NPV. Means, with respect to any Proved Reserves expected to be produced from any Oil and Gas Properties, the net present value, discounted at 9% per annum, of the future net revenues expected to accrue to the Borrower's and its Subsidiaries' collective interests in such reserves during the remaining expected economic lives of such reserves. Each calculation of such expected future net revenues shall be made in accordance with the then existing standards of the Society of Petroleum Engineers,
... provided that in any event: (a) appropriate deductions shall be made for severance and ad valorem taxes, and for operating, gathering, transportation and marketing costs required for the production and sale of such reserves, (b) appropriate adjustments shall be made for hedging operations; provided that: (i) Hydrocarbon Hedge Agreements with counterparties other than those which at the time such Hydrocarbon Hedge Agreement is made are either (A) a Lender or an Affiliate of a Lender, or (B) a counterparty rated at least A- or better by Standard & Poor's or A3 or better by Moody's Investor Services, shall not be taken into account to the extent that such Hydrocarbon Hedge Agreements improve the position of or otherwise benefit the Borrower or any of its Subsidiaries; and (ii) Hydrocarbon Hedge Agreements with counterparties which at the time such Hydrocarbon Hedge Agreement is made are either (A) a Lender or an Affiliate of a Lender, or (B) a counterparty rated at least A- or better by Standard & Poor's or A3 or better by Moody's Investor Services, shall not be subject to the limits in clause (c) immediately following, (c) the NPV for any particular reserves shall be the higher amount of the amounts computed using: (i) (A) for natural gas, the Gas Strip Price, provided that if any Gas Strip Price is greater than $5.50 per MMBtu, the price shall be capped at $5.50 per MMBtu and (B) for crude oil, the Oil Strip Price, provided that if any Oil Strip Price is greater than $36 per barrel, the price shall be capped at $36 per barrel and (ii) (A) for natural gas, the Alternate Gas Price and (B) for crude oil, the Alternate Oil Price, and (d) the cash-flows derived from the pricing assumptions set forth in clause (c) above shall be further adjusted to account for the historical basis differentials for each month during the preceding 12-month period calculated by comparing realized crude oil and natural gas prices to Cushing, Oklahoma and Henry Hub NYMEX prices for each month during such period. As used in this definition, (i) "Gas Strip Price" means, for any calendar year following the effective date of an Engineering Report (or, with respect to the initial partial calendar year following the effective date of any Internal Engineering Report, for such partial year), the unweighted average of the quotations for deliveries of natural gas at Henry Hub, Louisiana for each future month during such year (or partial year) for which a futures price is quoted on the New York Mercantile Exchange (provided that for years after the last December for which such a futures price is quoted, the price used shall be the Gas Strip Price for the year ending with such December), (ii) "Oil Strip Price" means, for any calendar year following the effective date of an Engineering Report (or, with respect to the initial partial calendar year following the effective date of any Internal Engineering Report, for such partial year), the unweighted average of the quotations for deliveries of light, sweet crude oil at Cushing, Oklahoma for each future month during such year (or partial year) for which a futures price is quoted on the New York Mercantile Exchange (provided that for years after the last December for which such a futures price is quoted, the price used shall be the Oil Strip Price for the year ending with such December), and (iii) "Alternate Gas Price" and "Alternate Oil Price", respectively, mean the prices for natural gas and crude oil, respectively, if designated by the Agent from time to time and for such periods as it determines in its sole discretion and provides to Borrower. Each Gas Strip Price and Oil Strip Price shall be determined as of the effective date of the Engineering Report in which such price is to be used, provided that if such effective date is not a Business Day such determination shall be made on the first Business Day thereafter.
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