Dan, I have reviewed the Wildhorse (Mesa) Gathering, Processing, and
Transport Agreement. This agreement is still valid and the gas is dedicated
to this Agreement through 2013. The agreement present some problematic
issues which I will outline.

1. Gas Quality - The gas quality provisions only require Wildhorse to
transport the gas if the gas meets the downstream carriers (in this case
Northwest Pipeline) gas quality specifications. We propose to put in a
treating plant which would allow the gas to meet the specifications, however
there are no provision in this Agreement which allow us to insert a plant
between Northwest Pipeline and Wildhorse. Wildhorse could delay are extract
value from us for this connection. This is an uncertainty.

2. Wildhorse Obligation to Perform - Based on my understanding of the
facts, at some point during the term of this agreement, Northwest Pipeline
enforced their gas quality specifications and refused to take the gas at the
downstream side of Wildhorse's Gathering System. As a result, Wildhorse shut
in Enogex's production and it has been shut in ever since. Wildhorse has a
right to do this under this Agreement (see #1 above) and therefore Wildhorse
has not breached its obligation to transport under this Agreement.
Wildhorse's obligation was suspended when Northwest refused receipt of the
gas.

3. Unprofitability - Assuming Wildhorse worked with us to install the
treating plant which conformed the gas to Northwest Specifications, they
could refuse to provide gathering service under this agreement if it was
still uneconomical for them to do so. If they decided it is uneconomical for
them to do so, they have the right to provide Enogex with various potential
solutions which include (i) renegotiating the terms (ii) allowing Enogex to
operate Wildhorse's equipment at Enogex sole cost, expense and risk, or (iii)
release the gas from the Agreement. The problem here is that there is no
time limit under which Wildhorse must reach a solution with us and no
specific solution they must reach. Wildhorse could drag this out for some
extended period of time and they could extract significant value.


My recommendation is that we make Enogex's resolution of these issues with
Wildhorse a condition precedent to closing and funding this deal. I know the
timing is late. However if Enron funds this deal and takes on the risk of
negotiating with Wildhorse to resolve either a new deal or a release of the
gas, everyone needs to understand that such negotiation could take
substantial time and Wildhorse will have significant leverage.

Let me know if you wish to discuss this further or have any questions.