CRUDE OIL MARKETING AGREEMENT

Exhibit 10.7

 

CRUDE OIL MARKETING AGREEMENT

 

among

 

PLAINS EXPLORATION & PRODUCTION COMPANY,

 

ARGUELLO INC.,

 

PXP GULF COAST INC.,

 

and

 

PLAINS MARKETING, L.P.

TABLE OF CONTENTS

 

 

EXHIBITS

 

CRUDE OIL MARKETING AGREEMENT

 

This CRUDE OIL MARKETING AGREEMENT (this “Agreement” ), dated July 15, 2004 by and among PLAINS EXPLORATION & PRODUCTION COMPANY (“PXP”), ARGUELLO INC. ( “Arguello” ), PXP GULF COAST INC. (“PXP Gulf Coast”), and PLAINS MARKETING, L.P. ( “Buyer” ) amends and restates the Crude Oil Marketing Agreement dated November 23, 1998, by and between PLAINS RESOURCES INC., PLAINS ILLINOIS INC., STOCKER RESOURCES, L.P. (predecessor in interest to PXP), CALUMET FLORIDA, INC. and Buyer, insofar as it affects PXP, Arguello, and PXP Gulf Coast, which are sometimes referred to herein individually as a “Seller” and collectively as the “Sellers.” Sellers and Buyer are sometimes referred to herein individually as a “Party” and collectively as the “Parties.”

 

RECITALS:

 

A. Sellers own and produce crude oil from properties located within the lower forty-eight (48) states of the United States.

 

B. Sellers desire to sell and Buyer desires to purchase all of the crude oil that is produced and owned by Sellers from such properties.

 

NOW, THEREFORE, the Parties agree as follows:

 

ARTICLE 1

DEFINITIONS

 

1.1 Definitions. As used herein, the following terms shall have the following meanings:

 

“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 clarity, PXP and Plains Resources Inc. shall not be deemed Affiliates of each other for purposes of this Agreement.

 

“Agreement” means this Agreement and all exhibits, schedules, amendments, modifications, and supplements to this Agreement.

 

“Anniversary Date” has the meaning assigned in Article 3 .

 

“Arguello” has the meaning assigned in the preamble.

 

“Barrel” means forty-two (42) United States gallons of Crude Oil measured in accordance with the General Provisions.

 

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“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 or the states of New York or Texas shall not be regarded as a Business Day.

 

“Buyer Specified Event” has the meaning assigned in Section 8.1.

 

“Conflicts Committee” means a committee of the Board of Directors of the General Partner composed entirely of two or more directors who are neither securityholders, officers nor employees of the General Partner nor officers, directors or employees of any Affiliate of the General Partner.

 

“Competitive Price” means the price otherwise available to Seller for production from specific Crude Oil producing properties, as demonstrated by Seller to the reasonable satisfaction of Buyer.

 

“Corporate Governance Documents” means, with respect to any Person, the Certificate or Articles of Incorporation, or Partnership Agreement (or their equivalents), the by-laws (or their equivalents), and the other corporate governance documents of such Person.

 

“Covered Property” means a Seller’s Crude Oil producing property located within the Marketing Area and either listed on Exhibit A as of the Effective Date or added pursuant to Section 2.3, but specifically excludes the Nuevo Excluded Properties.

 

“Crude Oil” means crude oil meeting the specifications set forth in the General Provisions.

 

“Defaulting Party” means (a) in the case of a Buyer Specified Event, Buyer, and (b) in the case of a Seller Specified Event, any Seller affected by such Seller Specified Event.

 

“Delivery Point” has the meaning assigned in Section 2.6.

 

“Effective Date” means the 15th day of July, 2004.

 

“Existing Contract” means any (i) third party crude oil sales contract to which a Seller or its properties are bound or (ii) any joint operating agreement governing a Seller’s property if the operator is not a Seller, to the extent, in the case of both clause (i) and (ii) above, such contract or operating agreement existed as of (a) the Effective Date and is listed on Exhibit B or (b) the date on which such Seller becomes a Seller pursuant to Section 2.2 or the properties become Covered Properties pursuant to Section 2.3.

 

“Force Majeure” has the meaning assigned in Article 9.

 

“General Partner” means Plains All American GP LLC, a Delaware limited liability company, in its capacity as the general partner of Plains AAP, L.P. (the general partner of Plains All American Pipeline, L.P)., and its predecessors, successors and permitted assigns as the managing entity of Plains All American Pipeline, L.P.

 

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“General Provisions” has the meaning assigned in Section 2.9.

 

“Governmental Requirements” means all judgments, orders, writs, injunctions, decrees, awards, laws, ordinances, statutes, regulations, rules, franchises, permits, certificates, licenses, authorizations, and the like of any government, or any commission, board, court, agency, instrumentality, or political subdivision thereof.

 

“Marketing and Administrative Fee” has the meaning assigned in Section 2.7.

 

“Marketing Area” means the lower 48 states of the United States, Alaska and the Outer Continental Shelf.

 

“Non-defaulting Party” means (i) in the case of a Buyer Specified Event, any Seller that is affected by such Buyer Specified Event, and (ii) in the case of a Seller Specified Event, Buyer.

 

“Nuevo Excluded Properties” means all properties covered by the Crude Oil Purchase Agreement entered into between Nuevo Energy Company and Tosco Corp. (now ConocoPhillips) dated January 1,2000 , which covers all fields set forth on Exhibit 1 thereto, plus any fields located in the state of California, California state waters, or Federal waters offshore of the state of California, which have been or will be subsequently acquired or developed by Nuevo, or PXP as its successor, pursuant to that certain Agreement and Plan of Merger dated February 12, 2004 between Nuevo and PXP whereby PXP will be the surviving entity.

 

“ Party ” or “ Parties ” have the meanings assigned in the preamble

 

“ Person ” means an individual or a corporation, limited liability company, partnership, joint venture, trust, unincorporated organization, association, government agency or political subdivision thereof or other entity.

 

“Platt’s P+ Average” means the arithmetic average of the Platt’s Prices for P-Plus WTI during a Trading Cycle.

 

“Platt’s Difference” means the arithmetic average for a Trading Cycle of the difference between the Platt’s Prices of the applicable grade of crude to be exchanged (i.e. WTS, LLS, HLS, Eugene Island, Bonito, etc.) and the prompt month WTI.

 

“Platt’s Prices” means the average of the price range of a particular grade of crude oil as published in the Crude Price Assessments table of Platt’s Oil gram Price Report.

 

“Purchase Price” has the meaning assigned in Section 2.7.

 

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“PXP” has the meaning assigned in the preamble.

 

“PXP Gulf Coast Agreement” means that Crude Oil Purchase Contract, dated December 17, 2003, between Buyer and PXP Gulf Coast, attached hereto as Exhibit C.

 

“Sales Price” has the meaning assigned in Section 2.7.

 

“Seller” and “Sellers” have the meaning assigned in the preamble.

 

“Seller Specified Event” has the meaning assigned in Section 8.2.

 

“Specified Event” means a Buyer Specified Event or a Seller Specified Event, as the case may be.

 

“Tosco Letter” means that certain letter agreement between Buyer and Stocker Resources, L.P. (predecessor to PXP) pursuant to which the parties agree that Buyer will continue to purchase and PXP will continue to deliver and sell PXP’s Crude Oil Production from the Arroyo Grande field under the same terms as this Agreement, despite any termination of this Agreement, for the extent to the term of the Buyer’s sales agreement to Tosco Refining Company.

 

“Trading Cycle” means for a particular month of delivery, a cycle beginning on the 26th day of the second month preceding such month of delivery through the 25th day of the month preceding such month of delivery.

 

“Trade Location” has the meaning assigned in Section 2.7(b).

 

ARTICLE 2

PURCHASE AND SALE

 

2.1 Purchase and Sale. Buyer hereby agrees to purchase and receive and Sellers hereby agree to sell and deliver all of the Crude Oil produced and owned by Sellers from Covered Properties; provided however, that the foregoing Sellers’ agreement shall be subject to any Existing Contract. No Crude Oil shall be sold hereunder in contravention of an Existing Contract by such Seller or from such properties until the Existing Contract has expired or been terminated. Currently, the Covered Properties are set forth on Exhibit A attached hereto and incorporated herein. Exhibit A shall be promptly updated to add or delete Covered Properties.

 

2.2 Addition of Sellers. Except for the Nuevo Excluded Properties, if a Person who owns Crude Oil producing properties within the Marketing Area becomes an Affiliate of PXP, PXP shall give prompt notice of such acquisition to Buyer, and shall cause such Affiliate to become a Seller hereunder by executing and delivering a ratification of this Agreement to Buyer as soon as practicable after the date such Person became an Affiliate of PXP.

 

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2.3 Addition of Covered Properties. Except for the Nuevo Excluded Properties, each Seller shall give prompt notice to Buyer of such Seller’s acquisition of any Crude Oil producing properties and if a Seller acquires additional Crude Oil producing properties (or with respect to the Crude Oil producing properties owned by a newly added Seller pursuant to Section 2.2), Buyer shall have the opportunity to match the Competitive Price. If Buyer agrees to match or pay a price higher than the Competitive Price within 15 business days of receipt of notice from such Seller pursuant to Section 2.2 or this Section 2.3 (for this purpose, the price paid by Buyer shall be inclusive of the Marketing and Administrative Fee), such properties shall become Covered Properties hereunder; provided, however, that such Seller’s obligation to deliver and sell Crude Oil from such properties shall be subject to the provisions of Section 2.1 with respect to any Existing Contract. The Parties shall execute an additional agreement (similar in form to the PXP Gulf Coast Agreement attached hereto as Exhibit C) evidencing the price to be paid for the Crude Oil ftom such properties and the term for which such price is applicable. Upon expiration of such term, the price may be renegotiated to reflect changes in market value of such Crude Oil production. Seller shall promptly submit a revised Exhibit A to reflect the addition of any Covered Properties added under this Section 2.3. If Buyer does not submit an offer or if the offer does not match or exceed the Competitive Price, such properties shall not (absent subsequent agreement of Buyer and such Seller) become Covered Properties and shall be released from any dedication of production under this Agreement.

 

2.4 Release of Covered Properties or Sellers

 

(a) If a Seller, other than PXP, ceases to be an Affiliate of PXP, this Agreement shall terminate with respect to such Seller, its properties, and the Crude Oil produced therefrom, with such termination to be effective as soon as practicable following the date such Seller gives written notice to Buyer that it has ceased to be an Affiliate of PXP; but in no event shall such properties cease to be subject to this Agreement prior to the termination of and to the extent of any agreement Buyer has previously entered into for the sale of Crude Oil attributable to production from such properties (including, without limitation, the agreement referenced in the Tosco Letter).

 

(b) If a Seller sells, transfers or otherwise disposes of any of its properties or the interests therein which are within the Marketing Area, such properties or interests shall cease to be subject to this Agreement as soon as practicable following the date of such sale, transfer or disposition; but in no event shall such properties or interests cease to be subject to this Agreement prior to the termination of any agreement Buyer has previously entered into for the sale of Crude Oil attributable to production from such properties or interests (including, without limitation, the agreement referenced in the Tosco Letter).

 

(c) If a Seller and Buyer determine that it is impracticable for Buyer to continue to purchase Crude Oil from any Covered Property, such Seller and Buyer may, by mutual written agreement, terminate this Agreement with respect to such property. Thereafter, neither such Seller nor Buyer shall have any further obligations under this Agreement with respect to such property.

 

2.5 Further Documentation. Upon request by any Party affected by an addition or release pursuant to Sections 2.2 through 2.4 above, all Parties hereto shall execute and deliver to the requesting Party such documents and instruments as may be reasonably necessary to evidence additions or releases of Parties or properties to this Agreement.

 

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2.6 Delivery. Delivery shall be made from the lease tankage on the properties, or such other point as is mutually agreed to and reflected on Exhibit A (a “Delivery Point”) , into transportation facilities designated by Buyer.

 

2.7 Price. The price to be paid by Buyer for Crude Oil sold hereunder (the “Purchase Price” ) shall be equal to the Sales Price for each Barrel as determined in this Section 2.7 , less the sum of (i) a marketing and administrative fee of $.20 for each Barrel sold (the “Marketing and Administrative Fee”) and (ii) with respect to Crude Oil which is not sold by Buyer at a Delivery Point, the reasonable out -of-pocket expenses (if any) incurred by Buyer to transport or exchange each Barrel of such Crude Oil; provided, however, that the Marketing and Administrative fee shall not apply to third-party royalty barrels; and provided, further, that Buyer may elect to reduce or eliminate the Marketing and Administrative Fee with respect to and in connection with making an offer under Section 2.3. Buyer hereby agrees to use commercially reasonable efforts to obtain (i) the highest Sales Price for Crude Oil sold pursuant to this Agreement and (ii) the lowest out-of-pocket expenses incurred by Buyer to transport or exchange each Barrel of Crude Oil, in each case taking into account all circumstances surrounding the transportation and sale of the Crude Oil. Buyer will, upon request of Seller, provide information with respect to bids solicited by Buyer for the sale of Crude Oil. Buyer also agrees that it will give Sellers notice prior to entering into any contract with third parties re the Crude Oil sold pursuant to this Agreement. Sellers will promptly, upon such notice, either approve or disapprove such contract, in writing. Buyer will not sell any Crude Oil under such contract without written approval from the relevant Sellers.

 

The “Sales Price” shall be determined according to the following:

 

(a) For Crude Oil that Buyer resells at a Delivery Point, the Sales Price shall be the price received by Buyer for each Barrel sold at the Delivery Point.

 

(b) For Crude Oil that Buyer either (i) transports to a location other than a Delivery Point (a “Trade Location”) or (ii) exchanges for other Crude Oil at a Trade Location, the Sales Price shall be determined as follows:

 

(x) if such Crude Oil is not aggregated with other Crude Oil owned by Buyer, the Sales Price shall be equal to the price received by Buyer for each Barrel sold at the Trade Location; or

 

(y) if such Crude Oil is aggregated with other Crude Oil owned by Buyer, the Sales Price shall be equal to the sum of (i) the posted price received by Buyer for each Barrel sold at the Trade Location and (ii) a premium equal to the Platt’s P+ Average and plus or minus, as applicable, the Platt’s Difference at the Trade Location. If the Platt’s P+ Average or the Platt’s Difference is not published, then the price shall be the weighted average for each Barrel of Buyer’s sales at such Trade Location;

 

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(c) with respect to the properties acquired by PXP in the 3TEC transaction, the Sales Price shall be the price set forth in the PXP Gulf Coast Agreement and any amendment thereto to reflect changes in the market value of the Crude Oil produced from such properties; or

 

(d) for Crude Oil produced from Covered Properties added pursuant to Section 2.3, the Sales Price shall be the price, net of the Marketing and Administrative Fee, offered by Buyer in connection with such addition.

 

2.8 Payment. Paym