<PAGE>
EXHIBIT 4.2
                    PLAN OF REORGANIZATION AND AGREEMENT OF MERGER

     THIS PLAN OF REORGANIZATION AND AGREEMENT OF MERGER (this "Agreement")
dated this 12th day of June, 1998, between Midwestern-Oklahoma Energy Resources
Corporation, an Oklahoma corporation ("Midwestern"), Potomac Exploration
Acquisition Corporation, an Oklahoma corporation and wholly-owned subsidiary of
Midwestern ("Acquisition Corp") and Potomac Energy (Bermuda) Ltd., a Bermuda
corporation ("Potomac"), (Acquisition Corp and Potomac being sometimes referred
to herein as the "Constituent Corporations").

                                       RECITALS

     The respective Boards of Directors of the Constituent Corporations and
Midwestern have determined that the merger of Potomac with and into Acquisition
Corp (which in its capacity as the surviving corporation, is hereinafter
sometimes referred to as the "Surviving Corporation") to be desirable and in the
best interest of the shareholders of Potomac and Midwestern as the sole
shareholder of Acquisition Corp, and desiring to adopt a plan of reorganization
within the meaning of Section 368(a)(1)(E) of the Internal Revenue Code of 1986,
as amended, have approved this Agreement.

     NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties, covenants and agreements contained herein, and in
accordance with the applicable provisions of the Oklahoma General Corporation
Act of the State of Oklahoma (the "Oklahoma Law") and of the Companies Act 1981
of Bermuda (the "Bermuda Law"), each of the Constituent Corporations hereby
agrees that Potomac shall be merged with and into Acquisition Corp (the
"Merger") and that the terms and conditions and consummation of the Merger shall
be as follows:


                                      ARTICLE I

                   MERGER OF POTOMAC WITH AND INTO ACQUISITION CORP

     1.01  EFFECT OF MERGER.  At the Effective Time (as defined in Section 4.1
hereof) all and singular the rights, privileges, powers and franchises, as well
of a public or private nature, and all property, real, personal and mixed, of
each of the Constituent Corporations, and all debts due to either of them on
whatever account, including subscriptions to shares and all other things in
action, or belonging to either of them, shall be, by operation of law or
otherwise, taken and deemed to be transferred to, and shall be vested in, the
Surviving Corporation without further act or deed; and all property, rights,
privileges, powers and franchises and all any every other interest shall
thereafter effectively be the property of the Surviving Corporation as they were
of the Constituent Corporations, and the title to any real estate vested by deed
or otherwise in either of the Constituent Corporations shall not revert or be in
any way impaired by reason of the merger; by the Surviving Corporation shall
thenceforth be liable for all debts, liabilities, obligations, duties and
penalties of each of the Constituent Corporations and all said debts,
liabilities, obligations, duties and penalties shall thenceforth attach to the
Surviving Corporation and may be enforced against it to the same extent as if
said debts, liabilities, obligations, duties and penalties had been incurred or
contracted by it.  No liability or obligation due or to become due at the
Effective Time, or any claim or demand for any cause then existing against
either of the Constituent Corporations or any shareholder, officer or director
thereof, shall be released or impaired by the merger, and all rights of
creditors and all liens upon property of either of the Constituent Corporations
shall be preserved unimpaired.

     1.02  EXECUTION OF ADDITIONAL INSTRUMENTS.  From time to time, as and when
requested by the Surviving Corporation, or its successors or assigns, the
officers and directors of Potomac last in office shall



                                         -1-
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execute and deliver such deeds and other instruments and shall take or cause to
be taken such further action or other actions as shall be necessary in order to
vest or perfect in or to confirm of record or otherwise the Surviving
Corporation's title to, and possession of, all property, interest, assets,
rights, privileges, immunities, powers, franchises and authority of Potomac and
otherwise carry out the purpose of this Agreement and the officers and directors
of Midwestern are fully authorized in the name of Potomac or otherwise to take
any and all such action.

     1.03  CORPORATE OFFICES.  Immediately following the Merger, the Surviving
Corporation shall maintain its corporate offices in Oklahoma City, Oklahoma, for
administrative, accounting and public relation functions.

     1.04  AVAILABILITY OF MIDWESTERN COMMON STOCK.  Midwestern will make
available to Acquisition Corp a sufficient number of shares of Common Stock,
$.001 par value per share, of Midwestern to effect the Merger pursuant to this
Agreement.

                                      ARTICLE II

                                SURVIVING CORPORATION

     2.01  CERTIFICATE OF INCORPORATION AND BYLAWS OF THE SURVIVING CORPORATION.
At and after the Effective Time,  the Certificate  of Incorporation and bylaws
of Acquisition Corp shall remain in full force and effect as written at the
Effective Time and shall not be amended in any further respect, by reason of
this Agreement and such Certificate of Incorporation and such bylaws shall be
the Certificate of Incorporation and bylaws of the Surviving Corporation until
amended in accordance with Oklahoma Law.

     2.02  BOARD OF DIRECTORS AND OFFICERS.  At the Effective Time, (i) Carl W.
Swan, Frank H. Mahan, Gene Callaway, James E. Frazier, Paul D. Meadows and
Joseph Edward Michaud (each of whom are currently members of the Board of
Directors of Potomac) shall become the Board of Directors of the Surviving
Corporation and Midwestern, (ii) the members of the Board of Directors of
Potomac (other than Messrs. Swan, Mahan, Callaway and Frazier) shall resign as
directors of Potomac, (iii) Messrs. Swan, Mahan, Callaway and Frazier shall
become officers of the Surviving Corporation and Midwestern, (iv) the officers
of Potomac (other than Messrs. Swan, Mahan, Callaway and Frazier) shall resign
as officers of Potomac, and (v) the members of the Board of Directors and the
officers of Acquisition Corp and Midwestern immediately prior to the Effective
Time shall resign as members of the Board of Directors and officers of
Acquisition Corp and Midwestern.

     2.03  SHAREHOLDER APPROVAL.  Prior to consummation of the Merger, this
Agreement must be approved by the shareholder or shareholders of each of the
Constituent Corporations.  This Agreement shall be submitted for approval by the
shareholder of Acquisition Corp pursuant to written consent in accordance with
the Oklahoma Law.  This Agreement shall be submitted for approval by the
shareholders of Potomac at a special meeting of shareholders or, if applicable,
approved by the shareholders pursuant to written consent in accordance with
Bermuda Law.

                                    ARTICLE THREE

                          CONVERSION AND EXCHANGE OF SHARES

     3.01  CONVERSION OF POTOMAC CAPITAL STOCK.  Midwestern shall issue
7,050,000 shares of its Common Stock to the shareholders of Potomac in
connection with the Merger to cause the shareholders of Potomac to hold 92
percent of the issued and outstanding Common Stock of Midwestern immediately
after the Effective Time.  Each share of Common Stock of Potomac issued and
outstanding immediately


                                         -2-
<PAGE>

prior to the Effective Time shall thereupon be exchanged for and converted into
and become one share of Common Stock of Midwestern.  Each share of such Common
Stock issued pursuant to this Section 3.01 shall be fully paid and
nonassessable.  Each share of Common Stock of Potomac so converted is herein
sometimes referred to as the "Converted Stock."  At the Effective Time,
Midwestern shall assume all obligations and agreements of Potomac under
outstanding stock options and agreements requiring the issuance of Potomac
Common Stock, as identified in Section 5.03 of this Agreement.  Each share of
Potomac Common Stock otherwise issuable upon exercise of such stock options or
requiring issuance pursuant to any other agreement by Potomac identified in
Section 5.03 shall at the Effective Time become exercisable for the purchase of
or converted into one share of Common Stock of Midwestern.

     3.02  FRACTIONAL SHARES.  No fraction of a share of Common Stock of
Midwestern shall be issuable upon conversion of the Common Stock of Potomac in
the Merger and any fractional shares shall be rounded to the next whole share.

     3.03  EXCHANGE OF CERTIFICATES.  At and after the Effective Time, each
holder of a certificate representing the Converted Stock, upon presentation and
surrender of such certificate or certificates to Midwestern or its transfer
agent, shall be entitled to receive in exchange therefor a certificate or
certificates representing the number of fully paid and non-assessable shares of
the Common Stock of Midwestern to which he, she or it is entitled as provided in
Section 3.01.  The Common Stock of Midwestern so received in exchange shall be
registered in such names as the holder of the Converted Stock so exchanged may
request; provided, however, that if any certificate representing shares of the
Common Stock of Midwestern is to be issued in a name other than that in which
the certificate surrendered shall be properly endorsed and otherwise in proper
form for transfer, and the person making such request shall have paid any
transfer or other taxes or established to the satisfaction of Midwestern that
such taxes have been paid or are not payable.  Until so presented and
surrendered in exchange for a certificate representing Common Stock of
Midwestern, each certificate which represented issued and outstanding shares of
Converted Stock at the Effective Time shall, except as provided in the following
sentence, be deemed for all purposes to evidence ownership of the number of
whole shares of Common Stock of Midwestern into which such shares of Converted
Stock have been converted pursuant to the Merger.  Until surrender of such
certificates in exchange for certificates representing Common Stock of
Midwestern, the holder Converted Stock shall not be entitled to receive any
dividend or other distribution payable to holders of shares of Common Stock of
Midwestern until the holder of the Converted Stock exchanges for certificates
representing the Common Stock of Midwestern, there shall be paid to the record
holder of the certificates representing Midwestern issued upon such surrender,
the amount of dividends or other distributions (without interest) which therefor
became payable and were not paid to such holder with respect to the number of
whole shares of Common Stock of Midwestern represented by the certificates
issued upon such surrender.

     3.04  CLOSING OF STOCK TRANSFER BOOKS.  The stock transfer books of Potomac
shall be closed upon execution of this Agreement, and no transfer of record and
no further issuance of any of the shares of Common Stock of Potomac shall take
place or be made thereafter.

     3.05  RESTRICTION ON TRANSFER OF MIDWESTERN COMMON STOCK.  The Common Stock
of Midwestern to be issued and delivered to the shareholders of Potomac pursuant
to this Agreement (i) will be acquired by such shareholders for investment
purposes only without the intent to resell or further distribute such Common
Stock, (ii) will be issued pursuant to exemption from registration under the
1933 Act and the applicable state or other jurisdictional securities acts, (iii)
will not be transferred except pursuant to registration under the 1933 Act and
the applicable state or other jurisdictional securities acts unless pursuant to
exemption from registration under such acts and (iv) the certificates evidencing
the Common Stock of


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Midwestern shall bear appropriate restrictive transfer legends as required
pursuant to the 1933 Act and the applicable state and other jurisdictional
securities acts.

                                     ARTICLE FOUR

                     EFFECTIVE TIME OF THE MERGER OR AMALGAMATION

     4.01  EFFECTIVE TIME.  The Merger shall become effective at 5:00 P.M.,
Central Standard Time, on the date when the last of the following actions shall
have been completed:

          (i)   Each of the Constituent Corporations shall have notified the
     other Constituent Corporation in writing that all conditions precedent to
     the obligation of such Constituent Corporation to consummate and effect the
     Merger have occurred or have been waived;

          (ii)  A Certificate of Merger shall have been executed, acknowledged
     and filed in accordance with the provisions of the Oklahoma Law; and

          (iii) Certificate of Amalgamation shall have been issued in accordance
     with the provisions of the Bermuda Law.

     The time when the Merger shall become effective, as defined by this Section
4.01, is herein called the "Effective Time."


                                     ARTICLE FIVE

                      REPRESENTATIONS AND WARRANTIES OF POTOMAC

     Potomac represents and warrants unto Midwestern and Acquisition Corp as
follows:

     5.01  ORGANIZATION.  Potomac is a corporation duly organized, validly
existing and in good standing under Bermuda Laws and has the corporate power and
is entitled to own or lease its properties and to carry on its business as, and
in the places where, such properties are now owned or leased and such business
is now conducted.  Bermuda is the only jurisdiction in which the property owned
or leased or the business conducted by Potomac would make any such qualification
necessary.

     5.02  DELIVERY OF CERTIFICATE OF INCORPORATION AND BYLAWS.  Potomac has
delivered to Midwestern complete and correct copies of its Memorandum of
Association and Bye-laws, as certified to by the Secretary or an Assistant
Secretary of Potomac, as in effect on the date hereof.

     5.03  CAPITALIZATION.  The authorized capital stock of Potomac consists of
(i) 12,000,000 shares of Common Stock, (US)$.01 par value, of which 7,050,000
shares are issued and outstanding.  Potomac has reserved (i) 800,000 shares of
its Common Stock for issuance pursuant to exercise of outstanding stock options,
each exercisable at any time to purchase one share of Common Stock for $1.00 per
share on or before December 31, 2003, (ii) 100,000 shares of its Common Stock
for issuance pursuant to exercise of outstanding stock options, each exercisable
at any time to purchase one share of Common Stock for $1.00 per share on or
before April 30, 1999, (iii) 50,000 shares of its Common Stock for issuance
pursuant to exercise of outstanding stock options, each exercisable at any time
to purchase one share of Common Stock for $.50 per share on or before December
31, 2003, and (iv) 500,000 shares of its Common Stock for issuance to directors,
consultants and other third parties as determined in the sole discretion of the
Board of Directors of Potomac.  Except as provided herein, there are no other
authorized or outstanding equity securities of Potomac of any class, kind or
character, and there are no outstanding subscriptions, options, warrants or
other agreements or commitments obligating Potomac to issue any additional
shares of its


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capital stock of any class, or any option or right with respect thereto, or any
securities convertible into shares of stock of any class.  All outstanding
shares of Common Stock of Potomac are duly and validly authorized and issued,
and have not been issued in violation of any preemptive right of shareholders.

     5.04  SUBSIDIARIES.  Potomac owns all of the issued and outstanding capital
stock of Potomac Energy (BVI) Ltd., a British Virgin Islands company ("BVI"),
has no treasury stock.  There are no other authorized or outstanding equity
securities of BVI of any class, kind or character, and there are no outstanding
subscriptions, options, warrants or other agreements or commitments obligating
BVI to issue any additional shares of its capital stock of any class, or any
option or right with respect thereto, or any securities convertible into shares
of stock of any class.  All outstanding shares of Common Stock of BVI are duly
and validly authorized and issued, fully paid and non-assessable and have not
been issued in violation of any preemptive right of shareholders.

     5.05  AUTHORIZATION OF AGREEMENT.  The Board of Directors of Potomac has
duly approved this Agreement and the transactions contemplated hereby and have
authorized the execution and delivery of this Agreement by Potomac.  The
shareholders of Potomac on or before the Effective Time have approved this
Agreement.  Potomac  has full power, authority and legal right to enter into
this Agreement and to consummate the transactions contemplated hereby.

     5.06  CONFLICTING AGREEMENTS.  Neither the execution nor the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby in
accordance with the terms of this Agreement, will conflict with, or result in a
breach of, any term of, or constitute a default under, (i) the Memorandum of
Association or Bye-laws of Potomac, or (ii) any material agreement or instrument
to which Potomac is a party, or (iii) any material judgment, decree, order,
statute, rule or regulation to which Potomac is subject, or result in the
creation of material lien, charge or encumbrance on any of the properties of
Potomac.  Potomac, to its knowledge, is not in default or would be in default
with lapse of time or notice or both, in respect to any such term.

     5.07  DELIVERY OF FINANCIAL STATEMENTS.  Potomac has furnished Midwestern
with the following financial statements (hereinafter collectively called the
"Potomac Financial Statements"):  the balance sheet of Potomac as of December
31, 1997 (the "1997 Potomac Balance Sheet"), together with statements of income,
stockholders' equity and changes in financial position of Potomac for the period
April 7, 1997 through December 31, 1997  and the notes thereto and certain
supplemental information.

     5.08  MARKETABLE TITLE TO ASSETS.  Potomac has good and marketable title to
the properties and assets reflected on the 1997 Potomac Balance Sheet as being
owned by Potomac, and all properties and assets thereafter acquired by it,
except to the extent such properties and assets are or were thereafter disposed
of for fair value in the ordinary course of business; all such properties and
assets are free and clear of all liens, charges and encumbrances, except (i)
those set forth or reflected in the 1997 Potomac Balance Sheet, (ii) liens for
taxes not yet due and payable or being contested in good faith, or (iii) defects
in title and liens, charges and encumbrances, if any, as do not materially
detract from the value, or materially interfere with the present or proposed
use, of the property or assets subject thereof or affected thereby, or otherwise
materially impair business operations of Potomac, taken as a whole.  The
operation of the properties and business of Potomac in the manner in which they
are now operated do not, to the knowledge of Potomac, violate any zoning
ordinances or municipal regulations in such a way as could, if such ordinances
or regulations were enforced, result in any material impairment of the uses of
the respective properties for the purposes for which they are now operated.  All
real and personal property leased by Potomac is held by Potomac under valid,
subsisting and enforceable leases.


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<PAGE>

     5.9  TAXES AND RETURNS.  Potomac has timely filed all federal, state, local
and foreign tax returns required to be filed by it.  All taxes and governmental
charges levied or assessed against the property or the business of Potomac have
been paid, other than taxes or charges, the payment of which is not yet due or
which, if due, is not yet delinquent or is being contested in good faith or has
not been finally determined.  The amount set up as accruals for taxes on the
1997 Potomac Balance Sheet is sufficient in all material respects for the
payment of all unpaid taxes and governmental charges of all kinds, applicable to
the property or business of Potomac for the period ended on December 31, 1997,
and all periods prior thereto.

     5.10  LAW COMPLIANCE.  To its actual knowledge, Potomac has complied with
all laws, regulations, licensing requirements and orders applicable to its
business the breach or violation of which could have a material adverse effect
on said business and has filed with the proper authorities, all statements and
reports required by the laws, regulations, licensing requirements and orders to
which it or any of its employees is subject, and Potomac possesses all necessary
licenses, franchises and permits to conduct its business in the manner in which
and in the jurisdictions and places where such businesses are now conducted.

     5.11  FINDER'S FEES AND BROKERAGE.  No director, officer or employee of
Potomac has incurred or will incur any brokerage, finder's or similar fee in
connection with the merger or the other transactions contemplated by this
Agreement.

     5.12  ACCURACY OF INFORMATION.  All written information regarding Potomac
previously delivered to Midwestern, including all financial information and
statements provided by Potomac to Midwestern, is true and correct.  All
additional information regarding Potomac to be delivered to Midwestern pursuant
to this Agreement will be true and correct.  Other than the properties shown on
the Potomac Financial Statements and 1997 Potomac Balance Sheet, there are no
properties, tangible or intangible, which are used in and material to the normal
day-to-day operations of Potomac as conducted by Potomac prior to and on the
date of this Agreement.

     5.13  LACK OF MATERIAL MISREPRESENTATION.  Potomac represents and warrants
that all the information and documents furnished by Potomac to Midwestern in
connection with this Agreement contain no untrue statement of material facts nor
do they omit material facts necessary in order to make the statements made, in
light of the circumstances under which they were made, not misleading.

                                     ARTICLE SIX

                     REPRESENTATIONS AND WARRANTIES OF MIDWESTERN

     Midwestern hereby represents and warrants to Potomac as follows:

     6.01  ORGANIZATION.  Midwestern is a corporation duly organized, validly
existing and in good standing under the laws of the State of Oklahoma and has
the corporate power and is entitled to own or lease its properties and to carry
on its business as, and in the places where, such properties are now owned or
leased and such business is now conducted.  The State of Oklahoma is the only
jurisdiction in which the property owned or leased or the business conducted by
Midwestern would make any such qualifications necessary.

     6.02  DELIVERY OF CERTIFICATE OF INCORPORATION AND BYLAWS. Midwestern has
delivered to Potomac complete and correct copies of the Certificate of
Incorporation of Midwestern and its Bylaws, as certified to by the Secretary or
an Assistant Secretary of Midwestern, as in effect on the date hereof.


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     6.03  CAPITALIZATION.  The total number of shares of capital stock which
Midwestern is authorized to issue is 50,000,000 shares of Common Stock, $.001
par value, of which 23,949,150 shares are issued and outstanding.  Midwestern
has no treasury stock.  There are no other authorized or outstanding equity
securities of Midwestern of any class, kind or character, and there are no
outstanding subscriptions, options, warrants or other agreements or commitments
obligating Midwestern to issue any additional shares of its capital stock of any
class, or any option or right with respect thereto, or any securities
convertible into shares of any class.  All outstanding shares of Common Stock of
Midwestern are duly and validly authorized and issued, and have not been issued
in violation of any preemptive right of shareholders.  Immediately prior to the
Effective Time, Midwestern shall cause a 1-for-41.4140846 reverse split of its
Common Stock so that immediately prior to the Effective Time Midwestern shall
have 578,261 shares of Common Stock issued and outstanding, without giving
effect to the elimination of any fractional shares of Common Stock, all
fractional shares shall be rounded to the next whole share.

     6.04  SUBSIDIARIES.  Other than Acquisition Corp, Midwestern does not have
any subsidiaries.

     6.05  AUTHORIZATION OF AGREEMENT.  The Board of Directors of Midwestern has
duly approved this Agreement and the transactions contemplated hereby and has
authorized the execution and delivery of this Agreement by Midwestern.
Midwestern has full power, authority and legal right to enter into this
Agreement and to consummate the transactions contemplated hereby.

     6.06  CONFLICTING AGREEMENTS.  Neither the execution nor the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby in
accordance with the terms of this Agreement, will conflict with, or result in a
breach of, any term of, or constitute a default under, (i) the Certificate of
Incorporation or Bylaws of Midwestern, or (ii) any material agreement or
instrument to which Midwestern is a party, or (iii) any material judgment,
decree, order, statute, rule or regulation to which Midwestern is subject, or
result in the creation of material lien, charge or encumbrance on any of the
properties of Midwestern, other than the merger of Potomac with and into
Midwestern and the other transactions contemplated in this Agreement. Midwestern
is not in default or would be in default with lapse of time or notice or both,
in respect to any such term.

     6.07  ASSETS AND LIABILITIES. Each of Midwestern and Acquisition Corp does
not have any asset or liabilities.

     6.08  FINDER'S FEES AND BROKERAGE.  No director, officer or employee of
Acquisition Corp or Midwestern has incurred or will incur any brokerage,
finder's or similar fee in connection with the merger or the other transactions
contemplated by this Agreement.

     6.09  ACCURACY OF INFORMATION.  All written information regarding
Midwestern and Acquisition Corp previously delivered to Potomac is true and
correct.  All additional information regarding Midwestern and Acquisition Corp
to be delivered to Potomac pursuant to this Agreement will be true and correct.

     6.10  LACK OF MATERIAL MISREPRESENTATION. Midwestern represents and
warrants that all the information and documents furnished by Midwestern to
Potomac in connection with this Agreement contain no untrue statement of
material facts nor do they omit material facts necessary in order to make the
statements made, in light of the circumstances under which they were made, not
misleading.

     6.11  VALIDITY OF ISSUANCE.  The shares of Common Stock of Midwestern to be
delivered to the shareholders of Potomac pursuant to this Agreement, when
delivered as provided herein, will be validly issued and outstanding, fully paid
and non-assessable.


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                                    ARTICLE SEVEN

                                 COVENANTS OF POTOMAC

     Between the date hereof and the Effective Time:

     7.01  ACCESS TO ASSETS, PROPERTY AND RECORDS.  Potomac will afford to the
officers and authorized representatives of Midwestern reasonable access to the
offices, properties, books and records of Potomac and will furnish Midwestern
with such additional financial and operating data and other information as to
the business and properties of Potomac as may be reasonable necessary for
Midwestern thoroughly to evaluate, prior to the Effective Time, the business
assets, operations and financial conditions of Potomac to include, without
limitation, tax returns filed and those in preparation of Potomac.  If, for any
reason, the Merger contemplated by this Agreement is not consummated, Potomac
will use its best efforts to cause all confidential information obtained by it
from Midwestern to be treated as such and will not use such information in a
manner detrimental to Midwestern.

     7.02  CONDUCT OF BUSINESS.  Potomac shall conduct its business in the usual
and ordinary course consistent with good corporate practices and policies, and
shall use its best efforts to preserve intact the present business organization,
keep available the services of its present officers and employees, maintain its
properties and business and to preserve the good will of employees, customers
and others having business dealings it.  Without the prior written consent of
Midwestern, Potomac shall not engage in any activity or enter into any
transaction that would cause any of the representations or warranties set forth
in Article V to be inaccurate if made as of a date subsequent to such activity
or transaction.

     7.03  SEC REPORTING COMPLIANCE AND COOPERATION.  Potomac will furnish
Midwestern with all information concerning Potomac as may be required for
inclusion any filing made by Midwestern with the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "1933 Act") or the
Securities Exchange Act of 1934, as amended ("1934 Act") or otherwise, or any
other governmental or regulatory body in connection with the transactions
contemplated by this Agreement.  Potomac represents and warrants that all
information so furnished for such statements and filing shall not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.

     7.04  PUBLIC ANNOUNCEMENTS.  Potomac will not, without prior consultation
with Midwestern, make any announcement to the public or any statement to its
employees generally concerning the transactions covered by this Agreement.

     7.05  NOTIFICATION OF EVENTS.  Potomac will promptly give notice to
Midwestern of the occurrence of any event or the failure of any event to occur
that results in a breach of any representation or warranty by Potomac or a
failure by Potomac to comply with any covenant, condition or agreement contained
herein.

     7.06  APPROVALS.  Potomac will use its best efforts to obtain all licenses,
consents or other approvals required to be obtained by Midwestern or Acquisition
Corp from any appropriate governmental agency or authority or other person in
connection with the carrying out of the transactions contemplated by this
Agreement.

     7.07  PERFORMANCES.  Potomac will use its best efforts to perform or cause
to be satisfied each covenant or condition to be performed or satisfied by it
pursuant hereto.


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<PAGE>

     7.08  SHAREHOLDER APPROVAL.  Potomac shall call a special meeting of its
shareholders to be held as soon as reasonably practicable after the date of this
Agreement (and give notice thereof  as soon as reasonably practicable after the
date of this Agreement or obtain waiver of such notice) for the purpose of
approval of this Agreement and the transactions contemplated in this Agreement.
In lieu of such special meeting of its shareholders, Potomac shall obtain
written consents in lieu of shareholders meeting approving this Agreement and
the transactions contemplated in this Agreement.

                                    ARTICLE EIGHT

                     COVENANTS OF MIDWESTERN AND ACQUISITION CORP

     Between the date hereof and the Effective Time:

     8.01  ACCESS TO RECORDS.  Midwestern and Acquisition Corp will afford to
the officers and authorized representatives of Potomac access to the books and
records of Midwestern and Acquisition Corp, and will furnish Potomac with such
additional information of Midwestern and Acquisition Corp as may be reasonably
requested by Potomac.  If, for any reason, the merger contemplated by this
Agreement is not consummated, Potomac will use its best efforts to cause all
confidential information obtained by it from Midwestern and Acquisition Corp to
be treated as such and will not use such information in a manner detrimental to
Midwestern and Acquisition Corp.

     8.02  CONDUCT OF BUSINESS. Midwestern and Acquisition Corp shall not
conduct any business other than in connection with the Merger and the other
transactions contemplated in this Agreement, and then only in the usual and
ordinary course consistent with good corporate practices and policies.  Without
the prior written consent of Potomac, Midwestern and Acquisition Corp shall not
engage in any activity or enter into any transaction that would cause any of the
representations or warranties set forth in Article VI to be inaccurate if made
as of a date subsequent to such activity or transaction.

     8.03  REGULATORY COMPLIANCE. Midwestern and Acquisition Corp will furnish
Potomac with all information concerning Midwestern and Acquisition Corp as may
be required by any governmental or regulatory agency in connection with the
transactions contemplated by this Agreement.  Each of Midwestern and Acquisition
Corp represents and warrants that all information so furnished shall not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein in order to make the statements therein, in light
of the circumstances under which they were made, not misleading.

     8.04  PUBLIC ANNOUNCEMENTS. Midwestern and Acquisition Corp will not,
without prior consultation with Potomac, make any announcement or other
statement to the public or any statement to its employees generally concerning
the transactions covered by this Agreement.

     8.05  NOTIFICATION OF EVENTS. Midwestern and Acquisition Corp will promptly
give notice of the occurrence of any event or the failure of any event to occur
that results in a breach of any representation or warranty by Midwestern and
Acquisition Corp or a failure by Midwestern or Acquisition Corp to comply with
any covenant, condition or agreement contained herein.

     8.06  APPROVALS. Midwestern and Acquisition Corp will use their best
efforts to obtain all licenses, consents or other approvals required to be
obtained by Midwestern and/or Acquisition Corp from any appropriate governmental
agency or authority or other person in connection with the carrying out of the
transactions contemplated by this Agreement.


                                         -9-
<PAGE>

     8.07  PERFORMANCE OF THIS AGREEMENT. Midwestern and Acquisition Corp will
use their best efforts to perform or cause to be satisfied each covenant or
condition to be performed or satisfied by it pursuant hereto.

     8.08  SHAREHOLDER APPROVAL.  Midwestern hereby specifically covenants and
agrees that it has read and been fully advised as to the meaning and effect of
this Agreement and the Merger to be effected hereby, and that it approves
thereof and by execution of this Agreement hereby votes all of the shares of
Acquisition Corp capital stock which it owns in favor of the Merger and hereby
consents in accordance with the Oklahoma Law to all corporate action required to
consummate the merger and the transactions contemplated in this Agreement
without the necessity for a meeting of the shareholders of Acquisition Corp.


                                     ARTICLE NINE

                      CONDITIONS TO OBLIGATIONS OF MIDWESTERN,
                             ACQUISITION CORP AND POTOMAC

     The obligations of Midwestern, Acquisition Corp and Potomac to effect the
Merger hereunder are, at their respective elections, subject to the satisfaction
or waiver of the following conditions:

     9.01  APPROVALS AND CONSENTS.  Prior to the Effective Time, all necessary
orders, consents and approvals shall have been entered by each regulatory
authority having jurisdiction in the premises and all applicable statutory
waiting periods shall have expired, and the consent of any other party necessary
to approve the Merger or to the continued holding by Midwestern and Acquisition
Corp and by Potomac of all rights in, to and under any contract, agreement,
license, permit, franchise, lease or other instrument and any property or
assets, tangible or intangible, reasonably deemed by Midwestern to be material
to Potomac or BVI, taken as a whole, or  to be material to Potomac, taken as a
whole, as the case may be, shall have been obtained.

                                     ARTICLE TEN

                        FURTHER CONDITIONS TO OBLIGATIONS OF
                           MIDWESTERN AND ACQUISITION CORP

     The obligation of Midwestern and Acquisition Corp to effect the Merger
hereunder, at their option, subject to the satisfaction or waiver of the
following further conditions:

     10.01  REPRESENTATIONS AND PERFORMANCES.  All of the representations and
warranties of Potomac contained in this Agreement shall be true in all material
respects as of the Effective Time as though such representations and warranties
were then made for the first time (other than those representations and
warranties which are specifically made as of a particular date or as of the date
of this Agreement); and Potomac, in all material respects, shall have performed
all obligations and complied with all covenants required by this Agreement to be
performed and complied with by it or them prior to the Effective Time.  As of
the Effective Time, Midwestern and Acquisition Corp shall have received a
certificate, dated the date on which the Effective Time is to occur, executed by
the Chairman, President or a Vice President and by the Treasurer or Chief
Financial Officer of Potomac, certifying in such detail as Midwestern and
Acquisition Corp may request as to the accuracy of such representations and
warranties and the fulfillment of such obligations and compliance with such
covenants as of the Effective Time.


                                         -10-
<PAGE>

                                    ARTICLE ELEVEN

                     FURTHER CONDITIONS TO OBLIGATIONS OF POTOMAC

     The obligations of Potomac to effect the Merger hereunder is, at their
option, subject to the satisfaction or waiver of the following further
conditions:

     11.01  REPRESENTATIONS AND PERFORMANCES.  All of the representations and
warranties of Midwestern and Acquisition Corp contained in this Agreement shall
be true in all material respects as of the Effective Time as though such
representations and warranties were then made for the first time (other than
those representations and warranties which are specifically made as of a
particular date or as of the date of this Agreement); and Midwestern and
Acquisition Corp, in all material respects, shall have performed all obligations
and complied with all covenants required by this Agreement to be performed and
complied with by each of them prior to the Effective Time.  As of the Effective
Time, Potomac shall have received a certificate dated the date on which the
Effective Time is to occur, executed by the Chairman, President or a Vice
President and by the Treasurer or Chief Financial Officer of Midwestern and
Acquisition Corp certifying in such detail as Potomac may request as to the
accuracy of such representations and warranties and the fulfillment of such
obligations and compliance with such covenants as of the Effective Time.

                                    ARTICLE TWELVE

                                ABANDONMENT OF MERGER

     12.01  TERMINATION AND ABANDONMENT.  This Agreement may be terminated and
the merger abandoned at any time prior to the Effective Time:

          (a) By mutual agreement of the Boards of Directors of Midwestern and
     Acquisition Corp and Potomac;

          (b) At the option of the Board of Directors of Potomac in the event
     that by April 30,1998, the conditions set forth in Articles Nine and Eleven
     shall not have been satisfied or waived;

          (c) At the option of the Board of Directors of Midwestern and
     Acquisition Corp in the event that by April 30, 1998, the conditions set
     forth in Articles Nine and Ten shall not have been satisfied or waived.

     12.02  NOTIFICATION.  In the event of termination by the Boards of
Directors of Midwestern and Acquisition Corp or Potomac as provided above,
written notice shall forthwith be given to the other parties.

     12.03  EFFECT.  In the event of termination of this Agreement and
abandonment of the Merger either by Midwestern and Acquisition Corp or by
Potomac as provided in this Agreement, this Agreement shall forthwith become
wholly void and of no effect, and there shall be no liability on the part of
either Midwestern and Acquisition Corp or Potomac, except that the
indemnification agreements relating to payment of expenses set forth in this
Agreement shall survive any such termination and abandonment.

                                   ARTICLE THIRTEEN

                        SURVIVAL OF REPRESENTATIONS WARRANTIES
                          AND COVENANTS AND INDEMNIFICATION

     13.01  SURVIVAL.  The representations, warranties, covenants and agreements
respectively made by Midwestern, Acquisition Corp or Potomac in this Agreement
or on any certificate delivered pursuant to


                                         -11-
<PAGE>

the provisions hereof, shall survive, and shall not terminate on, the Effective
Time and the consummation of the transactions contemplated under this Agreement.

     13.02  AVAILABLE REMEDIES.  Each party expressly agrees that, consistent
with its intention and agreement to be bound by the terms of this Agreement and
to consummate the transactions contemplated hereby, subject only to the
satisfaction of conditions precedent, the remedy of specific performance shall
be available to a non-breaching and non-defaulting party to enforce performance
of this Agreement by a breaching or defaulting party, including, without
limitation, to require the consummation of the Merger pursuant to this
Agreement.

     13.03  INDEMNITY.  (a) Midwestern and Acquisition Corp, in addition to the
remedies accorded the parties in Section 13.02 above, agree to indemnify and
hold Potomac harmless from and against any and all claims, actions, causes of
action, damages, costs and expenses, including without limitation attorneys'
fees, arising from or relating to a breach by the Midwestern or Acquisition Corp
of the representations, warranties, covenants and agreements  set forth in this
Agreement.

     (b)  Potomac, in addition to the remedies accorded the parties in Section
13.02 above, agrees to indemnify and hold Midwestern and Acquisition Corp
harmless from and against any and all claims, actions, causes of action,
damages, costs and expenses, including without limitation attorneys' fees,
arising from or relating to a breach by Potomac of the representations,
warranties, covenants and agreements set forth in this Agreement.

     13.04  RESCISSION AND OTHER RELIEF.  Each of Midwestern, Acquisition Corp
and Potomac acknowledge that Midwestern and Acquisition Corp, on the one hand,
and Potomac, on the other hand, would be irreparable damaged and that money
damages and any other remedy available at law would be inadequate to redress or
remedy any loss in the event that any of (i) any misrepresentation, or breach of
warranty under this Agreement, (ii) nonfulfillment or failure to perform any
covenant or agreement under this Agreement, or (iii) related and attributable
to, or asserted against a party hereto, each of Midwestern, Acquisition Corp and
Potomac, in addition to recovering any claim for  damages or obtaining any other
remedy available at law, also shall be entitled to rescission of the Merger and
shall be entitled to obtain any other appropriate remedy available in equity or
in law, and that each of Midwestern and Acquisition Corp and Potomac hereby
waives its right to assert and will not assert in defense that any other
adequate legal remedy is available.

                                   ARTICLE FOURTEEN

                                    MISCELLANEOUS

     14.01  NOTICES.  Any notice, request, instruction, document or other
communication required or permitted to be given under this Agreement after the
date hereof shall be in writing (including telex and telegraphic communication)
by any party hereto to any other party either (as elected by the party giving
such notice) personally delivered or sent by registered or certified mail,
postage pre-paid, return receipt requested, as follows:

          (a) If to Midwestern or Acquisition Corp, to

               Michael E. Dunn, Esq.
               Dunn Swan & Cunningham
               2800 First Oklahoma Tower
               210 West Park Avenue
               Oklahoma City, Oklahoma 73102-5604


                                         -12-
<PAGE>

          (b) If to Potomac, to

               Mr. Carl W. Swan, Chief Executive Officer
               1400 Founders Tower
               5900 Mosteller Drive
               Oklahoma City, Oklahoma 73112

or to such other address as any party may designate by notice complying with the
terms of this Section.  Each such notice shall be deemed delivered (i) on the
date delivered if by personal delivery, (ii) on the date telecommunicated if by
telegraph, (iii) on the date of transmission with confirmed answer if by telex,
telefax or other telegraphic method, and (iv) on the date upon which return
receipt is signed or delivery is refused or the notice is designated by the
postal authorities as not deliverable, as the case may be, if mailed.

     14.02  EXPENSES.  Midwestern and Acquisition Corp shall separately bear the
expenses of Midwestern and Acquisition Corp, and Potomac shall separately bear
the expenses of Potomac incurred in connection with this Agreement and in
connection with all things required to be done hereunder.  Notwithstanding the
foregoing, in the event of the failure to consummate the merger which results
from a misrepresentation or failure to perform a covenant or agreement on the
part of a party hereto (the "defaulting party"), defaulting party shall, in
addition to bearing and paying all costs and expenses incurred by it, bear and
pay all costs and expenses incurred by other parties hereto in connection with
the proceedings relating to the merger.

     14.03  AMENDMENT.  This Agreement may be amended at any time prior to the
Effective Time by a written instrument executed by Midwestern and Acquisition
Corp, and Potomac with the approval of their respective Boards of Directors.

     14.04  KNOWLEDGE DEFINED.  Whenever a representation or warranty is made
herein as being "to the actual knowledge of" or "to the knowledge of" or "known"
to or in "the opinion of" a corporation, it is understood that an officer of
such corporation has made or caused to be made (and the results thereof reported
to him) an investigation which is appropriate to determine the accuracy of such
representation or warranty by personnel or agents of such corporation competent
to perform such investigation and to determine the accuracy thereof, and any
such representation or warranty shall be deemed to be inaccurate if any officer
of such corporation on the basis of such investigation, or otherwise, has any
knowledge of any fact that would render such representation or warranty
inaccurate or such opinion inappropriate.

     14.05  ENTIRE AGREEMENT.  This Agreement and the documents and instruments
referred to herein constitute the entire Agreement between the parties hereto
and supersede all other understandings with respect to the subject matter
hereof.  This Agreement shall be governed by and construed in accordance with
the laws of the State of Oklahoma without regard to principles of conflict of
law.

     14.06  COUNTERPARTS.  For the convenience of the parties hereto and to
facilitate the filing and recording of this Agreement, it may be executed in one
or more counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute one and the same instrument.

     14.07  BINDING EFFECT.  All of the term and provisions of this Agreement,
whether so expressed or not, shall be binding upon, inure to the benefit of, and
be enforceable by the parties and their respective administrators, personal
representatives, legal representatives, heirs, successors and permitted assigns.

     14.08  ASSIGNABILITY.  No party shall assign his or its rights and/or
obligations hereunder without the prior written consent of each of the other
parties to this Agreement.


                                         -13-
<PAGE>

     14.09  HEADINGS.  The headings contained in this Agreement are for
convenience of reference only, are not to be considered a part hereof and shall
not limit or otherwise affect in any way the meaning or interpretation of this
Agreement.

     14.10  INVALID PROVISIONS.  In the event any provision of this Agreement or
any other agreement entered into pursuant hereto is contrary to, prohibited by
or deemed invalid under applicable law or regulation, such provision shall be
inapplicable and deemed omitted to the extend so contrary, prohibited or
invalid, but the remainder thereof shall not be invalidated thereby and shall be
given full force and effect so far as possible.  In the event any provision of
this Agreement may be construed in two or more ways, one of which would render
the provision invalid or otherwise voidable or unenforceable and another of
which would render the provision valid and enforceable, such provision shall
have the meaning which renders it valid and enforceable.

     14.11  WAIVER OF PERFORMANCE.  The failure or delay of any party at any
time to require performance by another party of any provision of this Agreement,
even if known, shall not affect the right of such party to require performance
of that provision or to exercise any right, power or remedy hereunder.  Any
waiver by any party of any breach of any provision of this Agreement shall not
be construed as a waiver of any continuing or succeeding breach of such
provision, a waiver of any continuing or succeeding breach of such right, power
or remedy under this Agreement.  No notice to or demand on any party in any case
shall, of itself, entitle such party to any other or further notice or demand in
similar or other circumstances.

     14.12  ATTORNEYS' FEES AND COSTS.  In the event any legal action or other
proceeding is brought for the enforcement of this Agreement, or because of an
alleged dispute, breach, default or misrepresentation in connection with any
provision of this Agreement, the successful or prevailing party or parties shall
be entitled to recover reasonable attorneys' fees, sales and use taxes, court
costs and all expenses even though not taxable as court costs (including,
without limitation, all such fees, taxes, costs and expenses incident to
arbitration, appellate, bankruptcy and post-judgment proceedings), incurred in
that action or proceeding, in addition to any other relief to which such party
or parties may be entitled.  Attorneys' fees shall include, without limitation,
paralegal fees, investigative fees, administrative costs, sales and use taxes
and all other charges billed by the attorney to the prevailing party.


                                         -14-
<PAGE>

     IN WITNESS WHEREOF, Midwestern, Acquisition Corp and Potomac have caused
this Agreement to be signed by their respective officers thereunto duly
authorized as of the date first above written.

"Midwestern"                  Midwestern-Oklahoma Energy Resources Corporation
                              A Oklahoma


                              By: /S/ MICHAEL E. DUNN
                                 ----------------------------------------------
                                   Michael E. Dunn, Chief Executive Officer

"Constituent Corporations"

  "Acquisition Corp"          POTOMAC EXPLORATION ACQUISITION
  or "Surviving Corporation"  CORPORATION, An Oklahoma Corporation



                              By: /S/ MICHAEL E. DUNN
                                 ----------------------------------------------
                                   Michael E. Dunn, Chief Executive Officer

     "Potomac"
                              POTOMAC ENERGY (BERMUDA) LTD.,
                              A Bermuda Corporation


                              By: /S/ CARL W. SWAN
                                 ----------------------------------------------
                                   Carl W. Swan, Chief Executive Officer


                                         -15-