee with respect to such Individual System used to calculate the amounts owed for
such Month under Section 6.1(i)(y) shall be reduced by the reduction percentage corresponding to the applicable Pressure Overage Percentage on the chart on
Exhibit C
.
(e)
Adjustments
. Nothing contained in this Agreement shall preclude Midstream Co from taking reasonable actions necessary to adjust
receipts or deliveries under this Agreement in order to maintain the operational integrity and safety of the System or any Individual System.
(f)
Monthly Settlement of Imbalances and Delivery of Related Data
. On a Monthly basis, Midstream Co shall settle all imbalances with
Producer and each other shipper or producer on each Individual System. The Monthly Loss/ Gain Report shall reflect, with respect to each producer and shipper on the System (including Producer), each of the following, broken out by Individual System:
(i) the total volumes received, delivered, and retained; (ii) the total imbalance for such Month; and (iii) any other information deemed necessary and appropriate by Midstream Co, all on an Individual System basis.
(g)
Intramonth Balancing
. Each production month, Midstream Co and Producer shall cooperate and use all reasonable efforts to reduce any
imbalance with respect to an Individual System. At any time during a production month that such an imbalance exists, Midstream Co shall advise Producer to deliver volumes of Product in addition to its nominated volumes to address an imbalance in
favor of Producer, or to deliver volumes of Product that are less than its nominated volumes to address an imbalance in favor of Midstream Co. Midstream Co may also require Producer to make appropriate adjustments to its nominations and deliveries
to correspond to adjustments that Midstream Co is required to make by Downstream Facilities. Midstream Co shall also have the right (acting in its reasonable discretion) to adjust nominations or take other actions, including suspending receipts and
deliveries of Product by Midstream Co, with respect to any Individual System necessary to correct an existing imbalance or mitigate an anticipated imbalance.
(h)
Intermonth Cash Out of Imbalances
. If an imbalance occurs at the end of any production month, (i) Midstream Co shall cause the
Monthly Loss/ Gain Report that reflects such production month to reflect such imbalance and (ii) the Parties shall cash out such imbalance using a cash out price established by the average of the 30 Days immediately preceding the last Day of
the applicable production month of the price point “Colorado Interstate Gas Company, Rockies” as published in Platt’s Gas Daily and shown in the table “Daily Price Survey,” or if the State is not Colorado or if for any
reason such index price is not published for such production month, such other index as agreed upon in writing by the Parties (for purposes of this paragraph only, the “
Index
”). Should such Index cease to be published, then the
Parties shall mutually agree on a similar Index or publication for such price for the relevant geographic area where the imbalance occurred. The cash out (either positive or negative) shall appear as an adjustment to an invoice delivered by
Midstream Co within two Months after the end of the applicable production month.
(i)
Penalties Regarding Imbalances
. As between the
Parties, Producer shall be responsible for and shall bear any penalties imposed or assessed by Downstream Facilities for imbalances in receipts or deliveries with respect to Producer’s Product (except to the extent an imbalance in receipts or
deliveries is caused by Midstream Co’s use of Other System Fuel).
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Section 5.5
Suspension/Shutdown of Service
.
(a)
Shutdown
. During any period when all or any portion of the Individual System is shut down (i) because of maintenance, repairs,
or Force Majeure, (ii) because such shutdown is necessary to avoid injury or harm to Persons or property, to the environment or to the integrity of all or any portion of the Individual System or (iii) because providing Services hereunder
has become uneconomic as further described in
Section 13.2
, Midstream Co may interrupt or curtail receipts of Producer’s Product and the Product of other producers as set forth herein. In such cases, Midstream Co shall have no
liability to Producer (subject to
Section 11.1(b)
) for its failure to receive Product, except to the extent such shutdown is caused by the negligence, gross negligence or willful misconduct of Midstream Co. If Midstream Co is required to
so interrupt or curtail receipts of Product, Midstream Co will advise (by telephone, following up by writing, which writing may be in the form of electronic mail) Producer of such interruption or curtailment as soon as practicable or in any event
within twenty-four hours after the occurrence of such event.
(b)
Planned Curtailments and Interruptions
.
(i) Midstream Co shall have the right to curtail or interrupt receipts and deliveries of Product for brief periods to perform
necessary maintenance of and repairs or modifications (including modifications required to perform its obligations under this Agreement) to the Individual System;
provided, however
, that to the extent reasonably practicable, Midstream Co
shall coordinate its maintenance, repair and modification operations with the operations of Producer and, in any case, will use its reasonable efforts to schedule maintenance, repair and modification operations so as to avoid or minimize to the
greatest extent possible service curtailments or interruptions.
(ii) Midstream Co shall provide Producer (x) with 30
Days prior notice of any upcoming normal and routine maintenance, repair and modification projects that Midstream Co has planned that would result in a curtailment or interruption of Producer’s deliveries and the estimated time period for such
curtailment or interruption and (y) with six Months prior notice of any maintenance (A) of which Midstream Co has knowledge at least six Months in advance and (B) that is anticipated to result in a curtailment or interruption of
Producer’s deliveries for five or more consecutive Days.
Section 5.6
Marketing and Transportation
. As between the
Parties, Producer shall be solely responsible, and shall make all necessary arrangements at and downstream of the Delivery Points, for the receipt, further transportation, and marketing of Producer’s owned and Controlled Product. Midstream Co
shall have no liability for any operations or activities upstream or downstream of the Individual System.
Section 5.7
No Prior
Flow of Product in Interstate Commerce
. Producer represents and warrants that at the time of Tender, none of the Product delivered at a Receipt Point hereunder has flowed in interstate commerce.
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Gas Gathering Agreement
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Article 6
Fees
Section 6.1
Fees
. Producer shall pay Midstream Co each Month in accordance with the terms of this Agreement for all Services provided by Midstream Co with respect to Dedicated Production received by Midstream Co from Producer or for Producer’s
account during such Month, an amount, for each Individual System, equal to the sum of (i) the product of (x) the aggregate quantity of such Product (reduced by any Product burned as Process Flare), stated in MMBtu, received by Midstream Co
from Producer or for Producer’s account at the applicable Receipt Points for such Product within the applicable Individual System during such Month, multiplied by (y) the applicable Individual Fee, (ii) (
reserved
) and
(iii) an amount equal to Producer’s allocated portion of the actual costs incurred by Midstream Co for electricity required to provide Services, such allocation to be based upon the aggregate quantities of Product received by Midstream Co.
Section 6.2
Fee Adjustments
(a) Redetermination.
(i)
Redetermination Proposal
. Between November 1 and December 31 of any Year, Midstream Co shall prepare and
deliver to Producer for its review and comment a written proposal (each, a “
Redetermination Proposal
”) to redetermine each Individual Fee (unless the Parties mutually agree not to redetermine any particular Individual Fee) in
accordance with this
Section 6.2(a)
. Each Redetermination Proposal shall include relevant supporting documentation based upon the latest updated Development Report and System Plan and shall take into account future items including,
projected production volumes, operating revenue projections, and budgeted amounts for capital expenditures and all estimated operating expenses that Midstream Co believes will be necessary to provide the applicable Services as contemplated by the
latest updated Development Report and System Plan; provided that a redetermined Individual Fee as agreed to by the Parties (a “
Redetermined Individual Fee
”) shall not recoup the difference between (A) estimated operating
expenses or revenues and (B) actual operating expenses or revenues for periods prior to the effective date of such Redetermined Individual Fee. The Parties may agree to redetermine a particular Individual Fee without obligation to agree to
redetermine any other Individual Fee.
(ii)
Subsequent Redetermination Timing
. Any Redetermined Individual Fee
agreed to by the Parties on or prior to the last Business Day of February of the applicable Adjustment Year (“
Redetermination Deadline
”) shall become effective as of the first Day of the Month following the Month in which agreement
has been reached. If the Parties fail to agree upon a redetermination of any Individual Fee set forth in the applicable Redetermination Proposal on or prior to the Redetermination Deadline, such Individual Fee shall remain in effect without
redetermination pursuant to this
Section 6.2(a)
. For purposes of this
Section 6.2(a)(ii)
, the Year immediately after the Year during which a Redetermination Proposal is delivered is herein the “
Adjustment
Year
.”
(b)
Annual Escalation
. Effective as of July 1 of each Year, the Individual Fee will be increased by
multiplying the then-applicable Individual Fee by the Escalation Percentage (herein, the “
Increase in Fee
”) and adding the then-applicable Individual Fee to the Increase in Fee;
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Gas Gathering Agreement
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provided
that Reimbursed Amounts shall not be subject to this
Section 6.2(b)
. Such annual increase to the Individual Fee shall become effective on July 1 of the applicable
Year, even if such Individual Fee was redetermined pursuant to
Section 6.2(a)
, with an effective date during the same Year.
(c)
Downtime Events
. If during any Month (i) there has been a Downtime Event, (ii) such Downtime Event was not a result of
Producer’s (A) production exceeding the production forecast in the Development Report on which the Individual System was based, or (B) delivery of Product outside of the pressure ranges permitted by
Section 5.4(d)
,
(iii) such Downtime Event caused the Downtime Percentage for any Individual System during any such Month to exceed the lowest percentage specified on
Exhibit B
during such Month, and (iv) Producer has waived its right to a temporary
release of Dedicated Production under
Section 2.4(b)
, then the Individual Fee with respect to such Individual System used to calculate the amounts owed for such Month under Section 6.1(i)(y) shall be reduced by the reduction
percentage corresponding to the applicable Downtime Percentage on the chart on
Exhibit B
.
(d)
Reinjection Volumes and
Buy-Back
. Midstream Co shall ensure that the volumes on which a fee is charged (which would typically be the volumes measured at the applicable Measurement Point) shall not include the volumes used by or returned to Producer for use in
connection with Producer’s lease operations (including Producer’s reservoir pressure maintenance operations) and water treatment facility operations. For the avoidance of doubt, Producer shall not pay the Individual Fee on gas used for
lease and water treatment facility operations more than once, even if some portion of the gas reserved for such operations passes through the applicable Individual System more than once, whether as a result of reinjection, recycling, buy back or
other similar operation.
Section 6.3
Treatment of Byproducts, L&U, Fuel and Related Matters
. No separate fee shall be
chargeable by Midstream Co and no refund or reduction in the Individual Fee shall be chargeable by or owed to Producer for the hydrocarbons or services described in this
Section 6.3
, except as provided in
Section 6.3(c)(iv)
and
Section 6.3(d)
.
(a)
Drip Condensate
. Midstream Co shall deliver to Producer, each Month, all Drip Condensate
allocated to Producer or for Producer’s account to the extent Producer and Midstream Co have agreed in writing to require such allocation. At all times during the Term either (x) Midstream Co and Producer shall be party to both this
Agreement and another Transaction Document that covers Crude Oil (in which case Producer shall not owe any amount under this Agreement or any other Transaction Document to which Midstream Co is a Party as a result of Drip Condensate being
transported through the Crude Oil Gathering System) or (y) the Parties shall set forth in the Agreement Addendum or an appropriate amendment to this Agreement the methodology for Midstream Co to deliver Drip Condensate to Producer and any fee
applicable thereto.
(b)
Flash Gas
. Midstream Co shall deliver to Producer, each Month, all Flash Gas allocated to Producer or for
Producer’s account to the extent Producer and Midstream Co have agreed in writing to require such allocation.
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(c)
System L&U
.
(i) Midstream Co will perform a Monthly material balance for each Individual System based on comparison of Product delivered to
the Product received into the applicable Individual System at Receipt Points (or, with respect to Flash Gas, such other receipt points).
(ii) If, during any Month, System L&U on an Individual System exceeds 2.00% of either energy or volumes of Producer’s
owned or Controlled Product delivered to the Individual System in such Month, then Midstream Co will, for the respective Individual System, obtain updated test data from the Measurement Points in the applicable Individual System and conduct a
field-wide (on an Individual System basis) meter inspection and calibration followed by an updated balance. If Midstream Co determines that a repair to the Individual System is needed to reduce the System L&U below 2.00%, Midstream Co shall
undertake such repairs in a commercially reasonable manner and as soon after making such determination as is commercially reasonable.
(iii) Midstream Co shall provide Producer with prior notice of, and reasonable access to observe, any such field-wide meter
balance.
(d)
System Fuel and Other System Fuel
. Midstream Co shall account for the actual fuel used by Midstream Co in the
operation of the Individual System, and such accounting shall detail whether such fuel is System Fuel or Other System Fuel (and, if Other System Fuel, whether for the account of Crude Oil, water or other product). Producer shall not be reimbursed
for System Fuel or Other System Fuel;
provided
that if during any Month, Producer does not deliver to Midstream Co Crude Oil under any Transaction Document to which Midstream Co is a party, then Midstream Co shall calculate the value of the
Other System Fuel used during the applicable Month based on the price of Product received by Producer during such Month and such amount shall appear as a reduction in the Individual Fees within 90 Days after the end of the applicable Month.
Article 7
Quality and
Pressure Specifications
Section 7.1
Quality Specifications
. Subject to
Section 7.2
, Producer shall cause all
Product delivered at the Receipt Points to Midstream Co to meet the quality specifications set forth below at a base pressure of fourteen and seventy-three hundredths (14.73) Psia and at a base temperature of sixty degrees Fahrenheit
(60°F), except with respect to any Individual System for which different quality specifications are set forth in the applicable Midstream Agreement Addendum, such specifications that are set out in the applicable Midstream Agreement Addendum
shall control. Such Product shall (a) be commercially free of all objectionable dust or other solid or liquid or gaseous matters that might interfere with its merchantability or cause injury to or interference with proper operations of any of
the facilities constituting such Individual System or the System through which the Product flows; (b) not contain more than five (5) parts per million of hydrogen sulfide; (c) not contain more than five (5) grains of total sulfur
per one hundred (100) Cubic Feet; (d) not contain more than one (1) grain mercaptans per one hundred (100) Cubic Feet; (e) not contain more than two percent (2%)
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Gas Gathering Agreement
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by volume of carbon dioxide or more than three percent (3%) by volume of gases; (f) not contain more than 40 parts per million of oxygen; (g) contain a Gross Heating Value of not
less than 1,200 Btu per Cubic Foot at the Receipt Points; and (h) be at temperatures above twenty degrees Fahrenheit (20ºF) but shall not exceed one hundred twenty degrees Fahrenheit (120ºF).
If Producer’s Product delivered to the Receipt Points complies with such quality specifications or, after blending in accordance with the
fifth sentence of
Section 7.2
, otherwise complies with such specifications, then all Product redelivered at the Delivery Points by Midstream Co to Producer shall meet the quality specifications applicable at the relevant Delivery Points.
Midstream Co may commingle Product received into the Individual System with other Product shipments and, subject to Midstream Co’s obligation to redeliver to Producer at the Delivery Points Product that satisfies the applicable quality
specifications of the Delivery Points, (a) such Product shall be subject to such changes in quality, composition and other characteristics as may result from such commingling, (b) Midstream Co shall have no other obligation to Producer
associated with changes in quality of Product as the result of such commingling, and (c) Midstream Co shall have the right to change the quality specifications to comply with any changes in the Downstream Facility specifications.
Section 7.2
Failure to Meet Specifications
. If any Product Tendered by Producer to the Individual System fails at any time to
conform to the applicable specifications, then Midstream Co will have the right to immediately discontinue receipt of such non-conforming Product and shall notify Producer of the specifications violation within twenty-four (24) hours after such
discontinuation. Such notification may be verbal initially followed by written confirmation. If Producer disputes Midstream Co’s determination that any Product fails to conform to the applicable specifications, then Producer shall
(a) notify Midstream Co thereof within twenty-four (24) hours after receiving such notice from Midstream Co, (b) submit the applicable Product to a mutually agreed upon Third Party laboratory, and (c) cause such laboratory to
analyze the Product within seventy-two (72) hours after Producer’s receipt of Midstream Co’s notice of non-conformance. If the results of such analysis provide that the applicable Product is non-conforming, the costs and expenses
associated with such analysis shall be borne by Producer; if the results of such analysis provide that the applicable Product conforms to the specifications, then Midstream Co shall reimburse Producer for all reasonable and documented costs and
expenses incurred by Producer to cause such Third Party laboratory to perform such analysis. Midstream Co shall use commercially reasonable efforts to blend and commingle such non-conforming Product with other Product in the Individual System so
that it meets the applicable specifications. Midstream Co may charge Producer a reasonable fee to compensate Midstream Co for its use of commercially reasonable efforts to cause such Product Tendered by Producer to conform to the applicable
specifications. Producer will promptly undertake commercially reasonable measures to eliminate the cause of such non-conformance.
Section 7.3
Indemnification Regarding Quality
. PRODUCER SHALL RELEASE, PROTECT, DEFEND, INDEMNIFY AND HOLD HARMLESS MIDSTREAM CO
GROUP FROM AND AGAINST ALL LOSSES DIRECTLY OR INDIRECTLY ARISING OUT OF, IN CONNECTION WITH OR IN ANY MANNER ATTRIBUTABLE TO THE FAILURE OF THE PRODUCT DELIVERED BY PRODUCER TO THE INDIVIDUAL SYSTEM TO MEET THE QUALITY SPECIFICATIONS SET FORTH
HEREIN, INCLUDING DISPOSAL COSTS, DAMAGE TO OR SUSTAINED BY THE INDIVIDUAL SYSTEM (INCLUDING
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THE EQUIPMENT AND COMPONENT PARTS), COSTS EXPENDED BY MIDSTREAM CO OR ANY OF ITS AFFILIATES TO RETURN THE INDIVIDUAL SYSTEM AND RELATED FACILITIES TO SERVICES, CLAIMS OF OTHER PRODUCERS ON THE
INDIVIDUAL SYSTEM, CLAIMS OF OWNERS OF ALL DOWNSTREAM FACILITIES AND CLAIMS OF ALL PERSONS WHO ULTIMATELY USE THE NON-CONFORMING PRODUCT DELIVERED BY PRODUCER AND THE COSTS OF ALL REGULATORY OR JURISDICTIONAL PROCEEDINGS.
Article 8
Term
Section 8.1
Term
. The term of this Agreement commenced on January 1, 2015, which is the original effective date of the
Parties’ agreement regarding the matters set forth herein, and this Agreement shall remain in effect until January 1, 2030 (the “
Initial Term
”) and thereafter on a Year to Year basis until terminated by Midstream Co or
Producer effective upon the expiration of the Initial Term or the expiration of any Year thereafter upon notice no less than 90 Days prior to the expiration of the Initial Term or the expiration of any Year thereafter (such period of time, the
“
Term
”). Notwithstanding the foregoing, with respect to the OpCo Agreement Addendum only, this Agreement shall continue for so long as any Original Midstream Co remains a Party under any Midstream Agreement Addendum then in effect
and shall automatically terminate at such time as no Original Midstream Co remains a Party to any Midstream Agreement Addendum.
Section 8.2
Effect of Termination or Expiration of the Term
. Upon the termination of the Term, this Agreement shall forthwith
become void and the Parties and OpCo shall have no liability or obligation under this Agreement, except that (a) the termination of this Agreement shall not relieve any Party or OpCo from any expense, liability or other obligation or remedy
therefor that has accrued or attached prior to the date of such termination, (b) the provisions of
Section 7.3
, this Section 8.2,
Article 15
and
Section 17.1
through
Section 17.10
shall survive
such termination and remain in full force and effect indefinitely, (c) the indemnities set forth in
Section 3.5(c)
shall survive such termination and remain in full force and effect indefinitely, and
(d)
Section 10.4
and
Section 17.11
shall survive such termination and remain in full force and effect for the period of time specified in such Sections.
Article 9
Title and
Custody
Section 9.1
Title
. A nomination of Product by Producer shall be deemed a warranty of title to such Product by
Producer or a warranty that Producer Controls the Product and has the right to deliver such Product for gathering under this Agreement, as applicable. Title to Product shall not transfer to Midstream Co by reason of Midstream Co’s performance
of the Services.
Section 9.2
Custody
. From and after Producer’s delivery of its owned or Controlled Product to Midstream
Co at the Receipt Points, and until Midstream Co’s redelivery of such Product to or for Producer’s account at the applicable Delivery Points, as between the Parties, Midstream Co shall have custody and control of, and be responsible for,
such Product. In all other circumstances, as between the Parties, Producer shall be deemed to have custody and control of, and be responsible for, such Product.
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Gas Gathering Agreement
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Article 10
Billing and Payment
Section 10.1
Statements
.
(a)
Ordinary Course
. Midstream Co shall submit invoices to Producer on or before the 25th Day after the end of a Month (the
“
Invoice Month
”). Each invoice shall be accompanied by supporting information for all amounts charged by such invoice. All amounts owed for Services provided during an Invoice Month shall be reflected on the applicable invoice for
such Invoice Month;
provided
that to the extent any amount appearing on an invoice is in respect of an amount paid by Midstream Co to a Third Party (collectively, the “
Reimbursed Amount
”) or the calculation of such amount is
contingent on information provided by a Third Party (collectively, the “
Conditional Amount
”), such Reimbursed Amount and Conditional Amount shall be reflected on an invoice within 90 Days after the end of the Month in which such
Reimbursed Amount was paid by Midstream Co.
(b)
Other
.
If actual measurements of volumes of Dedicated Production are not
available by the date stated in
Section 10.1(a)
, then Midstream Co may prepare and submit an invoice based on Midstream Co’s good faith estimate of the volumes of Dedicated Production received in the applicable Invoice Month. If
Midstream Co submits an invoice based on estimated volumes, Midstream Co shall prepare and submit to Producer an invoice based on actual measurements on or before the close of business of the 40th Day after the applicable Invoice Month, together
with a reconciliation to the invoice submitted based on Midstream Co’s estimate.
(c)
Detail
.
Midstream Co shall cause
its invoices and supporting information to include information reasonably sufficient to explain and support any estimates and charges reflected therein, the reconciliation of any estimates made in a prior Month to the actual measurements for such
Month, and any adjustments to prior period volumes and quantities.
(d)
Monthly Loss/ Gain Report
.
Midstream Co shall deliver
to Producer, on or before the close of business of the 40th Day after the applicable Invoice Month a Monthly Loss/ Gain Report. If Midstream Co elects, it may deliver such Monthly Loss/ Gain Report concurrently with the applicable invoice.
(e)
One Invoice; Netting
.
To the extent that Midstream Co and Producer are party to this Agreement and one or more other
Transaction Documents, one invoice may be delivered in respect of all amounts owing under such Transaction Documents. The Parties shall net all undisputed amounts due and owing or past due and owing arising under the Transaction Documents to which
Producer and Midstream Co are parties such that the Party owing the greater amount shall make a single payment of the net amount to the other Party. No amounts owing to or by any Midstream Co may be set off against amounts owing to or by any other
Midstream Co. No amounts owing to or by any Producer may be set off against amounts owing to or by any other Producer. To the extent possible, all fee adjustments set forth in
Article 6
shall be accomplished by setoff or netting.
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Restated
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Section 10.2
Payments
.
(a) Unless otherwise agreed by the Parties, all invoices under this Agreement shall be due and payable in accordance with each invoice’s
instructions on or before the later of the 30th Day of each Month and the 10th Day after receipt of the invoice or, if such Day is not a Business Day, then on the next Business Day. All payments by Producer under this Agreement shall be made by
electronic funds transfer to the account designated by Midstream Co. Any amounts not paid by the due date will be deemed delinquent and, with respect to amounts owed to Midstream Co, will accrue interest at the Interest Rate, such interest to be
calculated from and including the due date but excluding the date the delinquent amount is paid in full.
(b) If Producer, in good faith,
disputes the amount of any invoice of Midstream Co, Producer will pay Midstream Co such amount, if any, that is not in dispute and shall provide Midstream Co notice, no later than 30 Days after the date that payment of such invoice would be due
under
Section 10.2(a)
, of the disputed amount accompanied by reasonable documentation to support Producer’s dispute. If Producer fails to provide notice of dispute within such 30-Day period, then Producer shall be deemed to have
waived its right to dispute the applicable invoice, except for a dispute following an audit conducted in accordance with
Section 10.4
. Following Midstream Co’s receipt of such dispute notice, Producer and Midstream Co shall endeavor
in good faith to resolve such dispute, and if the Parties are unable to resolve such dispute within a reasonable time, such dispute may be resolved in accordance with
Section 17.6
. Upon resolution of the dispute, any required payment
shall be made within 15 Days after such resolution, and, if such amount shall be paid to Midstream Co, such amount shall be paid along with interest accrued at the Interest Rate from and including the due date but excluding the date paid.
Section 10.3
Adequate Assurances
. If (a) Producer fails to pay according to the provisions hereof and such failure continues
for a period of 5 Business Days after written notice of such failure is provided to Producer, (b) Producer is not the Original Producer, or (c) Midstream Co has reasonable grounds for insecurity regarding the performance by Producer of any
obligation under this Agreement, then Midstream Co, by notice to Producer, may, singularly or in combination with any other rights it may have, demand Adequate Assurance of Performance from Producer. “
Adequate Assurance of
Performance
” means, at the option of Producer, any of the following, (x) advance payment in cash by Producer to Midstream Co for Services to be provided under this Agreement in the following Month or (y) delivery to Midstream Co
by Producer of an irrevocable standby letter of credit or a performance bond, in form and substance reasonably acceptable to Midstream Co, issued by a Credit-Worthy Person, in an amount equal to not less than the aggregate proceeds due from Producer
under
Section 10.1
for the prior 2-Month period. Promptly following the termination of the condition giving rise to Midstream Co’s reasonable grounds for insecurity or payment in full of amounts outstanding, as applicable, Midstream
Co shall release to Producer the cash, letter of credit, bond or other assurance provided by Producer (including any accumulated interest, if applicable, and less any amounts actually applied to cover Producer’s obligations hereunder).
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Section 10.4
Audit
. Each Party has the right, at its sole expense and during normal
working hours, to examine the records of the other Party to the extent reasonably necessary to verify the accuracy of any statement, charge or computation made pursuant to the provisions of the Transaction Documents. The scope of such examination
will be limited to the 24 Months preceding the date such notice of audit, statement, charge or computation was presented. No Party may conduct more than one audit (taking all Transaction Documents to which Producer is a party together) of another
Party during any Year (except that, if a Party is in default hereunder, additional audits may be conducted during the continuance of such default). If any such examination reveals any inaccuracy in any statement or charge, the necessary adjustments
in such statement or charge and the payments necessitated thereby shall be made within 60 Days after resolution of the inaccuracy. This provision of this Agreement will survive any termination of this Agreement for the later of (a) a period of
24 Months from the end of the Year in which the date of such termination occurred or (b) until a dispute initiated within the 24 Month period is finally resolved, in each case for the purpose of such statement and payment objections.
Article 11
Remedies
Section 11.1
Suspension of Performance; Temporary Release from Dedication
.
(a)
Suspension by Midstream Co as Remedy for Payment Default
. If Producer fails to pay any invoice rendered under
Article 10
,
such failure is not due to a good faith dispute by Producer in accordance with
Section 10.2(b)
and such failure is not remedied within 5 Business Days after Producer’s receipt of written notice of such failure from Midstream Co,
Midstream Co shall have the right, at its sole discretion, to (i) suspend performance (including withholding any payments that are owed by Midstream Co to Producer, and such withheld amounts shall not be subject to setoff under
Section 10.1(e)
) under this Agreement until such amount, including interest at the Interest Rate, is paid in full or (ii) continue performing the Services under this Agreement, and, acting in a commercially reasonable manner, sell
any Product delivered by Producer to the Receipt Points on Producer’s behalf, and use the proceeds therefrom to reimburse Midstream Co for any amounts due and owing to Midstream Co, and, at Producer’s election, either (y) remit any
excess amounts received under such sale to Producer or (z) reduce the Services Fee due from Producer to Midstream Co for the following Month by the amount of such excess.
(b)
Additional Suspensions as Remedies
. If a Party fails to perform or comply with any material warranty, covenant or obligation (other
than as provided in
Section 11.1(a)
or
Section 2.4(a)(i)
) contained in this Agreement and such failure has not been remedied within 60 Days after its receipt of written notice from the other Party of such failure, then the
non-defaulting Party shall have the right to suspend performance of its obligations under this Agreement that are affected by such failure or non-compliance (including withholding any payments that are owed to the other Party, and such withheld
amounts shall not be subject to netting or setoff under
Section 10.1(e)
); provided that Producer may not withhold any payments that are owed to Midstream Co for Services actually performed by Midstream Co.
(c)
Specific Performance and Declaratory Judgments
. Damages in the event of breach of this Agreement by a Party hereto may be difficult,
if not impossible, to ascertain.
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Therefore, each Party, in addition to and without limiting any other remedy or right it may have, will have the right to seek a declaratory judgment and will have the right to an injunction or
other equitable relief in any court of competent jurisdiction, enjoining any such breach, and enforcing specifically the terms and provisions hereof, and each of the Parties hereto hereby waives any and all defenses it may have on the ground of lack
of jurisdiction or competence of the court to grant such an injunction or other equitable relief. The existence of this right will not preclude any Party from pursuing any other rights and remedies at law or in equity that such Party may have.
Section 11.2
No Election
. In the event of a default by a Party under this Agreement, the other Party shall be entitled in its sole
discretion to pursue one or more of the remedies set forth in this Agreement, or such other remedy as may be available to it under this Agreement, at Law or in equity, subject, however, to the limitations set forth in
Section 11.3
and
Article 15
. No election of remedies shall be required or implied as the result of a Party’s decision to avail itself of a remedy under this Agreement.
Section 11.3
DIRECT DAMAGES
. A PARTY’S DAMAGES RESULTING FROM A BREACH OR VIOLATION OF ANY REPRESENTATION, WARRANTY,
COVENANT, AGREEMENT OR CONDITION CONTAINED IN THIS AGREEMENT OR ANY ACT OR OMISSION ARISING FROM OR RELATED TO THIS AGREEMENT SHALL BE LIMITED TO ACTUAL DIRECT DAMAGES AND SHALL NOT INCLUDE ANY OTHER LOSS OR DAMAGE, INCLUDING INDIRECT, SPECIAL,
CONSEQUENTIAL, INCIDENTAL, EXEMPLARY OR PUNITIVE DAMAGES, INCLUDING LOST PROFITS, PRODUCTION, OR REVENUES, AND EACH PARTY RELEASES THE OTHER PARTY FROM ALL SUCH CLAIMS FOR LOSS OR DAMAGE OTHER THAN ACTUAL DIRECT DAMAGES; PROVIDED THAT THIS
LIMITATION TO DIRECT DAMAGES SHALL NOT LIMIT THE PARTIES’ INDEMNIFICATION OBLIGATIONS UNDER Section 3.5(c), Section 7.3, AND Article 15.
Article 12
Force
Majeure
Section 12.1
Force Majeure
. If either Midstream Co or Producer is rendered unable by an event of Force Majeure to
carry out, in whole or part, its obligations under this Agreement and such Party gives notice (which notice may initially be delivered orally so long as written notice is delivered as soon as reasonably practicable thereafter) and reasonably full
details of the event (including the nature, extent, effect, and likely duration of the event or circumstances constituting the Force Majeure event) to the other Party as soon as practicable after the occurrence of the event, then, during the
pendency of such Force Majeure, but only during that period, the obligations of the Party affected by the event shall be canceled or suspended, as applicable, to the extent required;
provided
,
however
, that notwithstanding anything in
the foregoing to the contrary, no Party shall be relieved from any indemnification obligation or any obligation to make payments, as the result of Force Majeure, regardless of which Party is affected;
provided further
that if the Force
Majeure impacts only a particular Facility Segment or Individual System, then the suspension of obligations described in this sentence shall apply only to the applicable Facility Segment or Individual System and not to the obligations owing in
connection with the rest of the System. The Party affected by Force Majeure shall use commercially reasonable efforts to remedy the Force Majeure condition with all reasonable dispatch, shall give notice to the other Party of the termination of the
Force Majeure, and shall resume performance of any suspended obligation promptly after termination of such Force Majeure.
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Section 12.2
Extension Due to Force Majeure
. If a Party is unable to meet any
deadline set forth herein as a result of a Force Majeure, then provided that such Party complies with the provisions of
Section 12.1
, such deadline shall be extended for a period of time equal to the period of time during which such
Party is delayed due to the Force Majeure.
Article 13
Change in Law; Uneconomic Service
Section 13.1
Changes in Applicable Law
.
(a) If any new Laws are enacted or amended or any new interpretations in respect of previously existing Laws are issued after the Effective
Date that require Midstream Co to make capital expenditures with respect to the System, then Midstream Co may propose an increase to the applicable Individual Fee as may be necessary or appropriate to preserve and continue for the Parties the rights
and benefits originally contemplated for the Parties by this Agreement;
provided
,
however
, that no increase to the applicable Individual Fee pursuant to this
Section 13.1
shall be applicable unless and until, in the
reasonable judgment of Midstream Co, Midstream Co would be required to make capital expenditures with respect to the System in order to comply with such new Law that materially and adversely affects the economics of the Services provided, fees
received, or the other economic benefits of this Agreement for Midstream Co.
(b) Producer shall accept or reject, in its sole discretion,
Midstream Co’s proposed increase to the Individual Fee within 30 Days after receiving such proposal from Midstream Co. If Producer fails to provide notice of such acceptance or rejection within such 30-Day period, then Producer shall be deemed
to have accepted such increase. If Producer rejects the amount of the proposed increase, then Midstream Co shall release the Wells, Separator Facilities, Receipt Points, Spacing Units, and Dedicated Production that would have been affected by such
increase in accordance with
Section 2.4(a)(viii)
. The Parties will amend, update, or revise the applicable Agreement Addendum in accordance with this Agreement to reflect any changes in the applicable Individual Fees agreed to in
accordance with this
Section 13.1
.
(c) Producer and Midstream Co shall use their commercially reasonable efforts to comply
with new and amended applicable Laws and new interpretations of existing Laws.
Section 13.2
Unprofitable Operations and Rights of
Termination.
(a)
Cessation of Services
. If, in the sole discretion of Midstream Co, (x) the gathering of Product from any
Wells, Separator Facilities or Receipt Points, (y) the delivery of Product to any Delivery Points or (z) the provision of any other Services under this Agreement, is or becomes uneconomical due to its volume, quality, or for any other
cause, then Midstream Co shall not be obligated to provide the applicable Services so long as such condition exists.
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(i) If Midstream Co suspends Services under this
Section 13.2(a)
as a
result of Producer’s (A) negligence, willful misconduct, or breach of this Agreement, (B) delivery of Product that fails to meet the quality specifications required by
Section 7.1
, or (C) execution of a plan of development
that deviates from the then-applicable Development Report, then Midstream Co may resume providing such Services at any time, upon two months’ advance written notice delivered to Producer, and the affected Wells, Separator Facilities, Receipt
Points, Spacing Units, and Dedicated Production shall only be permanently released as a result of suspension under this clause by mutual agreement of the Parties under
Section 2.4(a)(iv)
.
(ii) If Midstream Co suspends Services under this
Section 13.2(a)
for any reason other than as specified in
clause (i) above and (x) such suspension continues for six consecutive Months or (y) Midstream Co delivers notice to Producer that such suspension shall be permanent, then the applicable Wells, Separator Facilities, Receipt Points,
Spacing Units, and Dedicated Production shall be permanently released as specified in
Section 2.4(a)(ix)
.
(b)
Election not
to Expand System.
If Midstream Co determines, in its discretion, that an expansion of the Individual System to satisfy the needs of Producer, as described in
Section 3.2
hereof, would be uneconomical, then Midstream Co shall neither
be obligated to undertake such expansion nor to provide the applicable Services. Producer shall be entitled to a release of the applicable Planned Wells, Planned Separator Facilities and Dedicated Production pursuant to
Section 2.4(a)(ix)
immediately upon Midstream Co’s delivery of a System Plan (marked as “Final”) indicating that a requested expansion would be uneconomical pursuant
Section 13.2(d)
.
(c)
Start of Suspension of Services
. Midstream Co shall cause any suspension of Services permitted by this
Section 13.2
to
commence on the first Day of a Month and not on any other Day.
(d)
Supporting Documentation
. As soon as Midstream Co determines
that an expansion of the Individual System will not be economic or that continuing to provide Services at existing facilities has been rendered uneconomic, Midstream Co shall communicate the same to Producer. With respect to existing facilities,
such notice shall be delivered to Producer at least 60 Days in advance of any proposed curtailment under this
Section 13.2
and such notice shall be accompanied by documentation supporting its claim that certain Services have become
uneconomical. With respect to planned facilities, Midstream Co shall indicate that providing Services to Planned Wells or Planned Separator Facilities is uneconomical by failing to include the necessary expansion projects in the applicable System
Plan and shall provide supporting documentation for its determination that such expansion would be uneconomical, if requested by Producer. If Midstream Co delivers a System Plan (marked as “Final”) describing the necessary expansion
projects, such delivery shall be deemed to be a commitment by Midstream Co to complete such expansion without exercising its rights under
Section 13.2(b)
, so long as conditions (including anticipated throughput, pricing, the ability to
obtain rights-of-way, Producer’s continued execution of the Development Report, and any other factors deemed material by Midstream Co) do not materially change;
provided, however
that upon the initiation of Services through such
expansion project or through a component part of such expansion project, such expansion (or applicable portion thereof) shall be considered “existing facilities” for purposes of this
Section 13.2
and Midstream Co shall have all
of the rights set forth herein with respect to existing facilities that become uneconomical. Nothing in this
Section 13.2(d)
shall give Producer a right to consent to a suspension under this
Section 13.2
.
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Restated
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(e)
No Obligation to Drill or Operate
. Without limiting the right of Producer to revise
the Development Report to eliminate any proposed Wells or Separator Facilities, nothing herein shall be construed to require Producer to drill any Well, to continue to operate any Well, to place any new Separator Facility into service or to maintain
the operation of any Separator Facility that a prudent operator would not in like circumstances drill or continue to operate.
Article
14
Regulatory Status
Section 14.1
Non-Jurisdictional System
. The Services being provided by Midstream Co hereunder are intended to be gathering
services, and no Governmental Authority currently establishes the rates or terms of service relating to the Services. This Agreement is subject to all valid present and future Laws of Governmental Authorities now or hereafter having jurisdiction
over the Parties, this Agreement, the Services performed, or the System. It is the intent of the Parties that no Governmental Authority shall alter any provisions in the Agreement in such a way that would have the effect of altering the
economic benefits of either Party, as originally contemplated under this Agreement. The Parties shall (a) vigorously defend and support in good faith the enforceability of this Agreement and the continuance, without alternation, of the Services
in any and all proceedings before any Governmental Authority in which this Agreement is subject to review and (b) not initiate or support, either directly or indirectly, any challenge with any Governmental Authorities to the rates provided
herein or any other modification to this Agreement that would alter the economic benefits of a Party as originally contemplated under this Agreement.
Section 14.2
Government Authority Modification
. Notwithstanding the provisions of
Section 14.1
, if the rates are
changed or required to be changed or any other modification to this Agreement that alters the economic benefits of a Party, as originally contemplated under this Agreement, in response to any order, regulation, or other mandate of a Governmental
Authority, then no such change or modification shall constitute a breach or other default under the terms of this Agreement, and the Parties shall negotiate in good faith to enter into such amendments to this Agreement or a separate arrangement in
order to give effect, to the greatest extent possible, the economic benefit as originally contemplated in this Agreement. If, in the reasonable opinion of Midstream Co’s counsel, a Governmental Authority’s regulation of Midstream Co’s
results in (a) Midstream Co not having the same economic benefits as originally contemplated under this Agreement or (b) Midstream Co’s or any of its Affiliate’s pipelines becoming subject to additional legal requirements or
regulation, and the Parties have not mutually agreed as to how to mitigate or alleviate the foregoing, then Midstream Co shall have the right, without liability, to terminate this Agreement.
Article 15
Indemnification and Insurance
Section 15.1
Reciprocal Indemnity
. To the fullest extent permitted by applicable Law and except as otherwise set forth in
Section 3.5(c)
and
Section 7.3
:
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(a)
Producer Indemnification
. Producer shall release, protect, defend, indemnify and hold
harmless Midstream Co Group from and against all Losses directly or indirectly arising out of or in connection with bodily injury, death, illness, disease, or loss or damage to property of Producer or any member of Producer Group in any way arising
out of or relating to this Agreement, directly or indirectly. THIS RELEASE, DEFENSE AND INDEMNITY OBLIGATION SHALL APPLY REGARDLESS OF FAULT OF MIDSTREAM CO GROUP OR ANY OTHER PERSONS.
(b)
Midstream Co Indemnification
. Midstream Co shall release, protect, defend, indemnify and hold harmless Producer Group from and
against all Losses directly or indirectly arising out of or in connection with bodily injury, death, illness, disease, or loss or damage to property of Midstream Co or any member of Midstream Co Group in any way arising out of or relating to this
Agreement, directly or indirectly. THIS RELEASE, DEFENSE AND INDEMNITY OBLIGATION SHALL APPLY REGARDLESS OF FAULT OF PRODUCER GROUP OR ANY OTHER PERSONS.
(c)
Regardless of Fault
. AS USED IN THE PRECEDING TWO SUBCLAUSES, THE PHRASE “REGARDLESS OF FAULT” SHALL MEAN, WITH RESPECT TO
ANY LOSS THAT IS CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE (WHETHER SOLE, JOINT, CONCURRENT, COMPARATIVE, CONTRIBUTORY, ACTIVE, PASSIVE, OR OTHERWISE), STRICT LIABILITY, OR OTHER FAULT, OF ANY MEMBER OF MIDSTREAM CO GROUP OR THE PRODUCER GROUP,
WITHOUT REGARD TO THE CAUSE OR CAUSES THEREOF AND WITHOUT LIMITATION OF SUCH LOSS AND WHETHER OR NOT CAUSED BY A PRE-EXISTING CONDITION.
Section 15.2
Indemnification Regarding Third Parties
. Each Party shall release, protect, defend, indemnify and hold the other
Party harmless against any Loss by a Third Party that is not a member of the Producer Group or Midstream Co Group, to the extent such Loss (a) is caused by the negligence or willful misconduct of said indemnifying Party or such Party’s
Group, or (b) in the case of Producer as indemnifying Party, results from claims by a Third Party of title, rights, or encumbrances in or to Product delivered by Producer to a Receipt Point.
Section 15.3
Penalties
. Producer shall release, protect, defend, indemnify, and hold harmless Midstream Co from any Losses
resulting from scheduling penalties or Monthly balancing provisions imposed by a Downstream Facility in any transportation contracts or service agreements associated with, or related to, Producer’s owned or Controlled Product, including any
penalties imposed pursuant to the Downstream Facility’s tariff, or which may be caused by (i) an operational flow order or similar order respecting operating conditions issued by a Downstream Facility, (ii) a predetermined allocation
directive from (or agreement with) Producer or (iii) other pipeline allocation methods, or by unscheduled production, or by unauthorized production, except to the extent any such Losses are caused by Midstream Co’s use of Other System
Fuel.
Section 15.4
Insurance
. Midstream Co and Producer shall (a) carry and maintain no less than the insurance coverage
set forth in
Exhibit D
, and (b) cause such insurance to be (i) the primary coverage without any right of contribution from any other insurance held by the other Party to the extent of the insured Party’s indemnification
obligations hereunder, and (ii) written
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Gas Gathering Agreement
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and endorsed to include waivers of all subrogation rights of the insurers against Midstream Co and its Group (in the case of Producer’s insurance) or Producer and its Group (in the case of
Midstream Co’s insurance). Unless Producer is Original Producer, Producer shall also cause the insurance carried and maintained by it pursuant to this
Section 15.4
to be endorsed to name Midstream Co and its Group as additional
insureds or provide blanket additional insured status that covers Midstream Co and its Group as additional insureds, except in the case of worker’s compensation insurance. Any insurance provided by OpCo on behalf of Midstream Co that comports
with this
Section 15.4
shall be deemed to satisfy these requirements.
Article 16
Assignment
Section 16.1
Assignment of Rights and Obligations under this Agreement
.
(a)
Assignment
. Except as specifically otherwise provided in this Agreement, no Party nor OpCo shall have the right to assign its rights
and obligations under this Agreement (in whole or in part) to another Person except with the prior consent of Midstream Co (in the case of an assignment by Producer) or Producer (in the case of an assignment by OpCo or Midstream Co), which consent
may be withheld at such Party’s sole discretion. Notwithstanding the foregoing, Producer may assign its rights and obligations under this Agreement to any Person to whom Producer assigns or transfers an interest in any of the Dedicated
Properties insofar as this Agreement relates to such Dedicated Properties without the consent of Midstream Co;
provided
that (A) such Person assumes in writing the obligations of Producer under this Agreement insofar as it relates to the
portion of the Dedicated Properties so assigned or transferred, such writing shall take the form of an Agreement Addendum, executed by the applicable Midstream Co and the Producer Assignee (and others, if appropriate) and such writing shall be
recorded in the real property records of the counties in which the Dedication Area is located, (B) such assignment is made subject to this Agreement, (C) if such assignment or transfer is made to an Affiliate of Producer, the Original
Producer shall not be released from any of its obligations under this Agreement, and (D) if such transfer or assignment is to a Producer Assignee (a “
Third Party Assignment
”): (1) the Original Producer shall be released
from its obligations under this Agreement with respect to the Dedicated Properties so assigned or transferred, (2) at least thirty (30) Days prior to the closing date of the Third Party Assignment (or, if the period between signing and
closing is less than thirty (30) Days, as early as possible and in no event less than two Business Days prior to the closing of the Third Party Assignment), Producer shall cause the proposed Producer Assignee to deliver an updated Development
Report to Midstream Co and (3) prior to or on the closing date of the Third Party Assignment, the Producer Assignee shall deliver to Midstream Co (x) a copy of the writing pursuant to which the Third Party Assignment is occurring, and
(y) documentation of any Conflicting Dedication affecting any Product of the Producer Assignee that would otherwise be considered Dedicated Production.
(b)
Notice; Binding Effect
. Within 30 Days prior to the date of execution of a permitted assignment by Producer, Producer shall give
Midstream Co notice of any assignment of this Agreement or Dedicated Properties. Midstream Co shall give Producer written notice of any assignment of this Agreement within 30 Days after the date of execution of such permitted assignment. This
Agreement shall be binding upon and inure to the benefit of the respective permitted successors and assigns of the Parties. Any attempted assignment made without compliance with the provisions set forth in this
Section 16.1
shall be null
and void
ab initio
.
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(c)
Releases not Assignments
. Any release of any of the Dedicated Properties from the
Dedications pursuant to
Section 2.4
shall not constitute an assignment or transfer of such Dedicated Properties for the purposes of this
Article 16
.
Section 16.2
Pre-Approved Assignments
. Each Party shall have the right without the prior consent of the others to
(a) mortgage, pledge, encumber or otherwise impress a lien or security interest upon its rights and interest in and to this Agreement, and (b) make a transfer pursuant to any security interest arrangement described in (a) above,
including any judicial or non-judicial foreclosure and any assignment from the holder of such security interest to another Person.
Section 16.3
Change of Control
. Except as provided in
Section 16.1
, nothing in this
Article 16
shall prevent
Producer’s members or owners from transferring their respective interests (whether equity or otherwise and whether in whole or in part) in Producer and nothing in this
Article 16
shall prevent Midstream Co’s members or owners from
transferring their respective interests (whether equity or otherwise and whether in whole or in part) in Midstream Co. However, if a change of control of a Party gives rise to a reasonable basis for insecurity on the part of the other Party, such
change of control may be the basis for a request of Adequate Assurance of Performance. Each member or owner of Producer or Midstream Co, as applicable, shall have the right to assign and transfer such member’s or owner’s interests (whether
equity or otherwise and whether in whole or in part) in Producer or Midstream Co, as applicable, without restriction contained in this Agreement.
Article 17
Other
Provisions
Section 17.1
Relationship of the Parties
. The execution and delivery of an Agreement Addendum shall create a
binding agreement between the Parties signatory thereto or, in the case of the OpCo Agreement Addendum, the Producer signatory thereto and OpCo, consisting of the terms set forth in such Agreement Addendum together with the terms set forth in these
Agreement Terms and Conditions. The signatories of one Agreement Addendum shall not be bound to or otherwise in privity of contract with the signatories of any other Agreement Addendum, and the execution and delivery of each Agreement Addendum shall
form a separate and distinct contract. This Agreement shall not be deemed or construed to create, a partnership, joint venture or association or a trust between or among Producer, Midstream Co, and OpCo or the persons party to any other Agreement
Addendum. This Agreement shall not be deemed or construed to authorize any Party or OpCo to act as an agent, servant or employee for any other Party or OpCo for any purpose whatsoever except as explicitly set forth in this Agreement. In their
relations with each other under this Agreement, the Parties and OpCo shall not be considered fiduciaries.
Section 17.2
Notices
. Unless otherwise specified in the applicable provision, all notices, consents, approvals, requests, and other communications required or permitted to be given under this Agreement shall be in writing and delivered personally, or sent
by bonded
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overnight courier, mailed by U.S. Express Mail or by certified or registered United States Mail with all postage fully prepaid, return receipt requested, or, except in the case of notices of
breach or default, sent by electronic mail (including with a PDF of the notice or other communication attached), in each case, addressed (i) if to Producer, at the address set forth on the applicable Agreement Addendum and (ii) if to
Midstream Co or OpCo, then to OpCo and the applicable Midstream Co at the address set forth on the applicable Agreement Addendum;
provided
that in the case of any notice by electronic mail, such notice is confirmed by communication via
another method permitted by this
Section 17.2
. Any notice, consent, approval, request, or other communication (“Communications”) given in accordance herewith shall be deemed to have been given when (a) actually received or
rejected by the addressee in person or by courier, (b) (reserved), or (c) actually received or rejected by the addressee upon delivery by overnight courier or United States Mail, as shown in the tracking report or return receipt, as
applicable. Communications may not be transmitted by electronic mail, except for ordinary course business communications that shall be deemed to be received, if transmitted during normal business hours on such Business Day, or if transmitted after
normal business hours, on the next Business Day. Any Person may change their contact information for notice by giving notice to the other Party and, in the case of Producer, OpCo in the manner provided in this
Section 17.2
.
Section 17.3
Entire Agreement; Conflicts
. This Agreement (consisting of these Agreement Terms and Conditions and the applicable
Agreement Addendum) constitutes the entire agreement of Producer and Midstream Co or OpCo (as applicable) pertaining to the subject matter hereof and supersedes all prior agreements, understandings, negotiations, and discussions, whether oral or
written, of Producer and Midstream Co or OpCo (as applicable) pertaining to the subject matter hereof. There are no warranties, representations, or other agreements between Producer and Midstream Co or OpCo (as applicable) relating to the subject
matter hereof except as specifically set forth in this Agreement, including the exhibits hereto, and no Party or OpCo shall be bound by or liable for any alleged representation, promise, inducement, or statements of intention not so set forth.
Section 17.4
Waivers; Rights Cumulative
. Any of the terms, covenants, or conditions hereof may be waived only by a written
instrument executed by or on behalf of the Person waiving compliance. No course of dealing on the part of any Party or OpCo, or their respective officers, employees, agents, or representatives, nor any failure by a Party or OpCo to exercise any of
its rights under this Agreement shall operate as a waiver thereof or affect in any way the right of such Party or OpCo at a later time to enforce the performance of such provision. No waiver by any Party or OpCo of any condition, or any breach of
any term or covenant contained in this Agreement, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any such condition or breach or a waiver of any other condition or of any breach of any other
term or covenant. The rights of Producer, Midstream Co, and OpCo (as applicable) under this Agreement shall be cumulative, and the exercise or partial exercise of any such right shall not preclude the exercise of any other right.
Section 17.5
Amendment
.
(a) This Agreement may be amended only by an instrument in writing executed (except as otherwise set forth in this
Section 17.5
) by
Producer and Midstream Co or OpCo, as applicable, and expressly identified as an amendment or modification.
Second Amended and
Restated
Gas Gathering Agreement
- 49 -
(b) In the event of a conflict between (i) these Agreement Terms and Conditions or any
exhibit to this agreement, on the one hand, and (ii) an applicable Agreement Addendum, on the other, the applicable Agreement Addendum shall control.
Section 17.6
Governing Law; Arbitration
. This Agreement shall be governed by and construed in accordance with the laws of the
State, excluding any conflicts of law rule or principle that might refer construction of such provisions to the laws of another jurisdiction. Any dispute, controversy, or claim arising out of or relating to this Agreement shall be finally settled by
arbitration in accordance with the CPR Institute for Dispute Resolution Rules for Non-Administered Arbitration then in effect (the “
Rules
”) by a sole arbitrator appointed in accordance with the Rules. The arbitrator is not empowered
to award consequential, indirect, special, punitive or exemplary damages, and each Party and OpCo irrevocably waives any damages in excess of actual damages. Arbitration shall be held in the English language in the State, and the decision of the
arbitration panel shall include a statement of the reasons for such decision, and the award shall be final and binding on Producer and Midstream Co or OpCo, as applicable. Awards shall be final and binding on Producer and Midstream Co or OpCo, as
applicable, from the date they are made and judgment upon any award may be entered in any court having jurisdiction. The arbitrator shall apply the laws of the State, excluding any conflicts of law rule or principle that might refer construction of
such provisions to the laws of another jurisdiction.
Section 17.7
Parties in Interest
. Except for parties indemnified
hereunder, nothing in this Agreement shall entitle any Person other than the Parties and OpCo to any claim, cause of action, remedy or right of any kind.
Section 17.8
Preparation of Agreement
. The Parties and OpCo and their respective counsel participated in the preparation of this
Agreement. In the event of any ambiguity in this Agreement, no presumption shall arise based on the identity of the draftsman of this Agreement.
Section 17.9
Severability
. If any term or other provision of this Agreement is invalid, illegal, or incapable of being enforced by
any rule of Law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any
adverse manner to any Party or OpCo. Upon such determination that any term or other provision is invalid, illegal, or incapable of being enforced, Producer and Midstream Co or OpCo, as applicable, shall negotiate in good faith to modify this
Agreement so as to effect the original intent of Producer and Midstream Co or OpCo, as applicable, as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible. A ruling of
invalidity, illegality or unenforceability as to one Agreement shall only be applicable to that Agreement, not all the Agreements covered by these Agreement Terms and Conditions.
Section 17.10
Counterparts
. This Agreement may be executed in any number of counterparts, and each such counterpart hereof shall
be deemed to be an original instrument, but all of such counterparts shall constitute for all purposes one agreement. Any signature hereto delivered by a Party or OpCo by electronic mail shall be deemed an original signature hereto; provided that
the originals of any such electronically provided signatures shall be provided by the signatory, if requested by the other Party (or OpCo) within a week of exchanging such signatures.
Second Amended and
Restated
Gas Gathering Agreement
- 50 -
Section 17.11
Confidentiality
. All data and information exchanged by the Parties and
OpCo (other than the terms and conditions of this Agreement) and all pricing terms shall be maintained in strict and absolute confidence and no Party nor OpCo shall disclose, without the prior consent of the other Parties and OpCo, any such data,
information or pricing terms unless the release thereof is required by Law (including any requirement associated with an elective filing with a Governmental Authority) or the rules or regulations of any stock exchange on which any securities of the
Parties, OpCo, or any Affiliates thereof are traded. Nothing in this Agreement shall prohibit the Parties or OpCo from disclosing whatever information in such manner as may be required by applicable Law; nor shall any Party or OpCo be prohibited by
the terms hereof from disclosing information acquired under this Agreement to any financial institution or investors providing or proposing financing to a Party, OpCo, or to any Person proposing to purchase the equity in any Party or OpCo or the
assets owned by any Party or OpCo. Notwithstanding the foregoing, the restrictions in this
Section 17.11
will not apply to data or information that (i) is in the possession of the Person receiving such information prior to
disclosure by the other Party or OpCo, (ii) is or becomes known to the public other than as a result of a breach of this Agreement or (iii) becomes available to a Party or OpCo a non-confidential basis from a source other than the other
Party or OpCo,
provided
that such source is not bound by a confidentiality agreement with, or other fiduciary obligations of confidentiality to, the other Party or OpCo. This Section will survive any termination of this Agreement for a
period of 24 Months from the end of the Year in which the date of such termination occurred.
(End of Agreement Terms and
Conditions
)
Second Amended and
Restated
Gas Gathering Agreement
- 51 -
EXHIBIT A
TO
AGREEMENT TERMS AND
CONDITIONS
RELATING TO GAS GATHERING SERVICES
SERVICE AREA
Weld
County, Colorado, except for the following areas:
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|
|
|
|
|
|
Township
|
|
Range
|
|
Sections
|
|
|
|
T8N
|
|
R59W
|
|
ALL
|
|
|
|
T8N
|
|
R60W
|
|
ALL
|
|
|
|
T8N
|
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R61W
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ALL
|
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|
T8N
|
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R62W
|
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ALL
|
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T9N
|
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R58W
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ALL
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T9N
|
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R59W
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ALL
|
|
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|
T9N
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R60W
|
|
ALL
|
|
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T9N
|
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R61W
|
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ALL
|
|
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10N
|
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58W
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|
19-36 (also known as S/2)
|
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8N
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58W
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1-18 (also known as N/2)
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Second Amended and
Restated
Gas Gathering Agreement
Exhibit A – Page 1
EXHIBIT B
TO
AGREEMENT TERMS AND
CONDITIONS
RELATING TO GAS GATHERING SERVICES
DOWNTIME FEE REDUCTION
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|
Individual System Downtime Percentage
(per Month)
|
|
Percentage
Reduction of
Individual Fee with
respect to such
Individual System
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|
Greater than 7% and up to and including 10%
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5
|
%
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Greater than 10% and up to and including 12%
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10
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%
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Greater than 12% and up to and including 15%
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15
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%
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Greater than 15%
|
|
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20
|
%
|
Second Amended and
Restated
Gas Gathering Agreement
Exhibit B – Page 1
EXHIBIT C
TO
AGREEMENT TERMS AND
CONDITIONS
RELATING TO GAS GATHERING SERVICES
OPERATING PRESSURE FEE REDUCTION
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Pressure Overage Percentage, based on pressures at an Individual
System
|
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Percentage
Reduction of
Individual
Fee with respect to
such Individual
System
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Less than 15%
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None
|
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Greater than 15% and up to and including 25%
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15
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%
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Greater than 25% and up to and including 35%
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20
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%
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Greater than 35%
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25
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%
|
Second Amended and
Restated
Gas Gathering Agreement
Exhibit C – Page 1
EXHIBIT D
TO
AGREEMENT TERMS AND
CONDITIONS
RELATING TO GAS GATHERING SERVICES
INSURANCE
Each of OpCo (on behalf of
Midstream Co) and Producer shall purchase and maintain (or cause to be purchased and maintained) in full force and effect at all times during the Term of this Agreement, at such Party’s sole cost and expense and from insurance companies that
are rated (or whose reinsurers are rated) “A-VII” or better by AM Best or “BBB-” or better by Standard & Poor’s or an equivalent rating from another recognized rating agency, policies providing the types and limits
of insurance indicated below, which insurance shall be regarded as a minimum and, to the extent of the obligations undertaken by such Party in this Agreement, shall be primary (with the exception of the Excess Liability Insurance and Workers’
Compensation) as to any other existing, valid, and collectable insurance. Each Party’s deductibles shall be borne by that Party.
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A.
|
Where applicable, Workers’ Compensation and Employers’ Liability Insurance, in accordance with the statutory requirements of the State and endorsed specifically to include the following:
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1.
|
Employers’ Liability, subject to a limit of liability of not less than $1,000,000 per accident, $1,000,000 for each employee/disease, and a $1,000,000 policy limit.
|
The Workers’ Compensation and Employers’ Liability Insurance policy(ies) shall contain an alternate employer endorsement.
|
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B.
|
Commercial General Liability Insurance, with limits of liability of not less than the following:
|
$2,000,000 general aggregate
$1,000,000 each occurrence, Bodily Injury or Property Damage Combined Single Limit
Such insurance shall include the following:
|
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1.
|
Premises and Operations coverage.
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|
2.
|
Contractual Liability covering the liabilities assumed under this Agreement.
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3.
|
Broad Form Property Damage Liability endorsement, unless policy is written on November 1988 or later ISO form.
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4.
|
Products and Completed Operations.
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|
5.
|
Time Element Limited Pollution coverage.
|
Second Amended and
Restated
Gas Gathering Agreement
Exhibit D – Page 1
|
|
C.
|
If applicable, Automobile Liability Insurance, with limits of liability of not less than the following:
|
$1,000,000 Bodily Injury or Property Damage Combined Single Limit, for each occurrence.
Such coverage shall include hired and non-owned vehicles and owned vehicles where applicable.
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D.
|
If applicable, Aircraft Liability Insurance. In any operation requiring the use or charter of aircraft or helicopters by Midstream Co or Producer, combined single limit insurance shall be carried or cause to be carried
for public liability, passenger liability and property damage liability in an amount of not less than $8,000,000 per seat subject to a minimum of $20,000,000; this insurance shall cover all owned and non-owned aircraft, including helicopters, used
by Midstream Co in connection with the performance of the work set forth in this Agreement.
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E.
|
Excess Liability Insurance, with limits of liability not less than the following:
|
Limits of
Liability—$10,000,000 Occurrence/Aggregate for Bodily Injury and Property Damage in excess of the coverage outlined in Paragraphs A, B, C and D.
The
limits of coverage required in this Agreement may be met with any combination of policies as long as the minimum required limits are met.
Each Party to
this Agreement shall have the right to acquire, at its own expense, such additional insurance coverage as it desires to further protect itself against any risk or liability with respect to this Agreement and operations and activities under this
Agreement or related thereto. All insurance maintained by or on behalf of Producer or Midstream Co shall contain a waiver by the insurance company of all rights of subrogation in favor of the other Party.
Neither the minimum policy limits of insurance required of the Parties nor the actual amounts of insurance maintained by the Parties under their insurance
program shall operate to modify the Parties’ liability or indemnity obligations in this Agreement.
A Party may self-insure the requirements in this
Exhibit D
if such Party is Controlled by Noble Energy, Inc. and, otherwise, if such Party or its parent is considered investment grade (S&P BBB- or equivalent or higher).
(End of Exhibit D)
Second Amended and
Restated
Gas Gathering Agreement
Exhibit D – Page 2
Exhibit 10.7.1
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED. THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
When Recorded,
Mail To:
Attn: DJ Land Manager
1625 Broadway, Suite 2200
Denver, CO 80202
SECOND AMENDED AND
RESTATED
GAS GATHERING AGREEMENT
SECOND AMENDED AND RESTATED
AGREEMENT ADDENDUM 01
W
ELLS
R
ANCH
This AGREEMENT ADDENDUM 01 (this “
Agreement Addendum
”) (a) shall be effective as among the Persons named below as
“Producer” and “Midstream Co” as of the date specified below as the “Effective Date,” (b) incorporates the Second Amended and Restated Agreement Terms and Conditions Relating to Gas Gathering Services (the
“
Agreement Terms and Conditions
”), which were last amended effective as of March 31, 2016 and recorded in the real property records of Weld County, Colorado on
as
, and (c) together with the Agreement Terms and Conditions, shall constitute one contract and shall be the Agreement
of the Parties. Except as otherwise set forth herein (i) all terms shall have the meanings assigned to such terms in the Agreement Terms and Conditions, and (ii) all references to Exhibits, Appendices, Articles, Sections, subsections and
other subdivisions refer to the corresponding Exhibits, Appendices, Articles, Sections, subsections and other subdivisions of or to the Agreement Terms and Conditions.
Producer desires to contract with Midstream Co for Midstream Co to provide the Services utilizing the Individual System, and Midstream Co
desires to provide the Services to Producer, on the terms and subject to the conditions of this Agreement.
NOW, THEREFORE, in
consideration of the mutual agreements in this Agreement, Midstream Co and Producer hereby agree as follows:
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Producer
|
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Noble Energy, Inc., a Delaware corporation
|
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Midstream Co
|
|
Colorado River DevCo LP, a Delaware limited partnership
|
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.
THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
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Parties
|
|
The term “Party” or “Parties” shall refer to the Producer and Midstream Co identified in this Agreement Addendum
|
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Effective Date
|
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March 31, 2016
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Dedication Area
|
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The Wells Ranch integrated development plan area, as such area was defined by Producer on the Effective Date, and which consists of the following areas within Weld County, Colorado
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Township
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Range
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Sections
|
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T7N
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R64W
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31-36
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T7N
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R63W
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31-36
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T6N
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R64W
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ALL
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T6N
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R63W
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ALL
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T6N
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R62W
|
|
2-11, 14-23, 26-35
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T5N
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R62W
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2-11, 14-23
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T5N
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R63W
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ALL
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T7N
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R62W
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31
|
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T5N
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R64W
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1-6, 10-15, 22-27, 34-36
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Except and excluding the wells, leases and other acreage described in the property exhibits attached to the Releases of Dedication.
|
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|
Individual Fee
|
|
$[**]/ MMBtu
|
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|
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|
Pressures
|
|
|
|
|
MAOP
|
|
500 psig
|
|
Target Pressure
|
|
150 psig
|
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|
|
Deviations from Service Conditions
(the specifications in this section supersede the applicable language from Article 7)
|
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|
|
NONE
|
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|
|
Additional Revisions
|
|
|
|
|
Section 5.4(d)(ii)
is hereby amended as follows:
|
|
Section 5.4(d)(ii)
is of no force and effect in the Wells Ranch Individual System.
|
Agreement Addendum 01
– Page 2
Second Amended and Restated Gas Gathering Agreement
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.
THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
|
|
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|
|
Section 6.2(c)
is hereby amended as follows:
|
|
Section 6.2(c)
is of no force and effect in the Wells Ranch Individual System.
|
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|
Notices and Payments
|
|
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|
|
Notice Address – General Matters & Correspondence
|
|
Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Chief Financial Officer
John F. Bookout,
IV
Telephone: (832) 639-7134
Email: John.Bookout@nblenergy.com
Producer:
Noble Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO 80202
Attention: Director of USO Finance,
Gerald Free
Telephone: (303) 228-4174
Email:
Gerald.Free@nblenergy.com
|
Agreement Addendum 01
– Page 3
Second Amended and Restated Gas Gathering Agreement
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.
THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
|
|
|
|
|
Notice Address – Operational Matters
|
|
Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Chief Operating Officer
John C. Nicholson
Telephone: (281) 876-6186
Email: John.Nicholson@nblenergy.com
Producer:
Noble Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO 80202
Attention:
Vice President – DJ Business Unit
Mark
Patteson
|
|
|
|
|
Notice Address – Force Majeure and Marketing interruptions
|
|
Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
Facsimile: (303) 228-4296
Attention: Natural Gas Marketing Department
Producer:
Noble Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO 80202
Attention:
Director of USO Finance,
Gerald Free
Telephone: (303) 228-4174
Email: Gerald.Free@nblenergy.com
|
Agreement Addendum 01
– Page 4
Second Amended and Restated Gas Gathering Agreement
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.
THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
|
|
|
|
|
Notice Address – Invoicing Matters
|
|
Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Ian Dams
Telephone: (832) 639-7406
Email:
ian.dams@nblenergy.com
Producer:
1001 Noble Energy Way
Houston, TX 77070
Attention:
Director of Revenue Accounting
John Nedelka
Telephone: (281) 872-3120
Email: John.Nedelka@nblenergy.com
|
|
|
|
|
Payments by Electronic Funds Transfer
|
|
Midstream Co:
ABA for wire: 021000021
ABA for ACH: 111000614
Account Number: 780161720
Account Name: Colorado River DevCo
LP
Financial Institution: JP Morgan
Bank Swift: CHASUS33
Producer:
ABA/Routing Number: 021000021
Account
Number: 08805135066
Account Name: Noble Energy, Inc.
Financial Institution: JP Morgan
Bank Swift:
CHASUS33
|
|
|
|
|
Marketing Notice – Midstream Co
|
|
Attention: Gas Marketing Department
Diane Banning
Noble Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO 80202
|
(End of Agreement Addendum 01)
Agreement Addendum 01
– Page 5
Second Amended and Restated Gas Gathering Agreement
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.
THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement in duplicate originals to
be effective as of the Effective Date.
|
|
|
|
|
“Producer”
|
|
|
|
NOBLE ENERGY, INC.
|
|
|
|
|
By:
|
|
/s/ Gary W. Willingham
|
|
|
|
Gary W. Willingham
|
|
|
|
Executive Vice President
|
|
|
|
|
|
|
|
STATE OF TEXAS
|
|
)
|
|
|
|
|
|
)
|
|
ss.
|
|
COUNTY OF HARRIS
|
|
)
|
|
|
The foregoing instrument was acknowledged before me this
26th
day of April, 2016, by Gary W. Willingham, Executive Vice
President of Noble Energy, Inc., a Delaware corporation, on behalf of said corporation.
|
|
|
/s/ Vickie L. Graham
|
|
Notary Public in and for the State of Texas
|
Agreement Addendum 01
– Signature Page 1
Second Amended and Restated Gas Gathering Agreement
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.
THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
|
|
|
|
|
“Midstream Co”
|
|
|
|
COLORADO RIVER DEVCO LP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By: Colorado River DevCo GP LLC
|
|
|
|
|
|
By: Noble Midstream Services, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
/s/ Terry R. Gerhart
|
|
|
|
|
|
|
|
Terry R. Gerhart
|
|
|
|
|
|
|
|
Chief Executive Officer
|
|
|
|
|
|
|
|
STATE OF TEXAS
|
|
)
|
|
|
|
|
|
)
|
|
ss.
|
|
COUNTY OF HARRIS
|
|
)
|
|
|
The foregoing instrument was acknowledged before me this
26th
day of April, 2016 by Terry R. Gerhart, as Chief
Executive Officer of Noble Midstream Services, LLC, which is the sole member of Colorado River DevCo GP LLC, which is the general partner of Colorado River DevCo LP, a Delaware limited partnership, on behalf of said company.
|
|
|
/s/ Joanne Garner
|
|
Notary Public in and for the State of Texas
|
Agreement Addendum 01
– Signature Page 2
Second Amended and Restated Gas Gathering Agreement
Exhibit 10.7.2
When Recorded, Mail To:
Attn: DJ Land Manager
1625 Broadway, Suite 2200
Denver, CO 80202
FORM OF
AMENDMENT 01
TO
THAT CERTAIN
SECOND AMENDED AND RESTATED
GAS GATHERING AGREEMENT
W
ELLS
R
ANCH
C
ONTRACT
N
UMBER
: CRWR01-GG
This AMENDMENT 01 (this “
Amendment
”) shall be effective as among Noble Energy, Inc., a Delaware corporation (the
“
Producer
”) and Colorado River DevCo LP, a Delaware limited partnership, together with its permitted successors and assigns (“
Midstream Co
”) as of September 1, 2016 (the “
Amendment Effective
Time
”). This Amendment modifies that certain Second Amended and Restated Gas Gathering Agreement, effective as of March 31, 2016 (the “
Agreement
”), which has been given contract number CRWR01-GG and is comprised
of (i) that certain Second Amended and Restated Agreement Terms and Conditions Relating to Gas Gathering Services (the “
Agreement Terms and Conditions
”), last updated March 31, 2016, together with (ii) that
certain Second Amended and Restated Agreement Addendum 01 (the “
Agreement Addendum
”), effective as of March 31, 2016. The Agreement Terms and Conditions, the Agreement Addendum and this Amendment shall constitute one contract
and shall be the Agreement of the Parties.
WHEREAS, the Parties acknowledge that the purpose of this Amendment is make certain technical
modifications.
WHEREAS, the Parties agree and acknowledge that amendments to the Agreement Terms and Conditions set forth herein
constitute an amendment only to the Agreement and not to any other agreement in respect of natural gas gathering services to which Producer is a party.
NOW, THEREFORE, in consideration of the foregoing recitals, which are incorporated herein and the mutual agreements in the Agreement,
Midstream Co and Producer hereby agree as follows:
1.
Amendments
.
1.1
Section 1.1
of the Agreement (which appears in the Agreement Terms and Conditions) is hereby amended by amending and restating
the following defined terms in their entirety to read as follows:
“
Facility Segment
” means each segment of an Individual
System comprised of facilities beginning at a Receipt Point and ending at a Delivery Point. If an Individual System does not contain any such distinct segment, then the term Facility Segment shall be synonymous with Individual System.
“
Individual System
” means the portion of the System beginning at the Receipt Points and ending at the Delivery Points. The
Individual Systems in existence on the Effective Date are more particularly described in writing between Producer and Midstream Co. Additional Individual Systems may be added to the System from time to time in satisfaction of the needs identified by
Producer and evidenced in writing between Producer and Midstream Co.
1.2
Section 1.1
of the Agreement (which appears in the
Agreement Terms and Conditions) is further amended by amending and restating clauses (a) and (b) of the defined term “Dedicated Production” to read as follows: “(a) Product owned by Producer or an Affiliate of Producer and
produced from a Well within the Dedication Area that is operated by Producer or an Affiliate under the Control of Producer, (b)
Reserved
,”.
1.3
Section 2.3(d)
of the Agreement (which appears in the Agreement Terms and Conditions) is hereby amended and restated in its
entirety to read: “(d) to pool, communitize or unitize Producer’s interests with respect to Dedicated Production”.
1.4
Section 2.4(b)(iv)
of the Agreement (which appears in the Agreement Terms and Conditions) is amended and restated in its entirety to read: “(iv)
Reserved.
”.
1.5
Section 3.1(e)
of the Agreement (which appears in the Agreement Terms and Conditions) is hereby amended by deleting the
sentence that reads as follows “In the sole discretion of each Person serving as a Midstream Co under a Midstream Agreement Addendum, such Midstream Co may work with any other Midstream Co to prepare and deliver a System Plan jointly.” and
inserting in place thereof the following sentence: “Midstream Co may, in its sole discretion, work with OpCo or any of OpCo’s subsidiaries to prepare and deliver a System Plan jointly with such other entity or entities.”
1.6
Section 3.2
of the Agreement (which appears in the Agreement Terms and Conditions) is hereby amended by inserting the following
new
clause (e)
immediately following
clause (d)
of such
Section 3.2
:
“(e)
Substation and
Interconnection Facilities
. The obligations of Midstream Co hereunder to design and construct the Individual System and to perform the Services do not include the design or construction of any substation or other interconnecting facilities
required to procure electricity for the Individual System. If a substation or any other interconnecting facility is required in order for Midstream Co to perform its obligations
Amendment 01 –
Page 2
Second Amended and Restated Gas Gathering Agreement
Colorado River Gas Gathering Agreement
CRWR01-GG
hereunder, Midstream Co and Producer shall enter into a separate agreement setting forth each Party’s responsibilities in connection therewith, including an allocation of responsibility for
all associated costs and expenses.”
2.
Confidentiality
. Pursuant to
Section 17.11
of the Agreement (which appears
in the Agreement Terms and Conditions), the Parties have agreed to treat the information exchanged in connection with and the provisions of the Agreement as confidential. In addition, confidential treatment has been requested with the Securities and
Exchange Commission for the pricing terms of the Agreement, and the Parties agree to take appropriate measures to abide by the requirements imposed by the Securities and Exchange Commission to preserve such confidential treatment, if granted.
3.
Confirmation
. The provisions of the Agreement, as amended by this Amendment, shall remain in full force and effect following the
effectiveness of this Amendment. No provision of the Agreement is amended or otherwise modified hereby, except as expressly stated herein.
4.
No Waiver
. The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of
any Party to the Agreement, nor constitute a waiver of any provision of the Agreement. On and after the Amendment Effective Time, this Amendment shall for all purposes constitute a part of the Agreement.
5.
Counterparts
. This Amendment may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be an
original instrument, but all of such counterparts shall constitute for all purposes one agreement. Any signature hereto delivered by a Party by electronic mail shall be deemed an original signature hereto.
6.
Governing Law
. This Amendment shall be governed by and construed in accordance with the laws of the State, excluding any conflicts of
law rule or principle that might refer construction of such provisions to the laws of another jurisdiction.
(Signature Pages follow)
Amendment 01 –
Page 3
Second Amended and Restated Gas Gathering Agreement
Colorado River Gas Gathering Agreement
CRWR01-GG
IN WITNESS WHEREOF, the Parties hereto have executed this Amendment to the Agreement in duplicate
originals to be effective as of the Amendment Effective Time.
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“Producer”
NOBLE ENERGY, INC.
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By:
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Gary W. Willingham
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Executive Vice President
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STATE OF TEXAS
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)
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)
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ss.
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COUNTY OF HARRIS
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)
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The foregoing instrument was acknowledged before me this
day of
,
, by Gary W. Willingham as Executive Vice President of Noble Energy, Inc., a Delaware corporation.
WITNESS my hand and official seal.
My commission expires:
Amendment 01 –
Signature Page 1
Second Amended and Restated Gas Gathering Agreement
Colorado River Gas Gathering Agreement
CRWR01-GG
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“Midstream Co”
COLORADO RIVER DEVCO LP
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By:
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Colorado River DevCo GP LLC
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By:
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Noble Midstream Services, LLC
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By:
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Terry R. Gerhart
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Chief Executive Officer
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STATE OF TEXAS
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)
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)
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ss.
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COUNTY OF HARRIS
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)
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The foregoing instrument was acknowledged before me this
day of
,
, by Terry R. Gerhart as Chief Executive Officer of Noble Midstream Services, LLC, which is the sole member of Colorado River DevCo GP LLC, which is the general partner
of Colorado River DevCo LP, a Delaware limited partnership.
WITNESS my hand and official seal.
My commission expires:
Amendment 01 –
Signature Page 2
Second Amended and Restated Gas Gathering Agreement
Colorado River Gas Gathering Agreement
CRWR01-GG
Exhibit 10.8.1
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED. THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
When Recorded,
Mail To:
Attn: DJ Land Manager
1625 Broadway, Suite 2200
Denver, CO 80202
SECOND AMENDED AND
RESTATED
GAS GATHERING AGREEMENT
SECOND AMENDED AND RESTATED
AGREEMENT ADDENDUM 03
M
USTANG
This
AGREEMENT ADDENDUM 03 (this “
Agreement Addendum
”) (a) shall be effective as among the Persons named below as “Producer” and “Midstream Co” as of the date specified below as the “Effective Date,”
(b) incorporates the Second Amended and Restated Agreement Terms and Conditions Relating to Gas Gathering Services (the “
Agreement Terms and Conditions
”) which were last amended effective as of March 31, 2016 and recorded
in the real property records of Weld County, Colorado on
as
, and (c) together with the Agreement Terms and Conditions, shall constitute one contract and shall be the Agreement
of the Parties. Except as otherwise set forth herein (i) all terms shall have the meanings assigned to such terms in the Agreement Terms and Conditions, and (ii) all references to Exhibits, Appendices, Articles, Sections, subsections and
other subdivisions refer to the corresponding Exhibits, Appendices, Articles, Sections, subsections and other subdivisions of or to the Agreement Terms and Conditions.
Producer desires to contract with Midstream Co for Midstream Co to provide the Services utilizing the Individual System, and Midstream Co
desires to provide the Services to Producer, on the terms and subject to the conditions of this Agreement.
NOW, THEREFORE, in
consideration of the mutual agreements in this Agreement, Midstream Co and Producer hereby agree as follows:
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Producer
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Noble Energy, Inc., a Delaware corporation
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Midstream Co
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Green River DevCo LP, a Delaware limited partnership
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TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.
THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
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Parties
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The term “Party” or “Parties” shall refer to the Producer and Midstream Co identified in this Agreement Addendum
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Effective Date
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March 31, 2016
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Dedication Area
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The Mustang integrated development plan area, as such area was defined by Producer on the Effective Date, and which consists of the following areas within Weld County, Colorado
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Township
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Range
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Sections
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T4N
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R64W
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1-3, 10-15, 22-27, 32-36
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T4N
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R63W
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2-11, 14-23 26-35
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T3N
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R63W
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4-9, 16-21, 28-33
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T3N
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R64W
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ALL
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T3N
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R65W
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1-3, 10-15, 22-27, 34-36
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T2N
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R64W
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ALL
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T2N
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R63W
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3-9, 16-21, 28-33
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Except and excluding the wells, leases and other acreage described in the property exhibits attached to the Releases of Dedication
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Individual Fee
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$[**]/ MMBtu
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Pressures
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MAOP
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500 psig
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Target Pressure
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150 psig
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Deviations from Service Conditions
(the specifications in this section supersede the applicable language from Article 7)
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NONE
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Additional Revisions
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NONE
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Agreement Addendum 03
– Page 2
Second Amended and Restated Gas Gathering Agreement
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.
THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
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Notices and Payments
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Notice Address – General Matters & Correspondence
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Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Chief Financial Officer
John F. Bookout,
IV
Telephone: (832) 639-7134
Email: John.Bookout@nblenergy.com
Producer:
Noble Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO 80202
Attention:
Director of USO Finance,
Gerald Free
Telephone: (303) 228-4174
Email: Gerald.Free@nblenergy.com
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Notice Address – Operational Matters
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Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Chief Operating Officer
John C. Nicholson
Telephone: (281) 876-6186
Email:
John.Nicholson@nblenergy.com
Producer:
Noble Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO 80202
Attention:
Vice President – DJ Business Unit
Mark
Patteson
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Agreement Addendum 03
– Page 3
Second Amended and Restated Gas Gathering Agreement
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.
THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
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Notice Address – Invoicing Matters
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Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Ian Dams
Telephone: (832) 639-7406
Email: ian.dams@nblenergy.com
Producer:
1001 Noble Energy Way
Houston, TX 77070
Attention: Director of Revenue Accounting
John
Nedelka
Telephone: (281) 872-3120
Email: John.Nedelka@nblenergy.com
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Payments by Electronic Funds Transfer
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Midstream Co:
ABA for wire: 021000021
ABA for ACH: 111000614
Account Number: 780162330
Account Name: Green River DevCo LP
Financial Institution: JP Morgan
Bank Swift: CHASUS33
Producer:
ABA/Routing Number: 021000021
Account Number: 08805135066
Account Name: Noble Energy, Inc.
Financial Institution: JP
Morgan
Bank Swift: CHASUS33
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Marketing Notice – Midstream Co
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Attention: Gas Marketing Department
Diane
Banning
Noble Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO 80202
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(End of Agreement Addendum 03)
Agreement Addendum 03
– Page 4
Second Amended and Restated Gas Gathering Agreement
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement in duplicate originals to be
effective as of the Effective Date.
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“Producer”
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NOBLE ENERGY, INC.
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By:
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/s/ Gary W. Willingham
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Gary W. Willingham
|
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|
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Executive Vice President
|
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|
|
|
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STATE OF TEXAS
|
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)
|
|
|
|
|
|
)
|
|
ss.
|
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COUNTY OF HARRIS
|
|
)
|
|
|
The foregoing instrument was acknowledged before me this
26th
day of April, 2016, by Gary W. Willingham, Executive Vice
President of Noble Energy, Inc., a Delaware corporation, on behalf of said corporation.
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/s/ Vickie L. Graham
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Notary Public in and for the State of Texas
|
Agreement Addendum 03
– Signature Page 1
Second Amended and Restated Gas Gathering Agreement
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.
THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
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Midstream Co”
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GREEN RIVER DEVCO LP
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By: Green River DevCo GP LLC
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By: Noble Midstream Services, LLC
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By:
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/s/ Terry R. Gerhart
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Terry R. Gerhart
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Chief Executive Officer
|
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STATE OF TEXAS
|
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)
|
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|
|
|
|
)
|
|
ss.
|
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COUNTY OF HARRIS
|
|
)
|
|
|
The foregoing instrument was acknowledged before me this
26th
day of April, 2016, by Terry R. Gerhart as Chief
Executive Officer of Noble Midstream Services, LLC, which is the sole member of Green River DevCo GP LLC, which is the general partner of Green River DevCo LP, a Delaware limited partnership.
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/s/ Joanne Garner
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Notary Public in and for the State of Texas
|
Agreement Addendum 03
– Signature Page 2
Second Amended and Restated Gas Gathering Agreement
Exhibit 10.8.1.1
When Recorded, Mail To:
Attn: DJ Land Manager
1625 Broadway, Suite 2200
Denver, CO 80202
FORM OF
AMENDMENT 01
TO
THAT CERTAIN
SECOND AMENDED AND RESTATED
GAS GATHERING AGREEMENT
M
USTANG
C
ONTRACT
N
UMBER
: GRMU03-GG
This AMENDMENT 01 (this “
Amendment
”) shall be effective as among Noble Energy, Inc., a Delaware corporation (the
“
Producer
”) and Green River DevCo LP, a Delaware limited partnership, together with its permitted successors and assigns (“
Midstream Co
”) as of September 1, 2016 (the “
Amendment Effective
Time
”). This Amendment modifies that certain Second Amended and Restated Gas Gathering Agreement, effective as of March 31, 2016 (the “
Agreement
”), which has been given contract number GRMU03-GG and is comprised
of (i) that certain Second Amended and Restated Agreement Terms and Conditions Relating to Gas Gathering Services (the “
Agreement Terms and Conditions
”), last updated March 31, 2016, together with (ii) that
certain Second Amended and Restated Agreement Addendum 03 (the “
Agreement Addendum
”), effective as of March 31, 2016. The Agreement Terms and Conditions, the Agreement Addendum and this Amendment shall constitute one contract
and shall be the Agreement of the Parties.
WHEREAS, the Parties acknowledge that the purpose of this Amendment is make certain technical
modifications.
WHEREAS, the Parties agree and acknowledge that amendments to the Agreement Terms and Conditions set forth herein
constitute an amendment only to the Agreement and not to any other agreement in respect of natural gas gathering services to which Producer is a party.
NOW, THEREFORE, in consideration of the foregoing recitals, which are incorporated herein and the mutual agreements in the Agreement,
Midstream Co and Producer hereby agree as follows:
1.
Amendments
.
1.1
Section 1.1
of the Agreement (which appears in the Agreement Terms and Conditions) is hereby amended by amending and restating
the following defined terms in their entirety to read as follows:
“
Facility Segment
” means each segment of an Individual
System comprised of facilities beginning at a Receipt Point and ending at a Delivery Point. If an Individual System does not contain any such distinct segment, then the term Facility Segment shall be synonymous with Individual System.
“
Individual System
” means the portion of the System beginning at the Receipt Points and ending at the Delivery Points. The
Individual Systems in existence on the Effective Date are more particularly described in writing between Producer and Midstream Co. Additional Individual Systems may be added to the System from time to time in satisfaction of the needs identified by
Producer and evidenced in writing between Producer and Midstream Co.
1.2
Section 1.1
of the Agreement (which appears in the
Agreement Terms and Conditions) is further amended by amending and restating clauses (a) and (b) of the defined term “Dedicated Production” to read as follows: “(a) Product owned by Producer or an Affiliate of Producer and
produced from a Well within the Dedication Area that is operated by Producer or an Affiliate under the Control of Producer, (b)
Reserved
,”.
1.3
Section 2.3(d)
of the Agreement (which appears in the Agreement Terms and Conditions) is hereby amended and restated in its
entirety to read: “(d) to pool, communitize or unitize Producer’s interests with respect to Dedicated Production”.
1.4
Section 2.4(b)(iv)
of the Agreement (which appears in the Agreement Terms and Conditions) is amended and restated in its entirety to read: “(iv)
Reserved.
”.
1.5
Section 3.1(e)
of the Agreement (which appears in the Agreement Terms and Conditions) is hereby amended by deleting the
sentence that reads as follows “In the sole discretion of each Person serving as a Midstream Co under a Midstream Agreement Addendum, such Midstream Co may work with any other Midstream Co to prepare and deliver a System Plan jointly.” and
inserting in place thereof the following sentence: “Midstream Co may, in its sole discretion, work with OpCo or any of OpCo’s subsidiaries to prepare and deliver a System Plan jointly with such other entity or entities.”
1.6
Section 3.2
of the Agreement (which appears in the Agreement Terms and Conditions) is hereby amended by inserting the following
new
clause (e)
immediately following
clause (d)
of such
Section 3.2
:
“(e)
Substation and
Interconnection Facilities
. The obligations of Midstream Co hereunder to design and construct the Individual System and to perform the Services do not include the design or construction of any substation or other interconnecting facilities
required to procure electricity for the Individual System. If a substation or any other interconnecting facility is required in order for Midstream Co to perform its obligations
Amendment 01 –
Page 2
Second Amended and Restated Gas Gathering Agreement
Green River Gas Gathering Agreement
GRMU03-GG
hereunder, Midstream Co and Producer shall enter into a separate agreement setting forth each Party’s responsibilities in connection therewith, including an allocation of responsibility for
all associated costs and expenses.”
2.
Confidentiality
. Pursuant to
Section 17.11
of the Agreement (which appears
in the Agreement Terms and Conditions), the Parties have agreed to treat the information exchanged in connection with and the provisions of the Agreement as confidential. In addition, confidential treatment has been requested with the Securities and
Exchange Commission for the pricing terms of the Agreement, and the Parties agree to take appropriate measures to abide by the requirements imposed by the Securities and Exchange Commission to preserve such confidential treatment, if granted.
3.
Confirmation
. The provisions of the Agreement, as amended by this Amendment, shall remain in full force and effect following the
effectiveness of this Amendment. No provision of the Agreement is amended or otherwise modified hereby, except as expressly stated herein.
4.
No Waiver
. The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of
any Party to the Agreement, nor constitute a waiver of any provision of the Agreement. On and after the Amendment Effective Time, this Amendment shall for all purposes constitute a part of the Agreement.
5.
Counterparts
. This Amendment may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be an
original instrument, but all of such counterparts shall constitute for all purposes one agreement. Any signature hereto delivered by a Party by electronic mail shall be deemed an original signature hereto.
6.
Governing Law
. This Amendment shall be governed by and construed in accordance with the laws of the State, excluding any conflicts of
law rule or principle that might refer construction of such provisions to the laws of another jurisdiction.
(Signature Pages follow)
Amendment 01 –
Page 3
Second Amended and Restated Gas Gathering Agreement
Green River Gas Gathering Agreement
GRMU03-GG
IN WITNESS WHEREOF, the Parties hereto have executed this Amendment to the Agreement in duplicate
originals to be effective as of the Amendment Effective Time.
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“Producer”
NOBLE ENERGY, INC.
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By:
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Gary W. Willingham
|
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|
Executive Vice President
|
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|
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|
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|
|
STATE OF TEXAS
|
|
|
)
|
|
|
|
|
|
|
|
)
|
|
|
ss.
|
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COUNTY OF HARRIS
|
|
|
)
|
|
|
|
The foregoing instrument was acknowledged before me this
day of
,
, by Gary W. Willingham as Executive Vice President of Noble Energy, Inc., a Delaware corporation.
WITNESS my hand and official seal.
My commission expires:
Amendment 01 –
Signature Page 1
Second Amended and Restated Gas Gathering Agreement
Green River Gas Gathering Agreement
GRMU03-GG
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“Midstream Co”
GREEN
RIVER DEVCO LP
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By:
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Green River DevCo GP LLC
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By:
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Noble Midstream Services, LLC
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By:
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Terry R. Gerhart
|
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Chief Executive Officer
|
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STATE OF TEXAS
|
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)
|
|
|
|
|
|
|
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)
|
|
|
ss.
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|
COUNTY OF HARRIS
|
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|
)
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|
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The foregoing instrument was acknowledged before me this
day of
,
, by Terry R. Gerhart as Chief Executive Officer of Noble Midstream Services, LLC, which is the sole member of Green River DevCo GP LLC, which is the general partner of
Green River DevCo LP, a Delaware limited partnership.
WITNESS my hand and official seal.
My commission expires:
Amendment 01 –
Signature Page 2
Second Amended and Restated Gas Gathering Agreement
Green River Gas Gathering Agreement
GRMU03-GG
Exhibit 10.8.2
When Recorded, Mail To:
Attn: DJ Land Manager
1625 Broadway, Suite 2200
Denver, CO 80202
SECOND AMENDED AND RESTATED
GAS GATHERING AGREEMENT
AGREEMENT ADDENDUM XX
OPCO’S OBLIGATIONS
This
AGREEMENT ADDENDUM XX (this “
Agreement Addendum
”) (a) shall be effective as among the Persons named below as “Producer” and “OpCo” as of the date specified below as the “Effective Date,”
(b) incorporates the Second Amended and Restated Agreement Terms and Conditions Relating to Gas Gathering Services (the “
Agreement Terms and Conditions
”), which were last amended effective as of March 31, 2016 and recorded
in the real property records of Weld County, Colorado on
as
, and (c) together with the Agreement Terms and Conditions, shall constitute one contract and shall be the Agreement
of the Parties. Except as otherwise set forth herein (i) all terms shall have the meanings assigned to such terms in the Agreement Terms and Conditions, and (ii) all references to Exhibits, Appendices, Articles, Sections, subsections and
other subdivisions refer to the corresponding Exhibits, Appendices, Articles, Sections, subsections and other subdivisions of or to the Agreement Terms and Conditions.
OpCo owns, directly or indirectly, all of the Controlling interest in Colorado River DevCo LP and Green River DevCo LP (collectively, the
“
Original Subsidiaries
”).
Producer desires for OpCo to cause the Original Subsidiaries to provide the Services utilizing
the System in order for Producer to obtain a consistent level of service with respect to the gathering of and other Services related to Product that are required by Producer within the Service Area, and OpCo desires to cause the Original
Subsidiaries to provide the Services to Producer, on the terms and subject to the conditions of this Agreement.
In order for Producer to
obtain a consistent level of service with respect to the gathering of and other Services related to Product that are required by Producer within the Service Area, Producer and OpCo hereby enter into this Agreement.
Agreement Addendum XX
–Page 1
Second Amended and Restated Gas Gathering Agreement
NOW, THEREFORE, in consideration of the mutual agreements in this Agreement, OpCo and Producer
hereby agree as follows:
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Producer
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Noble Energy, Inc., a Delaware corporation
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OpCo
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Noble Midstream Services, LLC, a Delaware limited liability company
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Effective Date
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March 31, 2016
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Notices and Payments
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Notice Address – General Matters & Correspondence
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OpCo:
Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention:
Chief Financial Officer
John F.
Bookout, IV
Telephone: (832) 639-7134
Email: John.Bookout@nblenergy.com
Producer:
Noble Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO 80202
Attention:
Director of USO Finance,
Gerald Free
Telephone: (303) 228-4174
Email: Gerald.Free@nblenergy.com
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Agreement Addendum XX
–Page 2
Second Amended and Restated Gas Gathering Agreement
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Notice Address – Operational Matters
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OpCo:
Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention:
Chief Operating Officer
John C.
Nicholson
Telephone: (281) 876-6186
Email: John.Nicholson@nblenergy.com
Producer:
Noble Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO 80202
Attention:
Vice President – DJ Business Unit
Mark
Patteson
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Notice Address – Invoicing Matters
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OpCo:
OpCo
1001 Noble Energy Way
Houston, TX 77070
Attention:
Ian Dams
Telephone: (832) 639-7406
Email: ian.dams@nblenergy.com
Producer:
1001 Noble Energy Way
Houston, TX 77070
Attention: Director of Revenue Accounting
John Nedelka
Telephone: (281) 872-3120
Email: John.Nedelka@nblenergy.com
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Payments by Electronic Funds Transfer
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Producer:
ABA/Routing Number: 021000021
Account Number:
08805135066
Account Name: Noble Energy, Inc.
Financial
Institution: JP Morgan
Bank Swift: CHASUS33
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Agreement Addendum XX
–Page 3
Second Amended and Restated Gas Gathering Agreement
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1.
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Definitions
. The term “Original Midstream Co” shall refer to each entity that is both a Midstream Co party to an Agreement related to the gathering of Product and is a subsidiary of OpCo. For the
avoidance of doubt, OpCo has no obligations or responsibilities towards or with respect to NBL Midstream Holdings LLC.
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2.
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OpCo’s Obligations
. OpCo shall cause each Original Midstream Co to comply with the obligations of such Original Midstream Co under the Midstream Agreement Addendum to which such Original Midstream Co is a
party and the Agreement Terms and Conditions. If at any time, an Original Midstream Co assigns its obligations under a Midstream Agreement Addendum to a Midstream Co Assignee, OpCo shall have no obligations under this Section 1 with respect to
such Midstream Co Assignee and shall not be liable for any performance or non-performance by such Midstream Co Assignee.
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3.
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Coordination of System Plans
. Subject to Midstream Co’s rights under
Section 13.2,
OpCo shall cause the Original Midstream Cos to coordinate their System Plans so that, taken as a whole, the
System Plans delivered by all of the Original Midstream Cos satisfy the needs for Services throughout the Service Area, except to the extent OpCo reasonably determines any portion of the Service Area should be serviced by any Midstream Co Assignee.
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4.
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No Other Obligations
. OpCo shall not have any of the rights or be bound by any of the terms of the Agreement Terms and Conditions, except as provided in (a) Section 1 of this Agreement Addendum, and
(b)
Article 8
and
Article 17
of the Agreement Terms and Conditions. No reference to a “Party” or the “Parties” in the Agreement Terms and Conditions shall be deemed to include a reference to OpCo.
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5.
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Enforcement by OpCo
. OpCo shall have the right to enforce all rights of each Original Midstream Cos under the Agreement Addendum to which such Original Midstream Co is a Party.
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6.
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Notices Delivered to OpCo
. All notices and other communications required under the Agreement Terms and Conditions to be delivered to an Original Midstream Co shall be deemed delivered if received by OpCo.
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(End of Agreement Addendum XX)
Agreement Addendum XX
–Page 4
Second Amended and Restated Gas Gathering Agreement
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement in duplicate originals to be
effective as of the Effective Date.
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“Producer”
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NOBLE ENERGY, INC.
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By:
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/s/ Gary W. Willingham
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Gary W. Willingham
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Executive Vice President
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STATE OF TEXAS
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)
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)
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ss.
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COUNTY OF HARRIS
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)
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|
The foregoing instrument was acknowledged before me this
26th
day of April, 2016, by Gary W. Willingham, Executive Vice
President of Noble Energy, Inc., a Delaware corporation, on behalf of said corporation.
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/s/ Vickie L. Graham
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Notary Public in and for the State of Texas
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Agreement Addendum XX
– Signature Page 1
Second Amended and Restated Gas Gathering Agreement
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“OpCo”
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NOBLE MIDSTREAM SERVICES, LLC
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By:
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/s/ Terry R. Gerhart
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Terry R. Gerhart
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Chief Executive Officer
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STATE OF TEXAS
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)
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)
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ss.
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COUNTY OF HARRIS
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)
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The foregoing instrument was acknowledged before me this
26th
day of April, 2016 by Terry R. Gerhart as Chief Executive
Officer of Noble Midstream Services, LLC, a Delaware limited liability company.
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/s/ Joanne Garner
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Notary Public in and for the State of Texas
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Agreement Addendum XX
– Signature Page 2
Second Amended and Restated Gas Gathering Agreement
Exhibit 10.11
Execution Version
When Recorded, Mail To:
Attn: DJ Land Manager
1625 Broadway, Suite 2200
Denver, CO 80202
SECOND AMENDED AND RESTATED
PRODUCED WATER SERVICES AGREEMENT
consisting of the
SECOND
AMENDED AND RESTATED
AGREEMENT TERMS AND CONDITIONS RELATING TO
PRODUCED WATER SERVICES
taken together with the applicable
SECOND AMENDED AND RESTATED
AGREEMENT ADDENDUM
now or
in the future effective
TABLE OF CONTENTS
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PAGE
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ARTICLE 1 DEFINITIONS
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2
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Section 1.1
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Definitions
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2
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Section 1.2
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Other Terms
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12
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Section 1.3
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References and Rules of Construction
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13
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ARTICLE 2 PRODUCT DEDICATION AND REAL PROPERTY DEDICATION
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13
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Section 2.1
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Producer’s Dedications
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13
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Section 2.2
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Conflicting Dedications
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13
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Section 2.3
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Producer’s Reservation
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14
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Section 2.4
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Releases from Dedication
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14
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Section 2.5
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Covenants Running with the Land
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17
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Section 2.6
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Recording of Agreement
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17
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ARTICLE 3 SYSTEM EXPANSION AND CONNECTION OF WELLS
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17
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Section 3.1
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Development Report; System Plan; Meetings
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17
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Section 3.2
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Expansion of System and Connection of Separator Facilities
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21
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Section 3.3
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Temporary Services
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22
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Section 3.4
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Cooperation
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22
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Section 3.5
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Grant of Access; Real Property Rights
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22
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ARTICLE 4 MEASUREMENT DEVICES
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24
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Section 4.1
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Measurement Devices
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24
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Section 4.2
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Measurement Procedures
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26
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Section 4.3
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Product Meter Adjustments
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26
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ARTICLE 5 TENDER, NOMINATION, AND GATHERING OF PRODUCTION
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27
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Section 5.1
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Limitations on Service to Third Parties
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27
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Section 5.2
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Tender of Dedicated Production
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27
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Section 5.3
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Services; Service Standard
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27
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Section 5.4
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Designation of Recycling or Disposal, Nominations, Scheduling, and Curtailment
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28
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Section 5.5
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Suspension/Shutdown of Service
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28
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ARTICLE 6 FEES
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29
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Section 6.1
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Fees
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29
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Section 6.2
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Fee Adjustments
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30
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Second Amended and
Restated
Produced Water Services Agreement
- i -
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Section 6.3
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Treatment of Byproducts, System Gains/Losses, Fuel and Related Matters
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30
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ARTICLE 7 QUALITY SPECIFICATIONS
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31
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Section 7.1
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Quality Specification
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31
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Section 7.2
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Failure to Meet Specifications
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32
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ARTICLE 8 TERM
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33
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Section 8.1
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Term
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33
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Section 8.2
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Effect of Termination or Expiration of the Term
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34
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ARTICLE 9 TITLE AND CUSTODY
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34
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Section 9.1
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Title
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34
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Section 9.2
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Custody
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34
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ARTICLE 10 BILLING AND PAYMENT
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34
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Section 10.1
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Statements
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34
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Section 10.2
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Payments
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35
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Section 10.3
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Adequate Assurances
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36
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Section 10.4
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Audit
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36
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ARTICLE 11 REMEDIES
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36
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Section 11.1
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Suspension of Performance; Temporary Release from Dedication
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36
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Section 11.2
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No Election
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37
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Section 11.3
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DIRECT DAMAGES
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37
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ARTICLE 12 FORCE MAJEURE
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38
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Section 12.1
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Force Majeure
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38
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Section 12.2
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Extension Due to Force Majeure
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38
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ARTICLE 13 CHANGE IN LAW; UNECONOMIC SERVICE
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38
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Section 13.1
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Changes in Applicable Law
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38
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Section 13.2
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Unprofitable Operations and Rights of Termination
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39
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ARTICLE 14
RESERVED
|
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|
40
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ARTICLE 15 INDEMNIFICATION AND INSURANCE
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40
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Section 15.1
|
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Reciprocal Indemnity
|
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40
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Section 15.2
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Indemnification Regarding Third Parties
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41
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Section 15.3
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Penalties
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41
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|
Second Amended and
Restated
Produced Water Services Agreement
- ii -
|
|
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|
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Section 15.4
|
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Insurance
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41
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ARTICLE 16 ASSIGNMENT
|
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42
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Section 16.1
|
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Assignment of Rights and Obligations under this Agreement
|
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|
42
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Section 16.2
|
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Pre-Approved Assignments
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43
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Section 16.3
|
|
Change of Control
|
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43
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|
ARTICLE 17 OTHER PROVISIONS
|
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43
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Section 17.1
|
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Relationship of the Parties
|
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43
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Section 17.2
|
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Notices
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43
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Section 17.3
|
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Entire Agreement; Conflicts
|
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44
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Section 17.4
|
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Waivers; Rights Cumulative
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44
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Section 17.5
|
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Amendment
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|
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44
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Section 17.6
|
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Governing Law; Arbitration
|
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45
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Section 17.7
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Parties in Interest
|
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45
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Section 17.8
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|
Preparation of Agreement
|
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|
45
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Section 17.9
|
|
Severability
|
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|
45
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Section 17.10
|
|
Counterparts
|
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45
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Section 17.11
|
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Confidentiality
|
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45
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EXHIBITS
|
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EXHIBIT A
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SERVICE AREA
|
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EXHIBIT B
|
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RESERVED
|
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EXHIBIT C
|
|
RESERVED
|
|
|
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EXHIBIT D
|
|
INSURANCE
|
|
|
|
|
Second Amended and
Restated
Produced Water Services Agreement
- iii -
SECOND AMENDED AND RESTATED
AGREEMENT TERMS AND CONDITIONS RELATING TO
PRODUCED WATER SERVICES
These SECOND AMENDED AND RESTATED AGREEMENT TERMS AND CONDITIONS RELATING TO PRODUCED WATER SERVICES (these “
Agreement Terms and
Conditions
”) (i) shall be effective with respect to each signatory of each Agreement Addendum as of the Effective Date specified in the applicable Agreement Addendum (defined below), (ii) were last updated as of March 31,
2016, (iii) are incorporated into and made a part of each Agreement Addendum, and (iv) taken together with the applicable Agreement Addendum shall constitute one Agreement, separate and apart from any other Agreement governed by these
Agreement Terms and Conditions.
Recitals:
|
|
A.
|
Producer owns rights, title and interests in certain oil and gas leases and other interests located within the Service Area (defined below) that require services related to the Product (defined below).
|
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|
B.
|
Producer wishes to obtain such services from each Midstream Co (defined below) that executes and delivers a Midstream Agreement Addendum (defined below) pursuant to these Agreement Terms and Conditions, as modified by
the applicable Midstream Agreement Addendum.
|
|
|
C.
|
Producer desires to dedicate all produced water it Controls (defined below) that is attributable to its right, title, and interest in certain oil and gas leases and other interests located within the Dedication Area
(defined below) to the Individual System (defined below).
|
|
|
D.
|
Each Midstream Co that executes and delivers a Midstream Agreement Addendum owns and operates an Individual System, which gathers Product that is produced together with Producer’s Crude Oil produced from certain
oil and gas leases and other interests.
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|
|
E.
|
OpCo (defined below) owns, directly or indirectly, the Controlling equity interests in each Original Midstream Co (defined below) and intends to assist all of the Original Midstream Cos to, collectively, provide all of
the Services (defined below) required by Producer hereunder, as provided in the OpCo Agreement Addendum (defined below).
|
Agreements:
NOW,
THEREFORE, in consideration of the foregoing Recitals, which are incorporated herein, the mutual agreements in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, OpCo, Midstream
Co, and Producer hereby agree as follows:
Second Amended and
Restated
Produced Water Services Agreement
- 1 -
Article 1
Definitions
Section 1.1
Definitions
. As used in this Agreement, the following capitalized terms shall have the meanings ascribed to them
below:
“
Abandonment Date
” has the meaning given to in
Section 3.2(d)
.
“
Additional/Accelerated Well
” has the meaning given to it in
Section 3.2(c)
.
“
Adequate Assurance of Performance
” has the meaning given to it in
Section 10.3
.
“
Adjustment Year
” has the meaning given to it in
Section 6.2(a)(ii)
.
“
Affiliate
” means, with respect to any Person, any other Person that directly, or indirectly through one or more
intermediaries, Controls, or is Controlled by, or is under common Control with, such Person. The following sentence shall not apply to the term “Affiliate” as used in
Section 2.2(b)
or the definition of “Conflicting
Dedication”: Producer and its subsidiaries (other than OpCo and its subsidiaries), on the one hand, and OpCo and its subsidiaries, on the other, shall not be considered Affiliates of each other for purposes of this Agreement.
“
Agreement
” means the applicable Agreement Addendum taken together with these Agreement Terms and Conditions, as modified by
such Agreement Addendum.
“
Agreement Addendum
” means each Midstream Agreement Addendum and OpCo Agreement Addendum.
“
Agreement Addenda
” shall be the collective reference to each Agreement Addendum then in effect.
“
Agreement
Terms and Conditions
” has the meaning given to it in the introductory paragraph.
“
Associated Water
” means water
that is produced with Crude Oil Controlled by Producer and delivered with such Crude Oil to the Crude Oil Gathering System, which will be separated prior to redelivery of such Crude Oil to Producer. Following separation from Crude Oil and delivery
into the System, such water shall cease to be Associated Water and shall be deemed Product.
“
Barrel
” means a quantity
consisting of forty-two Gallons.
“
Beneficiary
” has the meaning given to it in
Section 4.1(g)
.
“
Business Day
” means a Day (other than a Saturday or Sunday) on which federal reserve banks are open for business.
“
Cancellation Date
” has the meaning given to it in
Section 3.1(c)
.
“
Claiming Party
” has the meaning given to it in the definition of “Force Majeure”.
Second Amended and
Restated
Produced Water Services Agreement
- 2 -
“
Communications
” has the meaning given to it in
Section 17.2
.
“
Conditional Amount
” has the meaning set forth in
Section 10.1(a)
.
“
Conflicting Dedication
” means any gathering agreement, commitment, or arrangement (including any volume commitment) that
requires (i) Producer’s owned or Controlled Product to be trucked from or sold to a Third Party at the lease or gathered on any gathering system or similar system other than the System, including any such agreement, commitment, or
arrangement burdening properties hereinafter acquired by Producer in the Dedication Area or (ii) Producer to utilize a Third Party for any other Services covered by this Agreement. No dedication of acreage shall constitute a Conflicting
Dedication if Producer’s requirement under such dedication is to deliver Product from a Delivery Point specified herein. A right of first refusal in favor of an entity other than Original Producer, OpCo, or any of their Affiliates shall be
deemed to be a “Conflicting Dedication” if Affiliates of Original Producer are prohibited from providing Services pursuant to the applicable agreement creating such right of first refusal.
“
Control
” (including the term “
Controlled
”) means (a) with respect to any Person, the possession,
direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting shares, by contract, or otherwise and (b) with respect to any Product, such Product produced
from the Dedication Area and owned by a Third Party or an Affiliate and with respect to which Producer has the contractual right or obligation (pursuant to a marketing, agency, operating, unit, or similar agreement) to recycle or otherwise dispose
of such Product and Producer elects or is obligated to recycle or otherwise dispose of such Product on behalf of the applicable Third Party or Affiliate.
“
Credit-Worthy Person
” means a Person with a senior unsecured and credit-unenhanced long term debt rating equivalent to A- or
better as determined by at least two rating agencies, one of which must be either Standard & Poor’s or Moody’s (or if either one or both are not available, equivalent ratings from alternate rating sources reasonably acceptable to
Midstream Co).
“
Crude Oil
” means crude oil produced from oil or gas wells in the Dedication Area and Controlled by
Producer, in its natural form, which may include Associated Water naturally produced therewith.
“
Crude Oil Gathering
System
” means the Crude Oil gathering system used to provide Crude Oil gathering services to Producer.
“
Day
”
means a period of time from 7:00 a.m. Mountain Time on a calendar day until 7:00 a.m. Mountain Time on the succeeding calendar day. The term “
Daily
” shall have the correlative meaning.
“
Dedicated Production
” means (a) Product owned by Producer and produced from the Dedicated Properties, (b) Product
owned by an Affiliate of Producer and produced from a Well operated by Producer within the Dedication Area, and (c) Product produced within the Dedication Area that is owned by a Third Party and under the Control of Producer. Notwithstanding
the foregoing, (i) any Product that was released pursuant to the Releases of
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Restated
Produced Water Services Agreement
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Dedication shall not be included in this definition of “Dedicated Production”, (ii) any Product that is permanently released pursuant to
Section 2.4(a)
or otherwise
shall cease to be included in this definition of “Dedicated Production” immediately upon the effectiveness of such permanent release, and (iii) in the event of an assignment by a Producer (“X”) to an assignee (“Y”)
that is permitted under
Article 16
, any Product that is so assigned shall cease to be included in X’s Dedicated Production and shall solely be included in Y’s Dedicated Production as of the effective date of such assignment.
“
Dedicated Properties
” means the interests held by Producer or its Affiliates in the oil and gas leases, mineral interests,
and other similar interests as of the Effective Date or acquired by Producer or its Affiliates after the Effective Date that relate to land within the Dedication Area. Notwithstanding the foregoing, (a) any interest that was released pursuant
to the Releases of Dedication shall not be included in this definition of “Dedicated Properties”, (b) any interest that is permanently released pursuant to
Section 2.4(a)
or otherwise, shall cease to be included in this
definition of “Dedicated Properties” immediately upon the effectiveness of such permanent release and (c) in the event of an assignment by a Producer (“X”) to an assignee (“Y”) that is permitted under
Article
16
, any interest that is so assigned shall cease to be included in X’s Dedicated Properties and shall solely be included in Y’s Dedicated Properties as of the effective date of such assignment.
“
Dedications
” means the Product Dedication and the Real Property Dedication together, and “
Dedication
” means
the Product Dedication or the Real Property Dedication, as applicable.
“
Dedication Area
” means, with respect to this
Agreement, the area described on the applicable Midstream Agreement Addendum. Notwithstanding the foregoing, (a) any acreage that was released pursuant to the Releases of Dedication shall not be included in this definition of “Dedication
Area”, (b) any acreage that is permanently released pursuant to
Section 2.4(a)
or otherwise shall cease to be included in this definition of “Dedication Area” immediately upon the effectiveness of such permanent
release and (c) in the event of an assignment by a Producer (“X”) to an assignee (“Y”) that is permitted under
Article 16
, any acreage that is so assigned shall cease to be included in X’s Dedication Area and
shall solely be included in Y’s Dedication Area as of the effective date of such assignment.
“
Delivery Point
” means
the point at which custody transfers from Midstream Co to or for the account of Producer. The custody transfer point may include (a) the facilities of a Downstream Facility, (b) trucks or (c) any other point as may be mutually agreed
between the Parties. The Delivery Points for each Individual System in existence on the Effective Date shall be set forth in writing between Producer and Midstream Co, and additional points may become Delivery Points hereunder upon mutual agreement
of the Parties as construction is completed on additional facilities in satisfaction of the needs identified by Producer and the Parties shall continuously update the list of Delivery Points by mutual agreement.
“
Development Report
” has the meaning given to it in
Section 3.1(a)
.
“
Downstream Facility
” means the disposal system into which Product is delivered at a Delivery Point or, with respect to
Product that is cleaned, treated or otherwise recycled hereunder, any storage facility or pipeline, in either case, downstream of the applicable Delivery Point.
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Restated
Produced Water Services Agreement
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“
Drip Condensate
” means that portion of Gas Controlled by Producer received into
the Gas System (without manual separation or injection) that condenses in, and is recovered from, the Gas System as a liquid.
“
Effective Date
” has the meaning given to it in the applicable Agreement Addendum.
“
Escalation Percentage
” means 2.50%.
“
Excluded Amounts
” means Midstream Co’s general and administrative costs and any costs for design or construction of
facilities that can be used to connect other Planned Wells or Planned Separator Facilities in the Development Report that Producer at such time intends to develop.
“
Facility Segment
” means, for any Individual System that is described on the applicable Midstream Agreement Addendum that
includes a description of two or more Facility Segments, the distinct segment of such Individual System that is capable of being operated independently of the remaining portion of the Individual System. With respect to any Individual System that is
not described in the applicable Midstream Agreement Addendum as having multiple Facility Segments, the term Facility Segment shall be synonymous with Individual System.
“
First Development Report
” means the first report delivered by Original Producer to Midstream Co that satisfies the
requirements for a Development Report in
Section 3.1(a)
and
Section 3.1(b)
(an “
Original Report
”); and in the event that Producer assigns all or any part of the Dedicated Properties to a Producer Assignee,
then with respect to such Producer Assignee, the First Development Report shall not refer to the Original Report but rather to the first Development Report delivered by such Producer Assignee to Midstream Co that satisfies the requirements for such
report in
Section 3.1(a)
and
Section 3.1(b)
.
“
Force Majeure
” means an event that is not within
the reasonable control of the Party claiming suspension (the “
Claiming Party
”), and that by the exercise of reasonable due diligence the Claiming Party is unable to avoid or overcome in a reasonable manner. To the extent meeting the
foregoing requirements, Force Majeure includes: (a) acts of God; (b) wars (declared or undeclared); (c) insurrections, hostilities, riots; (d) floods, droughts, fires, storms, storm warnings, landslides, lightning, earthquakes,
washouts; (e) industrial disturbances, acts of a public enemy, acts of terror, sabotage, blockades, epidemics; (f) arrests and restraints of rulers and peoples; (g) civil disturbances; (h) explosions, breakage or accidents to
machinery or lines of pipe; (i) hydrate obstruction or blockages of any kind in lines of pipe; (j) freezing of wells or delivery facilities, partial or entire failure of wells, and other events beyond the reasonable control of the Claiming
Party that affect the timing of production or production levels; (k) (
reserved
); (l) action or restraint by any Governmental Authority (so long as the Claiming Party has not applied for or assisted in the application for, and has
opposed where and to the extent commercially reasonable, such action or restraint), (m) delays or failures by a Governmental Authority to grant Permits applicable to the System (or any Individual System) so
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Produced Water Services Agreement
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long as the Claiming Party has used its commercially reasonable efforts to make any required filings with such Governmental Authority relating to such Permits, and (n) delays or failures by
the Claiming Party to obtain easements and rights of way, surface leases and other real property interests related to the System (or any Individual System) from Third Parties, so long as the Claiming Party has used its commercially reasonable
efforts to obtain such easements and rights of way, surface leases and other real property interests. The failure of a Claiming Party to settle or prevent a strike or other labor dispute with employees shall not be considered to be a matter within
such Claiming Party’s control.
“
Gallon
” means one U.S. Standard gallon.
“
Gas
” means any mixture of gaseous hydrocarbons, consisting essentially of methane and heavier hydrocarbons, including gas
vaporized from Crude Oil after production that has been collected in the Crude Oil Gathering System and, unless otherwise expressly provided herein, liquefiable hydrocarbons and Drip Condensate, and including inert and noncombustible gases, produced
in the Dedication Area.
“
Gas System
” means the Gas gathering system used to provide Gas gathering services to Producer.
“
Governmental Authority
” means any federal, state, local, municipal, tribal or other government; any governmental,
regulatory (including self-regulatory) or administrative agency, commission, body or other authority exercising or entitled to exercise any administrative, executive, judicial, legislative, regulatory or taxing authority or power; and any court or
governmental tribunal, including any tribal authority having or asserting jurisdiction.
“
Group
” means (a) with
respect to Midstream Co, the Midstream Co Group, and (b) with respect to Producer, the Producer Group.
“
Increase in
Fee
” has the meaning given to it in
Section 6.2(b)
.
“
Individual Fee
” means the aggregate of the
Individual First Phase Fee and the Individual Second Phase Fee.
“
Individual First Phase Fee
” means the fee calculated as
described in
Section 6.1(i)
.
“
Individual First Phase Rate
” means the Monthly rate for providing Services
(other than the Second Phase Services) at a particular Individual System, as set forth opposite the heading “Individual First Phase Rate” on the applicable Midstream Agreement Addendum.
“
Individual Second Phase Fee
” means the fee calculated as described in
Section 6.1(ii)
;
provided
that the
Individual Second Phase Fee shall accrue only with respect to Services performed by Midstream Co on Product flowing through an Individual System.
“
Individual Second Phase Rate
” means the Monthly rate for providing Second Phase Services at a particular Individual System,
as set forth opposite the heading “Individual Second Phase Rate” on the applicable Midstream Agreement Addendum.
Second Amended and
Restated
Produced Water Services Agreement
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“
Individual System
” means the portion of the System beginning at the Receipt
Points described on the applicable Midstream Agreement Addendum and ending at the Delivery Points described on the applicable Midstream Agreement Addendum. The Individual Systems in existence on the Effective Date are more particularly described in
the applicable Midstream Agreement Addendum. Additional Individual Systems may be added to the System from time to time in satisfaction of the needs identified by Producer and evidenced through amendments to the applicable Midstream Agreement
Addendum or the execution and delivery of additional Midstream Agreement Addenda.
“
Initial Term
” has the meaning given
to it in
Section 8.1
.
“
Interest Rate
” means, on the applicable date of determination, the prime rate (as
published in the “Money Rates” table of
The Wall Street Journal
, eastern edition, or if such rate is no longer published in such publication or such publication ceases to be published, then as published in a similar national
business publication as mutually agreed by the Parties) plus an additional two percentage points (or, if such rate is contrary to any applicable Law, the maximum rate permitted by such applicable Law).
“
Internal Transfer Point
” means the point at which custody transfers from Midstream Co to a Third Party contractor for the
provision of Second Phase Services. The Internal Transfer Points for each Individual System in existence on the Effective Date shall be set forth in writing among Producer, Midstream Co and OpCo, and additional points may become Internal Transfer
Points hereunder by mutual agreement of the Parties.
“
Interruption Conditions
” has the meaning given to it in
Section 2.4(b)
.
“
Invoice Month
” has the meaning given to it in
Section 10.1(a)
.
“
Law
” means any applicable statute, law, rule, regulation, ordinance, order, code, ruling, writ, injunction, decree or other
official act of or by any Governmental Authority.
“
Losses
” means any actions, claims, causes of action (including
actions in rem or in personam), settlements, judgments, demands, liens, encumbrances, losses, damages, fines, penalties, interest, costs, liabilities, expenses (including expenses attributable to the defense of any actions or claims and
attorneys’ fees) of any kind or character, including Losses for bodily injury, death, or property damage, whether under judicial proceedings, administrative proceedings or otherwise, and under any theory of tort, contract, breach of contract,
breach of representation or warranty (express or implied) or by reason of the conditions of the premises of or attributable to any Person or Person or any Party or Parties.
“
Measurement Device
” means the lease automatic custody transfer, coriolis, or other metering device or equipment which, along
with application of test results (e.g. meter proves, etc), as required for the Individual System, measure the amount of oil, water, and basic sediment and water, all of which shall conform to industry standards and government regulations, as further
described in
Article 4
.
Second Amended and
Restated
Produced Water Services Agreement
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“
Measurement Point
” means the Measurement Device that the Parties have agreed in
writing will measure the volume of Product moving through the Individual System.
“
Midstream Agreement Addendum
” means
each Agreement Addendum by and between a Producer and a Midstream Co that expressly states that it is governed by these Agreement Terms and Conditions. “
Midstream Agreement Addenda
” shall be the collective reference to each
Agreement Addendum then in effect.
“
Midstream Co
” means the Original Midstream Co, together with its permitted
successors and assigns, including any Midstream Co Assignee.
“
Midstream Co Assignee
” means any Third Party to whom
Midstream Co assigns its rights and obligations in accordance with this Agreement.
“
Midstream Co Group
” means Midstream
Co, its Affiliates, and the directors, officers, employees, and agents, of Midstream Co and its Affiliates; provided that all subsidiaries of OpCo that do not hold equity in Midstream Co shall be excluded from this definition.
“
Modifications
” has the meaning given to it in
Section 3.1(c)
.
“
Month
” means a period of time from 7:00 a.m. Mountain Time on the first Day of a calendar month until 7:00 a.m. Mountain
Time on the first Day of the next succeeding calendar month. The term “
Monthly
” shall have the correlative meaning.
“
Monthly Loss/ Gain Report
” means the report delivered pursuant to
Section 10.1(d)
, which shall include
statements of the following with respect to such Invoice Month: (a) the System Gains/Losses and (b) the Other System Fuel used by Midstream Co in the operation of the Individual System.
“
Moody’s
” means Moody’s Investors Service, Inc., or any successor to its statistical rating business.
“
On-Line Deadline
” has the meaning given to it in
Section 3.2(b)
.
“
OpCo
” means Noble Midstream Services, LLC, together with its permitted successors and assigns.
“
OpCo Agreement Addendum
” means the Agreement Addendum by and between a Producer and OpCo that expressly states that it is
governed by these Agreement Terms and Conditions.
“
Original Midstream Co
” means the entity identified as the
“Midstream Co” in the applicable Midstream Agreement Addendum as of the Effective Date.
“
Original Producer
”
means Noble Energy, Inc.
Second Amended and
Restated
Produced Water Services Agreement
- 8 -
“
Original Report
” has the meaning set forth in the definition of “First
Development Report.”
“
Other System Fuel
” means that portion of the Gas delivered by Producer to Midstream Co and
measured and used as fuel by Midstream Co.
“
Other Services
” means services that (i) are not Services, (ii) are
provided to Producer, any of its Affiliates or to any Third Party and (iii) pertain to the production of oil, other hydrocarbons, water, and waste products from the production of hydrocarbons.
“
Owner
” has the meaning given to it in
Section 4.1(g)
.
“
Party
” or “
Parties
” with respect to each Midstream Agreement Addendum shall mean the applicable Producer
and the applicable Midstream Co. Unless expressly stated otherwise, references to “Parties” shall not refer to all parties to all Agreements governed hereby. Rather, references to “Parties” shall refer only to such Parties as
determined by the applicable Agreement Addendum. References to a “Party” or the “Parties” shall not include OpCo.
“
Period of Five Years
” means, with respect to any report delivered hereunder, the period from the first Day of the fiscal
quarter during which such report is required to be delivered until the fifth anniversary thereof.
“
Period of Two Years
”
means, with respect to any report delivered hereunder, the period beginning on the first Day of the fiscal quarter during which such report is required to be delivered and ending 24 Months after such date.
“
Permits
” means any permit, license, approval, or consent from a Governmental Authority.
“
Person
” means any individual, corporation, company, partnership, limited partnership, limited liability company, trust,
estate, Governmental Authority, or any other entity.
“
Planned Separator Facility
” has the meaning given to it in
Section 3.1(b)
.
“
Planned Well
” has the meaning given to it in
Section 3.1(b)
.
“
Producer
” means the Original Producer, together with its permitted successors and assigns, including any Producer Assignee.
“
Producer Assignee
” means any Person to whom Original Producer or any subsequent Producer sells, assigns, or otherwise
transfers acreage subject to the Dedications.
“
Producer Group
” means Producer, its Affiliates, and the directors,
officers, employees, and agents of Producer and its Affiliates.
“
Producer Meters
” means any Measurement Device owned and
operated by Producer (or caused to be installed or operated by Producer).
Second Amended and
Restated
Produced Water Services Agreement
- 9 -
“
Product
” means water that is produced as a byproduct of Producer’s
operation of the Wells that are located in the Dedication Area;
provided
that any water that is Associated Water shall not constitute Product hereunder until such time as it has been separated from Crude Oil and ceases being Associated Water.
The term “Product” as used in this Agreement shall refer to all water that is in the Individual System from Receipt Point to Delivery Point, whether such water is in the form of saltwater or water that has completed the recycling and
treating processes.
“
Product Dedication
” means the dedication and commitment made by Producer pursuant to
Section 2.1(a)
.
“
Real Property Dedication
” means the dedication and commitment made by Producer pursuant to
the first sentence in
Section 2.1(b)
.
“
Receipt Point
” means the point at which custody transfers from
Producer to Midstream Co. The custody transfer point may include: (a) each of the connecting flanges through which Product travels after it has been separated from crude oil on the System located at or near the applicable Separator Facility,
which flanges connect such Separator Facility to the System, (b) with respect to water that is separated from crude oil at a point in the System other than the Separator Facility, the point at which such Product is delivered into the System or
(c) any other point as may be mutually agreed between the Parties. The Receipt Points in existence on the Effective Date shall be set forth in writing between Producer and Midstream Co, and additional points may become Receipt Points hereunder
upon mutual agreement of the Parties as construction is completed on additional facilities in satisfaction of the needs identified by Producer and the Parties shall continuously update the list of Receipt Points by mutual agreement.
“
Redetermination Deadline
” has the meaning given to it in
Section 6.2(a)(ii)
.
“
Redetermination Proposal
” has the meaning given to it in
Section 6.2(a)(i)
.
“
Redetermined Individual Fee
” has the meaning given to it in
Section 6.2(a)(i)
.
“
Reimbursed Amount
” has the meaning given to it in
Section 10.1(a)
.
“
Release Conditions
” has the meaning given to it in
Section 2.4(a)
.
“
Releases of Dedication
” means those certain releases of dedication, executed by and among Original Producer, OpCo and
certain of OpCo’s subsidiaries, pursuant to
Section 2.4(a)
prior to March 31, 2016.
“
Rules
” has
the meaning given to it in
Section 17.6
.
“
Second Phase Services
” has the meaning set forth in the definition
of “Services”.
“
Separator Facility
” means the surface facility where the Crude Oil produced from one or more
Wells in the Dedication Area is collected and gas and Product is separated from the Crude Oil. A Separator Facility may be known by the Original Producer as an econode but may also refer to a well pad or other facility from which Product is
delivered into the System.
Second Amended and
Restated
Produced Water Services Agreement
- 10 -
“
Service Area
” means (a) with respect to the Original Producer, the area
described on
Exhibit A
, except that any acreage that was released pursuant to the Releases of Dedication shall not be included in this definition of “Service Area”, and (b) with respect to any Producer Assignee, the Dedication
Area described in such Producer Assignee’s Agreement Addendum. Any acreage that is permanently released pursuant to
Section 2.4(a)
or otherwise shall cease to be included in the definition of “Service Area” immediately
upon the effectiveness of such permanent release.
“
Services
” means: (a) the receipt of Producer’s owned or
Controlled Product at the Receipt Points; (b) the collection and gathering of such Product; (c) the storage of Product; (d) the cleaning of Product; (e) the delivery of Product to the applicable Internal Transfer Point;
(f) the further cleaning, recycling, transportation from the applicable Internal Transfer Point to the applicable Delivery Point, and disposal of Product, as applicable (this clause (f), the “
Second Phase Services
”) and
(g) the other services to be performed by Midstream Co in respect of such Product as set forth in this Agreement and the System Plan for an Individual System, all in accordance with the terms of this Agreement (including any services with
respect to metering services).
“
Services Fee
” means, collectively, the fees described in
Section 6.1
.
“
Spacing Unit
” means the area fixed for the drilling of one Well by order or rule of any applicable Governmental Authority,
or (if no such order or rule is applicable) the area fixed for the drilling of a Well or Planned Well reasonably established by the pattern of drilling in the applicable area or otherwise established by Producer in its reasonable discretion.
“
Standard & Poor’s
” means Standard & Poor’s Rating Group, a division of McGraw Hill, Inc., or any
successor to its statistical rating business.
“
State
” means the state in which the Individual System is located.
“
System
” means all Individual Systems described in all of the Agreement Addenda, collectively, including: (a) pipelines;
(b) central processing facilities inclusive of pumping, treating and other equipment; (c) controls; (d) Delivery Points, meters and measurement facilities; (e) storage for Product; (f) easements, licenses, rights of way, fee
parcels, surface rights and Permits; (g) pumping facilities, if any and (h) all appurtenant facilities, in each case, that are owned, leased, contracted or operated by each Midstream Co to provide Services to Producer or Third Parties, as
such gathering system and facilities are modified or extended from time to time to provide Services to Producer pursuant to the terms hereof or to Third Parties, including the Facility Segments specified in the Agreement Addenda.
“
System Gains/Losses
” means any Product, in terms of Barrels, received into the Individual System that is lost, gained, or
otherwise not accounted for.
“
System Plan
” has the meaning given to it in
Section 3.1(c)
.
Second Amended and
Restated
Produced Water Services Agreement
- 11 -
“
Target On-Line Date
” means (a) with respect to a Planned Separator
Facility or, with respect to a Planned Well that is not intended to be serviced by a Separator Facility, such Planned Well, in either case, that is described for the first time in the Original Report, the date specified in the Original Report for
the applicable Planned Separator Facility or Planned Well, as applicable, (b) with respect to any Planned Separator Facility or, with respect to any Planned Well that is not intended to be serviced by a Separator Facility, such Planned Well, in
either case, that is described in a First Development Report that is not the Original Report, 24 Months after the date of such First Development Report, unless Midstream Co consents to a shorter time period, and (c) with respect to any Planned
Separator Facility or, with respect to any Planned Well that is not intended to be serviced by a Separator Facility, such Planned Well, in either case, that is not described in the First Development Report, 24 Months after the date of the
Development Report that initially reflects the Planned Separator Facility or Planned Well, as applicable, unless Midstream Co consents to a shorter time period.
“
Tender
” means the act of Producer’s making Product available or causing Product to be made available to the System at a
Receipt Point. “
Tendered
” shall have the correlative meaning.
“
Term
” has the meaning given to it in
Section 8.1
.
“
Third Party
” means any Person other than a Party to this Agreement or any Affiliate of a Party
to this Agreement.
“
Third Party Assignment
” has the meaning given to it in
Section 16.1(a)
.
“
Transaction Document
” means each agreement entered into pursuant to the agreement terms and conditions related to gas
gathering services, agreement terms and conditions related to oil gathering services, agreement terms and conditions related to produced water services, agreement terms and conditions related to gas processing services, agreement terms and
conditions related to crude oil treating services, and agreement terms and conditions related to fresh water services, now or in the future existing between Producer and Midstream Co.
“
Well
” means a well (i) for the production of hydrocarbons, (ii) that is located in the Dedication Area,
(iii) in which Producer owns an interest, and (iv) for which Producer has a right or obligation to market hydrocarbons (and related byproducts) produced thereby through ownership or pursuant to a marketing, agency, operating, unit, or
similar agreement.
“
Year
” means a period of time from January 1 of a calendar year through December 31 of the
same calendar year;
provided
that the first Year shall commence on the Effective Date and run through December 31 of that calendar year, and the last Year shall commence on January 1 of the calendar year and end on the Day on which
this Agreement terminates.
Section 1.2
Other Terms
. Other capitalized terms used in this Agreement and not defined in
Section 1.1
above have the meanings ascribed to them throughout this Agreement.
Second Amended and
Restated
Produced Water Services Agreement
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Section 1.3
References and Rules of Construction
. All references in this Agreement to
Exhibits, Appendices, Articles, Sections, subsections and other subdivisions refer to the corresponding Exhibits, Appendices, Articles, Sections, subsections and other subdivisions of or to this Agreement unless expressly provided otherwise. Titles
appearing at the beginning of any Articles, Sections, subsections and other subdivisions of this Agreement are for convenience only, do not constitute any part of this Agreement, and shall be disregarded in construing the language hereof. The words
“this Agreement,” “herein,” “hereby,” “hereunder” and “hereof,” and words of similar import, refer to this Agreement as a whole, including the applicable Agreement Addendum and all Exhibits,
Appendices, and other attachments to these Agreement Terms and Conditions and the applicable Agreement Addendum, all of which are incorporated herein, and not to any particular Exhibit, Appendix, Article, Section, subsection or other subdivision
unless expressly so limited. The word “including” (in its various forms) means “including without limitation.” The word “or” shall mean “and/or” unless a clear contrary intention exists. The word
“from” means “from and including”, the word “through” means “through and including”, and the word “until” means “until but excluding”. All references to “$” or “dollars”
shall be deemed references to United States dollars. The words “will” and “shall” have the same meaning, force and effect. Each accounting term not defined herein will have the meaning given to it under generally accepted
accounting principles. Pronouns in masculine, feminine or neuter genders shall be construed to state and include any other gender, and words, terms and titles (including terms defined herein) in the singular form shall be construed to include the
plural and vice versa, unless the context otherwise requires. References to any Law, contract or other agreement mean such Law, contract or agreement as it may be amended, supplemented, released, revised, replaced, or otherwise modified from time to
time.
Article 2
Product Dedication and Real Property Dedication
Section 2.1
Producer’s Dedications
.
(a)
Product Dedication
. Subject to
Section 2.2
through
Section 2.4
, during the Term, Producer exclusively
dedicates and commits to deliver to Midstream Co under this Agreement, as and when produced, all of the Dedicated Production and agrees not to deliver any Dedicated Production to any other gatherer, purchaser, or other Person prior to delivery to
Midstream Co at the Receipt Points.
(b)
Real Property Dedication
. Subject to
Section 2.2
through
Section 2.4
, during the Term, Producer dedicates and commits the Dedicated Properties to Midstream Co for performance of the Services pursuant to this Agreement. Except for the Parties’ performance of their obligations under this
Agreement, no further performance is required by either Party to effectuate the Real Property Dedication.
Section 2.2
Conflicting
Dedications
.
(a) Notwithstanding anything in this Agreement to the contrary, Producer shall have the right to comply with
(i) each of the Conflicting Dedications existing on the Effective Date or, in the case of a Producer Assignee, the effective date of such assignment, and (ii) any other Conflicting Dedication applicable as of the date of acquisition of any
oil and gas leases, mineral interests, and other similar interests within the Dedication Area that are acquired by Producer after the Effective Date and otherwise would have become subject to the Dedications (but not
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any Conflicting Dedications entered into in connection with such acquisition). Producer shall have the right to comply with a Conflicting Dedication only until the first Day of the Month
following the termination of such Conflicting Dedication. Producer shall not extend or renew any Conflicting Dedication and shall terminate each Conflicting Dedication as soon as permitted under the underlying contract without causing Producer to
incur any costs or expenses deemed unreasonable or inappropriate in the opinion of Producer and shall not enter into any new Conflicting Dedication.
(b) Certain Conflicting Dedications contain rights of first refusal or other provisions that (i) entitle Producer to a release of acreage
from such Conflicting Dedication if Producer dedicates the released acreage to a Third Party or (ii) expressly prohibit Producer from dedicating such released acreage to an Affiliate of Producer. As used herein, the term “Conflicting
Dedication” shall include both the original right of first refusal (or similar right) and the dedication resulting from an exercise of such right of first refusal (or similar right) so long as the resulting dedication covers the same acreage as
the original Conflicting Dedication.
(c) To the extent Producer claims that a Conflicting Dedication exists with respect to certain
Services on specified Dedicated Properties, Midstream Co shall have the right to review the documentation creating such Conflicting Dedication, subject to confidentiality requirements applicable to such Conflicting Dedication.
Section 2.3
Producer’s Reservation
. Producer reserves the following rights respecting Dedicated Production for itself:
(a) to operate (or cause to be operated) Wells producing Dedicated Production in its sole discretion, including the right to drill new Wells,
repair and rework old Wells, temporarily shut in Wells, renew or extend, in whole or in part, any oil and gas lease or term mineral interest, or cease production from or abandon any Well or surrender any applicable oil and gas lease, in whole or in
part, when no longer deemed by Producer to be capable of producing in paying quantities under normal methods of operation; and
(b)
Reserved
;
(c)
Reserved
;
(d) to pool, communitize or unitize Producer’s interests with respect to Dedicated Production;
provided
that Producer’s share
of Dedicated Production produced from such pooled, communitized, or unitized interests shall be committed and dedicated pursuant to this Agreement.
Section 2.4
Releases from Dedication
.
(a)
Permanent Releases
. Midstream Co shall permanently release from the Dedications: (i) any Dedicated Production from any Well,
Dedicated Properties, or Spacing Unit affected by one or more of the Release Conditions, (ii) any Dedicated Production that would have been delivered to a Separator Facility affected by one or more of the Release Conditions, (iii) any
Dedicated Properties affected by one or more of the Release Conditions and (iv) any Purchased Dedicated Production for which the Individual System has been affected by one or more of the Release Conditions. The “
Release
Conditions
” are:
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(i) Midstream Co’s failure to complete the facilities that are described on
a System Plan and that are necessary to connect any Planned Separator Facility or Planned Wells to the System or failure to commence the Services with respect to any Planned Separator Facility or Planned Wells by the applicable On-Line Deadline (so
long as such failure was not the result of Producer’s failure to comply with the then-applicable Development Report);
(ii) Midstream Co’s election (x) pursuant to
Section 3.1(c)
not to provide Services for any Well or
Separator Facility included in a Development Report delivered by a Producer that is not the Original Producer or (y) pursuant to
Section 3.3(b)
not to provide Services for (1) any Well or Separator Facility for which Producer
failed to deliver a Development Report on or before the applicable deadline set forth in
Section 3.1(a)
, (2) any Well or Separator Facility not described in the applicable Development Report or (3) any excess volume of Product
produced from any Well during any Day that exceeds the volume included in Producer’s estimate set forth in the most recent Development Report delivered to Midstream Co;
(iii) expiration of the Term, as further described in
Section 8.2;
(iv) written agreement of Producer and Midstream Co, and each Party shall consider in good faith any proposal by the other
Party to permanently release any Dedicated Production or Dedicated Properties;
(v) the occurrence of a Force Majeure of
the type described in clauses (l), (m) or (n) of the definition of “
Force Majeure
” affecting Midstream Co that continues for a period of 120 Days or more;
(vi)
Reserved
;
(vii) a default (other than a default of the type covered by
Section 2.4(a)(i)
) by Midstream Co that remains
uncured for 90 Days or more;
(viii) Producer’s rejection of any increase in the Individual Fee pursuant to
Section 13.1(b)
; or
(ix) (x) Midstream Co’s suspension of Services pursuant to
Section 13.2(a)(ii)
that extends for the period of time stated in such Section or (y) Midstream Co’s election not to expand an Individual System pursuant to
Section 13.2(b)
.
Producer may deliver any Dedicated Production released from the Dedications pursuant to this
Section 2.4(a)
to such other
gatherers as it shall determine.
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(b)
Temporary Release
. Midstream Co shall temporarily release from the Dedications:
(i) any Dedicated Production from any Well, Dedicated Properties, or Spacing Unit affected by one or more of the Interruption Conditions, (ii) any Dedicated Production that would have been delivered to a Separator Facility affected by one
or more of the Interruption Conditions, (iii) any Dedicated Properties affected by one or more of the Interruption Conditions, and (iv) any Purchased Dedicated Production for which the Individual System has been affected by one or more of
the Interruption Conditions. The “
Interruption Conditions
” are:
(i) the occurrence and continuation of an
uncured default by Midstream Co;
(ii) Midstream Co’s interruption or curtailment of receipts and deliveries of
Product pursuant to
Section 5.5
that continues for a period of 30 consecutive Days;
(iii) Until a permanent
release is required under
Section 2.4(a)
or Section 13.2, Midstream Co’s suspension of Services pursuant to
Section 13.2(a)
(and, if
Section 13.2(a)(i)
applies, such temporary release shall continue at
the discretion of Midstream Co, subject to the time limits set forth in
Section 13.2(a)(i)
); and
(iv)
Midstream Co’s election not to expand an Individual System or System pursuant to
Section 13.2(b)
.
Producer may make
alternative arrangements for the gathering of any Dedicated Production temporarily released from the Dedications pursuant to this
Section 2.4(b)
. To the extent that an interruption or curtailment can be limited to a Facility Segment,
Midstream Co shall so limit such interruption or curtailment, and to the extent that Midstream Co does so limit such curtailment or interruption, the temporary release permitted by this
Section 2.4(b)
shall only apply to the affected
Facility Segment. Such temporary release shall continue until the first Day of the Month after the Month during which Midstream Co cures the applicable default or the interruption, curtailment, or suspension of Services terminates;
provided
that, if Producer obtained temporary services from a Third Party (pursuant to a contract that does not give rise to a default under this Agreement) during the pendency of such default, interruption, curtailment, or suspension, such release shall
continue until the earlier of (A) the first Day of the Month that is six Months after the event or condition that gave rise to the interruption, curtailment or other temporary cessation has been corrected and (B) the first Day of the Month
after the termination of the applicable contract with such Third Party. For the avoidance of doubt, the temporary services that Producer may obtain under
Section 3.3
shall not constitute a release under the terms of this Agreement;
provided that, if Producer cannot obtain such temporary services without a temporary release, Midstream Co may in its discretion grant or refuse to grant a temporary release on such terms as reasonably required by Midstream Co (including, for
example, conditioning the grant of a temporary release on the establishment of a termination date for such temporary release).
(c)
Evidence of Release
. At the request of Producer, the Parties shall execute a release agreement reasonably acceptable to all Parties (which, in the case of a permanent release, shall be in recordable form) reflecting any release of Dedicated
Production or Dedicated Properties pursuant to this
Section 2.4
.
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Section 2.5
Covenants Running with the Land
. Subject to the provisions of
Section 2.3
and
Section 2.4
, each of the Dedications (a) is a covenant running with the Dedicated Properties, (b) touches and concerns Producer’s interests in the Dedicated Properties, and (c) shall be
binding on and enforceable by Midstream Co and its successors and assigns. Except as set forth in
Article 16
, (i) in the event Producer sells, transfers, conveys, assigns, grants or otherwise disposes of any or all of its interest in the
Dedicated Properties, then any such sale, transfer, conveyance, assignment, grant or other disposition shall be made subject to this Agreement and (ii) in the event Midstream Co sells, transfers, conveys, assigns, grants or otherwise disposes
of any or all of its interest in the Individual System, then any such sale, transfer, conveyance, assignment, grant or other disposition shall be made subject to this Agreement. The Real Property Dedication is not an executory contract under
Section 365 of Title 11 of the United States Code (11 U.S.C. § 365).
Section 2.6
Recording of Agreement
. Producer
hereby authorizes Midstream Co to record a memorandum of the Agreement in the real property records of the counties in which the Service Area is located. Midstream Co and Producer agree that until Midstream Co provides notice to the contrary, all
payment terms and pricing information shall remain confidential and be redacted from any filings in the real property records.
Article
3
System Expansion and Connection of Wells
Section 3.1
Development Report; System Plan; Meetings
.
(a)
Development Report
. Original Producer will provide, on or before July 1, 2016, and each Producer Assignee will provide, on or
before the date stated in
Section 16.1
, Midstream Co with its First Development Report, which shall describe (x) in detail the planned development, drilling, and production activities relating to the Dedicated Production through the
end of the applicable Period of Two Years, and (y) generally the long-term drilling and production expectations for those project areas in which drilling activity is expected to occur during the applicable Period of Five Years, including the
information described in
Section 3.1(b)
. On or before each January 1, each April 1, each July 1, and each October 1 of each Year following the date on which the First Development Report is to be delivered, Producer
shall provide to Midstream Co an update of the then-current report (the First Development Report, as updated in accordance with the foregoing and as the then current report may be updated from time to time, the “
Development
Report
”).
(b)
Development Report Content
. With respect to the Dedication Area, the Development Reports shall include
information as to:
(i) the Wells (each, a “
Planned Well
”) and Separator Facilities (each, a
“
Planned Separator Facility
”) that Producer expects to drill or install during the applicable Period of Two Years, including the expected locations, completion dates thereof (which completion dates shall not be earlier than the
applicable Target On-Line Dates), the expected spud dates of such Planned Wells, and dates flow is anticipated to initiate from such Wells;
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(ii) the anticipated Product content from any Well and Separator Facility that
Producer expects to produce during the applicable Period of Two Years;
(iii) the Receipt Points and Delivery Points
(including proposed receipt points and delivery points not yet agreed in writing among the Parties) at which Product produced from each Well is to be disposed of or (after completion of the Services related to cleaning, treating and recycling)
redelivered to Producer during the applicable Period of Two Years;
(iv) the number of Planned Wells and Planned Separator
Facilities anticipated to be producing after the Period of Two Years and before the end of the Period of Five Years, broken out by an appropriate geographic area, such as a development plan area;
(v) the actual lateral length for each Well described in the Period of Two Years, the anticipated lateral length for each
Planned Well described in the Period of Two Years and initial assumptions for the planned lateral length for each Planned Well anticipated to be producing after the Period of Two Years and before the end of the Period of Five Years;
(vi) the number of rigs that Producer intends to operate in the Dedication Area each year during the Period of Five Years
(including sufficient detail regarding the anticipated location of such rigs to allow Midstream Co to determine which Individual System would be impacted by such rig activity);
(vii) with respect to the Period of Two Years, the anticipated date of each frac, the quantity of fresh water required to
complete such frac and an indication of the type of frac to be performed (slick, hybrid gel, gel, etc);
(viii) with
respect to the Period of Two Years, the anticipated date on which Midstream Co may initiate construction or other development activities at the Well or Separator Facility in order to complete the interconnection into the Individual System; and
(ix) such other information as may be reasonably requested by Midstream Co with respect to Wells and Separator Facilities that
Producer intends to drill or from which Producer intends to deliver Product during the Period of Two Years and Period of Five Years.
To
the extent possible, any information Producer is required to provide under this
Section 3.1(b)
with respect to Wells or Separator Facilities shall also include such information related to Planned Wells and Planned Separator Facilities.
In addition, if appropriate to provide a complete and accurate Development Report, any information requested with respect to Planned Wells and Planned Separator Facilities shall also be provided with respect to existing Wells or Separator
Facilities.
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(c)
System Plan
. Based on the Development Report and such other information about the
expected development of the Dedicated Properties as shall be provided to Midstream Co by or on behalf of Producer, including as a result of meetings between representatives of Midstream Co and Producer, Midstream Co shall develop and periodically
update a plan (the “
System Plan
”) describing or depicting the modifications, extensions, enhancements, major maintenance and other actions necessary in order for the Individual System to be able to provide timely Services for the
Product produced by the Wells and Separator Facilities described in the most recent Development Report (including Planned Wells, Planned Separator Facilities and changes in anticipated production from existing Wells and Separator Facilities).
Without limiting or otherwise altering Midstream Co’s rights under
Section 13.2
, unless the applicable Well or Separator Facility is operated by Original Producer, Midstream Co may elect, in its sole discretion, not to make such
modifications, extensions, enhancements, major maintenance, or other actions to the System (the “
Modifications
”) and not to provide Services for any Wells or Separator Facilities included in a Development Report delivered by a
Producer that is not the Original Producer. If (i) Midstream Co elects to make such Modifications, (ii) Producer thereafter modifies the Development Report or provides other information (the date on which the modified Development Report or
such other information is provided to Midstream Co, the “
Cancellation Date
”) indicating that such Modifications are no longer necessary, and (iii) as of the Cancellation Date, the actual aggregate costs and expenses
(excluding Excluded Amounts) incurred or committed by Midstream Co to make such cancelled Modifications exceeds $100,000.00, then Producer shall reimburse Midstream Co for all reasonable and documented costs and expenses (other than the Excluded
Amounts) incurred or committed by Midstream Co through the Cancellation Date to make such Modifications. The System Plan shall include information as to:
(i) each Facility Segment then existing and operational, under construction, or planned and the Individual System of which such
Facility Segment is a part;
(ii) all Internal Transfer Points, Receipt Points and Delivery Points served or to be served
by each such Facility Segment;
(iii)
Reserved
;
(iv) all pumps, treatment, oil, separators and other major physical facilities located or to be located on or within each such
Facility Segment, together with their sizes, operating parameters, capacities, and other relevant specifications, which sizes, parameters, capacities and other relevant specifications shall be sufficient to (x) connect the Individual System to
the Receipt Points and Delivery Points for all Planned Separator Facilities and (with respect to any Planned Wells not intended to be serviced by a Separator Facility) Planned Wells set forth in the most recent Development Report and
(y) perform the Services for all Dedicated Production projected to be produced from the Dedicated Properties as contemplated by the most recent Development Report;
(v) the anticipated schedule for completing the construction and installation of the planned Facility Segments and all planned
Receipt Points, Internal Transfer Points and Delivery Points, in each case, for all Planned Separator Facilities or Planned Wells, as applicable, included in the most recent Development Report;
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(vi) the allocation methodologies to be used by Midstream Co with respect to
System Gains/ Losses, Other System Fuel and other allocations hereunder and, with respect to any System Plan after the initial System Plan, any proposed changes to the allocation methodologies then in effect, which allocation methodologies
(A) shall permit allocations to be made by Midstream Co in a commercially reasonable manner; (B) be based upon the measurements taken and quantities determined for the applicable Month; and (C) may take into account the following
factors: throughput volumes, System Gains/Losses, total consumption of Other System Fuel, the relative effort required to move the applicable product through the facilities of Midstream Co and other factors determined in good faith by Midstream Co;
profit shall not be a component in the allocation of System Gains/Losses; Midstream Co shall have no obligation to allocate back System Gains/Losses or Other System Fuel to a particular Receipt Point; and
(vii) other information reasonably requested by Producer that is relevant to the design, construction, and operation of the
System, the relevant Individual System, the relevant Facility Segment, and the relevant Receipt Points, Internal Transfer Points and Delivery Points;
provided
that in no event shall Midstream Co be obligated to supply to Producer
(A) pricing, budget or similar financial information or (B) information that is covered by a confidentiality agreement or confidentiality obligations;
Midstream Co shall deliver the applicable System Plan (including any updated System Plan) to Producer for Producer’s review and comment not later than 30
Days after Producer’s delivery to Midstream Co of the applicable Development Report or amendment thereto.
(d)
Meetings
.
Midstream Co shall make representatives of Midstream Co available to discuss the most recent System Plan with Producer and its representatives at Producer’s written request. Producer shall make representatives of Producer available to discuss
the most recent Development Report with Midstream Co and its representatives at Midstream Co’s written request. The Parties agree that the meetings described in the previous sentences of this clause (d) may occur (and shall, if requested
by either Party) on a Monthly basis. At all such meetings, the Parties shall exchange updated information about their respective plans for the development and expansion of the Dedicated Properties (including amendments to the Development Report) and
the System (including amendments to the System Plan for Producer’s review and comment) and shall have the opportunity to discuss and provide comments on the other Party’s plans.
(e)
Scope and Purpose of Planning Tools
. The Development Report and the System Plan are intended to assist Midstream Co and Producer
with long-term planning and goals. None of the Development Reports nor the System Plans shall amend or modify this Agreement in any way. In the sole discretion of each Person serving as a Midstream Co under a Midstream Agreement Addendum, such
Midstream Co may work with any other Midstream Co to prepare and deliver a System Plan jointly. To the extent that a Development Report or System Plan that satisfies the requirements above is delivered or deemed delivered under any other Transaction
Document, such Development Report or System Plan shall be deemed delivered hereunder.
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Section 3.2
Expansion of System and Connection of Separator Facilities
.
(a)
Service Standards
. Midstream Co shall, at its sole cost and expense, design, construct (as applicable), and own the Individual
System in a good and workmanlike manner and in accordance with the System Plan and this
Section 3.2
. Until such time as Producer has delivered a Development Report, Midstream Co shall have no obligation under this
Section 3.2(a)
.
(b)
On-Line Deadline
. Subject to
Section 12.2
, Midstream Co shall by the later of
(x) the date that the first Planned Well on a particular Planned Separator Facility (or, with respect to a Planned Well that is not intended to be serviced by a Separator Facility, the date that such Planned Well) is ready for connection to the
System and (y) the applicable Target On-Line Date (such later date, the “
On-Line Deadline
”): (i) have completed (or caused the completion of) the construction of the necessary facilities, in accordance with the then
current System Plan, (A) to connect such Planned Separator Facility or such Planned Well to the System and (B) to connect the System to each planned Delivery Point for such Planned Separator Facility or such Planned Well, as applicable,
and (ii) be ready and able to commence Services with respect to Dedicated Production from such Planned Separator Facility or Planned Well, as applicable.
(c)
Additional/Accelerated Well
. From time to time, Producer may provide notice to Midstream Co that Producer has accelerated the Target
On-Line Date for a Planned Well or Planned Separator Facility (any such Well or Separator Facility, an “
Additional/Accelerated Well
”). Midstream Co will use its commercially reasonable efforts to modify the System Plan and to cause
the necessary gathering facilities to be constructed prior to the On-Line Deadline for such Additional/Accelerated Well. From time to time, Producer may provide notice to Midstream Co that Producer (i) has delayed the Target On-Line Date for a
Planned Well or Planned Separator Facility, (ii) subject to
Section 3.2(c)
, anticipates eliminating a Planned Well or Planned Separator Facility from its development plans and the Development Report, or (iii) anticipates
shutting in a Well or Separator Facility that has been producing. Midstream Co may adjust the System Plan as it determines to be appropriate and commercially reasonable to accommodate such elimination of such Wells and Separator Facilities.
(d)
Cancellation of Planned Wells and Planned Separator Facilities
. If (i) Midstream Co reasonably determines that Producer has
permanently abandoned the drilling or installation of any Planned Well or Planned Separator Facility or Producer notifies Midstream Co that Producer intends to permanently abandon the drilling or installation of any Planned Well or Planned Separator
Facility (whether through the delivery of an updated Development Report or otherwise, the date on which such determination is made, the “
Abandonment Date
”), (ii) Midstream Co had begun to design or construct the Facility
Segment to connect such Planned Well or Planned Separator Facility to the System prior to such Abandonment Date, and (iii) the actual aggregate costs and expenses (excluding Excluded Amounts) incurred or committed by Midstream Co prior to the
Abandonment Date exceeds $100,000.00, then Producer shall reimburse Midstream Co for all reasonable and documented costs and expenses (other than the Excluded Amounts) incurred or committed by Midstream Co prior to such Abandonment Date to design
and construct such Facility Segment.
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Section 3.3
Temporary Services
.
(a) Pending the completion of facilities contemplated in a System Plan or that may be required to service Wells in existence as of the
Effective Date, Producer may enter into a contract with a Third Party to provide services with respect to the Dedicated Production that is anticipated to be serviced by the new, modified, or enhanced facilities if the term of such contract does not
exceed six Months (and may be renewed in six-Month increments until such time as Midstream Co has completed the applicable facilities). If any such contract is in effect with respect to any Well, Producer will not be obligated to connect such Well
to the System until the first Day of the Month following expiration of such contract.
(b) If at any time, (i) Producer fails to
deliver a Development Report on or before the applicable deadline set forth in
(a)
, (ii) a Development Report delivered by Producer failed to describe any Well, or (iii) the average rate of production at any Receipt Point described
in the then-applicable Development Report exceeds Producer’s forecast for such Receipt Point set forth in such Development Report, and as a result, Midstream Co has not completed any new, modified, or enhanced facilities necessary to allow
Midstream Co to accept all of the Product Tendered by Producer at a Receipt Point, then (x) within a reasonable time after Midstream Co becomes aware of the need for such new, modified, or enhanced facilities, Midstream Co shall elect, in its
sole discretion, whether to proceed with the development and completion of such facilities by providing notice to Producer, and (y) if Midstream Co elects to proceed with the development and completion of such facilities, (1) Midstream Co
shall cause such facilities to be completed within a reasonable time after such election, and (2) pending the completion of such facilities, Midstream Co may elect (in its reasonable discretion and in exchange for reasonable compensation) to
permit Producer to enter into a contract with a Third Party as provided in
Section 3.3(a)
to provide services with respect to the Dedicated Production that Midstream Co is unable to accept.
Section 3.4
Cooperation
. The Parties shall work (at their own cost and expense) together in good faith to obtain such Permits as
are necessary to drill and complete each Planned Well and construct the required extensions of the System to each Planned Separator Facility (and each Planned Well, as applicable) as expeditiously as reasonably practicable, all as provided in this
Agreement. The Parties shall cooperate with each other and to communicate regularly regarding their efforts to obtain such Permits. Upon request by Producer, Midstream Co shall promptly provide to Producer copies of all Permits obtained by Midstream
Co in order to construct any Facility Segment (or portion of a Facility Segment) of the System.
Section 3.5
Grant of Access; Real
Property Rights
.
(a)
Producer’s Grant of Access
. Producer hereby grants to Midstream Co, without warranty of title, either
express or implied, to the extent that it may lawfully and is contractually permitted to do so without the incurrence of additional expense, the rights of ingress and egress with respect to, and the right to access, all lands constituting Dedicated
Properties for the purpose of using, maintaining, servicing, inspecting, repairing, and operating all or any portion of the applicable Individual System, including all pipelines, meters and other equipment necessary for the performance by Midstream
Co of this Agreement. Such right of access shall not include any right to install, replace, disconnect, or remove all or any portion of the applicable Individual System, which rights may only be granted pursuant to a separate instrument entered into
pursuant to
Section 3.5(f)
.
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(b)
Producer Does Not Have Obligation to Maintain
. Producer shall not have a duty to
maintain in force and effect any underlying agreements (such as any lease, easement, or surface use agreement) that the grant of access by Producer to Midstream Co under
Section 3.5(a)
is based upon, and such grant will terminate if
Producer loses its rights to the applicable property, regardless of the reason for such loss of rights.
(c)
Midstream Co’s Grant
of Access
. Midstream Co hereby grants to Producer, without warranty of title, either express or implied, to the extent that it may lawfully and is contractually permitted to do so without the incurrence of additional expense, the rights of
ingress and egress with respect to, and the right to access, all lands covered by the Individual System in order to exercise its rights and obligations hereunder. Such right shall not include any right to install, replace, disconnect, or remove any
facilities on such lands, which rights may only be granted pursuant to a separate instrument entered into pursuant to
Section 3.5(f)
. Producer shall release, protect, defend, indemnify and hold harmless Midstream Co Group from and
against all Losses directly or indirectly arising out of or in connection with bodily injury, death, illness, disease, or loss or damage to property of Midstream Co or any member of Midstream Co Group directly arising from Producer’s exercise
of its access rights hereunder, except to the extent such Losses are caused by the gross negligence or willful misconduct of Midstream Co Group.
(d)
Midstream Co Does Not Have Obligation to Maintain
. Midstream Co shall not have a duty to maintain in force and effect any underlying
agreements that the grant of access by Midstream Co to Producer pursuant to this
Section 3.5(d)
is based upon, and such grant will terminate if Midstream Co loses its rights to the applicable property, regardless of the reason for such
loss of rights.
(e)
No Interference
. A Party’s exercise of the rights granted to a Party by the other Party pursuant to this
Section 3.5
shall not unreasonably interfere with the granting Party’s operations or with the rights of owners in fee with respect to the applicable lands, and such rights will be exercised in material compliance with all applicable
Laws and the safety and other reasonable access requirements of the granting Party. Each Party obtaining a right of access pursuant to this
Section 3.5
shall have the status of “licensee,” except when such Party is accessing
the applicable real property by way of a right-of-way, easement, or other similar real property right granted pursuant to a separate instrument.
(f)
Real Property Rights
. Each Party shall acquire and maintain all easements, rights of way, surface use, surface access agreements,
and other real property rights from Third Parties necessary to perform its obligations hereunder. To the extent a Party has the contractual right and title to do so, such Party shall provide to the other Party the right of co-usage on the easements,
sub-easements, rights of way, surface use, and other real property rights held by such Party covering lands for which the other Party requires real property rights to perform its obligations hereunder, all at no cost to the providing Party and on
terms and conditions mutually acceptable to the Parties in their reasonable discretion. Where a Party does not have the contractual right to do so, such Party shall provide reasonable assistance to the other Party in obtaining the real property
rights with respect to such lands as necessary or desirable to perform its obligations hereunder.
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Article 4
Measurement Devices
Section 4.1
Measurement Devices
.
(a) Midstream Co shall construct, install, own, and operate (or cause to be constructed, installed, and operated) the Measurement Devices
located at the Measurement Points. Midstream Co may, in its discretion, construct, install, own, and operate (or cause to be constructed, installed, and operated) Measurement Devices located at or upstream of the Delivery Points or at or downstream
of the Receipt Points.
(b) Midstream Co shall cause all Measurement Devices that are owned by Midstream Co to be constructed, installed,
and operated in accordance with applicable industry standards and applicable Laws, and as set forth in the current System Plan.
(c)
Producer shall have the right, at its sole expense, to install, own and operate Measurement Devices located at the Measurement Points, Receipt Points and Delivery Points. Producer shall cause Producer Meters to be installed, subsequent to providing
a minimum of seventy-two (72) hours’ notice to Midstream Co, so as not to interfere with Midstream Co’s Measurement Devices and shall take steps that are reasonable and customary in the industry to mitigate or prevent any problems
that may interfere with Midstream Co’s Measurement Devices at the Measurement Points.
(d) Midstream Co may elect to use a Producer
Meter as the Measurement Device for a Measurement Point in lieu of constructing, installing, owning, and operating a Measurement Device located at such Measurement Point by providing notice to Producer (including by detailing such election in the
applicable System Plan). If Midstream Co elects to use such Producer Meter as the Measurement Device for a Measurement Point, Producer shall provide Midstream Co reasonable access to such Producer Meter, including prior advance notice of, and the
ability to witness, the calibration of such Producer Meter.
(e) Producer and Midstream Co shall cause Measurement Devices owned by such
Party to be constructed, installed and operated in a manner which is agreeable to all parties involved and satisfies local and state regulation.
(f) Midstream Co may (but shall not be obligated to) replace or make any alterations to the Measurement Devices necessary to comply with any
subsequent amendments, revisions or modifications of Applicable Law. With respect to Producer Meters that Midstream Co has elected to use, Producer may (but shall not be obligated to) replace or make any alterations to the Measurement Devices
necessary to comply with subsequent amendments, revisions or modifications of Applicable Law.
Second Amended and
Restated
Produced Water Services Agreement
- 24 -
(g) The accuracy of all Measurement Devices at the Measurement Points and Delivery Points, and of
all Measurement Devices that serve as “check meters” for any such Measurement Point or Delivery Point Measurement Devices will be verified by the owner of such Measurement Device (the “
Owner
”) at Monthly intervals and, if
requested, in the presence of a representative of the other Party (the “
Beneficiary
”). The Owner shall verify the accuracy of any owned Measurement Device before the next Monthly verification required by the preceding sentence if
the Beneficiary makes a written request for a special test as described below. Notwithstanding the foregoing, when Daily deliveries of Product at any Measurement Point or Delivery Point average 100 Barrels per Day or less during any Month, the Owner
may request from the Beneficiary that the accuracy of the Measurement Devices at such Measurement Point or Delivery Point be verified quarterly. If, upon any test, any Measurement Device is found to be inaccurate by 2% or less, previous readings of
such Measurement Device will be considered correct in computing the deliveries of Product under this Agreement. If, upon any test, any Measurement Device is found to be inaccurate by more than 2% (excessive meter factor deviation), such Measurement
Device will immediately be removed from service, adjusted, calibrated, repaired or replaced to record accurately (within the manufacturer’s allowance for error) and reproved prior to returning to service. If the excessive meter factor deviation
can be explained by changing conditions (gravity, temperature or flow-rate) no corrective action may be taken if mutually agreed upon by both the Owner and the Beneficiary. Any previous recordings of such Measurement Device with an excessive meter
factor deviation will be corrected by using the arithmetic average of the malfunction factor and the previous factor shall be applied to the production measured through the meter between the date of the previous factor and the date of the
malfunction factor. The proving report must clearly indicate the meter’s malfunction factor and all remarks associated with the repairs or adjustments. If the Beneficiary desires a special test of any Measurement Device, at least 72 hours’
advance written notice will be given to the Owner, and the Parties will cooperate to secure a prompt test of the accuracy of such Measurement Device. If the Measurement Device so tested is found to be inaccurate by 2% or less, the Owner will have
the right to bill the Beneficiary for the costs incurred due to such special test, including any labor and transportation costs, and the Beneficiary will pay such costs promptly upon invoice therefor.
(h) If requested by the Beneficiary, the Measurement Devices owned by Owner shall include a sufficient number of data ports, and Owner shall
permit Beneficiary to connect to such data ports, as shall be required to provide to Beneficiary on a real-time basis all measurement data generated by such measurement equipment. Beneficiary shall be responsible at its own cost for obtaining
equipment and services to connect to such data ports and receive and process such data.
(i) Each Party shall make the charts and records
by which measurements are determined available for the use of the other Party in fulfilling the terms and conditions thereof. Each Party shall, upon written request of the other Party, mail, email or deliver for checking and calculation all
measurement data, including flowing parameters, characteristics, constants, configurations and events in its possession and used in the measurement of Product delivered under this Agreement within 30 Days after the last chart for each billing period
is removed from the meter. Such data shall be returned within 90 Days after the receipt thereof.
Second Amended and
Restated
Produced Water Services Agreement
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(j) Each Party shall preserve or cause to be preserved for mutual use all test data or other
similar records in accordance with the applicable rules and regulations of regulatory bodies having jurisdiction, if any, with respect to the retention of such records, and, in any event, for at least 24 Months.
Section 4.2
Measurement Procedures
. Midstream Co shall use the Measurement Devices owned by Midstream Co (or if Midstream
Co’s rights under
Section 4.1(d)
are exercised, then the Measurement Devices owned by Producer) at the Measurement Points to determine the volumes of Product passing through the Individual System for purposes of
Article 6
and
Article 10
. Midstream Co shall cause (or if Midstream Co’s rights under
Section 4.1(d)
are exercised, then Producer shall cause) the measurements of the quantity and quality of all Product measured at the Measurement Points
(and at each Receipt Point or Delivery Point at which measurements are taken) to be conducted in accordance with industry standards (referenced below):
API Manual of Petroleum Measurement Standards:
Chapter 4, Proving Systems
Chapter 5.1. General Considerations for Measurement by Meters
Chapter 5.6, Measurement of Liquid by Coriolis Meters
Chapter 7, Temperature Determination
Chapter 8, Sampling
Chapter
8.2, Automatic Sampling of Petroleum and Petroleum Products
Chapter 9, Density Determination
Chapter 10, Sediment and Water
Chapter 12.2, Calculation of Petroleum Quantities Measured by Turbine or Displacement Meters.
Section 4.3
Product Meter Adjustments
. If a Measurement Device is out of service or registering inaccurately, the Parties shall
determine the quantities of Product received or delivered during such period as follows:
(a) By using the registration of any check meter
or meters, if installed and accurately registering; or in the absence of such check meters,
(b) By using a meter operating in parallel
with the estimated volume corrected for any differences found when the meters are operating properly,
(c) By correcting the error if the
percentage of error is ascertainable by calibration, tests or mathematical calculation, such as step change, uncertainty calculation or balance adjustment; or in the absence of check meters and the ability to make corrections under this
Section 4.3(c)
, then,
Second Amended and
Restated
Produced Water Services Agreement
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(d) By estimating the quantity received or delivered by receipts or deliveries during periods
under similar conditions when the meter was registering accurately.
Article 5
Tender, Nomination, and Gathering of Production
Section 5.1
Limitations on Service to Third Parties
. Midstream Co shall obtain Original Producer’s consent prior to offering
services on an Individual System to any Third Party, unless (a) Midstream Co is required by a Governmental Authority to offer service to a Third Party, in which case Midstream Co shall provide Producer prior notice of offering such service to
such Third Party, (b) such Third Party has become a Producer hereunder by virtue of assignment of Dedicated Properties to such Party, or (c) Original Producer has ceased to operate acreage serviced by such Individual System.
Section 5.2
Tender of Dedicated Production
. Subject to
Section 5.3(c)
, (a) each Day during the Term, Producer
shall Tender to the Individual System at each applicable Receipt Point all of the Dedicated Production available to Producer at such Receipt Point and (b) Producer shall have the right to Tender to Midstream Co for Services under this Agreement
Product other than Dedicated Production.
Section 5.3
Services; Service Standard
.
(a)
Services
. Subject to
Section 5.3(c)
, Midstream Co shall provide all of the Services, including all services related to
collecting, gathering, cleaning, treating, recycling, and disposing of the Product.
(i) Midstream Co shall cause the
applicable Individual System to be able to flow such Product at volumes produced into such Individual System, so long as total water volumes for such Individual System are not greater than the current capacity of such Individual System.
(ii) The quantity of Product for which Midstream Co shall provide the Services is:
(A) with respect to the receipt, collection, gathering, storage and cleaning Services further described in
clauses (a)
,
(b)
,
(c)
and
(d)
of the definition of “Services”, all of the Product that is Tendered by Producer to Midstream Co at the applicable Receipt Points, so long as such quantity is not in
excess of the current capacity of the applicable Individual System;
(B) with respect to the delivery Services further
described in clause (e) of the definition of “Services”, Midstream Co shall deliver to the applicable Internal Transfer Points a quantity of Product equivalent to the quantity described in the preceding clause, taking into account any
System Gains/ Losses; and
Second Amended and
Restated
Produced Water Services Agreement
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(C) with respect to Second Phase Services, Midstream Co shall be responsible for
either disposing of or recycling all quantities of Product that flow through the applicable Internal Transfer Point.
(b)
Services
Standard
. Midstream Co shall own and operate (or contract for, as applicable) the System and perform the Services in a good and workmanlike manner in accordance with standards customary in the industry.
(c)
Priority of Service
. Midstream Co shall cause (i) Product delivered by Original Producer to have priority service on the System
over Product of any Producer Assignee to the extent not in violation of applicable Law, and (ii) Product delivered by Producer to have priority service on the System over Product of any Third Party. Midstream Co’s performance of its
obligations under
Section 5.3(a)
with respect to any Product (A) of any Producer Assignee, or (B) produced from any Well but not included on a Development Report or for which new, modified, or enhanced facilities are
contemplated in a System Plan, shall at all times be subject to the available capacity on the System at the time that Product is available to be Tendered by Producer at a Receipt Point; provided, however, that in the case of clause (B), Producer may
make alternative arrangements for the Product not received by Midstream Co pursuant to
Section 3.3
.
Section 5.4
Designation of Recycling or Disposal, Nominations, Scheduling, and Curtailment
. With respect to all quantities of Product delivered to the applicable Internal Transfer Point, Producer shall specify the percentage of such Product that shall be
disposed of and the remaining percentage shall be recycled. Product shall be received and redelivered under this Agreement at the similar quantities for a delivery Month. Midstream Co shall use System storage only for the operational purposes, as
determined solely by Midstream Co. Nothing contained in this Agreement shall preclude Midstream Co from taking reasonable actions necessary to adjust receipts or deliveries under this Agreement in order to maintain the operational integrity and
safety of the System.
Section 5.5
Suspension/Shutdown of Service
.
(a)
Shutdown
. During any period when all or any portion of the Individual System is shut down (i) because of maintenance, repairs,
or Force Majeure, (ii) because such shutdown is necessary to avoid injury or harm to Persons or property, to the environment or to the integrity of all or any portion of the Individual System or (iii) because providing Services hereunder
has become uneconomic as further described in
Section 13.2
, Midstream Co may interrupt or curtail receipts of Producer’s Product and the Product of other producers as set forth herein. In such cases, Midstream Co shall have no
liability to Producer (subject to
Section 11.1(b)
) for its failure to receive Product, except to the extent such shutdown is caused by the negligence, gross negligence or willful misconduct of Midstream Co. If Midstream Co is required to
so interrupt or curtail receipts of Product, Midstream Co will advise (by telephone, following up by writing, which writing may be in the form of electronic mail) Producer of such interruption or curtailment as soon as practicable or in any event
within twenty-four hours after the occurrence of such event.
Second Amended and
Restated
Produced Water Services Agreement
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(b)
Planned Curtailments and Interruptions
.
(i) Midstream Co shall have the right to curtail or interrupt receipts and deliveries of Product for brief periods to perform
necessary maintenance of and repairs or modifications (including modifications required to perform its obligations under this Agreement) to the Individual System;
provided
,
however
, that to the extent reasonably practicable, Midstream
Co shall coordinate its maintenance, repair and modification operations with the operations of Producer and, in any case, will use its reasonable efforts to schedule maintenance, repair and modification operations so as to avoid or minimize to the
greatest extent possible service curtailments or interruptions.
(ii) Midstream Co shall provide Producer (x) with 30
Days prior notice of any upcoming normal and routine maintenance, repair and modification projects that Midstream Co has planned that would result in a curtailment or interruption of Producer’s deliveries and the estimated time period for such
curtailment or interruption and (y) with six Months prior notice of any maintenance (A) of which Midstream Co has knowledge at least six Months in advance and (B) that is anticipated to result in a curtailment or interruption of
Producer’s deliveries for five or more consecutive Days.
Section 5.6
Transportation and Disposal
. As between the
Parties, Midstream Co shall be solely responsible, and shall make all necessary arrangements for the receipt, further transportation, and disposal of Producer’s owned and Controlled Product from the Receipt Points, to the Internal Transfer
Points and ending at the Delivery Points.
Article 6
Fees
Section 6.1
Fees
. Producer shall pay Midstream Co each Month in accordance with the terms of this Agreement for all Services provided by Midstream Co with respect to Dedicated Production received by Midstream Co from Producer or for Producer’s
account during such Month, an amount, for each Individual System, equal to the sum of (i) the product of (x) the aggregate quantity of such Product, stated in Barrels, received by Midstream Co from Producer or for Producer’s account
at the applicable Receipt Points for such Product within the applicable Individual System during such Month, multiplied by (y) the applicable Individual First Phase Rate (the “
Individual First Phase Fee
”), (ii) the product
of (x) the aggregate quantity of such Product, stated in Barrels, delivered by Midstream Co to the Internal Transfer Point during such Month multiplied by (y) the applicable Individual Second Phase Rate (the “
Individual Second
Phase Fee
”) and (iii) an amount equal to Producer’s allocated portion of the actual costs incurred by Midstream Co for electricity required to provide Services, such allocation to be based upon the aggregate volumes of Product
received by Midstream Co.
Second Amended and
Restated
Produced Water Services Agreement
- 29 -
Section 6.2
Fee Adjustments
.
(a)
Redetermination
.
(i)
Redetermination Proposal
. Between November 1 and December 31 of any Year, Midstream Co shall prepare and
deliver to Producer for its review and comment a written proposal (each, a “
Redetermination Proposal
”) to redetermine each Individual Fee (unless the Parties mutually agree not to redetermine any particular Individual Fee) in
accordance with this
Section 6.2(a)
. Each Redetermination Proposal shall include relevant supporting documentation based upon the latest updated Development Report and System Plan and shall take into account future items including,
projected production volumes, operating revenue projections, and budgeted amounts for capital expenditures and all estimated operating expenses that Midstream Co believes will be necessary to provide the applicable Services as contemplated by the
latest updated Development Report and System Plan; provided that a redetermined Individual Fee as agreed to by the Parties (a “
Redetermined Individual Fee
”) shall not recoup the difference between (A) estimated operating
expenses or revenues and (B) actual operating expenses or revenues for periods prior to the effective date of such Redetermined Individual Fee. The Parties may agree to redetermine a particular Individual Fee without obligation to agree to
redetermine any other Individual Fee.
(ii)
Subsequent Redetermination Timing
. Any Redetermined Individual Fee
agreed to by the Parties on or prior to the last Business Day of February of the applicable Adjustment Year (“
Redetermination Deadline
”) shall become effective as of the first Day of the Month following the Month in which agreement
has been reached. If the Parties fail to agree upon a redetermination of any Individual Fee set forth in the applicable Redetermination Proposal on or prior to the Redetermination Deadline, such Individual Fee shall remain in effect without
redetermination pursuant to this
Section 6.2(a)
. For purposes of this
Section 6.2(a)(ii)
, the Year immediately after the Year during which a Redetermination Proposal is delivered is herein the “
Adjustment
Year
”.
(b)
Annual Escalation
. Effective as of July 1 of each Year, the Individual Fee will be increased by
multiplying the then-applicable Individual Fee by the Escalation Percentage (herein, the “
Increase in Fee
”) and adding the then-applicable Individual Fee to the Increase in Fee;
provided
that Reimbursed Amounts shall not be
subject to this
Section 6.2(b)
. Such annual increase to the Individual Fee shall become effective on July 1 of the applicable Year, even if such Individual Fee was redetermined pursuant to
Section 6.2(a)
, with an
effective date during the same Year.
Section 6.3
Treatment of Byproducts, System Gains/Losses, Fuel and Related Matters
. No
separate fee shall be chargeable by Midstream Co and no refund or reduction in the Individual Fee shall be chargeable by or owed to Producer for the hydrocarbons or services described in this
Section 6.3
.
(a)
Reserved
.
(b)
Reserved
.
Second Amended and
Restated
Produced Water Services Agreement
- 30 -
(c)
System Gains/Losses
.
(i) Midstream Co will perform a Monthly material balance for each Individual System based on comparison of Product delivered
and the amount of Product calculated to have been delivered into the Individual System (in conjunction with determining the theoretical Crude Oil volume under any Transaction Document to which Midstream Co is a Party covering crude oil gathering
services) received into the Individual System at Receipt Points. Actual gains or losses in an Individual System from the material balance will be allocated back to Producer’s Receipt Points to determine allocated quantities of Product received
at Receipt Points for each Month.
(ii) If, during any Month, System Gains/Losses on an Individual System allocated to
Producer in accordance with this Agreement exceeds 2.00% of the total quantities of Producer’s owned or Controlled Product delivered to the Individual System in such Month, then Midstream Co will, for the respective Individual System, obtain
updated test data (i.e. sample results, meter proves, etc.) from Receipt Points involved in calculating the amount of Product determined to have been delivered into the Individual System (in conjunction with determining the theoretical Crude Oil
volume under any Transaction Document relating to the provision of crude oil gathering services by Midstream Co) and conduct a field-wide (on an Individual System basis) meter inspection and proving, if necessary, followed by an updated balance. If
Midstream Co determines that a repair to the Individual System is needed to reduce the System Gains/ Losses below 2.00%, Midstream Co shall undertake such repairs in a commercially reasonable manner and as soon after making such determination as is
commercially reasonable.
(iii) Midstream Co shall provide Producer with prior notice of, and reasonable access to observe,
any such field-wide meter balance.
(d)
Other System Fuel
. Midstream Co shall account for the Other System Fuel used by Midstream Co
in the operation of the Individual System. If during any Month, the Producer does not deliver to Midstream Co Gas under any Transaction Document to which Midstream Co is a party, then Midstream Co shall calculate the value of the Other System Fuel
used during the applicable Month based on the price of Gas received by Producer during such Month and such amount shall appear as an additional fee owed by Producer to Midstream Co on an invoice delivered to Producer within 90 Days after the end of
the applicable Month.
Article 7
Quality Specifications
Section 7.1
Quality Specification
. Subject to
Section 7.2
, at no time shall Midstream Co be required to accept Product
that is not produced from a Well within the Dedication Area. Midstream Co shall perform regular testing at the Receipt Points to ensure no additional contaminants, such as gel fractionation fluids, are contained within the Product. Midstream Co may
commingle Product received into the Individual System with other Product shipments. Subject to
Section 7.2
, Producer shall cause all Product delivered at the Receipt Points to Midstream Co to meet the quality specifications set forth
below:
Second Amended and
Restated
Produced Water Services Agreement
- 31 -
|
|
|
|
|
|
|
Constituent
|
|
Unit
|
|
Limit
|
|
pH
|
|
|
|
NA
|
|
Total Hardness
|
|
mg/L as CaCO3
|
|
1,500
|
|
Sodium
|
|
mg/L
|
|
15,000
|
|
Iron
|
|
mg/L
|
|
295
|
|
Sulfate
|
|
mg/L
|
|
1100
|
|
Chloride
|
|
mg/L
|
|
18,500
|
|
Silica
|
|
mg/L
|
|
130
|
|
Aluminum
|
|
mg/L
|
|
40
|
|
Total Alkalinity
|
|
mg/L as CaCO3
|
|
1,500
|
|
Oil and Grease
|
|
mg/L
|
|
170
|
|
Particulate Size
|
|
Nominal Micron
|
|
300
|
Recycled Water – as used herein, such term is referring to Product that has been cleaned, treated or
recycled to the extent that such water meets the following specifications:
|
|
|
|
|
pH
|
|
6.5 to 7.5
|
|
Iron (Fe)
|
|
25 mg/L
|
|
Chloride (Cl)
|
|
23,125 mg/L
|
|
Sulfate (SO4)
|
|
800 mg/L
|
|
Calcium (Ca)
|
|
|
|
Magnesium (Mg)
|
|
|
|
Carbonate (CO3)
|
|
|
|
Bicarbonate (HCO3)
|
|
|
|
Tannin/ Lignin
|
|
|
|
Total Hardness
|
|
500 mg/L as CaCO3
|
|
Total Alkalinity
|
|
500 mg/L as CaCO3
|
|
Sodium
|
|
18,750 mg/L
|
|
Silica
|
|
10 mg/L
|
|
Aluminum
|
|
4 mg/L
|
|
Oil and Grease
|
|
5 mg/L
|
|
Particulate Size
|
|
50 nominal micron
|
Section 7.2
Failure to Meet Specifications
. If any Product Tendered by Producer to the Individual
System fails at any time to conform to the applicable specifications, then Midstream Co will have the right to immediately discontinue receipt of such non-conforming Product and shall notify Producer of the specifications violation within
twenty-four (24) hours after such discontinuation. Such notification may be verbal initially, followed by written confirmation. If Producer disputes Midstream Co’s determination that any Product fails to conform to the applicable
specifications, then Producer shall (a) notify Midstream Co thereof
Second Amended and
Restated
Produced Water Services Agreement
- 32 -
within twenty-four (24) hours after receiving such notice from Midstream Co, (b) submit the applicable Product to a mutually agreed upon Third Party laboratory, and (c) cause such
laboratory to analyze the Product within seventy-two (72) hours after Producer’s receipt of Midstream Co’s notice of non-conformance. If the results of such analysis provide that the applicable Product is non-conforming, the costs and
expenses associated with such analysis shall be borne by Producer; if the results of such analysis provide that the applicable Product conforms to the specifications, then Midstream Co shall reimburse Producer for all reasonable and documented costs
and expenses incurred by Producer to cause such Third Party laboratory to perform such analysis. Producer will promptly undertake commercially reasonable measures to eliminate the cause of such non-conformance. Midstream Co, in its sole discretion,
may accept receipt, or continue to receive, non-conforming Product if the blending and commingling of such Producer’s non-conforming Product with other Product in the Individual System does not materially affect the Individual System and the
ability of Midstream Co to deliver Product at Delivery Point(s) within applicable Delivery Point specifications. Midstream Co’s continued taking of non-conforming Product shall not relieve Producer of the responsibility to undertake
commercially reasonable measures to eliminate the cause of such non-conformance.
Section 7.3
Indemnification Regarding
Quality
. PRODUCER SHALL RELEASE, PROTECT, DEFEND, INDEMNIFY AND HOLD HARMLESS MIDSTREAM CO GROUP FROM AND AGAINST ALL LOSSES DIRECTLY OR INDIRECTLY ARISING OUT OF, IN CONNECTION WITH OR IN ANY MANNER ATTRIBUTABLE TO THE FAILURE OF THE PRODUCT
DELIVERED BY PRODUCER TO THE INDIVIDUAL SYSTEM TO MEET THE QUALITY SPECIFICATIONS SET FORTH HEREIN, INCLUDING DISPOSAL COSTS, DAMAGE TO OR SUSTAINED BY THE INDIVIDUAL SYSTEM (INCLUDING THE EQUIPMENT AND COMPONENT PARTS), COSTS EXPENDED BY MIDSTREAM
CO OR ANY OF ITS AFFILIATES TO RETURN THE INDIVIDUAL SYSTEM AND RELATED FACILITIES TO SERVICES, CLAIMS OF OTHER PRODUCERS ON THE INDIVIDUAL SYSTEM, CLAIMS OF OWNERS OF ALL DOWNSTREAM FACILITIES AND CLAIMS OF ALL PERSONS WHO ULTIMATELY USE THE
NON-CONFORMING PRODUCT DELIVERED BY PRODUCER AND THE COSTS OF ALL REGULATORY OR JURISDICTIONAL PROCEEDINGS.
Article 8
Term
Section 8.1
Term
. The term of this Agreement commenced on January 1, 2015, which is the original effective date of the Parties’ agreement regarding the matters set forth herein, and this Agreement shall remain in effect until
January 1, 2030 (the “
Initial Term
”) and thereafter on a Year to Year basis until terminated by Midstream Co or Producer effective upon the expiration of the Initial Term or the expiration of any Year thereafter upon
notice no less than 90 Days prior to the expiration of the Initial Term or the expiration of any Year thereafter (such period of time, the “
Term
”). Notwithstanding the foregoing, with respect to the OpCo Agreement Addendum only,
this Agreement shall continue for so long as any Original Midstream Co remains a Party under any Midstream Agreement Addendum then in effect and shall automatically terminate at such time as no Original Midstream Co remains a Party to any Midstream
Agreement Addendum.
Second Amended and
Restated
Produced Water Services Agreement
- 33 -
Section 8.2
Effect of Termination or Expiration of the Term
. Upon the termination of
the Term, this Agreement shall forthwith become void and the Parties and OpCo shall have no liability or obligation under this Agreement, except that (a) the termination of this Agreement shall not relieve any Party or OpCo from any expense,
liability or other obligation or remedy therefor that has accrued or attached prior to the date of such termination, (b) the provisions of
Section 7.3
, this
Section 8.2
,
Article 15
and
Section 17.1
through
Section 17.10
shall survive such termination and remain in full force and effect indefinitely, (c) the indemnities set forth in
Section 3.5(c)
shall survive such termination and remain in full force and effect
indefinitely, and (d)
Section 10.4
and
Section 17.11
shall survive such termination and remain in full force and effect for the period of time specified in such Sections.
Article 9
Title and
Custody
Section 9.1
Title
. Delivery by Producer of Product to any Receipt Point shall be deemed a warranty of title to
such Product by Producer or a warranty that Producer Controls the Product and has the right to deliver such Product for gathering under this Agreement, as applicable. Title to Product shall not transfer to Midstream Co by reason of Midstream
Co’s performance of the Services.
Section 9.2
Custody
. From and after Producer’s delivery of its owned or
Controlled Product to Midstream Co at the Receipt Points, and until Midstream Co’s disposal of Product or redelivery of such Product to or for Producer’s account at the applicable Delivery Points, as between the Parties, Midstream Co shall
have custody and control of, and be responsible for, such Product. In all other circumstances, as between the Parties, Producer shall be deemed to have custody and control of, and be responsible for, such Product.
Article 10
Billing and
Payment
Section 10.1
Statements
.
(a)
Ordinary Course
. Midstream Co shall submit invoices to Producer on or before the 25th Day after the end of a Month (the
“
Invoice Month
”). Each invoice shall be accompanied by supporting information for all amounts charged by such invoice. All amounts owed for Services provided during an Invoice Month shall be reflected on the applicable invoice for
such Invoice Month;
provided
that to the extent any amount appearing on an invoice is in respect of an amount paid by Midstream Co to a Third Party (collectively, the “
Reimbursed Amount
”) or the calculation of such amount is
contingent on information provided by a Third Party (collectively, the “
Conditional Amount
”), such Reimbursed Amount and Conditional Amount shall be reflected on an invoice within 90 Days after the end of the Month in which such
Reimbursed Amount was paid by Midstream Co.
Second Amended and
Restated
Produced Water Services Agreement
- 34 -
(b)
Reserved
.
(c)
Detail
.
Midstream Co shall cause its invoices and supporting information to include information reasonably sufficient to
explain and support any estimates and charges reflected therein, the reconciliation of any estimates made in a prior Month to the actual measurements for such Month, and any adjustments to prior period volumes and quantities.
(d)
Monthly Loss/ Gain Report
.
Midstream Co shall deliver to Producer, on or before the close of business of the 40th Day after
the applicable Invoice Month a Monthly Loss/ Gain Report. If Midstream Co elects, it may deliver such Monthly Loss/ Gain Report concurrently with the applicable invoice.
(e)
One Invoice; Netting
.
To the extent that Midstream Co and Producer are party to this Agreement and one or more other
Transaction Documents, one invoice may be delivered in respect of all amounts owing under such Transaction Documents. The Parties shall net all undisputed amounts due and owing or past due and owing arising under the Transaction Documents to which
Producer and Midstream Co are parties such that the Party owing the greater amount shall make a single payment of the net amount to the other Party. No amounts owing to or by any Midstream Co may be set off against amounts owing to or by any other
Midstream Co. No amounts owing to or by any Producer may be set off against amounts owing to or by any other Producer. To the extent possible, all fee adjustments set forth in
Article 6
shall be accomplished by setoff or netting.
Section 10.2
Payments
.
(a) Unless otherwise agreed by the Parties, all invoices under this Agreement shall be due and payable in accordance with each invoice’s
instructions on or before the later of the 30th Day of each Month and the 10th Day after receipt of the invoice or, if such Day is not a Business Day, then on the next Business Day. All payments by Producer under this Agreement shall be made by
electronic funds transfer to the account designated by Midstream Co. Any amounts not paid by the due date will be deemed delinquent and, with respect to amounts owed to Midstream Co, will accrue interest at the Interest Rate, such interest to be
calculated from and including the due date but excluding the date the delinquent amount is paid in full.
(b) If Producer, in good faith,
disputes the amount of any invoice of Midstream Co, Producer will pay Midstream Co such amount, if any, that is not in dispute and shall provide Midstream Co notice, no later than 30 Days after the date that payment of such invoice would be due
under
Section 10.2(a)
, of the disputed amount accompanied by reasonable documentation to support Producer’s dispute. If Producer fails to provide notice of dispute within such 30-Day period, then Producer shall be deemed to have
waived its right to dispute the applicable invoice, except for a dispute following an audit conducted in accordance with
Section 10.4
. Following Midstream Co’s receipt of such dispute notice, Producer and Midstream Co shall endeavor
in good faith to resolve such dispute, and if the Parties are unable to resolve such dispute within a reasonable time, such dispute may be resolved in accordance with
Section 17.6
of this Agreement. Upon resolution of the dispute, any
required payment shall be made within 15 Days after such resolution, and, if such amount shall be paid to Midstream Co, such amount shall be paid along with interest accrued at the Interest Rate from and including the due date but excluding the date
paid
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Restated
Produced Water Services Agreement
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Section 10.3
Adequate Assurances
. If (a) Producer fails to pay according to the
provisions hereof and such failure continues for a period of 5 Business Days after written notice of such failure is provided to Producer, (b) Producer is not the Original Producer or (c) Midstream Co has reasonable grounds for insecurity
regarding the performance by Producer of any obligation under this Agreement, then Midstream Co, by notice to Producer, may, singularly or in combination with any other rights it may have, demand Adequate Assurance of Performance from Producer.
“Adequate Assurance of Performance” means, at the option of Producer, any of the following, (x) advance payment in cash by Producer to Midstream Co for Services to be provided under this Agreement in the following Month or
(y) delivery to Midstream Co by Producer of an irrevocable standby letter of credit or a performance bond, in form and substance reasonably acceptable to Midstream Co, issued by a Credit-Worthy Person, in an amount equal to not less than the
aggregate proceeds due from Producer under
Section 10.1
for the prior 2-Month period. Promptly following the termination of the condition giving rise to Midstream Co’s reasonable grounds for insecurity or payment in full of amounts
outstanding, as applicable, Midstream Co shall release to Producer the cash, letter of credit, bond or other assurance provided by Producer (including any accumulated interest, if applicable, and less any amounts actually applied to cover
Producer’s obligations hereunder)
.
Section 10.4
Audit
. Each Party has the right, at its sole expense and during
normal working hours, to examine the records of the other Party to the extent reasonably necessary to verify the accuracy of any statement, charge or computation made pursuant to the provisions of the Transaction Documents. The scope of such
examination will be limited to the 24 Months preceding the date such notice of audit, statement, charge or computation was presented. No Party may conduct more than one audit (taking all Transaction Documents to which Producer is a party together)
of another Party during any Year (except that, if a Party is in default hereunder, additional audits may be conducted during the continuance of such default). If any such examination reveals any inaccuracy in any statement or charge, the necessary
adjustments in such statement or charge and the payments necessitated thereby shall be made within 60 Days after resolution of the inaccuracy. This provision of this Agreement will survive any termination of this Agreement for the later of
(a) a period of 24 Months from the end of the Year in which the date of such termination occurred or (b) until a dispute initiated within the 24 Month period is finally resolved, in each case for the purpose of such statement and payment
objections.
Article 11
Remedies
Section 11.1
Suspension of Performance; Temporary Release from Dedication
.
(a)
Suspension by Midstream Co as Remedy for Payment Default
. If Producer fails to pay any invoice rendered under
Article 10
,
such failure is not due to a good faith dispute by Producer in accordance with
Section 10.2(b)
and such failure is not remedied within 5 Business Days after Producer’s receipt of written notice of such failure from Midstream Co,
Midstream Co shall have the right, at its sole discretion, to (i) suspend performance (including withholding any payments that are owed by Midstream Co to Producer, and such withheld amounts shall not be subject to setoff under
Section 10.1(e)
) under this Agreement until such amount, including interest at the Interest Rate, is paid in full or (ii) continue performing the Services under this
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Restated
Produced Water Services Agreement
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Agreement, and, acting in a commercially reasonable manner, sell any Product delivered by Producer to the Receipt Points on Producer’s behalf, and use the proceeds therefrom to reimburse
Midstream Co for any amounts due and owing to Midstream Co, and, at Producer’s election, either (y) remit any excess amounts received under such sale to Producer or (z) reduce the Services Fee due from Producer to Midstream Co for the
following Month by the amount of such excess.
(b)
Additional Suspensions as Remedies
. If a Party fails to perform or comply with
any material warranty, covenant or obligation (other than as provided in
Section 11.1(a)
or
Section 2.4(a)(i)
) contained in this Agreement and such failure has not been remedied within 60 Days after its receipt of written
notice from the other Party of such failure, then the non-defaulting Party shall have the right to suspend performance of its obligations under this Agreement that are affected by such failure or non-compliance (including withholding any payments
that are owed to the other Party, and such withheld amounts shall not be subject to netting or setoff under
Section 10.1(e)
); provided that Producer may not withhold any payments that are owed to Midstream Co for Services actually
performed by Midstream Co.
(c)
Specific Performance and Declaratory Judgments
. Damages in the event of breach of this Agreement by
a Party hereto may be difficult, if not impossible, to ascertain. Therefore, each Party, in addition to and without limiting any other remedy or right it may have, will have the right to seek a declaratory judgment and will have the right to an
injunction or other equitable relief in any court of competent jurisdiction, enjoining any such breach, and enforcing specifically the terms and provisions hereof, and each of the Parties hereto hereby waives any and all defenses it may have on the
ground of lack of jurisdiction or competence of the court to grant such an injunction or other equitable relief. The existence of this right will not preclude any Party from pursuing any other rights and remedies at law or in equity that such Party
may have.
Section 11.2
No Election
. In the event of a default by a Party under this Agreement, the other Party shall be
entitled in its sole discretion to pursue one or more of the remedies set forth in this Agreement, or such other remedy as may be available to it under this Agreement, at Law or in equity, subject, however, to the limitations set forth in
Section 11.3
and
Article 15
. No election of remedies shall be required or implied as the result of a Party’s decision to avail itself of a remedy under this Agreement.
Section 11.3
DIRECT DAMAGES
. A PARTY’S DAMAGES RESULTING FROM A BREACH OR VIOLATION OF ANY REPRESENTATION, WARRANTY,
COVENANT, AGREEMENT OR CONDITION CONTAINED IN THIS AGREEMENT OR ANY ACT OR OMISSION ARISING FROM OR RELATED TO THIS AGREEMENT SHALL BE LIMITED TO ACTUAL DIRECT DAMAGES AND SHALL NOT INCLUDE ANY OTHER LOSS OR DAMAGE, INCLUDING INDIRECT, SPECIAL,
CONSEQUENTIAL, INCIDENTAL, EXEMPLARY OR PUNITIVE DAMAGES, INCLUDING LOST PROFITS, PRODUCTION, OR REVENUES, AND EACH PARTY RELEASES THE OTHER PARTY FROM ALL SUCH CLAIMS FOR LOSS OR DAMAGE OTHER THAN ACTUAL DIRECT DAMAGES;
PROVIDED
THAT THIS
LIMITATION TO DIRECT DAMAGES SHALL NOT LIMIT THE PARTIES’ INDEMNIFICATION OBLIGATIONS UNDER
Section 3.5(c)
,
Section 7.3
, AND
Article 15
.
Second Amended and
Restated
Produced Water Services Agreement
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Article 12
Force Majeure
Section 12.1
Force Majeure
. If either Midstream Co or Producer is rendered unable by an event of Force Majeure to carry out, in
whole or part, its obligations under this Agreement and such Party gives notice (which notice may initially be delivered orally so long as written notice is delivered as soon as reasonably practicable thereafter) and reasonably full details of the
event (including the nature, extent, effect, and likely duration of the event or circumstances constituting the Force Majeure event) to the other Party as soon as practicable after the occurrence of the event, then, during the pendency of such Force
Majeure, but only during that period, the obligations of the Party affected by the event shall be canceled or suspended, as applicable, to the extent required;
provided
,
however
, that notwithstanding anything in the foregoing to the
contrary, no Party shall be relieved from any indemnification obligation or any obligation to make payments, as the result of Force Majeure, regardless of which Party is affected;
provided further
that if the Force Majeure impacts only a
particular Facility Segment or Individual System, then the suspension of obligations described in this sentence shall apply only to the applicable Facility Segment or Individual System and not to the obligations owing in connection with the rest of
the System. The Party affected by Force Majeure shall use commercially reasonable efforts to remedy the Force Majeure condition with all reasonable dispatch, shall give notice to the other Party of the termination of the Force Majeure, and shall
resume performance of any suspended obligation promptly after termination of such Force Majeure.
Section 12.2
Extension Due to
Force Majeure
. If a Party is unable to meet any deadline set forth herein as a result of a Force Majeure, then provided that such Party complies with the provisions of Section 12.1, such deadline shall be extended for a period of time equal
to the period of time during which such Party is delayed due to the Force Majeure.
Article 13
Change in Law; Uneconomic Service
Section 13.1
Changes in Applicable Law
.
(a) If any new Laws are enacted or amended or any new interpretations in respect of previously existing Laws are issued after the Effective
Date that require Midstream Co to make capital expenditures with respect to the System, then Midstream Co may propose an increase to the applicable Individual Fee as may be necessary or appropriate to preserve and continue for the Parties the rights
and benefits originally contemplated for the Parties by this Agreement;
provided, however
, that no increase to the applicable Individual Fee pursuant to this
Section 13.1
shall be applicable unless and until, in the reasonable
judgment of Midstream Co, Midstream Co would be required to make capital expenditures with respect to the System in order to comply with such new Law that materially and adversely affects the economics of the Services provided, fees received, or the
other economic benefits of this Agreement for Midstream Co.
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(b) Producer shall accept or reject, in its sole discretion, Midstream Co’s proposed
increase to the Individual Fee within 30 Days after receiving such proposal from Midstream Co. If Producer fails to provide notice of such acceptance or rejection within such 30-Day period, then Producer shall be deemed to have accepted such
increase. If Producer rejects the amount of the proposed increase, then Midstream Co shall release the Wells, Separator Facilities, Receipt Points, Spacing Units, and Dedicated Production that would have been affected by such increase in accordance
with
Section 2.4(a)(viii)
. The Parties will amend, update, or revise the applicable Agreement Addendum in accordance with this Agreement to reflect any changes in the applicable Individual Fees agreed to in accordance with this
Section 13.1
.
(c) Producer and Midstream Co shall use their commercially reasonable efforts to comply with new and amended
applicable Laws and new interpretations of existing Laws.
Section 13.2
Unprofitable Operations and Rights of Termination
.
(a)
Cessation of Services
. If, in the sole discretion of Midstream Co, (x) the gathering of Product from any Wells, Separator
Facilities or Receipt Points, (y) the delivery of Product to any Delivery Points or (z) the provision of any other Service under this Agreement, is or becomes uneconomical due to its volume, quality, or for any other cause, then Midstream
Co shall not be obligated to provide the applicable Services so long as such condition exists.
(i) If Midstream Co
suspends Services under this
Section 13.2(a)
as a result of Producer’s (A) negligence, willful misconduct, or breach of this Agreement, (B) delivery of Product that fails to meet the quality specifications required by
Section 7.1
, or (C) execution of a plan of development that deviates from the then-applicable Development Report, then Midstream Co may resume providing such Services at any time, upon two months’ advance written notice
delivered to Producer, and the affected Wells, Separator Facilities, Receipt Points and Dedicated Production shall only be permanently released as a result of suspension under this clause by mutual agreement of the Parties under
Section 2.4(a)(iv)
.
(ii) If Midstream Co suspends Services under this
Section 13.2(a)
for any
reason other than as specified in clause (i) above and (x) such suspension continues for six consecutive Months or (y) Midstream Co delivers notice to Producer that such suspension shall be permanent, then the applicable Wells,
Separator Facilities, Receipt Points, Spacing Units and Dedicated Production shall be permanently released as specified in
Section 2.4(a)(ix)
.
(b)
Election not to Expand System
. If Midstream Co determines, in its discretion, that an expansion of the Individual System to satisfy
the needs of Producer, as described in
Section 3.2
hereof, would be uneconomical, then Midstream Co shall neither be obligated to undertake such expansion nor to provide the applicable Services. Producer shall be entitled to a release of
the applicable Planned Wells, Planned Separator Facilities and Dedicated Production pursuant to
Section 2.4(a)(ix)
immediately upon Midstream Co’s delivery of a System Plan (marked as “Final”) indicating that a requested
expansion would be uneconomical pursuant
Section 13.2(d)
.
(c)
Start of Suspension of Services
. Midstream Co shall cause
any suspension of Services permitted by this
Section 13.2
to commence on the first Day of a Month and not on any other Day.
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Restated
Produced Water Services Agreement
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(d)
Supporting Documentation
. As soon as Midstream Co determines that an expansion of the
Individual System will not be economic or that continuing to provide Services at existing facilities has been rendered uneconomic, Midstream Co shall communicate the same to Producer. With respect to existing facilities, such notice shall be
delivered to Producer at least 60 Days in advance of any proposed curtailment under this
Section 13.2
and such notice shall be accompanied by documentation supporting its claim that certain Services have become uneconomical. With respect
to planned facilities, Midstream Co shall indicate that providing Services to Planned Wells or Planned Separator Facilities is uneconomical by failing to include the necessary expansion projects in the applicable System Plan and shall provide
supporting documentation for its determination that such expansion would be uneconomical, if requested by Producer. If Midstream Co delivers a System Plan (marked as “Final”) describing the necessary expansion projects, such delivery shall
be deemed to be a commitment by Midstream Co to complete such expansion without exercising its rights under
Section 13.2(b)
, so long as conditions (including anticipated throughput, pricing, the ability to obtain rights-of-way,
Producer’s continued execution of the Development Report, and any other factors deemed material by Midstream Co) do not materially change;
provided, however
that upon the initiation of Services through such expansion project or through a
component part of such expansion project, such expansion (or applicable portion thereof) shall be considered “existing facilities” for purposes of this
Section 13.2
and Midstream Co shall have all of the rights set forth herein
with respect to existing facilities that become uneconomical. Nothing in this
Section 13.2(d)
shall give Producer a right to consent to a suspension under this
Section 13.2
.
(e)
No Obligation to Drill or Operate
. Without limiting the right of Producer to revise the Development Report to eliminate any proposed
Wells or Separator Facilities, nothing herein shall be construed to require Producer to drill any Well, to continue to operate any Well, to place any new Separator Facility into service or to maintain the operation of any Separator Facility that a
prudent operator would not in like circumstances drill or continue to operate.
Article 14
Reserved
Article
15
Indemnification and Insurance
Section 15.1
Reciprocal Indemnity
. To the fullest extent permitted by Applicable Law and except as otherwise set forth in
Section 3.5(c)
and
Section 7.3
:
(a)
Producer Indemnification
. Producer shall release, protect, defend,
indemnify and hold harmless Midstream Co Group from and against all Losses directly or indirectly arising out of or in connection with bodily injury, death, illness, disease, or loss or damage to property of Producer or any member of Producer Group
in any way arising out of or relating to this Agreement, directly or indirectly. THIS RELEASE, DEFENSE AND INDEMNITY OBLIGATION SHALL APPLY REGARDLESS OF FAULT OF MIDSTREAM CO GROUP OR ANY OTHER PERSONS.
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Produced Water Services Agreement
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(b)
Midstream Co Indemnification
. Midstream Co shall release, protect, defend, indemnify
and hold harmless Producer Group from and against all Losses directly or indirectly arising out of or in connection with bodily injury, death, illness, disease, or loss or damage to property of Midstream Co or any member of Midstream Co Group in any
way arising out of or relating to this Agreement, directly or indirectly. THIS RELEASE, DEFENSE AND INDEMNITY OBLIGATION SHALL APPLY REGARDLESS OF FAULT OF PRODUCER GROUP OR ANY OTHER PERSONS.
(c)
Regardless of Fault
. AS USED IN THE PRECEDING TWO SUBCLAUSES, THE PHRASE “REGARDLESS OF FAULT” SHALL MEAN, WITH RESPECT TO
ANY LOSS THAT IS CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE (WHETHER SOLE, JOINT, CONCURRENT, COMPARATIVE, CONTRIBUTORY, ACTIVE, PASSIVE, OR OTHERWISE), STRICT LIABILITY, OR OTHER FAULT, OF ANY MEMBER OF MIDSTREAM CO GROUP OR THE PRODUCER GROUP,
WITHOUT REGARD TO THE CAUSE OR CAUSES THEREOF AND WITHOUT LIMITATION OF SUCH LOSS AND WHETHER OR NOT CAUSED BY A PRE-EXISTING CONDITION.
Section 15.2
Indemnification Regarding Third Parties
. Each Party shall release, protect, defend, indemnify and hold the other
Party harmless against any Loss by a Third Party that is not a member of the Producer Group or Midstream Co Group, to the extent such Loss (a) is caused by the negligence or willful misconduct of said indemnifying Party or such Party’s
Group, or (b) in the case of Producer as indemnifying Party, results from claims by a Third Party of title, rights, or encumbrances in or to Product delivered by Producer to a Receipt Point.
Section 15.3
Penalties
. Producer shall release, protect, defend, indemnify, and hold harmless Midstream Co from any Losses
resulting from penalties imposed by a Downstream Facility in any transportation contracts or service agreements associated with, or related to, Producer’s owned or Controlled Product.
Section 15.4
Insurance
. Midstream Co and Producer shall (a) carry and maintain no less than the insurance coverage set forth
in
Exhibit D
, and (b) cause such insurance to be (i) the primary coverage without any right of contribution from any other insurance held by the other Party to the extent of the insured Party’s indemnification obligations
hereunder, and (ii) written and endorsed to include waivers of all subrogation rights of the insurers against Midstream Co and its Group (in the case of Producer’s insurance) or Producer and its Group (in the case of Midstream Co’s
insurance). Unless Producer is Original Producer, Producer shall also cause the insurance carried and maintained by it pursuant to this
Section 15.4
to be endorsed to name Midstream Co and its Group as additional insureds or provide
blanket additional insured status that covers Midstream Co and its Group as additional insureds, except in the case of worker’s compensation insurance. Any insurance provided by OpCo on behalf of Midstream Co that comports with this
Section 15.4
shall be deemed to satisfy these requirements.
Second Amended and
Restated
Produced Water Services Agreement
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Article 16
Assignment
Section 16.1
Assignment of Rights and Obligations under this Agreement
.
(a)
Assignment
. Except as specifically otherwise provided in this Agreement, no Party nor OpCo shall have the right to assign its rights
and obligations under this Agreement (in whole or in part) to another Person except with the prior consent of Midstream Co (in the case of an assignment by Producer) or Producer (in the case of an assignment by OpCo or Midstream Co), which consent
may be withheld at such Party’s sole discretion. Notwithstanding the foregoing, Producer may assign its rights and obligations under this Agreement to any Person to whom Producer assigns or transfers an interest in any of the Dedicated
Properties insofar as this Agreement relates to such Dedicated Properties without the consent of Midstream Co;
provided
that (A) such Person assumes in writing the obligations of Producer under this Agreement insofar as it relates to the
portion of the Dedicated Properties so assigned or transferred, such writing shall take the form of an Agreement Addendum, executed by the applicable Midstream Co and the Producer Assignee (and others, if appropriate) and such writing shall be
recorded in the real property records of the counties in which the Dedication Area is located, (B) such assignment is made subject to this Agreement, (C) if such assignment or transfer is made to an Affiliate of Producer, the Original
Producer shall not be released from any of its obligations under this Agreement, and (D) if such transfer or assignment is to a Producer Assignee (a “
Third Party Assignment
”): (1) the Original Producer shall be released
from its obligations under this Agreement with respect to the Dedicated Properties so assigned or transferred, (2) at least thirty (30) Days prior to the closing date of the Third Party Assignment (or, if the period between signing and
closing is less than thirty (30) Days, as early as possible and in no event less than two Business Days prior to the closing of the Third Party Assignment), Producer shall cause the proposed Producer Assignee to deliver an updated Development
Report to Midstream Co and (3) prior to or on the closing date of the Third Party Assignment, the Producer Assignee shall deliver to Midstream Co (x) a copy of the writing pursuant to which the Third Party Assignment is occurring, and
(y) documentation of any Conflicting Dedication affecting any Product of the Producer Assignee that would otherwise be considered Dedicated Production.
(b)
Notice; Binding Effect
. Within 30 Days prior to the date of execution of a permitted assignment by Producer, Producer shall give
Midstream Co notice of any assignment of this Agreement or Dedicated Properties. Midstream Co shall give Producer written notice of any assignment of this Agreement within 30 Days after the date of execution of such permitted assignment. This
Agreement shall be binding upon and inure to the benefit of the respective permitted successors and assigns of the Parties. Any attempted assignment made without compliance with the provisions set forth in this
Section 16.1
shall be null
and void
ab initio
.
(c)
Releases not Assignments
. Any release of any of the Dedicated Properties from the Dedications
pursuant to
Section 2.4
shall not constitute an assignment or transfer of such Dedicated Properties for the purposes of this
Article 16
.
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Produced Water Services Agreement
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Section 16.2
Pre-Approved Assignments
. Each Party shall have the right without the
prior consent of the others to (a) mortgage, pledge, encumber or otherwise impress a lien or security interest upon its rights and interest in and to this Agreement, and (b) make a transfer pursuant to any security interest arrangement
described in (a) above, including any judicial or non-judicial foreclosure and any assignment from the holder of such security interest to another Person.
Section 16.3
Change of Control
. Except as provided in Section 16.1, nothing in this Article 16 shall prevent Producer’s
members or owners from transferring their respective interests (whether equity or otherwise and whether in whole or in part) in Producer and nothing in this Article 16 shall prevent Midstream Co’s members or owners from transferring their
respective interests (whether equity or otherwise and whether in whole or in part) in Midstream Co. However, if a change of control of a Party gives rise to a reasonable basis for insecurity on the part of the other Party, such change of control may
be the basis for a request of Adequate Assurance of Performance. Each member or owner of Producer or Midstream Co, as applicable, shall have the right to assign and transfer such member’s or owner’s interests (whether equity or otherwise
and whether in whole or in part) in Producer or Midstream Co, as applicable, without restriction contained in this Agreement.
Article
17
Other Provisions
Section 17.1
Relationship of the Parties
. The execution and delivery of an Agreement Addendum shall create a binding agreement
between the Parties signatory thereto or, in the case of the OpCo Agreement Addendum, the Producer signatory thereto and OpCo, consisting of the terms set forth in such Agreement Addendum together with the terms set forth in these Agreement Terms
and Conditions. The signatories of one Agreement Addendum shall not be bound to or otherwise in privity of contract with the signatories of any other Agreement Addendum, and the execution and delivery of each Agreement Addendum shall form a separate
and distinct contract. This Agreement shall not be deemed or construed to create, a partnership, joint venture or association or a trust between or among Producer, Midstream Co, and OpCo or the persons party to any other Agreement Addendum. This
Agreement shall not be deemed or construed to authorize any Party or OpCo to act as an agent, servant or employee for any other Party or OpCo for any purpose whatsoever except as explicitly set forth in this Agreement. In their relations with each
other under this Agreement, the Parties and OpCo shall not be considered fiduciaries.
Section 17.2
Notices
. Unless otherwise
specified in the applicable provision, all notices, consents, approvals, requests, and other communications required or permitted to be given under this Agreement shall be in writing and delivered personally, or sent by bonded overnight courier,
mailed by U.S. Express Mail or by certified or registered United States Mail with all postage fully prepaid, return receipt requested, or, except in the case of notices of breach or default, sent by electronic mail (including with a PDF of the
notice or other communication attached), in each case, addressed (i) if to Producer, at the address set forth on the applicable Agreement Addendum and (ii) if to Midstream Co or OpCo, then to OpCo and the applicable Midstream Co at the
address set forth on the applicable Agreement Addendum;
provided
that in the case of any notice by electronic mail, such notice is confirmed by communication via another method permitted by this
Section 17.2
. Any notice, consent,
approval, request, or other
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communication (“
Communications
”) given in accordance herewith shall be deemed to have been given when (a) actually received or rejected by the addressee in person or by
courier, (b) (
reserved
), or (c) actually received or rejected by the addressee upon delivery by overnight courier or United States Mail, as shown in the tracking report or return receipt, as applicable. Communications may not be
transmitted by electronic mail, except for ordinary course business communications that shall be deemed to be received, if transmitted during normal business hours on such Business Day, or if transmitted after normal business hours, on the next
Business Day. Any Person may change their contact information for notice by giving notice to the other Party and, in the case of Producer, OpCo in the manner provided in this
Section 17.2
.
Section 17.3
Entire Agreement; Conflicts
. This Agreement (consisting of these Agreement Terms and Conditions and the applicable
Agreement Addendum) constitutes the entire agreement of Producer and Midstream Co or OpCo (as applicable) pertaining to the subject matter hereof and supersedes all prior agreements, understandings, negotiations, and discussions, whether oral or
written, of Producer and Midstream Co or OpCo (as applicable) pertaining to the subject matter hereof. There are no warranties, representations, or other agreements between Producer and Midstream Co or OpCo (as applicable) relating to the subject
matter hereof except as specifically set forth in this Agreement, including the exhibits hereto, and no Party or OpCo shall be bound by or liable for any alleged representation, promise, inducement, or statements of intention not so set forth.
Section 17.4
Waivers; Rights Cumulative
. Any of the terms, covenants, or conditions hereof may be waived only by a written
instrument executed by or on behalf of the Person waiving compliance. No course of dealing on the part of any Party or OpCo, or their respective officers, employees, agents, or representatives, nor any failure by a Party or OpCo to exercise any of
its rights under this Agreement shall operate as a waiver thereof or affect in any way the right of such Party or OpCo at a later time to enforce the performance of such provision. No waiver by any Party or OpCo of any condition, or any breach of
any term or covenant contained in this Agreement, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any such condition or breach or a waiver of any other condition or of any breach of any other
term or covenant. The rights of Producer, Midstream Co, and OpCo (as applicable) under this Agreement shall be cumulative, and the exercise or partial exercise of any such right shall not preclude the exercise of any other right.
Section 17.5
Amendment
.
(a) This Agreement may be amended only by an instrument in writing executed (except as otherwise set forth in this
Section 17.5
) by
Producer and Midstream Co or OpCo, as applicable, and expressly identified as an amendment or modification.
(b) In the event of a conflict
between (i) these Agreement Terms and Conditions or any exhibit to this agreement, on the one hand, and (ii) an applicable Agreement Addendum, on the other, the applicable Agreement Addendum shall control.
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Produced Water Services Agreement
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Section 17.6
Governing Law; Arbitration
. This Agreement shall be governed by and
construed in accordance with the laws of the State, excluding any conflicts of law rule or principle that might refer construction of such provisions to the laws of another jurisdiction. Any dispute, controversy, or claim arising out of or relating
to this Agreement shall be finally settled by arbitration in accordance with the CPR Institute for Dispute Resolution Rules for Non-Administered Arbitration then in effect (the “Rules”) by a sole arbitrator appointed in accordance with the
Rules. The arbitrator is not empowered to award consequential, indirect, special, punitive or exemplary damages, and each Party and OpCo irrevocably waives any damages in excess of actual damages. Arbitration shall be held in the English language in
the State, and the decision of the arbitration panel shall include a statement of the reasons for such decision, and the award shall be final and binding on Producer and Midstream Co or OpCo, as applicable. Awards shall be final and binding on
Producer and Midstream Co or OpCo, as applicable, from the date they are made and judgment upon any award may be entered in any court having jurisdiction. The arbitrator shall apply the laws of the State, excluding any conflicts of law rule or
principle that might refer construction of such provisions to the laws of another jurisdiction.
Section 17.7
Parties in
Interest
. Except for parties indemnified hereunder, nothing in this Agreement shall entitle any Person other than the Parties and OpCo to any claim, cause of action, remedy or right of any kind.
Section 17.8
Preparation of Agreement
. The Parties and OpCo and their respective counsel participated in the preparation of this
Agreement. In the event of any ambiguity in this Agreement, no presumption shall arise based on the identity of the draftsman of this Agreement.
Section 17.9
Severability
. If any term or other provision of this Agreement is invalid, illegal, or incapable of being enforced by
any rule of Law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any
adverse manner to any Party or OpCo. Upon such determination that any term or other provision is invalid, illegal, or incapable of being enforced, Producer and Midstream Co or OpCo, as applicable, shall negotiate in good faith to modify this
Agreement so as to effect the original intent of Producer and Midstream Co or OpCo, as applicable, as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible. A ruling of
invalidity, illegality or unenforceability as to one Agreement shall only be applicable to that Agreement, not all the Agreements covered by these Agreement Terms and Conditions.
Section 17.10
Counterparts
. This Agreement may be executed in any number of counterparts, and each such counterpart hereof shall
be deemed to be an original instrument, but all of such counterparts shall constitute for all purposes one agreement. Any signature hereto delivered by a Party or OpCo by electronic mail shall be deemed an original signature hereto; provided that
the originals of any such electronically provided signatures shall be provided by the signatory, if requested by the other Party (or OpCo) within a week of exchanging signatures.
Section 17.11
Confidentiality
. All data and information exchanged by the Parties and OpCo (other than the terms and conditions of
this Agreement) and all pricing terms shall be maintained in strict and absolute confidence and no Party nor OpCo shall disclose, without the prior consent of the other Parties and OpCo, any such data, information or pricing terms unless
Second Amended and
Restated
Produced Water Services Agreement
- 45 -
the release thereof is required by Law (including any requirement associated with an elective filing with a Governmental Authority) or the rules or regulations of any stock exchange on which any
securities of the Parties, OpCo, or any Affiliates thereof are traded. Nothing in this Agreement shall prohibit the Parties or OpCo from disclosing whatever information in such manner as may be required by Applicable Law; nor shall any Party or OpCo
be prohibited by the terms hereof from disclosing information acquired under this Agreement to any financial institution or investors providing or proposing financing to a Party, OpCo, or to any Person proposing to purchase the equity in any Party
or OpCo or the assets owned by any Party or OpCo. Notwithstanding the foregoing, the restrictions in this Section 17.11 will not apply to data or information that (i) is in the possession of the Person receiving such information prior to
disclosure by the other Party or OpCo, (ii) is or becomes known to the public other than as a result of a breach of this Agreement or (iii) becomes available to a Party or OpCo a non-confidential basis from a source other than the other
Party or OpCo,
provided
that such source is not bound by a confidentiality agreement with, or other fiduciary obligations of confidentiality to, the other Party or OpCo. This Section will survive any termination of this Agreement for a
period of 24 Months from the end of the Year in which the date of such termination occurred.
(End of Agreement Terms and
Conditions
)
Second Amended and
Restated
Produced Water Services Agreement
- 46 -
EXHIBIT A
OPERATING TERMS AND CONDITIONS
SERVICE AREA
Weld County,
Colorado
Second Amended and
Restated
Produced Water Services Agreement
EXHIBIT B
Reserved
Second Amended and
Restated
Produced Water Services Agreement
EXHIBIT C
Reserved
Second Amended and
Restated
Produced Water Services Agreement
EXHIBIT D
INSURANCE
Each of OpCo (on behalf of
Midstream Co) and Producer shall purchase and maintain (or cause to be purchased and maintained) in full force and effect at all times during the Term of this Agreement, at such Party’s sole cost and expense and from insurance companies that
are rated (or whose reinsurers are rated) “A-VII” or better by AM Best or “BBB-” or better by Standard & Poor’s or an equivalent rating from another recognized rating agency, policies providing the types and limits
of insurance indicated below, which insurance shall be regarded as a minimum and, to the extent of the obligations undertaken by such Party in this Agreement, shall be primary (with the exception of the Excess Liability Insurance and Workers’
Compensation) as to any other existing, valid, and collectable insurance. Each Party’s deductibles shall be borne by that Party.
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A.
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Where applicable, Workers’ Compensation and Employers’ Liability Insurance, in accordance with the statutory requirements of the State and endorsed specifically to include the following:
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1.
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Employers’ Liability, subject to a limit of liability of not less than $1,000,000 per accident, $1,000,000 for each employee/disease, and a $1,000,000 policy limit.
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The Workers’ Compensation and Employers’ Liability Insurance policy(ies) shall contain an alternate employer endorsement.
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B.
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Commercial General Liability Insurance, with limits of liability of not less than the following:
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$2,000,000 general aggregate
$1,000,000 each occurrence, Bodily Injury or Property Damage Combined Single Limit
Such insurance shall include the following:
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1.
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Premises and Operations coverage.
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2.
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Contractual Liability covering the liabilities assumed under this Agreement.
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3.
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Broad Form Property Damage Liability endorsement, unless policy is written on November 1988 or later ISO form.
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4.
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Products and Completed Operations.
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5.
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Time Element Limited Pollution coverage.
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C.
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If applicable, Automobile Liability Insurance, with limits of liability of not less than the following:
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Second Amended and
Restated
Produced Water Services Agreement
Exhibit D - Page 1
$1,000,000 Bodily Injury or Property Damage Combined Single Limit, for each occurrence.
Such coverage shall include hired and non-owned vehicles and owned vehicles where applicable.
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D.
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If applicable, Aircraft Liability Insurance. In any operation requiring the use or charter of aircraft or helicopters by Midstream Co or Producer, combined single limit insurance shall be carried or cause to be carried
for public liability, passenger liability and property damage liability in an amount of not less than $8,000,000 per seat subject to a minimum of $20,000,000; this insurance shall cover all owned and non-owned aircraft, including helicopters, used
by Midstream Co in connection with the performance of the work set forth in this Agreement.
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E.
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Excess Liability Insurance, with limits of liability not less than the following:
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Limits of
Liability—$10,000,000 Occurrence/Aggregate for Bodily Injury and Property Damage in excess of the coverage outlined in Paragraphs A, B, C and D.
The
limits of coverage required in this Agreement may be met with any combination of policies as long as the minimum required limits are met.
Each Party to
this Agreement shall have the right to acquire, at its own expense, such additional insurance coverage as it desires to further protect itself against any risk or liability with respect to this Agreement and operations and activities under this
Agreement or related thereto. All insurance maintained by or on behalf of Producer or Midstream Co shall contain a waiver by the insurance company of all rights of subrogation in favor of the other Party.
Neither the minimum policy limits of insurance required of the Parties nor the actual amounts of insurance maintained by the Parties under their insurance
program shall operate to modify the Parties’ liability or indemnity obligations in this Agreement.
A Party may self-insure the requirements in this
Exhibit D
if such Party is Controlled by Noble Energy, Inc. and, otherwise, if such Party or its parent is considered investment grade (S&P BBB- or equivalent or higher).
(End of Exhibit D)
Second Amended and
Restated
Produced Water Services Agreement
Exhibit D - Page 2
Exhibit 10.12.2
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED. THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
When Recorded,
Mail To:
Attn: DJ Land Manager
1625 Broadway, Suite 2200
Denver, CO 80202
SECOND AMENDED AND
RESTATED
PRODUCED WATER SERVICES AGREEMENT
SECOND AMENDED AND RESTATED
AGREEMENT ADDENDUM 01
W
ELLS
R
ANCH
This AGREEMENT ADDENDUM 01 (this “
Agreement Addendum
”) (a) shall be effective as among the Persons named below as
“Producer” and “Midstream Co” as of the date specified below as the “Effective Date,” (b) incorporates the Second Amended and Restated Agreement Terms and Conditions Relating to Produced Water Services (the
“
Agreement Terms and Conditions
”), which were last amended effective as of March 31, 2016 and recorded in the real property records of Weld County, Colorado on
, as and
(c) together with the Agreement Terms and Conditions, shall constitute one contract and shall be the Agreement of the Parties. Except as otherwise set forth herein (i) all terms shall have the meanings assigned to such terms in the
Agreement Terms and Conditions and (ii) all references to Exhibits, Appendices, Articles, Sections, subsections and other subdivisions refer to the corresponding Exhibits, Appendices, Articles, Sections, subsections and other subdivisions of or
to the Agreement Terms and Conditions.
Producer desires to contract with Midstream Co for Midstream Co to provide the Services utilizing
the Individual System, and Midstream Co desires to provide the Services to Producer, on the terms and subject to the conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements in this Agreement, Midstream Co and Producer hereby agree as follows:
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Producer
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Noble Energy, Inc., a Delaware corporation
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Midstream Co
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Colorado River DevCo LP, a Delaware limited partnership
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Agreement Addendum 01 – Page 1
Second Amended and Restated Produced Water Services Agreement
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.
THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
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Parties
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The term “Party” or “Parties” shall refer to the Producer and Midstream Co identified in this Agreement Addendum
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Effective Date
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March 31, 2016
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Dedication Area
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The Wells Ranch integrated development plan area, as such area was defined by Producer on the Effective Date, and which consists of the following areas within Weld County, Colorado
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Township
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Range
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Sections
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T7N
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R64W
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31-36
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T7N
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R63W
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31-36
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T6N
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R64W
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ALL
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T6N
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R63W
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ALL
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T6N
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R62W
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2-11, 14-23, 26-35
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T5N
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R62W
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2-11, 14-23
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T5N
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R63W
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ALL
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T7N
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R62W
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31
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T5N
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R64W
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1-6, 10-15, 22-27, 34-36
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Except and excluding the wells, leases and other acreage described in the property exhibits attached to the Releases of Dedication
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Individual First
Phase Rate
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$[**]/Barrel
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Individual Second
Phase Rate
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Individual Second Phase Rate applied to each Barrel for which Producer elects to receive disposal services
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Individual Second Phase Rate applied to each Barrel for which Producer elects to receive recycling services
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$[**]/ Barrel
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[**].
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Deviations from Service Conditions (the specifications in this section supersede the
applicable language from Article 7 )
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NONE
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Agreement Addendum 01
– Page 2
Second Amended and Restated Produced Water Services Agreement
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.
THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
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Additional Revisions
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Section 4.1(c):
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The Parties shall agree in writing how to address the accuracy of all Measurement Devices, and, unless otherwise agreed in writing, Section 4.1(g) shall have no effect in the Dedication Area.
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Clause (x) of Section 6.1(i) is amended and restated as follows:
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(x) the aggregate quantity of such Product, stated in Barrels, calculated by Midstream Co to have been received by Midstream Co from Producer or for Producer’s account at the applicable Measurement Points for such Product
during such Month multiplied by
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Notices and Payments
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Notice Address – General Matters & Correspondence
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Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Chief Financial Officer
John F. Bookout, IV
Telephone: (832) 639-7134
Email:
John.Bookout@nblenergy.com
Producer:
Noble Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO 80202
Attention: Director of
USO Finance,
Gerald
Free
Telephone: (303) 228-4174
Email:
Gerald.Free@nblenergy.com
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Agreement Addendum 01
– Page 3
Second Amended and Restated Produced Water Services Agreement
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.
THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
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Notice Address – Operational Matters
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Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Chief Operating Officer
John C. Nicholson
Telephone: (281) 876-6186
Email:
John.Nicholson@nblenergy.com
Producer:
Noble Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO 80202
Attention: Vice President – DJ Business Unit
Mark Patteson
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Notice Address – Force Majeure and Disposal or Recycling interruptions
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Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Chief Operating Officer
John C. Nicholson
Telephone: (281) 876-6186
Email:
John.Nicholson@nblenergy.com
Producer:
Noble Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO 80202
Attention: Director of USO
Finance,
Gerald Free
Telephone: (303) 228-4174
Email:
Gerald.Free@nblenergy.com
|
Agreement Addendum 01
– Page 4
Second Amended and Restated Produced Water Services Agreement
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.
THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
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Notice Address – Invoicing Matters
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Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Ian Dams
Telephone: (832) 639-7406
Email:
ian.dams@nblenergy.com
Producer:
1001 Noble Energy Way
Houston, TX 77070
Attention: Director of
Revenue Accounting
John
Nedelka
Telephone: (281) 872-3120
Email:
John.Nedelka@nblenergy.com
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Payments by Electronic Funds Transfer
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Midstream Co:
ABA for wire: 021000021
ABA for ACH: 111000614
Account Number: 780161720
Account Name: Colorado River DevCo
LP
Financial Institution: JP Morgan
Bank Swift: CHASUS33
Producer:
ABA/Routing Number: 021000021
Account Number: 08805135066
Account Name: Noble Energy, Inc.
Financial Institution: JP
Morgan
Bank Swift: CHASUS33
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(End of Agreement Addendum 01)
Agreement Addendum 01
– Page 5
Second Amended and Restated Produced Water Services Agreement
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.
THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement in duplicate originals to
be effective as of the Effective Date.
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“Producer”
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NOBLE ENERGY, INC.
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By:
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/s/ Gary W. Willingham
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Gary W. Willingham
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Executive Vice President
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STATE OF TEXAS
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)
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)
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ss.
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COUNTY OF HARRIS
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)
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The foregoing instrument was acknowledged before me this this
26th
day of April, 2016 by Gary W. Willingham as
Executive Vice President of Noble Energy, Inc., a Delaware corporation, on behalf of said corporation.
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/s/ Vickie L. Graham
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Notary Public in and for the State of Texas
|
Agreement Addendum 01
– Page 1
Second Amended and Restated Produced Water Services Agreement
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.
THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
“Midstream Co”
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COLORADO RIVER DEVCO LP
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By:
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Colorado River DevCo GP LLC
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By:
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Noble Midstream Services, LLC
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By:
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/s/ Terry R. Gerhart
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Terry R. Gerhart
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Chief Executive Officer
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STATE OF TEXAS
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)
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) ss.
|
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COUNTY OF HARRIS
|
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)
|
The foregoing instrument was acknowledged before me this this
26th
day of April, 2016 by Terry R. Gerhart as Chief
Executive Officer of Noble Midstream Services, LLC, which is the sole member of Colorado River DevCo GP LLC, which is the general partner of Colorado River DevCo LP, a Delaware limited partnership, on behalf of said company.
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/s/ Joanne Garner
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Notary Public in and for the State of Texas
|
Agreement Addendum 01
– Page 2
Second Amended and Restated Produced Water Services Agreement
Exhibit 10.12.3
When Recorded, Mail To:
Attn: DJ Land Manager
1625 Broadway, Suite 2200
Denver, CO 80202
FORM OF
AMENDMENT 01
TO
THAT CERTAIN
SECOND AMENDED AND RESTATED
PRODUCED WATER SERVICES AGREEMENT
W
ELLS
R
ANCH
C
ONTRACT
N
UMBER
: CRWR01-PW
This AMENDMENT 01 (this “
Amendment
”) shall be effective among Noble Energy, Inc., a Delaware corporation (the
“
Producer
”) and Colorado River DevCo LP, a Delaware limited partnership, together with its permitted successors and assigns (“
Midstream Co
”) as of September 1, 2016 (the “
Amendment Effective
Time
”). This Amendment modifies that certain Second Amended and Restated Produced Water Services Agreement, effective as of March 31, 2016 (the “
Agreement
”), which has been given contract number CRWR01-PW and is
comprised of (i) that certain Second Amended and Restated Agreement Terms and Conditions Relating to Produced Water Services (the “
Agreement Terms and Conditions
”), last updated March 31, 2016, together with
(ii) that certain Second Amended and Restated Agreement Addendum 01 (the “
Agreement Addendum
”), effective as of March 31, 2016. The Agreement Terms and Conditions, the Agreement Addendum and this Amendment shall
constitute one contract and shall be the Agreement of the Parties.
WHEREAS, capitalized terms used herein have the meanings assigned to
such terms in the Agreement Terms and Conditions.
WHEREAS, pursuant to
Section 2.1
of the Agreement Terms and Conditions,
Producer has dedicated and committed to deliver to Midstream Co under the Agreement, as and when produced, all of the Dedicated Production and agreed not to deliver any Dedicated Production to any other gatherer, purchaser, or other Person prior to
delivery to Midstream Co at the Receipt Points.
WHEREAS, at certain times prior to or after connection of the Individual System to a
particular Well or Separator Facility, the Individual System may not be available to accept deliveries of Dedicated Production.
WHEREAS,
during such times, Producer remains obligated to deliver the Dedicated Production to Midstream Co and Midstream Co remains obligated to arrange for the disposal of
such Dedicated Production, and the Parties desire to amend the Agreement to provide for the flexibility required.
WHEREAS, the Parties agree and acknowledge that amendments to the Agreement Terms and Conditions set forth herein constitute an amendment only
to the Agreement and not to any other agreement in respect of produced water services to which Producer or Midstream Co is a party.
NOW,
THEREFORE, in consideration of the foregoing recitals, which are incorporated herein and the mutual agreements in the Agreement, Midstream Co and Producer hereby agree as follows:
1.
Amendments to Article 1
.
1.1 The following defined terms are hereby amended and restated in their entirety to read as follows:
“
Facility Segment
” means each segment of an Individual System comprised of facilities beginning at a Receipt Point and ending
at an Internal Transfer Point. If an Individual System does not contain any such distinct segment, then the term Facility Segment shall be synonymous with Individual System.
“
Individual Fee
” means the aggregate of the Individual First Phase Fee, the Individual Second Phase Fee and the Individual
Disposal by Truck Fee;
provided
that for purposes of the annual escalation in the Individual Fee described in
Section 6.2(b)
, such term shall not include any Reimbursed Amount.
“
Individual Second Phase Fee
” means the Monthly fee for providing Second Phase Services at a particular Individual System, as
set forth opposite the heading “Individual Second Phase Fee” on the applicable Midstream Agreement Addendum;
provided
that the Individual Second Phase Fee shall accrue only with respect to Services performed by Midstream Co on
Product flowing through an Individual System.
“
Individual System
” means the portion of the System beginning at the
Receipt Points and ending at the Delivery Points. The Individual Systems in existence on the Effective Date are more particularly described in writing between Producer and Midstream Co. Additional Individual Systems may be added to the System from
time to time in satisfaction of the needs identified by Producer and evidenced in writing between Producer and Midstream Co.
“
Other System Fuel
” means any natural gas delivered into Midstream Co’s custody by Producer pursuant to a Transaction
Document between Producer and Midstream Co and measured and used as fuel by Midstream Co.
1.2 The defined terms “Drip
Condensate”, “Gas”, “Gas System”, “Individual Second Phase Rate”, and “Other Services” are hereby deleted.
Amendment 01 – Page 2
Second Amended and Restated Produced Water Services Agreement
Colorado River Produced Water Agreement
CRWR01-PW
1.3 Clauses (a) and (b) of the defined term “Dedicated Production” are hereby
amended and restated to read as follows: “(a) Product owned by Producer or an Affiliate of Producer and produced from a Well within the Dedication Area that is operated by Producer or an Affiliate under the Control of Producer,
(b)
Reserved
, and”.
1.4 The defined term “Product” is hereby amended by inserting the following
sentence at the end of such definition:
“In the event Producer exercises its Trucking Election, the term “Product” shall
refer to all water that is accepted for delivery at a SWD Trucking Facility for the account of Midstream Co.”
1.5 The
defined term “Services” is hereby amended by deleting “and (g)” at the end of clause (f) and inserting in place thereof the following: “, (g) Trucked Water Services and (h)”.
1.6 The following new definitions shall be added to Article 1 in alphabetical order:
“
Approved SWD Vendor
” means Midstream Co or a Third Party, in either case, as mutually agreed in writing by the Parties;
provided, however, that if an Approved SWD Vendor rejects any Product delivered to a SWD Trucking Facility for quality or safety reasons, then Midstream Co shall be entitled to select an alternative vendor to take title to, store, handle, and
dispose of such Product without obtaining Producer’s approval of such vendor, and such vendor shall be deemed an Approved SWD Vendor for such purpose.
“
Flowback
” means the water-based solution that flows back to the surface during and after the completion of hydraulic
fracturing a Well.
“
Flowback Period
” means, with respect to a Well, the period of time commencing on the Day Flowback
begins to return to the surface and ending on the earlier of the date (a) on which such Well or the Separator Facility to which such Well is connected is connected to the Individual System or (b) that is 10 Days following the first Day of
the applicable Flowback Period.
“
Individual Disposal by Truck Fee
” means the Monthly fee for providing Trucked Water
Services with respect to Dedicated Production delivered to a SWD Trucking Facility, as set forth opposite the heading “Individual Disposal by Truck Fee” on the applicable Midstream Agreement Addendum;
provided
that the Individual
Disposal by Truck Fee shall accrue only with respect to Dedicated Production delivered by truck to a SWD Trucking Facility.
“
Pipeline Unavailability
” means any time during which the Individual System is not capable of accepting or transporting
volumes of Product for any reason, including Flowback that exceeds the capacity of the Individual System, Flowback at a time when the Individual System is not yet online, curtailments on the Individual System and interruptions of Service.
Amendment 01 – Page 3
Second Amended and Restated Produced Water Services Agreement
Colorado River Produced Water Agreement
CRWR01-PW
“
SWD Trucking Facility
” means an Approved SWD Vendor’s saltwater disposal
well that Midstream Co has designated for disposal of Dedicated Production that is transported by truck.
“
Transporter
”
means a wastewater truck transportation company engaged by Producer or Midstream Co, as applicable, to transport Trucked Volumes to the SWD Trucking Facility.
“
Trucked Volumes
” has the meaning given to it in
Section 18.3(a)
.
“
Trucked Water Services
” means, at any time when Producer has exercised its Trucking Election, Midstream Co shall make
arrangements for the disposal of Dedicated Production that arrives by truck at the applicable SWD Trucking Facility. In addition, in connection with a Trucking Election, (a) during a Flowback Period, if Producer requests and Midstream Co
agrees, then with Producer’s reasonable cooperation, Midstream Co will arrange for the dispatching of the applicable trucks to the applicable SWD Trucking Facility and otherwise coordinate the water hauling trucks and (b) at all other
times during a Pipeline Unavailability in which Producer has made a Trucking Election, Midstream Co shall arrange for the dispatching of the applicable trucks to the applicable SWD Trucking Facility and otherwise coordinate the water hauling trucks.
“
Trucking Election
” has the meaning given to it in
Section 2.3(b)
.
2.
Amendments to Article 2
.
2.1
Section 2.3(b)
of the Agreement Terms and Conditions is hereby amended and restated in its entirety to read: “(b) during
Pipeline Unavailability, Producer may elect to deliver Dedicated Production directly to a SWD Trucking Facility (the “
Trucking Election
”); and”.
2.2
Section 2.3(d)
of the Agreement Terms and Conditions is hereby amended and restated in its entirety to read: “(d) to pool,
communitize or unitize Producer’s interests with respect to Dedicated Production”.
2.3
Section 2.4(b)(iv)
of the
Agreement Terms and Conditions is amended and restated in its entirety to read: “(iv)
Reserved.
”.
3.
Amendments to
Article 3
.
3.1
Section 3.1(e)
of the Agreement Terms and Conditions is hereby amended by deleting the sentence that reads
as follows “In the sole discretion of each Person serving as a Midstream Co under a Midstream Agreement Addendum, such Midstream Co may work with any other Midstream Co to prepare and deliver a System Plan jointly.” and inserting in place
thereof the following sentence: “Midstream Co may, in its sole discretion, work with OpCo or any of OpCo’s subsidiaries to prepare and deliver a System Plan jointly with such other entity or entities.”
Amendment 01 – Page 4
Second Amended and Restated Produced Water Services Agreement
Colorado River Produced Water Agreement
CRWR01-PW
3.2
Section 3.2
of the Agreement Terms and Conditions is hereby amended by inserting
the following new
clause (e)
immediately following
clause (d)
of such
Section 3.2
:
“(e)
Substation and Interconnection Facilities
. The obligations of Midstream Co hereunder to design and construct the Individual System and to perform the Services do not include the design or construction of any substation or other
interconnecting facilities required to procure electricity for the Individual System. If a substation or any other interconnecting facility is required in order for Midstream Co to perform its obligations hereunder, Midstream Co and Producer shall
enter into a separate agreement setting forth each Party’s responsibilities in connection therewith, including an allocation of responsibility for all associated costs and expenses.”
4.
Amendments to Article 6
.
4.1 Clause (ii) of
Section 6.1
of the Agreement Terms and Conditions is hereby amended and restated in its entirety to read as
follows: “(ii) the Individual Second Phase Fee, if any, applicable to Second Phase Services performed within the Dedication Area,”
4.2
Section 6.1
of the Agreement Terms and Conditions is further amended by deleting the period at the end of such
Section 6.1
and inserting in place thereof the following clause: “and (iv) the Individual Disposal by Truck Fee, if any.”
4.3
Section 6.3(d)
of the Agreement Terms and Conditions is hereby amended and restated in its entirety to read as follows:
“
Other System Fuel
. Midstream Co may elect to use Other System Fuel as fuel to operate the Individual System, or to generate electricity for the operation of the Individual System and shall account for any Other System Fuel used by
Midstream Co. Producer, at its sole cost and expense, shall procure all fuel, in addition to Other System Fuel used by Midstream Co, if any, required to operate the Individual System or to generate electricity for the operation of the Individual
System and arrange for transportation of such fuel to the Individual System.”.
5.
Amendments to Article 8
. Clause (d) of
Section 8.2
of the Agreement Terms and Conditions is hereby amended by deleting the phrase “and
Section 17.11
shall” and inserting in place thereof the clause: “,
Section 17.11
and
Section 18.7
shall”.
6.
New Article 18
. The following new
Article 18
shall be inserted immediately
following the conclusion of
Article 17
of the Agreement Terms and Conditions:
Article 18
Pipeline Unavailability
Section 18.1 Pipeline Unavailability
.
(a) It is the intention of the Parties to use the Individual System for all Dedicated Production. To accommodate operational
upsets and periods of increased flow (such as during Flowback), the Parties have agreed under
Section 2.3(b)
that, during Pipeline Unavailability, Producer shall elect to either
Amendment 01 – Page 5
Second Amended and Restated Produced Water Services Agreement
Colorado River Produced Water Agreement
CRWR01-PW
(i) exercise the Trucking Election or (ii) cease producing Dedicated Production until the end of the Pipeline Unavailability, as provided in
Section 18.2
. To the extent
Producer exercises its Trucking Election, this
Article 18
shall govern with respect to the Trucked Volumes and the other matters set forth herein, rather than
Articles 4
,
7
(other than
Section 7.3
as it applies to
Trucked Volumes delivered to a SWD Trucking Facility that fail to meet the quality requirements of
Section 18.3(d)
) and
9
and
Sections 5.1
,
5.2
,
5.3
,
5.4
, and
5.6
.
(b) The Parties agree that during Pipeline Unavailability, Producer shall not have the right to temporary services under
Sections 3.3(a)
and
3.3(b)
of the Agreement or to a temporary release under
Section 2.4(b)(ii)
of the Agreement except to the extent that Midstream Co fails to provide Trucked Water Services.
(c) At Producer’s election, if the Pipeline Unavailability arises from Midstream Co’s failure to meet an On-Line
Deadline, Producer may exercise its Trucking Election for so long as it desires, rather than exercising its right to a permanent release under
Section 2.4(a)(i)
and
Section 2.4(a)(ii)
. If the Parties have agreed to connect
the applicable Individual System to a Well or Separator Facility after Flowback has started, then the fact of a Pipeline Unavailability occurring after Flowback has started shall not constitute a failure by Midstream Co to meet an On-Line Deadline
and Producer shall not have a right to a permanent release under
Section 2.4(a)(i)
and
Section 2.4(a)(ii)
until such time as the agreed upon connection date has passed.
Section 18.2 Exercise of Trucking Election
.
(a) In the event that Pipeline Unavailability will result from a Well completion prior to the connection of the Individual
System, Producer shall give Midstream Co notice that Dedicated Production is expected to be produced from the applicable Well at least 72 hours prior to such production. If Pipeline Unavailability arises after the applicable Well or Separator
Facility is online, Midstream Co shall deliver notice to Producer of planned and unplanned curtailments and interruptions as required in
Section 5.5
.
(b) Once Producer or Midstream Co, as applicable, has delivered notice to the other Party that a Pipeline Unavailability is
expected (or has occurred), Producer will inform Midstream Co whether Producer elects to exercise its Trucking Election or to cease producing Dedicated Production until the end of the Pipeline Unavailability. If Producer exercises the Trucking
Election during the Flowback Period, Producer shall coordinate with the water hauling trucks and arrange for transportation of the Dedicated Production to the SWD Trucking Facility at its sole cost and expense until the end of the Flowback Period.
At all other times during a Pipeline Unavailability, including when Flowback is occurring after the expiration of the Flowback Period, Midstream Co shall coordinate with the water hauling trucks and arrange for transportation of the Dedicated
Production to the SWD Trucking Facility as part of the Trucked Water Services unless Producer has elected to cease producing Dedicated Production.
Amendment 01 – Page 6
Second Amended and Restated Produced Water Services Agreement
Colorado River Produced Water Agreement
CRWR01-PW
Section 18.3
Delivery of and Title to Trucked Volumes
.
(a)
Trucked Water Services Obligation
. Upon the exercise of a Trucking Election, Midstream Co shall cause an Approved
SWD Vendor to accept delivery of, take title to, store, handle and dispose of Dedicated Production that is delivered by truck to a SWD Trucking Facility. Upon the exercise of a Trucking Election, Midstream Co may, in its sole discretion, also accept
delivery of, take title to, store, handle and dispose of other Product delivered by truck to a SWD Trucking Facility. The volumes that are actually delivered by truck shall be referred to as “Trucked Volumes”.
(b)
Consistent Volumes
. The Trucked Volumes delivered to the applicable SWD Trucking Facility shall be at a rate of
delivery that is as uniform as reasonably possible in accordance with Producer’s drilling, completion, and frac schedule.
(c)
Title and Custody
. Title to and risk of loss to the Trucked Volumes and all contents thereof shall pass from
Producer to Approved SWD Vendor when delivered into Approved SWD Vendor’s storage tanks at the SWD Trucking Facility, unless the Parties otherwise agree in writing.
(d)
Quality
. Producer represents and warrants that all Trucked Volumes delivered to an Approved SWD Vendor may lawfully
be disposed of in Class II disposal wells. Midstream Co’s performance of Trucked Water Services for any Trucked Volumes that do not meet such requirement shall not relieve Producer from any liability for Producer’s breach of the foregoing
representation and warranty nor serve as a waiver of any rights or remedies available to Midstream Co therefor.
(e)
Prohibition on Skimming
. The Party that coordinates the water hauling trucks shall direct the Transporter not to skim, transfer, sell, or otherwise remove hydrocarbons or Trucked Volumes from trucks after receipt by such Transporter and prior
to such Trucked Volumes being received by the Approved SWD Vendor. If the Approved SWD Vendor alleges that the Trucked Volumes delivered appear to have been handled in a manner inconsistent with the foregoing sentence, Producer shall corporate with
Midstream Co and the Approved SWD Vendor in a review and analysis and, if required by the Approved SWD Vendor, take corrective action in a timely manner. If Transporters engaged by Producer fail to comply with the directions received, then Midstream
Co may direct Producer to use a different Transporter.
Amendment 01 – Page 7
Second Amended and Restated Produced Water Services Agreement
Colorado River Produced Water Agreement
CRWR01-PW
Section 18.4
Unavailability of a SWD Trucking Facility
. If for any
reason there is a disruption of receipts at the SWD Trucking Facility, the Parties shall work in good faith to find a mutually agreeable resolution. If for any reason Midstream Co receives reimbursements in respect of trucking as a result of an
originally scheduled SWD Trucking Facility being unable to accept deliveries, Midstream Co shall disclose such reimbursements on the applicable invoice and pass through such reimbursements to Producer if Producer paid the costs of the applicable
Transporter directly.
Section 18.5
Testing; Non-Conforming Product
. If requested by Midstream Co, Producer
shall obtain water samples for analyses and retain appropriate qualified personnel to conduct analyses following methodologies considered appropriate in the industry or shall permit Midstream Co to obtain such samples.
Section 18.6
Producer’s Grant of Access
. Producer hereby grants to Midstream Co, and shall grant to each
Transporter, without warranty of title, either express or implied, to the extent that it may lawfully and is contractually permitted to do so without the incurrence of additional expense, the rights of ingress and egress with respect to, and the
right to access, all lands constituting Dedicated Properties for the purposes of (a) transporting Trucked Volumes, and (b) obtaining water samples as described in
Section 18.5
.
Section 18.7
Information
. Producer agrees that information it supplies to Midstream Co regarding anticipated
volumes of Dedicated Production and Trucked Volumes may be shared with an Approved SWD Vendor to the extent required by the applicable Approved SWD Vendor to assist in planning and operations, and Producer agrees to provide additional information
regarding anticipated volumes of Dedicated Production and Trucked Volumes to the extent requested by Midstream Co in response to inquiries from an Approved SWD Vendor (so long as Midstream Co is required to deliver the requested information in order
to comply with Midstream Co’s contractual arrangements with such Approved SWD Vendor). Under
Section 3.1
, Midstream Co has the right to hold certain meetings with Producer, and at the request of Midstream Co, one of such meetings
per year may be held in conjunction with the Approved SWD Vendor to discuss confer regarding planned activities.
Section 18.8
Indemnification in Respect of Trucked Volumes
. Without in any way limiting any indemnification
obligation otherwise set forth in the Agreement, the Parties agree that the indemnification obligations of Producer set forth in
Section 7.3
and
Section 15.2(b)
apply to Trucked Volumes delivered to a SWD Trucking Facility.
Amendment 01 – Page 8
Second Amended and Restated Produced Water Services Agreement
Colorado River Produced Water Agreement
CRWR01-PW
Section 18.9
Invoices from Approved SWD Vendor
. The Party that
engages the Transporter shall take all reasonable measures to ensure that the invoicing procedures that Midstream Co has negotiated with the Approved SWD Vendor are used, including notation of the geographic area to which the services pertain.
Midstream Co shall provide a written copy of such procedures to Producer upon request.
7.
Amendments to Agreement Addendum
.
7.1 The specifications regarding the “Individual Second Phase Rate” appearing in the Agreement Addendum are hereby amended and
restated in their entirety and the specifications regarding the “Individual Disposal By Truck Fee” are hereby added to the Agreement Addendum as follows:
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Individual Second
Phase Fee
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An amount equal to the actual costs incurred by Midstream Co for providing the Second Phase Services multiplied
by 1.05.
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Individual
Disposal by Truck
Fee
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An amount equal to the actual costs incurred by Midstream Co for providing the Trucked Water Services with
respect to Dedicated Production delivered to a SWD Trucking Facility multiplied by 1.05.
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8.
Confidentiality
. Pursuant to Section 17.11 of the Agreement (which appears in the Agreement
Terms and Conditions), the Parties have agreed to treat the information exchanged in connection with and the provisions of the Agreement as confidential. In addition, confidential treatment has been requested with the Securities and Exchange
Commission for the pricing terms of the Agreement and the Parties agree to take appropriate measures to abide by the requirements imposed by the Securities and Exchange Commission to preserve such confidential treatment, if granted.
9.
Confirmation
. The provisions of the Agreement, as amended by this Amendment, shall remain in full force and effect following the
effectiveness of this Amendment. No provision of the Agreement is amended or otherwise modified hereby, except as expressly stated herein.
10.
No Waiver
. The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy
of any Party to the Agreement, nor constitute a waiver of any provision of the Agreement. On and after the Amendment Effective Time, this Amendment shall for all purposes constitute a part of the Agreement.
11.
Counterparts
. This Amendment may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be
an original instrument, but all of such counterparts shall constitute for all purposes one agreement. Any signature hereto delivered by a Party by electronic mail shall be deemed an original signature hereto.
Amendment 01 – Page 9
Second Amended and Restated Produced Water Services Agreement
Colorado River Produced Water Agreement
CRWR01-PW
12.
Governing Law
. This Amendment shall be governed by and construed in accordance with
the laws of the State, excluding any conflicts of law rule or principle that might refer construction of such provisions to the laws of another jurisdiction.
(Signature Pages follow)
Amendment 01 – Page 10
Second Amended and Restated Produced Water Services Agreement
Colorado River Produced Water Agreement
CRWR01-PW
IN WITNESS WHEREOF, the Parties hereto have executed this Amendment to the Agreement in duplicate
originals to be effective as of the Amendment Effective Time.
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“Producer”
NOBLE ENERGY, INC.
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By:
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Gary W. Willingham
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Executive Vice President
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STATE OF TEXAS
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)
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)
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ss.
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COUNTY OF HARRIS
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)
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The foregoing instrument was acknowledged before me this
day of
,
, by Gary W. Willingham as Executive Vice President of Noble Energy, Inc., a Delaware corporation.
WITNESS my hand and official seal.
My commission
expires:
Amendment 01 – Signature Page 1
Second Amended and Restated Produced Water Services Agreement
Colorado River Produced Water Agreement
CRWR01-PW
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“Midstream Co”
COLORADO RIVER DEVCO LP
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By: Colorado River DevCo GP LLC
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By: Noble Midstream Services, LLC
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By:
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Terry R. Gerhart
Chief Executive Officer
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STATE OF TEXAS
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)
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) ss.
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COUNTY OF HARRIS
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)
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The foregoing instrument was acknowledged before me this
day of
,
, by Terry R. Gerhart as Chief Executive Officer of Noble Midstream Services, LLC, which is the sole member of Colorado River DevCo GP LLC, which is the general partner
of Colorado River DevCo LP, a Delaware limited partnership.
WITNESS my hand and official seal.
My commission
expires:
Amendment 01 – Signature Page 2
Second Amended and Restated Produced Water Services Agreement
Colorado River Produced Water Agreement
CRWR01-PW
Exhibit 10.13.1
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED. THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
When Recorded,
Mail To:
Attn: DJ Land Manager
1625 Broadway, Suite 2200
Denver, CO 80202
SECOND AMENDED AND
RESTATED
PRODUCED WATER SERVICES AGREEMENT
SECOND AMENDED AND RESTATED
AGREEMENT ADDENDUM 02
N
ORTHERN
C
OLORADO
This AGREEMENT ADDENDUM 02 (this “
Agreement Addendum
”) (a) shall be effective as among the Persons named below as
“Producer” and “Midstream Co” as of the date specified below as the “Effective Date,” (b) incorporates the Second Amended and Restated Agreement Terms and Conditions Relating to Produced Water Services (the
“
Agreement Terms and Conditions
”), which were last amended effective as of March 31, 2016 and recorded in the real property records of Weld County, Colorado on
, as and (c) together with the Agreement Terms and Conditions, shall constitute one contract and
shall be the Agreement of the Parties. Except as otherwise set forth herein (i) all terms shall have the meanings assigned to such terms in the Agreement Terms and Conditions and (ii) all references to Exhibits, Appendices, Articles,
Sections, subsections and other subdivisions refer to the corresponding Exhibits, Appendices, Articles, Sections, subsections and other subdivisions of or to the Agreement Terms and Conditions.
Producer desires to contract with Midstream Co for Midstream Co to provide the Services utilizing the Individual System, and Midstream Co
desires to provide the Services to Producer, on the terms and subject to the conditions of this Agreement.
NOW, THEREFORE, in
consideration of the mutual agreements in this Agreement, Midstream Co and Producer hereby agree as follows:
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Producer
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Noble Energy, Inc., a Delaware corporation
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Midstream Co
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San Juan River DevCo LP, a Delaware limited partnership
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Agreement Addendum 02 – Page
1
Second Amended and Restated Produced Water Services Agreement
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.
THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
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Parties
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The term “Party” or “Parties” shall refer to the Producer and Midstream Co identified in this Agreement Addendum
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Effective Date
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March 31, 2016
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Dedication Area
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The area in Northern Colorado including (but not limited to) the East Pony integrated development plan area, as such area was defined by Producer on the Effective Date, and which consists of the following areas within Weld County,
Colorado.
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Township
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Range
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Section(s)
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T8N
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R59W
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ALL
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T8N
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R60W
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ALL
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T8N
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R61W
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ALL
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T8N
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R62W
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ALL
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T9N
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R58W
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ALL
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T9N
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R59W
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ALL
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T9N
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R60W
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ALL
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T9N
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R61W
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ALL
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10N
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58W
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19-36 (also known as S/2)
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8N
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58W
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1-18 (also known as N/2)
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Except and excluding the wells, leases and other acreage described in the property exhibits attached to the Releases of Dedication
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Individual First Phase Rate
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$[**]/ Barrel
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Individual Second Phase Rate
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Individual Second Phase Rate applied to each Barrel for which Producer elects to receive disposal services
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Individual Second Phase Rate applied to each Barrel for which Producer elects to receive recycling services
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Not applicable.
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Not applicable.
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Deviations from Service Conditions (the specifications in this section supersede the applicable
language from Article 7)
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NONE
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Agreement Addendum 02
– Page 2
Second Amended and Restated Produced Water Services Agreement
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.
THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
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Additional Revisions
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Omnibus Amendment
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Notwithstanding any other term or provision in the Agreement Terms and
Conditions, Midstream Co shall not be required to perform Second Phase Services.
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Section 5.3(a) is hereby amended and restated in its entirety to read as follows:
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Subject to Section 5.3(c), Midstream Co shall (i) provide Services for all Product that is Tendered by Producer to Midstream Co at the applicable Receipt Point, (ii) redeliver to Producer or for the benefit of Producer at the
relevant Delivery Point (as designated by Producer) equivalent quantities of such Product, inclusive of any System Gains/ Losses and (iii) cause the System to be able to flow such Product at volumes produced into each Individual System, in each
case, so long as total water volumes for the respective Individual System are not greater than the current capacity of the applicable Individual System.
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Notices and Payments
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Notice Address – General Matters & Correspondence
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Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Chief Financial Officer
John F. Bookout, IV
Telephone: (832) 639-7134
Email:
John.Bookout@nblenergy.com
Producer:
Noble Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO 80202
Attention: Director of
USO Finance,
Gerald
Free
Telephone: (303) 228-4174
Email:
Gerald.Free@nblenergy.com
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Agreement Addendum 02
– Page 3
Second Amended and Restated Produced Water Services Agreement
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.
THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
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Notice Address – Operational Matters
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Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Chief Operating Officer
John C. Nicholson
Telephone: (281) 876-6186
Email:
John.Nicholson@nblenergy.com
Producer:
Noble Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO 80202
Attention: Vice President – DJ
Business Unit
Mark
Patteson
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Notice Address – Force Majeure and Disposal or Recycling interruptions
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Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Chief Operating Officer
John C. Nicholson
Telephone: (281) 876-6186
Email:
John.Nicholson@nblenergy.com
Producer:
Noble Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO 80202
Attention: Director of USO
Finance,
Gerald Free
Telephone: (303) 228-4174
Email:
Gerald.Free@nblenergy.com
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Agreement Addendum 02
– Page 4
Second Amended and Restated Produced Water Services Agreement
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.
THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
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Notice Address – Invoicing Matters
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Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Ian Dams
Telephone: (832) 639-7406
Email: ian.dams@nblenergy.com
Producer:
1001 Noble Energy Way
Houston, TX 77070
Attention: Director of Revenue Accounting
John Nedelka
Telephone: (281) 872-3120
Email:
John.Nedelka@nblenergy.com
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Payments by Electronic Funds Transfer
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Midstream Co:
ABA for wire: 021000021
ABA for ACH: 111000614
Account Number: 780162439
Account Name: San Juan River DevCo
LP
Financial Institution: JP Morgan
Bank Swift: CHASUS33
Producer:
ABA/Routing Number: 021000021
Account Number: 08805135066
Account Name: Noble Energy, Inc.
Financial Institution: JP
Morgan
Bank Swift: CHASUS33
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(End of Agreement Addendum 02)
Agreement Addendum 02
– Page 5
Second Amended and Restated Produced Water Services Agreement
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.
THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement in duplicate originals to
be effective as of the Effective Date.
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“Producer”
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NOBLE ENERGY, INC.
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By:
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/s/ Gary W. Willingham
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Gary W. Willingham
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Executive Vice President
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STATE OF TEXAS
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) ss.
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COUNTY OF HARRIS
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The foregoing instrument was acknowledged before me this
26th
day of April, 2016 by Gary W. Willingham as Executive
Vice President of Noble Energy, Inc., a Delaware corporation, on behalf of said corporation.
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/s/ Vickie L. Graham
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Notary Public in and for the State of Texas
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Agreement Addendum 02
– Page 1
Second Amended and Restated Produced Water Services Agreement
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.
THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
“Midstream Co”
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SAN JUAN RIVER DEVCO LP
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By:
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San Juan River DevCo GP LLC
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By:
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Noble Midstream Services, LLC
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By:
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/s/ Terry R. Gerhart
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Terry R. Gerhart
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Chief Executive Officer
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STATE OF TEXAS
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)
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ss.
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COUNTY OF HARRIS
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The foregoing instrument was acknowledged before me this
26th
day of April, 2016 by Terry R. Gerhart, Chief Executive
Officer of Noble Midstream Services, LLC, a Delaware limited liability company, which is the sole member of of San Juan River DevCo GP LLC,, which is the general partner of San Juan River DevCo LP, a Delaware limited partnership, on behalf of said
company.
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/s/ Joanne Garner
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Notary Public in and for the State of Texas
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Agreement Addendum 02
– Page 2
Second Amended and Restated Produced Water Services Agreement
Exhibit 10.13.2
When Recorded, Mail To:
Attn: DJ Land Manager
1625 Broadway, Suite 2200
Denver, CO 80202
FORM OF
AMENDMENT 01
TO
THAT CERTAIN
SECOND AMENDED AND RESTATED
PRODUCED WATER SERVICES AGREEMENT
N
ORTHERN
C
OLORADO
C
ONTRACT
N
UMBER
: SJNC02-PW
This AMENDMENT 01 (this “
Amendment
”) shall be effective among Noble Energy, Inc., a Delaware corporation (the
“
Producer
”) and San Juan River DevCo LP, a Delaware limited partnership, together with its permitted successors and assigns (“
Midstream Co
”) as of September 1, 2016 (the “
Amendment Effective
Time
”). This Amendment modifies that certain Second Amended and Restated Produced Water Services Agreement, effective as of March 31, 2016 (the “
Agreement
”), which has been given contract number SJNC02-PW and is
comprised of (i) that certain Second Amended and Restated Agreement Terms and Conditions Relating to Produced Water Services (the “
Agreement Terms and Conditions
”), last updated March 31, 2016, together with
(ii) that certain Second Amended and Restated Agreement Addendum 02 (the “
Agreement Addendum
”), effective as of March 31, 2016. The Agreement Terms and Conditions, the Agreement Addendum and this Amendment shall
constitute one contract and shall be the Agreement of the Parties.
WHEREAS, capitalized terms used herein have the meanings assigned to
such terms in the Agreement Terms and Conditions.
WHEREAS, pursuant to
Section 2.1
of the Agreement Terms and Conditions,
Producer has dedicated and committed to deliver to Midstream Co under the Agreement, as and when produced, all of the Dedicated Production and agreed not to deliver any Dedicated Production to any other gatherer, purchaser, or other Person prior to
delivery to Midstream Co at the Receipt Points.
WHEREAS, at certain times prior to or after connection of the Individual System to a
particular Well or Separator Facility, the Individual System may not be available to accept deliveries of Dedicated Production.
WHEREAS,
during such times, Producer remains obligated to deliver the Dedicated Production to Midstream Co and Midstream Co remains obligated to arrange for the disposal of such Dedicated Production, and the Parties desire to amend the Agreement to provide
for the flexibility required.
WHEREAS, the Parties agree and acknowledge that amendments to the Agreement Terms and Conditions
set forth herein constitute an amendment only to the Agreement and not to any other agreement in respect of produced water services to which Producer or Midstream Co is a party.
NOW, THEREFORE, in consideration of the foregoing recitals, which are incorporated herein and the mutual agreements in the Agreement,
Midstream Co and Producer hereby agree as follows:
1.
Amendments to Article 1
.
1.1 The following defined terms are hereby amended and restated in their entirety to read as follows:
“
Facility Segment
” means each segment of an Individual System comprised of facilities beginning at a Receipt Point and ending
at an Internal Transfer Point. If an Individual System does not contain any such distinct segment, then the term Facility Segment shall be synonymous with Individual System.
“
Individual Fee
” means the aggregate of the Individual First Phase Fee, the Individual Second Phase Fee and the Individual
Disposal by Truck Fee;
provided
that for purposes of the annual escalation in the Individual Fee described in
Section 6.2(b)
, such term shall not include any Reimbursed Amount.
“
Individual Second Phase Fee
” means the Monthly fee for providing Second Phase Services at a particular Individual System, as
set forth opposite the heading “Individual Second Phase Fee” on the applicable Midstream Agreement Addendum;
provided
that the Individual Second Phase Fee shall accrue only with respect to Services performed by Midstream Co on
Product flowing through an Individual System.
“
Individual System
” means the portion of the System beginning at the
Receipt Points and ending at the Delivery Points. The Individual Systems in existence on the Effective Date are more particularly described in writing between Producer and Midstream Co. Additional Individual Systems may be added to the System from
time to time in satisfaction of the needs identified by Producer and evidenced in writing between Producer and Midstream Co.
“
Other System Fuel
” means any natural gas delivered into Midstream Co’s custody by Producer pursuant to a Transaction
Document between Producer and Midstream Co and measured and used as fuel by Midstream Co.
1.2 The defined terms “Drip
Condensate”, “Gas”, “Gas System”, “Individual Second Phase Rate”, and “Other Services” are hereby deleted.
Amendment 01 –
Page 2
Second Amended and Restated Produced Water Services Agreement
San Juan River Produced Water Agreement
SJNC02-PW
1.3 Clauses (a) and (b) of the defined term “Dedicated Production” are hereby
amended and restated to read as follows: “(a) Product owned by Producer or an Affiliate of Producer and produced from a Well within the Dedication Area that is operated by Producer or an Affiliate under the Control of Producer,
(b)
Reserved
, and”.
1.4 The defined term “Product” is hereby amended by inserting the following
sentence at the end of such definition:
“In the event Producer exercises its Trucking Election, the term “Product” shall
refer to all water that is accepted for delivery at a SWD Trucking Facility for the account of Midstream Co.”
1.5 The
defined term “Services” is hereby amended by deleting “and (g)” at the end of clause (f) and inserting in place thereof the following: “, (g) Trucked Water Services and (h)”.
1.6 The following new definitions shall be added to Article 1 in alphabetical order:
“
Approved SWD Vendor
” means Midstream Co or a Third Party, in either case, as mutually agreed in writing by the Parties;
provided, however, that if an Approved SWD Vendor rejects any Product delivered to a SWD Trucking Facility for quality or safety reasons, then Midstream Co shall be entitled to select an alternative vendor to take title to, store, handle, and
dispose of such Product without obtaining Producer’s approval of such vendor, and such vendor shall be deemed an Approved SWD Vendor for such purpose.
“
Flowback
” means the water-based solution that flows back to the surface during and after the completion of hydraulic
fracturing a Well.
“
Flowback Period
” means, with respect to a Well, the period of time commencing on the Day Flowback
begins to return to the surface and ending on the earlier of the date (a) on which such Well or the Separator Facility to which such Well is connected is connected to the Individual System or (b) that is 10 Days following the first Day of
the applicable Flowback Period.
“
Individual Disposal by Truck Fee
” means the Monthly fee for providing Trucked Water
Services with respect to Dedicated Production delivered to a SWD Trucking Facility, as set forth opposite the heading “Individual Disposal by Truck Fee” on the applicable Midstream Agreement Addendum;
provided
that the Individual
Disposal by Truck Fee shall accrue only with respect to Dedicated Production delivered by truck to a SWD Trucking Facility.
“
Pipeline Unavailability
” means any time during which the Individual System is not capable of accepting or transporting
volumes of Product for any reason, including Flowback that exceeds the capacity of the Individual System, Flowback at a time when the Individual System is not yet online, curtailments on the Individual System and interruptions of Service.
Amendment 01 –
Page 3
Second Amended and Restated Produced Water Services Agreement
San Juan River Produced Water Agreement
SJNC02-PW
“
SWD Trucking Facility
” means an Approved SWD Vendor’s saltwater disposal
well that Midstream Co has designated for disposal of Dedicated Production that is transported by truck.
“
Transporter
”
means a wastewater truck transportation company engaged by Producer or Midstream Co, as applicable, to transport Trucked Volumes to the SWD Trucking Facility.
“
Trucked Volumes
” has the meaning given to it in
Section 18.3(a)
.
“
Trucked Water Services
” means, at any time when Producer has exercised its Trucking Election, Midstream Co shall make
arrangements for the disposal of Dedicated Production that arrives by truck at the applicable SWD Trucking Facility. In addition, in connection with a Trucking Election, (a) during a Flowback Period, if Producer requests and Midstream Co
agrees, then with Producer’s reasonable cooperation, Midstream Co will arrange for the dispatching of the applicable trucks to the applicable SWD Trucking Facility and otherwise coordinate the water hauling trucks and (b) at all other
times during a Pipeline Unavailability in which Producer has made a Trucking Election, Midstream Co shall arrange for the dispatching of the applicable trucks to the applicable SWD Trucking Facility and otherwise coordinate the water hauling trucks.
“
Trucking Election
” has the meaning given to it in
Section 2.3(b)
.
2.
Amendments to Article 2
.
2.1
Section 2.3(b)
of the Agreement Terms and Conditions is hereby amended and restated in its entirety to read: “(b) during
Pipeline Unavailability, Producer may elect to deliver Dedicated Production directly to a SWD Trucking Facility (the “
Trucking Election
”); and”.
2.2
Section 2.3(d)
of the Agreement Terms and Conditions is hereby amended and restated in its entirety to read: “(d) to
pool, communitize or unitize Producer’s interests with respect to Dedicated Production”.
2.3
Section 2.4(b)(iv)
of
the Agreement Terms and Conditions is amended and restated in its entirety to read: “(iv)
Reserved.
”.
3.
Amendments
to Article 3
.
3.1
Section 3.1(e)
of the Agreement Terms and Conditions is hereby amended by deleting the sentence that
reads as follows “In the sole discretion of each Person serving as a Midstream Co under a Midstream Agreement Addendum, such Midstream Co may work with any other Midstream Co to prepare and deliver a System Plan jointly.” and inserting in
place thereof the following sentence: “Midstream Co may, in its sole discretion, work with OpCo or any of OpCo’s subsidiaries to prepare and deliver a System Plan jointly with such other entity or entities.”
Amendment 01 –
Page 4
Second Amended and Restated Produced Water Services Agreement
San Juan River Produced Water Agreement
SJNC02-PW
3.2
Section 3.2
of the Agreement Terms and Conditions is hereby amended by inserting
the following new
clause (e)
immediately following
clause (d)
of such
Section 3.2
:
“(e)
Substation and Interconnection Facilities
. The obligations of Midstream Co hereunder to design and construct the Individual System and to perform the Services do not include the design or construction of any substation or other
interconnecting facilities required to procure electricity for the Individual System. If a substation or any other interconnecting facility is required in order for Midstream Co to perform its obligations hereunder, Midstream Co and Producer shall
enter into a separate agreement setting forth each Party’s responsibilities in connection therewith, including an allocation of responsibility for all associated costs and expenses.”
4.
Amendments to Article 6
.
4.1 Clause (ii) of
Section 6.1
of the Agreement Terms and Conditions is hereby amended and restated in its entirety to read as
follows: “(ii) the Individual Second Phase Fee, if any, applicable to Second Phase Services performed within the Dedication Area,”
4.2
Section 6.1
of the Agreement Terms and Conditions is further amended by deleting the period at the end of such
Section 6.1
and inserting in place thereof the following clause: “and (iv) the Individual Disposal by Truck Fee, if any.”
4.3
Section 6.3(d)
of the Agreement Terms and Conditions is hereby amended and restated in its entirety to read as follows:
“
Other System Fuel
. Midstream Co may elect to use Other System Fuel as fuel to operate the Individual System, or to generate electricity for the operation of the Individual System and shall account for any Other System Fuel used by
Midstream Co. Producer, at its sole cost and expense, shall procure all fuel, in addition to Other System Fuel used by Midstream Co, if any, required to operate the Individual System or to generate electricity for the operation of the Individual
System and arrange for transportation of such fuel to the Individual System.”.
5.
Amendments to Article 8
. Clause (d) of
Section 8.2
of the Agreement Terms and Conditions is hereby amended by deleting the phrase “and
Section 17.11
shall” and inserting in place thereof the clause: “,
Section 17.11
and
Section 18.7
shall”.
6.
New Article 18
. The following new
Article 18
shall be inserted immediately
following the conclusion of
Article 17
of the Agreement Terms and Conditions:
Article 18
Pipeline Unavailability
Section 18.1 Pipeline Unavailability
.
(a) It is the intention of the Parties to use the Individual System for all Dedicated Production. To accommodate operational
upsets and periods of increased flow (such as during Flowback), the Parties have agreed under
Section 2.3(b)
that, during Pipeline Unavailability, Producer shall elect to either
Amendment 01 –
Page 5
Second Amended and Restated Produced Water Services Agreement
San Juan River Produced Water Agreement
SJNC02-PW
(i) exercise the Trucking Election or (ii) cease producing Dedicated Production until the end of the Pipeline Unavailability, as provided in
Section 18.2
. To the extent
Producer exercises its Trucking Election, this
Article 18
shall govern with respect to the Trucked Volumes and the other matters set forth herein, rather than
Articles 4
,
7
(other than
Section 7.3
as it applies to
Trucked Volumes delivered to a SWD Trucking Facility that fail to meet the quality requirements of
Section 18.3(d)
) and
9
and
Sections 5.1
,
5.2
,
5.3
,
5.4
, and
5.6
.
(b) The Parties agree that during Pipeline Unavailability, Producer shall not have the right to temporary services under
Sections 3.3(a)
and
3.3(b)
of the Agreement or to a temporary release under
Section 2.4(b)(ii)
of the Agreement except to the extent that Midstream Co fails to provide Trucked Water Services.
(c) At Producer’s election, if the Pipeline Unavailability arises from Midstream Co’s failure to meet an On-Line
Deadline, Producer may exercise its Trucking Election for so long as it desires, rather than exercising its right to a permanent release under
Section 2.4(a)(i)
and
Section 2.4(a)(ii)
. If the Parties have agreed to connect
the applicable Individual System to a Well or Separator Facility after Flowback has started, then the fact of a Pipeline Unavailability occurring after Flowback has started shall not constitute a failure by Midstream Co to meet an On-Line Deadline
and Producer shall not have a right to a permanent release under
Section 2.4(a)(i)
and
Section 2.4(a)(ii)
until such time as the agreed upon connection date has passed.
Section 18.2 Exercise of Trucking Election
.
(a) In the event that Pipeline Unavailability will result from a Well completion prior to the connection of the Individual
System, Producer shall give Midstream Co notice that Dedicated Production is expected to be produced from the applicable Well at least 72 hours prior to such production. If Pipeline Unavailability arises after the applicable Well or Separator
Facility is online, Midstream Co shall deliver notice to Producer of planned and unplanned curtailments and interruptions as required in
Section 5.5
.
(b) Once Producer or Midstream Co, as applicable, has delivered notice to the other Party that a Pipeline Unavailability is
expected (or has occurred), Producer will inform Midstream Co whether Producer elects to exercise its Trucking Election or to cease producing Dedicated Production until the end of the Pipeline Unavailability. If Producer exercises the Trucking
Election during the Flowback Period, Producer shall coordinate with the water hauling trucks and arrange for transportation of the Dedicated Production to the SWD Trucking Facility at its sole cost and expense until the end of the Flowback Period.
At all other times during a Pipeline Unavailability, including when Flowback is occurring after the expiration of the Flowback Period, Midstream Co shall coordinate with the water hauling trucks and arrange for transportation of the Dedicated
Production to the SWD Trucking Facility as part of the Trucked Water Services unless Producer has elected to cease producing Dedicated Production.
Amendment 01 –
Page 6
Second Amended and Restated Produced Water Services Agreement
San Juan River Produced Water Agreement
SJNC02-PW
Section 18.3
Delivery of and Title to Trucked Volumes
.
(a)
Trucked Water Services Obligation
. Upon the exercise of a Trucking Election, Midstream Co shall cause an Approved
SWD Vendor to accept delivery of, take title to, store, handle and dispose of Dedicated Production that is delivered by truck to a SWD Trucking Facility. Upon the exercise of a Trucking Election, Midstream Co may, in its sole discretion, also accept
delivery of, take title to, store, handle and dispose of other Product delivered by truck to a SWD Trucking Facility. The volumes that are actually delivered by truck shall be referred to as “Trucked Volumes”.
(b)
Consistent Volumes
. The Trucked Volumes delivered to the applicable SWD Trucking Facility shall be at a rate of
delivery that is as uniform as reasonably possible in accordance with Producer’s drilling, completion, and frac schedule.
(c)
Title and Custody
. Title to and risk of loss to the Trucked Volumes and all contents thereof shall pass from
Producer to Approved SWD Vendor when delivered into Approved SWD Vendor’s storage tanks at the SWD Trucking Facility, unless the Parties otherwise agree in writing.
(d)
Quality
. Producer represents and warrants that all Trucked Volumes delivered to an Approved SWD Vendor may lawfully
be disposed of in Class II disposal wells. Midstream Co’s performance of Trucked Water Services for any Trucked Volumes that do not meet such requirement shall not relieve Producer from any liability for Producer’s breach of the foregoing
representation and warranty nor serve as a waiver of any rights or remedies available to Midstream Co therefor.
(e)
Prohibition on Skimming
. The Party that coordinates the water hauling trucks shall direct the Transporter not to skim, transfer, sell, or otherwise remove hydrocarbons or Trucked Volumes from trucks after receipt by such Transporter and prior
to such Trucked Volumes being received by the Approved SWD Vendor. If the Approved SWD Vendor alleges that the Trucked Volumes delivered appear to have been handled in a manner inconsistent with the foregoing sentence, Producer shall corporate with
Midstream Co and the Approved SWD Vendor in a review and analysis and, if required by the Approved SWD Vendor, take corrective action in a timely manner. If Transporters engaged by Producer fail to comply with the directions received, then Midstream
Co may direct Producer to use a different Transporter.
Amendment 01 –
Page 7
Second Amended and Restated Produced Water Services Agreement
San Juan River Produced Water Agreement
SJNC02-PW
Section 18.4
Unavailability of a SWD Trucking Facility
. If for any
reason there is a disruption of receipts at the SWD Trucking Facility, the Parties shall work in good faith to find a mutually agreeable resolution. If for any reason Midstream Co receives reimbursements in respect of trucking as a result of an
originally scheduled SWD Trucking Facility being unable to accept deliveries, Midstream Co shall disclose such reimbursements on the applicable invoice and pass through such reimbursements to Producer if Producer paid the costs of the applicable
Transporter directly.
Section 18.5
Testing; Non-Conforming Product
. If requested by Midstream Co, Producer
shall obtain water samples for analyses and retain appropriate qualified personnel to conduct analyses following methodologies considered appropriate in the industry or shall permit Midstream Co to obtain such samples.
Section 18.6
Producer’s Grant of Access
. Producer hereby grants to Midstream Co, and shall grant to each
Transporter, without warranty of title, either express or implied, to the extent that it may lawfully and is contractually permitted to do so without the incurrence of additional expense, the rights of ingress and egress with respect to, and the
right to access, all lands constituting Dedicated Properties for the purposes of (a) transporting Trucked Volumes, and (b) obtaining water samples as described in
Section 18.5
.
Section 18.7
Information
. Producer agrees that information it supplies to Midstream Co regarding anticipated
volumes of Dedicated Production and Trucked Volumes may be shared with an Approved SWD Vendor to the extent required by the applicable Approved SWD Vendor to assist in planning and operations, and Producer agrees to provide additional information
regarding anticipated volumes of Dedicated Production and Trucked Volumes to the extent requested by Midstream Co in response to inquiries from an Approved SWD Vendor (so long as Midstream Co is required to deliver the requested information in order
to comply with Midstream Co’s contractual arrangements with such Approved SWD Vendor). Under
Section 3.1
, Midstream Co has the right to hold certain meetings with Producer, and at the request of Midstream Co, one of such meetings
per year may be held in conjunction with the Approved SWD Vendor to discuss confer regarding planned activities.
Section 18.8
Indemnification in Respect of Trucked Volumes
. Without in any way limiting any indemnification
obligation otherwise set forth in the Agreement, the Parties agree that the indemnification obligations of Producer set forth in
Section 7.3
and
Section 15.2(b)
apply to Trucked Volumes delivered to a SWD Trucking Facility.
Amendment 01 –
Page 8
Second Amended and Restated Produced Water Services Agreement
San Juan River Produced Water Agreement
SJNC02-PW
Section 18.9
Invoices from Approved SWD Vendor
. The Party that
engages the Transporter shall take all reasonable measures to ensure that the invoicing procedures that Midstream Co has negotiated with the Approved SWD Vendor are used, including notation of the geographic area to which the services pertain.
Midstream Co shall provide a written copy of such procedures to Producer upon request.
7.
Amendments to Agreement Addendum
.
7.1 The specifications regarding the “Individual Second Phase Rate” appearing in the Agreement Addendum are hereby amended and
restated in their entirety and the specifications regarding the “Individual Disposal By Truck Fee” are hereby added to the Agreement Addendum as follows:
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Individual Second Phase Fee
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An amount equal to the actual costs incurred by Midstream Co for providing the Second Phase Services multiplied by 1.05.
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Individual Disposal by Truck Fee
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An amount equal to the actual costs incurred by Midstream Co for providing the Trucked Water Services with respect to Dedicated Production delivered to a SWD Trucking Facility multiplied by 1.05.
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8.
Confidentiality
. Pursuant to Section 17.11 of the Agreement (which appears in the Agreement
Terms and Conditions), the Parties have agreed to treat the information exchanged in connection with and the provisions of the Agreement as confidential. In addition, confidential treatment has been requested with the Securities and Exchange
Commission for the pricing terms of the Agreement and the Parties agree to take appropriate measures to abide by the requirements imposed by the Securities and Exchange Commission to preserve such confidential treatment, if granted.
9.
Confirmation
. The provisions of the Agreement, as amended by this Amendment, shall remain in full force and effect following the
effectiveness of this Amendment. No provision of the Agreement is amended or otherwise modified hereby, except as expressly stated herein.
10.
No Waiver
. The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy
of any Party to the Agreement, nor constitute a waiver of any provision of the Agreement. On and after the Amendment Effective Time, this Amendment shall for all purposes constitute a part of the Agreement.
11.
Counterparts
. This Amendment may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be
an original instrument, but all of such counterparts shall constitute for all purposes one agreement. Any signature hereto delivered by a Party by electronic mail shall be deemed an original signature hereto.
Amendment 01 –
Page 9
Second Amended and Restated Produced Water Services Agreement
San Juan River Produced Water Agreement
SJNC02-PW
12.
Governing Law
. This Amendment shall be governed by and construed in accordance with
the laws of the State, excluding any conflicts of law rule or principle that might refer construction of such provisions to the laws of another jurisdiction.
(Signature Pages follow)
Amendment 01 –
Page 10
Second Amended and Restated Produced Water Services Agreement
San Juan River Produced Water Agreement
SJNC02-PW
IN WITNESS WHEREOF, the Parties hereto have executed this Amendment to the Agreement in duplicate
originals to be effective as of the Amendment Effective Time.
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“Producer”
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NOBLE ENERGY, INC.
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By:
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Gary W. Willingham
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Executive Vice President
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STATE OF TEXAS
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ss.
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COUNTY OF HARRIS
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)
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The foregoing instrument was acknowledged before me this
day of
,
, by Gary W. Willingham as Executive Vice President of Noble
Energy, Inc., a Delaware corporation.
WITNESS my hand and official seal.
My commission expires:
Amendment 01 –
Signature Page 1
Second Amended and Restated Produced Water Services Agreement
San Juan River Produced Water Agreement
SJNC02-PW
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“Midstream Co”
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SAN JUAN RIVER DEVCO LP
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By: San Juan River DevCo GP LLC
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By: Noble Midstream Services, LLC
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By:
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Terry R. Gerhart
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Chief Executive Officer
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STATE OF TEXAS
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)
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ss.
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COUNTY OF HARRIS
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)
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The foregoing instrument was acknowledged before me this
day of
,
, by Terry R. Gerhart as Chief Executive Officer of Noble
Midstream Services, LLC, which is the sole member of San Juan River DevCo GP LLC, which is the general partner of San Juan River DevCo LP, a Delaware limited partnership.
WITNESS my hand and official seal.
My commission expires:
Amendment 01 –
Signature Page 2
Second Amended and Restated Produced Water Services Agreement
San Juan River Produced Water Agreement
SJNC02-PW
Exhibit 10.14.1
When Recorded, Mail To:
Attn: DJ Land Manager
1625 Broadway, Suite 2200
Denver, CO 80202
SECOND AMENDED AND RESTATED
PRODUCED WATER SERVICES AGREEMENT
SECOND AMENDED AND RESTATED
AGREEMENT ADDENDUM 03
M
USTANG
This
AGREEMENT ADDENDUM 03 (this “
Agreement Addendum
”) (a) shall be effective as among the Persons named below as “Producer” and “Midstream Co” as of the date specified below as the “Effective Date,”
(b) incorporates the Second Amended and Restated Agreement Terms and Conditions Relating to Produced Water Services (the “
Agreement Terms and Conditions
”), which were last amended effective as of March 31, 2016 and
recorded in the real property records of Weld County, Colorado on , as and (c) together with the
Agreement Terms and Conditions, shall constitute one contract and shall be the Agreement of the Parties. Except as otherwise set forth herein (i) all terms shall have the meanings assigned to such terms in the Agreement Terms and Conditions and
(ii) all references to Exhibits, Appendices, Articles, Sections, subsections and other subdivisions refer to the corresponding Exhibits, Appendices, Articles, Sections, subsections and other subdivisions of or to the Agreement Terms and
Conditions.
Producer desires to contract with Midstream Co for Midstream Co to provide the Services utilizing the Individual System, and
Midstream Co desires to provide the Services to Producer, on the terms and subject to the conditions of this Agreement.
NOW, THEREFORE,
in consideration of the mutual agreements in this Agreement, Midstream Co and Producer hereby agree as follows:
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Producer
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Noble Energy, Inc., a Delaware corporation
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Midstream Co
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Green River DevCo LP, a Delaware limited partnership
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Agreement Addendum 03
– Page 1
Second Amended and Restated Produced Water Services Agreement
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Parties
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The term “Party” or “Parties” shall refer to the Producer and Midstream Co identified in this Agreement Addendum
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Effective Date
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March 31, 2016
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Dedication Area
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The Mustang integrated development plan area, as such area was defined by Producer on the Effective Date, and which consists of the following areas within Weld County, Colorado
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Township
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Range
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Sections
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T4N
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R64W
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1-3, 10-15, 22-27, 32-36
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T4N
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R63W
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2-11, 14-23 26-35
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T3N
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R63W
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4-9, 16-21, 28-33
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T3N
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R64W
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ALL
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T3N
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R65W
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1-3, 10-15, 22-27, 34-36
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T2N
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R64W
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ALL
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T2N
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R63W
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3-9, 16-21, 28-33
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Except and excluding the wells, leases and other acreage described in the property exhibits attached to the Releases of Dedication
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Individual First Phase Rate
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The Individual First Phase Rate shall be determined by the Parties prior to Services being provided by Midstream Co to Producer in the Dedication Area.
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Individual Second Phase Rate
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Individual Second Phase Rate applied to each Barrel for which Producer elects to receive disposal services
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Individual Second Phase Rate applied to each Barrel for which Producer elects to receive recycling services
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The Individual Second Phase Rate shall be determined by the Parties
prior to Services being provided by Midstream Co to Producer in the Dedication Area.
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The Individual Second Phase Rate shall be determined by the Parties
prior to Services being provided by Midstream Co to Producer in the Dedication Area.
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Deviations from Service Conditions (the specifications in this section supersede the applicable
language from Article 7)
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NONE
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Additional Revisions
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NONE
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Agreement Addendum 03
– Page 2
Second Amended and Restated Produced Water Services Agreement
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Notices and Payments
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Notice Address – General Matters & Correspondence
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Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Chief Financial Officer
John F. Bookout, IV
Telephone: (832) 639-7134
Email:
John.Bookout@nblenergy.com
Producer:
Noble Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO 80202
Attention: Director of
USO Finance,
Gerald Free
Telephone: (303) 228-4174
Email:
Gerald.Free@nblenergy.com
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Notice Address – Operational Matters
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Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Chief Operating Officer
John C. Nicholson
Telephone: (281) 876-6186
Email:
John.Nicholson@nblenergy.com
Producer:
Noble Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO 80202
Attention: Vice
President – DJ Business Unit
Mark
Patteson
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Agreement Addendum 03
– Page 3
Second Amended and Restated Produced Water Services Agreement
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Notice Address – Force Majeure and Disposal or Recycling interruptions
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Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Chief Operating Officer
John C. Nicholson
Telephone: (281) 876-6186
Email:
John.Nicholson@nblenergy.com
Producer:
Noble Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO 80202
Attention: Director of
USO Finance,
Gerald Free
Telephone: (303) 228-4174
Email: Gerald.Free@nblenergy.com
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Notice Address – Invoicing Matters
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Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Ian Dams
Telephone: (832) 639-7406
Email: ian.dams@nblenergy.com
Producer:
1001 Noble Energy Way
Houston, TX 77070
Attention: Director of Revenue Accounting
John Nedelka
Telephone: (281) 872-3120
Email:
John.Nedelka@nblenergy.com
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Agreement Addendum 03
– Page 4
Second Amended and Restated Produced Water Services Agreement
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Payments by Electronic Funds Transfer
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Midstream Co:
ABA for wire: 021000021
ABA for ACH: 111000614
Account Number: 780162330
Account Name: Green River DevCo LP
Financial Institution: JP Morgan
Bank Swift: CHASUS33
Producer:
ABA/Routing Number: 021000021
Account Number: 08805135066
Account Name: Noble Energy, Inc.
Financial Institution: JP
Morgan
Bank Swift: CHASUS33
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(End of Agreement Addendum 03)
Agreement Addendum 03
– Page 5
Second Amended and Restated Produced Water Services Agreement
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement in duplicate originals to be
effective as of the Effective Date.
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“Producer”
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NOBLE ENERGY, INC.
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By:
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/s/ Gary W. Willingham
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Gary W. Willingham
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Executive Vice President
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STATE OF TEXAS
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)
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ss.
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COUNTY OF HARRIS
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)
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The foregoing instrument was acknowledged before me this this
26th
day of April, 2016 by Gary W. Willingham as
Executive Vice President of Noble Energy, Inc., a Delaware corporation, on behalf of said corporation.
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/s/ Vickie L. Graham
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Notary Public in and for the State of Texas
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Agreement Addendum 03
– Page 1
Second Amended and Restated Produced Water Services Agreement
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“Midstream Co”
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GREEN RIVER DEVCO LP
By: Green River DevCo GP LLC
By: Noble Midstream Services, LLC
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By:
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/s/ Terry R. Gerhart
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Terry R. Gerhart
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Chief Executive Officer
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STATE OF TEXAS
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)
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ss.
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COUNTY OF HARRIS
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)
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The foregoing instrument was acknowledged before me this
26th
day of April, 2016, by Terry R. Gerhart, Chief Executive
Officer of Noble Midstream Services, LLC, a Delaware limited liability company, which is the sole member of Green River DevCo GP LLC, which is the general partner of Green River DevCo LP, a Delaware limited partnership, on behalf of said company.
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/s/ Joanne Garner
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Notary Public in and for the State of Texas
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Agreement Addendum 03
– Page 2
Second Amended and Restated Produced Water Services Agreement
Exhibit 10.14.2
When Recorded, Mail To:
Attn: DJ Land Manager
1625 Broadway, Suite 2200
Denver, CO 80202
FORM OF
AMENDMENT 01
TO
THAT CERTAIN
SECOND AMENDED AND RESTATED
PRODUCED WATER SERVICES AGREEMENT
M
USTANG
C
ONTRACT
N
UMBER
: GRMU03-PW
This AMENDMENT 01 (this “
Amendment
”) shall be effective among Noble Energy, Inc., a Delaware corporation (the
“
Producer
”) and Green River DevCo LP, a Delaware limited partnership, together with its permitted successors and assigns (“
Midstream Co
”) as of September 1, 2016 (the “
Amendment Effective
Time
”). This Amendment modifies that certain Second Amended and Restated Produced Water Services Agreement, effective as of March 31, 2016 (the “
Agreement
”), which has been given contract number GRMU03-PW and is
comprised of (i) that certain Second Amended and Restated Agreement Terms and Conditions Relating to Produced Water Services (the “
Agreement Terms and Conditions
”), last updated March 31, 2016, together with
(ii) that certain Second Amended and Restated Agreement Addendum 03 (the “
Agreement Addendum
”), effective as of March 31, 2016. The Agreement Terms and Conditions, the Agreement Addendum and this Amendment shall
constitute one contract and shall be the Agreement of the Parties.
WHEREAS, capitalized terms used herein have the meanings assigned to
such terms in the Agreement Terms and Conditions.
WHEREAS, pursuant to
Section 2.1
of the Agreement Terms and Conditions,
Producer has dedicated and committed to deliver to Midstream Co under the Agreement, as and when produced, all of the Dedicated Production and agreed not to deliver any Dedicated Production to any other gatherer, purchaser, or other Person prior to
delivery to Midstream Co at the Receipt Points.
WHEREAS, at certain times prior to or after connection of the Individual System to a
particular Well or Separator Facility, the Individual System may not be available to accept deliveries of Dedicated Production.
WHEREAS,
during such times, Producer remains obligated to deliver the Dedicated Production to Midstream Co and Midstream Co remains obligated to arrange for the disposal of such Dedicated Production, and the Parties desire to amend the Agreement to provide
for the flexibility required.
WHEREAS, the Parties agree and acknowledge that amendments to the Agreement Terms and Conditions
set forth herein constitute an amendment only to the Agreement and not to any other agreement in respect of produced water services to which Producer or Midstream Co is a party.
NOW, THEREFORE, in consideration of the foregoing recitals, which are incorporated herein and the mutual agreements in the Agreement,
Midstream Co and Producer hereby agree as follows:
1.
Amendments to Article 1
.
1.1 The following defined terms are hereby amended and restated in their entirety to read as follows:
“
Facility Segment
” means each segment of an Individual System comprised of facilities beginning at a Receipt Point and ending
at an Internal Transfer Point. If an Individual System does not contain any such distinct segment, then the term Facility Segment shall be synonymous with Individual System.
“
Individual Fee
” means the aggregate of the Individual First Phase Fee, the Individual Second Phase Fee and the Individual
Disposal by Truck Fee;
provided
that for purposes of the annual escalation in the Individual Fee described in
Section 6.2(b)
, such term shall not include any Reimbursed Amount.
“
Individual Second Phase Fee
” means the Monthly fee for providing Second Phase Services at a particular Individual System, as
set forth opposite the heading “Individual Second Phase Fee” on the applicable Midstream Agreement Addendum;
provided
that the Individual Second Phase Fee shall accrue only with respect to Services performed by Midstream Co on
Product flowing through an Individual System.
“
Individual System
” means the portion of the System beginning at the
Receipt Points and ending at the Delivery Points. The Individual Systems in existence on the Effective Date are more particularly described in writing between Producer and Midstream Co. Additional Individual Systems may be added to the System from
time to time in satisfaction of the needs identified by Producer and evidenced in writing between Producer and Midstream Co.
“
Other System Fuel
” means any natural gas delivered into Midstream Co’s custody by Producer pursuant to a Transaction
Document between Producer and Midstream Co and measured and used as fuel by Midstream Co.
1.2 The defined terms “Drip
Condensate”, “Gas”, “Gas System”, “Individual Second Phase Rate”, and “Other Services” are hereby deleted.
Amendment 01 –
Page 2
Second Amended and Restated Produced Water Services Agreement
Green River Produced Water Agreement
GRMU03-PW
1.3 Clauses (a) and (b) of the defined term “Dedicated Production” are hereby
amended and restated to read as follows: “(a) Product owned by Producer or an Affiliate of Producer and produced from a Well within the Dedication Area that is operated by Producer or an Affiliate under the Control of Producer,
(b)
Reserved
, and”.
1.4 The defined term “Product” is hereby amended by inserting the
following sentence at the end of such definition:
“In the event Producer exercises its Trucking Election, the term
“Product” shall refer to all water that is accepted for delivery at a SWD Trucking Facility for the account of Midstream Co.”
1.5 The defined term “Services” is hereby amended by deleting “and (g)” at the end of clause (f) and
inserting in place thereof the following: “, (g) Trucked Water Services and (h)”.
1.6 The following new
definitions shall be added to Article 1 in alphabetical order:
“
Approved SWD Vendor
” means Midstream Co or a Third Party,
in either case, as mutually agreed in writing by the Parties; provided, however, that if an Approved SWD Vendor rejects any Product delivered to a SWD Trucking Facility for quality or safety reasons, then Midstream Co shall be entitled to select an
alternative vendor to take title to, store, handle, and dispose of such Product without obtaining Producer’s approval of such vendor, and such vendor shall be deemed an Approved SWD Vendor for such purpose.
“
Flowback
” means the water-based solution that flows back to the surface during and after the completion of hydraulic
fracturing a Well.
“
Flowback Period
” means, with respect to a Well, the period of time commencing on the Day Flowback
begins to return to the surface and ending on the earlier of the date (a) on which such Well or the Separator Facility to which such Well is connected is connected to the Individual System or (b) that is 10 Days following the first Day of
the applicable Flowback Period.
“
Individual Disposal by Truck Fee
” means the Monthly fee for providing Trucked Water
Services with respect to Dedicated Production delivered to a SWD Trucking Facility, as set forth opposite the heading “Individual Disposal by Truck Fee” on the applicable Midstream Agreement Addendum;
provided
that the Individual
Disposal by Truck Fee shall accrue only with respect to Dedicated Production delivered by truck to a SWD Trucking Facility.
“
Pipeline Unavailability
” means any time during which the Individual System is not capable of accepting or transporting
volumes of Product for any reason, including Flowback that exceeds the capacity of the Individual System, Flowback at a time when the Individual System is not yet online, curtailments on the Individual System and interruptions of Service.
Amendment 01 –
Page 3
Second Amended and Restated Produced Water Services Agreement
Green River Produced Water Agreement
GRMU03-PW
“
SWD Trucking Facility
” means an Approved SWD Vendor’s saltwater disposal
well that Midstream Co has designated for disposal of Dedicated Production that is transported by truck.
“
Transporter
”
means a wastewater truck transportation company engaged by Producer or Midstream Co, as applicable, to transport Trucked Volumes to the SWD Trucking Facility.
“
Trucked Volumes
” has the meaning given to it in
Section 18.3(a)
.
“
Trucked Water Services
” means, at any time when Producer has exercised its Trucking Election, Midstream Co shall make
arrangements for the disposal of Dedicated Production that arrives by truck at the applicable SWD Trucking Facility. In addition, in connection with a Trucking Election, (a) during a Flowback Period, if Producer requests and Midstream Co
agrees, then with Producer’s reasonable cooperation, Midstream Co will arrange for the dispatching of the applicable trucks to the applicable SWD Trucking Facility and otherwise coordinate the water hauling trucks and (b) at all other
times during a Pipeline Unavailability in which Producer has made a Trucking Election, Midstream Co shall arrange for the dispatching of the applicable trucks to the applicable SWD Trucking Facility and otherwise coordinate the water hauling trucks.
“
Trucking Election
” has the meaning given to it in
Section 2.3(b)
.
2.
Amendments to Article 2
.
2.1
Section 2.3(b)
of the Agreement Terms and Conditions is hereby amended and restated in its entirety to read: “(b) during
Pipeline Unavailability, Producer may elect to deliver Dedicated Production directly to a SWD Trucking Facility (the “
Trucking Election
”); and”.
2.2
Section 2.3(d)
of the Agreement Terms and Conditions is hereby amended and restated in its entirety to read: “(d) to
pool, communitize or unitize Producer’s interests with respect to Dedicated Production”.
2.3
Section 2.4(b)(iv)
of
the Agreement Terms and Conditions is amended and restated in its entirety to read: “(iv)
Reserved.
”.
3.
Amendments
to Article 3
.
3.1
Section 3.1(e)
of the Agreement Terms and Conditions is hereby amended by deleting the sentence that
reads as follows “In the sole discretion of each Person serving as a Midstream Co under a Midstream Agreement Addendum, such Midstream Co may work with any other Midstream Co to prepare and deliver a System Plan jointly.” and inserting in
place thereof the following sentence: “Midstream Co may, in its sole discretion, work with OpCo or any of OpCo’s subsidiaries to prepare and deliver a System Plan jointly with such other entity or entities.”
Amendment 01 –
Page 4
Second Amended and Restated Produced Water Services Agreement
Green River Produced Water Agreement
GRMU03-PW
3.2
Section 3.2
of the Agreement Terms and Conditions is hereby amended by inserting
the following new
clause (e)
immediately following
clause (d)
of such
Section 3.2
:
“(e)
Substation and Interconnection Facilities
. The obligations of Midstream Co hereunder to design and construct the Individual System and to perform the Services do not include the design or construction of any substation or other
interconnecting facilities required to procure electricity for the Individual System. If a substation or any other interconnecting facility is required in order for Midstream Co to perform its obligations hereunder, Midstream Co and Producer shall
enter into a separate agreement setting forth each Party’s responsibilities in connection therewith, including an allocation of responsibility for all associated costs and expenses.”
4.
Amendments to Article 6
.
4.1 Clause (ii) of
Section 6.1
of the Agreement Terms and Conditions is hereby amended and restated in its entirety to read
as follows: “(ii) the Individual Second Phase Fee, if any, applicable to Second Phase Services performed within the Dedication Area,”
4.2
Section 6.1
of the Agreement Terms and Conditions is further amended by deleting the period at the end of such
Section 6.1
and inserting in place thereof the following clause: “and (iv) the Individual Disposal by Truck Fee, if any.”
4.3
Section 6.3(d)
of the Agreement Terms and Conditions is hereby amended and restated in its entirety to read as follows:
“
Other System Fuel
. Midstream Co may elect to use Other System Fuel as fuel to operate the Individual System, or to generate electricity for the operation of the Individual System and shall account for any Other System Fuel used by
Midstream Co. Producer, at its sole cost and expense, shall procure all fuel, in addition to Other System Fuel used by Midstream Co, if any, required to operate the Individual System or to generate electricity for the operation of the Individual
System and arrange for transportation of such fuel to the Individual System.”.
5.
Amendments to Article 8
. Clause (d) of
Section 8.2
of the Agreement Terms and Conditions is hereby amended by deleting the phrase “and
Section 17.11
shall” and inserting in place thereof the clause: “,
Section 17.11
and
Section 18.7
shall”.
6.
New Article 18
. The following new
Article 18
shall be inserted immediately
following the conclusion of
Article 17
of the Agreement Terms and Conditions:
Article 18
Pipeline Unavailability
Section 18.1 Pipeline Unavailability
.
(a) It is the intention of the Parties to use the Individual System for all Dedicated Production. To accommodate operational
upsets and periods of increased flow (such as during Flowback), the Parties have agreed under
Section 2.3(b)
that, during Pipeline Unavailability, Producer shall elect to either
Amendment 01 –
Page 5
Second Amended and Restated Produced Water Services Agreement
Green River Produced Water Agreement
GRMU03-PW
(i) exercise the Trucking Election or (ii) cease producing Dedicated Production until the end of the Pipeline Unavailability, as provided in
Section 18.2
. To the extent
Producer exercises its Trucking Election, this
Article 18
shall govern with respect to the Trucked Volumes and the other matters set forth herein, rather than
Articles 4
,
7
(other than
Section 7.3
as it applies to
Trucked Volumes delivered to a SWD Trucking Facility that fail to meet the quality requirements of
Section 18.3(d)
) and
9
and
Sections 5.1
,
5.2
,
5.3
,
5.4
, and
5.6
.
(b) The Parties agree that during Pipeline Unavailability, Producer shall not have the right to temporary services under
Sections 3.3(a)
and
3.3(b)
of the Agreement or to a temporary release under
Section 2.4(b)(ii)
of the Agreement except to the extent that Midstream Co fails to provide Trucked Water Services.
(c) At Producer’s election, if the Pipeline Unavailability arises from Midstream Co’s failure to meet an On-Line
Deadline, Producer may exercise its Trucking Election for so long as it desires, rather than exercising its right to a permanent release under
Section 2.4(a)(i)
and
Section 2.4(a)(ii)
. If the Parties have agreed to connect
the applicable Individual System to a Well or Separator Facility after Flowback has started, then the fact of a Pipeline Unavailability occurring after Flowback has started shall not constitute a failure by Midstream Co to meet an On-Line Deadline
and Producer shall not have a right to a permanent release under
Section 2.4(a)(i)
and
Section 2.4(a)(ii)
until such time as the agreed upon connection date has passed.
Section 18.2 Exercise of Trucking Election
.
(a) In the event that Pipeline Unavailability will result from a Well completion prior to the connection of the Individual
System, Producer shall give Midstream Co notice that Dedicated Production is expected to be produced from the applicable Well at least 72 hours prior to such production. If Pipeline Unavailability arises after the applicable Well or Separator
Facility is online, Midstream Co shall deliver notice to Producer of planned and unplanned curtailments and interruptions as required in
Section 5.5
.
(b) Once Producer or Midstream Co, as applicable, has delivered notice to the other Party that a Pipeline Unavailability is
expected (or has occurred), Producer will inform Midstream Co whether Producer elects to exercise its Trucking Election or to cease producing Dedicated Production until the end of the Pipeline Unavailability. If Producer exercises the Trucking
Election during the Flowback Period, Producer shall coordinate with the water hauling trucks and arrange for transportation of the Dedicated Production to the SWD Trucking Facility at its sole cost and expense until the end of the Flowback Period.
At all other times during a Pipeline Unavailability, including when Flowback is occurring after the expiration of the Flowback Period, Midstream Co shall coordinate with the water hauling trucks and arrange for transportation of the Dedicated
Production to the SWD Trucking Facility as part of the Trucked Water Services unless Producer has elected to cease producing Dedicated Production.
Amendment 01 –
Page 6
Second Amended and Restated Produced Water Services Agreement
Green River Produced Water Agreement
GRMU03-PW
Section 18.3
Delivery of and Title to Trucked Volumes
.
(a)
Trucked Water Services Obligation
. Upon the exercise of a Trucking Election, Midstream Co shall cause an Approved
SWD Vendor to accept delivery of, take title to, store, handle and dispose of Dedicated Production that is delivered by truck to a SWD Trucking Facility. Upon the exercise of a Trucking Election, Midstream Co may, in its sole discretion, also accept
delivery of, take title to, store, handle and dispose of other Product delivered by truck to a SWD Trucking Facility. The volumes that are actually delivered by truck shall be referred to as “Trucked Volumes”.
(b)
Consistent Volumes
. The Trucked Volumes delivered to the applicable SWD Trucking Facility shall be at a rate of
delivery that is as uniform as reasonably possible in accordance with Producer’s drilling, completion, and frac schedule.
(c)
Title and Custody
. Title to and risk of loss to the Trucked Volumes and all contents thereof shall pass from
Producer to Approved SWD Vendor when delivered into Approved SWD Vendor’s storage tanks at the SWD Trucking Facility, unless the Parties otherwise agree in writing.
(d)
Quality
. Producer represents and warrants that all Trucked Volumes delivered to an Approved SWD Vendor may lawfully
be disposed of in Class II disposal wells. Midstream Co’s performance of Trucked Water Services for any Trucked Volumes that do not meet such requirement shall not relieve Producer from any liability for Producer’s breach of the foregoing
representation and warranty nor serve as a waiver of any rights or remedies available to Midstream Co therefor.
(e)
Prohibition on Skimming
. The Party that coordinates the water hauling trucks shall direct the Transporter not to skim, transfer, sell, or otherwise remove hydrocarbons or Trucked Volumes from trucks after receipt by such Transporter and prior
to such Trucked Volumes being received by the Approved SWD Vendor. If the Approved SWD Vendor alleges that the Trucked Volumes delivered appear to have been handled in a manner inconsistent with the foregoing sentence, Producer shall corporate with
Midstream Co and the Approved SWD Vendor in a review and analysis and, if required by the Approved SWD Vendor, take corrective action in a timely manner. If Transporters engaged by Producer fail to comply with the directions received, then Midstream
Co may direct Producer to use a different Transporter.
Amendment 01 –
Page 7
Second Amended and Restated Produced Water Services Agreement
Green River Produced Water Agreement
GRMU03-PW
Section 18.4
Unavailability of a SWD Trucking Facility
. If for any
reason there is a disruption of receipts at the SWD Trucking Facility, the Parties shall work in good faith to find a mutually agreeable resolution. If for any reason Midstream Co receives reimbursements in respect of trucking as a result of an
originally scheduled SWD Trucking Facility being unable to accept deliveries, Midstream Co shall disclose such reimbursements on the applicable invoice and pass through such reimbursements to Producer if Producer paid the costs of the applicable
Transporter directly.
Section 18.5
Testing; Non-Conforming Product
. If requested by Midstream Co, Producer
shall obtain water samples for analyses and retain appropriate qualified personnel to conduct analyses following methodologies considered appropriate in the industry or shall permit Midstream Co to obtain such samples.
Section 18.6
Producer’s Grant of Access
. Producer hereby grants to Midstream Co, and shall grant to each
Transporter, without warranty of title, either express or implied, to the extent that it may lawfully and is contractually permitted to do so without the incurrence of additional expense, the rights of ingress and egress with respect to, and the
right to access, all lands constituting Dedicated Properties for the purposes of (a) transporting Trucked Volumes, and (b) obtaining water samples as described in
Section 18.5
.
Section 18.7
Information
. Producer agrees that information it supplies to Midstream Co regarding anticipated
volumes of Dedicated Production and Trucked Volumes may be shared with an Approved SWD Vendor to the extent required by the applicable Approved SWD Vendor to assist in planning and operations, and Producer agrees to provide additional information
regarding anticipated volumes of Dedicated Production and Trucked Volumes to the extent requested by Midstream Co in response to inquiries from an Approved SWD Vendor (so long as Midstream Co is required to deliver the requested information in order
to comply with Midstream Co’s contractual arrangements with such Approved SWD Vendor). Under
Section 3.1
, Midstream Co has the right to hold certain meetings with Producer, and at the request of Midstream Co, one of such meetings
per year may be held in conjunction with the Approved SWD Vendor to discuss confer regarding planned activities.
Section 18.8
Indemnification in Respect of Trucked Volumes
. Without in any way limiting any indemnification
obligation otherwise set forth in the Agreement, the Parties agree that the indemnification obligations of Producer set forth in
Section 7.3
and
Section 15.2(b)
apply to Trucked Volumes delivered to a SWD Trucking Facility.
Amendment 01 –
Page 8
Second Amended and Restated Produced Water Services Agreement
Green River Produced Water Agreement
GRMU03-PW
Section 18.9
Invoices from Approved SWD Vendor
. The Party that
engages the Transporter shall take all reasonable measures to ensure that the invoicing procedures that Midstream Co has negotiated with the Approved SWD Vendor are used, including notation of the geographic area to which the services pertain.
Midstream Co shall provide a written copy of such procedures to Producer upon request.
7.
Amendments to Agreement Addendum
.
7.1 The specifications regarding the “Individual Second Phase Rate” appearing in the Agreement Addendum are hereby amended and
restated in their entirety and the specifications regarding the “Individual Disposal By Truck Fee” are hereby added to the Agreement Addendum as follows:
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Individual Second Phase Fee
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An amount equal to the actual costs incurred by Midstream Co for providing the Second Phase Services multiplied by 1.05.
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Individual Disposal by Truck Fee
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An amount equal to the actual costs incurred by Midstream Co for providing the Trucked Water Services with respect to Dedicated Production delivered to a SWD Trucking Facility multiplied by 1.05.
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8.
Confidentiality
. Pursuant to Section 17.11 of the Agreement (which appears in the Agreement
Terms and Conditions), the Parties have agreed to treat the information exchanged in connection with and the provisions of the Agreement as confidential. In addition, confidential treatment has been requested with the Securities and Exchange
Commission for the pricing terms of the Agreement and the Parties agree to take appropriate measures to abide by the requirements imposed by the Securities and Exchange Commission to preserve such confidential treatment, if granted.
9.
Confirmation
. The provisions of the Agreement, as amended by this Amendment, shall remain in full force and effect following the
effectiveness of this Amendment. No provision of the Agreement is amended or otherwise modified hereby, except as expressly stated herein.
10.
No Waiver
. The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy
of any Party to the Agreement, nor constitute a waiver of any provision of the Agreement. On and after the Amendment Effective Time, this Amendment shall for all purposes constitute a part of the Agreement.
11.
Counterparts
. This Amendment may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be
an original instrument, but all of such counterparts shall constitute for all purposes one agreement. Any signature hereto delivered by a Party by electronic mail shall be deemed an original signature hereto.
Amendment 01 –
Page 9
Second Amended and Restated Produced Water Services Agreement
Green River Produced Water Agreement
GRMU03-PW
12.
Governing Law
. This Amendment shall be governed by and construed in accordance with
the laws of the State, excluding any conflicts of law rule or principle that might refer construction of such provisions to the laws of another jurisdiction.
(Signature Pages follow)
Amendment 01 –
Page 10
Second Amended and Restated Produced Water Services Agreement
Green River Produced Water Agreement
GRMU03-PW
IN WITNESS WHEREOF, the Parties hereto have executed this Amendment to the Agreement in duplicate
originals to be effective as of the Amendment Effective Time.
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“Producer”
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NOBLE ENERGY, INC.
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By:
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Gary W. Willingham
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Executive Vice President
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STATE OF TEXAS
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)
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)
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ss.
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COUNTY OF HARRIS
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)
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The foregoing instrument was acknowledged before me this
day of
,
, by Gary W. Willingham as Executive Vice President of Noble
Energy, Inc., a Delaware corporation.
WITNESS my hand and official seal.
My commission expires:
Amendment 01 –
Signature Page 1
Second Amended and Restated Produced Water Services Agreement
Green River Produced Water Agreement
GRMU03-PW
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“Midstream Co”
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GREEN RIVER DEVCO LP
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By: Green River DevCo GP LLC
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By: Noble Midstream Services, LLC
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By:
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Terry R. Gerhart
Chief Executive
Officer
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STATE OF TEXAS
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)
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)
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ss.
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COUNTY OF HARRIS
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)
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The foregoing instrument was acknowledged before me this
day of
,
, by Terry R. Gerhart as Chief Executive Officer of Noble
Midstream Services, LLC, which is the sole member of Green River DevCo GP LLC, which is the general partner of Green River DevCo LP, a Delaware limited partnership.
WITNESS my hand and official seal.
My commission expires:
Amendment 01 –
Signature Page 2
Second Amended and Restated Produced Water Services Agreement
Green River Produced Water Agreement
GRMU03-PW
Exhibit 10.15.1
When Recorded, Mail To:
Attn: DJ Land Manager
1625 Broadway, Suite 2200
Denver, CO 80202
SECOND AMENDED AND RESTATED
PRODUCED WATER SERVICES AGREEMENT
SECOND AMENDED AND RESTATED
AGREEMENT ADDENDUM 04
B
RONCO
This
AGREEMENT ADDENDUM 04 (this “
Agreement Addendum
”) (a) shall be effective as among the Persons named below as “Producer” and “Midstream Co” as of the date specified below as the “Effective Date,”
(b) incorporates the Second Amended and Restated Agreement Terms and Conditions Relating to Produced Water Services (the “
Agreement Terms and Conditions
”), which were last amended effective as of March 31, 2016 and
recorded in the real property records of Weld County, Colorado on , as and (c) together with the
Agreement Terms and Conditions, shall constitute one contract and shall be the Agreement of the Parties. Except as otherwise set forth herein (i) all terms shall have the meanings assigned to such terms in the Agreement Terms and Conditions and
(ii) all references to Exhibits, Appendices, Articles, Sections, subsections and other subdivisions refer to the corresponding Exhibits, Appendices, Articles, Sections, subsections and other subdivisions of or to the Agreement Terms and
Conditions.
Producer desires to contract with Midstream Co for Midstream Co to provide the Services utilizing the Individual System, and
Midstream Co desires to provide the Services to Producer, on the terms and subject to the conditions of this Agreement.
NOW, THEREFORE,
in consideration of the mutual agreements in this Agreement, Midstream Co and Producer hereby agree as follows:
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Producer
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Noble Energy, Inc., a Delaware corporation
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Midstream Co
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Gunnison River DevCo LP, a Delaware limited partnership
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Agreement Addendum 04
– Page 1
Second Amended and Restated Produced Water Services Agreement
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Parties
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The term “Party” or “Parties” shall refer to the Producer and Midstream Co identified in this Agreement Addendum
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Effective Date
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March 31, 2016
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Dedication Area
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The Bronco integrated development plan area, as such area was defined by Producer on the Effective Date, and which consists of the following areas within Weld County, Colorado
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Township
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Range
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Section
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T5N
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R65W
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13, 21-29, 31-36
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T5N
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R64W
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7-9, 16-21, 28-33
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T4N
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R64W
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4-9, 16-21, 28-31
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T4N
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R65W
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ALL
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T4N
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R67W
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25, 36
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T4N
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R66W
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1-3, 8-36
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Except and excluding the wells, leases and other acreage described in the property exhibits attached to the Releases of Dedication
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Individual First Phase Rate
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The Individual First Phase Rate shall be determined by the Parties prior to Services being provided by Midstream Co to Producer in the Dedication Area.
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Individual Second Phase Rate
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Individual Second Phase Rate applied to each Barrel for which Producer elects to receive disposal services
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Individual Second Phase Rate applied to each Barrel for which Producer elects to receive recycling services
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The Individual Second Phase Rate shall be determined by the Parties
prior to Services being provided by Midstream Co to Producer in the Dedication Area.
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The Individual Second Phase Rate shall be determined by the Parties
prior to Services being provided by Midstream Co to Producer in the Dedication Area.
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Deviations from Service Conditions (the specifications in this section supersede the applicable
language from Article 7)
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NONE
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Additional Revisions
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NONE
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Agreement Addendum 04
– Page 2
Second Amended and Restated Produced Water Services Agreement
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Notices and Payments
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Notice Address – General Matters & Correspondence
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Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Chief Financial Officer
John F. Bookout, IV
Telephone: (832) 639-7134
Email:
John.Bookout@nblenergy.com
Producer:
Noble Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO 80202
Attention: Director of
USO Finance,
Gerald Free
Telephone: (303) 228-4174
Email:
Gerald.Free@nblenergy.com
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Notice Address – Operational Matters
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Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Chief Operating Officer
John C. Nicholson
Telephone: (281) 876-6186
Email:
John.Nicholson@nblenergy.com
Producer:
Noble Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO 80202
Attention: Vice
President – DJ Business Unit
Mark Patteson
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Agreement Addendum 04
– Page 3
Second Amended and Restated Produced Water Services Agreement
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Notice Address – Force Majeure and Disposal or Recycling interruptions
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Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Chief Operating Officer
John C. Nicholson
Telephone: (281) 876-6186
Email:
John.Nicholson@nblenergy.com
Producer:
Noble Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO 80202
Attention: Director of
USO Finance,
Gerald Free
Telephone: (303) 228-4174
Email:
Gerald.Free@nblenergy.com
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Notice Address – Invoicing Matters
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Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Ian Dams
Telephone: (832) 639-7406
Email: ian.dams@nblenergy.com
Producer:
1001 Noble Energy Way
Houston, TX 77070
Attention: Director of Revenue Accounting
John Nedelka
Telephone: (281) 872-3120
Email:
John.Nedelka@nblenergy.com
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Agreement Addendum 04
– Page 4
Second Amended and Restated Produced Water Services Agreement
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Payments by Electronic Funds Transfer
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Midstream Co:
ABA for wire: 021000021
ABA for ACH: 111000614
Account Number: 780162371
Account Name: Gunnison River DevCo
LP
Financial Institution: JP Morgan
Bank Swift: CHASUS33
Producer:
ABA/Routing Number: 021000021
Account Number: 08805135066
Account Name: Noble Energy, Inc.
Financial Institution: JP
Morgan
Bank Swift: CHASUS33
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(End of Agreement Addendum 04)
Agreement Addendum 04
– Page 5
Second Amended and Restated Produced Water Services Agreement
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement in duplicate originals to be
effective as of the Effective Date.
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“Producer”
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NOBLE ENERGY, INC.
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By:
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/s/ Gary W. Willingham
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Gary W. Willingham
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Executive Vice President
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STATE OF TEXAS
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)
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)
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ss.
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COUNTY OF HARRIS
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)
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The foregoing instrument was acknowledged before me this
26th
day of April, 2016 by Gary W. Willingham as Executive
Vice President of Noble Energy, Inc., a Delaware corporation, on behalf of said corporation.
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/s/ Vickie L. Graham
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Notary Public in and for the State of Texas
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Agreement Addendum 04
– Page 1
Second Amended and Restated Produced Water Services Agreement
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“Midstream Co”
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GUNNISON RIVER DEVCO LP
By: Gunnison River DevCo GP LLC
By: Noble Midstream Services, LLC
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By:
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/s/ Terry R. Gerhart
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Terry R. Gerhart
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Chief Executive Officer
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STATE OF TEXAS
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)
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)
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ss.
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COUNTY OF HARRIS
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)
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The foregoing instrument was acknowledged before me this
26th
day of April, 2016, by Terry R. Gerhart, Chief Executive
Officer of Noble Midstream Services, LLC, a Delaware limited liability company, which is the sole member of Gunnison River DevCo GP LLC, which is the general partner of Gunnison River DevCo LP, a Delaware limited partnership, on behalf of said
company.
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/s/ Joanne Garner
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Notary Public in and for the State of Texas
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Agreement Addendum 04
– Page 2
Second Amended and Restated Produced Water Services Agreement
Exhibit 10.15.2
When Recorded, Mail To:
Attn: DJ Land Manager
1625 Broadway, Suite 2200
Denver, CO 80202
FORM OF
AMENDMENT 01
TO
THAT CERTAIN
SECOND AMENDED AND RESTATED
PRODUCED WATER SERVICES AGREEMENT
B
RONCO
C
ONTRACT
N
UMBER
: GUBR04-PW
This AMENDMENT 01 (this “
Amendment
”) shall be effective among Noble Energy, Inc., a Delaware corporation (the
“
Producer
”) and Gunnison River DevCo LP, a Delaware limited partnership, together with its permitted successors and assigns (“
Midstream Co
”) as of September 1, 2016 (the “
Amendment Effective
Time
”). This Amendment modifies that certain Second Amended and Restated Produced Water Services Agreement, effective as of March 31, 2016 (the “
Agreement
”), which has been given contract number GUBR04-PW and is
comprised of (i) that certain Second Amended and Restated Agreement Terms and Conditions Relating to Produced Water Services (the “
Agreement Terms and Conditions
”), last updated March 31, 2016, together with
(ii) that certain Second Amended and Restated Agreement Addendum 04 (the “
Agreement Addendum
”), effective as of March 31, 2016. The Agreement Terms and Conditions, the Agreement Addendum and this Amendment shall
constitute one contract and shall be the Agreement of the Parties.
WHEREAS, capitalized terms used herein have the meanings assigned to
such terms in the Agreement Terms and Conditions.
WHEREAS, Section 16.1 of the Agreement (which appears in the Agreement Terms and
Conditions) prohibits either Party to the Agreement from assigning its rights and obligations, except that Producer may assign its rights and obligations to any Person (herein, the “
Transferee
”) to whom Producer transfers Dedicated
Properties so long as such Transferee assumes the rights and obligations of Producer with respect to such transferred Dedicated Properties.
WHEREAS, pursuant to that certain Purchase and Sale Agreement, by and among Producer, NBL Energy Royalties, Inc. and Noble Energy WyCo, LLC,
collectively as the Seller, and Synergy Resources Corporation, as Purchaser (the “
Transferee
”), executed May 2, 2016 with an effective time of April 1, 2016 at 12:01 AM, Producer agreed to sell approximately 30,000
acres of the Dedicated Properties to the Transferee.
WHEREAS, pursuant to
Section 2.1
of the Agreement Terms and Conditions, Producer has
dedicated and committed to deliver to Midstream Co under the Agreement, as and when produced, all of the Dedicated Production and agreed not to deliver any Dedicated Production to any other gatherer, purchaser, or other Person prior to delivery to
Midstream Co at the Receipt Points.
WHEREAS, at certain times prior to or after connection of the Individual System to a particular Well
or Separator Facility, the Individual System may not be available to accept deliveries of Dedicated Production.
WHEREAS, during such
times, Producer remains obligated to deliver the Dedicated Production to Midstream Co and Midstream Co remains obligated to arrange for the disposal of such Dedicated Production, and the Parties desire to amend the Agreement to provide for the
flexibility required.
WHEREAS, the Parties agree and acknowledge that amendments to the Agreement Terms and Conditions set forth herein
constitute an amendment only to the Agreement and not to any other agreement in respect of produced water services to which Producer or Midstream Co is a party.
NOW, THEREFORE, in consideration of the foregoing recitals, which are incorporated herein and the mutual agreements in the Agreement,
Midstream Co and Producer hereby agree as follows:
1.
Amendments to Article 1
.
1.1 The following defined terms are hereby amended and restated in their entirety to read as follows:
“
Facility Segment
” means each segment of an Individual System comprised of facilities beginning at a Receipt Point and ending
at an Internal Transfer Point. If an Individual System does not contain any such distinct segment, then the term Facility Segment shall be synonymous with Individual System.
“
Individual Fee
” means the aggregate of the Individual First Phase Fee, the Individual Second Phase Fee and the Individual
Disposal by Truck Fee;
provided
that for purposes of the annual escalation in the Individual Fee described in
Section 6.2(b)
, such term shall not include any Reimbursed Amount.
“
Individual Second Phase Fee
” means the Monthly fee for providing Second Phase Services at a particular Individual System, as
set forth opposite the heading “Individual Second Phase Fee” on the applicable Midstream Agreement Addendum;
provided
that the Individual Second Phase Fee shall accrue only with respect to Services performed by Midstream Co on
Product flowing through an Individual System.
Amendment 01 –
Page 2
Second Amended and Restated Produced Water Services Agreement
Gunnison River Produced Water Agreement
GUBR04-PW
“
Individual System
” means the portion of the System beginning at the Receipt
Points and ending at the Delivery Points. The Individual Systems in existence on the Effective Date are more particularly described in writing between Producer and Midstream Co. Additional Individual Systems may be added to the System from time to
time in satisfaction of the needs identified by Producer and evidenced in writing between Producer and Midstream Co.
“
Other System
Fuel
” means any natural gas delivered into Midstream Co’s custody by Producer pursuant to a Transaction Document between Producer and Midstream Co and measured and used as fuel by Midstream Co.
1.2 The defined terms “Drip Condensate”, “Gas”, “Gas System”, “Individual Second Phase Rate”, and
“Other Services” are hereby deleted.
1.3 Clauses (a) and (b) of the defined term “Dedicated Production” are
hereby amended and restated to read as follows: “(a) Product owned by Producer or an Affiliate of Producer and produced from a Well within the Dedication Area that is operated by Producer or an Affiliate under the Control of Producer,
(b)
Reserved
, and”.
1.4 The defined term “Product” is hereby amended by inserting the following sentence at
the end of such definition:
“In the event Producer exercises its Trucking Election, the term “Product” shall refer to all
water that is accepted for delivery at a SWD Trucking Facility for the account of Midstream Co.”
1.5 The defined term
“Services” is hereby amended by deleting “and (g)” at the end of clause (f) and inserting in place thereof the following: “, (g) Trucked Water Services and (h)”.
1.6 The following new definitions shall be added to Article 1 in alphabetical order:
“
Approved SWD Vendor
” means Midstream Co or a Third Party, in either case, as mutually agreed in writing by the Parties;
provided, however, that if an Approved SWD Vendor rejects any Product delivered to a SWD Trucking Facility for quality or safety reasons, then Midstream Co shall be entitled to select an alternative vendor to take title to, store, handle, and
dispose of such Product without obtaining Producer’s approval of such vendor, and such vendor shall be deemed an Approved SWD Vendor for such purpose.
“
Flowback
” means the water-based solution that flows back to the surface during and after the completion of hydraulic
fracturing a Well.
Amendment 01 –
Page 3
Second Amended and Restated Produced Water Services Agreement
Gunnison River Produced Water Agreement
GUBR04-PW
“
Flowback Period
” means, with respect to a Well, the period of time commencing
on the Day Flowback begins to return to the surface and ending on the earlier of the date (a) on which such Well or the Separator Facility to which such Well is connected is connected to the Individual System or (b) that is 10 Days
following the first Day of the applicable Flowback Period.
“
Individual Disposal by Truck Fee
” means the Monthly fee for
providing Trucked Water Services with respect to Dedicated Production delivered to a SWD Trucking Facility, as set forth opposite the heading “Individual Disposal by Truck Fee” on the applicable Midstream Agreement Addendum;
provided
that the Individual Disposal by Truck Fee shall accrue only with respect to Dedicated Production delivered by truck to a SWD Trucking Facility.
“
Pipeline Unavailability
” means any time during which the Individual System is not capable of accepting or transporting
volumes of Product for any reason, including Flowback that exceeds the capacity of the Individual System, Flowback at a time when the Individual System is not yet online, curtailments on the Individual System and interruptions of Service.
“
SWD Trucking Facility
” means an Approved SWD Vendor’s saltwater disposal well that Midstream Co has designated for
disposal of Dedicated Production that is transported by truck.
“
Transporter
” means a wastewater truck transportation
company engaged by Producer or Midstream Co, as applicable, to transport Trucked Volumes to the SWD Trucking Facility.
“
Trucked
Volumes
” has the meaning given to it in
Section 18.3(a)
.
“
Trucked Water Services
” means, at any time
when Producer has exercised its Trucking Election, Midstream Co shall make arrangements for the disposal of Dedicated Production that arrives by truck at the applicable SWD Trucking Facility. In addition, in connection with a Trucking Election,
(a) during a Flowback Period, if Producer requests and Midstream Co agrees, then with Producer’s reasonable cooperation, Midstream Co will arrange for the dispatching of the applicable trucks to the applicable SWD Trucking Facility and
otherwise coordinate the water hauling trucks and (b) at all other times during a Pipeline Unavailability in which Producer has made a Trucking Election, Midstream Co shall arrange for the dispatching of the applicable trucks to the applicable
SWD Trucking Facility and otherwise coordinate the water hauling trucks.
“
Trucking Election
” has the meaning given to it
in
Section 2.3(b)
.
2.
Amendments to Article 2
.
2.1
Section 2.3(b)
of the Agreement Terms and Conditions is hereby amended and restated in its entirety to read: “(b) during
Pipeline Unavailability, Producer may elect to deliver Dedicated Production directly to a SWD Trucking Facility (the “
Trucking Election
”); and”.
Amendment 01 –
Page 4
Second Amended and Restated Produced Water Services Agreement
Gunnison River Produced Water Agreement
GUBR04-PW
2.2
Section 2.3(d)
of the Agreement Terms and Conditions is hereby amended and
restated in its entirety to read: “(d) to pool, communitize or unitize Producer’s interests with respect to Dedicated Production”.
2.3
Section 2.4(b)(iv)
of the Agreement Terms and Conditions is amended and restated in its entirety to read: “(iv)
Reserved.
”.
3.
Amendments to Article 3
.
3.1
Section 3.1(e)
of the Agreement Terms and Conditions is hereby amended by deleting the sentence that reads as follows “In
the sole discretion of each Person serving as a Midstream Co under a Midstream Agreement Addendum, such Midstream Co may work with any other Midstream Co to prepare and deliver a System Plan jointly.” and inserting in place thereof the
following sentence: “Midstream Co may, in its sole discretion, work with OpCo or any of OpCo’s subsidiaries to prepare and deliver a System Plan jointly with such other entity or entities.”
3.2
Section 3.2
of the Agreement Terms and Conditions is hereby amended by inserting the following new
clause
(e)
immediately following
clause (d)
of such
Section 3.2
:
“(e)
Substation and Interconnection
Facilities
. The obligations of Midstream Co hereunder to design and construct the Individual System and to perform the Services do not include the design or construction of any substation or other interconnecting facilities required to procure
electricity for the Individual System. If a substation or any other interconnecting facility is required in order for Midstream Co to perform its obligations hereunder, Midstream Co and Producer shall enter into a separate agreement setting forth
each Party’s responsibilities in connection therewith, including an allocation of responsibility for all associated costs and expenses.”
4.
Amendments to Article 6
.
4.1 Clause (ii) of
Section 6.1
of the Agreement Terms and Conditions is hereby amended and restated in its entirety to read as
follows: “(ii) the Individual Second Phase Fee, if any, applicable to Second Phase Services performed within the Dedication Area,”
4.2
Section 6.1
of the Agreement Terms and Conditions is further amended by deleting the period at the end of such
Section 6.1
and inserting in place thereof the following clause: “and (iv) the Individual Disposal by Truck Fee, if any.”
4.3
Section 6.3(d)
of the Agreement Terms and Conditions is hereby amended and restated in its entirety to read as follows:
“
Other System Fuel
. Midstream Co may elect to use Other System Fuel as fuel to operate the Individual System, or to generate electricity for the operation of the Individual System and shall account for any Other System Fuel used by
Midstream Co. Producer, at its sole cost and expense, shall procure all fuel, in addition to Other System Fuel used by Midstream Co, if any, required to operate the Individual System or to generate electricity for the operation of the Individual
System and arrange for transportation of such fuel to the Individual System.”.
Amendment 01 –
Page 5
Second Amended and Restated Produced Water Services Agreement
Gunnison River Produced Water Agreement
GUBR04-PW
5.
Amendments to Article 8
. Clause (d) of
Section 8.2
of the Agreement
Terms and Conditions is hereby amended by deleting the phrase “and
Section 17.11
shall” and inserting in place thereof the clause: “,
Section 17.11
and
Section 18.7
shall”.
6.
New Article 18
. The following new
Article 18
shall be inserted immediately following the conclusion of
Article 17
of
the Agreement Terms and Conditions:
Article 18
Pipeline Unavailability
Section 18.1 Pipeline Unavailability
.
(a) It is the intention of the Parties to use the Individual System for all Dedicated Production. To accommodate operational
upsets and periods of increased flow (such as during Flowback), the Parties have agreed under
Section 2.3(b)
that, during Pipeline Unavailability, Producer shall elect to either (i) exercise the Trucking Election or (ii) cease
producing Dedicated Production until the end of the Pipeline Unavailability, as provided in
Section 18.2
. To the extent Producer exercises its Trucking Election, this
Article 18
shall govern with respect to the Trucked Volumes and
the other matters set forth herein, rather than
Articles 4
,
7
(other than
Section 7.3
as it applies to Trucked Volumes delivered to a SWD Trucking Facility that fail to meet the quality requirements of
Section 18.3(d)
) and
9
and
Sections 5.1
,
5.2
,
5.3
,
5.4
, and
5.6
.
(b)
The Parties agree that during Pipeline Unavailability, Producer shall not have the right to temporary services under
Sections 3.3(a)
and
3.3(b)
of the Agreement or to a temporary release under
Section 2.4(b)(ii)
of the
Agreement except to the extent that Midstream Co fails to provide Trucked Water Services.
(c) At Producer’s election,
if the Pipeline Unavailability arises from Midstream Co’s failure to meet an On-Line Deadline, Producer may exercise its Trucking Election for so long as it desires, rather than exercising its right to a permanent release under
Section 2.4(a)(i)
and
Section 2.4(a)(ii)
. If the Parties have agreed to connect the applicable Individual System to a Well or Separator Facility after Flowback has started, then the fact of a Pipeline Unavailability occurring
after Flowback has started shall not constitute a failure by Midstream Co to meet an On-Line Deadline and Producer shall not have a right to a permanent release under
Section 2.4(a)(i)
and
Section 2.4(a)(ii)
until such time
as the agreed upon connection date has passed.
Section 18.2 Exercise of Trucking Election
.
(a) In the event that Pipeline Unavailability will result from a Well completion prior to the connection of the Individual
System, Producer shall give Midstream Co notice that Dedicated Production is expected to be produced from the applicable Well at least 72 hours prior to such production. If Pipeline Unavailability arises after the applicable Well or Separator
Facility is online, Midstream Co shall deliver notice to Producer of planned and unplanned curtailments and interruptions as required in
Section 5.5
.
Amendment 01 –
Page 6
Second Amended and Restated Produced Water Services Agreement
Gunnison River Produced Water Agreement
GUBR04-PW
(b) Once Producer or Midstream Co, as applicable, has delivered notice to the
other Party that a Pipeline Unavailability is expected (or has occurred), Producer will inform Midstream Co whether Producer elects to exercise its Trucking Election or to cease producing Dedicated Production until the end of the Pipeline
Unavailability. If Producer exercises the Trucking Election during the Flowback Period, Producer shall coordinate with the water hauling trucks and arrange for transportation of the Dedicated Production to the SWD Trucking Facility at its sole cost
and expense until the end of the Flowback Period. At all other times during a Pipeline Unavailability, including when Flowback is occurring after the expiration of the Flowback Period, Midstream Co shall coordinate with the water hauling trucks and
arrange for transportation of the Dedicated Production to the SWD Trucking Facility as part of the Trucked Water Services unless Producer has elected to cease producing Dedicated Production.
Section 18.3
Delivery of and Title to Trucked Volumes
.
(a)
Trucked Water Services Obligation
. Upon the exercise of a Trucking Election, Midstream Co shall cause an Approved
SWD Vendor to accept delivery of, take title to, store, handle and dispose of Dedicated Production that is delivered by truck to a SWD Trucking Facility. Upon the exercise of a Trucking Election, Midstream Co may, in its sole discretion, also accept
delivery of, take title to, store, handle and dispose of other Product delivered by truck to a SWD Trucking Facility. The volumes that are actually delivered by truck shall be referred to as “Trucked Volumes”.
(b)
Consistent Volumes
. The Trucked Volumes delivered to the applicable SWD Trucking Facility shall be at a rate of
delivery that is as uniform as reasonably possible in accordance with Producer’s drilling, completion, and frac schedule.
(c)
Title and Custody
. Title to and risk of loss to the Trucked Volumes and all contents thereof shall pass from
Producer to Approved SWD Vendor when delivered into Approved SWD Vendor’s storage tanks at the SWD Trucking Facility, unless the Parties otherwise agree in writing.
(d)
Quality
. Producer represents and warrants that all Trucked Volumes delivered to an Approved SWD Vendor may lawfully
be disposed of in Class II disposal wells. Midstream Co’s performance of Trucked Water Services for any Trucked Volumes that do not meet such requirement shall not relieve Producer from any liability for Producer’s breach of the foregoing
representation and warranty nor serve as a waiver of any rights or remedies available to Midstream Co therefor.
(e)
Prohibition on Skimming
. The Party that coordinates the water hauling trucks shall direct the Transporter not to skim, transfer, sell, or otherwise remove hydrocarbons or Trucked Volumes from trucks after receipt by such Transporter and prior
to such Trucked Volumes being received by the Approved
Amendment 01 –
Page 7
Second Amended and Restated Produced Water Services Agreement
Gunnison River Produced Water Agreement
GUBR04-PW
SWD Vendor. If the Approved SWD Vendor alleges that the Trucked Volumes delivered appear to have been handled in a manner inconsistent with the foregoing sentence, Producer shall corporate with
Midstream Co and the Approved SWD Vendor in a review and analysis and, if required by the Approved SWD Vendor, take corrective action in a timely manner. If Transporters engaged by Producer fail to comply with the directions received, then Midstream
Co may direct Producer to use a different Transporter.
Section 18.4
Unavailability of a SWD Trucking
Facility
. If for any reason there is a disruption of receipts at the SWD Trucking Facility, the Parties shall work in good faith to find a mutually agreeable resolution. If for any reason Midstream Co receives reimbursements in respect of
trucking as a result of an originally scheduled SWD Trucking Facility being unable to accept deliveries, Midstream Co shall disclose such reimbursements on the applicable invoice and pass through such reimbursements to Producer if Producer paid the
costs of the applicable Transporter directly.
Section 18.5
Testing; Non-Conforming Product
. If requested by
Midstream Co, Producer shall obtain water samples for analyses and retain appropriate qualified personnel to conduct analyses following methodologies considered appropriate in the industry or shall permit Midstream Co to obtain such samples.
Section 18.6
Producer’s Grant of Access
. Producer hereby grants to Midstream Co, and shall grant to each
Transporter, without warranty of title, either express or implied, to the extent that it may lawfully and is contractually permitted to do so without the incurrence of additional expense, the rights of ingress and egress with respect to, and the
right to access, all lands constituting Dedicated Properties for the purposes of (a) transporting Trucked Volumes, and (b) obtaining water samples as described in
Section 18.5
.
Section 18.7
Information
. Producer agrees that information it supplies to Midstream Co regarding anticipated
volumes of Dedicated Production and Trucked Volumes may be shared with an Approved SWD Vendor to the extent required by the applicable Approved SWD Vendor to assist in planning and operations, and Producer agrees to provide additional information
regarding anticipated volumes of Dedicated Production and Trucked Volumes to the extent requested by Midstream Co in response to inquiries from an Approved SWD Vendor (so long as Midstream Co is required to deliver the requested information in order
to comply with Midstream Co’s contractual arrangements with such Approved SWD Vendor). Under
Section 3.1
, Midstream Co has the right to hold certain meetings with Producer, and at the request of Midstream Co, one of such meetings
per year may be held in conjunction with the Approved SWD Vendor to discuss confer regarding planned activities.
Section 18.8
Indemnification in Respect of Trucked Volumes
. Without in any way limiting any indemnification
obligation otherwise set forth in the Agreement, the Parties agree that the indemnification obligations of Producer set forth in
Section 7.3
and
Section 15.2(b)
apply to Trucked Volumes delivered to a SWD Trucking Facility.
Amendment 01 –
Page 8
Second Amended and Restated Produced Water Services Agreement
Gunnison River Produced Water Agreement
GUBR04-PW
Section 18.9
Invoices from Approved SWD Vendor
. The Party that
engages the Transporter shall take all reasonable measures to ensure that the invoicing procedures that Midstream Co has negotiated with the Approved SWD Vendor are used, including notation of the geographic area to which the services pertain.
Midstream Co shall provide a written copy of such procedures to Producer upon request.
7.
Amendments to Agreement Addendum
.
7.1 The description of the “Dedication Area” appearing in Agreement Addendum is hereby amended and restated in its entirety to read
as follows:
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Dedication Area
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The following areas within Weld County, Colorado
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Township
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Range
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Sections
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5N
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65W
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13, S/2 21, S/2 22, 23-27, 33-36
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5N
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64W
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7-9, 16-21, 28-33
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4N
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67W
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25, 36
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4N
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66W
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1-3, 8-36
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4N
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65W
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ALL
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4N
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64W
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4-9, 16-21, 28-31
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Except and excluding the wells, leases, and other acreage described in the property exhibits attached to the Releases of
Dedication.
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7.1 The specifications regarding the “Individual Second Phase Rate” appearing in the Agreement
Addendum are hereby amended and restated in their entirety and the specifications regarding the “Individual Disposal By Truck Fee” are hereby added to the Agreement Addendum as follows:
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Individual Second Phase Fee
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An amount equal to the actual costs incurred by Midstream Co for providing the Second Phase Services multiplied by 1.05.
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Individual Disposal by Truck Fee
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An amount equal to the actual costs incurred by Midstream Co for providing the Trucked Water Services with respect to Dedicated Production delivered to a SWD Trucking Facility multiplied by 1.05.
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8.
Confidentiality
. Pursuant to Section 17.11 of the Agreement (which appears in the Agreement
Terms and Conditions), the Parties have agreed to treat the information exchanged in connection with and the provisions of the Agreement as confidential. In addition, confidential treatment has been requested with the Securities and Exchange
Commission for the
Amendment 01 –
Page 9
Second Amended and Restated Produced Water Services Agreement
Gunnison River Produced Water Agreement
GUBR04-PW
pricing terms of the Agreement and the Parties agree to take appropriate measures to abide by the requirements imposed by the Securities and Exchange Commission to preserve such confidential
treatment, if granted.
9.
Confirmation
. The provisions of the Agreement, as amended by this Amendment, shall remain in full force
and effect following the effectiveness of this Amendment. No provision of the Agreement is amended or otherwise modified hereby, except as expressly stated herein.
10.
No Waiver
. The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy
of any Party to the Agreement, nor constitute a waiver of any provision of the Agreement. On and after the Amendment Effective Time, this Amendment shall for all purposes constitute a part of the Agreement.
11.
Counterparts
. This Amendment may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be
an original instrument, but all of such counterparts shall constitute for all purposes one agreement. Any signature hereto delivered by a Party by electronic mail shall be deemed an original signature hereto.
12.
Governing Law
. This Amendment shall be governed by and construed in accordance with the laws of the State, excluding any conflicts
of law rule or principle that might refer construction of such provisions to the laws of another jurisdiction.
(Signature Pages follow)
Amendment 01 –
Page 10
Second Amended and Restated Produced Water Services Agreement
Gunnison River Produced Water Agreement
GUBR04-PW
IN WITNESS WHEREOF, the Parties hereto have executed this Amendment to the Agreement in duplicate
originals to be effective as of the Amendment Effective Time.
“Producer”
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NOBLE ENERGY, INC.
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By:
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Gary W. Willingham
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Executive Vice President
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STATE OF
TEXAS )
) ss.
COUNTY OF
HARRIS
)
The foregoing instrument was acknowledged before me this
day of
,
, by Gary W.
Willingham as Executive Vice President of Noble Energy, Inc., a Delaware corporation.
WITNESS my hand and official seal.
My commission expires:
Amendment 01 –
Signature Page 1
Second Amended and Restated Produced Water Services Agreement
Gunnison River Produced Water Agreement
GUBR04-PW
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“Midstream Co”
GUNNISON RIVER DEVCO LP
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By:
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Gunnison River DevCo GP LLC
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By:
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Noble Midstream Services, LLC
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By:
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Terry R. Gerhart
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Chief Executive Officer
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STATE OF
TEXAS )
) ss.
COUNTY OF
HARRIS
)
The foregoing instrument was acknowledged before me this
day of
,
, by Terry R.
Gerhart as Chief Executive Officer of Noble Midstream Services, LLC, which is the sole member of Gunnison River DevCo GP LLC, which is the general partner of Gunnison River DevCo LP, a Delaware limited partnership.
WITNESS my hand and official seal.
My commission expires:
Amendment 01 –
Signature Page 2
Second Amended and Restated Produced Water Services Agreement
Gunnison River Produced Water Agreement
GUBR04-PW
Exhibit 10.16.1
When Recorded, Mail To:
Attn: DJ Land Manager
1625 Broadway, Suite 2200
Denver, CO 80202
SECOND AMENDED AND RESTATED
PRODUCED WATER SERVICES AGREEMENT
SECOND AMENDED AND RESTATED
AGREEMENT ADDENDUM 05
G
REELEY
C
RESCENT
This AGREEMENT ADDENDUM 05 (this “
Agreement Addendum
”) (a) shall be effective as among the Persons named below as
“Producer” and “Midstream Co” as of the date specified below as the “Effective Date,” (b) incorporates the Second Amended and Restated Agreement Terms and Conditions Relating to Produced Water Services (the
“
Agreement Terms and Conditions
”), which were last amended effective as of March 31, 2016 and recorded in the real property records of Weld County, Colorado on
, as and (c) together with the Agreement Terms and Conditions, shall constitute one contract and
shall be the Agreement of the Parties. Except as otherwise set forth herein (i) all terms shall have the meanings assigned to such terms in the Agreement Terms and Conditions and (ii) all references to Exhibits, Appendices, Articles,
Sections, subsections and other subdivisions refer to the corresponding Exhibits, Appendices, Articles, Sections, subsections and other subdivisions of or to the Agreement Terms and Conditions.
Producer desires to contract with Midstream Co for Midstream Co to provide the Services utilizing the Individual System, and Midstream Co
desires to provide the Services to Producer, on the terms and subject to the conditions of this Agreement.
NOW, THEREFORE, in
consideration of the mutual agreements in this Agreement, Midstream Co and Producer hereby agree as follows:
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Producer
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Noble Energy, Inc., a Delaware corporation
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Midstream Co
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Laramie River DevCo LP, a Delaware limited partnership
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Parties
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The term “Party” or “Parties” shall refer to the Producer and Midstream Co identified in this Agreement Addendum
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Agreement Addendum 05
– Page 1
Second Amended and Restated Produced Water Services Agreement
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Effective Date
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March 31, 2016
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Dedication Area
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The Greeley Crescent integrated development plan area, as such area was defined by Producer on the Effective Date, and which consists of the following areas within Weld County, Colorado
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Township
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Range
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Sections
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T7N
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R67W
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ALL
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T7N
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R66W
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ALL
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T7N
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R65W
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ALL
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T6N
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R65W
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ALL
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T6N
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R66W
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ALL
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T6N
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R67W
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1-18, 23, 24, 25, 26, 35, 36
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T5N
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R67W
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1, 2, 11, 12, 13, 14, 23, 24, 25, 26, 35, 36
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T5N
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R66W
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ALL
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T5N
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R65W
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1-12, 14-20, 30
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T4N
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R67W
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1,2, 11, 12, 13, 14, 22-24, 26, 27, 34, 35
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T4N
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R66W
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4-7
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Except and excluding the wells, leases and other acreage described in the property exhibits attached to the Releases of Dedication
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Individual First Phase Rate
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The Individual First Phase Rate shall be determined by the Parties prior to Services being provided by Midstream Co to Producer in the Dedication Area.
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Individual Second Phase Rate
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Individual Second Phase Rate applied to each Barrel for which Producer elects to receive disposal services
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Individual Second Phase Rate applied to each Barrel for which Producer elects to receive recycling services
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The Individual Second Phase Rate shall be determined by the Parties
prior to Services being provided by Midstream Co to Producer in the Dedication Area.
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The Individual Second Phase Rate shall be determined by the Parties
prior to Services being provided by Midstream Co to Producer in the Dedication Area.
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Deviations from Service Conditions (the specifications in this section supersede the applicable
language from Article 7)
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NONE
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Agreement Addendum 05
– Page 2
Second Amended and Restated Produced Water Services Agreement
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Additional Revisions
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NONE
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Notices and Payments
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Notice Address – General Matters & Correspondence
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Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Chief Financial Officer
John F. Bookout, IV
Telephone: (832) 639-7134
Email:
John.Bookout@nblenergy.com
Producer:
Noble Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO 80202
Attention: Director of
USO Finance,
Gerald Free
Telephone: (303) 228-4174
Email:
Gerald.Free@nblenergy.com
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Notice Address – Operational Matters
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Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Chief Operating Officer
John C. Nicholson
Telephone: (281) 876-6186
Email:
John.Nicholson@nblenergy.com
Producer:
Noble Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO 80202
Attention: Vice
President – DJ Business Unit
Mark Patteson
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Agreement Addendum 05
– Page 3
Second Amended and Restated Produced Water Services Agreement
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Notice Address – Force Majeure and Disposal or Recycling interruptions
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Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Chief Operating Officer
John C. Nicholson
Telephone: (281) 876-6186
Email:
John.Nicholson@nblenergy.com
Producer:
Noble Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO 80202
Attention: Director of
USO Finance,
Gerald Free
Telephone: (303) 228-4174
Email: Gerald.Free@nblenergy.com
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Notice Address – Invoicing Matters
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Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Ian Dams
Telephone: (832) 639-7406
Email:
ian.dams@nblenergy.com
Producer:
1001 Noble Energy Way
Houston, TX 77070
Attention: Director of
Revenue Accounting
John
Nedelka
Telephone: (281) 872-3120
Email:
John.Nedelka@nblenergy.com
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Agreement Addendum 05
– Page 4
Second Amended and Restated Produced Water Services Agreement
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Payments by Electronic Funds Transfer
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Midstream Co:
ABA for wire: 021000021
ABA for ACH: 111000614
Account Number: 780162447
Account Name: Laramie River DevCo
LP
Financial Institution: JP Morgan
Bank Swift: CHASUS33
Producer:
ABA/Routing Number: 021000021
Account Number: 08805135066
Account Name: Noble Energy, Inc.
Financial Institution: JP
Morgan
Bank Swift: CHASUS33
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(End of Agreement Addendum 05)
Agreement Addendum 05
– Page 5
Second Amended and Restated Produced Water Services Agreement
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement in duplicate originals to be
effective as of the Effective Date.
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“Producer”
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NOBLE ENERGY, INC.
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By:
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/s/ Gary W. Willingham
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Gary W. Willingham
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Executive Vice President
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STATE OF TEXAS
|
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)
|
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)
|
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ss.
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COUNTY OF HARRIS
|
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)
|
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|
The foregoing instrument was acknowledged before me this
26th
day of April, 2016 by Gary W. Willingham as Executive
Vice President of Noble Energy, Inc., a Delaware corporation, on behalf of said corporation.
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/s/ Vickie L. Graham
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Notary Public in and for the State of Texas
|
Agreement Addendum 05
– Page 1
Second Amended and Restated Produced Water Services Agreement
|
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|
|
“Midstream Co”
|
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|
|
LARAMIE RIVER DEVCO LP
By: Laramie River DevCo GP LLC
By: Noble Midstream Services, LLC
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By:
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/s/ Terry R. Gerhart
|
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|
Terry R. Gerhart
|
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Chief Executive Officer
|
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STATE OF TEXAS
|
|
)
|
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|
|
|
|
)
|
|
ss.
|
|
COUNTY OF HARRIS
|
|
)
|
|
|
The foregoing instrument was acknowledged before me this
26th
day of April, 2016, by Terry R. Gerhart, Chief Executive
Officer of Noble Midstream Services, LLC, a Delaware limited liability company, which is the sole member of Laramie River DevCo GP LLC, which is the general partner of Laramie River DevCo LP, a Delaware limited partnership, on behalf of said
company.
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/s/ Joanne Garner
|
|
Notary Public in and for the State of Texas
|
Agreement Addendum 05
– Page 2
Second Amended and Restated Produced Water Services Agreement
Exhibit 10.16.1.1
When Recorded, Mail To:
Attn: DJ Land Manager
1625 Broadway, Suite 2200
Denver, CO 80202
FORM OF
AMENDMENT 01
TO
THAT CERTAIN
SECOND AMENDED AND RESTATED
PRODUCED WATER SERVICES AGREEMENT
G
REELEY
C
RESCENT
C
ONTRACT
N
UMBER
:LAGC05-PW
This AMENDMENT 01 (this “
Amendment
”) shall be effective among Noble Energy, Inc., a Delaware corporation (the
“
Producer
”) and Laramie River DevCo LP, a Delaware limited partnership, together with its permitted successors and assigns (“
Midstream Co
”) as of September 1, 2016 (the “
Amendment Effective
Time
”). This Amendment modifies that certain Second Amended and Restated Produced Water Services Agreement, effective as of March 31, 2016 (the “
Agreement
”), which has been given contract number LAGC05-PW and is
comprised of (i) that certain Second Amended and Restated Agreement Terms and Conditions Relating to Produced Water Services (the “
Agreement Terms and Conditions
”), last updated March 31, 2016, together with
(ii) that certain Second Amended and Restated Agreement Addendum 05 (the “
Agreement Addendum
”), effective as of March 31, 2016. The Agreement Terms and Conditions, the Agreement Addendum and this Amendment shall
constitute one contract and shall be the Agreement of the Parties.
WHEREAS, capitalized terms used herein have the meanings assigned to
such terms in the Agreement Terms and Conditions.
WHEREAS, Section 16.1 of the Agreement (which appears in the Agreement Terms and
Conditions) prohibits either Party to the Agreement from assigning its rights and obligations, except that Producer may assign its rights and obligations to any Person (herein, the “
Transferee
”) to whom Producer transfers Dedicated
Properties so long as such Transferee assumes the rights and obligations of Producer with respect to such transferred Dedicated Properties.
WHEREAS, pursuant to that certain Purchase and Sale Agreement, by and among Producer, NBL Energy Royalties, Inc. and Noble Energy WyCo, LLC,
collectively as the Seller, and Synergy Resources Corporation, as Purchaser (the “
Transferee
”), executed May 2, 2016 with an effective time of April 1, 2016 at 12:01 AM, Producer agreed to sell approximately 30,000
acres of the Dedicated Properties to the Transferee.
WHEREAS, pursuant to
Section 2.1
of the Agreement Terms and Conditions, Producer has
dedicated and committed to deliver to Midstream Co under the Agreement, as and when produced, all of the Dedicated Production and agreed not to deliver any Dedicated Production to any other gatherer, purchaser, or other Person prior to delivery to
Midstream Co at the Receipt Points.
WHEREAS, at certain times prior to or after connection of the Individual System to a particular Well
or Separator Facility, the Individual System may not be available to accept deliveries of Dedicated Production.
WHEREAS, during such
times, Producer remains obligated to deliver the Dedicated Production to Midstream Co and Midstream Co remains obligated to arrange for the disposal of such Dedicated Production, and the Parties desire to amend the Agreement to provide for the
flexibility required.
WHEREAS, the Parties agree and acknowledge that amendments to the Agreement Terms and Conditions set forth herein
constitute an amendment only to the Agreement and not to any other agreement in respect of produced water services to which Producer or Midstream Co is a party.
NOW, THEREFORE, in consideration of the foregoing recitals, which are incorporated herein and the mutual agreements in the Agreement,
Midstream Co and Producer hereby agree as follows:
1.
Amendments to Article 1
.
1.1 The following defined terms are hereby amended and restated in their entirety to read as follows:
“
Facility Segment
” means each segment of an Individual System comprised of facilities beginning at a Receipt Point and ending
at an Internal Transfer Point. If an Individual System does not contain any such distinct segment, then the term Facility Segment shall be synonymous with Individual System.
“
Individual Fee
” means the aggregate of the Individual First Phase Fee, the Individual Second Phase Fee and the Individual
Disposal by Truck Fee;
provided
that for purposes of the annual escalation in the Individual Fee described in
Section 6.2(b)
, such term shall not include any Reimbursed Amount.
“
Individual Second Phase Fee
” means the Monthly fee for providing Second Phase Services at a particular Individual System, as
set forth opposite the heading “Individual Second Phase Fee” on the applicable Midstream Agreement Addendum;
provided
that the Individual Second Phase Fee shall accrue only with respect to Services performed by Midstream Co on
Product flowing through an Individual System.
Amendment 01 –
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Second Amended and Restated Produced Water Services Agreement
Laramie River Produced Water Agreement
LAGC05-PW
“
Individual System
” means the portion of the System beginning at the Receipt
Points and ending at the Delivery Points. The Individual Systems in existence on the Effective Date are more particularly described in writing between Producer and Midstream Co. Additional Individual Systems may be added to the System from time to
time in satisfaction of the needs identified by Producer and evidenced in writing between Producer and Midstream Co.
“
Other System
Fuel
” means any natural gas delivered into Midstream Co’s custody by Producer pursuant to a Transaction Document between Producer and Midstream Co and measured and used as fuel by Midstream Co.
1.2 The defined terms “Drip Condensate”, “Gas”, “Gas System”, “Individual Second Phase
Rate”, and “Other Services” are hereby deleted.
1.3 Clauses (a) and (b) of the defined term
“Dedicated Production” are hereby amended and restated to read as follows: “(a) Product owned by Producer or an Affiliate of Producer and produced from a Well within the Dedication Area that is operated by Producer or an Affiliate
under the Control of Producer, (b) Reserved, and”.
1.4 The defined term “Product” is hereby amended
by inserting the following sentence at the end of such definition:
“In the event Producer exercises its Trucking Election, the term
“Product” shall refer to all water that is accepted for delivery at a SWD Trucking Facility for the account of Midstream Co.”
1.5 The defined term “Services” is hereby amended by deleting “and (g)” at the end of clause (f) and
inserting in place thereof the following: “, (g) Trucked Water Services and (h)”.
1.6 The following new
definitions shall be added to Article 1 in alphabetical order:
“
Approved SWD Vendor
” means Midstream Co or a Third Party,
in either case, as mutually agreed in writing by the Parties; provided, however, that if an Approved SWD Vendor rejects any Product delivered to a SWD Trucking Facility for quality or safety reasons, then Midstream Co shall be entitled to select an
alternative vendor to take title to, store, handle, and dispose of such Product without obtaining Producer’s approval of such vendor, and such vendor shall be deemed an Approved SWD Vendor for such purpose.
“
Flowback
” means the water-based solution that flows back to the surface during and after the completion of hydraulic
fracturing a Well.
“
Flowback Period
” means, with respect to a Well, the period of time commencing on the Day Flowback
begins to return to the surface and ending on the earlier of the date (a) on which such Well or the Separator Facility to which such Well is connected is connected to the Individual System or (b) that is 10 Days following the first Day of
the applicable Flowback Period.
Amendment 01 –
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Second Amended and Restated Produced Water Services Agreement
Laramie River Produced Water Agreement
LAGC05-PW
“
Individual Disposal by Truck Fee
” means the Monthly fee for providing Trucked
Water Services with respect to Dedicated Production delivered to a SWD Trucking Facility, as set forth opposite the heading “Individual Disposal by Truck Fee” on the applicable Midstream Agreement Addendum;
provided
that the
Individual Disposal by Truck Fee shall accrue only with respect to Dedicated Production delivered by truck to a SWD Trucking Facility.
“
Pipeline Unavailability
” means any time during which the Individual System is not capable of accepting or transporting
volumes of Product for any reason, including Flowback that exceeds the capacity of the Individual System, Flowback at a time when the Individual System is not yet online, curtailments on the Individual System and interruptions of Service.
“
SWD Trucking Facility
” means an Approved SWD Vendor’s saltwater disposal well that Midstream Co has designated for
disposal of Dedicated Production that is transported by truck.
“
Transporter
” means a wastewater truck transportation
company engaged by Producer or Midstream Co, as applicable, to transport Trucked Volumes to the SWD Trucking Facility.
“
Trucked
Volumes
” has the meaning given to it in
Section 18.3(a)
.
“
Trucked Water Services
” means, at any time
when Producer has exercised its Trucking Election, Midstream Co shall make arrangements for the disposal of Dedicated Production that arrives by truck at the applicable SWD Trucking Facility. In addition, in connection with a Trucking Election,
(a) during a Flowback Period, if Producer requests and Midstream Co agrees, then with Producer’s reasonable cooperation, Midstream Co will arrange for the dispatching of the applicable trucks to the applicable SWD Trucking Facility and
otherwise coordinate the water hauling trucks and (b) at all other times during a Pipeline Unavailability in which Producer has made a Trucking Election, Midstream Co shall arrange for the dispatching of the applicable trucks to the applicable
SWD Trucking Facility and otherwise coordinate the water hauling trucks.
“
Trucking Election
” has the meaning given to it
in
Section 2.3(b)
.
2.
Amendments to Article 2
.
2.1
Section 2.3(b)
of the Agreement Terms and Conditions is hereby amended and restated in its entirety to read:
“(b) during Pipeline Unavailability, Producer may elect to deliver Dedicated Production directly to a SWD Trucking Facility (the “
Trucking Election
”); and”.
Amendment 01 –
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Second Amended and Restated Produced Water Services Agreement
Laramie River Produced Water Agreement
LAGC05-PW
2.2
Section 2.3(d)
of the Agreement Terms and Conditions is hereby
amended and restated in its entirety to read: “(d) to pool, communitize or unitize Producer’s interests with respect to Dedicated Production”.
2.3
Section 2.4(b)(iv)
of the Agreement Terms and Conditions is amended and restated in its entirety to read:
“(iv)
Reserved.
”.
3.
Amendments to Article 3
.
3.1
Section 3.1(e)
of the Agreement Terms and Conditions is hereby amended by deleting the sentence that reads as
follows “In the sole discretion of each Person serving as a Midstream Co under a Midstream Agreement Addendum, such Midstream Co may work with any other Midstream Co to prepare and deliver a System Plan jointly.” and inserting in place
thereof the following sentence: “Midstream Co may, in its sole discretion, work with OpCo or any of OpCo’s subsidiaries to prepare and deliver a System Plan jointly with such other entity or entities.”
3.2
Section 3.2
of the Agreement Terms and Conditions is hereby amended by inserting the following new
clause
(e)
immediately following
clause (d)
of such
Section 3.2
:
“(e)
Substation and Interconnection
Facilities
. The obligations of Midstream Co hereunder to design and construct the Individual System and to perform the Services do not include the design or construction of any substation or other interconnecting facilities required to procure
electricity for the Individual System. If a substation or any other interconnecting facility is required in order for Midstream Co to perform its obligations hereunder, Midstream Co and Producer shall enter into a separate agreement setting forth
each Party’s responsibilities in connection therewith, including an allocation of responsibility for all associated costs and expenses.”
4.
Amendments to Article 6
.
4.1 Clause (ii) of
Section 6.1
of the Agreement Terms and Conditions is hereby amended and restated in its
entirety to read as follows: “(ii) the Individual Second Phase Fee, if any, applicable to Second Phase Services performed within the Dedication Area,”
4.2
Section 6.1
of the Agreement Terms and Conditions is further amended by deleting the period at the end of such
Section 6.1
and inserting in place thereof the following clause: “and (iv) the Individual Disposal by Truck Fee, if any.”
4.3
Section 6.3(d)
of the Agreement Terms and Conditions is hereby amended and restated in its entirety to read as
follows: “
Other System Fuel
. Midstream Co may elect to use Other System Fuel as fuel to operate the Individual System, or to generate electricity for the operation of the Individual System and shall account for any Other System Fuel used
by Midstream Co. Producer, at its sole cost and expense, shall procure all fuel, in addition to Other System Fuel used by Midstream Co, if any, required to operate the Individual System or to generate electricity for the operation of the Individual
System and arrange for transportation of such fuel to the Individual System.”.
Amendment 01 –
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Second Amended and Restated Produced Water Services Agreement
Laramie River Produced Water Agreement
LAGC05-PW
5.
Amendments to Article 8
. Clause (d) of
Section 8.2
of the Agreement
Terms and Conditions is hereby amended by deleting the phrase “and
Section 17.11
shall” and inserting in place thereof the clause: “,
Section 17.11
and
Section 18.7
shall”.
6.
New Article 18
. The following new
Article 18
shall be inserted immediately following the conclusion of
Article 17
of
the Agreement Terms and Conditions:
Article 18
Pipeline Unavailability
Section 18.1
Pipeline Unavailability
.
(a) It is the intention of the Parties to use the Individual System for all Dedicated Production. To accommodate operational
upsets and periods of increased flow (such as during Flowback), the Parties have agreed under
Section 2.3(b)
that, during Pipeline Unavailability, Producer shall elect to either (i) exercise the Trucking Election or (ii) cease
producing Dedicated Production until the end of the Pipeline Unavailability, as provided in
Section 18.2
. To the extent Producer exercises its Trucking Election, this
Article 18
shall govern with respect to the Trucked Volumes and
the other matters set forth herein, rather than
Articles 4
,
7
(other than
Section 7.3
as it applies to Trucked Volumes delivered to a SWD Trucking Facility that fail to meet the quality requirements of
Section 18.3(d)
) and
9
and
Sections 5.1
,
5.2
,
5.3
,
5.4
, and
5.6
.
(b)
The Parties agree that during Pipeline Unavailability, Producer shall not have the right to temporary services under
Sections 3.3(a)
and
3.3(b)
of the Agreement or to a temporary release under
Section 2.4(b)(ii)
of the
Agreement except to the extent that Midstream Co fails to provide Trucked Water Services.
(c) At Producer’s election,
if the Pipeline Unavailability arises from Midstream Co’s failure to meet an On-Line Deadline, Producer may exercise its Trucking Election for so long as it desires, rather than exercising its right to a permanent release under
Section 2.4(a)(i)
and
Section 2.4(a)(ii)
. If the Parties have agreed to connect the applicable Individual System to a Well or Separator Facility after Flowback has started, then the fact of a Pipeline Unavailability occurring
after Flowback has started shall not constitute a failure by Midstream Co to meet an On-Line Deadline and Producer shall not have a right to a permanent release under
Section 2.4(a)(i)
and
Section 2.4(a)(ii)
until such time
as the agreed upon connection date has passed.
Section 18.2
Exercise of Trucking Election
.
(a) In the event that Pipeline Unavailability will result from a Well completion prior to the connection of the Individual
System, Producer shall give Midstream Co notice that Dedicated Production is expected to be produced from the applicable Well at least 72 hours prior to such production. If Pipeline Unavailability arises after the applicable Well or Separator
Facility is online,
Amendment 01 –
Page 6
Second Amended and Restated Produced Water Services Agreement
Laramie River Produced Water Agreement
LAGC05-PW
Midstream Co shall deliver notice to Producer of planned and unplanned curtailments and interruptions as required in
Section 5.5
.
(b) Once Producer or Midstream Co, as applicable, has delivered notice to the other Party that a Pipeline Unavailability is
expected (or has occurred), Producer will inform Midstream Co whether Producer elects to exercise its Trucking Election or to cease producing Dedicated Production until the end of the Pipeline Unavailability. If Producer exercises the Trucking
Election during the Flowback Period, Producer shall coordinate with the water hauling trucks and arrange for transportation of the Dedicated Production to the SWD Trucking Facility at its sole cost and expense until the end of the Flowback Period.
At all other times during a Pipeline Unavailability, including when Flowback is occurring after the expiration of the Flowback Period, Midstream Co shall coordinate with the water hauling trucks and arrange for transportation of the Dedicated
Production to the SWD Trucking Facility as part of the Trucked Water Services unless Producer has elected to cease producing Dedicated Production.
Section 18.3
Delivery of and Title to Trucked Volumes
.
(a)
Trucked Water Services Obligation
. Upon the exercise of a Trucking Election, Midstream Co shall cause an Approved
SWD Vendor to accept delivery of, take title to, store, handle and dispose of Dedicated Production that is delivered by truck to a SWD Trucking Facility. Upon the exercise of a Trucking Election, Midstream Co may, in its sole discretion, also accept
delivery of, take title to, store, handle and dispose of other Product delivered by truck to a SWD Trucking Facility. The volumes that are actually delivered by truck shall be referred to as “Trucked Volumes”.
(b)
Consistent Volumes
. The Trucked Volumes delivered to the applicable SWD Trucking Facility shall be at a rate of
delivery that is as uniform as reasonably possible in accordance with Producer’s drilling, completion, and frac schedule.
(c)
Title and Custody
. Title to and risk of loss to the Trucked Volumes and all contents thereof shall pass from
Producer to Approved SWD Vendor when delivered into Approved SWD Vendor’s storage tanks at the SWD Trucking Facility, unless the Parties otherwise agree in writing.
(d)
Quality
. Producer represents and warrants that all Trucked Volumes delivered to an Approved SWD Vendor may lawfully
be disposed of in Class II disposal wells. Midstream Co’s performance of Trucked Water Services for any Trucked Volumes that do not meet such requirement shall not relieve Producer from any liability for Producer’s breach of the foregoing
representation and warranty nor serve as a waiver of any rights or remedies available to Midstream Co therefor.
(e)
Prohibition on Skimming
. The Party that coordinates the water hauling trucks shall direct the Transporter not to skim, transfer, sell, or otherwise remove hydrocarbons or Trucked Volumes from trucks after receipt by such Transporter and prior
to such Trucked Volumes being received by the Approved
Amendment 01 –
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Second Amended and Restated Produced Water Services Agreement
Laramie River Produced Water Agreement
LAGC05-PW
SWD Vendor. If the Approved SWD Vendor alleges that the Trucked Volumes delivered appear to have been handled in a manner inconsistent with the foregoing sentence, Producer shall corporate with
Midstream Co and the Approved SWD Vendor in a review and analysis and, if required by the Approved SWD Vendor, take corrective action in a timely manner. If Transporters engaged by Producer fail to comply with the directions received, then Midstream
Co may direct Producer to use a different Transporter.
Section 18.4
Unavailability of a SWD Trucking Facility
.
If for any reason there is a disruption of receipts at the SWD Trucking Facility, the Parties shall work in good faith to find a mutually agreeable resolution. If for any reason Midstream Co receives reimbursements in respect of trucking as a result
of an originally scheduled SWD Trucking Facility being unable to accept deliveries, Midstream Co shall disclose such reimbursements on the applicable invoice and pass through such reimbursements to Producer if Producer paid the costs of the
applicable Transporter directly.
Section 18.5
Testing; Non-Conforming Product
. If requested by Midstream Co,
Producer shall obtain water samples for analyses and retain appropriate qualified personnel to conduct analyses following methodologies considered appropriate in the industry or shall permit Midstream Co to obtain such samples.
Section 18.6
Producer’s Grant of Access
. Producer hereby grants to Midstream Co, and shall grant to each
Transporter, without warranty of title, either express or implied, to the extent that it may lawfully and is contractually permitted to do so without the incurrence of additional expense, the rights of ingress and egress with respect to, and the
right to access, all lands constituting Dedicated Properties for the purposes of (a) transporting Trucked Volumes, and (b) obtaining water samples as described in
Section 18.5
.
Section 18.7
Information
. Producer agrees that information it supplies to Midstream Co regarding anticipated
volumes of Dedicated Production and Trucked Volumes may be shared with an Approved SWD Vendor to the extent required by the applicable Approved SWD Vendor to assist in planning and operations, and Producer agrees to provide additional information
regarding anticipated volumes of Dedicated Production and Trucked Volumes to the extent requested by Midstream Co in response to inquiries from an Approved SWD Vendor (so long as Midstream Co is required to deliver the requested information in order
to comply with Midstream Co’s contractual arrangements with such Approved SWD Vendor). Under
Section 3.1
, Midstream Co has the right to hold certain meetings with Producer, and at the request of Midstream Co, one of such meetings
per year may be held in conjunction with the Approved SWD Vendor to discuss confer regarding planned activities.
Section 18.8
Indemnification in Respect of Trucked Volumes
. Without in any way limiting any indemnification
obligation otherwise set forth in the Agreement, the Parties agree that the indemnification obligations of Producer set forth in
Section 7.3
and
Section 15.2(b)
apply to Trucked Volumes delivered to a SWD Trucking Facility.
Amendment 01 –
Page 8
Second Amended and Restated Produced Water Services Agreement
Laramie River Produced Water Agreement
LAGC05-PW
Section 18.9
Invoices from Approved SWD Vendor
. The Party that
engages the Transporter shall take all reasonable measures to ensure that the invoicing procedures that Midstream Co has negotiated with the Approved SWD Vendor are used, including notation of the geographic area to which the services pertain.
Midstream Co shall provide a written copy of such procedures to Producer upon request.
7.
Amendments to Agreement Addendum
.
7.1 The description of the “Dedication Area” appearing in Agreement Addendum 05 is hereby amended and restated in its
entirety to read as follows:
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Dedication Area
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The following areas within Weld County, Colorado
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Township
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Range
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Sections
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T7N
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R65W
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ALL
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T6N
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R65W
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1-5, 9-17, 20-29, 33-36
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T5N
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R67W
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13, 14, 23-26, 35, 36
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T5N
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R66W
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18-20, 25, S/2 26, 27-36
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T5N
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R65W
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1-3, E/2 4, 14
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T4N
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R67W
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1,2, 26, 27, 34, 35
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Except and excluding the wells, leases, and other acreage described in the property exhibits attached to the Releases of Dedication.
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7.1 The specifications regarding the “Individual Second Phase Rate” appearing in the
Agreement Addendum are hereby amended and restated in their entirety and the specifications regarding the “Individual Disposal By Truck Fee” are hereby added to the Agreement Addendum as follows:
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Individual Second Phase Fee
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An amount equal to the actual costs incurred by Midstream Co for providing the Second Phase Services multiplied by 1.05.
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Individual Disposal by Truck Fee
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An amount equal to the actual costs incurred by Midstream Co for providing the Trucked Water Services with respect to Dedicated Production delivered to a SWD Trucking Facility multiplied by 1.05.
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8.
Confidentiality
. Pursuant to Section 17.11 of the Agreement (which appears in the Agreement
Terms and Conditions), the Parties have agreed to treat the information exchanged in connection with and the provisions of the Agreement as confidential. In addition, confidential treatment has been requested with the Securities and Exchange
Commission for the pricing terms of the Agreement and the Parties agree to take appropriate measures to abide by the requirements imposed by the Securities and Exchange Commission to preserve such confidential treatment, if granted.
Amendment 01 –
Page 9
Second Amended and Restated Produced Water Services Agreement
Laramie River Produced Water Agreement
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9.
Confirmation
. The provisions of the Agreement, as amended by this Amendment, shall
remain in full force and effect following the effectiveness of this Amendment. No provision of the Agreement is amended or otherwise modified hereby, except as expressly stated herein.
10.
No Waiver
. The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy
of any Party to the Agreement, nor constitute a waiver of any provision of the Agreement. On and after the Amendment Effective Time, this Amendment shall for all purposes constitute a part of the Agreement.
11.
Counterparts
. This Amendment may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be
an original instrument, but all of such counterparts shall constitute for all purposes one agreement. Any signature hereto delivered by a Party by electronic mail shall be deemed an original signature hereto.
12.
Governing Law
. This Amendment shall be governed by and construed in accordance with the laws of the State, excluding any conflicts
of law rule or principle that might refer construction of such provisions to the laws of another jurisdiction.
(Signature Pages follow)
Amendment 01 –
Page 10
Second Amended and Restated Produced Water Services Agreement
Laramie River Produced Water Agreement
LAGC05-PW
IN WITNESS WHEREOF, the Parties hereto have executed this Amendment to the Agreement in
duplicate originals to be effective as of the Amendment Effective Time.
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“Producer”
NOBLE ENERGY, INC.
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By:
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Gary W. Willingham
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Executive Vice President
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STATE OF TEXAS
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ss.
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COUNTY OF HARRIS
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The foregoing instrument was acknowledged before me this
day of
,
, by Gary W. Willingham as Executive Vice President of Noble Energy, Inc., a Delaware corporation.
WITNESS my hand and official seal.
My commission expires:
Amendment 01 –
Signature Page 1
Second Amended and Restated Produced Water Services Agreement
Laramie River Produced Water Agreement
LAGC05-PW
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“Midstream Co”
LARAMIE RIVER DEVCO LP
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By:
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Laramie River DevCo GP LLC
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By:
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Noble Midstream Services, LLC
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By:
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Terry R. Gerhart
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Chief Executive Officer
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STATE OF TEXAS
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ss.
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COUNTY OF HARRIS
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The foregoing instrument was acknowledged before me this
day of
,
, by Terry R. Gerhart as Chief Executive Officer of Noble Midstream Services, LLC, which is the
sole member of Laramie River DevCo GP LLC, which is the general partner of Laramie River DevCo LP, a Delaware limited partnership.
WITNESS my hand and
official seal.
My commission expires:
Amendment 01 –
Signature Page 2
Second Amended and Restated Produced Water Services Agreement
Laramie River Produced Water Agreement
LAGC05-PW
Exhibit 10.16.2
When Recorded, Mail To:
Attn: DJ Land Manager
1625 Broadway, Suite 2200
Denver, CO 80202
SECOND AMENDED AND RESTATED
PRODUCED WATER SERVICES AGREEMENT
AGREEMENT ADDENDUM XX
OPCO’S OBLIGATIONS
This
AGREEMENT ADDENDUM XX (this “
Agreement Addendum
”) (a) shall be effective as among the Persons named below as “Producer” and “OpCo” as of the date specified below as the “Effective Date,”
(b) incorporates the Second Amended and Restated Agreement Terms and Conditions Relating to Produced Water Services (the “
Agreement Terms and Conditions
”), which were last amended effective as of March 31, 2016 and
recorded in the real property records of Weld County, Colorado on
as
, and
(c) together with the Agreement Terms and Conditions, shall constitute one contract and shall be the Agreement of the Parties. Except as otherwise set forth herein (i) all terms shall have the meanings assigned to such terms in the
Agreement Terms and Conditions, and (ii) all references to Exhibits, Appendices, Articles, Sections, subsections and other subdivisions refer to the corresponding Exhibits, Appendices, Articles, Sections, subsections and other subdivisions of
or to the Agreement Terms and Conditions.
OpCo owns, directly or indirectly, all of the Controlling interest in Colorado River DevCo LP,
San Juan River DevCo LP, Green River DevCo LP, Gunnison River DevCo LP, and Laramie River DevCo LP (collectively, the “
Original Subsidiaries
”).
Producer desires for OpCo to cause the Original Subsidiaries to provide the Services utilizing the System in order for Producer to obtain a
consistent level of service with respect to the gathering of and other Services related to Product that are required by Producer within the Service Area, and OpCo desires to cause the Original Subsidiaries to provide the Services to Producer, on the
terms and subject to the conditions of this Agreement.
In order for Producer to obtain a consistent level of service with respect to the
gathering of and other Services related to Product that are required by Producer within the Service Area, Producer and OpCo hereby enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements in this Agreement, OpCo and Producer hereby agree as follows:
Agreement Addendum XX
– Page 1
Second Amended and Restated Produced Water Services Agreement
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Producer
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Noble Energy, Inc., a Delaware corporation
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OpCo
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Noble Midstream Services, LLC, a Delaware limited liability company
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Effective Date
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March 31, 2016
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Notices and Payments
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Notice Address – General Matters & Correspondence
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OpCo:
Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Chief
Financial Officer
John F.
Bookout, IV
Telephone: (832) 639-7134
Email:
John.Bookout@nblenergy.com
Producer:
Noble Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO 80202
Attention: Director of
USO Finance,
Gerald Free
Telephone: (303) 228-4174
Email: Gerald.Free@nblenergy.com
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Notice Address – Operational Matters
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OpCo:
Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Chief
Operating Officer
John C.
Nicholson
Telephone: (281) 876-6186
Email:
John.Nicholson@nblenergy.com
Producer:
Noble Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO 80202
Attention: Vice
President – DJ Business Unit
Mark
Patteson
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Agreement Addendum XX
– Page 2
Second Amended and Restated Produced Water Services Agreement
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Notice Address – Invoicing Matters
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OpCo:
OpCo
1001 Noble Energy Way
Houston, TX 77070
Attention: Ian Dams
Telephone: (832) 639-7406
Email:
ian.dams@nblenergy.com
Producer:
Noble Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO 80202
Attention: Director of Revenue Accounting,
John Nedelka
Telephone: (281) 872-3120
Email: john.nedelka@nblenergy.com
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Payments by Electronic Funds Transfer
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Producer:
ABA/Routing Number: 021000021
Account Number: 08805135066
Account Name: Noble Energy, Inc.
Financial Institution: JP
Morgan
Bank Swift: CHASUS33
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1.
|
Definitions
. The term “Original Midstream Co” shall refer to each entity that is both a Midstream Co party to an Agreement related to the gathering of Product and is a subsidiary of OpCo. For the
avoidance of doubt, OpCo has no obligations or responsibilities towards or with respect to NBL Midstream Holdings LLC.
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2.
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OpCo’s Obligations
. OpCo shall cause each Original Midstream Co to comply with the obligations of such Original Midstream Co under the Midstream Agreement Addendum to which such Original Midstream Co is a
party and the Agreement Terms and Conditions. If at any time, an Original Midstream Co assigns its obligations under a Midstream Agreement Addendum to a Midstream Co Assignee, OpCo shall have no obligations under this Section 1 with respect to
such Midstream Co Assignee and shall not be liable for any performance or non-performance by such Midstream Co Assignee.
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3.
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Coordination of System Plans
. Subject to Midstream Co’s rights under
Section 13.2
, OpCo shall cause the Original Midstream Cos to coordinate their System Plans so that, taken as a whole, the
System Plans delivered by all of the Original Midstream Cos satisfy the needs for Services throughout the Service Area, except to the extent OpCo reasonably determines any portion of the Service Area should be serviced by any Midstream Co Assignee.
|
Agreement Addendum XX
– Page 3
Second Amended and Restated Produced Water Services Agreement
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4.
|
No Other Obligations
. OpCo shall not have any of the rights or be bound by any of the terms of the Agreement Terms and Conditions, except as provided in (a) Section 1 of this Agreement Addendum, and
(b)
Article 8
and
Article 17
of the Agreement Terms and Conditions. No reference to a “Party” or the “Parties” in the Agreement Terms and Conditions shall be deemed to include a reference to OpCo.
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5.
|
Enforcement by OpCo
. OpCo shall have the right to enforce all rights of each Original Midstream Cos under the Agreement Addendum to which such Original Midstream Co is a Party.
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6.
|
Notices Delivered to OpCo
. All notices and other communications required under the Agreement Terms and Conditions to be delivered to an Original Midstream Co shall be deemed delivered if received by OpCo.
|
(End of Agreement Addendum XX)
Agreement Addendum XX
– Page 4
Second Amended and Restated Produced Water Services Agreement
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement in duplicate originals to be
effective as of the Effective Date.
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“Producer”
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NOBLE ENERGY, INC.
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By:
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/s/ Gary W. Willingham
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Gary W. Willingham
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Executive Vice President
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STATE OF TEXAS
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)
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)
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ss.
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COUNTY OF HARRIS
|
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)
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|
The foregoing instrument was acknowledged before me this
26th
day of April, 2016, by Gary W. Willingham, Executive Vice
President of Noble Energy, Inc., a Delaware corporation, on behalf of said corporation.
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/s/ Vickie L. Graham
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Notary Public in and for the State of Texas
|
Agreement Addendum XX
– Signature Page 1
Amended and Restated Produced Water Services Agreement
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“OpCo”
|
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NOBLE MIDSTREAM SERVICES, LLC
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By:
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/s/ Terry R. Gerhart
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Terry R. Gerhart
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Chief Executive Officer
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STATE OF TEXAS
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)
|
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)
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ss.
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COUNTY OF HARRIS
|
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)
|
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|
The foregoing instrument was acknowledged before me this
26th
day of April, 2016, by Terry R. Gerhart, Chief Executive
Officer of Noble Midstream Services, LLC, a Delaware limited liability company, on behalf of said company.
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/s/ Joanne Garner
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Notary Public in and for the State of Texas
|
Agreement Addendum XX
– Signature Page 2
Amended and Restated Produced Water Services Agreement
Exhibit 10.17
SECOND AMENDED AND RESTATED
FRESH WATER SERVICES AGREEMENT
consisting of the
SECOND
AMENDED AND RESTATED
AGREEMENT TERMS AND CONDITIONS RELATING TO
FRESH WATER SERVICES
taken
together with the applicable
SECOND AMENDED AND RESTATED
AGREEMENT ADDENDUM
now or
in the future effective
TABLE OF CONTENTS
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PAGE
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ARTICLE 1 DEFINITIONS
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2
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Section 1.1
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Definitions
|
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2
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Section 1.2
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Other Terms
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13
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Section 1.3
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References and Rules of Construction
|
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14
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ARTICLE 2 PRODUCER DEDICATION AND COMMITMENT
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14
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Section 2.1
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Producer’s Dedications and Commitment
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14
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Section 2.2
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Conflicting Dedications
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15
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Section 2.3
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Producer’s Reservation
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15
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Section 2.4
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Releases from Dedication and Commitment
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15
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Section 2.5
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Covenant Running with the Land
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18
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Section 2.6
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Recording of Agreement
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18
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ARTICLE 3 SYSTEM EXPANSION AND CONNECTION OF WELLS
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18
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Section 3.1
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Development Report; System Plan; Meetings
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18
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Section 3.2
|
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Expansion of System and Connection of Wells
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21
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Section 3.3
|
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Temporary Services
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22
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Section 3.4
|
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Cooperation
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|
23
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Section 3.5
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Grant of Access; Real Property Rights
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23
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ARTICLE 4 MEASUREMENT DEVICES
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24
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Section 4.1
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Measurement Devices
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24
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Section 4.2
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Measurement Procedures
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26
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ARTICLE 5 SERVICES
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26
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Section 5.1
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Limitations on Service to Third Parties
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26
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Section 5.2
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Tender of Fresh Water
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26
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Section 5.3
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Services; Service Standard
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27
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Section 5.4
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Adjustments
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27
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Section 5.5
|
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Suspension/Shutdown of Service
|
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27
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ARTICLE 6 FEES
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28
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Section 6.1
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Fees
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28
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Section 6.2
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Fee Adjustments
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28
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Section 6.3
|
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System Fuel
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29
|
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|
ARTICLE 7 QUALITY AND SPECIFICATIONS
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30
|
|
Second Amended and
Restated
Fresh Water Services Agreement
-i-
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Section 7.1
|
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Quality Standard for Fresh Water
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30
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Section 7.2
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Non-Conforming Fresh Water
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|
31
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Section 7.3
|
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Indemnification Regarding Quality
|
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|
31
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Section 7.4
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Delivery Rates
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32
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Section 7.5
|
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Producer Facilities
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32
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ARTICLE 8 TERM
|
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|
32
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Section 8.1
|
|
Term
|
|
|
32
|
|
|
Section 8.2
|
|
Effect of Termination or Expiration of the Term
|
|
|
32
|
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|
ARTICLE 9 TITLE AND CUSTODY
|
|
|
32
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|
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|
Section 9.1
|
|
Title and Custody Raw Fresh Water
|
|
|
32
|
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|
Section 9.2
|
|
Title and Custody Recycled Water
|
|
|
33
|
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|
ARTICLE 10 BILLING AND PAYMENT
|
|
|
33
|
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|
Section 10.1
|
|
Statements
|
|
|
33
|
|
|
Section 10.2
|
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Payments
|
|
|
34
|
|
|
Section 10.3
|
|
Adequate Assurances
|
|
|
34
|
|
|
Section 10.4
|
|
Audit
|
|
|
35
|
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|
|
ARTICLE 11 REMEDIES
|
|
|
35
|
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|
|
|
|
|
Section 11.1
|
|
Suspension of Performance; Temporary Release from Dedication
|
|
|
35
|
|
|
Section 11.2
|
|
No Election
|
|
|
36
|
|
|
Section 11.3
|
|
DIRECT DAMAGES
|
|
|
36
|
|
|
|
|
|
ARTICLE 12 FORCE MAJEURE
|
|
|
36
|
|
|
|
|
|
|
Section 12.1
|
|
Force Majeure
|
|
|
36
|
|
|
Section 12.2
|
|
Extensions Due to Force Majeure
|
|
|
37
|
|
|
|
|
|
ARTICLE 13 CHANGE IN LAW AND SCOPE
|
|
|
37
|
|
|
|
|
|
|
Section 13.1
|
|
Changes in Applicable Law
|
|
|
37
|
|
|
Section 13.2
|
|
Unprofitable Operations and Rights of Termination
|
|
|
38
|
|
|
|
|
|
ARTICLE 14 RESERVED
|
|
|
39
|
|
|
|
|
|
ARTICLE 15 INDEMNIFICATION AND INSURANCE
|
|
|
39
|
|
|
|
|
|
|
Section 15.1
|
|
Reciprocal Indemnity
|
|
|
39
|
|
|
Section 15.2
|
|
Indemnification Regarding Third Parties
|
|
|
40
|
|
|
Section 15.3
|
|
Reserved
|
|
|
40
|
|
|
Section 15.4
|
|
Insurance
|
|
|
40
|
|
Second Amended and
Restated
Fresh Water Services Agreement
-ii-
|
|
|
|
|
|
|
|
|
|
|
|
ARTICLE 16 ASSIGNMENT
|
|
|
40
|
|
|
|
|
|
|
Section 16.1
|
|
Assignment of Rights and Obligations under this Agreement
|
|
|
40
|
|
|
Section 16.2
|
|
Pre-Approved Assignments
|
|
|
41
|
|
|
Section 16.3
|
|
Change of Control
|
|
|
41
|
|
|
|
|
|
ARTICLE 17 OTHER PROVISIONS
|
|
|
42
|
|
|
|
|
|
|
Section 17.1
|
|
Relationship of the Parties
|
|
|
42
|
|
|
Section 17.2
|
|
Notices
|
|
|
42
|
|
|
Section 17.3
|
|
Entire Agreement; Conflicts
|
|
|
42
|
|
|
Section 17.4
|
|
Waivers; Rights Cumulative
|
|
|
42
|
|
|
Section 17.5
|
|
Amendment
|
|
|
43
|
|
|
Section 17.6
|
|
Governing Law; Arbitration
|
|
|
43
|
|
|
Section 17.7
|
|
Parties in Interest
|
|
|
43
|
|
|
Section 17.8
|
|
Preparation of Agreement
|
|
|
43
|
|
|
Section 17.9
|
|
Severability
|
|
|
43
|
|
|
Section 17.10
|
|
Counterparts
|
|
|
44
|
|
|
Section 17.11
|
|
Confidentiality
|
|
|
44
|
|
EXHIBITS
|
|
|
|
|
EXHIBIT A
|
|
SERVICE AREA
|
|
EXHIBIT B
|
|
DOWNTIME DURATION
|
|
EXHIBIT C
|
|
RESERVED
|
|
EXHIBIT D
|
|
INSURANCE
|
Second Amended and
Restated
Fresh Water Services Agreement
-iii-
SECOND AMENDED AND RESTATED
AGREEMENT TERMS AND CONDITIONS RELATING TO
FRESH WATER SERVICES
These SECOND AMENDED AND RESTATED AGREEMENT TERMS AND CONDITIONS RELATING TO FRESH WATER SERVICES (these “
Agreement Terms and
Conditions
”) (i) shall be effective with respect to each signatory of each Agreement Addendum as of the Effective Date specified in the applicable Agreement Addendum (defined below), (ii) were last updated as of March 31,
2016, (iii) are incorporated into and made a part of each Agreement Addendum, and (iv) taken together with the applicable Agreement Addendum shall constitute one Agreement, separate and apart from any other Agreement governed by these
Agreement Terms and Conditions.
Recitals:
|
|
A.
|
Producer (defined below) owns rights, title and interests in certain oil and gas leases and other interests located within the Service Area (defined below) that require services related to Fresh Water (defined below)
for construction, maintenance, production and operations activities, including hydraulic fracturing operations and other purposes.
|
|
|
B.
|
Producer wishes to obtain such Fresh Water services from each Midstream Co (defined below) that executes and delivers a Midstream Agreement Addendum (defined below) pursuant to these Agreement Terms and Conditions, as
modified by the applicable Midstream Agreement Addendum.
|
|
|
C.
|
Producer owns rights and interests in certain water rights, leases and other interests that permit Producer to take custody of and use Raw Fresh Water (defined below) from certain rivers, streams, reservoirs and other
sources, and some of the water of which Producer takes custody is intended to be stored prior to use by Producer.
|
|
|
D.
|
Producer owns rights and interests in certain Recycled Water (defined below) that permit Producer to take custody of and use such Recycled Water, and some of such Recycled Water of which Producer takes custody is
intended to be stored prior to redeployment by Producer.
|
|
|
E.
|
Each Midstream Co that executes and delivers a Midstream Agreement Addendum owns and operates an Individual System (defined below), which receives or will receive Fresh Water from, stores or will store Fresh Water in,
and delivers or will deliver Fresh Water to locations in the applicable Dedication Area (defined below).
|
|
|
F.
|
OpCo (defined below) owns, directly or indirectly, the Controlling (defined below) equity interests in each Original Midstream Co (defined below) and intends to assist all of the Original Midstream Cos to, collectively,
provide all of the Services (defined below) required by Producer hereunder, as provided in the OpCo Agreement Addendum (defined below).
|
Second Amended and
Restated
Fresh Water Services Agreement
-1-
Agreements:
NOW, THEREFORE, in consideration of the foregoing Recitals, which are incorporated herein, the mutual agreements in this Agreement, and other
good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, OpCo, Midstream Co, and Producer hereby agree as follows:
Article 1
Definitions
Section 1.1
Definitions
. As used in this Agreement, the following capitalized terms shall have the meanings ascribed to
them below:
“
Abandonment Date
” has the meaning given to it in
Section 3.2(d)
.
“
Additional/Accelerated Well
” has the meaning given to it in
Section 3.2(c)
.
“
Adequate Assurance of Performance
” has the meaning given to it in
Section 10.3
.
“
Adjustment Year
” has the meaning given to it in
Section 6.2(a)(ii)
.
“
Affiliate
” means, with respect to any Person, any other Person that directly, or indirectly through one or more
intermediaries, Controls, or is Controlled by, or is under common Control with, such Person. The following sentence shall not apply to the term “Affiliate” as used in
Section 2.2(b)
or the definition of “Conflicting
Dedication”: Producer and its subsidiaries (other than OpCo and its subsidiaries), on the one hand, and OpCo and its subsidiaries, on the other, shall not be considered Affiliates of each other for purposes of this Agreement.
“
Agreement
” means the applicable Agreement Addendum taken together with these Agreement Terms and Conditions, as modified by
such Agreement Addendum.
“
Agreement Addendum
” means each Midstream Agreement Addendum and OpCo Agreement Addendum.
“
Agreement Addenda
” shall be the collective reference to each Agreement Addendum then in effect.
“
Agreement
Terms and Conditions
” has the meaning given to it in the introductory paragraph.
“
Associated Water
” means water
that is produced with Crude Oil Controlled by Producer and delivered with such Crude Oil to the Crude Oil Gathering System, which will be separated prior to redelivery of such Crude Oil to Producer.
“
Barrel
” means a quantity consisting of forty-two Gallons.
“
Beneficiary
” has the meaning given to it in
Section 4.1(g)
.
“
Business Day
” means a Day (other than a Saturday or Sunday) on which federal reserve banks are open for business.
Second Amended and
Restated
Fresh Water Services Agreement
-2-
“
Cancellation Date
” has the meaning given to it in
Section 3.1(c)
.
“
Claiming Party
” has the meaning given to it in the definition of “Force Majeure”.
“
Communications
” has the meaning given to it in
Section 17.2
.
“
Conditional Amount
” has the meaning set forth in
Section 10.1(a)
.
“
Conflicting Dedication
” means any volumetric or “take or pay” or similar arrangement for the delivery of Fresh
Water to a Well within the Dedication Area for a Purpose and any arrangement requiring Producer (i) to store Fresh Water with a Third Party, (ii) to use a specified tank, pond or other storage facility owned by a Third Party or
(iii) both of the foregoing, in any case, within the Dedication Area. A right of first refusal in favor of any entity other than Original Producer, OpCo or any of their Affiliates shall be deemed to be a “Conflicting Dedication” if
Affiliates of Original Producer are prohibited from providing Services pursuant to the applicable agreement creating such right of first refusal.
“
Control
” (including the term “
Controlled
”) means with respect to any Person, the possession, direct or
indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting shares, by contract, or otherwise.
“
Credit-Worthy Person
” means a Person with a senior unsecured and credit-unenhanced long term debt rating equivalent to A- or
better as determined by at least two rating agencies, one of which must be either Standard & Poor’s or Moody’s (or if either one or both are not available, equivalent ratings from alternate rating sources reasonably acceptable to
Midstream Co).
“
Crude Oil
” means crude oil produced from oil or gas wells in the Dedication Area and Controlled by
Producer, in its natural form, which may include Associated Water naturally produced therewith.
“
Crude Oil Gathering
System
” means the Crude Oil gathering system used to provide Crude Oil gathering services to Producer.
“
Day
”
means a period of time from 7:00 a.m. Mountain Time on a calendar day until 7:00 a.m. Mountain Time on the succeeding calendar day. The term “
Daily
” shall have the correlative meaning.
“
Dedicated Properties
” means (a) the interests held by Producer or its Affiliates in the oil and gas leases, mineral
interests, and other similar interests as of the Effective Date or acquired by Producer or its Affiliates after the Effective Date that relate to land within the Dedication Area, (b) all of Producer’s interest in the Water Sources from
which Producer has the right to take Fresh Water (either through fee ownership, lease, contract or otherwise). Notwithstanding the foregoing, (i) any interest that was released pursuant to the Releases of Dedication shall not be included in
this definition of “Dedicated Properties,” (ii) any interest that is permanently released pursuant to
Section 2.4(a)
or otherwise shall cease to be included in this definition of “Dedicated Properties”
immediately upon the effectiveness of such permanent release and (iii) in the event of an assignment by a Producer (“X”) to an assignee (“Y”) that is permitted under
Article 16
, any interest that is so assigned shall
cease to be included in X’s Dedicated Properties and shall solely be included in Y’s Dedicated Properties as of the effective date of such assignment.
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“
Dedications
” means the Fresh Water Dedication and the Real Property Dedication
together, and “Dedication” means the Fresh Water Dedication or the Real Property Dedication, as applicable.
“
Dedication
Area
” means, with respect to this Agreement, the area described on the applicable Midstream Agreement Addendum. Notwithstanding the foregoing, (a) any acreage that was released pursuant to the Releases of Dedication shall not be
included in this definition of “Dedication Area,” (b) any acreage that is permanently released pursuant to
Section 2.4(a)
or otherwise shall cease to be included in this definition of “Dedication Area”
immediately upon the effectiveness of such permanent release and (c) in the event of an assignment by a Producer (“X”) to an assignee (“Y”) that is permitted under
Article 16
, any acreage that is so assigned shall
cease to be included in X’s Dedication Area and shall solely be included in Y’s Dedication Area as of the effective date of such assignment.
“
Delivery Point
” means the point at which custody transfers from Midstream Co to or for the account of Producer. The Delivery
Points for each Individual System in existence on the Effective Date shall be set forth in writing between Producer and Midstream Co, and additional points may become Delivery Points hereunder upon mutual agreement of the Parties as construction is
completed on additional facilities in satisfaction of the needs identified by Producer and the Parties shall continuously update the list of Delivery Points by mutual agreement.
“
Development Report
” has the meaning given to it in
Section 3.1(a)
.
“
Downtime Duration
” means, (i) with respect to any Downtime Event of the type described in clause (i) of the
definition of “Downtime Event”, the number of days during which Fresh Water is actively leaking from or otherwise being lost from the applicable facility and (ii) with respect to any Downtime Event of the type described in clause
(ii) of the definition of “Downtime Event”, the number of days beginning on the day immediately subsequent to the date delivery of Fresh Water was requested by Producer to be delivered to a specified Delivery Point and ending on the
date that the full quantity of Fresh Water that is required to be delivered hereunder is actually delivered to such Delivery Point (such number of days shall be inclusive of both the first and last day of such period).
“
Downtime Event
” means, (i) with respect to any facility on an Individual System that is designed for the purpose of
storing Fresh Water, an event that results in the loss of 10% or more of the Fresh Water that should have been stored in such facility at such time, except for any such event arising from Force Majeure and (ii) with respect to any facility on
an Individual System that is designed for the purpose of transporting and delivering Fresh Water to Producer at a Delivery Point that is not a Retention Facility, an event that prevents Midstream Co from delivering to such Delivery Point all or a
portion of the quantity of Fresh Water requested by Producer for a reason other than Force Majeure;
provided
that to the extent Producer requests Fresh Water in a quantity exceeding the amount required to be delivered by Midstream Co
hereunder, then a Downtime Event shall only occur with respect to the quantity of Fresh Water
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that Midstream Co is obligated to deliver hereunder. Notwithstanding the foregoing, no event described in
Section 5.5(a)
shall constitute a Downtime Event, and no event described in
Section 5.5(b)
shall constitute a Downtime Event so long as Midstream Co has complied with the notice provisions set forth therein.
“
Effective Date
” has the meaning given to it in the applicable Agreement Addendum.
“
Escalation Percentage
” means 2.50%.
“
Excluded Amounts
” means Midstream Co’s general and administrative costs and any costs for design or construction of
facilities that can be used to connect other Planned Wells or Planned Retention Facilities in the Development Report that Producer at such time intends to develop.
“
Facility Segment
” means, for any Individual System that is described on the applicable Midstream Agreement Addendum that
includes a description of two or more Facility Segments, the distinct segment of such Individual System that is capable of being operated independently of the remaining portion of the Individual System. With respect to any Individual System that is
not described in the applicable Midstream Agreement Addendum as having multiple Facility Segments, the term Facility Segment shall be synonymous with Individual System.
“
First Development Report
” means the first report delivered by Original Producer to Midstream Co that satisfies the
requirements for a Development Report in
Section 3.1(a)
and
Section 3.1(b)
(an “Original Report”), and, in the event that Producer assigns all or any part of the Dedicated Properties to a Producer Assignee, then
with respect to such Producer Assignee, the First Development Report shall not refer to the Original Report but rather to the first Development Report delivered by such Producer Assignee to Midstream Co that satisfies the requirements for such
report in
Section 3.1(a)
and
Section 3.1(b)
.
“
Fresh Water
” means Raw Fresh Water and Recycled
Water (or, if the context requires either or both of the foregoing).
“
Fresh Water Dedication
” means the dedications and
commitments made by Producer pursuant to
Section 2.1(a)
.
“
Force Majeure
” means an event that is not within
the reasonable control of the Party claiming suspension (the “
Claiming Party
”), and that by the exercise of reasonable due diligence the Claiming Party is unable to avoid or overcome in a reasonable manner. To the extent meeting the
foregoing requirements, Force Majeure includes: (a) acts of God; (b) wars (declared or undeclared); (c) insurrections, hostilities, riots; (d) floods, droughts, fires, storms, storm warnings, landslides, lightning, earthquakes,
washouts; (e) industrial disturbances, acts of a public enemy, acts of terror, sabotage, blockades, epidemics; (f) arrests and restraints of rulers and peoples; (g) civil disturbances; (h) explosions, breakage or accidents to
machinery or lines of pipe; (i) hydrate obstruction or blockages of any kind in lines of pipe; (j) freezing of wells or delivery facilities, partial or entire failure of wells, and other events beyond the reasonable control of the Claiming
Party that affect the timing of production or production levels; (k) mining accidents, subsidence, cave-ins and fires; (l) action or restraint by any Governmental Authority (so long as the Claiming Party has not applied for or assisted in
the application for, and
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Fresh Water Services Agreement
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has opposed where and to the extent commercially reasonable, such action or restraint), (m) delays or failures by a Governmental Authority to grant Permits applicable to the System (or any
Individual System) so long as the Claiming Party has used its commercially reasonable efforts to make any required filings with such Governmental Authority relating to such Permits, and (n) delays or failures by the Claiming Party to obtain
easements and rights of way, surface leases and other real property interests related to the System (or any Individual System) from Third Parties, so long as the Claiming Party has used its commercially reasonable efforts to obtain such easements
and rights of way, surface leases and other real property interests. The failure of a Claiming Party to settle or prevent a strike or other labor dispute with employees shall not be considered to be a matter within such Claiming Party’s
control.
“
Gallon
” means one U.S. Standard gallon.
“
Governmental Authority
” means any federal, state, local, municipal, tribal or other government; any governmental, regulatory
(including self-regulatory) or administrative agency, commission, body or other authority exercising or entitled to exercise any administrative, executive, judicial, legislative, regulatory or taxing authority or power; and any court or governmental
tribunal, including any tribal authority having or asserting jurisdiction.
“
Group
” means (a) with respect to
Midstream Co, the Midstream Co Group, and (b) with respect to Producer, the Producer Group.
“
Increase in Fee
” has
the meaning given to it in
Section 6.2(b)
.
“
Individual Fee
” means the aggregate of the Individual First
Phase Fee and the Individual Second Phase Fee.
“
Individual First Phase Fee
” means the fee calculated as described in
clause (i) of
Section 6.1
.
“
Individual First Phase Rate
” means the Monthly rate for providing Services
(other than the Second Phase Services) at a particular Individual System, as set forth opposite the heading “Individual First Phase Rate” on the applicable Midstream Agreement Addendum.
“
Individual Second Phase Fee
” means the Monthly fee for providing Second Phase Services at a particular Individual System, as
set forth opposite the heading “Individual Second Phase Fee” on the applicable Midstream Agreement Addendum
provided
that the Individual Second Phase Fee shall accrue only with respect to Services performed by Midstream Co on Fresh
Water flowing through an Individual System.
“
Individual System
” means the portion of the System beginning at the Receipt
Points described on the applicable Midstream Agreement Addendum and ending at the Delivery Points described on the applicable Midstream Agreement Addendum. The Individual Systems in existence on the Effective Date are more particularly described in
the applicable Midstream Agreement Addendum. Additional Individual Systems may be added to the System from time to time in satisfaction of the needs identified by Producer and evidenced through amendments to the applicable Midstream Agreement
Addendum or the execution and delivery of additional Midstream Agreement Addenda.
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Fresh Water Services Agreement
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“
Initial Term
” has the meaning given to it in
Section 8.1
.
“
Interest Rate
” means, on the applicable date of determination, the prime rate (as published in the “Money Rates”
table of
The Wall Street Journal
, eastern edition, or if such rate is no longer published in such publication or such publication ceases to be published, then as published in a similar national business publication as mutually agreed by the
Parties) plus an additional two percentage points (or, if such rate is contrary to any applicable Law, the maximum rate permitted by such applicable Law).
“
Internal Transfer Point
” shall be the point at which custody transfer from Midstream Co to a Third Party contractor for the
provision of Second Phase Services. The Internal Transfer Points for each Individual System in existence on the Effective Date shall be set forth in writing among Producer, Midstream Co and OpCo, and additional points may become Internal Transfer
Points hereunder by mutual agreement of the Parties.
“
Interruption Conditions
” has the meaning given to it in
Section 2.4(b)
.
“
Invoice Month
” has the meaning given to it in
Section 10.1(a)
.
“
Law
” means any applicable statute, law, rule, regulation, ordinance, order, code, ruling, writ, injunction, decree or other
official act of or by any Governmental Authority.
“
Losses
” means any actions, claims, causes of action (including
actions in rem or in personam), settlements, judgments, demands, liens, encumbrances, losses, damages, fines, penalties, interest, costs, liabilities, expenses (including expenses attributable to the defense of any actions or claims and
attorneys’ fees) of any kind or character, including Losses for bodily injury, death, or property damage, whether under judicial proceedings, administrative proceedings or otherwise, and under any theory of tort, contract, breach of contract,
breach of representation or warranty (express or implied) or by reason of the conditions of the premises of or attributable to any Person or Person or any Party or Parties.
“
Maximum BPM Rate
” means the rate set forth on the applicable Midstream Agreement Addendum.
“
Measurement Device
” means the totalizing meter, other metering device or equipment which, along with application of test
results (e.g. meter proves, etc), as required for the Individual System, measure the amount of water, all of which shall conform to industry standards and government regulations, as further described in
Article 4
.
“
Measurement Point
” means the Measurement Device that the Parties have agreed in writing will measure the volume of Fresh
Water moving through the Individual System.
“
Midstream Agreement Addendum
” means each Agreement Addendum by and between
a Producer and a Midstream Co that expressly states that it is governed by these Agreement Terms and Conditions. “
Midstream Agreement Addenda
” shall be the collective reference to each Midstream Agreement Addendum then in effect.
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Fresh Water Services Agreement
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“
Midstream Co
” means the entity or entities identified as such in the applicable
Midstream Agreement Addendum, together with its or their permitted successors and assigns.
“
Midstream Co Assignee
” means
any Third Party to whom Midstream Co assigns its rights and obligations in accordance with this Agreement.
“
Midstream
Co
” means the Original Midstream Co, together with its permitted successors and assigns, including any Midstream Co Assignee.
“
Midstream Co Group
” means Midstream Co, its Affiliates, and the directors, officers, employees, and agents, of Midstream Co
and its Affiliates; provided that all subsidiaries of OpCo that do not hold equity in Midstream Co shall be excluded from this definition.
“
Modifications
” has the meaning given to it in Section 3.1(c).
“
Month
” means a period of time from 12:00 a.m. (midnight) Mountain Time on the first Day of a calendar month until 12:00 a.m.
(midnight) Mountain Time on the first Day of the next succeeding calendar month. The term “
Monthly
” shall have the correlative meaning.
“
Moody’s
” means Moody’s Investors Service, Inc., or any successor to its statistical rating business.
“
Oil and Gas Interests
” means oil and gas leasehold interests and oil and gas mineral fee interests, including working
interests, overriding royalty interests, net profits interests, carried interests, and similar rights and interests.
“
On-Line
Deadline
” has the meaning given to it in
Section 3.2(b)
.
“
OpCo
” means Noble Midstream Services,
LLC, together with its permitted successors and assigns.
“
OpCo Agreement Addendum
” means the Agreement Addendum by and
between a Producer and OpCo that expressly states that it is governed by these Agreement Terms and Conditions.
“
Original
Midstream Co
” means the entity identified as the “Midstream Co” in the applicable Midstream Agreement Addendum as of the Effective Date.
“
Original Producer
” means Noble Energy, Inc.
“
Original Report
” has the meaning set forth in the definition of “First Development Report.”
“
Owner
” has the meaning given to it in
Section 4.1(g)
.
“
Party
” or “
Parties
” with respect to each Midstream Agreement Addendum shall mean the applicable Producer
and the applicable Midstream Co. Unless expressly stated otherwise, references to “Parties” shall not refer to all parties to all Agreements governed hereby. Rather, references to “Parties” shall refer only to such Parties as
determined by the applicable Agreement Addendum. References to a “Party” or the “Parties” shall not include OpCo.
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Fresh Water Services Agreement
-8-
“
Period of Five Years
” means, with respect to any report delivered hereunder,
the period from the first Day of the fiscal quarter during which such report is required to be delivered until the fifth anniversary thereof.
“
Period of Two Years
” means, with respect to any report delivered hereunder, the period beginning on the first Day of the
fiscal quarter during which such report is required to be delivered and ending 24 Months after such date.
“
Permits
”
means any permit, license, approval, or consent from a Governmental Authority.
“
Person
” means any individual,
corporation, company, partnership, limited partnership, limited liability company, trust, estate, Governmental Authority, or any other entity.
“
Planned Retention Facility
” means each Retention Facility that Producer has requested to be constructed in an appropriate
Development Report.
“
Planned Well
” has the meaning given to it in
Section 3.1(b)(i)
.
“
Produced Water
” means water that is produced as a byproduct of Producer’s operation of the Wells that are located in
the Dedication Area; provided that any water that is Associated Water shall not constitute Produced Water hereunder until such time as it has been separated from Crude Oil and ceases being Associated Water.
“
Producer
” means the Original Producer, together with its permitted successors and assigns, including any Producer Assignee.
“
Producer Assignee
” means any Person to whom Original Producer or any subsequent Producer sells, assigns, or otherwise
transfers acreage subject to the Dedications.
“
Producer Group
” means Producer, its Affiliates, and the directors,
officers, employees, and agents of Producer and its Affiliates.
“
Producer Meters
” means any Measurement Device owned and
operated by Producer (or caused to be installed or operated by Producer).
“
Purpose
” means any and all uses related to
activities associated with the exploration and production of hydrocarbons, including but not limited to hydraulic fracturing operations, and the construction, maintenance and operation of Wells or facilities for Raw Fresh Water and Recycled Water.
“
Quality Standard for Delivery
” means the Quality Standard for Fresh Water unless on or prior to the Quality Standard
Notification Date, Producer informs Midstream Co that with respect to a specified volume of Fresh Water, Producer will require such Fresh Water to meet the Quality Standard for Frac Water, the Quality Standard for Cement Water or the Quality
Standard for Recycled Water, as applicable.
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Fresh Water Services Agreement
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“
Quality Standard for Cement Water
” means the specifications set forth in
Section 7.1(a)
under the heading “Cement Water”.
“
Quality Standard for Frac Water
” means the
specifications set forth in
Section 7.1(a)
under the heading “FRAC Water” unless, on or before the Quality Standard Notification Date, Producer delivers to Midstream Co a certificate stating that the Third Party contractor that
Producer has engaged to provide frac services has imposed different water quality standards for fracking the applicable Well.
“
Quality Standard for Fresh Water
” means all applicable Laws, the specifications set forth in
Section 7.1(a)
under the heading “Fresh Water” and any other specifications required to protect the System.
“
Quality Standard for
Recycled Water
” means all applicable Laws, the specifications set forth in
Section 7.1(a)
under the heading “Recycled Water” and any other specifications required to protect the System.
“
Quality Standard Notification Date
” means the Business Day that is at least 5 Business Days prior to the date on which
Producer requested delivery of a volume of Fresh Water.
“
Raw Fresh Water
” means raw fresh water obtained from either
ground water withdrawals or surface diversions from Water Sources. It does not include Recycled Water, Produced Water or Associated Water.
“
Real Property Dedication
” means the dedication and commitment made by Producer pursuant to the first sentence in
Section 2.1(b)
.
“
Receipt Point
” means the point at which custody transfers from Producer or a Third Party to
Midstream Co. With respect to Fresh Water obtained by Producer through a lease or water use agreement, the custody transfer point generally refers to the Custody Transfer Point, as such term (or a similar term) is used in the applicable Commercial
Water Lease Agreement or other similar instrument, at which custody transfers from the lessor, fee owner or other water rights holder to Producer;
provided
that Producer shall take title and custody at the applicable Custody Transfer Point
(or other applicable term) and immediately transfer custody (but not title) to Midstream Co. With respect to Fresh Water obtained by Producer through a fee interest, the custody transfer point generally refers to the wellhead equipment or other
point at which Producer delivers the Fresh Water to Midstream Co. Regardless of the Water Source, the Receipt Point may include: (a) with respect to Fresh Water obtained from a water well, the applicable wellhead (unless Producer elects to
transport such Fresh Water from the applicable wellhead to the System), (b) with respect to Fresh Water delivered into a pipeline constituting part of the System, the point on the applicable pipeline at which such Fresh Water enters the System,
(c) with respect to Fresh Water delivered directly into a Retention Facility, such Retention Facility, (d) with respect to Fresh Water that is initially collected into lease lines or other production equipment owned and operated by
Producer or a Third Party, the point where such lease lines or other production equipment connect with the System, (e) with respect to Fresh
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Water obtained from a reservoir, the pumping station located at such reservoir, (f) with respect to Fresh Water obtained from a river, stream or other naturally occurring Water Source above
ground, the applicable pumping station, (g) with respect to Fresh Water that has been recycled, the downstream flange of each recycled water system agreed to between the Parties and (h) each other point as mutually agreed between the
Parties. The Receipt Points in existence on the Effective Date shall be set forth in writing between Producer and Midstream Co, and additional points may become Receipt Points hereunder upon mutual agreement of the Parties as construction is
completed on additional facilities in satisfaction of the needs identified by Producer and the Parties shall continuously update the list of Receipt Points by mutual agreement.
“
Recycled Water
” means Produced Water, Associated Water, flowback water or any other water, in each case, that has been
treated or recycled to the extent that such water meets the specifications set forth in
Section 7.1
under the heading “Recycled Water”. It does not include Raw Fresh Water, or any untreated Produced Water or untreated
Associated Water.
“
Redetermination Deadline
” has the meaning given to it in
Section 6.2(a)(iii)
.
“
Redetermination Proposal
” has the meaning given to it in
Section 6.2(a)(i)
.
“
Redetermined Individual Fee
” has the meaning given to it in
Section 6.2(a)(i)
.
“
Reimbursed Amount
” has the meaning given to it in Section 10.1(a).
“
Release Conditions
” has the meaning given to it in
Section 2.4(a)
.
“
Releases of Dedication
” means those certain releases of dedication, executed by and among Original Producer, OpCo and
certain of OpCo’s subsidiaries, pursuant to
Section 2.4(a)
prior to March 31, 2016.
“
Retention
Facility
” means each storage tank, pond, retention area or other storage facility that is used to store Fresh Water and that is part of the System.
“
Rules
” has the meaning given to it in
Section 17.6
.
“
Second Phase Services
” has the meaning set forth in the definition of “Services”.
“
Service Area
” means (a) with respect to the Original Producer, the area described on
Exhibit A
, except that any
acreage that was released pursuant to the Releases of Dedication shall not be included in this definition of “Service Area”, and (b) with respect to any Producer Assignee, the Dedication Area described in such Producer Assignee’s
Agreement Addendum. Any acreage that is permanently released pursuant to
Section 2.4(a)
or otherwise shall cease to be included in the definition of “Service Area” immediately upon the effectiveness of such permanent release.
“
Services
” means the following services: (a) receiving at each Receipt Point on each Day, Fresh Water in a quantity
up to (i) the maximum capacity of the facilities at such Receipt Point as they then exist at such Receipt Point on such Day, (ii) the maximum volume of Fresh Water
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that may be taken at such Receipt Point in accordance with Producer’s rights to take or receive Fresh Water at such Receipt Point, including contractual rights, laws, regulations,
governmental approvals, etc., and (iii) such volume of Fresh Water as shall be nominated by Producer in accordance with this Agreement;
provided
that if the aggregate of amount specified in this
clause (a)
at all Receipt
Points on an Individual System exceed the capacity then available in the applicable Individual System, then the quantity required to be received into such system, regardless of Receipt Point, shall be such maximum available capacity,
(b) storing the Fresh Water received into the System until Producer requests delivery of such Fresh Water and treating such stored Fresh Water to ensure compliance with
Section 7.1
, (c) transporting Fresh Water from the
applicable Receipt Point to the applicable Internal Transfer Point, (d) transporting Fresh Water from the applicable Internal Transfer Point to the applicable Delivery Point (this clause (d), the “
Second Phase Services
”),
(e) with respect to Fresh Water transported to an Internal Transfer Point or Delivery Point, as the case may be, the amount to be delivered to Producer shall be in a quantity equal to the lesser of (i) such volume of Fresh Water as
requested by Producer in accordance with this Agreement and (ii) the Maximum BPM Rate designated for the applicable Individual System and (f) the other services to be performed by Midstream Co in respect of such Fresh Water as set forth in
this Agreement and the System Plan for an Individual System, all in accordance with the terms of this Agreement (including any services with respect to metering services).
“
Services Fee
” means, collectively, the fees described in
Section 6.1
and
Section 6.3
.
“
Spacing Unit
” means the area fixed for the drilling of one Well by order or rule of any applicable Governmental Authority,
or (if no such order or rule is applicable) the area fixed for the drilling of a Well or Planned Well reasonably established by the pattern of drilling in the applicable area or otherwise established by Producer in its reasonable discretion.
“
Standard & Poor’s
” means Standard & Poor’s Rating Group, a division of McGraw Hill, Inc., or any
successor to its statistical rating business.
“
State
” means the state in which the Individual System is located.
“
System
” means all Individual Systems described in all of the Agreement Addenda, collectively, including: (a) pipelines;
(b) (
reserved
); (c) (
reserved
); (d) controls;, (e) Delivery Points, meters and measurement facilities; (f) ponds and other storage for Fresh Water; (g) easements, licenses, rights of way, surface rights
and Permits; and (h) all appurtenant facilities, in each case, that are owned, leased, contracted or operated by each Midstream Co to provide Services to Producer or Third Parties, as such system and facilities are modified or extended from
time to time to provide Services to Producer pursuant to the terms hereof or to Third Parties, including the Facility Segments operated under this Agreement by each Midstream Co specified in the Agreement Addenda.
“
System Plan
” has the meaning given to it in
Section 3.1(c)
.
“
Target On-Line Date
” means (a) with respect to a Planned Retention Facility or Planned Well that is described for the
first time in the Original Report, the date specified in the Original Report for the applicable Planned Retention Facility or Planned Well, as applicable, (b) with
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respect to any Planned Retention Facility or Planned Well that is described in a First Development Report that is not the Original Report, 24 Months after the date of such First Development
Report, unless Midstream Co consents to a shorter time period, and (c) with respect to any Planned Retention Facility or Planned Well that is not described in the First Development Report, 24 Months after the date of the Development Report that
initially reflects the Planned Retention Facility or Planned Well, as applicable, unless Midstream Co consents to a shorter time period.
“
Tender
” means the act of Producer’s making Fresh Water available or causing Fresh Water to be made available to the
System at a Receipt Point.
“
Tendered
” shall have the correlative meaning.
“
Term
” has the meaning given to it in
Section 8.1
.
“
Third Party
” means any Person other than a Party to this Agreement or any Affiliate of a Party to this Agreement.
“
Third Party Assignment
” has the meaning given to it in
Section 16.1(a)
.
“
Transaction Document
” means each agreement entered into pursuant to the agreement terms and conditions related to gas
gathering services, agreement terms and conditions related to oil gathering services, agreement terms and conditions related to produced water services, agreement terms and conditions related to gas processing services, agreement terms and
conditions related to crude oil treating services, and agreement terms and conditions related to fresh water services, now or in the future existing between Producer and Midstream Co.
“
Water Sources
” means, with respect to Raw Fresh Water, ground water, streams, springs, reservoirs, ponds or other surface
water features from which Producer has a right to take Fresh Water and, with respect to Recycled Water, the applicable recycling facility (whether owned and operated by Producer, any of its Affiliates or a Third Party). The Water Sources in
existence on the Effective Date for the System shall be set forth in writing among Producer, Midstream Co and OpCo, and additional ground water, streams, springs, reservoirs, ponds, surface water features or recycling facilities or other rights or
interests may become Water Sources hereunder as Producer acquires additional interests entitling it to take custody of and use Fresh Water from such sources, and the Parties shall evidence such additional Water Sources in writing among Producer,
Midstream Co and OpCo.
“
Well
” means a well (i) for the production of hydrocarbons, (ii) that is located in the
Dedication Area, (iii) in which Producer owns an interest and is the operator.
“
Year
” means a period of time from
January 1 of a calendar year through December 31 of the same calendar year;
provided
that the first Year shall commence on the Effective Date and run through December 31 of that calendar year, and the last Year shall commence
on January 1 of the calendar year and end on the Day on which this Agreement terminates.
Section 1.2
Other Terms
. Other
capitalized terms used in this Agreement and not defined in
Section 1.1
above have the meanings ascribed to them throughout this Agreement.
Second Amended and
Restated
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Section 1.3
References and Rules of Construction
. All references in this Agreement to
Exhibits, Appendices, Articles, Sections, subsections and other subdivisions refer to the corresponding Exhibits, Appendices, Articles, Sections, subsections and other subdivisions of or to this Agreement unless expressly provided otherwise. Titles
appearing at the beginning of any Articles, Sections, subsections and other subdivisions of this Agreement are for convenience only, do not constitute any part of this Agreement, and shall be disregarded in construing the language hereof. The words
“this Agreement,” “herein,” “hereby,” “hereunder” and “hereof,” and words of similar import refer to this Agreement as a whole, including the applicable Agreement Addendum and all Exhibits,
Appendices, and other attachments to these Agreement Terms and Conditions and the applicable Agreement Addendum, all of which are incorporated herein, and not to any particular Exhibit, Appendix, Article, Section, subsection or other subdivision
unless expressly so limited. The word “including” (in its various forms) means “including without limitation.” The word “or” shall mean “and/or” unless a clear contrary intention exists. The word
“from” means from and including, the word “through” means through and including, and the word “until” means until but excluding. All references to “$” or “dollars” shall be deemed references to
United States dollars. The words “will” and “shall” have the same meaning, force, and effect. Each accounting term not defined herein will have the meaning given to it under generally accepted accounting principles. Pronouns in
masculine, feminine or neuter genders shall be construed to state and include any other gender, and words, terms and titles (including terms defined herein) in the singular form shall be construed to include the plural and vice versa, unless the
context otherwise requires. References to any Law, contract or other agreement mean such Law, contract or agreement as it may be amended, supplemented, released, revised, replaced, or otherwise modified from time to time.
Article 2
Producer
Dedication and Commitment
Section 2.1
Producer’s Dedications and Commitment
.
(a)
Fresh Water Dedication
. Subject to
Section 2.2
through
Section 2.4
, during the Term, Producer
(i) covenants and commits to deliver all Fresh Water to which Producer obtains title, custody or a right of use from a Water Source within the Dedication Area into the Individual System at appropriate Receipt Points, except for the portion of
Fresh Water used for a reserved purpose set forth in
Section 2.3
; (ii) covenants to store in the Individual System all Fresh Water that Producer intends to store and that Producer has obtained from a Water Source within the
Dedication Area; and (iii) covenants and commits to use for a Purpose all of the Fresh Water that Producer delivers into the Individual System at each Receipt Point within 12 Months of delivery of such Fresh Water into the Individual System.
(b)
Real Property Dedication
. Subject to
Section 2.2
through
Section 2.4
, during the Term, Producer
dedicates and commits the Dedicated Properties to Midstream Co for performance of the Services pursuant to this Agreement. Except for the Parties’ performance of their obligations under this Agreement, no further performance is required by
either Party to effectuate the Real Property Dedication.
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Restated
Fresh Water Services Agreement
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Section 2.2
Conflicting Dedications
.
(a) Notwithstanding anything in this Agreement to the contrary, Producer shall have the right to comply with (i) each of the Conflicting
Dedications existing on the Effective Date or, in the case of a Producer Assignee, the effective date of such assignment, and (ii) any other Conflicting Dedication applicable as of the date of acquisition of any Oil and Gas Interest or rights
to any Fresh Water from any Water Source, and other similar interests within the Dedication Area that are acquired by Producer after the Effective Date and otherwise would have become subject to the Dedications (but not any Conflicting Dedications
entered into in connection with such acquisition). Producer shall have the right to comply with a Conflicting Dedication only until the first Day of the Month following the termination of such Conflicting Dedication. Producer shall not extend or
renew any Conflicting Dedication and shall terminate each Conflicting Dedication as soon as permitted under the underlying contract, without causing Producer to incur any costs or expenses deemed unreasonable or inappropriate in the opinion of
Producer and shall not enter into any new Conflicting Dedication.
(b) Certain Conflicting Dedications contain rights of first refusal or
other provisions that (i) entitle Producer to a release of acreage from such Conflicting Dedication if Producer dedicates the released acreage to a Third Party or (ii) expressly prohibit Producer from dedicating such released acreage to an
Affiliate of Producer. As used herein, the term “Conflicting Dedication” shall include both the original right of first refusal (or similar right) and the dedication resulting from an exercise of such right of first refusal (or similar
right) so long as the resulting dedication covers the same acreage as the original Conflicting Dedication.
(c) To the extent Producer
claims that a Conflicting Dedication exists with respect to certain Services on specified Dedicated Properties, Midstream Co shall have the right to review the documentation creating such Conflicting Dedication, subject to confidentiality
requirements applicable to such Conflicting Dedication.
Section 2.3
Producer’s Reservation
. Producer reserves the
following rights respecting Fresh Water for itself:
(a) to construct, operate (or cause to be operated), maintain, repair, rework, or
cease production, construction, development or operation of any Well or oil and gas lease, without consideration of the impact on Midstream Co;
(b) to use Fresh Water for any and all uses, other than a Purpose;
(c) to use any Fresh Water, in any amount for lease or Well purposes, prior to delivering such Fresh Water into the System; and
(d) to store Fresh Water in the vicinity of a Planned Well for reasonable periods of time immediately prior to needing such Fresh Water for a
Purpose.
Section 2.4
Releases from Dedication and Commitment
.
(a)
Permanent Releases
. Midstream Co shall permanently release Producer from the Dedications with respect to any Fresh Water, Receipt
Point, Water Source, Well, Spacing Unit, or Dedicated Properties affected by one or more of the Release Conditions. The “
Release Conditions
” are:
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Fresh Water Services Agreement
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(i) Midstream Co’s failure to complete the facilities that are described on
a System Plan or failure to commence the Services with respect to any Planned Well by the applicable On-Line Deadline (so long as such failure was not the result of Producer’s failure to comply with the then-applicable Development Report);
(ii) Midstream Co’s election (x) pursuant to
Section 3.1(c)
not to provide Services for any Well included
in a Development Report delivered by a Producer that is not the Original Producer or (y) pursuant to
Section 3.3(b)
not to provide Services for (1) any Well for which Producer failed to deliver a Development Report on or before
the applicable deadline set forth in
Section 3.1(a)
, (2) any Well not described in the applicable Development Report or (3) any excess Fresh Water required for any Well or required to be stored at any Retention Facility.
(iii) expiration of the Term, as further described in
Section 8.2;
(iv) written agreement of Producer and Midstream Co, and each Party shall consider in good faith any proposal by the other
Party to permanently release any Well, Spacing Unit, or Dedicated Properties;
(v) the occurrence of a Force Majeure of the
type described in clauses (l), (m) or (n) of the definition of “Force Majeure” affecting Midstream Co that continues for a period of 120 Days or more;
(vi) Midstream Co’s interruption or curtailment of deliveries of Fresh Water pursuant to
Section 5.5
or
refusal to store any Fresh Water that Midstream Co is obligated to store hereunder that continues for 90 Days or more;
provided
that unless Midstream Co has indicated it will not store any Fresh Water from the applicable Water Source, the
applicable Receipt Point and Water Sources shall not be released from the Dedications;
(vii) a default (other than a
default of the type covered by
Section 2.4(a)(i)
) by Midstream Co that remains uncured for 90 Days or more;
(viii) Producer’s rejection of any increase in the Individual Fee pursuant to
Section 13.1(b)
;
(ix) (x) Midstream Co’s suspension of Services pursuant to
Section 13.2(a)(ii)
that extends for the
period of time stated in such Section or (y) Midstream Co’s election not to expand an Individual System pursuant to
Section 13.2(b)
; or
(x) a Downtime Event that extends for the Downtime Duration specified in the applicable Row D on
Exhibit B
or longer.
Producer may obtain the applicable Services for the Fresh Water, Wells, or Spacing Units released pursuant to this
Section 2.4(a)
from any Third Party.
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Restated
Fresh Water Services Agreement
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(b)
Temporary Release
. Midstream Co shall temporarily release Producer from the
Dedications with respect to any Fresh Water, Receipt Point, Water Source, Well, Spacing Unit, or Dedicated Properties affected by one or more of the Interruption Conditions. The “
Interruption Conditions
” are:
(i) The occurrence and continuation of an uncured default by Midstream Co;
(ii) Midstream Co’s interruption or curtailment of deliveries of Fresh Water pursuant to
Section 5.5
or
refusal to store any Fresh Water that Midstream Co is obligated to store hereunder;
provided
that unless Midstream Co has indicated it will not store any Fresh Water from the applicable Water Source, the applicable Receipt Points and Water
Sources shall not be released from the Dedications;
(iii) Until a permanent release is required under
Section 2.4(a)
or
Section 13.2
, Midstream Co’s suspension of Services pursuant to
Section 13.2(a)
(and, if Section
13.2(a)(i)
applies, such temporary release shall continue at the discretion of
Midstream Co, subject to the time limits set forth in
Section 13.2(a)(i))
;
(iv) Midstream Co’s election
not to expand an Individual System or System pursuant to
Section 13.2(b)
; or
(v) A Downtime Event with a
Downtime Duration in excess of the duration described in the applicable Row B on
Exhibit B
but less than the duration specified in
Section 2.4(a)(ix)
.
Producer may obtain the applicable Services for the Fresh Water, Wells, or Spacing Units temporarily released pursuant to this
Section 2.4(b)
. To the extent that an interruption or curtailment of Services can be limited to a Facility Segment, Midstream Co shall so limit such interruption or curtailment, and to the extent that Midstream Co does so limit such
curtailment or interruption, the temporary release permitted by this
Section 2.4(b)
shall only apply to the affected Facility Segment. Such temporary release shall continue until the first Day of the Month after the Month during which
Midstream Co cures the applicable default or the interruption, curtailment, or suspension of Services terminates;
provided
that, if Producer obtained temporary services from a Third Party (pursuant to a contract that does not give rise to a
default under this Agreement) during the pendency of such default, interruption, curtailment, or suspension, such release shall continue until the earlier of (A) the first Day of the Month that is six Months after the event or condition that
gave rise to the interruption, curtailment or other temporary cessation has been corrected and (B) the first Day of the Month after the termination of the applicable contract with such Third Party. For the avoidance of doubt, the temporary
services that Producer may obtain under
Section 3.3
shall not constitute a release under the terms of this Agreement; provided that, if Producer cannot obtain such temporary services without a temporary release, Midstream Co may in its
discretion grant or refuse to grant a temporary release on such terms as reasonably required by Midstream Co (including, for example, conditioning the grant of a temporary release on the establishment of a termination date for such temporary
release).
(c)
Evidence of Release
. At the request of Producer, the Parties shall execute a release agreement reasonably acceptable
to all Parties (which, in the case of a permanent release, shall be in recordable form) reflecting any release of Fresh Water, Receipt Points, Water Sources, Wells, Spacing Units, or Dedicated Properties pursuant to this
Section 2.4
.
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Restated
Fresh Water Services Agreement
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Section 2.5
Covenant Running with the Land
. Subject to the provisions of
Section 2.3
and
Section 2.4
, each of the Dedications (a) is a covenant running with the Dedicated Properties, (b) touches and concerns Producer’s interests in the Dedicated Properties, and (c) shall be
binding on and enforceable by Midstream Co and its successors and assigns. Except as set forth in
Article 16
, (i) in the event Producer sells, transfers, conveys, assigns, grants or otherwise disposes of any or all of its interest
in the Dedicated Properties, then any such sale, transfer, conveyance, assignment, grant or other disposition shall be made subject to this Agreement and (ii) in the event Midstream Co sells, transfers, conveys, assigns, grants or otherwise
disposes of any or all of its interest in the Individual System, then any such sale, transfer, conveyance, assignment, grant or other disposition shall be made subject to this Agreement. The Real Property Dedication is not an executory contract
under Section 365 of Title 11 of the United States Code (11 U.S.C. § 365).
Section 2.6
Recording of Agreement
.
Producer hereby authorizes Midstream Co to record a memorandum of the Agreement in the real property records of the counties in which the Service Area is located. Midstream Co and Producer agree that until Midstream Co provides notice to the
contrary, all payment terms and pricing information shall remain confidential and be redacted from any filings in the real property records.
Article 3
System
Expansion and Connection of Wells
Section 3.1
Development Report; System Plan; Meetings
.
(a)
Development Report
. Original Producer will provide, on or before July 1, 2016, and each Producer Assignee will provide, on or
before the date stated in
Section 16.1
, Midstream Co with its First Development Report, which shall describe (x) in detail the planned development, drilling, and production activities relating to the Dedicated Properties through the
end of the applicable Period of Two Years, (y) generally the long-term drilling and production expectations for those project areas in which drilling activity is expected to occur during the applicable Period of Five Years, including the
information described in
Section 3.1(b)
, and (z) the anticipated need for Fresh Water delivery and storage, including an identification of the applicable Water Sources. On or before each January 1, each April 1, each
July 1, and each October 1 of each Year following the date on which the First Development Report is to be delivered, Producer shall provide to Midstream Co an update of the then-current report (the First Development Report, as updated in
accordance with the foregoing and as the then current report may be updated from time to time, the “
Development Report
”).
(b)
Development Report Content
. With respect to the Dedication Area, the Development Reports shall include information as to:
(i) the Wells that Producer expects to drill or install during the applicable Period of Two Years (each, a “
Planned
Well
”), including the expected locations and completion dates thereof, and the earliest date on which Fresh Water will be required for the Purposes at each Planned Well, and the earliest date on which Fresh Water will be required to be
stored at a Planned Retention Facility or other storage location;
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Fresh Water Services Agreement
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(ii) the volumes of Fresh Water that will be required for each Planned Well and
the volumes of Fresh Water that will be required to be stored at each Planned Retention Facility;
(iii) the Receipt Points
and Delivery Points (including proposed receipt points and delivery points not yet agreed in writing among the Parties) at which Fresh Water is to be delivered to or delivered by Producer during the applicable Period of Two Years;
(iv) (Reserved);
(v) the actual lateral length for each Well described in the Period of Two Years, the anticipated lateral length for each
Planned Well described in the Period of Two Years and initial assumptions for the planned lateral length for each Planned Well anticipated to be producing after the Period of Two Years and before the end of the Period of Five Years;
(vi) the number of rigs that Producer intends to operate in the Dedication Area each year during the Period of Five Years
(including sufficient detail regarding the anticipated location of such rigs to allow Midstream Co to determine which Individual System would be impacted by such rig activity);
(vii) with respect to the Period of Two Years, the anticipated date of each frac, the quantity of Fresh Water required to
complete such frac and an indication of the type of frac to be performed (slick, hybrid gel, gel, etc);
(viii) with
respect to the Period of Two Years, the anticipated date on which Midstream Co may initiate construction or other development activities at the Well or Separator Facility in order to complete the interconnection into the Individual System;
(ix) each Water Source, the amount of Fresh Water anticipated to be obtained therefrom, the first delivery date and the rate of
flow from each such Water Source; and
(x) such other information as may be reasonably requested by Midstream Co with
respect to Wells that Producer intends to drill or for which Producer expects to require Fresh Water during the Period of Two Years and the Period of Five Years.
To the extent possible, any information Producer is required to provide under this
Section 3.1(b)
with respect to Wells shall also
include such information related to Planned Wells. In addition, if appropriate to provide a complete and accurate Development Report, any information requested with respect to Planned Wells shall also be provided with respect to existing Wells.
(c)
System Plan
. Based on the Development Report and such other information about the expected development of the Dedicated Properties
as shall be provided to Midstream Co by or on behalf of Producer, including as a result of meetings between representatives of
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Fresh Water Services Agreement
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Midstream Co and Producer, Midstream Co shall develop and periodically update a plan (the “
System Plan
”) describing or depicting the modifications, extensions, enhancements,
major maintenance and other actions necessary in order for the Individual System to be able to provide timely Services in accordance with the most recent Development Report. Without limiting or otherwise altering Midstream Co’s rights under
Section 13.2
, unless the applicable Well is operated by Original Producer, Midstream Co may elect, in its sole discretion, not to make such modifications, extensions, enhancements, major maintenance, or other actions to the System
(the “
Modifications
”) and not to provide Services for any Wells included in a Development Report delivered by a Producer that is not the Original Producer. If (i) Midstream Co elects to make such Modifications,
(ii) Producer thereafter modifies the Development Report or provides other information (the date on which the modified Development Report or such other information is provided to Midstream Co, the “
Cancellation Date
”)
indicating that such Modifications are no longer necessary, and (iii) as of the Cancellation Date, the actual aggregate costs and expenses (excluding Excluded Amounts) incurred or committed by Midstream Co to make such cancelled Modifications
exceeds $100,000.00, then Producer shall reimburse Midstream Co for all reasonable and documented costs and expenses (other than the Excluded Amounts) incurred or committed by Midstream Co through the Cancellation Date to make such Modifications.
The System Plan shall include information as to:
(i) each Facility Segment then existing and operational, under
construction, or planned and the Individual System of which such Facility Segment is a part;
(ii) all Retention
Facilities, Internal Transfer Points, Receipt Points and Delivery Points served or to be served by each such Facility Segment;
(iii)
Reserved
;
(iv) all pumping facilities and other major physical facilities located or to be located on or within each such Facility
Segment, together with their sizes, operating parameters, capacities, and other relevant specifications;
(v) the
anticipated schedule for completing the construction and installation of the planned Facility Segments and all Planned Retention Facilities, Receipt Points and Delivery Points, in each case, for all Individual Systems, included in the most recent
Development Report;
(vi) the allocation methodologies to be used by Midstream Co hereunder, if any, and, with respect to
any System Plan after the initial System Plan, any proposed changes to the allocation methodologies then in effect, which allocation methodologies (A) shall permit allocations to be made by Midstream Co in a commercially reasonable manner; and
(B) be based upon the measurements taken and quantities determined for the applicable Month; and
(vii) other
information reasonably requested by Producer that is relevant to the design, construction, and operation of the System, the relevant Individual System, the relevant Facility Segment, and the relevant Retention Facilities, Receipt Points and Delivery
Points;
provided
that in no event shall Midstream Co be obligated to supply to Producer (A) pricing, budget or similar financial information or (B) information that is covered by a confidentiality agreement or confidentiality
obligations;
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Restated
Fresh Water Services Agreement
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Midstream Co shall deliver the applicable System Plan (including any updated System Plan) to Producer for
Producer’s review and comment not later than 30 Days after Producer’s delivery to Midstream Co of the applicable Development Report or amendment thereto.
(d)
Meetings
. Midstream Co shall make representatives of Midstream Co available to discuss the most recent System Plan with Producer and
its representatives at Producer’s written request. Producer shall make representatives of Producer available to discuss the most recent Development Report with Midstream Co and its representatives at Midstream Co’s written request. The
Parties agree that the meetings described in the previous sentences of this clause (d) may occur (and shall, if requested by either Party) on a Monthly basis. At all such meetings, the Parties shall exchange updated information about their
respective plans for the development and expansion of the Dedicated Properties (including amendments to the Development Report) and the System (including amendments to the System Plan for Producer’s review and comment) and shall have the
opportunity to discuss and provide comments on the other Party’s plans.
(e)
Scope and Purpose of Planning Tools
. The
Development Report and the System Plan are intended to assist Midstream Co and Producer with long-term planning and goals. None of the Development Reports nor the System Plans shall amend or modify this Agreement in any way. In the sole discretion
of each Person serving as a Midstream Co under a Midstream Agreement Addendum, such Midstream Co may work with any other Midstream Co to prepare and deliver a System Plan jointly. To the extent that a Development Report or System Plan that satisfies
the requirements above is delivered or deemed delivered under any other Transaction Document, such Development Report or System Plan shall be deemed delivered hereunder.
Section 3.2
Expansion of System and Connection of Wells
.
(a)
Service Standards
. Midstream Co shall, at its sole cost and expense, design, construct (as applicable), and own the Individual
System in a good and workmanlike manner and in accordance with the System Plan and this
Section 3.2
;
provided, however
, that nothing in this statement shall require Midstream Co to deliver or store quantities of Fresh Water in
excess of the limitations set forth in the definition of “Services.” Until such time as Producer has delivered a Development Report, Midstream Co shall have no obligation under this
Section 3.2(a)
.
(b)
On-Line Deadline
. Subject to
Section 3.4
, Midstream Co shall by the later of (x) the date that a Planned Well is
ready for receipt of Services and (y) the applicable Target On-Line Date (such later date, the “
On-Line Deadline
”), have obtained all rights of way, easements, and water use instruments and have completed (or caused the
completion of) the construction of the necessary facilities, in accordance with the then current System Plan, to make Fresh Water available to each Planned Well at an applicable Delivery Point. With respect to Services for the storage of Fresh
Water, the “On-Line Deadline” shall mean the date that the Producer is allowed to extract or take Fresh Water from any Water Source and deliver such Fresh Water to Midstream Co for Services related to storage.
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(c)
Additional/Accelerated Well
. From time to time, Producer may provide notice to
Midstream Co that Producer has accelerated the Target On-Line Date for a Planned Well or Planned Retention Facility (any such Well or Planned Retention Facility, an “
Additional/Accelerated Well
”). Midstream Co will use its
commercially reasonable efforts to modify the System Plan and to cause the necessary facilities to be constructed prior to the On-Line Deadline for such Additional/Accelerated Well. From time to time, Producer may provide notice to Midstream Co that
Producer (i) has delayed the Target On-Line Date for a Planned Well, (ii) subject to Section 3.2(d), anticipates eliminating a Planned Well from its development plans and the Development Report, or (iii) no longer needs a Planned
Retention Facility. Midstream Co may adjust the System Plan as it determines to be appropriate and commercially reasonable to accommodate such elimination of such Wells.
(d)
Cancellation of Planned Wells and Planned Retention Facilities
. If (i) Midstream Co reasonably determines that Producer has
permanently abandoned the drilling or installation of any Planned Well or Planned Retention Facility or Producer notifies Midstream Co that Producer intends to permanently abandon the drilling or installation of any Planned Well or Planned Retention
Facility (whether through the delivery of an updated Development Report or otherwise, the date on which such determination is made, the “
Abandonment Date
”), (ii) Midstream Co had begun to design or construct the Facility
Segment to connect such Planned Well or Planned Retention Facility to the System prior to such Abandonment Date, and (iii) the actual aggregate costs and expenses (excluding Excluded Amounts) incurred or committed by Midstream Co prior to the
Abandonment Date exceeds $100,000.00, then Producer shall reimburse Midstream Co for all reasonable and documented costs and expenses (other than the Excluded Amounts) incurred or committed by Midstream Co prior to the Abandonment Date to design and
construct such Facility Segment.
Section 3.3
Temporary Services
.
(a) Pending the completion of facilities contemplated in a System Plan or that may be required to service Wells in existence as of the
Effective Date, Producer may enter into a contract with a Third Party to provide services with respect to the Dedicated Properties and the Water Sources that, in either case, are anticipated to be serviced by the new, modified, or enhanced
facilities if the term of such contract does not exceed six Months (and may be renewed in six-Month increments until such time as Midstream Co has completed the applicable facilities). If any such contract is in effect with respect to any Well or
Water Source, Producer will not be obligated to connect such Well or Water Source to the System until the first Day of the Month following expiration of such contract.
(b) If at any time, (i) Producer fails to deliver a Development Report on or before the applicable deadline set forth in
Section 3.1(a)
, (ii) a Development Report delivered by Producer failed to describe any Well, or (iii) the volume of Fresh Water required for any Well or required to be stored at any Retention Facility during any Day exceeds the
volume included in Producer’s estimate set forth in the most recent Development Report delivered to Midstream Co, and as a result, Midstream Co has not completed any new, modified, or enhanced facilities necessary to allow Midstream Co to fully
provide the Services with respect to a Well or Retention Facility , then (x) within a reasonable time after Midstream Co becomes aware of the need for such new, modified, or enhanced facilities, Midstream Co shall elect, in its sole discretion,
whether to proceed with the development and completion of such facilities by providing notice to Producer,
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and (y) if Midstream Co elects to proceed with the development and completion of such facilities, (1) Midstream Co shall cause such facilities to be completed within a reasonable time
after such election, and (2) pending the completion of such facilities, Midstream Co may elect (in its reasonable discretion and in exchange for reasonable compensation) to permit Producer to enter into a contract with a Third Party as provided
in
Section 3.3(a)
to provide services that Midstream Co is unable to provide.
Section 3.4
Cooperation
. The
Parties shall work (at their own cost and expense) together in good faith to obtain such Permits as are necessary to provide the Services hereunder, including delivery of Fresh Water for the Purposes and the storage of Fresh Water, as expeditiously
as reasonably practicable, all as provided in this Agreement. The Parties shall cooperate with each other and to communicate regularly regarding their efforts to obtain such Permits.
Section 3.5
Grant of Access; Real Property Rights
.
(a)
Producer’s Grant of Access
. Producer hereby grants to Midstream Co, without warranty of title, either express or implied, to
the extent that it may lawfully and is contractually permitted to do so without the incurrence of additional expense, the rights of ingress and egress with respect to, and the right to access, all lands constituting Dedicated Properties for the
purpose of using, maintaining, servicing, inspecting, repairing, and operating all or any portion of the applicable Individual System, including all pipelines, meters and other equipment necessary for the performance by Midstream Co of this
Agreement. Such right of access shall not include any right to install, replace, disconnect, or remove all or any portion of the applicable Individual System, which rights may only be granted pursuant to a separate instrument entered into pursuant
to
Section 3.5(f)
.
(b)
Producer Does Not Have Obligation to Maintain
. Producer shall not have a duty to maintain in
force and effect any underlying agreements (such as any lease, easement, or surface use agreement) that the grant of access by Producer to Midstream Co under
Section 3.5(a)
is based upon, and such grant will terminate if Producer loses
its rights to the applicable property, regardless of the reason for such loss of rights.
(c)
Midstream Co’s Grant of Access
.
Midstream Co hereby grants to Producer, without warranty of title, either express or implied, to the extent that it may lawfully and is contractually permitted to do so without the incurrence of additional expense, the rights of ingress and egress
with respect to, and the right to access, all lands covered by the Individual System in order to exercise its rights and obligations hereunder. Such right shall not include any right to install, replace, disconnect, or remove any facilities on such
lands, which rights may only be granted pursuant to a separate instrument entered into pursuant to
Section 3.5(f)
. Producer shall release, protect, defend, indemnify and hold harmless Midstream Co Group from and against all Losses
directly or indirectly arising out of or in connection with bodily injury, death, illness, disease, or loss or damage to property of Midstream Co or any member of Midstream Co Group directly arising from Producer’s exercise of its access rights
hereunder, except to the extent such Losses are caused by the gross negligence or willful misconduct of Midstream Co Group.
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Restated
Fresh Water Services Agreement
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(d)
Midstream Co Does Not Have Obligation to Maintain
. Midstream Co shall not have a duty
to maintain in force and effect any underlying agreements that the grant of access by Midstream Co to Producer pursuant to this
Section 3.5(d)
is based upon, and such grant will terminate if Midstream Co loses its rights to the
applicable property, regardless of the reason for such loss of rights.
(e)
No Interference
. A Party’s exercise of the rights
granted to a Party by the other Party pursuant to this
Section 3.5
shall not unreasonably interfere with the granting Party’s operations or with the rights of owners in fee with respect to the applicable lands, and such rights will
be exercised in material compliance with all applicable Laws and the safety and other reasonable access requirements of the granting Party. Each Party obtaining a right of access pursuant to this
Section 3.5
shall have the status of
“licensee,” except when such Party is accessing the applicable real property by way of a right-of-way, easement, or other similar real property right granted pursuant to a separate instrument.
(f)
Real Property Rights
. Each Party shall acquire and maintain all easements, rights of way, surface use, surface access agreements,
and other real property rights from Third Parties necessary to perform its obligations hereunder. To the extent a Party has the contractual right and title to do so, such Party shall provide to the other Party the right of co-usage on the easements,
sub-easements, rights of way, surface use, and other real property rights held by such Party covering lands for which the other Party requires real property rights to perform its obligations hereunder, all at no cost to the providing Party and on
terms and conditions mutually acceptable to the Parties in their reasonable discretion. Where a Party does not have the contractual right to do so, such Party shall provide reasonable assistance to the other Party in obtaining the real property
rights with respect to such lands as necessary or desirable to perform its obligations hereunder.
Article 4
Measurement Devices
Section 4.1
Measurement Devices
.
(a) Midstream Co shall construct, install, own, and operate (or cause to be constructed, installed, and operated) the Measurement Devices
located at the Measurement Points. Midstream Co may, in its discretion, construct, install, own, and operate (or cause to be constructed, installed, and operated) Measurement Devices at Retention Facilities and at other points in the Individual
System.
(b) Midstream Co shall cause all Measurement Devices that are owned by Midstream Co to be constructed, installed, and operated in
accordance with applicable Law, resource industry standards, and governmental regulations, as set forth in the current System Plan.
(c)
Producer shall have the right, at its sole expense, to install, own and operate Measurement Devices located at the Measurement Points, Receipt Points and Delivery Points. Producer shall cause Producer Meters to be installed, subsequent to providing
a minimum of 72 hours’ notice to Midstream Co, so as not to interfere with Midstream Co’s Measurement Devices and shall take steps that are reasonable and customary in the industry to mitigate or prevent any quality problems that may
interfere with Midstream Co’s Measurement Devices at the Measurement Points.
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Fresh Water Services Agreement
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(d) Midstream Co may elect to use a Producer Meter as the Measurement Device for a Measurement
Point in lieu of constructing, installing, owning, and operating a Measurement Device located at such Measurement Point by providing notice to Producer (including by detailing such election in the applicable System Plan). If Midstream Co elects to
use such Producer Meter as the Measurement Device for a Measurement Point, Producer shall provide Midstream Co reasonable access to such Producer Meter, including prior advance notice of, and the ability to witness, the calibration of such Producer
Meter.
(e) Producer and Midstream Co shall cause Measurement Devices owned by such Party to be constructed, installed and operated in a
manner which is agreeable to all parties involved and satisfies local and state regulation
.
(f) Midstream Co may (but shall not be
obligated to) replace or make any alterations to the Measurement Devices necessary to comply with any applicable Law, resource industry standards, and governmental regulations. With respect to Producer Meters that Midstream Co has elected to use,
Producer may (but shall not be obligated to) replace or make any alterations to the Measurement Devices necessary to comply with any subsequent amendments, revisions or modifications of applicable Law, resource industry standards, and governmental
regulations.
(g) The accuracy of all Measurement Devices at the Measurement Points and Delivery Points, and of all Measurement Devices
that serve as “check meters” for any such Measurement Point or Delivery Point Measurement Devices will be verified by the owner of such Measurement Device (the “
Owner
”) at Monthly intervals and, if requested, in the
presence of a representative of the other Party (the “
Beneficiary
”). The Owner shall verify the accuracy of any owned Measurement Device before the next Monthly verification required by the preceding sentence if the Beneficiary
makes a written request for a special test as described below. If, upon any test, any Measurement Device is found to be inaccurate by 2% or less, previous readings of such Measurement Device will be considered correct in computing the deliveries of
Fresh Water under this Agreement. If, upon any test, any Measurement Device is found to be inaccurate by more than 2% (excessive meter factor deviation), such Measurement Device will immediately be removed from service, adjusted, calibrated,
repaired or replaced to record accurately (within the manufacturer’s allowance for error) and reproved prior to returning to service. If the excessive meter factor deviation can be explained by changing conditions (gravity, temperature or
flow-rate) no corrective action may be taken if mutually agreed upon by both Owner and Beneficiary. Any previous recordings of such Measurement Device with an excessive meter factor deviation will be corrected by using the arithmetic average of the
malfunction factor and the previous factor shall be applied to the production measured through the meter between the date of the previous factor and the date of the malfunction factor. The proving report must clearly indicate the meter’s
malfunction factor and all remarks associated with the repairs and adjustments. If Beneficiary desires a special test of any Measurement Device, at least 72 hours’ advance written notice will be given to the Owner, and the Parties will
cooperate to secure a prompt test of the accuracy of such Measurement Device. If the Measurement Device so tested is found to be inaccurate by 2% or less, the Owner will have the right to bill the Beneficiary for the costs incurred due to such
special test, including any labor and transportation costs, and the Beneficiary will pay such costs promptly upon invoice therefor.
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Restated
Fresh Water Services Agreement
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(h) If requested by the Beneficiary, the Measurement Devices owned by Owner shall include a
sufficient number of data ports, and Owner shall permit Beneficiary to connect to such data ports, as shall be required to provide to Beneficiary on a real-time basis all measurement data generated by such measurement equipment. Beneficiary shall be
responsible at its own cost for obtaining equipment and services to connect to such data ports and receive and process such data.
(i) Each
Party shall make the data and records by which measurements are determined available for the use of the other Party in fulfilling the terms and conditions thereof. Each Party shall, upon written request of the other Party, mail, email or deliver for
checking and calculation all volume and other meter and test records in its possession and used in the measurement and allocation of Fresh Water delivered under this Agreement within 30 Days after the last billing period. Such data shall be returned
within 90 Days after the receipt thereof.
(j) Each Party shall preserve or cause to be preserved for mutual use all test data or other
similar records in accordance with the applicable rules and regulations of regulatory bodies having jurisdiction, if any, with respect to the retention of such records, and, in any event, for at least 24 Months.
Section 4.2
Measurement Procedures
. The measurements of the quantity of all Fresh Water delivered at the Receipt Points and
Delivery Points will be conducted in accordance with water resource industry standards.
Article 5
Services
Section 5.1
Limitations on Service to Third Parties
. Midstream Co shall obtain Original Producer’s consent prior to offering services on an Individual System to any Third Party, unless (a) Midstream Co is required by a Governmental Authority to
offer service to a Third Party, in which case Midstream Co shall provide Producer prior notice of offering such service to such Third Party, (b) such Third Party has become a Producer hereunder by virtue of assignment of Dedicated Properties to
such Party, or (c) Original Producer has ceased to operate acreage serviced by such Individual System.
Section 5.2
Tender of
Fresh Water
. Subject to
Section 5.3(c)
, (a) each Day during the Term, Producer shall Tender to the Individual System at each applicable Receipt Point all of the Fresh Water to which it has taken title and custody from Water
Sources within the Service Area, and (b) Producer shall have the right to Tender to Midstream Co for Services under this Agreement Fresh Water other than the Fresh Water described in the preceding sentence and Producer shall also have the
reservations and right to alternate uses of Fresh Water set forth in
Article 2
.
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Restated
Fresh Water Services Agreement
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Section 5.3
Services; Service Standard
.
(a)
Services
. Subject to
Section 5.3(c)
, Midstream Co shall, at its sole cost and expense, (i) provide facilities at
each Receipt Point, Delivery Point and Retention Facility identified in the applicable Midstream Agreement Addendum sufficient (in the aggregate for the applicable Individual System) to receive, deliver or store, as applicable, all volumes of Fresh
Water Tendered by Producer from Water Sources within the Dedication Area up to the maximum levels set forth in the definition of “Services”, (ii) provide Services for all such Fresh Water and (iii) redeliver to Producer or for
the benefit of Producer at the relevant Delivery Point (as designated by Producer) Fresh Water that satisfies the applicable Quality Standard for Delivery (as further described in
Article 7
) and that is in the amount specified by Producer up
to the maximum levels set forth in the definition of “Services”.
(b)
Services Standard
. Midstream Co shall own and
operate (or contract for, as applicable) the System and perform the Services in a good and workmanlike manner in accordance with standards customary in the industry.
(c)
Priority of Service
. Midstream Co shall cause (i) Fresh Water Tendered by Original Producer to have priority service on the
System over Fresh Water of any Producer Assignee to the extent not in violation of applicable Law, and (ii) Fresh Water Tendered by Producer to have priority service on the System over Fresh Water of any Third Party. Midstream Co’s
performance of its obligations under
Section 5.3(a)
with respect to any Fresh Water (A) of any Producer Assignee, (B) required for any Well not included on a Development Report, (C) required to be stored at any Retention
Facility not included on a Development Report, or (D) for which new, modified, or enhanced facilities are contemplated in a System Plan, shall at all times be subject to the available capacity on the System at the time that Fresh Water is
available to be Tendered by Producer at a Receipt Point; provided, however, that in the case of clauses (B) through (D), Producer may make alternative arrangements for the Fresh Water not received by Midstream Co pursuant to
Section 3.3
.
(d)
Performance of Services by Third Parties
. In its performances of the Services hereunder, Midstream Co
may, but shall not be obligated to, engage or retain any necessary Third Party. To the extent Midstream Co does engage or retain a Third Party, Midstream Co shall use commercially reasonable efforts to achieve the lowest cost possible for the
Services provided by such Third Party.
Section 5.4
Adjustments
. Nothing contained in this Agreement shall preclude Midstream
Co from taking reasonable actions necessary to adjust receipts or deliveries under this Agreement in order to maintain the operational integrity and safety of the System or any Individual System.
Section 5.5
Suspension/Shutdown of Service
.
(a)
Shutdown
. During any period when all or any portion of the Individual System is shut down (i) because of maintenance, repairs,
Force Majeure, (ii) because such shutdown is necessary to avoid injury or harm to Persons or property, to the environment or to the integrity of all or any portion of the Individual System, or (iii) because providing Services hereunder has
become uneconomic as further described in
Section 13.2
, Midstream Co may interrupt or curtail the performance of the Services in respect of Fresh Water as set forth herein. In such cases Midstream Co shall have no liability to Producer
(subject to
Section 11.1(b)
) for its failure to provide Services, except to the extent such shutdown is caused by the negligence, gross
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Restated
Fresh Water Services Agreement
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negligence or willful misconduct of Midstream Co. If Midstream Co is required to so interrupt or curtail the performance of Services, Midstream Co will advise (by telephone, following up by
writing, which writing may be in the form of electronic mail) Producer of such interruption or curtailment as soon as practicable or in any event within twenty-four hours after the occurrence of such event.
(b)
Planned Curtailments and Interruptions
.
(i) Midstream Co shall have the right to curtail or interrupt the Services in respect of Fresh Water for brief periods to
perform necessary maintenance of and repairs or modifications (including modifications required to perform its obligations under this Agreement) to the Individual System;
provided
,
however
, that to the extent reasonably practicable,
Midstream Co shall coordinate its maintenance, repair and modification operations with the operations of Producer and, in any case, will use its reasonable efforts to schedule maintenance, repair and modification operations so as to avoid or
minimize to the greatest extent possible service curtailments or interruptions.
(ii) Midstream Co shall provide Producer
(x) with 30 Days prior notice of any upcoming normal and routine maintenance, repair and modification projects that Midstream Co has planned that would result in a curtailment or interruption of Services hereunder and the estimated time period
for such curtailment or interruption and (y) with six Months prior notice of any maintenance (A) of which Midstream Co has knowledge at least six Months in advance and (B) that is anticipated to result in a curtailment of Services
hereunder for five or more consecutive Days.
Article 6
Fees
Section 6.1
Fees
. Producer shall pay Midstream Co in accordance with the terms of this Agreement, for each Month in which Midstream Co provides Services with respect to the Fresh Water within an Individual System that is subject to this Agreement, an
amount equal to the sum of (i) the product of (x) the aggregate quantity of such Fresh Water, stated in Barrels, delivered to Producer by Midstream Co at the applicable Internal Transfer Point for such Fresh Water within the applicable
Individual System during such Month, multiplied by (y) the applicable Individual First Phase Rate, (ii) the Individual Second Phase Fee, if any, applicable to Second Phase Services performed within the Dedication Area and (iii) an
amount equal to Producer’s allocated portion of the actual costs incurred by Midstream Co for electricity required to provide Services, such allocation to be based upon the aggregate volumes of Fresh Water received by Midstream Co.
Section 6.2
Fee Adjustments
.
(a)
Redetermination
.
(i)
Redetermination Proposal
. Between November 1 and December 31 of any Year, Midstream Co shall prepare and
deliver to Producer for its review and comment a written proposal (each, a “
Redetermination Proposal
”) to redetermine each Individual Fee (unless the Parties mutually agree not to redetermine any particular Individual Fee) in
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Fresh Water Services Agreement
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accordance with this
Section 6.2(a)
. Each Redetermination Proposal shall include relevant supporting documentation based upon the latest updated Development Report and System Plan and
shall take into account future items including projected production volumes, operating revenue projections, and budgeted amounts for capital expenditures and all estimated operating expenses that Midstream Co believes will be necessary to provide
the applicable Services as contemplated by the latest updated Development Report and System Plan;
provided
that a redetermined Individual Fee as agreed to by the Parties (a “
Redetermined Individual Fee
”) shall not recoup the
difference between (A) estimated operating expenses or revenues and (B) actual operating expenses or revenues for periods prior to the effective date of such Redetermined Individual Fee. The Parties may agree to redetermine a particular
Individual Fee without obligation to agree to redetermine any other Individual Fee.
(ii)
Subsequent Redetermination
Timing
. Any Redetermined Individual Fee agreed to by the Parties on or prior to the last Business Day of February of the applicable Adjustment Year (“
Redetermination Deadline
”) shall become effective as of the first Day of the
Month following the Month in which agreement has been reached. If the Parties fail to agree upon a redetermination of any Individual Fee set forth in the applicable Redetermination Proposal on or prior to the Redetermination Deadline, such
Individual Fee shall remain in effect without redetermination pursuant to this
Section 6.2(a)
. For purposes of this
Section 6.2(a)(ii)
, the Year immediately after the Year during which a Redetermination Proposal is delivered
is herein the “
Adjustment Year
”.
(b)
Annual Escalation
. Effective as of July 1 of each Year, the Individual
Fee will be increased by multiplying the then-applicable Individual Fee by the Escalation Percentage (herein, the “
Increase in Fee
”) and adding the then-applicable Individual Fee to the Increase in Fee;
provided
that
Reimbursed Amounts shall not be subject to this
Section 6.2(b)
. Such annual increase to the Individual Fee shall become effective on July 1 of the applicable Year, even if such Individual Fee was redetermined pursuant to
Section 6.2(a)
, with an effective date during the same Year.
(c)
Downtime Events
. If (i) there has been a Downtime
Event and (ii) such Downtime Event caused the Downtime Duration for any facility on an Individual System during any such calendar quarter to extend for the duration shown on
Exhibit B
, then the applicable Individual First Phase Fee shall
be reduced as set forth in
Exhibit B
for such duration. To the extent that, as a result of a Downtime Event, Producer exercises its right to a temporary release pursuant to
Section 2.4(b)
, Producer shall be entitled to both such
release and the reduction of the applicable Individual First Phase Fee pursuant to this
Section 6.2(c)
.
Section 6.3
System Fuel
. Producer shall provide all fuel to operate the Individual System, including the cost of transportation of such fuel to the Individual System.
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Restated
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Article 7
Quality and Specifications
Section 7.1
Quality Standard for Fresh Water
.
(a) The following quality standards shall apply to the Fresh Water and Recycled Water as provided herein:
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Fresh Water
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Recycled
Water
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Cement
Water
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FRAC
Water
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pH
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6.5 to 7.5
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6.5 to 7.5
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6 to 8.5
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6 to 8
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Iron (Fe)
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25 mg/L
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25 mg/L
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300 mg/L
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25 mg/L
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Chloride (Cl)
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23,125 mg/L
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23,125 mg/L
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7000 mg/L
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~
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Sulfate (SO4)
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800 mg/L
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800 mg/L
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2,000 mg/L
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500 mg/L
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Calcium (Ca)
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500 mg/L
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2000 mg/L
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Magnesium (Mg)
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300 mg/L
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2000 mg/l
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Carbonate (CO3)
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100 mg/L
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300 mg/L
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Bicarbonate (HCO3)
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1000 mg/L
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300 mg/L
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Tannin/ Lignin
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25 mg/L
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~
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Total Hardness
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500 mg/L as
CaCO3
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500 mg/L as
CaCO3
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Total Alkalinity
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500 mg/L as
CaCO3
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500 mg/L as
CaCO3
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Sodium
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18,750 mg/L
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18,750 mg/L
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Silica
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10 mg/L
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10 mg/L
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Aluminum
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4 mg/L
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4 mg/L
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Oil and Grease
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5 mg/L
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5 mg/L
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Particulate Size
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50 nominal
micron
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50 nominal
micron
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(b) Fresh Water at each Retention Facility, Receipt Point and Delivery Point shall be free from any
contamination or any substances that would result in such Fresh Water being unsuitable for any Purpose or violating any law, rule or regulation (including but not limited to environmental laws). Raw Fresh Water at each Retention Facility, Receipt
Point and Delivery Point shall conform to Quality Standard for Fresh Water. Recycled Water at each Retention Facility, Receipt Point and Delivery Point shall conform to Quality Standard for Recycled Water.
(c) Producer shall not deliver Raw Fresh Water and Recycled Water into the same Retention Facility, unless agreed to by Midstream Co prior to
such delivery. With respect to the Raw Fresh Water delivered into the Individual System, Producer has the obligation to obtain and deliver Raw Fresh Water that conforms to the Quality Standard for Fresh Water. With respect to the Recycled Water
delivered into the Individual System, Producer has the obligation to obtain and deliver Recycled Water that conforms to the Quality Standard for Recycled Water.
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(d) Except to the extent specified in
Section 7.2
, Midstream Co shall use reasonable
efforts to ensure that Fresh Water that is held in the Retention Facilities or conveyed through the Individual System is not subject to any contamination or pollution that would result in the Fresh Water held in the Individual System not meeting
Quality Standard for Fresh Water or Quality Standard for Recycled Water, as applicable.
(e) Either Party may, at its option and sole
expense, obtain water samples available at any Retention Facility, Receipt Point or Delivery Point for water quality analyses and retain appropriate qualified personnel to conduct analyses in accordance with all then-applicable general industry
practices to ensure the water quality in the System meets or conforms with the Quality Standard for Fresh Water and, if applicable the Quality Standard for Delivery. Each Party shall bear all costs associated with its own water quality analytical
work.
Section 7.2
Non-Conforming Fresh Water
.
(a) If the Fresh Water in any Retention Facility, Individual System or Facility Segment does not conform to the Quality Standard for Fresh
Water or the Quality Standard for Recycled Water, as applicable, then Midstream Co will have the right to immediately discontinue receiving Fresh Water, discontinue delivering Fresh Water or may take any other ameliorative action it deems
appropriate to address such non-conformance.
(b) If the Fresh Water delivered to any Delivery Point does not conform to the Quality
Standard for Delivery, then Producer will have the right to immediately discontinue accepting delivery of such Fresh Water or may take any other ameliorative action it deems appropriate to address such non-conformance
(c) If Producer disputes Midstream Co’s determination that any Fresh Water fails to conform to the applicable specifications, then
Producer shall (a) notify Midstream Co thereof within twenty-four (24) hours after receiving such notice from Midstream Co, (b) submit the applicable Fresh Water to a mutually agreed upon Third Party laboratory, and (c) cause
such laboratory to analyze the Fresh Water within seventy-two (72) hours after Producer’s receipt of Midstream Co’s notice of non-conformance. If the results of such analysis provide that the applicable Fresh Water is non-conforming,
the costs and expenses associated with such analysis shall be borne by Producer; if the results of such analysis provide that the applicable Fresh Water conforms to the specifications, then Midstream Co shall reimburse Producer for all reasonable
and documented costs and expenses incurred by Producer to cause such Third Party laboratory to perform such analysis.
Section 7.3
Indemnification Regarding Quality
. PRODUCER SHALL RELEASE, PROTECT, DEFEND, INDEMNIFY AND HOLD HARMLESS MIDSTREAM CO GROUP FROM AND AGAINST ALL LOSSES DIRECTLY OR INDIRECTLY ARISING OUT OF, IN CONNECTION WITH OR IN ANY MANNER ATTRIBUTABLE TO
THE FAILURE OF THE FRESH WATER DELIVERED BY PRODUCER TO THE INDIVIDUAL SYSTEM TO MEET THE QUALITY SPECIFICATIONS SET FORTH HEREIN, EXCEPT TO THE EXTENT THAT MIDSTREAM CO CAUSED SUCH NON-CONFORMANCE BY ITS ACTION OR INACTION THAT WAS NOT UNDERTAKEN
AT THE DIRECTION OF PRODUCER.
Second Amended and
Restated
Fresh Water Services Agreement
-31-
Section 7.4
Delivery Rates
. Subject to the other provisions of this Agreement,
Midstream Co shall construct and operate each Individual System in a manner so as to permit Fresh Water to be made available at the Delivery Points at delivery rates equal to or greater than the Maximum BPM Rate specified on the applicable Midstream
Agreement Addendum.
Section 7.5
Producer Facilities
. Producer, at its own expense, shall construct, equip, maintain, and
operate all facilities necessary to receive Fresh Water into the tanks or other storage facilities located at the Delivery Points of each Individual System at delivery rates equal to or greater than the Maximum BPM Rate specified on the applicable
Midstream Agreement Addendum. Producer shall be responsible at its own expense for using or disposing of any Fresh Water delivered to Producer hereunder at the volumes and flow rates required hereunder.
Article 8
Term
Section 8.1
Term
. The term of this Agreement commenced on January 1, 2015, which is the original effective date of the
Parties’ agreement regarding the matters set forth herein, and this Agreement remain in effect until January 1, 2030 (the “
Initial Term
”) and thereafter on a Year to Year basis until terminated by Midstream Co or
Producer effective upon the expiration of the Initial Term or the expiration of any Year thereafter upon notice no less than 90 Days prior to the expiration of the Initial Term or the expiration of any Year thereafter (such period of time, the
“
Term
”). Notwithstanding the foregoing, with respect to the OpCo Agreement Addendum only, this Agreement shall continue for so long as any Original Midstream Co remains a Party under any Midstream Agreement Addendum then in effect
and shall automatically terminate at such time as no Original Midstream Co remains a Party to any Midstream Agreement Addendum.
Section 8.2
Effect of Termination or Expiration of the Term
. Upon the termination of the Term, this Agreement shall forthwith
become void and the Parties and OpCo shall have no liability or obligation under this Agreement, except that (a) the termination of this Agreement shall not relieve any Party or OpCo from any expense, liability or other obligation or remedy
therefor that has accrued or attached prior to the date of such termination, (b) the provisions of
Section 7.3
, this
Section 8.2
,
Article 15
and
Section 17.1
through
Section 17.10
shall
survive such termination and remain in full force and effect indefinitely, (c) the indemnities set forth in
Section 3.5(c)
shall survive such termination and remain in full force and effect indefinitely, and
(d)
Section 10.4
and
Section 17.11
shall survive such termination and remain in full force and effect for the period of time specified in such Sections.
Article 9
Title and
Custody
Section 9.1
Title and Custody Raw Fresh Water
. The Raw Fresh Water supplies that are subject to this Agreement
are water rights or permitted ground water adjudicated by the representative court of competent jurisdiction or permitted under authority vested to the Colorado Division of Water Resources, respectively. The title of said water rights or groundwater
permits are not affected or transferred under the terms of this Agreement. At each applicable Receipt Point, Midstream Co shall receive custody to the Raw Fresh Water delivered
Second Amended and
Restated
Fresh Water Services Agreement
-32-
into the Individual System, with all rights and responsibilities thereof. At all times that the Raw Fresh Water is in the Individual System, Midstream Co shall retain exclusive custody to such
Raw Fresh Water. At each applicable Delivery Point, Producer shall receive custody to the Raw Fresh Water delivered to Producer at such Delivery Point, with all rights and responsibilities thereof. Delivery by the Producer of Raw Fresh Water to any
Receipt Point shall be deemed a transfer of custody to such Raw Fresh Water by Producer, or a warranty of the good right in Producer to deliver such Raw Fresh Water to Midstream Co under this Agreement. Delivery by Midstream Co of Raw Fresh Water to
any Delivery Point shall be deemed a transfer of custody to such Raw Fresh Water by Midstream Co, or a warranty of the good right in Midstream Co to deliver such Raw Fresh Water to Producer under this Agreement.
Section 9.2
Title and Custody Recycled Water
. The title to the Recycled Water is not affected or transferred under the terms of
this Agreement. At each applicable Receipt Point, Midstream Co shall receive custody to the Recycled Water delivered into the Individual System, with all rights and responsibilities thereof. At all times that the Recycled Water is in the Individual
System, Midstream Co shall retain exclusive custody to such Recycled Water. At each applicable Delivery Point, Producer shall receive custody to the Recycled Water delivered to Producer at such Delivery Point, with all rights and responsibilities
thereof. Delivery by the Producer of Recycled Water to any Receipt Point shall be deemed a transfer of custody to such Recycled Water by Producer, or a warranty of the good right in Producer to deliver such Recycled Water to Midstream Co under this
Agreement. Delivery by Midstream Co of Recycled Water to any Delivery Point shall be deemed a transfer of custody to such Recycled Water by Midstream Co, or a warranty of the good right in Midstream Co to deliver such Recycled Water to Producer
under this Agreement.
Article 10
Billing and Payment
Section 10.1
Statements
.
(a)
Ordinary Course.
Midstream Co shall submit invoices to Producer on or before the 25th Day after the end of a Month (the
“
Invoice Month
”). Each invoice shall be accompanied by supporting information for all amounts charged by such invoice. All amounts owed for Services provided during an Invoice Month shall be reflected on the applicable invoice for
such Invoice Month;
provided
that to the extent any amount appearing on an invoice is in respect of an amount paid by Midstream Co to a Third Party (collectively, the “
Reimbursed Amount
”) or the calculation of such amount is
contingent on information provided by a Third Party (collectively, the “
Conditional Amount
”), such Reimbursed Amount and Conditional Amount shall be reflected on an invoice within 90 Days after the end of the Month in which such
Reimbursed Amount was paid by Midstream Co.
(b)
Reserved
.
(c)
Detail
. Midstream Co shall cause its invoices and supporting information to include information reasonably sufficient to explain and
support any estimates and charges reflected therein, the reconciliation of any estimates made in a prior Month to the actual measurements for such Month, and any adjustments to prior period volumes and quantities.
Second Amended and
Restated
Fresh Water Services Agreement
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(d)
Reserved
.
(e)
One Invoice; Netting
.
To the extent that Midstream Co and Producer are party to this Agreement and one or more other
Transaction Documents, one invoice may be delivered in respect of all amounts owing under such Transaction Documents. The Parties shall net all undisputed amounts due and owing or past due and owing arising under the Transaction Documents to which
Producer and Midstream Co are parties such that the Party owing the greater amount shall make a single payment of the net amount to the other Party. No amounts owing to or by any Midstream Co may be set off against amounts owing to or by any other
Midstream Co. No amounts owing to or by any Producer may be set off against amounts owing to or by any other Producer. To the extent possible, all fee adjustments set forth in
Article 6
shall be accomplished by setoff or netting.
Section 10.2
Payments
.
(a) Unless otherwise agreed by the Parties, all invoices under this Agreement shall be due and payable in accordance with each invoice’s
instructions on or before the later of the 30th Day of each Month and the 10th Day after receipt of the invoice or, if such Day is not a Business Day, then on the next Business Day. All payments by Producer under this Agreement shall be made by
electronic funds transfer to the account designated by Midstream Co. Any amounts not paid by the due date will be deemed delinquent and, with respect to amounts owed to Midstream Co, will accrue interest at the Interest Rate, such interest to be
calculated from and including the due date but excluding the date the delinquent amount is paid in full.
(b) If Producer, in good faith,
disputes the amount of any invoice of Midstream Co, Producer will pay Midstream Co such amount, if any, that is not in dispute and shall provide Midstream Co notice, no later than 30 Days after the date that payment of such invoice would be due
under
Section 10.2(a)
, of the disputed amount accompanied by reasonable documentation to support Producer’s dispute. If Producer fails to provide notice of dispute within such 30-Day period, then Producer shall be deemed to have
waived its right to dispute the applicable invoice, except for a dispute following an audit conducted in accordance with
Section 10.4
. Following Midstream Co’s receipt of such dispute notice, Producer and Midstream Co shall endeavor
in good faith to resolve such dispute, and if the Parties are unable to resolve such dispute within a reasonable time, such dispute may be resolved in accordance with
Section 17.6
of this Agreement. Upon resolution of the dispute, any
required payment shall be made within 15 Days after such resolution, and, if such amount shall be paid to Midstream Co, such amount shall be paid along with interest accrued at the Interest Rate from and including the due date but excluding the date
paid.
Section 10.3
Adequate Assurances
. If (a) Producer fails to pay according to the provisions hereof and such failure
continues for a period of 5 Business Days after written notice of such failure is provided to Producer, (b) Producer is not the Original Producer or (c) Midstream Co has reasonable grounds for insecurity regarding the performance by
Producer of any obligation under this Agreement, then Midstream Co, by notice to Producer, may, singularly or in combination with any other rights it may have, demand Adequate Assurance of Performance from Producer. “
Adequate Assurance of
Performance
” means, at the option of Producer, any of the following, (x) advance payment in cash by Producer to Midstream Co for
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Services to be provided under this Agreement in the following Month or (y) delivery to Midstream Co by Producer of an irrevocable standby letter of credit or a performance bond, in form and
substance reasonably acceptable to Midstream Co, issued by a Credit-Worthy Person, in an amount equal to not less than the aggregate proceeds due from Producer under
Section 10.1
for the prior 2-Month period. Promptly following the
termination of the condition giving rise to Midstream Co’s reasonable grounds for insecurity or payment in full of amounts outstanding, as applicable, Midstream Co shall release to Producer the cash, letter of credit, bond or other assurance
provided by Producer (including any accumulated interest, if applicable, and less any amounts actually applied to cover Producer’s obligations hereunder)
.
Section 10.4
Audit
. Each Party has the right, at its sole expense and during normal working hours, to examine the records of the
other Party to the extent reasonably necessary to verify the accuracy of any statement, charge or computation made pursuant to the provisions of the Transaction Documents. The scope of such examination will be limited to the 24 Months preceding the
date such notice of audit, statement, charge or computation was presented. No Party may conduct more than one audit (taking all Transaction Documents to which Producer is a party together) of another Party during any Year (except that, if a Party is
in default hereunder, additional audits may be conducted during the continuance of such default). If any such examination reveals any inaccuracy in any statement or charge, the necessary adjustments in such statement or charge and the payments
necessitated thereby shall be made within 60 Days after resolution of the inaccuracy. This provision of this Agreement will survive any termination of this Agreement for the later of (a) a period of 24 Months from the end of the Year in which
the date of such termination occurred or (b) until a dispute initiated within the 24 Month period is finally resolved, in each case for the purpose of such statement and payment objections.
Article 11
Remedies
Section 11.1
Suspension of Performance; Temporary Release from Dedication
.
(a)
Suspension by Midstream Co as Remedy for Payment Default
. If Producer fails to pay any invoice rendered under
Article 10
,
such failure is not due to a good faith dispute by Producer in accordance with
Section 10.2(b)
and such failure is not remedied within 5 Business Days after Producer’s receipt of written notice of such failure from Midstream Co,
Midstream Co shall have the right, at its sole discretion, to (i) suspend performance (including withholding any payments that are owed by Midstream Co to Producer, and such withheld amounts shall not be subject to setoff under
Section 10.1(e)
) under this Agreement until such amount, including interest at the Interest Rate, is paid in full or (ii) continue performing the Services under this Agreement, and, acting in a commercially reasonable manner, sell
any Fresh Water delivered by Producer to the Receipt Points on Producer’s behalf, and use the proceeds therefrom to reimburse Midstream Co for any amounts due and owing to Midstream Co, and, at Producer’s election, either (y) remit
any excess amounts received under such sale to Producer or (z) reduce the Services Fee due from Producer to Midstream Co for the following Month by the amount of such excess.
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(b)
Additional Suspensions as Remedies
. If a Party fails to perform or comply with any
material warranty, covenant, or obligation (other than as provided in
Section 11.1(a)
or
Section 2.4(a)(i)
) contained in this Agreement and such failure has not been remedied within 60 Days after its receipt of written notice
from the other Party of such failure, then the non-defaulting Party shall have the right to suspend performance of its obligations under this Agreement that are affected by such failure or non-compliance (including withholding any payments that are
owed to the other Party, and such withheld amounts shall not be subject to netting or setoff under
Section 10.1(e)
); provided that Producer may not withhold any payments that are owed to Midstream Co for Services actually performed by
Midstream Co.
(c)
Specific Performance and Declaratory Judgments
. Damages in the event of breach of this Agreement by a Party
hereto may be difficult, if not impossible, to ascertain. Therefore, each Party, in addition to and without limiting any other remedy or right it may have, will have the right to seek a declaratory judgment and will have the right to an injunction
or other equitable relief in any court of competent jurisdiction, enjoining any such breach, and enforcing specifically the terms and provisions hereof, and each of the Parties hereto hereby waives any and all defenses it may have on the ground of
lack of jurisdiction or competence of the court to grant such an injunction or other equitable relief. The existence of this right will not preclude any Party from pursuing any other rights and remedies at law or in equity that such Party may have.
Section 11.2
No Election
. In the event of a default by a Party under this Agreement, the other Party shall be entitled in its
sole discretion to pursue one or more of the remedies set forth in this Agreement, or such other remedy as may be available to it under this Agreement, at Law or in equity, subject, however, to the limitations set forth in
Section 11.3
and
Article 15
. No election of remedies shall be required or implied as the result of a Party’s decision to avail itself of a remedy under this Agreement.
Section 11.3
DIRECT DAMAGES
A PARTY’S DAMAGES RESULTING FROM A BREACH OR VIOLATION OF ANY REPRESENTATION, WARRANTY, COVENANT,
AGREEMENT OR CONDITION CONTAINED IN THIS AGREEMENT OR ANY ACT OR OMISSION ARISING FROM OR RELATED TO THIS AGREEMENT SHALL BE LIMITED TO ACTUAL DIRECT DAMAGES AND SHALL NOT INCLUDE ANY OTHER LOSS OR DAMAGE, INCLUDING INDIRECT, SPECIAL, CONSEQUENTIAL,
INCIDENTAL, EXEMPLARY OR PUNITIVE DAMAGES, INCLUDING LOST PROFITS, PRODUCTION, OR REVENUES, AND EACH PARTY RELEASES THE OTHER PARTY FROM ALL SUCH CLAIMS FOR LOSS OR DAMAGE OTHER THAN ACTUAL DIRECT DAMAGES; PROVIDED THAT THIS LIMITATION TO DIRECT
DAMAGES SHALL NOT LIMIT THE PARTIES’ INDEMNIFICATION OBLIGATIONS UNDER
SECTION 3.5(c)
,
SECTION 7.3
, AND
ARTICLE 15
.
Article 12
Force
Majeure
Section 12.1
Force Majeure
. If either Midstream Co or Producer is rendered unable by an event of Force Majeure to
carry out, in whole or part, its obligations under this Agreement and such Party gives notice (which notice may initially be delivered orally so long as written notice is delivered as soon as reasonably practicable thereafter) and reasonably full
details of the event (including the nature, extent, effect, and likely duration of the event or circumstances constituting the Force Majeure event) to the other Party as soon as practicable after the
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occurrence of the event, then, during the pendency of such Force Majeure, but only during that period, the obligations of the Party affected by the event shall be canceled or suspended, as
applicable, to the extent required;
provided
,
however
, that notwithstanding anything in the foregoing to the contrary, no Party shall be relieved from any indemnification obligation or any obligation to make payments, as the result of
Force Majeure, regardless of which Party is affected;
provided further
that if the Force Majeure impacts only a particular Facility Segment or Individual System, then the suspension of obligations described in this sentence shall apply only
to the applicable Facility Segment or Individual System and not to the obligations owing in connection with the rest of the System. The Party affected by Force Majeure shall use commercially reasonable efforts to remedy the Force Majeure condition
with all reasonable dispatch, shall give notice to the other Party of the termination of the Force Majeure, and shall resume performance of any suspended obligation promptly after termination of such Force Majeure.
Section 12.2
Extensions Due to Force Majeure
. If a Party is unable to meet any deadline set forth herein as a result of a Force
Majeure, then provided that such Party complies with the provisions of Section 12.1, such deadline shall be extended for a period of time equal to the period of time during which such Party is delayed due to the Force Majeure.
Article 13
Change in
Law and Scope
Section 13.1
Changes in Applicable Law
.
(a) If any new Laws are enacted or amended or any new interpretations in respect of previously existing Laws are issued after the Effective
Date that require Midstream Co to make capital expenditures with respect to the System, then Midstream Co may propose an increase to the applicable Individual Fee as may be necessary or appropriate to preserve and continue for the Parties the rights
and benefits originally contemplated for the Parties by this Agreement;
provided, however
, that no increase to the applicable Individual Fee pursuant to this
Section 13.1
shall be applicable unless and until, in the reasonable
judgment of Midstream Co, Midstream Co would be required to make capital expenditures with respect to the System in order to comply with such new Law that materially and adversely affects the economics of the Services provided, fees received, or the
other economic benefits of this Agreement for Midstream Co.
(b) Producer shall accept or reject, in its sole discretion, Midstream
Co’s proposed increase to the Individual Fee within 30 Days after receiving such proposal from Midstream Co. If Producer fails to provide notice of such acceptance or rejection within such 30-Day period, then Producer shall be deemed to have
accepted such increase. If Producer rejects the amount of the proposed increase, then Midstream Co shall release the Wells, Separator Facilities, Receipt Points, Spacing Units, and Dedicated Production that would have been affected by such increase
in accordance with
Section 2.4(a)(viii)
. The Parties will amend, update, or revise the applicable Agreement Addendum in accordance with this Agreement to reflect any changes in the applicable Individual Fees agreed to in accordance with
this
Section 13.1
.
(c) Producer and Midstream Co shall use their commercially reasonable efforts to comply with new and
amended applicable Laws and new interpretations of existing Laws.
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Section 13.2
Unprofitable Operations and Rights of Termination
.
(a)
Cessation of Services
. If, in the sole discretion of Midstream Co, the Services under this Agreement are or become uneconomical for
any cause, then Midstream Co shall not be obligated to provide the applicable Services so long as such condition exists.
(i) If Midstream Co suspends Services under this
Section 13.2(a)
as a result of Producer’s
(A) negligence, willful misconduct, or breach of this Agreement, (B) delivery of Fresh Water that fails to meet the quality specifications required by
Section 7.1
, or (C) execution of a plan of development that deviates
from the then-applicable Development Report, then Midstream Co may resume providing such Services at any time, upon two months’ advance written notice delivered to Producer, and the affected Fresh Water, Receipt Points, Water Sources, Wells,
and Spacing Units shall only be permanently released as a result of suspension under this clause by mutual agreement of the Parties under
Section 2.4(a)(iv)
.
(ii) If Midstream Co suspends Services under this
Section 13.2(a)
for any reason other than as specified in clause
(i) above and (x) such suspension continues for six consecutive Months or (y) Midstream Co delivers notice to Producer that such suspension shall be permanent, then the applicable Fresh Water, Receipt Points, Water Sources, Wells, and
Spacing Units shall be permanently released as specified in
Section 2.4(a)(ix)
.
(b)
Election not to Expand System
. If
Midstream Co determines, in its discretion, that an expansion of the Individual System to satisfy the needs of Producer, as described in
Section 3.2
hereof, would be uneconomical, then Midstream Co shall neither be obligated to undertake
such expansion nor to provide the applicable Services. Producer shall be entitled to a release of the applicable Planned Wells pursuant to
Section 2.4(a)(ix)
immediately upon Midstream Co’s delivery of a System Plan (marked as
“Final”) indicating that a requested expansion would be uneconomical pursuant
Section 13.2(d)
.
(c)
Start of
Suspension of Services
. Midstream Co shall cause any suspension of Services permitted by this
Section 13.2
to commence on the first Day of a Month and not on any other Day.
(d)
Supporting Documentation
. As soon as Midstream Co determines that an expansion of the Individual System will not be economic or that
continuing to provide Services at existing facilities has been rendered uneconomic, Midstream Co shall communicate the same to Producer. With respect to existing facilities, such notice shall be delivered to Producer at least 60 Days in advance of
any proposed curtailment under this
Section 13.2
and such notice shall be accompanied by documentation supporting its claim that certain Services have become uneconomical. With respect to planned facilities, Midstream Co shall indicate
that providing Services to Planned Wells is uneconomical by failing to include the necessary expansion projects in the applicable System Plan and shall provide supporting documentation for its determination that such expansion would be uneconomical,
if requested by Producer. If Midstream Co delivers a System Plan (marked as “Final”) describing the necessary expansion projects, such delivery shall be deemed to be a commitment by Midstream Co to complete such expansion without
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exercising its rights under
Section 13.2(b)
, so long as conditions (including anticipated throughput, pricing, the ability to obtain rights-of-way, Producer’s continued execution
of the Development Report, and any other factors deemed material by Midstream Co) do not materially change; provided, however that upon the initiation of Services through such expansion project or through a component part of such expansion project,
such expansion (or applicable portion thereof) shall be considered “existing facilities” for purposes of this
Section 13.2
and Midstream Co shall have all of the rights set forth herein with respect to existing facilities that
become uneconomical. Nothing in this
Section 13.2(d)
shall give Producer a right to consent to a suspension under this
Section 13.2
.
(e)
No Obligation to Drill or Operate
. Without limiting the right of Producer to revise the Development Report to eliminate any proposed
Wells or Retention Facilities, nothing herein shall be construed to require Producer to drill any Well, to continue to operate any Well, to develop or maintain any Water Resources that a prudent operator would not in like circumstances drill or
continue to operate, develop, or maintain.
Article 14
Reserved
Article 15
Indemnification and Insurance
Section 15.1
Reciprocal Indemnity
. To the fullest extent permitted by applicable Law and except as otherwise set forth in
Section 3.5(c)
and
Section 7.3
:
(a)
Producer Indemnification
. Producer shall release, protect, defend,
indemnify and hold harmless Midstream Co Group from and against all Losses directly or indirectly arising out of or in connection with bodily injury, death, illness, disease, or loss or damage to property of Producer or any member of Producer Group
in any way arising out of or relating to this Agreement, directly or indirectly. THIS RELEASE, DEFENSE AND INDEMNITY OBLIGATION SHALL APPLY REGARDLESS OF FAULT OF MIDSTREAM CO GROUP OR ANY OTHER PERSONS.
(b)
Midstream Co Indemnification
. Midstream Co shall release, protect, defend, indemnify and hold harmless Producer Group from and
against all Losses directly or indirectly arising out of or in connection with bodily injury, death, illness, disease, or loss or damage to property of Midstream Co or any member of Midstream Co Group in any way arising out of or relating to this
Agreement, directly or indirectly. THIS RELEASE, DEFENSE AND INDEMNITY OBLIGATION SHALL APPLY REGARDLESS OF FAULT OF PRODUCER GROUP OR ANY OTHER PERSONS.
(c)
Regardless of Fault
. AS USED IN THE PRECEDING TWO SUBCLAUSES, THE PHRASE “REGARDLESS OF FAULT” SHALL MEAN, WITH RESPECT TO
ANY LOSS THAT IS CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE (WHETHER SOLE, JOINT, CONCURRENT, COMPARATIVE, CONTRIBUTORY, ACTIVE, PASSIVE, OR OTHERWISE), STRICT LIABILITY, OR OTHER FAULT, OF ANY MEMBER OF MIDSTREAM CO GROUP OR THE PRODUCER GROUP,
WITHOUT REGARD TO THE CAUSE OR CAUSES THEREOF AND WITHOUT LIMITATION OF SUCH LOSS AND WHETHER OR NOT CAUSED BY A PRE-EXISTING CONDITION.
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Section 15.2
Indemnification Regarding Third Parties
. Each Party shall release,
protect, defend, indemnify and hold the other Party harmless against any Loss by a Third Party that is not a member of the Producer Group or Midstream Co Group, to the extent such Loss (a) is caused by the negligence or willful misconduct of
said indemnifying Party or such Party’s Group, or (b) in the case of Producer as indemnifying Party, results from claims by a Third Party of title, rights, or encumbrances in or to Fresh Water delivered by Producer to a Receipt Point.
Section 15.3
Reserved
.
Section 15.4
Insurance
. Midstream Co and Producer shall (a) carry and maintain no less than the insurance coverage set forth
in
Exhibit D
, and (b) cause such insurance to be (i) the primary coverage without any right of contribution from any other insurance held by the other Party to the extent of the insured Party’s indemnification obligations
hereunder, and (ii) written and endorsed to include waivers of all subrogation rights of the insurers against Midstream Co and its Group (in the case of Producer’s insurance) or Producer and its Group (in the case of Midstream Co’s
insurance). Unless Producer is Original Producer, Producer shall also cause the insurance carried and maintained by it pursuant to this
Section 15.4
to be endorsed to name Midstream Co and its Group as additional insureds or provide
blanket additional insured status that covers Midstream Co and its Group as additional insureds, except in the case of worker’s compensation insurance. Any insurance provided by OpCo on behalf of Midstream Co that comports with this
Section 15.4
shall be deemed to satisfy these requirements.
Article 16
Assignment
Section 16.1
Assignment of Rights and Obligations under this Agreement
.
(a)
Assignment
. Except as specifically otherwise provided in this Agreement, no Party nor OpCo shall have the right to assign its rights
and obligations under this Agreement (in whole or in part) to another Person except with the prior consent of Midstream Co (in the case of an assignment by Producer) or Producer (in the case of an assignment by OpCo or Midstream Co), which consent
may be withheld at such Party’s sole discretion. Notwithstanding the foregoing, Producer may assign its rights and obligations under this Agreement to any Person to whom Producer assigns or transfers an interest in any of the Dedicated
Properties insofar as this Agreement relates to such Dedicated Properties without the consent of Midstream Co;
provided
that (A) such Person assumes in writing the obligations of Producer under this Agreement insofar as it relates to the
portion of the Dedicated Properties so assigned or transferred, such writing shall take the form of an Agreement Addendum, executed by the applicable Midstream Co and the Producer Assignee (and others, if appropriate) and such writing shall be
recorded in the real property records of the counties in which the Dedication Area is located, (B) such assignment is made subject to this Agreement, (C) if such assignment or transfer is made to an Affiliate of Producer, the Original
Producer shall not be released from any of its obligations under this Agreement, and (D) if such transfer or assignment is to a Producer Assignee (a “
Third Party Assignment
”): (1) the Original Producer shall be released
from its obligations under this
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Agreement with respect to the Dedicated Properties so assigned or transferred, (2) at least thirty (30) Days prior to the closing date of the Third Party Assignment (or, if the period
between signing and closing is less than thirty (30) Days, as early as possible and in no event less than two Business Days prior to the closing of the Third Party Assignment) Producer shall cause the proposed Producer Assignee to deliver an
updated Development Report to Midstream Co and (3) prior to or on the closing date of the Third Party Assignment, the Producer Assignee shall deliver to Midstream Co (x) a copy of the writing pursuant to which the Third Party Assignment is
occurring, and (y) documentation of any Conflicting Dedication affecting the Producer Assignee.
(b)
Notice; Binding Effect
.
Within 30 Days prior to the date of execution of a permitted assignment by Producer, Producer shall give Midstream Co notice of any assignment of this Agreement or Dedicated Properties. Midstream Co shall give Producer written notice of any
assignment of this Agreement within 30 Days after the date of execution of such permitted assignment. This Agreement shall be binding upon and inure to the benefit of the respective permitted successors and assigns of the Parties. Any attempted
assignment made without compliance with the provisions set forth in this
Section 16.1
shall be null and void
ab initio
.
(c)
Releases not Assignments
. Any release of any of the Dedicated Properties from the Dedications pursuant to
Section 2.4
shall not constitute an assignment or transfer of such Dedicated Properties for the purposes of this
Article 16
.
Section 16.2
Pre-Approved Assignments
. Each Party shall have the right without the prior consent of the others to (a) mortgage, pledge, encumber or otherwise impress a lien or security interest upon its rights and interest in and to this Agreement,
and (b) make a transfer pursuant to any security interest arrangement described in (a) above, including any judicial or non-judicial foreclosure and any assignment from the holder of such security interest to another Person.
Section 16.3
Change of Control
. Except as provided in
Section 16.1
, nothing in this
Article 16
shall prevent
Producer’s members or owners from transferring their respective interests (whether equity or otherwise and whether in whole or in part) in Producer and nothing in this
Article 16
shall prevent Midstream Co’s members or owners from
transferring their respective interests (whether equity or otherwise and whether in whole or in part) in Midstream Co. However, if a change of control of a Party gives rise to a reasonable basis for insecurity on the part of the other Party, such
change of control may be the basis for a request of Adequate Assurance of Performance. Each member or owner of Producer or Midstream Co, as applicable, shall have the right to assign and transfer such member’s or owner’s interests (whether
equity or otherwise and whether in whole or in part) in Producer or Midstream Co, as applicable, without restriction contained in this Agreement.
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Article 17
Other Provisions
Section 17.1
Relationship of the Parties
. The execution and delivery of an Agreement Addendum shall create a binding agreement
between the Parties signatory thereto or, in the case of the OpCo Agreement Addendum, the Producer signatory thereto and OpCo, consisting of the terms set forth in such Agreement Addendum together with the terms set forth in these Agreement Terms
and Conditions. The signatories of one Agreement Addendum shall not be bound to or otherwise in privity of contract with the signatories of any other Agreement Addendum, and the execution and delivery of each Agreement Addendum shall form a separate
and distinct contract. This Agreement shall not be deemed or construed to create, a partnership, joint venture or association or a trust between or among Producer, Midstream Co, and OpCo or the persons party to any other Agreement Addendum. This
Agreement shall not be deemed or construed to authorize any Party or OpCo to act as an agent, servant or employee for any other Party or OpCo for any purpose whatsoever except as explicitly set forth in this Agreement. In their relations with each
other under this Agreement, the Parties and OpCo shall not be considered fiduciaries.
Section 17.2
Notices
. Unless otherwise
specified in the applicable provision, all notices, consents, approvals, requests, and other communications required or permitted to be given under this Agreement shall be in writing and delivered personally, or sent by bonded overnight courier,
mailed by U.S. Express Mail or by certified or registered United States Mail with all postage fully prepaid, return receipt requested, or, except in the case of notices of breach or default, sent by electronic mail (including with a PDF of the
notice or other communication attached), in each case, addressed (i) if to Producer, at the address set forth on the applicable Agreement Addendum and (ii) if to Midstream Co or OpCo, then to OpCo and the applicable Midstream Co at the
address set forth on the applicable Agreement Addendum;
provided
that in the case of any notice by electronic mail, such notice is confirmed by communication via another method permitted by this
Section 17.2
. Any notice, consent,
approval, request, or other communication (“Communications”) given in accordance herewith shall be deemed to have been given when (a) actually received or rejected by the addressee in person or by courier, (b) (reserved), or
(c) actually received or rejected by the addressee upon delivery by overnight courier or United States Mail, as shown in the tracking report or return receipt, as applicable. Communications may not be transmitted by electronic mail, except for
ordinary course business communications that shall be deemed to be received, if transmitted during normal business hours on such Business Day, or if transmitted after normal business hours, on the next Business Day. Any Person may change their
contact information for notice by giving notice to the other Party and, in the case of Producer, OpCo in the manner provided in this
Section 17.2
.
Section 17.3
Entire Agreement; Conflicts
. This Agreement (consisting of these Agreement Terms and Conditions and the applicable
Agreement Addendum) constitutes the entire agreement of Producer and Midstream Co or OpCo (as applicable) pertaining to the subject matter hereof and supersedes all prior agreements, understandings, negotiations, and discussions, whether oral or
written, of Producer and Midstream Co or OpCo (as applicable) pertaining to the subject matter hereof. There are no warranties, representations, or other agreements between Producer and Midstream Co or OpCo (as applicable) relating to the subject
matter hereof except as specifically set forth in this Agreement, including the exhibits hereto, and no Party or OpCo shall be bound by or liable for any alleged representation, promise, inducement, or statements of intention not so set forth.
Section 17.4
Waivers; Rights Cumulative
. Any of the terms, covenants, or conditions hereof may be waived only by a written
instrument executed by or on behalf of the Person waiving compliance. No course of dealing on the part of any Party or OpCo, or their respective
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officers, employees, agents, or representatives, nor any failure by a Party or OpCo to exercise any of its rights under this Agreement shall operate as a waiver thereof or affect in any way the
right of such Party or OpCo at a later time to enforce the performance of such provision. No waiver by any Party or OpCo of any condition, or any breach of any term or covenant contained in this Agreement, in any one or more instances, shall be
deemed to be or construed as a further or continuing waiver of any such condition or breach or a waiver of any other condition or of any breach of any other term or covenant. The rights of Producer, Midstream Co, and OpCo (as applicable) under this
Agreement shall be cumulative, and the exercise or partial exercise of any such right shall not preclude the exercise of any other right.
Section 17.5
Amendment
.
(a) This Agreement may be amended only by an instrument in writing executed (except as otherwise set forth in this
Section 17.5
) by
Producer and Midstream Co or OpCo, as applicable, and expressly identified as an amendment or modification.
(b) In the event of a conflict
between (i) these Agreement Terms and Conditions or any exhibit to this agreement, on the one hand, and (ii) an applicable Agreement Addendum, on the other, the applicable Agreement Addendum shall control.
Section 17.6
Governing Law; Arbitration
. This Agreement shall be governed by and construed in accordance with the laws of the
State, excluding any conflicts of law rule or principle that might refer construction of such provisions to the laws of another jurisdiction. Any dispute, controversy, or claim arising out of or relating to this Agreement shall be finally settled by
arbitration in accordance with the CPR Institute for Dispute Resolution Rules for Non-Administered Arbitration then in effect (the “
Rules
”) by a sole arbitrator appointed in accordance with the Rules. The arbitrator is not empowered
to award consequential, indirect, special, punitive or exemplary damages, and each Party and OpCo irrevocably waives any damages in excess of actual damages. Arbitration shall be held in the English language in the State, and the decision of the
arbitration panel shall include a statement of the reasons for such decision, and the award shall be final and binding on Producer and Midstream Co or OpCo, as applicable. Awards shall be final and binding on Producer and Midstream Co or OpCo, as
applicable, from the date they are made and judgment upon any award may be entered in any court having jurisdiction. The arbitrator shall apply the laws of the State, excluding any conflicts of law rule or principle that might refer construction of
such provisions to the laws of another jurisdiction.
Section 17.7
Parties in Interest
. Except for parties indemnified
hereunder, nothing in this Agreement shall entitle any Person other than the Parties and OpCo to any claim, cause of action, remedy or right of any kind.
Section 17.8
Preparation of Agreement
. The Parties and OpCo and their respective counsel participated in the preparation of this
Agreement. In the event of any ambiguity in this Agreement, no presumption shall arise based on the identity of the draftsman of this Agreement.
Section 17.9
Severability
. If any term or other provision of this Agreement is invalid, illegal, or incapable of being enforced by
any rule of Law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the
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economic or legal substance of the transactions contemplated hereby is not affected in any adverse manner to any Party or OpCo. Upon such determination that any term or other provision is
invalid, illegal, or incapable of being enforced, Producer and Midstream Co or OpCo, as applicable, shall negotiate in good faith to modify this Agreement so as to effect the original intent of Producer and Midstream Co or OpCo, as applicable, as
closely as possible in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible. A ruling of invalidity, illegality or unenforceability as to one Agreement shall only be applicable to that
Agreement, not all the Agreements covered by these Agreement Terms and Conditions.
Section 17.10
Counterparts
. This Agreement
may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be an original instrument, but all of such counterparts shall constitute for all purposes one agreement. Any signature hereto delivered by a Party or
OpCo by electronic mail shall be deemed an original signature hereto; provided that the originals of any such electronically provided signatures shall be provided by the signatory, if requested by the other Party (or OpCo) within a week of
exchanging such signatures.
Section 17.11
Confidentiality
. All data and information exchanged by the Parties and OpCo (other
than the terms and conditions of this Agreement) and all pricing terms shall be maintained in strict and absolute confidence and no Party nor OpCo shall disclose, without the prior consent of the other Parties and OpCo, any such data, information or
pricing terms unless the release thereof is required by Law (including any requirement associated with an elective filing with a Governmental Authority) or the rules or regulations of any stock exchange on which any securities of the Parties, OpCo,
or any Affiliates thereof are traded. Nothing in this Agreement shall prohibit the Parties or OpCo from disclosing whatever information in such manner as may be required by applicable Law; nor shall any Party or OpCo be prohibited by the terms
hereof from disclosing information acquired under this Agreement to any financial institution or investors providing or proposing financing to a Party, OpCo, or to any Person proposing to purchase the equity in any Party or OpCo or the assets owned
by any Party or OpCo. Notwithstanding the foregoing, the restrictions in this
Section 17.11
will not apply to data or information that (i) is in the possession of the Person receiving such information prior to disclosure by the
other Party or OpCo, (ii) is or becomes known to the public other than as a result of a breach of this Agreement or (iii) becomes available to a Party or OpCo a non-confidential basis from a source other than the other Party or OpCo,
provided
that such source is not bound by a confidentiality agreement with, or other fiduciary obligations of confidentiality to, the other Party or OpCo. This Section will survive any termination of this Agreement for a period of 24
Months from the end of the Year in which the date of such termination occurred.
(End of Agreement Terms and Conditions
)
Second Amended and
Restated
Fresh Water Services Agreement
-44-
EXHIBIT A
TO
AGREEMENT TERMS AND
CONDITIONS
RELATING TO FRESH WATER SERVICES
Weld County, Colorado
Second Amended and
Restated
Fresh Water Services Agreement
Exhibit A - Page 1
EXHIBIT B
TO
AGREEMENT TERMS AND
CONDITIONS
RELATING TO FRESH WATER SERVICES
DOWNTIME DURATION
With respect to a
Downtime Event described in clause (i) of the definition of “Downtime Event” (Retention Facilities):
|
|
|
|
|
|
|
Row
|
|
Downtime Duration for any applicable
Retention Facility (per calendar quarter)
|
|
Percentage Reduction of Individual First
Phase Fee with respect to the applicable
Individual System
|
|
A
|
|
3 days up to and including 5 days
|
|
5%
|
|
B
|
|
Greater than 5 days and up to and including 7 days
|
|
10%
|
|
C
|
|
Greater than 7 days and up to and including 9 days
|
|
15%
|
|
D
|
|
Greater than 9 days
|
|
20%
|
With respect to a Downtime Event described in clause (ii) of the definition of “Downtime Event” (conveyance
facilities):
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|
Row
|
|
Downtime Duration for any applicable facility
(per calendar quarter)
|
|
Percentage Reduction of Individual
First Phase Fee with respect to the
applicable Individual System
|
|
A
|
|
3 days up to and including 5 days
|
|
5%
|
|
B
|
|
Greater than 5 days and up to and including 7 days
|
|
10%
|
|
C
|
|
Greater than 7 days and up to and including 9 days
|
|
15%
|
|
D
|
|
Greater than 9 days
|
|
20%
|
(
End of Exhibit B
)
Second Amended and
Restated
Fresh Water Services Agreement
Exhibit B - Page 1
EXHIBIT C
Reserved
Second Amended and
Restated
Fresh Water Services Agreement
Exhibit C - Page 1
EXHIBIT D
TO
AGREEMENT TERMS AND
CONDITIONS
RELATING TO FRESH WATER SERVICES
INSURANCE
Each of OpCo (on behalf of
Midstream Co) and Producer shall purchase and maintain (or cause to be purchased and maintained) in full force and effect at all times during the Term of this Agreement, at such Party’s sole cost and expense and from insurance companies that
are rated (or whose reinsurers are rated) “A-VII” or better by AM Best or “BBB-” or better by Standard & Poor’s or an equivalent rating from another recognized rating agency, policies providing the types and limits
of insurance indicated below, which insurance shall be regarded as a minimum and, to the extent of the obligations undertaken by such Party in this Agreement, shall be primary (with the exception of the Excess Liability Insurance and Workers’
Compensation) as to any other existing, valid, and collectable insurance. Each Party’s deductibles shall be borne by that Party.
|
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A.
|
Where applicable, Workers’ Compensation and Employers’ Liability Insurance, in accordance with the statutory requirements of the State, and endorsed specifically to include the following:
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1.
|
Employers’ Liability, subject to a limit of liability of not less than $1,000,000 per accident, $1,000,000 for each employee/disease, and a $1,000,000 policy limit.
|
The Workers’ Compensation and Employers’ Liability Insurance policy(ies) shall contain an alternate employer endorsement.
|
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B.
|
Commercial General Liability Insurance, with limits of liability of not less than the following:
|
$2,000,000 general aggregate
$1,000,000 each occurrence, Bodily Injury or Property Damage Combined Single Limit
Such insurance shall include the following:
|
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1.
|
Premises and Operations coverage.
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|
2.
|
Contractual Liability covering the liabilities assumed under this Agreement.
|
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|
3.
|
Broad Form Property Damage Liability endorsement, unless policy is written on November 1988 or later ISO form.
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|
4.
|
Products and Completed Operations.
|
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|
5.
|
Time Element Limited Pollution coverage.
|
Second Amended and
Restated
Fresh Water Services Agreement
Exhibit D - Page 1
|
|
C.
|
If applicable, Automobile Liability Insurance, with limits of liability of not less than the following:
|
$1,000,000 Bodily Injury or Property Damage Combined Single Limit, for each occurrence.
Such coverage shall include hired and non-owned vehicles and owned vehicles where applicable.
|
|
D.
|
If applicable, Aircraft Liability Insurance. In any operation requiring the use or charter of aircraft or helicopters by Midstream Co or Producer, combined single limit insurance shall be carried or cause to be carried
for public liability, passenger liability and property damage liability in an amount of not less than $8,000,000 per seat subject to a minimum of $20,000,000; this insurance shall cover all owned and non-owned aircraft, including helicopters, used
by Midstream Co in connection with the performance of the work set forth in this Agreement.
|
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|
E.
|
Excess Liability Insurance, with limits of liability not less than the following:
|
Limits of
Liability - $10,000,000 Occurrence/Aggregate for Bodily Injury and Property Damage in excess of the coverage outlined in Paragraphs A, B, C and D.
The
limits of coverage required in this Agreement may be met with any combination of policies as long as the minimum required limits are met.
Each Party to
this Agreement shall have the right to acquire, at its own expense, such additional insurance coverage as it desires to further protect itself against any risk or liability with respect to this Agreement and operations and activities under this
Agreement or related thereto. All insurance maintained by or on behalf of Producer or Midstream Co shall contain a waiver by the insurance company of all rights of subrogation in favor of the other Party.
Neither the minimum policy limits of insurance required of the Parties nor the actual amounts of insurance maintained by the Parties under their insurance
program shall operate to modify the Parties’ liability or indemnity obligations in this Agreement.
A Party may self-insure the requirements
in this
Exhibit D
if such Party is Controlled by Noble Energy, Inc. and, otherwise, if such Party or its parent is considered investment grade (S&P BBB- or equivalent or higher).
(End of Exhibit D)
Second Amended and
Restated
Fresh Water Services Agreement
Exhibit D - Page 2
Exhibit 10.18.1
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED. THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
SECOND AMENDED AND RESTATED
FRESH WATER SERVICES AGREEMENT
AGREEMENT ADDENDUM 01
W
ELLS
R
ANCH
This AGREEMENT ADDENDUM 01 (this “
Agreement Addendum
”) (a) shall be effective as among the Persons named below as
“Producer” and “Midstream Co” as of the date specified below as the “Effective Date,” (b) incorporates the Second Amended and Restated Agreement Terms and Conditions Relating to Fresh Water Services (the
“
Agreement Terms and Conditions
”), which were last amended effective as of March 31, 2016 and recorded in the real property records of Weld County, Colorado on
as
, and (c) together with the Agreement Terms and Conditions, shall constitute one
contract and shall be the Agreement of the Parties. Except as otherwise set forth herein (i) all terms shall have the meanings assigned to such terms in the Agreement Terms and Conditions, and (ii) all references to Exhibits, Appendices,
Articles, Sections, subsections and other subdivisions refer to the corresponding Exhibits, Appendices, Articles, Sections, subsections and other subdivisions of or to the Agreement Terms and Conditions.
Producer desires to contract with Midstream Co for Midstream Co to provide the Services utilizing the Individual System, and Midstream Co
desires to provide the Services to Producer, on the terms and subject to the conditions of this Agreement.
NOW, THEREFORE, in
consideration of the mutual agreements in this Agreement, Midstream Co and Producer hereby agree as follows:
|
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|
|
Producer
|
|
Noble Energy, Inc., a Delaware corporation
|
|
|
|
|
Midstream Co
|
|
Colorado River DevCo LP, a Delaware limited partnership
|
|
|
|
|
Parties
|
|
The term “Party” or “Parties” shall refer to the Producer and Midstream Co identified in this Agreement Addendum
|
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|
Effective Date
|
|
March 31, 2016
|
|
|
|
|
Dedication Area
|
|
The Wells Ranch integrated development plan area, as such area was defined by Producer on the Effective Date, and which consists of the following areas within Weld County, Colorado
|
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.
THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
|
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|
|
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|
|
Township
|
|
Range
|
|
Sections
|
|
|
|
T7N
|
|
R64W
|
|
31-36
|
|
|
|
T7N
|
|
R63W
|
|
31-36
|
|
|
|
T6N
|
|
R64W
|
|
ALL
|
|
|
|
T6N
|
|
R63W
|
|
ALL
|
|
|
|
T6N
|
|
R62W
|
|
2-11, 14-23, 26-35
|
|
|
|
T5N
|
|
R62W
|
|
2-11, 14-23
|
|
|
|
T5N
|
|
R63W
|
|
ALL
|
|
|
|
T7N
|
|
R62W
|
|
31
|
|
|
|
T5N
|
|
R64W
|
|
1-6, 10-15, 22-27, 34-36
|
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|
|
|
|
|
|
|
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|
.
|
|
Except and excluding the wells, leases, and other acreage described in the property exhibits attached to the Releases of Dedication.
|
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|
|
|
Individual First Phase Rate
|
|
$[**] / Barrel
|
|
|
|
|
Individual Second Phase Fee
|
|
[**].
|
|
|
|
|
Maximum BPM Rate
|
|
110
|
|
|
|
|
|
Additional Revisions
|
|
|
|
|
Section 2.3
|
|
In addition to the Producer’s reservations in Section 2.3, Producer further reserves to itself the right to provide transportation by truck of Fresh Water from the Wells Ranch Ponds to facilities outside of Wells Ranch,
and further reserves the right to transport Fresh Water by truck.
|
Agreement Addendum 01
– Page
2
Second Amended and Restated Fresh Water Services Agreement
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.
THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
|
|
|
|
|
Notices and Payments
|
|
|
|
|
Notice Address – General Matters & Correspondence
|
|
Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Chief Financial Officer
John F. Bookout, IV
Telephone: (832) 639-7134
Email:
John.Bookout@nblenergy.com
Producer:
Noble Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO 80202
Attention: Director of
USO Finance,
Gerald
Free
Telephone: (303) 228-4174
Email:
Gerald.Free@nblenergy.com
|
|
|
|
|
Notice Address – Operational Matters, Force Majeure and Delivery interruptions
|
|
Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Chief Operating Officer
John C. Nicholson
Telephone: (281) 876-6186
Email:
John.Nicholson@nblenergy.com
Producer:
Noble Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO 80202
Attention: Vice President – DJ Business
Unit
Mark Patteson
|
Agreement Addendum 01
– Page
3
Second Amended and Restated Fresh Water Services Agreement
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.
THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
|
|
|
|
|
Notice Address – Invoicing Matters
|
|
Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Ian Dams
Telephone: (832) 639-7406
Email:
ian.dams@nblenergy.com
Producer:
1001 Noble Energy Way
Houston, TX 77070
Attention: Director of Revenue Accounting
John Nedelka
Telephone: (281) 872-3120
Email:
John.Nedelka@nblenergy.com
|
|
|
|
|
Payments by Electronic Funds Transfer
|
|
Midstream Co:
ABA for wire: 021000021
ABA for ACH: 111000614
Account Number: 780161720
Account Name: Colorado River DevCo
LP
Financial Institution: JP Morgan
Bank Swift: CHASUS33
Producer:
ABA/Routing Number: 021000021
Account Number: 08805135066
Account Name: Noble Energy, Inc.
Financial Institution: JP
Morgan
Bank Swift: CHASUS33
|
(End of Agreement Addendum 01)
Agreement Addendum 01
– Page
4
Second Amended and Restated Fresh Water Services Agreement
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.
THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement in duplicate originals to
be effective as of the Effective Date.
|
|
|
|
|
“Producer”
|
|
|
|
NOBLE ENERGY, INC.
|
|
|
|
|
By:
|
|
/s/ Gary W. Willingham
|
|
|
|
Gary W. Willingham
|
|
|
|
Executive Vice President
|
|
|
|
|
|
|
|
STATE OF TEXAS
|
|
)
|
|
|
|
|
|
)
|
|
ss.
|
|
COUNTY OF HARRIS
|
|
)
|
|
|
The foregoing instrument was acknowledged before me this
26th
day of April, 2016 by Gary W. Willingham as Executive
Vice President of Noble Energy, Inc., a Delaware corporation, on behalf of said corporation.
|
|
|
/s/ Vickie L. Graham
|
|
Notary Public in and for the State of Texas
|
Agreement Addendum 01
– Signature Page
1
Second Amended and Restated Fresh Water Services Agreement
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.
THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
|
|
|
|
|
“Midstream Co”
|
|
|
|
COLORADO RIVER DEVCO LP
By: Colorado River DevCo GP LLC
By: Noble Midstream Services, LLC
|
|
|
|
|
By:
|
|
/s/ Terry R. Gerhart
|
|
|
|
Terry R. Gerhart
|
|
|
|
Chief Executive Officer
|
|
|
|
|
|
|
|
STATE OF TEXAS
|
|
)
|
|
|
|
|
|
)
|
|
ss.
|
|
COUNTY OF HARRIS
|
|
)
|
|
|
The foregoing instrument was acknowledged before me this
26th
day of April, 2016 by Terry R. Gerhart as Chief Executive
Officer of Noble Midstream Services, LLC, which is the sole member of Colorado River DevCo GP LLC, which is the general partner of Colorado River DevCo LP, a Delaware limited partnership, on behalf of said company.
|
|
|
/s/ Joanne Garner
|
|
Notary Public in and for the State of Texas
|
Agreement Addendum 01
– Signature Page
2
Second Amended and Restated Fresh Water Services Agreement
Exhibit 10.18.2
When Recorded, Mail To:
Attn: DJ Land Manager
1625 Broadway, Suite 2200
Denver, CO 80202
FORM OF
AMENDMENT 01
TO
THAT CERTAIN
SECOND AMENDED AND RESTATED
FRESH WATER SERVICES AGREEMENT
W
ELLS
R
ANCH
C
ONTRACT
NUMBER
: CRWR01-FW
This AMENDMENT 01 (this “
Amendment
”) shall be effective among Noble Energy, Inc., a Delaware corporation (the
“
Producer
”) and Colorado River DevCo LP, a Delaware limited partnership, together with its permitted successors and assigns (“
Midstream Co
”) as of September 1, 2016 (the “
Amendment Effective
Date
”). This Amendment modifies that certain Second Amended and Restated Fresh Water Services Agreement, effective as of March 31, 2016 (the “
Agreement
”), which has been given contract number CRWR01-FW and is comprised
of (i) that certain Second Amended and Restated Agreement Terms and Conditions Relating to Fresh Water Services (the “
Agreement Terms and Conditions
”), last updated March 31, 2016, together with (ii) that certain
Second Amended and Restated Agreement Addendum 01 (the “
Agreement Addendum
”), effective as of March 31, 2016. The Agreement Terms and Conditions, the Agreement Addendum and this Amendment shall constitute one contract and
shall be the Agreement of the Parties.
WHEREAS, the Parties acknowledge that the purpose of this Amendment is to correct an error in
certain specifications set out in
Section 7.1(a)
of the Agreement Terms and Conditions, and incorporated in the Agreement Addendum, and to make certain other technical modifications.
WHEREAS, the Parties agree and acknowledge that amendments set forth herein constitute an amendment only to the Agreement and not to any other
agreement in respect of fresh water services to which Producer is a party.
NOW, THEREFORE, in consideration of the foregoing recitals, which are incorporated herein and the
mutual agreements in the Agreement, Midstream Co and Producer hereby agree as follows:
1.
Amendments
.
1.1
Section 1.1
of the Agreement (which appears in the Agreement Terms and Conditions) is hereby amended by amending and restating
the following defined terms in their entirety to read as follows:
“
Facility Segment
” means each segment of an Individual
System comprised of facilities that can be operated independently of other Facility Segments. For example, a Facility Segment may begin at a Receipt Point and end at a Retention Facility, begin at a Retention Facility and end at a Delivery Point or
have another configuration. If an Individual System does not contain any such distinct segment, then the term Facility Segment shall be synonymous with Individual System.
“
Individual Fee
” means the aggregate of the Individual First Phase Fee and the Individual Second Phase Fee;
provided
that for purposes of the annual escalation in the Individual Fee described in
Section 6.2(b)
, such term shall not include any Reimbursed Amount.
“
Individual System
” means the portion of the System beginning at the Receipt Points and ending at the Delivery Points. The
Individual Systems in existence on the Effective Date are more particularly described in writing between Producer and Midstream Co. Additional Individual Systems may be added to the System from time to time in satisfaction of the needs identified by
Producer and evidenced in writing between Producer and Midstream Co.
1.2
Section 2.4(b)(iv)
of the Agreement (which appears
in the Agreement Terms and Conditions) is amended and restated in its entirety to read: “(iv)
Reserved.
”.
1.3
Section 3.1(e)
of the Agreement (which appears in the Agreement Terms and Conditions) is hereby amended by deleting the sentence that reads as follows “In the sole discretion of each Person serving as a Midstream Co under a
Midstream Agreement Addendum, such Midstream Co may work with any other Midstream Co to prepare and deliver a System Plan jointly.” and inserting in place thereof the following sentence: “Midstream Co may, in its sole discretion, work with
OpCo or any of OpCo’s subsidiaries to prepare and deliver a System Plan jointly with such other entity or entities.”
1.4
Section 6.3
of the Agreement (which appears in the Agreement Terms and Conditions) is hereby amended and restated in its entirety to read as follows:
Section 6.3 Producer, at its sole cost and expense, shall procure all fuel used by Midstream Co, if any, required to operate the
Individual System or to generate electricity for the operation of the Individual System and arrange for transportation of such fuel to the Individual System.
1.5 The last row of the chart in
Section 7.1(a)
of the Agreement Terms and Conditions is hereby amended and restated in its
entirety to read as follows:
|
|
|
|
|
|
|
|
|
|
|
Particulate Size
|
|
100 nominal micron
|
|
100 nominal micron
|
|
|
|
|
Amendment 01 –
Page 2
Second Amended and Restated Fresh Water Services Agreement
Colorado River Fresh Water Agreement
CRWR01-FW
2.
Clarification Regarding Second Phase Services
. Midstream Co shall have the option to
deliver Fresh Water through an Internal Transfer Point as described in the definition of “Services” in the Agreement (which appears in the Agreement Terms and Conditions) or directly to a Delivery Point without transporting Fresh Water
through an Internal Transfer Point. The Individual Second Phase Fee shall be equal to zero for any Fresh Water that Midstream Co elects to deliver directly to a Delivery Point without passing through an Internal Transfer Point.
3.
Confidentiality
. Pursuant to
Section 17.11
of the Agreement (which appears in the Agreement Terms and Conditions), the
Parties have agreed to treat the information exchanged in connection with and the provisions of the Agreement as confidential. In addition, confidential treatment has been requested with the Securities and Exchange Commission for the pricing terms
of the Agreement, and the Parties agree to take appropriate measures to abide by the requirements imposed by the Securities and Exchange Commission to preserve such confidential treatment, if granted.
4.
Confirmation
. The provisions of the Agreement, as amended by this Amendment, shall remain in full force and effect following the
effectiveness of this Amendment. No provision of the Agreement is amended or otherwise modified hereby, except as expressly stated herein.
5.
No Waiver
. The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy
of any Party to the Agreement, nor constitute a waiver of any provision of the Agreement. On and after the Amendment Effective Date, this Amendment shall for all purposes constitute a part of the Agreement.
6.
Counterparts
. This Amendment may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be
an original instrument, but all of such counterparts shall constitute for all purposes one agreement. Any signature hereto delivered by a Party by electronic mail shall be deemed an original signature hereto.
7.
Governing Law
. This Amendment shall be governed by and construed in accordance with the laws of the State, excluding any conflicts
of law rule or principle that might refer construction of such provisions to the laws of another jurisdiction.
(Signature Pages follow)
Amendment 01 –
Page 3
Second Amended and Restated Fresh Water Services Agreement
Colorado River Fresh Water Agreement
CRWR01-FW
IN WITNESS WHEREOF, the Parties hereto have executed this Amendment to the Agreement in duplicate
originals to be effective as of the Amendment Effective Date.
|
|
|
|
|
“Producer”
|
|
|
|
NOBLE ENERGY, INC.
|
|
|
|
|
By:
|
|
|
|
|
|
Gary W. Willingham
|
|
|
|
Executive Vice President
|
|
|
|
|
|
|
|
STATE OF TEXAS
|
|
)
|
|
|
|
|
|
)
|
|
ss.
|
|
COUNTY OF HARRIS
|
|
)
|
|
|
The foregoing instrument was acknowledged before me this
day of
,
, by Gary W. Willingham as Executive Vice President of Noble
Energy, Inc., a Delaware corporation.
WITNESS my hand and official seal.
My commission expires:
Amendment 01 –
Signature Page 1
Second Amended and Restated Fresh Water Services Agreement
Colorado River Fresh Water Agreement
CRWR01-FW
|
|
|
|
|
|
|
|
|
|
|
“Midstream Co”
|
|
COLORADO RIVER DEVCO LP
|
|
|
|
|
|
|
By: Colorado River DevCo GP LLC
|
|
|
|
|
|
By: Noble Midstream Services, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
|
|
Terry R. Gerhart
|
|
|
|
|
|
|
|
|
|
Chief Executive Officer
|
|
|
|
|
|
|
|
STATE OF TEXAS
|
|
)
|
|
|
|
|
|
)
|
|
ss.
|
|
COUNTY OF HARRIS
|
|
)
|
|
|
The foregoing instrument was acknowledged before me this
day of
,
, by Terry R. Gerhart as Chief Executive Officer of Noble
Midstream Services, LLC, which is the sole member of Colorado River DevCo GP LLC, which is the general partner of Colorado River DevCo LP, a Delaware limited partnership.
WITNESS my hand and official seal.
My commission expires:
Amendment 01 –
Signature Page 2
Second Amended and Restated Fresh Water Services Agreement
Colorado River Fresh Water Agreement
CRWR01-FW
Exhibit 10.19.1
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED. THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
SECOND AMENDED AND RESTATED
FRESH WATER SERVICES AGREEMENT
AGREEMENT ADDENDUM 02
N
ORTHERN
C
OLORADO
This AGREEMENT ADDENDUM 02 (this “
Agreement Addendum
”) (a) shall be effective as among the Persons named below as
“Producer” and “Midstream Co” as of the date specified below as the “Effective Date,” (b) incorporates the Second Amended and Restated Agreement Terms and Conditions Relating to Fresh Water Services (the
“
Agreement Terms and Conditions
”), which were last amended effective as of March 31, 2016 and recorded in the real property records of Weld County, Colorado on
as
, and (c) together with the Agreement Terms and Conditions, shall constitute one
contract and shall be the Agreement of the Parties. Except as otherwise set forth herein (i) all terms shall have the meanings assigned to such terms in the Agreement Terms and Conditions, and (ii) all references to Exhibits, Appendices,
Articles, Sections, subsections and other subdivisions refer to the corresponding Exhibits, Appendices, Articles, Sections, subsections and other subdivisions of or to the Agreement Terms and Conditions.
Producer desires to contract with Midstream Co for Midstream Co to provide the Services utilizing the Individual System, and Midstream Co
desires to provide the Services to Producer, on the terms and subject to the conditions of this Agreement.
NOW, THEREFORE, in
consideration of the mutual agreements in this Agreement, Midstream Co and Producer hereby agree as follows:
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Producer
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Noble Energy, Inc., a Delaware corporation
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Midstream Co
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San Juan River DevCo LP, a Delaware limited partnership
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Parties
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The term “Party” or “Parties” shall refer to OpCo, Producer and Midstream Co identified in this Agreement Addendum
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Effective Date
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March 31, 2016
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Dedication Area
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The area in Northern Colorado including (but not limited to) the East Pony integrated development plan area, as such area was defined by Producer on the Effective Date, and which consists of the following areas within Weld County,
Colorado
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TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.
THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
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Township
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Range
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Sections
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T8N
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R59W
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ALL
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T8N
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R60W
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ALL
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T8N
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R61W
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ALL
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T8N
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R62W
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ALL
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T9N
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R58W
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ALL
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T9N
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R59W
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ALL
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T9N
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R60W
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ALL
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T9N
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R61W
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ALL
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10N
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58W
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19-36 (also known as S/2)
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8N
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58W
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1-18 (also known as N/2)
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Except and excluding the wells, leases, and other acreage described in the property exhibits attached to the Releases of Dedication.
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Individual First Phase Rate
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$[**] / Barrel
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Individual Second Phase Fee
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[**].
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Maximum BPM Rate
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130
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Additional Revisions
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Section 2.3
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In addition to the Producer’s reservations in Section 2.3, Producer further reserves to itself the right to transport Fresh Water by truck.
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Agreement Addendum 02
– Page
2
Second Amended and Restated Fresh Water Services Agreement
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.
THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
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Notices and Payments
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Notice Address – General Matters & Correspondence
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Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Chief Financial Officer
John F. Bookout, IV
Telephone: (832) 639-7134
Email:
John.Bookout@nblenergy.com
Producer:
Noble Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO 80202
Attention: Director of
USO Finance,
Gerald Free
Telephone: (303) 228-4174
Email:
Gerald.Free@nblenergy.com
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Notice Address – Operational Matters, Force Majeure and Delivery interruptions
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Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Chief Operating Officer
John C. Nicholson
Telephone: (281) 876-6186
Email:
John.Nicholson@nblenergy.com
Producer:
Noble Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO 80202
Attention: Vice President – DJ Business Unit
Mark Patteson
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Agreement Addendum 02
– Page
3
Second Amended and Restated Fresh Water Services Agreement
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.
THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
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Notice Address – Invoicing Matters
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Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Ian Dams
Telephone: (832) 639-7406
Email:
ian.dams@nblenergy.com
Producer:
1001 Noble Energy Way
Houston, TX 77070
Attention: Director of Revenue Accounting
John Nedelka
Telephone: (281) 872-3120
Email: John.Nedelka@nblenergy.com
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Payments by Electronic Funds Transfer
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Midstream Co:
ABA for wire: 021000021
ABA for ACH: 111000614
Account Number: 780162439
Account Name: San Juan River DevCo
LP
Financial Institution: JP Morgan
Bank Swift: CHASUS33
Producer:
ABA/Routing Number: 021000021
Account Number: 08805135066
Account Name: Noble Energy, Inc.
Financial Institution: JP
Morgan
Bank Swift: CHASUS33
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(End of Agreement Addendum 02)
Agreement Addendum 02
– Page
4
Second Amended and Restated Fresh Water Services Agreement
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.
THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement in duplicate originals to
be effective as of the Effective Date.
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“Producer”
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NOBLE ENERGY, INC.
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By:
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/s/ Gary W. Willingham
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Gary W. Willingham
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Executive Vice President
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STATE OF TEXAS
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)
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)
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ss.
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COUNTY OF HARRIS
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)
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The foregoing instrument was acknowledged before me this
26th
day of April, 2016 by Gary W. Willingham as Executive
Vice President of Noble Energy, Inc., a Delaware corporation, on behalf of said corporation.
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/s/ Vickie L. Graham
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Notary Public in and for the State of Texas
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Agreement Addendum 02
– Signature Page
1
Second Amended and Restated Fresh Water Services Agreement
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.
THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
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“Midstream Co”
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SAN JUAN RIVER DEVCO LP
By: San Juan River DevCo GP LLC
By: Noble Midstream Services, LLC
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By:
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/s/ Terry R. Gerhart
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Terry R. Gerhart
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Chief Executive Officer
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STATE OF COLORADO
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)
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ss.
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COUNTY OF
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)
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The foregoing instrument was acknowledged before me this
26th
day of April, 2016 by Terry R. Gerhart, Chief Executive
Officer of Noble Midstream Services, LLC, a Delaware limited liability company, which is the sole member of San Juan River DevCo GP LLC, which is the general partner of Colorado River DevCo LP, a Delaware limited partnership, on behalf of said
company.
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/s/ Joanne Garner
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Notary Public in and for the State of Texas
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Agreement Addendum 02
– Signature Page
2
Second Amended and Restated Fresh Water Services Agreement
Exhibit 10.19.2
When Recorded, Mail To:
Attn: DJ Land Manager
1625 Broadway, Suite 2200
Denver, CO 80202
FORM OF
AMENDMENT 01
TO
THAT CERTAIN
SECOND AMENDED AND RESTATED
FRESH WATER SERVICES AGREEMENT
N
ORTHERN
C
OLORADO
C
ONTRACT
N
UMBER
: SJNC02-FW
This AMENDMENT 01 (this “
Amendment
”) shall be effective as among Noble Energy, Inc., a Delaware corporation (the
“
Producer
”) and San Juan River DevCo LP, a Delaware limited partnership, together with its permitted successors and assigns (“
Midstream Co
”) as of September 1, 2016 (the “
Amendment Effective
Date
”). This Amendment modifies that certain Second Amended and Restated Fresh Water Services Agreement, effective as of March 31, 2016 (the “
Agreement
”), which has been given contract number SJNC02-FW and is comprised
of (i) that certain Second Amended and Restated Agreement Terms and Conditions Relating to Fresh Water Services (the “
Agreement Terms and Conditions
”), last updated March 31, 2016, together with (ii) that
certain Second Amended and Restated Agreement Addendum 02 (the “
Agreement Addendum
”), effective as of March 31, 2016. The Agreement Terms and Conditions, the Agreement Addendum 02 and this Amendment shall constitute one
contract and shall be the Agreement of the Parties.
WHEREAS, capitalized terms used herein have the meanings assigned to such terms in
the Agreement Terms and Conditions.
WHEREAS,
Section 17.5
of the Agreement (which appears in the Agreement Terms and
Conditions) permits the Parties to amend provisions of the Agreement relating to fees by a written agreement that is executed by all Parties and is expressly identified as an amendment or modification.
WHEREAS, the Parties agree and acknowledge that amendments to the Agreement Terms and Conditions set forth herein constitute an amendment only
to the Agreement and not to any other agreement in respect of fresh water services to which Producer is a party.
WHEREAS, pursuant to the
definition of “Services” Midstream Co is only required to accept a volume of Fresh Water at all Receipt Points on an Individual System that does not exceed the capacity then available in the applicable Individual System and Producer’s
Fresh Water requirements in Northern Colorado exceed the capacity currently available on the Individual System servicing Northern Colorado.
WHEREAS, Producer has requested and Midstream Co has agreed to expand the Individual System by
adding a new Retention Facility, and Midstream Co has contracted with a Third Party vendor to finance and construct such facility for Midstream Co’s use in satisfying Producer’s demand.
WHEREAS, Producer and Midstream Co also desire to correct an error in certain specifications set out in
Section 7.1(a)
of the
Agreement Terms and Conditions.
NOW, THEREFORE, in consideration of the foregoing recitals, which are incorporated herein and the mutual
agreements in the Agreement, Midstream Co and Producer hereby agree as follows:
1.
Amendments
.
1.1
Section 1.1
of the Agreement (which appears in the Agreement Terms and Conditions) is hereby amended by inserting the following
definitions in alphabetical order:
“
Commitment Period
” means the period from the date that operations at Starlight Pond
commence until the fifth anniversary thereof.
“
Excused Amount
” means the sum of the following, stated in Barrels:
(i) if Starlight Pond is not ready to accept deliveries of and store Fresh Water by September 1, 2016, then 30,000 Barrels for each Day, beginning on September 2, 2016, when Starlight Pond is not in service or is otherwise unavailable
to store Fresh Water until Starlight Pond is placed in service and available to store Fresh Water, and (ii) if during the Commitment Period, the number of Unavailable Days exceeds an aggregate of more than 60 Days, the product of
(A) 10,000,000 Barrels less the amount determined pursuant to clause (i) of this definition, and (B) a fraction, the numerator of which is equal to the number of Unavailable Days during the Commitment Period in excess of 60 Days, and
the denominator of which is equal to the total number of Days in the Commitment Period.
“
Shortfall Amount
” has the
meaning set forth in
Section 6.1(b)
.
“
Shortfall Payment
” has the meaning set forth in
Section 6.1(b)
.
“
Starlight Pond
” has the meaning agreed by the Parties in writing.
“
Starlight Pond Fee
” means the fee calculated as described in
clause (iv)
of
Section 6.1(a)
.
“
Starlight Pond Rate
” means the Monthly rate for providing Services at the Starlight Pond, as set forth opposite the heading
“Starlight Pond Rate” on the applicable Midstream Agreement Addendum.
Amendment 01 –
Page 2
Second Amended and Restated Fresh Water Services Agreement
San Juan River Fresh Water Agreement
SJNC02-FW
“
Unavailable Day
” means any Day on which Starlight Pond is not in service or is
otherwise unavailable to store Fresh Water, other than due to any normal and routine maintenance, repair, or modification projects for which Midstream Co provided Producer with at least 30 Days’ advance notice or any event of Force Majeure.
1.2
Section 2.4(b)(iv)
of the Agreement (which appears in the Agreement Terms and Conditions) is amended and restated in its
entirety to read: “(iv)
Reserved.
”.
1.3
Section 1.1
of the Agreement (which appears in the Agreement Terms
and Conditions) is hereby amended by amending and restating the following defined terms in their entirety to read as follows:
“
Facility Segment
” means each segment of an Individual System comprised of facilities that can be operated independently of
other Facility Segments. For example, a Facility Segment may begin at a Receipt Point and end at a Retention Facility, begin at a Retention Facility and end at a Delivery Point or have another configuration. If an Individual System does not contain
any such distinct segment, then the term Facility Segment shall be synonymous with Individual System.
“
Individual Fee
”
means the aggregate of the Individual First Phase Fee, the Individual Second Phase Fee and the Starlight Pond Fee;
provided
that for purposes of the annual escalation in the Individual Fee described in
Section 6.2(b)
, such term
shall not include any Reimbursed Amount.
“
Individual System
” means the portion of the System beginning at the Receipt
Points and ending at the Delivery Points. The Individual Systems in existence on the Effective Date are more particularly described in writing between Producer and Midstream Co. Additional Individual Systems may be added to the System from time to
time in satisfaction of the needs identified by Producer and evidenced in writing between Producer and Midstream Co.
1.4
Section 3.1(e)
of the Agreement (which appears in the Agreement Terms and Conditions) is hereby amended by deleting the sentence that reads as follows “In the sole discretion of each Person serving as a Midstream Co under a
Midstream Agreement Addendum, such Midstream Co may work with any other Midstream Co to prepare and deliver a System Plan jointly.” and inserting in place thereof the following sentence: “Midstream Co may, in its sole discretion, work with
OpCo or any of OpCo’s subsidiaries to prepare and deliver a System Plan jointly with such other entity or entities.”
1.5
Section 6.1
of the Agreement (which appears in the Agreement Terms and Conditions) is hereby amended and restated in its entirety to read as follows:
Section 6.1
Fees
.
(a)
Payment of Fees
. Producer shall pay Midstream Co in accordance with the terms of this Agreement, for each Month in which Midstream
Co provides Services with respect to the Fresh Water within an Individual System that is subject to this Agreement, an amount equal to the sum of (i) the product of (x) the aggregate quantity of such Fresh Water, stated in Barrels,
delivered to Producer by Midstream Co at the applicable Internal
Amendment 01 –
Page 3
Second Amended and Restated Fresh Water Services Agreement
San Juan River Fresh Water Agreement
SJNC02-FW
Transfer Point for such Fresh Water within the applicable Individual System during such Month, multiplied by (y) the applicable Individual First Phase Rate, (ii) the Individual Second
Phase Fee, if any, applicable to Second Phase Services performed within the Dedication Area, (iii) an amount equal to Producer’s allocated portion of the actual costs incurred by Midstream Co for electricity required to provide Services,
such allocation to be based upon the aggregate volumes of Fresh Water received by Midstream Co, and (iv) the product of (x) the aggregate quantity of such Fresh Water, stated in Barrels, extracted from Starlight Pond for the account of
Producer during such Month, multiplied by (y) the applicable Starlight Pond Rate corresponding to the cumulative volumes of Fresh Water extracted from the Starlight Pond by Midstream Co (whether for the account of Producer or a Third Party)
since the first date Services are provided at the Starlight Pond.
(b)
Minimum Volume to Starlight Pond
. If the aggregate quantity
of Fresh Water, stated in Barrels, extracted from Starlight Pond for the account of Producer and Third Parties during the Commitment Period is equal to or less than 10,000,000 Barrels, then Midstream Co shall include on an invoice delivered to
Producer within 60 days of the termination of the Commitment Period, and Producer shall pay Midstream Co in accordance with the payment provisions of
Article X
, an amount equal to the product of (i) an amount equal to (x) 10,000,000
Barrels, minus (y) the aggregate quantity of Fresh Water, stated in Barrels, extracted from Starlight Pond by Midstream Co for the account of Producer and Third Parties, minus (z) the Excused Amount (the amount determined pursuant to this
clause (i), the “
Shortfall Amount
”), multiplied by (ii) the Starlight Pond Rate that would have applied had the Shortfall Amount actually been extracted from Starlight Pond by Midstream Co for the account of Producer (the
“
Shortfall Payment
”). Upon receipt of such Shortfall Payment, Midstream Co shall credit the Shortfall Payment against any Starlight Pond Fees that would otherwise be owed by Producer to Midstream Co pursuant to
Section 6.1(a)
during the two-year period beginning on the expiration of the Commitment Period and ending on the earlier of (1) the date that such credit has been exhausted and (2) the expiration of such two-year period. During
such time, Midstream Co shall continue to prepare and deliver invoices to Producer as required by
Article X
, except that such invoices shall show (1) the amount due and owing from Producer for the applicable Invoice Month, (2) how
much of the amount due under the applicable invoice has been set off against the Shortfall Payment, and (3) how much of the Shortfall Payment remains to be credited back to Producer.
1.6
Section 6.3
of the Agreement (which appears in the Agreement Terms and Conditions) is hereby amended and restated in its
entirety to read as follows:
Section 6.3 Producer, at its sole cost and expense, shall procure all fuel used by Midstream Co, if any,
required to operate the Individual System or to generate electricity for the operation of the Individual System and arrange for transportation of such fuel to the Individual System.
Amendment 01 –
Page 4
Second Amended and Restated Fresh Water Services Agreement
San Juan River Fresh Water Agreement
SJNC02-FW
1.7 The last row of the chart in
Section 7.1(a)
of the Agreement (which appears in
the Agreement Terms and Conditions) is hereby amended and restated in its entirety to read as follows:
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Particulate Size
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100 nominal micron
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100 nominal micron
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1.8
Section 8.1
of the Agreement (which appears in the Agreement Terms and Conditions) is hereby
amended and restated in its entirety to read as follows:
Section 8.1
Term
. The term of this Agreement commenced on
January 1, 2015, which is the original effective date of the Parties’ agreement regarding the matters set forth herein, and this Agreement remain in effect until January 1, 2030 (the “
Initial Term
”) and
thereafter on a Year to Year basis until terminated by Midstream Co or Producer effective upon the expiration of the Initial Term or the expiration of any Year thereafter upon notice no less than 90 Days prior to the expiration of the Initial Term
or the expiration of any Year thereafter (such period of time, the “
Term
”). Notwithstanding the foregoing, (a) with respect to the OpCo Agreement Addendum only, this Agreement shall continue for so long as any Original
Midstream Co remains a Party under any Midstream Agreement Addendum then in effect and shall automatically terminate at such time as no Original Midstream Co remains a Party to any Midstream Agreement Addendum, and (b) if title to all or any
portion of the Individual System is transferred to Timbro Land and Cattle Company, LLC pursuant to the Commercial Water Sales Contract, dated October 10, 2012, between Timbro Land and Cattle Company, LLC and Noble Energy, Inc., then this
Agreement shall automatically terminate effective as of the date such title transfers.
1.9 The following specifications regarding a
“Starlight Pond Rate” shall be added to Agreement Addendum immediately following the specifications for “Individual Second Phase Fee”:
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Starlight Pond Rate
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Cumulative volumes of Fresh Water extracted from the Starlight Pond by Midstream Co (whether for the account of Producer or a Third Party) since the first date Services are provided at the Starlight Pond
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Starlight Pond Rate
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Up to and including 3,000,000 Barrels
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$1.05/ Barrel
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3,000,001 to 10,000,000 Barrels
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$0.32/ Barrel
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Greater than 10,000,000 Barrels
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$0.21/ Barrel
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2.
Clarification Regarding Second Phase Services
. Midstream Co shall have the option to deliver Fresh
Water through an Internal Transfer Point as described in the definition of “Services” in the Agreement (which appears in the Agreement Terms and Conditions) or directly to a Delivery Point without transporting Fresh Water through an
Internal Transfer Point. The Individual Second Phase Fee shall be equal to zero for any Fresh Water that Midstream Co elects to deliver directly to a Delivery Point without passing through an Internal Transfer Point.
Amendment 01 –
Page 5
Second Amended and Restated Fresh Water Services Agreement
San Juan River Fresh Water Agreement
SJNC02-FW
3.
Records
. Midstream Co shall keep records of the cumulative volumes of Fresh Water
extracted from the Starlight Pond (whether for the account of Producer or a Third Party) since the first date Services are provided at the Starlight Pond, and Producer’s audit rights under the Agreement (which appear in the Agreement Terms and
Conditions) shall extend to such records.
4.
Confidentiality
. Pursuant to
Section 17.11
of the Agreement (which
appears in the Agreement Terms and Conditions), the Parties have agreed to treat the information exchanged in connection with and the provisions of the Agreement as confidential. In addition, confidential treatment has been requested with the
Securities and Exchange Commission for the pricing terms of the Agreement, and the Parties agree to take appropriate measures to abide by the requirements imposed by the Securities and Exchange Commission to preserve such confidential treatment, if
granted.
5.
Confirmation
. The provisions of the Agreement, as amended by this Amendment, shall remain in full force and effect
following the effectiveness of this Amendment. No provision of the Agreement is amended or otherwise modified hereby, except as expressly stated herein.
6.
No Waiver
. The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy
of any Party to the Agreement, nor constitute a waiver of any provision of the Agreement. On and after the Amendment Effective Date, this Amendment shall for all purposes constitute a part of the Agreement.
7.
Counterparts
. This Amendment may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be
an original instrument, but all of such counterparts shall constitute for all purposes one agreement. Any signature hereto delivered by a Party by electronic mail shall be deemed an original signature hereto.
8.
Governing Law
. This Amendment shall be governed by and construed in accordance with the laws of the State, excluding any conflicts
of law rule or principle that might refer construction of such provisions to the laws of another jurisdiction.
(Signature Pages follow)
Amendment 01 –
Page 6
Second Amended and Restated Fresh Water Services Agreement
San Juan River Fresh Water Agreement
SJNC02-FW
IN WITNESS WHEREOF, the Parties hereto have executed this Amendment to the Agreement in duplicate
originals to be effective as of the Amendment Effective Date.
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“Producer”
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|
NOBLE ENERGY, INC.
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By:
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Gary W. Willingham
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Executive Vice President
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STATE OF TEXAS
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)
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)
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ss.
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COUNTY OF HARRIS
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)
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The foregoing instrument was acknowledged before me this
day of
,
, by Gary W. Willingham as Executive Vice President of Noble
Energy, Inc., a Delaware corporation.
WITNESS my hand and official seal.
My commission expires:
Amendment 01 –
Signature Page 1
Second Amended and Restated Fresh Water Services Agreement
San Juan River Fresh Water Agreement
SJNC02-FW
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“Midstream Co”
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SAN JUAN RIVER DEVCO LP
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By: San Juan River DevCo GP LLC
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By: Noble Midstream Services, LLC
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By:
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Terry R. Gerhart
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Chief Executive Officer
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STATE OF TEXAS
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)
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)
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ss.
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COUNTY OF HARRIS
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)
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The foregoing instrument was acknowledged before me this
day of
,
, by Terry R. Gerhart as Chief Executive Officer of Noble
Midstream Services, LLC, which is the sole member of San Juan River DevCo GP LLC, which is the general partner of San Juan River DevCo LP, a Delaware limited partnership.
WITNESS my hand and official seal.
My commission expires:
Amendment 01 –
Signature Page 2
Second Amended and Restated Fresh Water Services Agreement
San Juan River Fresh Water Agreement
SJNC02-FW
Exhibit 10.20.1
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED. THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
SECOND AMENDED AND RESTATED
FRESH WATER SERVICES AGREEMENT
AGREEMENT ADDENDUM 03
M
USTANG
This
AGREEMENT ADDENDUM 03 (this “
Agreement Addendum
”) (a) shall be effective as among the Persons named below as “Producer” and “Midstream Co” as of the date specified below as the “Effective Date,”
(b) incorporates the Second Amended and Restated Agreement Terms and Conditions Relating to Fresh Water Services (the “
Agreement Terms and Conditions
”), which were last amended effective as of March 31, 2016 and recorded
in the real property records of Weld County, Colorado on
as
, and (c) together with
the Agreement Terms and Conditions, shall constitute one contract and shall be the Agreement of the Parties. Except as otherwise set forth herein (i) all terms shall have the meanings assigned to such terms in the Agreement Terms and
Conditions, and (ii) all references to Exhibits, Appendices, Articles, Sections, subsections and other subdivisions refer to the corresponding Exhibits, Appendices, Articles, Sections, subsections and other subdivisions of or to the Agreement
Terms and Conditions.
Producer desires to contract with Midstream Co for Midstream Co to provide the Services utilizing the Individual
System, and Midstream Co desires to provide the Services to Producer, on the terms and subject to the conditions of this Agreement.
NOW,
THEREFORE, in consideration of the mutual agreements in this Agreement, Midstream Co and Producer hereby agree as follows:
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Producer
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Noble Energy, Inc., a Delaware corporation
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Midstream Co
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Green River DevCo LP, a Delaware limited partnership
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Parties
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The term “Party” or “Parties” shall refer to OpCo, Producer and Midstream Co identified in this Agreement Addendum
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Effective Date
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March 31, 2016
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Dedication Area
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The Mustang integrated development plan area, as such area was defined by Producer on the Effective Date, and which consists of the following areas within Weld County, Colorado
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TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.
THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
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Township
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Range
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Sections
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T4N
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R64W
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1-3, 10-15, 22-27, 32-36
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T4N
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R63W
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2-11, 14-23 26-35
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T3N
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R63W
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4-9, 16-21, 28-33
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T3N
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R64W
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ALL
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T3N
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R65W
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1-3, 10-15, 22-27, 34-36
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T2N
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R64W
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ALL
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T2N
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R63W
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3-9, 16-21, 28-33
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Except and excluding the wells, leases, and other acreage described in the property exhibits attached to the Releases of Dedication.
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Individual First Phase Rate
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$[**] / Barrel
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Individual Second Phase Fee
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[**].
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Maximum BPM Rate
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180
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Additional Revisions
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Section 2.3
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In addition to the Producer’s reservations in Section 2.3, Producer further reserves to itself the right to transport Fresh Water by truck.
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Agreement Addendum 03
– Page
2
Second Amended and Restated Fresh Water Services Agreement
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.
THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
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Notices and Payments
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Notice Address – General Matters & Correspondence
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Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Chief Financial Officer
John F. Bookout, IV
Telephone: (832) 639-7134
Email:
John.Bookout@nblenergy.com
Producer:
Noble Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO 80202
Attention: Director of
USO Finance,
Gerald Free
Telephone: (303) 228-4174
Email:
Gerald.Free@nblenergy.com
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Notice Address – Operational Matters, Force Majeure and Delivery interruptions
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Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Chief Operating Officer
John C. Nicholson
Telephone: (281) 876-6186
Email:
John.Nicholson@nblenergy.com
Producer:
Noble Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO 80202
Attention: Vice
President – DJ Business Unit
Mark Patteson
|
Agreement Addendum 03
– Page
3
Second Amended and Restated Fresh Water Services Agreement
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.
THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
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Notice Address – Invoicing Matters
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Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Ian Dams
Telephone: (832) 639-7406
Email: ian.dams@nblenergy.com
Producer:
1001 Noble Energy Way
Houston, TX 77070
Attention: Director of Revenue Accounting
John Nedelka
Telephone: (281) 872-3120
Email:
John.Nedelka@nblenergy.com
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Payments by Electronic Funds Transfer
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Midstream Co:
ABA for wire: 021000021
ABA for ACH: 111000614
Account Number: 780162330
Account Name: Green River DevCo LP
Financial Institution: JP Morgan
Bank Swift: CHASUS33
Producer:
ABA/Routing Number: 021000021
Account Number: 08805135066
Account Name: Noble Energy, Inc.
Financial Institution: JP
Morgan
Bank Swift: CHASUS33
|
(End of Agreement Addendum 03)
Agreement Addendum 03
– Page
4
Second Amended and Restated Fresh Water Services Agreement
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.
THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement in duplicate originals to
be effective as of the Effective Date.
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“Producer”
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NOBLE ENERGY, INC.
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By:
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/s/ Gary W. Willingham
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Gary W. Willingham
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Executive Vice President
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STATE OF TEXAS
|
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)
|
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|
|
|
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)
|
|
ss.
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COUNTY OF HARRIS
|
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)
|
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|
The foregoing instrument was acknowledged before me this
26th
day of April, 2016 by Gary W. Willingham as Executive
Vice President of Noble Energy, Inc., a Delaware corporation, on behalf of said corporation.
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/s/ Vickie L. Graham
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Notary Public in and for the State of Texas
|
Agreement Addendum 03
– Signature Page
1
Second Amended and Restated Fresh Water Services Agreement
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.
THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
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“Midstream Co”
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GREEN RIVER DEVCO LP
By: Green River DevCo GP LLC
By: Noble Midstream Services, LLC
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By:
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/s/ Terry R. Gerhart
|
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Terry R. Gerhart
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Chief Executive Officer
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STATE OF COLORADO
|
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)
|
|
|
|
|
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)
|
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ss.
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COUNTY OF
|
|
)
|
|
|
The foregoing instrument was acknowledged before me this
26th
day of April, 2016 by Terry R. Gerhart, Chief Executive
Officer of Noble Midstream Services, LLC, a Delaware limited liability company, which is the sole member of Green River DevCo GP LLC, which is the general partner of Green River DevCo LP, a Delaware limited partnership, on behalf of said company.
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/s/ Joanne Garner
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Notary Public in and for the State of Texas
|
Agreement Addendum 03
– Signature Page
2
Second Amended and Restated Fresh Water Services Agreement
Exhibit 10.20.2
When Recorded, Mail To:
Attn: DJ Land Manager
1625 Broadway, Suite 2200
Denver, CO 80202
FORM OF
AMENDMENT 01
TO
THAT CERTAIN
SECOND AMENDED AND RESTATED
FRESH WATER SERVICES AGREEMENT
M
USTANG
CONTRACT
NUMBER: GRMU03-FW
This AMENDMENT 01 (this “
Amendment
”) shall be effective among Noble Energy, Inc., a Delaware
corporation (the “
Producer
”) and Green River DevCo LP, a Delaware limited partnership, together with its permitted successors and assigns (“
Midstream Co
”) as of September 1, 2016 (the “
Amendment
Effective Date
”). This Amendment modifies that certain Second Amended and Restated Fresh Water Services Agreement, effective as of March 31, 2016 (the “
Agreement
”), which has been given contract number
GRMU03-FW
and is comprised of (i) that certain Second Amended and Restated Agreement Terms and Conditions Relating to Fresh Water Services (the “
Agreement Terms and Conditions
”), last updated
March 31, 2016, together with (ii) that certain Second Amended and Restated Agreement Addendum 03 (the “
Agreement Addendum
”), effective as of March 31, 2016. The Agreement Terms and Conditions, the Agreement
Addendum and this Amendment shall constitute one contract and shall be the Agreement of the Parties.
WHEREAS, the Parties acknowledge
that the purpose of this Amendment is to correct an error in certain specifications set out in
Section 7.1(a)
of the Agreement Terms and Conditions, and incorporated in the Agreement Addendum, and to make certain other technical
modifications.
WHEREAS, the Parties agree and acknowledge that amendments set forth herein constitute an amendment only to the Agreement
and not to any other agreement in respect of fresh water services to which Producer is a party.
NOW, THEREFORE, in consideration of the foregoing recitals, which are incorporated herein and the
mutual agreements in the Agreement, Midstream Co and Producer hereby agree as follows:
1.1
Section 1.1
of the Agreement (which appears in the
Agreement Terms and Conditions) is hereby amended by amending and restating the following defined terms in their entirety to read as follows:
“
Facility Segment
” means each segment of an Individual System comprised of facilities that can be operated independently of
other Facility Segments. For example, a Facility Segment may begin at a Receipt Point and end at a Retention Facility, begin at a Retention Facility and end at a Delivery Point or have another configuration. If an Individual System does not contain
any such distinct segment, then the term Facility Segment shall be synonymous with Individual System.
“
Individual Fee
”
means the aggregate of the Individual First Phase Fee and the Individual Second Phase Fee;
provided
that for purposes of the annual escalation in the Individual Fee described in
Section 6.2(b)
, such term shall not include any
Reimbursed Amount.
“
Individual System
” means the portion of the System beginning at the Receipt Points and ending at the
Delivery Points. The Individual Systems in existence on the Effective Date are more particularly described in writing between Producer and Midstream Co. Additional Individual Systems may be added to the System from time to time in satisfaction of
the needs identified by Producer and evidenced in writing between Producer and Midstream Co.
1.2
Section 2.4(b)(iv)
of the
Agreement (which appears in the Agreement Terms and Conditions) is amended and restated in its entirety to read: “(iv)
Reserved.
”.
1.3
Section 3.1(e)
of the Agreement (which appears in the Agreement Terms and Conditions) is hereby amended by deleting the
sentence that reads as follows “In the sole discretion of each Person serving as a Midstream Co under a Midstream Agreement Addendum, such Midstream Co may work with any other Midstream Co to prepare and deliver a System Plan jointly.” and
inserting in place thereof the following sentence: “Midstream Co may, in its sole discretion, work with OpCo or any of OpCo’s subsidiaries to prepare and deliver a System Plan jointly with such other entity or entities.”
1.4
Section 6.3
of the Agreement (which appears in the Agreement Terms and Conditions) is hereby amended and restated in its
entirety to read as follows:
Section 6.3 Producer, at its sole cost and expense, shall procure all fuel used by Midstream Co, if
any, required to operate the Individual System or to generate electricity for the operation of the Individual System and arrange for transportation of such fuel to the Individual System.
1.5 The last row of the chart in
Section 7.1(a)
of the Agreement Terms and Conditions is hereby amended and restated in its
entirety to read as follows:
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Particulate Size
|
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100 nominal micron
|
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100 nominal micron
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Amendment 01 –
Page 2
Second Amended and Restated Fresh Water Services Agreement
Green River Fresh Water Agreement
GRMU03-FW
2.
Clarification Regarding Second Phase Services
. Midstream Co shall have the option to
deliver Fresh Water through an Internal Transfer Point as described in the definition of “Services” in the Agreement (which appears in the Agreement Terms and Conditions) or directly to a Delivery Point without transporting Fresh Water
through an Internal Transfer Point. The Individual Second Phase Fee shall be equal to zero for any Fresh Water that Midstream Co elects to deliver directly to a Delivery Point without passing through an Internal Transfer Point.
3.
Confidentiality
. Pursuant to
Section 17.11
of the Agreement (which appears in the Agreement Terms and Conditions), the
Parties have agreed to treat the information exchanged in connection with and the provisions of the Agreement as confidential. In addition, confidential treatment has been requested with the Securities and Exchange Commission for the pricing terms
of the Agreement, and the Parties agree to take appropriate measures to abide by the requirements imposed by the Securities and Exchange Commission to preserve such confidential treatment, if granted.
4.
Confirmation
. The provisions of the Agreement, as amended by this Amendment, shall remain in full force and effect following the
effectiveness of this Amendment. No provision of the Agreement is amended or otherwise modified hereby, except as expressly stated herein.
5.
No Waiver
. The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy
of any Party to the Agreement, nor constitute a waiver of any provision of the Agreement. On and after the Amendment Effective Date, this Amendment shall for all purposes constitute a part of the Agreement.
6.
Counterparts
. This Amendment may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be
an original instrument, but all of such counterparts shall constitute for all purposes one agreement. Any signature hereto delivered by a Party by electronic mail shall be deemed an original signature hereto.
7.
Governing Law
. This Amendment shall be governed by and construed in accordance with the laws of the State, excluding any conflicts
of law rule or principle that might refer construction of such provisions to the laws of another jurisdiction.
(Signature Pages follow)
Amendment 01 –
Page 3
Second Amended and Restated Fresh Water Services Agreement
Green River Fresh Water Agreement
GRMU03-FW
IN WITNESS WHEREOF, the Parties hereto have executed this Amendment to the Agreement in duplicate
originals to be effective as of the Amendment Effective Date.
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“Producer”
NOBLE ENERGY, INC.
|
|
|
|
|
By:
|
|
|
|
|
|
Gary W. Willingham
Executive Vice
President
|
|
|
|
|
|
|
|
STATE OF TEXAS
|
|
)
|
|
|
|
|
|
) ss.
|
|
|
|
COUNTY OF HARRIS
|
|
)
|
|
|
The foregoing instrument was acknowledged before me this
day of
,
, by Gary W. Willingham as Executive
Vice President of Noble Energy, Inc., a Delaware corporation.
WITNESS my hand and official seal.
My commission expires:
Amendment 01 –
Signature Page 1
Second Amended and Restated Fresh Water Services Agreement
Green River Fresh Water Agreement
GRMU03-FW
“Midstream Co”
GREEN RIVER DEVCO LP
By: Green River
DevCo GP LLC
By: Noble Midstream Services, LLC
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
Terry R. Gerhart
Chief Executive
Officer
|
|
|
|
|
|
|
|
STATE OF TEXAS
|
|
)
|
|
|
|
|
|
) ss.
|
|
|
|
COUNTY OF HARRIS
|
|
)
|
|
|
The foregoing instrument was acknowledged before me this
day of
,
, by Terry R. Gerhart as Chief
Executive Officer of Noble Midstream Services, LLC, which is the sole member of Green River DevCo GP LLC, which is the general partner of Green River DevCo LP, a Delaware limited partnership.
WITNESS my hand and official seal.
My commission expires:
Amendment 01 –
Signature Page 2
Second Amended and Restated Fresh Water Services Agreement
Green River Fresh Water Agreement
GRMU03-FW
Exhibit 10.21.1
SECOND AMENDED AND RESTATED
FRESH WATER SERVICES AGREEMENT
AGREEMENT ADDENDUM 04
B
RONCO
This
AGREEMENT ADDENDUM 04 (this “
Agreement Addendum
”) (a) shall be effective as among the Persons named below as “Producer” and “Midstream Co” as of the date specified below as the “Effective Date,”
(b) incorporates the Second Amended and Restated Agreement Terms and Conditions Relating to Fresh Water Services (the “
Agreement Terms and Conditions
”), which were last amended effective as of March 31, 2016 and recorded
in the real property records of Weld County, Colorado on
as
, and (c) together with
the Agreement Terms and Conditions, shall constitute one contract and shall be the Agreement of the Parties. Except as otherwise set forth herein (i) all terms shall have the meanings assigned to such terms in the Agreement Terms and
Conditions, and (ii) all references to Exhibits, Appendices, Articles, Sections, subsections and other subdivisions refer to the corresponding Exhibits, Appendices, Articles, Sections, subsections and other subdivisions of or to the Agreement
Terms and Conditions.
Producer desires to contract with Midstream Co for Midstream Co to provide the Services utilizing the Individual
System, and Midstream Co desires to provide the Services to Producer, on the terms and subject to the conditions of this Agreement.
NOW,
THEREFORE, in consideration of the mutual agreements in this Agreement, Midstream Co and Producer hereby agree as follows:
|
|
|
|
|
Producer
|
|
Noble Energy, Inc., a Delaware corporation
|
|
|
|
|
Midstream Co
|
|
Gunnison River DevCo LP, a Delaware limited partnership
|
|
|
|
|
Parties
|
|
The term “Party” or “Parties” shall refer to Producer and Midstream Co identified in this Agreement Addendum
|
|
|
|
|
Effective Date
|
|
March 31, 2016
|
|
|
|
|
Dedication Area
|
|
The Bronco integrated development plan area, as such area was defined by Producer on the Effective Date, and which consists of the following areas within Weld County, Colorado
|
|
|
|
|
|
|
|
|
|
Township
|
|
Range
|
|
Sections
|
|
|
|
T5N
|
|
R65W
|
|
13, 21-29, 31-36
|
|
|
|
T5N
|
|
R64W
|
|
7-9, 16-21, 28-33
|
|
|
|
T4N
|
|
R64W
|
|
4-9, 16-21, 28-31
|
|
|
|
T4N
|
|
R65W
|
|
ALL
|
|
|
|
T4N
|
|
R67W
|
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25, 36
|
|
|
|
T4N
|
|
R66W
|
|
1-3, 8-36
|
|
|
|
|
|
|
|
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Except and excluding the wells, leases, and other acreage described in the property exhibits attached to the Releases of Dedication.
|
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|
|
|
Individual First Phase Rate
|
|
The Individual First Phase Rate shall be determined by the Parties prior to Services being provided by Midstream Co to Producer in the Dedication Area.
|
|
|
|
|
Individual Second Phase Fee
|
|
The Individual Second Phase Rate shall be determined by the Parties prior to Services being provided by Midstream Co to Producer in the Dedication Area.
|
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|
|
|
Maximum BPM Rate
|
|
The Maximum BPM Rate shall be determined by the Parties prior to Services being provided by Midstream Co to Producer in the Dedication Area.
|
|
|
|
Additional Revisions
|
|
|
|
NONE
|
Agreement Addendum 04
– Page 2
Second Amended and Restated Fresh Water Services Agreement
|
|
|
|
|
Notices and Payments
|
|
Notice Address – General Matters & Correspondence
|
|
Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Chief Financial Officer
John F. Bookout, IV
Telephone: (832) 639-7134
Email:
John.Bookout@nblenergy.com
Producer:
Noble Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO 80202
Attention: Director of
USO Finance,
Gerald Free
Telephone: (303) 228-4174
Email:
Gerald.Free@nblenergy.com
|
|
Notice Address – Operational Matters, Force Majeure and Delivery interruptions
|
|
Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Chief Operating Officer
John C. Nicholson
Telephone: (281) 876-6186
Email:
John.Nicholson@nblenergy.com
Producer:
Noble Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO 80202
Attention: Vice
President – DJ Business Unit
Mark Patteson
|
Agreement Addendum 04
– Page 3
Second Amended and Restated Fresh Water Services Agreement
|
|
|
|
|
Notice Address – Invoicing Matters
|
|
Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Ian Dams
Telephone: (832) 639-7406
Email:
ian.dams@nblenergy.com
Producer:
1001 Noble Energy Way
Houston, TX 77070
Attention: Director of Revenue Accounting
John Nedelka
Telephone: (281) 872-3120
Email:
John.Nedelka@nblenergy.com
|
|
Payments by Electronic Funds Transfer
|
|
Midstream Co:
ABA for wire: 021000021
ABA for ACH: 111000614
Account Number: 780162371
Account Name: Gunnison River DevCo
LP
Financial Institution: JP Morgan
Bank Swift: CHASUS33
Producer:
ABA/Routing Number: 021000021
Account Number: 08805135066
Account Name: Noble Energy, Inc.
Financial Institution: JP
Morgan
Bank Swift: CHASUS33
|
(End of Agreement Addendum 04)
Agreement Addendum 04
– Page 4
Second Amended and Restated Fresh Water Services Agreement
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement in duplicate originals to be
effective as of the Effective Date.
|
|
|
|
|
“Producer”
|
|
|
|
NOBLE ENERGY, INC.
|
|
|
|
|
By:
|
|
/s/ Gary W. Willingham
|
|
|
|
Gary W. Willingham
|
|
|
|
Executive Vice President
|
|
|
|
|
|
|
|
STATE OF TEXAS
|
|
)
|
|
|
|
|
|
)
|
|
ss.
|
|
COUNTY OF HARRIS
|
|
)
|
|
|
The foregoing instrument was acknowledged before me this
26th
day of April, 2016 by Gary W. Willingham, Executive Vice
President of Noble Energy, Inc., a Delaware corporation, on behalf of said corporation.
|
|
|
/s/ Vickie L. Graham
|
|
Notary Public in and for the State of Texas
|
Agreement Addendum 04
– Signature Page 1
Second Amended and Restated Fresh Water Services Agreement
|
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|
|
“Midstream Co”
|
|
|
|
GUNNISON RIVER DEVCO LP
By: Gunnison River DevCo GP LLC
By: Noble Midstream Services, LLC
|
|
|
|
|
By:
|
|
/s/ Terry R. Gerhart
|
|
|
|
Terry R. Gerhart
|
|
|
|
Chief Executive Officer
|
|
|
|
|
|
|
|
STATE OF COLORADO
|
|
)
|
|
|
|
|
|
)
|
|
ss.
|
|
COUNTY OF
|
|
)
|
|
|
The foregoing instrument was acknowledged before me this
26th
day of April, 2016 by Terry R. Gerhart, Chief Executive
Officer of Noble Midstream Services, LLC, a Delaware limited liability company, which is the sole member of Gunnison River DevCo GP LLC, which is the general partner of Gunnison River DevCo LP, a Delaware limited partnership, on behalf of said
company.
|
|
|
/s/ Joanne Garner
|
|
Notary Public in and for the State of Texas
|
Agreement Addendum 04
– Signature Page 2
Second Amended and Restated Fresh Water Services Agreement
Exhibit 10.21.2
When Recorded, Mail To:
Attn: DJ Land Manager
1625 Broadway, Suite 2200
Denver, CO 80202
FORM OF
AMENDMENT 01
TO
THAT CERTAIN
SECOND AMENDED AND RESTATED
FRESH WATER SERVICES AGREEMENT
B
RONCO
C
ONTRACT
N
UMBER
: GUBR04-FW
This AMENDMENT 01 (this “
Amendment
”) shall be effective among Noble Energy, Inc., a Delaware corporation (the
“
Producer
”) and Gunnison River DevCo LP, a Delaware limited partnership, together with its permitted successors and assigns (“
Midstream Co
”) as of September 1, 2016 (the “
Amendment Effective
Time
”). This Amendment modifies that certain Second Amended and Restated Fresh Water Services Agreement, effective as of March 31, 2016 (the “
Agreement
”), which has been given contract number
GUBR04-FW
and is comprised of (i) that certain Second Amended and Restated Agreement Terms and Conditions Relating to Fresh Water Services (the “
Agreement Terms and Conditions
”), last updated
March 31, 2016, together with (ii) that certain Second Amended and Restated Agreement Addendum 04 (the “
Agreement Addendum
”), effective as of March 31, 2016. The Agreement Terms and Conditions, the Agreement Addendum
and this Amendment shall constitute one contract and shall be the Agreement of the Parties.
WHEREAS, capitalized terms used herein have
the meanings assigned to such terms in the Agreement Terms and Conditions.
WHEREAS,
Section 16.1
of the Agreement (which
appears in the Agreement Terms and Conditions) prohibits either Party to the Agreement from assigning its rights and obligations, except that Producer may assign its rights and obligations to any Person (herein, the “
Transferee
”) to
whom Producer transfers Dedicated Properties so long as such Transferee assumes the rights and obligations of Producer with respect to such transferred Dedicated Properties.
WHEREAS, pursuant to that certain Purchase and Sale Agreement, by and among Producer, NBL Energy Royalties, Inc. and Noble Energy WyCo, LLC,
collectively as the Seller, and Synergy Resources Corporation, as Purchaser (the “
Transferee
”), executed May 2, 2016 with an effective time of April 1, 2016 at 12:01 AM, Producer agreed to sell approximately
30,000 acres of the Dedicated Properties to the Transferee.
WHEREAS, the Parties acknowledge that the purpose of this Amendment is to correct an error in
certain specifications set out in
Section 7.1(a)
of the Agreement Terms and Conditions, and incorporated in the Agreement Addendum, and to make certain other technical modifications.
WHEREAS, the Parties agree and acknowledge that amendments to the Agreement Terms and Conditions set forth herein constitute an amendment only
to the Agreement and not to any other agreement in respect of fresh water services to which Producer is a party.
NOW, THEREFORE, in
consideration of the foregoing recitals, which are incorporated herein and the mutual agreements in the Agreement, Midstream Co and Producer hereby agree as follows:
1.1
Section 1.1
of the Agreement (which appears in the
Agreement Terms and Conditions) is hereby amended by amending and restating the following defined terms in their entirety to read as follows:
“
Facility Segment
” means each segment of an Individual System comprised of facilities that can be operated independently of
other Facility Segments. For example, a Facility Segment may begin at a Receipt Point and end at a Retention Facility, begin at a Retention Facility and end at a Delivery Point or have another configuration. If an Individual System does not contain
any such distinct segment, then the term Facility Segment shall be synonymous with Individual System.
“
Individual Fee
”
means the aggregate of the Individual First Phase Fee and the Individual Second Phase Fee;
provided
that for purposes of the annual escalation in the Individual Fee described in
Section 6.2(b)
, such term shall not include any
Reimbursed Amount.
“
Individual System
” means the portion of the System beginning at the Receipt Points and ending at the
Delivery Points. The Individual Systems in existence on the Effective Date are more particularly described in writing between Producer and Midstream Co. Additional Individual Systems may be added to the System from time to time in satisfaction of
the needs identified by Producer and evidenced in writing between Producer and Midstream Co.
1.2
Section 2.4(b)(iv)
of the
Agreement (which appears in the Agreement Terms and Conditions) is amended and restated in its entirety to read: “(iv)
Reserved.
”.
Amendment 01 –
Page 2
Second Amended and Restated Fresh Water Services Agreement
Gunnison River Fresh Water Agreement
GUBR04-FW
1.3
Section 3.1(e)
of the Agreement (which appears in the Agreement Terms and
Conditions) is hereby amended by deleting the sentence that reads as follows “In the sole discretion of each Person serving as a Midstream Co under a Midstream Agreement Addendum, such Midstream Co may work with any other Midstream Co to
prepare and deliver a System Plan jointly.” and inserting in place thereof the following sentence: “Midstream Co may, in its sole discretion, work with OpCo or any of OpCo’s subsidiaries to prepare and deliver a System Plan jointly
with such other entity or entities.”
1.4
Section 6.3
of the Agreement (which appears in the Agreement Terms and
Conditions) is hereby amended and restated in its entirety to read as follows:
Section 6.3 Producer, at its sole cost and expense,
shall procure all fuel used by Midstream Co, if any, required to operate the Individual System or to generate electricity for the operation of the Individual System and arrange for transportation of such fuel to the Individual System.
1.5 The last row of the chart in
Section 7.1(a)
of the Agreement Terms and Conditions is hereby amended and restated in its
entirety to read as follows:
|
|
|
|
|
|
|
|
|
|
|
Particulate Size
|
|
100 nominal micron
|
|
100 nominal micron
|
|
|
|
|
1.6 The description of the “Dedication Area” appearing in Agreement Addendum is hereby amended and
restated in its entirety to read as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Dedication Area
|
|
The following areas within Weld County, Colorado
|
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|
|
|
|
|
|
|
|
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|
Township
|
|
Range
|
|
Sections
|
|
|
|
|
|
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|
5N
|
|
65W
|
|
13, S/2 21, S/2 22, 23-27, 33-36
|
|
|
|
|
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|
5N
|
|
64W
|
|
7-9, 16-21, 28-33
|
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|
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4N
|
|
67W
|
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25, 36
|
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4N
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|
66W
|
|
1-3, 8-36
|
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|
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4N
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|
65W
|
|
ALL
|
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4N
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64W
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4-9, 16-21, 28-31
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Except and excluding the wells, leases, and other acreage described in the property exhibits attached to the Releases of Dedication.
|
2.
Clarification Regarding Second Phase Services
. Midstream Co shall have the option to deliver Fresh
Water through an Internal Transfer Point as described in the definition of “Services” in the Agreement (which appears in the Agreement Terms and Conditions) or directly to a Delivery Point without transporting Fresh Water through an
Internal Transfer Point. The Individual Second Phase Fee shall be equal to zero for any Fresh Water that Midstream Co elects to deliver directly to a Delivery Point without passing through an Internal Transfer Point.
Amendment 01 –
Page 3
Second Amended and Restated Fresh Water Services Agreement
Gunnison River Fresh Water Agreement
GUBR04-FW
3.
Confidentiality
. Pursuant to
Section 17.11
of the Agreement (which appears
in the Agreement Terms and Conditions), the Parties have agreed to treat the information exchanged in connection with and the provisions of the Agreement as confidential. In addition, confidential treatment has been requested with the Securities and
Exchange Commission for the pricing terms of the Agreement, and the Parties agree to take appropriate measures to abide by the requirements imposed by the Securities and Exchange Commission to preserve such confidential treatment, if granted.
4.
Confirmation
. The provisions of the Agreement, as amended by this Amendment, shall remain in full force and effect following the
effectiveness of this Amendment. No provision of the Agreement is amended or otherwise modified hereby, except as expressly stated herein.
5.
No Waiver
. The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy
of any Party to the Agreement, nor constitute a waiver of any provision of the Agreement. On and after the Amendment Effective Time, this Amendment shall for all purposes constitute a part of the Agreement.
6.
Counterparts
. This Amendment may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be
an original instrument, but all of such counterparts shall constitute for all purposes one agreement. Any signature hereto delivered by a Party by electronic mail shall be deemed an original signature hereto.
7.
Governing Law
. This Amendment shall be governed by and construed in accordance with the laws of the State, excluding any conflicts
of law rule or principle that might refer construction of such provisions to the laws of another jurisdiction.
(Signature Pages follow)
Amendment 01 –
Page 4
Second Amended and Restated Fresh Water Services Agreement
Gunnison River Fresh Water Agreement
GUBR04-FW
IN WITNESS WHEREOF, the Parties hereto have executed this Amendment to the Agreement in duplicate
originals to be effective as of the Amendment Effective Time.
|
|
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|
|
“Producer”
NOBLE ENERGY, INC.
|
|
|
|
|
By:
|
|
|
|
|
|
Gary W. Willingham
Executive Vice
President
|
|
|
|
|
|
|
|
STATE OF TEXAS
|
|
)
|
|
|
|
|
|
) ss.
|
|
|
|
COUNTY OF HARRIS
|
|
)
|
|
|
The foregoing instrument was acknowledged before me this
day of
,
, by Gary W. Willingham as Executive
Vice President of Noble Energy, Inc., a Delaware corporation.
WITNESS my hand and official seal.
My commission expires:
Amendment 01 –
Signature Page 1
Second Amended and Restated Fresh Water Services Agreement
Gunnison River Fresh Water Agreement
GUBR04-FW
“Midstream Co”
GUNNISON RIVER DEVCO LP
By: Gunnison
River DevCo GP LLC
By: Noble Midstream Services, LLC
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
Terry R. Gerhart
Chief Executive
Officer
|
|
|
|
|
|
|
|
STATE OF TEXAS
|
|
)
|
|
|
|
|
|
) ss.
|
|
|
|
COUNTY OF HARRIS
|
|
)
|
|
|
The foregoing instrument was acknowledged before me this
day of
,
, by Terry R. Gerhart as Chief
Executive Officer of Noble Midstream Services, LLC, which is the sole member of Gunnison River DevCo GP LLC, which is the general partner of Gunnison River DevCo LP, a Delaware limited partnership.
WITNESS my hand and official seal.
My commission expires:
Amendment 01 –
Signature Page 2
Second Amended and Restated Fresh Water Services Agreement
Gunnison River Fresh Water Agreement
GUBR04-FW
Exhibit 10.22.1
SECOND AMENDED AND RESTATED
FRESH WATER SERVICES AGREEMENT
AGREEMENT ADDENDUM 05
G
REELEY
C
RESCENT
This AGREEMENT ADDENDUM 05 (this “
Agreement Addendum
”) (a) shall be effective as among the Persons named below as
“Producer” and “Midstream Co” as of the date specified below as the “Effective Date,” (b) incorporates the Second Amended and Restated Agreement Terms and Conditions Relating to Fresh Water Services (the
“
Agreement Terms and Conditions
”), which were last amended effective as of March 31, 2016 and recorded in the real property records of Weld County, Colorado on
as
, and (c) together with the Agreement Terms and Conditions, shall constitute one
contract and shall be the Agreement of the Parties. Except as otherwise set forth herein (i) all terms shall have the meanings assigned to such terms in the Agreement Terms and Conditions, and (ii) all references to Exhibits, Appendices,
Articles, Sections, subsections and other subdivisions refer to the corresponding Exhibits, Appendices, Articles, Sections, subsections and other subdivisions of or to the Agreement Terms and Conditions.
Producer desires to contract with Midstream Co for Midstream Co to provide the Services utilizing the Individual System, and Midstream Co
desires to provide the Services to Producer, on the terms and subject to the conditions of this Agreement.
NOW, THEREFORE, in
consideration of the mutual agreements in this Agreement, Midstream Co and Producer hereby agree as follows:
|
|
|
|
|
|
|
|
Producer
|
|
Noble Energy, Inc., a Delaware corporation
|
|
|
|
|
Midstream Co
|
|
Laramie River DevCo LP, a Delaware limited partnership
|
|
|
|
|
Parties
|
|
The term “Party” or “Parties” shall refer to Producer and Midstream Co identified in this Agreement Addendum
|
|
|
|
|
Effective Date
|
|
March 31, 2016
|
|
|
|
|
Dedication Area
|
|
The Greeley Crescent integrated development plan area, as such area was defined by Producer on the Effective Date, and which consists of the following areas within Weld County, Colorado
|
|
|
|
|
|
|
|
|
|
Township
|
|
Range
|
|
Sections
|
|
|
|
T7N
|
|
R67W
|
|
ALL
|
|
|
|
T7N
|
|
R66W
|
|
ALL
|
|
|
|
T7N
|
|
R65W
|
|
ALL
|
|
|
|
T6N
|
|
R65W
|
|
ALL
|
|
|
|
T6N
|
|
R66W
|
|
ALL
|
|
|
|
T6N
|
|
R67W
|
|
1-18, 23, 24, 25, 26, 35, 36
|
|
|
|
T5N
|
|
R67W
|
|
1, 2, 11, 12, 13, 14, 23, 24, 25, 26, 35, 36
|
|
|
|
T5N
|
|
R66W
|
|
ALL
|
|
|
|
T5N
|
|
R65W
|
|
1-12, 14-20, 30
|
|
|
|
T4N
|
|
R67W
|
|
1,2, 11, 12, 13, 14, 22-24, 26, 27, 34, 35
|
|
|
|
T4N
|
|
R66W
|
|
4-7
|
|
|
|
|
|
|
|
|
|
|
|
|
Except and excluding the wells, leases, and other acreage described in the property exhibits attached to the Releases of Dedication.
|
|
|
|
|
Individual First Phase Rate
|
|
The Individual First Phase Rate shall be determined by the Parties prior to Services being provided by Midstream Co to Producer in the Dedication Area.
|
|
|
|
|
Individual Second Phase Fee
|
|
The Individual Second Phase Rate shall be determined by the Parties prior to Services being provided by Midstream Co to Producer in the Dedication Area.
|
|
|
|
|
Maximum BPM Rate
|
|
The Maximum BPM Rate shall be determined by the Parties prior to Services being provided by Midstream Co to Producer in the Dedication Area.
|
|
|
|
Additional Revisions
|
|
|
|
NONE
|
Agreement Addendum 05
– Page 2
Second Amended and Restated Fresh Water Services Agreement
|
|
|
|
|
Notices and Payments
|
|
Notice Address – General Matters & Correspondence
|
|
Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Chief Financial Officer
John F. Bookout, IV
Telephone: (832) 639-7134
Email:
John.Bookout@nblenergy.com
Producer:
Noble Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO 80202
Attention: Director of
USO Finance,
Gerald Free
Telephone: (303) 228-4174
Email:
Gerald.Free@nblenergy.com
|
|
Notice Address – Operational Matters, Force Majeure and Delivery interruptions
|
|
Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Chief Operating Officer
John C. Nicholson
Telephone: (281) 876-6186
Email:
John.Nicholson@nblenergy.com
Producer:
Noble Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO 80202
Attention: Vice
President – DJ Business Unit
Mark Patteson
|
Agreement Addendum 05
– Page 3
Second Amended and Restated Fresh Water Services Agreement
|
|
|
|
|
Notice Address – Invoicing Matters
|
|
Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Ian Dams
Telephone: (832) 639-7406
Email: ian.dams@nblenergy.com
Producer:
1001 Noble Energy Way
Houston, TX 77070
Attention: Director of Revenue Accounting
John Nedelka
Telephone: (281) 872-3120
Email:
John.Nedelka@nblenergy.com
|
|
Payments by Electronic Funds Transfer
|
|
Midstream Co:
ABA for wire: 021000021
ABA for ACH: 111000614
Account Number: 780162447
Account Name: Laramie River DevCo
LP
Financial Institution: JP Morgan
Bank Swift: CHASUS33
Producer:
ABA/Routing Number: 021000021
Account Number: 08805135066
Account Name: Noble Energy, Inc.
Financial Institution: JP
Morgan
Bank Swift: CHASUS33
|
(End of Agreement Addendum 05)
Agreement Addendum 05
– Page 4
Second Amended and Restated Fresh Water Services Agreement
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement in duplicate originals to be
effective as of the Effective Date.
|
|
|
|
|
“Producer”
|
|
|
|
NOBLE ENERGY, INC.
|
|
|
|
|
By:
|
|
/s/ Gary W. Willingham
|
|
|
|
Gary W. Willingham
|
|
|
|
Executive Vice President
|
|
|
|
|
|
|
|
STATE OF TEXAS
|
|
)
|
|
|
|
|
|
)
|
|
ss.
|
|
COUNTY OF HARRIS
|
|
)
|
|
|
The foregoing instrument was acknowledged before me this
26th
day of April, 2016 by Gary W. Willingham, Executive Vice
President of Noble Energy, Inc., a Delaware corporation, on behalf of said corporation.
|
|
|
/s/ Vickie L. Graham
|
|
Notary Public in and for the State of Texas
|
|
|
|
|
|
“Midstream Co”
|
|
|
|
LARAMIE RIVER DEVCO LP
By: Laramie River DevCo GP LLC
By: Noble Midstream Services, LLC
|
|
By:
|
|
/s/ Terry R. Gerhart
|
|
|
|
Terry R. Gerhart
|
|
|
|
Chief Executive Officer
|
|
|
|
|
|
|
|
STATE OF COLORADO
|
|
)
|
|
|
|
|
|
)
|
|
ss.
|
|
COUNTY OF
|
|
)
|
|
|
The foregoing instrument was acknowledged before me this
26th
day of April, 2016 by Terry R. Gerhart, Chief Executive
Officer of Noble Midstream Services, LLC, a Delaware limited liability company, which is the sole member of Laramie River DevCo GP LLC, which is the general partner of Laramie River DevCo LP, a Delaware limited partnership, on behalf of said
company.
|
|
|
/s/ Joanne Garner
|
|
Notary Public in and for the State of Texas
|
Agreement Addendum 05
– Signature Page 2
Second Amended and Restated Fresh Water Services Agreement
Exhibit 10.22.1.1
When Recorded, Mail To:
Attn: DJ Land Manager
1625 Broadway, Suite 2200
Denver, CO 80202
FORM OF AMENDMENT 01
TO
THAT CERTAIN
SECOND AMENDED AND RESTATED
FRESH WATER SERVICES AGREEMENT
G
REELEY
C
RESCENT
C
ONTRACT
N
UMBER
: LAGC05-FW
This AMENDMENT 01 (this “
Amendment
”) shall be effective among Noble Energy, Inc., a Delaware corporation (the
“
Producer
”) and Laramie River DevCo LP, a Delaware limited partnership, together with its permitted successors and assigns (“
Midstream Co
”) as of September 1, 2016 (the “
Agreement Effective
Time
”). This Amendment modifies that certain Second Amended and Restated Fresh Water Services Agreement, effective as of March 31, 2016 (the “
Agreement
”), which has been given contract number LAGC05-FW and is comprised
of (i) that certain Second Amended and Restated Agreement Terms and Conditions Relating to Fresh Water Services (the “
Agreement Terms and Conditions
”), last updated March 31, 2016, together with (ii) that certain
Second Amended and Restated Agreement Addendum 05 (the “
Agreement Addendum
”), effective as of March 31, 2016. The Agreement Terms and Conditions, the Agreement Addendum and this Amendment shall constitute one contract and shall
be the Agreement of the Parties.
WHEREAS, capitalized terms used herein have the meanings assigned to such terms in the Agreement Terms
and Conditions.
WHEREAS, Section 16.1 of the Agreement (which appears in the Agreement Terms and Conditions) prohibits either Party
to the Agreement from assigning its rights and obligations, except that Producer may assign its rights and obligations to any Person (herein, the “
Transferee
”) to whom Producer transfers Dedicated Properties so long as such
Transferee assumes the rights and obligations of Producer with respect to such transferred Dedicated Properties.
WHEREAS, pursuant to
that certain Purchase and Sale Agreement, by and among Producer, NBL Energy Royalties, Inc. and Noble Energy WyCo, LLC, collectively as the Seller, and Synergy Resources Corporation, as Purchaser (the “
Transferee
”), executed
May 2, 2016 with an effective time of April 1, 2016 at 12:01 AM, Producer agreed to sell approximately 30,000 acres of the Dedicated Properties to the Transferee.
WHEREAS, the Parties acknowledge that the purpose of this Amendment is to correct an error in
certain specifications set out in
Section 7.1(a)
of the Agreement Terms and Conditions, and incorporated in the Agreement Addendum, and to make certain other technical modifications.
WHEREAS, the Parties agree and acknowledge that amendments to the Agreement Terms and Conditions set forth herein constitute an amendment only
to the Agreement and not to any other agreement in respect of fresh water services to which Producer is a party.
NOW, THEREFORE, in
consideration of the foregoing recitals, which are incorporated herein and the mutual agreements in the Agreement, Midstream Co and Producer hereby agree as follows:
1.
Amendments
.
1.1
Section 1.1
of the Agreement (which appears in the Agreement Terms and Conditions) is hereby amended by amending and restating the following defined terms in their entirety to read as follows:
“
Facility Segment
” means each segment of an Individual System comprised of facilities that can be operated independently of
other Facility Segments. For example, a Facility Segment may begin at a Receipt Point and end at a Retention Facility, begin at a Retention Facility and end at a Delivery Point or have another configuration. If an Individual System does not contain
any such distinct segment, then the term Facility Segment shall be synonymous with Individual System.
“
Individual Fee
”
means the aggregate of the Individual First Phase Fee and the Individual Second Phase Fee;
provided
that for purposes of the annual escalation in the Individual Fee described in
Section 6.2(b)
, such term shall not include any
Reimbursed Amount.
“
Individual System
” means the portion of the System beginning at the Receipt Points and ending at the
Delivery Points. The Individual Systems in existence on the Effective Date are more particularly described in writing between Producer and Midstream Co. Additional Individual Systems may be added to the System from time to time in satisfaction of
the needs identified by Producer and evidenced in writing between Producer and Midstream Co.
1.2
Section 2.4(b)(iv)
of the
Agreement (which appears in the Agreement Terms and Conditions) is amended and restated in its entirety to read: “(iv)
Reserved.
”.
1.3
Section 3.1(e)
of the Agreement (which appears in the Agreement Terms and Conditions) is hereby amended by deleting the
sentence that reads as follows “In the sole discretion of each Person serving as a Midstream Co under a Midstream Agreement Addendum,
Amendment 01 –
Page 2
Second Amended and Restated Fresh Water Services Agreement
Laramie River Fresh Water Agreement
LAGC05-FW
such Midstream Co may work with any other Midstream Co to prepare and deliver a System Plan jointly.” and inserting in place thereof the following sentence: “Midstream Co may, in its
sole discretion, work with OpCo or any of OpCo’s subsidiaries to prepare and deliver a System Plan jointly with such other entity or entities.”
1.4
Section 6.3
of the Agreement (which appears in the Agreement Terms and Conditions) is hereby amended and restated in its
entirety to read as follows:
Section 6.3 Producer, at its sole cost and expense, shall procure all fuel used by Midstream Co, if any,
required to operate the Individual System or to generate electricity for the operation of the Individual System and arrange for transportation of such fuel to the Individual System.
1.5 The last row of the chart in
Section 7.1(a)
of the Agreement Terms and Conditions is hereby amended and restated in its
entirety to read as follows:
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Particulate Size
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100 nominal
micron
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100 nominal
micron
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1.1 The description of the “Dedication Area” appearing in Agreement Addendum is hereby amended and
restated in its entirety to read as follows:
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Dedication Area
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The following areas within Weld County, Colorado
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Township
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Range
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Sections
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T7N
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R65W
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ALL
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T6N
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R65W
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1-5, 9-17,
20-29, 33-36
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T5N
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R67W
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13, 14, 23-26, 35, 36
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T5N
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R66W
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18-20, 25, S/2 26,
27-36
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T5N
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R65W
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1-3, E/2 4, 14
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T4N
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R67W
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1,2, 26, 27, 34, 35
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Except and excluding the wells, leases, and other acreage described in the property exhibits attached to the Releases of
Dedication.
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2.
Clarification Regarding Second Phase Services
. Midstream Co shall have the option to deliver Fresh
Water through an Internal Transfer Point as described in the definition of “Services” in the Agreement (which appears in the Agreement Terms and Conditions) or directly to a Delivery Point without transporting Fresh Water through an
Internal Transfer Point. The Individual Second Phase Fee shall be equal to zero for any Fresh Water that Midstream Co elects to deliver directly to a Delivery Point without passing through an Internal Transfer Point.
3.
Confidentiality
. Pursuant to
Section 17.11
of the Agreement (which appears in the Agreement Terms and Conditions), the
Parties have agreed to treat the information exchanged in connection with and the provisions of the Agreement as confidential. In addition,
Amendment 01 –
Page 3
Second Amended and Restated Fresh Water Services Agreement
Laramie River Fresh Water Agreement
LAGC05-FW
confidential treatment has been requested with the Securities and Exchange Commission for the pricing terms of the Agreement, and the Parties agree to take appropriate measures to abide by the
requirements imposed by the Securities and Exchange Commission to preserve such confidential treatment, if granted.
4.
Confirmation
. The provisions of the Agreement, as amended by this Amendment, shall remain in full force and effect following the effectiveness of this Amendment. No provision of the Agreement is amended or otherwise modified hereby, except as
expressly stated herein.
5.
No Waiver
. The execution, delivery and effectiveness of this Amendment shall not operate as a waiver
of any right, power or remedy of any Party to the Agreement, nor constitute a waiver of any provision of the Agreement. On and after the Amendment Effective Time, this Amendment shall for all purposes constitute a part of the Agreement.
6.
Counterparts
. This Amendment may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be
an original instrument, but all of such counterparts shall constitute for all purposes one agreement. Any signature hereto delivered by a Party by electronic mail shall be deemed an original signature hereto.
7.
Governing Law
. This Amendment shall be governed by and construed in accordance with the laws of the State, excluding any conflicts
of law rule or principle that might refer construction of such provisions to the laws of another jurisdiction.
(Signature Pages follow)
Amendment 01 –
Page 4
Second Amended and Restated Fresh Water Services Agreement
Laramie River Fresh Water Agreement
LAGC05-FW
IN WITNESS WHEREOF, the Parties hereto have executed this Amendment to the Agreement in duplicate
originals to be effective as of the Amendment Effective Time.
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“Producer”
NOBLE ENERGY, INC.
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By:
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Gary W. Willingham
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Executive Vice President
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STATE OF TEXAS
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)
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)
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ss.
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COUNTY OF HARRIS
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)
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The foregoing instrument was acknowledged before me this
day of
,
, by Gary W. Willingham as Executive Vice President of Noble Energy, Inc., a Delaware corporation.
WITNESS my hand and official seal.
My commission expires:
Amendment 01 –
Signature Page 1
Second Amended and Restated Fresh Water Services Agreement
Laramie River Fresh Water Agreement
LAGC05-FW
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“Midstream Co”
LARAMIE RIVER DEVCO LP
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By:
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Laramie River DevCo GP LLC
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By:
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Noble Midstream Services, LLC
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By:
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Terry R. Gerhart
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Chief Executive Officer
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STATE OF TEXAS
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)
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)
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ss.
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COUNTY OF HARRIS
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)
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The foregoing instrument was acknowledged before me this
day of
,
, by Terry R. Gerhart as Chief Executive Officer of Noble Midstream Services, LLC, which is the sole member of Laramie River DevCo GP LLC, which is the general partner of
Laramie River DevCo LP, a Delaware limited partnership.
WITNESS my hand and official seal.
My commission expires:
Amendment 01 –
Signature Page 2
Second Amended and Restated Fresh Water Services Agreement
Laramie River Fresh Water Agreement
LAGC05-FW
Exhibit 10.22.2
SECOND AMENDED AND RESTATED
FRESH WATER SERVICES AGREEMENT
AGREEMENT ADDENDUM XX
OPCO’S OBLIGATIONS
This
AGREEMENT ADDENDUM XX (this “
Agreement Addendum
”) (a) shall be effective as among the Persons named below as “Producer” and “OpCo” as of the date specified below as the “Effective Date,”
(b) incorporates the Second Amended and Restated Agreement Terms and Conditions Relating to Fresh Water Services (the “
Agreement Terms and Conditions
”), which were last amended effective as of March 31, 2016 and recorded
in the real property records of Weld County, Colorado on
as
, and (c) together with
the Agreement Terms and Conditions, shall constitute one contract and shall be the Agreement of the Parties. Except as otherwise set forth herein (i) all terms shall have the meanings assigned to such terms in the Agreement Terms and
Conditions, and (ii) all references to Exhibits, Appendices, Articles, Sections, subsections and other subdivisions refer to the corresponding Exhibits, Appendices, Articles, Sections, subsections and other subdivisions of or to the Agreement
Terms and Conditions.
OpCo owns, directly or indirectly, all of the Controlling interest in Colorado River DevCo LP and Green River DevCo
LP (collectively, the “
Original Subsidiaries
”).
Producer desires for OpCo to cause the Original Subsidiaries to provide
the Services utilizing the System in order for Producer to obtain a consistent level of service related to the storage and transportation of Fresh Water within the Service Area, and OpCo desires to cause the Original Subsidiaries to provide the
Services to Producer, on the terms and subject to the conditions of this Agreement.
In order for Producer to obtain a consistent level of
service to Producer within the Service Area, Producer and OpCo hereby enter into this Agreement.
NOW, THEREFORE, in consideration of the
mutual agreements in this Agreement, OpCo and Producer hereby agree as follows:
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Producer
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Noble Energy, Inc., a Delaware corporation
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OpCo
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Noble Midstream Services, LLC, a Delaware limited liability company
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Effective Date
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March 31, 2016
|
Agreement Addendum XX
– Page 1
Second Amended and Restated Fresh Water Services Agreement
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Notices and Payments
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Notice Address – General Matters & Correspondence
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OpCo:
Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Chief
Financial Officer
John F.
Bookout, IV
Telephone: (832) 639-7134
Email:
John.Bookout@nblenergy.com
Producer:
Noble Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO 80202
Attention: Director of
USO Finance,
Gerald Free
Telephone: (303) 228-4174
Email:
Gerald.Free@nblenergy.com
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Notice Address – Operational Matters, Force Majeure and Delivery interruptions
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Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Chief Operating Officer
John C. Nicholson
Telephone: (281) 876-6186
Email:
John.Nicholson@nblenergy.com
Producer:
Noble Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO 80202
Attention: Vice
President – DJ Business Unit
Mark Patteson
|
Agreement Addendum XX
– Page 2
Second Amended and Restated Fresh Water Services Agreement
|
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Notice Address – Invoicing Matters
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OpCo:
OpCo
1001 Noble Energy Way
Houston, TX 77070
Attention: Ian Dams
Telephone: (832) 639-7406
Email: ian.dams@nblenergy.com
Producer:
1001 Noble Energy Way
Houston, TX 77070
Attention: Director of Revenue Accounting
John Nedelka
Telephone: (281) 872-3120
Email:
John.Nedelka@nblenergy.com
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Payments by Electronic Funds Transfer
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Producer:
ABA/Routing Number: 021000021
Account Number: 08805135066
Account Name: Noble Energy, Inc.
Financial Institution: JP
Morgan
Bank Swift: CHASUS33
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1.
|
Definitions
. The term “Original Midstream Co” shall refer to each entity that is both a Midstream Co party to an Agreement related to the storage and transportation of Fresh Water and is a subsidiary of
OpCo. For the avoidance of doubt, OpCo has no obligations or responsibilities towards or with respect to NBL Midstream Holdings LLC.
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2.
|
OpCo’s Obligations
. OpCo shall cause each Original Midstream Co to comply with the obligations of such Original Midstream Co under the Midstream Agreement Addendum to which such Original Midstream Co is a
party and the Agreement Terms and Conditions. If at any time, an Original Midstream Co assigns its obligations under a Midstream Agreement Addendum to a Midstream Co Assignee, OpCo shall have no obligations under this Section 2 with respect to
such Midstream Co Assignee and shall not be liable for any performance or non-performance by such Midstream Co Assignee.
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3.
|
Coordination of System Plans
. Subject to Midstream Co’s rights under
Section 13.2
, OpCo shall cause the Original Midstream Cos to coordinate their System Plans so that, taken as a whole, the
System Plans delivered by all of the Original Midstream Cos satisfy the needs for Services throughout the Service Area, except to the extent OpCo reasonably determines any portion of the Service Area should be serviced by any Midstream Co Assignee.
|
Agreement Addendum XX
– Page 3
Second Amended and Restated Fresh Water Services Agreement
|
4.
|
No Other Obligations
. OpCo shall not have any of the rights or be bound by any of the terms of the Agreement Terms and Conditions, except as provided in (a) Section 1 of this Agreement Addendum, and
(b)
Article 8
and
Article 17
of the Agreement Terms and Conditions. No reference to a “Party” or the “Parties” in the Agreement Terms and Conditions shall be deemed to include a reference to OpCo.
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5.
|
Enforcement by OpCo
. OpCo shall have the right to enforce all rights of each Original Midstream Cos under the Agreement Addendum to which such Original Midstream Co is a Party.
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6.
|
Notices Delivered to OpCo
. All notices and other communications required under the Agreement Terms and Conditions to be delivered to an Original Midstream Co shall be deemed delivered if received by OpCo.
|
(End of Agreement Addendum XX)
Agreement Addendum XX
– Page 4
Second Amended and Restated Fresh Water Services Agreement
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement in duplicate originals to be
effective as of the Effective Date.
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“Producer”
|
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|
|
NOBLE ENERGY, INC.
|
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|
|
|
By:
|
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/s/ Gary W. Willingham
|
|
|
|
Gary W. Willingham
|
|
|
|
Executive Vice President
|
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|
|
|
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|
|
STATE OF TEXAS
|
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)
|
|
|
|
|
|
)
|
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ss.
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|
COUNTY OF HARRIS
|
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)
|
|
|
The foregoing instrument was acknowledged before me this
26th
day of April, 2016 by Gary W. Willingham, Executive Vice
President of Noble Energy, Inc., a Delaware corporation, on behalf of said corporation.
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/s/ Vickie L. Graham
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Notary Public in and for the State of Texas
|
Agreement Addendum XX
– Signature Page 1
Second Amended and Restated Fresh Water Services Agreement
|
|
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|
|
“OpCo”
|
|
|
|
NOBLE MIDSTREAM SERVICES, LLC
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|
By:
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/s/ Terry R. Gerhart
|
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|
|
Terry R. Gerhart
|
|
|
|
Chief Executive Officer
|
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|
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STATE OF COLORADO
|
|
)
|
|
|
|
|
|
)
|
|
ss.
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|
COUNTY OF
|
|
)
|
|
|
The foregoing instrument was acknowledged before me this
26th
day of April, 2016 by Terry R. Gerhart, Chief Executive
Officer of Noble Midstream Services, LLC, a Delaware limited liability company, on behalf of said company.
|
|
|
/s/ Joanne Garner
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|
Notary Public in and for the State of Texas
|
Agreement Addendum XX
– Signature Page 2
Second Amended and Restated Fresh Water Services Agreement
Exhibit 10.23
Execution Version
When Recorded, Mail To:
Attn: DJ Land Manager
1625 Broadway, Suite 2200
Denver, CO 80202
SECOND AMENDED AND RESTATED
CRUDE OIL GATHERING AGREEMENT
consisting of the
SECOND
AMENDED AND RESTATED
AGREEMENT TERMS AND CONDITIONS RELATING TO
CRUDE OIL GATHERING SERVICES
taken together with the applicable
SECOND AMENDED AND RESTATED
AGREEMENT ADDENDUM
now or
in the future effective
TABLE OF CONTENTS
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ARTICLE 1 DEFINITIONS
|
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2
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Section 1.1
|
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Definitions
|
|
|
2
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|
Section 1.2
|
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Other Terms
|
|
|
13
|
|
|
Section 1.3
|
|
References and Rules of Construction
|
|
|
13
|
|
|
|
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|
ARTICLE 2 PRODUCT DEDICATION AND REAL PROPERTY DEDICATION
|
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|
14
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|
|
|
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|
|
Section 2.1
|
|
Producer’s Dedications
|
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|
14
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|
Section 2.2
|
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Conflicting Dedications
|
|
|
14
|
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|
Section 2.3
|
|
Producer’s Reservation
|
|
|
15
|
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|
Section 2.4
|
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Releases from Dedication
|
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15
|
|
|
Section 2.5
|
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Covenants Running with the Land
|
|
|
17
|
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|
Section 2.6
|
|
Recording of Agreement
|
|
|
18
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|
ARTICLE 3 SYSTEM EXPANSION AND CONNECTION OF WELLS
|
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|
18
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|
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|
|
Section 3.1
|
|
Development Report; System Plan; Meetings
|
|
|
18
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|
Section 3.2
|
|
Expansion of System and Connection of Separator Facilities
|
|
|
21
|
|
|
Section 3.3
|
|
Temporary Services.
|
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|
22
|
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|
Section 3.4
|
|
Cooperation
|
|
|
23
|
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|
Section 3.5
|
|
Grant of Access; Real Property Rights
|
|
|
23
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|
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|
ARTICLE 4 MEASUREMENT DEVICES
|
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|
24
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|
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Section 4.1
|
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Measurement Devices.
|
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|
24
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Section 4.2
|
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Measurement Procedures
|
|
|
27
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Section 4.3
|
|
Product Meter Adjustments
|
|
|
27
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|
ARTICLE 5 TENDER, NOMINATION, AND GATHERING OF PRODUCTION
|
|
|
28
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|
|
|
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|
|
Section 5.1
|
|
Limitations on Service to Third Parties
|
|
|
28
|
|
|
Section 5.2
|
|
Tender of Dedicated Production
|
|
|
28
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Section 5.3
|
|
Services; Service Standard
|
|
|
28
|
|
|
Section 5.4
|
|
Nominations, Scheduling, and Curtailment
|
|
|
29
|
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|
Section 5.5
|
|
Suspension/Shutdown of Service
|
|
|
30
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|
|
Section 5.6
|
|
Marketing and Transportation
|
|
|
30
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|
|
Section 5.7
|
|
No Prior Flow of Product in Interstate Commerce
|
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|
30
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|
ARTICLE 6 FEES
|
|
|
31
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|
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|
Section 6.1
|
|
Fees
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|
|
31
|
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|
Section 6.2
|
|
Fee Adjustments
|
|
|
31
|
|
|
Section 6.3
|
|
Treatment of Byproducts, System Gains/Losses, Fuel and Related Matters
|
|
|
32
|
|
Second Amended and
Restated
Crude Oil Gathering Agreement
i
|
|
|
|
|
|
|
|
|
ARTICLE 7 QUALITY
|
|
|
33
|
|
|
|
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|
|
Section 7.1
|
|
Quality Specifications
|
|
|
33
|
|
|
Section 7.2
|
|
Failure to Meet Specifications
|
|
|
35
|
|
|
Section 7.3
|
|
Indemnification Regarding Quality
|
|
|
35
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|
|
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|
ARTICLE 8 TERM
|
|
|
35
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|
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|
Section 8.1
|
|
Term
|
|
|
35
|
|
|
Section 8.2
|
|
Effect of Termination or Expiration of the Term
|
|
|
36
|
|
|
|
|
|
ARTICLE 9 TITLE AND CUSTODY
|
|
|
36
|
|
|
|
|
|
|
Section 9.1
|
|
Title
|
|
|
36
|
|
|
Section 9.2
|
|
Custody
|
|
|
36
|
|
|
|
|
|
ARTICLE 10 BILLING AND PAYMENT
|
|
|
36
|
|
|
|
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|
|
Section 10.1
|
|
Statements
|
|
|
36
|
|
|
Section 10.2
|
|
Payments
|
|
|
37
|
|
|
Section 10.3
|
|
Adequate Assurances
|
|
|
38
|
|
|
Section 10.4
|
|
Audit
|
|
|
38
|
|
|
|
|
|
ARTICLE 11 REMEDIES
|
|
|
38
|
|
|
|
|
|
|
Section 11.1
|
|
Suspension of Performance; Temporary Release from Dedication
|
|
|
38
|
|
|
Section 11.2
|
|
No Election
|
|
|
39
|
|
|
Section 11.3
|
|
DIRECT DAMAGES
|
|
|
39
|
|
|
|
|
|
ARTICLE 12 FORCE MAJEURE
|
|
|
40
|
|
|
|
|
|
|
Section 12.1
|
|
Force Majeure
|
|
|
40
|
|
|
Section 12.2
|
|
Extension Due to Force Majeure
|
|
|
40
|
|
|
ARTICLE 13 CHANGE IN LAW; UNECONOMIC SERVICE
|
|
|
40
|
|
|
Section 13.1
|
|
Changes in Applicable Law
|
|
|
40
|
|
|
Section 13.2
|
|
Unprofitable Operations and Rights of Termination
|
|
|
41
|
|
|
|
|
|
ARTICLE 14 REGULATORY STATUS
|
|
|
42
|
|
|
|
|
|
|
Section 14.1
|
|
Non-Jurisdictional System
|
|
|
42
|
|
|
Section 14.2
|
|
Government Authority Modification
|
|
|
43
|
|
|
|
|
|
ARTICLE 15 INDEMNIFICATION AND INSURANCE
|
|
|
43
|
|
|
|
|
|
|
Section 15.1
|
|
Reciprocal Indemnity
|
|
|
43
|
|
|
Section 15.2
|
|
Indemnification Regarding Third Parties
|
|
|
44
|
|
|
Section 15.3
|
|
Penalties
|
|
|
44
|
|
Second Amended and
Restated
Crude Oil Gathering Agreement
ii
|
|
|
|
|
|
|
|
|
Section 15.4
|
|
Insurance
|
|
|
44
|
|
|
|
|
|
ARTICLE 16 ASSIGNMENT
|
|
|
44
|
|
|
|
|
|
|
Section 16.1
|
|
Assignment of Rights and Obligations under this Agreement
|
|
|
44
|
|
|
Section 16.2
|
|
Pre-Approved Assignments
|
|
|
45
|
|
|
Section 16.3
|
|
Change of Control
|
|
|
45
|
|
|
|
|
|
ARTICLE 17 OTHER PROVISIONS
|
|
|
46
|
|
|
|
|
|
|
Section 17.1
|
|
Relationship of the Parties
|
|
|
46
|
|
|
Section 17.2
|
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Notices
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46
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Section 17.3
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Entire Agreement; Conflicts
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46
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Section 17.4
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Waivers; Rights Cumulative
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47
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Section 17.5
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Amendment
|
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47
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Section 17.6
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Governing Law; Arbitration
|
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47
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Section 17.7
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Parties in Interest
|
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47
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Section 17.8
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Preparation of Agreement
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48
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Section 17.9
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Severability
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48
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Section 17.10
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Counterparts
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48
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Section 17.11
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Confidentiality
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48
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EXHIBITS
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EXHIBIT A
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SERVICE AREA
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EXHIBIT B
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DOWNTIME FEE REDUCTION
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EXHIBIT C
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RESERVED
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EXHIBIT D
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INSURANCE
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Second Amended and
Restated
Crude Oil Gathering Agreement
iii
SECOND AMENDED AND RESTATED
AGREEMENT TERMS AND CONDITIONS RELATING TO
CRUDE OIL GATHERING SERVICES
These SECOND AMENDED AND RESTATED AGREEMENT TERMS AND CONDITIONS RELATING TO CRUDE OIL GATHERING SERVICES (these “
Agreement Terms and
Conditions
”) (i) shall be effective with respect to each signatory of each Agreement Addendum as of the Effective Date specified in the applicable Agreement Addendum (defined below), (ii) were last updated as of March 31,
2016, (iii) are incorporated into and made a part of each Agreement Addendum, and (iv) taken together with the applicable Agreement Addendum shall constitute one Agreement, separate and apart from any other Agreement governed by these
Agreement Terms and Conditions.
Recitals:
A. Producer owns rights, title and interests in certain oil and gas leases and other interests located within the Service Area (defined below)
that require services related to the gathering of hydrocarbons.
B. Producer wishes to obtain such gathering services from each Midstream
Co (defined below) that executes and delivers a Midstream Agreement Addendum (defined below) pursuant to these Agreement Terms and Conditions, as modified by the applicable Midstream Agreement Addendum.
C. Producer desires to dedicate all crude oil it Controls (defined below) that is attributable to its right, title, and interest in certain oil
and gas leases and other interests located within the Dedication Area (defined below) to the Individual System (defined below).
D. Each
Midstream Co that executes and delivers a Midstream Agreement Addendum owns and operates an Individual System that gathers gas from certain oil and gas leases and other interests.
E. OpCo (defined below) owns, directly or indirectly, the Controlling equity interests in each Original Midstream Co (defined below) and
intends to assist all of the Original Midstream Cos to, collectively, provide all of the Services (defined below) required by Producer hereunder, as provided in the OpCo Agreement Addendum (defined below).
Agreements:
NOW,
THEREFORE, in consideration of the foregoing Recitals, which are incorporated herein, the mutual agreements in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, OpCo, Midstream
Co, and Producer hereby agree as follows:
Second Amended and
Restated
Crude Oil Gathering Agreement
- 1 -
Article 1
Definitions
Section 1.1
Definitions
. As used in this Agreement, the following capitalized terms shall have the meanings ascribed to them
below:
“
Abandonment Date
” has the meaning given to it in
Section 3.2(d)
.
“
Additional/Accelerated Well
” has the meaning given to it in
Section 3.2(c)
.
“
Adequate Assurance of Performance
” has the meaning given to it in
Section 10.3
.
“
Adjustment Year
” has the meaning given to it in
Section 6.2(a)(ii)
.
“
Affiliate
” means, with respect to any Person, any other Person that directly, or indirectly through one or more
intermediaries, Controls, or is Controlled by, or is under common Control with, such Person. The following sentence shall not apply to the term “Affiliate” as used in
Section 2.2(b)
or the definition of “Conflicting
Dedication”: Producer and its subsidiaries (other than OpCo and its subsidiaries), on the one hand, and OpCo and its subsidiaries, on the other, shall not be considered Affiliates of each other for purposes of this Agreement.
“
Agreement
” means the applicable Agreement Addendum taken together with these Agreement Terms and Conditions, as modified by
such Agreement Addendum.
“
Agreement Addendum
” means each Midstream Agreement Addendum and OpCo Agreement Addendum.
“
Agreement Addenda
” shall be the collective reference to each Agreement Addendum then in effect.
“
Agreement
Terms and Conditions
” has the meaning given to it in the introductory paragraph.
“
Associated Water
” means water
that is produced with Producer’s owned or Controlled Product and delivered with such Product to the System at the Receipt Point, which Midstream Co will separate (if and to the degree required) from such Product prior to the redelivery of such
Product to Producer at the Delivery Point; provided that from and after the point that such water has been separated from such Product (such term, in this context, used excluding Associated Water) and delivered into the Water System, such water
shall cease to be Associated Water hereunder and shall be deemed to be Produced Water.
“
Barrel
” means a quantity
consisting of forty-two Gallons.
“
Beneficiary
” has the meaning given to it in Section 4.1(g).
“
BS&W
” means basic sediment and water (which for the avoidance of doubt, includes both Associated Water and Produced
Water).
Second Amended and
Restated
Crude Oil Gathering Agreement
- 2 -
“
Business Day
” means a Day (other than a Saturday or Sunday) on which federal
reserve banks are open for business.
“
Cancellation Date
” has the meaning given to it in
Section 3.1(c)
.
“
Claiming Party
” has the meaning given to it in the definition of “Force Majeure”.
“
Communications
” has the meaning given to it in
Section 17.2
.
“
Conditional Amount
” has the meaning set forth in
Section 10.1(a)
.
“
Conflicting Dedication
” means any gathering agreement, commitment, or arrangement (including any volume commitment) that
requires Producer’s owned or Controlled Product to be trucked from or sold to a Third Party at the lease or to be gathered on any gathering system or similar system other than the System, including any such agreement, commitment, or arrangement
burdening properties hereinafter acquired by Producer in the Dedication Area. No dedication of acreage shall constitute a Conflicting Dedication if Producer’s requirement under such dedication is to deliver Product from the tailgate of the
System or any other point that is a Delivery Point hereunder. A right of first refusal in favor of an entity other than Original Producer, OpCo, or any of their Affiliates shall be deemed to be a “Conflicting Dedication” if Affiliates of
Original Producer are prohibited from providing Services pursuant to the applicable agreement creating such right of first refusal.
“
Control
” (including the term “
Controlled
”) means (a) with respect to any Person, the possession,
direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting shares, by contract, or otherwise and (b) with respect to any Product, such Product produced
from the Dedication Area and owned by a Third Party or an Affiliate and with respect to which Producer has the contractual right or obligation (pursuant to a marketing, agency, operating, unit, or similar agreement) to market such Product and
Producer elects or is obligated to market such Product on behalf of the applicable Third Party or Affiliate.
“
Credit-Worthy
Person
” means a Person with a senior unsecured and credit-unenhanced long term debt rating equivalent to A- or better as determined by at least two rating agencies, one of which must be either Standard & Poor’s or Moody’s
(or if either one or both are not available, equivalent ratings from alternate rating sources reasonably acceptable to Midstream Co).
“
Day
” means a period of time from 7:00 a.m. Mountain Time on a calendar day until 7:00 a.m. Mountain Time on the succeeding
calendar day. The term “
Daily
” shall have the correlative meaning.
“
Dedicated Production
” means
(a) Product owned by Producer and produced from the Dedicated Properties, (b) Product owned by an Affiliate of Producer and produced from a Well operated by Producer within the Dedication Area, (c) Product produced within the
Dedication Area that is owned by a Third Party and under the Control of Producer, and (d) Purchased Dedicated Production. Notwithstanding the foregoing, (i) any Product that was released pursuant to the Releases of Dedication shall not be
included in this definition of “Dedicated Production,” (ii) any Product that is permanently released pursuant to
Section 2.4(a)
or otherwise shall cease
Second Amended and
Restated
Crude Oil Gathering Agreement
- 3 -
to be included in this definition of “Dedicated Production” immediately upon the effectiveness of such permanent release, and (iii) in the event of an assignment by a Producer
(“X”) to an assignee (“Y”) that is permitted under
Article 16
, any Product that is so assigned shall cease to be included in X’s Dedicated Production and shall solely be included in Y’s Dedicated Production as of
the effective date of such assignment.
“
Dedicated Properties
” means the interests held by Producer or its Affiliates in
the oil and gas leases, mineral interests, and other similar interests as of the Effective Date or acquired by Producer or its Affiliates after the Effective Date that relate to land within the Dedication Area. Notwithstanding the foregoing,
(a) any interest that was released pursuant to the Releases of Dedication shall not be included in this definition of “Dedicated Properties,” (b) any interest that is permanently released pursuant to
Section 2.4(a)
or
otherwise shall cease to be included in this definition of “Dedicated Properties” immediately upon the effectiveness of such permanent release and (c) in the event of an assignment by a Producer (“X”) to an assignee
(“Y”) that is permitted under
Article 16
, any interest that is so assigned shall cease to be included in X’s Dedicated Properties and shall solely be included in Y’s Dedicated Properties as of the effective date of such
assignment.
“
Dedications
” means the Product Dedication and the Real Property Dedication together, and
“
Dedication
” means the Product Dedication or the Real Property Dedication, as applicable.
“
Dedication
Area
” means, with respect to this Agreement, the area described on the applicable Midstream Agreement Addendum. Notwithstanding the foregoing, (a) any acreage that was released pursuant to the Releases of Dedication shall not be
included in this definition of “Dedication Area,” (b) any acreage that is permanently released pursuant to
Section 2.4(a)
or otherwise shall cease to be included in this definition of “Dedication Area”
immediately upon the effectiveness of such permanent release and (c) in the event of an assignment by a Producer (“X”) to an assignee (“Y”) that is permitted under
Article 16
, any acreage that is so assigned shall
cease to be included in X’s Dedication Area and shall solely be included in Y’s Dedication Area as of the effective date of such assignment.
“
Delivery Point
” means the point at which custody transfers from Midstream Co to or for the account of Producer. The custody
transfer point may include (a) the facilities of a Downstream Facility, (b) trucks, (c) the facilities of an oil processing facility or (d) any other point as may be mutually agreed between the Parties. The Delivery Points for
each Individual System in existence on the Effective Date shall be set forth in writing between Producer and Midstream Co, and additional points may become Delivery Points hereunder upon mutual agreement of the Parties as construction is completed
on additional facilities in satisfaction of the needs identified by Producer and the Parties shall continuously update the list of Delivery Points by mutual agreement.
“
Development Report
” has the meaning given to it in
Section 3.1(a)
.
“
Downstream Facility
” means any pipeline downstream of any Delivery Point on the System.
Second Amended and
Restated
Crude Oil Gathering Agreement
- 4 -
“
Downtime Event
” means a period during which an Individual System was
unavailable to provide Services for a reason other than (i) Force Majeure, (ii) an event or condition downstream of the Individual System that was not caused by Midstream Co or (iii) planned maintenance for which Midstream Co provided
notice as described in
Section 5.5(b)(ii)
.
“
Downtime Percentage
” means, with respect to any Individual
System during a specified period, an amount equal to the quotient of (a) aggregate of the hours during which such Individual System was unavailable to provide Services during such period divided by (b) the total hours during the applicable
period.
“
Drip Condensate
” means that portion of Gas Controlled by Producer received into the Gas System (without manual
separation or injection) that condenses in the Gas System, and is recovered by Midstream Co. If at any time Midstream Co is not providing gathering services to Producer in the Dedication Area with respect to Gas, there will be no Drip Condensate
delivered into the Individual System.
“
Effective Date
” has the meaning given to it in the applicable Agreement Addendum.
“
Escalation Percentage
” means 2.50%.
“
Excluded Amounts
” means Midstream Co’s general and administrative costs and any costs for design or construction of
facilities that can be used to connect other Planned Wells or Planned Separator Facilities in the Development Report that Producer at such time intends to develop.
“
Facility Segment
” means, for any Individual System that is described on the applicable Midstream Agreement Addendum that
includes a description of two or more Facility Segments, the distinct segment of such Individual System that is capable of being operated independently of the remaining portion of the Individual System. With respect to any Individual System that is
not described in the applicable Midstream Agreement Addendum as having multiple Facility Segments, the term Facility Segment shall be synonymous with Individual System.
“
First Development Report
” means the first report delivered by Original Producer to Midstream Co that satisfies the
requirements for a Development Report in
Section 3.1(a)
and
Section 3.1(b)
(an “
Original Report
”); and, in the event that Producer assigns all or any part of the Dedicated Properties to a Producer Assignee,
then with respect to such Producer Assignee, the First Development Report shall not refer to the Original Report but rather to the first Development Report delivered by such Producer Assignee to Midstream Co that satisfies the requirements for such
report in
Section 3.1(a)
and
Section 3.1(b)
.
“
Flash Gas
” means any gas that has been vaporized
from Product resulting from the gathering and treating of Product in the Individual System pursuant to this Agreement and has been collected by Midstream Co.
“
Force Majeure
” means an event that is not within the reasonable control of the Party claiming suspension (the
“
Claiming Party
”), and that by the exercise of reasonable due diligence the Claiming Party is unable to avoid or overcome in a reasonable manner. To the extent meeting the foregoing requirements, Force Majeure includes:
(a) acts of God; (b) wars (declared
Second Amended and
Restated
Crude Oil Gathering Agreement
- 5 -
or undeclared); (c) insurrections, hostilities, riots; (d) floods, droughts, fires, storms, storm warnings, landslides, lightning, earthquakes, washouts; (e) industrial
disturbances, acts of a public enemy, acts of terror, sabotage, blockades, epidemics; (f) arrests and restraints of rulers and peoples; (g) civil disturbances; (h) explosions, breakage or accidents to machinery or lines of pipe;
(i) hydrate obstruction or blockages of any kind in lines of pipe; (j) freezing of wells or delivery facilities, partial or entire failure of wells, and other events beyond the reasonable control of the Claiming Party that affect the
timing of production or production levels; (k) (
reserved
); (l) action or restraint by any Governmental Authority (so long as the Claiming Party has not applied for or assisted in the application for, and has opposed where and to the
extent commercially reasonable, such action or restraint), (m) delays or failures by a Governmental Authority to grant Permits applicable to the System (or any Individual System) so long as the Claiming Party has used its commercially
reasonable efforts to make any required filings with such Governmental Authority relating to such Permits, and (n) delays or failures by the Claiming Party to obtain easements and rights of way, surface leases and other real property interests
related to the System (or any Individual System) from Third Parties, so long as the Claiming Party has used its commercially reasonable efforts to obtain such easements and rights of way, surface leases and other real property interests. The failure
of a Claiming Party to settle or prevent a strike or other labor dispute with employees shall not be considered to be a matter within such Claiming Party’s control.
“
Gallon
” means one U.S. Standard gallon.
“
Gas
” means any mixture of gaseous hydrocarbons, consisting essentially of methane and heavier hydrocarbons, including Flash
Gas and, unless otherwise expressly provided herein, liquefiable hydrocarbons and Drip Condensate, and including inert and noncombustible gases, produced in the Dedication Area.
“
Gas System
” means the Gas gathering system providing Gas gathering services to Producer.
“
Governmental Authority
” means any federal, state, local, municipal, tribal or other government; any governmental, regulatory
(including self-regulatory) or administrative agency, commission, body or other authority exercising or entitled to exercise any administrative, executive, judicial, legislative, regulatory or taxing authority or power; and any court or governmental
tribunal, including any tribal authority having or asserting jurisdiction.
“
Group
” means (a) with respect to
Midstream Co, the Midstream Co Group, and (b) with respect to Producer, the Producer Group.
“
Increase in Fee
” has
the meaning given to it in
Section 6.2(b)
.
“
Individual Fee
” means the rate for each Individual System set
forth on the applicable Midstream Agreement Addendum.
“
Individual System
” means the portion of the System beginning at
the Receipt Points described on the applicable Midstream Agreement Addendum and ending at the Delivery Points described on the applicable Midstream Agreement Addendum. The Individual Systems in
Second Amended and
Restated
Crude Oil Gathering Agreement
- 6 -
existence on the Effective Date are more particularly described in the applicable Midstream Agreement Addendum. Additional Individual Systems may be added to the System from time to time in
satisfaction of the needs identified by Producer and evidenced through amendments to the applicable Midstream Agreement Addendum or the execution and delivery of additional Midstream Agreement Addenda.
“
Initial Term
” has the meaning given to it in
Section 8.1
.
“
Interest Rate
” means, on the applicable date of determination, the prime rate (as published in the “Money Rates”
table of
The Wall Street Journal
, eastern edition, or if such rate is no longer published in such publication or such publication ceases to be published, then as published in a similar national business publication as mutually agreed by the
Parties) plus an additional two percentage points (or, if such rate is contrary to any applicable Law, the maximum rate permitted by such applicable Law).
“
Interruption Conditions
” has the meaning given to it in
Section 2.4(b)
.
“
Inventory Account
” has the meaning given to it in
Section 5.4(f)
.
“
Invoice Month
” has the meaning given to it in
Section 10.1(a)
.
“
Law
” means any applicable statute, law, rule, regulation, ordinance, order, code, ruling, writ, injunction, decree or other
official act of or by any Governmental Authority.
“
Losses
” means any actions, claims, causes of action (including
actions in rem or in personam), settlements, judgments, demands, liens, encumbrances, losses, damages, fines, penalties, interest, costs, liabilities, expenses (including expenses attributable to the defense of any actions or claims and
attorneys’ fees) of any kind or character, including Losses for bodily injury, death, or property damage, whether under judicial proceedings, administrative proceedings or otherwise, and under any theory of tort, contract, breach of contract,
breach of representation or warranty (express or implied) or by reason of the conditions of the premises of or attributable to any Person or Person or any Party or Parties.
“
Measurement Device
” means the lease automatic custody transfer, coriolis, or other metering device or equipment which, along
with application of test results (e.g. shrinkage factors, BS&W factors, meter proves, etc), as required for the Individual System, measure the amount of oil, water, and BS&W, all of which shall conform to industry standards and government
regulations, as further described in
Article 4
.
“
Measurement Point
” means the Measurement Device that the Parties
have agreed in writing will measure the volume of Product moving through the Individual System.
“
Midstream Agreement
Addendum
” means each Agreement Addendum by and between a Producer and a Midstream Co that expressly states that it is governed by these Agreement Terms and Conditions. “
Midstream Agreement Addenda
” shall be the collective
reference to each Agreement Addendum then in effect.
Second Amended and
Restated
Crude Oil Gathering Agreement
- 7 -
“
Midstream Co
” means the Original Midstream Co, together with its permitted
successors and assigns, including any Midstream Co Assignee.
“
Midstream Co Assignee
” means any Third Party to whom
Midstream Co assigns its rights and obligations in accordance with this Agreement.
“
Midstream Co Group
” means Midstream
Co, its Affiliates, and the directors, officers, employees, and agents, of Midstream Co and its Affiliates; provided that all subsidiaries of OpCo that do not hold equity in Midstream Co shall be excluded from this definition.
“Modifications” has the meaning given to it in
Section 3.1(c)
.
“
Month
” means a period of time from 7:00 a.m. Mountain Time on the first Day of a calendar month until 7:00 a.m. Mountain
Time on the first Day of the next succeeding calendar month. The term “
Monthly
” shall have the correlative meaning.
“
Monthly Loss/ Gain Report
” means, with respect to any Invoice Month, the report delivered pursuant to
Section 10.1(d)
, which shall include statements of the following with respect to such Invoice Month: (a) the System Gains/Losses, (b) the Other System Fuel used by Midstream Co in the operation of the Individual System,
(c) the Associated Water returned to Producer, and (d) to the extent required by a writing signed by Producer and Midstream Co, the Drip Condensate and Flash Gas recovered by Midstream Co and returned to Producer. With respect to any
allocated volumes (specifically, those described in clauses (c) and, if applicable, (d)), the information included shall be of sufficient detail such that Producer may verify that the allocation procedures then in effect for the applicable
Invoice Month were applied.
“
Moody’s
” means Moody’s Investors Service, Inc., or any successor to its
statistical rating business.
“
Net Standard Volume
” means, with respect to Product, the gross standard volume, excluding
BS&W. For purposes of this definition, the following terms have the definitions set forth below:
|
|
1.
|
“
Indicated Volume
” means the change in meter reading which occurs during a receipt or delivery (Indicated Volume = closed meter reading - open meter reading).
|
|
|
2.
|
“
Gross Volume
” means the Indicated Volume multiplied by the meter factor for the particular liquid and flow rate under which the meter was proved.
|
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3.
|
“
Gross Standard Volume
” means the Gross Volume, corrected for base gravity, at standard temperature corrected to standard pressure.
|
“
Oil Quality
” means the inherent characteristics of Product as determined by measurement or tests including BS&W, API
gravity, sulfur content, viscosity, pour point, wax crystallization temperature, metals content, and similar characteristics.
“
On-Line Deadline
” has the meaning given to it in
Section 3.2(b)
.
Second Amended and
Restated
Crude Oil Gathering Agreement
- 8 -
“
OpCo
” means Noble Midstream Services, LLC, together with its permitted
successors and assigns.
“
OpCo Agreement Addendum
” means the Agreement Addendum by and between a Producer and OpCo that
expressly states that it is governed by these Agreement Terms and Conditions.
“
Original Midstream Co
” means the entity
identified as the “Midstream Co” in the applicable Midstream Agreement Addendum as of the Effective Date.
“
Original
Producer
” means Noble Energy, Inc.
“
Original Report
” has the meaning set forth in the definition of “First
Development Report.”
“
Other System Fuel
” means that portion of the natural gas delivered by Producer to Midstream
Co and measured and used as fuel by Midstream Co.
“
Other Services
” means services that (i) are not Services,
(ii) are provided to Producer, any of its Affiliates or to any Third Party, and (iii) pertain to the production of oil, other hydrocarbons, Produced Water, and waste products from the production of hydrocarbons.
“
Owner
” has the meaning given to it in Section 4.1(g).
“
Party
” or “
Parties
” with respect to each Midstream Agreement Addendum shall mean the applicable Producer
and the applicable Midstream Co. Unless expressly stated otherwise, references to “Parties” shall not refer to all parties to all Agreements governed hereby. Rather, references to “Parties” shall refer only to such Parties as
determined by the applicable Agreement Addendum. References to a “Party” or the “Parties” shall not include OpCo.
“
Period of Five Years
” means, with respect to any report delivered hereunder, the period from the first Day of the fiscal
quarter during which such report is required to be delivered until the fifth anniversary thereof.
“
Period of Two Years
”
means, with respect to any report delivered hereunder, the period beginning on the first Day of the fiscal quarter during which such report is required to be delivered and ending 24 Months after such date.
“
Permits
” means any permit, license, approval, or consent from a Governmental Authority.
“
Person
” means any individual, corporation, company, partnership, limited partnership, limited liability company, trust,
estate, Governmental Authority, or any other entity.
“
Planned Separator Facility
” has the meaning given to it in
Section 3.1(b)(i)
.
“
Planned Well
” has the meaning given to it in
Section 3.1(b)(i)
.
Second Amended and
Restated
Crude Oil Gathering Agreement
- 9 -
“
Produced Water
” means water that is produced as a byproduct of Producer’s
operation of the Wells that are located in the Dedication Area; provided that any water that is Associated Water shall not constitute Produced Water hereunder until such time as it has been separated from Product and ceases being Associated Water.
The term “Produced Water” shall refer to all water that is in the Water System, whether such water is in the form of saltwater or water that has completed the recycling and treating processes.
“
Producer
” means the Original Producer, together with its permitted successors and assigns, including any Producer Assignee.
“
Producer Assignee
” means any Person to whom Original Producer or any subsequent Producer sells, assigns, or otherwise
transfers acreage subject to the Dedications.
“
Producer Group
” means Producer, its Affiliates, and the directors,
officers, employees, and agents of Producer and its Affiliates.
“
Producer Line Fill
” has the meaning given to it in
Section 5.4(f)(i)
.
“
Producer Meters
” means any Measurement Device owned and operated by Producer (or caused
to be installed or operated by Producer).
“
Product
” means the crude oil produced from oil or gas wells, in its natural
form, which may include Associated Water and Flash Gas naturally produced therewith.
“
Product Dedication
” means the
dedication and commitment made by Producer pursuant to
Section 2.1(a)
.
“
Purchased Dedicated Production
”
means Product produced by a Third Party that (a) either (i) has been purchased by Producer or (ii) the Parties have mutually agreed should be considered “Dedicated Production,” and (b) for which the Parties have agreed
upon a Receipt Point for delivery into the Individual System.
“
Real Property Dedication
” means the dedication and
commitment made by Producer pursuant to the first sentence in
Section 2.1(b)
.
“
Receipt Point
” means the
point at which custody transfers from Producer to Midstream Co. The custody transfer point may include: (a) with respect to any Well serviced by a Separator Facility, each of the connecting flanges on the System located at or near such
Separator Facility, which flanges connect such Separator Facility to the System, (b) with respect to any Well that is not serviced by a Separator Facility, each of the connecting flanges on the System that connect the Producer’s line to
the System, (c) with respect to any Product delivered to an Individual System by truck, the applicable truck unload facility or (d) any other point as may be mutually agreed between the Parties. The Receipt Points in existence on the
Effective Date shall be set forth in writing between Producer and Midstream Co, and additional points may become Receipt Points hereunder upon mutual agreement of the Parties as construction is completed on additional facilities in satisfaction of
the needs identified by Producer and the Parties shall continuously update the list of Receipt Points by mutual agreement.
Second Amended and
Restated
Crude Oil Gathering Agreement
- 10 -
“
Redetermination Deadline
” has the meaning given to it in
Section 6.2(a)(ii)
.
“
Redetermination Proposal
” has the meaning given to it in
Section 6.2(a)(i)
.
“
Redetermined Individual Fee
” has the meaning given to it in
Section 6.2(a)(i)
.
“
Reimbursed Amount
” has the meaning given to it in
Section 10.1(a)
.
“
Release Conditions
” has the meaning given to it in
Section 2.4(a)
.
“
Releases of Dedication
” means those certain releases of dedication, executed by and among Original Producer, OpCo and
certain of OpCo’s subsidiaries, pursuant to
Section 2.4(a)
prior to March 31, 2016.
“
Rules
” has
the meaning given to it in
Section 17.6
.
“
Separator Facility
” means the surface facility where the Product
produced from one or more Wells in the Dedication Area is collected and gas and Associated Water are separated from the Product. A Separator Facility may be known by the Original Producer as an econode but may also refer to a well pad or other
facility from which Product is delivered into the System.
“
Service Area
” means (a) with respect to the Original
Producer, the area described on
Exhibit A
, except that any acreage that was released pursuant to the Releases of Dedication shall not be included in this definition of “Service Area”, and (b) with respect to any Producer
Assignee, the Dedication Area described in such Producer Assignee’s Agreement Addendum. Any acreage that is permanently released pursuant to
Section 2.4(a)
or otherwise shall cease to be included in the definition of “Service
Area” immediately upon the effectiveness of such permanent release.
“
Services
” means: (a) the receipt of
Producer’s owned or Controlled Product (including Associated Water and Flash Gas, as applicable in the approved System Plan) at the Receipt Points; (b) the receipt of Producer’s owned or Controlled Drip Condensate, (c) the
gathering of such Product; (d) the gathering of such Associated Water from the applicable Well to the point in the Individual System where Associated Water is delivered into the Water System, (e) the heating, separation, and chemical and
other treatment of Product to remove Associated Water and Flash Gas from the Product prior to the applicable Delivery Point to the extent agreed between Producer and Midstream Co and to the extent required to meet Oil Quality specification of
Downstream Facilities or markets designated by the Producer; (f) the redelivery of Product to Producer at the applicable Delivery Point for Producer’s account (inclusive of actual System gains or losses for the respective Individual
System), (g) the delivery of Flash Gas into the Gas System at an appropriate Delivery Point; and (h) the other services to be performed by Midstream Co in respect of such Product as set forth in this Agreement and the System Plan for an
Individual System, all in accordance with the terms of this Agreement (including any services with respect to metering services).
“
Services Fee
” means, collectively, the fees described in
Section 6.1
.
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“
Spacing Unit
” means the area fixed for the drilling of one Well by order or
rule of any applicable Governmental Authority, or (if no such order or rule is applicable) the area fixed for the drilling of a Well or Planned Well reasonably established by the pattern of drilling in the applicable area or otherwise established by
Producer in its reasonable discretion.
“
Standard & Poor’s
” means Standard & Poor’s Rating
Group, a division of McGraw Hill, Inc., or any successor to its statistical rating business.
“
State
” means the state in
which the Individual System is located.
“
System
” means all Individual Systems described in all of the Agreement Addenda,
collectively, including: (a) pipelines; (b) central processing facilities inclusive of pumping, heating, separating, treating, stabilizing, vapor recovery, and other equipment, (c) controls; (d) Delivery Points, meters and
measurement facilities; (e) storage for Product; (f) easements, licenses, rights of way, fee parcels, surface rights and Permits; (g) pumping facilities, if any, and (h) all appurtenant facilities, in each case, that are owned,
leased or operated by each Midstream Co to provide Services to Producer or Third Parties, as such gathering system and facilities are modified or extended from time to time to provide Services to Producer pursuant to the terms hereof or to Third
Parties, including the Facility Segments operated under this Agreement by each Midstream Co specified in the Agreement Addenda.
“
System Gains/Losses
” means any Product, in terms of Barrels, received into the System that is lost, gained, or otherwise not
accounted for incident to, or occasioned by, the gathering, and redelivery, of Product, including Product lost or gained in connection with the operation of a pipeline, excluding line pack for new facilities. System Gains/Losses will be determined
and allocated on an Individual System basis.
“
System Plan
” has the meaning given to it in
Section 3.1(c)
.
“
Target On-Line Date
” means (a) with respect to a Planned Separator Facility or, with respect to a Planned Well
that is not intended to be serviced by a Separator Facility, such Planned Well, in either case, that is described for the first time in the Original Report, the date specified in the Original Report for the applicable Planned Separator Facility or
Planned Well, as applicable, (b) with respect to any Planned Separator Facility or, with respect to any Planned Well that is not intended to be serviced by a Separator Facility, such Planned Well, in either case, that is described in a First
Development Report that is not the Original Report, 24 Months after the date of such First Development Report, unless Midstream Co consents to a shorter time period, and (c) with respect to any Planned Separator Facility or, with respect to any
Planned Well that is not intended to be serviced by a Separator Facility, such Planned Well, in either case, that is not described in the First Development Report, 24 Months after the date of the Development Report that initially reflects the
Planned Separator Facility or Planned Well, as applicable, unless Midstream Co consents to a shorter time period.
“
Tender
” means the act of Producer’s making Product available or causing Product to be made available to the System at a
Receipt Point. “
Tendered
” shall have the correlative meaning.
“
Term
” has the meaning given to it in
Section 8.1
.
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“
Third Party
” means any Person other than a Party to this Agreement or any
Affiliate of a Party to this Agreement.
“
Third Party Assignment
” has the meaning given to it in
Section 16.1(a)
.
“
Transaction Document
” means each agreement entered into pursuant to the agreement terms
and conditions related to gas gathering services, agreement terms and conditions related to oil gathering services, agreement terms and conditions related to produced water services, agreement terms and conditions related to gas processing services,
agreement terms and conditions related to crude oil treating services, and agreement terms and conditions related to fresh water services, now or in the future existing between Producer and Midstream Co.
“
Water System
” means the Produced Water system used to provide Produced Water services to Producer.
“
Well
” means a well (i) for the production of hydrocarbons, (ii) that is located in the Dedication Area,
(iii) in which Producer owns an interest, and (iv) for which Producer has a right or obligation to market Product produced thereby through ownership or pursuant to a marketing, agency, operating, unit, or similar agreement.
“
Year
” means a period of time from January 1 of a calendar year through December 31 of the same calendar year;
provided
that the first Year shall commence on the Effective Date and run through December 31 of that calendar year, and the last Year shall commence on January 1 of the calendar year and end on the Day on which this Agreement
terminates.
Section 1.2
Other Terms
. Other capitalized terms used in this Agreement and not defined in
Section 1.1
above have the meanings ascribed to them throughout this Agreement.
Section 1.3
References and Rules of
Construction
. All references in this Agreement to Exhibits, Appendices, Articles, Sections, subsections and other subdivisions refer to the corresponding Exhibits, Appendices, Articles, Sections, subsections and other subdivisions of or to this
Agreement unless expressly provided otherwise. Titles appearing at the beginning of any Articles, Sections, subsections and other subdivisions of this Agreement are for convenience only, do not constitute any part of this Agreement, and shall be
disregarded in construing the language hereof. The words “this Agreement,” “herein,” “hereby,” “hereunder” and “hereof,” and words of similar import refer to this Agreement as a whole, including the
applicable Agreement Addendum and all Exhibits, Appendices, and other attachments to these Agreement Terms and Conditions and the applicable Agreement Addendum, all of which are incorporated herein, and not to any particular Exhibit, Appendix,
Article, Section, subsection or other subdivision unless expressly so limited. The word “including” (in its various forms) means “including without limitation.” The word “or” shall mean “and/or” unless a clear
contrary intention exists. The word “from” means from and including, the word “through” means through and including, and the word “until” means until but excluding. All references to “$” or “dollars”
shall be deemed references to United States dollars. The words “will” and “shall” have the same meaning, force, and effect. Each accounting term not defined herein will have the meaning given to it under generally accepted
accounting principles. Pronouns in masculine, feminine or neuter genders shall be construed to state and include any other gender, and words, terms and
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titles (including terms defined herein) in the singular form shall be construed to include the plural and vice versa, unless the context otherwise requires. References to any Law, contract or
other agreement mean such Law, contract or agreement as it may be amended, supplemented, released, revised, replaced, or otherwise modified from time to time.
Article 2
Product
Dedication and Real Property Dedication
Section 2.1
Producer’s Dedications
.
(a)
Product Dedication
. Subject to
Section 2.2
through
Section 2.4
, during the Term, Producer exclusively
dedicates and commits to deliver to Midstream Co under this Agreement, as and when produced, all of the Dedicated Production and agrees not to deliver any Dedicated Production to any other gatherer, purchaser, marketer, or other Person prior to
delivery to Midstream Co at the Receipt Points.
(b)
Real Property Dedication
. Subject to
Section 2.2
through
Section 2.4
, during the Term, Producer dedicates and commits the Dedicated Properties to Midstream Co for performance of the Services pursuant to this Agreement. Except for the Parties’ performance of their obligations under this
Agreement, no further performance is required by either Party to effectuate the Real Property Dedication.
Section 2.2
Conflicting
Dedications
.
(a) Notwithstanding anything in this Agreement to the contrary, Producer shall have the right to comply with
(i) each of the Conflicting Dedications existing on the Effective Date or, in the case of a Producer Assignee, the effective date of such assignment, and (ii) any other Conflicting Dedication applicable as of the date of acquisition of any
oil and gas leases, mineral interests, and other similar interests within the Dedication Area that are acquired by Producer after the Effective Date and otherwise would have become subject to the Dedications (but not any Conflicting Dedications
entered into in connection with such acquisition). Producer shall have the right to comply with a Conflicting Dedication only until the first Day of the Month following the termination of such Conflicting Dedication. Producer shall not extend or
renew any Conflicting Dedication and shall terminate each Conflicting Dedication as soon as permitted under the underlying contract without causing Producer to incur any costs or expenses deemed unreasonable or inappropriate in the opinion of
Producer and shall not enter into any new Conflicting Dedication.
(b) Certain Conflicting Dedications contain rights of first refusal or
other provisions that (i) entitle Producer to a release of acreage from such Conflicting Dedication if Producer dedicates the released acreage to a Third Party or (ii) expressly prohibit Producer from dedicating such released acreage to an
Affiliate of Producer. As used herein, the term “
Conflicting Dedication
” shall include both the original right of first refusal (or similar right) and the dedication resulting from an exercise of such right of first refusal (or
similar right) so long as the resulting dedication covers the same acreage as the original Conflicting Dedication.
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(c) To the extent Producer claims that a Conflicting Dedication exists with respect to certain
Services on specified Dedicated Properties, Midstream Co shall have the right to review the documentation creating such Conflicting Dedication, subject to confidentiality requirements applicable to such Conflicting Dedication.
Section 2.3
Producer’s Reservation
. Producer reserves the following rights respecting Dedicated Production for itself:
(a) to operate (or cause to be operated) Wells producing Dedicated Production in its sole discretion, including the right to drill new Wells,
repair and rework old Wells, temporarily shut in Wells, renew or extend, in whole or in part, any oil and gas lease or term mineral interest, or cease production from or abandon any Well or surrender any applicable oil and gas lease, in whole or in
part, when no longer deemed by Producer to be capable of producing in paying quantities under normal methods of operation;
(b)
Reserved;
(c) to deliver such Dedicated Production or furnish such Dedicated Production to Producer’s lessors and holders of
other burdens on production with respect to such Dedicated Production as is required to satisfy the terms of the applicable oil and gas leases or other applicable instruments; and
(d) to pool, communitize or unitize Producer’s interests with respect to Dedicated Production;
provided
that Producer’s share
of Dedicated Production produced from such pooled, communitized, or unitized interests shall be committed and dedicated pursuant to this Agreement.
Section 2.4
Releases from Dedication
.
(a)
Permanent Releases
. Midstream Co shall permanently release from the Dedications: (i) any Dedicated Production from any Well,
Dedicated Properties, or Spacing Unit affected by one or more of the Release Conditions, (ii) any Dedicated Production that would have been delivered to a Separator Facility affected by one or more of the Release Conditions, (iii) any
Dedicated Properties affected by one or more of the Release Conditions and (iv) any Purchased Dedicated Production for which the Individual System has been affected by one or more of the Release Conditions. The “
Release
Conditions
” are:
(i) Midstream Co’s failure to complete the facilities that are described on a System Plan
and that are necessary to connect any Planned Separator Facility or Planned Wells to the System or failure to commence the Services with respect to any Planned Separator Facility or Planned Wells by the applicable On-Line Deadline (so long as such
failure was not the result of Producer’s failure to comply with the then-applicable Development Report);
(ii)
Midstream Co’s election (x) pursuant to
Section 3.1(c)
not to provide Services for any Well or Separator Facility included in a Development Report delivered by a Producer that is not the Original Producer or (y) pursuant
to
Section 3.3(b)
not to provide Services for (1) any Well or Separator Facility for which Producer failed to
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deliver a Development Report on or before the applicable deadline set forth in
Section 3.1(a)
, (2) any Well or Separator Facility not described in the applicable Development
Report or (3) any excess volume of Product produced from any Well during any Day that exceeds the volume included in Producer’s estimate set forth in the most recent Development Report delivered to Midstream Co;
(iii) expiration of the Term, as further described in
Section 8.2
;
(iv) written agreement of Producer and Midstream Co, and each Party shall consider in good faith any proposal by the other
Party to permanently release any Dedicated Production or Dedicated Properties;
(v) the occurrence of a Force Majeure of
the type described in clauses (l), (m) or (n) of the definition of “
Force Majeure
” affecting Midstream Co that continues for a period of 120 Days or more;
(vi) Midstream Co’s interruption or curtailment of receipts and deliveries of Product from any Well or Separator Facility
pursuant to
Section 5.5
that continues for 90 Days or more, except to the extent Producer elects to reduce the Individual Fee with respect to any volumes that are affected by a Downtime Event pursuant to
Section 6.2(c)
;
(vii) a default (other than a default of the type covered by
Section 2.4(a)(i)
) by Midstream Co that remains
uncured for 90 Days or more;
(viii) Producer’s rejection of any increase in the Individual Fee pursuant to
Section 13.1(b)
; or
(ix) (x) Midstream Co’s suspension of Services pursuant to
Section 13.2(a)(ii)
that extends for the period of time stated in such Section or (y) Midstream Co’s election not to expand an Individual System pursuant to
Section 13.2(b)
.
Producer may deliver any Dedicated Production released from the Dedications pursuant to this
Section 2.4(a)
to such other
gatherers as it shall determine.
(b)
Temporary Release
. Midstream Co shall temporarily release from the Dedications: (i) any
Dedicated Production from any Well, Dedicated Properties, or Spacing Unit affected by one or more of the Interruption Conditions, (ii) any Dedicated Production that would have been delivered to a Separator Facility affected by one or more of
the Interruption Conditions, (iii) any Dedicated Properties affected by one or more of the Interruption Conditions, and (iv) any Purchased Dedicated Production for which the Individual System has been affected by one or more of the
Interruption Conditions. The “
Interruption Conditions
” are:
(i) the occurrence and continuation of an
uncured default by Midstream Co;
(ii) Midstream Co’s interruption or curtailment of receipts and deliveries of
Product pursuant to
Section 5.5
that continues for a period of 30 consecutive Days, except to the extent Producer elects to reduce the Individual Fee with respect to any volumes that are affected by a Downtime Event pursuant to
Section 6.2(c)
;
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(iii) Until a permanent release is required under
Section 2.4(a)
or
Section 13.2
, Midstream Co’s suspension of Services pursuant to
Section 13.2(a)
(and, if
Section 13.2(a)(i)
applies, such temporary release shall continue at the discretion of Midstream Co, subject to the
time limits set forth in
Section 13.2(a)(i)
); and
(iv) Midstream Co’s election not to expand an
Individual System or System pursuant to
Section 13.2(b)
.
Producer may make alternative arrangements for the gathering of any
Dedicated Production temporarily released from the Dedications pursuant to this
Section 2.4(b)
. To the extent that an interruption or curtailment can be limited to a Facility Segment, Midstream Co shall so limit such interruption or
curtailment, and to the extent that Midstream Co does so limit such curtailment or interruption, the temporary release permitted by this
Section 2.4(b)
shall only apply to the affected Facility Segment. Such temporary release shall
continue until the first Day of the Month after the Month during which Midstream Co cures the applicable default or the interruption, curtailment, or suspension of Services terminates;
provided
that, if Producer obtained temporary services
from a Third Party (pursuant to a contract that does not give rise to a default under this Agreement) during the pendency of such default, interruption, curtailment, or suspension, such release shall continue until the earlier of (A) the first
Day of the Month that is six Months after the event or condition that gave rise to the interruption, curtailment or other temporary cessation has been corrected and (B) the first Day of the Month after the termination of the applicable contract
with such Third Party. For the avoidance of doubt, the temporary services that Producer may obtain under
Section 3.3
shall not constitute a release under the terms of this Agreement; provided that, if Producer cannot obtain such
temporary services without a temporary release, Midstream Co may in its discretion grant or refuse to grant a temporary release on such terms as reasonably required by Midstream Co (including, for example, conditioning the grant of a temporary
release on the establishment of a termination date for such temporary release).
(c)
Evidence of Release
. At the request of
Producer, the Parties shall execute a release agreement reasonably acceptable to all Parties (which, in the case of a permanent release, shall be in recordable form) reflecting any release of Dedicated Production or Dedicated Properties pursuant to
this
Section 2.4
.
Section 2.5
Covenants Running with the Land
. Subject to the provisions of
Section 2.3
and
Section 2.4
, each of the Dedications (a) is a covenant running with the Dedicated Properties, (b) touches and concerns Producer’s interests in the Dedicated Properties, and (c) shall be
binding on and enforceable by Midstream Co and its successors and assigns. Except as set forth in Article 16, (i) in the event Producer sells, transfers, conveys, assigns, grants or otherwise disposes of any or all of its interest in the
Dedicated Properties, then any such sale, transfer, conveyance, assignment, grant or other disposition shall be made subject to this Agreement and (ii) in the event Midstream Co sells, transfers, conveys, assigns, grants or otherwise disposes
of any or all of its interest in the Individual System, then any such sale, transfer, conveyance, assignment, grant or other disposition shall be made subject to this Agreement. The Real Property Dedication is not an executory contract under
Section 365 of Title 11 of the United States Code (11 U.S.C. § 365).
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Section 2.6
Recording of Agreement
. Producer hereby authorizes Midstream Co to record
a memorandum of the Agreement in the real property records of the counties in which the Service Area is located. Midstream Co and Producer agree that until Midstream Co provides notice to the contrary, all payment terms and pricing information shall
remain confidential and be redacted from any filings in the real property records.
Article 3
System Expansion and Connection of Wells
Section 3.1
Development Report; System Plan; Meetings
.
(a)
Development Report
. Original Producer will provide, on or before July 1, 2016, and each Producer Assignee will provide, on or
before the date stated in
Section 16.1
, Midstream Co with its First Development Report, which shall describe (x) in detail the planned development, drilling, and production activities relating to the Dedicated Production through the
end of the applicable Period of Two Years, and (y) generally the long-term drilling and production expectations for those project areas in which drilling activity is expected to occur during the applicable Period of Five Years, including the
information described in
Section 3.1(b)
. On or before each January 1, each April 1, each July 1, and each October 1 of each Year following the date on which the First Development Report is to be delivered, Producer
shall provide to Midstream Co an update of the then-current report (the First Development Report, as updated in accordance with the foregoing and as the then current report may be updated from time to time, the “
Development
Report
”).
(b)
Development Report Content
. With respect to the Dedication Area, the Development Reports shall include
information as to
(i) the Wells (each, a “
Planned Well
”) and Separator Facilities (each, a
“
Planned Separator Facility
”) that Producer expects to drill or install during the applicable Period of Two Years, including the expected locations, completion dates thereof (which completion dates shall not be earlier than the
applicable Target On-Line Dates), the expected spud dates of such Planned Wells, and dates flow is anticipated to initiate from such Wells;
(ii) the anticipated Oil Quality of the production from any Well and Separator Facility that Producer expects to produce during
the applicable Period of Two Years;
(iii) the Receipt Points and Delivery Points (including proposed receipt points and
delivery points not yet agreed in writing among the Parties) at which Product produced from each Well is to be delivered by or redelivered to Producer during the applicable Period of Two Years;
(iv) the number of Planned Wells and Planned Separator Facilities anticipated to be producing after the Period of Two Years and
before the end of the Period of Five Years, broken out by an appropriate geographic area, such as a development plan area;
(v) the actual lateral length for each Well described in the Period of Two Years, the anticipated lateral length for each
Planned Well described in the Period of Two Years and initial assumptions for the planned lateral length for each Planned Well anticipated to be producing after the Period of Two Years and before the end of the Period of Five Years;
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(vi) the number of rigs that Producer intends to operate in the Dedication Area
each year during the Period of Five Years (including sufficient detail regarding the anticipated location of such rigs to allow Midstream Co to determine which Individual System would be impacted by such rig activity);
(vii) with respect to the Period of Two Years, the anticipated date of each frac, the quantity of fresh water required to
complete such frac and an indication of the type of frac to be performed (slick, hybrid gel, gel, etc);
(viii) with
respect to the Period of Two Years, the anticipated date on which Midstream Co may initiate construction or other development activities at the Well or Separator Facility in order to complete the interconnection into the Individual System; and
(ix) such other information as may be reasonably requested by Midstream Co with respect to Wells and Separator Facilities that
Producer intends to drill or from which Producer intends to deliver Product during the Period of Two Years and Period of Five Years.
To
the extent possible, any information Producer is required to provide under this
Section 3.1(b)
with respect to Wells or Separator Facilities shall also include such information related to Planned Wells and Planned Separator Facilities.
In addition, if appropriate to provide a complete and accurate Development Report, any information requested with respect to Planned Wells and Planned Separator Facilities shall also be provided with respect to existing Wells or Separator
Facilities.
(c)
System Plan
. Based on the Development Report and such other information about the expected development of the
Dedicated Properties as shall be provided to Midstream Co by or on behalf of Producer, including as a result of meetings between representatives of Midstream Co and Producer, Midstream Co shall develop and periodically update a plan (the
“
System Plan
”) describing or depicting the modifications, extensions, enhancements, major maintenance and other actions necessary in order for the Individual System to be able to provide timely Services for the Product produced by
the Wells and Separator Facilities described in the most recent Development Report (including Planned Wells, Planned Separator Facilities and changes in anticipated production from existing Wells and Separator Facilities). Without limiting or
otherwise altering Midstream Co’s rights under
Section 13.2
, unless the applicable Well or Separator Facility is operated by Original Producer, Midstream Co may elect, in its sole discretion, not to make such modifications,
extensions, enhancements, major maintenance, or other actions to the System (the “
Modifications
”) and not to provide Services for any Wells or Separator Facilities included in a Development Report delivered by a Producer that
is not the Original Producer. If (i) Midstream Co elects to make such Modifications, (ii) Producer thereafter modifies the Development Report or provides other information (the date on which the modified Development Report or such other
information is provided to Midstream Co,
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the “
Cancellation Date
”) indicating that such Modifications are no longer necessary, and (iii) as of the Cancellation Date, the actual aggregate costs and expenses
(excluding Excluded Amounts) incurred or committed by Midstream Co to make such cancelled Modifications exceeds $100,000.00, then Producer shall reimburse Midstream Co for all reasonable and documented costs and expenses (other than the Excluded
Amounts) incurred or committed by Midstream Co through the Cancellation Date to make such Modifications. The System Plan (or, with respect to the allocation procedures described in clause (vi), the applicable writing signed by Midstream Co and
Producer) shall include information as to:
(i) each Facility Segment then existing and operational, under construction, or
planned and the Individual System of which such Facility Segment is a part;
(ii) all Receipt Points and Delivery Points
served or to be served by each such Facility Segment;
(iii)
Reserved
;
(iv) all pumps, heaters, stabilizers, treatment, Associated Water and Flash Gas separation, and other major physical facilities
located or to be located on or within each such Facility Segment, together with their sizes, operating parameters, capacities, and other relevant specifications (including the maximum operating pressures of the low pressure gathering lines and the
high pressure gathering lines), which sizes, parameters, capacities and other relevant specifications shall be sufficient to (x) connect the Individual System to the Receipt Points and Delivery Points for all Planned Separator Facilities and
(with respect to any Planned Wells not intended to be serviced by a Separator Facility) Planned Wells set forth in the most recent Development Report and (y) perform the Services for all Dedicated Production projected to be produced from the
Dedicated Properties as contemplated by the most recent Development Report;
(v) the anticipated schedule for completing
the construction and installation of the planned Facility Segments and all planned Receipt Points and Delivery Points, in each case, for all Planned Separator Facilities or Planned Wells, as applicable, included in the most recent Development
Report;
(vi) the allocation methodologies to be used by Midstream Co with respect to System Gains/ Losses, Other System
Fuel and other allocations hereunder (including, to the extent required by a writing signed by Producer and Midstream Co, allocations with respect to Drip Condensate and Flash Gas) and, with respect to any System Plan after the initial System Plan,
any proposed changes to the allocation methodologies then in effect, which allocation methodologies (A) shall permit allocations to be made by Midstream Co in a commercially reasonable manner; and (B) be based upon the measurements taken
and quantities determined for the applicable Month. To the extent required by a writing signed by Producer and Midstream Co, Midstream Co shall allocate, in a manner that is commercially reasonable and determined by Midstream Co in good faith, to a
particular Receipt Point, the Flash Gas and Drip Condensate from a Facility Segment.
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(vii) other information reasonably requested by Producer that is relevant to the
design, construction, and operation of the System, the relevant Individual System, the relevant Facility Segment, and the relevant Receipt Points and Delivery Points; provided that in no event shall Midstream Co be obligated to supply to Producer
(A) pricing, budget or similar financial information or (B) information that is covered by a confidentiality agreement or confidentiality obligations;
Midstream Co shall deliver the applicable System Plan (including any updated System Plan) to Producer for Producer’s review and comment not later than 30
Days after Producer’s delivery to Midstream Co of the applicable Development Report or amendment thereto.
(d)
Meetings
.
Midstream Co shall make representatives of Midstream Co available to discuss the most recent System Plan with Producer and its representatives at Producer’s written request. Producer shall make representatives of Producer available to discuss
the most recent Development Report with Midstream Co and its representatives at Midstream Co’s written request. The Parties agree that the meetings described in the previous sentences of this clause (d) may occur (and shall, if requested
by either Party) on a Monthly basis. At all such meetings, the Parties shall exchange updated information about their respective plans for the development and expansion of the Dedicated Properties (including amendments to the Development Report) and
the System (including amendments to the System Plan for Producer’s review and comment) and shall have the opportunity to discuss and provide comments on the other Party’s plans.
(e)
Scope and Purpose of Planning Tools
. The Development Report and the System Plan are intended to assist Midstream Co and Producer
with long-term planning and goals. None of the Development Reports nor the System Plans shall amend or modify this Agreement in any way. In the sole discretion of each Person serving as a Midstream Co under a Midstream Agreement Addendum, such
Midstream Co may work with any other Midstream Co to prepare and deliver a System Plan jointly. To the extent that a Development Report or System Plan that satisfies the requirements above is delivered or deemed delivered under any other Transaction
Document, such Development Report or System Plan shall be deemed delivered hereunder.
Section 3.2
Expansion of System and
Connection of Separator Facilities
.
(a)
Service Standards
. Midstream Co shall, at its sole cost and expense, design, construct
(as applicable), and own the Individual System in a good and workmanlike manner and in accordance with the System Plan and this
Section 3.2
. Until such time as Producer has delivered a Development Report, Midstream Co shall have no
obligation under this
Section 3.2(a)
.
(b)
On-Line Deadline
. Subject to
Section 12.2
, Midstream Co shall by
the later of (x) the date that the first Planned Well on a particular Planned Separator Facility (or, with respect to a Planned Well that is not intended to be serviced by a Separator Facility, the date that such Planned Well) is ready for
connection to the System and (y) the applicable Target On-Line Date (such later date, the “
On-Line Deadline
”): (i) have completed (or caused the completion of) the construction of the necessary facilities, in accordance
with the then current System Plan, (A) to connect such Planned Separator Facility or such Planned Well to the System and (B) to connect the System to each planned Delivery Point for such Planned Separator Facility or such Planned Well, as
applicable, and (ii) be ready and able to commence Services with respect to Dedicated Production from such Planned Separator Facility or Planned Well, as applicable.
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(c)
Additional/Accelerated Well
. From time to time, Producer may provide notice to
Midstream Co that Producer has accelerated the Target On-Line Date for a Planned Well or Planned Separator Facility (any such Well or Separator Facility, an “
Additional/Accelerated Well
”). Midstream Co will use its commercially
reasonable efforts to modify the System Plan and to cause the necessary gathering facilities to be constructed prior to the On-Line Deadline for such Additional/Accelerated Well. From time to time, Producer may provide notice to Midstream Co that
Producer (i) has delayed the Target On-Line Date for a Planned Well or Planned Separator Facility, (ii) subject to
Section 3.2(d)
, anticipates eliminating a Planned Well or Planned Separator Facility from its development plans
and the Development Report, or (iii) anticipates shutting in a Well or Separator Facility that has been producing. Midstream Co may adjust the System Plan as it determines to be appropriate and commercially reasonable to accommodate such
elimination of such Wells and Separator Facilities.
(d)
Cancellation of Planned Wells and Planned Separator Facilities
. If
(i) Midstream Co reasonably determines that Producer has permanently abandoned the drilling or installation of any Planned Well or Planned Separator Facility or Producer notifies Midstream Co that Producer intends to permanently abandon the
drilling or installation of any Planned Well or Planned Separator Facility (whether through the delivery of an updated Development Report or otherwise, the date on which such determination is made, the “
Abandonment Date
”),
(ii) Midstream Co had begun to design or construct the Facility Segment to connect such Planned Well or Planned Separator Facility to the System prior to such Abandonment Date, and (iii) the actual aggregate costs and expenses (excluding
Excluded Amounts) incurred or committed by Midstream Co prior to the Abandonment Date exceeds $100,000.00, then Producer shall reimburse Midstream Co for all reasonable and documented costs and expenses (other than the Excluded Amounts) incurred or
committed by Midstream Co prior to such Abandonment Date to design and construct such Facility Segment.
Section 3.3
Temporary
Services.
(a) Pending the completion of facilities contemplated in a System Plan or that may be required to service Wells in
existence as of the Effective Date, Producer may enter into a contract with a Third Party to provide services with respect to the Dedicated Production that is anticipated to be serviced by the new, modified, or enhanced facilities if the term of
such contract does not exceed six Months (and may be renewed in six-Month increments until such time as Midstream Co has completed the applicable facilities). If any such contract is in effect with respect to any Well, Producer will not be obligated
to connect such Well to the System until the first Day of the Month following expiration of such contract.
(b) If at any time,
(i) Producer fails to deliver a Development Report on or before the applicable deadline set forth in
Section 3.1(a)
, (ii) a Development Report delivered by Producer failed to describe any Well, or (iii) the average rate of
production at any Receipt Point described in the then-applicable Development Report exceeds Producer’s forecast for such Receipt Point set forth in such Development Report, and as a result, Midstream Co has not completed any new, modified, or
enhanced facilities necessary to allow Midstream Co to accept all of the Product
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Tendered by Producer at a Receipt Point, then (x) within a reasonable time after Midstream Co becomes aware of the need for such new, modified, or enhanced facilities, Midstream Co shall
elect, in its sole discretion, whether to proceed with the development and completion of such facilities by providing notice to Producer, and (y) if Midstream Co elects to proceed with the development and completion of such facilities,
(1) Midstream Co shall cause such facilities to be completed within a reasonable time after such election, and (2) pending the completion of such facilities, Midstream Co may elect (in its reasonable discretion and in exchange for
reasonable compensation) to permit Producer to enter into a contract with a Third Party as provided in
Section 3.3(a)
to provide services with respect to the Dedicated Production that Midstream Co is unable to accept.
Section 3.4
Cooperation
. The Parties shall work (at their own cost and expense) together in good faith to obtain such Permits as
are necessary to drill and complete each Planned Well and construct the required extensions of the System to each Planned Separator Facility (and each Planned Well, as applicable) as expeditiously as reasonably practicable, all as provided in this
Agreement. The Parties shall cooperate with each other and to communicate regularly regarding their efforts to obtain such Permits. Upon request by Producer, Midstream Co shall promptly provide to Producer copies of all Permits obtained by Midstream
Co in order to construct any Facility Segment (or portion of a Facility Segment) of the System.
Section 3.5
Grant of Access; Real
Property Rights
.
(a)
Producer’s Grant of Access
. Producer hereby grants to Midstream Co, without warranty of title, either
express or implied, to the extent that it may lawfully and is contractually permitted to do so without the incurrence of additional expense, the rights of ingress and egress with respect to, and the right to access, all lands constituting Dedicated
Properties for the purpose of using, maintaining, servicing, inspecting, repairing, and operating all or any portion of the applicable Individual System, including all pipelines, meters and other equipment necessary for the performance by Midstream
Co of this Agreement. Such right of access shall not include any right to install, replace, disconnect, or remove all or any portion of the applicable Individual System, which rights may only be granted pursuant to a separate instrument entered into
pursuant to
Section 3.5(f)
.
(b)
Producer Does Not Have Obligation to Maintain
. Producer shall not have a duty to
maintain in force and effect any underlying agreements (such as any lease, easement, or surface use agreement) that the grant of access by Producer to Midstream Co under
Section 3.5(a)
is based upon, and such grant will terminate if
Producer loses its rights to the applicable property, regardless of the reason for such loss of rights.
(c)
Midstream Co’s Grant
of Access
. Midstream Co hereby grants to Producer, without warranty of title, either express or implied, to the extent that it may lawfully and is contractually permitted to do so without the incurrence of additional expense, the rights of
ingress and egress with respect to, and the right to access, all lands covered by the Individual System in order to exercise its rights and obligations hereunder. Such right shall not include any right to install, replace, disconnect, or remove any
facilities on such lands, which rights may only be granted pursuant to a separate instrument entered into pursuant to
Section 3.5(f)
. Producer shall release, protect, defend, indemnify and hold harmless Midstream Co Group from and
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Crude Oil Gathering Agreement
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against all Losses directly or indirectly arising out of or in connection with bodily injury, death, illness, disease, or loss or damage to property of Midstream Co or any member of Midstream Co
Group directly arising from Producer’s exercise of its access rights hereunder, except to the extent such Losses are caused by the gross negligence or willful misconduct of Midstream Co Group.
(d)
Midstream Co Does Not Have Obligation to Maintain
. Midstream Co shall not have a duty to maintain in force and effect any underlying
agreements that the grant of access by Midstream Co to Producer pursuant to this
Section 3.5(d)
is based upon, and such grant will terminate if Midstream Co loses its rights to the applicable property, regardless of the reason for such
loss of rights.
(e)
No Interference
. A Party’s exercise of the rights granted to a Party by the other Party pursuant to this
Section 3.5
shall not unreasonably interfere with the granting Party’s operations or with the rights of owners in fee with respect to the applicable lands, and such rights will be exercised in material compliance with all applicable
Laws and the safety and other reasonable access requirements of the granting Party. Each Party obtaining a right of access pursuant to this
Section 3.5
shall have the status of “licensee,” except when such Party is accessing
the applicable real property by way of a right-of-way, easement, or other similar real property right granted pursuant to a separate instrument.
(f)
Real Property Rights
. Each Party shall acquire and maintain all easements, rights of way, surface use, surface access agreements,
and other real property rights from Third Parties necessary to perform its obligations hereunder. To the extent a Party has the contractual right and title to do so, such Party shall provide to the other Party the right of co-usage on the easements,
sub-easements, rights of way, surface use, and other real property rights held by such Party covering lands for which the other Party requires real property rights to perform its obligations hereunder, all at no cost to the providing Party and on
terms and conditions mutually acceptable to the Parties in their reasonable discretion. Where a Party does not have the contractual right to do so, such Party shall provide reasonable assistance to the other Party in obtaining the real property
rights with respect to such lands as necessary or desirable to perform its obligations hereunder.
Article 4
Measurement Devices
Section 4.1
Measurement Devices.
(a) Midstream Co shall construct, install, own, and operate (or cause to be constructed, installed, and operated) the Measurement Devices
located at the Measurement Points. Midstream Co may, in its discretion, construct, install, own, and operate (or cause to be constructed, installed, and operated) Measurement Devices located at or upstream of the Delivery Points or at or downstream
of the Receipt Points.
(b) Midstream Co shall cause all Measurement Devices that are owned by Midstream Co to be constructed, installed,
and operated in accordance with applicable industry standards and applicable Laws, and as set forth in the current System Plan.
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Crude Oil Gathering Agreement
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(c) Producer shall have the right, at its sole expense, to install, own and operate Measurement
Devices located at the Measurement Points, Receipt Points and Delivery Points. Producer shall cause Producer Meters to be installed, subsequent to providing a minimum of 72 hours’ notice to Midstream Co, so as not to interfere with Midstream
Co’s Measurement Devices and shall take steps that are reasonable and customary in the industry to mitigate or prevent any problems that may interfere with Midstream Co’s Measurement Devices at the Measurement Points.
(d) Midstream Co may elect to use a Producer Meter as the Measurement Device for a Measurement Point in lieu of constructing, installing,
owning, and operating a Measurement Device located at such Measurement Point by providing notice to Producer (including by detailing such election in the applicable System Plan). If Midstream Co elects to use such Producer Meter as the Measurement
Device for a Measurement Point, Producer shall provide Midstream Co reasonable access to such Producer Meter, including prior advance notice of, and the ability to witness, the calibration of such Producer Meter.
(e) Producer and Midstream Co shall cause Measurement Devices owned by such Party to be constructed, installed and operated in accordance with
the following depending on the type of meter used:
(i) API Manual of Petroleum Measurement Standard, Chapter 6.1, Metering
Assemblies, Lease Automatic Custody Transfer (LACT)
(ii) API, MPMS, Spec 11N, Specification for Lease Automatic Custody
Transfer (LACT)
(f) Midstream Co may (but shall not be obligated to) replace or make any alterations to the Measurement Devices necessary
to comply with any subsequent amendments, revisions or modifications of applicable Law or the American Gas Association Reports cited above. With respect to Producer Meters that Midstream Co has elected to use, Producer may (but shall not be
obligated to) replace or make any alterations to the Measurement Devices necessary to comply with any subsequent amendments, revisions or modifications of applicable Law or the American Gas Association Reports cited above.
(g) The accuracy of all Measurement Devices at the Measurement Points and Delivery Points and of all Measurement Devices that serve as
“check meters” for any such Measurement Point or Delivery Point Measurement Devices will be verified by the owner of such Measurement Device (the “
Owner
”) at Monthly intervals and, if requested, in the presence of a
representative of the other Party (the “
Beneficiary
”). The Owner shall verify the accuracy of any owned Measurement Device before the next Monthly verification required by the preceding sentence if the Beneficiary makes a
written request for a special test as described below. Notwithstanding the foregoing, when Daily deliveries of Product at any Measurement Point or Delivery Point average 100 Barrels per Day or less during any Month, the Owner may request from the
Beneficiary that the accuracy of the Measurement Devices at such Measurement Point or Delivery Point be verified quarterly. If, upon any test, any Measurement Device is found to be inaccurate by 0.25% or less, previous readings of such Measurement
Device will be considered correct in computing the deliveries of Product under this Agreement. If, upon any
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Crude Oil Gathering Agreement
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test, any Measurement Device is found to be inaccurate by more than 0.25% (excessive meter factor deviation), such Measurement Device will immediately be removed from service, adjusted, repaired
or replaced to record accurately (within the manufacturer’s allowance for error) and reproved prior to returning to service. If the excessive meter factor deviation can be explained by changing conditions (gravity, temperature or flow-rate) no
corrective action may be taken if mutually agreed upon by both the Owner and the Beneficiary. Any previous recordings of such Measurement Device with an excessive meter factor deviation will be corrected by using the arithmetic average of the
malfunction factor and the previous factor shall be applied to the production measured through the meter between the date of the previous factor and the date of the malfunction factor. The proving report must clearly indicate the meter’s
malfunction factor and all remarks associated with the repairs or adjustments. If the Beneficiary desires a special test of any Measurement Device, at least 72 hours’ advance written notice will be given to the Owner, and the Parties will
cooperate to secure a prompt test of the accuracy of such Measurement Device. If the Measurement Device so tested is found to be inaccurate by 0.25% or less, the Owner will have the right to bill the Beneficiary for the costs incurred due to such
special test, including any labor and transportation costs, and the Beneficiary will pay such costs promptly upon invoice therefor.
(h) If
requested by the Beneficiary, the Measurement Devices owned by Owner shall include a sufficient number of data ports, and Owner shall permit Beneficiary to connect to such data ports, as shall be required to provide to Beneficiary on a real-time
basis all measurement data generated by such measurement equipment. Beneficiary shall be responsible at its own cost for obtaining equipment and services to connect to such data ports and receive and process such data.
(i) Each Party shall make the charts and records by which measurements are determined available for the use of the other Party in fulfilling
the terms and conditions thereof. Each Party shall, upon written request of the other Party, mail, email or deliver for checking and calculation all volume, BS&W, and gravity, average flowing temperature, average flowing pressure and other meter
or test records in its possession and used in the measurement or allocation of Product delivered under this Agreement within 30 Days after the last chart for each billing period is removed from the meter. Such data shall be returned within 90 Days
after the receipt thereof.
(j) Each Party shall preserve or cause to be preserved for mutual use all test data or other similar records in
accordance with the applicable rules and regulations of regulatory bodies having jurisdiction, if any, with respect to the retention of such records, and, in any event, for at least 24 Months.
(k) So long as the Parties to this Agreement are also parties to a Transaction Document that covers Gas, the requirements for Measurement
Devices in respect of Flash Gas shall be covered by such Transaction Document. If at any time the Parties to this Agreement are not also party to another Transaction Document that covers Gas, the Parties shall set forth in the Agreement Addendum or
an appropriate amendment to this Agreement the requirements for Measurement Devices pertaining to Flash Gas; absent such agreement, Midstream Co shall install and maintain measuring equipment at the Delivery Points that is in accordance with
applicable API standards.
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Restated
Crude Oil Gathering Agreement
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Section 4.2
Measurement Procedures
. Midstream Co shall use the Measurement Devices
owned by Midstream Co (or if Midstream Co’s rights under
Section 4.1(d)
are exercised, then the Measurement Devices owned by Producer) at the Measurement Points to determine the volumes of Product passing through the Individual
System for purposes of
Article 6
and
Article 10
. Midstream Co shall cause (or if Midstream Co’s rights under
Section 4.1(d)
are exercised, then Producer shall cause) the measurements of the quantity and quality of all
Product measured at the Measurement Points (and at each Receipt Point or Delivery Point at which measurements are taken) to be conducted in accordance with industry standards (referenced below) and governmental regulations, BLM Onshore Order
No. 4: Measurement of Oil.
API Manual of Petroleum Measurement Standards:
Chapter 4, Proving Systems
Chapter 5.1. General Considerations for Measurement by Meters
Chapter 5.6, Measurement of Liquid by Coriolis Meters
Chapter 7, Temperature Determination
Chapter 8, Sampling
Chapter
8.2, Automatic Sampling of Petroleum and Petroleum Products
Chapter 9, Density Determination
Chapter 10, Sediment and Water
Chapter 12.2, Calculation of Petroleum Quantities Measured by Turbine or Displacement Meters
Section 4.3
Product Meter Adjustments
. If a Measurement Device is out of service or registering inaccurately, the Parties shall
determine the quantities of Product received or delivered during such period as follows:
(a) By using the registration of any check meter
or meters, if installed and accurately registering; or in the absence of such check meters,
(b) By using a meter operating in parallel
with the estimated volume corrected for any differences found when the meters are operating properly,
(c) By correcting the error if the
percentage of error is ascertainable by calibration, tests or mathematical calculation, such as step change, uncertainty calculation or balance adjustment; or in the absence of check meters and the ability to make corrections under this
Section 4.3(c)
, then,
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Crude Oil Gathering Agreement
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(d) By estimating the quantity received or delivered by receipts or deliveries during periods
under similar conditions when the meter was registering accurately.
Article 5
Tender, Nomination, and Gathering of Production
Section 5.1
Limitations on Service to Third Parties
. Midstream Co shall obtain Original Producer’s consent prior to offering
services on an Individual System to any Third Party, unless (a) Midstream Co is required by a Governmental Authority to offer service to a Third Party, in which case Midstream Co shall provide Producer prior notice of offering such service to
such Third Party, (b) such Third Party has become a Producer hereunder by virtue of assignment of Dedicated Properties to such Party, or (c) Original Producer has ceased to operate acreage serviced by such Individual System.
Section 5.2
Tender of Dedicated Production
. Subject to
Section 5.3(c)
, (a) each Day during the Term, Producer
shall Tender to the Individual System at each applicable Receipt Point all of the Dedicated Production available to Producer at such Receipt Point, and (b) Producer shall have the right to Tender to Midstream Co for Services under this
Agreement Product other than Dedicated Production.
Section 5.3
Services; Service Standard
.
(a)
Services
. Subject to
Section 5.3(c)
, Midstream Co shall (i) provide Services for all Product that is Tendered by
the Producer to Midstream Co at the applicable Receipt Point, (ii) redeliver to Producer or for the benefit of Producer at the relevant Delivery Point (as designated by Producer) equivalent quantities of such Product, less any Associated Water
and Flash Gas removed therefrom attributable to Producer’s owned or Controlled Product, taking into account any System Gains/ Losses, and (iii) cause the System to be able to flow such Product at volumes produced into each Individual
System, in each case, so long as total crude volumes for the respective Individual System are not greater than the current capacity of the System.
(b)
Services Standard
. Midstream Co shall own and operate the System and perform the Services in a good and workmanlike manner in
accordance with standards customary in the industry.
(c)
Priority of Service
. Midstream Co shall cause (i) Product delivered
by Original Producer to have priority service on the System over Product of any Producer Assignee to the extent not in violation of applicable Law, and (ii) Product delivered by Producer to have priority service on the System over Product of
any Third Party. Midstream Co’s performance of its obligations under
Section 5.3(a)
with respect to any Product (A) of any Producer Assignee, or (B) produced from any Well but not included on a Development Report or for
which new, modified, or enhanced facilities are contemplated in a System Plan, shall at all times be subject to the available capacity on the System at the time that Product is available to be Tendered by Producer at a Receipt Point; provided,
however, that in the case of clause (B), Producer may make alternative arrangements for the Product not received by Midstream Co pursuant to
Section 3.3
.
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Restated
Crude Oil Gathering Agreement
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Section 5.4
Nominations, Scheduling, and Curtailment
. Nominations and scheduling of
Product available for, and interruptions and curtailment of, Services under this Agreement shall be performed in accordance with the following provisions:
(a)
Nominations
. Product shall be received only under a nomination submitted by Producer. For purposes of this Agreement, a nomination
is the volume, in Barrels per day, forecasted by Producer to be delivered to Receipt Points and redelivered by Midstream Co to Delivery Points for a particular month of Deliver. Nominations shall be submitted on or before the 25th day of the Month
preceding the Month of delivery.
(b)
Reserved.
(c)
Consistent Quantities
. Producer and Midstream Co shall use commercially reasonable efforts to cause Product to be received and
redelivered under this Agreement at similar quantities for a delivery Month. System storage shall be used only for the operational purposes of Midstream Co, as determined solely by Midstream Co.
(d)
Reserved.
(e)
Adjustments
. Nothing contained in this Agreement shall preclude Midstream Co from taking reasonable actions necessary to adjust receipts or deliveries under this Agreement in order to maintain the operational integrity and safety of the
System.
(f)
Line Fill
.
(i) Producer shall deliver to Midstream Co a pro rata portion of the Product that Midstream Co determines is necessary for
efficient operation of the System (such pro rata portion, the “
Producer Line Fill
”), and Midstream Co shall not be obligated to receive any Product Tendered by Producer until Producer’s delivery of Product to Midstream Co
has met the Producer Line Fill.
(ii) Midstream Co shall maintain an inventory account (the “
Inventory
Account
”) for Producer and each other shipper or producer on the System which reflects for each Month with respect to each producer and shipper on the System (including Producer) (i) the total volumes received and delivered;
(ii) the starting and ending minimum line fill required; (iii) the starting and ending amount of crude oil inventory in Midstream Co’s facilities above the minimum line fill required; and (iv) any other information deemed
necessary and appropriate by Midstream Co, all on an Individual System basis. Midstream Co shall provide a statement of Producer’s Inventory Account as part of the supplemental and supporting information for each invoice.
(iii) At the end of the Term, Producer’s Product in inventory (both Producer Line Fill and any amounts above Producer Line
Fill quantities) within Midstream Co’s System, or within the respective Individual System within Midstream Co’s System, will be delivered by Midstream Co to the Delivery Point specified by Producer within sixty (60) days after the end of
the Term.
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Restated
Crude Oil Gathering Agreement
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Section 5.5
Suspension/Shutdown of Service
.
(a)
Shutdown
. During any period when all or any portion of the Individual System is shut down (i) because of maintenance, repairs,
or Force Majeure, (ii) because such shutdown is necessary to avoid injury or harm to Persons or property, to the environment or to the integrity of all or any portion of the Individual System or (iii) because providing Services hereunder
has become uneconomic as further described in
Section 13.2
, Midstream Co may interrupt or curtail receipts of Producer’s Product and the Product of other producers as set forth herein. In such cases, Midstream Co shall have no
liability to Producer (subject to
Section 11.1(b)
) for its failure to receive Product, except to the extent such shutdown is caused by the negligence, gross negligence or willful misconduct of Midstream Co. If Midstream Co is required to
so interrupt or curtail receipts of Product, Midstream Co will advise (by telephone, following up by writing, which writing may be in the form of electronic mail) Producer of such interruption or curtailment as soon as practicable or in any event
within twenty-four hours after the occurrence of such event.
(b)
Planned Curtailments and Interruptions.
(i) Midstream Co shall have the right to curtail or interrupt receipts and deliveries of Product for brief periods to perform
necessary maintenance of and repairs or modifications (including modifications required to perform its obligations under this Agreement) to the Individual System; provided, however, that to the extent reasonably practicable, Midstream Co shall
coordinate its maintenance, repair and modification operations with the operations of Producer and, in any case, will use its reasonable efforts to schedule maintenance, repair and modification operations so as to avoid or minimize to the greatest
extent possible service curtailments or interruptions.
(ii) Midstream Co shall provide Producer (x) with 30 Days
prior notice of any upcoming normal and routine maintenance, repair and modification projects that Midstream Co has planned that would result in a curtailment or interruption of Producer’s deliveries and the estimated time period for such
curtailment or interruption and (y) with six Months prior notice of any maintenance (A) of which Midstream Co has knowledge at least six Months in advance and (B) that is anticipated to result in a curtailment or interruption of
Producer’s deliveries for five or more consecutive Days.
Section 5.6
Marketing and Transportation
. As between the
Parties, Producer shall be solely responsible, and shall make all necessary arrangements at and downstream of the Delivery Points, for the receipt, further transportation, and marketing of Producer’s owned and Controlled Product. Midstream Co
shall have no liability for any operations or activities upstream or downstream of the Individual System.
Section 5.7
No Prior
Flow of Product in Interstate Commerce
. Producer represents and warrants that at the time of Tender, none of the Product delivered at a Receipt Point hereunder has flowed in interstate commerce.
Second Amended and
Restated
Crude Oil Gathering Agreement
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Article 6
Fees
Section 6.1
Fees
. Producer shall pay Midstream Co each Month in accordance with the terms of this Agreement for all Services provided by Midstream Co with respect to Dedicated Production received by Midstream Co from Producer or for Producer’s
account during such Month, an amount, for each Individual System, equal to the sum of (i) the product of (x) the Net Standard Volume of Product, stated in Barrels, received by Midstream Co from Producer or for Producer’s account at
the applicable Receipt Points for such Product within the applicable Individual System during such Month, multiplied by (y) the applicable Individual Fee, (ii) (
reserved
) and (iii) an amount equal to Producer’s allocated
portion of the actual costs incurred by Midstream Co for electricity required to provide Services, such allocation to be based upon the aggregate quantities of Product received by Midstream Co.
Section 6.2
Fee Adjustments
.
(a)
Redetermination
.
(i)
Redetermination Proposal
. Between November 1 and December 31 of any Year, Midstream Co shall prepare and
deliver to Producer for its review and comment a written proposal (each, a “
Redetermination Proposal
”) to redetermine each Individual Fee (unless the Parties mutually agree not to redetermine any particular Individual Fee) in
accordance with this
Section 6.2(a)
. Each Redetermination Proposal shall include relevant supporting documentation based upon the latest updated Development Report and System Plan and shall take into account future items including
projected production volumes, operating revenue projections, and budgeted amounts for capital expenditures and all estimated operating expenses that Midstream Co believes will be necessary to provide the applicable Services as contemplated by the
latest updated Development Report and System Plan; provided that a redetermined Individual Fee as agreed to by the Parties (a “
Redetermined Individual Fee
”) shall not recoup the difference between (A) estimated operating
expenses or revenues and (B) actual operating expenses or revenues for periods prior to the effective date of such Redetermined Individual Fee. The Parties may agree to redetermine a particular Individual Fee without obligation to agree to
redetermine any other Individual Fee.
(ii)
Subsequent Redetermination Timing
. Any Redetermined Individual Fee
agreed to by the Parties on or prior to the last Business Day of February of the applicable Adjustment Year (“
Redetermination Deadline
”) shall become effective as of the first Day of the Month following the Month in which agreement
has been reached. If the Parties fail to agree upon a redetermination of any Individual Fee set forth in the applicable Redetermination Proposal on or prior to the Redetermination Deadline, such Individual Fee shall remain in effect without
redetermination pursuant to this
Section 6.2(a)
. For purposes of this
Section 6.2(a)(ii)
, the Year immediately after the Year during which a Redetermination Proposal is delivered is herein the “
Adjustment
Year
.”
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Restated
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(b)
Annual Escalation
. Effective as of July 1 of each Year, the Individual Fee will
be increased by multiplying the then-applicable Individual Fee by the Escalation Percentage (herein, the “
Increase in Fee
”) and adding the then-applicable Individual Fee to the Increase in Fee;
provided
that Reimbursed
Amounts shall not be subject to this
Section 6.2(b)
. Such annual increase to the Individual Fee shall become effective on July 1 of the applicable Year, even if such Individual Fee was redetermined pursuant to
Section 6.2(a)
, with an effective date during the same Year.
(c)
Downtime Events
. If during any Month (i) there
has been a Downtime Event, (ii) such Downtime Event was not a result of Producer’s production exceeding the production forecast in the Development Report on which the Individual System was based, (iii) such Downtime Event caused the
Downtime Percentage for any Individual System during such Month to exceed the lowest percentage specified on
Exhibit B
during such Month, and (iv) Producer has waived its right to a temporary release of Dedicated Production under
Section 2.4(b)
, then the Individual Fee with respect to such Individual System used to calculate the amounts owed for such Month under Section 6.1(y) shall be reduced by the reduction percentage corresponding to the applicable
Downtime Percentage on the chart on
Exhibit B
.
Section 6.3
Treatment of Byproducts, System Gains/Losses, Fuel and Related
Matters
. No separate fee shall be chargeable by Midstream Co and no refund or reduction in the Individual Fee shall be chargeable by or owed to Producer for the hydrocarbons or services described in this
Section 6.3
, except as
provided in
Section 6.3(d)
.
(a)
Drip Condensate
. Midstream Co shall deliver to Producer, each Month, all Drip
Condensate allocated to Producer or for Producer’s account to the extent Producer and Midstream Co have agreed in writing to require such allocation.
(b)
Flash Gas
. Midstream Co shall deliver to Producer, each Month, all Flash Gas allocated to Producer or for Producer’s account by
delivering such Flash Gas into the Gas System to the extent Producer and Midstream Co have agreed in writing to require such allocation. At all times during the Term either (x) Midstream Co and Producer shall be party to both this Agreement and
another Transaction Document that covers Gas (in which case Producer shall not owe any amount under this Agreement or any other Transaction Document to which Midstream Co is a Party as a result of Flash Gas being transported through the Gas System)
or (y) the Parties shall set forth in the Agreement Addendum or an appropriate amendment to this Agreement the methodology for Midstream Co to deliver Flash Gas to Producer any fee applicable thereto.
(c)
System Gains/Losses
.
(i) Midstream Co will perform a Monthly material balance for each Individual System based on comparison of Product delivered,
Product inventory change within Midstream Co’s facilities, and the theoretical Product (after removal of Associated Water and Flash Gas) received into the Individual System at Receipt Points (or measured if Associated Water and Flash Gas of
Product at Receipt Points meets Oil Quality specifications of Downstream Facilities or markets without treatment by Midstream Co). Actual System gains or losses from the material balance will be allocated back to Producer’s Receipt Points to
determine allocated quantities of Product received at Receipt Points for each Month.
Second Amended and
Restated
Crude Oil Gathering Agreement
- 32 -
(ii) If, during any Month, System Gains/Losses on an Individual System allocated
to Producer in accordance with this Agreement exceeds 2.00% of the total quantities of Producer’s owned or Controlled Product delivered to the Individual System in such Month, then Midstream Co will, for the respective Individual System, obtain
updated test data (i.e. sample results, meter proves, etc.) from Receipt Points involved in calculating theoretical Product (after removal of Associated Water and Flash Gas) received into the System at Receipt Points on the Individual System and
conduct a field-wide (on an Individual System basis) meter inspection and proving, if necessary, followed by an updated balance. If Midstream Co determines that a repair to the Individual System is needed to reduce the System Gains/Losses below
2.00%, Midstream Co shall undertake such repairs in a commercially reasonable manner and as soon after making such determination as is commercially reasonable.
(iii) Midstream Co shall provide Producer with prior notice of, and reasonable access to observe, any such field-wide meter
balance.
(d)
Other System Fuel
. Midstream Co shall account for the Other System Fuel used by Midstream Co in the operation of the
Individual System. If during any Month, Producer does not deliver to Midstream Co Gas under any Transaction Document to which Midstream Co is a party, then Midstream Co shall calculate the value of the Other System Fuel used during the applicable
Month based on the price of Product received by Producer during such Month and such amount shall appear as an additional fee owed by Producer to Midstream Co on an invoice delivered to Producer within 90 Days after the end of the applicable Month.
(e)
Associated Water
. Midstream Co shall deliver to Producer, each Month, all Associated Water allocated to Producer or for
Producer’s account by delivering such Associated Water into the Water System. The Parties acknowledge that there is no separate fee chargeable by Midstream Co hereunder for Services with respect to Associated Water and that the fees chargeable
by Midstream Co hereunder for Product sufficiently compensate Midstream Co for Services with respect to Associated Water. The Monthly Loss/ Gain Report shall include a statement of the Associated Water separated from the Product and delivered to
Producer into the Water System.
Article 7
Quality
Section 7.1
Quality Specifications
.
(a) Each Individual System will be operated as a field System, and as such, Product received from Producer
at the Receipt Points shall conform to the applicable quality specifications of the relevant Downstream Facility or the following quality specifications, whichever is most restrictive,
provided
that the following may be varied or adjusted as
described in this
Section 7.1
or by express language set forth in the applicable Agreement Addendum. Midstream Co will not accept any Product unless it meets the specifications listed in the chart below and unless other properties of
such Product (viscosity, pour point, and other properties) are such that it will be readily susceptible to transportation through Midstream Co’s pipeline system. These specifications may be applied to each Barrel of Producer’s nomination
and not be limited to the composite sample of the nomination.
Second Amended and
Restated
Crude Oil Gathering Agreement
- 33 -
|
|
|
|
|
|
|
Crude Oil
|
|
|
|
|
API Gravity, º API
|
|
33 – 65
|
|
|
|
|
Sulfur Content, Weight %
|
|
<= 0.45
|
|
|
|
|
BS&W
|
|
<= 0.5%
|
|
|
Of which, water content is no more than
|
|
|
<= 0.3%
|
(b) Midstream Co will reject all tenders when: (i) the Reid vapor pressure of the Product exceeds ten
pounds (10 lbs.) at one hundred degrees Fahrenheit (100ºF); (ii) the true vapor pressure of the Product might result in non-compliance with federal, state or local regulations by Midstream Co or by pipelines downstream of the Delivery
Point; (iii) if Midstream Co determines that a Producer has delivered Product that contains or has been contaminated by the presence of any excessive deleterious substances including but not limited to metals, chlorinated or oxygenated
hydrocarbons, hydrogen sulfide, or salt; or (iv) if Midstream Co determines that a Producer has delivered Product that will adversely affect the quality of Product received from other producers, cause disadvantage to other producers or
Midstream Co, or damage or change the characteristics of the common stream of the Individual System.
(c) All Product delivered by Producer
to Midstream Co shall have a maximum temperature of one hundred twenty degrees (120º) Fahrenheit at the Receipt Point.
(d) From
time to time, Midstream Co may require that Producer furnish certified laboratory reports showing the results of quality tests on the Product tendered for gathering. Midstream Co may also from time to time obtain samples for laboratory analysis to
check compliance with the specifications cited above.
(e) If any Product Tendered by Producer to the Individual System fails at any time
to conform to the applicable specifications, then Midstream Co will have the rights specified in
Section 7.2
.
(f) If
Producer’s Product delivered to the Receipt Points complies with such quality specifications, then all Product redelivered at the Delivery Points by Midstream Co to Producer shall meet the quality specifications applicable at the relevant
Delivery Points. Midstream Co may commingle Product received into the Individual System with other Product shipments and, subject to Midstream Co’s obligation to redeliver to Producer at the Delivery Points Product that satisfies the applicable
quality specifications of the Delivery Points, (a) such Product shall be subject to such changes in quality, composition and other characteristics as may result from such commingling and the removal of Associated Water and Flash Gas (if any),
(b) Midstream Co shall have no other obligation to Producer associated with changes in quality of Product as the result of such commingling and Associated Water and Flash Gas removal, and (c) Midstream Co shall have the right to change the
quality specifications to comply with any changes in the Downstream Facility specifications.
Second Amended and
Restated
Crude Oil Gathering Agreement
- 34 -
Section 7.2
Failure to Meet Specifications
. If any Product Tendered by Producer to
the Individual System fails at any time to conform to the applicable specifications, then Midstream Co will have the right to immediately discontinue receipt of such non-conforming Product and shall notify Producer of the specifications violation
within twenty-four (24) hours after such discontinuation. Such notification may be verbal initially, followed by written confirmation. If Producer disputes Midstream Co’s determination that any Product fails to conform to the applicable
specifications, then Producer shall (a) notify Midstream Co thereof within twenty-four (24) hours after receiving such notice from Midstream Co, (b) submit the applicable Product to a mutually agreed upon Third Party laboratory, and
(c) cause such laboratory to analyze the Product within seventy-two (72) hours after Producer’s receipt of Midstream Co’s notice of non-conformance. If the results of such analysis provide that the applicable Product is
non-conforming, the costs and expenses associated with such analysis shall be borne by Producer; if the results of such analysis provide that the applicable Product conforms to the specifications, then Midstream Co shall reimburse Producer for all
reasonable and documented costs and expenses incurred by Producer to cause such Third Party laboratory to perform such analysis. Producer will promptly undertake commercially reasonable measures to eliminate the cause of such non-conformance.
Midstream Co, in its sole discretion, may accept receipt, or continue to receive, non-conforming Product if the blending and commingling of such Producer’s non-conforming Product with other Product in the Individual System does not materially
affect the System and the ability of Midstream Co to deliver Product at Delivery Points within applicable Delivery Point specifications. Midstream Co’s continued taking of non-conforming Product shall not relieve Producer of the responsibility
to undertake commercially reasonable measures to eliminate the cause of such non-conformance.
Section 7.3
Indemnification
Regarding Quality
. PRODUCER SHALL RELEASE, PROTECT, DEFEND, INDEMNIFY AND HOLD HARMLESS MIDSTREAM CO GROUP FROM AND AGAINST ALL LOSSES DIRECTLY OR INDIRECTLY ARISING OUT OF, IN CONNECTION WITH OR IN ANY MANNER ATTRIBUTABLE TO THE FAILURE OF THE
PRODUCT DELIVERED BY PRODUCER TO THE INDIVIDUAL SYSTEM TO MEET THE QUALITY SPECIFICATIONS SET FORTH HEREIN, INCLUDING DISPOSAL COSTS, DAMAGE TO OR SUSTAINED BY THE INDIVIDUAL SYSTEM (INCLUDING THE EQUIPMENT AND COMPONENT PARTS), COSTS EXPENDED BY
MIDSTREAM CO OR ANY OF ITS AFFILIATES TO RETURN THE INDIVIDUAL SYSTEM AND RELATED FACILITIES TO SERVICES, CLAIMS OF OTHER PRODUCERS ON THE INDIVIDUAL SYSTEM, CLAIMS OF OWNERS OF ALL DOWNSTREAM FACILITIES AND CLAIMS OF ALL PERSONS WHO ULTIMATELY USE
THE NON-CONFORMING PRODUCT DELIVERED BY PRODUCER AND THE COSTS OF ALL REGULATORY OR JURISDICTIONAL PROCEEDINGS.
Article 8
Term
Section 8.1
Term
. The term of this Agreement commenced on January 1, 2015, which is the original effective date of the Parties’ agreement regarding the matters set forth herein, and this Agreement shall remain in effect until
January 1, 2030 (the “
Initial Term
”) and thereafter on a Year to Year basis until terminated by Midstream Co or Producer effective upon the expiration of the Initial Term or the expiration of any Year thereafter upon
notice no less than 90 Days prior
Second Amended and
Restated
Crude Oil Gathering Agreement
- 35 -
to the expiration of the Initial Term or the expiration of any Year thereafter (such period of time, the “
Term
”). Notwithstanding the foregoing, with respect to the OpCo
Agreement Addendum only, this Agreement shall continue for so long as any Original Midstream Co remains a Party under any Midstream Agreement Addendum then in effect and shall automatically terminate at such time as no Original Midstream Co remains
a Party to any Midstream Agreement Addendum.
Section 8.2
Effect of Termination or Expiration of the Term
. Upon the
termination of the Term, this Agreement shall forthwith become void and the Parties and OpCo shall have no liability or obligation under this Agreement, except that (a) the termination of this Agreement shall not relieve any Party or OpCo from
any expense, liability or other obligation or remedy therefor that has accrued or attached prior to the date of such termination, (b) the provisions of
Section 7.3
, this
Section 8.2
,
Article 15
and
Section 17.1
through
Section 17.10
shall survive such termination and remain in full force and effect indefinitely, (c) the indemnities set forth in
Section 3.5(c)
shall survive such termination and remain in
full force and effect indefinitely, and (d)
Section 10.4
and
Section 17.11
shall survive such termination and remain in full force and effect for the period of time specified in such Sections.
Article 9
Title and
Custody
Section 9.1
Title
. A nomination of Product by Producer shall be deemed a warranty of title to such Product by
Producer or a warranty that Producer Controls the Product and has the right to deliver such Product for gathering under this Agreement, as applicable. Title to Product shall not transfer to Midstream Co by reason of Midstream Co’s performance
of the Services.
Section 9.2
Custody
. From and after Producer’s delivery of its owned or Controlled Product to Midstream
Co at the Receipt Points, and until Midstream Co’s redelivery of such Product to or for Producer’s account at the applicable Delivery Points, as between the Parties, Midstream Co shall have custody and control of, and be responsible for,
such Product. In all other circumstances, as between the Parties, Producer shall be deemed to have custody and control of, and be responsible for, such Product.
Article 10
Billing and
Payment
Section 10.1
Statements
.
(a)
Ordinary Course
. Midstream Co shall submit invoices to Producer on or before the 25th Day after the end of a Month (the
“
Invoice Month
”). Each invoice shall be accompanied by supporting information for all amounts charged by such invoice. All amounts owed for Services provided during an Invoice Month shall be reflected on the applicable invoice for
such Invoice Month;
provided
that to the extent any amount appearing on an invoice is in respect of an amount paid by Midstream Co to a Third Party (collectively, the “
Reimbursed Amount
”) or the calculation of such amount is
contingent on information provided by a Third Party (collectively, the “
Conditional Amount
”), such Reimbursed Amount and Conditional Amount, shall be reflected on an invoice within 90 Days after the end of the Month in which such
Reimbursed Amount was paid by Midstream Co.
Second Amended and
Restated
Crude Oil Gathering Agreement
- 36 -
(b)
Reserved.
(c)
Detail
.
Midstream Co shall cause its invoices and supporting information to include information reasonably sufficient to
explain and support any estimates and charges reflected therein, the reconciliation of any estimates made in a prior Month to the actual measurements for such Month, and any adjustments to prior period volumes and quantities.
(d)
Monthly Loss/ Gain Report
.
Midstream Co shall deliver to Producer, on or before the close of business of the 40th Day after
the applicable Invoice Month a Monthly Loss/ Gain Report. If Midstream Co elects, it may deliver such Monthly Loss/ Gain Report concurrently with the applicable invoice.
(e)
One Invoice; Netting
.
To the extent that Midstream Co and Producer are party to this Agreement and one or more other
Transaction Documents, one invoice may be delivered in respect of all amounts owing under such Transaction Documents. The Parties shall net all undisputed amounts due and owing or past due and owing arising under the Transaction Documents to which
Producer and Midstream Co are parties such that the Party owing the greater amount shall make a single payment of the net amount to the other Party. No amounts owing to or by any Midstream Co may be set off against amounts owing to or by any other
Midstream Co. No amounts owing to or by any Producer may be set off against amounts owing to or by any other Producer. To the extent possible, all fee adjustments set forth in Article 6 shall be accomplished by setoff or netting.
Section 10.2
Payments
.
(a) Unless otherwise agreed by the Parties, all invoices under this Agreement shall be due and payable in accordance with each invoice’s
instructions on or before the later of the 30th Day of each Month and the 10th Day after receipt of the invoice or, if such Day is not a Business Day, then on the next Business Day. All payments by Producer under this Agreement shall be made by
electronic funds transfer to the account designated by Midstream Co. Any amounts not paid by the due date will be deemed delinquent and, with respect to amounts owed to Midstream Co, will accrue interest at the Interest Rate, such interest to be
calculated from and including the due date but excluding the date the delinquent amount is paid in full.
(b) If Producer, in good faith,
disputes the amount of any invoice of Midstream Co, Producer will pay Midstream Co such amount, if any, that is not in dispute and shall provide Midstream Co notice, no later than 30 Days after the date that payment of such invoice would be due
under
Section 10.2(a)
, of the disputed amount accompanied by reasonable documentation to support Producer’s dispute. If Producer fails to provide notice of dispute within such 30-Day period, then Producer shall be deemed to have
waived its right to dispute the applicable invoice, except for a dispute following an audit conducted in accordance with
Section 10.4
. Following Midstream Co’s receipt of such dispute notice, Producer and Midstream Co shall endeavor
in good faith to resolve such dispute, and if the Parties are unable to resolve such dispute within a reasonable time, such dispute may be resolved in accordance with
Section 17.6
of this
Second Amended and
Restated
Crude Oil Gathering Agreement
- 37 -
Agreement. Upon resolution of the dispute, any required payment shall be made within 15 Days after such resolution, and, if such amount shall be paid to Midstream Co, such amount shall be paid
along with interest accrued at the Interest Rate from and including the due date but excluding the date paid.
Section 10.3
Adequate Assurances
. If (a) Producer fails to pay according to the provisions hereof and such failure continues for a period of 5 Business Days after written notice of such failure is provided to Producer, (b) Producer is not the
Original Producer or (c) Midstream Co has reasonable grounds for insecurity regarding the performance by Producer of any obligation under this Agreement, then Midstream Co, by notice to Producer, may, singularly or in combination with any other
rights it may have, demand Adequate Assurance of Performance from Producer. “
Adequate Assurance of Performance
” means, at the option of Producer, any of the following, (x) advance payment in cash by Producer to Midstream Co for
Services to be provided under this Agreement in the following Month or (y) delivery to Midstream Co by Producer of an irrevocable standby letter of credit or a performance bond, in form and substance reasonably acceptable to Midstream Co,
issued by a Credit-Worthy Person, in an amount equal to not less than the aggregate proceeds due from Producer under
Section 10.1
for the prior 2-Month period. Promptly following the termination of the condition giving rise to Midstream
Co’s reasonable grounds for insecurity or payment in full of amounts outstanding, as applicable, Midstream Co shall release to Producer the cash, letter of credit, bond or other assurance provided by Producer (including any accumulated
interest, if applicable, and less any amounts actually applied to cover Producer’s obligations hereunder).
Section 10.4
Audit
. Each Party has the right, at its sole expense and during normal working hours, to examine the records of the other Party to the extent reasonably necessary to verify the accuracy of any statement, charge or computation made pursuant to
the provisions of the Transaction Documents. The scope of such examination will be limited to the 24 Months preceding the date such notice of audit, statement, charge or computation was presented. No Party may conduct more than one audit (taking all
Transaction Documents to which Producer is a party together) of another Party during any Year (except that, if a Party is in default hereunder, additional audits may be conducted during the continuance of such default). If any such examination
reveals any inaccuracy in any statement or charge, the necessary adjustments in such statement or charge and the payments necessitated thereby shall be made within 60 Days of resolution of the inaccuracy. This provision of this Agreement will
survive any termination of this Agreement for the later of (a) a period of 24 Months from the end of the Year in which the date of such termination occurred or (b) until a dispute initiated within the 24 Month period is finally resolved,
in each case for the purpose of such statement and payment objections.
Article 11
Remedies
Section 11.1
Suspension of Performance; Temporary Release from Dedication
.
(a)
Suspension by Midstream Co as Remedy for Payment Default
. If Producer fails to pay any invoice rendered under
Article 10
,
such failure is not due to a good faith dispute by Producer in accordance with
Section 10.2(b)
, and such failure is not remedied within 5 Business Days after Producer’s receipt of written notice of such failure from Midstream Co,
Midstream
Second Amended and
Restated
Crude Oil Gathering Agreement
- 38 -
Co shall have the right, at its sole discretion, to (i) suspend performance (including withholding any payments that are owed by Midstream Co to Producer, and such withheld amounts shall not
be subject to setoff under
Section 10.1(e)
) under this Agreement until such amount, including interest at the Interest Rate, is paid in full or (ii) continue performing the Services under this Agreement, and, acting in a
commercially reasonable manner, sell any Product delivered by Producer to the Receipt Points on Producer’s behalf, and use the proceeds therefrom to reimburse Midstream Co for any amounts due and owing to Midstream Co, and, at Producer’s
election, either (y) remit any excess amounts received under such sale to Producer or (z) reduce the Services Fee due from Producer to Midstream Co for the following Month by the amount of such excess.
(b)
Additional Suspensions as Remedies
. If a Party fails to perform or comply with any material warranty, covenant or obligation (other
than as provided in
Section 11.1(a)
or
Section 2.4(a)(i)
) contained in this Agreement and such failure has not been remedied within 60 Days after its receipt of written notice from the other Party of such failure, then the
non-defaulting Party shall have the right to suspend performance of its obligations under this Agreement that are affected by such failure or non-compliance (including withholding any payments that are owed to the other Party, and such withheld
amounts shall not be subject to netting or setoff under
Section 10.1(e)
); provided that Producer may not withhold any payments that are owed to Midstream Co for Services actually performed by Midstream Co.
(c)
Specific Performance and Declaratory Judgments
. Damages in the event of breach of this Agreement by a Party hereto may be
difficult, if not impossible, to ascertain. Therefore, each Party, in addition to and without limiting any other remedy or right it may have, will have the right to seek a declaratory judgment and will have the right to an injunction or other
equitable relief in any court of competent jurisdiction, enjoining any such breach, and enforcing specifically the terms and provisions hereof, and each of the Parties hereto hereby waives any and all defenses it may have on the ground of lack of
jurisdiction or competence of the court to grant such an injunction or other equitable relief. The existence of this right will not preclude any Party from pursuing any other rights and remedies at law or in equity that such Party may have.
Section 11.2
No Election
. In the event of a default by a Party under this Agreement, the other Party shall be entitled in its sole
discretion to pursue one or more of the remedies set forth in this Agreement, or such other remedy as may be available to it under this Agreement, at Law or in equity, subject, however, to the limitations set forth in
Section 11.3
and
Article 15
. No election of remedies shall be required or implied as the result of a Party’s decision to avail itself of a remedy under this Agreement.
Section 11.3
DIRECT DAMAGES
. A PARTY’S DAMAGES RESULTING FROM A BREACH OR VIOLATION OF ANY REPRESENTATION, WARRANTY,
COVENANT, AGREEMENT OR CONDITION CONTAINED IN THIS AGREEMENT OR ANY ACT OR OMISSION ARISING FROM OR RELATED TO THIS AGREEMENT SHALL BE LIMITED TO ACTUAL DIRECT DAMAGES AND SHALL NOT INCLUDE ANY OTHER LOSS OR DAMAGE, INCLUDING INDIRECT, SPECIAL,
CONSEQUENTIAL, INCIDENTAL, EXEMPLARY OR PUNITIVE DAMAGES, INCLUDING LOST PROFITS, PRODUCTION, OR REVENUES, AND EACH PARTY RELEASES THE OTHER PARTY FROM ALL SUCH CLAIMS FOR LOSS OR DAMAGE OTHER THAN ACTUAL DIRECT DAMAGES;
PROVIDED
THAT THIS
LIMITATION TO DIRECT DAMAGES SHALL NOT LIMIT THE PARTIES’ INDEMNIFICATION OBLIGATIONS UNDER
Section 3.5(c)
,
Section 7.3
, AND
Article 15
.
Second Amended and
Restated
Crude Oil Gathering Agreement
- 39 -
Article 12
Force Majeure
Section 12.1
Force Majeure
. If either Midstream Co or Producer is rendered unable by an event of Force Majeure to carry out, in
whole or part, its obligations under this Agreement and such Party gives notice (which notice may initially be delivered orally so long as written notice is delivered as soon as reasonably practicable thereafter) and reasonably full details of the
event (including the nature, extent, effect, and likely duration of the event or circumstances constituting the Force Majeure event) to the other Party as soon as practicable after the occurrence of the event, then, during the pendency of such Force
Majeure, but only during that period, the obligations of the Party affected by the event shall be canceled or suspended, as applicable, to the extent required;
provided
,
however
, that notwithstanding anything in the foregoing to the
contrary, no Party shall be relieved from any indemnification obligation or any obligation to make payments, as the result of Force Majeure, regardless of which Party is affected;
provided further
that if the Force Majeure impacts only a
particular Facility Segment or Individual System, then the suspension of obligations described in this sentence shall apply only to the applicable Facility Segment or Individual System and not to the obligations owing in connection with the rest of
the System. The Party affected by Force Majeure shall use commercially reasonable efforts to remedy the Force Majeure condition with all reasonable dispatch, shall give notice to the other Party of the termination of the Force Majeure, and shall
resume performance of any suspended obligation promptly after termination of such Force Majeure.
Section 12.2
Extension Due to
Force Majeure
. If a Party is unable to meet any deadline set forth herein as a result of a Force Majeure, then provided that such Party complies with the provisions of
Section 12.1
, such deadline shall be extended for a period of
time equal to the period of time during which such Party is delayed due to the Force Majeure.
Article 13
Change in Law; Uneconomic Service
Section 13.1
Changes in Applicable Law
.
(a) If any new Laws are enacted or amended or any new interpretations in respect of previously existing Laws are issued after the Effective
Date that require Midstream Co to make capital expenditures with respect to the System, then Midstream Co may propose an increase to the applicable Individual Fee as may be necessary or appropriate to preserve and continue for the Parties the rights
and benefits originally contemplated for the Parties by this Agreement;
provided, however
, that no increase to the applicable Individual Fee pursuant to this
Section 13.1
shall be applicable unless and until, in the reasonable
judgment of Midstream Co, Midstream Co would be required to make capital expenditures with respect to the System in order to comply with such new Law that materially and adversely affects the economics of the Services provided, fees received, or the
other economic benefits of this Agreement for Midstream Co.
Second Amended and
Restated
Crude Oil Gathering Agreement
- 40 -
(b) Producer shall accept or reject, in its sole discretion, Midstream Co’s proposed
increase to the Individual Fee within 30 Days after receiving such proposal from Midstream Co. If Producer fails to provide notice of such acceptance or rejection within such 30-Day period, then Producer shall be deemed to have accepted such
increase. If Producer rejects the amount of the proposed increase, then Midstream Co shall release the Wells, Separator Facilities, Receipt Points, Spacing Units, and Dedicated Production that would have been affected by such increase in accordance
with
Section 2.4(a)(viii)
. The Parties will amend, update, or revise the applicable Agreement Addendum in accordance with this Agreement to reflect any changes in the applicable Individual Fees agreed to in accordance with this
Section 13.1
.
(c) Producer and Midstream Co shall use their commercially reasonable efforts to comply with new and amended
applicable Laws and new interpretations of existing Laws.
Section 13.2
Unprofitable Operations and Rights of Termination
.
(a)
Cessation of Services
. If, in the sole discretion of Midstream Co, (x) the gathering of Product from any Wells, Separator
Facilities or Receipt Points, (y) the delivery of Product to any Delivery Points or (z) the provision of any other Service under this Agreement, is or becomes uneconomical due to its volume, quality, or for any other cause, then Midstream
Co shall not be obligated to provide the applicable Services so long as such condition exists.
(i) If Midstream Co
suspends Services under this
Section 13.2(a)
as a result of Producer’s (A) negligence, willful misconduct, or breach of this Agreement, (B) delivery of Product that fails to meet the quality specifications required by
Section 7.1
, or (C) execution of a plan of development that deviates from the then-applicable Development Report, then Midstream Co may resume providing such Services at any time, upon two months’ advance written notice
delivered to Producer, and the affected Wells, Separator Facilities, Receipt Points, Spacing Units and Dedicated Production shall only be permanently released as a result of suspension under this clause by mutual agreement of the Parties under
Section 2.4(a)(iv)
.
(ii) If Midstream Co suspends Services under this
Section 13.2(a)
for any
reason other than as specified in clause (i) above and (x) such suspension continues for six consecutive Months or (y) Midstream Co delivers notice to Producer that such suspension shall be permanent, then the applicable Wells,
Separator Facilities, Receipt Points, Spacing Units, and Dedicated Production shall be permanently released as specified in
Section 2.4(a)(viii)
.
(b)
Election not to Expand System
. If Midstream Co determines, in its discretion, that an expansion of the Individual System to satisfy
the needs of Producer, as described in
Section 3.2
hereof, would be uneconomical, then Midstream Co shall neither be obligated to undertake such expansion nor to provide the applicable Services. Producer shall be entitled to a release of
the applicable Planned Wells, Planned Separator Facilities and Dedicated Production pursuant to
Section 2.4(a)(ix)
immediately upon Midstream Co’s delivery of a System Plan (marked as “Final”) indicating that a requested
expansion would be uneconomical pursuant
Section 13.2(d)
.
Second Amended and
Restated
Crude Oil Gathering Agreement
- 41 -
(c)
Start of Suspension of Services
. Midstream Co shall cause any suspension of Services
permitted by this
Section 13.2
to commence on the first Day of a Month and not on any other Day.
(d)
Supporting
Documentation
. As soon as Midstream Co determines that an expansion of the Individual System will not be economic or that continuing to provide Services at existing facilities has been rendered uneconomic, Midstream Co shall communicate the same
to Producer. With respect to existing facilities, such notice shall be delivered to Producer at least 60 Days in advance of any proposed curtailment under this
Section 13.2
and such notice shall be accompanied by documentation supporting
its claim that certain Services have become uneconomical. With respect to planned facilities, Midstream Co shall indicate that providing Services to Planned Wells or Planned Separator Facilities is uneconomical by failing to include the necessary
expansion projects in the applicable System Plan and shall provide supporting documentation for its determination that such expansion would be uneconomical, if requested by Producer. If Midstream Co delivers a System Plan (marked as
“Final”) describing the necessary expansion projects, such delivery shall be deemed to be a commitment by Midstream Co to complete such expansion without exercising its rights under
Section 13.2(b)
, so long as conditions
(including anticipated throughput, pricing, the ability to obtain rights-of-way, Producer’s continued execution of the Development Report, and any other factors deemed material by Midstream Co) do not materially change;
provided, however
that upon the initiation of Services through such expansion project or through a component part of such expansion project, such expansion (or applicable portion thereof) shall be considered “existing facilities” for purposes of this
Section 13.2
and Midstream Co shall have all of the rights set forth herein with respect to existing facilities that become uneconomical. Nothing in this
Section 13.2(d)
shall give Producer a right to consent to a suspension
under this
Section 13.2
.
(e)
No Obligation to Drill or Operate
. Without limiting the right of Producer to revise the
Development Report to eliminate any proposed Wells or Separator Facilities, nothing herein shall be construed to require Producer to drill any Well, to continue to operate any Well, to place any new Separator Facility into service or to maintain the
operation of any Separator Facility that a prudent operator would not in like circumstances drill or continue to operate.
Article 14
Regulatory Status
Section 14.1
Non-Jurisdictional System
. The Services being provided by Midstream Co hereunder are intended to be gathering
services, and no Governmental Authority currently establishes the rates or terms of service relating to the Services. This Agreement is subject to all valid present and future Laws of Governmental Authorities now or hereafter having jurisdiction
over the Parties, this Agreement, the Services performed, or the System. It is the intent of the Parties that no Governmental Authority shall alter any provisions in the Agreement in such a way that would have the effect of altering the economic
benefits of either Party, as originally contemplated under this Agreement. The Parties shall (a) vigorously defend and support in good faith the enforceability of this Agreement and the continuance, without alternation, of the Services in any
and all proceedings before any Governmental Authority in which this Agreement is subject to review and (b) not initiate or support, either directly or indirectly, any challenge with any Governmental Authorities to the rates provided herein or
any other modification to this Agreement that would alter the economic benefits of a Party as originally contemplated under this Agreement.
Second Amended and
Restated
Crude Oil Gathering Agreement
- 42 -
Section 14.2
Government Authority Modification
. Notwithstanding the provisions
of
Section 14.1
, if the rates are changed or required to be changed or any other modification to this Agreement that alters the economic benefits of a Party, as originally contemplated under this Agreement, in response to any order,
regulation, or other mandate of a Governmental Authority, then no such change or modification shall constitute a breach or other default under the terms of this Agreement, and the Parties shall negotiate in good faith to enter into such amendments
to this Agreement or a separate arrangement in order to give effect, to the greatest extent possible, the economic benefit as originally contemplated in this Agreement. If, in the reasonable opinion of Midstream Co’s counsel, a Governmental
Authority’s regulation of Midstream Co’s results in (a) Midstream Co not having the same economic benefits as originally contemplated under this Agreement or (b) Midstream Co’s or any of its Affiliate’s pipelines
becoming subject to additional legal requirements or regulation, and the Parties have not mutually agreed as to how to mitigate or alleviate the foregoing, then Midstream Co shall have the right, without liability, to terminate this Agreement.
Article 15
Indemnification and Insurance
Section 15.1
Reciprocal Indemnity
. To the fullest extent permitted by applicable Law and except as otherwise set forth in
Section 3.5(c)
and
Section 7.3
:
(a)
Producer Indemnification
. Producer shall release, protect, defend,
indemnify and hold harmless Midstream Co Group from and against all Losses directly or indirectly arising out of or in connection with bodily injury, death, illness, disease, or loss or damage to property of Producer or any member of Producer Group
in any way arising out of or relating to this Agreement, directly or indirectly. THIS RELEASE, DEFENSE AND INDEMNITY OBLIGATION SHALL APPLY REGARDLESS OF FAULT OF MIDSTREAM CO GROUP OR ANY OTHER PERSONS.
(b)
Midstream Co Indemnification
. Midstream Co shall release, protect, defend, indemnify and hold harmless Producer Group from and
against all Losses directly or indirectly arising out of or in connection with bodily injury, death, illness, disease, or loss or damage to property of Midstream Co or any member of Midstream Co Group in any way arising out of or relating to this
Agreement, directly or indirectly. THIS RELEASE, DEFENSE AND INDEMNITY OBLIGATION SHALL APPLY REGARDLESS OF FAULT OF PRODUCER GROUP OR ANY OTHER PERSONS.
(c)
Regardless of Fault
. AS USED IN THE PRECEDING TWO SUBCLAUSES, THE PHRASE “REGARDLESS OF FAULT” SHALL MEAN, WITH RESPECT TO
ANY LOSS THAT IS CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE (WHETHER SOLE, JOINT, CONCURRENT, COMPARATIVE, CONTRIBUTORY, ACTIVE, PASSIVE, OR OTHERWISE), STRICT LIABILITY, OR OTHER FAULT, OF ANY MEMBER OF MIDSTREAM CO GROUP OR THE PRODUCER GROUP,
WITHOUT REGARD TO THE CAUSE OR CAUSES THEREOF AND WITHOUT LIMITATION OF SUCH LOSS AND WHETHER OR NOT CAUSED BY A PRE-EXISTING CONDITION.
Second Amended and
Restated
Crude Oil Gathering Agreement
- 43 -
Section 15.2
Indemnification Regarding Third Parties
. Each Party shall release,
protect, defend, indemnify and hold the other Party harmless against any Loss by a Third Party that is not a member of the Producer Group or Midstream Co Group, to the extent such Loss (a) is caused by the negligence or willful misconduct of
said indemnifying Party or such Party’s Group, or (b) in the case of Producer as indemnifying Party, results from claims by a Third Party of title, rights, or encumbrances in or to Product delivered by Producer to a Receipt Point.
Section 15.3
Penalties
. Producer shall release, protect, defend, indemnify, and hold harmless Midstream Co from any Losses
resulting from penalties imposed by a Downstream Facility in any transportation contracts or service agreements associated with, or related to, Producer’s owned or Controlled Product, including any penalties imposed pursuant to the Downstream
Facility’s tariff.
Section 15.4
Insurance
. Midstream Co and Producer shall (a) carry and maintain no less than the
insurance coverage set forth in
Exhibit D
, and (b) cause such insurance to be (i) the primary coverage without any right of contribution from any other insurance held by the other Party to the extent of the insured Party’s
indemnification obligations hereunder, and (ii) written and endorsed to include waivers of all subrogation rights of the insurers against Midstream Co and its Group (in the case of Producer’s insurance) or Producer and its Group (in the
case of Midstream Co’s insurance). Unless Producer is Original Producer, Producer shall also cause the insurance carried and maintained by it pursuant to this
Section 15.4
to be endorsed to name Midstream Co and its Group as
additional insureds or provide blanket additional insured status that covers Midstream Co and its Group as additional insureds, except in the case of worker’s compensation insurance. Any insurance provided by OpCo on behalf of Midstream Co that
comports with this
Section 15.4
shall be deemed to satisfy these requirements.
Article 16
Assignment
Section 16.1
Assignment of Rights and Obligations under this Agreement
.
(a)
Assignment
. Except as specifically otherwise provided in this Agreement, no Party nor OpCo shall have the right to assign its rights
and obligations under this Agreement (in whole or in part) to another Person except with the prior consent of Midstream Co (in the case of an assignment by Producer) or Producer (in the case of an assignment by OpCo or Midstream Co), which consent
may be withheld at such Party’s sole discretion. Notwithstanding the foregoing, Producer may assign its rights and obligations under this Agreement to any Person to whom Producer assigns or transfers an interest in any of the Dedicated
Properties insofar as this Agreement relates to such Dedicated Properties without the consent of Midstream Co;
provided
that (A) such Person assumes in writing the obligations of Producer under this Agreement insofar as it relates to the
portion of the Dedicated Properties so assigned or transferred, such writing shall take the form of an Agreement Addendum, executed by the applicable Midstream Co and the Producer Assignee (and others, if appropriate) and such writing shall be
recorded in the real property records of the counties in which the Dedication Area is located, (B) such assignment is
Second Amended and
Restated
Crude Oil Gathering Agreement
- 44 -
made subject to this Agreement, (C) if such assignment or transfer is made to an Affiliate of Producer, the Original Producer shall not be released from any of its obligations under this
Agreement, and (D) if such transfer or assignment is to a Producer Assignee (a “
Third Party Assignment
”): (1) the Original Producer shall be released from its obligations under this Agreement with respect to the Dedicated
Properties so assigned or transferred, (2) at least thirty (30) Days prior to the closing date of the Third Party Assignment (or, if the period between signing and closing is less than thirty (30) Days, as early as possible and in no
event less than two Business Days prior to the closing of the Third Party Assignment), Producer shall cause the proposed Producer Assignee to deliver an updated Development Report to Midstream Co and (3) prior to or on the closing date of the
Third Party Assignment, the Producer Assignee shall deliver to Midstream Co (x) a copy of the writing pursuant to which the Third Party Assignment is occurring, and (y) documentation of any Conflicting Dedication affecting any Product of
the Producer Assignee that would otherwise be considered Dedicated Production.
(b)
Notice; Binding Effect
. Within 30 Days prior to
the date of execution of a permitted assignment by Producer, Producer shall give Midstream Co notice of any assignment of this Agreement or Dedicated Properties. Midstream Co shall give Producer written notice of any assignment of this Agreement
within 30 Days after the date of execution of such permitted assignment. This Agreement shall be binding upon and inure to the benefit of the respective permitted successors and assigns of the Parties. Any attempted assignment made without
compliance with the provisions set forth in this
Section 16.1
shall be null and void
ab initio
.
(c)
Releases not
Assignments
. Any release of any of the Dedicated Properties from the Dedications pursuant to
Section 2.4
shall not constitute an assignment or transfer of such Dedicated Properties for the purposes of this
Article 16
.
Section 16.2
Pre-Approved Assignments
. Each Party shall have the right without the prior consent of the others to
(a) mortgage, pledge, encumber or otherwise impress a lien or security interest upon its rights and interest in and to this Agreement, and (b) make a transfer pursuant to any security interest arrangement described in (a) above,
including any judicial or non-judicial foreclosure and any assignment from the holder of such security interest to another Person.
Section 16.3
Change of Control
. Except as provided in
Section 16.1
, nothing in this
Article 16
shall prevent
Producer’s members or owners from transferring their respective interests (whether equity or otherwise and whether in whole or in part) in Producer and nothing in this
Article 16
shall prevent Midstream Co’s members or owners from
transferring their respective interests (whether equity or otherwise and whether in whole or in part) in Midstream Co. However, if a change of control of a Party gives rise to a reasonable basis for insecurity on the part of the other Party, such
change of control may be the basis for a request of Adequate Assurance of Performance. Each member or owner of Producer or Midstream Co, as applicable, shall have the right to assign and transfer such member’s or owner’s interests (whether
equity or otherwise and whether in whole or in part) in Producer or Midstream Co, as applicable, without restriction contained in this Agreement.
Second Amended and
Restated
Crude Oil Gathering Agreement
- 45 -
Article 17
Other Provisions
Section 17.1
Relationship of the Parties
. The execution and delivery of an Agreement Addendum shall create a binding agreement
between the Parties signatory thereto or, in the case of the OpCo Agreement Addendum, the Producer signatory thereto and OpCo, consisting of the terms set forth in such Agreement Addendum together with the terms set forth in these Agreement Terms
and Conditions. The signatories of one Agreement Addendum shall not be bound to or otherwise in privity of contract with the signatories of any other Agreement Addendum, and the execution and delivery of each Agreement Addendum shall form a separate
and distinct contract. This Agreement shall not be deemed or construed to create, a partnership, joint venture or association or a trust between or among Producer, Midstream Co, and OpCo or the persons party to any other Agreement Addendum. This
Agreement shall not be deemed or construed to authorize any Party or OpCo to act as an agent, servant or employee for any other Party or OpCo for any purpose whatsoever except as explicitly set forth in this Agreement. In their relations with each
other under this Agreement, the Parties and OpCo shall not be considered fiduciaries.
Section 17.2
Notices
. Unless otherwise
specified in the applicable provision, all notices, consents, approvals, requests, and other communications required or permitted to be given under this Agreement shall be in writing and delivered personally, or sent by bonded overnight courier,
mailed by U.S. Express Mail or by certified or registered United States Mail with all postage fully prepaid, return receipt requested, or, except in the case of notices of breach or default, sent by electronic mail (including with a PDF of the
notice or other communication attached), in each case, addressed (i) if to Producer, at the address set forth on the applicable Agreement Addendum and (ii) if to Midstream Co or OpCo, then to OpCo and the applicable Midstream Co, at the
address set forth on the applicable Agreement Addendum;
provided
that in the case of any notice by electronic mail, such notice is confirmed by communication via another method permitted by this
Section 17.2
. Any notice, consent,
approval, request, or other communication (“
Communications
”) given in accordance herewith shall be deemed to have been given when (a) actually received or rejected by the addressee in person or by courier,
(b) (
reserved
), or (c) actually received or rejected by the addressee upon delivery by overnight courier or United States Mail, as shown in the tracking report or return receipt, as applicable. Communications may not be transmitted
by electronic mail, except for ordinary course business communications that shall be deemed to be received, if transmitted during normal business hours on such Business Day, or if transmitted after normal business hours, on the next Business Day.
Any Person may change their contact information for notice by giving notice to the other Party and, in the case of Producer, OpCo in the manner provided in this
Section 17.2
.
Section 17.3
Entire Agreement; Conflicts
. This Agreement (consisting of these Agreement Terms and Conditions and the applicable
Agreement Addendum) constitutes the entire agreement of Producer and Midstream Co or OpCo (as applicable) pertaining to the subject matter hereof and supersedes all prior agreements, understandings, negotiations, and discussions, whether oral or
written, of Producer and Midstream Co or OpCo (as applicable) pertaining to the subject matter hereof. There are no warranties, representations, or other agreements between Producer and Midstream Co or OpCo (as applicable) relating to the subject
matter hereof except as specifically set forth in this Agreement, including the exhibits hereto, and no Party or OpCo shall be bound by or liable for any alleged representation, promise, inducement, or statements of intention not so set forth.
Second Amended and
Restated
Crude Oil Gathering Agreement
- 46 -
Section 17.4
Waivers; Rights Cumulative
. Any of the terms, covenants, or conditions
hereof may be waived only by a written instrument executed by or on behalf of the Person waiving compliance. No course of dealing on the part of any Party or OpCo, or their respective officers, employees, agents, or representatives, nor any failure
by a Party or OpCo to exercise any of its rights under this Agreement shall operate as a waiver thereof or affect in any way the right of such Party or OpCo at a later time to enforce the performance of such provision. No waiver by any Party or OpCo
of any condition, or any breach of any term or covenant contained in this Agreement, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any such condition or breach or a waiver of any other
condition or of any breach of any other term or covenant. The rights of Producer, Midstream Co, and OpCo (as applicable) under this Agreement shall be cumulative, and the exercise or partial exercise of any such right shall not preclude the exercise
of any other right.
Section 17.5
Amendment
.
(a) This Agreement may be amended only by an instrument in writing executed (except as otherwise set forth in this
Section 17.5
) by
Producer and Midstream Co or OpCo, as applicable, and expressly identified as an amendment or modification.
(b) In the event of a conflict
between (i) these Agreement Terms and Conditions or any exhibit to this agreement, on the one hand, and (ii) an applicable Agreement Addendum, on the other, the applicable Agreement Addendum shall control.
Section 17.6
Governing Law; Arbitration
. This Agreement shall be governed by and construed in accordance with the laws of the
State, excluding any conflicts of law rule or principle that might refer construction of such provisions to the laws of another jurisdiction. Any dispute, controversy, or claim arising out of or relating to this Agreement shall be finally settled by
arbitration in accordance with the CPR Institute for Dispute Resolution Rules for Non-Administered Arbitration then in effect (the “
Rules
”) by a sole arbitrator appointed in accordance with the Rules. The arbitrator is not empowered
to award consequential, indirect, special, punitive or exemplary damages, and each Party and OpCo irrevocably waives any damages in excess of actual damages. Arbitration shall be held in the English language in the State, and the decision of the
arbitration panel shall include a statement of the reasons for such decision, and the award shall be final and binding on Producer and Midstream Co or OpCo, as applicable. Awards shall be final and binding on Producer and Midstream Co or OpCo, as
applicable, from the date they are made and judgment upon any award may be entered in any court having jurisdiction. The arbitrator shall apply the laws of the State, excluding any conflicts of law rule or principle that might refer construction of
such provisions to the laws of another jurisdiction.
Section 17.7
Parties in Interest
. Except for parties indemnified
hereunder, nothing in this Agreement shall entitle any Person other than the Parties and OpCo to any claim, cause of action, remedy or right of any kind.
Second Amended and
Restated
Crude Oil Gathering Agreement
- 47 -
Section 17.8
Preparation of Agreement
. The Parties and OpCo and their respective
counsel participated in the preparation of this Agreement. In the event of any ambiguity in this Agreement, no presumption shall arise based on the identity of the draftsman of this Agreement.
Section 17.9
Severability
. If any term or other provision of this Agreement is invalid, illegal, or incapable of being enforced by
any rule of Law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any
adverse manner to any Party or OpCo. Upon such determination that any term or other provision is invalid, illegal, or incapable of being enforced, Producer and Midstream Co or OpCo, as applicable, shall negotiate in good faith to modify this
Agreement so as to effect the original intent of Producer and Midstream Co or OpCo, as applicable, as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible. A ruling of
invalidity, illegality or unenforceability as to one Agreement shall only be applicable to that Agreement, not all the Agreements covered by these Agreement Terms and Conditions.
Section 17.10
Counterparts
. This Agreement may be executed in any number of counterparts, and each such counterpart hereof shall
be deemed to be an original instrument, but all of such counterparts shall constitute for all purposes one agreement. Any signature hereto delivered by a Party or OpCo by electronic mail shall be deemed an original signature hereto; provided that
the originals of any such electronically provided signatures shall be provided by the signatory, if requested by the other Party (or OpCo) within a week of exchanging such signatures.
Section 17.11
Confidentiality
. All data and information exchanged by the Parties and OpCo (other than the terms and conditions of
this Agreement) and all pricing terms shall be maintained in strict and absolute confidence and no Party nor OpCo shall disclose, without the prior consent of the other Parties and OpCo, any such data, information or pricing terms unless the release
thereof is required by Law (including any requirement associated with an elective filing with a Governmental Authority) or the rules or regulations of any stock exchange on which any securities of the Parties, OpCo, or any Affiliates thereof are
traded. Nothing in this Agreement shall prohibit the Parties or OpCo from disclosing whatever information in such manner as may be required by applicable Law; nor shall any Party or OpCo be prohibited by the terms hereof from disclosing information
acquired under this Agreement to any financial institution or investors providing or proposing financing to a Party, OpCo, or to any Person proposing to purchase the equity in any Party or OpCo or the assets owned by any Party or OpCo.
Notwithstanding the foregoing, the restrictions in this
Section 17.11
will not apply to data or information that (i) is in the possession of the Person receiving such information prior to disclosure by the other Party or OpCo,
(ii) is or becomes known to the public other than as a result of a breach of this Agreement or (iii) becomes available to a Party or OpCo a non-confidential basis from a source other than the other Party or OpCo,
provided
that such
source is not bound by a confidentiality agreement with, or other fiduciary obligations of confidentiality to, the other Party or OpCo. This Section will survive any termination of this Agreement for a period of 24 Months from the end of the
Year in which the date of such termination occurred.
(
End of Agreement Terms and Conditions
)
Second Amended and
Restated
Crude Oil Gathering Agreement
- 48 -
EXHIBIT A
TO AGREEMENT TERMS AND CONDITIONS
RELATING TO OIL GATHERING SERVICES
SERVICE AREA
Weld County, Colorado
Second Amended and
Restated
Crude Oil Gathering Agreement
Exhibit A – Page 1
EXHIBIT B
TO AGREEMENT TERMS AND CONDITIONS
RELATING TO OIL GATHERING SERVICES
DOWNTIME FEE REDUCTION
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|
|
|
|
Individual System Downtime Percentage (per Month)
|
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Percentage Reduction of
Individual Fee with respect to
such Individual System
|
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Greater than 7% and up to and including 10%
|
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5%
|
|
Greater than 10% and up to and including 12%
|
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10%
|
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Greater than 12% and up to and including 15%
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15%
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Greater than 15%
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20%
|
(End of Exhibit B)
Second Amended and
Restated
Crude Oil Gathering Agreement
Exhibit B – Page 1
EXHIBIT C
Reserved
Second Amended and
Restated
Crude Oil Gathering Agreement
EXHIBIT D
TO AGREEMENT TERMS AND CONDITIONS
RELATING TO OIL GATHERING SERVICES
INSURANCE
Each of OpCo (on behalf of
Midstream Co) and Producer shall purchase and maintain (or cause to be purchased and maintained) in full force and effect at all times during the Term of this Agreement, at such Party’s sole cost and expense and from insurance companies that
are rated (or whose reinsurers are rated) “A-VII” or better by AM Best or “BBB-” or better by Standard & Poor’s or an equivalent rating from another recognized rating agency, policies providing the types and limits
of insurance indicated below, which insurance shall be regarded as a minimum and, to the extent of the obligations undertaken by such Party in this Agreement, shall be primary (with the exception of the Excess Liability Insurance and Workers’
Compensation) as to any other existing, valid, and collectable insurance. Each Party’s deductibles shall be borne by that Party.
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A.
|
Where applicable, Workers’ Compensation and Employers’ Liability Insurance, in accordance with the statutory requirements of the State, and endorsed specifically to include the following:
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1.
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Employers’ Liability, subject to a limit of liability of not less than $1,000,000 per accident, $1,000,000 for each employee/disease, and a $1,000,000 policy limit.
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The Workers’ Compensation and Employers’ Liability Insurance policy(ies) shall contain an alternate employer endorsement.
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B.
|
Commercial General Liability Insurance, with limits of liability of not less than the following:
|
$2,000,000 general aggregate
$1,000,000 each occurrence, Bodily Injury or Property Damage Combined Single Limit
Such insurance shall include the following:
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1.
|
Premises and Operations coverage.
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2.
|
Contractual Liability covering the liabilities assumed under this Agreement.
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3.
|
Broad Form Property Damage Liability endorsement, unless policy is written on November 1988 or later ISO form.
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4.
|
Products and Completed Operations.
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5.
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Time Element Limited Pollution coverage.
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C.
|
If applicable, Automobile Liability Insurance, with limits of liability of not less than the following:
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Second Amended and
Restated
Crude Oil Gathering Agreement
Exhibit D – Page 1
$1,000,000 Bodily Injury or Property Damage Combined Single Limit, for each occurrence.
Such coverage shall include hired and non-owned vehicles and owned vehicles where applicable.
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D.
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If applicable, Aircraft Liability Insurance. In any operation requiring the use or charter of aircraft or helicopters by Midstream Co or Producer, combined single limit insurance shall be carried or cause to be carried
for public liability, passenger liability and property damage liability in an amount of not less than $8,000,000 per seat subject to a minimum of $20,000,000; this insurance shall cover all owned and non-owned aircraft, including helicopters, used
by Midstream Co in connection with the performance of the work set forth in this Agreement.
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E.
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Excess Liability Insurance, with limits of liability not less than the following:
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Limits of
Liability - $10,000,000 Occurrence/Aggregate for Bodily Injury and Property Damage in excess of the coverage outlined in Paragraphs A, B, C and D.
The
limits of coverage required in this Agreement may be met with any combination of policies as long as the minimum required limits are met.
Each Party to
this Agreement shall have the right to acquire, at its own expense, such additional insurance coverage as it desires to further protect itself against any risk or liability with respect to this Agreement and operations and activities under this
Agreement or related thereto. All insurance maintained by or on behalf of Producer or Midstream Co shall contain a waiver by the insurance company of all rights of subrogation in favor of the other Party.
Neither the minimum policy limits of insurance required of the Parties nor the actual amounts of insurance maintained by the Parties under their insurance
program shall operate to modify the Parties’ liability or indemnity obligations in this Agreement.
A Party may self-insure the requirements in this
Exhibit D
if such Party is Controlled by Noble Energy, Inc. and, otherwise, if such Party or its parent is considered investment grade (S&P BBB- or equivalent or higher).
(End of Exhibit D)
Second Amended and
Restated
Crude Oil Gathering Agreement
Exhibit D – Page 2
Exhibit 10.24.1
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED. THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
SECOND AMENDED AND RESTATED
CRUDE OIL GATHERING AGREEMENT
SECOND AMENDED AND RESTATED
AGREEMENT ADDENDUM 01
W
ELLS
R
ANCH
This SECOND AMENDED AND RESTATED AGREEMENT ADDENDUM 01 (this “
Agreement Addendum
”) (a) shall be effective as among the
Persons named below as “Producer” and “Midstream Co” as of the date specified below as the “Effective Date,” (b) incorporates the Second Amended and Restated Agreement Terms and Conditions Relating to Crude Oil
Gathering Services (the “
Agreement Terms and Conditions
”), which were last amended effective as of March 31, 2016, and recorded in the real property records of Weld County, Colorado, on
as , and (c) together with the Agreement Terms and Conditions, shall constitute one contract and
shall be the Agreement of the Parties. Except as otherwise set forth herein (i) all terms shall have the meanings assigned to such terms in the Agreement Terms and Conditions, and (ii) all references to Exhibits, Appendices, Articles,
Sections, subsections and other subdivisions refer to the corresponding Exhibits, Appendices, Articles, Sections, subsections and other subdivisions of or to the Agreement Terms and Conditions.
Producer desires to contract with Midstream Co for Midstream Co to provide the Services utilizing the Individual System, and Midstream Co
desires to provide the Services to Producer, on the terms and subject to the conditions of this Agreement.
NOW, THEREFORE, in
consideration of the mutual agreements in this Agreement, Midstream Co and Producer hereby agree as follows:
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Producer
|
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Noble Energy, Inc., a Delaware corporation
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Midstream Co
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Colorado River DevCo LP, a Delaware limited partnership
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Parties
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The term “Party” or “Parties” shall refer to the Producer and Midstream Co identified in this Agreement Addendum
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Effective Date
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March 31, 2016
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Agreement Addendum 01
– Page 1
Second Amended and Restated Crude Oil Gathering Agreement
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.
THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
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Dedication Area
|
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The Wells Ranch integrated development plan area, as such area was defined by Producer on the Effective Date, and which consists of the following areas within Weld County, Colorado:
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Township
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Range
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Sections
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T7N
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R64W
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31-36
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T7N
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R63W
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31-36
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T6N
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R64W
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ALL
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T6N
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R63W
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ALL
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T6N
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R62W
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2-11, 14-23, 26-35
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T5N
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R62W
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2-11, 14-23
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T5N
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R63W
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ALL
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T7N
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R62W
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31
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T5N
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R64W
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1-6, 10-15, 22-27, 34-36
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Except and excluding the wells, leases and other acreage described in the property exhibits attached to the Releases of Dedication.
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Individual Fee
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$[**]/Bbl
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Additional Revisions
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Clause (x) of Section 6.1(i) is amended and restated as follows:
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(x) the aggregate quantity of such Product, stated in Barrels, calculated by Midstream Co to have been received by Midstream Co from Producer or for Producer’s account at the applicable Measurement Points for such Product
during such Month multiplied by
|
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Section 6.3(c)(ii) is hereby amended and restated in its entirety to read as set forth in the next column in order to adjust the System Gains/ Losses Threshold:
|
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(ii) If, the average during any three-Month period (on a rolling basis), System Gains/Losses on an Individual System allocated to Producer in accordance with this Agreement exceeds 3.00% of the total quantities of Producer’s
owned or Controlled Product delivered to the Individual System in such Month, then Midstream Co will, for the respective Individual System, obtain updated test data (i.e. sample results, meter proves, etc.) from Receipt Points involved in
calculating theoretical Product (after removal of Associated Water and Flash Gas) received into the System at Receipt Points on the Individual System and conduct a field-wide (on an Individual System basis) meter inspection and proving, if
necessary, followed by an updated balance.
|
Agreement Addendum 01
– Page 2
Second Amended and Restated Crude Oil Gathering Agreement
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.
THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
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Additional Revisions
|
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Crude Oil Quality Specifications, altering Article 7 as follows:
|
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“Raw” Crude Oil as separated in, and delivered from, the Separator Facility pressurized separator crude oil outlet exceeding the BS&W specification (due to Associated Water content) and RVP specification (due to Flash
Gas content) will be accepted into the System.
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Notices and Payments
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Midstream Co:
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Notice Address – General Matters & Correspondence
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Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Chief
Financial Officer
John
F. Bookout, IV
Telephone: (832) 639-7134
Email: John.Bookout@nblenergy.com
Producer:
Noble Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO 80202
Attention: Director of USO Finance,
Gerald Free
Telephone: (303) 228-4174
Email:
Gerald.Free@nblenergy.com
|
Agreement Addendum 01
– Page 3
Second Amended and Restated Crude Oil Gathering Agreement
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.
THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
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Notice Address – Operational Matters
|
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Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Chief Operating Officer
John C. Nicholson
Telephone: (281) 876-6186
Email:
John.Nicholson@nblenergy.com
Producer:
Noble Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO 80202
Attention: Vice President – DJ
Business Unit
Mark
Patteson
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Notice Address – Force Majeure and Marketing interruptions
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Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Chief Operating Officer
John C. Nicholson
Telephone: (281) 876-6186
Email:
John.Nicholson@nblenergy.com
Producer:
Noble Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO 80202
Attention: DeLynne Barrow
Telephone: (303) 228-4222
Email:
Delynne.Barrow@nblenergy.com
|
Agreement Addendum 01
– Page 4
Second Amended and Restated Crude Oil Gathering Agreement
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.
THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
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Notice Address – Invoicing Matters
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Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Ian Dams
Telephone: (832) 639-7406
Email: ian.dams@nblenergy.com
Producer:
1001 Noble Energy Way
Houston, TX 77070
Attention: Director of Revenue Accounting
John Nedelka
Telephone: (281) 872-3120
Email:
John.Nedelka@nblenergy.com
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Payments by Electronic Funds Transfer
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Midstream Co:
ABA for wire: 021000021
ABA for ACH: 111000614
Account Number: 780161720
Account Name: Colorado River DevCo
LP
Financial Institution: JP Morgan
Bank Swift: CHASUS33
Producer:
ABA/Routing Number: 021000021
Account Number: 08805135066
Account Name: Noble Energy, Inc.
Financial Institution: JP Morgan
Bank Swift:
CHASUS33
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Marketing Notice – Midstream Co
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Attention: Oil Marketing Department
Noble
Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO
80202
|
(End of Agreement Addendum 01)
Agreement Addendum 01
– Page 5
Second Amended and Restated Crude Oil Gathering Agreement
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.
THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement in duplicate originals to
be effective as of the Effective Date.
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“Producer”
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NOBLE ENERGY, INC.
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By:
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/s/ Gary W. Willingham
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Gary W. Willingham
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Executive Vice President
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STATE OF TEXAS
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)
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) ss.
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COUNTY OF HARRIS
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)
|
The foregoing instrument was acknowledged before me this
26th
day of April, 2016, by Gary W. Willingham, Executive Vice
President of Noble Energy, Inc., a Delaware corporation, on behalf of said corporation.
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/s/ Vickie L. Graham
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Notary Public in and for the State of Texas
|
Agreement Addendum 01
– Signature Page 1
Amended and Restated Crude Oil Gathering Agreement
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.
THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
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“Midstream Co”
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COLORADO RIVER DEVCO LP
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By:
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Colorado River DevCo GP LLC
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By:
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Noble Midstream Services, LLC
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By:
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/s/ Terry R. Gerhart
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Terry R. Gerhart
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Chief Executive Officer
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STATE OF TEXAS
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)
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) ss.
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COUNTY OF HARRIS
|
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)
|
The foregoing instrument was acknowledged before me this
26th
day of April, 2016, by Terry R. Gerhart, Chief Executive
Officer of Noble Midstream Services, LLC, a Delaware limited liability company, which is the sole member of Colorado River DevCo GP LLC, which is the general partner of Colorado River DevCo LP, a Delaware limited partnership, on behalf of said
company.
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/s/ Joanne Garner
|
|
Notary Public in and for the State of Texas
|
Agreement Addendum 01
– Signature Page 2
Amended and Restated Crude Oil Gathering Agreement
Exhibit 10.24.2
When Recorded, Mail To:
Attn: DJ Land Manager
1625 Broadway, Suite 2200
Denver, CO 80202
FORM OF
AMENDMENT 01
TO
THAT CERTAIN
SECOND AMENDED AND RESTATED
CRUDE OIL GATHERING AGREEMENT
W
ELLS
R
ANCH
C
ONTRACT
N
UMBER
: CRWR01-OG
This AMENDMENT 01 (this “
Amendment
”) shall be effective as among Noble Energy, Inc., a Delaware corporation (the
“
Producer
”) and Colorado River DevCo LP, a Delaware limited partnership, together with its permitted successors and assigns (“
Midstream Co
”) as of September 1, 2016 (the “
Amendment Effective
Time
”). This Amendment modifies that certain Second Amended and Restated Crude Oil Gathering Agreement, effective as of March 31, 2016 (the “
Agreement
”), which has been given contract number CRWR01-OG and is
comprised of (i) that certain Second Amended and Restated Agreement Terms and Conditions Relating to Crude Oil Gathering Services (the “
Agreement Terms and Conditions
”), last updated March 31, 2016, together with
(ii) that certain Second Amended and Restated Agreement Addendum 01 (the “
Agreement Addendum
”), effective as of March 31, 2016. The Agreement Terms and Conditions, the Agreement Addendum and this Amendment shall constitute
one contract and shall be the Agreement of the Parties.
WHEREAS, the Parties acknowledge that the purpose of this Amendment is make
certain technical modifications.
WHEREAS, the Parties agree and acknowledge that amendments to the Agreement Terms and Conditions set
forth herein constitute an amendment only to the Agreement and not to any other agreement in respect of crude oil gathering services to which Producer is a party.
NOW, THEREFORE, in consideration of the foregoing recitals, which are incorporated herein and the mutual agreements in the Agreement,
Midstream Co and Producer hereby agree as follows:
1.
Amendments
.
1.1
Section 1.1
of the Agreement (which appears in the Agreement Terms and Conditions) is hereby amended by amending and restating
the following defined terms in their entirety to read as follows:
“
Facility Segment
” means each segment of an Individual
System comprised of facilities beginning at a Receipt Point and ending at a Delivery Point. If an Individual System does not contain any such distinct segment, then the term Facility Segment shall be synonymous with Individual System.
“
Individual System
” means the portion of the System beginning at the Receipt Points and ending at the Delivery Points. The
Individual Systems in existence on the Effective Date are more particularly described in writing between Producer and Midstream Co. Additional Individual Systems may be added to the System from time to time in satisfaction of the needs identified by
Producer and evidenced in writing between Producer and Midstream Co.
“
Other System Fuel
” means any (a) Gas delivered
by Producer to Midstream Co pursuant to a Transaction Document between Producer and Midstream Co related to gas gathering services, or (b) Flash Gas, in each case, measured and used as fuel by Midstream Co.
1.2
Section 1.1
of the Agreement (which appears in the Agreement Terms and Conditions) is further amended by amending and
restating clauses (a) and (b) of the defined term “Dedicated Production” to read as follows: “(a) Product owned by Producer or an Affiliate of Producer and produced from a Well within the Dedication Area that is operated by
Producer or an Affiliate under the Control of Producer, (b)
Reserved
,”.
1.3
Section 2.3(d)
of the Agreement
(which appears in the Agreement Terms and Conditions) is hereby amended and restated in its entirety to read: “(d) to pool, communitize or unitize Producer’s interests with respect to Dedicated Production”.
1.4
Section 2.4(b)(iv)
of the Agreement (which appears in the Agreement Terms and Conditions) is amended and restated in its
entirety to read: “(iv)
Reserved.
”.
1.5
Section 3.1(e)
of the Agreement (which appears in the Agreement
Terms and Conditions) is hereby amended by deleting the sentence that reads as follows “In the sole discretion of each Person serving as a Midstream Co under a Midstream Agreement Addendum, such Midstream Co may work with any other Midstream Co
to prepare and deliver a System Plan jointly.” and inserting in place thereof the following sentence: “Midstream Co may, in its sole discretion, work with OpCo or any of OpCo’s subsidiaries to prepare and deliver a System Plan jointly
with such other entity or entities.”
Amendment 01 –
Page 2
Second Amended and Restated Crude Oil Gathering Agreement
Colorado River Crude Oil Gathering Agreement
CRWR01-OG
1.6
Section 3.2
of the Agreement (which appears in the Agreement Terms and
Conditions) is hereby amended by inserting the following new
clause (e)
immediately following
clause (d)
of such
Section 3.2
:
“(e)
Substation and Interconnection Facilities
. The obligations of Midstream Co hereunder to design and construct the Individual
System and to perform the Services do not include the design or construction of any substation or other interconnecting facilities required to procure electricity for the Individual System. If a substation or any other interconnecting facility is
required in order for Midstream Co to perform its obligations hereunder, Midstream Co and Producer shall enter into a separate agreement setting forth each Party’s responsibilities in connection therewith, including an allocation of
responsibility for all associated costs and expenses.”
1.7
Section 4.1
of the Agreement (which appears in the Agreement
Terms and Conditions) is hereby amended by deleting both sentences in the middle of
clause (g)
that start with the phrase “If, upon any test…” and inserting in place thereof the following two sentences: “If, upon any
test, any (i) Measurement Device at the Measurement Point is found to be inaccurate by 2.0% or less or (ii) Measurement Device at the Delivery Point is found to be inaccurate by 0.25% or less, previous readings of such Measurement Device
will be considered correct in computing the deliveries of Product under this Agreement. If, upon any test, any (1) Measurement Device at the Measurement Point is found to be inaccurate by more than 2.0% or (2) Measurement Device at the
Delivery Point is found to be inaccurate by more than 0.25% (excessive meter factor deviation), such Measurement Device will immediately be removed from service, adjusted, repaired or replaced to record accurately (within the manufacturer’s
allowance for error) and reproved prior to returning to service.”
1.8
Section 4.1
of the Agreement (which appears in the
Agreement Terms and Conditions) is hereby further amended by deleting the phrase “inaccurate by 0.25% or less, the Owner” from the last sentence of clause (g) and inserting in place thereof the phrase: “inaccurate by 2.0% or less
or 0.25% or less, as applicable, the Owner”.
1.9
Section 6.3(d)
of the Agreement (which appears in the Agreement Terms
and Conditions) is hereby amended and restated in its entirety to read as follows:
(d)
Other System Fuel
. Midstream Co may elect to
use Other System Fuel as fuel to operate the Individual System, or to generate electricity for the operation of the Individual System and shall account for any Other System Fuel used by Midstream Co. Producer, at its sole cost and expense, shall
procure all fuel, in addition to Other System Fuel used by Midstream Co, if any, required to operate the Individual System or to generate electricity for the operation of the Individual System and arrange for transportation of such fuel to the
Individual System.
2.
Confidentiality
. Pursuant to
Section 17.11
of the Agreement (which appears in the Agreement
Terms and Conditions), the Parties have agreed to treat the information exchanged in connection with and the provisions of the Agreement as confidential. In addition, confidential treatment has been requested with the Securities and Exchange
Commission for the pricing terms of the Agreement, and the Parties agree to take appropriate measures to abide by the requirements imposed by the Securities and Exchange Commission to preserve such confidential treatment, if granted.
Amendment 01 –
Page 3
Second Amended and Restated Crude Oil Gathering Agreement
Colorado River Crude Oil Gathering Agreement
CRWR01-OG
3.
Confirmation
. The provisions of the Agreement, as amended by this Amendment, shall
remain in full force and effect following the effectiveness of this Amendment. No provision of the Agreement is amended or otherwise modified hereby, except as expressly stated herein.
4.
No Waiver
. The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy
of any Party to the Agreement, nor constitute a waiver of any provision of the Agreement. On and after the Amendment Effective Time, this Amendment shall for all purposes constitute a part of the Agreement.
5.
Counterparts
. This Amendment may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be
an original instrument, but all of such counterparts shall constitute for all purposes one agreement. Any signature hereto delivered by a Party by electronic mail shall be deemed an original signature hereto.
6.
Governing Law
. This Amendment shall be governed by and construed in accordance with the laws of the State, excluding any conflicts
of law rule or principle that might refer construction of such provisions to the laws of another jurisdiction.
(Signature Pages follow)
Amendment 01 –
Page 4
Second Amended and Restated Crude Oil Gathering Agreement
Colorado River Crude Oil Gathering Agreement
CRWR01-OG
IN WITNESS WHEREOF, the Parties hereto have executed this Amendment to Agreement in duplicate
originals to be effective as of the Amendment Effective Time.
|
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|
|
“Producer”
NOBLE ENERGY, INC.
|
|
|
|
|
By:
|
|
|
|
|
|
Gary W. Willingham
|
|
|
|
Executive Vice President
|
|
|
|
|
|
|
|
|
|
STATE OF TEXAS
|
|
|
)
|
|
|
|
|
|
|
|
)
|
|
|
ss.
|
|
COUNTY OF HARRIS
|
|
|
)
|
|
|
|
The foregoing instrument was acknowledged before me this
day of
,
, by Gary W. Willingham as Executive Vice President of Noble Energy, Inc., a Delaware corporation.
WITNESS my hand and official seal.
My commission expires:
Amendment 01 –
Signature Page 1
Second Amended and Restated Crude Oil Gathering Agreement
Colorado River Crude Oil Gathering Agreement
CRWR01-OG
|
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“Midstream Co”
COLORADO RIVER DEVCO LP
|
|
|
|
|
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|
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By:
|
|
Colorado River DevCo GP LLC
|
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|
|
|
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By:
|
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Noble Midstream Services, LLC
|
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|
|
|
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|
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|
|
|
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|
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By:
|
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|
|
|
|
|
|
|
|
|
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|
|
|
|
Terry R. Gerhart
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
STATE OF TEXAS
|
|
|
)
|
|
|
|
|
|
|
|
)
|
|
|
ss.
|
|
COUNTY OF HARRIS
|
|
|
)
|
|
|
|
The foregoing instrument was acknowledged before me this
day of
,
, by Terry R. Gerhart as Chief Executive Officer of Noble Midstream Services, LLC, which is the sole member of Colorado River DevCo GP LLC, which is the general partner
of Colorado River DevCo LP, a Delaware limited partnership.
WITNESS my hand and official seal.
My commission expires:
Amendment 01 –
Signature Page 2
Second Amended and Restated Crude Oil Gathering Agreement
Colorado River Crude Oil Gathering Agreement
CRWR01-OG
Exhibit 10.25.1
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED. THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
SECOND AMENDED AND RESTATED
CRUDE OIL GATHERING AGREEMENT
SECOND AMENDED AND RESTATED
AGREEMENT ADDENDUM 02
N
ORTHERN
C
OLORADO
This SECOND AMENDED AND RESTATED AGREEMENT ADDENDUM 02 (this “
Agreement Addendum
”) (a) shall be effective as among the
Persons named below as “Producer” and “Midstream Co” as of the date specified below as the “Effective Date,” (b) incorporates the Second Amended and Restated Agreement Terms and Conditions Relating to Crude Oil
Gathering Services (the “
Agreement Terms and Conditions
”), which were last amended effective as of March 31, 2016, and recorded in the real property records of Weld County, Colorado, on
as , and (c) together with the Agreement Terms and Conditions, shall constitute one contract and
shall be the Agreement of the Parties. Except as otherwise set forth herein (i) all terms shall have the meanings assigned to such terms in the Agreement Terms and Conditions, and (ii) all references to Exhibits, Appendices, Articles,
Sections, subsections and other subdivisions refer to the corresponding Exhibits, Appendices, Articles, Sections, subsections and other subdivisions of or to the Agreement Terms and Conditions.
Producer desires to contract with Midstream Co for Midstream Co to provide the Services utilizing the Individual System, and Midstream Co
desires to provide the Services to Producer, on the terms and subject to the conditions of this Agreement.
NOW, THEREFORE, in
consideration of the mutual agreements in this Agreement, Midstream Co and Producer hereby agree as follows:
|
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Producer
|
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Noble Energy, Inc., a Delaware corporation
|
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|
|
Midstream Co
|
|
Colorado River DevCo LP, a Delaware limited partnership
|
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|
|
|
Parties
|
|
The term “Party” or “Parties” shall refer to the Producer and Midstream Co identified in this Agreement Addendum
|
|
|
|
|
Effective Date
|
|
March 31, 2016
|
Agreement Addendum 02
– Page 1
Second Amended and Restated Crude Oil Gathering Agreement
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.
THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
|
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|
|
Dedication Area
|
|
The area in Northern Colorado including (but not limited to) the East Pony integrated development plan area, as such area was defined by Producer on the Effective Date, and which consists of the following areas within Weld County,
Colorado
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Township
|
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Range
|
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Sections
|
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T8N
|
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R59W
|
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ALL
|
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T8N
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R60W
|
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ALL
|
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T8N
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R61W
|
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ALL
|
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T8N
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R62W
|
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ALL
|
|
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T9N
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R58W
|
|
ALL
|
|
|
|
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|
T9N
|
|
R59W
|
|
ALL
|
|
|
|
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|
T9N
|
|
R60W
|
|
ALL
|
|
|
|
|
|
T9N
|
|
R61W
|
|
ALL
|
|
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10N
|
|
58W
|
|
19-36 (also known as S/2)
|
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8N
|
|
58W
|
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1-18 (also known as N/2)
|
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Except and excluding the wells, leases and other acreage described in the property exhibits attached to the Releases of Dedication.
|
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Individual Fee
|
|
$[**]/Bbl
|
|
|
|
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|
Additional Revisions
|
|
NONE
|
|
|
Agreement Addendum 02
– Page 2
Second Amended and Restated Crude Oil Gathering Agreement
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.
THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
|
|
|
|
|
Notices and Payments
|
|
Notice Address –
General Matters
&
Correspondence
|
|
Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Chief Financial Officer
John F. Bookout, IV
Telephone: (832) 639-7134
Email:
John.Bookout@nblenergy.com
Producer:
Noble Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO 80202
Attention:
Director of USO Finance,
Gerald Free
Telephone: (303) 228-4174
Email:
Gerald.Free@nblenergy.com
|
|
|
|
|
Notice Address –
Operational
Matters
|
|
Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Chief Operating Officer
John C. Nicholson
Telephone: (281) 876-6186
Email:
John.Nicholson@nblenergy.com
Producer:
Noble Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO 80202
Attention:
Vice President – DJ Business Unit
Mark
Patteson
|
Agreement Addendum 02
– Page 3
Second Amended and Restated Crude Oil Gathering Agreement
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.
THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
|
|
|
|
|
Notice Address –
Force Majeure
and
Marketing
interruptions
|
|
Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Chief Operating Officer
John C. Nicholson
Telephone: (281) 876-6186
Email:
John.Nicholson@nblenergy.com
Producer:
Noble Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO 80202
Attention:
DeLynne Barrow
Telephone: (303) 228-4222
Email: Delynne.Barrow@nblenergy.com
|
|
|
|
|
Notice Address –
Invoicing
Matters
|
|
Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Ian Dams
Telephone: (832) 639-7406
Email:
ian.dams@nblenergy.com
Producer:
1001 Noble Energy Way
Houston, TX 77070
Attention: Director of Revenue Accounting
John Nedelka
Telephone: (281) 872-3120
Email:
John.Nedelka@nblenergy.com
|
Agreement Addendum 02
– Page 4
Second Amended and Restated Crude Oil Gathering Agreement
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.
THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
|
|
|
|
|
Payments by
Electronic Funds
Transfer
|
|
Midstream Co:
ABA for wire: 021000021
ABA for ACH: 111000614
Account Number: 780161720
Account Name: Colorado River DevCo
LP
Financial Institution: JP Morgan
Bank Swift: CHASUS33
Producer:
ABA/Routing Number: 021000021
Account Number: 08805135066
Account Name: Noble Energy, Inc.
Financial Institution: JP Morgan
Bank Swift:
CHASUS33
|
|
|
|
|
Marketing Notice –
Midstream
Co
|
|
Attention: Oil Marketing Department
Noble
Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO
80202
|
(End of Agreement Addendum 02)
Agreement Addendum 02
– Page 5
Second Amended and Restated Crude Oil Gathering Agreement
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.
THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement in duplicate originals to
be effective as of the Effective Date.
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“Producer”
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|
NOBLE ENERGY, INC.
|
|
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|
By:
|
|
/s/ Gary W. Willingham
|
|
|
|
Gary W. Willingham
|
|
|
|
Executive Vice President
|
|
|
|
|
|
|
|
|
|
STATE OF TEXAS
|
|
)
|
|
|
|
|
|
|
|
) ss.
|
|
|
|
|
|
COUNTY OF HARRIS
|
|
)
|
|
|
|
|
The foregoing instrument was acknowledged before me this
26th
day of April, 2016, by Gary W. Willingham, Executive Vice
President of Noble Energy, Inc., a Delaware corporation, on behalf of said corporation.
|
|
|
/s/ Vickie L. Graham
|
|
Notary Public in and for the State of Texas
|
Agreement Addendum 02
– Signature Page 1
Amended and Restated Crude Oil Gathering Agreement
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.
THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
|
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“Midstream Co”
|
|
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|
COLORADO RIVER DEVCO LP
By: Colorado River DevCo GP LLC
By: Noble Midstream Services, LLC
|
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By:
|
|
/s/ Terry R. Gerhart
|
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|
Terry R. Gerhart
|
|
|
|
Chief Executive Officer
|
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|
STATE OF TEXAS
|
|
)
|
|
|
|
|
|
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|
) ss.
|
|
|
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|
COUNTY OF HARRIS
|
|
)
|
|
|
|
|
The foregoing instrument was acknowledged before me this
26th
day of April, 2016, by Terry R. Gerhart, Chief Executive
Officer of Noble Midstream Services, LLC, a Delaware limited liability company, which is the sole member of Colorado River DevCo GP LLC, which is the general partner of Colorado River DevCo LP, a Delaware limited partnership.
|
|
|
/s/ Joanne Garner
|
|
Notary Public in and for the State of Texas
|
Agreement Addendum 02
– Signature Page 2
Amended and Restated Crude Oil Gathering Agreement
Exhibit 10.25.2
When Recorded, Mail To:
Attn: DJ Land Manager
1625 Broadway, Suite 2200
Denver, CO 80202
FORM OF
AMENDMENT 01
TO
THAT CERTAIN
SECOND AMENDED AND RESTATED
CRUDE OIL GATHERING AGREEMENT
N
ORTHERN
C
OLORADO
C
ONTRACT
N
UMBER
: CRNC02-OG
This AMENDMENT 01 (this “
Amendment
”) shall be effective as among Noble Energy, Inc., a Delaware corporation (the
“
Producer
”) and Colorado River DevCo LP, a Delaware limited partnership, together with its permitted successors and assigns (“
Midstream Co
”) as of September 1, 2016 (the “
Amendment Effective
Time
”). This Amendment modifies that certain Second Amended and Restated Crude Oil Gathering Agreement, effective as of March 31, 2016 (the “
Agreement
”), which has been given contract number CRNC02-OG and is
comprised of (i) that certain Second Amended and Restated Agreement Terms and Conditions Relating to Crude Oil Gathering Services (the “
Agreement Terms and Conditions
”), last updated March 31, 2016, together with
(ii) that certain Second Amended and Restated Agreement Addendum 02 (the “
Agreement Addendum
”), effective as of March 31, 2016. The Agreement Terms and Conditions, the Agreement Addendum and this Amendment shall constitute
one contract and shall be the Agreement of the Parties.
WHEREAS, the Parties acknowledge that the purpose of this Amendment is make
certain technical modifications.
WHEREAS, the Parties agree and acknowledge that amendments to the Agreement Terms and Conditions set
forth herein constitute an amendment only to the Agreement and not to any other agreement in respect of crude oil gathering services to which Producer is a party.
NOW, THEREFORE, in consideration of the foregoing recitals, which are incorporated herein and the
mutual agreements in the Agreement, Midstream Co and Producer hereby agree as follows:
1.
Amendments
.
1.1
Section 1.1
of the Agreement (which appears in the Agreement Terms and Conditions) is hereby amended by amending and restating
the following defined terms in their entirety to read as follows:
“
Facility Segment
” means each segment of an Individual
System comprised of facilities beginning at a Receipt Point and ending at a Delivery Point. If an Individual System does not contain any such distinct segment, then the term Facility Segment shall be synonymous with Individual System.
“
Individual System
” means the portion of the System beginning at the Receipt Points and ending at the Delivery Points. The
Individual Systems in existence on the Effective Date are more particularly described in writing between Producer and Midstream Co. Additional Individual Systems may be added to the System from time to time in satisfaction of the needs identified by
Producer and evidenced in writing between Producer and Midstream Co.
“
Other System Fuel
” means any (a) Gas delivered
by Producer to Midstream Co pursuant to a Transaction Document between Producer and Midstream Co related to gas gathering services, or (b) Flash Gas, in each case, measured and used as fuel by Midstream Co.
1.2
Section 1.1
of the Agreement (which appears in the Agreement Terms and Conditions) is further amended by amending and
restating clauses (a) and (b) of the defined term “Dedicated Production” to read as follows: “(a) Product owned by Producer or an Affiliate of Producer and produced from a Well within the Dedication Area that is operated by
Producer or an Affiliate under the Control of Producer, (b) Reserved,”.
1.3
Section 2.3(d)
of the Agreement (which
appears in the Agreement Terms and Conditions) is hereby amended and restated in its entirety to read: “(d) to pool, communitize or unitize Producer’s interests with respect to Dedicated Production”.
1.4
Section 2.4(b)(iv)
of the Agreement (which appears in the Agreement Terms and Conditions) is amended and restated in its
entirety to read: “(iv) Reserved.”.
1.5
Section 3.1(e)
of the Agreement (which appears in the Agreement Terms and
Conditions) is hereby amended by deleting the sentence that reads as follows “In the sole discretion of each Person serving as a Midstream Co under a Midstream Agreement Addendum, such Midstream Co may work with any other Midstream Co to
prepare and deliver a System Plan jointly.” and inserting in place thereof the following sentence: “Midstream Co may, in its sole discretion, work with OpCo or any of OpCo’s subsidiaries to prepare and deliver a System Plan jointly
with such other entity or entities.”
Amendment 01 –
Page 2
Second Amended and Restated Crude Oil Gathering Agreement
Colorado River Crude Oil Gathering Agreement (NoCo)
CRNC02-OG
1.6
Section 3.2
of the Agreement (which appears in the Agreement Terms and
Conditions) is hereby amended by inserting the following new clause (e) immediately following clause (d) of such Section 3.2:
“(e) Substation and Interconnection Facilities. The obligations of Midstream Co hereunder to design and construct the Individual System
and to perform the Services do not include the design or construction of any substation or other interconnecting facilities required to procure electricity for the Individual System. If a substation or any other interconnecting facility is required
in order for Midstream Co to perform its obligations hereunder, Midstream Co and Producer shall enter into a separate agreement setting forth each Party’s responsibilities in connection therewith, including an allocation of responsibility for
all associated costs and expenses.”
1.7
Section 6.3(d)
of the Agreement (which appears in the Agreement Terms and
Conditions) is hereby amended and restated in its entirety to read as follows:
(d)
Other System Fuel
. Midstream Co may elect to use
Other System Fuel as fuel to operate the Individual System, or to generate electricity for the operation of the Individual System and shall account for any Other System Fuel used by Midstream Co. Producer, at its sole cost and expense, shall procure
all fuel, in addition to Other System Fuel used by Midstream Co, if any, required to operate the Individual System or to generate electricity for the operation of the Individual System and arrange for transportation of such fuel to the Individual
System.
2.
Confidentiality
. Pursuant to
Section 17.11
of the Agreement (which appears in the Agreement Terms and
Conditions), the Parties have agreed to treat the information exchanged in connection with and the provisions of the Agreement as confidential. In addition, confidential treatment has been requested with the Securities and Exchange Commission for
the pricing terms of the Agreement, and the Parties agree to take appropriate measures to abide by the requirements imposed by the Securities and Exchange Commission to preserve such confidential treatment, if granted.
3.
Confirmation
. The provisions of the Agreement, as amended by this Amendment, shall remain in full force and effect following the
effectiveness of this Amendment. No provision of the Agreement is amended or otherwise modified hereby, except as expressly stated herein.
4.
No Waiver
. The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy
of any Party to the Agreement, nor constitute a waiver of any provision of the Agreement. On and after the Amendment Effective Time, this Amendment shall for all purposes constitute a part of the Agreement.
5.
Counterparts
. This Amendment may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be
an original instrument, but all of such counterparts shall constitute for all purposes one agreement. Any signature hereto delivered by a Party by electronic mail shall be deemed an original signature hereto.
Amendment 01 –
Page 3
Second Amended and Restated Crude Oil Gathering Agreement
Colorado River Crude Oil Gathering Agreement (NoCo)
CRNC02-OG
6.
Governing Law
. This Amendment shall be governed by and construed in accordance with the
laws of the State, excluding any conflicts of law rule or principle that might refer construction of such provisions to the laws of another jurisdiction.
(Signature Pages follow)
Amendment 01 –
Page 4
Second Amended and Restated Crude Oil Gathering Agreement
Colorado River Crude Oil Gathering Agreement (NoCo)
CRNC02-OG
IN WITNESS WHEREOF, the Parties hereto have executed this Amendment to the Agreement in duplicate
originals to be effective as of the Amendment Effective Time.
|
|
|
|
|
“Producer”
|
|
|
|
NOBLE ENERGY, INC.
|
|
|
|
|
By:
|
|
|
|
|
|
Gary W. Willingham
|
|
|
|
Executive Vice President
|
|
|
|
|
|
|
|
STATE OF TEXAS
|
|
)
|
|
|
|
|
|
)
|
|
ss.
|
|
COUNTY OF HARRIS
|
|
)
|
|
|
The foregoing instrument was acknowledged before me this
day of
,
, by Gary W. Willingham as Executive Vice President of Noble
Energy, Inc., a Delaware corporation.
WITNESS my hand and official seal.
My commission expires:
Amendment 01 –
Signature Page 1
Second Amended and Restated Crude Oil Gathering Agreement
Colorado River Crude Oil Gathering Agreement (NoCo)
CRNC02-OG
|
|
|
|
|
|
|
|
|
|
|
“Midstream Co”
|
|
COLORADO RIVER DEVCO LP
|
|
|
|
|
|
|
By: Colorado River DevCo GP LLC
|
|
|
|
|
|
By: Noble Midstream Services, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
|
|
Terry R. Gerhart
|
|
|
|
|
|
|
|
|
|
Chief Executive Officer
|
|
|
|
|
|
|
|
STATE OF TEXAS
|
|
)
|
|
|
|
|
|
)
|
|
ss.
|
|
COUNTY OF HARRIS
|
|
)
|
|
|
The foregoing instrument was acknowledged before me this
day of
,
, by Terry R. Gerhart as Chief Executive Officer of Noble
Midstream Services, LLC, which is the sole member Colorado River DevCo GP LLC, which is the general partner of Colorado River DevCo LP, a Delaware limited partnership.
WITNESS my hand and official seal.
My commission expires:
Amendment 01 –
Signature Page 2
Second Amended and Restated Crude Oil Gathering Agreement
Colorado River Crude Oil Gathering Agreement (NoCo)
CRNC02-OG
Exhibit 10.26.1
SECOND AMENDED AND RESTATED
CRUDE OIL GATHERING AGREEMENT
SECOND AMENDED AND RESTATED
AGREEMENT ADDENDUM 03
M
USTANG
This
SECOND AMENDED AND RESTATED AGREEMENT ADDENDUM 03 (this “
Agreement Addendum
”) (a) shall be effective as among the Persons named below as “Producer” and “Midstream Co” as of the date specified below as the
“Effective Date,” (b) incorporates the Second Amended and Restated Agreement Terms and Conditions Relating to Crude Oil Gathering Services (the “
Agreement Terms and Conditions
”), which were last amended effective as
of March 31, 2016, and recorded in the real property records of Weld County, Colorado, on as
, and (c) together with the Agreement Terms and Conditions, shall constitute one contract and shall be the Agreement of the
Parties. Except as otherwise set forth herein (i) all terms shall have the meanings assigned to such terms in the Agreement Terms and Conditions, and (ii) all references to Exhibits, Appendices, Articles, Sections, subsections and other
subdivisions refer to the corresponding Exhibits, Appendices, Articles, Sections, subsections and other subdivisions of or to the Agreement Terms and Conditions.
Producer desires to contract with Midstream Co for Midstream Co to provide the Services utilizing the Individual System, and Midstream Co
desires to provide the Services to Producer, on the terms and subject to the conditions of this Agreement.
NOW, THEREFORE, in
consideration of the mutual agreements in this Agreement, Midstream Co and Producer hereby agree as follows:
|
|
|
|
|
Producer
|
|
Noble Energy, Inc., a Delaware corporation
|
|
|
|
|
Midstream Co
|
|
Green River DevCo LP, a Delaware limited partnership
|
|
|
|
|
Parties
|
|
The term “Party” or “Parties” shall refer to the Producer and Midstream Co identified in this Agreement Addendum
|
|
|
|
|
Effective Date
|
|
March 31, 2016
|
Agreement Addendum 03
– Page 1
Second Amended and Restated Crude Oil Gathering Agreement
|
|
|
|
|
Dedication Area
|
|
The Mustang integrated development plan area, as such area was defined by Producer on the Effective Date, and which consists of the following areas within Weld County, Colorado
|
|
|
|
|
|
|
|
|
|
Township
|
|
Range
|
|
Sections
|
|
|
|
T4N
|
|
R64W
|
|
1-3, 10-15, 22-27, 32-36
|
|
|
|
T4N
|
|
R63W
|
|
2-11, 14-23 26-35
|
|
|
|
T3N
|
|
R63W
|
|
4-9, 16-21, 28-33
|
|
|
|
T3N
|
|
R64W
|
|
ALL
|
|
|
|
T3N
|
|
R65W
|
|
1-3, 10-15, 22-27, 34-36
|
|
|
|
T2N
|
|
R64W
|
|
ALL
|
|
|
|
T2N
|
|
R63W
|
|
3-9, 16-21, 28-33
|
|
|
|
|
|
|
|
|
|
Except and excluding the wells, leases and other acreage described in the property exhibits attached to the Releases of Dedication.
|
|
|
|
|
Individual Fee
|
|
The Individual Fee shall be determined by the Parties prior to Services being provided by Midstream Co to Producer in the Dedication Area.
|
|
|
|
Additional Revisions
|
|
|
|
NONE
|
|
|
|
|
|
Notices and Payments
|
|
|
|
|
Notice Address – General Matters & Correspondence
|
|
Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Chief Financial Officer
John F. Bookout, IV
Telephone: (832) 639-7134
Email: John.Bookout@nblenergy.com
Producer:
Noble Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO 80202
Attention: Director of
USO Finance,
Gerald Free
Telephone: (303) 228-4174
Email:
Gerald.Free@nblenergy.com
|
Agreement Addendum 03
– Page 2
Second Amended and Restated Crude Oil Gathering Agreement
|
|
|
|
|
Notice Address – Operational Matters
|
|
Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Chief Operating Officer
John C. Nicholson
Telephone: (281) 876-6186
Email: John.Nicholson@nblenergy.com
Producer:
Noble Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO 80202
Attention: Vice President
– DJ Business Unit
Mark
Patteson
|
|
|
|
|
Notice Address – Force Majeure and Marketing interruptions
|
|
Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Chief Operating Officer
John C. Nicholson
Telephone: (281) 876-6186
Email: John.Nicholson@nblenergy.com
Producer:
Noble Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO 80202
Attention: DeLynne
Barrow
Telephone: (303) 228-4222
Email: Delynne.Barrow@nblenergy.com
|
Agreement Addendum 03
– Page 3
Second Amended and Restated Crude Oil Gathering Agreement
|
|
|
|
|
Notice Address – Invoicing Matters
|
|
Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Ian Dams
Telephone: (832)
639-7406
Email: ian.dams@nblenergy.com
Producer:
1001 Noble Energy Way
Houston, TX 77070
Attention: Director of Revenue Accounting
John
Nedelka
Telephone: (281) 872-3120
Email: John.Nedelka@nblenergy.com
|
|
|
|
|
Payments by Electronic Funds Transfer
|
|
Midstream Co:
ABA for wire: 021000021
ABA for ACH: 111000614
Account Number: 780162330
Account Name: Green River DevCo LP
Financial Institution: JP Morgan
Bank Swift: CHASUS33
Producer:
ABA/Routing Number: 021000021
Account Number: 08805135066
Account Name: Noble Energy, Inc.
Financial Institution: JP
Morgan
Bank Swift: CHASUS33
|
|
|
|
|
Marketing Notice – Midstream Co
|
|
Attention: Oil Marketing Department
Noble
Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO
80202
|
(End of Agreement Addendum 03)
Agreement Addendum 03
– Page 4
Second Amended and Restated Crude Oil Gathering Agreement
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement in duplicate originals to be
effective as of the Effective Date.
|
|
|
|
|
“Producer”
|
|
|
|
NOBLE ENERGY, INC.
|
|
|
|
|
By:
|
|
/s/ Gary W. Willingham
|
|
|
|
Gary W. Willingham
|
|
|
|
Executive Vice President
|
|
|
|
|
|
STATE OF TEXAS
|
|
)
|
|
|
|
) ss.
|
|
COUNTY OF HARRIS
|
|
)
|
The foregoing instrument was acknowledged before me this
26th
day of April, 2016, by Gary W. Willingham, Executive Vice
President of Noble Energy, Inc., a Delaware corporation, on behalf of said corporation.
|
|
|
/s/ Vickie L. Graham
|
|
Notary Public in and for the State of Texas
|
Agreement Addendum 03
– SignaturePage 1
Amended and Restated Crude Oil Gathering Agreement
|
|
|
“Midstream Co”
|
|
|
|
GREEN RIVER DEVCO LP
By: Green River DevCo GP LLC
By: Noble Midstream Services, LLC
|
|
|
|
By:
/s/ Terry R.
Gerhart
|
|
Terry R. Gerhart
|
|
Chief Executive Officer
|
|
|
|
|
|
STATE OF COLORADO
|
|
)
|
|
|
|
) ss.
|
|
COUNTY OF
|
|
)
|
The foregoing instrument was acknowledged before me this
26th
day of April, 2016, by Terry R. Gerhart, Chief Executive
Officer of Noble Midstream Services, LLC, a Delaware limited liability company, which is the sole member of Green River DevCo GP LLC, which is the general partner of Green River DevCo LP, a Delaware limited partnership, on behalf of said company.
|
|
|
/s/ Joanne Garner
|
|
Notary Public in and for the State of Texas
|
Agreement Addendum 03
– Signature Page 2
Amended and Restated Crude Oil Gathering Agreement
Exhibit 10.26.2
When Recorded, Mail To:
Attn: DJ Land Manager
1625 Broadway, Suite 2200
Denver, CO 80202
FORM OF
AMENDMENT 01
TO
THAT CERTAIN
SECOND AMENDED AND RESTATED
CRUDE OIL GATHERING AGREEMENT
M
USTANG
C
ONTRACT
N
UMBER
: GRMU03-OG
This AMENDMENT 01 (this “
Amendment
”) shall be effective as among Noble Energy, Inc., a Delaware corporation (the
“
Producer
”) and Green River DevCo LP, a Delaware limited partnership, together with its permitted successors and assigns (“
Midstream Co
”) as of September 1, 2016 (the “
Amendment Effective
Time
”). This Amendment modifies that certain Second Amended and Restated Crude Oil Gathering Agreement, effective as of March 31, 2016 (the “
Agreement
”), which has been given contract number GRMU03-OG and is
comprised of (i) that certain Second Amended and Restated Agreement Terms and Conditions Relating to Crude Oil Gathering Services (the “
Agreement Terms and Conditions
”), last updated March 31, 2016, together with
(ii) that certain Second Amended and Restated Agreement Addendum 03 (the “
Agreement Addendum
”), effective as of March 31, 2016. The Agreement Terms and Conditions, the Agreement Addendum and this Amendment shall constitute
one contract and shall be the Agreement of the Parties.
WHEREAS, the Parties acknowledge that the purpose of this Amendment is make
certain technical modifications.
WHEREAS, the Parties agree and acknowledge that amendments to the Agreement Terms and Conditions set
forth herein constitute an amendment only to the Agreement and not to any other agreement in respect of crude oil gathering services to which Producer is a party.
NOW, THEREFORE, in consideration of the foregoing recitals, which are incorporated herein and the
mutual agreements in the Agreement, Midstream Co and Producer hereby agree as follows:
1.
Amendments
.
1.1
Section 1.1
of the Agreement (which appears in the Agreement Terms and Conditions) is hereby amended by amending and restating
the following defined terms in their entirety to read as follows:
“
Facility Segment
” means each segment of an Individual
System comprised of facilities beginning at a Receipt Point and ending at a Delivery Point. If an Individual System does not contain any such distinct segment, then the term Facility Segment shall be synonymous with Individual System.
“
Individual System
” means the portion of the System beginning at the Receipt Points and ending at the Delivery Points. The
Individual Systems in existence on the Effective Date are more particularly described in writing between Producer and Midstream Co. Additional Individual Systems may be added to the System from time to time in satisfaction of the needs identified by
Producer and evidenced in writing between Producer and Midstream Co.
“
Other System Fuel
” means any (a) Gas delivered
by Producer to Midstream Co pursuant to a Transaction Document between Producer and Midstream Co related to gas gathering services, or (b) Flash Gas, in each case, measured and used as fuel by Midstream Co.
1.2
Section 1.1
of the Agreement (which appears in the Agreement Terms and Conditions) is further amended by amending and
restating clauses (a) and (b) of the defined term “Dedicated Production” to read as follows: “(a) Product owned by Producer or an Affiliate of Producer and produced from a Well within the Dedication Area that is operated by
Producer or an Affiliate under the Control of Producer, (b) Reserved,”.
1.3
Section 2.3(d)
of the Agreement (which
appears in the Agreement Terms and Conditions) is hereby amended and restated in its entirety to read: “(d) to pool, communitize or unitize Producer’s interests with respect to Dedicated Production”.
1.4
Section 2.4(b)(iv)
of the Agreement (which appears in the Agreement Terms and Conditions) is amended and restated in its
entirety to read: “(iv) Reserved.”.
1.5
Section 3.1(e)
of the Agreement (which appears in the Agreement Terms and
Conditions) is hereby amended by deleting the sentence that reads as follows “In the sole discretion of each Person serving as a Midstream Co under a Midstream Agreement Addendum, such Midstream Co may work with any other Midstream Co to
prepare and deliver a System Plan jointly.” and inserting in place thereof the following sentence: “Midstream Co may, in its sole discretion, work with OpCo or any of OpCo’s subsidiaries to prepare and deliver a System Plan jointly
with such other entity or entities.”
Amendment 01 –
Page 2
Second Amended and Restated Crude Oil Gathering Agreement
Green River Crude Oil Gathering Agreement
GRMU03-OG
1.6
Section 3.2
of the Agreement (which appears in the Agreement Terms and
Conditions) is hereby amended by inserting the following new clause (e) immediately following clause (d) of such Section 3.2:
“(e) Substation and Interconnection Facilities. The obligations of Midstream Co hereunder to design and construct the Individual System
and to perform the Services do not include the design or construction of any substation or other interconnecting facilities required to procure electricity for the Individual System. If a substation or any other interconnecting facility is required
in order for Midstream Co to perform its obligations hereunder, Midstream Co and Producer shall enter into a separate agreement setting forth each Party’s responsibilities in connection therewith, including an allocation of responsibility for
all associated costs and expenses.”
1.7
Section 6.3(d)
of the Agreement (which appears in the Agreement Terms and
Conditions) is hereby amended and restated in its entirety to read as follows:
(d)
Other System Fuel
. Midstream Co may elect to use
Other System Fuel as fuel to operate the Individual System, or to generate electricity for the operation of the Individual System and shall account for any Other System Fuel used by Midstream Co. Producer, at its sole cost and expense, shall procure
all fuel, in addition to Other System Fuel used by Midstream Co, if any, required to operate the Individual System or to generate electricity for the operation of the Individual System and arrange for transportation of such fuel to the Individual
System.
2.
Confidentiality
. Pursuant to
Section 17.11
of the Agreement (which appears in the Agreement Terms and
Conditions), the Parties have agreed to treat the information exchanged in connection with and the provisions of the Agreement as confidential. In addition, confidential treatment has been requested with the Securities and Exchange Commission for
the pricing terms of the Agreement, and the Parties agree to take appropriate measures to abide by the requirements imposed by the Securities and Exchange Commission to preserve such confidential treatment, if granted.
3.
Confirmation
. The provisions of the Agreement, as amended by this Amendment, shall remain in full force and effect following the
effectiveness of this Amendment. No provision of the Agreement is amended or otherwise modified hereby, except as expressly stated herein.
4.
No Waiver
. The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy
of any Party to the Agreement, nor constitute a waiver of any provision of the Agreement. On and after the Amendment Effective Time, this Amendment shall for all purposes constitute a part of the Agreement.
5.
Counterparts
. This Amendment may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be
an original instrument, but all of such counterparts shall constitute for all purposes one agreement. Any signature hereto delivered by a Party by electronic mail shall be deemed an original signature hereto.
Amendment 01 –
Page 3
Second Amended and Restated Crude Oil Gathering Agreement
Green River Crude Oil Gathering Agreement
GRMU03-OG
6.
Governing Law
. This Amendment shall be governed by and construed in accordance with the
laws of the State, excluding any conflicts of law rule or principle that might refer construction of such provisions to the laws of another jurisdiction.
(Signature Pages follow)
Amendment 01 –
Page 4
Second Amended and Restated Crude Oil Gathering Agreement
Green River Crude Oil Gathering Agreement
GRMU03-OG
IN WITNESS WHEREOF, the Parties hereto have executed this Amendment to the Agreement in duplicate
originals to be effective as of the Amendment Effective Time.
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“Producer”
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NOBLE ENERGY, INC.
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By:
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Gary W. Willingham
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Executive Vice President
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STATE OF TEXAS
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)
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)
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ss.
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COUNTY OF HARRIS
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)
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The foregoing instrument was acknowledged before me this
day of
,
, by Gary W. Willingham as Executive Vice President of Noble
Energy, Inc., a Delaware corporation.
WITNESS my hand and official seal.
My commission expires:
Amendment 01 –
Signature Page 1
Second Amended and Restated Crude Oil Gathering Agreement
Green River Crude Oil Gathering Agreement
GRMU03-OG
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“Midstream Co”
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GREEN RIVER DEVCO LP
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By: Green River DevCo GP LLC
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By: Noble Midstream Services, LLC
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By:
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Terry R. Gerhart
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Chief Executive Officer
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STATE OF TEXAS
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)
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)
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ss.
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COUNTY OF HARRIS
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)
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The foregoing instrument was acknowledged before me this
day of
,
, by Terry R. Gerhart as Chief Executive Officer of Noble
Midstream Services, LLC, which is the sole member of Green River DevCo GP LLC, which is the general partner of Green River DevCo LP, a Delaware limited partnership.
WITNESS my hand and official seal.
My commission expires:
Amendment 01 –
Signature Page 2
Second Amended and Restated Crude Oil Gathering Agreement
Green River Crude Oil Gathering Agreement
GRMU03-OG
Exhibit 10.27.1
SECOND AMENDED AND RESTATED
CRUDE OIL GATHERING AGREEMENT
SECOND AMENDED AND RESTATED
AGREEMENT ADDENDUM 04
B
RONCO
This
SECOND AMENDED AND RESTATED AGREEMENT ADDENDUM 04 (this “
Agreement Addendum
”) (a) shall be effective as among the Persons named below as “Producer” and “Midstream Co” as of the date specified below as the
“Effective Date,” (b) incorporates the Second Amended and Restated Agreement Terms and Conditions Relating to Crude Oil Gathering Services (the “
Agreement Terms and Conditions
”), which were last amended effective as
of March 31, 2016, and recorded in the real property records of Weld County, Colorado, on as
, and (c) together with the Agreement Terms and Conditions, shall constitute one contract and shall be the Agreement of the Parties. Except as
otherwise set forth herein (i) all terms shall have the meanings assigned to such terms in the Agreement Terms and Conditions, and (ii) all references to Exhibits, Appendices, Articles, Sections, subsections and other subdivisions refer to
the corresponding Exhibits, Appendices, Articles, Sections, subsections and other subdivisions of or to the Agreement Terms and Conditions.
Producer desires to contract with Midstream Co for Midstream Co to provide the Services utilizing the Individual System, and Midstream Co
desires to provide the Services to Producer, on the terms and subject to the conditions of this Agreement.
NOW, THEREFORE, in
consideration of the mutual agreements in this Agreement, Midstream Co and Producer hereby agree as follows:
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Producer
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Noble Energy, Inc., a Delaware corporation
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Midstream Co
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Gunnison River DevCo LP, a Delaware limited partnership
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Parties
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The term “Party” or “Parties” shall refer to the Producer and Midstream Co identified in this Agreement Addendum
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Effective Date
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March 31, 2016
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Agreement Addendum 04
– Page 1
Second Amended and Restated Crude Oil Gathering Agreement
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Dedication Area
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The Bronco integrated development plan area, as such area was defined by Producer on the Effective Date, and which consists of the following areas within Weld County, Colorado
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Township
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Range
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Sections
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T5N
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R65W
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13, 21-29, 31-36
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T5N
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R64W
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7-9, 16-21, 28-33
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T4N
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R64W
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4-9, 16-21, 28-31
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T4N
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R65W
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ALL
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T4N
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R67W
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25, 36
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T4N
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R66W
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1-3, 8-36
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Except and excluding the wells, leases and other acreage described in the property exhibits attached to the Releases of Dedication.
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Individual Fee
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The Individual Fee shall be determined by the Parties prior to Services being provided by Midstream Co to Producer in the Dedication Area.
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Additional Revisions
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NONE
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Notices and Payments
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Notice Address – General Matters & Correspondence
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Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Chief Financial Officer
John F. Bookout, IV
Telephone: (832) 639-7134
Email: John.Bookout@nblenergy.com
Producer:
Noble Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO 80202
Attention: Director of
USO Finance,
Gerald Free
Telephone: (303) 228-4174
Email: Gerald.Free@nblenergy.com
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Agreement Addendum 04
– Page 2
Second Amended and Restated Crude Oil Gathering Agreement
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Notice Address – Operational Matters
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Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Chief Operating Officer
John C. Nicholson
Telephone: (281) 876-6186
Email: John.Nicholson@nblenergy.com
Producer:
Noble Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO 80202
Attention: Vice President – DJ Business
Unit
Mark Patteson
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Notice Address – Force Majeure and Marketing interruptions
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Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Chief Operating Officer
John C.
Nicholson
Telephone: (281) 876-6186
Email: John.Nicholson@nblenergy.com
Producer:
Noble Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO 80202
Attention: DeLynne
Barrow
Telephone: (303) 228-4222
Email: Delynne.Barrow@nblenergy.com
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Agreement Addendum 04
– Page 3
Second Amended and Restated Crude Oil Gathering Agreement
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Notice Address – Invoicing Matters
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Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Ian Dams
Telephone: (832) 639-7406
Email: ian.dams@nblenergy.com
Producer:
1001 Noble Energy Way
Houston, TX 77070
Attention: Director of Revenue Accounting
John
Nedelka
Telephone: (281) 872-3120
Email: John.Nedelka@nblenergy.com
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Payments by Electronic Funds Transfer
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Midstream Co:
ABA for wire: 021000021
ABA for ACH: 111000614
Account Number: 780162371
Account Name: Gunnison River DevCo
LP
Financial Institution: JP Morgan
Bank Swift: CHASUS33
Producer:
ABA/Routing Number: 021000021
Account Number: 08805135066
Account Name: Noble Energy, Inc.
Financial Institution: JP
Morgan
Bank Swift: CHASUS33
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Marketing Notice – Midstream Co
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Attention: Oil Marketing Department
Noble
Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO
80202
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(End of Agreement Addendum 04)
Agreement Addendum 04
– Page 4
Second Amended and Restated Crude Oil Gathering Agreement
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement in duplicate originals to be
effective as of the Effective Date.
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“Producer”
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NOBLE ENERGY, INC.
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By:
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/s/ Gary W. Willingham
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Gary W. Willingham
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Executive Vice President
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STATE OF TEXAS
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)
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) ss.
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COUNTY OF HARRIS
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)
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The foregoing instrument was acknowledged before me this
26th
day of April, 2016, by Gary W. Willingham, Executive Vice
President of Noble Energy, Inc., a Delaware corporation, on behalf of said corporation.
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/s/ Vickie L. Graham
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Notary Public in and for the State of Texas
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Agreement Addendum 04
– Signature Page 1
Amended and Restated Crude Oil Gathering Agreement
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“Midstream Co”
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GUNNISON RIVER DEVCO LP
By: Gunnison River DevCo GP LLC
By: Noble Midstream Services, LLC
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By:
/s/ Terry R.
Gerhart
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Terry R. Gerhart
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Chief Executive Officer
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STATE OF COLORADO
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)
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) ss.
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COUNTY OF
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)
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The foregoing instrument was acknowledged before me this
26th
day of April, 2016, by Terry R. Gerhart, Chief Executive
Officer of Noble Midstream Services, LLC, a Delaware limited liability company, which is the sole member of Gunnison River DevCo GP LLC, which is the general partner of Gunnison River DevCo LP, a Delaware limited partnership, on behalf of said
company.
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/s/ Joanne Garner
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Notary Public in and for the State of Texas
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Agreement Addendum 04
– Signature Page 2
Amended and Restated Crude Oil Gathering Agreement
Exhibit 10.27.2
When Recorded, Mail To:
Attn: DJ Land Manager
1625 Broadway, Suite
2200 Denver, CO 80202
FORM OF
AMENDMENT 01
TO
THAT CERTAIN
SECOND AMENDED AND RESTATED
CRUDE OIL GATHERING AGREEMENT
B
RONCO
C
ONTRACT
N
UMBER
: GUBR04-OG
This AMENDMENT 01 (this “
Amendment
”) shall be effective as among Noble Energy, Inc., a Delaware corporation (the
“
Producer
”) and Gunnison River DevCo LP, a Delaware limited partnership, together with its permitted successors and assigns (“
Midstream Co
”) as of September 1, 2016 (the “
Amendment Effective
Time
”). This Amendment modifies that certain Second Amended and Restated Crude Oil Gathering Agreement, effective as of March 31, 2016 (the “
Agreement
”), which has been given contract number GUBR04-OG and is comprised
of (i) that certain Second Amended and Restated Agreement Terms and Conditions Relating to Crude Oil Gathering Services (the “
Agreement Terms and Conditions
”), last updated March 31, 2016, together with (ii) that
certain Second Amended and Restated Agreement Addendum 04 (the “
Agreement Addendum
”), effective as of March 31, 2016. The Agreement Terms and Conditions, the Agreement Addendum and this Amendment shall constitute one contract
and shall be the Agreement of the Parties.
WHEREAS, capitalized terms used herein have the meanings assigned to such terms in the
Agreement Terms and Conditions.
WHEREAS,
Section 16.1
of the Agreement (which appears in the Agreement Terms and Conditions)
prohibits either Party to the Agreement from assigning its rights and obligations, except that Producer may assign its rights and obligations to any Person (herein, the “
Transferee
”) to whom Producer transfers Dedicated Properties
so long as such Transferee assumes the rights and obligations of Producer with respect to such transferred Dedicated Properties.
WHEREAS,
pursuant to that certain Purchase and Sale Agreement, by and among Producer, NBL Energy Royalties, Inc. and Noble Energy WyCo, LLC, collectively as the Seller, and Synergy Resources Corporation, as Purchaser (the “
Transferee
”),
executed May 2, 2016 with
an effective time of April 1, 2016 at 12:01 AM, Producer agreed to sell approximately 30,000 acres of the Dedicated Properties to the Transferee.
WHEREAS, in addition, the Parties acknowledge that a purpose of this Amendment is to make certain technical modifications.
WHEREAS, the Parties agree and acknowledge that amendments to the Agreement Terms and Conditions set forth herein constitute an amendment only
to the Agreement and not to any other agreement in respect of crude oil gathering services to which Producer is a party.
NOW, THEREFORE,
in consideration of the foregoing recitals, which are incorporated herein and the mutual agreements in the Agreement, Midstream Co and Producer hereby agree as follows:
1.
Amendments
.
1.1
Section 1.1
of the Agreement (which appears in the Agreement Terms and Conditions) is hereby amended by amending and restating the following defined terms in their entirety to read as follows:
“
Facility Segment
” means each segment of an Individual System comprised of facilities beginning at a Receipt Point and ending
at a Delivery Point. If an Individual System does not contain any such distinct segment, then the term Facility Segment shall be synonymous with Individual System.
“
Individual System
” means the portion of the System beginning at the Receipt Points and ending at the Delivery Points. The
Individual Systems in existence on the Effective Date are more particularly described in writing between Producer and Midstream Co. Additional Individual Systems may be added to the System from time to time in satisfaction of the needs identified by
Producer and evidenced in writing between Producer and Midstream Co.
“
Other System Fuel
” means any (a) Gas delivered
by Producer to Midstream Co pursuant to a Transaction Document between Producer and Midstream Co related to gas gathering services, or (b) Flash Gas, in each case, measured and used as fuel by Midstream Co.
1.2
Section 1.1
of the Agreement (which appears in the Agreement Terms and Conditions) is further amended by amending and restating
clauses (a) and (b) of the defined term “Dedicated Production” to read as follows: “(a) Product owned by Producer or an Affiliate of Producer and produced from a Well within the Dedication Area that is operated by Producer
or an Affiliate under the Control of Producer, (b) Reserved,”.
Amendment 01 –
Page 2
Second Amended and Restated Crude Oil Gathering Agreement
Gunnison River Crude Oil Gathering Agreement
GUBR04-OG
1.3
Section 2.3(d)
of the Agreement (which appears in the Agreement Terms and
Conditions) is hereby amended and restated in its entirety to read: “(d) to pool, communitize or unitize Producer’s interests with respect to Dedicated Production”.
1.4
Section 2.4(b)(iv)
of the Agreement (which appears in the Agreement Terms and Conditions) is amended and restated in its
entirety to read: “(iv) Reserved.”.
1.5
Section 3.1(e)
of the Agreement (which appears in the Agreement Terms and
Conditions) is hereby amended by deleting the sentence that reads as follows “In the sole discretion of each Person serving as a Midstream Co under a Midstream Agreement Addendum, such Midstream Co may work with any other Midstream Co to
prepare and deliver a System Plan jointly.” and inserting in place thereof the following sentence: “Midstream Co may, in its sole discretion, work with OpCo or any of OpCo’s subsidiaries to prepare and deliver a System Plan jointly
with such other entity or entities.”
1.6
Section 3.2
of the Agreement (which appears in the Agreement Terms and
Conditions) is hereby amended by inserting the following new clause (e) immediately following clause (d) of such Section 3.2:
“(e) Substation and Interconnection Facilities. The obligations of Midstream Co hereunder to design and construct the Individual System
and to perform the Services do not include the design or construction of any substation or other interconnecting facilities required to procure electricity for the Individual System. If a substation or any other interconnecting facility is required
in order for Midstream Co to perform its obligations hereunder, Midstream Co and Producer shall enter into a separate agreement setting forth each Party’s responsibilities in connection therewith, including an allocation of responsibility for
all associated costs and expenses.”
1.7
Section 6.3(d)
of the Agreement (which appears in the Agreement Terms and
Conditions) is hereby amended and restated in its entirety to read as follows:
(d)
Other System Fuel
. Midstream Co may elect to use
Other System Fuel as fuel to operate the Individual System, or to generate electricity for the operation of the Individual System and shall account for any Other System Fuel used by Midstream Co. Producer, at its sole cost and expense, shall procure
all fuel, in addition to Other System Fuel used by Midstream Co, if any, required to operate the Individual System or to generate electricity for the operation of the Individual System and arrange for transportation of such fuel to the Individual
System.
Amendment 01 –
Page 3
Second Amended and Restated Crude Oil Gathering Agreement
Gunnison River Crude Oil Gathering Agreement
GUBR04-OG
1.8 The description of the “Dedication Area” appearing in Agreement Addendum is hereby
amended and restated in its entirety to read as follows:
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Dedication Area
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The following areas within Weld
County, Colorado
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Township
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Range
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Sections
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5N
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65W
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13, S/2 21, S/2 22, 23-27, 33-36
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5N
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64W
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7-9, 16-21, 28-33
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4N
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67W
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25, 36
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4N
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66W
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1-3, 8-36
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4N
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65W
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ALL
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4N
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64W
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4-9, 16-21, 28-31
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Except and excluding the wells, leases, and other acreage described in the property exhibits
attached to the Releases of Dedication.
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2.
Confidentiality
. Pursuant to
Section 17.11
of the Agreement (which appears in the
Agreement Terms and Conditions), the Parties have agreed to treat the information exchanged in connection with and the provisions of the Agreement as confidential. In addition, confidential treatment has been requested with the Securities and
Exchange Commission for the pricing terms of the Agreement, and the Parties agree to take appropriate measures to abide by the requirements imposed by the Securities and Exchange Commission to preserve such confidential treatment, if granted.
3.
Confirmation
. The provisions of the Agreement, as amended by this Amendment, shall remain in full force and effect following the
effectiveness of this Amendment. No provision of the Agreement is amended or otherwise modified hereby, except as expressly stated herein.
4.
No Waiver
. The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy
of any Party to the Agreement, nor constitute a waiver of any provision of the Agreement. On and after the Amendment Effective Time, this Amendment shall for all purposes constitute a part of the Agreement.
5.
Counterparts
. This Amendment may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be
an original instrument, but all of such counterparts shall constitute for all purposes one agreement. Any signature hereto delivered by a Party by electronic mail shall be deemed an original signature hereto.
6.
Governing Law
. This Amendment shall be governed by and construed in accordance with the laws of the State, excluding any conflicts
of law rule or principle that might refer construction of such provisions to the laws of another jurisdiction.
(Signature Pages follow)
Amendment 01 –
Page 4
Second Amended and Restated Crude Oil Gathering Agreement
Gunnison River Crude Oil Gathering Agreement
GUBR04-OG
IN WITNESS WHEREOF, the Parties hereto have executed this Amendment to the Agreement in duplicate
originals to be effective as of the Amendment Effective Time.
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|
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“Producer”
NOBLE ENERGY, INC.
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|
|
|
|
By:
|
|
|
|
|
|
Gary W. Willingham
|
|
|
|
Executive Vice President
|
|
|
|
|
|
|
|
|
|
STATE OF TEXAS
|
|
|
)
|
|
|
|
|
|
|
|
)
|
|
|
ss.
|
|
COUNTY OF HARRIS
|
|
|
)
|
|
|
|
The foregoing instrument was acknowledged before me this
day of
,
, by Gary W. Willingham as Executive Vice President of Noble Energy, Inc., a Delaware corporation.
WITNESS my hand and official seal.
My commission expires:
Amendment 01 –
Signature Page 1
Second Amended and Restated Crude Oil Gathering Agreement
Gunnison River Crude Oil Gathering Agreement
GUBR04-OG
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“Midstream Co”
GUNNISON RIVER DEVCO LP
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By:
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Gunnison River DevCo GP LLC
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By:
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Noble Midstream Services, LLC
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By:
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Terry R. Gerhart
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Chief Executive Officer
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STATE OF TEXAS
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)
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)
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ss.
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COUNTY OF HARRIS
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)
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The foregoing instrument was acknowledged before me this
day of
,
, by Terry R. Gerhart as Chief Executive Officer of Noble Midstream Services, LLC, which is the sole member of Gunnison River DevCo GP LLC, which is the general partner
of Gunnison River DevCo LP, a Delaware limited partnership.
WITNESS my hand and official seal.
My commission expires:
Amendment 01 –
Signature Page 2
Second Amended and Restated Crude Oil Gathering Agreement
Gunnison River Crude Oil Gathering Agreement
GUBR04-OG
Exhibit 10.28.1
SECOND AMENDED AND RESTATED
CRUDE OIL GATHERING AGREEMENT
SECOND AMENDED AND RESTATED
AGREEMENT ADDENDUM 05
G
REELEY
C
RESCENT
This SECOND AMENDED AND RESTATED AGREEMENT ADDENDUM 05 (this “
Agreement Addendum
”) (a) shall be effective as among the
Persons named below as “Producer” and “Midstream Co” as of the date specified below as the “Effective Date,” (b) incorporates the Second Amended and Restated Agreement Terms and Conditions Relating to Crude Oil
Gathering Services (the “
Agreement Terms and Conditions
”), which were last amended effective as of March 31, 2016, and recorded in the real property records of Weld County, Colorado, on
as , and (c) together with the Agreement Terms and Conditions, shall constitute one contract and
shall be the Agreement of the Parties. Except as otherwise set forth herein (i) all terms shall have the meanings assigned to such terms in the Agreement Terms and Conditions, and (ii) all references to Exhibits, Appendices, Articles,
Sections, subsections and other subdivisions refer to the corresponding Exhibits, Appendices, Articles, Sections, subsections and other subdivisions of or to the Agreement Terms and Conditions.
Producer desires to contract with Midstream Co for Midstream Co to provide the Services utilizing the Individual System, and Midstream Co
desires to provide the Services to Producer, on the terms and subject to the conditions of this Agreement.
NOW, THEREFORE, in
consideration of the mutual agreements in this Agreement, Midstream Co and Producer hereby agree as follows:
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Producer
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Noble Energy, Inc., a Delaware corporation
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Midstream Co
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Laramie River DevCo LP, a Delaware limited partnership
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Parties
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The term “Party” or “Parties” shall refer to the Producer and Midstream Co identified in this Agreement Addendum
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Effective Date
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March 31, 2016
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Agreement Addendum 05
– Page 1
Second Amended and Restated Crude Oil Gathering Agreement
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Dedication Area
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The Greeley Crescent integrated development plan area, as such area was defined by Producer on the Effective Date, and which consists of the following areas within Weld County, Colorado
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Township
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Range
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1, 2, 11, 12, 13, 14, 23, 24, 25, 26, 35, 36
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R66W
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R65W
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T4N
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4-7
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Except and excluding the wells, leases and other acreage described in the property exhibits attached to the Releases of Dedication.
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Individual Fee
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The Individual Fee shall be determined by the Parties prior to Services being provided by Midstream Co to Producer in the Dedication Area.
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Additional Revisions
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NONE
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Agreement Addendum 05
– Page 2
Second Amended and Restated Crude Oil Gathering Agreement
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Notices and Payments
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Notice Address –
General Matters
&
Correspondence
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Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Chief Financial Officer
John F. Bookout, IV
Telephone: (832) 639-7134
Email:
John.Bookout@nblenergy.com
Noble Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO 80202
Attention: Director of USO Finance,
Gerald Free
Telephone: (303) 228-4174
Email:
Gerald.Free@nblenergy.com
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Notice Address –
Operational
Matters
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Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Chief Operating Officer
John C. Nicholson
Telephone: (281) 876-6186
Email:
John.Nicholson@nblenergy.com
Producer:
Noble Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO 80202
Attention: Vice President – DJ Business
Unit
Mark Patteson
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Agreement Addendum 05
– Page 3
Second Amended and Restated Crude Oil Gathering Agreement
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Notice Address –
Force Majeure
and
Marketing
interruptions
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Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Chief Operating Officer
John C. Nicholson
Telephone: (281) 876-6186
Email:
John.Nicholson@nblenergy.com
Producer:
Noble Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO 80202
Attention: DeLynne Barrow
Telephone: (303) 228-4222
Email: Delynne.Barrow@nblenergy.com
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Notice Address –
Invoicing
Matters
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Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Ian Dams
Telephone: (832) 639-7406
Email: ian.dams@nblenergy.com
Producer:
1001 Noble Energy Way
Houston, TX 77070
Attention: Director of Revenue Accounting
John Nedelka
Telephone: (281) 872-3120
Email:
John.Nedelka@nblenergy.com
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Agreement Addendum 05
– Page 4
Second Amended and Restated Crude Oil Gathering Agreement
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Payments by
Electronic Funds
Transfer
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Midstream Co:
ABA for wire: 021000021
ABA for ACH: 111000614
Account Number: 780162447
Account Name: Laramie River DevCo
LP
Financial Institution: JP Morgan
Bank Swift: CHASUS33
Producer:
ABA/Routing Number: 021000021
Account Number: 08805135066
Account Name: Noble Energy, Inc.
Financial Institution: JP Morgan
Bank Swift:
CHASUS33
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Marketing Notice –
Midstream
Co
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Attention: Oil Marketing Department
Noble
Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO
80202
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(End of Agreement Addendum 05)
Agreement Addendum 05
– Page 5
Second Amended and Restated Crude Oil Gathering Agreement
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement in duplicate originals to be
effective as of the Effective Date.
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“Producer”
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NOBLE ENERGY, INC.
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By:
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/s/ Gary W. Willingham
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Gary W. Willingham
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Executive Vice President
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STATE OF TEXAS
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)
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) ss.
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COUNTY OF HARRIS
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)
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The foregoing instrument was acknowledged before me this
26th
day of April, 2016, by Gary W. Willingham, Executive Vice
President of Noble Energy, Inc., a Delaware corporation, on behalf of said corporation.
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/s/ Vickie L. Graham
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Notary Public in and for the State of Texas
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Agreement Addendum 05
– Signature Page 1
Second Amended and Restated Crude Oil Gathering Agreement
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“Midstream Co”
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LARAMIE RIVER DEVCO LP
By: Laramie River DevCo GP LLC
By: Noble Midstream Services, LLC
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By:
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/s/ Terry R. Gerhart
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Terry R. Gerhart
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Chief Executive Officer
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STATE OF COLORADO
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)
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) ss.
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COUNTY OF
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)
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The foregoing instrument was acknowledged before me this
26th
day of April, 2016, by Terry R. Gerhart, Chief Executive
Officer of Noble Midstream Services, LLC, a Delaware limited liability company, which is the sole member of Laramie River DevCo GP LLC, which is the general partner of Laramie River DevCo LP, a Delaware limited partnership, on behalf of said
company.
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/s/ Joanne Garner
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Notary Public in and for the State of Texas
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Agreement Addendum 05
– Signature Page 2
Second Amended and Restated Crude Oil Gathering Agreement
Exhibit 10.28.1.1
When Recorded, Mail To:
Attn: DJ Land Manager
1625 Broadway, Suite 2200
Denver, CO 80202
FORM OF
AMENDMENT 01
TO
THAT CERTAIN
SECOND AMENDED AND RESTATED
CRUDE OIL GATHERING AGREEMENT
G
REELEY
C
RESCENT
C
ONTRACT
N
UMBER
: LAGC05-OG
This AMENDMENT 01 (this “
Amendment
”) shall be effective as among Noble Energy, Inc., a Delaware corporation (the
“
Producer
”) and Laramie River DevCo LP, a Delaware limited partnership, together with its permitted successors and assigns (“
Midstream Co
”) as of September 1, 2016 (the “
Amendment Effective
Time
”). This Amendment modifies that certain Second Amended and Restated Crude Oil Gathering Agreement, effective as of March 31, 2016 (the “
Agreement
”), which has been given contract number LAGC05-OG and is comprised
of (i) that certain Second Amended and Restated Agreement Terms and Conditions Relating to Crude Oil Gathering Services (the “
Agreement Terms and Conditions
”), last updated March 31, 2016, together with (ii) that
certain Second Amended and Restated Agreement Addendum 05 (the “
Agreement Addendum
”), effective as of March 31, 2016. The Agreement Terms and Conditions, the Agreement Addendum and this Amendment shall constitute one contract
and shall be the Agreement of the Parties.
WHEREAS, capitalized terms used herein have the meanings assigned to such terms in the
Agreement Terms and Conditions.
WHEREAS, Section 16.1 of the Agreement (which appears in the Agreement Terms and Conditions)
prohibits either Party to the Agreement from assigning its rights and obligations, except that Producer may assign its rights and obligations to any Person (herein, the “
Transferee
”) to whom Producer transfers Dedicated Properties
so long as such Transferee assumes the rights and obligations of Producer with respect to such transferred Dedicated Properties.
WHEREAS,
pursuant to that certain Purchase and Sale Agreement, by and among Producer, NBL Energy Royalties, Inc. and Noble Energy WyCo, LLC, collectively as the Seller, and Synergy Resources Corporation, as Purchaser (the “
Transferee
”),
executed May 2, 2016 with an effective time of April 1, 2016 at 12:01 AM, Producer agreed to sell approximately 30,000 acres of the Dedicated Properties to the Transferee.
WHEREAS, in addition, the Parties acknowledge that a purpose of this Amendment is to make certain
technical modifications.
WHEREAS, the Parties agree and acknowledge that amendments to the Agreement Terms and Conditions set forth
herein constitute an amendment only to the Agreement and not to any other agreement in respect of crude oil gathering services to which Producer is a party.
NOW, THEREFORE, in consideration of the foregoing recitals, which are incorporated herein and the mutual agreements in the Agreement,
Midstream Co and Producer hereby agree as follows:
1.
Amendments
.
1.1
Section 1.1
of the Agreement (which appears in the Agreement Terms and Conditions) is hereby amended by amending and restating
the following defined terms in their entirety to read as follows:
“
Facility Segment
” means each segment of an Individual
System comprised of facilities beginning at a Receipt Point and ending at a Delivery Point. If an Individual System does not contain any such distinct segment, then the term Facility Segment shall be synonymous with Individual System.
“
Individual System
” means the portion of the System beginning at the Receipt Points and ending at the Delivery Points. The
Individual Systems in existence on the Effective Date are more particularly described in writing between Producer and Midstream Co. Additional Individual Systems may be added to the System from time to time in satisfaction of the needs identified by
Producer and evidenced in writing between Producer and Midstream Co.
“
Other System Fuel
” means any (a) Gas delivered
by Producer to Midstream Co pursuant to a Transaction Document between Producer and Midstream Co related to gas gathering services, or (b) Flash Gas, in each case, measured and used as fuel by Midstream Co.
1.2
Section 1.1
of the Agreement (which appears in the Agreement Terms and Conditions) is further amended by amending and
restating clauses (a) and (b) of the defined term “Dedicated Production” to read as follows: “(a) Product owned by Producer or an Affiliate of Producer and produced from a Well within the Dedication Area that is operated by
Producer or an Affiliate under the Control of Producer, (b) Reserved,”.
Amendment 01 –
Page 2
Second Amended and Restated Crude Oil Gathering Agreement
Laramie River Crude Oil Gathering Agreement
LAGC05-OG
1.3
Section 2.3(d)
of the Agreement (which appears in the Agreement Terms and
Conditions) is hereby amended and restated in its entirety to read: “(d) to pool, communitize or unitize Producer’s interests with respect to Dedicated Production”.
1.4
Section 2.4(b)(iv)
of the Agreement (which appears in the Agreement Terms and Conditions) is amended and restated in its
entirety to read: “(iv) Reserved.”.
1.5
Section 3.1(e)
of the Agreement (which appears in the Agreement Terms and
Conditions) is hereby amended by deleting the sentence that reads as follows “In the sole discretion of each Person serving as a Midstream Co under a Midstream Agreement Addendum, such Midstream Co may work with any other Midstream Co to
prepare and deliver a System Plan jointly.” and inserting in place thereof the following sentence: “Midstream Co may, in its sole discretion, work with OpCo or any of OpCo’s subsidiaries to prepare and deliver a System Plan jointly
with such other entity or entities.”
1.6
Section 3.2
of the Agreement (which appears in the Agreement Terms and
Conditions) is hereby amended by inserting the following new clause (e) immediately following clause (d) of such Section 3.2:
“(e) Substation and Interconnection Facilities. The obligations of Midstream Co hereunder to design and construct the Individual System
and to perform the Services do not include the design or construction of any substation or other interconnecting facilities required to procure electricity for the Individual System. If a substation or any other interconnecting facility is required
in order for Midstream Co to perform its obligations hereunder, Midstream Co and Producer shall enter into a separate agreement setting forth each Party’s responsibilities in connection therewith, including an allocation of responsibility for
all associated costs and expenses.”
1.7
Section 6.3(d)
of the Agreement (which appears in the Agreement Terms and
Conditions) is hereby amended and restated in its entirety to read as follows:
(d)
Other System Fuel
. Midstream Co may elect to use
Other System Fuel as fuel to operate the Individual System, or to generate electricity for the operation of the Individual System and shall account for any Other System Fuel used by Midstream Co. Producer, at its sole cost and expense, shall procure
all fuel, in addition to Other System Fuel used by Midstream Co, if any, required to operate the Individual System or to generate electricity for the operation of the Individual System and arrange for transportation of such fuel to the Individual
System.
Amendment 01 –
Page 3
Second Amended and Restated Crude Oil Gathering Agreement
Laramie River Crude Oil Gathering Agreement
LAGC05-OG
1.8 The description of the “Dedication Area” appearing in Agreement Addendum is hereby
amended and restated in its entirety to read as follows:
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Dedication Area
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The following areas within Weld County, Colorado
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Township
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Range
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Sections
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T7N
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R65W
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ALL
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T6N
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R65W
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1-5, 9-17, 20-29, 33-36
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T5N
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R67W
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13, 14, 23-26, 35, 36
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T5N
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R66W
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18-20, 25, S/2 26, 27-36
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T5N
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R65W
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1-3, E/2 4, 14
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T4N
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R67W
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1,2, 26, 27, 34, 35
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Except and excluding the wells,
leases, and other acreage described in the property exhibits attached to the Releases of Dedication.
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2.
Confidentiality
. Pursuant to
Section 17.11
of the Agreement (which appears in the
Agreement Terms and Conditions), the Parties have agreed to treat the information exchanged in connection with and the provisions of the Agreement as confidential. In addition, confidential treatment has been requested with the Securities and
Exchange Commission for the pricing terms of the Agreement, and the Parties agree to take appropriate measures to abide by the requirements imposed by the Securities and Exchange Commission to preserve such confidential treatment, if granted.
3.
Confirmation
. The provisions of the Agreement, as amended by this Amendment, shall remain in full force and effect following the
effectiveness of this Amendment. No provision of the Agreement is amended or otherwise modified hereby, except as expressly stated herein.
4.
No Waiver
. The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy
of any Party to the Agreement, nor constitute a waiver of any provision of the Agreement. On and after the Amendment Effective Time, this Amendment shall for all purposes constitute a part of the Agreement.
5.
Counterparts
. This Amendment may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be
an original instrument, but all of such counterparts shall constitute for all purposes one agreement. Any signature hereto delivered by a Party by electronic mail shall be deemed an original signature hereto.
6.
Governing Law
. This Amendment shall be governed by and construed in accordance with the laws of the State, excluding any conflicts
of law rule or principle that might refer construction of such provisions to the laws of another jurisdiction.
(Signature Pages follow)
Amendment 01 –
Page 4
Second Amended and Restated Crude Oil Gathering Agreement
Laramie River Crude Oil Gathering Agreement
LAGC05-OG
IN WITNESS WHEREOF, the Parties hereto have executed this Amendment to the Agreement in duplicate
originals to be effective as of the Amendment Effective Time.
“Producer”
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NOBLE ENERGY, INC.
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By:
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Gary W. Willingham
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Executive Vice President
|
STATE OF
TEXAS )
) ss.
COUNTY OF
HARRIS
)
The foregoing instrument was acknowledged before me this
day of
,
, by Gary W.
Willingham as Executive Vice President of Noble Energy, Inc., a Delaware corporation.
WITNESS my hand and official seal.
My commission expires:
Amendment 01 –
Signature Page 1
Second Amended and Restated Crude Oil Gathering Agreement
Laramie River Crude Oil Gathering Agreement
LAGC05-OG
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“Midstream Co”
LARAMIE RIVER DEVCO LP
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By:
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Laramie River DevCo GP LLC
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By:
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Noble Midstream Services, LLC
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By:
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Terry R. Gerhart
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Chief Executive Officer
|
STATE OF
TEXAS )
) ss.
COUNTY OF
HARRIS
)
The foregoing instrument was acknowledged before me this
day
of
,
, by Terry R.
Gerhart as Chief Executive Officer of Noble Midstream Services, LLC, which is the sole member of Laramie River DevCo GP LLC, which is the general partner of Laramie River DevCo LP, a Delaware limited partnership.
WITNESS my hand and official seal.
My commission
expires:
Amendment 01 –
Signature Page 2
Second Amended and Restated Crude Oil Gathering Agreement
Laramie River Crude Oil Gathering Agreement
LAGC05-OG
Exhibit 10.28.2
SECOND AMENDED AND RESTATED
CRUDE OIL GATHERING AGREEMENT
AGREEMENT ADDENDUM XX
OPCO’S OBLIGATIONS
This
AGREEMENT ADDENDUM XX (this “
Agreement Addendum
”) (a) shall be effective as among the Persons named below as “Producer” and “OpCo” as of the date specified below as the “Effective Date,”
(b) incorporates the Second Amended and Restated Agreement Terms and Conditions Relating to Oil Gathering Services (the “
Agreement Terms and Conditions
”), which were last amended effective as of March 31, 2016 and recorded
in the real property records of Weld County, Colorado on as
, and (c) together with the
Agreement Terms and Conditions, shall constitute one contract and shall be the Agreement of the Parties. Except as otherwise set forth herein (i) all terms shall have the meanings assigned to such terms in the Agreement Terms and Conditions,
and (ii) all references to Exhibits, Appendices, Articles, Sections, subsections and other subdivisions refer to the corresponding Exhibits, Appendices, Articles, Sections, subsections and other subdivisions of or to the Agreement Terms and
Conditions.
OpCo owns, directly or indirectly, all of the Controlling interest in Colorado River DevCo LP, Green River DevCo LP, Gunnison
River DevCo LP, and Laramie River DevCo LP (collectively, the “
Original Subsidiaries
”).
Producer desires for OpCo to
cause the Original Subsidiaries to provide the Services utilizing the System in order for Producer to obtain a consistent level of service with respect to the gathering of and other Services related to Product that are required by Producer within
the Service Area, and OpCo desires to cause the Original Subsidiaries to provide the Services to Producer, on the terms and subject to the conditions of this Agreement.
In order for Producer to obtain a consistent level of service with respect to the gathering of and other Services related to Product that are
required by Producer within the Service Area, Producer and OpCo hereby enter into this Agreement.
NOW, THEREFORE, in consideration of the
mutual agreements in this Agreement, OpCo and Producer hereby agree as follows:
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Producer
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Noble Energy, Inc., a Delaware corporation
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OpCo
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Noble Midstream Services, LLC, a Delaware limited liability company
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Effective Date
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March 31, 2016
|
Agreement Addendum XX
– Page 1
Second Amended and Restated Crude Oil Gathering Agreement
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|
|
Notices and Payments
|
|
Notice Address –
General Matters
&
Correspondence
|
|
OpCo:
Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Chief Financial Officer
John F. Bookout, IV
Telephone: (832) 639-7134
Email:
John.Bookout@nblenergy.com
Producer:
Noble Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO 80202
Attention: Director of USO Finance,
Gerald Free
Telephone: (303) 228-4174
Email:
Gerald.Free@nblenergy.com
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Notice Address –
Operational
Matters
|
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Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Chief Operating Officer
John C. Nicholson
Telephone: (281) 876-6186
Email:
John.Nicholson@nblenergy.com
Producer:
Noble Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO 80202
Attention: Vice President – DJ Business Unit
Mark Patteson
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Agreement Addendum XX
– Page 2
Second Amended and Restated Crude Oil Gathering Agreement
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Notice Address –
Invoicing
Matters
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OpCo:
OpCo
1001 Noble Energy Way
Houston, TX 77070
Attention: Director of Revenue Accounting
John Nedelka
Telephone: (281) 872-3120
Email:
John.Nedelka@nblenergy.com
Producer:
Noble Energy, Inc.
1625 Broadway, Ste 2200
Denver, CO 80202
Attention: Director of Revenue Accounting,
John Nedelka
Telephone: (303) 228-4174
Email:
john.nedelka@nblenergy.com
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Payments by
Electronic Funds
Transfer
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Producer:
ABA/Routing Number: 021000021
Account Number: 08805135066
Account Name: Noble Energy, Inc.
Financial Institution: JP
Morgan
Bank Swift: CHASUS33
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1.
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Definitions
. The term “Original Midstream Co” shall refer to each entity that is both a Midstream Co party to an Agreement related to the gathering of Product and is a subsidiary of OpCo. For the
avoidance of doubt, OpCo has no obligations or responsibilities towards or with respect to NBL Midstream Holdings LLC.
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2.
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OpCo’s Obligations
. OpCo shall cause each Original Midstream Co to comply with the obligations of such Original Midstream Co under the Midstream Agreement Addendum to which such Original Midstream Co is a
party and the Agreement Terms and Conditions. If at any time, an Original Midstream Co assigns its obligations under a Midstream Agreement Addendum to a Midstream Co Assignee, OpCo shall have no obligations under this Section 1 with respect to
such Midstream Co Assignee and shall not be liable for any performance or non-performance by such Midstream Co Assignee.
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3.
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Coordination of System Plans
. Subject to Midstream Co’s rights under
Section 13.2
, OpCo shall cause the Original Midstream Cos to coordinate their System Plans so that, taken as a whole, the
System Plans delivered by all of the Original Midstream Cos satisfy the needs for Services throughout the Service Area, except to the extent OpCo reasonably determines any portion of the Service Area should be serviced by any Midstream Co Assignee.
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Agreement Addendum XX
– Page 3
Second Amended and Restated Crude Oil Gathering Agreement
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4.
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No Other Obligations
. OpCo shall not have any of the rights or be bound by any of the terms of the Agreement Terms and Conditions, except as provided in (a) Section 1 of this Agreement Addendum, and
(b)
Article 8
and
Article 17
of the Agreement Terms and Conditions. No reference to a “Party” or the “Parties” in the Agreement Terms and Conditions shall be deemed to include a reference to OpCo.
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5.
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Enforcement by OpCo
. OpCo shall have the right to enforce all rights of each Original Midstream Cos under the Agreement Addendum to which such Original Midstream Co is a Party.
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6.
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Notices Delivered to OpCo
. All notices and other communications required under the Agreement Terms and Conditions to be delivered to an Original Midstream Co shall be deemed delivered if received by OpCo.
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(End of Agreement Addendum XX)
Agreement Addendum XX
– Page 4
Second Amended and Restated Crude Oil Gathering Agreement
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement in duplicate originals to be
effective as of the Effective Date.
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“Producer”
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NOBLE ENERGY, INC.
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By:
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/s/ Gary W. Willingham
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Gary W. Willingham
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Executive Vice President
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STATE OF TEXAS
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)
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) ss.
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COUNTY OF HARRIS
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)
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The foregoing instrument was acknowledged before me this
26th
day of April, 2016, by Gary W. Willingham, Executive Vice
President of Noble Energy, Inc., a Delaware corporation, on behalf of said corporation.
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/s/ Vickie L. Graham
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Notary Public in and for the State of Texas
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Agreement Addendum XX
– Signature Page 1
Second Amended and Restated Crude Oil Gathering Agreement
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“OpCo”
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NOBLE MIDSTREAM SERVICES, LLC
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By:
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/s/ Terry R. Gerhart
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Terry R. Gerhart
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Chief Executive Officer
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STATE OF COLORADO
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)
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) ss.
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COUNTY OF
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)
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The foregoing instrument was acknowledged before me this
26th
day of April, 2016, by Terry R. Gerhart, Chief Executive
Officer of Noble Midstream Services, LLC, a Delaware limited liability company, on behalf of said company.
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/s/ Joanne Garner
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Notary Public in and for the State of Texas
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Agreement Addendum XX
– Signature Page 2
Second Amended and Restated Crude Oil Gathering Agreement
Exhibit 10.34
FORM OF
BLANCO RIVER
DEVCO LP
FIRST AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
Dated
Effective as of [ ], 2016
TABLE OF CONTENTS
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Page
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Article I Definitions and Construction
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1
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Section 1.1
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Definitions
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1
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Section 1.2
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Construction
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10
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Article II Business Purpose and Term of Partnership
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11
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Section 2.1
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Formation
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11
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Section 2.2
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Name
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11
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Section 2.3
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Registered Office; Registered Agent; Principal Office; Other Offices
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11
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Section 2.4
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Purpose and Business
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12
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Section 2.5
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Powers
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12
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Section 2.6
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Term
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12
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Section 2.7
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Title to Property
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12
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Section 2.8
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IPO Documents
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13
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Article III Partners
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13
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Section 3.1
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Partners; Percentage Interests
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13
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Section 3.2
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Adjustments in Percentage Interests
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13
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Section 3.3
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Limitation of Liability
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13
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Article IV Capital Contributions
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13
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Section 4.1
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Capitalization of the Partnership
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13
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Section 4.2
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Additional Capital Contributions
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13
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Section 4.3
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Withdrawal of Capital; Interest
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13
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Section 4.4
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Capital Contribution Events
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14
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Section 4.5
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Failure to Contribute
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14
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Article V Allocations and Other Tax Matters
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15
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Section 5.1
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Profits
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15
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Section 5.2
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Losses
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15
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Section 5.3
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Special Allocations
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16
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Section 5.4
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Curative Allocations
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17
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Section 5.5
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Other Allocation Rules
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17
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Section 5.6
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Tax Allocations: Code Section 704(c)
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18
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Section 5.7
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Tax Elections
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18
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Section 5.8
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Tax Returns
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19
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Section 5.9
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Tax Matters Partner
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19
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Section 5.10
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Duties of Tax Matters Partner
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20
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Section 5.11
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Survival of Provisions
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21
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Article VI Distributions
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21
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Section 6.1
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Distributions of Distributable Cash
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21
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Section 6.2
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Liquidating Distributions
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21
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Section 6.3
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Distribution in Kind
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21
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i
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Article VII Books and Records
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22
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Section 7.1
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Books and Records; Examination
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22
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Section 7.2
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Reports
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22
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Article VIII Management and Voting
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22
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Section 8.1
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Management
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22
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Section 8.2
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Matters Constituting Unanimous Approval Matters
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22
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Section 8.3
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Meetings and Voting
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23
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Section 8.4
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Reliance by Third Parties
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24
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Section 8.5
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Reimbursement of the General Partner
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25
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Article IX Transfer of Partnership Interests
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25
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Section 9.1
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Restrictions on Transfers
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25
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Section 9.2
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Conditions for Admission
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25
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Section 9.3
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Allocations and Distributions
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26
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Section 9.4
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Restriction on Resignation or Withdrawal
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26
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Article X Liability, Exculpation and Indemnification
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26
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Section 10.1
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Liability for Partnership Obligations
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26
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Section 10.2
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Disclaimer of Duties and Exculpation
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26
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Section 10.3
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Indemnification
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27
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Article XI Conflicts of interest
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29
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Section 11.1
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Transactions with Affiliates
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29
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Section 11.2
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Outside Activities
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29
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Article XII Dissolution and Termination
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29
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Section 12.1
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Dissolution
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29
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Section 12.2
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Winding Up of Partnership
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30
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Section 12.3
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Compliance with Certain Requirements of Regulations; Deficit Capital Accounts
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30
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Section 12.4
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Deemed Distribution and Recontribution
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30
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Section 12.5
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Distribution of Property
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31
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Section 12.6
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Termination of Partnership
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31
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Article XIII Miscellaneous
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31
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Section 13.1
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Notices
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31
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Section 13.2
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Integration
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31
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Section 13.3
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Assignment
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31
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Section 13.4
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Parties in Interest
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31
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Section 13.5
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Counterparts
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32
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Section 13.6
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Amendment; Waiver
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32
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Section 13.7
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Severability
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32
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Section 13.8
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Governing Law
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32
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Section 13.9
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No Bill for Accounting
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32
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Section 13.10
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Waiver of Partition
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32
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Section 13.11
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Third Parties
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32
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ii
FIRST AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
BLANCO RIVER DEVCO
LP
This First Amended and Restated Agreement of Limited Partnership of Blanco River DevCo LP (the
“
Partnership
”), dated effective as of [ ], 2016 (the “
Effective Date
”), is entered into by and between Blanco River DevCo GP LLC,
a Delaware limited liability company (the “
General Partner
”), and NBL Midstream, LLC, a Delaware limited liability company (“
Limited Partner
”). In consideration of the covenants, conditions and
agreements contained herein, the parties hereto hereby agree as follows:
RECITALS:
WHEREAS
, the General Partner and Noble Midstream Services, LLC, a Delaware limited liability company (the “
Original Limited
Partner
” or “
OpCo
”), previously formed the Partnership as a limited partnership under the Delaware Revised Uniform Limited Partnership Act by filing a Certificate of Limited Partnership with the Secretary of
State of the State of Delaware effective as of June 6, 2016.
WHEREAS
, the Partnership was previously governed by that certain
Agreement of Limited Partnership dated as of June 6, 2016 (the “
Original LP Agreement
”).
WHEREAS
, pursuant
to that certain Contribution Agreement dated on or about the date hereof, the Original Limited Partner distributed its limited partner interest in the Partnership to the Limited Partner, the Limited Partner was admitted as a limited partner of the
Partnership, and immediately thereafter the Original Limited Partner ceased to be a partner of the Partnership.
WHEREAS
, the
General Partner and the Limited Partner now desire to amend and restate the Original LP Agreement in its entirety by executing this First Amended and Restated Agreement of Limited Partnership.
NOW THEREFORE
, in consideration of the covenants, conditions and agreements contained herein, the General Partner and the Limited
Partner hereby enter into this Agreement:
ARTICLE I
DEFINITIONS AND CONSTRUCTION
Section 1.1
Definitions
.
The following terms have the following meanings when used in this Agreement.
“
Adjusted Capital Account
” means, with respect to any Partner, the balance in such Partner’s Capital Account as
of the end of the relevant Allocation Year, after giving effect to the following adjustments:
(i) Credit to such Capital
Account any amounts which such Partner is deemed obligated to restore pursuant to the penultimate sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and
(ii) Debit to such Capital Account the items described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5)
and 1.704-1(b)(2)(ii)(d)(6).
The foregoing definition of Adjusted Capital Account is intended to comply with the provisions of Regulations
Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
“
Adjusted Capital Account Deficit
”
means, with respect to any Partner, the deficit balance, if any, in such Partner’s Adjusted Capital Account as of the end of the relevant Allocation Year.
“
Affiliate
” means, with respect to any Person, any other Person that directly or indirectly through one or more
intermediaries controls, is controlled by or is under common control with, the Person in question. As used herein, the term “control” means the possession, direct or indirect, of the power to direct or cause the direction of the management
and policies of a Person, whether through ownership of voting securities, by contract or otherwise.
“
Agreement
”
means this First Amended and Restated Agreement of Limited Partnership of Blanco River DevCo LP, as it may be amended, supplemented or restated from time to time.
“
Allocation Year
” means (a) each calendar year ending on December 31st or (b) any portion thereof for which the
Partnership is required to allocate Profits, Losses and other items of Partnership income, gain, loss or deduction pursuant to
Article V
.
“
Applicable Law
” means any applicable statute, law, regulation, ordinance, rule, judgment, rule of law, order, decree,
permit, approval, concession, grant, franchise, license, agreement, requirement or other governmental restriction or any similar form of decision of, or any provision or condition of any permit, license or other operating authorization issued under
any of the foregoing by or any determination by any Governmental Authority having or asserting jurisdiction over the matter or matters in question, whether now or hereafter in effect and in each case as amended (including all of the terms and
provisions of the common law of such Governmental Authority), as interpreted and enforced at the time in question.
“
Call
Notice
” is defined in
Section 4.4(a)
.
“
Capital Account
” means, with respect to any Partner,
the Capital Account established and maintained for such Partner in accordance with the following provisions:
(i) To each
Partner’s Capital Account there shall be credited (A) such Partner’s Capital Contributions, (B) such Partner’s distributive share of Profits and any items in the nature of income or gain that are specially allocated to such Partner
pursuant to
Section 5.3
or
Section 5.4
and (C) the amount of any Liabilities of the Partnership assumed by such Partner or that are secured by any Property distributed to such Partner;
2
(ii) To each Partner’s Capital Account there shall be debited (A) the amount
of cash and the Gross Asset Value of any Property distributed to such Partner pursuant to any provision of this Agreement, (B) such Partner’s distributive share of Losses and any items in the nature of deduction, expense or loss which are
specially allocated to such Partner pursuant to
Section 5.3
or
Section 5.4
and (C) the amount of any Liabilities of such Partner assumed by the Partnership or that are secured by any Property contributed by such Partner to the
Partnership;
(iii) In the event a Partnership Interest is transferred in accordance with the terms of this Agreement, the
transferee shall succeed to the Capital Account of the transferor to the extent it relates to the transferred interest; and
(iv) In determining the amount of any Liability for purposes of subparagraphs (i) and (ii) above there shall be taken into
account Code Section 752(c) and any other applicable provisions of the Code and Regulations.
The foregoing provisions and the other provisions of this
Agreement relating to the maintenance of Capital Accounts are intended to comply with Regulations Section 1.704-1(b) and shall be interpreted and applied in a manner consistent with such Regulations. In the event the Tax Matters Partner shall
determine in good faith and on a commercially reasonable basis that it is prudent to modify the manner in which the Capital Accounts, or any debits or credits thereto, are computed in order to comply with such Regulations, the Tax Matters Partner
may amend this Agreement without the consent of any other Partner notwithstanding any other provision of this Agreement (including
Section 13.6
) to make such modification;
provided
that the Tax Matters Partner shall promptly give each
other Partner written notice of such modification. The Tax Matters Partner also shall, in good faith and on a commercially reasonable basis, (A) make any adjustments to the Capital Accounts that are necessary or appropriate to maintain equality
between the aggregate Capital Accounts of the Partners and the amount of capital reflected on the Partnership’s balance sheet, as computed for book purposes, in accordance with Regulations Section 1.704-1(b)(2)(iv)(q) and (B) make any
appropriate modifications to the Capital Accounts in the event unanticipated events might otherwise cause this Agreement not to comply with Regulations Section 1.704-1(b).
“
Capital Contributions
” means, with respect to any Partner, (i) the amount of cash, cash equivalents or the initial
Gross Asset Value of any Property (other than cash) contributed or deemed contributed to the Partnership by such Partner or (ii) current distributions that a Partner is entitled to receive but otherwise waives.
“
Capital Lease
” means any lease of (or other arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and accounted for as a capital lease on a consolidated balance sheet of the Partnership and its subsidiaries in accordance with GAAP.
“
Certificate of Limited Partnership
” means the Certificate of Limited Partnership of the Partnership filed with the
Secretary of State of the State of Delaware as referenced in
Section 2.1
, as such Certificate of Limited Partnership may be amended, supplemented or restated from time to time.
3
“
Code
” means the Internal Revenue Code of 1986, as amended and in effect
from time to time. Any reference herein to a specific section or sections of the Code shall be deemed to include a reference to any corresponding provision of any successor law.
“
Commercial Agreements
” means those certain (i) Texas Crude Oil Gathering Agreement, effective as of September 1,
2016, consisting of the Texas Agreement Terms and Conditions Relating to Crude Oil Gathering Services, and each Agreement Addendum thereto executed from time to time by Rosetta Resources Operating LP or its Affiliates and OpCo or one or more of its
Subsidiaries and (ii) Texas Produced Water Services Agreement, effective as of September 1, 2016, consisting of the Texas Agreement Terms and Conditions Relating to Produced Water Services, and each Agreement Addendum thereto executed from time to
time by Rosetta Resources Operating LP or its Affiliates and OpCo or one or more of its Subsidiaries.
“
Default Interest
Amount
” is defined in
Section 4.5(c)
.
“
Default Interest Rate
” means the lesser of (a) eight
percent (8%) per annum and (b) the maximum rate of interest permitted by Applicable Law.
“
Delaware Act
” means the
Delaware Revised Uniform Limited Partnership Act, 6 Del. C. § 17-101
et seq
., as amended, supplemented or restated from time to time, and any successor to such statute.
“
Delinquent Partner
” is defined in
Section 4.5(a)
.
“
Depreciation
” means, for each Allocation Year, an amount equal to the depreciation, amortization or other cost
recovery deduction allowable with respect to an asset for such Allocation Year for federal income tax purposes, except that (i) if the Gross Asset Value of an asset differs from its adjusted tax basis for federal income tax purposes at the beginning
of such Allocation Year and such difference is being eliminated by use of the “remedial allocation method” as defined in Regulations Section 1.704-3(d), Depreciation for such Allocation Year shall equal the amount of book basis recovered
for such period under the rules prescribed in Regulations Section 1.704-3(d) and (ii) with respect to any other asset whose Gross Asset Value differs from its adjusted tax basis for federal income tax purposes at the beginning of such Allocation
Year, Depreciation shall be an amount that bears the same ratio to such beginning Gross Asset Value as the federal income tax depreciation, amortization or other cost recovery deduction for such Allocation Year bears to such beginning adjusted tax
basis;
provided
,
however
, that if the adjusted basis for federal income tax purposes of an asset at the beginning of such Allocation Year is zero, Depreciation shall be determined with reference to such beginning Gross Asset Value
using any reasonable method selected by the General Partner.
“
Distributable Cash
” means, with respect to any
Quarter: (i) the sum of all cash and cash equivalents of the Partnership and its Subsidiaries on hand at the end of such Quarter; less (ii) the amount of any cash reserves established by the General Partner to (A) provide for the proper conduct of
the business of the Partnership and its Subsidiaries (including reserves for future capital or operating expenditures and for anticipated future credit needs of the Partnership and its Subsidiaries) subsequent to such Quarter; and (B) comply with
Applicable Law or any loan agreement, security agreement, mortgage, debt instrument or other agreement or obligation to which the Partnership or any of its Subsidiaries is a party or by which any of them is bound or any of their respective assets
are subject.
4
“
Effective Date
” is defined in the introductory paragraph.
“
Fiscal Year
” means a calendar year ending December 31.
“
GAAP
” means generally accepted accounting principles in the United States.
“
General Partner
” is defined in the introductory paragraph,
provided
that such term shall also include such
entity’s successors and permitted assigns that are admitted to the Partnership as general partner and any additional general partner of the Partnership, each in its capacity as general partner of the Partnership.
“
General Partner Interest
” means the equity interest of the General Partner in the Partnership (in its capacity as a
general partner without reference to any Limited Partner Interest held by it) and includes any and all rights, powers and benefits to which the General Partner is entitled as provided in this Agreement, together with all obligations of the General
Partner to comply with the terms and provisions of this Agreement.
“
Governmental Authority
” means any federal,
state, local or foreign government or any provincial, departmental or other political subdivision thereof, or any entity, body or authority exercising executive, legislative, judicial, regulatory, administrative or other governmental functions or
any court, department, commission, board, bureau, agency, instrumentality or administrative body of any of the foregoing.
“
Gross Asset Value
” means, with respect to any asset, the asset’s adjusted basis for federal income tax purposes,
except as follows:
(i) The initial Gross Asset Value of any Property contributed by a Partner to the Partnership shall be
the gross fair market value of such asset as agreed to by each Partner or, in the absence of any such agreement, as determined by the General Partner;
(ii) The Gross Asset Values of all items of Property shall be adjusted to equal their respective fair market values as
determined by the General Partner as of the following times: (A) the acquisition of an additional interest in the Partnership by any new or existing Partner in exchange for more than a de minimis Capital Contribution, (B) the distribution by the
Partnership to a Partner of more than a de minimis amount of Property as consideration for an interest in the Partnership, (C) the issuance of additional Partnership Interests as consideration for the provision of services, (D) the liquidation of
the Partnership within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g) (other than pursuant to Section 708(b)(1)(B) of the Code), (E) the issuance of a Noncompensatory Option, or (F) any other event to the extent determined by the Partners
to be necessary to properly reflect the Gross Asset Values in accordance with the standards set forth in Regulations Section 1.704-1(b)(2)(iv)(q);
provided
,
however
, that in the event of the issuance of an interest in the Partnership
pursuant to the exercise of a Noncompensatory Option where the right to share in Partnership capital represented by the Partnership interest differs from the consideration paid to acquire and exercise the
5
Noncompensatory Option, the Gross Asset Value of each Property immediately after the issuance of the Partnership interest shall be adjusted upward or downward to reflect any unrealized gain or
unrealized loss attributable to the Property and the Capital Accounts of the Partners shall be adjusted in a manner consistent with Regulations Section 1.704-1(b)(2)(iv)(s); and
provided
further
,
however
, if any Noncompensatory
Options are outstanding upon the occurrence of an event described in this paragraph (ii)(A) through (ii)(F), the Partnership shall adjust the Gross Asset Values of its properties in accordance with Treasury Regulations Sections 1.704-1(b)(2)(iv)(f)
and 1.704-1(b)(2)(iv)(h)(2);
(iii) The Gross Asset Value of any item of Property distributed to any Partner shall be
adjusted to equal the fair market value of such item on the date of distribution as determined by the General Partner; and
(iv) The Gross Asset Value of each item of Property shall be increased (or decreased) to reflect any adjustments to the
adjusted basis of such assets pursuant to Code Sections 734(b) or 743(b), but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m) and subparagraph (vi)
of the definition of Profits and Losses;
provided
,
however
, that Gross Asset Values shall not be adjusted pursuant to this subparagraph (iv) to the extent that an adjustment pursuant to subparagraph (ii) is required in connection with
a transaction that would otherwise result in an adjustment pursuant to this subparagraph (iv).
If the Gross Asset Value of an asset has been determined
or adjusted pursuant to subparagraph (i), subparagraph (ii) or subparagraph (iv), such Gross Asset Value shall thereafter be adjusted by the Depreciation taken into account with respect to such asset for purposes of computing Profits and Losses.
“
Guarantees
” by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly
guaranteeing any Indebtedness or other obligation of any other Person or in any manner providing for the payment of any Indebtedness or other obligation of any other Person or otherwise protecting the holder of such Indebtedness or other obligations
against loss (whether arising by virtue of organizational agreements, by obtaining letters of credit, by agreement to keep-well, to take-or-pay or to purchase assets, goods, securities or services, or otherwise);
provided
that the term
“Guarantee” shall not include endorsements for collection or deposit in the ordinary course of business.
“
Indebtedness
” of any Person means, without duplication, (i) all obligations of such Person for borrowed money or with
respect to deposits or advances of any kind, (ii) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (iii) all obligations of such Person upon which interest charges are customarily paid, (iv) all
obligations of such Person under conditional sale or other title retention agreements relating to property or assets purchased by such Person, (v) all obligations of such Person issued or assumed as the deferred purchase price of property or
services (excluding trade accounts payable, trade advertising and accrued obligations), (vi) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any
lien on property owned or acquired by such Person, whether or not the obligations secured
6
thereby have been assumed, (vii) all Guarantees by such Person of Indebtedness of others, (viii) all Capital Lease obligations of such Person, (ix) all obligations of such Person in respect of
interest rate protection agreements, foreign currency exchange agreements or other interest rate hedging arrangements and (x) all obligations of such Person as an account party in respect of letters of credit and bankers’ acceptances. The
Indebtedness of any Person shall include the Indebtedness of any partnership in which such Person is a general partner, other than to the extent that the instrument or agreement evidencing such Indebtedness expressly limits the Liability of such
Person in respect thereof.
“
Indemnitee
” means (i) any Partner, (ii) any Person who is or was an Affiliate of a
Partner, (iii) any Person who is or was a member, manager, partner, director, officer, fiduciary or trustee of a Partner or any Affiliate of a Partner, (iv) any Person who is or was serving at the request of a Partner or any Affiliate of a Partner
as a member, manager, partner, director, officer, fiduciary or trustee of another Person;
provided
, that a Person shall not be an Indemnitee by reason of providing, on a fee-for-services basis, trustee, fiduciary or custodial services and (v)
any Person the General Partner designates as an “Indemnitee” for purposes of this Agreement because such Person’s status, service or relationship exposes such Person to potential claims, demands, suits or proceedings relating to the
business and affairs of the Partnership and its Subsidiaries.
“
IPO Date
” means the date of the closing of the
initial public offering of common units representing limited partner interests in NBLX.
“
Liability
” means any
Indebtedness, obligation or other liability, whether arising under Applicable Law, contract or otherwise, known or unknown, fixed or contingent, real or potential, tangible or intangible, now existing or hereafter arising.
“
Limited Partner
” is defined in the introductory paragraph,
provided
that such term shall also include such
entity’s successors and permitted assigns that are admitted as a limited partner of the Partnership and each additional Person who becomes a limited partner of the Partnership pursuant to the terms of this Agreement, in each case, in such
Person’s capacity as a limited partner of the Partnership.
“
Limited Partner Interest
” means an equity
interest of a Limited Partner in the Partnership (in its capacity as a limited partner without reference to any General Partner Interest held by it) and includes any and all benefits to which such Limited Partner is entitled as provided in this
Agreement, together with all obligations of such Limited Partner pursuant to the terms and provisions of this Agreement.
“
Make-Up Contribution
” is defined in
Section 4.5(c)
.
“
Minimum Gain
” is defined in Regulations Sections 1.704-2(b)(2) and 1.704-2(d).
“
NBLX
” means Noble Midstream Partners LP, a Delaware limited partnership.
“
NBLX Partnership Agreement
” means the First Amended and Restated Agreement of Limited Partnership of NBLX,
substantially in the form attached as an exhibit to NBLX’s registration statement on Form S-1 (file no. 333-207560), that will be entered into in connection with NBLX’s initial public offering, as it may be amended, modified, supplemented
or restated from time to time, or any successor agreement.
7
“
NDP Amount
” is defined in
Section 4.5(b)
.
“
Noble
” means Noble Energy, Inc., a Delaware corporation.
“
Noncompensatory Option
” is defined in Regulations Section 1.721-2(f).
“
Nonrecourse Deductions
” is defined in Regulations Section 1.704-2(b)(1) and 1.704-2(c).
“
Nonrecourse Liability
” is defined in Regulations Section 1.704-2(b)(3).
“
Original LP Agreement
” is defined in the Recitals.
“
Partner
” means a General Partner or a Limited Partner.
“
Partner Nonrecourse Debt
” is defined in Regulations Section 1.704-2(b)(4).
“
Partner Nonrecourse Debt Minimum Gain
” means an amount, with respect to each Partner Nonrecourse Debt, equal to the
Minimum Gain that would result if such Partner Nonrecourse Debt were treated as a Nonrecourse Liability, determined in accordance with Regulations Section 1.704-2(i)(3).
“
Partner Nonrecourse Deductions
” is defined in Regulations Sections 1.704-2(i)(1) and 1.704-2(i)(2).
“
Partnership
” is defined in the introductory paragraph.
“
Partnership Interest
” means any equity interest, including any class or series of equity interest, in the
Partnership, which shall include any Limited Partner Interests and the General Partner Interest.
“
Percentage
Interest
” means, with respect to any Partner, the percentage interest set forth opposite such Partner’s name on
Exhibit A
attached hereto. In the event any Partnership Interest is transferred in accordance with the
provisions of this Agreement, the transferee of such interest shall succeed to the Percentage Interest of its transferor to the extent it relates to the transferred interest.
“
Person
” means an individual or a corporation, firm, limited liability company, partnership, joint venture, trust,
estate, unincorporated organization, association, Governmental Authority or political subdivision thereof or other entity.
“
Profits
” and “
Losses
” mean, for each Allocation Year, an amount equal to the
Partnership’s taxable income or loss for such Allocation Year, determined in accordance with Code Section 703(a) (for this purpose, all items of income, gain, loss or deduction required to be stated separately pursuant to Code Section 703(a)(1)
shall be included in taxable income or loss), with the following adjustments (without duplication):
(i) The Partnership
shall be treated as owning directly its proportionate share (as determined by the General Partner) of any other partnership, limited liability company, unincorporated business or other entity classified as a partnership or disregarded entity for
U.S. federal income tax purposes of which the Partnership is, directly or indirectly, a partner, member or other equity-holder;
8
(ii) Any income of the Partnership that is exempt from federal income tax and not
otherwise taken into account in computing Profits or Losses pursuant to this definition of Profits and Losses shall be added to such taxable income or loss;
(iii) Any expenditures of the Partnership described in Code Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B)
expenditures pursuant to Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing Profits or Losses pursuant to this definition of Profits and Losses, shall be subtracted from such taxable income or loss;
(iv) In the event the Gross Asset Value of any item of Property is adjusted pursuant to subparagraph (ii) or subparagraph (iii)
of the definition of Gross Asset Value, the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the Gross Asset Value of the item of Property) or an item of loss (if the adjustment decreases the Gross Asset
Value of the item of Property) from the disposition of such asset and shall be taken into account for purposes of computing Profits or Losses;
(v) Gain or loss resulting from any disposition of any Property with respect to which gain or loss is recognized for federal
income tax purposes shall be computed by reference to the Gross Asset Value of the item of Property disposed of, notwithstanding that the adjusted tax basis of such Property differs from its Gross Asset Value;
(vi) In lieu of the depreciation, amortization and other cost recovery deductions taken into account in computing such taxable
income or loss, there shall be taken into account Depreciation for such Allocation Year, computed in accordance with the definition of Depreciation;
(vii) To the extent an adjustment to the adjusted tax basis of any item of Property pursuant to Code Sections 734(b) or 743(b)
is required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital Accounts as a result of a distribution other than in liquidation of a Partner’s Partnership Interest, the amount of such
adjustment shall be treated as an item of gain (if the adjustment increases the basis of the item of Property) or loss (if the adjustment decreases such basis) from the disposition of such item of Property and shall be taken into account for
purposes of computing Profits or Losses; and
(viii) Notwithstanding any other provision of this definition, any items that
are specially allocated pursuant to
Section 5.3
or
Section 5.4
shall not be taken into account in computing Profits or Losses.
9
The amounts of the items of Partnership income, gain, loss or deduction available to be specially allocated
pursuant to
Section 5.3
and
Section 5.4
shall be determined by applying rules analogous to those set forth in subparagraph (i) through subparagraph (viii) above. For the avoidance of doubt, any guaranteed payment that accrues with
respect to an Allocation Year will be treated as an item of deduction of the Partnership for purposes of computing Profits and Losses in accordance with the provisions of Regulations Section 1.707-1(c).
“
Property
” means all real and personal property acquired by the Partnership, including cash, and any improvements
thereto, and shall include both tangible and intangible property.
“
Quarter
” means, unless the context requires
otherwise, a fiscal quarter of the Partnership or, with respect to the fiscal quarter of the Partnership which includes the IPO Date, the portion of such fiscal quarter from and after the IPO Date.
“
Regulations
” means the Income Tax Regulations, including Temporary Regulations, promulgated under the Code, as such
regulations are amended from time to time.
“
Regulatory Allocations
” is defined in
Section 5.4
.
“
Representative
” is defined in
Section 8.3(a)
.
“
Required Contribution
” is defined in
Section 4.4(a)
.
“
Subsidiary
” means, with respect to any Person, (a) a corporation of which more than 50% of the voting power of shares
entitled (without regard to the occurrence of any contingency) to vote in the election of directors or other governing body of such corporation is owned, directly or indirectly, at the date of determination, by such Person, by one or more
Subsidiaries of such Person or a combination thereof, (b) a partnership (whether general or limited) in which such Person or a Subsidiary of such Person is, at the date of determination, a general or limited partner of such partnership, but only if
more than 50% of the general partner interests of such partnership is owned, directly or indirectly, at the date of determination, by such Person, by one or more Subsidiaries of such Person or a combination thereof or (c) any other Person (other
than a corporation or a partnership) in which such Person, one or more Subsidiaries of such Person, or a combination thereof, directly or indirectly, at the date of determination, has (i) at least a majority ownership interest or (ii) the power to
elect or direct the election of a majority of the directors or other governing body of such Person.
“
Tax Matters
Partner
” is defined in
Section 5.9(a)
.
“
Transaction Documents
” is defined in the NBLX
Partnership Agreement.
“
Unanimous Approval Matter
” is defined in
Section 8.2
.
Section 1.2
Construction
.
Unless the context requires otherwise: (a) any pronoun used in this Agreement shall include the
corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa; (b) references to Articles and Sections refer to Articles and Sections of this Agreement; (c) the terms
“include,” “includes,” “including” or words of like import shall be deemed to be followed by the
10
words “without limitation” and (d) the terms “hereof,” “herein” or “hereunder” refer to this Agreement as a whole and not to any particular provision of
this Agreement. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. The General Partner has the power to construe and
interpret this Agreement and to act upon any such construction or interpretation. To the fullest extent permitted by law, any construction or interpretation of this Agreement by the General Partner, any action taken pursuant thereto and any
determination made by the General Partner in good faith shall, in each case, be conclusive and binding on all Limited Partners, each other Person who acquires an interest in a Partnership Interest and all other Persons for all purposes.
ARTICLE II
BUSINESS
PURPOSE AND TERM OF PARTNERSHIP
Section 2.1
Formation
.
The Partnership was previously formed as a limited
partnership by the filing of the Certificate of Limited Partnership with the Secretary of State of the State of Delaware pursuant to the provisions of the Delaware Act and the execution of the Original LP Agreement. This Agreement amends and
restates the Original LP Agreement in its entirety. Except as expressly provided in this Agreement, the rights, duties, liabilities and obligations of the Partners and the administration, dissolution and termination of the Partnership shall be
governed by the Delaware Act. All Partnership Interests shall constitute personal property of the owner thereof for all purposes.
Section 2.2
Name
.
The name of the Partnership shall be “Blanco River DevCo LP”. Subject to Applicable Law, the
Partnership’s business may be conducted under any other name or names as determined by the General Partner, including the name of the General Partner. The words “Limited Partnership,” “L.P.,” “Ltd.” or similar
words or letters shall be included in the Partnership’s name where necessary for the purpose of complying with the laws of any jurisdiction that so requires. The General Partner may, without the consent of any Limited Partner, amend this
Agreement and the Certificate of Limited Partnership to change the name of the Partnership at any time and from time to time and shall notify the Limited Partners of such change in the next regular communication to the Limited Partners.
Section 2.3
Registered Office; Registered Agent; Principal Office; Other Offices
.
Unless and until changed by the General
Partner, the registered office of the Partnership in the State of Delaware shall be located at 1209 Orange Street, Wilmington, New Castle County, Delaware 19801, and the registered agent for service of process on the Partnership in the State of
Delaware at such registered office shall be The Corporation Trust Company. The principal office of the Partnership shall be located at 1001 Noble Energy Way, Houston, Texas 77070, or such other place as the General Partner may from time to
time designate by notice to the Limited Partners. The Partnership may maintain offices at such other place or places within or outside the State of Delaware as the General Partner determines to be necessary or appropriate. The address of
the General Partner shall be the address set forth on
Exhibit A
, or such other place as the General Partner may from time to time designate by notice to the Limited Partners. The address of the initial Limited Partner shall be the
address set forth on
Exhibit A
, or such other place as the initial Limited Partner may from time to time designate by notice to the General Partner. The address of each additional Limited Partner shall be the place such Limited Partner
designates from time to time by notice to the General Partner.
11
Section 2.4
Purpose and Business
.
The purpose and nature of the business to be
conducted by the Partnership shall be to engage directly or indirectly in any business activity that is approved by the General Partner and that lawfully may be conducted by a limited partnership organized pursuant to the Delaware Act;
provided
,
however
, that the General Partner shall not cause the Partnership to engage, directly or indirectly, in any business activity that the General Partner determines would be reasonably likely to cause the Partnership to be
treated as an association taxable as a corporation or otherwise taxable as an entity for U.S. federal income tax purposes. To the fullest extent permitted by law, the General Partner shall have no duty or obligation to propose or approve the
conduct by the Partnership of any business and may decline to do so free of any fiduciary duty or obligation whatsoever to the Partnership, any Limited Partner or any other Person bound by this Agreement and, in declining to so propose or approve,
shall not be required to act in good faith or pursuant to any other standard imposed by this Agreement, any other agreement contemplated hereby or under the Delaware Act or any other law, rule or regulation or at equity, and the General Partner in
determining whether to propose or approve the conduct by the Partnership of any business shall be permitted to do so in its sole and absolute discretion.
Section 2.5
Powers
.
The Partnership shall be empowered to do any and all acts and things necessary, appropriate, proper,
advisable, incidental to or convenient for the furtherance and accomplishment of the purposes and business described in
Section 2.4
and for the protection and benefit of the Partnership.
Section 2.6
Term
.
The term of the Partnership commenced upon the filing of the Certificate of Limited Partnership in
accordance with the Delaware Act and shall continue until the dissolution of the Partnership in accordance with the provisions of
Article XII
. The existence of the Partnership as a separate legal entity shall continue until the
cancellation of the Certificate of Limited Partnership as provided in the Delaware Act.
Section 2.7
Title to
Property
.
Title to Property, whether real, personal or mixed and whether tangible or intangible, shall be deemed to be owned by the Partnership as an entity, and no Partner, individually or collectively, shall have any ownership
interest in such Property or any portion thereof. Title to any or all of the Property may be held in the name of the Partnership, the General Partner, one or more Affiliates of the General Partner or one or more nominees of the General Partner
or its Affiliates, as the General Partner may determine. The General Partner hereby declares and warrants that any Property for which record title is held in the name of the General Partner or one or more Affiliates of the General Partner or
one or more nominees of the General Partner or its Affiliates shall be held by the General Partner or such Affiliate or nominee for the use and benefit of the Partnership in accordance with the provisions of this Agreement;
provided
,
however
, that the General Partner shall use reasonable efforts to cause record title to such assets (other than those assets in respect of which the General Partner determines that the expense and difficulty of conveyancing makes transfer of
record title to the Partnership impracticable) to be vested in the Partnership or one or more of the Partnership’s designated Affiliates as soon as reasonably practicable;
provided
,
further
, that, prior to the withdrawal or
removal of the General Partner or as soon thereafter as practicable, the General Partner shall use
12
reasonable efforts to effect the transfer of record title to the Partnership and, prior to any such transfer, will provide for the use of such assets in a manner satisfactory to any successor
General Partner. All Property shall be recorded as the property of the Partnership in its books and records, irrespective of the name in which record title to such Property is held.
Section 2.8
IPO Documents
.
The Partnership is hereby authorized to execute, deliver and perform, and the General
Partner on behalf of the Partnership is hereby authorized to execute and deliver (and any execution, delivery or performance by the Partnership or the General Partner prior to the date hereof is hereby ratified and approved), the Commercial
Agreements to which it is a party, the Transaction Documents to which it is a party and all documents, agreements, certificates or other instruments contemplated thereby or related thereto, all without any further act, vote or approval of the
General Partner, any Limited Partner or any other Person notwithstanding any other provision of this Agreement.
ARTICLE III
PARTNERS
Section 3.1
Partners; Percentage Interests
.
The names of the Partners, their respective Percentage Interests, and the type of Partnership Interest held by each Partner are set forth on
Exhibit A
to this Agreement.
Section 3.2
Adjustments in Percentage Interests
.
The respective Percentage Interests of the Partners shall be
adjusted (a) at the time of any transfer of all or a portion of such Partner’s Partnership Interest pursuant to
Section 9.1
, (b) at the time of the issuance of additional Partnership Interests pursuant to
Section 8.2(b)
and (c) at
the time of the admission of each new Partner in accordance with this Agreement, in each case to take into account such transfer, issuance or admission of a new Partner. The General Partner is authorized to amend
Exhibit
A
to this Agreement to reflect any such adjustment without the consent of any other Partner.
Section
3.3
Limitation of Liability
.
The Limited Partners shall have no liability under this Agreement except as expressly provided in this Agreement or the Delaware Act.
ARTICLE IV
CAPITAL
CONTRIBUTIONS
Section 4.1
Capitalization of the Partnership
.
Subject to
Section 8.2
, the Partnership
is authorized to issue two classes of Partnership Interests. The Partnership Interests shall be designated as General Partner Interests and Limited Partner Interests, each having such rights, powers, preferences and designations as set forth in
this Agreement.
Section 4.2
Additional Capital Contributions
.
The Partners shall make additional Capital
Contributions to the Partnership at such times and in such amounts as determined by the Partners in accordance with this Agreement.
Section 4.3
Withdrawal of Capital; Interest
.
No Partner may withdraw capital or receive any distributions from the
Partnership except as specifically provided herein. No interest shall accrue or be payable by the Partnership on any Capital Contributions.
13
Section 4.4
Capital Contribution Events.
(a) Notwithstanding anything in
Section 4.2
to the contrary, whenever the General Partner determines in good faith that additional
Capital Contributions in cash from the Partners are necessary to fund the Partnership’s operations, the General Partner may issue a notice to each Partner (a “
Call Notice
”) for an additional Capital Contribution by each
Partner (a “
Required Contribution
”) in an amount equal to such Partner’s pro rata portion (based on the Percentage Interests of the Partners) of the aggregate additional Capital Contribution determined to be necessary by
the General Partner not less than fifteen (15) days prior to the date the General Partner determines such additional Capital Contributions shall be made by the Partners.
(b) All Call Notices shall be expressed in U.S. dollars and shall state the date on which payment is due and the bank(s) or account(s) to
which payment is to be made. Each Call Notice shall specify in reasonable detail the purpose(s) for which such Required Contribution is required and the amount of the Required Contribution to be made by each Partner pursuant to such Call
Notice. Each Partner shall contribute its Required Contribution within five (5) Business Days of the date of delivery of the relevant Call Notice. The Partnership shall use the proceeds of such Required Contributions exclusively for the
purpose specified in the relevant Call Notice.
Section 4.5
Failure to Contribute
.
(a) If a Partner fails to contribute all or any portion of a Required Contribution that such Partner (a “
Delinquent
Partner
”) is required to make as provided in this Agreement, then, while such Partner is a Delinquent Partner, each non-Delinquent Partner may (but shall have no obligation to) elect to fund all or any portion of the Delinquent
Partner’s Required Contribution as a Capital Contribution pursuant to this
Section 4.5
. If a non-Delinquent Partner so desires to fund such amount, such non-Delinquent Partner shall so notify each of the other non-Delinquent
Partners, who shall have five (5) days thereafter to elect to participate in such funding.
(b) The portion that each participating
non-Delinquent Partner may fund as a Capital Contribution pursuant to this
Section 4.5
(the “
NDP Amount
”) shall be equal to the product of (x) the delinquent amount of such Required Contribution multiplied by (y) a
fraction, the numerator of which shall be the Percentage Interest then held by such participating non-Delinquent Partner and the denominator of which shall be the aggregate Percentage Interest held by all such participating non-Delinquent Partners;
provided
, that if any participating non-Delinquent Partner elects to fund less than its full allocation of such amount, the fully participating non-Delinquent Partners shall be entitled to take up such shortfall (allocated, as necessary,
based on their respective Percentage Interests). Upon such funding as a Capital Contribution, the Partnership Interest and Percentage Interest of each Partner shall be appropriately adjusted to reflect all such funding (based on total Capital
Contributions).
(c) Notwithstanding anything in this
Section 4.5
to the contrary, the Delinquent Partner may cure such delinquency
(i) by contributing its Required Contribution prior to the Capital Contribution being made by another Partner or (ii) on or before the sixtieth (60th) day following the date that the participating non-Delinquent Partner(s) satisfied the Required
Contribution, by making a Capital Contribution to the Partnership in an amount equal to the
14
Required Contribution (a “
Make-Up Contribution
”) and paying to each participating non-Delinquent Partner an amount equal to its respective NDP Amount multiplied by the
Default Interest Rate for the period from the date such participating non-Delinquent Partner funded its NDP Amount to the date that the Delinquent Partner makes its Make-Up Contribution (the “
Default Interest Amount
”). If a
Delinquent Partner cures its delinquency pursuant to
Section 4.5(c)(ii)
by making a Make-Up Contribution and paying the Default Interest Amount, then (A) first, the Partnership shall distribute to each existing Partner that is a participating
non-Delinquent Partner the NDP Amount that such participating non-Delinquent Partner funded pursuant to
Section 4.5(b)
, (B) second, the respective Capital Accounts and Percentage Interests of the Partners shall be adjusted with all necessary
increases or decreases to return the Partners’ Capital Accounts and Percentage Interests status quo ante application of
Section 4.5(b)
and (C) third, the Percentage Interest and Partnership Interests of each Partner shall be
appropriately adjusted to reflect the Make-Up Contribution (based on total Capital Contributions). If the delinquency is remedied (i) by the Delinquent Partner making its Required Contribution or Make-Up Contribution pursuant to this
Section
4.5(c)
or (ii) by funding by the non-Delinquent Partner(s) as a Capital Contribution pursuant to
Section 4.5(b)
, the Delinquent Partner shall no longer be deemed to be a Delinquent Partner with respect to the unfunded Required
Contribution.
ARTICLE V
ALLOCATIONS AND OTHER TAX MATTERS
Section 5.1
Profits
. After giving effect to the special allocations set forth in
Section 5.3
and
Section 5.4
,
and any allocation of Profits set forth in
Section 5.2(b)
, Profits for any Allocation Year shall be allocated among the Partners in proportion to their respective Percentage Interests.
Section 5.2
Losses
.
(a) After giving effect to the special allocations set forth in
Section 5.3
and
Section 5.4
, Losses for any Allocation Year
shall be allocated among the Partners in proportion to their respective Percentage Interests.
(b) The Losses allocated pursuant to
Section 5.2(a)
shall not exceed the maximum amount of Losses that can be so allocated without causing any Partner to have an Adjusted Capital Account Deficit at the end of any Allocation Year. In the event some but not all of the
Partners would have Adjusted Capital Account Deficits as a result of an allocation of Losses pursuant to
Section 5.2(a)
, Losses that would otherwise be allocated to a Partner pursuant to
Section 5.2(a)
but for the limitation set forth
in this
Section 5.2(b)
shall be allocated to the remaining Partners in proportion to their relative Percentage Interests. All remaining Losses in excess of the limitation set forth in this
Section 5.2(b)
shall be allocated to the
General Partner. Profits for any Allocation Year subsequent to an Allocation Year for which the limitation set forth in this
Section 5.2(b)
was applicable shall be allocated (i) first, to reverse any Losses allocated to the General
Partner pursuant to the third sentence of this
Section 5.2(b)
and (ii) second, to reverse any Losses allocated to the Partners pursuant to the second sentence of this
Section 5.2(b)
and in proportion to how such Losses were allocated.
15
Section 5.3
Special Allocations
.
The following special allocations shall be
made in the following order:
(a)
Minimum Gain Chargeback
. Except as otherwise provided in Regulations Section 1.704-2(f),
notwithstanding any other provision of this
Article V
, if there is a net decrease in Minimum Gain during any Allocation Year, each Partner shall be specially allocated items of Partnership income and gain for such Allocation Year (and, if
necessary, subsequent Allocation Years) in an amount equal to such Partner’s share of the net decrease in Minimum Gain, determined in accordance with Regulations Section 1.704-2(g). Allocations pursuant to the previous sentence shall be
made in proportion to the respective amounts required to be allocated to each Partner pursuant thereto. The items to be so allocated shall be determined in accordance with Regulations Sections 1.704-2(f)(6) and 1.704-2(g)(2). This
Section 5.3(a)
is intended to comply with the minimum gain chargeback requirement in Regulations Section 1.704-2(f) and shall be interpreted consistently therewith.
(b)
Partner Minimum Gain Chargeback
. Except as otherwise provided in Regulations Section 1.704-2(i)(4), notwithstanding any other
provision of this
Article V
, if there is a net decrease in Partner Nonrecourse Debt Minimum Gain attributable to a Partner Nonrecourse Debt during any Allocation Year, each Partner who has a share of the Partner Nonrecourse Debt Minimum Gain
attributable to such Partner Nonrecourse Debt, determined in accordance with Regulations Section 1.704-2(i)(5), shall be specially allocated items of Partnership income and gain for such Allocation Year (and, if necessary, subsequent Allocation
Years) in an amount equal to such Partner’s share of the net decrease in Partner Nonrecourse Debt Minimum Gain attributable to such Partner Nonrecourse Debt, determined in accordance with Regulations Section 1.704-2(i)(4). Allocations
pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Partner pursuant thereto. The items to be so allocated shall be determined in accordance with Regulations Sections
1.704-2(i)(4) and 1.704-2(j)(2). This
Section 5.3(b)
is intended to comply with the minimum gain chargeback requirement in Regulations Section 1.704-2(i)(4) and shall be interpreted consistently therewith.
(c)
Qualified Income Offset
. In the event that any Partner unexpectedly receives any adjustments, allocations or distributions
described in Regulations Sections 1.704- 1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) or 1.704-1(b)(2)(ii)(d)(6), items of Partnership income and gain shall be allocated to such Partner in an amount and manner sufficient to eliminate, to the extent
required by the Regulations, the Adjusted Capital Account Deficit of such Partner as quickly as possible;
provided
that an allocation pursuant to this
Section 5.3(c)
shall be made only if and to the extent that such Partner would have
an Adjusted Capital Account Deficit after all other allocations provided for in this
Article V
have been tentatively made as if this
Section 5.3(c)
were not in this Agreement.
(d)
Gross Income Allocation
. In the event that any Partner has an Adjusted Capital Account Deficit at the end of any Allocation
Year, each such Partner shall be allocated items of Partnership income and gain in the amount of such deficit as quickly as possible;
provided
that an allocation pursuant to this
Section 5.3(d)
shall be made only if and to the extent
that such Partner would have an Adjusted Capital Account Deficit after all other allocations provided for in this
Article V
have been tentatively made as if
Section 5.3(c)
and this
Section 5.3(d)
were not in this Agreement.
16
(e)
Nonrecourse Deductions
. Nonrecourse Deductions for any Allocation Year shall be
allocated among the Partners in proportion to their respective Percentage Interests.
(f)
Partner Nonrecourse Deductions
. Any
Partner Nonrecourse Deductions for any Allocation Year shall be specially allocated to the Partner who bears the economic risk of loss with respect to the Partner Nonrecourse Debt to which such Partner Nonrecourse Deductions are attributable in
accordance with Regulations Section 1.704-2(i)(1).
(g)
Nonrecourse Liabilities
. Nonrecourse Liabilities of the Partnership
described in Regulations Section 1.752-3(a)(3) shall be allocated among the Partners in the manner chosen by the General Partner and consistent with such section of the Regulations.
(h)
Section 754 Adjustments
. To the extent an adjustment to the adjusted tax basis of any Property, pursuant to Code Section
734(b) or Code Section 743(b) is required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(2) or 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital Accounts as the result of a distribution to a Partner in complete
liquidation of such Partner’s Partnership Interest, the amount of such adjustment to Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis) and
such gain or loss shall be specially allocated to the Partners in accordance with their interests in the Partnership in the event Regulations Section 1.704-1(b)(2)(iv)(m)(2) applies, or to the Partner to whom such distribution was made in the event
Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies.
Section 5.4
Curative Allocations
.
The allocations set forth in
Section 5.3
(the “
Regulatory Allocations
”) are intended to comply with certain requirements of the Regulations. It is the intent of the Partners that, to the extent possible, the Regulatory Allocations shall be offset
either with special allocations of other items of Partnership income, gain, loss or deduction pursuant to this
Section 5.4
. Therefore, notwithstanding any other provision of this
Article V
(other than the Regulatory Allocations),
the Tax Matters Partner shall make such offsetting special allocations of Partnership income, gain, loss or deduction in whatever manner it determines appropriate so that, after such offsetting allocations are made, each Partner’s Capital
Account balance is, to the extent possible, equal to the Capital Account balance such Partner would have had if the Regulatory Allocations were not part of this Agreement and all Partnership items were allocated pursuant to
Section 5.1
,
Section 5.2
and
Section 5.3
(other than the Regulatory Allocations). In exercising its discretion under this
Section 5.4
, the Tax Matters Partner shall take into account future Regulatory Allocations that, although not yet
made, are likely to offset other Regulatory Allocations previously made.
Section 5.5
Other Allocation Rules
.
(a) Profits, Losses and any other items of income, gain, loss, or deduction shall be allocated to the Partners pursuant to this
Article
V
as of the last day of each Fiscal Year;
provided
that Profits, Losses and such other items shall also be allocated at such times as the Gross Asset Values of the Partnership’s assets are adjusted pursuant to subparagraph (ii) of
the definition of “Gross Asset Value” in
Section 1.1
.
(b) For purposes of determining the Profits, Losses or any other
items allocable to any period, Profits, Losses and any such other items shall be determined on a daily proration basis by the General Partner under Code Section 706 and the Regulations thereunder.
17
Section 5.6
Tax Allocations: Code Section 704(c)
.
(a) Except as otherwise provided in this
Section 5.6
, each item of income, gain, loss and deduction of the Partnership for federal
income tax purposes shall be allocated among the Partners in the same manner as such items are allocated for book purposes under this
Article V
. In accordance with Code Section 704(c) and the Regulations thereunder, income, gain, loss
and deduction with respect to any Property contributed to the capital of the Partnership shall, solely for tax purposes, be allocated among the Partners so as to take account of any variation between the adjusted basis of such Property to the
Partnership for federal income tax purposes and its initial Gross Asset Value (computed in accordance with the definition of Gross Asset Value). Such allocation shall be made in accordance with the “remedial method” described by
Regulations Section 1.704-3(d).
(b) In the event the Gross Asset Value of any Property is adjusted pursuant to subparagraph (ii) of the
definition of Gross Asset Value, subsequent allocations of income, gain, loss and deduction with respect to such Property shall take account of any variation between the adjusted basis of such Property for federal income tax purposes and its Gross
Asset Value in the same manner as under Code Section 704(c) and the Regulations thereunder. Such allocation shall be made in accordance with the “remedial method” described by Regulations Section 1.704-3(d).
(c) In accordance with Regulations Sections 1.1245-1(e) and 1.1250-1(f), any gain allocated to the Partners upon the sale or other taxable
disposition of any Property shall, to the extent possible, after taking into account other required allocations of gain pursuant to this
Section 5.6(c)
, be characterized as “recapture income” in the same proportions and to the same
extent as such Partners (or their predecessors in interest) have been allocated any deductions directly or indirectly giving rise to the treatment of such gains as “recapture income.”
(d) Any elections or other decisions relating to such allocations shall be made by the General Partner in any manner that reasonably reflects
the purpose and intention of this Agreement. Allocations pursuant to this
Section 5.6
are solely for purposes of federal, state and local taxes and shall not affect, or in any way be taken into account in computing, any Partner’s
Capital Account or share of Profits, Losses, other items or distributions pursuant to any provision of this Agreement.
Section 5.7
Tax Elections
.
(a) The Partners intend that the Partnership be treated as a partnership or a “disregarded entity”
for federal income tax purposes. Accordingly, neither the Tax Matters Partner nor any Limited Partner shall file any election or return on its own behalf or on behalf of the Partnership that is inconsistent with that intent.
(b) The Partnership shall make the election under Code Section 754 in accordance with the applicable Regulations issued thereunder, subject to
the reservation of the right to seek to revoke any such election upon the General Partner’s determination that such revocation is in the best interests of the Partners.
(c) Any elections or other decisions relating to tax matters that are not expressly provided herein, shall be made jointly by the Partners in
any manner that reasonably reflects the purpose and intention of this Agreement.
18
Section 5.8
Tax Returns
.
(a) The Partnership shall cause to be prepared and timely filed all federal, state, local and foreign income tax returns and reports required
to be filed by the Partnership and its subsidiaries. The Partnership shall provide copies of all the Partnership’s federal, state, local and foreign tax returns (and any schedules or other required filings related to such returns) that reflect
items of income, gain, deduction, loss or credit that flow to separate Partner returns, to the Partners for their review and comment prior to filing, except as otherwise agreed by the Partners. The Partners agree in good faith to resolve any
difference in the tax treatment of any item affecting such returns and schedules. However, if the Partners are unable to resolve the dispute, the position of the Tax Matters Partner shall be followed if nationally recognized tax counsel acceptable
to the Partners provides an opinion that substantial authority exists for such position. Substantial authority shall be given the meaning ascribed to it for purposes of applying Code Section 6662. If the Partners are unable to resolve the dispute
prior to the due date for filing the return, including approved extensions, the position of the Tax Matters Partner shall be followed, and amended returns shall be filed if necessary at such time the dispute is resolved. The costs of the dispute
shall be borne by the Partnership. The Partners agree to file their separate federal income tax returns in a manner consistent with the Partnership’s return, the provisions of this Agreement and in accordance with Applicable Law.
(b) The Partnership shall elect the most rapid method of depreciation and amortization allowed under Applicable Law, unless the Partners agree
otherwise.
(c) The Partners shall provide each other with copies of all correspondence or summaries of other communications with the
Internal Revenue Service or any state, local or foreign taxing authority (other than routine correspondence and communications) regarding the tax treatment of the Partnership’s operations. No Partner shall enter into settlement negotiations
with the Internal Revenue Service or any state, local or foreign taxing authority with respect to any issue concerning the Partnership’s income, gains, losses, deductions or credits if the tax adjustment attributable to such issue (assuming the
then current aggregate tax rate) would be $100,000 or greater, without first giving reasonable advance notice of such intended action to the other Partners.
Section 5.9
Tax Matters Partner
.
(a) The General Partner shall be the “
Tax Matters Partner
” of the Partnership within the meaning of Section 6231(a)(7)
of the Code, and shall act in any similar capacity under the Applicable Law of any state, local or foreign jurisdiction, but only with respect to returns for which items of income, gain, loss, deduction or credit flow to the separate returns of the
Partners. If at any time there is more than one General Partner, the Tax Matters Partner shall be the General Partner with the largest Percentage Interest following such admission.
(b) The Tax Matters Partner shall incur no Liability (except as a result of the gross negligence or willful misconduct of the Tax Matters
Partner) to the Partnership or the other Partners including, but not limited to, Liability for any additional taxes, interest or penalties owed by the other Partners due to adjustments of Partnership items of income, gain, loss, deduction or credit
at the Partnership level.
19
Section 5.10
Duties of Tax Matters Partner
.
(a) Except as provided in
Section 5.10(b)
, the Tax Matters Partner shall cooperate with the other Partners and shall promptly provide
the other Partners with copies of notices or other materials from, and inform the other Partners of discussions engaged with, the Internal Revenue Service or any state, local or foreign taxing authority and shall provide the other Partners with
notice of all scheduled proceedings, including meetings with agents of the Internal Revenue Service or any state, local or foreign taxing authority, technical advice conferences, appellate hearings, and similar conferences and hearings, as soon as
possible after receiving notice of the scheduling of such proceedings, but in any case prior to the date of such scheduled proceedings.
(b) The duties of the Tax Matters Partner under
Section 5.10(a)
shall not apply with respect to notices, materials, discussions,
proceedings, meetings, conferences, or hearings involving any issue concerning the Partnership’s income, gains, losses, deductions or credits if the tax adjustment attributable to such issue (assuming the then current aggregate tax rate) would
be less than $100,000 except as otherwise required under Applicable Law.
(c) The Tax Matters Partner shall not extend the period of
limitations or assessments without the consent of the other Partners, which consent shall not be unreasonably withheld.
(d) The Tax
Matters Partner shall not file a petition or complaint in any court, or file any claim, amended return or request for an administrative adjustment with respect to partnership items, after any return has been filed, with respect to any issue
concerning the Partnership’s income, gains, losses, deductions or credits if the tax adjustment attributable to such issue (assuming the then current aggregate tax rate) would be $100,000 or greater, unless agreed by the other Partners. If
the other Partners do not agree, the position of the Tax Matters Partner shall be followed if nationally recognized tax counsel acceptable to all Partners issues an opinion that a reasonable basis exists for such position. Reasonable basis
shall be given the meaning ascribed to it for purposes of applying Code Section 6662. The costs of the dispute shall be borne by the Partnership.
(e) The Tax Matters Partner shall not enter into any settlement agreement with the Internal Revenue Service or any state, local or foreign
taxing authority, either before or after any audit of the applicable return is completed, with respect to any issue concerning the Partnership’s income, gains, losses, deductions or credits, unless any of the following apply:
(i) all Partners agree to the settlement;
20
(ii) the tax effect of the issue if resolved adversely would be, and the tax
effect of settling the issue is, proportionately the same for all Partners (assuming each otherwise has substantial taxable income);
(iii) the Tax Matters Partner determines that the settlement of the issue is fair to the Partners; or
(iv) tax counsel acceptable to all Partners determines that the settlement is fair to all Partners and is one it would
recommend to the Partnership if all Partners were owned by the same person and each had substantial taxable income.
In all events, the costs incurred by
the Tax Matters Partner in performing its duties hereunder shall be borne by the Partnership.
(f) The Tax Matters Partner may request
extensions to file any tax return or statement without the written consent of, but shall so inform, the other Partners.
Section 5.11
Survival of Provisions
.
To the fullest extent permitted by law, the provisions of this Agreement regarding the Partnership’s tax returns and Tax Matters Partner shall survive the termination of the Partnership and the transfer of any
Partner’s interest in the Partnership and shall remain in effect for the period of time necessary to resolve any and all matters regarding the federal, state, local and foreign taxation of the Partnership and items of Partnership income, gain,
loss, deduction and credit.
ARTICLE VI
DISTRIBUTIONS
Section
6.1
Distributions of Distributable Cash
.
Within 40 days following the end of each Quarter commencing with the Quarter that includes the IPO Date, the Partnership shall distribute to the Partners pro rata in accordance with their
respective Percentage Interests an amount equal to 100% of Distributable Cash. Notwithstanding any other provision of this Agreement, the Partnership shall not make a distribution to any Partner on account of its interest in the Partnership if
such distribution would violate the Delaware Act or other Applicable Law.
Section 6.2
Liquidating
Distributions
.
Notwithstanding any other provision of this
Article VI
(other than the last sentence of
Section 6.1
), distributions with respect to the Quarter in which a dissolution of the Partnership occurs shall be made
in accordance with
Article XII
.
Section 6.3
Distribution in Kind
.
The Partnership shall not distribute to
the Partners any assets in kind unless approved by the Partners in accordance with this Agreement. If cash and property in kind are to be distributed simultaneously, the Partnership shall distribute such cash and property in kind in the same
proportion to each Partner, unless otherwise approved by the Partners in accordance with this Agreement.
21
ARTICLE VII
BOOKS AND RECORDS
Section 7.1
Books and Records; Examination
.
The General Partner shall keep or cause to be kept such books of account and
records with respect to the Partnership’s business as it may deem necessary and appropriate. Each Partner and its duly authorized representatives shall have the right, for any purpose reasonably related to its interest in the Partnership, at
any time to examine, or to appoint independent certified public accountants (the fees of which shall be paid by such Partner) to examine, the books, records and accounts of the Partnership and its Subsidiaries, their operations and all other matters
that such Partner may wish to examine, including all documentation relating to actual or proposed transactions between the Partnership and any Partner or any Affiliate of a Partner. The Partnership’s books of account shall be kept using the
method of accounting determined by the General Partner.
Section 7.2
Reports
.
The General Partner shall prepare and
send to each Partner (at the same time) promptly such financial information of the Partnership as a Partner shall from time to time reasonably request, for any purpose reasonably related to its interest in the Partnership. The General Partner shall,
for any purpose reasonably related to a Partner’s interest in the Partnership, permit examination and audit of the Partnership’s books and records by both the internal and independent auditors of its Partners.
ARTICLE VIII
MANAGEMENT
AND VOTING
Section 8.1
Management
.
The General Partner shall conduct, direct and manage the business of the
Partnership. Except as otherwise expressly provided in this Agreement, all management powers over the business and affairs of the Partnership shall be exclusively vested in the General Partner, and no Limited Partner shall have any management
power over the business and affairs of the Partnership. In addition to the powers now or hereafter granted a general partner of a limited partnership under the Delaware Act or which are granted to the General Partner under any other provision
of this Agreement, the General Partner, subject to
Section 8.2
, shall have full power and authority to do all things on such terms as it, in its sole discretion, may deem necessary or appropriate to conduct the business of the
Partnership and to effectuate the purposes set forth in
Section 2.4
. The Partnership shall reimburse the General Partner, on a monthly basis or such other basis as the General Partner may determine, for all direct and indirect costs and
expenses incurred by the General Partner or payments made by the General Partner, in its capacity as the general partner of the Partnership, for and on behalf of the Partnership. Except as provided in this
Section 8.1
, and elsewhere in
this Agreement, the General Partner shall not be compensated for its services as the general partner of the Partnership.
Section 8.2
Matters Constituting Unanimous Approval Matters
.
Notwithstanding anything in this Agreement or the Delaware Act to the contrary, and subject to the provisions of
Section 8.3(c)
, each of the following matters, and
only the following matters, shall constitute a “
Unanimous Approval Matter
” which requires the prior approval of all of the Partners pursuant to
Section 8.3(c)
:
(a) any merger, consolidation, reorganization or similar transaction between or among the Partnership and any Person (other than a transaction
between the Partnership and a direct or indirect wholly owned Subsidiary of the Partnership) or any sale or lease of all or substantially all of the Partnership’s assets to any Person (other than a direct or indirect wholly owned Subsidiary of
the Partnership);
22
(b) the creation of any new class of Partnership Interests, the issuance of any additional
Partnership Interests or the issuance of any security that is convertible into or exchangeable for a Partnership Interest;
(c) the
admission or withdrawal of any Person as a Partner other than pursuant to (i) the third sentence of
Section 9.2
, (ii)
Section 9.4
or (iii) any transfer of Partnership Interests pursuant to
Section 9.1(b)
, as applicable;
(d) the commencement of a voluntary case with respect to the Partnership or any of its Subsidiaries under any applicable bankruptcy,
insolvency or other similar Applicable Law now or hereafter in effect, or the consent to the entry of an order for relief in an involuntary case under any such Applicable Law, or the consent to the appointment of or the taking possession by a
receiver, liquidator, assignee, custodian, trustee or sequestrator (or similar official) of the Partnership or any of its Subsidiaries or for any substantial part of the Partnership’s or any of its Subsidiaries’ property, or the making of
any general assignment for the benefit of creditors;
(e) the modification, alteration or amendment of the amount, timing, frequency or
method of calculation of distributions to the Partners from that provided in
Article VI
;
(f) (i) the approval of any distribution
by the Partnership to the Partners of any assets in kind (other than cash or cash equivalents), (ii) the approval of any distribution by the Partnership to the Partners of cash or property in kind on a non-pro rata basis and (iii) the determination
of the value assigned to distributions of property in kind;
(g) other than pursuant to
Section 4.4
, the making of any additional
Capital Contributions to the Partnership; and
(h) any other provision of this Agreement expressly requiring the approval, consent or
other form of authorization of all of the Partners.
Section 8.3
Meetings and Voting
.
(a)
Representatives
. For purposes of this
Article VIII
and subject to the General Partner’s authority under
Section
8.1
, each Partner shall be represented by a designated representative (each, a “
Representative
”), who shall be appointed by, and may be removed with or without cause by, the Partner that designated such Person. Each
Representative shall have the full authority to act on behalf of the Partner who designated such Representative. To the fullest extent permitted by Applicable Law, each Representative shall be deemed the agent of the Partner that appointed him, and
each Representative shall not be an agent of the Partnership or the other Partners. The action of a Representative at a meeting of the Partners (or through a written consent) shall bind the Partner that designated that Representative, and the other
Partners shall be entitled to rely upon such action without further inquiry or investigation as to the actual authority (or lack thereof) of such Representative.
23
(b)
Meetings and Voting
. Meetings of Partners shall be at such times and locations as
the General Partner shall determine in its sole discretion. The General Partner shall provide notice to the Limited Partners of any meetings of Partners in any manner that it deems reasonable and appropriate under the circumstances. The
holders of a majority, by Percentage Interest, of Partnership Interests for which a meeting has been called (including Partnership Interests owned by the General Partner) represented in person or by proxy shall constitute a quorum at a meeting of
Partners unless any such action by the Partners requires approval by holders of a greater Percentage Interest, in which case the quorum shall be such greater Percentage Interest. At any meeting of the Partners duly called and held in accordance
with this Agreement at which a quorum is present, the act of Partners holding Partnership Interests that, in the aggregate, represent a majority of the Percentage Interests of those present in person or by proxy at such meeting shall be deemed to
constitute the act of all Partners, unless a greater or different percentage is required with respect to such action under the provisions of this Agreement, in which case the act of the Partners holding Partnership Interests that in the aggregate
represent at least such greater or different percentage shall be required. The Partners present at a duly called or held meeting at which a quorum is present may continue to transact business until adjournment, notwithstanding the withdrawal of
enough Partners to leave less than a quorum, if any action taken (other than adjournment) is approved by Partners holding the required Percentage Interests specified in this Agreement. In the absence of a quorum, any meeting of Partners may be
adjourned from time to time by the affirmative vote of Partners with at least a majority of the Percentage Interests of the Partners entitled to vote at such meeting (including the General Partner) represented either in person or by proxy, but no
other business may be transacted.
(c)
Unanimous Approval Matters
. All Unanimous Approval Matters shall be approved by the
unanimous affirmative vote of all of the Partners. Each Partner acknowledges and agrees that all references in this Agreement to any approval, consent or other form of authorization by “all Partners,” “each of the Partners” or
similar phrases shall be deemed to mean that such approval, consent or other form of authorization shall constitute a Unanimous Approval Matter that requires the unanimous approval of all of the Partners in accordance with this
Section
8.3(c)
.
(d)
Action Without a Meeting
. Any action that may be taken at a meeting of the Partners may be taken without a
meeting and without prior notice if an approval in writing setting forth the action so taken is signed by the Partners owning not less than the minimum Percentage Interests of the Partnership Interests that would be necessary to authorize or take
such action at a meeting at which all of the Partners were present and voted. Prompt notice of the taking of action without a meeting shall be given to the Partners who have not approved such action in writing.
Section 8.4
Reliance by Third Parties
.
Persons dealing with the Partnership are entitled to rely conclusively upon the
power and authority of the General Partner set forth in this Agreement. Neither a Limited Partner nor its Representative shall have the authority to bind the Partnership or any of its Subsidiaries.
24
Section 8.5
Reimbursement of the General Partner
. The General Partner shall
be reimbursed on a monthly basis, or such other basis as the General Partner may determine, for (i) all direct and indirect expenses it incurs or payments it makes on behalf of the Partnership (including salary, bonus, incentive compensation and
other amounts paid to any Person, including Affiliates of the General Partner, to perform services for the Partnership or for the General Partner in the discharge of its duties to the Partnership) and (ii) all other expenses allocable to the
Partnership or otherwise incurred by the General Partner or its Affiliates in connection with managing and operating the Partnership’s business and affairs (including expenses allocated to the General Partner by its Affiliates). The General
Partner shall determine the expenses that are allocable to the Partnership. Reimbursements pursuant to this
Section 8.5
shall be in addition to any reimbursement to the General Partner as a result of indemnification pursuant to
Section 10.3
. Any allocation of expenses to the Partnership by the General Partner in a manner consistent with its or its Affiliates’ past business practices shall be permitted by, and not constitute a breach of, this Agreement or
any duty owed by the General Partner to the Partnership, the Partners, or any other Person bound by this Agreement.
ARTICLE IX
TRANSFER OF PARTNERSHIP INTERESTS
Section 9.1
Restrictions on Transfers
.
(a)
General
. Except as expressly provided by this
Article IX
, no Partner shall transfer all or any part of its Partnership
Interests to any Person without first obtaining the written approval of each of the other Partners, which approval may be granted or withheld in their sole discretion.
(b)
Transfer by Operation of Law
. In the event a Partner shall be party to a merger, consolidation or similar business combination
transaction with another Person or sell all or substantially all its assets to another Person, such Partner may transfer all or part of its Partnership Interests to such other Person without the approval of any other Partner.
(c)
Consequences of an Unpermitted Transfer
. To the fullest extent permitted by law, any transfer of a Partner’s Partnership
Interest in violation of the applicable provisions of this Agreement shall be void.
Section 9.2
Conditions for
Admission
.
No transferee of all or a portion of the Partnership Interests of any Partner shall be admitted as a Partner hereunder unless such Partnership Interests are transferred in compliance with the applicable provisions of
this Agreement. Each such transferee shall have executed and delivered to the Partnership such instruments as the General Partner deems necessary or appropriate in its sole discretion to effectuate the admission of such transferee as a Partner
and to confirm the agreement of such transferee to be bound by all the terms and provisions of this Agreement. The admission of a transferee shall be effective immediately prior to such transfer and, immediately following such admission, the
transferor shall cease to be a Partner (to the extent it transferred its entire Partnership Interest). If the General Partner transfers its entire General Partner Interest in the Partnership, the transferee General Partner, to the extent
admitted as a substitute General Partner, is hereby authorized to, and shall, continue the Partnership without dissolution.
25
Section 9.3
Allocations and Distributions
.
Subject to applicable
Regulations, upon the transfer of all the Partnership Interests of a Partner as herein provided, the Profit or Loss of the Partnership attributable to the Partnership Interests so transferred for the Fiscal Year in which such transfer occurs shall
be allocated between the transferor and transferee as of the effective date of the assignment, and such allocation shall be based upon any permissible method agreed to by the Partners that is provided for in Code Section 706 and the Regulations
issued thereunder.
Section 9.4
Restriction on Resignation or Withdrawal
.
Except in connection with a
transfer permitted pursuant to
Section 9.1
or as contemplated by
Section 12.1
, no Partner shall withdraw from the Partnership without the consent of each of the other Partners. To the extent permitted by law, any purported
withdrawal from the Partnership in violation of this
Section 9.4
shall be null and void.
ARTICLE X
LIABILITY, EXCULPATION AND INDEMNIFICATION
Section 10.1
Liability for Partnership Obligations
.
Except as otherwise required by the Delaware Act, the
Liabilities of the Partnership shall be solely the Liabilities of the Partnership, and no Indemnitee (other than the General Partner) shall be obligated personally for any such Liability of the Partnership solely by reason of being an Indemnitee.
Section 10.2
Disclaimer of Duties and Exculpation
.
(a) Except as otherwise expressly provided in this Agreement, to the fullest extent permitted by law, no Indemnitee shall have any duty
(fiduciary or otherwise) or obligation to the Partnership, the Partners or to any other Person bound by this Agreement, and in taking, or refraining from taking, any action required or permitted under this Agreement or under Applicable Law, each
Indemnitee shall be entitled to consider only such interests and factors as such Indemnitee deems advisable, including its own interests, and need not consider any interest of or factors affecting, any other Indemnitee or the Partnership
notwithstanding any duty otherwise existing at law or in equity. To the extent that an Indemnitee is required or permitted under this Agreement to act in “good faith” or under another express standard, such Indemnitee shall act under such
express standard and shall not be subject to any other or different standard under this Agreement or otherwise existing under Applicable Law or in equity.
(b) The provisions of this Agreement, to the extent that they restrict or eliminate the duties (including fiduciary duties) and Liabilities of
an Indemnitee otherwise existing under Applicable Law or in equity, are agreed by the Partners to replace such other duties and Liabilities of such Indemnitee in their entirety, and no Indemnitee shall be liable to the Partnership, the Partners or
any other Person bound by this Agreement for its good faith reliance on the provisions of this Agreement.
(c) To the fullest extent
permitted by law, no Indemnitee shall be liable to the Partnership, the Partners or any other Person bound by this Agreement for any cost, expense, loss, damage, claim or Liability incurred by reason of any act or omission performed or omitted by
such Indemnitee in such capacity, whether or not such Person continues to be an Indemnitee
26
at the time of such cost, expense, loss, damage, claim or Liability is incurred or imposed, if the Indemnitee acted in good faith reliance on the provisions of this Agreement, and, with respect
to any criminal action or proceeding, such Indemnitee had no reasonable cause to believe its conduct was unlawful.
(d) An Indemnitee
shall be fully protected from liability to the Partnership, the Partners and any other Person bound by this Agreement in acting or refraining from acting in good faith reliance upon the records of the Partnership and such other information,
opinions, reports or statements presented to the Partnership by any Person as to any matters the Indemnitee reasonably believes are within such other Person’s professional or expert competence and who has been selected with reasonable care by
or on behalf of the Partnership, including information, opinions, reports or statements as to the value and amount of the assets, Liabilities, Profits and Losses of the Partnership.
Section 10.3
Indemnification
.
(a) To the fullest extent permitted by law but subject to the limitations expressly provided in this Agreement, all Indemnitees shall be
indemnified and held harmless by the Partnership from and against any and all losses, claims, damages, liabilities, joint or several, expenses (including legal fees and expenses), judgments, fines, penalties, interest, settlements or other amounts
arising from any and all threatened, pending or completed claims, demands, actions, suits or proceedings, whether civil, criminal, administrative or investigative, and whether formal or informal and including appeals, in which any Indemnitee may be
involved, or is threatened to be involved, as a party or otherwise, by reason of its status as an Indemnitee and acting (or refraining to act) in such capacity on behalf of or for the benefit of the Partnership;
provided
, that the Indemnitee
shall not be indemnified and held harmless pursuant to this Agreement if there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that, in respect of the matter for which the Indemnitee is seeking
indemnification pursuant to this Agreement, the Indemnitee acted in bad faith or engaged in intentional fraud, willful misconduct or, in the case of a criminal matter, acted with knowledge that the Indemnitee’s conduct was unlawful;
provided, further
, no indemnification pursuant to this
Section 10.3
shall be available to any Affiliate of the Partnership, or to any other Indemnitee, with respect to any such Affiliate’s obligations pursuant to the
Transaction Documents. Any indemnification or advancement of expenses pursuant to this
Section 10.3
shall be made only out of the assets of the Partnership, it being agreed that the General Partner shall not be personally liable for such
indemnification or advancement of expenses and shall have no obligation to contribute or loan any monies or property to the Partnership to enable it to effectuate such indemnification or advancement of expenses.
(b) To the fullest extent permitted by law, expenses (including legal fees and expenses) incurred by an Indemnitee who is entitled to be
indemnified pursuant to
Section 10.3(a)
in defending any claim, demand, action, suit or proceeding shall, from time to time, be advanced by the Partnership prior to a final and non-appealable judgment entered by a court of competent
jurisdiction determining that, in respect of the matter for which the Indemnitee is seeking indemnification pursuant to this
Section 10.3
, the Indemnitee is not entitled to be indemnified upon receipt by the Partnership of any
undertaking by or on behalf of the Indemnitee to repay such amount if it shall be ultimately determined that the Indemnitee is not entitled to be indemnified as authorized by this
Section 10.3
.
27
(c) The indemnification provided by this
Section 10.3
shall be in addition to any other
rights to which an Indemnitee may be entitled under any agreement, as a matter of law, in equity or otherwise, both as to actions in the Indemnitee’s capacity as an Indemnitee and as to actions in any other capacity, and shall continue as to an
Indemnitee who has ceased to serve in such capacity and shall inure to the benefit of the heirs, successors, assigns, executors and administrators of the Indemnitee.
(d) The Partnership may purchase and maintain (or reimburse the General Partner or its Affiliates for the cost of) insurance, on behalf of the
General Partner, its Affiliates and such other Persons as the General Partner shall determine, against any liability that may be asserted against or expense that may be incurred by such Person in connection with the Partnership’s activities or
such Person’s activities on behalf of the Partnership, regardless of whether the Partnership would have the power to indemnify such Person against such liability under the provisions of this Agreement.
(e) For purposes of this
Section 10.3
, the Partnership shall be deemed to have requested an Indemnitee to serve as fiduciary of an
employee benefit plan whenever the performance by it of its duties to the Partnership also imposes duties on, or otherwise involves services by, it to the plan or participants or beneficiaries of the plan; excise taxes assessed on an Indemnitee with
respect to an employee benefit plan pursuant to Applicable Law shall constitute “fines” within the meaning of
Section 10.3(a);
and action taken or omitted by an Indemnitee with respect to any employee benefit plan in the performance
of its duties for a purpose subjectively believed by it not to be adverse to the interests of the participants and beneficiaries of the plan shall be deemed to be for a purpose that is on behalf of and for the benefit of the Partnership and not
adverse to the interests of the Partnership.
(f) In no event may an Indemnitee subject the Limited Partners to personal liability by
reason of the indemnification provisions set forth in this Agreement.
(g) An Indemnitee shall not be denied indemnification in whole or
in part under this
Section 10.3
solely because the Indemnitee had an interest in the transaction with respect to which the indemnification applies.
(h) The provisions of this
Section 10.3
are for the benefit of the Indemnitees and their heirs, successors, assigns, executors and
administrators and shall not be deemed to create any rights for the benefit of any other Persons.
(i) No amendment, modification or
repeal of this
Section 10.3
or any provision hereof shall in any manner terminate, reduce or impair the right of any past, present or future Indemnitee to be indemnified by the Partnership, nor the obligations of the Partnership to indemnify
any such Indemnitee under and in accordance with the provisions of this
Section 10.3
as in effect immediately prior to such amendment, modification or repeal with respect to claims arising from or relating to matters occurring, in whole or in
part, prior to such amendment, modification or repeal, regardless of when such claims may arise or be asserted.
28
ARTICLE XI
CONFLICTS OF INTEREST
Section 11.1
Transactions with Affiliates
.
The Partnership and its Subsidiaries shall be permitted to enter into or renew
or extend the term of any agreement or transaction with a Partner or an Affiliate of a Partner on such terms and conditions as the General Partner shall approve in its sole discretion, without the approval of any Limited Partner.
Section 11.2
Outside Activities
.
Notwithstanding anything to the contrary in this Agreement or any duty otherwise existing
at law or in equity, (a) the engaging in activities by any Indemnitee that are competitive with the business of the Partnership is hereby approved by all Partners, (b) it shall not be a breach of any fiduciary duty or any other duty or obligation of
a Partner under this Agreement or otherwise existing under Applicable Law or in equity for such Indemnitee to engage in such activities in preference to or to the exclusion of the Partnership, (c) an Indemnitee shall have no obligation under this
Agreement or as a result of any duty (including any fiduciary duty) otherwise existing under Applicable Law or in equity, to present business opportunities to the Partnership and (d) the doctrine of corporate opportunity, or any analogous doctrine,
shall not apply to any Indemnitee;
provided
such Indemnitee does not engage in such activity as a result of or using confidential or proprietary information provided by or on behalf of the Partnership to such Indemnitee.
ARTICLE XII
DISSOLUTION
AND TERMINATION
Section 12.1
Dissolution
.
The Partnership shall be dissolved and its business and affairs wound up
upon the earliest to occur of any one of the following events:
(a) at any time there are no Limited Partners of the Partnership, unless
the business of the Partnership is continued in accordance with the Delaware Act;
(b) the written consent of all the Partners;
(c) an “event of withdrawal” (as defined in the Delaware Act) of the General Partner; or
(d) the entry of a decree of judicial dissolution of the Partnership pursuant to Section 17-802 of the Delaware Act.
The bankruptcy, involuntary liquidation or dissolution of a Partner shall cause that Partner to cease to be a partner of the Partnership. Notwithstanding the
foregoing, the Partnership shall not be dissolved and its business and affairs shall not be wound up upon the occurrence of any event specified in clause (c) above if, at the time of occurrence of such event, there is at least one remaining General
Partner (who is hereby authorized to, and shall, carry on the business of the Partnership) and at least one Limited Partner, or if within ninety (90) days after the date on which such event occurs, the remaining Partners elect in writing to continue
the business of the Partnership and to the appointment, effective as of the date of such event, if required, of one or more additional General Partners of the Partnership. Except as provided in this paragraph, and to the fullest extent permitted by
the Delaware Act, the occurrence of an event that causes a Partner
29
to cease to be a Partner of the Partnership shall not, in and of itself, cause the Partnership to be dissolved or its business or affairs to be wound up, and upon the occurrence of such an event,
the business of the Partnership shall, to the extent permitted by the Delaware Act, continue without dissolution.
Section 12.2
Winding Up of Partnership
.
Upon dissolution, the Partnership’s business shall be wound up in an orderly manner. The General Partner shall (unless the General Partner (or, if no General Partner, the remaining Limited Partners) elects
to appoint a liquidating trustee) wind up the affairs of the Partnership pursuant to this Agreement. In performing its duties, the General Partner or liquidating trustee is authorized to sell, distribute, exchange or otherwise dispose of the assets
of the Partnership in accordance with the Delaware Act and in any reasonable manner that the General Partner or liquidating trustee shall determine to be not adverse to the interests of the Partners or their successors-in-interest. The General
Partner or liquidating trustee shall take full account of the Partnership’s Liabilities and Property and shall cause the Property or the proceeds from the sale thereof, to the extent sufficient therefor, to be applied and distributed, to the
maximum extent permitted by Applicable Law, in the following order:
(a) First, to creditors, including Partners who are creditors, to the
extent permitted by law, in satisfaction of all of the Partnership’s Liabilities (whether by payment or the making of reasonable provision for payment thereof to the extent required by Section 17-804 of the Delaware Act), other than Liabilities
for distribution to Partners under Section 17-601 or 17-604 of the Delaware Act;
(b) Second, to the Partners and former Partners of the
Partnership in satisfaction of Liabilities for distributions under
Sections 17-601
or 17-604 of the Delaware Act; and
(c) The balance, if any, to the Partners in accordance with the positive balance in their respective Capital Accounts, after giving effect to
all contributions, distributions and allocations for all periods.
Section 12.3
Compliance with Certain Requirements of Regulations;
Deficit Capital Accounts
.
In the event the Partnership is “liquidated” within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g), distributions shall be made pursuant to this
Article XII
to the Partners who have
positive Capital Accounts in compliance with Regulations Section 1.704- 1(b)(2)(ii)(b)(2). If any Partner has a deficit balance in its Capital Account (after giving effect to all contributions, distributions and allocations for all Allocation Years,
including the Allocation Year during which such liquidation occurs), such Partner shall have no obligation to make any contribution to the capital of the Partnership with respect to such deficit, and such deficit shall not be considered a debt owed
to the Partnership or to any other Person for any purpose whatsoever.
Section 12.4
Deemed Distribution and
Recontribution
.
Notwithstanding any other provision of this
Article XII
, in the event the Partnership is liquidated within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g) but no actual dissolution and winding up under the
Delaware Act has occurred, the Property shall not be liquidated, the Partnership’s debts and other Liabilities shall not be paid or discharged, and the Partnership’s affairs shall not be wound up.
30
Instead, solely for federal income tax purposes, the Partnership shall be deemed to have contributed all its Property and Liabilities to a new limited partnership in exchange for an interest in
such new limited partnership and, immediately thereafter, the Partnership will be deemed to liquidate by distributing interests in the new limited partnership to the Partners.
Section 12.5
Distribution of Property
.
In the event the General Partner determines that it is necessary in connection with
the winding up of the Partnership to make a distribution of property in kind, such property shall be transferred and conveyed to the Partners so as to vest in each of them as a tenant in common an undivided interest in the whole of such property,
but otherwise in accordance with
Section 12.3
.
Section 12.6
Termination of Partnership
.
The Partnership shall
terminate when all assets of the Partnership, after payment of or due provision for all Liabilities of the Partnership, shall have been distributed to the Partners in the manner provided for in this Agreement, and the Certificate of Limited
Partnership shall have been canceled in the manner provided by the Delaware Act.
ARTICLE XIII
MISCELLANEOUS
Section
13.1
Notices
.
Except as otherwise expressly provided in this Agreement, all notices, demands, requests, or other communications required or permitted to be given pursuant to this Agreement shall be in writing and shall be given either (a)
in person, (b) by United States mail or (c) by expedited delivery service (charges prepaid) with proof of delivery. The Partnership’s address for notice shall be the principal place of business of the Partnership, as set forth in
Section
2.3
. The address for notices and other communications to the General Partner shall be the address set forth in
Section 2.3
. The address for notices and other communications to any Limited Partner shall be the address set forth
in or designated pursuant to
Section 2.3
. Addresses for notices and communications hereunder may be changed by the Partnership, the General Partner or any Limited Partner, as applicable, giving notice in writing, stating its new address
for notices, to the other. For purposes of the foregoing, any notice required or permitted to be given shall be deemed to be delivered and given on the date actually delivered to the address specified in this
Section 13.1
.
Section 13.2
Integration
.
This Agreement constitutes the entire agreement among the parties hereto pertaining to the
subject matter hereof and supersedes all prior agreements and understandings pertaining thereto.
Section 13.3
Assignment
.
A Partner shall not assign all or any of its rights, obligations or benefits under this Agreement to any other Person otherwise than (i) in connection with a transfer of its Partnership Interests pursuant to
Article
IX
or (ii) with the prior written consent of each of the other Partners, which consent may be withheld in such Partner’s sole discretion, and any attempted assignment not in compliance with
Article IX
or this
Section 13.3
shall be void.
Section 13.4
Parties in Interest
.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their heirs, executors, administrators, successors, legal representatives and permitted assigns.
31
Section 13.5
Counterparts
.
This Agreement may be executed in counterparts, all
of which together shall constitute an agreement binding on all the parties hereto, notwithstanding that all such parties are not signatories to the original or the same counterpart.
Section 13.6
Amendment; Waiver
.
Subject to the definition of Capital Account,
Section 2.2
and
Section 3.2
, this Agreement may not be amended except in a written instrument signed by each of the Partners and expressly stating it is an amendment to this Agreement. Any failure or delay on the part of any Partner in exercising
any power or right hereunder shall not operate as a waiver thereof, nor shall any single or partial exercise of any such right or power preclude any other or further exercise thereof or the exercise of any other right or power hereunder or otherwise
available under Applicable Law or in equity.
Section 13.7
Severability
.
If any term, provision, covenant, or
restriction in this Agreement or the application thereof to any Person or circumstance, at any time or to any extent, is held by a court of competent jurisdiction or other Governmental Authority to be invalid, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions of this Agreement (or the application of such provision in other jurisdictions or to Persons or circumstances other than those to which it was held invalid or unenforceable) shall in no way be
affected, impaired or invalidated, and to the extent permitted by Applicable Law, any such term, provision, covenant or restriction shall be restricted in applicability or reformed to the minimum extent required for such to be enforceable. This
provision shall be interpreted and enforced to give effect to the original written intent of the Partners prior to the determination of such invalidity or unenforceability.
Section 13.8
Governing Law
.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
DELAWARE, WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF. ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY CLAIM OR PROCEEDING RELATED TO OR ARISING OUT OF THIS AGREEMENT, OR ANY TRANSACTION OR CONDUCT IN CONNECTION HEREWITH,
IS HEREBY WAIVED BY EACH OF THE PARTNERS.
Section 13.9
No Bill for Accounting
.
To the fullest extent permitted by law,
in no event shall any Partner have any right to file a bill for an accounting or any similar proceeding.
Section 13.10
Waiver of
Partition
.
Each Partner hereby waives any right to partition of the Property.
Section 13.11
Third
Parties
.
Nothing herein expressed or implied is intended or shall be construed to confer upon or give any Person (other than Indemnitees) other than the Partners and their respective successors, legal representatives and permitted
assigns any rights, remedies or basis for reliance upon, under or by reason of this Agreement.
[Signature pages follow]
32
IN WITNESS WHEREOF, the parties have signed this Agreement as of the Effective Date.
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GENERAL PARTNER:
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BLANCO RIVER DEVCO GP LLC
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By:
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Name:
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Terry R. Gerhart
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Title:
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Chief Executive Officer
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Signature Page to
First Amended and Restated Agreement of Limited Partnership of
Blanco River DevCo LP
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LIMITED PARTNER:
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NBL MIDSTREAM, LLC
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By:
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Name:
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Charles J. Rimer
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Title:
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President
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Signature Page to
First Amended and Restated Agreement of Limited Partnership of
Blanco River DevCo LP
Exhibit A
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Partner
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Percentage
Interest
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Type of
Partnership
Interest
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Blanco River DevCo GP LLC
1001 Noble Energy Way
Houston, Texas 77070
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75
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%
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General Partner
Interest
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NBL Midstream, LLC
1001 Noble Energy Way
Houston, Texas 77070
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25
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%
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Limited Partner
Interest
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Exhibit A – Page 1
Exhibit 10.35
FORM OF
TEXAS CRUDE
OIL GATHERING AGREEMENT
consisting of the
TEXAS AGREEMENT TERMS AND CONDITIONS RELATING TO
CRUDE OIL GATHERING SERVICES
taken together with the applicable
TEXAS AGREEMENT ADDENDUM
now or in the future effective
TABLE OF CONTENTS
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ARTICLE 1 DEFINITIONS
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1
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Section 1.1
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Definitions
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1
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Section 1.2
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Other Terms
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13
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Section 1.3
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References and Rules of Construction
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13
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ARTICLE 2 PRODUCT DEDICATION AND REAL PROPERTY DEDICATION
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14
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Section 2.1
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Producer’s Dedications
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14
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Section 2.2
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Conflicting Dedications
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14
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Section 2.3
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Producer’s Reservation
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15
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Section 2.4
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Releases from Dedication
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15
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Section 2.5
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Covenants Running with the Land
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17
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Section 2.6
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Recording of Agreement
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18
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ARTICLE 3 SYSTEM EXPANSION AND CONNECTION OF WELLS
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18
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Section 3.1
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Development Report; System Plan; Meetings
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Section 3.2
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Expansion of System and Connection of Separator Facilities
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22
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Section 3.3
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Temporary Services
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23
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Section 3.4
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Cooperation
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Section 3.5
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Grant of Access; Real Property Rights
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ARTICLE 4 MEASUREMENT DEVICES
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25
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Section 4.1
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Measurement Devices
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25
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Section 4.2
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Measurement Procedures
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Section 4.3
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Product Meter Adjustments
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ARTICLE 5 TENDER, NOMINATION, AND GATHERING OF PRODUCTION
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28
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Section 5.1
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Limitations on Service to Third Parties
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Section 5.2
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Tender of Dedicated Production
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Section 5.3
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Services; Service Standard
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29
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Section 5.4
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Nominations, Scheduling, and Curtailment
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Section 5.5
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Suspension/Shutdown of Service
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31
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Section 5.6
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Marketing and Transportation
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32
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Section 5.7
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No Prior Flow of Product in Interstate Commerce
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32
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ARTICLE 6 FEES
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32
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Section 6.1
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Fees
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32
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Section 6.2
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Fee Adjustments
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32
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Section 6.3
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Treatment of Byproducts, System Gains/Losses, Fuel and Related Matters
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33
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Texas Crude Oil
Gathering Agreement
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ARTICLE 7 QUALITY
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35
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Section 7.1
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Quality Specifications
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35
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Section 7.2
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Failure to Meet Specifications
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36
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Section 7.3
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Indemnification Regarding Quality
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37
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ARTICLE 8 TERM
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37
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Section 8.1
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Term
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37
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Section 8.2
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Effect of Termination or Expiration of the Term
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37
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ARTICLE 9 TITLE AND CUSTODY
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37
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Section 9.1
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Title
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37
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Section 9.2
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Custody
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37
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ARTICLE 10 BILLING AND PAYMENT
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38
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Section 10.1
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Statements
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38
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Section 10.2
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Payments
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38
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Section 10.3
|
|
Adequate Assurances
|
|
|
39
|
|
|
Section 10.4
|
|
Audit
|
|
|
39
|
|
|
|
|
|
ARTICLE 11 REMEDIES
|
|
|
40
|
|
|
|
|
|
|
Section 11.1
|
|
Suspension of Performance; Temporary Release from Dedication
|
|
|
40
|
|
|
Section 11.2
|
|
No Election
|
|
|
41
|
|
|
Section 11.3
|
|
DIRECT DAMAGES
|
|
|
41
|
|
|
|
|
|
ARTICLE 12 FORCE MAJEURE
|
|
|
41
|
|
|
|
|
|
|
Section 12.1
|
|
Force Majeure
|
|
|
41
|
|
|
Section 12.2
|
|
Extension Due to Force Majeure
|
|
|
42
|
|
|
|
|
|
ARTICLE 13 CHANGE IN LAW; UNECONOMIC SERVICE
|
|
|
42
|
|
|
|
|
|
|
Section 13.1
|
|
Changes in Applicable Law
|
|
|
42
|
|
|
Section 13.2
|
|
Unprofitable Operations and Rights of Termination
|
|
|
42
|
|
|
|
|
|
ARTICLE 14 REGULATORY STATUS
|
|
|
44
|
|
|
|
|
|
|
Section 14.1
|
|
Non-Jurisdictional System
|
|
|
44
|
|
|
Section 14.2
|
|
Government Authority Modification
|
|
|
45
|
|
|
|
|
|
ARTICLE 15 INDEMNIFICATION AND INSURANCE
|
|
|
45
|
|
|
|
|
|
|
Section 15.1
|
|
Reciprocal Indemnity
|
|
|
45
|
|
|
Section 15.2
|
|
Indemnification Regarding Third Parties
|
|
|
46
|
|
|
Section 15.3
|
|
Penalties
|
|
|
46
|
|
|
Section 15.4
|
|
Insurance
|
|
|
46
|
|
Texas Crude Oil
Gathering Agreement
ii
|
|
|
|
|
|
|
|
|
|
|
|
ARTICLE 16 ASSIGNMENT
|
|
|
46
|
|
|
|
|
|
|
Section 16.1
|
|
Assignment of Rights and Obligations under this Agreement
|
|
|
46
|
|
|
Section 16.2
|
|
Pre-Approved Assignments
|
|
|
47
|
|
|
Section 16.3
|
|
Change of Control
|
|
|
48
|
|
|
|
|
|
ARTICLE 17 OTHER PROVISIONS
|
|
|
48
|
|
|
|
|
|
|
Section 17.1
|
|
Relationship of the Parties
|
|
|
48
|
|
|
Section 17.2
|
|
Notices
|
|
|
48
|
|
|
Section 17.3
|
|
Entire Agreement; Conflicts
|
|
|
49
|
|
|
Section 17.4
|
|
Waivers; Rights Cumulative
|
|
|
49
|
|
|
Section 17.5
|
|
Amendment
|
|
|
49
|
|
|
Section 17.6
|
|
Governing Law; Arbitration
|
|
|
49
|
|
|
Section 17.7
|
|
Parties in Interest
|
|
|
50
|
|
|
Section 17.8
|
|
Preparation of Agreement
|
|
|
50
|
|
|
Section 17.9
|
|
Severability
|
|
|
50
|
|
|
Section 17.10
|
|
Counterparts
|
|
|
50
|
|
|
Section 17.11
|
|
Confidentiality
|
|
|
50
|
|
EXHIBITS
|
|
|
|
|
EXHIBIT A
|
|
RESERVED
|
|
EXHIBIT B
|
|
DOWNTIME FEE REDUCTION
|
|
EXHIBIT C
|
|
OPERATING PRESSURE FEE REDUCTION
|
|
EXHIBIT D
|
|
INSURANCE
|
Texas Crude Oil
Gathering Agreement
iii
TEXAS AGREEMENT TERMS AND CONDITIONS RELATING TO
CRUDE OIL GATHERING SERVICES
These TEXAS AGREEMENT TERMS AND CONDITIONS RELATING TO CRUDE OIL GATHERING SERVICES (these “
Agreement Terms and Conditions
”)
(i) shall be effective with respect to each signatory of each Agreement Addendum as of the Effective Date specified in the applicable Agreement Addendum (defined below), (ii) were last updated as of the Effective Date, (iii) are
incorporated into and made a part of each Agreement Addendum, and (iv) taken together with the applicable Agreement Addendum shall constitute one Agreement, separate and apart from any other Agreement governed by these Agreement Terms and
Conditions.
Recitals:
A. Producer owns rights, title and interests in certain oil and gas leases and other interests located within the Dedication Area (defined
below) that require services related to the gathering of hydrocarbons.
B. Producer wishes to obtain such gathering services from each
Midstream Co (defined below) that executes and delivers an Agreement Addendum (defined below) pursuant to these Agreement Terms and Conditions, as modified by the applicable Agreement Addendum.
C. Producer desires to dedicate all crude oil it Controls (defined below) that is attributable to its right, title, and interest in certain oil
and gas leases and other interests located within the Dedication Area (defined below) to the Individual System (defined below).
D. Each
Midstream Co that executes and delivers an Agreement Addendum owns and operates an Individual System that gathers gas from certain oil and gas leases and other interests.
Agreements:
NOW,
THEREFORE, in consideration of the foregoing Recitals, which are incorporated herein, the mutual agreements in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Midstream Co and
Producer hereby agree as follows:
Article 1
Definitions
Section
1.1
Definitions
. As used in this Agreement, the following capitalized terms shall have the meanings ascribed to them below:
“
Abandonment Date
” has the meaning given to it in
Section 3.2(d)
.
“
Additional/Accelerated Well
” has the meaning given to it in
Section 3.2(c)
.
Texas Crude Oil
Gathering Agreement
- 1 -
“
Adequate Assurance of Performance
” has the meaning given to it in
Section
10.3
.
“
Adjustment Year
” has the meaning given to it in
Section 6.2(a)(ii)
.
“
Affiliate
” means, with respect to any Person, any other Person that directly, or indirectly through one or more
intermediaries, Controls, or is Controlled by, or is under common Control with, such Person. The following sentence shall not apply to the term “Affiliate” as used in
Section 2.2(b)
or the definition of “Conflicting
Dedication”: Producer and its subsidiaries (other than OpCo and its subsidiaries), on the one hand, and OpCo and its subsidiaries, on the other, shall not be considered Affiliates of each other for purposes of this Agreement.
“
Agreement
” means the applicable Agreement Addendum taken together with these Agreement Terms and Conditions, as modified by
such Agreement Addendum.
“
Agreement Addendum
” means each Agreement Addendum by and between a Producer and a Midstream Co
that expressly states that it is governed by these Agreement Terms and Conditions. “
Agreement Addenda
” shall be the collective reference to each Agreement Addendum then in effect.
“
Agreement Terms and Conditions
” has the meaning given to it in the introductory paragraph.
“
Applicable Month
” has the meaning set forth in
Section 6.2(c)
.
“
Associated Water
” means water that is produced with Producer’s owned or Controlled Product and delivered with such
Product to the System at the Receipt Point, which Midstream Co will separate (if and to the degree required) from such Product prior to the redelivery of such Product to Producer at the Delivery Point; provided that from and after the point that
such water has been separated from such Product (such term, in this context, used excluding Associated Water) and delivered into the Water System, such water shall cease to be Associated Water hereunder and shall be deemed to be Produced Water.
“
Barrel
” means a quantity consisting of forty-two Gallons.
“
Beneficiary
” has the meaning given to it in Section 4.1(g).
“
BS&W
” means basic sediment and water (which for the avoidance of doubt, includes both Associated Water and Produced
Water).
“
Business Day
” means a Day (other than a Saturday or Sunday) on which federal reserve banks are open for
business.
“
Cancellation Date
” has the meaning given to it in
Section 3.1(c)
.
“
Claiming Party
” has the meaning given to it in the definition of “Force Majeure”.
“
Communications
” has the meaning given to it in
Section 17.2
.
Texas Crude Oil
Gathering Agreement
- 2 -
“
Conditional Amount
” has the meaning set forth in
Section 10.1(a)
.
“
Conflicting Dedication
” means any gathering agreement, commitment, or arrangement (including any volume commitment) that
requires Producer’s owned or Controlled Product to be trucked from or sold to a Third Party at the lease or to be gathered on any gathering system or similar system other than the System, including any such agreement, commitment, or arrangement
burdening properties hereinafter acquired by Producer in the Dedication Area. No dedication of acreage shall constitute a Conflicting Dedication if Producer’s requirement under such dedication is to deliver Product from the tailgate of the
System or any other point that is a Delivery Point hereunder. A right of first refusal in favor of an entity other than Original Producer, OpCo, or any of their Affiliates shall be deemed to be a “Conflicting Dedication” if Affiliates of
Original Producer are prohibited from providing Services pursuant to the applicable agreement creating such right of first refusal.
“
Control
” (including the term “
Controlled
”) means (a) with respect to any Person, the possession, direct or
indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting shares, by contract, or otherwise and (b) with respect to any Product, such Product produced from the
Dedication Area and owned by a Third Party or an Affiliate and with respect to which Producer has the contractual right or obligation (pursuant to a marketing, agency, operating, unit, or similar agreement) to market such Product and Producer elects
or is obligated to market such Product on behalf of the applicable Third Party or Affiliate.
“
Credit-Worthy Person
”
means a Person with a senior unsecured and credit-unenhanced long term debt rating equivalent to A- or better as determined by at least two rating agencies, one of which must be either Standard & Poor’s or Moody’s (or if either one or
both are not available, equivalent ratings from alternate rating sources reasonably acceptable to Midstream Co).
“
Day
”
means a period of time from 7:00 a.m. Central Time on a calendar day until 7:00 a.m. Central Time on the succeeding calendar day. The term “
Daily
” shall have the correlative meaning.
“
Dedicated Production
” means (a) Product owned by Producer or an Affiliate of Producer and produced from a Well within
the Dedication Area that is operated by Producer or an Affiliate under the Control of Producer, (b) Reserved, (c) Product produced within the Dedication Area that is owned by a Third Party and under the Control of Producer, and (d) Purchased
Dedicated Production. Notwithstanding the foregoing, (i) any Product that was released pursuant to the Releases of Dedication shall not be included in this definition of “Dedicated Production,” (ii) any Product that is
permanently released pursuant to
Section 2.4(a)
or otherwise shall cease to be included in this definition of “Dedicated Production” immediately upon the effectiveness of such permanent release, and (iii) in the event of an
assignment by a Producer (“X”) to an assignee (“Y”) that is permitted under
Article 16
, any Product that is so assigned shall cease to be included in X’s Dedicated Production and shall solely be included in Y’s
Dedicated Production as of the effective date of such assignment.
“
Dedicated Properties
” means the interests held by
Producer or its Affiliates in the oil and gas leases, mineral interests, and other similar interests as of the Effective Date or acquired by
Texas Crude Oil
Gathering Agreement
- 3 -
Producer or its Affiliates after the Effective Date that relate to land within the Dedication Area. Notwithstanding the foregoing, (a) any interest that was released pursuant to the Releases
of Dedication shall not be included in this definition of “Dedicated Properties,” (b) any interest that is permanently released pursuant to
Section 2.4(a)
or otherwise shall cease to be included in this definition of
“Dedicated Properties” immediately upon the effectiveness of such permanent release and (c) in the event of an assignment by a Producer (“X”) to an assignee (“Y”) that is permitted under
Article 16
, any interest
that is so assigned shall cease to be included in X’s Dedicated Properties and shall solely be included in Y’s Dedicated Properties as of the effective date of such assignment.
“
Dedications
” means the Product Dedication and the Real Property Dedication together, and “
Dedication
” means
the Product Dedication or the Real Property Dedication, as applicable.
“
Dedication Area
” means, with respect to this
Agreement, the area described on the applicable Agreement Addendum. Notwithstanding the foregoing, (a) any acreage that was released pursuant to the Releases of Dedication shall not be included in this definition of “Dedication Area,”
(b) any acreage that is permanently released pursuant to
Section 2.4(a)
or otherwise shall cease to be included in this definition of “Dedication Area” immediately upon the effectiveness of such permanent release and (c) in the
event of an assignment by a Producer (“X”) to an assignee (“Y”) that is permitted under
Article 16
, any acreage that is so assigned shall cease to be included in X’s Dedication Area and shall solely be included in
Y’s Dedication Area as of the effective date of such assignment.
“
Delivery Point
” means the point at which custody
transfers from Midstream Co to or for the account of Producer. The custody transfer point may include (a) the facilities of a Downstream Facility, (b) trucks, (c) the facilities of an oil processing facility or (d) any other point as
may be mutually agreed between the Parties. The Delivery Points for each Individual System in existence on the Effective Date shall be set forth in writing between Producer and Midstream Co, and additional points may become Delivery Points hereunder
upon mutual agreement of the Parties as construction is completed on additional facilities in satisfaction of the needs identified by Producer and the Parties shall continuously update the list of Delivery Points by mutual agreement.
“
Development Report
” has the meaning given to it in
Section 3.1(a)
.
“
Downstream Facility
” means any pipeline downstream of any Delivery Point on the System.
“
Downtime Event
” means, with respect to any Facility Segment, or, as applicable, all of the Facilities Segments of an
Individual System, a period during which Midstream Co is unable to receive Product into the central facility of such Facility Segment for a reason other than (i) Force Majeure, (ii) an event or condition downstream of the Individual System of which
such Facility Segment is a part that was not caused by Midstream Co, (iii) planned maintenance for which Midstream Co provided notice as described in
Section 5.5(b)(ii)
, or (iv) Producer’s production exceeding the production
forecast in the Development Report on which the applicable Facility Segment was based.
Texas Crude Oil
Gathering Agreement
- 4 -
“
Downtime Hours
” means, with respect to any Facility Segment, the hours during
the Applicable Month during which such Facility Segment was unavailable to provide Services.
“
Downtime Percentage
”
means, with respect to any Facility Segment during the Applicable Month, an amount equal to the quotient of (a) the aggregate number of Downtime Hours during the Applicable Month, divided by (b) the total hours during the Applicable Month.
“
Drip Condensate
” means that portion of Gas Controlled by Producer received into the Gas System (without manual separation or
injection) that condenses in the Gas System, and is recovered by Midstream Co. If at any time Midstream Co is not providing gathering services to Producer in the Dedication Area with respect to Gas, there will be no Drip Condensate delivered into
the Individual System.
“
Effective Date
” has the meaning given to it in the applicable Agreement Addendum.
“
Escalation Percentage
” means 2.50%.
“
Excluded Amounts
” means Midstream Co’s general and administrative costs and any costs for design or construction of
facilities that can be used to connect other Planned Wells or Planned Separator Facilities in the Development Report that Producer at such time intends to develop.
“
Facility Segment
” means each segment of an Individual System comprised of facilities beginning at a Receipt Point and ending
at a Delivery Point. If an Individual System does not contain any such distinct segment, then the term Facility Segment shall be synonymous with Individual System.
“
First Development Report
” means the first report delivered by Original Producer to Midstream Co that satisfies the
requirements for a Development Report in
Section 3.1(a)
and
Section 3.1(b)
(an “
Original Report
”); and, in the event that Producer assigns all or any part of the Dedicated Properties to a Producer Assignee, then with
respect to such Producer Assignee, the First Development Report shall not refer to the Original Report but rather to the first Development Report delivered by such Producer Assignee to Midstream Co that satisfies the requirements for such report in
Section 3.1(a)
and
Section 3.1(b)
.
“
Flash Gas
” means any gas that has been vaporized from Product
resulting from the gathering and treating of Product in the Individual System pursuant to this Agreement and has been collected by Midstream Co.
“
Force Majeure
” means an event that is not within the reasonable control of the Party claiming suspension (the
“
Claiming Party
”), and that by the exercise of reasonable due diligence the Claiming Party is unable to avoid or overcome in a reasonable manner. To the extent meeting the foregoing requirements, Force Majeure includes:
(a) acts of God; (b) wars (declared or undeclared); (c) insurrections, hostilities, riots; (d) floods, droughts, fires, storms, storm warnings, landslides, lightning, earthquakes, washouts; (e) industrial disturbances, acts of a
public enemy, acts of terror, sabotage, blockades, epidemics; (f) arrests and restraints of rulers and peoples; (g) civil disturbances; (h) explosions, breakage or accidents to machinery or lines of pipe; (i) hydrate obstruction or
blockages of any kind in lines of pipe; (j) freezing of wells or
Texas Crude Oil
Gathering Agreement
- 5 -
delivery facilities, partial or entire failure of wells, and other events beyond the reasonable control of the Claiming Party that affect the timing of production or production levels;
(k) (
reserved
); (l) action or restraint by any Governmental Authority (so long as the Claiming Party has not applied for or assisted in the application for, and has opposed where and to the extent commercially reasonable, such action or
restraint), (m) delays or failures by a Governmental Authority to grant Permits applicable to the System (or any Individual System) so long as the Claiming Party has used its commercially reasonable efforts to make any required filings with
such Governmental Authority relating to such Permits, and (n) delays or failures by the Claiming Party to obtain easements and rights of way, surface leases and other real property interests related to the System (or any Individual System) from
Third Parties, so long as the Claiming Party has used its commercially reasonable efforts to obtain such easements and rights of way, surface leases and other real property interests. The failure of a Claiming Party to settle or prevent a strike or
other labor dispute with employees shall not be considered to be a matter within such Claiming Party’s control.
“
Gallon
” means one U.S. Standard gallon measured at 60 degrees Fahrenheit.
“
Gas
” means any mixture of gaseous hydrocarbons, consisting essentially of methane and heavier hydrocarbons, including Flash
Gas and, unless otherwise expressly provided herein, liquefiable hydrocarbons and Drip Condensate, and including inert and noncombustible gases, produced in the Dedication Area.
“
Gas System
” means the Gas gathering system providing Gas gathering services to Producer.
“
Governmental Authority
” means any federal, state, local, municipal, tribal or other government; any governmental, regulatory
(including self-regulatory) or administrative agency, commission, body or other authority exercising or entitled to exercise any administrative, executive, judicial, legislative, regulatory or taxing authority or power; and any court or governmental
tribunal, including any tribal authority having or asserting jurisdiction.
“
Group
” means (a) with respect to
Midstream Co, the Midstream Co Group, and (b) with respect to Producer, the Producer Group.
“
Increase in Fee
” has the
meaning given to it in
Section 6.2(b)
.
“
Individual Fee
” means the rate for each Individual System set forth on
the applicable Agreement Addendum.
“
Individual System
” means the portion of the System beginning at the Receipt Points
and ending at the Delivery Points. The Individual Systems in existence on the Effective Date are more particularly described in writing between Producer and Midstream Co. Additional Individual Systems may be added to the System from time
to time in satisfaction of the needs identified by Producer and evidenced in writing between Producer and Midstream Co.
“
Initial
Term
” has the meaning given to it in
Section 8.1
.
Texas Crude Oil
Gathering Agreement
- 6 -
“
Interest Rate
” means, on the applicable date of determination, the prime rate
(as published in the “Money Rates” table of
The Wall Street Journal
, eastern edition, or if such rate is no longer published in such publication or such publication ceases to be published, then as published in a similar national
business publication as mutually agreed by the Parties) plus an additional two percentage points (or, if such rate is contrary to any applicable Law, the maximum rate permitted by such applicable Law).
“
Interruption Conditions
” has the meaning given to it in
Section 2.4(b)
.
“
Inventory Account
” has the meaning given to it in
Section 5.4(f)
.
“
Invoice Month
” has the meaning given to it in
Section 10.1(a)
.
“
Law
” means any applicable statute, law, rule, regulation, ordinance, order, code, ruling, writ, injunction, decree or other
official act of or by any Governmental Authority.
“
Losses
” means any actions, claims, causes of action (including
actions in rem or in personam), settlements, judgments, demands, liens, encumbrances, losses, damages, fines, penalties, interest, costs, liabilities, expenses (including expenses attributable to the defense of any actions or claims and
attorneys’ fees) of any kind or character, including Losses for bodily injury, death, or property damage, whether under judicial proceedings, administrative proceedings or otherwise, and under any theory of tort, contract, breach of contract,
breach of representation or warranty (express or implied) or by reason of the conditions of the premises of or attributable to any Person or Person or any Party or Parties.
“
Measurement Device
” means the lease automatic custody transfer, coriolis, or other metering device or equipment which, along
with application of test results (e.g. shrinkage factors, BS&W factors, meter proves, etc), as required for the Individual System, measure the amount of oil, water, and BS&W, all of which shall conform to industry standards and government
regulations, as further described in
Article 4
.
“
Measurement Point
” means the Measurement Device that the Parties
have agreed in writing will measure the volume of Product moving through the Individual System.
“
Meetings of Senior
Management
” means meetings between senior members of management of Midstream Co and Producer, or, if applicable, senior members of management of an Affiliate of Midstream Co or Producer, respectively, that Controls such entity.
“
Midstream Co
” means the Original Midstream Co, together with its permitted successors and assigns, including any Midstream
Co Assignee.
“
Midstream Co Assignee
” means any Third Party to whom Midstream Co assigns its rights and obligations in
accordance with this Agreement.
“
Midstream Co Group
” means Midstream Co, its Affiliates, and the directors, officers,
employees, and agents, of Midstream Co and its Affiliates; provided that all subsidiaries of OpCo that do not hold equity in Midstream Co shall be excluded from this definition.
Texas Crude Oil
Gathering Agreement
- 7 -
“
Modifications
” has the meaning given to it in
Section 3.1(c)
.
“
Month
” means a period of time from 7:00 a.m. Central Time on the first Day of a calendar month until 7:00 a.m. Central Time
on the first Day of the next succeeding calendar month. The term “
Monthly
” shall have the correlative meaning.
“
Monthly Loss/ Gain Report
” means, with respect to any Invoice Month, the report delivered pursuant to
Section
10.1(d)
, which shall include statements of the following with respect to such Invoice Month: (a) the System Gains/Losses, (b) the Other System Fuel used by Midstream Co in the operation of the Individual System, (c) the Associated
Water returned to Producer, and (d) to the extent required by a writing signed by Producer and Midstream Co, the Drip Condensate, the Recovered Oil and Flash Gas recovered by Midstream Co and returned to Producer. With respect to any
allocated volumes (specifically, those described in clauses (c) and, if applicable, (d)), the information included shall be of sufficient detail such that Producer may verify that the allocation procedures then in effect for the applicable Invoice
Month were applied.
“
Moody’s
” means Moody’s Investors Service, Inc., or any successor to its statistical
rating business.
“
Net Acres
” means (a) with respect to any oil and gas lease in which Producer has an interest, (i) the
number of gross acres in the lands covered by such oil and gas lease, multiplied by (ii) the undivided percentage interest in oil, gas and other minerals covered by such oil and gas lease, multiplied by (iii) Producer’s working interest in such
oil and gas lease, and (b) with respect to any mineral fee interest of Producer, (i) the number of gross acres in the lands covered by such mineral fee interest, multiplied by (ii) the undivided percentage interest of Producer in oil, gas and other
minerals in such lands.
“
Net Standard Volume
” means, with respect to Product, the gross standard volume, excluding
BS&W. For purposes of this definition, the following terms have the definitions set forth below:
|
|
1.
|
“
Indicated Volume
” means the change in meter reading which occurs during a receipt or delivery (Indicated Volume = closed meter reading - open meter reading).
|
|
|
2.
|
“
Gross Volume
” means the Indicated Volume multiplied by the meter factor for the particular liquid and flow rate under which the meter was proved.
|
|
|
3.
|
“
Gross Standard Volume
” means the Gross Volume, corrected for base gravity, at standard temperature corrected to standard pressure.
|
“
Oil Quality
” means the inherent characteristics of Product as determined by measurement or tests including BS&W, API
gravity, sulfur content, viscosity, pour point, wax crystallization temperature, metals content, and similar characteristics.
“
On-Line Deadline
” has the meaning given to it in
Section 3.2(b)
.
Texas Crude Oil
Gathering Agreement
- 8 -
“
OpCo
” means Noble Midstream Services, LLC, together with its permitted
successors and assigns.
“
Operating Hours
” has the meaning set forth in
Section 6.2(c)
.
“
Original Midstream Co
” means the entity identified as the “Midstream Co” in the applicable Agreement Addendum as
of the Effective Date.
“
Original Producer
” means Rosetta Resources Operating LP, a Delaware limited partnership .
“
Original Report
” has the meaning set forth in the definition of “First Development Report.”
“
Other System Fuel
” means any (a) Gas delivered by Producer to Midstream Co pursuant to a Transaction Document between
Producer and Midstream Co related to gas gathering services, or (b) Flash Gas, in each case, measured and used as fuel by Midstream Co.
“
Outbound Acreage
” has the meaning given to it in
Section 16.2(b)(i)
.
“
Overage Period
” has the meaning given to it in
Section 5.4(d)(ii)
.
“
Owner
” has the meaning given to it in
Section 4.1(g)
.
“
Party
” or “
Parties
” with respect to each Agreement Addendum shall mean the applicable Producer and the
applicable Midstream Co. Unless expressly stated otherwise, references to “Parties” shall not refer to all parties to all Agreements governed hereby. Rather, references to “Parties” shall refer only to such Parties as determined
by the applicable Agreement Addendum.
“
Period of Five Years
” means, with respect to any report delivered hereunder, the
period from the first Day of the fiscal quarter during which such report is required to be delivered until the fifth anniversary thereof.
“
Period of Two Years
” means, with respect to any report delivered hereunder, the period beginning on the first Day of the
fiscal quarter during which such report is required to be delivered and ending 24 Months after such date.
“
Permits
”
means any permit, license, approval, or consent from a Governmental Authority.
“
Person
” means any individual,
corporation, company, partnership, limited partnership, limited liability company, trust, estate, Governmental Authority, or any other entity.
“
Planned Separator Facility
” has the meaning given to it in
Section 3.1(b)(i)
.
“
Planned Well
” has the meaning given to it in
Section 3.1(b)(i)
.
“
Pressure Overage Percentage
” means an amount equal to the quotient of (a) the difference between (i) the highest actual
operating pressure of the applicable Facility Segment, as
Texas Crude Oil
Gathering Agreement
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measured at the inlet to the applicable central facility, sustained during any Overage Period and (ii) the Target Pressure for such Facility Segment divided by (b) the Target Pressure
for such Facility Segment.
“
Produced Water
” means water that is produced as a byproduct of Producer’s operation of
the Wells that are located in the Dedication Area; provided that any water that is Associated Water shall not constitute Produced Water hereunder until such time as it has been separated from Product and ceases being Associated Water. The term
“Produced Water” shall refer to all water that is in the Water System, whether such water is in the form of saltwater or water that has completed the recycling and treating processes.
“
Producer
” means the Original Producer, together with its permitted successors and assigns, including any Producer Assignee.
“
Producer Assignee
” means any Person to whom Original Producer or any subsequent Producer sells, assigns, or otherwise
transfers acreage subject to the Dedications.
“
Producer Group
” means Producer, its Affiliates, and the directors,
officers, employees, and agents of Producer and its Affiliates.
“
Producer Line Fill
” has the meaning given to it in
Section 5.4(f)(i)
.
“
Producer Meters
” means any Measurement Device owned and operated by Producer (or caused to be
installed or operated by Producer).
“
Product
” means the crude oil produced from oil or gas wells, in its natural form,
which may include Associated Water and Flash Gas naturally produced therewith.
“
Product Dedication
” means the dedication
and commitment made by Producer pursuant to
Section 2.1(a)
.
“
Psig
” means pounds per square inch gauge.
“
Purchased Dedicated Production
” means Product produced by a Third Party that (a) either (i) has been purchased by
Producer or (ii) the Parties have mutually agreed should be considered “Dedicated Production,” and (b) for which the Parties have agreed upon a Receipt Point for delivery into the Individual System.
“
Real Property Dedication
” means the dedication and commitment made by Producer pursuant to the first sentence in
Section 2.1(b)
.
“
Receipt Point
” means the point at which custody transfers from Producer to Midstream Co.
The custody transfer point may include: (a) with respect to any Well serviced by a Separator Facility, each of the connecting flanges on the System located at or near such Separator Facility, which flanges connect such Separator Facility to the
System, (b) with respect to any Well that is not serviced by a Separator Facility, each of the connecting flanges on the System that connect the Producer’s line to the System, (c) with respect to any Product delivered to an Individual System by
truck, the applicable truck unload facility or (d) any other point as may be mutually
Texas Crude Oil
Gathering Agreement
- 10 -
agreed between the Parties. The Receipt Points in existence on the Effective Date shall be set forth in writing between Producer and Midstream Co, and additional points may become Receipt
Points hereunder upon mutual agreement of the Parties as construction is completed on additional facilities in satisfaction of the needs identified by Producer and the Parties shall continuously update the list of Receipt Points by mutual agreement.
“
Recovered Oil
” means that portion of Product Controlled by Producer received into the Water System that is recovered by
Midstream Co. If at any time Midstream Co is not providing gathering services to Producer in the Dedication Area with respect to Produced Water, there will be no Recovered Oil delivered into the Individual System.
“
Redetermination Deadline
” has the meaning given to it in
Section 6.2(a)(ii)
.
“
Redetermination Proposal
” has the meaning given to it in
Section 6.2(a)(i)
.
“
Redetermined Individual Fee
” has the meaning given to it in
Section 6.2(a)(i)
.
“
Reimbursed Amount
” has the meaning given to it in
Section 10.1(a)
.
“
Release Conditions
” has the meaning given to it in
Section 2.4(a)
.
“
Releases of Dedication
” is not applicable to Original Producer. For purposes of this Agreement, there have been no Releases
of Dedication.
“
Rules
” has the meaning given to it in
Section 17.6
.
“
Separator Facility
” means the surface facility where the Product produced from one or more Wells in the Dedication Area is
collected and gas and Associated Water are separated from the Product. A Separator Facility may be known by the Original Producer as an econode but may also refer to a well pad or other facility from which Product is delivered into the System.
“
Services
” means: (a) the receipt of Producer’s owned or Controlled Product (including Associated Water and Flash Gas,
as applicable in the approved System Plan) at the Receipt Points; (b) the receipt of Producer’s owned or Controlled Drip Condensate and Recovered Oil, (c) the gathering of such Product; (d) the storage of such Product; (e) the gathering of
such Associated Water from the applicable Well to the point in the Individual System where Associated Water is delivered into the Water System, (f) the heating, separation, and chemical and other treatment of Product to remove Associated Water and
Flash Gas from the Product prior to the applicable Delivery Point to the extent agreed between Producer and Midstream Co and to the extent required to meet Oil Quality specification of Downstream Facilities or markets designated by the Producer; (g)
the redelivery of Product to Producer at the applicable Delivery Point for Producer’s account (inclusive of actual System gains or losses for the respective Individual System), (h) the delivery of Flash Gas into the Gas System at an appropriate
Delivery Point; and (i) the other services to be performed by Midstream Co in respect of such Product as set forth in this Agreement and the System Plan for an Individual System, all in accordance with the terms of this Agreement (including any
services with respect to metering services).
“
Services Fee
” means, collectively, the fees described in
Section
6.1
.
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Gathering Agreement
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“
Spacing Unit
” means the area fixed for the drilling of one Well by order or
rule of any applicable Governmental Authority, or (if no such order or rule is applicable) the area fixed for the drilling of a Well or Planned Well reasonably established by the pattern of drilling in the applicable area or otherwise established by
Producer in its reasonable discretion.
“
Standard & Poor’s
” means Standard & Poor’s Rating Group, a
division of McGraw Hill, Inc., or any successor to its statistical rating business.
“
State
” means the state in which the
Individual System is located.
“
System
” means all Individual Systems described in all of the Agreement Addenda,
collectively, including: (a) pipelines; (b) central facilities inclusive of pumping, heating, separating, treating, stabilizing, vapor recovery, and other equipment, (c) controls; (d) Delivery Points, meters and measurement facilities; (e)
storage for Product; (f) easements, licenses, rights of way, fee parcels, surface rights and Permits; (g) pumping facilities, if any, and (h) all appurtenant facilities, in each case, that are owned, leased or operated by each Midstream Co
to provide Services to Producer or Third Parties, as such gathering system and facilities are modified or extended from time to time to provide Services to Producer pursuant to the terms hereof or to Third Parties, including the Facility Segments
operated under this Agreement by each Midstream Co specified in the Agreement Addenda.
“
System Gains/Losses
” means any
Product, in terms of Barrels, received into the System that is lost, gained, or otherwise not accounted for incident to, or occasioned by, the gathering, and redelivery, of Product, including Product lost or gained in connection with the operation
of a pipeline, excluding line pack for new facilities. System Gains/Losses will be determined and allocated on an Individual System basis.
“
System Plan
” has the meaning given to it in
Section 3.1(c)
.
“
Target On-Line Date
” means (a) with respect to a Planned Separator Facility or, with respect to a Planned Well that is not
intended to be serviced by a Separator Facility, such Planned Well, in either case, that is described for the first time in the Original Report, the date specified in the Original Report for the applicable Planned Separator Facility or Planned Well,
as applicable, (b) with respect to any Planned Separator Facility or, with respect to any Planned Well that is not intended to be serviced by a Separator Facility, such Planned Well, in either case, that is described in a First Development
Report that is not the Original Report, 18 Months after the date of such First Development Report, unless Midstream Co consents to a shorter time period, and (c) with respect to any Planned Separator Facility or, with respect to any Planned Well
that is not intended to be serviced by a Separator Facility, such Planned Well, in either case, that is not described in the First Development Report, 18 Months after the date of the Development Report that initially reflects the Planned Separator
Facility or Planned Well, as applicable, unless Midstream Co consents to a shorter time period.
“
Target Pressure
” means
90 Psig, as measured at the inlet to the applicable central facility, unless otherwise set forth in writing between Producer and Midstream Co.
“
Tender
” means the act of Producer’s making Product available or causing Product to be made available to the System at a
Receipt Point. “
Tendered
” shall have the correlative meaning.
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Gathering Agreement
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“
Term
” has the meaning given to it in
Section 8.1
.
“
Third Party
” means any Person other than a Party to this Agreement or any Affiliate of a Party to this Agreement.
“
Third Party Assignment
” has the meaning given to it in
Section 16.1(a)
.
“
Transaction Document
” means each agreement entered into pursuant to the agreement terms and conditions related to gas
gathering services, agreement terms and conditions related to oil gathering services, agreement terms and conditions related to produced water services, agreement terms and conditions related to gas processing services, agreement terms and
conditions related to crude oil treating services, and agreement terms and conditions related to fresh water services, now or in the future existing between Producer and Midstream Co.
“
Transfer
” means a sale, conveyance, assignment, exchange, farmout, disposition or other transfer of Dedicated Properties by
Original Producer under
Section 16.2(b)
. In other Sections of this Agreement where the term uses a lower case, the term is not intended to have such a restrictive meaning.
“
Water System
” means the Produced Water system used to provide Produced Water services to Producer.
“
Well
” means a well (i) for the production of hydrocarbons, (ii) that is located in the Dedication Area,
(iii) in which Producer owns an interest, and (iv) for which Producer has a right or obligation to market Product produced thereby through ownership or pursuant to a marketing, agency, operating, unit, or similar agreement.
“
Year
” means a period of time from January 1 of a calendar year through December 31 of the same calendar year;
provided
that the first Year shall commence on the Effective Date and run through December 31 of that calendar year, and the last Year shall commence on January 1 of the calendar year and end on the Day on which this Agreement
terminates.
Section 1.2
Other Terms
. Other capitalized terms used in this Agreement and not defined in
Section 1.1
above have the meanings ascribed to them throughout this Agreement.
Section 1.3
References and Rules of Construction
. All
references in this Agreement to Exhibits, Appendices, Articles, Sections, subsections and other subdivisions refer to the corresponding Exhibits, Appendices, Articles, Sections, subsections and other subdivisions of or to this Agreement unless
expressly provided otherwise. Titles appearing at the beginning of any Articles, Sections, subsections and other subdivisions of this Agreement are for convenience only, do not constitute any part of this Agreement, and shall be disregarded in
construing the language hereof. The words “this Agreement,” “herein,” “hereby,” “hereunder” and “hereof,” and words of similar import refer to this Agreement as a whole, including the applicable
Agreement Addendum and all Exhibits, Appendices, and other attachments to these Agreement Terms and Conditions and the applicable Agreement Addendum, all of which are incorporated herein, and not to any particular Exhibit, Appendix, Article,
Section, subsection or other subdivision unless expressly so limited. The word “including” (in its various forms) means “including without limitation.” The word “or” shall mean “and/or” unless a clear contrary
Texas Crude Oil
Gathering Agreement
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intention exists. The word “from” means from and including, the word “through” means through and including, and the word “until” means until but excluding. All
references to “$” or “dollars” shall be deemed references to United States dollars. The words “will” and “shall” have the same meaning, force, and effect. Each accounting term not defined herein will have the
meaning given to it under generally accepted accounting principles. Pronouns in masculine, feminine or neuter genders shall be construed to state and include any other gender, and words, terms and titles (including terms defined herein) in the
singular form shall be construed to include the plural and vice versa, unless the context otherwise requires. References to any Law, contract or other agreement mean such Law, contract or agreement as it may be amended, supplemented, released,
revised, replaced, or otherwise modified from time to time.
Article 2
Product Dedication and Real Property Dedication
Section 2.1
Producer’s Dedications
.
(a)
Product Dedication
. Subject to
Section 2.2
through
Section 2.4
, during the Term, Producer exclusively dedicates
and commits to deliver to Midstream Co under this Agreement, as and when produced, all of the Dedicated Production and agrees not to deliver any Dedicated Production to any other gatherer, purchaser, marketer, or other Person prior to delivery to
Midstream Co at the Receipt Points.
(b)
Real Property Dedication
. Subject to
Section 2.2
through
Section 2.4
,
during the Term, Producer grants, dedicates, and commits the Dedicated Properties to Midstream Co for performance of the Services pursuant to this Agreement. Except for the Parties’ performance of their obligations under this Agreement, no
further performance is required by either Party to effectuate the Real Property Dedication.
Section 2.2
Conflicting Dedications
.
(a) Notwithstanding anything in this Agreement to the contrary, Producer shall have the right to comply with (i) each of the
Conflicting Dedications existing on the Effective Date or, in the case of a Producer Assignee, the effective date of such assignment, and (ii) any other Conflicting Dedication applicable as of the date of acquisition of any oil and gas leases,
mineral interests, and other similar interests within the Dedication Area that are acquired by Producer after the Effective Date and otherwise would have become subject to the Dedications (but not any Conflicting Dedications entered into in
connection with such acquisition). Without the prior written consent of Midstream Co (which shall not be unreasonably withheld), Producer shall not extend or renew any Conflicting Dedication and shall terminate each Conflicting Dedication as soon as
permitted under the underlying contract without causing Producer to incur any costs or expenses deemed unreasonable or inappropriate in the opinion of Producer and shall not enter into any new Conflicting Dedication. If services of the type provided
hereunder are being provided to Producer by a Third Party with respect to Dedicated Properties under a Conflicting Dedication, then 180 Days prior to the expiration of such Conflicting Dedication, if requested by Producer, Midstream Co and Producer
shall have a Meeting of Senior Management (unless both Parties agree that a Meeting of Senior Management is not required) to assess whether Midstream Co is ready, willing and able to begin providing Services with respect to such Dedicated
Texas Crude Oil
Gathering Agreement
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Properties concurrently with the anticipated expiration or termination of the applicable Conflicting Dedication. If Midstream Co cannot provide Producer such assurances, then Midstream Co
shall deliver to Producer a written consent to the extension of the applicable Conflicting Dedication. In no event shall Producer be required to begin using Services provided by Midstream Co on a Day other than the first Day of a Month.
(b) Certain Conflicting Dedications contain rights of first refusal or other provisions that (i) entitle Producer to a release of acreage
from such Conflicting Dedication if Producer dedicates the released acreage to a Third Party or (ii) expressly prohibit Producer from dedicating such released acreage to an Affiliate of Producer. As used herein, the term “
Conflicting
Dedication
” shall include both the original right of first refusal (or similar right) and the dedication resulting from an exercise of such right of first refusal (or similar right) so long as the resulting dedication covers the same
acreage as the original Conflicting Dedication.
(c) To the extent Producer claims that a Conflicting Dedication exists with respect to
certain Services on specified Dedicated Properties, Midstream Co shall have the right to review the documentation creating such Conflicting Dedication, subject to confidentiality requirements applicable to such Conflicting Dedication.
Section 2.3
Producer’s Reservation
. Producer reserves the following rights respecting Dedicated Production for itself:
(a) to operate (or cause to be operated) Wells producing Dedicated Production in its sole discretion, including the right to drill new Wells,
repair and rework old Wells, temporarily shut in Wells, renew or extend, in whole or in part, any oil and gas lease or term mineral interest, or cease production from or abandon any Well or surrender any applicable oil and gas lease, in whole or in
part, when no longer deemed by Producer to be capable of producing in paying quantities under normal methods of operation;
(b)
Reserved;
(c) to deliver such Dedicated Production or furnish such Dedicated Production to Producer’s lessors and holders of
other burdens on production with respect to such Dedicated Production as is required to satisfy the terms of the applicable oil and gas leases or other applicable instruments; and
(d) to pool, communitize or unitize Producer’s interests with respect to Dedicated Production.
Section 2.4
Releases from Dedication
.
(a)
Permanent Releases
. Midstream Co shall permanently release from the Dedications: (i) any Dedicated Production from any
Well, Dedicated Properties, or Spacing Unit affected by one or more of the Release Conditions, (ii) any Dedicated Production that would have been delivered to a Separator Facility affected by one or more of the Release Conditions,
(iii) any Dedicated Properties affected by one or more of the Release Conditions and (iv) any Purchased Dedicated Production for which the Individual System has been affected by one or more of the Release Conditions. The
“
Release Conditions
” are:
(i) Midstream Co’s failure to complete the facilities that are described
on a System Plan and that are necessary to connect any Planned Separator Facility or Planned Wells to the System or failure to commence the Services with respect to any Planned Separator Facility or Planned Wells by the applicable On-Line Deadline
(so long as such failure was not the result of Producer’s failure to comply with the then-applicable Development Report);
Texas Crude Oil
Gathering Agreement
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(ii) Midstream Co’s election (x) pursuant to
Section 3.1(c)
not
to provide Services for any Well or Separator Facility included in a Development Report delivered by a Producer that is not the Original Producer or (y) pursuant to
Section 3.3(b)
not to provide Services for (1) any Well or
Separator Facility for which Producer failed to deliver a Development Report on or before the applicable deadline set forth in
Section 3.1(a)
, (2) any Well or Separator Facility not described in the applicable Development Report or
(3) any excess volume of Product produced from any Well during any Day that exceeds the volume included in Producer’s estimate set forth in the most recent Development Report delivered to Midstream Co;
(iii) expiration of the Term, as further described in
Section 8.2
;
(iv) written agreement of Producer and Midstream Co, and each Party shall consider in good faith any proposal by the other
Party to permanently release any Dedicated Production or Dedicated Properties;
(v) the occurrence of a Force Majeure of
the type described in clauses (l), (m) or (n) of the definition of “
Force Majeure
” affecting Midstream Co that continues for a period of 120 Days or more;
(vi) Midstream Co’s interruption or curtailment of receipts and deliveries of Product from any Well or Separator Facility
pursuant to
Section 5.5
that continues for 90 Days or more, except to the extent (A) such interruption or curtailment is caused by the acts or omissions of Producer, or (B) Producer elects to reduce the Individual Fee with respect
to any volumes that are affected by a Downtime Event pursuant to
Section 6.2(c)
;
(vii) a default (other than a
default of the type covered by
Section 2.4(a)(i)
) by Midstream Co that remains uncured for 90 Days or more;
(viii)
Producer’s rejection of any increase in the Individual Fee pursuant to
Section 13.1(b)
; or
(ix) Midstream
Co’s suspension of Services pursuant to
Section 13.2(a)(ii)
that extends for the period of time stated in such Section or (y) Midstream Co’s election not to expand an Individual System pursuant to
Section 13.2(b)
.
Producer may deliver any Dedicated Production released from the Dedications pursuant to this
Section 2.4(a)
to such other gatherers as
it shall determine.
(b)
Temporary Release
. Midstream Co shall temporarily release from the Dedications: (i) any
Dedicated Production from any Well, Dedicated Properties, or Spacing Unit
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Gathering Agreement
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affected by one or more of the Interruption Conditions, (ii) any Dedicated Production that would have been delivered to a Separator Facility affected by one or more of the Interruption
Conditions, (iii) any Dedicated Properties affected by one or more of the Interruption Conditions, and (iv) any Purchased Dedicated Production for which the Individual System has been affected by one or more of the Interruption Conditions.
The “
Interruption Conditions
” are:
(i) the occurrence and continuation of an uncured default by Midstream
Co;
(ii) Midstream Co’s interruption or curtailment of receipts and deliveries of Product pursuant to
Section
5.5
that continues for a period of 15 consecutive Days, except to the extent (A) such interruption or curtailment is caused by the acts or omissions of Producer, or (B) Producer elects to reduce the Individual Fee with respect to any
volumes that are affected by a Downtime Event pursuant to
Section 6.2(c)
; and
(iii) Until a permanent release is
required under
Section 2.4(a)
or
Section 13.2
, Midstream Co’s suspension of Services pursuant to
Section 13.2(a)
(and, if
Section 13.2(a)(i)
applies, such temporary release shall continue at the discretion of
Midstream Co, subject to the time limits set forth in
Section 13.2(a)(i)
).
Producer may make alternative arrangements for the
gathering of any Dedicated Production temporarily released from the Dedications pursuant to this
Section 2.4(b)
. To the extent that an interruption or curtailment can be limited to a Facility Segment, Midstream Co shall so limit such
interruption or curtailment, and to the extent that Midstream Co does so limit such curtailment or interruption, the temporary release permitted by this
Section 2.4(b)
shall only apply to the affected Facility Segment. Such temporary
release shall continue until the first Day of the Month after the Month during which Midstream Co cures the applicable default or the interruption, curtailment, or suspension of Services terminates;
provided
that, if Producer obtained
temporary services from a Third Party (pursuant to a contract that does not give rise to a default under this Agreement) during the pendency of such default, interruption, curtailment, or suspension, such release shall continue until the earlier of
(A) the first Day of the Month that is six Months after the event or condition that gave rise to the interruption, curtailment or other temporary cessation has been corrected and (B) the first Day of the Month after the termination of the
applicable contract with such Third Party. For the avoidance of doubt, the temporary services that Producer may obtain under
Section 3.3
shall not constitute a release under the terms of this Agreement; provided that, if Producer cannot
obtain such temporary services without a temporary release, Midstream Co may in its discretion grant or refuse to grant a temporary release on such terms as reasonably required by Midstream Co (including, for example, conditioning the grant of a
temporary release on the establishment of a termination date for such temporary release).
(c)
Evidence of Release
. At the
request of Producer, the Parties shall execute a release agreement reasonably acceptable to all Parties (which, in the case of a permanent release, shall be in recordable form) reflecting any release of Dedicated Production or Dedicated Properties
pursuant to this
Section 2.4
.
Section 2.5
Covenants Running with the Land
. Subject to the provisions of
Section
2.3
and
Section 2.4
, each of the Dedications (a) is a covenant running with the Dedicated
Texas Crude Oil
Gathering Agreement
- 17 -
Properties, (b) touches and concerns Producer’s interests in the Dedicated Properties, and (c) shall be binding on and enforceable by Midstream Co and its successors and assigns.
Except as set forth in Article 16, (i) in the event Producer sells, transfers, conveys, assigns, grants or otherwise disposes of any or all of its interest in the Dedicated Properties, then any such
sale, transfer, conveyance, assignment, grant or other disposition shall be made subject to this Agreement and (ii) in the event Midstream Co sells, transfers, conveys, assigns, grants or otherwise disposes of any or all of its interest in the
Individual System, then any such sale, transfer, conveyance, assignment, grant or other disposition shall be made subject to this Agreement. The Real Property Dedication is not an executory contract under Section 365 of Title 11 of the
United States Code (11 U.S.C. § 365).
Section 2.6
Recording of Agreement
. Producer hereby authorizes Midstream Co to
record a memorandum of the Agreement in the real property records of the counties in which the Dedication Area is located. Midstream Co and Producer agree that until Midstream Co provides notice to the contrary, all payment terms and pricing
information shall remain confidential and be redacted from any filings in the real property records.
Article 3
System Expansion and Connection of Wells
Section 3.1
Development Report; System Plan; Meetings
.
(a)
Development Report
. Original Producer will provide, on or before October 1, 2016, and each Producer Assignee will
provide, on or before the date stated in
Section 16.1
, Midstream Co with its First Development Report, which shall describe (x) in detail the planned development, drilling, and production activities relating to the Dedicated Production
through the end of the applicable Period of Two Years, and (y) generally the long-term drilling and production expectations for those project areas in which drilling activity is expected to occur during the applicable Period of Five Years,
including the information described in
Section 3.1(b)
. On or before each January 1, each April 1, each July 1, and each October 1 of each Year following the date on which the First Development Report is to be delivered, Producer
shall provide to Midstream Co an update of the then-current report (the First Development Report, as updated in accordance with the foregoing and as the then current report may be updated from time to time, the “
Development
Report
”).
(b)
Development Report Content
. With respect to the Dedication Area, the Development Reports shall include
information as to
(i) the Wells (each, a “
Planned Well
”) and Separator Facilities (each, a
“
Planned Separator Facility
”) that Producer expects to drill or install during the applicable Period of Two Years, including the expected locations, completion dates thereof (which completion dates shall not be earlier than the
applicable Target On-Line Dates), the expected spud dates of such Planned Wells, and dates flow is anticipated to initiate from such Wells;
(ii) the anticipated Oil Quality of the production from any Well and Separator Facility that Producer expects to produce during
the applicable Period of Two Years;
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(iii) the Receipt Points and Delivery Points (including proposed receipt points
and delivery points not yet agreed in writing among the Parties) at which Product produced from each Well is to be delivered by or redelivered to Producer during the applicable Period of Two Years;
(iv) the number of Planned Wells and Planned Separator Facilities anticipated to be producing after the Period of Two Years and
before the end of the Period of Five Years, broken out by an appropriate geographic area, such as a development plan area;
(v) the actual lateral length for each Well described in the Period of Two Years, the anticipated lateral length for each
Planned Well described in the Period of Two Years and initial assumptions for the planned lateral length for each Planned Well anticipated to be producing after the Period of Two Years and before the end of the Period of Five Years;
(vi) the number of rigs that Producer intends to operate in the Dedication Area each year during the Period of Five Years
(including sufficient detail regarding the anticipated location of such rigs to allow Midstream Co to determine which Individual System would be impacted by such rig activity);
(vii) with respect to the Period of Two Years, the anticipated date of each frac, the quantity of fresh water required to
complete such frac and an indication of the type of frac to be performed (slick, hybrid gel, gel, etc);
(viii) with
respect to the Period of Two Years, the anticipated date on which Midstream Co may initiate construction or other development activities at the Well or Separator Facility in order to complete the interconnection into the Individual System; and
(ix) such other information as may be reasonably requested by Midstream Co with respect to Wells and Separator Facilities that
Producer intends to drill or from which Producer intends to deliver Product during the Period of Two Years and Period of Five Years.
To
the extent possible, any information Producer is required to provide under this
Section 3.1(b)
with respect to Wells or Separator Facilities shall also include such information related to Planned Wells and Planned Separator
Facilities. In addition, if appropriate to provide a complete and accurate Development Report, any information requested with respect to Planned Wells and Planned Separator Facilities shall also be provided with respect to existing Wells or
Separator Facilities.
(c)
System Plan
. Based on the Development Report and such other information about the expected
development of the Dedicated Properties as shall be provided to Midstream Co by or on behalf of Producer, including as a result of meetings between representatives of Midstream Co and Producer, Midstream Co shall develop and periodically update a
plan (the “
System Plan
”) describing or depicting the modifications, extensions, enhancements, major maintenance and other actions necessary in order for the Individual System to be able to provide timely Services for the Product
produced by the Wells and Separator Facilities described in the
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Gathering Agreement
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most recent Development Report (including Planned Wells, Planned Separator Facilities and changes in anticipated production from existing Wells and Separator Facilities). Without limiting or
otherwise altering Midstream Co’s rights under
Section 13.2
, unless the applicable Well or Separator Facility is operated by Original Producer, Midstream Co may elect, in its sole discretion, not to make such modifications, extensions,
enhancements, major maintenance, or other actions to the System (the “
Modifications
”) and not to provide Services for any Wells or Separator Facilities included in a Development Report delivered by a Producer that is not the
Original Producer. If (i) Midstream Co elects to make such Modifications, (ii) Producer thereafter modifies the Development Report or provides other information (the date on which the modified Development Report or such other information
is provided to Midstream Co, the “
Cancellation Date
”) indicating that such Modifications are no longer necessary, and (iii) as of the Cancellation Date, the actual aggregate costs and expenses (excluding Excluded Amounts)
incurred or committed by Midstream Co to make such cancelled Modifications exceeds $100,000.00, then Producer shall reimburse Midstream Co for all reasonable and documented costs and expenses (other than the Excluded Amounts) incurred or committed
by Midstream Co through the Cancellation Date to make such Modifications. The System Plan (or, with respect to the allocation procedures described in clause (vi), the applicable writing signed by Midstream Co and Producer) shall include
information as to:
(i) each Facility Segment then existing and operational, under construction, or planned and the
Individual System of which such Facility Segment is a part;
(ii) all Receipt Points and Delivery Points served or to be
served by each such Facility Segment;
(iii) estimated gathering pressures for the 12 Month period beginning on the Target
On-Line Date for the applicable Facility Segment and the Target Pressures for each Individual System included in the Development Report;
(iv) all pumps, heaters, stabilizers, treatment, Associated Water and Flash Gas separation, and other major physical facilities
located or to be located on or within each such Facility Segment, together with their sizes, operating parameters, capacities, and other relevant specifications (including the maximum operating pressures of the low pressure gathering lines and the
high pressure gathering lines), which sizes, parameters, capacities and other relevant specifications shall be sufficient to (x) connect the Individual System to the Receipt Points and Delivery Points for all Planned Separator Facilities and
(with respect to any Planned Wells not intended to be serviced by a Separator Facility) Planned Wells set forth in the most recent Development Report and (y) perform the Services for all Dedicated Production projected to be produced from the
Dedicated Properties as contemplated by the most recent Development Report;
(v) the anticipated schedule for completing
the construction and installation of the planned Facility Segments and all planned Receipt Points and Delivery Points, in each case, for all Planned Separator Facilities or Planned Wells, as applicable, included in the most recent Development
Report;
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Gathering Agreement
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(vi) the allocation methodologies to be used by Midstream Co with respect to
System Gains/ Losses, Other System Fuel and other allocations hereunder (including, to the extent required by a writing signed by Producer and Midstream Co, allocations with respect to Drip Condensate, Recovered Oil and Flash Gas) and, with respect
to any System Plan after the initial System Plan, any proposed changes to the allocation methodologies then in effect, which allocation methodologies shall (A) permit allocations to be made by Midstream Co in a commercially reasonable manner;
and (B) be based upon the measurements taken and quantities determined for the applicable Month. To the extent required by a writing signed by Producer and Midstream Co, Midstream Co shall allocate, in a manner that is commercially reasonable
and determined by Midstream Co in good faith, to a particular Receipt Point, the Flash Gas, Recovered Oil and Drip Condensate from a Facility Segment.
(vii) other information reasonably requested by Producer that is relevant to the design, construction, and operation of the
System, the relevant Individual System, the relevant Facility Segment, and the relevant Receipt Points and Delivery Points; provided that in no event shall Midstream Co be obligated to supply to Producer (A) pricing, budget or similar financial
information or (B) information that is covered by a confidentiality agreement or confidentiality obligations;
Midstream Co shall deliver the
applicable System Plan (including any updated System Plan) to Producer for Producer’s review and comment not later than 30 Days after Producer’s delivery to Midstream Co of the applicable Development Report or amendment thereto.
(d)
Meetings
. Midstream Co shall make representatives of Midstream Co available to discuss the most recent System Plan with Producer
and its representatives at Producer’s written request. Producer shall make representatives of Producer available to discuss the most recent Development Report with Midstream Co and its representatives at Midstream Co’s written request. The
Parties agree that the meetings described in the previous sentences of this clause (d) may occur (and shall, if requested by either Party) on a Monthly basis. At all such meetings, the Parties shall exchange updated information about their
respective plans for the development and expansion of the Dedicated Properties (including amendments to the Development Report) and the System (including amendments to the System Plan for Producer’s review and comment) and shall have the
opportunity to discuss and provide comments on the other Party’s plans.
(e)
Scope and Purpose of Planning Tools
. The
Development Report and the System Plan are intended to assist Midstream Co and Producer with long-term planning and goals. None of the Development Reports nor the System Plans shall amend or modify this Agreement in any way. Midstream Co may, in its
sole discretion, work with OpCo or any of OpCo’s subsidiaries to prepare and deliver a System Plan jointly with such other entity or entities. To the extent that a Development Report or System Plan that satisfies the requirements above is
delivered or deemed delivered under any other Transaction Document, such Development Report or System Plan shall be deemed delivered hereunder.
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Gathering Agreement
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Section 3.2
Expansion of System and Connection of Separator Facilities
.
(a)
Service Standards
. Midstream Co shall, at its sole cost and expense, design, construct (as applicable), and own the Individual
System in a good and workmanlike manner and in accordance with the System Plan and this
Section 3.2
. Until such time as Producer has delivered a Development Report, Midstream Co shall have no obligation under this
Section
3.2
(a)
.
(b)
On-Line Deadline
. Subject to
Section 12.2
, Midstream Co shall by the later of (x) the date
that the first Planned Well on a particular Planned Separator Facility (or, with respect to a Planned Well that is not intended to be serviced by a Separator Facility, the date that such Planned Well) is ready for connection to the System and (y)
the applicable Target On-Line Date (such later date, the “
On-Line Deadline
”): (i) have completed (or caused the completion of) the construction of the necessary facilities, in accordance with the then current System Plan, (A)
to connect such Planned Separator Facility or such Planned Well to the System and (B) to connect the System to each planned Delivery Point for such Planned Separator Facility or such Planned Well, as applicable, and (ii) be ready and able
to commence Services with respect to Dedicated Production from such Planned Separator Facility or Planned Well, as applicable.
(c)
Additional/Accelerated Well
. From time to time, Producer may provide notice to Midstream Co that Producer has accelerated the Target On-Line Date for a Planned Well or Planned Separator Facility (any such Well or Separator Facility, an
“
Additional/Accelerated Well
”). Midstream Co will use its commercially reasonable efforts to modify the System Plan and to cause the necessary gathering facilities to be constructed prior to the On-Line Deadline for such
Additional/Accelerated Well. From time to time, Producer may provide notice to Midstream Co that Producer (i) has delayed the Target On-Line Date for a Planned Well or Planned Separator Facility, (ii) subject to
Section 3.2(d)
,
anticipates eliminating a Planned Well or Planned Separator Facility from its development plans and the Development Report, or (iii) anticipates shutting in a Well or Separator Facility that has been producing. Midstream Co may adjust the
System Plan as it determines to be appropriate and commercially reasonable to accommodate such elimination of such Wells and Separator Facilities.
(d)
Cancellation of Planned Wells and Planned Separator Facilities
. If (i) Midstream Co reasonably determines that Producer
has permanently abandoned the drilling or installation of any Planned Well or Planned Separator Facility or Producer notifies Midstream Co that Producer intends to permanently abandon the drilling or installation of any Planned Well or Planned
Separator Facility (whether through the delivery of an updated Development Report or otherwise, the date on which such determination is made, the “
Abandonment Date
”), (ii) Midstream Co had begun to design or construct the
Facility Segment to connect such Planned Well or Planned Separator Facility to the System prior to such Abandonment Date, and (iii) the actual aggregate costs and expenses (excluding Excluded Amounts) incurred or committed by Midstream Co prior
to the Abandonment Date exceeds $100,000.00, then Producer shall reimburse Midstream Co for all reasonable and documented costs and expenses (other than the Excluded Amounts) incurred or committed by Midstream Co prior to such Abandonment Date to
design and construct such Facility Segment.
(e)
Substation and Interconnection Facilities
. The obligations of Midstream Co
hereunder to design and construct the Individual System and to perform the Services do not include the design or construction of any substation or other interconnecting facilities required to procure electricity for the Individual System. If a
substation or any other interconnecting facility is required in order for Midstream Co to perform its obligations hereunder, Midstream Co and Producer shall enter into a separate agreement setting forth each Party’s responsibilities in
connection therewith, including an allocation of responsibility for all associated costs and expenses.
Texas Crude Oil
Gathering Agreement
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Section 3.3
Temporary Services.
(a) Pending the completion of facilities contemplated in a System Plan or that may be required to service Wells in existence as of the
Effective Date, Producer may enter into a contract with a Third Party to provide services with respect to the Dedicated Production that is anticipated to be serviced by the new, modified, or enhanced facilities if the term of such contract does not
exceed six Months (and may be renewed in six-Month increments until such time as Midstream Co has completed the applicable facilities).
(b) If at any time, (i) Producer fails to deliver a Development Report on or before the applicable deadline set forth in
Section 3.1(a)
, (ii) a Development Report delivered by Producer failed to describe any Well, or (iii) the average rate of production at any Receipt Point described in the then-applicable Development Report exceeds Producer’s
forecast for such Receipt Point set forth in such Development Report, and as a result, Midstream Co has not completed any new, modified, or enhanced facilities necessary to allow Midstream Co to accept all of the Product Tendered by Producer at a
Receipt Point, then (x) within a reasonable time after Midstream Co becomes aware of the need for such new, modified, or enhanced facilities, Midstream Co shall elect, in its sole discretion, whether to proceed with the development and
completion of such facilities by providing notice to Producer, and (y) if Midstream Co elects to proceed with the development and completion of such facilities, (1) Midstream Co shall cause such facilities to be completed within a
reasonable time after such election, and (2) pending the completion of such facilities, Midstream Co may elect (in its reasonable discretion and in exchange for reasonable compensation) to permit Producer to enter into a contract with a Third
Party as provided in
Section 3.3(a)
to provide services with respect to the Dedicated Production that Midstream Co is unable to accept.
(c) Any time Producer makes alternative arrangements with a Third Party for the provision of services or to accept Product as provided for in
this Agreement, Producer shall (i) if Midstream Co anticipates being able to provide Services hereunder or to accept Product within a period of time that is shorter than six Months, use commercially reasonable efforts to enter into a contract
with a term that expires on or around the date on which Midstream Co anticipates being able to provide Services hereunder or to accept Product, and (ii) notify Midstream Co of the term of such contract promptly after execution
thereof. Prior to requiring Producer to begin using, or resume using, as applicable, Services hereunder, Midstream Co shall provide notice to Producer of the date on which Midstream Co expects to be ready, willing and able to begin providing
Services to Producer no later than 45 Days prior to the expiration of the Third Party contract. In no event shall Producer be required to begin using, or resume using, as applicable, Services on a Day other than the first Day of a Month.
Texas Crude Oil
Gathering Agreement
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Section 3.4
Cooperation
. The Parties shall work (at their own cost and expense)
together in good faith to obtain such Permits as are necessary to drill and complete each Planned Well and construct the required extensions of the System to each Planned Separator Facility (and each Planned Well, as applicable) as expeditiously as
reasonably practicable, all as provided in this Agreement. The Parties shall cooperate with each other and to communicate regularly regarding their efforts to obtain such Permits. Upon request by Producer, Midstream Co shall promptly
provide to Producer copies of all Permits obtained by Midstream Co in order to construct any Facility Segment (or portion of a Facility Segment) of the System.
Section 3.5
Grant of Access; Real Property Rights
.
(a)
Producer
’
s Grant of Access
. Producer hereby grants to Midstream Co, without warranty of title, either
express or implied, to the extent that it may lawfully and is contractually permitted to do so without the incurrence of additional expense, the rights of ingress and egress with respect to, and the right to access, all lands constituting Dedicated
Properties for the purpose of using, maintaining, servicing, inspecting, repairing, and operating all or any portion of the applicable Individual System, including all pipelines, meters and other equipment necessary for the performance by Midstream
Co of this Agreement. Such right of access shall not include any right to install, replace, disconnect, or remove all or any portion of the applicable Individual System, which rights may only be granted pursuant to a separate instrument entered
into pursuant to
Section 3.5(f)
.
(b)
Producer Does Not Have Obligation to Maintain
. Producer shall not have a duty to
maintain in force and effect any underlying agreements (such as any lease, easement, or surface use agreement) that the grant of access by Producer to Midstream Co under
Section 3.5(a)
is based upon, and such grant will terminate if Producer
loses its rights to the applicable property, regardless of the reason for such loss of rights.
(c)
Midstream Co
’
s
Grant of Access
. Midstream Co hereby grants to Producer, without warranty of title, either express or implied, to the extent that it may lawfully and is contractually permitted to do so without the incurrence of additional expense, the
rights of ingress and egress with respect to, and the right to access, all lands covered by the Individual System in order to exercise its rights and obligations hereunder. Such right shall not include any right to install, replace, disconnect,
or remove any facilities on such lands, which rights may only be granted pursuant to a separate instrument entered into pursuant to
Section 3.5(f)
. Producer shall release, protect, defend, indemnify and hold harmless Midstream Co Group from
and against all Losses directly or indirectly arising out of or in connection with bodily injury, death, illness, disease, or loss or damage to property of Midstream Co or any member of Midstream Co Group directly arising from Producer’s
exercise of its access rights hereunder, except to the extent such Losses are caused by the gross negligence or willful misconduct of Midstream Co Group.
(d)
Midstream Co Does Not Have Obligation to Maintain
. Midstream Co shall not have a duty to maintain in force and effect any
underlying agreements that the grant of access by Midstream Co to Producer pursuant to this
Section 3.5(d)
is based upon, and such grant will terminate if Midstream Co loses its rights to the applicable property, regardless of the reason for
such loss of rights.
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Gathering Agreement
- 24 -
(e)
No Interference
. A Party’s exercise of the rights granted to a Party by the other
Party pursuant to this
Section 3.5
shall not unreasonably interfere with the granting Party’s operations or with the rights of owners in fee with respect to the applicable lands, and such rights will be exercised in material compliance
with all applicable Laws and the safety and other reasonable access requirements of the granting Party. Each Party obtaining a right of access pursuant to this
Section 3.5
shall have the status of “licensee,” except when such Party
is accessing the applicable real property by way of a right-of-way, easement, or other similar real property right granted pursuant to a separate instrument.
(f)
Real Property Rights
. Each Party shall acquire and maintain all easements, rights of way, surface use, surface access
agreements, and other real property rights from Third Parties necessary to perform its obligations hereunder. To the extent a Party has the contractual right and title to do so, such Party shall provide to the other Party the right of co-usage
on the easements, sub-easements, rights of way, surface use, and other real property rights held by such Party covering lands for which the other Party requires real property rights to perform its obligations hereunder, all at no cost to the
providing Party and on terms and conditions mutually acceptable to the Parties in their reasonable discretion. Where a Party does not have the contractual right to do so, such Party shall provide reasonable assistance to the other Party in
obtaining the real property rights with respect to such lands as necessary or desirable to perform its obligations hereunder.
Article 4
Measurement Devices
Section 4.1
Measurement Devices.
(a) Midstream Co shall construct, install, own, and operate (or cause to be constructed, installed, and operated) the Measurement Devices
located at the Measurement Points. Midstream Co may, in its discretion, construct, install, own, and operate (or cause to be constructed, installed, and operated) Measurement Devices located at or upstream of the Delivery Points or at or
downstream of the Receipt Points.
(b) Midstream Co shall cause all Measurement Devices that are owned by Midstream Co to be constructed,
installed, and operated in accordance with applicable industry standards and applicable Laws, and as set forth in the current System Plan.
(c) Producer shall have the right, at its sole expense, to install, own and operate Measurement Devices located at the Measurement Points,
Receipt Points and Delivery Points. Producer shall cause Producer Meters to be installed, subsequent to providing a minimum of 72 hours’ notice to Midstream Co, so as not to interfere with Midstream Co’s Measurement Devices and shall take
steps that are reasonable and customary in the industry to mitigate or prevent any problems that may interfere with Midstream Co’s Measurement Devices at the Measurement Points.
(d) Midstream Co may elect to use a Producer Meter as the Measurement Device for a Measurement Point in lieu of constructing, installing,
owning, and operating a Measurement Device located at such Measurement Point by providing notice to Producer (including by
Texas Crude Oil
Gathering Agreement
- 25 -
detailing such election in the applicable System Plan). If Midstream Co elects to use such Producer Meter as the Measurement Device for a Measurement Point, Producer shall provide Midstream Co
reasonable access to such Producer Meter, including prior advance notice of, and the ability to witness, the calibration of such Producer Meter.
(e) Producer and Midstream Co shall cause Measurement Devices owned by such Party to be constructed, installed and operated in accordance with
the following depending on the type of meter used:
(i) API Manual of Petroleum Measurement Standard, Chapter 6.1, Metering
Assemblies, Lease Automatic Custody Transfer (LACT)
(ii) API, MPMS, Spec 11N, Specification for Lease Automatic Custody
Transfer (LACT)
(f) Midstream Co may (but shall not be obligated to) replace or make any alterations to the Measurement Devices necessary
to comply with any subsequent amendments, revisions or modifications of applicable Law or the American Gas Association Reports cited above. With respect to Producer Meters that Midstream Co has elected to use, Producer may (but shall not be
obligated to) replace or make any alterations to the Measurement Devices necessary to comply with any subsequent amendments, revisions or modifications of applicable Law or the American Gas Association Reports cited above.
(g) The accuracy of all Measurement Devices at the Measurement Points and Delivery Points and of all Measurement Devices that serve as
“check meters” for any such Measurement Point or Delivery Point Measurement Devices will be verified by the owner of such Measurement Device (the “
Owner
”) at Monthly intervals and, if requested, in the presence of a
representative of the other Party (the “
Beneficiary
”). The Owner shall verify the accuracy of any owned Measurement Device before the next Monthly verification required by the preceding sentence if the Beneficiary makes a
written request for a special test as described below. Notwithstanding the foregoing, when Daily deliveries of Product at any Measurement Point or Delivery Point average 100 Barrels per Day or less during any Month, the Owner may request from the
Beneficiary that the accuracy of the Measurement Devices at such Measurement Point or Delivery Point be verified quarterly. If, upon any test, any (i) Measurement Device at the Measurement Point is found to be inaccurate by 2.0% or less or (ii)
Measurement Device at the Delivery Point is found to be inaccurate by 0.25% or less, previous readings of such Measurement Device will be considered correct in computing the deliveries of Product under this Agreement. If, upon any test, any (1)
Measurement Device at the Measurement Point is found to be inaccurate by more than 2.0% or (2) Measurement Device at the Delivery Point is found to be inaccurate by more than 0.25% (excessive meter factor deviation), such Measurement Device will
immediately be removed from service, adjusted, repaired or replaced to record accurately (within the manufacturer’s allowance for error) and reproved prior to returning to service. If the excessive meter factor deviation can be explained by
changing conditions (gravity, temperature or flow-rate) no corrective action may be taken if mutually agreed upon by both the Owner and the Beneficiary. Any previous recordings of such Measurement Device with an excessive meter factor deviation will
be corrected by using the arithmetic average of the malfunction factor and the previous factor shall be applied to the production measured through the meter between the
Texas Crude Oil
Gathering Agreement
- 26 -
date of the previous factor and the date of the malfunction factor. The proving report must clearly indicate the meter’s malfunction factor and all remarks associated with the repairs or
adjustments. If the Beneficiary desires a special test of any Measurement Device, at least 72 hours’ advance written notice will be given to the Owner, and the Parties will cooperate to secure a prompt test of the accuracy of such Measurement
Device. If the Measurement Device so tested is found to be inaccurate by 2.0% or less or 0.25% or less, as applicable, the Owner will have the right to bill the Beneficiary for the costs incurred due to such special test, including any labor and
transportation costs, and the Beneficiary will pay such costs promptly upon invoice therefor.
(h) If requested by the Beneficiary, the
Measurement Devices owned by Owner shall include a sufficient number of data ports, and Owner shall permit Beneficiary to connect to such data ports, as shall be required to provide to Beneficiary on a real-time basis all measurement data generated
by such measurement equipment. Beneficiary shall be responsible at its own cost for obtaining equipment and services to connect to such data ports and receive and process such data.
(i) Each Party shall make the charts and records by which measurements are determined available for the use of the other Party in fulfilling
the terms and conditions thereof. Each Party shall, upon written request of the other Party, mail, email or deliver for checking and calculation all volume, BS&W, and gravity, average flowing temperature, average flowing pressure and other
meter or test records in its possession and used in the measurement or allocation of Product delivered under this Agreement within 30 Days after the last chart for each billing period is removed from the meter. Such data shall be returned
within 90 Days after the receipt thereof.
(j) Each Party shall preserve or cause to be preserved for mutual use all test data or other
similar records in accordance with the applicable rules and regulations of regulatory bodies having jurisdiction, if any, with respect to the retention of such records, and, in any event, for at least 24 Months.
(k) So long as the Parties to this Agreement are also parties to a Transaction Document that covers Gas, the requirements for Measurement
Devices in respect of Flash Gas shall be covered by such Transaction Document. If at any time the Parties to this Agreement are not also party to another Transaction Document that covers Gas, the Parties shall set forth in the Agreement
Addendum or an appropriate amendment to this Agreement the requirements for Measurement Devices pertaining to Flash Gas; absent such agreement, Midstream Co shall install and maintain measuring equipment at the Delivery Points that is in accordance
with applicable API standards.
Section 4.2
Measurement Procedures
. Midstream Co shall use the Measurement Devices owned by
Midstream Co (or if Midstream Co’s rights under
Section 4.1(d)
are exercised, then the Measurement Devices owned by Producer) at the Measurement Points to determine the volumes of Product passing through the Individual System for
purposes of
Article 6
and
Article 10
. Midstream Co shall cause (or if Midstream Co’s rights under
Section 4.1(d)
are exercised, then Producer shall cause) the measurements of the quantity and quality of all Product
measured at the Measurement Points (and at each Receipt Point or Delivery Point at which measurements are taken) to be conducted in accordance with industry standards (referenced below) and governmental regulations, BLM Onshore Order No. 4:
Measurement of Oil.
Texas Crude Oil
Gathering Agreement
- 27 -
API Manual of Petroleum Measurement Standards:
Chapter 4, Proving Systems
Chapter 5.1. General Considerations for Measurement by Meters
Chapter 5.6, Measurement of Liquid by Coriolis Meters
Chapter 7, Temperature Determination
Chapter 8, Sampling
Chapter 8.2, Automatic Sampling of Petroleum and Petroleum Products
Chapter 9, Density Determination
Chapter 10, Sediment and Water
Chapter 12.2, Calculation of Petroleum Quantities Measured by Turbine or Displacement Meters
Section 4.3
Product Meter Adjustments
. If a Measurement Device is out of service or registering inaccurately, the Parties shall
determine the quantities of Product received or delivered during such period as follows:
(a) By using the registration of any check meter
or meters, if installed and accurately registering; or in the absence of such check meters,
(b) By using a meter operating in parallel
with the estimated volume corrected for any differences found when the meters are operating properly,
(c) By correcting the error if the
percentage of error is ascertainable by calibration, tests or mathematical calculation, such as step change, uncertainty calculation or balance adjustment; or in the absence of check meters and the ability to make corrections under this
Section
4.3(c)
, then,
(d) By estimating the quantity received or delivered by receipts or deliveries during periods under similar conditions
when the meter was registering accurately.
Article 5
Tender, Nomination, and Gathering of Production
Section 5.1
Limitations on Service to Third Parties
. Midstream Co shall obtain Original Producer’s consent prior to offering
services on an Individual System to any Third Party, unless (a) Midstream Co is required by a Governmental Authority to offer service to a Third Party, in which case Midstream Co shall provide Producer prior notice of offering such
Texas Crude Oil
Gathering Agreement
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service to such Third Party, (b) such Third Party has become a Producer hereunder by virtue of assignment of Dedicated Properties to such Party, or (c) Original Producer has ceased to
operate acreage serviced by such Individual System.
Section 5.2
Tender of Dedicated Production
. Subject to
Section 5.3(c)
,
(a) each Day during the Term, Producer shall Tender to the Individual System at each applicable Receipt Point all of the Dedicated Production available to Producer at such Receipt Point, and (b) Producer shall have the right to Tender to
Midstream Co for Services under this Agreement Product other than Dedicated Production.
Section 5.3
Services; Service Standard.
(a)
Services
. Subject to
Section 5.3(c)
, Midstream Co shall (i) provide Services for all Product that is Tendered by
the Producer to Midstream Co at the applicable Receipt Point, (ii) redeliver to Producer or for the benefit of Producer at the relevant Delivery Point (as designated by Producer) equivalent quantities of such Product, less any Associated Water
and Flash Gas removed therefrom attributable to Producer’s owned or Controlled Product, taking into account any System Gains/ Losses, and (iii) cause the System to be able to flow such Product at volumes produced into each Individual System, in
each case, so long as total crude volumes for the respective Individual System are not greater than the current capacity of the System.
(b)
Services Standard
. Midstream Co shall own and operate the System and perform the Services in a good and workmanlike manner in
accordance with standards customary in the industry.
(c)
Priority of Service
. Midstream Co shall cause (i) Product delivered
by Original Producer to have priority service on the System over Product of any Producer Assignee to the extent not in violation of applicable Law, and (ii) Product delivered by Producer to have priority service on the System over Product of
any Third Party. Midstream Co’s performance of its obligations under
Section 5.3(a)
with respect to any Product (A) of any Producer Assignee, or (B) produced from any Well but not included on a Development Report or for
which new, modified, or enhanced facilities are contemplated in a System Plan, shall at all times be subject to the available capacity on the System at the time that Product is available to be Tendered by Producer at a Receipt Point; provided,
however, that in the case of clause (B), Producer may make alternative arrangements for the Product not received by Midstream Co pursuant to
Section 3.3
.
Section 5.4
Nominations, Scheduling, and Curtailment
. Nominations and scheduling of Product available for, and interruptions and
curtailment of, Services under this Agreement shall be performed in accordance with the following provisions:
(a)
Nominations
. Product shall be received only under a nomination submitted by Producer. For purposes of this Agreement, a nomination is the volume, in Barrels per day, forecasted by Producer to be delivered to Receipt Points and
redelivered by Midstream Co to Delivery Points for a particular month of Deliver. Nominations shall be submitted on or before the 25th day of the Month preceding the Month of delivery.
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(b)
Reserved.
(c)
Consistent Quantities
. Producer and Midstream Co shall use commercially reasonable efforts to cause Product to be received and
redelivered under this Agreement at similar quantities for a delivery Month. System storage shall be used only for the operational purposes of Midstream Co, as determined solely by Midstream Co.
(d)
Target Pressures
.
(i)
Reserved.
(ii)
Maintenance of Pressure on System.
Midstream Co shall use its commercially reasonable efforts to
maintain the operating pressure of each Facility Segment, as measured at the inlet flange of the central facility of the applicable Facility Segment, at a level that is equal to or less than the Target Pressure. Except in the event of
(A) Force Majeure or an event or condition downstream of the System that was not caused by Producer or Midstream Co, or (B) maintenance or repairs that result in a suspension, shutdown or curtailment of the applicable Facility Segment as
specified in
Section 5.5
, if (1) the operating pressure of a Facility Segment measured at such inlet flange continuously exceeds the Target Pressure for a period of more than 5 Days (any such period, an “
Overage
Period
”), (2) such increased operating pressure is not a result of Producer’s production exceeding the production forecast in the Development Report on which the applicable Facility Segment was based, and (3) Midstream Co has
sufficient production data available to confirm that the increased pressure is not a result of Producer’s production exceeding such production forecast, then commencing on the first day after the expiration of the applicable Overage Period, the
Individual Fee for the applicable Facility Segment shall be reduced by the reduction percentage corresponding to the applicable Pressure Overage Percentage on the chart on
Exhibit C
for a period of time equal in length to such Overage Period.
(e)
Adjustments
. Nothing contained in this Agreement shall preclude Midstream Co from taking reasonable actions necessary to
adjust receipts or deliveries under this Agreement in order to maintain the operational integrity and safety of the System.
(f)
Line
Fill
.
(i) Producer shall deliver to Midstream Co a pro rata portion of the Product that Midstream Co determines
is necessary for efficient operation of the System (such pro rata portion, the “
Producer Line Fill
”), and Midstream Co shall not be obligated to receive any Product Tendered by Producer until Producer’s delivery of Product
to Midstream Co has met the Producer Line Fill.
(ii) Midstream Co shall maintain an inventory account (the
“
Inventory Account
”) for Producer and each other shipper or producer on the System which reflects for each Month with respect to each producer and shipper on the System (including Producer) (i) the total volumes received and
delivered; (ii) the starting and ending minimum line fill required; (iii) the starting and ending amount of crude oil inventory in Midstream Co’s facilities above the minimum line fill required; and (iv) any other
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information deemed necessary and appropriate by Midstream Co, all on an Individual System basis. Midstream Co shall provide a statement of Producer’s Inventory Account as part of the
supplemental and supporting information for each invoice.
(iii) At the end of the Term, Producer’s Product in
inventory (both Producer Line Fill and any amounts above Producer Line Fill quantities) within Midstream Co’s System, or within the respective Individual System within Midstream Co’s System, will be delivered by Midstream Co to the
Delivery Point specified by Producer within sixty (60) days after the end of the Term.
Section 5.5
Suspension/Shutdown of Service
.
(a)
Shutdown
. During any period when all or any portion of the Individual System is shut down (i) because of
maintenance, repairs, or Force Majeure, (ii) because such shutdown is necessary to avoid injury or harm to Persons or property, to the environment or to the integrity of all or any portion of the Individual System or (iii) because
providing Services hereunder has become uneconomic as further described in
Section 13.2
, Midstream Co may interrupt or curtail receipts of Producer’s Product and the Product of other producers as set forth herein. In such cases,
Midstream Co shall have no liability to Producer (subject to
Section 11.1(b)
) for its failure to receive Product, except to the extent such shutdown is caused by the negligence, gross negligence or willful misconduct of Midstream Co. If
Midstream Co is required to so interrupt or curtail receipts of Product, Midstream Co will advise (by telephone, following up by writing, which writing may be in the form of electronic mail) Producer of such interruption or curtailment as soon as
practicable or in any event within twenty-four hours after the occurrence of such event.
(b)
Planned Curtailments and
Interruptions.
(i) Midstream Co shall have the right to curtail or interrupt receipts and deliveries of Product for
brief periods to perform necessary maintenance of and repairs or modifications (including modifications required to perform its obligations under this Agreement) to the Individual System; provided, however, that to the extent reasonably practicable,
Midstream Co shall coordinate its maintenance, repair and modification operations with the operations of Producer and, in any case, will use its reasonable efforts to schedule maintenance, repair and modification operations so as to avoid or
minimize to the greatest extent possible service curtailments or interruptions.
(ii) Midstream Co shall provide Producer
(x) with 60 Days prior notice of any upcoming normal and routine maintenance, repair and modification projects that Midstream Co has planned that would result in a curtailment or interruption of Producer’s deliveries and the estimated time
period for such curtailment or interruption and (y) with six Months prior notice of any maintenance (A) of which Midstream Co has knowledge at least six Months in advance and (B) that is anticipated to result in a curtailment or interruption of
Producer’s deliveries for five or more consecutive Days.
(iii) On or before January 1, 2017, Midstream Co shall
provide a schedule of the expected planned maintenance for the System for the subsequent 12 Months.
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Thereafter, on or before October 1 of each Year, starting October 1, 2017, Midstream Co shall deliver a schedule of the expected planned maintenance for the System for the subsequent 12
Months. The delivery of this plan is intended as a tool to assist the Parties in planning and does not replace the notices required in the foregoing clauses and in no way commits Midstream Co to adhere to the schedule set forth in such 12-Month
plan.
Section 5.6
Marketing and Transportation
. As between the Parties, Producer shall make all necessary arrangements at and
downstream of the Delivery Points, for the receipt, further transportation, and marketing of Producer’s owned and Controlled Product.
Section 5.7
No Prior Flow of Product in Interstate Commerce
. Producer represents and warrants that at the time of Tender, none of
the Product delivered at a Receipt Point hereunder has flowed in interstate commerce.
Article 6
Fees
Section 6.1
Fees
. Producer shall pay Midstream Co each Month in accordance with the terms of this Agreement for all Services provided by Midstream Co with respect to Dedicated Production received by Midstream Co from Producer or for Producer’s
account during such Month, an amount, for each Individual System, equal to the sum of (i) the product of (x) the Net Standard Volume of Product, stated in Barrels, received by Midstream Co from Producer or for Producer’s account at the
applicable Receipt Points for such Product within the applicable Individual System during such Month, multiplied by (y) the applicable Individual Fee, (ii) (
reserved
) and (iii) an amount equal to Producer’s allocated portion of
the actual costs incurred by Midstream Co for electricity required to provide Services, such allocation to be based upon the aggregate quantities of Product received by Midstream Co.
Section 6.2
Fee Adjustments
.
(a)
Redetermination
.
(i)
Redetermination Proposal
. Between November 1 and December 31 of any Year, Midstream Co shall prepare and
deliver to Producer for its review and comment a written proposal (each, a “
Redetermination Proposal
”) to redetermine each Individual Fee (unless the Parties mutually agree not to redetermine any particular Individual Fee) in
accordance with this
Section 6.2(a)
. Each Redetermination Proposal shall include relevant supporting documentation based upon the latest updated Development Report and System Plan and shall take into account future items including projected
production volumes, operating revenue projections, and budgeted amounts for capital expenditures and all estimated operating expenses that Midstream Co believes will be necessary to provide the applicable Services as contemplated by the latest
updated Development Report and System Plan; provided that a redetermined Individual Fee as agreed to by the Parties (a “
Redetermined Individual Fee
”) shall not recoup the difference between (A) estimated operating expenses or
revenues and (B) actual operating expenses or revenues for periods prior to the effective date of such Redetermined Individual Fee. The Parties may agree to redetermine a particular Individual Fee without obligation to agree to redetermine any other
Individual Fee.
(ii)
Subsequent Redetermination Timing
. Any Redetermined Individual Fee agreed to by the Parties on
or prior to the last Business Day of February of the applicable Adjustment Year (“
Redetermination Deadline
”) shall become effective as of the first Day of the Month following the Month in which agreement has been reached. If the
Parties fail to agree upon a redetermination of any Individual Fee set forth in the applicable Redetermination Proposal on or prior to the Redetermination Deadline, such Individual Fee shall remain in effect without redetermination pursuant to this
Section 6.2(a)
. For purposes of this
Section 6.2(a)(ii)
, the Year immediately after the Year during which a Redetermination Proposal is delivered is herein the “
Adjustment Year
.”
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(b)
Annual Escalation
. Effective as of July 1 of each Year, the Individual Fee will
be increased by multiplying the then-applicable Individual Fee by the Escalation Percentage (herein, the “
Increase in Fee
”) and adding the then-applicable Individual Fee to the Increase in Fee;
provided
that Reimbursed
Amounts shall not be subject to this
Section 6.2(b)
. Such annual increase to the Individual Fee shall become effective on July 1 of the applicable Year, even if such Individual Fee was redetermined pursuant to
Section 6.2(a)
,
with an effective date during the same Year.
(c)
Downtime Events
. If during any Month (as applicable, the “
Applicable
Month
”), (i) one or more Downtime Events occur with respect to a Facility Segment, (ii) such Downtime Events caused the Downtime Percentage for such Facility Segment during the Applicable Month to exceed the lowest percentage specified
on
Exhibit B
during such Month, and (iii) Producer has waived its right to a temporary release of Dedicated Production under
Section 2.4(b)
, then the Individual Fee for the applicable Facility Segment shall be reduced by the
reduction percentage corresponding to the applicable Downtime Percentage on the chart on
Exhibit B
during each hour in which such Facility Segment is available to provide Services (an “
Operating Hour
”) during the subsequent
Month until the reduced Individual Fee has been applied to an aggregate number of Operating Hours equal to the aggregate number of Downtime Hours during the Applicable Month. If the aggregate number of Operating Hours during the subsequent Month is
less than the aggregate number of Downtime Hours during the Applicable Month, the applicable reduced Individual Fee shall be applied to Operating Hours during the next-subsequent Month or Months until the reduced Individual Fee has been applied to
an aggregate number of Operating Hours equal to the aggregate number of Downtime Hours during the Applicable Month. A reduced Individual Fee that would otherwise apply during any Month subsequent to an Applicable Month shall not be applied until all
Downtime Hours from previous Applicable Months have been addressed as provided in this Section.
Section 6.3
Treatment of Byproducts,
System Gains/Losses, Fuel and Related Matters
. No separate fee shall be chargeable by Midstream Co and no refund or reduction in the Individual Fee shall be chargeable by or owed to Producer for the hydrocarbons or services described in
this
Section 6.3
, except as provided in
Section 6.3(d)
.
(a)
Drip Condensate and Recovered Oil
. Midstream Co
shall deliver to Producer, each Month, all Drip Condensate and Recovered Oil allocated to Producer or for Producer’s account to the extent Producer and Midstream Co have agreed in writing to require such allocation.
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(b)
Flash Gas
. Midstream Co shall deliver to Producer, each Month, all Flash Gas
allocated to Producer or for Producer’s account by delivering such Flash Gas into the Gas System to the extent Producer and Midstream Co have agreed in writing to require such allocation. At all times during the Term, either (x) Midstream
Co and Producer shall be party to both this Agreement and another Transaction Document that covers Gas (in which case Producer shall not owe any amount under this Agreement or any other Transaction Document to which Midstream Co is a Party as a
result of Flash Gas being transported through the Gas System) or (y) the Parties shall set forth in the Agreement Addendum or an appropriate amendment to this Agreement the methodology for Midstream Co to deliver Flash Gas to Producer and any
fee applicable thereto.
(c)
System Gains/Losses
.
(i) Midstream Co will perform a Monthly material balance for each Individual System based on comparison of Product delivered,
Product inventory change within Midstream Co’s facilities, and the theoretical Product (after removal of Associated Water and Flash Gas) received into the Individual System at Receipt Points (or measured if Associated Water and Flash Gas of
Product at Receipt Points meets Oil Quality specifications of Downstream Facilities or markets without treatment by Midstream Co). Actual System gains or losses from the material balance will be allocated back to Producer’s Receipt Points
to determine allocated quantities of Product received at Receipt Points for each Month.
(ii) If, during any Month, System
Gains/Losses on an Individual System allocated to Producer in accordance with this Agreement exceeds 2.00% of the total quantities of Producer’s owned or Controlled Product delivered to the Individual System in such Month, then Midstream Co
will, for the respective Individual System, obtain updated test data (i.e. sample results, meter proves, etc.) from Receipt Points involved in calculating theoretical Product (after removal of Associated Water and Flash Gas) received into the System
at Receipt Points on the Individual System and conduct a field-wide (on an Individual System basis) meter inspection and proving, if necessary, followed by an updated balance. If Midstream Co determines that a repair to the Individual System is
needed to reduce the System Gains/Losses below 2.00%, Midstream Co shall undertake such repairs in a commercially reasonable manner and as soon after making such determination as is commercially reasonable.
(iii) Midstream Co shall provide Producer with prior notice of, and reasonable access to observe, any such field-wide meter
balance.
(d)
Other System Fuel
. Midstream Co may elect to use Other System Fuel as fuel to operate the Individual System, or to
generate electricity for the operation of the Individual System and shall account for any Other System Fuel used by Midstream Co. Producer, at its sole cost and expense, shall procure all fuel except diesel, in addition to Other System Fuel
used by Midstream Co, if any, required to operate the Individual System or to generate electricity for the operation of the Individual System and arrange for transportation of such fuel to the Individual System.
(e)
Associated Water
. Midstream Co shall deliver to Producer, each Month, all Associated Water allocated to Producer or for
Producer’s account by delivering such Associated Water into the Water System. The Parties acknowledge that there is no separate fee chargeable by Midstream Co hereunder for Services with respect to Associated Water and that the fees chargeable
by Midstream Co hereunder for Product sufficiently compensate Midstream Co for Services with respect to Associated Water. The Monthly Loss/ Gain Report shall include a statement of the Associated Water separated from the Product and delivered to
Producer into the Water System.
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Article 7
Quality
Section 7.1
Quality Specifications
.
(a) Each Individual System will be operated as a field System, and as such, Product received from Producer
at the Receipt Points shall conform to the following quality specifications,
provided
that the following may be varied or adjusted as described in this
Section 7.1
or by express language set forth in the applicable Agreement
Addendum. Midstream Co will not accept any Product unless it meets the specifications listed in the chart below and unless other properties of such Product (viscosity, pour point, and other properties) are such that it will be readily susceptible to
transportation through Midstream Co’s pipeline system. These specifications may be applied to each Barrel of Producer’s nomination and not be limited to the composite sample of the nomination.
|
|
|
|
|
|
|
Crude Oil
|
|
Sulfur Content, Weight %
|
|
<= 0.40
|
|
BS&W
|
|
<= 3.5%
|
|
|
Of which, basic sediment is no more than
|
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<= 0.5%
|
(b)
Reserved
(c) All Product delivered by Producer to Midstream Co shall have a maximum temperature of one hundred forty degrees (140º) Fahrenheit at
the Receipt Point.
(d) From time to time, Midstream Co may require that Producer furnish certified laboratory reports showing the results
of quality tests on the Product tendered for gathering. Midstream Co may also from time to time obtain samples for laboratory analysis to check compliance with the specifications cited above.
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(e) If any Product Tendered by Producer to the Individual System fails at any time to conform to
the applicable specifications, then Midstream Co will have the rights specified in
Section 7.2
.
(f) If Producer’s Product
delivered to the Receipt Points complies with such quality specifications, then all Product redelivered at the Delivery Points by Midstream Co to Producer shall meet the quality specifications of the applicable Downstream Facility. Midstream Co may
commingle Product received into the Individual System with other Product shipments and, subject to Midstream Co’s obligation to redeliver to Producer at the Delivery Points Product that satisfies the applicable quality specifications of the
Delivery Points, (a) such Product shall be subject to such changes in quality, composition and other characteristics as may result from such commingling and the removal of Associated Water and Flash Gas (if any), (b) Midstream Co shall
have no other obligation to Producer associated with changes in quality of Product as the result of such commingling and Associated Water and Flash Gas removal, and (c) Midstream Co shall have the right to change the quality specifications to
comply with any changes in the Downstream Facility specifications.
Section 7.2
Failure to Meet Specifications
. If any Product
Tendered by Producer to the Individual System fails at any time to conform to the applicable specifications, then Midstream Co will have the right to discontinue receipt of such non-conforming Product. Unless such non-conforming Product creates
a safety hazard or may damage existing infrastructure (in the opinion of Midstream Co), Midstream Co shall provide notice (which notice may be verbal initially, followed by written confirmation) to Producer twenty-four (24) hours prior to such
discontinuation, and Producer shall cease delivery of Product until such time as the Product Tendered by Producer will again conform to the applicable specifications. If Producer fails to comply with the discontinuation notice (or deliver a formal
dispute, as specified in the following sentence) prior to the expiration of twenty-four (24) hours after receiving such notice from Midstream Co, then Midstream Co shall be entitled to unilaterally cease receiving Product. If Producer disputes
Midstream Co’s determination that any Product fails to conform to the applicable specifications, then Producer shall (a) notify Midstream Co thereof within twenty-four (24) hours after receiving such notice from Midstream Co, (b) submit
the applicable Product to a mutually agreed upon Third Party laboratory, and (c) cause such laboratory to analyze the Product within seventy-two (72) hours after Producer’s receipt of Midstream Co’s notice of non-conformance (during which
time Midstream Co shall continue to accept deliveries from Producer, unless Midstream Co believes such deliveries present a safety hazard or may damage installed infrastructure). If the results of such analysis provide that the applicable Product is
non-conforming, the costs and expenses associated with such analysis shall be borne by Producer; if the results of such analysis provide that the applicable Product conforms to the specifications, then Midstream Co shall reimburse Producer for all
reasonable and documented costs and expenses incurred by Producer to cause such Third Party laboratory to perform such analysis. Producer will promptly undertake commercially reasonable measures to eliminate the cause of such non-conformance.
Midstream Co, in its sole discretion, may accept receipt, or continue to receive, non-conforming Product if the blending and commingling of such Producer’s non-conforming Product with other Product in the Individual System does not materially
affect the System and the ability of Midstream Co to deliver Product at Delivery Points within applicable Delivery Point specifications. Midstream Co’s continued taking of non-conforming Product shall not relieve Producer of the responsibility
to undertake commercially reasonable measures to eliminate the cause of such non-conformance.
Section 7.3
Indemnification Regarding
Quality
. PRODUCER SHALL RELEASE, PROTECT, DEFEND, INDEMNIFY AND HOLD HARMLESS MIDSTREAM CO GROUP FROM AND AGAINST ALL LOSSES DIRECTLY OR INDIRECTLY ARISING OUT OF, IN CONNECTION WITH OR IN ANY MANNER ATTRIBUTABLE TO THE FAILURE OF THE
PRODUCT DELIVERED BY PRODUCER TO THE INDIVIDUAL SYSTEM TO MEET THE QUALITY SPECIFICATIONS SET FORTH HEREIN, INCLUDING DISPOSAL COSTS, DAMAGE TO OR SUSTAINED BY THE INDIVIDUAL SYSTEM (INCLUDING THE EQUIPMENT AND COMPONENT PARTS), COSTS EXPENDED BY
MIDSTREAM CO OR ANY OF ITS AFFILIATES TO RETURN THE INDIVIDUAL SYSTEM AND RELATED FACILITIES TO SERVICES, CLAIMS OF OTHER PRODUCERS ON THE INDIVIDUAL SYSTEM, AND CLAIMS OF OWNERS OF ALL DOWNSTREAM FACILITIES.
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Article 8
Term
Section 8.1
Term
. The term of this Agreement commenced on the Effective Date, and this Agreement shall remain in effect until the 16
th
anniversary of the Effective Date (the “
Initial
Term
”) and thereafter on a Year to Year basis until terminated by Midstream Co or Producer effective upon the expiration of the Initial Term or the expiration of any Year thereafter upon notice no less than 90 Days prior to the expiration
of the Initial Term or the expiration of any Year thereafter (such period of time, the “
Term
”).
Section 8.2
Effect of
Termination or Expiration of the Term
. Upon the termination of the Term, this Agreement shall forthwith become void and the Parties shall have no liability or obligation under this Agreement, except that (a) the termination of this
Agreement shall not relieve any Party from any expense, liability or other obligation or remedy therefor that has accrued or attached prior to the date of such termination, (b) the provisions of
Section 7.3
, this
Section 8.2
,
Article 15
and
Section 17.1
through
Section 17.10
shall survive such termination and remain in full force and effect indefinitely, (c) the indemnities set forth in
Section 3.5(c)
shall survive such
termination and remain in full force and effect indefinitely, and (d)
Section 10.4
and
Section 17.11
shall survive such termination and remain in full force and effect for the period of time specified in such Sections.
Article 9
Title and
Custody
Section 9.1
Title
. A nomination of Product by Producer shall be deemed a warranty of title to such Product by Producer
or a warranty that Producer Controls the Product and has the right to deliver such Product for gathering under this Agreement, as applicable. Title to Product shall not transfer to Midstream Co by reason of Midstream Co’s performance of the
Services.
Section 9.2
Custody
. From and after Producer’s delivery of its owned or Controlled Product to Midstream Co at the
Receipt Points, and until Midstream Co’s redelivery of such
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Product to or for Producer’s account at the applicable Delivery Points, as between the Parties, Midstream Co shall have custody and control of, and be responsible for, such Product. In all
other circumstances, as between the Parties, Producer shall be deemed to have custody and control of, and be responsible for, such Product.
Article 10
Billing and
Payment
Section 10.1
Statements
.
(a)
Ordinary Course
. Midstream Co shall submit invoices to Producer on or before the 25th Day after the end of a Month (the
“
Invoice Month
”). Each invoice shall be accompanied by supporting information for all amounts charged by such invoice. All amounts owed for Services provided during an Invoice Month shall be reflected on the applicable invoice for
such Invoice Month;
provided
that to the extent any amount appearing on an invoice is in respect of an amount paid by Midstream Co to a Third Party (collectively, the “
Reimbursed Amount
”) or the calculation of such amount is
contingent on information provided by a Third Party (collectively, the “
Conditional Amount
”), such Reimbursed Amount and Conditional Amount, shall be reflected on an invoice within 90 Days after the end of the Month in which such
Reimbursed Amount was paid by Midstream Co.
(b)
Reserved.
(c)
Detail
.
Midstream Co shall cause its invoices and supporting information to include information reasonably sufficient
to explain and support any estimates and charges reflected therein, the reconciliation of any estimates made in a prior Month to the actual measurements for such Month, and any adjustments to prior period volumes and quantities.
(d)
Monthly Loss/ Gain Report
.
Midstream Co shall deliver to Producer, on or before the close of business of the 40th Day
after the applicable Invoice Month a Monthly Loss/ Gain Report. If Midstream Co elects, it may deliver such Monthly Loss/ Gain Report concurrently with the applicable invoice.
(e)
One Invoice; Netting
.
To the extent that Midstream Co and Producer are party to this Agreement and one or more other
Transaction Documents, one invoice may be delivered in respect of all amounts owing under such Transaction Documents. The Parties shall net all undisputed amounts due and owing or past due and owing arising under the Transaction Documents to
which Producer and Midstream Co are parties such that the Party owing the greater amount shall make a single payment of the net amount to the other Party. No amounts owing to or by any Midstream Co may be set off against amounts owing to or by
any other Midstream Co. No amounts owing to or by any Producer may be set off against amounts owing to or by any other Producer. To the extent possible, all fee adjustments set forth in Article 6 shall be accomplished by setoff or netting.
Section 10.2
Payments
.
(a) Unless otherwise agreed by the Parties, all invoices under this Agreement shall be due and payable in accordance with each invoice’s
instructions on or before the later of the 30th
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Day of each Month and the 10th
Day after receipt of the invoice or, if such Day is not a Business Day, then on the next Business Day. All payments by Producer under this Agreement shall be
made by electronic funds transfer to the account designated by Midstream Co. Any amounts not paid by the due date will be deemed delinquent and, with respect to amounts owed to Midstream Co, will accrue interest at the Interest Rate, such
interest to be calculated from and including the due date but excluding the date the delinquent amount is paid in full.
(b) If Producer,
in good faith, disputes the amount of any invoice of Midstream Co, Producer will pay Midstream Co such amount, if any, that is not in dispute and shall provide Midstream Co notice, no later than 30 Days after the date that payment of such invoice
would be due under
Section 10.2(a)
, of the disputed amount accompanied by reasonable documentation to support Producer’s dispute. If Producer fails to provide notice of dispute within such 30-Day period, then Producer shall be deemed to
have waived its right to dispute the applicable invoice, except for a dispute following an audit conducted in accordance with
Section 10.4
. Following Midstream Co’s receipt of such dispute notice, Producer and Midstream Co shall
endeavor in good faith to resolve such dispute, and if the Parties are unable to resolve such dispute within a reasonable time, such dispute may be resolved in accordance with
Section 17.6
of this Agreement. Upon resolution of the
dispute, any required payment shall be made within 15 Days after such resolution, and, if such amount shall be paid to Midstream Co, such amount shall be paid along with interest accrued at the Interest Rate from and including the due date but
excluding the date paid.
Section 10.3
Adequate Assurances
. If (a) Producer fails to pay according to the provisions hereof
and such failure continues for a period of 5 Business Days after written notice of such failure is provided to Producer, (b) Producer is not the Original Producer or (c) Midstream Co has reasonable grounds for insecurity regarding the performance by
Producer of any obligation under this Agreement, then Midstream Co, by notice to Producer, may, singularly or in combination with any other rights it may have, demand Adequate Assurance of Performance from Producer. “
Adequate Assurance of
Performance
” means, at the option of Producer, any of the following, (x) advance payment in cash by Producer to Midstream Co for Services to be provided under this Agreement in the following Month or (y) delivery to Midstream Co by
Producer of an irrevocable standby letter of credit or a performance bond, in form and substance reasonably acceptable to Midstream Co, issued by a Credit-Worthy Person, in an amount equal to not less than the aggregate proceeds due from Producer
under
Section 10.1
for the prior 2-Month period. Promptly following the termination of the condition giving rise to Midstream Co’s reasonable grounds for insecurity or payment in full of amounts outstanding, as applicable, Midstream
Co shall release to Producer the cash, letter of credit, bond or other assurance provided by Producer (including any accumulated interest, if applicable, and less any amounts actually applied to cover Producer’s obligations hereunder).
Section 10.4
Audit
. Each Party has the right, at its sole expense and during normal working hours, to examine the records of the
other Party to the extent reasonably necessary to verify the accuracy of any statement, charge or computation made pursuant to the provisions of the Transaction Documents. The scope of such examination will be limited to the 24 Months preceding
the date such notice of audit, statement, charge or computation was presented. No Party may conduct more than one audit (taking all Transaction Documents to which Producer is a party together) of another Party during any Year (except that, if a
Party is in default hereunder,
Texas Crude Oil
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additional audits may be conducted during the continuance of such default). If any such examination reveals any inaccuracy in any statement or charge, the necessary adjustments in such
statement or charge and the payments necessitated thereby shall be made within 60 Days of resolution of the inaccuracy. This provision of this Agreement will survive any termination of this Agreement for the later of (a) a period of 24
Months from the end of the Year in which the date of such termination occurred or (b) until a dispute initiated within the 24 Month period is finally resolved, in each case for the purpose of such statement and payment objections.
Article 11
Remedies
Section 11.1
Suspension of Performance; Temporary Release from Dedication
.
(a)
Suspension by Midstream Co as Remedy for Payment Default
. If Producer fails to pay any invoice rendered under
Article 10
, such failure is not due to a good faith dispute by Producer in accordance with
Section 10.2(b)
, and such failure is not remedied within 5 Business Days after Producer’s receipt of written notice of such failure
from Midstream Co, Midstream Co shall have the right, at its sole discretion, to (i) suspend performance (including withholding any payments that are owed by Midstream Co to Producer, and such withheld amounts shall not be subject to setoff
under
Section 10.1(e)
) under this Agreement until such amount, including interest at the Interest Rate, is paid in full or (ii) continue performing the Services under this Agreement, and, acting in a commercially reasonable manner, sell
any Product delivered by Producer to the Receipt Points on Producer’s behalf, and use the proceeds therefrom to reimburse Midstream Co for any amounts due and owing to Midstream Co, and, at Producer’s election, either (y) remit any
excess amounts received under such sale to Producer or (z) reduce the Services Fee due from Producer to Midstream Co for the following Month by the amount of such excess.
(b)
Additional Suspensions as Remedies
. If a Party fails to perform or comply with any material warranty, covenant or obligation
(other than as provided in Section 11.1(a) or Section 2.4(a)(i)) contained in this Agreement and such failure has not been remedied within 60 Days after its receipt of written notice from the other Party of such failure, then the non-defaulting
Party shall have the right to suspend performance of its obligations under this Agreement that are affected by such failure or non-compliance (including withholding any payments that are owed to the other Party, and such withheld amounts shall not
be subject to netting or setoff under Section 10.1(e)); provided that Producer may not withhold any payments that are owed to Midstream Co for Services actually performed by Midstream Co. Original Producer’s failure to accurately track,
calculate and timely provide support of the total Net Acres sold pursuant to
Section 16.2(b)(ii)
shall constitute a material breach of Original Producer’s obligations hereunder.
(c)
Specific Performance and Declaratory Judgments
. Damages in the event of breach of this Agreement by a Party hereto may be
difficult, if not impossible, to ascertain. Therefore, each Party, in addition to and without limiting any other remedy or right it may have, will have the right to seek a declaratory judgment and will have the right to an injunction or other
equitable relief in any court of competent jurisdiction, enjoining any such breach, and enforcing specifically the terms and provisions hereof, and each of the Parties hereto hereby waives any
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and all defenses it may have on the ground of lack of jurisdiction or competence of the court to grant such an injunction or other equitable relief. The existence of this right will not preclude
any Party from pursuing any other rights and remedies at law or in equity that such Party may have.
Section 11.2
No
Election
. In the event of a default by a Party under this Agreement, the other Party shall be entitled in its sole discretion to pursue one or more of the remedies set forth in this Agreement, or such other remedy as may be available to it
under this Agreement, at Law or in equity, subject, however, to the limitations set forth in
Section 11.3
and
Article 15
. No election of remedies shall be required or implied as the result of a Party’s decision to avail itself of
a remedy under this Agreement.
Section 11.3
DIRECT DAMAGES
. A PARTY’S DAMAGES RESULTING FROM A BREACH OR VIOLATION OF
ANY REPRESENTATION, WARRANTY, COVENANT, AGREEMENT OR CONDITION CONTAINED IN THIS AGREEMENT OR ANY ACT OR OMISSION ARISING FROM OR RELATED TO THIS AGREEMENT SHALL BE LIMITED TO ACTUAL DIRECT DAMAGES AND SHALL NOT INCLUDE ANY OTHER LOSS OR DAMAGE,
INCLUDING INDIRECT, SPECIAL, CONSEQUENTIAL, INCIDENTAL, EXEMPLARY OR PUNITIVE DAMAGES, INCLUDING LOST PROFITS, PRODUCTION, OR REVENUES, AND EACH PARTY RELEASES THE OTHER PARTY FROM ALL SUCH CLAIMS FOR LOSS OR DAMAGE OTHER THAN ACTUAL DIRECT DAMAGES;
PROVIDED
THAT THIS LIMITATION TO DIRECT DAMAGES SHALL NOT LIMIT THE PARTIES’ INDEMNIFICATION OBLIGATIONS UNDER
Section 3.5(c)
,
Section 7.3
, AND
Article 15
.
Article 12
Force
Majeure
Section 12.1
Force Majeure
. If either Midstream Co or Producer is rendered unable by an event of Force Majeure to
carry out, in whole or part, its obligations under this Agreement and such Party gives notice (which notice may initially be delivered orally so long as written notice is delivered as soon as reasonably practicable thereafter) and reasonably full
details of the event (including the nature, extent, effect, and likely duration of the event or circumstances constituting the Force Majeure event) to the other Party as soon as practicable after the occurrence of the event, then, during the
pendency of such Force Majeure, but only during that period, the obligations of the Party affected by the event shall be canceled or suspended, as applicable, to the extent required;
provided
,
however
, that notwithstanding anything in
the foregoing to the contrary, no Party shall be relieved from any indemnification obligation or any obligation to make payments, as the result of Force Majeure, regardless of which Party is affected;
provided further
that if the Force
Majeure impacts only a particular Facility Segment or Individual System, then the suspension of obligations described in this sentence shall apply only to the applicable Facility Segment or Individual System and not to the obligations owing in
connection with the rest of the System. The Party affected by Force Majeure shall use commercially reasonable efforts to remedy the Force Majeure condition with all reasonable dispatch, shall give notice to the other Party of the termination of
the Force Majeure, and shall resume performance of any suspended obligation promptly after termination of such Force Majeure.
Section
12.2
Extension Due to Force Majeure
. If a Party is unable to meet any deadline set forth herein as a result of a Force Majeure, then provided that such Party complies with the provisions of
Section 12.1
, such deadline shall be extended
for a period of time equal to the period of time during which such Party is delayed due to the Force Majeure.
Texas Crude Oil
Gathering Agreement
- 41 -
Article 13
Change in Law; Uneconomic Service
Section 13.1
Changes in Applicable Law
.
(a) If any new Laws are enacted or amended or any new interpretations in respect of previously existing Laws are issued after the Effective
Date that require Midstream Co to make capital expenditures with respect to the System, then Midstream Co may propose an increase to the applicable Individual Fee as may be necessary or appropriate to preserve and continue for the Parties the rights
and benefits originally contemplated for the Parties by this Agreement;
provided, however
, that no increase to the applicable Individual Fee pursuant to this
Section 13.1
shall be applicable unless and until, in the reasonable judgment
of Midstream Co, Midstream Co would be required to make capital expenditures with respect to the System in order to comply with such new Law that materially and adversely affects the economics of the Services provided, fees received, or the other
economic benefits of this Agreement for Midstream Co.
(b) Producer shall accept or reject, in its sole discretion, Midstream Co’s
proposed increase to the Individual Fee within 30 Days after receiving such proposal from Midstream Co. If Producer fails to provide notice of such acceptance or rejection within such 30-Day period, then Producer shall be deemed to have accepted
such increase. If Producer rejects the amount of the proposed increase, then Midstream Co shall release the Wells, Separator Facilities, Receipt Points, Spacing Units, and Dedicated Production that would have been affected by such increase in
accordance with
Section 2.4(a)(viii)
. The Parties will amend, update, or revise the applicable Agreement Addendum in accordance with this Agreement to reflect any changes in the applicable Individual Fees agreed to in accordance with this
Section 13.1
.
(c) Producer and Midstream Co shall use their commercially reasonable efforts to comply with new and amended
applicable Laws and new interpretations of existing Laws.
Section 13.2
Unprofitable Operations and Rights of Termination
.
(a)
Cessation of Services
. If, in the sole discretion of Midstream Co, (x) the gathering of Product from any Wells, Separator
Facilities or Receipt Points, (y) the delivery of Product to any Delivery Points or (z) the provision of any other Service under this Agreement, is or becomes uneconomical due to its volume, quality, or for any other cause, then Midstream Co shall
not be obligated to provide the applicable Services so long as such condition exists.
(i) If Midstream Co suspends
Services under this
Section 13.2(a)
as a result of Producer’s (A) negligence, willful misconduct, or breach of this Agreement, (B) delivery of Product that fails to meet the quality specifications required by
Section
7.1
, or (C) execution of a plan of development that deviates from the then-applicable Development Report, then Midstream Co may resume providing such Services at any
Texas Crude Oil
Gathering Agreement
- 42 -
time, upon two months’ advance written notice delivered to Producer, and the affected Wells, Separator Facilities, Receipt Points, Spacing Units and Dedicated Production shall only be
permanently released as a result of suspension under this clause by mutual agreement of the Parties under
Section 2.4(a)(iv)
.
(ii) If Midstream Co suspends Services under this
Section 13.2(a)
for any reason other than as specified in clause (i)
above and (x) such suspension continues for six consecutive Months or (y) Midstream Co delivers notice to Producer that such suspension shall be permanent, then the applicable Wells, Separator Facilities, Receipt Points, Spacing Units, and
Dedicated Production shall be permanently released as specified in
Section 2.4(a)(viii)
.
(b)
Election not to Expand
System
. If Midstream Co determines, in its discretion, that an expansion of the Individual System to satisfy the needs of Producer, as described in
Section 3.2
hereof, would be uneconomical, then Midstream Co shall neither be
obligated to undertake such expansion nor to provide the applicable Services. Producer shall be entitled to a release of the applicable Planned Wells, Planned Separator Facilities and Dedicated Production pursuant to
Section 2.4(a)(ix)
immediately upon Midstream Co’s delivery of a System Plan (marked as “Final”) indicating that a requested expansion would be uneconomical pursuant
Section 13.2(d)
.
(c)
Start Date of Suspension of Services
. Midstream Co shall cause any suspension of Services permitted by this
Section 13.2
to commence on the first Day of a Month and not on any other Day.
(d)
Supporting Documentation and Management
Discussions
. As soon as Midstream Co determines that an expansion of the Individual System will not be economic or that continuing to provide Services at existing facilities has been rendered uneconomic, Midstream Co shall communicate the
same to Producer.
(i) With respect to existing facilities, such notice shall be delivered to Producer at least 180 Days in
advance of any proposed curtailment under this
Section 13.2
and such notice shall be accompanied by documentation supporting its claim that certain Services have become uneconomical. Commencing on the date on which such notice is
delivered and continuing for 180 Days, Midstream Co shall participate in Meetings of Senior Management if so requested by Producer, so long as such Meetings of Senior Management are scheduled at mutually agreeable times and locations, in order to
negotiate a transition of Services that will not materially adversely affect Producer. Such discussions may include the following matters and such other matters aimed at ameliorating the detrimental effects of Midstream Co ceasing to provide
Services: (A) purchase by Producer from Midstream Co of the pipe, rights of way or other assets necessary for the types of services that otherwise would have been performed under this Agreement, (B) a continuation of the provision of
Services hereunder by Midstream Co for a period of time longer than the 180 Days required hereby in order to permit Producer sufficient time to take over operations or find an alternate midstream service provider and (C) adjustments to the
Development Plan or rework certain Wells in order to address the concerns of Midstream Co with respect to providing Services thereto. In no event shall
Texas Crude Oil
Gathering Agreement
- 43 -
Midstream Co’s obligation to be available for Meetings of Senior Management create an obligation on Midstream Co to continue providing services past the 180 Days required hereby, and
Midstream Co is under no obligation to agree to any amendments to this Agreement or modifications to the Services provided in order to accommodate requests of Producer during such negotiations. However, both Parties have an obligation to negotiate
in good faith during such discussions.
(ii) With respect to planned facilities, Midstream Co shall indicate that providing
Services to Planned Wells or Planned Separator Facilities is uneconomical by failing to include the necessary expansion projects in the applicable System Plan and shall provide supporting documentation for its determination that such expansion would
be uneconomical, if requested by Producer. If Midstream Co delivers a System Plan (marked as “Final”) describing the necessary expansion projects, such delivery shall be deemed to be a commitment by Midstream Co to complete such expansion
without exercising its rights under
Section 13.2(b)
, so long as conditions (including anticipated throughput, pricing, the ability to obtain rights-of-way, Producer’s continued execution of the Development Report, and any other factors
deemed material by Midstream Co) do not materially change;
provided, however
that upon the initiation of Services through such expansion project or through a component part of such expansion project, such expansion (or applicable portion
thereof) shall be considered “existing facilities” for purposes of this
Section 13.2
and Midstream Co shall have all of the rights set forth herein with respect to existing facilities that become uneconomical. Nothing in this
Section 13.2(d)
shall give Producer a right to consent to a suspension under this
Section 13.2
.
(e)
No Obligation to
Drill or Operate
. Without limiting the right of Producer to revise the Development Report to eliminate any proposed Wells or Separator Facilities, nothing herein shall be construed to require Producer to drill any Well, to continue to
operate any Well, to place any new Separator Facility into service or to maintain the operation of any Separator Facility that a prudent operator would not in like circumstances drill or continue to operate.
Article 14
Regulatory
Status
Section 14.1
Non-Jurisdictional System
. The Services being provided by Midstream Co hereunder are intended to be
gathering services, and no Governmental Authority currently establishes the rates or terms of service relating to the Services. This Agreement is subject to all valid present and future Laws of Governmental Authorities now or hereafter having
jurisdiction over the Parties, this Agreement, the Services performed, or the System. It is the intent of the Parties that no Governmental Authority shall alter any provisions in the Agreement in such a way that would have the effect of
altering the economic benefits of either Party, as originally contemplated under this Agreement. The Parties shall (a) vigorously defend and support in good faith the enforceability of this Agreement and the continuance, without alternation, of the
Services in any and all proceedings before any Governmental Authority in which this Agreement is subject to review and (b) not initiate or support, either directly or indirectly, any challenge with any Governmental Authorities to the rates provided
herein or any other modification to this Agreement that would alter the economic benefits of a Party as originally contemplated under this Agreement.
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Gathering Agreement
- 44 -
Section 14.2
Government Authority Modification
. Notwithstanding the provisions of
Section 14.1
, if the rates are changed or required to be changed or any other modification to this Agreement that alters the economic benefits of a Party, as originally contemplated under this Agreement, in response to any order, regulation,
or other mandate of a Governmental Authority, then no such change or modification shall constitute a breach or other default under the terms of this Agreement, and the Parties shall negotiate in good faith to enter into such amendments to this
Agreement or a separate arrangement in order to give effect, to the greatest extent possible, the economic benefit as originally contemplated in this Agreement. If, in the reasonable opinion of Midstream Co’s counsel, a Governmental
Authority’s regulation of Midstream Co’s results in (a) Midstream Co not having the same economic benefits as originally contemplated under this Agreement or (b) Midstream Co’s or any of its Affiliate’s pipelines becoming subject
to additional legal requirements or regulation, and the Parties have not mutually agreed as to how to mitigate or alleviate the foregoing, then Midstream Co shall have the right, without liability, to terminate this Agreement.
Article 15
Indemnification and Insurance
Section 15.1
Reciprocal Indemnity
. To the fullest extent permitted by applicable Law and except as otherwise set forth in
Section 3.5(c)
and
Section 7.3
:
(a)
Producer
Indemnification
. Producer shall release, protect,
defend, indemnify and hold harmless Midstream Co Group from and against all Losses directly or indirectly arising out of or in connection with bodily injury, death, illness, disease, or loss or damage to property of Producer or any member of
Producer Group in any way arising out of or relating to this Agreement, directly or indirectly. THIS RELEASE, DEFENSE AND INDEMNITY OBLIGATION SHALL APPLY REGARDLESS OF FAULT OF MIDSTREAM CO GROUP OR ANY OTHER PERSONS.
(b)
Midstream Co Indemnification
. Midstream Co shall release, protect, defend, indemnify and hold harmless Producer Group from and
against all Losses directly or indirectly arising out of or in connection with bodily injury, death, illness, disease, or loss or damage to property of Midstream Co or any member of Midstream Co Group in any way arising out of or relating to this
Agreement, directly or indirectly. THIS RELEASE, DEFENSE AND INDEMNITY OBLIGATION SHALL APPLY REGARDLESS OF FAULT OF PRODUCER GROUP OR ANY OTHER PERSONS.
(c)
Regardless of Fault
. AS USED IN THE PRECEDING TWO SUBCLAUSES, THE PHRASE “REGARDLESS OF FAULT” SHALL MEAN, WITH
RESPECT TO ANY LOSS THAT IS CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE (WHETHER SOLE, JOINT, CONCURRENT, COMPARATIVE, CONTRIBUTORY, ACTIVE, PASSIVE, OR OTHERWISE), STRICT LIABILITY, OR OTHER FAULT, OF ANY MEMBER OF MIDSTREAM CO GROUP OR THE
PRODUCER GROUP, WITHOUT REGARD TO THE CAUSE OR CAUSES THEREOF AND WITHOUT LIMITATION OF SUCH LOSS AND WHETHER OR NOT CAUSED BY A PRE-EXISTING CONDITION.
Texas Crude Oil
Gathering Agreement
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Section 15.2
Indemnification Regarding Third Parties
. Each Party shall release,
protect, defend, indemnify and hold the other Party harmless against any Loss by a Third Party that is not a member of the Producer Group or Midstream Co Group, to the extent such Loss (a) is caused by the negligence or willful misconduct of
said indemnifying Party or such Party’s Group, or (b) in the case of Producer as indemnifying Party, results from claims by a Third Party of title, rights, or encumbrances in or to Product delivered by Producer to a Receipt Point.
Section 15.3
Penalties
. Producer shall release, protect, defend, indemnify, and hold harmless Midstream Co from any Losses
resulting from penalties imposed by a Downstream Facility in any transportation contracts or service agreements associated with, or related to, Producer’s owned or Controlled Product, including any penalties imposed pursuant to the Downstream
Facility’s tariff.
Section 15.4
Insurance
. Midstream Co and Producer shall (a) carry and maintain no less than the
insurance coverage set forth in
Exhibit
D
, and (b) cause such insurance to be (i) the primary coverage without any right of contribution from any other insurance held by the other Party to the extent of the
insured Party’s indemnification obligations hereunder, and (ii) written and endorsed to include waivers of all subrogation rights of the insurers against Midstream Co and its Group (in the case of Producer’s insurance) or Producer and
its Group (in the case of Midstream Co’s insurance). Unless Producer is Original Producer, Producer shall also cause the insurance carried and maintained by it pursuant to this
Section 15.4
to be endorsed to name Midstream Co and
its Group as additional insureds or provide blanket additional insured status that covers Midstream Co and its Group as additional insureds, except in the case of worker’s compensation insurance. Any insurance provided by OpCo on behalf of
Midstream Co that comports with this
Section 15.4
shall be deemed to satisfy these requirements.
Article 16
Assignment
Section 16.1
Assignment of Rights and Obligations under this Agreement
.
(a)
Assignment
. Except as specifically otherwise provided in
this Agreement, no Party shall have the right to assign its rights and obligations under this Agreement (in whole or in part) to another Person except with the prior consent of Midstream Co (in the case of an assignment by Producer) or Producer (in
the case of an assignment by Midstream Co), which consent may be withheld at such Party’s sole discretion. Notwithstanding the foregoing, Producer may assign its rights and obligations under this Agreement to any Person to whom Producer assigns
or transfers an interest in any of the Dedicated Properties insofar as this Agreement relates to such Dedicated Properties without the consent of Midstream Co;
provided
that (A) such Person assumes in writing the obligations of Producer under
this Agreement insofar as it relates to the portion of the Dedicated Properties so assigned or transferred, such writing shall take the form of an Agreement Addendum, executed by the applicable Midstream Co and the Producer Assignee (and others, if
appropriate) and such writing shall be recorded in the real property records of the counties in which the Dedication Area is located, (B) such assignment is made subject to this Agreement, (C) if such assignment or transfer is made to an
Affiliate of Producer, the Original Producer shall not be released from any of its obligations under this Agreement, and (D) if such transfer or assignment is to a Producer Assignee (a “
Third Party
Texas Crude Oil
Gathering Agreement
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Assignment
”): (1) the Original Producer shall be released from its obligations under this Agreement with respect to the Dedicated Properties so assigned or transferred,
(2) at least thirty (30) Days prior to the closing date of the Third Party Assignment (or, if the period between signing and closing is less than thirty (30) Days, as early as possible and in no event less than two Business Days prior to the
closing of the Third Party Assignment), Producer shall cause the proposed Producer Assignee to deliver an updated Development Report to Midstream Co and (3) prior to or on the closing date of the Third Party Assignment, the Producer Assignee
shall deliver to Midstream Co (x) a copy of the writing pursuant to which the Third Party Assignment is occurring, and (y) documentation of any Conflicting Dedication affecting any Product of the Producer Assignee that would otherwise be
considered Dedicated Production.
(b)
Notice; Binding Effect
. Within 30 Days prior to the date of execution of a permitted
assignment by Producer, Producer shall give Midstream Co notice of any assignment of this Agreement or Dedicated Properties. Midstream Co shall give Producer written notice of any assignment of this Agreement within 30 Days after the date of
execution of such permitted assignment. This Agreement shall be binding upon and inure to the benefit of the respective permitted successors and assigns of the Parties. Any attempted assignment made without compliance with the provisions
set forth in this
Section 16.1
shall be null and void
ab initio
.
(c)
Releases not Assignments
. Any release of
any of the Dedicated Properties from the Dedications pursuant to
Section 2.4
shall not constitute an assignment or transfer of such Dedicated Properties for the purposes of this
Article 16
.
Section 16.2
Pre-Approved Assignments
.
(a) Each Party shall have the right without the prior consent of the others to (i) mortgage, pledge, encumber or otherwise impress a lien
or security interest upon its rights and interest in and to this Agreement, and (ii) make a transfer pursuant to any security interest arrangement described in (i) above, including any judicial or non-judicial foreclosure and any assignment from the
holder of such security interest to another Person.
(b) Original Producer (but not any subsequent Producer) may Transfer Dedicated
Properties free of the terms, conditions and obligations of this Agreement in a Transfer:
(i) where such Transfer is an
exchange of undeveloped Dedicated Properties (the “
Outbound Acreage
”) for properties of a Third Party located in the Dedication Area, which such properties become subject to the Dedications under this Agreement; provided that
Producer shall reimburse Midstream Co in full for all actual costs and expenses incurred by Midstream Co to install, build, construct, or otherwise place into service infrastructure for the Outbound Acreage, so long as Midstream Co had informed
Producer of its intention to install, build, construct or otherwise place into service the applicable infrastructure by inclusion of the same in a System Plan delivered prior to the closing of the applicable Transfer; or
(ii) where such Transfer (x) is not of the type described in
Section 16.2(b)(i)
, (y) pertains solely to Dedicated
Properties outside of the boundary shown on Annex A to Midstream Addendum 07, and (z) would not cause the number of Net Acres of Dedicated
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Gathering Agreement
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Properties Transferred pursuant to this
Section 16.2(b)(ii)
during the Term of this Agreement, on an aggregate basis, to exceed 3,500 Net Acres. Original Producer shall be responsible
for tracking the total acreage sold under this
Section 16.2(b)(ii)
and the number of Net Acres Transferred beginning on the Effective Date and continuing through the end of the Term and shall, upon request of Midstream Co, provide
evidence supporting Original Producer’s calculation thereof.
Section 16.3
Change of Control
. Except as provided in
Section 16.1
, nothing in this
Article 16
shall prevent Producer’s members or owners from transferring their respective interests (whether equity or otherwise and whether in whole or in part) in Producer and nothing in this
Article 16
shall prevent Midstream Co’s members or owners from transferring their respective interests (whether equity or otherwise and whether in whole or in part) in Midstream Co. However, if a change of control of a Party gives rise
to a reasonable basis for insecurity on the part of the other Party, such change of control may be the basis for a request of Adequate Assurance of Performance. Each member or owner of Producer or Midstream Co, as applicable, shall have the
right to assign and transfer such member’s or owner’s interests (whether equity or otherwise and whether in whole or in part) in Producer or Midstream Co, as applicable, without restriction contained in this Agreement.
Article 17
Other
Provisions
Section 17.1
Relationship of the Parties
. The execution and delivery of an Agreement Addendum shall create a
binding agreement between the Parties signatory thereto consisting of the terms set forth in such Agreement Addendum together with the terms set forth in these Agreement Terms and Conditions. The signatories of one Agreement Addendum shall not
be bound to or otherwise in privity of contract with the signatories of any other Agreement Addendum, and the execution and delivery of each Agreement Addendum shall form a separate and distinct contract. This Agreement shall not be deemed or
construed to create, a partnership, joint venture or association or a trust between Producer and Midstream Co or the persons party to any other Agreement Addendum. This Agreement shall not be deemed or construed to authorize any Party to act as
an agent, servant or employee for any other Party for any purpose whatsoever except as explicitly set forth in this Agreement. In their relations with each other under this Agreement, the Parties shall not be considered fiduciaries.
Section 17.2
Notices
. Unless otherwise specified in the applicable provision, all notices, consents, approvals, requests, and
other communications required or permitted to be given under this Agreement shall be in writing and delivered personally, or sent by bonded overnight courier, mailed by U.S. Express Mail or by certified or registered United States Mail with all
postage fully prepaid, return receipt requested, or, except in the case of notices of breach or default, sent by electronic mail (including with a PDF of the notice or other communication attached), in each case, addressed (i) if to Producer, at the
address set forth on the applicable Agreement Addendum and (ii) if to Midstream Co, at the address set forth on the applicable Agreement Addendum;
provided
that in the case of any notice by electronic mail, such notice is confirmed by
communication via another method permitted by this
Section 17.2
. Any notice, consent, approval, request, or other communication (“
Communications
”) given in accordance herewith shall be deemed to have been given when (a)
actually received or rejected by the
Texas Crude Oil
Gathering Agreement
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addressee in person or by courier, (b) (
reserved
), or (c) actually received or rejected by the addressee upon delivery by overnight courier or United States Mail, as shown in the
tracking report or return receipt, as applicable. Communications may not be transmitted by electronic mail, except for ordinary course business communications that shall be deemed to be received, if transmitted during normal business hours on
such Business Day, or if transmitted after normal business hours, on the next Business Day. Any Person may change their contact information for notice by giving notice to the other Party in the manner provided in this
Section 17.2
.
Section 17.3
Entire Agreement; Conflicts
. This Agreement (consisting of these Agreement Terms and Conditions and the applicable
Agreement Addendum) constitutes the entire agreement of Producer and Midstream Co pertaining to the subject matter hereof and supersedes all prior agreements, understandings, negotiations, and discussions, whether oral or written, of Producer and
Midstream Co pertaining to the subject matter hereof. There are no warranties, representations, or other agreements between Producer and Midstream Co relating to the subject matter hereof except as specifically set forth in this Agreement,
including the exhibits hereto, and no Party shall be bound by or liable for any alleged representation, promise, inducement, or statements of intention not so set forth.
Section 17.4
Waivers; Rights Cumulative
. Any of the terms, covenants, or conditions hereof may be waived only by a written
instrument executed by or on behalf of the Person waiving compliance. No course of dealing on the part of any Party, or their respective officers, employees, agents, or representatives, nor any failure by a Party to exercise any of its rights
under this Agreement shall operate as a waiver thereof or affect in any way the right of such Party at a later time to enforce the performance of such provision. No waiver by any Party of any condition, or any breach of any term or covenant
contained in this Agreement, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any such condition or breach or a waiver of any other condition or of any breach of any other term or
covenant. The rights of Produce and Midstream Co under this Agreement shall be cumulative, and the exercise or partial exercise of any such right shall not preclude the exercise of any other right.
Section 17.5
Amendment
.
(a) This Agreement may be amended only by an instrument in writing executed (except as otherwise set forth in this
Section 17.5
)
by Producer and Midstream Co and expressly identified as an amendment or modification.
(b) In the event of a conflict between (i) these
Agreement Terms and Conditions or any exhibit to this agreement, on the one hand, and (ii) an applicable Agreement Addendum, on the other, the applicable Agreement Addendum shall control.
Section 17.6
Governing Law; Arbitration
. This Agreement shall be governed by and construed in accordance with the laws of the State,
excluding any conflicts of law rule or principle that might refer construction of such provisions to the laws of another jurisdiction. Any dispute, controversy, or claim arising out of or relating to this Agreement shall be finally settled by
arbitration in accordance with the CPR Institute for Dispute Resolution Rules for Non-Administered Arbitration then in effect (the “
Rules
”) by a sole arbitrator appointed in accordance
Texas Crude Oil
Gathering Agreement
- 49 -
with the Rules. The arbitrator is not empowered to award consequential, indirect, special, punitive or exemplary damages, and each Party irrevocably waives any damages in excess of actual
damages. Arbitration shall be held in the English language in the State, and the decision of the arbitration panel shall include a statement of the reasons for such decision, and the award shall be final and binding on Producer and Midstream
Co. Awards shall be final and binding on Producer and Midstream Co from the date they are made and judgment upon any award may be entered in any court having jurisdiction. The arbitrator shall apply the laws of the State, excluding any
conflicts of law rule or principle that might refer construction of such provisions to the laws of another jurisdiction.
Section 17.7
Parties in Interest
. Except for parties indemnified hereunder, nothing in this Agreement shall entitle any Person other than the Parties to any claim, cause of action, remedy or right of any kind.
Section 17.8
Preparation of Agreement
. The Parties and their respective counsel participated in the preparation of this
Agreement. In the event of any ambiguity in this Agreement, no presumption shall arise based on the identity of the draftsman of this Agreement.
Section 17.9
Severability
. If any term or other provision of this Agreement is invalid, illegal, or incapable of being enforced by
any rule of Law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any
adverse manner to any Party. Upon such determination that any term or other provision is invalid, illegal, or incapable of being enforced, Producer and Midstream Co, as applicable, shall negotiate in good faith to modify this Agreement so as to
effect the original intent of Producer and Midstream Co as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible. A ruling of invalidity, illegality or
unenforceability as to one Agreement shall only be applicable to that Agreement, not all the Agreements covered by these Agreement Terms and Conditions.
Section 17.10
Counterparts
. This Agreement may be executed in any number of counterparts, and each such counterpart hereof shall
be deemed to be an original instrument, but all of such counterparts shall constitute for all purposes one agreement. Any signature hereto delivered by a Party by electronic mail shall be deemed an original signature hereto; provided that the
originals of any such electronically provided signatures shall be provided by the signatory, if requested by the other Party within a week of exchanging signatures.
Section 17.11
Confidentiality
. All data and information exchanged by the Parties (other than the terms and conditions of this
Agreement) and all pricing terms shall be maintained in strict and absolute confidence and no Party shall disclose, without the prior consent of the other Parties, any such data, information or pricing terms unless the release thereof is required by
Law (including any requirement associated with an elective filing with a Governmental Authority) or the rules or regulations of any stock exchange on which any securities of the Parties or any Affiliates thereof are traded. Nothing in this
Agreement shall prohibit the Parties from disclosing whatever information in such manner as may be required by Applicable Law; nor shall any Party be prohibited by the terms hereof from disclosing information acquired under this Agreement to any
financial institution or investors providing or proposing financing to a Party or
Texas Crude Oil
Gathering Agreement
- 50 -
to any Person proposing to purchase the equity in any Party or the assets owned by any Party. Notwithstanding the foregoing, the restrictions in this
Section 17.11
will not apply to
data or information that (i) is in the possession of the Person receiving such information prior to disclosure by the other Party, (ii) is or becomes known to the public other than as a result of a breach of this Agreement or
(iii) becomes available to a Party a non-confidential basis from a source other than the other Party,
provided
that such source is not bound by a confidentiality agreement with, or other fiduciary obligations of confidentiality to, the
other Party. This Section will survive any termination of this Agreement for a period of 24 Months from the end of the Year in which the date of such termination occurred.
(
End of Agreement Terms and Conditions
)
Texas Crude Oil
Gathering Agreement
- 51 -
EXHIBIT A
TO TEXAS AGREEMENT TERMS AND CONDITIONS
RELATING TO CRUDE OIL GATHERING SERVICES
Reserved
Texas Crude Oil
Gathering Agreement
Exhibit A - 1
EXHIBIT B
TO TEXAS AGREEMENT TERMS AND CONDITIONS
RELATING TO CRUDE OIL GATHERING SERVICES
DOWNTIME FEE REDUCTION
|
|
|
|
|
|
|
Facility Segment Downtime Percentage (per Month)
|
|
Percentage Reduction of
Individual Fee with respect to
such Facility Segment
|
|
|
Greater than 4.5% and up to and including 10%
|
|
|
5
|
%
|
|
Greater than 10% and up to and including 12%
|
|
|
10
|
%
|
|
Greater than 12% and up to and including 15%
|
|
|
15
|
%
|
|
Greater than 15%
|
|
|
20
|
%
|
(End of Exhibit B)
Texas Crude Oil
Gathering Agreement
Exhibit B - 1
EXHIBIT C
TO TEXAS AGREEMENT TERMS AND CONDITIONS
RELATING TO CRUDE OIL GATHERING SERVICES
OPERATING PRESSURE FEE REDUCTION
|
|
|
|
|
|
|
Pressure Overage Percentage, based on pressures at a central facility on a
Facility Segment
|
|
Percentage Reduction of
Individual Fee with respect to
such Facility Segment
|
|
|
Less than 5%
|
|
|
None
|
|
|
Greater than 5% and up to and including 15%
|
|
|
5
|
%
|
|
Greater than 15% and up to and including 25%
|
|
|
10
|
%
|
|
Greater than 25% and up to and including 35%
|
|
|
15
|
%
|
|
Greater than 35% and up to and including 45%
|
|
|
20
|
%
|
|
Greater than 45%
|
|
|
25
|
%
|
(End of Exhibit C)
Crude Oil Gathering
Agreement
Exhibit C - 1
EXHIBIT D
TO TEXAS AGREEMENT TERMS AND CONDITIONS
RELATING TO OIL GATHERING SERVICES
INSURANCE
Midstream Co and Producer
shall (or, in the case of Midstream Co, Midstream Co may cause OpCo to) purchase and maintain in full force and effect at all times during the Term of this Agreement, at such Party’s sole cost and expense and from insurance companies that are
rated (or whose reinsurers are rated) “A-VII” or better by AM Best or “BBB-” or better by Standard & Poor’s or an equivalent rating from another recognized rating agency, policies providing the types and limits of
insurance indicated below, which insurance shall be regarded as a minimum and, to the extent of the obligations undertaken by such Party in this Agreement, shall be primary (with the exception of the Excess Liability Insurance and Workers’
Compensation) as to any other existing, valid, and collectable insurance. Each Party’s deductibles shall be borne by that Party.
|
|
A.
|
Where applicable, Workers’ Compensation and Employers’ Liability Insurance, in accordance with the statutory requirements of the State, and endorsed specifically to include the following:
|
|
|
1.
|
Employers’ Liability, subject to a limit of liability of not less than $1,000,000 per accident, $1,000,000 for each employee/disease, and a $1,000,000 policy limit.
|
The Workers’ Compensation and Employers’ Liability Insurance policy(ies) shall contain an alternate employer endorsement.
|
|
B.
|
Commercial General Liability Insurance, with limits of liability of not less than the following:
|
$2,000,000 general aggregate
$1,000,000 each occurrence, Bodily Injury or Property Damage Combined Single Limit
Such insurance shall include the following:
|
|
1.
|
Premises and Operations coverage.
|
|
|
2.
|
Contractual Liability covering the liabilities assumed under this Agreement.
|
|
|
3.
|
Broad Form Property Damage Liability endorsement, unless policy is written on November 1988 or later ISO form.
|
|
|
4.
|
Products and Completed Operations.
|
|
|
5.
|
Time Element Limited Pollution coverage.
|
Crude Oil Gathering
Agreement
Exhibit D - 1
|
|
C.
|
If applicable, Automobile Liability Insurance, with limits of liability of not less than the following:
|
$1,000,000 Bodily Injury or Property Damage Combined Single Limit, for each occurrence.
Such coverage shall include hired and non-owned vehicles and owned vehicles where applicable.
|
|
D.
|
If applicable, Aircraft Liability Insurance. In any operation requiring the use or charter of aircraft or helicopters by Midstream Co or Producer, combined single limit insurance shall be carried or cause to be
carried for public liability, passenger liability and property damage liability in an amount of not less than $8,000,000 per seat subject to a minimum of $20,000,000; this insurance shall cover all owned and non-owned aircraft, including
helicopters, used by Midstream Co in connection with the performance of the work set forth in this Agreement.
|
|
|
E.
|
Excess Liability Insurance, with limits of liability not less than the following:
|
Limits of
Liability - $10,000,000 Occurrence/Aggregate for Bodily Injury and Property Damage in excess of the coverage outlined in Paragraphs A, B, C and D.
The
limits of coverage required in this Agreement may be met with any combination of policies as long as the minimum required limits are met.
Each Party to
this Agreement shall have the right to acquire, at its own expense, such additional insurance coverage as it desires to further protect itself against any risk or liability with respect to this Agreement and operations and activities under this
Agreement or related thereto. All insurance maintained by or on behalf of Producer or Midstream Co shall contain a waiver by the insurance company of all rights of subrogation in favor of the other Party.
Neither the minimum policy limits of insurance required of the Parties nor the actual amounts of insurance maintained by the Parties under their insurance
program shall operate to modify the Parties’ liability or indemnity obligations in this Agreement.
A Party may self-insure the requirements in this
Exhibit
D
if such Party is Controlled by Noble Energy, Inc. and, otherwise, if such Party or its parent is considered investment grade (S&P BBB- or equivalent or higher).
(End of Exhibit D)
Crude Oil Gathering
Agreement
Exhibit D -2
Exhibit 10.36
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED. THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
FORM OF
TEXAS OIL
GATHERING AGREEMENT
AGREEMENT ADDENDUM 01
P
ERMIAN
C
ONTRACT
N
UMBER
: BLPR01-OG
This AGREEMENT ADDENDUM 01 (this “
Agreement Addendum
”) (a) shall be effective as among the Persons named below as
“Producer” and “Midstream Co” as of the date specified below as the “Effective Date,” (b) incorporates the Texas Agreement Terms and Conditions Relating to Crude Oil Gathering Services (the “
Agreement Terms
and Conditions
”), which were last amended effective as of the Effective Date, and (c) together with the Agreement Terms and Conditions, shall constitute one contract and shall be the Agreement of the Parties. Except as otherwise
set forth herein (i) all terms shall have the meanings assigned to such terms in the Agreement Terms and Conditions, and (ii) all references to Exhibits, Appendices, Articles, Sections, subsections and other subdivisions refer to the
corresponding Exhibits, Appendices, Articles, Sections, subsections and other subdivisions of or to the Agreement Terms and Conditions.
Producer desires to contract with Midstream Co for Midstream Co to provide the Services utilizing the Individual System, and Midstream Co
desires to provide the Services to Producer, on the terms and subject to the conditions of this Agreement.
NOW, THEREFORE, in
consideration of the mutual agreements in this Agreement, Midstream Co and Producer hereby agree as follows:
|
|
|
|
|
Producer
|
|
Rosetta Resources Operating LP, a Delaware limited partnership
|
|
|
|
|
Midstream Co
|
|
Blanco River DevCo LP, a Delaware limited partnership
|
|
|
|
|
Parties
|
|
The term “Party” or “Parties” shall refer to Producer and Midstream Co identified in this Agreement Addendum
|
|
|
|
|
Effective Date
|
|
September 1, 2016
|
Agreement Addendum 01
– Page 1
Texas Crude Oil Gathering Agreement
Permian
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED. THE
REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
|
|
|
|
|
Dedication Area
|
|
The following areas within Reeves County, Texas:
H&GNRR Block 5
H&GNRR Block 6
H&GNRR Block 13
PSL Block C18
PSL Block C10
PSL Block C9
PSL Block C8
PSL Block C7
PSL Block C6
T&P RR Block 51-T7
T&P RR Block 50-T7
|
|
|
|
|
Individual Fee
|
|
$[**].
|
Agreement Addendum 01
– Page 2
Texas Crude Oil Gathering Agreement
Permian
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED. THE
REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
|
|
|
|
|
Notices and
Payments
|
|
Notice Address – General Matters & Correspondence
|
|
Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Chief Financial Officer
John F. Bookout, IV
Telephone: (832) 639-7134
Email: John.Bookout@nblenergy.com
Producer:
Rosetta Resources Operating LP
c/o Noble Energy, Inc.
1001 Noble Energy Way
Houston, TX 77070
Attention: John Nedelka, Director Revenue Accounting
Telephone: (281) 872-3120
Email: John.Nedelka@nblenergy.com
|
Agreement Addendum 01
– Page 3
Texas Crude Oil Gathering Agreement
Permian
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED. THE
REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
|
|
|
|
|
Notice Address – Operational Matters
|
|
Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Chief Operating Officer
John C. Nicholson
Telephone: (281) 876-6186
Email: John.Nicholson@nblenergy.com
Producer:
Rosetta Resources Operating LP
c/o Noble Energy, Inc.
1001 Noble Energy Way
Houston, TX 77070
Attention: John Nedelka, Director Revenue Accounting
Telephone: (281) 872-3120
Email: John.Nedelka@nblenergy.com
|
Agreement Addendum 01
– Page 4
Texas Crude Oil Gathering Agreement
Permian
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED. THE
REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
|
|
|
|
|
Notice Address – Force Majeure and Marketing interruptions
|
|
Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Chief Operating Officer
John C. Nicholson
Telephone: (281) 876-6186
Email: John.Nicholson@nblenergy.com
Producer:
Rosetta Resources Operating LP
c/o Noble Energy, Inc.
1001 Noble Energy Way
Houston, TX 77070
Attention: John Nedelka, Director Revenue Accounting
Telephone: (281) 872-3120
Email: John.Nedelka@nblenergy.com
|
|
|
|
|
Notice Address – Invoicing Matters
|
|
Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
Attention: Ian Dams
Telephone: (832) 639-7406
Email: ian.dams@nblenergy.com
Producer:
Rosetta Resources Operating LP
c/o Noble Energy, Inc.
1001 Noble Energy Way
Houston, TX 77070
Attention: John Nedelka, Director Revenue Accounting
Telephone: (281) 872-3120
Email: John.Nedelka@nblenergy.com
|
Agreement Addendum 01
– Page 5
Texas Crude Oil Gathering Agreement
Permian
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED. THE
REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
|
|
|
|
|
Payments by Electronic Funds Transfer
|
|
Midstream Co:
ABA for wire: 021000021
ABA for ACH: 111000614
Account Number: 880285205
Account Name: Blanco River DevCo
LP
Financial Institution: JP Morgan
Bank Swift: CHASUS33
Producer:
ABA/Routing Number: 021000021
Account
Number: 700628402
Account Name: Rosetta Resources Operating LP
Financial Institution: JPMorgan Chase – New York
Bank Swift:
CHASUS33
|
(End of Agreement Addendum 01)
Agreement Addendum 01
– Page 6
Texas Crude Oil Gathering Agreement
Permian
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED. THE
REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement in
duplicate originals to be effective as of the Effective Date.
|
|
|
|
|
|
|
“Producer”
|
|
|
|
ROSETTA RESOURCES OPERATING LP
|
|
|
|
|
|
|
BY: ROSETTA RESOURCES OPERATING GP, LLC, its general partner
|
|
|
|
|
By:
|
|
|
|
|
|
Name:
|
|
|
|
|
|
Title:
|
|
|
|
|
|
|
|
STATE OF TEXAS
|
|
)
|
|
|
|
) ss.
|
|
COUNTY OF HARRIS
|
|
)
|
The foregoing instrument was acknowledged before me this day of
, , by as of Rosetta Resources
Operating GP, LLC, a Delaware limited liability company, acting as the general partner of Rosetta Resources Operating LP, a Delaware limited partnership.
WITNESS my hand and official seal.
Agreement Addendum 01
– Signature Page 1
Texas Crude Oil Gathering Agreement
Permian
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED. THE
REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
|
|
|
|
|
|
|
|
|
|
|
“Midstream Co”
|
|
|
|
BLANCO RIVER DEVCO LP
|
|
|
|
|
|
|
By: Blanco River DevCo GP LLC
|
|
|
|
|
|
By: Noble Midstream Services, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
|
|
Terry R. Gerhart
|
|
|
|
|
|
|
|
|
|
Chief Executive Officer
|
|
|
|
|
|
STATE OF TEXAS
|
|
)
|
|
|
|
) ss.
|
|
COUNTY OF HARRIS
|
|
)
|
The foregoing instrument was acknowledged before me this day of
, , by Terry R. Gerhart as Chief Executive Officer of Noble Midstream Services, LLC, in its capacity as sole member of Blanco River DevCo GP LLC, in its
capacity as the general partner of Blanco River DevCo LP, a Delaware limited partnership.
WITNESS my hand and official seal.
Agreement Addendum 01
– Signature Page 2
Texas Crude Oil Gathering Agreement
Permian
Exhibit 10.37
FORM OF
TEXAS PRODUCED
WATER SERVICES AGREEMENT
consisting of the
TEXAS AGREEMENT TERMS AND CONDITIONS RELATING TO
PRODUCED WATER SERVICES
taken together with the applicable
TEXAS AGREEMENT ADDENDUM
now or in the future effective
TABLE OF CONTENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PAGE
|
|
|
|
|
|
ARTICLE 1 DEFINITIONS
|
|
|
1
|
|
|
|
|
|
|
|
Section 1.1
|
|
|
|
Definitions
|
|
|
1
|
|
|
Section 1.2
|
|
|
|
Other Terms
|
|
|
13
|
|
|
Section 1.3
|
|
|
|
References and Rules of Construction
|
|
|
13
|
|
|
|
|
|
ARTICLE 2 PRODUCT DEDICATION AND REAL PROPERTY DEDICATION
|
|
|
14
|
|
|
|
|
|
|
|
Section 2.1
|
|
|
|
Producer’s Dedications
|
|
|
14
|
|
|
Section 2.2
|
|
|
|
Conflicting Dedications
|
|
|
14
|
|
|
Section 2.3
|
|
|
|
Producer’s Reservation
|
|
|
15
|
|
|
Section 2.4
|
|
|
|
Releases from Dedication
|
|
|
15
|
|
|
Section 2.5
|
|
|
|
Covenants Running with the Land
|
|
|
18
|
|
|
Section 2.6
|
|
|
|
Recording of Agreement
|
|
|
18
|
|
|
|
|
|
ARTICLE 3 SYSTEM EXPANSION AND CONNECTION OF WELLS
|
|
|
18
|
|
|
|
|
|
|
|
Section 3.1
|
|
|
|
Development Report; System Plan; Meetings
|
|
|
18
|
|
|
Section 3.2
|
|
|
|
Expansion of System and Connection of Separator Facilities
|
|
|
22
|
|
|
Section 3.3
|
|
|
|
Temporary Services
|
|
|
23
|
|
|
Section 3.4
|
|
|
|
Cooperation
|
|
|
23
|
|
|
Section 3.5
|
|
|
|
Grant of Access; Real Property Rights
|
|
|
24
|
|
|
|
|
|
ARTICLE 4 MEASUREMENT DEVICES
|
|
|
25
|
|
|
|
|
|
|
|
Section 4.1
|
|
|
|
Measurement Devices
|
|
|
25
|
|
|
Section 4.2
|
|
|
|
Measurement Procedures
|
|
|
27
|
|
|
Section 4.3
|
|
|
|
Product Meter Adjustments
|
|
|
28
|
|
|
|
|
|
ARTICLE 5 TENDER, NOMINATION, AND GATHERING OF PRODUCTION
|
|
|
28
|
|
|
|
|
|
|
|
Section 5.1
|
|
|
|
Limitations on Service to Third Parties
|
|
|
28
|
|
|
Section 5.2
|
|
|
|
Tender of Dedicated Production
|
|
|
28
|
|
|
Section 5.3
|
|
|
|
Services; Service Standard
|
|
|
29
|
|
|
Section 5.4
|
|
|
|
Designation of Recycling or Disposal, Nominations, Scheduling, and Curtailment
|
|
|
30
|
|
|
Section 5.5
|
|
|
|
Suspension/Shutdown of Service
|
|
|
30
|
|
|
|
|
|
ARTICLE 6 FEES
|
|
|
31
|
|
|
|
|
|
|
|
Section 6.1
|
|
|
|
Fees
|
|
|
31
|
|
|
Section 6.2
|
|
|
|
Fee Adjustments
|
|
|
31
|
|
|
Section 6.3
|
|
|
|
Treatment of Byproducts, System Gains/Losses, Fuel and Related Matters
|
|
|
33
|
|
Texas Produced Water
Services Agreement
- i -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ARTICLE 7 QUALITY SPECIFICATIONS
|
|
|
34
|
|
|
|
|
|
|
|
Section 7.1
|
|
|
|
Quality Specification
|
|
|
34
|
|
|
Section 7.2
|
|
|
|
Failure to Meet Specifications
|
|
|
34
|
|
|
|
|
|
ARTICLE 8 TERM
|
|
|
35
|
|
|
|
|
|
|
|
Section 8.1
|
|
|
|
Term
|
|
|
35
|
|
|
Section 8.2
|
|
|
|
Effect of Termination or Expiration of the Term
|
|
|
35
|
|
|
|
|
|
ARTICLE 9 TITLE AND CUSTODY
|
|
|
36
|
|
|
|
|
|
|
|
Section 9.1
|
|
|
|
Title
|
|
|
36
|
|
|
Section 9.2
|
|
|
|
Custody
|
|
|
36
|
|
|
|
|
|
ARTICLE 10 BILLING AND PAYMENT
|
|
|
36
|
|
|
|
|
|
|
|
Section 10.1
|
|
|
|
Statements
|
|
|
36
|
|
|
Section 10.2
|
|
|
|
Payments
|
|
|
37
|
|
|
Section 10.3
|
|
|
|
Adequate Assurances
|
|
|
37
|
|
|
Section 10.4
|
|
|
|
Audit
|
|
|
38
|
|
|
|
|
|
ARTICLE 11 REMEDIES
|
|
|
38
|
|
|
|
|
|
|
|
Section 11.1
|
|
|
|
Suspension of Performance; Temporary Release from Dedication
|
|
|
38
|
|
|
Section 11.2
|
|
|
|
No Election
|
|
|
39
|
|
|
Section 11.3
|
|
|
|
DIRECT DAMAGES
|
|
|
39
|
|
|
|
|
|
ARTICLE 12 FORCE MAJEURE
|
|
|
39
|
|
|
|
|
|
|
|
Section 12.1
|
|
|
|
Force Majeure
|
|
|
39
|
|
|
Section 12.2
|
|
|
|
Extension Due to Force Majeure
|
|
|
40
|
|
|
|
|
|
ARTICLE 13 CHANGE IN LAW; UNECONOMIC SERVICE
|
|
|
40
|
|
|
|
|
|
|
|
Section 13.1
|
|
|
|
Changes in Applicable Law
|
|
|
40
|
|
|
Section 13.2
|
|
|
|
Unprofitable Operations and Rights of Termination
|
|
|
41
|
|
|
|
|
|
ARTICLE 14
RESERVED
|
|
|
42
|
|
|
|
|
|
ARTICLE 15 INDEMNIFICATION AND INSURANCE
|
|
|
43
|
|
|
|
|
|
|
|
Section 15.1
|
|
|
|
Reciprocal Indemnity
|
|
|
43
|
|
|
Section 15.2
|
|
|
|
Indemnification Regarding Third Parties
|
|
|
43
|
|
|
Section 15.3
|
|
|
|
Penalties
|
|
|
43
|
|
|
Section 15.4
|
|
|
|
Insurance
|
|
|
43
|
|
Texas Produced Water
Services Agreement
- ii -
|
|
|
|
|
|
|
|
|
|
|
Section 16.1
|
|
|
|
Assignment of Rights and Obligations under this Agreement
|
|
|
44
|
|
|
Section 16.2
|
|
|
|
Pre-Approved Assignments
|
|
|
45
|
|
|
Section 16.3
|
|
|
|
Change of Control
|
|
|
45
|
|
|
|
|
|
ARTICLE 17 OTHER PROVISIONS
|
|
|
46
|
|
|
|
|
|
|
|
Section 17.1
|
|
|
|
Relationship of the Parties
|
|
|
46
|
|
|
Section 17.2
|
|
|
|
Notices
|
|
|
46
|
|
|
Section 17.3
|
|
|
|
Entire Agreement; Conflicts
|
|
|
46
|
|
|
Section 17.4
|
|
|
|
Waivers; Rights Cumulative
|
|
|
47
|
|
|
Section 17.5
|
|
|
|
Amendment
|
|
|
47
|
|
|
Section 17.6
|
|
|
|
Governing Law; Arbitration
|
|
|
47
|
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|
Section 17.7
|
|
|
|
Parties in Interest
|
|
|
47
|
|
|
Section 17.8
|
|
|
|
Preparation of Agreement
|
|
|
48
|
|
|
Section 17.9
|
|
|
|
Severability
|
|
|
48
|
|
|
Section 17.10
|
|
|
|
Counterparts
|
|
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48
|
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Section 17.11
|
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Confidentiality
|
|
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48
|
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EXHIBITS
|
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EXHIBIT A
|
|
|
|
RESERVED
|
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EXHIBIT B
|
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DOWNTIME FEE REDUCTION
|
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EXHIBIT C
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RESERVED
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EXHIBIT D
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INSURANCE
|
Texas Produced Water
Services Agreement
- iii -
TEXAS AGREEMENT TERMS AND CONDITIONS RELATING TO
PRODUCED WATER SERVICES
These TEXAS AGREEMENT TERMS AND CONDITIONS RELATING TO PRODUCED WATER SERVICES (these “
Agreement Terms and Conditions
”)
(i) shall be effective with respect to each signatory of each Agreement Addendum as of the Effective Date specified in the applicable Agreement Addendum (defined below), (ii) were last updated as of the Effective Date, (iii) are
incorporated into and made a part of each Agreement Addendum, and (iv) taken together with the applicable Agreement Addendum shall constitute one Agreement, separate and apart from any other Agreement governed by these Agreement Terms and
Conditions.
Recitals:
|
|
A.
|
Producer owns rights, title and interests in certain oil and gas leases and other interests located within the Dedication Area (defined below) that require services related to the Product (defined below).
|
|
|
B.
|
Producer wishes to obtain such services from each Midstream Co (defined below) that executes and delivers an Agreement Addendum (defined below) pursuant to these Agreement Terms and Conditions, as modified by the
applicable Agreement Addendum.
|
|
|
C.
|
Producer desires to dedicate all produced water it Controls (defined below) that is attributable to its right, title, and interest in certain oil and gas leases and other interests located within the Dedication Area
(defined below) to the Individual System (defined below).
|
|
|
D.
|
Each Midstream Co that executes and delivers an Agreement Addendum owns and operates an Individual System that gathers Product that is produced together with Producer’s Crude Oil produced from certain oil and gas
leases and other interests.
|
Agreements:
NOW, THEREFORE, in consideration of the foregoing Recitals, which are incorporated herein, the mutual agreements in this Agreement, and other
good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Midstream Co, and Producer hereby agree as follows:
Article 1
Definitions
Section 1.1
Definitions
. As used in this Agreement, the following capitalized terms shall have the meanings ascribed to
them below:
“
Abandonment Date
” has the meaning given to it in
Section 3.2(d)
.
Texas Produced Water
Services Agreement
- 1 -
“
Additional/Accelerated Well
” has the meaning given to it in
Section
3.2(c)
.
“
Adequate Assurance of Performance
” has the meaning given to it in
Section 10.3
.
“
Adjustment Year
” has the meaning given to it in
Section 6.2(a)(ii)
.
“
Affiliate
” means, with respect to any Person, any other Person that directly, or indirectly through one or more
intermediaries, Controls, or is Controlled by, or is under common Control with, such Person. The following sentence shall not apply to the term “Affiliate” as used in
Section 2.2(b)
or the definition of “Conflicting
Dedication”: Producer and its subsidiaries (other than OpCo and its subsidiaries), on the one hand, and OpCo and its subsidiaries, on the other, shall not be considered Affiliates of each other for purposes of this Agreement.
“
Agreement
” means the applicable Agreement Addendum taken together with these Agreement Terms and Conditions, as modified by
such Agreement Addendum.
“
Agreement Addendum
” means each Agreement Addendum by and between a Producer and a Midstream Co
that expressly states that it is governed by these Agreement Terms and Conditions. “
Agreement Addenda
” shall be the collective reference to each Agreement Addendum then in effect.
“
Agreement Terms and Conditions
” has the meaning given to it in the introductory paragraph.
“
Applicable Month
” has the meaning set forth in
Section 6.2(c)
.
“
Approved SWD Vendor
” means Midstream Co or a Third Party, in either case, as mutually agreed in writing by the Parties;
provided, however, that if an Approved SWD Vendor rejects any Product delivered to a SWD Trucking Facility for quality or safety reasons, then Midstream Co shall be entitled to select an alternative vendor to take title to, store, handle, and
dispose of such Product without obtaining Producer’s approval of such vendor, and such vendor shall be deemed an Approved SWD Vendor for such purpose.
“
Associated Water
” means water that is produced with Crude Oil owned or Controlled by Producer and delivered with such Crude
Oil to the Crude Oil Gathering System, which will be separated prior to redelivery of such Crude Oil to Producer. Following separation from Crude Oil and delivery into the System, such water shall cease to be Associated Water and shall be deemed
Product.
“
Barrel
” means a quantity consisting of forty-two Gallons.
“
Beneficiary
” has the meaning given to it in
Section 4.1(g)
.
“
Business Day
” means a Day (other than a Saturday or Sunday) on which federal reserve banks are open for business.
“
Cancellation Date
” has the meaning given to it in
Section 3.1(c)
.
Texas Produced Water
Services Agreement
- 2 -
“
Claiming Party
” has the meaning given to it in the definition of “Force
Majeure”.
“
Communications
” has the meaning given to it in
Section 17.2
.
“
Conditional Amount
” has the meaning set forth in
Section 10.1(a)
.
“
Conflicting Dedication
” means any gathering agreement, commitment, or arrangement (including any volume commitment) that
requires (a) Producer’s owned or Controlled Product to be trucked from or sold to a Third Party at the lease or to be gathered on any gathering system or similar system other than the System, including any such agreement, commitment, or
arrangement burdening properties hereinafter acquired by Producer in the Dedication Area or (b) Producer to utilize a Third Party for any other Services covered by this Agreement. No dedication of acreage shall constitute a Conflicting
Dedication if Producer’s requirement under such dedication is to deliver Product from a Delivery Point hereunder. A right of first refusal in favor of an entity other than Original Producer, OpCo, or any of their Affiliates shall be deemed to
be a “Conflicting Dedication” if Affiliates of Original Producer are prohibited from providing Services pursuant to the applicable agreement creating such right of first refusal.
“
Control
” (including the term “
Controlled
”) means (a) with respect to any Person, the possession, direct or
indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting shares, by contract, or otherwise and (b) with respect to any Product, such Product produced from the
Dedication Area and owned by a Third Party or an Affiliate and with respect to which Producer has the contractual right or obligation (pursuant to a marketing, agency, operating, unit, or similar agreement) to dispose of such Product and Producer
elects or is obligated to dispose of such Product on behalf of the applicable Third Party or Affiliate.
“
Credit-Worthy
Person
” means a Person with a senior unsecured and credit-unenhanced long term debt rating equivalent to A- or better as determined by at least two rating agencies, one of which must be either Standard & Poor’s or Moody’s (or
if either one or both are not available, equivalent ratings from alternate rating sources reasonably acceptable to Midstream Co).
“
Crude Oil
” means crude oil produced from oil or gas wells in the Dedication Area and Controlled by Producer, in its natural
form, which may include Associated Water naturally produced therewith.
“
Crude Oil Gathering System
” means the Crude Oil
gathering system used to provide Crude Oil gathering services to Producer.
“
Day
” means a period of time from 7:00 a.m.
Central Time on a calendar day until 7:00 a.m. Central Time on the succeeding calendar day. The term “
Daily
” shall have the correlative meaning.
“
Dedicated Production
” means (a) Product owned by Producer or an Affiliate of Producer and produced from a Well within the
Dedication Area that is operated by Producer or an Affiliate under the Control of Producer, (b)
Reserved
, and (c) Product produced within the Dedication Area that is owned by a Third Party and under the Control of
Producer. Notwithstanding the foregoing, (i) any Product that was released pursuant to the Releases of Dedication shall not be
Texas Produced Water
Services Agreement
- 3 -
included in this definition of “Dedicated Production”, (ii) any Product that is permanently released pursuant to
Section 2.4(a)
or otherwise shall cease to be included in this
definition of “Dedicated Production” immediately upon the effectiveness of such permanent release, and (iii) in the event of an assignment by a Producer (“X”) to an assignee (“Y”) that is permitted under
Article
16
, any Product that is so assigned shall cease to be included in X’s Dedicated Production and shall solely be included in Y’s Dedicated Production as of the effective date of such assignment.
“
Dedicated Properties
” means the interests held by Producer or its Affiliates in the oil and gas leases, mineral interests,
and other similar interests as of the Effective Date or acquired by Producer or its Affiliates after the Effective Date that relate to land within the Dedication Area. Notwithstanding the foregoing, (a) any interest that was released pursuant to the
Releases of Dedication shall not be included in this definition of “Dedicated Properties”, (b) any interest that is permanently released pursuant to
Section 2.4(a)
or otherwise, shall cease to be included in this definition of
“Dedicated Properties” immediately upon the effectiveness of such permanent release and (c) in the event of an assignment by a Producer (“X”) to an assignee (“Y”) that is permitted under
Article 16
, any interest
that is so assigned shall cease to be included in X’s Dedicated Properties and shall solely be included in Y’s Dedicated Properties as of the effective date of such assignment.
“
Dedications
” means the Product Dedication and the Real Property Dedication together, and “
Dedication
” means
the Product Dedication or the Real Property Dedication, as applicable.
“
Dedication Area
” means, with respect to this
Agreement, the area described on the applicable Agreement Addendum. Notwithstanding the foregoing, (a) any acreage that was released pursuant to the Releases of Dedication shall not be included in this definition of “Dedication Area”, (b)
any acreage that is permanently released pursuant to
Section 2.4(a)
or otherwise shall cease to be included in this definition of “Dedication Area” immediately upon the effectiveness of such permanent release and (c) in the event of
an assignment by a Producer (“X”) to an assignee (“Y”) that is permitted under
Article 16
, any acreage that is so assigned shall cease to be included in X’s Dedication Area and shall solely be included in Y’s
Dedication Area as of the effective date of such assignment.
“
Delivery Point
” means the point at which custody transfers
from Midstream Co to or for the account of Producer. The custody transfer point may include (a) the facilities of a Downstream Facility, (b) trucks or (c) any other point as may be mutually agreed between the Parties. The Delivery Points
for each Individual System in existence on the Effective Date shall be set forth in writing between Producer and Midstream Co, and additional points may become Delivery Points hereunder upon mutual agreement of the Parties as construction is
completed on additional facilities in satisfaction of the needs identified by Producer and the Parties shall continuously update the list of Delivery Points by mutual agreement.
“
Development Report
” has the meaning given to it in
Section 3.1(a)
.
“
Downstream Facility
” means the disposal system into which Product is delivered at a Delivery Point or, with respect to
Product that is cleaned, treated or otherwise recycled hereunder, any storage facility or pipeline, in either case, downstream of the applicable Delivery Point.
Texas Produced Water
Services Agreement
- 4 -
“
Downtime Event
” means, with respect to any Facility Segment, or, as applicable,
all of the Facilities Segments of an Individual System, a period during which Midstream Co is unable to receive Product into the central facility of such Facility Segment for a reason other than (i) Force Majeure, (ii) an event or condition
downstream of the Individual System of which such Facility Segment is a part that was not caused by Midstream Co, (iii) planned maintenance for which Midstream Co provided notice as described in
Section 5.5(b)(ii)
, or
(iv) Producer’s production exceeding the production forecast in the Development Report on which the applicable Facility Segment was based.
“
Downtime Hours
” means, with respect to any Facility Segment, the hours during the Applicable Month during which such
Facility Segment was unavailable to provide Services.
“
Downtime Percentage
” means, with respect to any Facility Segment
during the Applicable Month, an amount equal to the quotient of (a) the aggregate number of Downtime Hours during the Applicable Month, divided by (b) the total hours during the Applicable Month.
“
Effective Date
” has the meaning given to it in the applicable Agreement Addendum.
“
Escalation Percentage
” means 2.50%.
“
Excluded Amounts
” means Midstream Co’s general and administrative costs and any costs for design or construction of
facilities that can be used to connect other Planned Wells or Planned Separator Facilities in the Development Report that Producer at such time intends to develop.
“
Facility Segment
” means each segment of an Individual System comprised of facilities beginning at a Receipt Point and ending
at an Internal Transfer Point. If an Individual System does not contain any such distinct segment, then the term Facility Segment shall be synonymous with Individual System.
“
First Development Report
” means the first report delivered by Original Producer to Midstream Co that satisfies the
requirements for a Development Report in
Section 3.1(a)
and
Section 3.1(b)
(an “
Original Report
”); and in the event that Producer assigns all or any part of the Dedicated Properties to a Producer Assignee, then with
respect to such Producer Assignee, the First Development Report shall not refer to the Original Report but rather to the first Development Report delivered by such Producer Assignee to Midstream Co that satisfies the requirements for such report in
Section 3.1(a)
and
Section 3.1(b)
.
“
Flowback
” means the water-based solution that flows back to the
surface during and after the completion of hydraulic fracturing a Well.
“
Flowback Period
” means, with respect to a Well,
the period of time commencing on the Day Flowback begins to return to the surface and ending on the earlier of the date (a) on which such Well or the Separator Facility to which such Well is connected is connected to the Individual System or
(b) ten Days following the first Day of the applicable Flowback Period.
Texas Produced Water
Services Agreement
- 5 -
“
Force Majeure
” means an event that is not within the reasonable control of the
Party claiming suspension (the “
Claiming Party
”), and that by the exercise of reasonable due diligence the Claiming Party is unable to avoid or overcome in a reasonable manner. To the extent meeting the foregoing requirements, Force
Majeure includes: (a) acts of God; (b) wars (declared or undeclared); (c) insurrections, hostilities, riots; (d) floods, droughts, fires, storms, storm warnings, landslides, lightning, earthquakes, washouts; (e) industrial disturbances,
acts of a public enemy, acts of terror, sabotage, blockades, epidemics; (f) arrests and restraints of rulers and peoples; (g) civil disturbances; (h) explosions, breakage or accidents to machinery or lines of pipe; (i) hydrate obstruction
or blockages of any kind in lines of pipe; (j) freezing of wells or delivery facilities, partial or entire failure of wells, and other events beyond the reasonable control of the Claiming Party that affect the timing of production or production
levels; (k) (
reserved
); (l) action or restraint by any Governmental Authority (so long as the Claiming Party has not applied for or assisted in the application for, and has opposed where and to the extent commercially reasonable, such
action or restraint), (m) delays or failures by a Governmental Authority to grant Permits applicable to the System (or any Individual System) so long as the Claiming Party has used its commercially reasonable efforts to make any required filings
with such Governmental Authority relating to such Permits, and (n) delays or failures by the Claiming Party to obtain easements and rights of way, surface leases and other real property interests related to the System (or any Individual System)
from Third Parties, so long as the Claiming Party has used its commercially reasonable efforts to obtain such easements and rights of way, surface leases and other real property interests. The failure of a Claiming Party to settle or prevent a
strike or other labor dispute with employees shall not be considered to be a matter within such Claiming Party’s control.
“
Gallon
” means one U.S. Standard gallon measured at 60 degrees Fahrenheit.
“
Governmental Authority
” means any federal, state, local, municipal, tribal or other government; any governmental, regulatory
(including self-regulatory) or administrative agency, commission, body or other authority exercising or entitled to exercise any administrative, executive, judicial, legislative, regulatory or taxing authority or power; and any court or governmental
tribunal, including any tribal authority having or asserting jurisdiction.
“
Group
” means (a) with respect to Midstream
Co, the Midstream Co Group, and (b) with respect to Producer, the Producer Group.
“
Increase in Fee
” has the meaning
given to it in
Section 6.2(b)
.
“
Individual Disposal by Truck Fee
” means the Monthly fee for providing Trucked
Water Services with respect to Dedicated Production delivered to a SWD Trucking Facility, as set forth opposite the heading “Individual Disposal by Truck Fee” on the applicable Agreement Addendum;
provided
that the Individual
Disposal by Truck Fee shall accrue only with respect to Dedicated Production delivered by truck to a SWD Trucking Facility.
“
Individual Fee
” means the aggregate of the Individual First Phase Fee, the Individual Second Phase Fee and the Individual
Disposal by Truck Fee;
provided
that for purposes of the annual escalation in the Individual Fee described in
Section
6.2(b)
, such term shall not include any Reimbursed Amount.
Texas Produced Water
Services Agreement
- 6 -
“
Individual First Phase Fee
” means the fee calculated as described in
Section
6.1(i)
.
“
Individual First Phase Rate
” means the Monthly rate for providing Services (other than the Second Phase
Services) at a particular Individual System set forth on the applicable Agreement Addendum.
“
Individual Second Phase
Fee
” means the Monthly fee for providing Second Phase Services at a particular Individual System, as set forth opposite the heading “Individual Second Phase Fee” on the applicable Agreement Addendum;
provided
that the
Individual Second Phase Fee shall accrue only with respect to Services performed by Midstream Co on Product flowing through an Individual System.
“
Individual System
” means the portion of the System beginning at the Receipt Points and ending at the Delivery
Points. The Individual Systems in existence on the Effective Date are more particularly described in writing between Producer and Midstream Co. Additional Individual Systems may be added to the System from time to time in satisfaction of
the needs identified by Producer and evidenced in writing between Producer and Midstream Co.
“
Initial Term
” has the
meaning given to it in
Section 8.1
.
“
Interest Rate
” means, on the applicable date of determination, the prime
rate (as published in the “Money Rates” table of
The Wall Street Journal
, eastern edition, or if such rate is no longer published in such publication or such publication ceases to be published, then as published in a similar
national business publication as mutually agreed by the Parties) plus an additional two percentage points (or, if such rate is contrary to any applicable Law, the maximum rate permitted by such applicable Law).
“
Internal Transfer Point
” means the point at which custody transfers from Midstream Co to a Third Party contractor for the
provision of Second Phase Services. The Internal Transfer Points for each Individual System in existence on the Effective Date shall be set forth in writing between Producer and Midstream Co, and additional points may become Internal Transfer Points
hereunder by mutual agreement of the Parties.
“
Interruption Conditions
” has the meaning given to it in
Section
2.4(b)
.
“
Invoice Month
” has the meaning given to it in
Section 10.1(a)
.
“
Law
” means any applicable statute, law, rule, regulation, ordinance, order, code, ruling, writ, injunction, decree or other
official act of or by any Governmental Authority.
“
Losses
” means any actions, claims, causes of action (including
actions in rem or in personam), settlements, judgments, demands, liens, encumbrances, losses, damages, fines, penalties, interest, costs, liabilities, expenses (including expenses attributable to the defense of any actions or claims and
attorneys’ fees) of any kind or character, including Losses for bodily injury, death, or property damage, whether under judicial proceedings, administrative proceedings or otherwise, and under any theory of tort, contract, breach of contract,
breach of representation or warranty (express or implied) or by reason of the conditions of the premises of or attributable to any Person or Person or any Party or Parties.
Texas Produced Water
Services Agreement
- 7 -
“
Measurement Device
” means the lease automatic custody transfer, coriolis, or
other metering device or equipment which, along with application of test results (e.g. meter proves, etc.), as required for the Individual System, measure the amount of oil, water, and basic sediment and water, all of which shall conform to industry
standards and government regulations, as further described in
Article 4
.
“
Measurement Point
” means the
Measurement Device that the Parties have agreed in writing will measure the volume of Product moving through the Individual System.
“
Meetings of Senior Management
” means meetings between senior members of management of Midstream Co and Producer, or, if
applicable, senior members of management of an Affiliate of Midstream Co or Producer, respectively, that Controls such entity.
“
Midstream Co
” means the Original Midstream Co, together with its permitted successors and assigns, including any Midstream
Co Assignee.
“
Midstream Co Assignee
” means any Third Party to whom Midstream Co assigns its rights and obligations in
accordance with this Agreement.
“
Midstream Co Group
” means Midstream Co, its Affiliates, and the directors, officers,
employees, and agents, of Midstream Co and its Affiliates; provided that all subsidiaries of OpCo that do not hold equity in Midstream Co shall be excluded from this definition.
“
Modifications
” has the meaning given to it in
Section 3.1(c)
.
“
Month
” means a period of time from 7:00 a.m. Central Time on the first Day of a calendar month until 7:00 a.m. Central Time
on the first Day of the next succeeding calendar month. The term “
Monthly
” shall have the correlative meaning.
“
Monthly Loss/ Gain Report
” means, with respect to any Invoice Month, the report delivered pursuant to
Section
10.1(d)
, which shall include statements of the following with respect to such Invoice Month: (a) the System Gains/Losses, (b) the Other System Fuel used by Midstream Co in the operation of the Individual System, and (c) the Recovered Oil
recovered by Midstream Co and returned to Producer. With respect to any allocated volumes described in clause (c), the information included shall be of sufficient detail such that Producer may verify that the allocation procedures then in
effect for the applicable Invoice Month were applied.
“
Moody’s
” means Moody’s Investors Service, Inc., or any
successor to its statistical rating business.
“
Net Acres
” means (a) with respect to any oil and gas lease in which
Producer has an interest, (i) the number of gross acres in the lands covered by such oil and gas lease, multiplied by (ii) the undivided percentage interest in oil, gas and other minerals covered by such oil and gas lease, multiplied by (iii)
Producer’s working interest in such oil and gas lease, and (b) with respect to any mineral fee interest of Producer, (i) the number of gross acres in the lands covered by such mineral fee interest, multiplied by (ii) the undivided percentage
interest of Producer in oil, gas and other minerals in such lands.
Texas Produced Water
Services Agreement
- 8 -
“
On-Line Deadline
” has the meaning given to it in
Section 3.2(b)
.
“
OpCo
” means Noble Midstream Services, LLC, together with its permitted successors and assigns.
“
Operating Hours
” has the meaning set forth in
Section 6.2(c)
.
“
Original Midstream Co
” means the entity identified as the “Midstream Co” in the applicable Agreement Addendum as
of the Effective Date.
“
Original Producer
” means Rosetta Resources Operating LP, a Delaware limited partnership.
“
Original Report
” has the meaning set forth in the definition of “First Development Report.”
“
Other System Fuel
” means any natural gas delivered into Midstream Co’s custody by Producer pursuant to a Transaction
Document between Producer and Midstream Co and measured and used as fuel by Midstream Co.
“
Outbound Acreage
” has the
meaning given to it in
Section 16.2(b)(i)
.
“
Owner
” has the meaning given to it in
Section 4.1(g)
.
“
Party
” or “
Parties
” with respect to each Agreement Addendum shall mean the applicable Producer and the
applicable Midstream Co. Unless expressly stated otherwise, references to “Parties” shall not refer to all parties to all Agreements governed hereby. Rather, references to “Parties” shall refer only to such Parties as determined
by the applicable Agreement Addendum.
“
Period of Five Years
” means, with respect to any report delivered hereunder, the
period from the first Day of the fiscal quarter during which such report is required to be delivered until the fifth anniversary thereof.
“
Period of Two Years
” means, with respect to any report delivered hereunder, the period beginning on the first Day of the
fiscal quarter during which such report is required to be delivered and ending 24 Months after such date.
“
Permits
”
means any permit, license, approval, or consent from a Governmental Authority.
“
Person
” means any individual,
corporation, company, partnership, limited partnership, limited liability company, trust, estate, Governmental Authority, or any other entity.
“
Pipeline Unavailability
” means any time during which the Individual System is not capable of accepting or transporting
volumes of Product for any reason, including Flowback that exceeds the capacity of the Individual System, Flowback at a time when the Individual System is not yet online, curtailments on the Individual System and interruptions of Service.
Texas Produced Water
Services Agreement
- 9 -
“
Planned Separator Facility
” has the meaning given to it in
Section
3.1(b)
.
“
Planned Well
” has the meaning given to it in
Section 3.1(b)
.
“
Producer
” means the Original Producer, together with its permitted successors and assigns, including any Producer Assignee.
“
Producer Assignee
” means any Person to whom Original Producer or any subsequent Producer sells, assigns, or otherwise
transfers acreage subject to the Dedications.
“
Producer Group
” means Producer, its Affiliates, and the directors,
officers, employees, and agents of Producer and its Affiliates.
“
Producer Meters
” means any Measurement Device owned and
operated by Producer (or caused to be installed or operated by Producer).
“
Product
” means water that originates in the
geologic formations and is produced as a byproduct of Producer’s development and operation of the Wells that are located in the Dedication Area, including Flowback and any Recovered Oil;
provided
that any water that is Associated Water
shall not constitute Product hereunder until such time as it has been separated from Crude Oil and ceases being Associated Water. The term “Product” as used in this Agreement shall refer to all water that is in the Individual System from
Receipt Point to Delivery Point, whether such water is in the form of saltwater or water that has completed the recycling and treating processes. In the event Producer exercises its Trucking Election, the term “Product” shall refer to all
water that is accepted for delivery at a SWD Trucking Facility for the account of Midstream Co.
“
Product Dedication
”
means the dedication and commitment made by Producer pursuant to
Section 2.1(a)
.
“
Real Property Dedication
” means
the dedication and commitment made by Producer pursuant to the first sentence in
Section 2.1(b)
.
“
Receipt
Point
” means the point at which custody transfers from Producer to Midstream Co. The custody transfer point may include: (a) each of the connecting flanges through which Product travels after it has been separated from crude oil on the
System located at or near the applicable Separator Facility, which flanges connect such Separator Facility to the System, (b) with respect to water that is separated from crude oil at a point in the System other than the Separator Facility, the
point at which such Product is delivered into the System or (c) any other point as may be mutually agreed between the Parties. The Receipt Points in existence on the Effective Date shall be set forth in writing between Producer and
Midstream Co, and additional points may become Receipt Points hereunder upon mutual agreement of the Parties as construction is completed on additional facilities in satisfaction of the needs identified by Producer and the Parties shall continuously
update the list of Receipt Points by mutual agreement.
“
Recovered Oil
” means that portion of Crude Oil recovered by
Midstream Co from Product received into the System. If at any time Midstream Co is not providing gathering services to Producer in the Dedication Area with respect to Crude Oil there will be no Recovered Oil delivered into the Crude Oil Gathering
System.
Texas Produced Water
Services Agreement
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“
Redetermination Deadline
” has the meaning given to it in
Section
6.2(a)(ii)
.
“
Redetermination Proposal
” has the meaning given to it in
Section 6.2(a)(i)
.
“
Redetermined Individual Fee
” has the meaning given to it in
Section 6.2(a)(i)
.
“
Reimbursed Amount
” has the meaning given to it in
Section 10.1(a)
.
“
Release Conditions
” has the meaning given to it in
Section 2.4(a)
.
“
Releases of Dedication
” is not applicable to Original Producer. For purposes of this Agreement there have been no Releases
of Dedication.
“
Rules
” has the meaning given to it in
Section 17.6
.
“
Second Phase Services
” has the meaning set forth in the definition of “Services”.
“
Separator Facility
” means the surface facility where the Crude Oil produced from one or more Wells in the Dedication Area is
collected and gas and Product is separated from the Crude Oil. A Separator Facility may be known by the Original Producer as an econode but may also refer to a well pad or other facility from which Product is delivered into the System.
“
Services
” means: (a) the receipt of Producer’s owned or Controlled Product at the Receipt Points (including Recovered
Oil as set forth in the approved System Plan); (b) the collection and gathering of such Product; (c) the storage of Product; (d) the cleaning of Product; (e) the removal of the Recovered Oil from the Product prior to the delivery of Product to the
applicable Internal Transfer Point; (f) the delivery of Recovered Oil into the Crude Oil Gathering System at an appropriate Delivery Point; (g) the delivery of the Product to the applicable Internal Transfer Point; (h) the further cleaning,
transportation from the applicable Internal Transfer Point to the applicable Delivery Point, and disposal of Product, as applicable (this clause (h), the “
Second Phase Services
”), (i) Trucked Water Services and (j) the other
services to be performed by Midstream Co in respect of such Product as set forth in this Agreement and the System Plan for an Individual System, all in accordance with the terms of this Agreement (including any services with respect to metering
services).
“
Services Fee
” means, collectively, the fees described in
Section 6.1
.
“
Spacing Unit
” means the area fixed for the drilling of one Well by order or rule of any applicable Governmental Authority,
or (if no such order or rule is applicable) the area fixed for the drilling of a Well or Planned Well reasonably established by the pattern of drilling in the applicable area or otherwise established by Producer in its reasonable discretion.
“
Standard & Poor’s
” means Standard & Poor’s Rating Group, a division of McGraw Hill, Inc., or any successor
to its statistical rating business.
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Services Agreement
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“
State
” means the state in which the Individual System is located.
“
SWD Trucking Facility
” means an Approved SWD Vendor’s saltwater disposal well that Midstream Co has designated for
disposal of Dedicated Production that is transported by truck.
“
System
” means all Individual Systems described in all of
the Agreement Addenda, collectively, including: (a) pipelines; (b) central processing facilities inclusive of pumping, treating and other equipment; (c) controls; (d) Delivery Points, meters and measurement facilities; (e) storage for
Product; (f) easements, licenses, rights of way, fee parcels, surface rights and Permits; (g) pumping facilities, if any and (h) all appurtenant facilities, in each case, that are owned, leased, contracted or operated by each Midstream Co
to provide Services to Producer or Third Parties, as such gathering system and facilities are modified or extended from time to time to provide Services to Producer pursuant to the terms hereof or to Third Parties, including the Facility Segments
specified in the Agreement Addenda.
“
System Gains/Losses
” means any Product, in terms of Barrels, received into the
Individual System that is lost, gained, or otherwise not accounted for.
“
System Plan
” has the meaning given to it in
Section 3.1(c)
.
“
Target On-Line Date
” means (a) with respect to a Planned Separator Facility or, with respect to
a Planned Well that is not intended to be serviced by a Separator Facility, such Planned Well, in either case, that is described for the first time in the Original Report, the date specified in the Original Report for the applicable Planned
Separator Facility or Planned Well, as applicable, (b) with respect to any Planned Separator Facility or, with respect to any Planned Well that is not intended to be serviced by a Separator Facility, such Planned Well, in either case, that is
described in a First Development Report that is not the Original Report, 18 Months after the date of such First Development Report, unless Midstream Co consents to a shorter time period, and (c) with respect to any Planned Separator Facility
or, with respect to any Planned Well that is not intended to be serviced by a Separator Facility, such Planned Well, in either case, that is not described in the First Development Report, 18 Months after the date of the Development Report that
initially reflects the Planned Separator Facility or Planned Well, as applicable, unless Midstream Co consents to a shorter time period.
“
Tender
” means the act of Producer’s making Product available or causing Product to be made available to the System at a
Receipt Point. “
Tendered
” shall have the correlative meaning.
“
Term
” has the meaning given to it in
Section 8.1
.
“
Third Party
” means any Person other than a Party to this Agreement or any Affiliate of a Party to
this Agreement.
“
Third Party Assignment
” has the meaning given to it in
Section 16.1(a)
.
“
Transaction Document
” means each agreement entered into pursuant to the agreement terms and conditions related to gas
gathering services, agreement terms and conditions related to oil gathering services, agreement terms and conditions related to produced water services,
Texas Produced Water
Services Agreement
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agreement terms and conditions related to gas processing services, agreement terms and conditions related to crude oil treating services, and agreement terms and conditions related to fresh water
services, now or in the future existing between Producer and Midstream Co.
“
Transfer
” means a sale, conveyance,
assignment, exchange, farmout, disposition or other transfer of Dedicated Properties by Original Producer under
Section 16.2(b)
. In other Sections of this Agreement where the term uses a lower case, the term is not intended to have such
a restrictive meaning.
“
Transporter
” means a wastewater truck transportation company engaged by Producer or Midstream
Co, as applicable, to transport Trucked Volumes to the SWD Trucking Facility.
“
Trucked Volumes
” has the meaning given to
it in
Section 18.3(a)
.
“
Trucked Water Services
” means, at any time when Producer has exercised its Trucking
Election, Midstream Co shall make arrangements for the disposal of Dedicated Production that arrives by truck at the applicable SWD Trucking Facility. In addition, in connection with a Trucking Election, (a) during a Flowback Period, if Producer
requests and Midstream Co agrees, then with Producer’s reasonable cooperation, Midstream Co will arrange for the dispatching of the applicable trucks to the applicable SWD Trucking Facility and otherwise coordinate the water hauling trucks and
(b) at all other times during a Pipeline Unavailability in which Producer has made a Trucking Election, Midstream Co shall arrange for the dispatching of the applicable trucks to the applicable SWD Trucking Facility and otherwise coordinate the
water hauling trucks.
“
Trucking Election
” has the meaning given to it in
Section 2.3(b)
.
“
Well
” means a well (i) for the production of hydrocarbons, (ii) that is located in the Dedication Area,
(iii) in which Producer owns an interest, and (iv) for which Producer has a right or obligation to market hydrocarbons (and related byproducts) produced thereby through ownership or pursuant to a marketing, agency, operating, unit, or similar
agreement.
“
Year
” means a period of time from January 1 of a calendar year through December 31 of the same
calendar year;
provided
that the first Year shall commence on the Effective Date and run through December 31 of that calendar year, and the last Year shall commence on January 1 of the calendar year and end on the Day on which this
Agreement terminates.
Section 1.2
Other Terms
. Other capitalized terms used in this Agreement and not defined in
Section
1.1
above have the meanings ascribed to them throughout this Agreement.
Section 1.3
References and Rules of
Construction
. All references in this Agreement to Exhibits, Appendices, Articles, Sections, subsections and other subdivisions refer to the corresponding Exhibits, Appendices, Articles, Sections, subsections and other subdivisions of or to
this Agreement unless expressly provided otherwise. Titles appearing at the beginning of any Articles, Sections, subsections and other subdivisions of this Agreement are for convenience only, do not constitute any part of this Agreement, and
shall be disregarded in construing the language hereof. The words “this Agreement,” “herein,” “hereby,” “hereunder” and “hereof,” and words of similar import, refer to this Agreement as a whole,
including the applicable
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Services Agreement
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Agreement Addendum and all Exhibits, Appendices, and other attachments to these Agreement Terms and Conditions and the applicable Agreement Addendum, all of which are incorporated herein, and not
to any particular Exhibit, Appendix, Article, Section, subsection or other subdivision unless expressly so limited. The word “including” (in its various forms) means “including without limitation.” The word “or” shall
mean “and/or” unless a clear contrary intention exists. The word “from” means “from and including”, the word “through” means “through and including”, and the word “until” means “until
but excluding”. All references to “$” or “dollars” shall be deemed references to United States dollars. The words “will” and “shall” have the same meaning, force and effect. Each accounting term not
defined herein will have the meaning given to it under generally accepted accounting principles. Pronouns in masculine, feminine or neuter genders shall be construed to state and include any other gender, and words, terms and titles (including terms
defined herein) in the singular form shall be construed to include the plural and vice versa, unless the context otherwise requires. References to any Law, contract or other agreement mean such Law, contract or agreement as it may be amended,
supplemented, released, revised, replaced, or otherwise modified from time to time.
Article 2
Product Dedication and Real Property Dedication
Section 2.1
Producer’s Dedications
.
(a)
Product Dedication
. Subject to
Section 2.2
through
Section 2.4
, during the Term, Producer exclusively dedicates
and commits to deliver to Midstream Co under this Agreement, as and when produced, all of the Dedicated Production and agrees not to deliver any Dedicated Production to any other gatherer, purchaser, or other Person prior to delivery to Midstream Co
at the Receipt Points.
(b)
Real Property Dedication
. Subject to
Section 2.2
through
Section 2.4
, during the
Term, Producer grants, dedicates, and commits the Dedicated Properties to Midstream Co for performance of the Services pursuant to this Agreement. Except for the Parties’ performance of their obligations under this Agreement, no further
performance is required by either Party to effectuate the Real Property Dedication.
Section 2.2
Conflicting Dedications
.
(a) Notwithstanding anything in this Agreement to the contrary, Producer shall have the right to comply with (i) each of the Conflicting
Dedications existing on the Effective Date or, in the case of a Producer Assignee, the effective date of such assignment, and (ii) any other Conflicting Dedication applicable as of the date of acquisition of any oil and gas leases, mineral
interests, and other similar interests within the Dedication Area that are acquired by Producer after the Effective Date and otherwise would have become subject to the Dedications (but not any Conflicting Dedications entered into in connection with
such acquisition). Without the prior written consent of Midstream Co (which shall not be unreasonably withheld), Producer shall not extend or renew any Conflicting Dedication and shall terminate each Conflicting Dedication as soon as permitted
under the underlying contract without causing Producer to incur any costs or expenses deemed unreasonable or inappropriate in the opinion of Producer and shall not enter into any new Conflicting Dedication. If services of the type provided
hereunder are being
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Services Agreement
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provided to Producer by a Third Party with respect to Dedicated Properties under a Conflicting Dedication, then 180 Days prior to the expiration of such Conflicting Dedication, if requested by
Producer, Midstream Co and Producer shall have a Meeting of Senior Management (unless both Parties agree that a Meeting of Senior Management is not required) to assess whether Midstream Co is ready, willing and able to begin providing Services with
respect to such Dedicated Properties concurrently with the anticipated expiration or termination of the applicable Conflicting Dedication. If Midstream Co cannot provide Producer such assurances, then Midstream Co shall deliver to Producer a
written consent to the extension of the applicable Conflicting Dedication. In no event shall Producer be required to begin using Services provided by Midstream Co on a Day other than the first Day of a Month.
(b) Certain Conflicting Dedications contain rights of first refusal or other provisions that (i) entitle Producer to a release of acreage from
such Conflicting Dedication if Producer dedicates the released acreage to a Third Party or (ii) expressly prohibit Producer from dedicating such released acreage to an Affiliate of Producer. As used herein, the term “Conflicting
Dedication” shall include both the original right of first refusal (or similar right) and the dedication resulting from an exercise of such right of first refusal (or similar right) so long as the resulting dedication covers the same acreage as
the original Conflicting Dedication.
(c) To the extent Producer claims that a Conflicting Dedication exists with respect to certain
Services on specified Dedicated Properties, Midstream Co shall have the right to review the documentation creating such Conflicting Dedication, subject to confidentiality requirements applicable to such Conflicting Dedication.
Section 2.3
Producer’s Reservation
. Producer reserves the following rights respecting Dedicated Production for itself:
(a) to operate (or cause to be operated) Wells producing Dedicated Production in its sole discretion, including the right to drill new Wells,
repair and rework old Wells, temporarily shut in Wells, renew or extend, in whole or in part, any oil and gas lease or term mineral interest, or cease production from or abandon any Well or surrender any applicable oil and gas lease, in whole or in
part, when no longer deemed by Producer to be capable of producing in paying quantities under normal methods of operation; and
(b) during
Pipeline Unavailability, Producer may elect to deliver Dedicated Production directly to a SWD Trucking Facility (the “
Trucking Election
”); and
(c)
Reserved
;
(d) to
pool, communitize or unitize Producer’s interests with respect to Dedicated Production.
Section 2.4
Releases from Dedication
.
(a)
Permanent Releases
. Midstream Co shall permanently release from the Dedications: (i) any Dedicated Production from
any Well, Dedicated Properties, or Spacing Unit affected by one or more of the Release Conditions, (ii) any Dedicated Production that would have been delivered to a Separator Facility affected by one or more of the Release Conditions,
Texas Produced Water
Services Agreement
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(iii) any Dedicated Properties affected by one or more of the Release Conditions and (iv) any Purchased Dedicated Production for which the Individual System has been affected by one or
more of the Release Conditions. The “
Release Conditions
” are:
(i) Midstream Co’s failure to complete
the facilities that are described on a System Plan and that are necessary to connect any Planned Separator Facility or Planned Wells to the System or failure to commence the Services with respect to any Planned Separator Facility or Planned Wells by
the applicable On-Line Deadline (so long as such failure was not the result of Producer’s failure to comply with the then-applicable Development Report);
(ii) Midstream Co’s election (x) pursuant to
Section 3.1(c)
not to provide Services for any Well or Separator
Facility included in a Development Report delivered by a Producer that is not the Original Producer or (y) pursuant to
Section 3.3(b)
not to provide Services for (1) any Well or Separator Facility for which Producer failed to
deliver a Development Report on or before the applicable deadline set forth in
Section 3.1(a)
, (2) any Well or Separator Facility not described in the applicable Development Report or (3) any excess volume of Product produced from any
Well during any Day that exceeds the volume included in Producer’s estimate set forth in the most recent Development Report delivered to Midstream Co;
(iii) expiration of the Term, as further described in
Section 8.2;
(iv) written agreement of Producer and Midstream Co, and each Party shall consider in good faith any proposal by the other
Party to permanently release any Dedicated Production or Dedicated Properties;
(v) the occurrence of a Force Majeure of
the type described in clauses (l), (m) or (n) of the definition of “
Force Majeure
” affecting Midstream Co that continues for a period of 120 Days or more;
(vi) Midstream Co’s interruption or curtailment of receipts and deliveries of Product from any Well or Separator Facility
pursuant to
Section 5.5
that continues for 90 Days or more, except to the extent (A) such interruption or curtailment is caused by the acts or omissions of Producer, or (B) Producer elects to reduce the Individual First Phase Fee
with respect to any volumes that are affected by a Downtime Event pursuant to
Section 6.2(c)
;
(vii) a default
(other than a default of the type covered by
Section 2.4(a)(i)
) by Midstream Co that remains uncured for 90 Days or more;
(viii) Producer’s rejection of any increase in the Individual Fee pursuant to
Section 13.1(b)
; or
(ix) Midstream Co’s suspension of Services pursuant to
Section 13.2(a)(ii)
that extends for the period of time
stated in such Section or (y) Midstream Co’s election not to expand an Individual System pursuant to
Section 13.2(b)
.
Texas Produced Water
Services Agreement
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Producer may deliver any Dedicated Production released from the Dedications pursuant to this
Section 2.4(a)
to such other gatherers as it shall determine.
(b)
Temporary Release
. Midstream Co shall temporarily
release from the Dedications: (i) any Dedicated Production from any Well, Dedicated Properties, or Spacing Unit affected by one or more of the Interruption Conditions, (ii) any Dedicated Production that would have been delivered to a
Separator Facility affected by one or more of the Interruption Conditions, (iii) any Dedicated Properties affected by one or more of the Interruption Conditions, and (iv) any Purchased Dedicated Production for which the Individual System
has been affected by one or more of the Interruption Conditions. The “
Interruption Conditions
” are:
(i)
the occurrence and continuation of an uncured default by Midstream Co;
(ii) Midstream Co’s interruption or
curtailment of receipts and deliveries of Product pursuant to
Section 5.5
that continues for a period of 15 consecutive Days, except to the extent (A) such interruption or curtailment is caused by the acts or omissions of Producer, or
(B) Producer elects to reduce the Individual First Phase Fee with respect to any volumes that are affected by a Downtime Event pursuant to
Section 6.2(c)
; and
(iii) Until a permanent release is required under
Section 2.4(a)
or Section 13.2, Midstream Co’s suspension of
Services pursuant to
Section 13.2(a)
(and, if
Section 13.2(a)(i)
applies, such temporary release shall continue at the discretion of Midstream Co, subject to the time limits set forth in
Section 13.2(a)(i)
).
Producer may make alternative arrangements for the gathering of any Dedicated Production temporarily released from the Dedications pursuant to
this
Section 2.4(b)
. To the extent that an interruption or curtailment can be limited to a Facility Segment, Midstream Co shall so limit such interruption or curtailment, and to the extent that Midstream Co does so limit such curtailment
or interruption, the temporary release permitted by this
Section 2.4(b)
shall only apply to the affected Facility Segment. Such temporary release shall continue until the first Day of the Month after the Month during which Midstream Co
cures the applicable default or the interruption, curtailment, or suspension of Services terminates;
provided
that, if Producer obtained temporary services from a Third Party (pursuant to a contract that does not give rise to a default under
this Agreement) during the pendency of such default, interruption, curtailment, or suspension, such release shall continue until the earlier of (A) the first Day of the Month that is six Months after the event or condition that gave rise to the
interruption, curtailment or other temporary cessation has been corrected and (B) the first Day of the Month after the termination of the applicable contract with such Third Party. For the avoidance of doubt, the temporary services that
Producer may obtain under
Section 3.3
shall not constitute a release under the terms of this Agreement; provided that, if Producer cannot obtain such temporary services without a temporary release, Midstream Co may in its discretion grant or
refuse to grant a temporary release on such terms as reasonably required by Midstream Co (including, for example, conditioning the grant of a temporary release on the establishment of a termination date for such temporary release).
Texas Produced Water
Services Agreement
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(c)
Evidence of Release
. At the request of Producer, the Parties shall execute a
release agreement reasonably acceptable to all Parties (which, in the case of a permanent release, shall be in recordable form) reflecting any release of Dedicated Production or Dedicated Properties pursuant to this
Section 2.4
.
Section 2.5
Covenants Running with the Land
. Subject to the provisions of
Section 2.3
and
Section 2.4
, each of the
Dedications (a) is a covenant running with the Dedicated Properties, (b) touches and concerns Producer’s interests in the Dedicated Properties, and (c) shall be binding on and enforceable by Midstream Co and its successors and
assigns.
Except as set forth in
Article 16
, (i) in the event Producer sells, transfers, conveys, assigns, grants or otherwise disposes of any or all of its interest in the Dedicated
Properties, then any such sale, transfer, conveyance, assignment, grant or other disposition shall be made subject to this Agreement and (ii) in the event Midstream Co sells, transfers, conveys, assigns, grants or otherwise disposes of any or all of
its interest in the Individual System, then any such sale, transfer, conveyance, assignment, grant or other disposition shall be made subject to this Agreement. The Real Property Dedication is not an executory contract under Section 365 of
Title 11 of the United States Code (11 U.S.C. § 365).
Section 2.6
Recording of Agreement
. Producer hereby authorizes
Midstream Co to record a memorandum of the Agreement in the real property records of the counties in which the Dedication Area is located. Midstream Co and Producer agree that until Midstream Co provides notice to the contrary, all payment
terms and pricing information shall remain confidential and be redacted from any filings in the real property records.
Article 3
System Expansion and Connection of Wells
Section 3.1
Development Report; System Plan; Meetings
.
(a)
Development Report
. Original Producer will provide, on or before October 1, 2016, and each Producer Assignee will provide, on
or before the date stated in
Section 16.1
, Midstream Co with its First Development Report, which shall describe (x) in detail the planned development, drilling, and production activities relating to the Dedicated Production through the end of
the applicable Period of Two Years, and (y) generally the long-term drilling and production expectations for those project areas in which drilling activity is expected to occur during the applicable Period of Five Years, including the
information described in
Section 3.1(b)
. On or before each January 1, each April 1, each July 1, and each October 1 of each Year following the date on which the First Development Report is to be delivered, Producer shall provide to
Midstream Co an update of the then-current report (the First Development Report, as updated in accordance with the foregoing and as the then current report may be updated from time to time, the “
Development Report
”).
(b)
Development Report Content
. With respect to the Dedication Area, the Development Reports shall include information as to:
(i) the Wells (each, a “
Planned Well
”) and Separator Facilities (each, a “
Planned Separator
Facility
”) that Producer expects to drill or install during the
Texas Produced Water
Services Agreement
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applicable Period of Two Years, including the expected locations, completion dates thereof (which completion dates shall not be earlier than the applicable Target On-Line Dates), the expected
spud dates of such Planned Wells, and dates flow is anticipated to initiate from such Wells;
(ii) the anticipated Product
content from any Well and Separator Facility that Producer expects to produce during the applicable Period of Two Years;
(iii) the Receipt Points and Delivery Points (including proposed receipt points and delivery points not yet agreed in writing
among the Parties) at which Product produced from each Well is to be disposed of or redelivered to Producer during the applicable Period of Two Years;
(iv) the number of Planned Wells and Planned Separator Facilities anticipated to be producing after the Period of Two Years and
before the end of the Period of Five Years, broken out by an appropriate geographic area, such as a development plan area;
(v) the actual lateral length for each Well described in the Period of Two Years, the anticipated lateral length for each
Planned Well described in the Period of Two Years and initial assumptions for the planned lateral length for each Planned Well anticipated to be producing after the Period of Two Years and before the end of the Period of Five Years;
(vi) the number of rigs that Producer intends to operate in the Dedication Area each year during the Period of Five Years
(including sufficient detail regarding the anticipated location of such rigs to allow Midstream Co to determine which Individual System would be impacted by such rig activity);
(vii) with respect to the Period of Two Years, the anticipated date of each frac, the quantity of fresh water required to
complete such frac and an indication of the type of frac to be performed (slick, hybrid gel, gel, etc.);
(viii) with
respect to the Period of Two Years, the anticipated date on which Midstream Co may initiate construction or other development activities at the Well or Separator Facility in order to complete the interconnection into the Individual System; and
(ix) such other information as may be reasonably requested by Midstream Co with respect to Wells and Separator Facilities that
Producer intends to drill or from which Producer intends to deliver Product during the Period of Two Years and Period of Five Years.
To
the extent possible, any information Producer is required to provide under this
Section 3.1(b)
with respect to Wells or Separator Facilities shall also include such information related to Planned Wells and Planned Separator
Facilities. In addition, if appropriate to provide a complete and accurate Development Report, any information requested with respect to Planned Wells and Planned Separator Facilities shall also be provided with respect to existing Wells or
Separator Facilities.
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Services Agreement
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(c)
System Plan
. Based on the Development Report and such other information about the
expected development of the Dedicated Properties as shall be provided to Midstream Co by or on behalf of Producer, including as a result of meetings between representatives of Midstream Co and Producer, Midstream Co shall develop and periodically
update a plan (the “
System Plan
”) describing or depicting the modifications, extensions, enhancements, major maintenance and other actions necessary in order for the Individual System to be able to provide timely Services for the
Product produced by the Wells and Separator Facilities described in the most recent Development Report (including Planned Wells, Planned Separator Facilities and changes in anticipated production from existing Wells and Separator Facilities).
Without limiting or otherwise altering Midstream Co’s rights under
Section 13.2
, unless the applicable Well or Separator Facility is operated by Original Producer, Midstream Co may elect, in its sole discretion, not to make such
modifications, extensions, enhancements, major maintenance, or other actions to the System (the “
Modifications
”) and not to provide Services for any Wells or Separator Facilities included in a Development Report delivered by a
Producer that is not the Original Producer. If (i) Midstream Co elects to make such Modifications, (ii) Producer thereafter modifies the Development Report or provides other information (the date on which the modified Development
Report or such other information is provided to Midstream Co, the “
Cancellation Date
”) indicating that such Modifications are no longer necessary, and (iii) as of the Cancellation Date, the actual aggregate costs and
expenses (excluding Excluded Amounts) incurred or committed by Midstream Co to make such cancelled Modifications exceeds $100,000.00, then Producer shall reimburse Midstream Co for all reasonable and documented costs and expenses (other than the
Excluded Amounts) incurred or committed by Midstream Co through the Cancellation Date to make such Modifications. The System Plan shall include information as to:
(i) each Facility Segment then existing and operational, under construction, or planned and the Individual System of which such
Facility Segment is a part;
(ii) all Internal Transfer Points, Receipt Points and Delivery Points served or to be served
by each such Facility Segment;
(iii)
Reserved
;
(iv) all pumps, treatment, oil, separators, Recovered Oil recovery, and other major physical facilities located or to be
located on or within each such Facility Segment, together with their sizes, operating parameters, capacities, and other relevant specifications, which sizes, parameters, capacities and other relevant specifications shall be sufficient to (x) connect
the Individual System to the Receipt Points and Delivery Points for all Planned Separator Facilities and (with respect to any Planned Wells not intended to be serviced by a Separator Facility) Planned Wells set forth in the most recent Development
Report and (y) perform the Services for all Dedicated Production projected to be produced from the Dedicated Properties as contemplated by the most recent Development Report;
(v) the anticipated schedule for completing the construction and installation of the planned Facility Segments and all planned
Receipt Points, Internal Transfer Points and Delivery Points, in each case, for all Planned Separator Facilities or Planned Wells, as applicable, included in the most recent Development Report;
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(vi) the allocation methodologies to be used by Midstream Co with respect to
System Gains/Losses, Other System Fuel, Recovered Oil, and other allocations hereunder and, with respect to any System Plan after the initial System Plan, any proposed changes to the allocation methodologies then in effect, which allocation
methodologies shall (A) permit allocations to be made by Midstream Co in a commercially reasonable manner; and (B) be based upon the measurements taken and quantities determined for the applicable Month. Midstream Co shall allocate, in a manner
that is commercially reasonable and determined by Midstream Co in good faith, to a particular Receipt Point, the Recovered Oil from a Facility Segment.
(vii) other information reasonably requested by Producer that is relevant to the design, construction, and operation of the
System, the relevant Individual System, the relevant Facility Segment, and the relevant Receipt Points, Internal Transfer Points and Delivery Points;
provided
that in no event shall Midstream Co be obligated to supply to Producer
(A) pricing, budget or similar financial information or (B) information that is covered by a confidentiality agreement or confidentiality obligations;
Midstream Co shall deliver the applicable System Plan (including any updated System Plan) to Producer for Producer’s review and comment not later than 30
Days after Producer’s delivery to Midstream Co of the applicable Development Report or amendment thereto.
(d)
Meetings
.
Midstream Co shall make representatives of Midstream Co available to discuss the most recent System Plan with Producer and its representatives at Producer’s written request. Producer shall make representatives of Producer available to discuss
the most recent Development Report with Midstream Co and its representatives at Midstream Co’s written request. The Parties agree that the meetings described in the previous sentences of this clause (d) may occur (and shall, if requested by
either Party) on a Monthly basis. At all such meetings, the Parties shall exchange updated information about their respective plans for the development and expansion of the Dedicated Properties (including amendments to the Development Report) and
the System (including amendments to the System Plan for Producer’s review and comment) and shall have the opportunity to discuss and provide comments on the other Party’s plans.
(e)
Scope and Purpose of Planning Tools
. The Development Report and the System Plan are intended to assist Midstream Co and Producer
with long-term planning and goals. None of the Development Reports nor the System Plans shall amend or modify this Agreement in any way. Midstream Co may, in its sole discretion, work with OpCo or any of OpCo’s subsidiaries to prepare and
deliver a System Plan jointly with such other entity or entities. To the extent that a Development Report or System Plan that satisfies the requirements above is delivered or deemed delivered under any other Transaction Document, such Development
Report or System Plan shall be deemed delivered hereunder.
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Section 3.2
Expansion of System and Connection of Separator Facilities
.
(a)
Service Standards
. Midstream Co shall, at its sole cost and expense, design, construct (as applicable), and own the Individual
System in a good and workmanlike manner and in accordance with the System Plan and this
Section 3.2
. Until such time as Producer has delivered a Development Report, Midstream Co shall have no obligation under this
Section 3.2(a)
.
(b)
On-Line Deadline
. Subject to
Section 12.2
, Midstream Co shall by the later of (x) the date that the first
Planned Well on a particular Planned Separator Facility (or, with respect to a Planned Well that is not intended to be serviced by a Separator Facility, the date that such Planned Well) is ready for connection to the System and (y) the applicable
Target On-Line Date (such later date, the “
On-Line Deadline
”): (i) have completed (or caused the completion of) the construction of the necessary facilities, in accordance with the then current System Plan, (A) to connect
such Planned Separator Facility or such Planned Well to the System and (B) to connect the System to each planned Delivery Point for such Planned Separator Facility or such Planned Well, as applicable, and (ii) be ready and able to commence
Services with respect to Dedicated Production from such Planned Separator Facility or Planned Well, as applicable.
(c)
Additional/Accelerated Well
. From time to time, Producer may provide notice to Midstream Co that Producer has accelerated the Target On-Line Date for a Planned Well or Planned Separator Facility (any such Well or Separator Facility, an
“
Additional/Accelerated Well
”). Midstream Co will use its commercially reasonable efforts to modify the System Plan and to cause the necessary gathering facilities to be constructed prior to the On-Line Deadline for such
Additional/Accelerated Well. From time to time, Producer may provide notice to Midstream Co that Producer (i) has delayed the Target On-Line Date for a Planned Well or Planned Separator Facility, (ii) subject to
Section 3.2(d)
,
anticipates eliminating a Planned Well or Planned Separator Facility from its development plans and the Development Report, or (iii) anticipates shutting in a Well or Separator Facility that has been producing. Midstream Co may adjust the
System Plan as it determines to be appropriate and commercially reasonable to accommodate such elimination of such Wells and Separator Facilities.
(d)
Cancellation of Planned Wells and Planned Separator Facilities
. If (i) Midstream Co reasonably determines that Producer has
permanently abandoned the drilling or installation of any Planned Well or Planned Separator Facility or Producer notifies Midstream Co that Producer intends to permanently abandon the drilling or installation of any Planned Well or Planned Separator
Facility (whether through the delivery of an updated Development Report or otherwise, the date on which such determination is made, the “
Abandonment Date
”), (ii) Midstream Co had begun to design or construct the Facility
Segment to connect such Planned Well or Planned Separator Facility to the System prior to such Abandonment Date, and (iii) the actual aggregate costs and expenses (excluding Excluded Amounts) incurred or committed by Midstream Co prior to the
Abandonment Date exceeds $100,000.00, then Producer shall reimburse Midstream Co for all reasonable and documented costs and expenses (other than the Excluded Amounts) incurred or committed by Midstream Co prior to such Abandonment Date to design
and construct such Facility Segment.
(e)
Substation and Interconnection Facilities
. The obligations of Midstream Co hereunder
to design and construct the Individual System and to perform the Services do not include the design or construction of any substation or other interconnecting facilities required to
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procure electricity for the Individual System. If a substation or any other interconnecting facility is required in order for Midstream Co to perform its obligations hereunder, Midstream Co and
Producer shall enter into a separate agreement setting forth each Party’s responsibilities in connection therewith, including an allocation of responsibility for all associated costs and expenses.
Section 3.3
Temporary Services
.
(a) Pending the completion of facilities contemplated in a System Plan or that may be required to service Wells in existence as of the
Effective Date, Producer may enter into a contract with a Third Party to provide services with respect to the Dedicated Production that is anticipated to be serviced by the new, modified, or enhanced facilities if the term of such contract does not
exceed six Months (and may be renewed in six-Month increments until such time as Midstream Co has completed the applicable facilities).
(b) If at any time, (i) Producer fails to deliver a Development Report on or before the applicable deadline set forth in
Section 3.1(a)
, (ii) a Development Report delivered by Producer failed to describe any Well, or (iii) the average rate of production at any Receipt Point described in the then-applicable Development Report exceeds Producer’s
forecast for such Receipt Point set forth in such Development Report, and as a result, Midstream Co has not completed any new, modified, or enhanced facilities necessary to allow Midstream Co to accept all of the Product Tendered by Producer at a
Receipt Point, then (x) within a reasonable time after Midstream Co becomes aware of the need for such new, modified, or enhanced facilities, Midstream Co shall elect, in its sole discretion, whether to proceed with the development and
completion of such facilities by providing notice to Producer, and (y) if Midstream Co elects to proceed with the development and completion of such facilities, (1) Midstream Co shall cause such facilities to be completed within a
reasonable time after such election, and (2) pending the completion of such facilities, Midstream Co may elect (in its reasonable discretion and in exchange for reasonable compensation) to permit Producer to enter into a contract with a Third
Party as provided in
Section 3.3(a)
to provide services with respect to the Dedicated Production that Midstream Co is unable to accept.
(c) Any time Producer makes alternative arrangements with a Third Party for the provision of services or to accept Product as provided for in
this Agreement, Producer shall (i) if Midstream Co anticipates being able to provide Services hereunder or to accept Product within a period of time that is shorter than six Months, use commercially reasonable efforts to enter into a contract
with a term that expires on or around the date on which Midstream Co anticipates being able to provide Services hereunder or to accept Product, and (ii) notify Midstream Co of the term of such contract promptly after execution
thereof. Prior to requiring Producer to begin using, or resume using, as applicable, Services hereunder, Midstream Co shall provide notice to Producer of the date on which Midstream Co expects to be ready, willing and able to begin providing
Services to Producer no later than 45 Days prior to the expiration of the Third Party contract. In no event shall Producer be required to begin using, or resume using, as applicable, Services on a Day other than the first Day of a Month.
Section 3.4
Cooperation
. The Parties shall work (at their own cost and expense) together in good faith to obtain such Permits as
are necessary to drill and complete each Planned
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Well and construct the required extensions of the System to each Planned Separator Facility (and each Planned Well, as applicable) as expeditiously as reasonably practicable, all as provided in
this Agreement. The Parties shall cooperate with each other and to communicate regularly regarding their efforts to obtain such Permits. Upon request by Producer, Midstream Co shall promptly provide to Producer copies of all Permits
obtained by Midstream Co in order to construct any Facility Segment (or portion of a Facility Segment) of the System.
Section 3.5
Grant of Access; Real Property Rights
.
(a)
Producer’s Grant of Access
. Producer hereby grants to Midstream Co,
without warranty of title, either express or implied, to the extent that it may lawfully and is contractually permitted to do so without the incurrence of additional expense, the rights of ingress and egress with respect to, and the right to access,
all lands constituting Dedicated Properties for the purpose of using, maintaining, servicing, inspecting, repairing, and operating all or any portion of the applicable Individual System, including all pipelines, meters and other equipment necessary
for the performance by Midstream Co of this Agreement. Such right of access shall not include any right to install, replace, disconnect, or remove all or any portion of the applicable Individual System, which rights may only be granted pursuant
to a separate instrument entered into pursuant to
Section 3.5(f)
.
(b)
Producer Does Not Have Obligation to
Maintain
. Producer shall not have a duty to maintain in force and effect any underlying agreements (such as any lease, easement, or surface use agreement) that the grant of access by Producer to Midstream Co under
Section 3.5(a)
is
based upon, and such grant will terminate if Producer loses its rights to the applicable property, regardless of the reason for such loss of rights.
(c)
Midstream Co’s Grant of Access
. Midstream Co hereby grants to Producer, without warranty of title, either express or implied,
to the extent that it may lawfully and is contractually permitted to do so without the incurrence of additional expense, the rights of ingress and egress with respect to, and the right to access, all lands covered by the Individual System in order
to exercise its rights and obligations hereunder. Such right shall not include any right to install, replace, disconnect, or remove any facilities on such lands, which rights may only be granted pursuant to a separate instrument entered into
pursuant to
Section 3.5(f)
. Producer shall release, protect, defend, indemnify and hold harmless Midstream Co Group from and against all Losses directly or indirectly arising out of or in connection with bodily injury, death, illness,
disease, or loss or damage to property of Midstream Co or any member of Midstream Co Group directly arising from Producer’s exercise of its access rights hereunder, except to the extent such Losses are caused by the gross negligence or willful
misconduct of Midstream Co Group.
(d)
Midstream Co Does Not Have Obligation to Maintain
. Midstream Co shall not have a duty
to maintain in force and effect any underlying agreements that the grant of access by Midstream Co to Producer pursuant to this
Section 3.5(d)
is based upon, and such grant will terminate if Midstream Co loses its rights to the applicable
property, regardless of the reason for such loss of rights.
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(e)
No Interference
. A Party’s exercise of the rights granted to a Party by the
other Party pursuant to this
Section 3.5
shall not unreasonably interfere with the granting Party’s operations or with the rights of owners in fee with respect to the applicable lands, and such rights will be exercised in material
compliance with all applicable Laws and the safety and other reasonable access requirements of the granting Party. Each Party obtaining a right of access pursuant to this
Section 3.5
shall have the status of “licensee,” except when
such Party is accessing the applicable real property by way of a right-of-way, easement, or other similar real property right granted pursuant to a separate instrument.
(f)
Real Property Rights
. Each Party shall acquire and maintain all easements, rights of way, surface use, surface access
agreements, and other real property rights from Third Parties necessary to perform its obligations hereunder. To the extent a Party has the contractual right and title to do so, such Party shall provide to the other Party the right of co-usage
on the easements, sub-easements, rights of way, surface use, and other real property rights held by such Party covering lands for which the other Party requires real property rights to perform its obligations hereunder, all at no cost to the
providing Party and on terms and conditions mutually acceptable to the Parties in their reasonable discretion. Where a Party does not have the contractual right to do so, such Party shall provide reasonable assistance to the other Party in
obtaining the real property rights with respect to such lands as necessary or desirable to perform its obligations hereunder.
Article 4
Measurement Devices
Section 4.1
Measurement Devices
.
(a) Midstream Co shall construct, install, own, and operate (or cause to be constructed, installed, and operated) the Measurement Devices
located at the Measurement Points. Midstream Co may, in its discretion, construct, install, own, and operate (or cause to be constructed, installed, and operated) Measurement Devices located at or upstream of the Delivery Points or at or
downstream of the Receipt Points.
(b) Midstream Co shall cause all Measurement Devices that are owned by Midstream Co to be constructed,
installed, and operated in accordance with applicable industry standards and applicable Laws, and as set forth in the current System Plan.
(c) Producer shall have the right, at its sole expense, to install, own and operate Measurement Devices located at the Measurement Points,
Receipt Points and Delivery Points. Producer shall cause Producer Meters to be installed, subsequent to providing a minimum of seventy-two (72) hours’ notice to Midstream Co, so as not to interfere with Midstream Co’s Measurement Devices
and shall take steps that are reasonable and customary in the industry to mitigate or prevent any problems that may interfere with Midstream Co’s Measurement Devices at the Measurement Points.
(d) Midstream Co may elect to use a Producer Meter as the Measurement Device for a Measurement Point in lieu of constructing, installing,
owning, and operating a Measurement Device located at such Measurement Point by providing notice to Producer (including by
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detailing such election in the applicable System Plan). If Midstream Co elects to use such Producer Meter as the Measurement Device for a Measurement Point, Producer shall provide Midstream Co
reasonable access to such Producer Meter, including prior advance notice of, and the ability to witness, the calibration of such Producer Meter.
(e) Producer and Midstream Co shall cause Measurement Devices owned by such Party to be constructed, installed and operated in a manner which
is agreeable to all parties involved and satisfies local and state regulation.
(f) Midstream Co may (but shall not be obligated to)
replace or make any alterations to the Measurement Devices necessary to comply with any subsequent amendments, revisions or modifications of Applicable Law. With respect to Producer Meters that Midstream Co has elected to use, Producer may (but
shall not be obligated to) replace or make any alterations to the Measurement Devices necessary to comply with subsequent amendments, revisions or modifications of Applicable Law.
(g) The accuracy of all Measurement Devices at the Measurement Points and Delivery Points, and of all Measurement Devices that serve as
“check meters” for any such Measurement Point or Delivery Point Measurement Devices will be verified by the owner of such Measurement Device (the “
Owner
”) at Monthly intervals and, if requested, in the presence of a
representative of the other Party (the “
Beneficiary
”). The Owner shall verify the accuracy of any owned Measurement Device before the next Monthly verification required by the preceding sentence if the Beneficiary makes a written
request for a special test as described below. Notwithstanding the foregoing, when Daily deliveries of Product at any Measurement Point or Delivery Point average 100 Barrels per Day or less during any Month, the Owner may request from the
Beneficiary that the accuracy of the Measurement Devices at such Measurement Point or Delivery Point be verified quarterly. If, upon any test, any (i) Measurement Device at the Measurement Point is found to be inaccurate by 2.0% or less or (ii)
Measurement Device at the Delivery Point is found to be inaccurate by 0.25% or less, previous readings of such Measurement Device will be considered correct in computing the deliveries of Product under this Agreement. If, upon any test, any (1)
Measurement Device at the Measurement Point is found to be inaccurate by more than 2.0% or (2) Measurement Device at the Delivery Point is found to be inaccurate by more than 0.25% (excessive meter factor deviation), such Measurement Device will
immediately be removed from service, adjusted, calibrated, repaired or replaced to record accurately (within the manufacturer’s allowance for error) and reproved prior to returning to service. If the excessive meter factor deviation can be
explained by changing conditions (gravity, temperature or flow-rate) no corrective action may be taken if mutually agreed upon by both the Owner and the Beneficiary. Any previous recordings of such Measurement Device with an excessive meter factor
deviation will be corrected by using the arithmetic average of the malfunction factor and the previous factor shall be applied to the production measured through the meter between the date of the previous factor and the date of the malfunction
factor. The proving report must clearly indicate the meter’s malfunction factor and all remarks associated with the repairs or adjustments. If the Beneficiary desires a special test of any Measurement Device, at least 72 hours’ advance
written notice will be given to the Owner, and the Parties will cooperate to secure a prompt test of the accuracy of such Measurement Device. If the Measurement Device so tested is found to be inaccurate by 2.0% or less or 0.25% or less, as
applicable, the Owner will have the right to bill the Beneficiary for the costs incurred due to such special test, including any labor and transportation costs, and the Beneficiary will pay such costs promptly upon invoice therefor.
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(h) If requested by the Beneficiary, the Measurement Devices owned by Owner shall include a
sufficient number of data ports, and Owner shall permit Beneficiary to connect to such data ports, as shall be required to provide to Beneficiary on a real-time basis all measurement data generated by such measurement equipment. Beneficiary
shall be responsible at its own cost for obtaining equipment and services to connect to such data ports and receive and process such data.
(i) Each Party shall make the charts and records by which measurements are determined available for the use of the other Party in fulfilling
the terms and conditions thereof. Each Party shall, upon written request of the other Party, mail, email or deliver for checking and calculation all measurement data, including flowing parameters, characteristics, constants, configurations and
events in its possession and used in the measurement of Product delivered under this Agreement within 30 Days after the last chart for each billing period is removed from the meter. Such data shall be returned within 90 Days after the receipt
thereof.
(j) Each Party shall preserve or cause to be preserved for mutual use all test data or other similar records in accordance with
the applicable rules and regulations of regulatory bodies having jurisdiction, if any, with respect to the retention of such records, and, in any event, for at least 24 Months.
(k) So long as the Parties to this Agreement are also parties to a Transaction Document that covers Crude Oil, the requirements for
Measurement Devices in respect of Recovered Oil shall be covered by such Transaction Document. If at any time the Parties to this Agreement are not also party to another Transaction Document that covers Crude Oil, the Parties shall set forth in the
Agreement Addendum or an appropriate amendment to this Agreement the requirements for Measurement Devices pertaining to Recovered Oil; absent such agreement, Midstream Co shall install and maintain measuring equipment at the Delivery Points that is
in accordance with applicable API standards.
Section 4.2
Measurement Procedures
. Midstream Co shall use the Measurement Devices
owned by Midstream Co (or if Midstream Co’s rights under
Section 4.1(d)
are exercised, then the Measurement Devices owned by Producer) at the Measurement Points to determine the volumes of Product passing through the Individual System
for purposes of
Article 6
and
Article 10
. Midstream Co shall cause (or if Midstream Co’s rights under
Section 4.1(d)
are exercised, then Producer shall cause) the measurements of the quantity and quality of
all Product measured at the Measurement Points (and at each Receipt Point or Delivery Point at which measurements are taken) to be conducted in accordance with industry standards (referenced below):
API Manual of Petroleum Measurement Standards:
Chapter 4, Proving Systems
Chapter 5.1. General Considerations for Measurement by Meters
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Chapter 5.6, Measurement of Liquid by Coriolis Meters
Chapter 7, Temperature Determination
Chapter 8, Sampling
Chapter 8.2, Automatic Sampling of Petroleum and Petroleum Products
Chapter 9, Density Determination
Chapter 10, Sediment and Water
Chapter 12.2, Calculation of Petroleum Quantities Measured by Turbine or Displacement Meters.
Section 4.3
Product Meter Adjustments
. If a Measurement Device is out of service or registering inaccurately, the Parties shall
determine the quantities of Product received or delivered during such period as follows:
(a) By using the registration of any check meter
or meters, if installed and accurately registering; or in the absence of such check meters,
(b) By using a meter operating in parallel
with the estimated volume corrected for any differences found when the meters are operating properly,
(c) By correcting the error if the
percentage of error is ascertainable by calibration, tests or mathematical calculation, such as step change, uncertainty calculation or balance adjustment; or in the absence of check meters and the ability to make corrections under this
Section
4.3(c)
, then,
(d) By estimating the quantity received or delivered by receipts or deliveries during periods under similar conditions
when the meter was registering accurately.
Article 5
Tender, Nomination, and Gathering of Production
Section 5.1
Limitations on Service to Third Parties
. Midstream Co shall obtain Original Producer’s consent prior to offering
services on an Individual System to any Third Party, unless (a) Midstream Co is required by a Governmental Authority to offer service to a Third Party, in which case Midstream Co shall provide Producer prior notice of offering such service to
such Third Party, (b) such Third Party has become a Producer hereunder by virtue of assignment of Dedicated Properties to such Party, or (c) Original Producer has ceased to operate acreage serviced by such Individual System.
Section 5.2
Tender of Dedicated Production
. Subject to
Section 5.3(c)
, (a) each Day during the Term, Producer shall
Tender to the Individual System at each applicable Receipt Point all of the Dedicated Production available to Producer at such Receipt Point and (b) Producer shall have the right to Tender to Midstream Co for Services under this Agreement
Product other than Dedicated Production.
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Section 5.3
Services; Service Standard
.
(a)
Services
. Subject to
Section 5.3(c)
, Midstream Co shall provide all of the Services, including all services related to
collecting, gathering, cleaning, treating, and disposing of the Product.
(i) Midstream Co shall cause the applicable
Individual System to be able to flow such Product at volumes produced into such Individual System, so long as total water volumes for such Individual System are not greater than the current capacity of such Individual System.
(ii) The quantity of Product for which Midstream Co shall provide the Services is:
(A) with respect to the receipt, collection, gathering, storage and cleaning Services further described in
clauses
(a)
,
(b)
,
(c)
and
(d)
of the definition of “Services”, all of the Product that is Tendered by Producer to Midstream Co at the applicable Receipt Points, so long as such quantity is not
in excess of the current capacity of the applicable Individual System;
(B) with respect to the delivery Services further
described in clause (e) of the definition of “Services”, Midstream Co shall deliver to the applicable Internal Transfer Points a quantity of Product equivalent to the quantity described in the preceding clause, taking into account any
System Gains/ Losses; and
(C) with respect to Second Phase Services, Midstream Co shall be responsible for either
disposing of all quantities of Product that flow through the applicable Internal Transfer Point.
(b)
Services
Standard
. Midstream Co shall own and operate (or contract for, as applicable) the System and perform the Services in a good and workmanlike manner in accordance with standards customary in the industry.
(c)
Priority of Service
. Midstream Co shall cause (i) Product delivered by Original Producer to have priority service on the
System over Product of any Producer Assignee to the extent not in violation of applicable Law, and (ii) Product delivered by Producer to have priority service on the System over Product of any Third Party. Midstream Co’s performance of its
obligations under
Section 5.3(a)
with respect to any Product (A) of any Producer Assignee, or (B) produced from any Well but not included on a Development Report or for which new, modified, or enhanced facilities are
contemplated in a System Plan, shall at all times be subject to the available capacity on the System at the time that Product is available to be Tendered by Producer at a Receipt Point; provided, however, that in the case of clause (B), Producer may
make alternative arrangements for the Product not received by Midstream Co pursuant to
Section 3.3
.
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Section 5.4
Nominations, Scheduling, and Curtailment
. Product shall be received and
redelivered under this Agreement at the similar quantities for a delivery Month. Midstream Co shall use System storage only for the operational purposes, as determined solely by Midstream Co. Nothing contained in this Agreement shall
preclude Midstream Co from taking reasonable actions necessary to adjust receipts or deliveries under this Agreement in order to maintain the operational integrity and safety of the System.
Section 5.5
Suspension/Shutdown of Service
.
(a)
Shutdown
. During any period when all or any portion of the Individual System is shut down (i) because of maintenance, repairs,
or Force Majeure, (ii) because such shutdown is necessary to avoid injury or harm to Persons or property, to the environment or to the integrity of all or any portion of the Individual System or (iii) because providing Services hereunder has become
uneconomic as further described in
Section 13.2
, Midstream Co may interrupt or curtail receipts of Producer’s Product and the Product of other producers as set forth herein. In such cases, Midstream Co shall have no liability to Producer
(subject to
Section 11.1(b)
) for its failure to receive Product, except to the extent such shutdown is caused by the negligence, gross negligence or willful misconduct of Midstream Co. If Midstream Co is required to so interrupt or
curtail receipts of Product, Midstream Co will advise (by telephone, following up by writing, which writing may be in the form of electronic mail) Producer of such interruption or curtailment as soon as practicable or in any event within twenty-four
hours after the occurrence of such event.
(b)
Planned Curtailments and Interruptions
.
(i) Midstream Co shall have the right to curtail or interrupt receipts and deliveries of Product for brief periods to perform
necessary maintenance of and repairs or modifications (including modifications required to perform its obligations under this Agreement) to the Individual System;
provided
,
however
, that to the extent reasonably practicable, Midstream
Co shall coordinate its maintenance, repair and modification operations with the operations of Producer and, in any case, will use its reasonable efforts to schedule maintenance, repair and modification operations so as to avoid or minimize to the
greatest extent possible service curtailments or interruptions.
(ii) Midstream Co shall provide Producer (x) with 60
Days prior notice of any upcoming normal and routine maintenance, repair and modification projects that Midstream Co has planned that would result in a curtailment or interruption of Producer’s deliveries and the estimated time period for such
curtailment or interruption and (y) with six Months prior notice of any maintenance (A) of which Midstream Co has knowledge at least six Months in advance and (B) that is anticipated to result in a curtailment or interruption of Producer’s
deliveries for five or more consecutive Days.
(iii) On or before January 1, 2017, Midstream Co shall provide a schedule of
the expected planned maintenance for the System for the subsequent 12 Months. Thereafter, on or before October 1 of each Year, starting October 1, 2017, Midstream Co shall deliver a schedule of the expected planned maintenance for the System
for the subsequent 12 Months. The delivery of this plan is intended as a tool to assist the Parties in planning and does not replace the notices required in the foregoing clauses and in no way commits Midstream Co to adhere to the schedule set forth
in such 12-Month plan.
Section 5.6
Transportation and Disposal
. As between the Parties, Midstream Co shall make all necessary
arrangements for the receipt, further transportation, and disposal of Producer’s owned and Controlled Product from the Receipt Points, to the Internal Transfer Points and ending at the Delivery Points.
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Article 6
Fees
Section 6.1
Fees
. Producer shall pay Midstream Co each Month in accordance with the terms of this Agreement for all Services provided by Midstream Co with respect to Dedicated Production received by Midstream Co from Producer or for Producer’s
account during such Month, an amount, for each Individual System, equal to the sum of:
(i) the product of (x) the
aggregate quantity of such Product, stated in Barrels, received by Midstream Co from Producer or for Producer’s account at the applicable Receipt Points for such Product within the applicable Individual System during such Month, multiplied by
(y) the applicable Individual First Phase Rate (the “
Individual First Phase Fee
”);
provided
that if the Pipeline Unavailability arises as a result of action or inaction under the control of Midstream Co, then the Individual
First Phase Fee shall not accrue with respect to the Trucked Volumes;
(ii) the Individual Second Phase Fee, if any,
applicable to Second Phase Services performed within the Dedication Area,
(iii) an amount equal to Producer’s
allocated portion of the actual costs incurred by Midstream Co for electricity required to provide Services, such allocation to be based upon the aggregate volumes of Product received by Midstream Co and
(iv) the Individual Disposal by Truck Fee, if any.
Section 6.2
Fee Adjustments
.
(a)
Redetermination
.
(i)
Redetermination Proposal
. Between November 1 and December 31 of any Year, Midstream Co shall prepare and
deliver to Producer for its review and comment a written proposal (each, a “
Redetermination Proposal
”) to redetermine each Individual Fee (unless the Parties mutually agree not to redetermine any particular Individual Fee) in
accordance with this
Section 6.2(a)
. Each Redetermination Proposal shall include relevant supporting documentation based upon the latest updated Development Report and System Plan and shall take into account future items including,
projected production volumes, operating revenue projections, and budgeted amounts for capital expenditures and all estimated operating expenses that Midstream Co believes will be necessary to provide the applicable Services as contemplated by the
latest updated Development Report and System Plan; provided that a redetermined Individual Fee as agreed to by the
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Services Agreement
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Parties (a “
Redetermined Individual Fee
”) shall not recoup the difference between (A) estimated operating expenses or revenues and (B) actual operating expenses or revenues for
periods prior to the effective date of such Redetermined Individual Fee. The Parties may agree to redetermine a particular Individual Fee without obligation to agree to redetermine any other Individual Fee.
(ii)
Subsequent Redetermination Timing
. Any Redetermined Individual Fee agreed to by the Parties on or prior to the last
Business Day of February of the applicable Adjustment Year (“
Redetermination Deadline
”) shall become effective as of the first Day of the Month following the Month in which agreement has been reached. If the Parties fail to agree
upon a redetermination of any Individual Fee set forth in the applicable Redetermination Proposal on or prior to the Redetermination Deadline, such Individual Fee shall remain in effect without redetermination pursuant to this
Section 6.2(a)
.
For purposes of this
Section 6.2(a)(ii)
, the Year immediately after the Year during which a Redetermination Proposal is delivered is herein the “
Adjustment Year
”.
(b)
Annual Escalation
. Effective as of July 1 of each Year, the Individual Fee will be increased by multiplying the
then-applicable Individual Fee by the Escalation Percentage (herein, the “
Increase in Fee
”) and adding the then-applicable Individual Fee to the Increase in Fee;
provided
that Reimbursed Amounts shall not be subject to this
Section 6.2(b)
. Such annual increase to the Individual Fee shall become effective on July 1 of the applicable Year, even if such Individual Fee was redetermined pursuant to
Section 6.2(a)
, with an effective date during the
same Year.
(c)
Downtime Events
. If during any Month (as applicable, the “
Applicable Month
”), (i) one or more
Downtime Events occur with respect to a Facility Segment, (ii) such Downtime Events caused the Downtime Percentage for such Facility Segment during the Applicable Month to exceed the lowest percentage specified on
Exhibit
B
during such Month, and (iii) Producer has waived its right to a temporary release of Dedicated Production under
Section 2.4(b)(ii)
, then the Individual First Phase Fee for the applicable Facility
Segment shall be reduced by the reduction percentage corresponding to the applicable Downtime Percentage on the chart on
Exhibit
B
during each hour in which such Facility Segment is available to provide Services (an
“
Operating Hour
”) during the subsequent Month until the reduced Individual First Phase Fee has been applied to an aggregate number of Operating Hours equal to the aggregate number of Downtime Hours during the Applicable
Month. If the aggregate number of Operating Hours during the subsequent Month is less than the aggregate number of Downtime Hours during the Applicable Month, the applicable reduced Individual First Phase Fee shall be applied to Operating Hours
during the next-subsequent Month or Months until the reduced Individual First Phase Fee has been applied to an aggregate number of Operating Hours equal to the aggregate number of Downtime Hours during the Applicable Month. A reduced Individual
First Phase Fee that would otherwise apply during any Month subsequent to an Applicable Month shall not be applied until all Downtime Hours from previous Applicable Months have been addressed as provided in this
Section 6.2(c)
. At all
times during which the Parties to this Agreement are also party to another Transaction Document that covers Crude Oil, Downtime Hours shall not accrue under this Agreement during the period of time in which a Downtime Event with respect to a
Facility Segment connecting to a central facility on the System is occurring at the same time a Downtime Event with respect to a Facility Segment connecting to the same central facility on the Crude Oil Gathering System is occurring.
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Services Agreement
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Section 6.3
Treatment of Byproducts, System Gains/Losses, Fuel and Related
Matters
. No separate fee shall be chargeable by Midstream Co and no refund or reduction in the Individual Fee shall be chargeable by or owed to Producer for the hydrocarbons or services described in this
Section 6.3
.
(a)
Reserved
.
(b)
Recovered Oil
. Midstream Co shall deliver to Producer, each Month, all Recovered Oil allocated to Producer or for Producer’s account by delivering such Recovered Oil into the Crude Oil Gathering System. At all times during the Term,
either (x) Midstream Co and Producer shall be a party to both this Agreement and another Transaction Document that covers Crude Oil (in which case Producer shall not owe any amount under this Agreement or any other Transaction Document to which
Midstream Co is a Party as a result of Recovered Oil being transported through the Crude Oil Gathering System) or (y) the Parties shall set forth in the Agreement Addendum or an appropriate amendment to this Agreement the methodology for Midstream
Co to deliver Recovered Oil to Producer and any fee applicable thereto.
(c)
System Gains/Losses
.
(i) Midstream Co will perform a Monthly material balance for each Individual System based on comparison of Product delivered
and the amount of Product calculated to have been delivered into the Individual System (after removal of Recovered Oil) (in conjunction with determining the theoretical Crude Oil volume under any Transaction Document to which Midstream Co is a Party
covering Crude Oil gathering services) received into the Individual System at Receipt Points. Actual gains or losses in an Individual System from the material balance will be allocated back to Producer’s Receipt Points to determine allocated
quantities of Product received at Receipt Points for each Month.
(ii) If, during any Month, System Gains/Losses on an
Individual System allocated to Producer in accordance with this Agreement exceeds 2.00% of the total quantities of Producer’s owned or Controlled Product delivered to the Individual System in such Month, then Midstream Co will, for the
respective Individual System, obtain updated test data (i.e. sample results, meter proves, etc.) from Receipt Points involved in calculating the amount of Product determined to have been delivered into the Individual System (after removal of
Recovered Oil) (in conjunction with determining the theoretical Crude Oil volume under any Transaction Document relating to the provision of crude oil gathering services by Midstream Co) and conduct a field-wide (on an Individual System basis) meter
inspection and proving, if necessary, followed by an updated balance. If Midstream Co determines that a repair to the Individual System is needed to reduce the System Gains/ Losses below 2.00%, Midstream Co shall undertake such repairs in a
commercially reasonable manner and as soon after making such determination as is commercially reasonable.
(iii) Midstream
Co shall provide Producer with prior notice of, and reasonable access to observe, any such field-wide meter balance.
(d)
Other System
Fuel
. Midstream Co may elect to use Other System Fuel as fuel to operate the Individual System, or to generate electricity for the operation of the Individual System and shall account for any Other System Fuel used by Midstream
Co. Producer, at its sole cost and expense, shall procure all fuel except diesel, in addition to Other System Fuel used by Midstream Co, if any, required to operate the Individual System or to generate electricity for the operation of the
Individual System and arrange for transportation of such fuel to the Individual System.
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Services Agreement
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Article 7
Quality Specifications
Section 7.1
Quality Specification
. Subject to
Section
7.2
, at no time shall Midstream Co be required to
accept Product that is not produced from a Well within the Dedication Area. Subject to
Section
7.2
, (a) Producer shall cause all Product delivered at the Receipt Points to Midstream Co to meet the quality
specifications of the applicable Downstream Facility and (b) Midstream Co will not accept any Product unless it meets the quality specifications of the applicable Downstream Facility. If Producer’s Product delivered to the Receipt Points
complies with such quality specifications, then all Product redelivered at the Delivery Points by Midstream Co to Producer shall meet the quality specifications of the applicable Downstream Facility. Producer shall not have the right to consent to
any changes to the quality specifications of the applicable Downstream Facility or the quality specifications of any Downstream Facility not in existence as of the Effective Date. Midstream Co may commingle Product received into the Individual
System with other Product shipments, and subject to Midstream Co’s obligation to redeliver to Producer at the Delivery Points Product that satisfies the applicable quality specifications of the Delivery Points, (i) such Product shall be subject
to such changes in quality, composition and other characteristics as may result from such commingling and the removal of Recovered Oil (if any), and (ii) Midstream Co shall have no other obligation to Producer associated with changes in quality of
Product as a result of such commingling and Recovered Oil removal.
Section 7.2
Failure to Meet Specifications
. If any Product
Tendered by Producer to the Individual System fails at any time to conform to the applicable specifications, then Midstream Co will have the right to discontinue receipt of such non-conforming Product. Unless such non-conforming Product creates a
safety hazard or may damage existing infrastructure (in the opinion of Midstream Co), Midstream Co shall provide notice (which notice may be verbal initially, followed by written confirmation) to Producer twenty-four (24) hours prior to such
discontinuation, and Producer shall cease delivery of Product until such time as the Product Tendered by Producer will again conform to the applicable specifications. If Producer fails to comply with the discontinuation notice (or deliver a formal
dispute, as specified in the following sentence) prior to the expiration of twenty-four (24) hours after receiving such notice from Midstream Co, then, Midstream Co shall be entitled to unilaterally cease receiving Product. If Producer disputes
Midstream Co’s determination that any Product fails to conform to the applicable specifications, then Producer shall (a) notify Midstream Co thereof within twenty-four (24) hours after receiving such notice from Midstream Co, (b) submit the
applicable Product to a
Texas Produced Water
Services Agreement
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mutually agreed upon Third Party laboratory, and (c) cause such laboratory to analyze the Product within seventy-two (72) hours after Producer’s receipt of Midstream Co’s notice of
non-conformance (during which time Midstream Co shall continue to accept deliveries from Producer, unless Midstream Co believes such deliveries present a safety hazard or may damage installed infrastructure). If the results of such analysis provide
that the applicable Product is non-conforming, the costs and expenses associated with such analysis shall be borne by Producer; if the results of such analysis provide that the applicable Product conforms to the specifications, then Midstream Co
shall reimburse Producer for all reasonable and documented costs and expenses incurred by Producer to cause such Third Party laboratory to perform such analysis. Producer will promptly undertake commercially reasonable measures to eliminate the
cause of such non-conformance. Midstream Co, in its sole discretion, may accept receipt, or continue to receive, non-conforming Product if the blending and commingling of such Producer’s non-conforming Product with other Product in the
Individual System does not materially affect the Individual System and the ability of Midstream Co to deliver Product at Delivery Point(s) within applicable Delivery Point specifications. Midstream Co’s continued taking of non-conforming
Product shall not relieve Producer of the responsibility to undertake commercially reasonable measures to eliminate the cause of such non-conformance.
Section 7.3
Indemnification Regarding Quality
. PRODUCER SHALL RELEASE, PROTECT, DEFEND, INDEMNIFY AND HOLD HARMLESS MIDSTREAM CO
GROUP FROM AND AGAINST ALL LOSSES DIRECTLY OR INDIRECTLY ARISING OUT OF, IN CONNECTION WITH OR IN ANY MANNER ATTRIBUTABLE TO THE FAILURE OF THE PRODUCT DELIVERED BY PRODUCER TO THE INDIVIDUAL SYSTEM TO MEET THE QUALITY SPECIFICATIONS SET FORTH
HEREIN, INCLUDING DISPOSAL COSTS, DAMAGE TO OR SUSTAINED BY THE INDIVIDUAL SYSTEM (INCLUDING THE EQUIPMENT AND COMPONENT PARTS), COSTS EXPENDED BY MIDSTREAM CO OR ANY OF ITS AFFILIATES TO RETURN THE INDIVIDUAL SYSTEM AND RELATED FACILITIES TO
SERVICES, CLAIMS OF OTHER PRODUCERS ON THE INDIVIDUAL SYSTEM, AND CLAIMS OF OWNERS OF ALL DOWNSTREAM FACILITIES.
Article 8
Term
Section 8.1
Term
. The term of this Agreement commenced on the Effective Date, and this Agreement shall remain in effect until the 16th anniversary of the Effective Date (the “
Initial Term
”) and thereafter on a Year to Year basis until
terminated by Midstream Co or Producer effective upon the expiration of the Initial Term or the expiration of any Year thereafter upon notice no less than 90 Days prior to the expiration of the Initial Term or the expiration of any Year thereafter
(such period of time, the “
Term
”).
Section 8.2
Effect of Termination or Expiration of the Term
. Upon the
termination of the Term, this Agreement shall forthwith become void and the Parties shall have no liability or obligation under this Agreement, except that (a) the termination of this Agreement shall not relieve any Party from any expense, liability
or other obligation or remedy therefor that has accrued or attached prior to the date of such termination, (b) the provisions of
Section 7.3
, this
Section 8.2
,
Article 15
and
Section 17.1
through
Section 17.10
shall survive such termination
Texas Produced Water
Services Agreement
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and remain in full force and effect indefinitely, (c) the indemnities set forth in
Section 3.5(c)
shall survive such termination and remain in full force and effect indefinitely, and (d)
Section 10.4
,
Section 17.11
and
Section
18.7
shall survive such termination and remain in full force and effect for the period of time specified in such Sections.
Article 9
Title and
Custody
Section 9.1
Title
. Delivery by Producer of Product to any Receipt Point shall be deemed a warranty of title to such
Product by Producer or a warranty that Producer Controls the Product and has the right to deliver such Product for gathering under this Agreement, as applicable. Title to Product shall not transfer to Midstream Co by reason of Midstream Co’s
performance of the Services.
Section 9.2
Custody
. From and after Producer’s delivery of its owned or Controlled Product to
Midstream Co at the Receipt Points, and until Midstream Co’s disposal of Product or redelivery of such Product to or for Producer’s account at the applicable Delivery Points, as between the Parties, Midstream Co shall have custody and
control of, and be responsible for, such Product. In all other circumstances, as between the Parties, Producer shall be deemed to have custody and control of, and be responsible for, such Product.
Article 10
Billing and
Payment
Section 10.1
Statements
.
(a)
Ordinary Course
. Midstream Co shall submit invoices to Producer on or before the 25th Day after the end of a Month (the
“
Invoice Month
”). Each invoice shall be accompanied by supporting information for all amounts charged by such invoice. All amounts owed for Services provided during an Invoice Month shall be reflected on the applicable invoice for
such Invoice Month;
provided
that to the extent any amount appearing on an invoice is in respect of an amount paid by Midstream Co to a Third Party (collectively, the “
Reimbursed Amount
”) or the calculation of such amount is
contingent on information provided by a Third Party (collectively, the “
Conditional Amount
”), such Reimbursed Amount and Conditional Amount shall be reflected on an invoice within 90 Days after the end of the Month in which such
Reimbursed Amount was paid by Midstream Co.
(b)
Reserved
.
(c)
Detail
.
Midstream Co shall cause its invoices and supporting information to include information reasonably sufficient
to explain and support any estimates and charges reflected therein, the reconciliation of any estimates made in a prior Month to the actual measurements for such Month, and any adjustments to prior period volumes and quantities.
(d)
Monthly Loss/ Gain Report
.
Midstream Co shall deliver to Producer, on or before the close of business of the 40th Day
after the applicable Invoice Month a Monthly Loss/ Gain Report. If Midstream Co elects, it may deliver such Monthly Loss/ Gain Report concurrently with the applicable invoice.
(e)
One Invoice; Netting
.
To the extent that Midstream Co and Producer are party to this Agreement and one or more other
Transaction Documents, one invoice may be delivered in respect of all amounts owing under such Transaction Documents. The Parties shall net all undisputed amounts due and owing or past due and owing arising under the Transaction Documents to
which Producer and Midstream Co are parties such that the Party owing the greater amount shall make a single payment of the net amount to the other Party. No amounts owing to or by any Midstream Co may be set off against amounts owing to or by
any other Midstream Co. No amounts owing to or by any Producer may be set off against amounts owing to or by any other Producer. To the extent possible, all fee adjustments set forth in
Article 6
shall be accomplished by setoff or
netting.
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Services Agreement
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Section 10.2
Payments
.
(a) Unless otherwise agreed by the Parties, all invoices under this Agreement shall be due and payable in accordance with each invoice’s
instructions on or before the later of the 30th Day of each Month and the 10th
Day after receipt of the invoice or, if such Day is not a Business Day, then on the next Business Day. All payments by Producer under this Agreement shall be made
by electronic funds transfer to the account designated by Midstream Co. Any amounts not paid by the due date will be deemed delinquent and, with respect to amounts owed to Midstream Co, will accrue interest at the Interest Rate, such interest
to be calculated from and including the due date but excluding the date the delinquent amount is paid in full.
(b) If Producer, in good
faith, disputes the amount of any invoice of Midstream Co, Producer will pay Midstream Co such amount, if any, that is not in dispute and shall provide Midstream Co notice, no later than 30 Days after the date that payment of such invoice would be
due under
Section 10.2(a)
, of the disputed amount accompanied by reasonable documentation to support Producer’s dispute. If Producer fails to provide notice of dispute within such 30-Day period, then Producer shall be deemed to have
waived its right to dispute the applicable invoice, except for a dispute following an audit conducted in accordance with
Section 10.4
. Following Midstream Co’s receipt of such dispute notice, Producer and Midstream Co shall endeavor
in good faith to resolve such dispute, and if the Parties are unable to resolve such dispute within a reasonable time, such dispute may be resolved in accordance with
Section 17.6
of this Agreement. Upon resolution of the dispute, any
required payment shall be made within 15 Days after such resolution, and, if such amount shall be paid to Midstream Co, such amount shall be paid along with interest accrued at the Interest Rate from and including the due date but excluding the date
paid
Section 10.3
Adequate Assurances
. If (a) Producer fails to pay according to the provisions hereof and such failure continues
for a period of 5 Business Days after written notice of such failure is provided to Producer, (b) Producer is not the Original Producer or (c) Midstream Co has reasonable grounds for insecurity regarding the performance by Producer of any obligation
under this Agreement, then Midstream Co, by notice to Producer, may, singularly or in combination with any other rights it may have, demand Adequate Assurance of Performance from Producer. “Adequate Assurance of Performance” means, at the
option of Producer, any of the following, (x) advance payment in cash by Producer to Midstream Co for Services to be provided under this Agreement in the following Month or (y) delivery to Midstream Co by Producer of an irrevocable standby letter of
credit or a performance bond, in
Texas Produced Water
Services Agreement
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form and substance reasonably acceptable to Midstream Co, issued by a Credit-Worthy Person, in an amount equal to not less than the aggregate proceeds due from Producer under
Section 10.1
for the prior 2-Month period. Promptly following the termination of the condition giving rise to Midstream Co’s reasonable grounds for insecurity or payment in full of amounts outstanding, as applicable, Midstream Co shall release to Producer
the cash, letter of credit, bond or other assurance provided by Producer (including any accumulated interest, if applicable, and less any amounts actually applied to cover Producer’s obligations hereunder)
.
Section 10.4
Audit
. Each Party has the right, at its sole expense and during normal working hours, to examine the records of the
other Party to the extent reasonably necessary to verify the accuracy of any statement, charge or computation made pursuant to the provisions of the Transaction Documents. The scope of such examination will be limited to the 24 Months preceding
the date such notice of audit, statement, charge or computation was presented. No Party may conduct more than one audit (taking all Transaction Documents to which Producer is a party together) of another Party during any Year (except that, if a
Party is in default hereunder, additional audits may be conducted during the continuance of such default). If any such examination reveals any inaccuracy in any statement or charge, the necessary adjustments in such statement or charge and the
payments necessitated thereby shall be made within 60 Days after resolution of the inaccuracy. This provision of this Agreement will survive any termination of this Agreement for the later of (a) a period of 24 Months from the end of the
Year in which the date of such termination occurred or (b) until a dispute initiated within the 24 Month period is finally resolved, in each case for the purpose of such statement and payment objections.
Article 11
Remedies
Section 11.1
Suspension of Performance; Temporary Release from Dedication
.
(a)
Suspension by Midstream Co as Remedy for Payment Default
. If Producer fails to pay any invoice rendered under
Article 10
, such failure is not due to a good faith dispute by Producer in accordance with
Section 10.2(b)
and such failure is not remedied within 5 Business Days
after Producer’s receipt of written notice of such
failure from Midstream Co, Midstream Co shall have the right, at its sole discretion, to (i) suspend performance (including withholding any payments that are owed by Midstream Co to Producer, and such withheld amounts shall not be subject to
setoff under
Section 10.1(e)
) under this Agreement until such amount, including interest at the Interest Rate, is paid in full or (ii) continue performing the Services under this Agreement, and, acting in a commercially reasonable
manner, sell any Product delivered by Producer to the Receipt Points on Producer’s behalf, and use the proceeds therefrom to reimburse Midstream Co for any amounts due and owing to Midstream Co, and, at Producer’s election, either (y)
remit any excess amounts received under such sale to Producer or (z) reduce the Services Fee due from Producer to Midstream Co for the following Month by the amount of such excess.
(b)
Additional Suspensions as Remedies
. If a Party fails to perform or comply with any material warranty, covenant or obligation
(other than as provided in
Section 11.1(a)
or
Section 2.4(a)(i)
) contained in this Agreement and such failure has not been remedied within 60 Days after its receipt of written notice from the other Party of such failure, then the
non-defaulting
Texas Produced Water
Services Agreement
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Party shall have the right to suspend performance of its obligations under this Agreement that are affected by such failure or non-compliance (including withholding any payments that are owed to
the other Party, and such withheld amounts shall not be subject to netting or setoff under
Section 10.1(e)
); provided that Producer may not withhold any payments that are owed to Midstream Co for Services actually performed by Midstream Co.
Original Producer’s failure to accurately track, calculate and timely provide support of the total Net Acres sold pursuant to
Section 16.2(b)(ii)
shall constitute a material breach of Original Producer’s obligations hereunder.
(c)
Specific Performance and Declaratory Judgments
. Damages in the event of breach of this Agreement by a Party hereto may be
difficult, if not impossible, to ascertain. Therefore, each Party, in addition to and without limiting any other remedy or right it may have, will have the right to seek a declaratory judgment and will have the right to an injunction or other
equitable relief in any court of competent jurisdiction, enjoining any such breach, and enforcing specifically the terms and provisions hereof, and each of the Parties hereto hereby waives any and all defenses it may have on the ground of lack of
jurisdiction or competence of the court to grant such an injunction or other equitable relief. The existence of this right will not preclude any Party from pursuing any other rights and remedies at law or in equity that such Party may have.
Section 11.2
No Election
. In the event of a default by a Party under this Agreement, the other Party shall be entitled in its sole
discretion to pursue one or more of the remedies set forth in this Agreement, or such other remedy as may be available to it under this Agreement, at Law or in equity, subject, however, to the limitations set forth in
Section 11.3
and
Article 15
. No election of remedies shall be required or implied as the result of a Party’s decision to avail itself of a remedy under this Agreement.
Section 11.3
DIRECT DAMAGES
. A PARTY’S DAMAGES RESULTING FROM A BREACH OR VIOLATION OF ANY REPRESENTATION, WARRANTY,
COVENANT, AGREEMENT OR CONDITION CONTAINED IN THIS AGREEMENT OR ANY ACT OR OMISSION ARISING FROM OR RELATED TO THIS AGREEMENT SHALL BE LIMITED TO ACTUAL DIRECT DAMAGES AND SHALL NOT INCLUDE ANY OTHER LOSS OR DAMAGE, INCLUDING INDIRECT, SPECIAL,
CONSEQUENTIAL, INCIDENTAL, EXEMPLARY OR PUNITIVE DAMAGES, INCLUDING LOST PROFITS, PRODUCTION, OR REVENUES, AND EACH PARTY RELEASES THE OTHER PARTY FROM ALL SUCH CLAIMS FOR LOSS OR DAMAGE OTHER THAN ACTUAL DIRECT DAMAGES;
PROVIDED
THAT THIS
LIMITATION TO DIRECT DAMAGES SHALL NOT LIMIT THE PARTIES’ INDEMNIFICATION OBLIGATIONS UNDER
Section 3.5(c)
,
Section 7.3
, AND
Article 15
.
Article 12
Force
Majeure
Section 12.1
Force Majeure
. If either Midstream Co or Producer is rendered unable by an event of Force Majeure to
carry out, in whole or part, its obligations under this Agreement and such Party gives notice (which notice may initially be delivered orally so long as written notice is delivered as soon as reasonably practicable thereafter) and reasonably full
details of the event (including the nature, extent, effect, and likely duration of the event or circumstances
Texas Produced Water
Services Agreement
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constituting the Force Majeure event) to the other Party as soon as practicable after the occurrence of the event, then, during the pendency of such Force Majeure, but only during that period,
the obligations of the Party affected by the event shall be canceled or suspended, as applicable, to the extent required;
provided
,
however
, that notwithstanding anything in the foregoing to the contrary, no Party shall be relieved
from any indemnification obligation or any obligation to make payments, as the result of Force Majeure, regardless of which Party is affected;
provided further
that if the Force Majeure impacts only a particular Facility Segment or Individual
System, then the suspension of obligations described in this sentence shall apply only to the applicable Facility Segment or Individual System and not to the obligations owing in connection with the rest of the System. The Party affected by
Force Majeure shall use commercially reasonable efforts to remedy the Force Majeure condition with all reasonable dispatch, shall give notice to the other Party of the termination of the Force Majeure, and shall resume performance of any suspended
obligation promptly after termination of such Force Majeure.
Section 12.2
Extension Due to Force Majeure
. If a Party is
unable to meet any deadline set forth herein as a result of a Force Majeure, then provided that such Party complies with the provisions of Section 12.1, such deadline shall be extended for a period of time equal to the period of time during which
such Party is delayed due to the Force Majeure.
Article 13
Change in Law; Uneconomic Service
Section 13.1
Changes in Applicable Law
.
(a) If any new Laws are enacted or amended or any new interpretations in respect of previously existing Laws are issued after the Effective
Date that require Midstream Co to make capital expenditures with respect to the System, then Midstream Co may propose an increase to the applicable Individual Fee as may be necessary or appropriate to preserve and continue for the Parties the rights
and benefits originally contemplated for the Parties by this Agreement;
provided, however
, that no increase to the applicable Individual Fee pursuant to this
Section 13.1
shall be applicable unless and until, in the reasonable judgment
of Midstream Co, Midstream Co would be required to make capital expenditures with respect to the System in order to comply with such new Law that materially and adversely affects the economics of the Services provided, fees received, or the other
economic benefits of this Agreement for Midstream Co.
(b) Producer shall accept or reject, in its sole discretion, Midstream Co’s
proposed increase to the Individual Fee within 30 Days after receiving such proposal from Midstream Co. If Producer fails to provide notice of such acceptance or rejection within such 30-Day period, then Producer shall be deemed to have accepted
such increase. If Producer rejects the amount of the proposed increase, then Midstream Co shall release the Wells, Separator Facilities, Receipt Points, Spacing Units, and Dedicated Production that would have been affected by such increase in
accordance with
Section 2.4(a)(viii)
. The Parties will amend, update, or revise the applicable Agreement Addendum in accordance with this Agreement to reflect any changes in the applicable Individual Fees agreed to in accordance with this
Section 13.1
.
(c) Producer and Midstream Co shall use their commercially reasonable efforts to comply with new and amended
applicable Laws and new interpretations of existing Laws.
Texas Produced Water
Services Agreement
- 40 -
Section 13.2
Unprofitable Operations and Rights of Termination
.
(a)
Cessation of Services
. If, in the sole discretion of Midstream Co, (x) the gathering of Product from any Wells, Separator
Facilities or Receipt Points, (y) the delivery of Product to any Delivery Points or (z) the provision of any other Service under this Agreement, is or becomes uneconomical due to its volume, quality, or for any other cause, then Midstream Co shall
not be obligated to provide the applicable Services so long as such condition exists.
(i) If Midstream Co suspends
Services under this
Section 13.2(a)
as a result of Producer’s (A) negligence, willful misconduct, or breach of this Agreement, (B) delivery of Product that fails to meet the quality specifications required by
Section 7.1
, or (C) execution of a plan of development that deviates from the then-applicable Development Report, then Midstream Co may resume providing such Services at any time, upon two months’ advance written notice
delivered to Producer, and the affected Wells, Separator Facilities, Receipt Points and Dedicated Production shall only be permanently released as a result of suspension under this clause by mutual agreement of the Parties under
Section
2.4(a)(iv)
.
(ii) If Midstream Co suspends Services under this
Section 13.2(a)
for any reason other than as
specified in clause (i) above and (x) such suspension continues for six consecutive Months or (y) Midstream Co delivers notice to Producer that such suspension shall be permanent, then the applicable Wells, Separator Facilities, Receipt Points,
Spacing Units and Dedicated Production shall be permanently released as specified in
Section 2.4(a)(ix)
.
(b)
Election not to
Expand System
. If Midstream Co determines, in its discretion, that an expansion of the Individual System to satisfy the needs of Producer, as described in
Section 3.2
hereof, would be uneconomical, then Midstream Co shall neither be
obligated to undertake such expansion nor to provide the applicable Services. Producer shall be entitled to a release of the applicable Planned Wells, Planned Separator Facilities and Dedicated Production pursuant to
Section 2.4(a)(ix)
immediately upon Midstream Co’s delivery of a System Plan (marked as “Final”) indicating that a requested expansion would be uneconomical pursuant
Section 13.2(d)
.
(c)
Start Date of Suspension of Services
. Midstream Co shall cause any suspension of Services permitted by this
Section 13.2
to commence on the first Day of a Month and not on any other Day.
(d)
Supporting Documentation and Management
Discussions
. As soon as Midstream Co determines that an expansion of the Individual System will not be economic or that continuing to provide Services at existing facilities has been rendered uneconomic, Midstream Co shall communicate the
same to Producer.
(i) With respect to existing facilities, such notice shall be delivered to Producer at least 180 Days in
advance of any proposed curtailment under this
Section
13.2
Texas Produced Water
Services Agreement
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and such notice shall be accompanied by documentation supporting its claim that certain Services have become uneconomical. Commencing on the date on which such notice is delivered and
continuing for 180 Days, Midstream Co shall participate in Meetings of Senior Management if so requested by Producer, so long as such Meetings of Senior Management are scheduled at mutually agreeable times and locations, in order to negotiate a
transition of Services that will not materially adversely affect Producer. Such discussions may include the following matters and such other matters aimed at ameliorating the detrimental effects of Midstream Co ceasing to provide Services:
(A) purchase by Producer from Midstream Co of the pipe, rights of way or other assets necessary for the types of services that otherwise would have been performed under this Agreement, (B) a continuation of the provision of Services
hereunder by Midstream Co for a period of time longer than the 180 Days required hereby in order to permit Producer sufficient time to take over operations or find an alternate midstream service provider and (C) adjustments to the Development
Plan or rework certain Wells in order to address the concerns of Midstream Co with respect to providing Services thereto. In no event shall Midstream Co’s obligation to be available for Meetings of Senior Management create an obligation on
Midstream Co to continue providing services past the 180 Days required hereby, and Midstream Co is under no obligation to agree to any amendments to this Agreement or modifications to the Services provided in order to accommodate requests of
Producer during such negotiations. However, both Parties have an obligation to negotiate in good faith during such discussions.
(ii) With respect to planned facilities, Midstream Co shall indicate that providing Services to Planned Wells or Planned
Separator Facilities is uneconomical by failing to include the necessary expansion projects in the applicable System Plan and shall provide supporting documentation for its determination that such expansion would be uneconomical, if requested by
Producer. If Midstream Co delivers a System Plan (marked as “Final”) describing the necessary expansion projects, such delivery shall be deemed to be a commitment by Midstream Co to complete such expansion without exercising its
rights under
Section 13.2(b)
, so long as conditions (including anticipated throughput, pricing, the ability to obtain rights-of-way, Producer’s continued execution of the Development Report, and any other factors deemed material by
Midstream Co) do not materially change;
provided, however
that upon the initiation of Services through such expansion project or through a component part of such expansion project, such expansion (or applicable portion thereof) shall be
considered “existing facilities” for purposes of this
Section 13.2
and Midstream Co shall have all of the rights set forth herein with respect to existing facilities that become uneconomical. Nothing in this
Section
13.2(d)
shall give Producer a right to consent to a suspension under this
Section 13.2
.
(e)
No Obligation to Drill or
Operate
. Without limiting the right of Producer to revise the Development Report to eliminate any proposed Wells or Separator Facilities, nothing herein shall be construed to require Producer to drill any Well, to continue to operate any
Well, to place any new Separator Facility into service or to maintain the operation of any Separator Facility that a prudent operator would not in like circumstances drill or continue to operate.
Article 14
Reserved
Texas Produced Water
Services Agreement
- 42 -
Article 15
Indemnification and Insurance
Section 15.1
Reciprocal Indemnity
. To the fullest extent permitted by applicable Law and except as otherwise set forth in
Section 3.5(c)
and
Section 7.3
:
(a)
Producer Indemnification
. Producer shall release, protect, defend,
indemnify and hold harmless Midstream Co Group from and against all Losses directly or indirectly arising out of or in connection with bodily injury, death, illness, disease, or loss or damage to property of Producer or any member of Producer Group
in any way arising out of or relating to this Agreement, directly or indirectly. THIS RELEASE, DEFENSE AND INDEMNITY OBLIGATION SHALL APPLY REGARDLESS OF FAULT OF MIDSTREAM CO GROUP OR ANY OTHER PERSONS.
(b)
Midstream Co Indemnification
. Midstream Co shall release, protect, defend, indemnify and hold harmless Producer Group from and
against all Losses directly or indirectly arising out of or in connection with bodily injury, death, illness, disease, or loss or damage to property of Midstream Co or any member of Midstream Co Group in any way arising out of or relating to this
Agreement, directly or indirectly. THIS RELEASE, DEFENSE AND INDEMNITY OBLIGATION SHALL APPLY REGARDLESS OF FAULT OF PRODUCER GROUP OR ANY OTHER PERSONS.
(c)
Regardless of Fault
. AS USED IN THE PRECEDING TWO SUBCLAUSES, THE PHRASE “REGARDLESS OF FAULT” SHALL MEAN, WITH
RESPECT TO ANY LOSS THAT IS CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE (WHETHER SOLE, JOINT, CONCURRENT, COMPARATIVE, CONTRIBUTORY, ACTIVE, PASSIVE, OR OTHERWISE), STRICT LIABILITY, OR OTHER FAULT, OF ANY MEMBER OF MIDSTREAM CO GROUP OR THE
PRODUCER GROUP, WITHOUT REGARD TO THE CAUSE OR CAUSES THEREOF AND WITHOUT LIMITATION OF SUCH LOSS AND WHETHER OR NOT CAUSED BY A PRE-EXISTING CONDITION.
Section 15.2
Indemnification Regarding Third Parties
. Each Party shall release, protect, defend, indemnify and hold the other
Party harmless against any Loss by a Third Party that is not a member of the Producer Group or Midstream Co Group, to the extent such Loss (a) is caused by the negligence or willful misconduct of said indemnifying Party or such Party’s
Group, or (b) in the case of Producer as indemnifying Party, results from claims by a Third Party of title, rights, or encumbrances in or to Product delivered by Producer to a Receipt Point.
Section 15.3
Penalties
. Producer shall release, protect, defend, indemnify, and hold harmless Midstream Co from any Losses resulting
from penalties imposed by a Downstream Facility in any transportation contracts or service agreements associated with, or related to, Producer’s owned or Controlled Product.
Section 15.4
Insurance
. Midstream Co and Producer shall (a) carry and maintain no less than the insurance coverage set forth
in
Exhibit D
, and (b) cause such insurance to be (i) the primary coverage without any right of contribution from any other insurance held by the other Party to the extent of the insured Party’s indemnification obligations
hereunder, and (ii) written
Texas Produced Water
Services Agreement
- 43 -
and endorsed to include waivers of all subrogation rights of the insurers against Midstream Co and its Group (in the case of Producer’s insurance) or Producer and its Group (in the case of
Midstream Co’s insurance). Unless Producer is Original Producer, Producer shall also cause the insurance carried and maintained by it pursuant to this
Section 15.4
to be endorsed to name Midstream Co and its Group as additional insureds
or provide blanket additional insured status that covers Midstream Co and its Group as additional insureds, except in the case of worker’s compensation insurance. Any insurance provided by OpCo on behalf of Midstream Co that comports with this
Section 15.4
shall be deemed to satisfy these requirements.
Article 16
Assignment
Section 16.1
Assignment of Rights and Obligations under this Agreement
.
(a)
Assignment
. Except as specifically otherwise provided
in this Agreement, no Party shall have the right to assign its rights and obligations under this Agreement (in whole or in part) to another Person except with the prior consent of Midstream Co (in the case of an assignment by Producer) or Producer
(in the case of an assignment by Midstream Co), which consent may be withheld at such Party’s sole discretion. Notwithstanding the foregoing, Producer may assign its rights and obligations under this Agreement to any Person to whom Producer
assigns or transfers an interest in any of the Dedicated Properties insofar as this Agreement relates to such Dedicated Properties without the consent of Midstream Co;
provided
that (A) such Person assumes in writing the obligations of
Producer under this Agreement insofar as it relates to the portion of the Dedicated Properties so assigned or transferred, such writing shall take the form of an Agreement Addendum, executed by the applicable Midstream Co and the Producer Assignee
(and others, if appropriate) and such writing shall be recorded in the real property records of the counties in which the Dedication Area is located, (B) such assignment is made subject to this Agreement, (C) if such assignment or transfer is
made to an Affiliate of Producer, the Original Producer shall not be released from any of its obligations under this Agreement, and (D) if such transfer or assignment is to a Producer Assignee (a “
Third Party Assignment
”):
(1) the Original Producer shall be released from its obligations under this Agreement with respect to the Dedicated Properties so assigned or transferred, (2) at least thirty (30) Days prior to the closing date of the Third Party
Assignment (or, if the period between signing and closing is less than thirty (30) Days, as early as possible and in no event less than two Business Days prior to the closing of the Third Party Assignment), Producer shall cause the proposed Producer
Assignee to deliver an updated Development Report to Midstream Co and (3) prior to or on the closing date of the Third Party Assignment, the Producer Assignee shall deliver to Midstream Co (x) a copy of the writing pursuant to which the
Third Party Assignment is occurring, and (y) documentation of any Conflicting Dedication affecting any Product of the Producer Assignee that would otherwise be considered Dedicated Production.
(b)
Notice; Binding Effect
. Within 30 Days prior to the date of execution of a permitted assignment by Producer, Producer shall
give Midstream Co notice of any assignment of this Agreement or Dedicated Properties. Midstream Co shall give Producer written notice of any assignment of this Agreement within 30 Days after the date of execution of such permitted
assignment. This Agreement shall be binding upon and inure to the benefit of the respective permitted successors and assigns of the Parties. Any attempted assignment made without compliance with the provisions set forth in this
Section
16.1
shall be null and void
ab initio
.
(c)
Releases not Assignments
. Any release of any of the Dedicated
Properties from the Dedications pursuant to
Section 2.4
shall not constitute an assignment or transfer of such Dedicated Properties for the purposes of this
Article 16
.
Texas Produced Water
Services Agreement
- 44 -
Section 16.2
Pre-Approved Assignments
.
(a) Each Party shall have the right without the prior consent of the others to (i) mortgage, pledge, encumber or otherwise impress a lien or
security interest upon its rights and interest in and to this Agreement, and (ii) make a transfer pursuant to any security interest arrangement described in (i) above, including any judicial or non-judicial foreclosure and any assignment from the
holder of such security interest to another Person.
(b) Original Producer (but not any subsequent Producer) may Transfer Dedicated
Properties free of the terms, conditions and obligations of this Agreement in a Transfer:
(i) where such Transfer is an
exchange of undeveloped Dedicated Properties (the “
Outbound Acreage
”) for properties of a Third Party located in the Dedication Area, which such properties become subject to the Dedications under this Agreement; provided that
Producer shall reimburse Midstream Co in full for all actual costs and expenses incurred by Midstream Co to install, build, construct, or otherwise place into service infrastructure for the Outbound Acreage, so long as Midstream Co had informed
Producer of its intention to install, build, construct or otherwise place into service the applicable infrastructure by inclusion of the same in a System Plan delivered prior to the closing of the applicable Transfer; or
(ii) where such Transfer (x) is not of the type described in
Section 16.2(b)(i)
, (y) pertains solely to Dedicated
Properties outside of the boundary shown on Annex A to Midstream Addendum 07, and (z) would not cause the number of Net Acres of Dedicated Properties Transferred pursuant to this
Section 16.2(b)(ii)
during the Term of this Agreement, on
an aggregate basis, to exceed 3,500 Net Acres. Original Producer shall be responsible for tracking the total acreage sold under this
Section 16.2(b)(ii)
and the number of Net Acres Transferred beginning on the Effective Date and
continuing through the end of the Term and shall, upon request of Midstream Co, provide evidence supporting Original Producer’s calculation thereof.
Section 16.3
Change of Control
. Except as provided in
Section 16.1
, nothing in this
Article 16
shall prevent
Producer’s members or owners from transferring their respective interests (whether equity or otherwise and whether in whole or in part) in Producer and nothing in this
Article 16
shall prevent Midstream Co’s members or owners from
transferring their respective interests (whether equity or otherwise and whether in whole or in part) in Midstream Co. However, if a change of control of a Party gives rise to a reasonable basis for insecurity on the part of the other Party, such
change of control may be the basis for a request of Adequate Assurance of Performance. Each member or owner of Producer or Midstream Co, as applicable, shall have the right to assign and transfer such member’s or owner’s interests (whether
equity or otherwise and whether in whole or in part) in Producer or Midstream Co, as applicable, without restriction contained in this Agreement.
Texas Produced Water
Services Agreement
- 45 -
Article 17
Other Provisions
Section
17.1
Relationship of the Parties
. The execution and delivery of an Agreement Addendum shall create a binding agreement between the Parties signatory thereto, consisting of the terms set forth in such Agreement Addendum together with the
terms set forth in these Agreement Terms and Conditions. The signatories of one Agreement Addendum shall not be bound to or otherwise in privity of contract with the signatories of any other Agreement Addendum, and the execution and delivery of
each Agreement Addendum shall form a separate and distinct contract. This Agreement shall not be deemed or construed to create, a partnership, joint venture or association or a trust between Producer and Midstream Co or the persons party to any
other Agreement Addendum. This Agreement shall not be deemed or construed to authorize any Party to act as an agent, servant or employee for any other Party for any purpose whatsoever except as explicitly set forth in this Agreement. In
their relations with each other under this Agreement, the Parties shall not be considered fiduciaries.
Section 17.2
Notices
. Unless otherwise specified in the applicable provision, all notices, consents, approvals, requests, and other communications required or permitted to be given under this Agreement shall be in writing and delivered personally, or
sent by bonded overnight courier, mailed by U.S. Express Mail or by certified or registered United States Mail with all postage fully prepaid, return receipt requested, or, except in the case of notices of breach or default, sent by electronic mail
(including with a PDF of the notice or other communication attached), in each case, addressed (i) if to Producer, at the address set forth on the applicable Agreement Addendum and (ii) if to Midstream Co, at the address set forth on the applicable
Agreement Addendum;
provided
that in the case of any notice by electronic mail, such notice is confirmed by communication via another method permitted by this
Section 17.2
. Any notice, consent, approval, request, or other
communication (“
Communications
”) given in accordance herewith shall be deemed to have been given when (a) actually received or rejected by the addressee in person or by courier, (b) (
reserved
), or (c) actually received
or rejected by the addressee upon delivery by overnight courier or United States Mail, as shown in the tracking report or return receipt, as applicable. Communications may not be transmitted by electronic mail, except for ordinary course
business communications that shall be deemed to be received, if transmitted during normal business hours on such Business Day, or if transmitted after normal business hours, on the next Business Day. Any Person may change their contact information
for notice by giving notice to the other Party in the manner provided in this
Section 17.2
.
Section 17.3
Entire Agreement;
Conflicts
. This Agreement (consisting of these Agreement Terms and Conditions and the applicable Agreement Addendum) constitutes the entire agreement of Producer and Midstream Co pertaining to the subject matter hereof and supersedes all prior
agreements, understandings, negotiations, and discussions, whether oral or written, of Producer and Midstream Co pertaining to the subject matter hereof. There are no warranties, representations, or other agreements between Producer and
Midstream Co relating to the subject matter hereof except as specifically set forth in this Agreement, including the exhibits hereto, and no Party shall be bound by or liable for any alleged representation, promise, inducement, or statements of
intention not so set forth.
Texas Produced Water
Services Agreement
- 46 -
Section 17.4
Waivers; Rights Cumulative
. Any of the terms, covenants, or conditions
hereof may be waived only by a written instrument executed by or on behalf of the Person waiving compliance. No course of dealing on the part of any Party, or their respective officers, employees, agents, or representatives, nor any failure by
a Party to exercise any of its rights under this Agreement shall operate as a waiver thereof or affect in any way the right of such Party at a later time to enforce the performance of such provision. No waiver by any Party of any condition, or
any breach of any term or covenant contained in this Agreement, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any such condition or breach or a waiver of any other condition or of any breach of
any other term or covenant. The rights of Producer and Midstream Co under this Agreement shall be cumulative, and the exercise or partial exercise of any such right shall not preclude the exercise of any other right.
Section 17.5
Amendment
.
(a) This Agreement may be amended only by an instrument in writing executed (except as otherwise set forth in this
Section 17.5
)
by Producer and Midstream Co and expressly identified as an amendment or modification.
(b) In the event of a conflict between
(i) these Agreement Terms and Conditions or any exhibit to this agreement, on the one hand, and (ii) an applicable Agreement Addendum, on the other, the applicable Agreement Addendum shall control.
Section 17.6
Governing Law; Arbitration
. This Agreement shall be governed by and construed in accordance with the laws of the State,
excluding any conflicts of law rule or principle that might refer construction of such provisions to the laws of another jurisdiction. Any dispute, controversy, or claim arising out of or relating to this Agreement shall be finally settled by
arbitration in accordance with the CPR Institute for Dispute Resolution Rules for Non-Administered Arbitration then in effect (the “Rules”) by a sole arbitrator appointed in accordance with the Rules. The arbitrator is not empowered to
award consequential, indirect, special, punitive or exemplary damages, and each Party irrevocably waives any damages in excess of actual damages. Arbitration shall be held in the English language in the State, and the decision of the arbitration
panel shall include a statement of the reasons for such decision, and the award shall be final and binding on Producer and Midstream Co. Awards shall be final and binding on Producer and Midstream Co from the date they are made and judgment upon any
award may be entered in any court having jurisdiction. The arbitrator shall apply the laws of the State, excluding any conflicts of law rule or principle that might refer construction of such provisions to the laws of another jurisdiction.
Section 17.7
Parties in Interest
. Except for parties indemnified hereunder, nothing in this Agreement shall entitle any Person
other than the Parties to any claim, cause of action, remedy or right of any kind.
Texas Produced Water
Services Agreement
- 47 -
Section 17.8
Preparation of Agreement
. The Parties and their respective counsel
participated in the preparation of this Agreement. In the event of any ambiguity in this Agreement, no presumption shall arise based on the identity of the draftsman of this Agreement.
Section 17.9
Severability
. If any term or other provision of this Agreement is invalid, illegal, or incapable of being enforced by
any rule of Law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any
adverse manner to any Party. Upon such determination that any term or other provision is invalid, illegal, or incapable of being enforced, Producer and Midstream Co shall negotiate in good faith to modify this Agreement so as to effect the
original intent of Producer and Midstream Co as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible. A ruling of invalidity, illegality or unenforceability as to
one Agreement shall only be applicable to that Agreement, not all the Agreements covered by these Agreement Terms and Conditions.
Section
17.10
Counterparts
. This Agreement may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be an original instrument, but all of such counterparts shall constitute for all purposes one
agreement. Any signature hereto delivered by a Party by electronic mail shall be deemed an original signature hereto; provided that the originals of any such electronically provided signatures shall be provided by the signatory, if requested by
the other Party within a week of exchanging signatures.
Section 17.11
Confidentiality
. All data and information exchanged by
the Parties (other than the terms and conditions of this Agreement) and all pricing terms shall be maintained in strict and absolute confidence and no Party shall disclose, without the prior consent of the other Parties, any such data, information
or pricing terms unless the release thereof is required by Law (including any requirement associated with an elective filing with a Governmental Authority) or the rules or regulations of any stock exchange on which any securities of the Parties or
any Affiliates thereof are traded. Nothing in this Agreement shall prohibit the Parties from disclosing whatever information in such manner as may be required by Applicable Law; nor shall any Party be prohibited by the terms hereof from
disclosing information acquired under this Agreement to any financial institution or investors providing or proposing financing to a Party or to any Person proposing to purchase the equity in any Party or the assets owned by any
Party. Notwithstanding the foregoing, the restrictions in this
Section 17.11
will not apply to data or information that (i) is in the possession of the Person receiving such information prior to disclosure by the other Party,
(ii) is or becomes known to the public other than as a result of a breach of this Agreement or (iii) becomes available to a Party a non-confidential basis from a source other than the other Party,
provided
that such source is not
bound by a confidentiality agreement with, or other fiduciary obligations of confidentiality to, the other Party. This Section will survive any termination of this Agreement for a period of 24 Months from the end of the Year in which the
date of such termination occurred.
Texas Produced Water
Services Agreement
- 48 -
Article 18
Pipeline Unavailability
Section 18.1
Pipeline Unavailability
.
(a) It is the intention of the Parties to use the Individual System for all Dedicated Production. To accommodate operational upsets and
periods of increased flow (such as during Flowback), the Parties have agreed under
Section
2.3(b)
that, during Pipeline Unavailability, Producer shall elect to either (i) exercise the Trucking Election or
(ii) cease producing Dedicated Production until the end of the Pipeline Unavailability, as provided in
Section 18.2
. To the extent Producer exercises its Trucking Election, this
Article 18
shall govern with respect to the
Trucked Volumes and the other matters set forth herein, rather than
Articles 4
,
7
(other than
Section 7.3
as it applies to Trucked Volumes delivered to a SWD Trucking Facility that fail to meet the quality requirements of
Section
18.3(d)
) and
9
and
Sections 5.1
,
5.2
,
5.3
,
5.4
, and
5.6
.
(b)
The Parties agree that during Pipeline Unavailability, Producer shall not have the right to temporary services under
Sections 3.3(a)
and
3.3(b)
of the Agreement or to a temporary release under
Section
2.4(b)(ii)
of the Agreement except to the extent that Midstream Co fails to provide Trucked Water Services.
(c) At Producer’s election, if the Pipeline Unavailability arises from Midstream Co’s failure to meet an On-Line Deadline, Producer
may exercise its Trucking Election for so long as it desires, rather than exercising its right to a permanent release under
Section 2.4(a)(i)
and
Section
2.4(a)(ii)
. If the Parties have agreed to connect
the applicable Individual System to a Well or Separator Facility after Flowback has started, then the fact of a Pipeline Unavailability occurring after Flowback has started shall not constitute a failure by Midstream Co to meet an On-Line Deadline
and Producer shall not have a right to a permanent release under
Section 2.4(a)(i)
and
Section 2.4(a)(ii)
until such time as the agreed upon connection date has passed.
Section 18.2
Exercise of Trucking Election
.
(a) In the event that Pipeline Unavailability will result from a Well completion prior to the connection of the Individual System, Producer
shall give Midstream Co notice that Dedicated Production is expected to be produced from the applicable Well at least 72 hours prior to such production. If Pipeline Unavailability arises after the applicable Well or Separator Facility is online,
Midstream Co shall deliver notice to Producer of planned and unplanned curtailments and interruptions as required in
Section
5.5
.
(b) Once Producer or Midstream Co, as applicable, has delivered notice to the other Party that a Pipeline Unavailability is expected (or has
occurred), Producer will inform Midstream Co whether Producer elects to exercise its Trucking Election or to cease producing Dedicated Production until the end of the Pipeline Unavailability. If Producer exercises the Trucking Election during the
Flowback Period, Producer shall coordinate with the water hauling trucks and arrange for transportation of the Dedicated Production to the SWD Trucking Facility at its sole cost and expense until the end of the Flowback Period. At all other times
during a Pipeline Unavailability, including when Flowback is occurring after the expiration of the Flowback Period, Midstream Co shall coordinate with the water hauling trucks and arrange for transportation of the Dedicated Production to the SWD
Trucking Facility as part of the Trucked Water Services unless Producer has elected to cease producing dedicated production.
Texas Produced Water
Services Agreement
- 49 -
Section 18.3
Delivery of and Title to Trucked Volumes
.
(a)
Trucked Water Services Obligation
. Upon the exercise of a Trucking Election, Midstream Co shall cause an Approved SWD Vendor to
accept delivery of, take title to, store, handle and dispose of Dedicated Production that is delivered by truck to a SWD Trucking Facility. Upon the exercise of a Trucking Election, Midstream Co may, in its sole discretion, also accept delivery of,
take title to, store, handle and dispose of other Product delivered by truck to a SWD Trucking Facility. The volumes that are actually delivered by truck shall be referred to as “
Trucked Volumes
”.
(b)
Consistent Volumes
. The Trucked Volumes delivered to the applicable SWD Trucking Facility shall be at a rate of delivery that is as
uniform as reasonably possible in accordance with Producer’s drilling, completion, and frac schedule.
(c)
Title and Custody
.
Title to and risk of loss to the Trucked Volumes and all contents thereof shall pass from Producer to Approved SWD Vendor when delivered into Approved SWD Vendor’s storage tanks at the SWD Trucking Facility, unless the Parties otherwise agree
in writing.
(d)
Quality
. Producer represents and warrants that all Trucked Volumes delivered to an Approved SWD Vendor may
lawfully be disposed of in Class II disposal wells. Midstream Co’s performance of Trucked Water Services for any Trucked Volumes that do not meet such requirement shall not relieve Producer from any liability for Producer’s breach of the
foregoing representation and warranty nor serve as a waiver of any rights or remedies available to Midstream Co therefor.
(e)
Prohibition on Skimming
. The Party that coordinates the water hauling trucks shall direct the Transporter not to skim, transfer, sell, or otherwise remove hydrocarbons or Trucked Volumes from trucks after receipt by such Transporter and
prior to such Trucked Volumes being received by the Approved SWD Vendor. If the Approved SWD Vendor alleges that the Trucked Volumes delivered appear to have been handled in a manner inconsistent with the foregoing sentence, Producer shall
corporate with Midstream Co and the Approved SWD Vendor in a review and analysis and, if required by the Approved SWD Vendor, take corrective action in a timely manner. If Transporters engaged by Producer fail to comply with the directions
received, then Midstream Co may direct Producer to use a different Transporter.
Section 18.4
Unavailability of a SWD Trucking
Facility
. If for any reason there is a disruption of receipts at the SWD Trucking Facility, the Parties shall work in good faith to find a mutually agreeable resolution. If for any reason Midstream Co receives reimbursements in respect
of trucking as a result of an originally scheduled SWD Trucking Facility being unable to accept deliveries, Midstream Co shall disclose such reimbursements on the applicable invoice and pass through such reimbursements to Producer if Producer paid
the costs of the applicable Transporter directly.
Section 18.5
Testing; Non-Conforming Product
. If requested by Midstream Co,
Producer shall obtain water samples for analyses and retain appropriate qualified personnel to conduct analyses following methodologies considered appropriate in the industry or shall permit Midstream Co to obtain such samples.
Texas Produced Water
Services Agreement
- 50 -
Section 18.6
Producer’s Grant of Access
. Producer hereby grants to Midstream Co,
and shall grant to each Transporter, without warranty of title, either express or implied, to the extent that it may lawfully and is contractually permitted to do so without the incurrence of additional expense, the rights of ingress and egress with
respect to, and the right to access, all lands constituting Dedicated Properties for the purposes of (a) transporting Trucked Volumes, and (b) obtaining water samples as described in
Section
18.5
.
Section 18.7
Information
. Producer agrees that information it supplies to Midstream Co regarding anticipated volumes of Dedicated
Production and Trucked Volumes may be shared with an Approved SWD Vendor to the extent required by the applicable Approved SWD Vendor to assist in planning and operations, and Producer agrees to provide additional information regarding anticipated
volumes of Dedicated Production and Trucked Volumes to the extent requested by Midstream Co in response to inquiries from an Approved SWD Vendor (so long as Midstream Co is required to deliver the requested information in order to comply with
Midstream Co’s contractual arrangements with such Approved SWD Vendor). Under
Section 3.1
, Midstream Co has the right to hold certain meetings with Producer, and at the request of Midstream Co, one of such meetings per year may be held
in conjunction with the Approved SWD Vendor to discuss confer regarding planned activities.
Section 18.8
Indemnification in Respect of
Trucked Volumes
. Without in any way limiting any indemnification obligation otherwise set forth in the Agreement, the Parties agree that the indemnification obligations of Producer set forth in
Section
7.3
and
Section
15.2(b)
apply to Trucked Volumes delivered to a SWD Trucking Facility.
Section 18.9
Invoices from
Approved SWD Vendor
. The Party that engages the Transporter shall take all reasonable measures to ensure that the invoicing procedures that Midstream Co has negotiated with the Approved SWD Vendor are used, including notation of the
geographic area to which the services pertain. Midstream Co shall provide a written copy of such procedures to Producer upon request.
(End of Agreement Terms and Conditions)
Texas Produced Water
Services Agreement
- 51 -
EXHIBIT A
TO TEXAS AGREEMENT TERMS AND CONDITIONS
RELATING TO PRODUCED WATER SERVICES
Reserved
Texas Produced Water
Services Agreement
Exhibit A - 1
EXHIBIT B
TO TEXAS AGREEMENT TERMS AND CONDITIONS
RELATING TO PRODUCED WATER SERVICES
DOWNTIME FEE REDUCTION
|
|
|
|
|
|
|
Facility Segment Downtime Percentage (per Month)
|
|
Percentage Reduction of
Individual First Phase Fee with
respect to such Facility Segment
|
|
|
Greater than 4.5% and up to and including 10%
|
|
|
5
|
%
|
|
Greater than 10% and up to and including 12%
|
|
|
10
|
%
|
|
Greater than 12% and up to and including 15%
|
|
|
15
|
%
|
|
Greater than 15%
|
|
|
20
|
%
|
(End of Exhibit B)
Texas Produced Water
Services Agreement
Exhibit B - 1
EXHIBIT C
TO TEXAS AGREEMENT TERMS AND CONDITIONS
RELATING TO PRODUCED WATER SERVICES
(Reserved)
Texas Produced Water
Services Agreement
Exhibit C - 1
EXHIBIT D
TO TEXAS AGREEMENT TERMS AND CONDITIONS
RELATING TO PRODUCED WATER SERVICES
INSURANCE
Midstream Co and Producer
shall (or, in the case of Midstream Co, Midstream Co may cause OpCo to) purchase and maintain in full force and effect at all times during the Term of this Agreement, at such Party’s sole cost and expense and from insurance companies that are
rated (or whose reinsurers are rated) “A-VII” or better by AM Best or “BBB-” or better by Standard & Poor’s or an equivalent rating from another recognized rating agency, policies providing the types and limits of
insurance indicated below, which insurance shall be regarded as a minimum and, to the extent of the obligations undertaken by such Party in this Agreement, shall be primary (with the exception of the Excess Liability Insurance and Workers’
Compensation) as to any other existing, valid, and collectable insurance. Each Party’s deductibles shall be borne by that Party.
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A.
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Where applicable, Workers’ Compensation and Employers’ Liability Insurance, in accordance with the statutory requirements of the State, and endorsed specifically to include the following:
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1.
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Employers’ Liability, subject to a limit of liability of not less than $1,000,000 per accident, $1,000,000 for each employee/disease, and a $1,000,000 policy limit.
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The Workers’ Compensation and Employers’ Liability Insurance policy(ies) shall contain an alternate employer endorsement.
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B.
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Commercial General Liability Insurance, with limits of liability of not less than the following:
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$2,000,000 general aggregate
$1,000,000 each occurrence, Bodily Injury or Property Damage Combined Single Limit
Such insurance shall include the following:
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1.
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Premises and Operations coverage.
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2.
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Contractual Liability covering the liabilities assumed under this Agreement.
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3.
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Broad Form Property Damage Liability endorsement, unless policy is written on November 1988 or later ISO form.
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4.
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Products and Completed Operations.
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5.
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Time Element Limited Pollution coverage.
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Texas Produced Water
Services Agreement
Exhibit D - 1
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C.
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If applicable, Automobile Liability Insurance, with limits of liability of not less than the following:
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$1,000,000 Bodily Injury or Property Damage Combined Single Limit, for each occurrence.
Such coverage shall include hired and non-owned vehicles and owned vehicles where applicable.
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D.
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If applicable, Aircraft Liability Insurance. In any operation requiring the use or charter of aircraft or helicopters by Midstream Co or Producer, combined single limit insurance shall be carried or cause to be
carried for public liability, passenger liability and property damage liability in an amount of not less than $8,000,000 per seat subject to a minimum of $20,000,000; this insurance shall cover all owned and non-owned aircraft, including
helicopters, used by Midstream Co in connection with the performance of the work set forth in this Agreement.
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E.
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Excess Liability Insurance, with limits of liability not less than the following:
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Limits of
Liability - $10,000,000 Occurrence/Aggregate for Bodily Injury and Property Damage in excess of the coverage outlined in Paragraphs A, B, C and D.
The
limits of coverage required in this Agreement may be met with any combination of policies as long as the minimum required limits are met.
Each Party to
this Agreement shall have the right to acquire, at its own expense, such additional insurance coverage as it desires to further protect itself against any risk or liability with respect to this Agreement and operations and activities under this
Agreement or related thereto. All insurance maintained by or on behalf of Producer or Midstream Co shall contain a waiver by the insurance company of all rights of subrogation in favor of the other Party.
Neither the minimum policy limits of insurance required of the Parties nor the actual amounts of insurance maintained by the Parties under their insurance
program shall operate to modify the Parties’ liability or indemnity obligations in this Agreement.
A Party may self-insure the requirements in this
Exhibit
D
if such Party is Controlled by Noble Energy, Inc. and, otherwise, if such Party or its parent is considered investment grade (S&P BBB- or equivalent or higher).
(End of Exhibit D)
Texas Produced Water
Services Agreement
Exhibit D - 2
Exhibit 10.38
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED. THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
FORM OF
TEXAS PRODUCED
WATER SERVICES AGREEMENT
AGREEMENT ADDENDUM 01
P
ERMIAN
C
ONTRACT
N
UMBER
: BLPR01-PW
This AGREEMENT ADDENDUM 01 (this “
Agreement Addendum
”) (a) shall be effective as among the Persons named below as
“Producer” and “Midstream Co” as of the date specified below as the “Effective Date,” (b) incorporates the Texas Agreement Terms and Conditions Relating to Produced Water Services (the “
Agreement Terms and
Conditions
”), which were last amended effective as of the Effective Date, and (c) together with the Agreement Terms and Conditions, shall constitute one contract and shall be the Agreement of the Parties. Except as otherwise set
forth herein (i) all terms shall have the meanings assigned to such terms in the Agreement Terms and Conditions, and (ii) all references to Exhibits, Appendices, Articles, Sections, subsections and other subdivisions refer to the
corresponding Exhibits, Appendices, Articles, Sections, subsections and other subdivisions of or to the Agreement Terms and Conditions.
Producer desires to contract with Midstream Co for Midstream Co to provide the Services utilizing the Individual System, and Midstream Co
desires to provide the Services to Producer, on the terms and subject to the conditions of this Agreement.
NOW, THEREFORE, in
consideration of the mutual agreements in this Agreement, Midstream Co and Producer hereby agree as follows:
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Producer
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Rosetta Resources Operating LP, a Delaware limited partnership
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Midstream Co
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Blanco River DevCo LP, a Delaware limited partnership
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Parties
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The term “Party” or “Parties” shall refer to Producer and Midstream Co identified in this Agreement Addendum
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Effective Date
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September 1, 2016
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Agreement Addendum 01
– Page 1
Texas Produced Water Services Agreement
Permian
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED. THE
REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
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Dedication Area
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The following areas within Reeves County, Texas:
H&GNRR Block 5
H&GNRR Block 6
H&GNRR Block 13
PSL Block C18
PSL Block C10
PSL Block C9
PSL Block C8
PSL Block C7
PSL Block C6
T&P RR Block 51-T7
T&P RR Block 50-T7
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Individual First Phase Rate
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$[**]/ Barrel
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Individual Second Phase Fee
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[**].
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Individual Disposal by Truck Fee
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[**].
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Agreement Addendum 01
– Page 2
Texas Produced Water Services Agreement
Permian
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED. THE
REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
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Notices and Payments
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Notice Address – General Matters & Correspondence
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Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
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Attention:
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Chief Financial Officer
John F. Bookout,
IV
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Telephone:
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(832) 639-7134
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Email:
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John.Bookout@nblenergy.com
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Producer:
Rosetta Resources Operating LP
c/o Noble Energy, Inc.
1001 Noble Energy Way
Houston, TX 77070
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Attention:
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John Nedelka, Director Revenue Accounting
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Telephone:
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(281) 872-3120
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Email:
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John.Nedelka@nblenergy.com
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Agreement Addendum 01
– Page 3
Texas Produced Water Services Agreement
Permian
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED. THE
REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
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Notice Address – Operational Matters
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Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
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Attention:
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Chief Operating Officer
John C.
Nicholson
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Telephone:
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(281) 876-6186
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Email:
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John.Nicholson@nblenergy.com
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Producer:
Rosetta Resources Operating LP
c/o Noble Energy, Inc.
1001 Noble Energy Way
Houston, TX 77070
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Attention:
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John Nedelka, Director Revenue Accounting
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Telephone:
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(281) 872-3120
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Email:
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John.Nedelka@nblenergy.com
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Agreement Addendum 01
– Page 4
Texas Produced Water Services Agreement
Permian
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED. THE
REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
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Notice Address – Force Majeure, interruptions and Pipeline Unavailability
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Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
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Attention:
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Chief Operating Officer
John C.
Nicholson
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Telephone:
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(281) 876-6186
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Email:
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John.Nicholson@nblenergy.com
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Producer:
Rosetta Resources Operating LP
c/o Noble Energy, Inc.
1001 Noble Energy Way
Houston, TX 77070
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Attention:
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John Nedelka, Director Revenue Accounting
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Telephone:
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(281) 872-3120
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Email:
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John.Nedelka@nblenergy.com
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Agreement Addendum 01
– Page 5
Texas Produced Water Services Agreement
Permian
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED. THE
REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
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Notice Address – Invoicing Matters
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Midstream Co:
Midstream Co
c/o Noble Midstream Services, LLC
1001 Noble Energy Way
Houston, TX 77070
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Attention:
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Ian Dams
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Telephone:
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(832) 639-7406
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Email:
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ian.dams@nblenergy.com
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Producer:
Rosetta Resources Operating LP
c/o Noble Energy, Inc.
1001 Noble Energy Way
Houston, TX 77070
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Attention:
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John Nedelka, Director Revenue Accounting
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Telephone:
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(281) 872-3120
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Email:
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John.Nedelka@nblenergy.com
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Payments by Electronic Funds Transfer
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Midstream Co:
ABA for wire: 021000021
ABA for ACH: 111000614
Account Number: 880285205
Account Name: Blanco River DevCo
LP
Financial Institution: JP Morgan
Bank Swift: CHASUS33
Producer:
ABA/Routing Number: 021000021
Account
Number: 700628402
Account Name: Rosetta Resources Operating LP
Financial Institution: JPMorgan Chase – New York
Bank Swift:
CHASUS33
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(End of Agreement Addendum 01)
Agreement Addendum 01
– Page 6
Texas Produced Water Services Agreement
Permian
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED. THE
REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement in
duplicate originals to be effective as of the Effective Date.
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“Producer”
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ROSETTA RESOURCES OPERATING LP
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BY: ROSETTA RESOURCES OPERATING GP, LLC, its general partner
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By:
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Name:
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Title:
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STATE OF TEXAS
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)
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) ss.
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COUNTY OF HARRIS
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)
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The foregoing instrument was acknowledged before me this day of
, , by as of Rosetta Resources
Operating GP, LLC, a Delaware limited liability company, acting as the general partner of Rosetta Resources Operating LP, a Delaware limited partnership.
WITNESS my hand and official seal.
Agreement Addendum 01
– Signature Page 1
Texas Produced Water Services Agreement
Permian
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED. THE
REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO BRACKETED ASTERISKS [**].
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“Midstream Co”
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BLANCO RIVER DEVCO LP
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By:
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Blanco River DevCo GP LLC
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By:
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Noble Midstream Services, LLC
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By:
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Terry R. Gerhart
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Chief Executive Officer
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STATE OF TEXAS
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)
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) ss.
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COUNTY OF HARRIS
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)
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The foregoing instrument was acknowledged before me this day of
, , by Terry R. Gerhart as Chief Executive Officer of Noble Midstream Services, LLC, in its capacity as sole member of Blanco River DevCo GP LLC, in its
capacity as the general partner of Blanco River DevCo LP, a Delaware limited partnership.
WITNESS my hand and official seal.
Agreement Addendum 01
– Signature Page 2
Texas Produced Water Services Agreement
Permian
Exhibit 21.1
SUBSIDIARIES OF NOBLE MIDSTREAM PARTNERS LP
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Subsidiary
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State of Organization
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Noble Midstream Services, LLC
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Delaware
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Colorado River DevCo GP LLC
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Delaware
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Colorado River DevCo LP
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Delaware
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Green River DevCo GP LLC
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Delaware
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Green River DevCo LP
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Delaware
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Gunnison River DevCo GP LLC
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Delaware
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Gunnison River DevCo LP
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Delaware
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Laramie River DevCo GP LLC
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Delaware
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Laramie River DevCo LP
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Delaware
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San Juan River DevCo GP LLC
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Delaware
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San Juan River DevCo LP
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Delaware
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Blanco River DevCo GP LLC
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Delaware
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Blanco River DevCo LP
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Delaware
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Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
The Partners
Noble Midstream Partners LP:
We consent to the use of our report dated May 12, 2016, with respect to the balance sheet of Noble Midstream Partners LP as of April 30, 2016, included
herein and to the reference to our firm under the heading “Experts” in the prospectus.
/s/ KPMG LLP
Houston, Texas
July 21, 2016
Exhibit 23.2
Consent of Independent Registered Public Accounting Firm
The Board of Directors
Noble Energy, Inc.:
We consent to the use of our report dated April 1, 2016, with respect to the combined balance sheets of Noble Midstream Partners LP Predecessor as of December
31, 2015 and 2014, and the related combined statements of operations, changes in net parent investment and cash flows for the years then ended, included herein and to the reference to our firm under the heading “Experts” in the prospectus.
Our report refers to a change to the straight-line method of depreciation.
/s/ KPMG LLP
Houston, Texas
July 21, 2016
Exhibit 23.5
Consent of Prospective Director
Pursuant to Rule 438 of Regulation C promulgated under the Securities Act of 1933, as amended (the “Securities Act”), in connection
with the Registration Statement on Form S-1 (the “Registration Statement”) of Noble Midstream Partners LP, the undersigned hereby consents to being named and described as a person who will become a director of Noble Midstream GP LLC in the
Registration Statement and any amendment or supplement to any prospectus included in such Registration Statement, any amendment to such Registration Statement or any subsequent Registration Statement filed pursuant to Rule 462(b) under the
Securities Act and to the filing or attachment of this consent with such Registration Statement and any amendment or supplement thereto.
IN WITNESS WHEREOF, the undersigned has executed this consent as of the 18th day of July, 2016.
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/s/ Hallie A. Vanderhider
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Hallie A. Vanderhider
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