<PAGE>   1
   
                                                                   EXHIBIT 10.20
    





                          PURCHASE AND SALE AGREEMENT


                                    BETWEEN


                              HARCOR ENERGY, INC.
                                   AS SELLER


                                      AND


                             PENROC OIL CORPORATION
                                    AS BUYER
<PAGE>   2
                          PURCHASE AND SALE AGREEMENT

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                            PAGE
                                                                            ----
<S>        <C>                                                                <C>
ARTICLE 1.    PURCHASE AND SALE . . . . . . . . . . . . . . . . . . . . . . .  1
       1.1    The Property  . . . . . . . . . . . . . . . . . . . . . . . . .  1
       1.2    Exclusions  . . . . . . . . . . . . . . . . . . . . . . . . . .  2
       1.3    Ownership of Production from the Property   . . . . . . . . . .  2

ARTICLE 2.    PURCHASE PRICE  . . . . . . . . . . . . . . . . . . . . . . . .  3
       2.1    Purchase Price  . . . . . . . . . . . . . . . . . . . . . . . .  3
       2.2    Allocated Values  . . . . . . . . . . . . . . . . . . . . . . .  3

ARTICLE 3.    REPRESENTATIONS AND WARRANTIES  . . . . . . . . . . . . . . . .  3
       3.1    Reciprocal Representations and Warranties   . . . . . . . . . .  3
       3.2    Buyer's Representations and Warranties  . . . . . . . . . . . .  4
       3.3    Seller's Representations and Warranties   . . . . . . . . . . .  5
       3.4    Notice  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  5
       3.5    Representations and Warranties Exclusive  . . . . . . . . . . .  5
       3.6    Survival of Representations and Warranties  . . . . . . . . . .  5

ARTICLE 4.    WARRANTY DISCLAIMER.  . . . . . . . . . . . . . . . . . . . . .  5
       4.1    Title; Encumbrances   . . . . . . . . . . . . . . . . . . . . .  5
       4.2    Other Property Warranties   . . . . . . . . . . . . . . . . . .  5
       4.3    Information About the Property  . . . . . . . . . . . . . . . .  6

ARTICLE 5.    PHYSICAL INSPECTION; ENVIRONMENTAL ASSESSMENT; CASUALTY LOSS. .  6
       5.1    Access to Records   . . . . . . . . . . . . . . . . . . . . . .  6
       5.2    Inspection  . . . . . . . . . . . . . . . . . . . . . . . . . .  6
       5.3    Environmental Assessment and Indemnification  . . . . . . . . .  7
       5.4    Casualty Losses   . . . . . . . . . . . . . . . . . . . . . . .  8

ARTICLE 6.    PREFERENTIAL RIGHTS/CONSENTS; TITLE DEFECTS . . . . . . . . . .  9
       6.1    Preferential Purchase Rights and Consents to Assign   . . . . .  9
       6.2    Title Defects   . . . . . . . . . . . . . . . . . . . . . . . . 10
       6.3    Right Not to Close  . . . . . . . . . . . . . . . . . . . . . . 12

ARTICLE 7.    CLOSING; FINAL SETTLEMENT . . . . . . . . . . . . . . . . . . . 13
       7.1    Closing Date  . . . . . . . . . . . . . . . . . . . . . . . . . 13
       7.2    Conditions to Closing   . . . . . . . . . . . . . . . . . . . . 13
       7.3    Closing   . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
       7.4.   Post-Closing Obligations  . . . . . . . . . . . . . . . . . . . 16
</TABLE>





                                      -i-
<PAGE>   3
<TABLE>
<S>                                                                           <C>
ARTICLE 8.    ASSUMPTION OF OBLIGATIONS . . . . . . . . . . . . . . . . . . . 17
       8.1    Ownership and Operations  . . . . . . . . . . . . . . . . . . . 17
       8.2    Plugging and Abandonment Obligations  . . . . . . . . . . . . . 18

ARTICLE 9.    INDEMNITIES . . . . . . . . . . . . . . . . . . . . . . . . . . 18
       9.1    Definition of Claims  . . . . . . . . . . . . . . . . . . . . . 18
       9.2    APPLICATION OF INDEMNITIES  . . . . . . . . . . . . . . . . . . 18
       9.3    Buyer's Indemnity   . . . . . . . . . . . . . . . . . . . . . . 19
       9.4    Seller's Indemnity  . . . . . . . . . . . . . . . . . . . . . . 19

ARTICLE 10.   TAXES AND EXPENSES. . . . . . . . . . . . . . . . . . . . . . . 19
       10.1   Recording Expenses  . . . . . . . . . . . . . . . . . . . . . . 19
       10.2   Ad Valorem, Real Property and Personal Property Taxes   . . . . 19
       10.3   Severance Taxes   . . . . . . . . . . . . . . . . . . . . . . . 19
       10.4   Sales Taxes   . . . . . . . . . . . . . . . . . . . . . . . . . 20

ARTICLE 11.   INTERIM OPERATION OF THE PROPERTY . . . . . . . . . . . . . . . 20
       11.1   Interim Operations  . . . . . . . . . . . . . . . . . . . . . . 20
       11.2   Buyer's Approval  . . . . . . . . . . . . . . . . . . . . . . . 20

ARTICLE 12.   MISCELLANEOUS   . . . . . . . . . . . . . . . . . . . . . . . . 20
       12.1   Production Imbalances   . . . . . . . . . . . . . . . . . . . . 20
       12.2   Press Releases  . . . . . . . . . . . . . . . . . . . . . . . . 21
       12.3   Notices   . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
       12.4   Entirety of Agreement; Amendment  . . . . . . . . . . . . . . . 21
       12.5   Successors and Assigns  . . . . . . . . . . . . . . . . . . . . 21
       12.6   Governing Law   . . . . . . . . . . . . . . . . . . . . . . . . 21
       12.7   Exhibits  . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
       12.8   Litigation Costs  . . . . . . . . . . . . . . . . . . . . . . . 22
       12.9   General   . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
       12.10  Texas Deceptive Trade Practices Act Waiver  . . . . . . . . . . 22
</TABLE>

EXHIBITS

       A      Leases and Certain Related Contracts
       B      Warranted Property, Allocation of Value
       C      Non Foreign Affidavit
       D      Assignment and Bill of Sale
       E      Release Liens
       F      Certain Consents and Preferential Purchase Rights
       G      Disclosure

SCHEDULES

       1.2.2





                                      -ii-

<PAGE>   4
                          PURCHASE AND SALE AGREEMENT


       This Purchase and Sale Agreement (the "Agreement"), dated December 3,
1997, but effective as hereinafter set forth at 7:00 a.m., local time, on
January 1, 1998 (the "Effective Date"), is between HarCor Energy, Inc., a
Delaware corporation ("Seller"), and Penroc Oil Corporation, a Texas
corporation ("Buyer").

                                   RECITALS:

       Seller owns certain oil and gas properties located in Texas, New Mexico,
Alabama, California, Oklahoma, North Dakota, Wyoming, Michigan and Louisiana,
and related contractual rights and desires to sell these properties and
transfer these contractual rights.

       Buyer desires to purchase these properties from Seller and acquire these
contractual rights.

       Accordingly, in consideration of the mutual promises contained in this
Agreement, Buyer and Seller agree as follows:

ARTICLE 1.  PURCHASE AND SALE

       1.1    The Property.  Subject to the terms of this Agreement (including,
without limitation, the exclusions provided in Section 1.2), Seller agrees to
sell and assign to Buyer and Buyer agrees to purchase and acquire from Seller
all of Seller's right and title to, and interest in, the following
(collectively, subject to the exclusions provided in Section 1.2, the
"Property"):

              1.1.1  The oil, gas and mineral leases and other interests in oil
and gas described in Exhibit A attached hereto (the "Leases") and all rights
and privileges appurtenant to the Leases;

              1.1.2  All rights in any unit in which the Leases are included,
to the extent that these rights arise from and are associated with the Leases,
including without limitation all rights derived from any unitization, pooling,
operating, communitization or other agreement or from any declaration or order
of any governmental authority;

              1.1.3  All oil, gas and condensate wells (whether producing, not
producing or abandoned), and water source, water injection and other injection
or disposal wells located on the Leases or lands unitized or pooled with the
Leases;

              1.1.4  All equipment, facilities and other personal property on
the Leases used in developing or operating the Leases or producing, treating,
storing, compressing, processing or transporting hydrocarbons on or from the
Leases;

              1.1.5  All easements, rights-of-way, licenses, permits,
servitudes and similar interests applicable to or used in operating the Leases
or the personal property described above, including without limitation those
described in Exhibit A, in each case to the extent they are
<PAGE>   5
assignable or transferable and subject to any consents to assignment or
transfer to which they may be subject;

              1.1.6  All contracts and contractual rights and interests
relating to the Leases and the other property described or referred to in this
Section 1.1, including (without limitation) unit agreements, farmout
agreements, farm in agreements, operating agreements, participation agreements,
exploration agreements, and hydrocarbon sales, purchase, gathering,
transportation, treating, marketing, exchange, processing and fractionating
agreements (collectively, the "Related Contracts"), including without
limitation those Related Contracts described in Exhibit A, in each case to the
extent they are assignable or transferable and subject to any consents to
assignment or transfer to which they may be subject;

              1.1.7  All seismic data and interpretive geological maps owned by
and in the possession of Seller to the extent, but only to the extent, such
maps and data cover the lands covered by the Leases or the Related Contracts or
lands pooled with lands covered by the Leases, to the extent the same is
assignable or transferable and subject to any confidentiality agreements, use
restrictions and consents to assignment or transfer to which the same may be
subject; and

              1.1.8  Without limiting and in addition to the foregoing, all of
Seller's rights, titles and interests in and to the Leases, the lands described
in the Leases and the lands described or referred to in Exhibit A, and in and
to oil and gas leases, working interests, overriding royalty interests, mineral
interests, royalty interests and all other interests and property of every kind
and character, insofar as the same cover or relate to such lands without
limitation as to depth, and the physical property thereon or used or obtained
for use in connection therewith, even though such rights, titles and interests
be incorrectly or insufficiently described or referred to in, or a description
thereof be omitted from, Exhibit A.

       1.2    Exclusions.  The Property sold and assigned under this Agreement
does not include:

              1.2.1  Trade credits, accounts and notes receivable, and
adjustments or refunds (including without limitation transportation tariff
refunds, take-or-pay claims, and audit adjustments) attributable to the
Property with respect to any period before the Effective Date or with respect
to any production prior to the Effective Date; and

              1.2.2  All claims, causes of action, rights under contracts or
applicable law, and other rights (a) relating to or arising out of the
ownership or operation of the Leases and other property described in Section
1.1 prior to the Effective Date, or (b) relating to any liabilities and
obligations retained by Seller or for which Seller is obligated to indemnify
Buyer hereunder arising out of the ownership or operation of the Leases and
other property described in Section 1.1 between the Effective Date and the
Closing, such claims and causes of action described in this Section 1.2.2 to
include (without limitation) those claims and causes of action listed in
Schedule 1.2.2.

       1.3    Ownership of Production from the Property.  If the Closing
occurs, (I) Seller owns all merchantable oil, gas, condensate and distillate
("Hydrocarbons") produced from the Property before the Effective Date, and (ii)
Buyer owns all Hydrocarbons produced from the Property on and after the
Effective Date.





                                      -2-
<PAGE>   6
ARTICLE 2.  PURCHASE PRICE

       2.1    Purchase Price.  Buyer shall pay Seller $13.2 Million for the
Property (the "Purchase Price"), subject to any adjustments to the Purchase
Price made at Closing.  Buyer shall, upon execution of this Agreement, pay the
Escrow Agent (as defined in Section 7.3.4) by wire transfer or certified funds
of cash $500,000 (the "Earnest Money Deposit").  In the event the Closing
occurs, the Earnest Money Deposit shall be applied upon the Purchase Price as
set forth in Section 7.3.2(I).  Anything in this Agreement to the contrary
notwithstanding, in the event the Closing does not occur, the Escrow Agent
shall pay to Seller and Seller shall be entitled to receive and retain the
Earnest Money Deposit (together with any interest earned thereon) only in the
event that:  (I) the conditions contained in this Agreement to which the duties
and obligations of Buyer are subject as set forth in Section 7.2 shall have
been fulfilled, (ii) Seller shall not have materially breached this Agreement,
and (iii) Buyer materially breaches this Agreement by failing or refusing to
close the sale as provided herein on the Closing Date or Buyer terminates this
Agreement.  In the event such sale is not closed and the Escrow Agent pays the
Earnest Money Deposit to Seller as provided in this Section 2.1, the Earnest
Money Deposit shall constitute liquidated damages in lieu of all other damages
(and as Seller's sole remedy in such event).  The parties hereby acknowledge
that the extent of damages to Seller occasioned by such failure or refusal by
Buyer would be impossible or extremely impractical to ascertain and that the
amount of the Earnest Money Deposit is a fair and reasonable estimate of such
damages under the circumstances.  In the event the Earnest Money Deposit is
neither applied upon the Purchase Price pursuant to Section 7.3.2(I) nor paid
to and retained by Seller pursuant to the foregoing provisions of this Section
2.1, the Escrow Agent shall return the Earnest Money Deposit to Buyer on or
before the date on or before which Buyer is entitled to receive it pursuant to
the other provisions of this Agreement.  If the sale contemplated hereby is not
consummated at Closing because of a breach of Seller's obligations hereunder,
this Agreement shall not terminate and Buyer shall have the right of specific
performance of the obligations of Seller hereunder by giving written notice of
such election to Seller within thirty (30) days after the scheduled Closing.
If Buyer fails to notify Seller of its election to exercise specific
performance within such thirty (30) day period, this Agreement shall terminate
and neither party shall have any further obligation to the other hereunder,
other than liabilities hereunder arising prior to such termination and those
obligations that by their terms survive termination.  In the event Buyer elects
to seek specific performance as provided for above and it is subsequently
determined by the court in which such proceeding is filed that specific
performance cannot be granted to Buyer because such remedy is unavailable to
Buyer, then, in such event, Buyer shall be entitled to all other remedies
available in law or in equity.

       2.2    Allocated Values.  The Purchase Price has been allocated by Buyer
and Seller among certain wells and other properties that are included as part
of the Property.  The wells and other properties described or referred to in
Exhibit B are herein collectively referred to as the "Warranted Property."  The
portion of the Purchase Price allocated to each Warranted Property (the
"Allocated Value") is set forth in Exhibit B.

ARTICLE 3.  REPRESENTATIONS AND WARRANTIES

       3.1    Reciprocal Representations and Warranties.  Seller and Buyer each
represent and warrant to the other that:





                                      -3-
<PAGE>   7
              3.1.1  Corporate Authority.  It is a corporation duly organized,
validly existing and in good standing under the laws of its state of
incorporation, is duly qualified to carry on its business in the States of
Texas, New Mexico, Alabama, California, Oklahoma, North Dakota, Wyoming,
Michigan and Louisiana (or the failure to be so qualified in any of such states
would not have a material adverse effect on Seller or the Property), and has
all the requisite corporate power and authority to enter into and perform this
Agreement.

              3.1.2  Requisite Approvals.  It has taken all necessary actions
pursuant to its Certificate of Incorporation, By-laws and other governing
documents to fully authorize it to consummate the transaction contemplated by
this Agreement.

              3.1.3  Validity of Obligation.  This Agreement and all documents
it is to execute and deliver on or before the Closing Date have been or will be
duly executed by its appropriate officials and constitute or will constitute
valid and legally binding obligations, enforceable against it in accordance
with the terms of this Agreement and such documents, except as such
enforceability may be limited by applicable bankruptcy, insolvency, and other
statutes and laws affecting the rights of creditors, and except in respect of
equitable remedies.

              3.1.4  Impediments to Consummation of Agreement.  Its executing,
delivering and performing this Agreement does not conflict with or violate any
agreement or instrument to which it is a party, or any law, rule, regulation,
ordinance, judgment, decree or order to which it is subject, subject to
compliance by Seller with any preferential purchase right or consent
requirements applicable to the Property.

              3.1.5  Bankruptcy.  There are no bankruptcy, reorganization or
receivership proceedings pending, being contemplated by, or to its actual
knowledge, threatened against it.

              3.1.6  Broker's Fees.  It has not incurred any obligation for
brokers, finders or similar fees for which the other party would be liable.

       3.2    Buyer's Representations and Warranties.  Buyer represents and
warrants to Seller that:

              3.2.1  Independent Evaluation.  Buyer is an experienced and
knowledgeable investor in the oil and gas business.  Buyer has been advised by
and has relied solely on its own expertise and legal, tax, reservoir
engineering and other professional counsel concerning this transaction, the
Property and the value thereof, as determined by Buyer's examination of
Seller's records and inspection of the Property, and the representations,
warranties and covenants made by the Seller in this Agreement.

              3.2.2  Eligibility.  Buyer is eligible under all applicable laws
and regulations to own the Property, including without limitation the Leases.

              3.2.3  Securities Laws. Buyer is acquiring the Property for its
own account for the purpose of investment and not for any distribution or re-
sale in violation of any applicable state or federal securities law.





                                      -4-
<PAGE>   8
       3.3    Seller's Representations and Warranties.  Seller represents and
warrants to Buyer that:

              3.3.1  Lawsuits and Claims.  Except as set forth on Exhibit G,
there is no judgment, order, decree or award, or suit, action or
administrative, arbitration or other proceeding or governmental investigation
of any kind in existence or pending or, to Seller's knowledge, threatened in
writing against Seller which has a material adverse effect on the Property or
the value thereof, and Seller has not received or been advised in writing of
any unsatisfied request for information, notice, administrative inquiry or
claim (including but not limited to those from the U.S. Environmental
Protection Agency or a state or local environmental agency) with respect to the
Property.

              3.3.2  Tax Partnerships.  The Property is not subject to any tax
partnerships.

       3.4    Notice.  Seller and Buyer shall each give the other prompt
written notice upon becoming aware of any matter materially affecting any of
its representations or warranties or those of the other party under this
Article 3 or rendering any such warranty or representation untrue.

       3.5    Representations and Warranties Exclusive.  All representations
and warranties contained in this Agreement are exclusive, and are given in lieu
of all other representations and warranties, express or implied.

       3.6    Survival of Representations and Warranties.  The representations,
warranties, and indemnities made or provided for in this Agreement shall
survive the Closing and shall not be deemed to have merged with the separate
representations, warranties and covenants made in the Assignment and Bill of
Sale, except that the representations and/or warranties of Buyer and Seller
under this Agreement shall survive for a period of one year after the Closing
Date, except that Seller's warranties contained in Section 3.3 shall expire at
Closing; Buyer's sole remedy with respect to Seller's warranties contained in
Section 3.3 shall be to terminate the Agreement pursuant to Section 7.1 prior
to the Closing.  Seller's liability for breach of warranties and
representations made by Seller pursuant to this Agreement shall in any event
not exceed the Purchase Price as adjusted hereunder.

ARTICLE 4.  WARRANTY DISCLAIMER.

       4.1    Title; Encumbrances.  IF THE CLOSING OCCURS, SELLER SHALL CONVEY
THE PROPERTY TO BUYER WITHOUT WARRANTY OF TITLE, EXPRESS OR IMPLIED, AS
PROVIDED IN THE ASSIGNMENT AND BILL OF SALE TO BE DELIVERED PURSUANT TO SECTION
7.3.1.

       4.2    Other Property Warranties.  SELLER SELLS AND TRANSFERS THE
PROPERTY TO BUYER WITHOUT ANY EXPRESS, STATUTORY OR IMPLIED WARRANTY OR
REPRESENTATION OF ANY KIND, INCLUDING WARRANTIES RELATING TO (I) THE CONDITION
OR MERCHANTABILITY OF THE PROPERTY, (II) THE FITNESS OF THE PROPERTY FOR A
PARTICULAR PURPOSE, OR (III) TITLE TO THE PROPERTY.  SUBJECT TO THE PROVISIONS
OF SECTION 5.3, BUYER HAS INSPECTED, OR BEFORE CLOSING WILL HAVE INSPECTED OR
BEEN GIVEN THE OPPORTUNITY TO INSPECT, THE PROPERTY AND IS SATISFIED AS TO THE





                                      -5-
<PAGE>   9
PHYSICAL AND ENVIRONMENTAL CONDITION (BOTH SURFACE AND SUBSURFACE) OF THE
PROPERTY AND ACCEPTS THE PROPERTY "AS IS", "WHERE IS", AND "WITH ALL FAULTS."

       4.3    Information About the Property.  EXCEPT FOR THE REPRESENTATIONS
AND WARRANTIES PROVIDED IN ARTICLE 3, SELLER MAKES NO WARRANTY OR
REPRESENTATION, EXPRESS, STATUTORY OR IMPLIED, AS TO (I) THE ACCURACY,
COMPLETENESS, OR MATERIALITY OF ANY DATA, INFORMATION OR RECORDS FURNISHED TO
BUYER IN CONNECTION WITH THE PROPERTY; (II) THE QUALITY AND QUANTITY OF
HYDROCARBON RESERVES (IF ANY) ATTRIBUTABLE TO THE PROPERTY; (III) THE ABILITY
OF THE PROPERTY TO PRODUCE HYDROCARBONS, INCLUDING WITHOUT LIMITATION
PRODUCTION RATES, DECLINE RATES AND RECOMPLETION OPPORTUNITIES; (IV) GAS
BALANCING INFORMATION, ALLOWABLES OR OTHER REGULATORY MATTERS, (V) THE PRESENT
OR FUTURE VALUE OF THE ANTICIPATED INCOME, COSTS OR PROFITS, IF ANY, TO BE
DERIVED FROM THE PROPERTY, OR (VI) THE ENVIRONMENTAL CONDITION OF THE PROPERTY.
ANY AND ALL DATA, INFORMATION OR OTHER RECORDS FURNISHED BY SELLER ARE PROVIDED
TO BUYER AS A CONVENIENCE AND BUYER'S RELIANCE ON OR USE OF THE SAME IS AT
BUYER'S SOLE RISK.

ARTICLE 5.  PHYSICAL INSPECTION; ENVIRONMENTAL ASSESSMENT; CASUALTY LOSS

       5.1    Access to Records.  Except to the extent Seller is restricted
from disclosing such information by existing agreements with third parties,
Seller shall give Buyer, and Buyer's authorized representatives, at mutually
agreeable times before Closing, access to all contract, land,  lease,
accounting, well, production and engineering records and pipeline and gathering
system files and all environmental permits and filings and supporting
documentation for such filings in connection with compliance with environmental
requirements, to the extent such data, records, files and documents are in
Seller's possession and relate to the Property (all of the foregoing, subject
to the exclusions stated above, being herein collectively called "Property
Records").  Buyer may photocopy the Property Records at its sole expense.
Buyer shall keep (and cause its representatives to keep) confidential all
information made available to Buyer in accordance with the provisions of the
confidentiality agreement previously executed by Buyer, unless and until
Closing occurs.  The confidentiality agreement previously executed by Buyer
will continue in force unless and until Closing occurs, at which time it will
terminate as to the Property, it being further understood and agreed that Buyer
shall be bound by the confidentiality obligations of the Related Contracts
assumed by Buyer pursuant to Article 8 of this Agreement.

       5.2    Inspection.  Before the Closing, Seller will cooperate with Buyer
in attempting to secure from third party operators access to any portion of the
Property operated by them for Buyer and its representatives, at their sole risk
and expense, to conduct reasonable inspections of the Property.  BUYER SHALL
REPAIR ANY DAMAGE TO THE PROPERTY RESULTING FROM ITS INSPECTION AND SHALL
INDEMNIFY, DEFEND AND HOLD SELLER AND EACH SUCH THIRD PARTY OPERATOR HARMLESS
FROM AND AGAINST ANY AND





                                      -6-
<PAGE>   10
ALL LOSSES, DAMAGES, OBLIGATIONS, CLAIMS, LIABILITIES, EXPENSES (INCLUDING
COURT COSTS AND ATTORNEY'S FEES), OR CAUSES OF ACTION ARISING FROM BUYER
INSPECTING AND OBSERVING THE PROPERTY, INCLUDING, WITHOUT LIMITATION, CLAIMS
FOR PERSONAL INJURIES OR DEATH OF EMPLOYEES OF THE BUYER, ITS CONTRACTORS,
AGENTS, CONSULTANTS AND REPRESENTATIVES, AND PROPERTY DAMAGES, REGARDLESS OF
WHETHER SUCH CLAIMS ARE CAUSED BY THE SOLE OR CONCURRENT NEGLIGENCE OF SELLER
OR ANY SUCH THIRD PARTY OPERATOR OR THE CONDITION OF THE PROPERTY.

       5.3    Environmental Assessment and Indemnification.

              5.3.1  "Adverse Environmental Conditions" means contaminations or
conditions that would require in the aggregate $100,000 or more of out of
pocket costs and expenses to remedy and that are not otherwise permanently
authorized by permit or law, resulting from the existence or any discharge,
release, disposal, production, storage, treatment, or any other activities on,
in or from the Property, or the migration or transportation from other lands to
the Property, prior to the Closing Date, of any wastes, pollutants,
contaminants, hazardous materials or other materials or substances that are
subject to regulation under any laws, rules or regulations relating to the
protection of health or the environment ("Environmental Laws"), including, but
not limited to, the Clean Air Act, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Federal Water Pollution Control
Act, the Safe Drinking Water Act, the Toxic Substance Control Act, the
Hazardous and Solid Waste Amendments Act of 1984, the Superfund Amendments and
Reauthorization Act of 1986, the Hazardous Materials Transportation Act, the
Clean Water Act, the National Environmental Policy Act, the Endangered Species
Act, the Fish and Wildlife Coordination Act, the National Historic Preservation
Act and the Oil Pollution Act of 1990, as well as any state and local
regulation or law governing the same, similar or related matters.

              5.3.2  Buyer shall advise Seller promptly of any Adverse
Environmental Conditions discovered after the date hereof as a result of its
investigation of the Property and the estimated costs for remediating such
conditions.  Buyer shall provide such information regarding such Adverse
Environmental Conditions as Seller may reasonably request.  If Seller receives
timely notice from Buyer not later than two (2) business days prior to the
Closing Date of any Adverse Environmental Conditions, (a) Seller shall have the
right

       (i)    to agree to remedy such Adverse Environmental Conditions to
              Buyer's reasonable satisfaction, all at Seller's sole cost and
              expense, not later than thirty (30) days after the Closing Date,
              in which case the amount to be paid to the Seller at the Closing
              shall be reduced by an amount equal to the agreed cost of
              remedying such Adverse Environmental Conditions (the "Remediation
              Amount") and the Buyer shall pay to the Escrow Agent at the
              Closing an amount equal to the Remediation Amount in accordance
              with the provisions of Section 7.3.4, or





                                      -7-
<PAGE>   11
       (ii)   if the parties have agreed upon an adjustment to the Purchase
              Price in respect of such Adverse Environmental Conditions, to
              reduce the Purchase Price by the amount of such adjustment, in
              which event Seller shall have no obligation or liability in
              respect of such Adverse Environmental Conditions,

and (b) if the reasonable cost of remedying all of the Adverse Environmental
Conditions exceeds $750,000, either party shall have the right to terminate
this Agreement.  Each party shall notify the other of any election under the
preceding sentence no later than two business days prior to Closing.  If Seller
elects to terminate this Agreement pursuant to the foregoing provision, the
Escrow Agent shall pay to Buyer the Earnest Money Deposit (together with any
interest earned thereon) within three (3) business days of receipt of such
cancellation notice by the party to whom it was addressed.  If Buyer elects to
terminate this Agreement pursuant to the foregoing provision, the Escrow Agent
shall pay to Seller and Seller shall be entitled to receive and retain the
Earnest Money Deposit (together with any interest earned thereon).  Seller
shall have no liability or obligation to Buyer under this Section 5.3.2 for any
Adverse Environmental Condition for which Seller did not receive timely written
notice of such condition not later than two (2) business days prior to the
Closing Date.  Buyer shall grant Seller and its representatives such access to
the Property as may be reasonably necessary provided such access does not
interfere with Buyer's operations.

              5.3.3  Except for any costs or expenses incurred by Seller in
discharging any remediation obligations under Section 5.3.2, if the Closing
occurs Buyer shall indemnify, defend and hold Seller harmless from and against
any and all claims, demands, causes of action, liabilities and obligations, and
all costs and expenses (including, without limitation, reasonable attorneys'
fees) associated therewith, arising out of or relating to any discharge,
release, disposal, production, storage, treatment or any activities on, in or
from the Property, or the migration or transportation from any other lands to
the Property, whether before or after the Effective Date, of materials or
substances that are presently, or become in the future, subject to regulation
under Environmental Laws, whether such Environmental Laws are presently
existing or are hereafter enacted, INCLUDING, WITHOUT LIMITATION, ANY CLAIMS,
DEMANDS, CAUSES OF ACTION, LIABILITIES, OR OBLIGATIONS ARISING IN WHOLE OR IN
PART FROM THE SOLE OR CONCURRENT NEGLIGENCE OR GROSS NEGLIGENCE OF SELLER.

       5.4    Casualty Losses.  If there is any loss resulting from destruction
of Property by fire or other casualty (a "Casualty Loss") before the Closing
Date, Seller shall notify Buyer promptly after Seller learns of such event.
Seller shall have the right, but not the obligation to cure the Casualty Loss
by repairing such damage or, in the case of personal property or fixtures,
replacing them with equivalent items, no later than the date of Closing, all to
Buyer's reasonable satisfaction.  If any uncured Casualty Loss exists at
Closing, the Purchase Price shall be reduced by the aggregate reduction in the
value of the Property as a result of such Casualty Loss, as determined by the
mutual agreement of the parties.  If the parties are unable to agree on the
reduction in the value of the Property as a result of such Casualty Loss, such
reduction in value shall be determined by arbitration pursuant to Section
6.2.4, the Property will be conveyed to Buyer at Closing without a reduction in
the Purchase Price because of the Casualty Loss, and within ten business days
after the parties receive the determination of the arbitrators Seller shall pay
to Buyer, by wire transfer of immediately available funds, the amount of the
reduction in value of the Property as a result of the Casualty Loss,





                                      -8-
<PAGE>   12
together with interest at ___% per anum (the "Interest Rate") from (and
including) the Closing Date to (but excluding) the date such payment is made.

ARTICLE 6.  PREFERENTIAL RIGHTS/CONSENTS; TITLE DEFECTS

       6.1    Preferential Purchase Rights and Consents to Assign.

              6.1.1  If any of the Property is subject to preferential purchase
rights, rights of first refusal, or similar rights (collectively "Preferential
Rights"), or consents to assign, lessor's approvals or similar rights
(collectively, "Consents"), Seller shall on the date of this Agreement (I)
notify the holders of the Preferential Rights and Consents that it intends to
sell the Property to Buyer, (ii) in the case of a Preferential Right, notify
the holder of such right that the price for the portion of the Property covered
by the Preferential Right is the Allocated Value of such interest, subject to
adjustment in the same manner that the Purchase Price is subject to adjustment
hereunder, (iii) provide them with any other information about the sale of the
Property to which they are entitled, and (iv) in the case of Consents, ask the
holders of the Consents to consent to the assignment of the affected Property
to Buyer.  Seller shall promptly notify Buyer whether Preferential Rights are
exercised, waived or deemed waived because of the expiration of the period
within which the Preferential Right may be exercised, or if any Consents are
given or denied.  Seller will not be liable to Buyer if any Preferential Rights
are exercised, or any Consents are denied, but the Purchase Price shall be
subject to adjustment to the extent provided below.

              6.1.2  If, before Closing, (I) any Preferential Right is validly
exercised or (ii) any Consent (other than consent on a Related Contract that
would not materially and adversely affect the operation of the affected
Property) is denied, Seller and Buyer shall exclude the affected Property at
Closing and deduct the Allocated Value of the affected Property from the
Purchase Price.

              6.1.3  If Seller is unable before Closing to obtain a Consent
(other than Consents on the Related Contracts that would not materially and
adversely affect the operation of the affected Property) or is unable to obtain
the waiver of a Preferential Right for which the period within which such
Preferential Right may be exercised has not expired (other than a Preferential
Right referred to in Section 6.1.2), then, unless mutually agreed, Buyer shall
exclude the affected Property at Closing and deduct the Allocated Value of the
affected Property from the Purchase Price.  Upon receipt of such Consent, the
waiver of such Preferential Right following Closing, or the expiration of the
period within which the Preferential Right may be exercised (if such right is
not exercised during such period), such Property will be purchased by and
conveyed to Buyer for an amount equal to the Allocated Value of such Property,
appropriately adjusted in a manner consistent with this Agreement, at a
subsequent closing to be held within ten days following receipt by Seller and
forwarding to Buyer of such Consent or waiver, or the expiration of the period
within which the Preferential Right may be exercised, as the case may be;
provided, however, that in the case of a Consent, if such Consent is not
obtained and provided to Seller and Buyer within 120 days following the
Closing, then the Property so affected shall be eliminated from this Agreement
and shall be excluded from the assets covered hereby (unless Buyer agrees to
proceed with the Closing on such Property and Buyer further agrees to indemnify
Seller against claims arising from such sale and assignment on terms acceptable
to Seller, in which event Buyer shall be deemed to have waived any objections
with respect to failing to obtain such Consent).





                                      -9-
<PAGE>   13
       6.2    Title Defects.

              6.2.1  For the purposes of this Agreement, the following terms
shall have the meanings given them below:

              "Defensible Title" shall mean:

              (a)    with respect to a well listed on Exhibit B, such title
       (whether of record or beneficially held pursuant to the provisions of a
       participation or exploration agreement listed in Exhibit A) as will
       entitle Buyer to receive a percentage of the Hydrocarbons produced and
       saved from such well (subject to any depth restrictions noted in Exhibit
       A), after deducting all applicable Production Burdens, that is not less
       than the "Net Revenue Interest" shown for such well on Exhibit B
       throughout the productive life of such well, and will obligate Buyer to
       bear and pay a portion of the costs and expenses of operating the well
       that is no greater than the "Working Interest" shown for such well on
       Exhibit B throughout the productive life of such well and is free and
       clear of Material Title Deficiencies (as hereinafter defined); and

              (b)    with respect to a Related Contract listed on Exhibit B,
       such title as will entitle Buyer to the interest in such Related
       Contract shown on Exhibit B and is free and clear of Material Title
       Deficiencies.

              "Material Title Deficiency" means a material deficiency in one or
       more of the following respects:  (I) Seller's title is subject to an
       outstanding mortgage, deed of trust, lien, encumbrance, contractual
       burden (other than Production Burdens that do not have the effect of
       reducing Seller's net revenue interest below that reflected on Exhibit
       B), adverse claim or defect which substantially and adversely affects
       the value or operation of the Property in question; (ii) Seller's rights
       and interests are subject to being reduced by virtue of the exercise by
       a third party of a reversionary, back-in or other similar right not
       reflected in Exhibit B; or (iii) Seller is in default under some
       material provision of a lease, farmout or other agreement or a right of
       way, easement, permit or license affecting the Property in question.

              "Net Revenue Interest" means in respect of any lease, well or
       unit, the interest (expressed as a percentage) in and to oil and gas
       produced from or allocated to such lease, well or unit after deducting
       all applicable Production Burdens.

              "Production Burdens" means all royalty interests, overriding
       royalty interests, production payments, net profits interests or other
       similar interests that constitute a burden on, are measured by or are
       payable out of the production of Hydrocarbons or the proceeds realized
       from the sale or other disposition thereof.

              "Title Defect" is any matter that causes the title to a Warranted
       Property to fail to qualify as Defensible Title.  Neither the
       environmental condition of a Warranted Property nor any failure to
       obtain Consents to the transfer of Related Contracts will be considered
       a Title Defect.





                                      -10-
<PAGE>   14
              "Title Defect Amount" is the amount by which a Title Defect
       reduces the fair market value of a Warranted Property below its
       Allocated Value.

              "Working Interest" means, in respect of any lease, well or unit,
       the interest (expressed as a percentage) in such lease, well or unit
       before giving effect to any applicable Production Burdens, and the
       percentage of all costs and expenses required to be borne that are
       associated with the exploration, development and operation of such
       lease, well or unit.

              6.2.2  Buyer may review title to the Warranted Property before
Closing and notify Seller in writing of any Title Defect it discovers as soon
as reasonably practicable after its discovery, but in no event less than two
(2) business days before the Closing Date.  Buyer will be deemed to have
conclusively waived any Title Defect for which Buyer has failed to notify
Seller in writing at least two (2) business days prior to the Closing Date.

              6.2.3  If Buyer properly notifies Seller of any alleged Title
Defect, Buyer and Seller shall meet and use their best efforts to agree on the
validity of the alleged Title Defect and the corresponding Title Defect Amount
based on the Allocated Value of such Property, and the following provisions
shall apply:

              (i)    The affected Property will be conveyed to Buyer at
       Closing.

              (ii)   If Buyer and Seller agree that there is a Title Defect and
       agree to a Title Defect Amount and Seller elects not to attempt to cure
       such Title Defect, the Title Defect Amount will be deducted from the
       Purchase Price at Closing and Seller shall have no liability to Buyer
       with respect to such Title Defect.

              (iii)  Seller shall have the right to agree to cure such Title
       Defect to Buyer's reasonable satisfaction, all at Seller's sole cost and
       expense, not later than thirty (30) days after the Closing Date, in
       which case the amount to be paid to the Seller at the Closing shall be
       reduced by an amount equal to the Title Defect Amount and the Buyer
       shall pay to the Escrow Agent at the Closing an amount equal to the
       Title Defect Amount in accordance with the provisions of Section 7.3.4.
       If the Seller fails to cure such Title Defect within such thirty day
       period, the Escrow Agent shall pay the Title Defect Amount to the Buyer
       and the Seller shall have no further liability to the Buyer with respect
       to such Title Defect.  If the Seller cures such Title Defect within such
       thirty day period, the Escrow Agent shall pay the Title Defect Amount to
       the Seller.

              (iv)   If Buyer and Seller are unable to agree on whether a Title
       Defect exists or if Buyer and Seller agree that a Title Defect exists
       but are unable to agree on the Title Defect Amount, then (A) the amount
       to be paid to the Seller at the Closing shall be reduced by an amount
       equal to the Title Defect Amount, (B) the Buyer shall pay to the Escrow
       Agent at the Closing an amount equal to such Title Defect Amount in
       accordance with the provisions of Section 7.3.4, and (C) the parties
       shall submit the determination of whether the Title Defect exists or the
       Title





                                      -11-
<PAGE>   15
       Defect Amount (as the case may be) to arbitration in accordance with the
       provisions of Section 6.2.4.  In such event, the provisions of Section
       6.2.4 shall apply and if the arbitrators determine that a Title Defect
       or the Title Defect Amount does exist, within ten (10) business days
       after the parties receive the determination of the arbitrators the Buyer
       shall be entitled to the payment by the Escrow Agent, in accordance with
       the provisions of Section 7.3.4, of the Title Defect Amount determined
       by the arbitrators, unless the Seller elects to attempt to cure the
       Title Defect pursuant to clause (iii) above in which event the
       provisions of clause (iii) shall apply.

              6.2.4  Any arbitration conducted pursuant to this Agreement shall
be conducted in Houston, Texas, in accordance with the Commercial Arbitration
Rules of the American Arbitration Association; provided, however, that the
parties hereby agree to modify those rules by adoption of the following
provisions of this Section, which the arbitrators shall be bound to apply.  On
or before the fifth day after the Closing Date, Seller must name its choice of
an arbitrator and Buyer must name its choice of an arbitrator.  Within seven
days thereafter, the two arbitrators so chosen shall name a third arbitrator.
If any of the three arbitrators has not been named within the appointed time,
then any party may apply to the American Arbitration Association for
appointment of the arbitrator(s) necessary to complete the panel within ten
days.  Seller shall pay the compensation and expenses of the arbitrator named
by or for it, Buyer shall pay the compensation and expenses of the arbitrator
named by or for it, and Seller and Buyer shall each pay one-half of the
compensation and expenses of the third arbitrator.  Within five days following
the date that a three-person panel is established, the three arbitrators shall
meet and proceed with due dispatch to hear the parties with respect to such
matters.  The decision of the arbitration panel, or a majority thereof, shall
be rendered in writing no later than 15 days after the arbitrators have met and
heard the parties.  Such decision shall be final and binding on the parties.

              6.2.5  The parties acknowledge that those certain liens, bank
loans and encumbrances shown on Exhibit E ("Release Liens") are in existence
with respect to the Property on the Effective Date.  The obligations of Seller
under this Agreement are subject to Seller's obtaining the consent to the
transaction contemplated by this Agreement from the holders of the Release
Liens and to obtaining releases of such Release Liens as to the Property.
Seller shall use reasonable efforts to obtain such consent and legally
sufficient and recordable releases of such Release Liens at or before the
Closing in form and substance satisfactory to Buyer; and such Release Liens, if
so released, shall not be considered Title Defects for purposes of this
Agreement.  The provisions of the preceding sentence shall not be deemed an
assumption of such liens or encumbrances by Buyer or a waiver of any claim or
defense of Buyer with respect thereto.

       6.3    Right Not to Close.  If, before the Closing Date,

       (i)    the net downward adjustments to the Purchase Price as the result
              of application of Sections 6.1 and 6.2 (exclusive, for purposes
              of this Section 6.3, of any adjustments as a result of the
              failure to obtain any consents or waivers of preferential
              purchase rights listed on Exhibit F) exceeds $750,000, or

       (ii)   the reasonable cost of remedying all of the Adverse Environmental
              Conditions asserted by the Buyer pursuant to Section 5.3 exceeds
              $750,000,





                                      -12-
<PAGE>   16
then either Seller or Buyer may, by notice to the other, elect to terminate
this Agreement and not to proceed with Closing.  If Seller is the party
electing to terminate this Agreement, Seller shall return the Earnest Money
Deposit paid by Buyer pursuant to Section 2.1 within three (3) business days of
receipt of such cancellation notice by the party to whom it was addressed.  If
Buyer is the party electing to terminate this Agreement, the Escrow Agent shall
pay to Seller and Seller shall be entitled to receive and retain the Earnest
Money Deposit (together with any interest earned thereon) paid by Buyer
pursuant to Section 2.1 free of any claim by Buyer.

ARTICLE 7.  CLOSING; FINAL SETTLEMENT

       7.1    Closing Date.  Unless Buyer and Seller otherwise agree, the
closing of this purchase and sale (the "Closing") will occur on January 15,
1998 (the actual date on which Closing occurs being the "Closing Date"), at
10:00 a.m. local time in Seller's offices in Houston, Texas, except that Seller
may postpone the Closing Date until Seller has obtained the consent and
releases described in Section 6.2.5.  Seller shall notify Buyer in writing of
such postponement, if any, not later than January 10, 1998.  Provided such
party is not in material default of its obligations under this Agreement,
either party may terminate this Agreement by giving written notice to the other
if the Closing has not occurred on or before the later of (i) July 1, 1998 and
(ii) (if Seller has postponed the Closing Date as above provided) the date
Seller has obtained the consent and releases described in Section 6.2.5.  In
the event of an election by either party to terminate this Agreement pursuant
to the foregoing provision, the Escrow Agent shall return to Buyer the Earnest
Money Deposit paid by Buyer pursuant to Section 2.1 within three (3) business
days of receipt of such cancellation notice by the party to whom it was
addressed.

       7.2    Conditions to Closing.  Each of Buyer and Seller shall not be
obligated to close the transaction that is the subject of this Agreement if:

              7.2.1  Any matter represented or warranted by the other party in
this Agreement is not true in any material respect as of the Closing Date, or
there has been a material breach by the other party of its obligations under
this Agreement and such breach is not cured by the Closing Date; or

              7.2.2  Any suit or other proceeding (other than a suit or
proceeding initiated by such party hereto) is pending or threatened before any
court or governmental agency seeking to restrain, prohibit, or declare illegal,
or seeking substantial damages in connection with, the transaction that is the
subject of this Agreement; or

              7.2.3  Seller fails to obtain, by the Closing Date, the consent
to the transaction contemplated by this Agreement from the holders of the
Release Liens or the releases of such Release Liens as to the Property as
described in Section 6.2.5.

       7.3    Closing.  Seller and Buyer have the following obligations at
Closing:

              7.3.1  Seller's Obligations.  At Closing, Seller shall deliver to
Buyer:





                                      -13-
<PAGE>   17
                            (i)    A duly executed Non Foreign Affidavit in the
                     form of Exhibit C;

                            (ii)   An executed and acknowledged Assignment and
                     Bill of Sale (in sufficient counterparts for recording) in
                     the form of Exhibit D (the "Assignment and Bill of Sale");

                            (iii)  Any other appropriate instruments necessary
                     to effect or support the transaction contemplated in this
                     Agreement, including, without limitation, any lease
                     assignment forms or other forms or filings required by
                     federal or state agencies to transfer ownership or
                     operation of the Property;

                            (iv)   Letters in lieu of transfer orders, executed
                     by Seller and Buyer, in form and substance satisfactory to
                     Buyer, directing all purchasers of production to make
                     payment of proceeds attributable to production from the
                     Property after  the Effective Date to Buyer; and

                            (v)    Letters to third party pipeline operators,
                     executed by Seller in form and substance reasonably
                     satisfactory to Buyer, notifying such operators that Buyer
                     shall operate all pipeline meters included in the Property
                     which are currently being operated by Seller.

              7.3.2  Buyer's Obligations.  At Closing, Buyer shall:

                            (i)    Pay Seller the Purchase Price, as adjusted
                     under 7.3.3 and any other provisions of this Agreement
                     (less the amount of the Earnest Money Deposit plus
                     interest thereon from the date of its payment to the
                     Escrow Agent until the Closing Date), by wire transfer of
                     immediately available funds into an account designated by
                     Seller according to Seller's instructions; and Buyer shall
                     cause the Escrow Agent to deliver to Seller at the Closing
                     the amount of the Earnest Money Deposit plus interest
                     thereon;

                            (iii)  Execute any ratification and joinder
                     instruments required to transfer Seller's rights,
                     obligations and interests in the Related Contracts and
                     other Property;

                            (iv)   Execute any applications necessary to
                     transfer regulatory permits to which the Property is
                     subject, and which Seller has agreed to transfer under
                     this Agreement; and

                            (v)    Execute, acknowledge and deliver to Seller
                     the Assignment and Bill of Sale.

              7.3.3  Purchase Price Adjustment.

                     7.3.3.1       The Purchase Price shall be adjusted upward
by the following:





                                      -14-
<PAGE>   18
                     (i)    The amount of (1) all overhead charges and
       administrative expenses paid by Seller to third parties under the terms
       of applicable joint operating agreements, (2) all actual direct
       operating expenses paid by Seller, and (3) all actual direct capital
       expenditures paid by Seller; but only to the extent that the expenses
       and expenditures described in clauses (1), (2) and (3) above arise from,
       or are otherwise properly allocable to, the ownership or operation of
       the Property after the Effective Date, and do not result from or relate
       to remediation of Adverse Environmental Conditions or curing of Title
       Defects; and

                     (ii)   An amount equal to all upward adjustments to the
       Purchase Price provided in Sections 6.1, 6.2 and 12.1.

                     7.3.3.2       The Purchase Price shall be adjusted
downward by the following:

                     (i)    The gross proceeds, net of production taxes paid
       with respect thereto, actually received by Seller, whether before or
       after Closing, that are attributable to the ownership or operation of
       the Property from and after the Effective Date (excluding any proceeds
       from the sale of the Hydrocarbons in storage on the Effective Date).
       The amount of gross proceeds received by Seller shall be determined on
       the basis of applicable sales and marketing agreements and not on the
       basis of swap or other hedging agreements, which swap or hedging
       agreements shall be solely for the account of Seller); and

                     (ii)   An amount equal to all downward adjustments to the
       Purchase Price provided in Sections 5.3, 5.4, 6.1, 6.2 and 12.1.

                     7.3.3.3       At least five (5) days prior to the Closing
Date, Seller shall estimate the amount of the Purchase Price adjustment under
Sections 7.3.3.1 and 7.3.3.2 in good faith and in a bona fide manner and
deliver to Buyer a certificate of the Chief Financial Officer of Seller setting
forth in reasonable detail the calculation thereof.  The Purchase Price shall
be adjusted as set forth in such certificate, and the resulting amount shall be
the initially adjusted Purchase Price.

                     7.3.3.4       As soon as reasonably practicable, and in
any event within 120 days following the Closing Date, Seller shall deliver to
Buyer a statement of the actual Purchase Price adjustment under Sections
7.3.3.1 and 7.3.3.2 (specifying whether the Purchase Price is to be increased
or decreased by such amount), which shall be certified by the Chief Financial
Officer of Seller (the "Purchase Price Adjustment Certificate"), and all
supporting documentation.  Within 30 days after delivery of the Purchase Price
Adjustment Certificate, Buyer shall notify Seller whether Buyer agrees or
disagrees with the determination of the Purchase Price adjustment set forth in
the Purchase Price Adjustment Certificate.  If Buyer disagrees with such
determination, representatives of Buyer and Seller shall meet and endeavor to
resolve their differences regarding the determination of the Purchase Price
adjustment as soon as reasonably possible.  If the representatives of Buyer and
Seller are unable to agree upon such determination of the Purchase Price
adjustment within 20 business days, the independent accounting firm of
______________ shall audit the Purchase Price Adjustment Certificate and
determine the Purchase Price adjustment as soon as reasonably possible.  The
decision of such independent accounting firm shall be binding on Seller and
Buyer, and the fees





                                      -15-
<PAGE>   19
and expenses of such independent accounting firm shall be borne one-half by
Seller and one-half by Buyer.  If the Purchase Price adjustment as finally
determined pursuant to this Section 7.3.3.4 is a smaller upward adjustment or a
larger downward adjustment than that estimated pursuant to Section 7.3.3.3,
Seller shall pay to Buyer the amount of such excess, plus interest thereon at
the Interest Rate from (and including) the Closing Date to (but excluding) the
date of payment.  If the Purchase Price Adjustment Amount as finally determined
pursuant to this Section 7.3.3.4 is a larger upward adjustment or a smaller
downward adjustment than that estimated pursuant to Section 7.3.3.3, Buyer
shall pay to Seller the amount of such deficiency, plus interest thereon at the
Interest Rate from (and including) the Closing Date to (but excluding) the date
of payment.  Any payment contemplated by this Section 7.3.3.4 shall be made by
wire transfer in federal or other immediately available funds on or before the
fifth business day following the final determination of the amount thereof.

              7.3.4  Escrow Agent.  At the Closing, Buyer shall pay to Texas
Commerce Bank N.A., Houston, Texas or another bank mutually acceptable to Buyer
and Seller (the "Escrow Agent") the amounts required to be paid to the Escrow
Agent in accordance with the provisions of Sections 5.3.2 and 6.2.3.  Such
payment shall be made by wire transfer in federal or other immediately
available funds.  If Seller cures or remedies any Title Defect or Adverse
Environmental Conditions in a timely manner as required by such Sections, then
Seller shall be entitled to payment of the applicable Title Defect Amount or
Remediation Amount out of the funds held by the Escrow Agent.  If Seller fails
to cure or remedy the Title Defect or Adverse Environmental Conditions in a
timely manner, then (I) Buyer shall be entitled to payment of the applicable
Title Defect Amount or Remediation Amount out of the funds held by the Escrow
Agent and (ii) Seller shall have no further obligation or liability to Buyer
with respect to or arising out of the uncured or unremediated Title Defect or
Adverse Environmental Conditions.  The parties shall direct the Escrow Agent to
make payments in accordance with the provisions of this Section 7.3.4 and
Sections 2.1, 5.3.2, 6.3, 7.1 and 7.3.2, and they shall enter into and execute
an escrow agreement with the Escrow Agent in a mutually acceptable form
consistent with the provisions of this Agreement.

              7.3.5  Document Preparation.  Unless Seller and Buyer otherwise
agree, Seller will prepare any Closing documents to be executed and delivered
under Sections 7.3.1 and 7.3.2 at Closing and will furnish copies of the same
to Buyer at least two days before the Closing, except as provided elsewhere in
this Agreement for an earlier date.

       7.4.   Post-Closing Obligations.  Seller and Buyer have the following
post-closing obligations:

              7.4.1  Property Records.  Within five (5) days after Closing,
Seller shall deliver to Buyer the originals (if in Seller's possession) of the
Property Records at a location designated by Buyer.  Seller shall have the
right to retain copies of any or all such Property Records.  Buyer shall
preserve and maintain all Property Records for at least seven (7) years after
the Closing Date.  Buyer shall notify Seller before destroying any Property
Records.  Seller reserves the right to access and copy (at its own expense) all
Property Records for seven (7) years after the Closing Date, and Buyer agrees
to provide access to the Property Records to Seller during normal business
hours.





                                      -16-
<PAGE>   20
              7.4.2  Recording and Filing.  Buyer, within thirty (30) days
after Closing, shall (I) file for record the Assignment and Bill of Sale and
all other instruments that must be recorded to effectuate the transfer of the
Property; and (ii) file for approval with the applicable government agencies
all state and federal transfer and assignment documents for the Property.
Buyer shall provide Seller a recorded copy of the Assignment and Bill of Sale
and other recorded instruments, and approved copies of the state and federal
transfer and assignment documents as soon as they are available.  If Buyer
fails, within thirty (30) days after Closing, to file for record the Assignment
and Bill of Sale and all other instruments that must be recorded to effectuate
the transfer of the Property, and file for approval with the applicable
government agencies all state and federal transfer and assignment documents for
the Property, Seller, in addition to any other rights available to it, shall
have the right to specific performance of Buyer's obligations under this
Section.

              7.4.3  Audit Rights.  For a period of two (2) years following the
Closing Date, any party hereto may at its expense audit the other party's
accounting for any item adjusted between them at Closing or in any pre-Closing
or post-Closing statement, billing, invoice or accounting made on the Property.

              7.4.4  Further Assurances.  Buyer and Seller agree to execute and
deliver from time to time such further instruments and do such other acts as
may be reasonably necessary to effectuate the purposes of this Agreement.

ARTICLE 8.  ASSUMPTION OF OBLIGATIONS

       8.1    Ownership and Operations.  If the Closing occurs, and in addition
to the liabilities and obligations for which Buyer indemnifies Seller or which
Buyer assumes in this Agreement, Buyer shall assume and perform the following
rights, duties, obligations and liabilities of ownership and operation of the
Property on and after the Effective Date: (I) all of Seller's express and
implied obligations and covenants under the terms of the Leases and the Related
Contracts described in Exhibit A; and all other orders and contracts to which
the Property is subject and of which Buyer has actual or constructive notice;
(ii) responsibility for all royalties, overriding royalties, production
payments, net profits obligations, rentals and shut-in payments and other
burdens or encumbrances to which the Property is subject and of which Buyer has
actual or constructive notice; (iii) responsibility for compliance with all
applicable laws, ordinances, rules and regulations pertaining to the Property,
and the procurement and maintenance of all permits required by public
authorities in connection with the Property; (iv) responsibility for all
liabilities of Seller for net proceeds from production attributable to the
Property as currently held in suspense because of lack of identity or address
of owners, title questions, change of ownership, or similar questions, to the
extent such net proceeds are transferred and delivered to Buyer at the Closing;
and (v) all other obligations assumed by Buyer under this Agreement; provided,
however, that, except to the extent provided in Sections 5.2 and 5.3, Buyer
does not assume any liabilities and obligations to third parties for loss or
damage to property or injury to or death of persons arising from the operation
of the Property during the period from the Effective Date to the Closing.
Seller remains responsible for all costs, expenses and liabilities incurred by
Seller in connection with the ownership or operation of the Property before the
Effective Date and for all liabilities and obligations to third parties for
loss or damage to property or injury to or death of persons arising from the
operation of the Property during the period from the Effective Date to the
Closing (except, in each case, for those costs, expenses,





                                      -17-
<PAGE>   21
liabilities and obligations for which Buyer indemnifies Seller or which Buyer
assumes under the provisions of this Agreement).

       8.2    Plugging and Abandonment Obligations.  From and after the Closing
Date, Buyer assumes full responsibility and liability for the following
obligations related to the Property (the "Plugging and Abandonment
Obligations"):  (I) plugging, replugging and abandoning all wells on the
Property (except wells previously permanently plugged and abandoned by Seller);
(ii) removing and disposing of all structures and equipment comprising part of
the Property,(iii) the necessary and proper capping and burying of all
associated flow lines comprising part of the Property; (iv) restoring the
leasehold premises of the Property; both surface and subsurface, to the
condition they were in before commencement of oil and gas operations, as may be
required by applicable laws, regulation or contract; and (v) any necessary
disposal of Property contaminated by naturally occurring radioactive material
("NORM").  Buyer's obligations under this Section 8.2 include without
limitation obligations arising from contractual requirements and demands made
by authorized regulatory bodies or parties claiming a vested interest in the
Property.  With respect to any non-operating interests in the Property being
transferred to Buyer under this Agreement, Buyer shall assume full
responsibility and liability, from and after the Closing Date, for that portion
of the Plugging and Abandonment Obligations for which non-operators are
responsible.

ARTICLE 9.  INDEMNITIES

       9.1    Definition of Claims.  As used in this Agreement, the term
"Claims" means any and all losses, liabilities, damages, obligations, expenses,
fines, penalties, costs, claims, causes of action and judgments for (I)
breaches of contract; (ii) loss or damage to property, injury to or death of
persons, and other tortious injury; and (iii) violations of applicable laws,
rules, regulations, orders or any other legal right or duty actionable at law
or equity.  The term "Claims" also includes attorneys fees and court costs
resulting from the defense of any claim or cause of action within the scope of
the indemnities in this Agreement.

       9.2    APPLICATION OF INDEMNITIES.  UNLESS THIS AGREEMENT EXPRESSLY
PROVIDES TO THE CONTRARY, THE INDEMNITIES SET FORTH IN THIS AGREEMENT APPLY
REGARDLESS OF WHETHER:  (I) AN INDEMNIFIED CLAIM ARISES OUT OF OR RESULTS FROM
THE INDEMNIFIED PARTY'S (OR ITS EMPLOYEES', AGENTS', CONTRACTORS', SUCCESSORS'
OR ASSIGNS') SOLE OR CONCURRENT NEGLIGENCE, (II) THE INDEMNIFIED PARTY (OR ITS
EMPLOYEES, AGENTS, CONTRACTORS, SUCCESSORS OR ASSIGNS) IS DEEMED TO BE STRICTLY
LIABLE, IN WHOLE OR PART, FOR AN INDEMNIFIED CLAIM; OR (III) ANY PART OF AN
INDEMNIFIED CLAIM IS THE RESULT OF THE IMPOSITION OF PUNITIVE DAMAGES.  ALL
INDEMNITIES SET FORTH IN THIS AGREEMENT EXTEND TO THE OFFICERS, DIRECTORS,
EMPLOYEES AND AFFILIATES OF THE PARTY INDEMNIFIED, AND COVER THE ACTS AND
OMISSIONS OF THE OFFICERS, DIRECTORS, EMPLOYEES, CONTRACTORS, SUCCESSORS AND
ASSIGNS OF THE INDEMNIFYING PARTY.





                                      -18-
<PAGE>   22
       9.3    Buyer's Indemnity.  Except as provided below in this Section 9.3,
Buyer shall indemnify, defend and hold Seller harmless from and against any and
all Claims caused by, resulting from or incidental to (a) the ownership or
operation of the Property on and after the Effective Date, or (b) the
obligations assumed by Buyer under the other provisions of this Agreement.  The
foregoing indemnity shall not apply to third party Claims for loss or damage to
property or injury to or death of persons arising out of the operation of the
Property during the period from the Effective Date to the Closing.  Moreover,
the foregoing indemnity shall not apply to any Claims covered by the provisions
of Section 5.3.

       9.4    Seller's Indemnity.  Except as provided below in this Section
9.4, Seller shall indemnify, defend and hold Buyer harmless from and against
(a) any and all Claims caused by, resulting from or incidental to Seller's
ownership or operation of the Property before the Effective Date, except those
arising out of, resulting from or incidental to the obligations assumed by
Buyer under the other provisions of this Agreement, and (b) any and all third
party Claims for loss or damage to property or injury to or death of persons
arising out of the operation of the Property during the period from the
Effective Date to the Closing.  The foregoing indemnity shall not apply to any
Claims covered by the provisions of Sections 5.2 or 5.3.

ARTICLE 10.  TAXES AND EXPENSES.

       10.1   Recording Expenses.  Buyer shall pay all costs of recording and
filing the Assignment and Bill of Sale for the Property, all state and federal
transfer and assignment documents, and all other instruments.

       10.2   Ad Valorem, Real Property and Personal Property Taxes.  All Ad
Valorem Taxes, Real Property Taxes, Personal Property Taxes, and similar
obligations ("Property Taxes") on the Property are Seller's obligation for
periods before the Effective Date and Buyer's obligation for periods after the
Effective Date.  If Property Taxes for the current tax year have not been
assessed and paid as of the Closing Date, the Buyer shall file all required
reports and returns incident to the Property Taxes and pay the Property Taxes
for the current tax year and subsequent periods.  The Seller will reimburse the
Buyer promptly for the Seller's proportionate share of these taxes, prorated as
of the Effective Date, upon receipt of evidence of the Buyer's payment of the
taxes.  If Property Taxes for the current tax year have been assessed and paid
as of the Closing Date, the Buyer will reimburse the Seller for its
proportionate share of these taxes, prorated as of the Effective Date.  Seller
shall furnish to Buyer upon request any information in Seller's possession
regarding the Property to assist Buyer in its preparation and filing of all
required reports and returns incident to the Property Taxes for the current tax
year.

       10.3   Severance Taxes.  Seller shall bear and pay all severance or
other taxes measured by Hydrocarbon production from the Property, or the
receipt of proceeds therefrom, to the extent attributable to production from
the Property before the Effective Date.  Seller shall withhold and pay (or
cause the first purchaser to withhold and pay) on behalf of Buyer all such
taxes on production from the Property between the Effective Date and the
Closing Date.  Subject to the obligations of Seller under the preceding
sentence, Buyer shall bear and pay all such taxes on production from the
Property on and after the Effective Date.  If either party pays taxes owed by
the other, upon receipt





                                      -19-
<PAGE>   23
of evidence of payment, the nonpaying party will reimburse the paying party
promptly for its proportionate share of such taxes.

       10.4   Sales Taxes.  The Purchase Price is exclusive of any applicable
sales tax.  In the event any sales tax is due in connection with the
transactions contemplated by this Agreement, Buyer shall be responsible for the
same and indemnify Seller against the same.

ARTICLE 11.  INTERIM OPERATION OF THE PROPERTY

       11.1   Interim Operations.  Seller shall use such efforts as are
reasonably available to a nonoperator during the period between the date this
Agreement is executed and the Closing Date (the "Interim Period") (I) to cause
the Property to be maintained and operated in a good and workmanlike manner,
(ii) to maintain or cause to be maintained insurance now in force with respect
to the Property, and (iii) to pay or cause to be paid all costs and expenses
incurred in connection therewith; provided, however, that Seller shall not
propose the commencement of operations for the drilling of any new well or the
redrilling of any existing well on the Property after the date of this
Agreement without the prior written consent of Buyer.  Seller shall carry on
the business of Seller with respect to the Property in substantially the same
manner as Seller has heretofore and shall not introduce any substantially new
method of management, operation or accounting with respect to the Property.

       11.2   Buyer's Approval.  Without prior written consent of Buyer (which
shall not be unreasonably withheld), Seller shall not enter into any new
agreements or commitments with respect to the Property which extend beyond the
Closing, shall not abandon any well located on the Property nor release or
abandon all or any portion of any of the Leases, shall not modify or terminate
any of the material agreements relating to the Property and shall not encumber,
sell or otherwise dispose of any of the Property other than (I) production sold
in the ordinary course of business or otherwise under a Related Contract, or
(ii) personal property that is replaced by equivalent property or consumed in
the normal operation of the Property.  Seller agrees to consult with Buyer
before making any expenditures on any well in excess of $25,000 and not
exceeding $50,000, and Seller shall not make any expenditures on any well
exceeding $50,000 without Buyer's prior written consent, which shall not be
unreasonably withheld.

ARTICLE 12.  MISCELLANEOUS

       12.1   Production Imbalances.  If there are any production imbalances
relating to the Property, Seller transfers all imbalances as of the Effective
Date to Buyer.  Buyer and Seller hereby agree that if Seller is in fact
underproduced as of the Effective Date with respect to any of the Property, the
Purchase Price will be increased by any amounts due Seller from third parties
(assuming permanent cessation of production as of the Effective Date) as the
result of Seller being an underproduced party with regard to gas produced from
the Property prior to the Effective Date.  Buyer and Seller hereby agree that
if Seller is in fact overproduced as of the Effective Date with respect to any
of the Property, the Purchase Price will be decreased by any amounts due third
parties from Seller (assuming permanent cessation of production as of the
Effective Date) as the result of Seller being an overproduced party with regard
to gas produced from the Property prior to the Effective Date.





                                      -20-
<PAGE>   24
       12.2   Press Releases.  The parties agree that prior to making any
public announcement or statement with respect to the transactions contemplated
by this Agreement, the party desiring to make such public announcement or
statement shall consult with the other parties hereto and exercise their best
good faith efforts to (I) agree upon the text of a joint public announcement or
statement to be made by both of such parties or (ii) obtain approval of the
other party hereto to the text of a public announcement or statement to be made
solely by Seller or Buyer, as the case may be; provided, however, if Seller or
Buyer is required by law to make such public announcement or statement, then
the same may be made without the approval of the other party.  The opinion of
counsel of either party shall be conclusive evidence of such requirement by
law.

       12.3   Notices.  All notices under this Agreement must be in writing.
Any notice under this Agreement may be given by personal delivery, facsimile
transmission, U.S. mail (postage prepaid), or commercial delivery service, and
will be deemed duly given when received by the party charged with such notice
and addressed as follows:

<TABLE>
<S>                                               <C>
Seller:       HarCor Energy, Inc.                 Buyer: Penroc Oil Corporation
------                                            ------                       
       4400 Post Oak Parkway, Suite 2220          P. O. Box 5970
       Houston, Texas 77027                       Hobbs, New Mexico 88241
       Attention:  President                             5014 Carlsbad Hwy.
                                                  Hobbs, New Mexico 88246

       FAX:  (713) 961-9773                       FAX:  (505) 393-7051
</TABLE>

Any party, by written notice to the other, may change the address or the
individual to which or to whom notices are to be sent under this Agreement.

       12.4   Entirety of Agreement; Amendment.  This Agreement constitutes the
entire understanding between the parties with respect to the subject matter
hereof, superseding all negotiations, prior discussions, representations, and
prior agreements and understandings relating to such subject matter.  This
Agreement may be amended, modified, and supplemented only in a writing duly
executed by Buyer and Seller.

       12.5   Successors and Assigns.  This Agreement binds and inures to the
benefit of the parties hereto and their respective permitted successors and
assigns, and nothing contained in this Agreement, express or implied, is
intended to confer upon any other person or entity any benefits, rights, or
remedies.  Neither party may assign any of its rights or obligations under this
Agreement prior to the Closing without the prior written consent of the other
party, which consent may be given or withheld in such party's sole discretion.
No permitted assignment by a party of its rights or obligations under this
Agreement shall release such party from its obligations hereunder.

       12.6   Governing Law.  THIS AGREEMENT IS GOVERNED BY AND MUST BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, EXCLUDING ANY
CONFLICTS-OF-LAW RULE OR PRINCIPLE THAT MIGHT APPLY THE LAW OF ANOTHER
JURISDICTION.





                                      -21-
<PAGE>   25
       12.7   Exhibits.  The Exhibits attached to this Agreement are
incorporated into and made a part of this Agreement.  In the event of a
conflict between the provisions of the Exhibits or the executed Assignment and
Bill of Sale and the foregoing provisions of this Agreement, the provisions of
the Exhibits and the executed Assignment and Bill of Sale take precedence over
the foregoing provisions of this Agreement.  In the event of a conflict between
the provisions of the pro forma Assignment and Bill of Sale attached to this
Agreement as Exhibit __ and the executed Assignment and Bill of Sale, the
provisions of the executed Assignment and Bill of Sale take precedence.

       12.8   Litigation Costs.  If any party hereto should hereafter institute
litigation against any other party hereto alleging that such other party has
breached this Agreement or any agreement or other instrument attached hereto or
delivered pursuant hereto, the nonprevailing party or parties (whether
plaintiff or defendant) in such action shall reimburse the prevailing party or
parties for the prevailing party's or parties' reasonable attorneys' fees,
witness fees, court costs and all other costs in connection with such
litigation.

       12.9   General.  References in this Agreement to Articles, Sections,
subsections, Exhibits and Schedules shall be deemed to refer to articles,
Sections and subsections of and Exhibits and Schedules to this Agreement except
as provided otherwise in this Agreement.  As used in this Agreement, "person"
means any natural person or corporation, partnership, limited liability
company, trust, estate, governmental unit or other entity.

       12.10  Texas Deceptive Trade Practices Act Waiver.  Buyer represents and
warrants to Seller that Buyer: (a) is acquiring the Property for commercial or
business use, (b) has assets of $25,000,000 or more or is owned or controlled
by a corporation or entity with assets of $25,000,000 or more, and (c) has
knowledge and experience in financial and business matters that enable it to
evaluate the merits and risks of the transactions contemplated by this
agreement and is not in a significantly disparate bargaining position with
respect to Seller.  MOREOVER, BUYER HEREBY UNCONDITIONALLY AND IRREVOCABLY
WAIVES ANY AND ALL RIGHTS OR REMEDIES THAT IT MAY HAVE UNDER THE DECEPTIVE
TRADE PRACTICES -- CONSUMER PROTECTION ACT OF THE STATE OF TEXAS, BUSINESS AND
COMMERCE CODE SECTION 17.41 THROUGH SECTION 17.63 (OTHER THAN SECTION 17.555).

       The authorized representatives of Seller and Buyer sign below indicating
their agreement to the terms of this Agreement on the date first above written.


<TABLE>
<S>                                <C>       
Seller:                            Buyer:

HarCor Energy, Inc.                Penroc Oil Corporation


By:  /s/ MARK G. HARRINGTON        By:  /s/  MOHAMMED YAMIN MERCHANT
     ----------------------             ----------------------------
Title:   CEO and Chairman                  Title:     President
</TABLE>





                                      -22-