Term Sheet for Gas Purchase Agreement with Take-or-pay obligation: Seller: Buyer: Term: Contract Year: Delivery Point: ABC Producing Co. Duke Energy Marketing, L.P. Fifteen Years from the first November 1 following initial delivery. November 1 through October 31. Outlet of Seller’s meter into Texas Eastern Transmission Corporation pipeline located in Cameron Parish Louisiana. $4.25 / MMBtu. Price will change each November 1 based on the change in GDP Deflator as published by U.S. Department of Commerce. The base year for the calculation will be 2002. The change in the GDP Deflator is defined as the previous year GDP Deflator divided by 2002 GDP Deflator. For each contract year Buyer will Take and Pay for 80% of the Annual Contract Quantity (ACQ). If buyer fails to take 80% of the ACQ then buyer will pay for all deficient volumes by December 1 following the end of a contract year. If there is a dispute over the quantity for which buyer is deficient, then buyer shall pay for all disputed quantities by December 1 and then Buyer and Seller will resolve the disputed quantities by the next January 1. If Seller is required to refund payment to Buyer for the disputed quantities then Buyer shall make the refund payment by January 10. Daily Contract Quantity (DCQ) will be based on a 24 hour deliverability test each quarter for the following quarter. Test Period January 1 – March 31 April 1 – June 30 July 1 – September 30 October 1 – December 31 ACQ: Effective Period April 1 – June 30 July 1 – September 30 October 1 – December 31 January 1 – March 31
Price:
Quantity:
DCQ:
Annual Contract Quantity (ACQ) is the sum of each day’s DCQ for a Contract Year. If Buyer is required to pay for gas which he did not take during a contract year then Buyer will have one year from the end of the contract year to make-up the quantity of gas which buyer paid for but did not take during the previous contract year. Buyer will not be given credit for make-up volumes until current contract year volume obligations have been fulfilled as defined in the Quantity section.
Make-up
Transaction Description: Purchase and sale of natural gas for fifteen years with the buyer having to take or pay for 80% of the annual contract quantity. Transaction specific Terms: Seller: ABC Producing Co. Buyer: Duke Energy Marketing, L.P. Term: Fifteen Years from the first November 1 following initial delivery. Contract Year: November 1 through October 31. Delivery Point: Outlet of Seller’s meter into Texas Eastern Transmission Corporation pipeline located in Cameron Parish Louisiana. DCQ: Daily Contract Quantity (DCQ) will be based on a 24 hour deliverability test each quarter for the following quarter. Test Period Effective Period January 1 – March 31 April 1 – June 30 April 1 – June 30 July 1 – September 30 July 1 – September 30 October 1 – December 31 October 1 – December 31 January 1 – March 31 ACQ: Annual Contract Quantity (ACQ) is the sum of each day’s DCQ for a Contract Year. Make-up If Buyer is required to pay for gas which he did not take during a contract year then Buyer will have one year from the end of the contract year to make-up the quantity of gas which buyer paid for but did not take during the previous contract year. Buyer will not be given credit for make-up volumes until current contract year volume obligations have been fulfilled as defined in the Quantity section. Market Terms: Price: $4.25 / MMBtu. Price will change each November 1 based on the change in GDP Deflator as published by U.S. Department of Commerce. The base year for the calculation will be 2002. The change in the GDP Deflator is defined as the previous year GDP Deflator divided by 2002 GDP Deflator. Additional Inputs for Valuation: Volatility at delivery point Market price at delivery point Historical prompt month volatility Libor curve Key Output: 1. Value for 80% take obligation 2. Value for selling a swing option on the remaining 20%. 3. Value for selling storage (make-up gas)