2006-080FILE REFERENCE FORM 2006-080
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First Amendment to Agreement [original is attached] 07/27/06 )R
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ORDINANCE NO. ~0O,6-DBO
AN ORDINANCE APPROVING THE ACQUISITION OF PROFESSIONAL AUDIT
SERVICES FOR THE REVIEW OF ROYALTIES PAID TO THE CITY OF DENTON FOR
GAS WELL LEASES WITHIN THE CITY OF DENTON; AUTHORIZING THE CITY
MANAGER OR HIS DESIGNEE TO EXECUTE A PROFESSIONAL SERVICES
AGREEMENT WITH DIVERSIFIED UTILITY CONSULTANTS, INC.; AUTHORIZING
THE EXPENDITURE OF AIRPORT GAS WELL REVENUES FOR THE AUDIT OF
AIRPORT GAS WELLS; AUTHORIZING THE EXPENDITURE OF ADDITIONAL FUNDS
FOR AUDIT SERVICES SUBJECT TO THE CITY MANAGER'S APPROVAL; AND
PROVIDING AN EFFECTNE DATE.
WHEREAS, the Denton Airport receives gas well royalties from a lease with Enexeco,
Inc. which was dated the 17th day of January, 2002, which was assigned to Dan A. Hughes
Company ("Hughes") and subsequently assigned to Stroud Energy, Ltd. ("Stroud"); and
WHEREAS, the Lease with Stroud was amended by that certain Modification,
Clarification and Ratification of Oil, Gas and Mineral Lease effective January 16, 2005; and
WHEREAS, the City staff has determined that there are inconsistencies pursuant to the
monthly royalty payments under the Lease by Stroud; and
WHEREAS, the City Manager recommends that the City Council employ the firm of
Diversified Utility Consultants, Ina (DUCT) to perform a preliminary audit of these payments
and, if the results of the preliminary audit so indicate, an in-depth audit at a cost not to exceed
$18,000 subject to the City Manager's approval and the Airport Advisory Board's ("Airport
Board") recommendation; and
WHEREAS, the Airport Board has recommended that City Council approve the hiring of
DUCI to provide a preliminary royalty payment audit not to exceed $4,500 for Airport Gas Well
No. 2-H and, if necessary, to perform additional royalty audit services with the amount for all
audit services, including preliminary audit services, not to exceed $18,000 subject to the City
Manager's approval and the Airport Board's recommendation; and
WHEREAS, the City Manager recommends that Airport Gas Well No. 1-H, which has
recently started producing, be added to the audit and DUCI has agreed to do a preliminary audit
of both Airport gas wells for $5,250; and
WHEREAS, the City Manager recommends that the producing gas well on Denton
Municipal Electric property under lease to Eagle Oil and Gas Company (Eagle) be added to the
audit and DUCI has agreed to do a preliminary audit of this gas well for $750 making the total
for the preliminary audit of all these gas wells $6,000; and
WHEREAS, Chapter 2254 of the Texas Government Code, known as the "Professional
Services Procurement Act," generally provides that a city may not select a provider of
professional services on the basis of competitive bids, but must select the provider of
professional services on the basis of demonstrated competence, knowledge, and qualifications,
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and for a fair and reasonable price; and the City Council hereby finds and concludes that DUCI
is appropriately qualified under the provisions'of the law to be retained as an auditor for the City;
and
WHEREAS, the City Council deems it in the public interest to employ DUCI to conduct
a preliminary audit of the royalty payments from Hughes, Stroud and Eagle and to provide
additional audit services if deemed necessary; NOW, THEREFORE,
THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS:
SECTION 1. The findings set forth in the preamble of this Ordinance are incorporated
by reference into the body of this Ordinance as if fully set forth herein.
SECTION 2. The City Manager or his designee is hereby authorized to execute a
professional services agreement for preliminary audit services with DUCT not to exceed $6,000
to review the gas well royalty payments from Dan A. Hughes Company and Stroud Energy, Ltd.
to the City of Denton for the Denton Municipal Airport Gas Well Lease with Stroud and the gas
well royalty payments From Eagle Oil and Gas Company for the Gas Well Lease on Denton
Municipal Electric property in substantially the form of the attached Professional Services
Agreement.
SECTION 3. The award of this Agreement is on the basis of the demonstrated
competence and qualifications of DUCI and`the ability of DUCI to perform the professional
auditing services needed by the City for a fair and reasonable price.
SECTION 4. The City Manager or his designee is authorized to make expenditures for
additional audit services not to exceed $18,000 for all audit services, if the preliminary audit
indicates an additional audit is necessary, if the Airport Board recommends an additional audit
and the City Manager approves the additional audit services.
SECTION 5. The City Manager or his designee is authorized to make expenditures of
Airport gas well revenues to pay for the audit of Airport gas wells.
SECTION 6. This Ordinance shall become effective immediately upon its passage and
approval.
PASSED AND APPROVED this the i ~r~_ day of , 2006.
EULINE BROCK, MAYOR
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ATTEST:
JENNIFER WALTERS, CITY SECRETARY
BY:
APPROC/ED AS TO LEGAL FORM:
EDWIN M. SNYDER, CITY ATTORNEY
BY:
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AGREEMENT FOR PROFESSIONAL SERVICES
REGARDING AN AUDIT OF GAS ROYALTY PAYMENTS
STATE OF TEXAS
COUNTY OF DENTON
THIS AGREEMENT is made and entered into as of the day of March, 2006, by
and between the City of Denton, Texas, a Texas municipal corporation, with its principal office
at 215 East McKinney Street, Denton, Denton County, Texas 76201, hereinafter called
"OWNER" and Diversified Utility Consultants, Inc., with its corporate office at 12113 Roxie
Drive, Suite 110, Austin, Texas 78729, hereinafter called "CONSULTANT," acting herein, by
and through their duly authorized representatives.
WITNESSETH, that in consideration of the covenants and agreements herein contained,
the parties hereto do mutually agree as follows:
ARTICLE 1
EMPLOYMENT OF CONSULTANT
The OWNER hereby contracts with the CONSULTANT, as an independent contractor,
and the CONSULTANT hereby agrees to perform the services herein in connection with the
Project as stated in the sections to follow, with diligence and in accordance with the highest
professional standards customarily obtained for such services in the State of Texas. The
professional services set out herein are in connection with the following described project:
The Project shall include, without limitation, audit, investigation, examination, and
analysis of Dan A. Hughes Company ("Hughes"), Stroud Energy, Ltd.'s ("Stroud") and Eagle
Oil and Gas Company ("Eagle") gas well royalty payments to the Owner.
ARTICLE 2
SCOPE OF SERVICES
The CONSULTANT shall perform the following services in a professional manner:
A. The CONSULTANT shall perform all those services as necessary and as described in the
CONSULTANT'S proposal of February 28, 2006 to complete a preliminary review of the
gas royalty payments from Hughes and Stroud on Airport Gas Wells No. 1-H and 2-H
beginning in April 2004 and from Eagle on the gas well on Denton Municipal Electric
property beginning in April 2005 through the most current payment together with
CONSULTANT'S cost proposal, which is attached hereto as Exhibit "A".
B. If provided by OWNER with information showing the calculation of the life expectancy
of Airport Gas Wells 1-H and 2-H and the Denton Municipal Electric Gas Well, which
shall include capacity of the gas field, withdrawal rates, seismic and geological
information concerning the gas field, depth of the well and pressure, the CONSULTANT
shall also calculate the life expectancy of Gas Wells 1-H and 2-H and the Denton
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Municipal Electric gas well and perform a preliminary estimate of the revenues and/or
volume of gas produced over the life of these gas wells.
C. CONSULTANT shall perform all those services set forth in individual task orders, if any,
which shall be attached to this Agreement and made a part hereof for all purposes as
separate agreements.
D. CONSULTANT will consult with and submit status reports to the Assistant City
Manager for Fiscal & Municipal Services, Airport Management, the City Attorney, and
their staffs. CONSULTANT shall not have to attend a City Council meeting unless
additional consultant fees to cover the cost of this audit are added to the maximum
compensation set forth in Article 5. CONSULTANT shall provide a final report
indicating its recommendations.
E. If there is any conflict between the terms of this Agreement and the exhibits attached to
this Agreement, the terms and conditions of this Agreement will control over the terms
and conditions of the attached exhibits or task orders.
ARTICLE 3
ADDITIONAL SERVICES
Additional services to be performed by the CONSULTANT, if authorized by the
OWNER; which are not included in the above-described Basic Services, are described as
follows:
A. Attending City Council meetings or appearing before regulatory agencies or courts as an
expert witness in any litigation, including, without limitation, testimony in rate
proceedings before the Texas Railroad, Commission, the Public Utilities Commission, or
other state and federal agencies.
B. Performance of additional audit services as indicated in a task order to be attached to the
Agreement if a more extensive audit is indicated by the CONSULTANT'S findings as a
result of the preliminary review if approved by the OWNER'S City Manager and these
additional audit services are recommended by the Airport Advisory Boazd.
C. Any other additional services specifically requested by the OWNER not included within
the scope of this Agreement and its exhibits.
ARTICLE 4
PERIOD OF SERVICE
This Agreement shall become effective upon execution of this Agreement by the
OWNER and the CONSULTANT and upon issue of a notice to proceed by the OWNER, and
shall remain in force for the period which may reasonably be required for the completion of the
Project, including Additional Services, if any, and any required extensions approved by the
OWNER, provided however, the Project shall be completed within 120 days of the date of the
notice to proceed, unless an extension of time is granted by the OWNER. This Agreement may
be sooner terminated in accordance with the provisions hereof. Time is of the essence in [his
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Agreement. The CONSULTANT shall make all reasonable efforts to complete the services set
forth herein as expeditiously as possible and to meet any schedule established by the OWNER in
Exhibit "A", acting through its City Manager or his designee.
ARTICLE 5
COMPENSATION
A. COMPENSATION TERMS:
1. "Subcontract Expense" is defined as expenses incurred by the CONSULTANT in
employment of others in outside firms for services.
2. "Direct Non-Labor Expense" is defined as that expense for any assignment
incurred by the CONSULTANT for supplies, transportation and equipment,
travel, communications, subsistence, and lodging away from home, and similar
incidental expenses in connection with that assignment.
B. BILLING AND PAYMENT: For and in consideration of the professional services to be
performed by the CONSULTANT herein, the OWNER agrees to pay, based on the cost
estimate detail at an hourly rate shown in Exhibit "B", from CONSULTANT to OWNER
and attached manpower and cost requirements to provide a preliminary audit of these gas
royalty payments on behalf of OWNER, a total fee, including reimbursement for direct
non-labor expenses not to exceed $6,000. Provided, if additional audit services are
recommended by the Aixport Advisory Board and approved by the City Manager or his
designee as indicated in Article 3, the total fee for both the preliminary audit and the
additional audit services, including reimbursement for direct non-labor expenses, shall
not exceed $15,500.
Partial payments to the CONSULTANT will be made on the basis of detailed monthly
statements rendered to and approved by the OWNER through its Assistant City Manager
for Fiscal & Municipal Services and its City Attorney or his designee; however, under no
circumstances shall any monthly statement for services exceed the value of the work
performed at the time a statement is rendered. The OWNER may withhold the final five
percent (5%) of the contract amount until completion of the Project.
Nothing contained in this Article shall require the OWNER to pay for any work which is
unsatisfactory, as reasonably determined by the City Manager or his designee, or which is
not submitted in compliance with the terms of this Agreement. The OWNER shall not be
required to make any payments to the CONSULTANT when the CONSULTANT is in
default under this Agreement.
It is specifically understood and agreed that the CONSULTANT shall not be authorized
to undertake any work pursuant to this Agreement which would require additional
payments by the OWNER for any charge, expense, or reimbursement above the
maximum not to exceed fee as stated, without first having obtained written authorization
from the OWNER. The CONSULTANT shall not proceed to perform the services listed
in Article 3 "Additional Services," without obtaining prior written authorization from the
OWNER.
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C. ADDITIONAL SERVICES: For additional services authorized in writing by the
OWNER in Article 3, the CONSULTANT shall be paid based on the Schedule of
Charges at an hourly rate shown in Exhibit "A". Payments for additional services shall
be due and payable upon submission by the CONSULTANT, and shall be in accordance
with subsection B hereof. Statements shall not be submitted more frequently than
monthly.
D. PAYMENT: If the OWNER fails to make payments due the CONSULTANT for
services and expenses within 60 days after receipt of the CONSULTANT'S undisputed
statement thereof, the amounts due the CONSULTANT will be increased by the rate of
one percent (1%) per month from the said sixtieth (60`h) day, and, in addition, the
CONSULTANT may, after giving seven days' written notice to the OWNER, suspend
services under this Agreement until the CONSULTANT has been paid in full all amounts
due for services, expenses, and chazges, provided, however, nothing herein shall require
the OWNER to pay the late chazge of one percent (1%) set forth herein if the OWNER
reasonably determines that the work is unsatisfactory, in accordance with this Article 5,
"Compensation."
ARTICLE 6
OBSERVATION AND REVIEW OF THE WORK
The CONSULTANT will exercise reasonable care and due diligence in discovering and
promptly reporting to the OWNER any defects or deficiencies in the work of the
CONSULTANT or any subcontractors or subconsultants.
ARTICLE 7
OWNERSHIP OF DOCUMENTS
All documents prepared or furnished: by the CONSULTANT (and CONSULTANT'S
subcontractors or subconsultants) pursuant to this Agreement aze instruments of service, and
shall become the property of the OWNER upon the termination of this Agreement. The
CONSULTANT is entitled to retain copies of all such documents. The documents prepared and
furnished by the CONSULTANT aze intended only to be applicable to this Project, and
OWNER'S use of these documents in other projects shall be at OWNER'S sole risk and expense.
In the event the OWNER uses any of the information or materials developed pursuant to this
Agreement in another project or for other purposes than specified herein, CONSULTANT is
released from any and all liability relating to their use in that project.
ARTICLE 8
INDEPENDENT CONTRACTOR
CONSULTANT shall provide services to OWNER as an independent contractor, not as
an employee of the OWNER. CONSULTANT shall not have or claim any right arising from
employee status.
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ARTICLE 9
INDEMNITY AGREEMENT
The CONSULTANT shall indemnify and save and hold harmless the OWNER and its
officers, agents, and employees from and against any and all liability, claims, demands, damages,
losses, and expenses, including, but not limited to court costs and reasonable attorney fees
incurred by the OWNER, and including without limitation, damages for bodily and personal
injury, death and property damage, resulting from the negligent acts or omissions of the
CONSULTANT or its officers, shazeholders, agents, or employees in the execution, operation, or
performance of this Agreement.
Nothing in this Agreement shall be construed to create a liability to any person who is not
a party to this Agreement, and nothing herein shall waive any of the parties' defenses, both at
law or equity, to any claim, cause of action, or litigation filed by anyone not a party to this
Agreement, including the defense of governmental immunity, which defenses are hereby
expressly reserved.
ARTICLE 10
INSURANCE
During the performance of the services under this Agreement, CONSULTANT shall
maintain the following insurance with an insurance company licensed to do business in the State
of Texas by the State Insurance Commission or any successor agency that has a rating with Best
Rate Carvers of at least an A- or above:
A. Comprehensive General Liability Insurance with bodily injury limits of not less than
$500,000 for each occurrence and not less than $500,000 in the aggregate, and with
property damage limits of not less than $100,000 for each occurrence and not less than
$100,000 in the aggregate.
B. Automobile Liability Insurance with bodily injury limits of not less than $500,000 for
each person and not less than $500,000 for each accident, and with property damage
limits of not less than $100,000 for each accident.
C. Worker's Compensation Insurance in accordance with statutory requirements, and
Employers' Liability Insurance with limits of not less than $100,000 for each accident.
D. Professional Liability Insurance with limits of not less than $1,000,000 annual aggregate.
E. The CONSULTANT shall furnish insurance certificates or insurance policies at the
OWNER's request to evidence such coverages. The insurance policies shall name the
OWNER as an additional insured on all such policies, and shall contain a provision that
such insurance shall not be canceled or modified without 30 days' prior written notice to
OWNER and CONSULTANT. In such event, the CONSULTANT shall, prior to the
effective date of the change or cancellation, serve substitute policies furnishing the same
coverage.
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ARTICLE 11
ARBITRATION AND ALTERNATE DISPUTE RESOLUTION
The parties may agree to settle any disputes under this Agreement by submitting the
dispute to arbitration or other means of alternate dispute resolution, such as mediation. No
azbitration or alternate dispute resolution arising out of or relating to this Agreement, involving
one party's disagreement, may include the other party to the disagreement without the other's
approval.
ARTICLE 12
TERMINATION OF AGREEMENT
A. Notwithstanding any other provision of this Agreement, either party may terminate by
giving 30 days' advance written notice to the other party.
B. This Agreement may be terminated in whole or in part in the event of either party
substantially failing to fulfil] its obligations under this Agreement. No such termination
will be affected unless the other party is given (1) written notice (delivered by certified
mail, return receipt requested) of intent to terminate and setting forth the reasons
specifying the non-performance, and not less than 30 calendar days to cure the failure;
and (2) an opportunity for consultation with the terminating party prior to termination.
C. If the Agreement is terminated prior to completion of the services to be provided
hereunder, CONSULTANT shall immediately cease all services and shall render a final
bill for services to the OWNER within 30 days after the date of termination. The
OWNER shall pay CONSULTANT for all services properly rendered and satisfactorily
performed and for reimbursable expenses to termination incurred prior to the date of
termination, in accordance with Article 5 "Compensation." Should the OWNER
subsequently contract with a new consultant for the continuation of services on the
Project, CONSULTANT shall cooperate in providing information. The CONSULTANT
shall turn over all documents prepared or furnished by CONSULTANT pursuant to this
Agreement to the OWNER on or before the date of termination, but may maintain copies
of such documents for its use.
ARTICLE 13
RESPONSIBILITY FOR CLAIMS AND LIABILITIES
Approval by the OWNER shall not constitute, nor be deemed a release of the
responsibility and liability of the CONSULTANT, its employees, associates, agents,
subcontractors, and subconsultants for the accuracy and competency of their designs or other
work; nor shall such approval be deemed to be an assumption of such responsibility by the
OWNER for any defect in the design or other work prepared by the CONSULTANT, its
employees, subcontractors, agents, and consultants.
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ARTICLE 14
NOTICES
All notices, communications, and reports required or permitted under this Agreement
shall be personally delivered or mailed to the respective parties by depositing same in the United
States mail to the address shown below, certified mail, return receipt requested, unless otherwise
specified herein. Mailed notices shall be deemed communicated as of three days' mailing:
To CONSULTANT:
Dan Lawton
Diversified Utility Consultants, Inc.
12113 Roxie Drive, Suite 110
Austin, Texas 78729
To OWNER:
City of Denton
Mark Nelson, Chief Transportation Officer
215 East McKinney St.
Denton, Texas 76201
All notices shall be deemed effective upon receipt by the party to whom such notice is
given, or within three days' mailing.
ARTICLE 15
ENTIRE AGREEMENT
This Agreement, consisting of ten pages and two exhibits, constitutes the complete and
final expression of the agreement of the parties, and is intended as a complete and exclusive
statement of the terms of their agreements, and supersedes all prior contemporaneous offers,
promises, representations, negotiations, discussions, communications, and agreements which
may have been made in connection with the subject matter hereof.
ARTICLE 16
SEVERABILITY
If any provision of this Agreement is found or deemed by a court of competent
jurisdiction to be invalid or unenforceable, it shall be considered severable from the remainder of
this Agreement and shall not cause the remainder to be invalid or unenforceable. In such event,
the parties shall reform this Agreement to replace such stricken provision with a valid and
enforceable provision which comes as close as possible to expressing the intention of the stricken
provision.
ARTICLE 17
COMPLIANCE WITH LAWS
The CONSULTANT shall comply with all federal, state, and local laws, rules,
regulations, and ordinances applicable to the work covered hereunder as they may now read or
hereinafter be amended.
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ARTICLE 18
DISCRIMINATION PROHIBITED
In performing the services required hereunder, the CONSULTANT shall not discriminate
against any person on the basis of race, color, religion, sex, national origin or ancestry, age, or
physical handicap.
ARTICLE 19
PERSONNEL
A. The CONSULTANT represents that' it has or will secure, at its own expense, all
personnel required to perform all the services required under this Ageement. Such
personnel shall not be employees or officers of, or have any contractual relations with the
OWNER. CONSULTANT shall inform the OWNER of any conflict of interest or
potential conflict of interest that may arise during the term of this Agreement.
B. All services required hereunder will be performed by the CONSULTANT or under its
supervision. All personnel engaged in work shall be qualified, and shall be authorized
and permitted under state and local laws to perform such services.
ARTICLE 20
ASSIGNABILITY
The CONSULTANT shall not assign any interest in this Agreement, and shall not
transfer any interest in this Agreement (whether by assignment, novation, or otherwise) without
the prior written consent of the OWNER.
ARTICLE 21
MODIFICATION
No waiver or modification of this Agreement or of any covenant, condition, or limitation
herein contained shall be valid unless in writing and duly executed by the party to be chazged
therewith, and no evidence of any waiver or modification shall be offered or received in evidence
in any proceeding arising between the parties hereto out of or affecting this Agreement, or the
rights or obligations of the parties hereunder, and unless such waiver or modification is in
writing and duly executed; and the parties further agree that the provisions of this section will not
be waived unless as set forth herein.
ARTICLE 22
MISCELLANEOUS
A. The following exhibits are attached to and made a part of this Agreement: Exhibit A -
Letter of Febnrazy 28, 2006, with CONSULTANT'S cost proposal as Exhibit B.
B. CONSULTANT agrees that OWNER shall, until the expiration of three yeazs after the
final payment under this Agreement, have access to and the right to examine any directly
pertinent books, documents, papers, and records of the CONSULTANT involving
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transactions relating to this Agreement. CONSULTANT agrees that OWNER shall have
access during normal working hours to all necessary CONSULTANT facilities and shall
be provided adequate and appropriate working space in order to conduct audits in
compliance with this section. OWNER shall give CONSULTANT reasonable advance
notice of intended audits.
C. Venue of any suit or cause of action under this Agreement shall lie exclusively in Denton
County, Texas. This Agreement shall be construed in accordance with the laws of the
State of Texas.
D. For the purpose of this Agreement, the key persons who will perform most of the work
hereunder shall be Jack Pous, Dan Lawton, Ruth Runyon Wenzel, and Sara Coleman.
However, nothing herein shall limit CONSULTANT from using other qualified and
competent members of its firm to perform the services required herein.
E. CONSULTANT shall commence, carry on, and complete any and all projects with all
applicable dispatch, in a sound, economical, and efficient manner and in accordance with
the provisions hereof. In accomplishing the projects, CONSULTANT shall take such
steps as are appropriate to ensure that the work involved is properly coordinated with
related work being carved on by the OWNER.
F. The OWNER shall assist the CONSULTANT by placing at the CONSULTANT'S
disposal all available information pertinent to the Project, including previous reports, any
other data relative to the Project, and arranging for the access thereto, and make all
provisions for the CONSULTANT to enter in or upon public and private property as
required for the CONSULTANT to perform services under this Agreement.
G. The captions of this Agreement are for. informational purposes only, and shall not in any
way affect the substantive terms or conditions of this Agreement.
IN WITNESS HEREOF, the City of Denton, Texas has caused this Agreement to be
executed by its duly authorized City Manager, and CONSULTAN~7T~ h~as executed this Agree ent
t~hrnonu/g_h its duly authorized undersigned officer on this the /~/L day of _~,
~~
CITY OF DENTON, TEXAS
~~~ ~~
HOWARD MARTIN
INTERIM CITY MANAGER
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ATTEST:
JENNIFER WALTERS, CITY SECRETARY
BY: ,Qi-
APPROVED AS TO LEGAL FORM:
EDWIN M. SNYDER, CITY ATTORNEY
_---
BY: ~/~
WITNESS:
BY: Q
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EXHIBIT A
DUCI
February 28, 2006
DIVERSIFIED UTILITX
CONSULTANTS, INC.
14119 HOXT.r nRIVF,. BliI1'.F. 7.? n. Av VrIP,'Px 78~Y9
SL^1.flS`flnxv. rm.9~ 4c7~4n00 Fn.R ~ r~ m af.9~9RA
Mr. Herbert C. Prouty
City Attorney
City of Denton
215 East McKinney Street
Denton, Texas 76201
Re:
Dear Mr. Prouty:
Per your request, Diversified Utility Consultants, Inc. ("DUCI") is submitting this
cost estimate to review and audit the royalty payments associated with the producing
gas well in the Ciry of Denton ("City"). It is DUCI's understanding that the Ciry has
three producing wells. The City has one well on Denton Municipal Electric property
and two wells at the airport owned by Stroud Energy.
The review of the royalty payments will consist of analyzing the provisions of
each royalty contract and all amendments to each contract, past royalty payments and
calculation of those payments, review of external documents filed at the Railroad
Commission of Texas and the State of Texas regarding amounts produced and
payments to the State.
Specifically, for the royalty payments related to the recently purchased Stroud
Energy wells, the review will consist of analyzing the past payments received by Dan
A. Hughes Company beginning in April 2004 through the most current payment
received from Stroud Energy. DUCT will review the accounting behind the
development of each payment, and verify that they are in compliance with the terms of
the contract and all amendments.
The cost estimate for a preliminary review of these three wells, based on
anticipated cooperation from the well owners regarding discovery, is $6,000.
Depending on DUCI's findings and direction from the City, a more comprehensive
audit may be required. Such audit would require extensive onsite review, additional
discovery and more in-depth analyses. DUCT has estimated the cost of the more
comprehensive audit would be an additional $9,500 or a total cost of $15,500. If
.necessary, a more accurate cost estimate can be made for the more comprehensive
audit after the preliminary review has been completed.
The following table breaks down DUCI's cost estimate by well:
Prellminarv Review Comprehensive Autllt
Stroud Energy Well #1-H $ 750 $1,000
Stroud Energy Well #2-H 4,500 13,500
Den[on Munlclpal Electric Well 750 1,_,000
TOTAL $~x Q Q $? `,~,a~.Q
We would like to thank you for allowing DUCT to submit this proposal. We are
prepared to commence work on this project immediately upon selection, and would
complete the project in a timely and efficient manner. Should you have any questions
with regards io this proposal or other matters, please feel free to contact Jack Pous or
Dan Lawton at (512) 257-2600.
Sincerely,
,~ ~ ~ ~ ~~~/ ~ mac.
DIVERSIFI D UTILITY CO ULTANTS, INC.
EXHIBIT B
MANPOWER AND COST REpUIREMENTS
TO PROVIDE REVIEW OF
STROUD ENERGY GAS WELLS 8 DENTON MUNICIPAL ELECTRIC WELL
ON BEHALF OF THE CITY OF DENTON
PRELIMINARY REVIEW
CHARGE LABOR REQUIREMENTS
HOURLY
CATEGORY HOURS RATE CHARGES TOTAL
PRINCIPALS'
Daniel Lawton 26 $150 $3,900
$~IOR CONSULTANTS
Sara Coleman 20 $100 $2,OOb
TOTAL LABOR 46 $5,900
EXPENSE REQUIREMENT
CHARGE
CATEGORY CHARGES TOTAL
Printing & Copying $25
Computer $Qp
Postage & Delivery $25
Phone $~p
Transportation gp
Hotel & Meals $p
Air Travel $p
TOTAL EXPENSE ~p
GRAND TOTAL 56.000
MANPOWER AND COST REOUI~2EMENTS
TO PROVIDE REVIEW OF
3TROUD ENERGY GAS WELLS & DENTON MUNICIPAL ELECTRIC WELL
ON BEHALF OF THE CITY OF DENTON
COMPREHENSIVE AUDIT
CHARGE
CATEGORY
PRINCIPALS:
Daniel Lawton
SENIOJ~CONSULTANTS:
Sara Coleman
TOTAL LABOR
LABOR REQUlRE1111ENTS
NOURLY
HOURS RATE .
48 $150
80 $1D0
128
EXPENSE REQUIREMENT
CHARGE
CATEGORY
Printing 8 Copying
Computer
Postage & Delivery
Phone
Transportation
Hotel & Meals
Air Travel
TOTAL EXPENSE
GRAND TOTAL
CHARGES TOTAL
$x.200
$e,ooD
$15,200
CH tOTAL
$135
$125
$30
$10
$o
$0
$0
$~QQ
15 500
S:\Our Documents\Contracts\06\Is[Amendmem-DUCT PSA for Hughes & Stroud.doc
FIRST AMENDMENT TO
AGREEMENT FOR PROFESSIONAL SERVICES
REGARDING AN AUDIT OF GAS ROYALTY PAYMENTS
STATE OF TEXAS §
COUNTY OF DENTON §
THIS FIRST AMENDMENT TO THAT CERTAIN AGREEMENT made and entered ,
into on the 7`s day of March, 2006, by and between the City of Denton, Texas, a Texas municipal
corporation, with its principal office at 215 East McKinney Street, Denton, Denton County,
Texas 76201, hereinafter called "OWNER" and Diversified Utility Consultants, Inc., with its
corporate office at 12113 Roxie Drive, Suite 110, Austin, Texas 78729, hereinafter called
"CONSULTANT," acting herein, by and through their duly authorized representatives
hereinafter referred to as Base Agreement.
WHEREAS, the Consultant has advised the City staff that it has been unable to complete
the audit within the original term of the Agreement due to the failure of both Stroud Energy, Ltd.
("Stroud") and Eagle Oil & Gas Company ("Eagle") to respond to the Consultant's request for
information and to provide the information necessazy to complete the audit; and
WHEREAS, Consultant has indicated that Stroud and Eagle's failure to respond is due to
the fact that neither Stroud nor Eagle aze accustomed to an audit review of this type and therefore
the data may not be readily available, it may take more time for them to accumulate the
requested information and that the failure to respond may also be impacted by the fact that ,
Stroud is in the process of being merged into Range Resources; NOW, THEREFORE,
WITNESSETH, that in consideration of the covenants and agreements herein contained,
the parties hereto do mutually agree as follows:
SECTION 1. The Base Agreement is hereby amended by amending Article 4 "Period of
Service" to read as follows:
ARTICLE 4
PERIOD OF SERVICE
This Agreement shall become effective upon execution of this Agreement by the
OWNER and the CONSULTANT and upon issue of a notice to proceed by the OWNER, and
shall remain in force for the period which may reasonably be required for the completion of the
Project, including Additional Services, if any, and any required extensions approved by the
OWNER, provided however, the Project shall be completed by October 31, 2006, unless an
extension of time is granted by the OWNER. This Agreement may be sooner terminated in
accordance with the provisions hereof. Time is of the essence in this Agreement. The
CONSULTANT shall make all reasonable efforts to complete the services set forth herein as
expeditiously as possible and to meet any schedule established by the OWNER in Exhibit "A",
acting through its or his designee.
S:\Our Documents\Contracts\O6\lst Amendment-DUCT PSA for Hughes & Stroud.doc
IN WITNESS HEREOF, the City of Denton, Texas has caused this Agreement to be
executed by its duly authorized Interim City Manager, and CONSULTANT has executed this
Agreement through its duly authorized undersigned officer on this the 2~~' day of
~Tu(~ ,3r/a6.
CITY OF DENTON, TEXAS
„'IV ~ " ~ \
HOWARD MARTIN
INTERIM CITY MANAGER
ATTEST:
JENNIFER WALTERS, CITY SECRETARY
BY: ~U.,
APPROVED AS TO LEGAL FORM:
EDWIN M. SNYDER, CITY ATTOR
(i
BY: E' ~
DNERSIFIED UTILITY CONSULTANTS,
IN.
DAN LAWTO , PRINCIP
WITNESS:
BY:
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