Here's the deal:
 
There is some P&L that needs to be taken whether we sell or not: (1) a depreciation catchup (impairment) that has not been taken of approx $647,000 (remember approx $4 million was taken in the 3rd qtr, but upon calculation, not enough) and (2) a depreciation catchup for the 4th qtr (thru November, assuming a quick sale) based on a units-of production depreciation method (to avoid impairment problems going forward) of approx $2.2 million.  These together are approx $2.8 million of loss, but again, I have suggested that these need to be taken whether we sell or not.  The sell/hold decision re: the Duke deal is a loss of $1.95 million (adjusted NBV after impairments/depr catchup of $16 million, less the $14.1 of sales proceeds) in exchange for the $14.1 million in cash.  So, sale is proposed at below book.  Jean/Lisa would think of the Duke deal as Mariner/Burlington cash flows being discounted at 12%, plus a premium of $1.3 million. Evidently they have found some reserves upside, thus the premium above the base cash flow annuity. Any questions, pls call me - x 37665.

-----Original Message-----
From: Kitchen, Louise 
Sent: Tuesday, November 20, 2001 4:26 PM
To: Mrha, Jean
Cc: Sherman, Cris; Miller, Kevin; Druzbik, Lisa; Josey, Scott
Subject: RE: Pluto/ MEGS Update


Cris
 
What exactly are the economics of this transaction?
 
If this at, below or above book?
 
Thanks
 
Louise

-----Original Message-----
From: Mrha, Jean 
Sent: Tuesday, November 20, 2001 4:16 PM
To: Kitchen, Louise
Cc: Sherman, Cris; Miller, Kevin; Druzbik, Lisa; Josey, Scott
Subject: Pluto/ MEGS Update
Importance: High


Louise,
 
Please see the attached correspondence below between ENA, Duke and Mariner.  Via facsmille, ENA has received a non-binding offer of $14.1 MM with a proposed effective date as of December 1, 2001, but the transaction would most likely close mid-December.  A meeting has been set up between ENA and Mariner to discuss data needed to address remaining due dilgence items on 11/27/01.  A follow-up meeting with Duke is scheduled for 11/28/01.
 
If you have any further questions, please contact me at my father's house (1-716-667-0107) or Ms. Lisa Druzbik (713-853-9620).  Lisa has been working with Kevin Miller to divest of the MEGS flowline and will be working tomorrow.
 
Regards, Jean

-----Original Message----- 
From: Druzbik, Lisa 
Sent: Tue 11/20/2001 3:15 PM 
To: 'sjosey@mariner-energy.com' 
Cc: Miller, Kevin; Mrha, Jean 
Subject: FW: MEGS Pipeline



Scott, 
Thanks for the message.  Duke's non-binding offer made today is $14.1MM in cash with a proposed effective date of December 1, 2001 and includes an acceptable premium over the minimum cash flow stream (Duke faxed the offer letter, therefore, I cannot forward it electronically).  

Duke e-mailed their outstanding due diligence items (see attached e-mail); we need Mariner's assistance to answer many of the questions listed and to provide appropriate documentation.  As mentioned earlier, Kevin Miller and I would like to meet with you and others at Mariner to discuss the due diligence list and action plan; we plan to come to your offices on Monday, November 26th at 1:30. 

Let me know if you have any questions or comments. 

Thanks, 
Lisa A. Druzbik 
Manager 
Upstream Products 
Enron North America 
713-853-9620 

-----Original Message----- 
From: Stephen P. Noe [ <mailto:spnoe@duke-energy.com>] 
Sent: Tuesday, November 20, 2001 11:36 AM 
To: Druzbik, Lisa; Miller, Kevin 
Subject: MEGS Pipeline 


As we discussed, the following is a list of diligence items that we would 
like to explore further.  This list is not all inclusive and we may need to 
discuss additional items as we continue with due diligence.  Please let  me 
know when we could meet to discuss them further.  Kevin and I had 
tentatively scheduled a November 28, 2001 meeting to discuss development of 
Purchase and Sale Agreements and possibly some of the items listed below: 

   Assuming that the MEGS system includes the riser and topside equipment 
   on Marathon's SP89 platform, we will need verify potential liability for 
   the same and any agreements addressing such access.  We would also like 
   to review the production handling agreement between Burlington/Mariner 
   and Marathon to verify the impact it may have on the future operation of 
   the system 
   We will need a definitive representation from Enron as to the status of 
   the producers committment obligations as of December 1, 2001 as defined 
   in the gathering agreements, including any credits due from prior years 
   excess flows.  It is our understanding that for the month of December 
   there will be a $93,000 credit to the payment due Gatherer and there are 
   no credits due in 2002. 
   In the Gathering Agreement "Project Payout" is referenced from the 
   Producer's JOA.  Please provide verification that this payout has 
   occured, the ownership percentage is now 51% Mariner and 49% Burlington 
   and that there is no future change that could affect the MEGS agreements 
   Need to review sample invoices, sample gas and condensate measurement 
   statements and demonstration of timely payment of such invoices by 
   producers 
   Have there been any leaks incurred and/or reported on the system?  Are 
   there any outstanding environmental issues on this system? 
   It is assumed that Enron/MEGS will be responsible to obtain any 
   assignments/consents that may be required to complete the transaction. 
   Please verify that this will be done. 
   The agreement stipulates that the insurance required is to include 
   business interruption coverage.  Please provide the coverage 
   declarations of the existing policy in effect for the system as a 
   reference for DEFS 
   Please provide a contact person who can discuss the environmental status 
   of the system with a DEFS EHS representative 
   Who is the MMS right of way owner and who is the MMS operator of record. 
   Please verify that the appropriate party has provided the MMS with a 
   "Certificate of Financial Responsibility" 
   We may want to schedule a site visit to SP89.  Please provide the 
   contacts to make these arrangements 
   We would like to review any additional pipeline engineering data and 
   material specifications available, inspection and hydrostatic test 
   reports, as-built drawings, environental reports/permits, rights of 
   way/permit documents and other related engineering and construction 
   information 

I will continue to provide you with additional questions that arise. 
Thanks and please let me know if you have any questions. 


Steve Noe 
Phone:  (713) 627-6249 
Fax:  (713) 627-6271