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Enron Mail |
Gerald: Thanks for the info. Very interesting. Sounds to me like
Wildhorse won't be acknowledging "unprofitability" any time soon. That would reduce the amount of gas committed to the contract, and even if it doesn't actually want to transport that gas at the contract price, Wildhorse will have even less desire to admit in advance of a sale that its committed reserves have been declining drastically. Your letter will, however, throw an interesting new element into the Tom Brown/Kinder Morgan discussions. Wouldn't it be fun to see how these "partners" go about handling formulation of a response? Craig -----Original Message----- From: Gerald Nemec [mailto:Gerald.Nemec@enron.com] Sent: Wednesday, August 02, 2000 1:20 PM To: ccarver@alfers-carver.com Subject: Re: Summary of Tom Brown Meeting Craig, FYI. Some internal discussions. ----- Forwarded by Gerald Nemec/HOU/ECT on 08/02/2000 02:19 PM ----- |--------+------------------------< | | Gerald Nemec | | | | | | 08/02/2000 | | | 02:07 PM | | | | |--------+------------------------< <--------------------------------------------------------------------------- -| | | | To: Dan J Bump/DEN/ECT@ENRON | | cc: Scott Josey/Corp/Enron@ENRON, Brian Redmond/HOU/ECT@ECT, Joan | | Quick/HOU/ECT@ECT, Barbara Gray, Teresa G Bushman/HOU/ECT@ECT | | Subject: Re: Summary of Tom Brown Meeting(Document link: Gerald | | Nemec) | <--------------------------------------------------------------------------- -| Confidential Work Product - Attorney Client Privilege Dan, Our letter was definitely structured to encourage a quick solution. As the situation stands now, Wildhorse's possible responses to the letter are as follows: 1. Declare Unprofitability wrt to the gas covered by the amendment. If they do so, then they have the obligation to provide alternatives to Crescendo, one of which is release of the gas. You are right, there is no time frame in the contract under which they must resolve these alternatives. That is a risk I pointed out early. However, in our letter to Wildhorse, I proposed a time frame to resolve these issue of 2 weeks. If Wildhorse is not working with us in good faith within a commercially reasonable time then we will have to make a choice: A. Go for a Declaratory Judgment to have the gas released from the contract. This will take time. Depending on court docket loads, 6 months to 1 year. B. Inform Wildhorse that we have been unable to reach an agreement within a commercially reasonable time and they have not negotiated in good faith and we consider the gas released (contract breached by Wildhorse) and that we will build our own system. Then Crescendo would build its own system and risk a suit by Wildhorse. 2. Not declare Unprofitability If Wildhorse does not declare unprofitability, then they have the obligation under the contract to take the gas in accordance with its terms. The only complication is that under the contract, Wildhorse's obligation to take the gas is subject to the downstream carriers ability to receive the aggregate gas stream. Depending on Wildhorse's flow dynamics and our plant placement, Wildhorse could use this as reason to refuse delivery of our gas. After your field meeting and our engineering assessment, hopefully we will have a better understanding of that situation. If Wildhorse does not declare unprofitability, we would demand evidence and assurances that they will be able to take the gas upon start up of the treating plant. If Wildhorse does not declare unprofitability, but continues to discuss renegotiating of this deal, I would very directly ask them "under what provision of the contract do they believe they have the right to renegotiate any fees?". They don't have a right to renegotiate under the contract without unprofitability. |--------+-----------------------< | | Dan J | | | Bump@ENRON | | | | | | 08/01/2000 | | | 05:23 PM | | | | |--------+-----------------------< <--------------------------------------------------------------------------- -| | | | To: Gerald Nemec/HOU/ECT@ECT | | cc: Scott Josey/Corp/Enron@ENRON, Brian Redmond/HOU/ECT@ECT, Joan| | Quick/HOU/ECT@ECT | | Subject: Summary of Tom Brown Meeting | <--------------------------------------------------------------------------- -| I wanted to provide a summary of my meeting with Tom Brown today. I met with the Business Development Director, Bob Mustard. 1) Tom Brown (as 45% owner of Wildhorse) is pushing Kinder Morgan to come up with solutions to the production problems (quality, pressure, et al) currently being experienced in the Piceance Basin. 2) Tom Brown is also encouraging KMI to develop plans to take Crescendo (and other producers) low Btu gas; they see these as a new business opportunity for Wildhorse. 3) Tom Brown is focusing their drilling efforts in other regions of the Rockies, therefore TBI would be interested in discussing Entrada development ventures with Crescendo. Bob worked at Amoco with Ken Krisa and is very familiar with the nitrogen treating technology. (I passed all this info on to Ken/Jim). 4) Here's the interesting part...Bob discussed (confidentially) that for the past 6-8 monthsTom Brown has been trying to negotiate a buy-out of Kinder Morgan's interest in Wildhorse (they have a right-to-match provision in their LLC agreement). The snag is on the last increment of valuation which is now being negotiated by the very top mgmt (Kinder & Evans). If they are successful, (which he thinks TBI will be), then TBI will turn-around and look to spin off the non-strategic systems (like the Piceance Basin assets) to third party purchasers. This conversation with Tom Brown led me to a worst case scenario with regard to our negotiations with Wildhorse..............Wildhorse has been slow-playing negotiations since I first met with them in late May and #4 above may be the reason why. Now that we've sent the letter recently to Wildhorse requesting (essentially) to clarify their understanding / status of the contracts so we can get to work, my feeling (based on the transaction between KMI & TBI) is that Wildhorse may try to continue stalling until their transaction with TBI is complete, (how much longer will this take?). Of course, if the transaction is completed, TBI has already made it clear they would like to sell this system, so even if ENA is interested, will TBI negotiate a gathering deal during this transition period or delay until the system is divested? The point is this......I'm anticipating a generic, non-commital response to Crescendo's letter from Wildhorse. Although I realize there are no time deadlines in the contract, could you suggest anything we can submit in writing to encourage a quick resolution to our contractual issues in the event my above worst case scenario begins to play itself out? I'm off to Grand Junction to meet with Wildhorse. I'll keep you informed of any developments. Thanks. Dan
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