Item 1.02Termination of a Materially Definitive Agreement.
As previously disclosed, on June 6, 2020, (i) Evolve Transition Infrastructure
LP (f/k/a Sanchez Midstream Partners LP) (the "Partnership") and Evolve
Transition Infrastructure GP LLC, the sole general partner of the Partnership
(f/k/a Sanchez Midstream Partners GP LLC, the "General Partner"), (A) each
entered into, (B) caused and approved the Partnership's wholly-owned
subsidiaries Catarina Midstream LLC ("Catarina Midstream") and Seco Pipeline,
LLC ("Seco Pipeline") entering into, and (C) approved Carnero G&P LLC ("Carnero
G&P"), a joint-venture in which the Partnership owns a fifty percent (50%)
interest, entering into, in each case, that certain Settlement Agreement (as
amended by that certain Amendment Agreement, dated as of June 14, 2020 but
effective as of June 6, 2020, the "Settlement Agreement") with Sanchez Energy
Corporation and certain of its subsidiaries, consisting of SN Palmetto, LLC, SN
Marquis LLC, SN Cotulla Assets, LLC, SN Operating, LLC, SN TMS, LLC, SN
Catarina, LLC ("SN Catarina"), Rockin L Ranch Company, LLC, SN Payables, LLC, SN
EF Maverick, LLC ("SN Maverick") and SN UR Holdings, LLC, SP Holdings, LLC, the
sole member of the General Partner, and TPL SouthTex Processing Company LP. Also
as previously disclosed, as of October 1, 2020, any party to the Settlement
Agreement could terminate the Settlement Agreement at any time pursuant to its
terms.
On June 24, 2021, the Partnership, the General Partner, Catarina Midstream and
Seco Pipeline received written notice (the "Termination Notice") from Mesquite
Energy, Inc. (f/k/a Sanchez Energy Corporation, "Mesquite"), of Mesquite's
intention to terminate the Settlement Agreement. The Termination Notice was
delivered pursuant to Section 5.1.2 and/or 5.1.3 of the Settlement Agreement and
the termination was effective as of the date of the Termination Notice.
The Partnership has material relationships with Mesquite. Mesquite accounted for
80% of the Partnership's total revenue for the year ended December 31, 2020. The
Partnership, indirectly through Catarina Midstream, is party to (i) that certain
Gas Lift Agreement, dated April 21, 2021, but effective January 1, 2021, with SN
Catarina, a subsidiary of Mesquite, and (ii) that certain Firm Gathering and
Processing Agreement, effective as of October 14, 2015, between SN Catarina and
Catarina Midstream, as amended by Amendment No. 1 to Firm Gathering and
Processing Agreement, effective April 1, 2017 (the "Catarina Gathering
Agreement"). The termination of the Settlement Agreement does not alter the
current relationship of the parties under the Gas Lift Agreement or the Catarina
Gathering Agreement.
The Settlement Agreement was material to the Partnership because it included,
among other things, (i) an amendment to the Catarina Gathering Agreement (the
"Catarina Amendment") which, among other things, provided that Mesquite would
dedicate its eastern Catarina acreage through October 2030, which would provide
the Partnership with an acreage dedication covering all of Mesquite's Catarina
acreage, (ii) a new Firm Transportation Service Agreement between Seco Pipeline,
LLC and each of SN Catarina and SN Maverick (the "Seco Transportation
Agreements"), and (iii) a customary release to each other party to the
Settlement Agreement from obligations and liabilities through the closing date
of the Settlement Agreement, subject to certain customary carve outs (the
"Releases"). As a result of the termination of the Settlement Agreement, the
Catarina Amendment, the Seco Transportation Agreements, and the Releases will
not go effective.
The Settlement Agreement was not terminated by the Partnership and did not
result in any early termination penalties being incurred by the Partnership.
Item 8.01Other Events.
On June 24, 2021, the Partnership increased the Western Catarina Midstream
tariff rate for interruptible throughput volumes that are outside of the
dedicated acreage under the Catarina Gathering Agreement.
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