Common use of Fair Value Measurements Clause in Contracts

Fair Value Measurements. Fair Values – Recurring (1) NGL prices used in the valuation are generally at the lower end of the range in the early years and increase over time. (2) Natural gas prices used in the valuations are generally at the lower end of the range in the early years and increase over time. (3) The producer counterparty to the embedded derivative has the option to renew the gas purchase agreement and the related keep-whole processing agreement for two successive five-year terms after 2022. The embedded gas purchase agreement cannot be renewed without the renewal of the related keep-whole processing agreement. Due to the significant number of years until the renewal options are exercisable and the high level of uncertainty regarding the counterparty’s future business strategy, the future commodity price environment, and the future competitive environment for midstream services in the Southern Appalachian region, management determined that a 50 percent probability of renewal for the first five-year term and 75 percent for the second five-year term are appropriate assumptions. Included in this assumption is a further extension of management’s estimates of future frac spreads through 2032.