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

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