<PAGE>

                              AMENDED AND RESTATED
                              --------------------
                   EXTENDIBLE REVOLVING TERM CREDIT FACILITY
                   -----------------------------------------

 This Agreement amends and restates in full the Loan Agreement dated April 19,
  1995 and the Amended and Restated Extendible Revolving Term Credit Facility
            dated June 28, 1996 between the Borrower and the Lender.

                                  May 29, 1997

BORROWER:     Norcen Energy Resources Limited (Norcen).
---------

FACILITY:     Extendible Revolving Term Credit Facility.
--------

AMOUNT:       Cdn. $50,000,000 or the U.S. dollar equivalent.
------

PURPOSE:      For general corporate purposes, including commercial paper       
-------       backstop, capital expenditures, short term working capital needs,
              refinancing existing bank indebtedness and for Permitted         
              Acquisitions.                                                    
                                                                               
LENDER:       Union Bank of Switzerland (Canada) ("UBS")
------

AVAILABILITY 
PERIOD:       The Facility will revolve and fluctuate for a period of 364 days 
------------  ("Revolving Period"), subject to renewal as provided below,      
              followed by a 2 year non-revolving term loan ("Term Period") with
              a bullet payment at the end of the Term Period.                  
              

REPAYMENT:    Revolving Period
---------     ----------------

              The Revolving Period ends May 28, 1998. The Revolving Period may
              be extended from time to time at the Lender's sole discretion for
              up to 364 days, within 30 days after the Borrower's request which
              may not be made more than twice in any 12 month period. The
              Borrower's request for extension will include a restatement of the
              Representations and Warranties. No response from the Lender within
              30 days of the request shall mean that an extension is not
              granted.


<PAGE>
                                       2

              Term Period

              -----------

              The Term Period commences on the day after the last day of the
              Revolving Period and ends two years thereafter. Any undrawn
              portion of the Facility will be canceled at the end of the
              Revolving Period. Any prepayment during the Term Period will
              constitute a permanent reduction of the Facility. For greater
              certainty, the rollover of a B/A or Libor Loan does not constitute
              a prepayment during the Term Period.

RANKING:      All amounts outstanding under the Facility will be senior        
-------       unsecured obligations of the Borrower ranking pari passu with all
              existing and future Senior Debt of the Borrower, other than      
              indebtedness secured by Permitted Encumbrances. The Facility will
              at all times rank senior to any existing or future Subordinated  
              Indebtedness.                                                    
              
             

AVAILMENTS:   The Facility  will be available by way of the following:
----------
              o        UBS Canadian dollar prime loans ("Cdn. Prime Rate 
                       Loans");

              o        UBS US dollar base rate loans ("USBR Loans")'

              o        Canadian dollar bankers' acceptances ("B/A's");

              o        US dollar London interbank offer rate loans ("Libor
                       Loans"); and

CURRENCY 
EXCESS:       If at any time the Canadian dollar equivalent of all outstanding 
--------      advances based on the noon (Toronto time) Bank of Canada exchange
              rate exceeds the available facility amount (a "Currency Excess"),
              the Borrower will repay forthwith Cdn. Prime Rate Loans or USBR  
              Loans until such time as the Currency Excess is eliminated. If a 
              Currency Excess remains after repayment of all Cdn. Prime Rate   
              Loans or USBR Loans, then the Borrower will:                     
             
             

              1) collateralize dollar for dollar the Currency Excess with
                 Canadian or US dollar deposits, or

<PAGE>

   
              2) repay any Libor Loans, as well as any expenses associated-with
                 breaking a Libor Loan, prior to maturity; or

              3) any combination of the foregoing.

BORROWING

AND NOTICE 
PROVISIONS:   A) The Borrower may borrow as follows:
----------

                 o        Cdn. Prime Rate Loans in minimum amounts of C$1 
                          million and multiples of $100,000 thereafter;


                 o        USBR Loans in minimum amounts of US$1 million and
                          multiples of $100,000 thereafter;

                 o        advances of B/A's will, subject to availability, be
                          issued for periods of 30, 60, 90, 120 or 180 days, or
                          such other period as is agreed to by the Lender, in
                          minimum amounts of C$1 million and multiples of
                          C$100,000 thereafter unless otherwise determined by
                          the market for B/A's; and

                 o        Libor Loans, with maturities of 1, 2, 3 or 6 months,
                          or such other period which as is agreed to by the
                          Lender, in minimum amounts of US$1 million and
                          multiples thereof

              B) The following notice provisions will apply to drawdowns,
                 repayments, rollovers and conversions: 

                 Prime Rate/USBR Loans

                 o        up to $20,000,000: same Business Day 9:00 a.m. notice
                          is required; and

                 o        over $20,000,000: 9:00 a.m. one Business Day prior
                          notice is required.


<PAGE>

                                     4 B/A's

              To the extent that the Borrower markets the B/A's, no notice is
              required. Should the Borrower request the Lender to market the
              B/A's then the following notice provisions shall apply:

              o        same Business Day 9:00 a.m. notice is required.

              o        one Business Day 9:00 a.m. notice is required for the 
                       rollover of B/A's, regardless of size.

              LIBOR Loans

              o        3 banking days (in London and Calgary) prior notice.

              The Borrower may repay any part of the outstanding amount without
              penalty subject to applicable notice periods and provided that

              B/A's and Libor Loans may be repaid on maturity dates only,
              unless, in the case of Libor Loans, the Borrower pays the expenses
              associated with breaking the Libor Loan prior to maturity.

INTEREST 
RATES:        During Revolving Period:  -  Libor + 40 bp                   
--------                                -  BA Rate + 40 bp                 
                                        -  UBS USBR                        
                                        -  UBS Canadian Prime              
                                                                           
              During Term Period:       -  All rates increase by 12.5 bp   
                                                                              
              
              Interest based on Cdn. Prime Rate and USBR Loans (except when
              interest on such loans is based on the Fed Funds Rate) will be
              calculated on a 365 or 366 day year, as applicable, and payable
              monthly in arrears on the last banking day of the month.

              Interest on USBR Loans based on the Fed Funds Rate will be
              calculated on a 360 day year.

              BA fees are payable at the time of endorsement and are calculated
              based on a 365-day or 366-day year.
<PAGE>
                                       5

              Interest on Libor Loans will be based on the Telerate screen #3750
              rate two days prior to funding and on a 360-day year. Interest is
              payable on rollover dates, or if the period of advance exceeds 6
              months, interest will accrue and be payable on the day which is 6
              months after the first day of such period, and on the last day of
              the Libor Loan.

              Any interest rate based on a period less than a year expressed
              as an annual rate for purposes of the Interest Act (Canada) is
              equivalent to such determined rate multiplied by the actual number
              of days in the calendar year in which same is to be ascertained
              and divided by the number of days in the period upon which it is
              based.

              The Borrower will pay interest on all overdue amounts (including
              overdue interest) at the Interest Rate specified in this Facility
              Agreement plus 1% per annum. All overdue interest is calculated on
              a daily basis and will be payable both before and after default,
              maturity and judgement.

FEES:         Standby Fees of 10 bp will be paid quarterly in arrears on the  
----          undrawn portion of the Facility during the Revolving Period. For  
              these purposes the amount of borrowings outstanding in US Dollars 
              will be notionally converted to Cdn. Dollars at the exchange rate 
              in effect on the Business Day prior to the due date for payment.  
              

EXPENSES:     The Borrower will pay all reasonable costs and expenses (including

--------      legal fees) incurred in connection with the review of the Facility
              Documents, the preservation and/or enforcement of any of the      
              rights of the Lender under the Facility, and loss or expenses     
              (including legal fees) incurred by the Lender as a consequence of 
              any failure to pay any stamp, registration or other tax to which  
              the Facility may be subject.                                      
              

CONDITIONS
PRECEDENT:    A) Conditions precedent to implementation of the terms and   
----------       conditions herein contained are the following:            
                                                                           
                1) officer's certificate stating that the Representations  
                   and Warranties are true and accurate in all material    
                   respects;                                               
                                                                           
                2) internal legal opinion stating that this Facility       
                   Agreement is valid, binding and legally enforceable.    
                                                                           

<PAGE>
                                       6

              B) Conditions precedent to subsequent drawdowns, rollovers and
                 conversions will be as follows:

                 1) receipt of applicable notice; and

                 2) no Event of Default or Potential Event of Default has
                    occurred or would occur as a result of such drawdown,
                    rollover or conversion.

REPRESENTATIONS
AND WARRANTIES:  Representations and Warranties are the following: 
---------------
   

                 1) corporate existence of the Borrower;

                 2) corporate power and legal capacity of the Borrower to
                    carry on business and own assets;

                 3) corporate power and authorization of the Borrower to
                    execute and deliver the Facility Documents and to perform
                    covenants under the Facility Documents;

                 4) Facility Documents have been duly executed and delivered
                    by the Borrower;

                 5) Facility Documents create legal, valid, binding and
                    enforceable obligations of the Borrower;

                 6) the most recent audited consolidated financial statements of
                    the Borrower (initially December 31, 1996), fairly present

                    the consolidated financial condition of the Borrower, as at
                    such date and the results of operations for the year ended,
                    in accordance with GAAP consistently applied, and since the
                    most recent audited financial statements of the Borrower,
                    there has been no material adverse change in the 
                    consolidated financial position or business operations of 
                    the Borrower;


<PAGE>
                                       7

                 7) the Borrower has in full force and effect such insurance
                    policies in amounts covering the properties and operations
                    of the Borrower as are customarily held by similar
                    corporations engaged in the same or similar businesses in
                    the localities where the Borrower's properties and
                    operations are located;

                 8) no pending or threatened action, suit, litigation,
                    judgement or proceeding that has a reasonable likelihood of
                    materially adversely affecting the Borrower's ability to 
                    repay or perform its obligations under the Facility
                    Documents other than as disclosed in writing by the
                    Borrower on or prior to the execution of the Facility
                    Documents;

                 9) no known material environmental liability, actual or
                    contingent which has not been provided for in the financial
                    statements of Borrower in accordance with GAAP; compliance
                    with environmental laws in all material respects; all
                    necessary material permits, licenses and other consents
                    required under environmental laws have been received and are
                    in good standing, and properties are not the subject of any
                    outstanding or threatened order or judgement alleging
                    violation of Environmental Laws which if enforced against
                    the Borrower would have a material adverse effect on the
                    financial condition, operations or business of the Borrower;

                10) unencumbered ownership and clear title to assets except
                    for Permitted Encumbrances;

                11) all amounts outstanding under the Facility rank at least
                    pari passu in right of payment with the Borrower's other
                    most senior unsecured Indebtedness, other than Indebtedness
                    which is a preferred claim arising by operation of law or a
                    Permitted Encumbrance;

                12) no Event of Default or Potential Event of Default has
                    occurred and is continuing; and,

                13) neither the execution and delivery of the Facility
                    Documents nor compliance with the terms and provisions
                    thereof will conflict with, result in a breach of, or

                    constitute a default under any law or regulation, any court
                    order, judgement or decree, or any agreement or instrument
                    binding upon the Borrower. 

<PAGE>
                                       8

GENERAL COVENANTS:  The Borrower will:
-----------------

                    1) pay all amounts owing under the Facility when due;

                    2) perform its obligations under the Facility Documents;

                    3) maintain its corporate existence;

                    4) supply to the Lender on a regular basis:

                       a) annual audited consolidated financial statements of
                          the Borrower prepared in accordance with GAAP, as soon
                          as available but in any event within 120 days of the
                          end of each fiscal year;

                       b) quarterly unaudited consolidated financial
                          statements of the Borrower prepared in accordance with
                          GAAP, as soon as available but in any event within 90
                          days of the end of the first 3 fiscal quarters of each
                          fiscal year, in all cases stating comparative figures
                          for the corresponding date and period in the previous
                          fiscal year;

                       c) a compliance certificate as per Exhibit A within
                          120 days of the fiscal year end and within 90 days of
                          the end of the first 3 quarters of each fiscal year
                          showing the calculation of all Financial Ratios and
                          including an officer's certificate stating that no
                          Event of Default or Potential Event of Default has
                          occurred;

                       d) Annual information forms or notices of material
                          change which are required to be filed by the Borrower
                          with any regulatory authority or securities exchange;

                    5) maintain the Interest Coverage Ratio and the Senior Debt
                       to Capital Ratio (the "Financial Ratios") as follows:

                       a) Interest Coverage Ratio on a rolling 4 quarter
                          basis to be greater than 2.50 times;

                       b) Senior Debt to Total Capital Ratio to be
                          maintained below 60:1,

                       all Financial Ratios to be calculated quarterly on a
                       consolidated basis, in accordance with GAAP;



<PAGE>
                                       9

                    6) carry on and conduct its business in a proper and
                       efficient manner and in compliance with applicable laws 
                       in all material respects;

                    7) maintain insurance policies covering its material
                       properties and operations as is customarily maintained
                       by similar corporations engaged in the same or similar
                       business;

                    8) not liquidate, dissolve or wind-up or take any steps or
                       proceedings in connection therewith;

                    9) not permit a merger with or into, or a consolidation
                       or amalgamation with, or transfer all or substantially
                       all its assets to, another entity, other than a merger or
                       amalgamation between the Borrower and a Wholly-Owned
                       Subsidiary, or between Wholly-Owned Subsidiaries:

                       a) if an Event of Default or Potential Event of Default
                          exists or would occur and be continuing immediately
                          before and after giving effect to the transaction; and

                       b) unless the successor corporation:

                          i) agrees to be bound by the Facility Documents;

                          ii) acknowledges the continuing validity and
                              enforceability of the Facility Documents;

                         iii) represents and warrants that the transaction
                              will not adversely affect the rights and benefits
                              afforded the Lender under the Facility Documents;

                          iv) represents that the creditworthiness of the
                              resulting, surviving or transferee entity is not
                              materially weaker than the Borrower prior to such
                              action; and

                           v) provides legal opinions confirming the matters
                              set forth in paragraphs i), ii), and iii) above.


<PAGE>

                                       10

                    10) not permit any lien, mortgage, charge, hypothec, pledge
                        or any other security interest or encumbrance on its
                        property or assets, except for Permitted Encumbrances,

                        unless at the same time or prior to securing any other
                        Indebtedness, the Borrower grants security for this 
                        Facility which ranks equally and rateably with the other
                        Indebtedness.

EVENTS OF DEFAULT:  Events of Default are as follows:
-----------------

                    1) nonpayment of principal when due;

                    2) nonpayment of interest or stamping fees due to the
                       Lender for 5 days after the due date. Non-payment of
                       standby fees or other fees due to the Lender in either
                       case for 5 days after notice of nonpayment.

                    3) nonpayment of other amounts under this Facility within
                       30 days after notice from the Lender;

                    4) breach of covenant under this Facility which remains
                       unremedied for 30 days after notice;

                    5) materially incorrect or misleading representation or
                       warranty under this Facility when given;

                    6) cross default to any defaulted Indebtedness of the
                       Borrower in excess of C$25 million and any applicable
                       period of grace has expired;

                    7) bankruptcy, insolvency, cessation of business or other
                       dissolution proceedings of the Borrower (30 day cure
                       period if involuntary bankruptcy applies);

                    8) final judgement or order in excess of C$25 million is
                       rendered against the Borrower which is not, within 60
                       days after entry thereof, bonded, discharged or stayed
                       pending appeal, or is not discharged within 60 days after
                       the expiration of such stay; or

                    9) a lien or security interest in excess of $25 million
                       is enforced against the property of the Borrower or a
                       Wholly-Owned Subsidiary.     

<PAGE>

                                       11

                       Upon the occurrence and continuance of an Event of
                       Default: the Lender may declare all Indebtedness under
                       the Facility to be due and payable, and the Lender will
                       have no obligation to make further advances, rollovers or
                       conversions; the Lender will have right of set off upon
                       the occurrence and continuance of an Event of Default;
                       all Libor Loans and USBR Loans may, at the Lender's sole
                       discretion, be converted to Cdn Prime Rate Loans at any

                       time and B/A's and letters of credit must be
                       collateralized by the Borrower in an escrow account;
                       interest will be calculated at the default rate of 1% per
                       annum above the Applicable Credit Spread; and, upon the
                       occurrence and continuance of an Event of Default the
                       Lender may arrange for an environmental audit at the
                       expense of the Borrower.

INCREASED COSTS
AND CHANGE OF LAW:     Increased costs and compensation for reduced returned to
------------------     the Lender in providing and maintaining the Facility    
                       including those costs arising from capital adequacy     
                       requirements and change of law to be for the account of 
                       the Borrower. The Lender will not be obliged to provide 
                       advances if rendered illegal.                           
                      

ASSIGNMENT:            The Lender reserves the right to sell, assign, transfer 
-----------            or grant participation in the Facility, in whole or in  
                       part, with the consent of the Borrower (such consent not
                       to be unreasonably withheld) provided that consent of the
                       Borrower will not be required after an Event of Default
                       or Potential Event of Default. Assignments will be     
                       permitted in minimum amounts equal to the lesser of (i)
                       C$10,000,000; and (ii) the remaining commitment of the 
                       Lender.                                                

                       The Borrower agrees to execute such further documentation
                       as the Lender may request for the purpose of any
                       assignment, sale or transfer of the Facility.

CANCELLATION:          The undrawn portion of the Credit Facility may be      
-------------          cancelled without penalty upon three Business Days     
                       notice.                                                
                       
 
GOVERNING LAW:         Governing law will be the laws of the Province of Alberta
--------------         and Canada applicable therein.
                       
                      
<PAGE>


                                       12

In witness whereof the parties hereto, by executing this document, are agreeable
to the terms and conditions as presented herein; Dated on 29th day of May, 1997.



UNION BANK OF SWITZERLAND (CANADA)


Per: ILLEGIBLE

     --------------------------


Per: /s/ L. J. MALONEY
     --------------------------
         L. J. MALONEY
         Vice President


NORCEN ENERGY RESOURCES LIMITED


Per: /s/ Robert J. Waters
     --------------------------
     Robert J. Waters
     Treasurer


Per: ILLEGIBLE                       
     --------------------------      
     



<PAGE>

                                       13

                                  DEFINITIONS
                                  -----------

"Applicable Credit Spread" means:
     - with respect to Canadian Prime Rate Loans .... nil 
     - with respect to USBR Loans.................... nil
     - with respect to Libor Loans................... 40 bp
     - with respect to B/A's......................... 40 bp (the stamping fee)

"B/A Rate" means the discount rate at which the Lender's B/A's are purchased by
the Lender or sold into the market by the Borrower. To the extent that the
Borrower requests the Lender to market the B/A's, then the B/A Rate will be the
prevailing CDOR rate for the relevant maturity plus 5 bp.

"Business Day" is a day, other than a Saturday or Sunday, on which the Lender is
open for business in Calgary, Alberta, Toronto, Ontario and New York, New York,
and with respect to Libor Loans, in London England.

"Cashflow" means, in respect of the Borrower, the aggregate of Consolidated Net
Earnings, Consolidated Interest Expense, Taxes and Non-Cash Items, all without
duplication and determined in accordance with GAAP.

"Cdn. Prime" means the rate of interest per annum, based on a 365 day year,
established and reported by the Lender to the Bank of Canada from time to time
as its reference rate of interest for determination of interest rates which the
Lender charges to customers of varying degrees of creditworthiness in Canada for

Canadian dollar loans made by it in Canada. For purposes of this Facility, the
Cdn. Prime will be the higher of the stated rate by the Lender or CDOR plus the
Applicable Credit Spread.

"CDOR" means the average yield to maturity for bankers' acceptances which is
quoted on Reuter's Canadian Discount Offer Rate screen at 10:00 a.m. Toronto
time on the applicable date of advance for B/A's having a term to maturity of 1
month.

"Consolidated Interest Expense" means consolidated interest, whether expensed or
capitalized, in respect of Indebtedness determined in accordance with GAAP.

"Consolidated Net Earnings" means consolidated net income or loss as reported on
the Borrower's consolidated statement of earnings excluding income from
discontinued operations determined in accordance with GAAP.


<PAGE>

                                       14

"Consolidated Tangible Net Worth" means, on a consolidated basis determined
in accordance with GAAP, at any time, the sum of:

     a     the Borrower's total shareholder equity; and
     b)    Subordinated Indebtedness;
     less:
     c)    any amounts of goodwill attributable to the Borrower.

"Facility Documents" means:

     a)    this letter agreement between the Borrower and the Lender; and

     b)    such other documents and certificates which in the opinion of the
           Lender, acting reasonably, are required to fully document or satisfy
           the terms and conditions herein contained.

"Fed Funds Rate" means, for any day, the rate set forth in the Federal Reserve
Bank of New York's weekly statistical release designated at H.15(519), opposite
the caption "Federal Funds (Effective)" for that day, or (if that day is not a
Business Day) for the next preceding Business Day.

"Funded Debt" means, all Indebtedness payable more than one year from the date
of creation thereof including current maturities of such Indebtedness and
Indebtedness which by its terms is renewable to a due date beyond one year;
excluding Subordinated Indebtedness.

"GAAP" means generally accepted accounting principles which are in effect from
time to time in Canada.

"Guarantees" means an undertaking to become liable for indebtedness for borrowed
money as presented on consolidated financial statements of Borrower.

"Hostile Acquisition" means an offer to acquire shares of a corporation, which

is required to be reported to an applicable securities regulatory authority,
where the board of directors of the target corporation has not approved such
offer nor recommended to the shareholders of the corporation that they sell
their shares pursuant to the proposed offer.

"Indebtedness" means all items in the consolidated financial statements of the
Borrower classified as liabilities for money borrowed in accordance with GAAP
(and will include capitalized leases, and Guarantees or endorsements (other than
of notes, bills and cheques presented to banks for collection or deposit in the
ordinary course of business) of indebtedness of others by the Borrower or
Wholly-Owned Subsidiaries, to the extent required by GAAP).

"Interest Coverage Ratio" means Cashflow divided by Consolidated Interest
Expense.
<PAGE>
                                       15

"Libor" means the rate of interest per annum, based on a 360 day year at which
the Lender makes available United States dollars which are obtained by the
Lender in the Interbank Euro Currency Market, London, England at approximately
11:00 a.m. (London time) on the second Business Day before the first day of, and
in an amount similar to, and for the period similar to the interest period of
such advance.

"Non-Cash Items" means depreciation, depletion, amortization, foreign exchange
translation gains or losses and other non-cash items included in the calculation
of Consolidated Net Earnings as reported on the Borrower's consolidated
statement of earnings as determined in accordance with GAAP.

"Permitted Acquisition" means a direct or indirect acquisition by the Borrower
which is not a Hostile Acquisition.

"Permitted Encumbrances" means:

        a) any security interest, except on fixed assets or on shares of any
           Subsidiary or affiliate, given in the ordinary course of business to
           any bank or other financial institution, to secure indebtedness
           payable on demand or maturing within 12 months of the date that such
           indebtedness is originally incurred provided that the total
           indebtedness so secured does not exceed $25 million;

        b) any Purchase Money Mortgage; 

        c) Risk Management Liens where the aggregate value of all cash and
           securities will not at any time exceed $25 million;

        d) any security interest on any petroleum and natural gas right,
           tangible assets associated therewith or the products derived
           therefrom or the proceeds of sale of such products, to secure
           production payments, royalties, carried interests and similar
           obligations or to secure obligations in connection with or
           necessarily incidental to commitments or purchase and sale of, or the
           transportation or distribution of, products derived from the
           petroleum and natural gas right, including without limitation forward

           sales;

        e) any security interest on any resource property of the Borrower
           that has not been in commercial production during the 12-month period
           ending on the date hereof, or has not been in commercial production
           during the 12-month period ending at the time of the imposition of
           such security to secure any indebtedness incurred for the development
           or improvement thereof or the development or improvement of any other
           resource property of the Borrower that has not been in commercial
           production during the 12-month period ending on the date hereof or
           has not been in commercial production during the 12-month period
           ending at the time of the imposition of such security; 



<PAGE>

                                       16

        f) any security interest in favour of the government of any country
           in which the Borrower owns assets or carries on business or the
           government of any province, state, municipality or other political
           subdivision in any such country, or any department or agency of any
           such government, given pursuant to a contract, concession, lease,
           license, franchise, grant, permit or other instrument pertaining to
           such assets or business or required by applicable laws;

        g) liens for taxes, assessments or other governmental charges not yet
           due or, if due, the validity of which is being contested in good
           faith, and liens for the excess of the amount of any past due taxes
           for which a final assessment has not been received over the amount
           of such taxes as estimated and paid by the Borrower;

        h) unless it constitutes an Event of Default, the lien of any
           judgement rendered or claim filed against the Borrower, which is
           being contested in good faith by the Borrower;

        i) undetermined or inchoate liens and charges (including builders',
           mechanics', warehousemen's carriers' and other similar liens)
           incidental to construction or current operations which relate to
           obligations not due or delinquent or which are being contested in
           good faith by the Borrower;

        j) liens incurred or created in the ordinary course of business on any
           particular petroleum and natural gas right and or on any tangible
           assets associated therewith as security, in favour of any other
           person who is conducting the exploration, exploitation, development
           or operation of the property or asset to which such petroleum and
           natural gas right relates, to secure payment by the Borrower of its
           proportion of the costs and expenses of such exploration,
           exploitation, development or operation incurred by such other person;

        k) any security interest given by the Borrower to a public utility or
           municipality or governmental or other public authority when required

           by such utility or municipality or other authority in connection with
           utility or municipal services required for the operations of the
           Borrower in the ordinary course of its business;

        l) any security on a lease or other instrument permitting the
           extraction of substances other than crude oil, natural gas, natural
           gas liquids and related products by the Borrower, provided that any
           such lease does not interfere with the enjoyment by the Borrower of
           any petroleum and natural gas right; 



<PAGE>

                                       17

        m) any renewal, refunding or extension of any security interest or
           encumbrance referred to in the foregoing clauses a) or l) or of any
           security interest or encumbrance on any property in existence at the
           time of acquisition thereof, in which the indebtedness thereby
           secured after such renewal, refunding or extension is not increased
           and the security interest or encumbrance is limited in its recourse
           to the property originally subject thereto and any improvements
           thereon; and

        n) any security interest or encumbrance, other than those referred to
           in the foregoing clauses a) to m) created by the Borrower if, after
           giving effect to the creation of such security interest or
           encumbrance, the aggregate principal amount of the indebtedness
           secured thereby would not be greater than C$25,000,000.

"Potential Event of Default" means an event that would constitute an Event of
Default with the giving of notice, lapse or time or both.

"Purchase Money Mortgage" means any mortgage, charge, hypothec, pledge or other
security or encumbrance created upon any real or personal property acquired by
the Borrower after the date hereof (or previously acquired and substantially
unimproved) to secure or securing the whole or any part of the purchase price of
such property (or, in the case of previously acquired and substantially
unimproved property, the cost of the improvement thereof) or the repayment of
money borrowed to pay the whole or any part of such purchase price or cost, or
any vendor's privilege or lien on such property securing all or any part of such
purchase price or cost, including title retention agreements and leases in the
nature of title retention agreements.

"Risk Management Liens" means liens on cash or marketable securities of the
Borrower granted in connection with any interest rate, foreign exchange or
commodity risk management arrangements provided:

        a) the Borrower reasonably expects to produce sufficient commodities
           of the type in question in the ordinary course of business to fulfill
           such contracts; and

        b) the obligations secured by such liens are not due and delinquent.


"Senior Debt" means all Funded Debt that ranks senior to Subordinated
Indebtedness.

"Senior Debt to Total Capital Ratio" means, Senior Debt divided by Total
Capital.

"Subordinated Indebtedness" means Indebtedness that is subordinate in all
circumstances including bankruptcy, in right of payment to Indebtedness under
this Facility and Senior Debt.

"Subsidiary" means any corporation a majority of the shares carrying voting
rights of which are at the time owned or controlled directly or indirectly by
the Borrower.

<PAGE>

"Taxes" means income taxes on the Borrower's consolidated statement of earnings
determined in accordance with GAAP.

"Total Capital" means Senior Debt plus Consolidated Tangible Net Worth.

"USBR" or "US Base Rate" means the rate of interest per annum, based on a 365
day year, established by the Lender from time to time as a reference rate for
the determination of interest rates that the Lender charges to customers of
varying degrees of creditworthiness for US dollar loans made by it in Canada.
For purposes of this Facility, the US Base Rate will be the higher of the stated
rate by the Lender or the Fed Funds Rate plus 1%.

"Wholly-Owned Subsidiary" means any Subsidiary in which all of the issued and
outstanding voting shares of each class of its capital are owned directly or
indirectly by the Borrower except that director's qualifying shares need not be
so owned.

* * * *