Stephen R. and Mary K. Herbel - Page 40

                                       - 40 -                                         
             the minimum volume Buyer [i.e., Arkla] was obligated to                  
             receive during the year."                                                
                  The Settlement Agreement provides that Arkla's payment              
             of $1,850,000 "shall constitute a prepayment in advance for              
             natural gas to be delivered by Seller to Buyer on and after              
             May 1, 1988 from all wells subject to the Contract".  In                 
             order to effectuate Arkla's receipt of a volume of natural               
             gas in an amount equal to the prepayment, the Settlement                 
             Agreement further provides that 50 percent of the volume of              
             natural gas delivered to Arkla under the Contract during                 
             the period May 1, 1988, through the remaining term of the                
             Contract or until the prepayment is fully recouped, shall                
             be considered recoupment gas and shall be received without               
             further payment.  The value of the gas delivered to Arkla                
             under the Contract is to be based upon "the price per MMBtu              
             in effect under the terms of the Contract, as amended this               
             date, at the time such natural gas is requested for                      
             delivery under the Contract."                                            
                  While the Settlement Agreement does not disturb                     
             Arkla's obligation of purchasing gas from Malibu, or                     
             Malibu's obligation of selling gas to Arkla, the binding                 
             nature of those obligations is alleviated somewhat under                 
             the Settlement Agreement.  As to Arkla's take or pay                     
             obligation, the Settlement Agreement provides that Malibu:               







Page:  Previous  25  26  27  28  29  30  31  32  33  34  35  36  37  38  39  40  41  42  43  44  Next

Last modified: May 25, 2011