UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 8-K

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CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

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Date of Report (date of earliest event reported): June 30, 2020

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Sanchez Midstream Partners LP

(Exact name of registrant as specified in its charter)

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(Former name or former address, if changed since last report.)

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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

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◻ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

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◻ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

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◻ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

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◻ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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Securities registered pursuant to Section 12(b) of the Act:

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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company◻

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

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Explanatory Note

As previously disclosed, on August 11, 2019, Sanchez Energy Corporation (“SN”) 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, Rockin L Ranch Company, LLC, SN Payables, LLC, SN EF Maverick, LLC (“SN Maverick”) and SN UR Holdings, LLC (collectively with SN, the “Debtors”), filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”).

On June 30, 2020, SN emerged from Chapter 11 as a privately held corporation under the name Mesquite Energy, Inc.

Item 1.01Entry into a Material Definitive Agreement

As previously disclosed, on June 6, 2020, (i) Sanchez Midstream Partners LP (the “Partnership”) and Sanchez Midstream Partners GP LLC, the sole general partner of the Partnership (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 and effective as of June 6, 2020 (as amended, the “Settlement Agreement”) with the Debtors, SP Holdings, LLC, the sole member of the General Partner (“SP Holdings”), and TPL SouthTex Processing Company LP (“Targa”, and collectively with each of the Partnership, the General Partner, Catarina Midstream, Seco Pipeline, Carnero G&P, the Debtors and SP Holdings, the “Parties”, and each a “Party”).

On June 30, 2020, the Bankruptcy Court entered an order approving the Settlement Agreement and authorizing the Parties to perform thereunder, and accordingly the Parties took the following actions:

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Catarina Gathering Amendment

The Catarina Gathering Amendment amends that certain Firm Gathering and Processing Agreement, dated as of October 14, 2015, as amended effective June 30, 2017, by and between Catarina Midstream and SN Catarina (as amended, the “Catarina Gathering Agreement”). The Catarina Gathering Amendment provided, among other things, (i) a new Gathering & Processing Fee (as defined in the Catarina Gathering Amendment), (ii) removal of SN Catarina’s minimum volume commitments and related deficiency fee obligations and (iii) expansion of the dedicated acreage thereunder.

The Catarina Gathering Amendment will become effective upon the satisfaction of certain closing conditions described in the Settlement Agreement.

The foregoing description of the Catarina Gathering Amendment does not purport to be complete and is qualified in its entirety by reference to such document, which is filed as Exhibit 10.1 hereto and incorporated herein by reference.

New Seco Pipeline Agreements

The Seco Catarina Agreement governs the receipt, transportation and delivery of certain natural gas on a firm basis and/or interruptible basis, as applicable, on the Seco Pipeline system located

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in LaSalle and Webb Counties, Texas. Under the Seco Catarina Agreement, SN Catarina dedicated to Seco Pipeline for transportation on the Seco Pipeline all volumes of residue gas owned or controlled by SN Catarina or its affiliates (other than SN Maverick) that are produced from natural gas delivered to SN Catarina under the Catarina Gathering Agreement, at the tailgate of the Raptor Plant and specifically excluding gas that is processed at any of the Carnero G&P processing plants in Bee County, Texas.

Under the Seco Comanche Agreement, SN Maverick dedicated to Seco Pipeline for transportation on the Seco pipeline all volumes of residue gas owned or controlled by SN Maverick or its affiliates (other than SN Catarina) that are produced from natural gas delivered to SN Maverick under that certain Firm Gas Gathering, Processing and Purchase Agreement, dated effective as of April 1, 2018, as amended, between SN Maverick and Carnero G&P, at the tailgate of the Raptor Plant. The Seco Comanche Agreement also provides that SN Maverick will enter into a ratification agreement with each Comanche Shipper (as defined in the Seco Comanche Agreement), under which such Comanche Shipper will ratify or otherwise commit itself to performance under the Seco Comanche Agreement.

Subject to earlier termination and renewals as set forth therein, each New Seco Pipeline Agreement has a primary term that will expire on March 31, 2033. Each New Seco Pipeline Agreement will become effective upon the satisfaction of certain closing conditions described in the Settlement Agreement.

The foregoing descriptions of the New Seco Pipeline Agreements do not purport to be complete and are qualified in their entirety by reference to the Seco Catarina Agreement and Seco Comanche Agreement, which are filed as Exhibit 10.2 and Exhibit 10.3, respectively, hereto and incorporated herein by reference.

Item 9.01Financial Statements and Exhibits.

(d) Exhibits.

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*Certain portions of this exhibit (indicated by “[***]”) have been omitted pursuant to Item 601(b)(10) of Regulation S-K.

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SIGNATURES

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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

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Exhibit 10.1

Certain portions of this exhibit (indicated by “[***]”) have been omitted pursuant to Item 601(b)(10) of Regulation S-K. Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

AMENDMENT NO. 2 TO FIRM GATHERING AND PROCESSING AGREEMENT

This AMENDMENT NO. 2 TO FIRM GATHERING AND PROCESSING AGREEMENT (this “Second Amendment”), executed on the Approval Date but deemed effective as of the Closing Date (“Amendment Effective Time”), is by and between SN Catarina, LLC, a Delaware limited liability company (“Producer”) and Catarina Midstream, LLC, a Delaware limited liability company (“Gatherer”).  Producer and Gatherer may be referred to in this Second Amendment individually as a “Party” and collectively as the “Parties.”

RECITALS

WHEREAS, Producer and Gatherer entered into that certain Firm Gathering and Processing Agreement, dated as of October 14, 2015 (the “Original Gathering Agreement”), as amended by that certain Amendment No. 1 to Firm Gathering and Processing Agreement, dated as of June 30, 2017 (the “First Amendment”, and together with the Original Gathering Agreement, the First Amendment and this Second Amendment, collectively, the “Gathering Agreement”), pursuant to which Gatherer provides certain gathering, transportation, and processing services to Producer;

WHEREAS, on August 11, 2019, Sanchez Energy Corporation (“Sanchez”) and certain of its subsidiaries, including Producer, filed for protection under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”);

WHEREAS, on April 6, 2020, Sanchez and certain of its subsidiaries, including Producer, filed that certain Joint Chapter 11 Plan of Reorganization of Sanchez Energy Corporation and its Debtor Affiliates with the Bankruptcy Court at Docket No. 1109, as amended by that certain Amended Joint Chapter 11 Plan of Reorganization of Sanchez Energy Corporation and its Debtor Affiliates filed with the Bankruptcy Court at Docket No. 1149 on April 26, 2020, as further amended by that certain Second Amended Joint Chapter 11 Plan of Reorganization of Sanchez Energy Corporation and its Debtor Affiliates, filed with the Bankruptcy Court at Docket No. 1198 on April 30, 2020 (as amended from time to time, the “Chapter 11 Plan”); and

WHEREAS, in connection with the effectiveness of the Chapter 11 Plan, the Parties desire to amend the Gathering Agreement to institute a new Gathering & Processing Fee, to remove Producer’s minimum volume commitments and related deficiency fee obligations, and to revise the definition of Dedicated Acreage, together with such other amendments, as more fully set forth herein.

NOW, THEREFORE, in consideration of the mutual covenants contained herein and for other valuable consideration, the Parties hereby agree as follows:

Section 1.1      Definitions.  Capitalized terms used throughout this Second Amendment and not defined herein have the meanings ascribed to them in the Gathering Agreement.

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Section 1.2      Amendments.

(a)        All references to the “Agreement” in the Gathering Agreement shall be deemed to include the terms and conditions of the First Amendment and this Second Amendment, as applicable.

(b)        Exhibit A to the Gathering Agreement is hereby deleted in its entirety and replaced with Exhibit A attached hereto.

(c)        Exhibit B to the Gathering Agreement is hereby deleted in its entirety and replaced with Exhibit B attached hereto.

(d)        Exhibit C to the Gathering Agreement is hereby deleted in its entirety and replaced with Exhibit C attached hereto.

(e)        Exhibit D to the Gathering Agreement is hereby deleted in its entirety and replaced with Exhibit D attached hereto.

(f)        Exhibit E to the Gathering Agreement is hereby deleted in its entirety and replaced with Exhibit E attached hereto.

(g)        Exhibit F to the Gathering Agreement is hereby deleted in its entirety and replaced with Exhibit F attached hereto.  The title of Exhibit F is hereby amended to “Pipelines” in all instances throughout the Gathering Agreement.

(h)        The following definitions are added to Section 1.1 of the Gathering Agreement in the appropriate alphabetic order:

“Approval Date” means the date on which the Bankruptcy Court enters the Approval Order.

“Approval Order” means an order of the Bankruptcy Court reasonably acceptable to the parties to the Settlement Agreement, entered pursuant to Rule 9019 of the Federal Rules of Bankruptcy Procedure, approving the Settlement Agreement, which order has not been reversed, vacated or stayed.

“Bankruptcy Cases” means the chapter 11 cases of the Debtors pending before the Bankruptcy Court, styled In re Sanchez Energy Corporation, et al., Case No. 19-34508 (MI) (Bankr. S.D. Tex.) (Jointly Administered).

“Bankruptcy Court” means the United States Bankruptcy Court for the Southern District of Texas.

“Chapter 11 Plan” has the meaning set forth in the recitals.

“Closing Date” means the date the Closing Notice is executed and filed with the Bankruptcy Court.

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“Closing Notice” means a notice of the occurrence of Closing (as defined in the Settlement Agreement and attached thereto as Exhibit G).

“Debtors” means, collectively, prior to the Effective Date, Sanchez Energy Corporation and each of its direct and indirect subsidiaries that are debtors and debtors-in-possession in the Bankruptcy Cases, including SN EF Maverick, LLC and SN Catarina, LLC, and, after the Effective Date, such entities as reorganized pursuant to the Chapter 11 Plan.

“First Amendment” means that certain Amendment No. 1 to Firm Gathering and Processing Agreement, dated as of June 30, 2017 with a deemed effective time of 12:01 a.m. on April 1, 2017, between Producer and Gatherer.

“Pipelines” has the meaning set forth in Section 18(a).

“Second Amendment” means that certain Amendment No. 2 to Firm Gathering and Processing Agreement, dated as the Approval Date but effective as of the Closing Date, between Producer and Gatherer.

“Settlement Agreement” means that certain Settlement Agreement, dated as of June 6, 2020, by and among the Debtors, Catarina Midstream LLC, Carnero G&P LLC, Seco Pipeline, LLC, Sanchez Midstream Partners, LP and TPL SouthTex Processing Company LP.

“Termination Notice” has the meaning set forth in Section 9.1(a).  “Transferee” means a Person who receives all or part of the Pipelines through a Transfer pursuant to Section 18.

(i)         The following definitions are deleted from Section 1.1 of the Gathering Agreement:

“Contract Quarter”; “Commitment Term”; “Election Notice”; “Excess Gas Volume”; “Excess Oil Volume”; “Gas Deficiency Volume”; “Gas Commitment Term”; “Minimum Quarterly Quantity of Gas”; “Minimum Quarterly Quantity of Oil”; “Oil Deficiency Volume”; “Oil Commitment Term”; “Quarterly Deficiency Payments”; “Quarterly Gas Deficiency Payment”; “Quarterly Oil Deficiency Payment”; and “Third Party Agreement”.

(j)         The following definitions from Section 1.1 of the Gathering Agreement are deleted in their entirety and replaced with the following:

“Cash Value” means the market value (expressed in U.S. dollars) of the Pipelines subject to the proposed Transfer, based on the amount that a willing buyer would pay a willing seller in an arm’s length transaction.

“Control” (including its derivatives and similar terms) means (a) with respect to any Person, possessing, directly or indirectly, the power to direct or cause the direction of the management and policies of any such relevant Person by

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ownership of voting interest, by contract or otherwise; provided, however, that solely having the power to act as the operator of a Person’s day-to-day commercial operations, without otherwise having the direct or indirect power to direct or cause the direction of the management and policies of such Person, shall not satisfy the foregoing definition of “Control” and (b) with respect to any Products or water, such Products or water with respect to which Producer has the contractual right or obligation (pursuant to a marketing, gathering, transportation, processing, agency, operating, unit or similar agreement) to market, gather, transport or process such Products or water and Producer elects or is obligated to market, gather, transport or process such Products or water.

“Dedicated Leases” means Producer’s mineral leases located within the area described on Exhibit C – Part 1, now existing or hereafter acquired, as such mineral leases may be in effect during the Term, including those mineral leases set forth on Exhibit C - Part 3 attached hereto and made a part hereof.

“Right of First Refusal” has the meaning set forth in Section 18(a).

“Transfer” has the meaning set forth in Section 18(a).

(k)        Section 2.2 of the Gathering Agreement is hereby deleted in its entirety and replaced with the following:

Subject to the terms of the Dedicated Instruments, Producer exclusively dedicates and commits the Dedicated Acreage to this Agreement and to deliver to Gatherer under this Agreement, as and when produced, (a) all of the Dedicated Products and water owned by Producer and (b) all of the third party Gas, Oil and water under the Control of Producer, in each case produced during the Term from the Dedicated Acreage.  The Gathering and Processing Fee provided for herein, and the dedication contemplated hereby, shall apply to (a) all of the Dedicated Products and water owned by Producer and (b) all of the third party Gas, Oil and water under the Control of Producer, in each case produced during the Term from the area described on Exhibit C – Part 1, including, for the avoidance of doubt, all of the foregoing produced from wells or leases within the area described on Exhibit C – Part 1 acquired or developed on or after the Closing Date.

(l)         Section 2.5 of the Gathering Agreement is hereby deleted in its entirety and replaced with the following:

Section 2.5      Memorandum.  In connection with the execution of the Second Amendment and from time to time during the Term, the Parties will execute, acknowledge, deliver and record a “short form” memorandum of this Agreement substantially in the form of Exhibit E identifying the Dedicated Acreage and identifying the lands, leases and wells within the Dedicated Acreage in which Producer and its Affiliates own interests, which Producer will file of record in the real property records of each county that contains Dedicated Acreage. Notwithstanding the foregoing, Gatherer shall also have the right to file and record

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such memorandum of this Agreement and any necessary supporting documents or instruments in the real property records of each county that contains Dedicated Acreage.

(m)       Section 3.1(b) of the Gathering Agreement is hereby deleted in its entirety and replaced with the following:

(b)        Reserved;

(n)        Section 3.3 of the Gathering Agreement is hereby deleted in its entirety and replaced with the following:

Section 3.3      Reserved.

(o)        Section 3.5 of the Gathering Agreement is hereby deleted in its entirety and replaced with the following:

Section 3.5     Gathering System Interruptions.  Producer’s Products entitled to Firm service may be, from time to time, interrupted, curtailed, or disrupted (herein, a “Disruption”) to the extent reasonably necessary (as determined by Gatherer acting in its reasonable discretion) for any of the following reasons:  (i) safe operation of the Gathering System, (ii) an ongoing event of Force Majeure affecting Gatherer, (iii) subject to the Gatherer’s compliance with the other terms and conditions of this Agreement, the inability of a Delivery Point to receive Producer’s Products, and (iv) upon reasonable advance notice to Producer, maintenance, expansions or modifications of the Gathering System from time to time, provided that with respect to this item Gatherer will reasonably cooperate with Producer to minimize adverse effects due to such work. In the event of a Disruption, Gatherer will give Producer prompt notice with reasonable detail of the reason for the Disruption and a good faith estimate of the duration and extent of such Disruption.  In such event Gatherer shall not be in breach or default of its obligations under this Agreement and shall have no liability to Producer in connection with or resulting from any such curtailment; provided, however, that Gatherer shall, at Producer’s request, release from dedication under this Agreement all of Producer’s volumes interrupted or curtailed as the result of such Disruption.  When Gatherer reestablishes Producer’s Firm service as to such volumes interrupted or curtailed by a Disruption, Gatherer shall give Producer notice of such fact and Producer shall recommence deliveries to Gatherer of the volumes that would have otherwise been released from dedication as a result of such Disruption on the first Day of the Month following the receipt of such notice and all such volumes shall again be subject to this Agreement.

(p)        The title to Article 5 of the Gathering Agreement is hereby deleted in its entirety and replaced with the following:

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ARTICLE 5

FEES, BILLING, AND PAYMENT

(q)        Section 5.2 of the Gathering Agreement is hereby deleted in its entirety and replaced with the following:

Section 5.2      Reserved.

(r)        Section 5.3(a)(vi) of the Gathering Agreement is hereby deleted in its entirety and replaced with the following:

(vi)       Reserved.

(s)        Section 5.3(b) of the Gathering Agreement is hereby amended by deleting “including any amounts for prior period adjustments, late payments and the Quarterly Deficiency Payments, if any” and replaced with “including any amounts for prior period adjustments and late payments”.

(t)         Section 5.4 of the Gathering Agreement is hereby deleted in its entirety and replaced with the following:

Section 5.4      Annual Rate Adjustment.  Effective on each anniversary of the Effective Date through the Term of this Agreement, the Gathering and Processing Fee (other than related to water) shall be adjusted by the product of the fees then in effect multiplied by the percentage increase (if any) between the Consumer Price Index (All Urban Consumers (CPI-U); U.S. City Average; All items, 1982-1984 reference base), issued by the United States Department of Labor, Bureau of Labor Statistics (“BLS”) (the “CPI”) for January of the current year and the CPI for January of the immediately preceding year; provided that in no event shall the fees hereunder be increased by more than 3% from the fees in effect for the immediately preceding year, or decreased. If the 1982-1984 reference base is no longer used as the standard reference base by BLS, then the standard reference base shall be that established from time to time by BLS as the replacement for the CPI.  For the avoidance of doubt and notwithstanding anything to the contrary, the Gathering and Processing Fee (including related to water) shall not be adjusted other than as specifically set forth in this Section 5.4.

(u)        Section 9.1(a) of the Gathering Agreement is hereby deleted in its entirety and replaced with the following:

This Agreement will commence on the Effective Date and remain in full force and effect until the 15th anniversary of the Effective Date (the “Primary Term”).  Unless terminated by Producer as provided below in this Section 9.1(a), upon the expiration of the Primary Term, this Agreement shall renew automatically for additional terms of twelve (12) months each thereafter (each, a “Renewal Term”) on the existing terms (including the then-existing rates) for up to four (4) total Renewal Terms.  No later than the date which is one hundred eighty (180) Days prior to the expiration of the Primary Term or Renewal Term (as applicable),

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Producer may elect in writing (a “Termination Notice”) to terminate this Agreement.  Upon Producer’s delivery to Gatherer of the Termination Notice, the Parties agree to negotiate in good faith an extension of this Agreement on the same terms and conditions except with a Gathering and Processing Fee which is at the then prevailing market rate for comparable gathering systems in the South Texas producing region.  The period of time that this Agreement remains in effect pursuant to this Section 9.1 is referred to as the “Term”.

(v)        Sections 9.1(b)-(f) of the Gathering Agreement are hereby deleted in their entirety.

(w)       Section 10.2(a) of the Gathering Agreement is hereby deleted in its entirety and replaced with the following:

Producer’s Oil received and delivered at each Receipt Point will meet the following quality specifications:

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(x)        Section 11.3 of the Gathering Agreement is hereby deleted in its entirety and replaced with the following:

Section 11.3    Performance Excused; Mitigation Duty.  In the event a Party is rendered unable, wholly or in part, by an event of Force Majeure, to carry out its obligations under this Agreement, such Party shall be excused from performance under this Agreement and shall not be liable for any failure to perform (except as set forth in the last sentence of this Section 11.3) during a Force Majeure event, and neither Gatherer nor Producer will be liable in damages to the other for any act, omission, or circumstances occasioned by or in consequence of such Force Majeure event (except as set forth in the last sentence of this Section 11.3), in each case, to the extent affected by such Force Majeure event. Except as provided herein, the Party experiencing a Force Majeure event shall use commercially reasonable efforts to mitigate the effects of any Force Majeure event and to remedy any inability to perform its obligations hereunder due to such events as promptly as reasonably practicable.  It is understood and agreed that the settlement of strikes or lockouts shall be entirely with the discretion of the Party affected thereby, and that the above requirement that any Force Majeure shall be mitigated using commercially reasonable efforts shall not require the settlement of strikes or lockouts by acceding to the demands of the opposing party when such course is inadvisable in the sole

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discretion of the Party affected thereby.  Notwithstanding anything to the contrary in this Section 11.3, no Party shall be excused from any indemnity obligation or any payment obligation for amounts due or becoming due under this Agreement by reason of this Section 11.3.

(y)        Section 11.5 of the Gathering Agreement is hereby deleted in its entirety.

(z)        Section 16.1 of the Gathering Agreement is hereby deleted in its entirety and replaced with the following:

Section 16.1   Notices.  Any notice, request, demand, statement, bill, payment or other communication provided for in this Agreement or any notice which any Party may desire to give to the other, will be in writing and will be considered as duly delivered if delivered by mail, email, commercial courier, facsimile or personally, to the address or facsimile numbers of the applicable Parties, and to the attention of their respective contact persons, as follows:

Gatherer:         Catarina Midstream, LLC

c/o Sanchez Midstream Partners LP

1360 Post Oak Blvd, Suite 2400

Houston, TX 77056

Attn: Chief Financial Officer

Email: cward@sanchezmidstream.com

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with a copy (which shall not constitute notice) to:

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Hunton Andrews Kurth LLP

600 Travis St, Suite 4200

Houston, Texas 77002

Attention: Philip Haines

Email: phaines@huntonak.com

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Producer:         SN Catarina, LLC

c/o Sanchez Energy Corporation

Pennzoil Place

700 Milam Street, Ste. 600

Houston, TX 77002

Attn: General Counsel

Fax: (713) 756-2784

Email: gkopel@sanchezog.com

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with a copy (which shall not constitute notice) to:

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Morrison & Foerster LLP

250 West 55th Street

New York, New York 10019

Facsimile: (212) 468-7900

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Attention: Dennis L. Jenkins and James A. Newton

Email: djenkins@mofo.com and jnewton@mofo.com

Notwithstanding the foregoing of this Section 16.1, statements, bills and invoices may be delivered via email or other electronic means as may be agreed to between the Parties and nominations and changes thereto may be delivered pursuant to Section 6.1. Either Party may at any time and from time to time by written notice to the other Party designate different persons or addresses for notice.

Notices will be deemed received:  (a) if sent by first class mail, three (3) Business Days after the postmark date when properly addressed and deposited in the United States mail, first class postage prepaid; (b) if sent by email, upon transmission so long as the sender does not receive an automatic system notification that such email was not deliverable; (c) if sent by facsimile, upon the sending Party’s receipt of its facsimile machine’s confirmation of successful transmission, provided that if the Day on which such facsimile is sent is not a Business Day or is after 5:00 p.m. on a Business Day in the receiving Party’s jurisdiction, then such facsimile will be deemed to have been delivered on the next Business Day; (d) if sent by commercial courier, upon the date of actual delivery as evidenced by the recipient’s written acknowledgment of receipt; and (e) if delivered personally, upon the date of actual delivery.

(aa)      Section 17.6 of the Gathering Agreement is hereby deleted in its entirety and replaced with the following:

Section 17.6   Consent to Disconnection.  If this Agreement terminates for any reason whatsoever, Producer hereby consents and agrees that Gatherer shall be entitled to disconnect, at its sole cost and expense, any wells, leases, pipeline connections or other facilities utilized by Producer that deliver Producer’s Products at the Receipt Points under this Agreement after ten (10) Days prior written notice.  “Disconnect” for the purposes of this Section 17.6 means to remove metering facilities, pipelines and any other interconnection facilities through which Producer’s Products was delivered under this Agreement that are either owned by Gatherer, or owned by the pipeline with which Gatherer contracted for the gathering or transportation services at the Delivery Point(s).  This consent and agreement by Producer in this paragraph applies to both Gatherer and Gatherer’s Affiliates, without distinction, and is intended in all respects to satisfy the laws, rules or regulations of any applicable jurisdiction.

(bb)      The reference to Section 9.1(b)-(f) in Section 17.9 of the Gathering Agreement is hereby deleted in its entirety.

(cc)      A new Section 18 is added to the Gathering Agreement as follows:

Section 18       Right of First Refusal.

(a)        If at any time Producer desires to directly Transfer all or any portion of the pipelines located in Dimmit, La Salle and Webb Counties, Texas as described

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in more detail in Exhibit F (the “Pipelines”) to a ready, willing and able unaffiliated Transferee in a bona fide, arms-length transaction (a “Transfer”), Gatherer shall have a right of first refusal to purchase the Pipelines from Producer (the “Right of First Refusal”); provided that, for purposes of this Section 18, a Transfer (i) shall not include a sale of all or substantially all of the assets or equity of any of Producer, its Affiliates or Sanchez Energy Corporation, a package sale, or a merger, reorganization, consolidation or other similar transaction involving either Producer, its Affiliates or Sanchez Energy Corporation, including in connection with any bankruptcy proceeding , and (ii) shall include any proposed lease of all or any portion of the Pipelines. For the avoidance of doubt, if Producer elects to sell a portion of the assets constituting the Pipelines in a Transfer, but not all of the Pipelines, the Right of First Refusal shall apply only to the portion of the Pipelines which Producer elects to sell.

(b)        Producer shall disclose relevant final terms and conditions of a Transfer of the Pipelines in a notice to Gatherer, which notice shall include a description of the transaction in which Producer proposed to Transfer the Pipeline(s), including the Cash Value if the Transfer is not a Cash Transfer.  Gatherer shall have the right to acquire the Pipelines subject to such proposed Transfer from Producer on the same such terms and conditions as were negotiated with the proposed Transferee, if, within 15 days after Producer's notice, Gatherer delivers to Producer a counter-notification that it accepts such terms and conditions (subject to the other provisions of this Section 18, where applicable).  If Gatherer does not deliver such counter-notification within such 15 day period, such Transfer to the proposed Transferee may, subject to the other provisions of this Agreement, including the restrictions set forth in Section 2.6 and Article 13, proceed without further notice under terms and conditions no more favorable to the Transferee than those set forth in the notice to Gatherer; provided that such Transfer shall be concluded within 180 days from the date of the original notice to Gatherer. If such Transfer fails to be concluded within such 180 day period and the parties thereto desire thereafter to proceed with such proposed Transfer or the terms and conditions of such Transfer change to be more favorable to the Transferee than those contained in the applicable notice to Gatherer, in each case, Producer shall be required to re- offer the assets subject to the Transfer to Gatherer in accordance with the terms and conditions of this Section 18.

(c)        In the event of a Transfer that is not a Cash Transfer, Producer shall include in its notice to Gatherer a statement of the proposed Cash Value of the Pipelines involved in the Transfer as provided by the proposed Transferee, and Gatherer shall have a right to acquire such Pipelines on the same final terms and conditions as were negotiated with the proposed Transferee except that it shall pay the Cash Value in immediately available funds at the closing of the Transfer in lieu of the consideration payable in the third party offer, and the terms and conditions of the applicable instruments shall be modified as necessary to reflect the acquisition of the applicable Pipelines (and no other properties) for cash.

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(d)        For purposes of Section 18(c), the Cash Value included by Producer in its notice to Gatherer shall be conclusively deemed correct unless Gatherer gives notice to Producer within 15 days after receipt of Gatherer's notice stating that it does not agree with the statement of the Cash Value, stating the Cash Value it believes is correct, and providing any supporting information that it believes is helpful.  In such event, the Parties shall have 15 days from the date Producer receives notice from Gatherer in which to attempt to negotiate in good faith an agreement on the applicable Cash Value; provided that, after such 15 day period of good faith negotiation, to the extent that the Cash Value cannot be mutually agreed upon, the provisions of this Section 18 shall not apply to such proposed Transfer so long as the Transfer concludes within such 180 day period from the date of the notice.

Section 1.3     Ratification.  Except as expressly amended, modified and supplemented hereby, the provisions of the Gathering Agreement are hereby ratified and confirmed in all respects and shall remain in full force and effect.  All references to the Gathering Agreement shall hereafter be deemed to refer to the Gathering Agreement as amended, including by this Second Amendment.

Section 1.4      Integrated Transaction.  Gatherer and Producer intend and agree that the Gathering Agreement and this Second Amendment (including all Exhibits hereto), and the recorded memorandum required hereby constitute and are a single integrated transaction and such documents contain the entire agreement between the Parties with respect to the subject matter of this single, indivisible contract as of the Amendment Effective Time.

Section 1.5       Governing Law.  This Second Amendment shall be governed and construed in accordance with the laws of the State of Texas, without reference to conflicts of laws principles that might apply the laws of another jurisdiction.

[Signature page follows.]

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IN WITNESS WHEREOF, this Second Amendment has been duly executed and delivered by each of the Parties on the date first above written, but effective for all purposes as of the Amendment Effective Time.

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[Signature Page to Amendment No. 2 to Firm Gathering and Processing Agreement]

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EXHIBIT A

Receipt Points; Delivery Point(s)

Receipt Points (AND CGPs)

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14

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