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6. Lease
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3 Months Ended |
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Mar. 31, 2015
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| Leases [Abstract] | |
| 6. Lease |
Kinder Morgan Crude & Condensate, LLC Lease
On July 15, 2014, the Company entered into an Equipment Lease/Option to Purchase Agreement (“Lease”) with Kinder Morgan Crude & Condensate, LLC (“Kinder Morgan”). In accordance with the terms and conditions of the agreement, Kinder Morgan agreed to lease and test the effectiveness of the Company’s AOT technology and equipment on one of Kinder Morgan’s operating pipelines. Equipment provided under the Lease includes a single AOT Midstream pressure vessel with a maximum flow capacity of 5,000 gallons per minute.
The initial term (“Initial Term”) of the Lease is four months, with an option to extend the Lease for up to a maximum of 84 months. During the Initial Term, either the Company or Kinder Morgan may terminate the Agreement for any reason on 45 days’ written notice. Lease payments shall be $20,000 per month; provided however, that in the event the Equipment is removed from service at its initial location during the Initial Term, the monthly lease payments shall be reduced to $5,000 until the Equipment is placed back in service at its new location, at which time the Lease payments shall resume at $20,000 per month. The agreement further provides that Kinder Morgan shall have an option to purchase the equipment during the term of the Lease for a fixed price of between $600,000 and $1,200,000, depending upon the date of purchase.
The equipment was delivered to Kinder Morgan in December 2014 and installed in March 2015. In early April 2015, during pre-start testing, an electrical short was discovered, and the Company and Kinder Morgan mutually agreed to replace the AOT pressure vessel with another unit. The replacement unit was cleaned and field prepped for installation, and delivered to Kinder Morgan in late April, 2015. Installation is expected to be completed in May 2015 and testing expected to resume in June 2015. |