EXHIBIT 10.4

                          CORPORATE SERVICES AGREEMENT

                 THIS CORPORATE SERVICES AGREEMENT (the "Agreement") is
effective as of November 19, 1996 (the "Effective Date"), and is entered into by
and between SANTA FE ENERGY RESOURCES, INC., a Delaware corporation ("Santa
Fe"), and MONTEREY RESOURCES, INC., a Delaware corporation (the "Company").

                                R E C I T A L S:

                 WHEREAS, the Company was formed in August 1996 as a wholly
owned subsidiary of Santa Fe to own and operate substantially all of the assets
constituting the Western Division of Santa Fe, which is engaged in the oil and
gas business in California; and

                 WHEREAS, pursuant to a Conveyance and Contribution Agreement
effective as of the date hereof, Santa Fe has transfered to the Company
substantially all of the assets constituting the Western Division of Santa Fe
and the Company assumed the liabilities and obligations of Santa Fe associated
therewith or allocated thereto; and

                 WHEREAS, Santa Fe has historically provided to its operating
divisions and its subsidiaries, including the Company, certain specialized
corporate and administrative services more particularly described hereinafter;
and

                 WHEREAS, the Company proposes to offer up to, but not
including, twenty percent (20%) of its common stock for sale to the public; and

                 WHEREAS, Santa Fe is considering the distribution to its
shareholders of all of Santa Fe's common stock in the Company; and

                 WHEREAS, in view of the proposed public offering and potential
distribution of the Company's common stock, Santa Fe and the Company desire by
their execution of this Agreement to evidence their understanding with respect
to the terms and conditions upon which Santa Fe will, from and after the
Effective Date, provide certain services to the Company in connection with its
business and affairs.

                              A G R E E M E N T S:

                 NOW, THEREFORE, in consideration of the premises recited above
and the covenants, conditions, and agreements contained herein, and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:
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1.       Term.

         The initial term of this Agreement shall commence on the Effective
Date and shall continue thereafter for so long as Santa Fe and its wholly owned
corporate affiliates own more than 80% of the outstanding shares of the
Company's capital stock ordinarily entitled to vote in the election of
directors, and for 90 days thereafter, unless terminated sooner in accordance
with Section 20 below.  Thereafter, the term shall be automatically extended
for successive periods of one (1) year each unless terminated sooner in
accordance with Section 20 below.

2.       Services.

         (a)     Services by Santa Fe. During the Applicable Period (as defined
in Section 21 hereof), in consideration for the payments to be made by the
Company as described herein, Santa Fe agrees to provide to the Company certain
corporate and administrative services described below in this subparagraph (a)
(the "Services") to the extent such Services may be reasonably requested by the
Company from time to time during the Applicable Period.

                 (i)      Advisory Management Services.  Santa Fe shall provide
         advisory management services to assist and advise the Company in the
         conduct of its business.

                 (ii)     Audit and Tax.  Santa Fe shall assist the Company with
         negotiating services for both internal and contract audit functions,
         and shall provide the services necessary to provide required tax
         information to the Company, arrange and coordinate external audits by
         an independent accounting firm selected by the Company and prepare tax
         returns, if any are required, and administer any tax matters or tax
         reporting requirements of the Company to the extent required.

                 (iii)    Data Processing and Personnel.  Santa Fe shall provide
         data processing and human resources services to the Company to the
         extent required.  Data processing services shall include, without
         limitation (A) the maintenance of corporate records, such as corporate
         minutes, and (B) the maintenance of business accounting and other
         records, such as the Company's general ledger and financial
         statements, accounts payable, invoicing and accounts receivable,
         personnel, inventory and engineering design activities.  Human
         resources services shall include, without limitation, advice with
         respect to the selection, employment, evaluation, counseling and
         motivation, and termination of employees.

                 (iv)     Financial Management.  Santa Fe shall provide services
         related to treasury and banking matters, including cash management
         services, for the Company.

                 (v)      Legal Services.  Santa Fe shall provide or contract to
         have provided legal services related to the operations of the Company.

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                 (vi)     Insurance. Santa Fe shall assist the Company in
         obtaining director and officer liability insurance, either under Santa
         Fe insurance policies if reasonably permitted by Santa Fe's insurers or
         under separate policies arranged by Santa Fe.

                 (vii)    SEC Filings. Santa Fe shall provide services necessary
         to provide assistance in connection with the Company's obligation to
         prepare any and all filings required to be made with the Securities and
         Exchange Commission pursuant to the Securities Act of 1933 or the
         Securities Exchange Act of 1934 or the New York Stock Exchange or other
         applicable securities exchange pursuant to the laws, rules and
         regulations governing the same, and in the preparation and distribution
         of all materials required to be delivered to the holders of securities,
         including annual and quarterly reports and proxy statements, issued by
         the Company pursuant to such laws or regulations. In connection
         therewith, Santa Fe shall (i) provide the Company with investor
         relation services and (ii) provide assistance in determining the impact
         of new and proposed accounting standards.

                 (viii)   Employee Benefit Plan Administration.  Santa Fe shall
         provide advice and administrative services in connection with any
         employee benefit plans offered to the Company employees.

                 (ix)     Governmental Reports.  Santa Fe shall file various
         reports on behalf of the Company with governmental agencies,
         including, but not limited to, the Department of Energy (EIA 28) and
         Department of Labor.

Santa Fe shall perform the Services with the same degree of care, skill and
prudence customarily exercised for its own operations. It is understood and
agreed that the Services will be substantially identical in nature and quality
to the Services performed by Santa Fe for the Western Division of Santa Fe
during the year prior to the Effective Date, except as required by the Company
becoming a public company following the initial public offering of common stock
of the Company.

         (b)     Contractors. Santa Fe may engage any third-party contractor
(foreign or domestic) to perform any Service (an "Outsourced Service");
provided, that Santa Fe shall remain responsible for the provision of the
Outsourced Service in accordance with this Agreement. The Company may not
terminate any such Outsourced Service except upon proper notice as provided in
any agreement between Santa Fe and the third-party contractor; provided,
however, that no agreement entered into by Santa Fe with a third-party
contractor after the Effective Date shall give to any such third-party
contractor a preferential right to provide the Company with Services following
the expiration of this Agreement.

         (c)     Cancellation or Reduction of Services. (i) General. The Company
may remove and terminate or reduce the level of any Service or Services and
Santa Fe may remove and terminate or reduce the level of any Service or Services
that are part of the Santa Fe Consolidated Program (as defined below), in each
case upon 30 days' prior written notice to the other party, subject to the
provisions of subparagraph (ii) below, subparagraph (b) above and Section 5(a)
hereof.

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<PAGE>   
                 (ii)     Consolidated Programs. The "Santa Fe Consolidated
Programs" are Santa Fe's consolidated pension, health and welfare plans ("Santa
Fe Consolidated Benefit Plans") and Santa Fe's consolidated treasury, accounting
and tax operations ("Santa Fe Consolidated Reporting").

                 (1)      Removal by the Company. The Company may remove from
this Agreement a Service provided as part of the Santa Fe Consolidated Programs
only with the prior consent of Santa Fe (which shall not be unreasonably
withheld) and upon terms and conditions reasonably acceptable to Santa Fe
(including reimbursement of costs incurred by Santa Fe in effecting such
removal).

                 (2)      Removal by Santa Fe. Santa Fe shall continue to
provide all services that are part of the Santa Fe Consolidated Programs until
either Santa Fe ceases providing such services for its consolidated group of
companies or the Company no longer participates in the applicable Santa Fe
Consolidated Program.

                 (iii)    Should the Company terminate any Service being
provided hereunder or cease to be eligible to purchase certain Services from
Santa Fe's third-party providers (such as the inability of the Company to use
computer licenses or otherwise not qualify under certain agreements to purchase
equipment or Services as a result of the Company not being an "affiliate" of
Santa Fe as required by such agreement), Santa Fe shall have no liability to the
Company for Santa Fe's failure or inability to replace such terminated Services.

         (d)     Corporate Management. Except as provided below in this Section,
nothing in this Agreement delegates or assigns to Santa Fe any general right or
responsibility to set corporate policies for the Company or to make decisions or
take actions commonly reserved to corporate officers, directors or managers, and
nothing in this Agreement shall be construed to relieve the directors or
officers of the Company from the performance of their respective duties or to
limit the exercise of their powers in accordance with the charter or by-laws of
the Company or in accordance with any applicable statute or regulation. Santa Fe
shall perform all Services, including those associated with the Santa Fe
Consolidated Programs, in accordance with the policies, practices and standards
established by Santa Fe from time to time for such services, which shall not
unfairly discriminate against the Company, compared with other Santa Fe
subsidiaries. If the Company ever requests that Santa Fe change any such policy,
practice or standard, and Santa Fe fails or refuses to do so, that failure or
refusal shall also constitute "cause" for immediate termination of this
Agreement under Section 20(a) below.

         (e)     Other Activities of Santa Fe. The Company recognizes that Santa
Fe now renders and may continue to render management and other services to other
companies that may or may not have policies and conduct activities similar to
those of the Company. Santa Fe shall be free to render such advice and other
services, and the Company hereby consents thereto. Santa Fe shall not be
required to devote full time and attention to the performance of its duties
under this Agreement, but shall 

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devote only so much of its time and attention as it deems reasonable or
necessary to perform the services required hereunder.

3.       Transfer of Responsibility of Services.

         (a)     General. In addition to the specific Services covered by this
Agreement, Santa Fe shall on request assist the Company in assuming
responsibility for some or all of the specific Services to be performed by Santa
Fe under this Agreement. For example, on request Santa Fe shall provide
on-the-job training for the Company's agents and employees who are assigned to
assume responsibility for a Service. Santa Fe shall not be liable or responsible
to the Company in any way for the acts or omission of such agents or employees.

         (b)     Procedures for Transferring Services.

                 (i)      Notices.  Upon termination of this Agreement or upon
         removal, termination or reduction of any Service from this Agreement,
         the Party who is terminating the Agreement or removing, terminating or
         reducing the Service shall, as part of the requisite Notice, identify
         the Services, if any,  to be transferred to the Company and propose
         the procedures and timetable for such transfer.

                 (ii)     Transfer.  The Parties shall then promptly assign
         sufficient personnel and resources to effect the transfer of
         responsibility in an efficient and orderly manner, shall negotiate in
         good faith to agree upon reasonable procedures and a timetable for the
         transfer, and shall cause the transfer to occur in accordance with
         those procedures and on the agreed timetable.  The term of this
         Agreement shall be deemed to have been extended with respect to the
         affected Services, if any,  until such transfer has been fully carried
         out.

                 (iii)    Information. Santa Fe shall deliver to the Company
         copies of all books, records, accounts, documents, contracts, files,
         data bases, and other information ("Information") reasonably requested
         by the Company in connection with any Service provided hereunder or
         reasonably necessary for the Company to assume responsibility for that
         Service, including those maintained in electronic form. To the extent
         Santa Fe lawfully may do so, Santa Fe shall also furnish the Company
         with copies of the computer programs, operating systems, codes,
         instructions, training materials, and manuals ("Related Materials")
         necessary or useful to receive, store, update, manipulate, use, and
         report the Information; and to the extent that Santa Fe may not
         lawfully furnish such copies, Santa Fe shall assist the Company in
         obtaining them from third parties.

                 (iv)     Costs. In addition to the other sums Santa Fe is
         entitled to be paid under this Agreement, the Company shall reimburse
         Santa Fe for its reasonable out-of-pocket costs of transferring each
         Service to the Company, including the costs of copying and transferring
         Information. Notwithstanding the foregoing, Santa Fe shall not be
         entitled to receive payment for any incremental cost increases to which
         Santa Fe may become subject due to 

                                      -5-
<PAGE>   

         the transfer of the Service, including, but not limited to, health
         and/or life insurance premiums and/or employee benefit or pension plan
         contributions.

4.       Payment for Services.

         (a)     Payments by the Company. The Company, in consideration for the
performance of the Services by or on behalf of Santa Fe, agrees to reimburse
Santa Fe, without duplication, for (i) the actual cost of any item purchased for
the Company, at the request of the Company, by Santa Fe ("Direct Costs"), (ii)
all reasonable expenses actually incurred by Santa Fe for Outsourced Services or
other contract services or utilities provided by any third party providers for
the Company under an agreement with such third party ("Outsourced Charges"),
(iii) reasonable out-of-pocket expenses incurred by Santa Fe employees in
providing Services hereunder, (iv) insurance premiums, funding contributions,
costs and expenses related to the Company's properties, employees, including
their continued participation in Santa Fe employee benefit plans and programs,
and operations, whether such insurance or funding is provided by third parties
or self-insurance programs, and (v) other expenses and Services in accordance
with the schedule or charges shown on Exhibit A attached hereto. If the
compensation for the Services does not include sales, use, excise, value added
or similar taxes, and if any such taxes are imposed on the Services, the Company
shall pay or reimburse Santa Fe for any such taxes.
        
5.       Invoicing.

         (a)     Santa Fe shall invoice the Company for all Services, Direct
Costs and Outsourced Charges for each calendar month within 45 days following
the end of such calendar month, provided that any failure by Santa Fe to provide
an invoice within such time period shall not relieve the Company of its
obligation to pay an invoice received after such date. All invoices shall
reflect in reasonable detail a description of the Services performed, and the
aggregate amount reflected on any such invoice shall be due and payable within
30 days following the Company's receipt of the invoice.

         (b)     In the event of a dispute as to the propriety of invoiced
amounts, the Company shall pay all undisputed amounts on each invoice, but shall
be entitled to withhold payment of any amount in dispute and shall notify Santa
Fe within ten (10) business days from receipt of the disputed invoice of the
disputed amount and the reasons each such charge is disputed by the Company.
Santa Fe shall provide the Company with records relating to the disputed amount
so as to enable the parties to resolve the dispute.

         (c)     In the event the aggregate amount on any invoice is not
disputed and is not paid within 30 days following the Company's receipt of the
invoice, the unpaid amount thereof shall bear interest at the prime rate of
Chase Manhattan Bank, N.A. for the period such amount remains unpaid.

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         (d)     Any statement or payment not disputed in writing by either
party within two years of the date of such statement shall be considered final
and no longer subject to adjustment.  Either party shall not be obligated to
pay for any charges for which statements for payment are submitted more than
two years after the termination of this Agreement.

6.       The Company as Sole Beneficiary.

         The Company acknowledges that the Services shall be provided only with
respect to the business of the Company and its Subsidiaries as currently
operated or as mutually agreed by the parties hereto. The Company shall not
request performance of any Services for the benefit of any entity other than the
Company and its Subsidiaries. The Company represents and agrees that the Company
will use the Services only in accordance with all applicable federal, state and
local laws and regulations and communications and common carrier tariffs, and in
accordance with the reasonable conditions, rules, regulations and specifications
which may be set forth in any manuals, materials, documents or instructions
furnished from time to time by Santa Fe to the Company. Santa Fe reserves the
right to take all actions, including termination of any particular Services,
that Santa Fe reasonably believes to be necessary to assure compliance with
applicable laws, regulations and tariffs. Santa Fe will notify the Company of
the reasons for any such termination of Services.

7.       Limited Warranty, Limitation of Liability

         Santa Fe represents that it will provide or cause the Services to be
provided to the Company with reasonable diligence. EXCEPT AS SET FORTH IN THE
IMMEDIATELY PRECEDING SENTENCE, ALL PRODUCTS OBTAINED FOR, AND SERVICES PROVIDED
TO, THE COMPANY ARE AS IS, WHERE IS, WITH ALL FAULTS. SANTA FE MAKES NO (AND
HEREBY DISCLAIMS AND NEGATES ANY AND ALL) REPRESENTATIONS AND WARRANTIES,
EXPRESS OR IMPLIED, INCLUDING THE WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE WITH RESPECT TO THE SERVICES PROVIDED TO OR PRODUCTS OBTAINED
FOR THE COMPANY. FURTHERMORE, THE COMPANY MAY NOT RELY UPON ANY REPRESENTATION
OR WARRANTY, EXPRESS OR IMPLIED, INCLUDING THE WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE MADE TO SANTA FE BY ANY PARTY (INCLUDING AN
AFFILIATE OF SANTA FE) PERFORMING SERVICES ON BEHALF OF SANTA FE HEREUNDER,
UNLESS SUCH PARTY MAKES AN EXPRESS WARRANTY TO THE COMPANY.

     IT IS EXPRESSLY UNDERSTOOD BY THE COMPANY AND THE COMPANY AGREES THAT SANTA
FE SHALL HAVE NO LIABILITY FOR ANY DAMAGES ARISING OUT OF THE PERFORMANCE OR
NON-PERFORMANCE OF ANY SERVICES PROVIDED HEREUNDER BY SANTA FE OR ANY THIRD
PARTY PROVIDER UNLESS IN EACH CASE SUCH DAMAGES ARISE OUT OF THE GROSS
NEGLIGENCE OR INTENTIONAL MISCONDUCT ON THE PART OF SANTA FE. THE COMPANY AGREES
THAT THE REMUNERATION PAID TO SANTA FE HEREUNDER FOR THE SERVICES 

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TO BE PERFORMED REFLECT THIS LIMITATION OF LIABILITY AND DISCLAIMER OF
WARRANTIES. IN NO EVENT SHALL SANTA FE BE LIABLE TO THE COMPANY OR ANY OTHER
PERSON FOR ANY INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES RESULTING FROM ANY
ERROR IN THE PERFORMANCE OF SERVICES OR FROM THE BREACH OF THIS AGREEMENT,
REGARDLESS OF THE FAULT OF SANTA FE, OR ANY THIRD PARTY PROVIDER OR WHETHER
SANTA FE, OR ANY THIRD PARTY PROVIDER OR WHETHER SANTA FE OR THE THIRD PARTY
PROVIDER ARE WHOLLY, CONCURRENTLY, PARTIALLY, OR SOLELY NEGLIGENT, UNLESS IN
EACH CASE SUCH DAMAGES ARISE OUT OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT
OF SANTA FE OR SUCH THIRD PARTY PROVIDER. TO THE EXTENT ANY THIRD PARTY PROVIDER
HAS LIMITED ITS LIABILITY TO SANTA FE FOR SERVICES UNDER AN OUTSOURCING OR OTHER
AGREEMENT, THE COMPANY AGREES TO BE BOUND BY SUCH LIMITATION OF LIABILITY FOR
ANY PRODUCT OR SERVICE PROVIDED TO THE COMPANY BY SUCH THIRD PARTY PROVIDER
UNDER SANTA FE'S AGREEMENT.

8.       Force Majeure.

                 SANTA FE SHALL HAVE NO OBLIGATION TO PERFORM OR CAUSE THE
SERVICES TO BE PERFORMED IF ITS FAILURE TO DO SO IS CAUSED BY OR RESULTS FROM
ANY ACT OF GOD, GOVERNMENTAL ACTION, NATURAL DISASTER, STRIKE, FAILURE OF
ESSENTIAL EQUIPMENT OR ANY OTHER CAUSE OR CIRCUMSTANCE BEYOND THE CONTROL OF
SANTA FE OR, IF APPLICABLE, THIRD PARTY PROVIDERS OF SERVICES TO SANTA FE
("EVENT OF FORCE MAJEURE"). Santa Fe will notify the Company of any Event of
Force Majeure affecting its Services to the Company. Santa Fe agrees that
following any Event of Force Majeure, the Company shall have no obligation to
pay for the Services affected thereby and Santa Fe will use its reasonable best
efforts to restore such Services.

9.       Liability and Indemnification.

         (a) Liability of Santa Fe and Indemnitees. (i) Notwithstanding anything
to the contrary set forth in this Agreement, neither Santa Fe nor any Indemnitee
(as defined in Section 21 hereof) shall be liable, responsible or accountable in
damages or otherwise to the Company for any expenses (including attorney's
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by the Company in connection with any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, except to the extent such expenses, judgments, fines and amounts
arose out of the gross negligence or willful misconduct of Santa Fe or such
Indemnitee. Neither Santa Fe nor any Indemnitee shall be liable to the Company
for any action of any other employee or agent of the Company (acting in its
capacity as such).

                 (ii) Subject to its obligations and duties under this Agreement
set forth in Section 2, Santa Fe may exercise any powers granted to it by this
Agreement and perform any of the duties 

                                      -8-
<PAGE>   
imposed upon it hereunder either directly, by or through its agents or by or
through third party contractors.

                 (iii) Any amendment, modification or repeal of this Section 9
or any provisions hereof shall be prospective only and shall not in any way
affect the limitations on the liability to the Company of the Indemnitees under
this Section 9 as in effect immediately prior to such amendment, modification or
repeal with respect to claims arising from or relating to matters occurring, in
whole or in part, prior to such amendment, modification or repeal regardless of
when such claims may arise or be asserted.

         (b)     Indemnification.

                 (i) The Company shall indemnify and hold harmless Santa Fe and
each Indemnitee from and against any and all losses, claims, damages,
liabilities (joint or several) expenses (including legal fees and expenses),
judgments, fines, penalties, interest, settlements and other amounts arising
from any and all claims, demands, actions, suits or proceedings, whether civil,
criminal, administrative or investigative, in which Santa Fe or any Indemnitee
may be involved, or is threatened to be involved, as a party or otherwise, by
reason of its status or in connection with services rendered in connection with
the activities of the Company; except to the extent such expenses, judgments,
fines and amounts arose out of the gross negligence or willful misconduct of
Santa Fe or such Indemnitee and provided in each case that Santa Fe or the
Indemnitee acted in good faith and in a manner that Santa Fe or such Indemnitee
reasonably believed to be in, or not opposed to, the best interests of the
Company and, with respect to any criminal proceeding, had no reasonable cause to
believe its conduct was unlawful.

                 (ii) Expenses (including legal fees and expenses) incurred by
Santa Fe or any Indemnitee who is entitled to indemnification pursuant to this
Section 9 in defending any claim, demand, action, suit or proceeding shall, from
time to time, be advanced by the Company prior to the final disposition of such
claim, demand, action, suit or proceeding upon receipt by the Company of an
undertaking by or on behalf of Santa Fe or such Indemnitee to repay such amount
if it shall be determined that Santa Fe or such Indemnitee is not entitled to be
indemnified as authorized in this Section 9.

                 (iii) The indemnification provided for by this Section 9 shall
be in addition to any other rights to which Santa Fe or an Indemnitee shall be
entitled under any agreement, as a matter of law, or otherwise, and shall
continue as to Santa Fe or any Indemnitee who has ceased to serve in such
capacity and shall inure to the benefit of the heirs, successors, assigns and
administrators of Santa Fe or the Indemnitee.

                 (iv) No amendment, modification or repeal of this Section 9 or
any provision hereof shall in any manner terminate, reduce or impair the right
of Santa Fe or any past, present or future Indemnitee to be indemnified by the
Company, nor the obligation of the Company to indemnify any such Indemnitee
under and in accordance with the provisions of this Section 9 as in effect

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immediately prior to such amendment, modification or repeal with respect to
claims arising from or relating to matters occurring, in whole or in part, prior
to such amendment, modification or repeal, regardless of when such claims may
arise or be asserted.

         (c)      Insurance. The Company may purchase and maintain (or shall
reimburse Santa Fe for the cost of) insurance, on behalf of Santa Fe and such
other Persons as Santa Fe shall reasonably determine, against any liability that
may be asserted against or expense that may be incurred by such Person in
connection with Services performed for or on behalf of the Company, regardless
of whether the Company has the obligation to indemnify such Person against such
liability under the provisions of this Agreement.
        
10.      Severability.

         In the event any portion of this Agreement shall be found by a court
of competent jurisdiction to be unenforceable, that portion of the Agreement
will be null and void and the remainder of the Agreement will be binding on the
parties as if the unenforceable provisions had never been contained herein.

11.      Assignment.

         Except for the ability of Santa Fe to cause one or more of the Services
to be performed by a third party provider, no party shall have the right to
assign its rights or obligations under this Agreement without the prior written
consent of the other party.

12.      Entire Agreement, Supersedure.

         This Agreement constitutes the entire agreement of the parties relating
to the performance of the Services by Santa Fe, and all prior or contemporaneous
written or oral agreements are merged herein.

13.      Choice of Law.

         THIS AGREEMENT SHALL BE SUBJECT TO AND GOVERNED BY THE LAWS OF THE
STATE OF TEXAS, EXCLUDING ANY CONFLICTS-OF- LAW RULE OR PRINCIPLE THAT MIGHT
REFER THE CONSTRUCTION OR INTERPRETATION OF THIS AGREEMENT TO THE LAWS OF
ANOTHER STATE.

14.      Amendment or Modification.

         This Agreement may be amended or modified from time to time only by a
written amendment signed by Santa Fe and the Company.

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15.      Notices.

         Any notice, request, instruction, correspondence or other document to
be given hereunder by any party to the other (herein collectively called
"Notice") shall be in writing and delivered personally or mailed, postage
prepaid, or by telegram or telecopier, as follows:

                                  IF TO SANTA FE:

                                  Santa Fe Energy Resources, Inc.
                                  1616 South Voss Road
                                  Suite No. 1000
                                  Houston, Texas   77057
                                  Attention: General Counsel

                                  IF TO THE COMPANY:

                                  Monterey Resources, Inc.
                                  5201 Truxtun Avenue
                                  Suite No. 100
                                  Bakersfield, California   93309
                                  Attention: General Counsel

Notice given by personal delivery or mail shall be effective upon actual
receipt.  Notice given by telegram or telecopier shall be effective upon actual
receipt if received during the recipient's normal business hours, or at the
beginning of the recipient's next business day after receipt if not received
during the recipient's normal business hours.  Any party may change any address
to which Notice is to be given to it by giving Notice as provided above of such
change of address.

16.      Further Assurances.

         In connection with this Agreement and all transactions contemplated by
this Agreement, by execution of this Agreement each signatory party hereto
agrees to execute and deliver such additional documents and instruments as may
be required for Santa Fe to provide the Services hereunder and to perform such
other additional acts as may be necessary or appropriate to effectuate, carry
out and perform all of the terms, provisions, and conditions of this Agreement.

17.      Acknowledgment Regarding Certain Provisions.

         EACH OF THE PARTIES HERETO SPECIFICALLY ACKNOWLEDGES AND AGREES (A)
THAT IT HAS A DUTY TO READ THIS AGREEMENT AND THAT IT IS CHARGED WITH NOTICE AND
KNOWLEDGE OF THE TERMS HEREOF, (B) THAT IT HAS IN FACT READ THIS AGREEMENT AND
IS FULLY INFORMED AND HAS FULL NOTICE AND KNOWLEDGE OF THE TERMS, CONDITIONS AND
EFFECTS OF 

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THIS AGREEMENT, AND (C) THAT IT RECOGNIZES THAT CERTAIN OF THE TERMS OF THIS
AGREEMENT PROVIDE FOR THE ASSUMPTION BY ONE PARTY OF, AND/OR RELEASE OF THE
OTHER PARTY FROM, CERTAIN LIABILITIES ATTRIBUTABLE TO THE MATTERS COVERED BY
THIS AGREEMENT THAT SUCH PARTY WOULD OTHERWISE BE RESPONSIBLE FOR UNDER THE LAW.
EACH PARTY HERETO FURTHER AGREES AND COVENANTS THAT IT WILL NOT CONTEST THE
VALIDITY OR ENFORCEABILITY OF ANY SUCH PROVISIONS OF THIS AGREEMENT ON THE BASIS
THAT THE PARTY HAD NO NOTICE OR KNOWLEDGE OF SUCH PROVISION OR THAT SUCH
PROVISIONS ARE NOT "CONSPICUOUS."

18.      No Third Party Beneficiary.

         The provisions of this Agreement are enforceable solely by the parties
to this Agreement, and no Assignee or other Person, other than pursuant to
Section 9 hereof, shall have the right, separate and apart from the Company or
Santa Fe, to enforce any provision of this Agreement or to compel any party to
this Agreement to comply with the terms of this Agreement.

19.      Mediation.

         Santa Fe and the Company agree to negotiate in good faith in an effort
to resolve any dispute related to this Agreement that may arise between the
parties. If the dispute cannot be resolved promptly by negotiation, then either
party may give the other party written notice that the dispute should be
submitted to mediation. Promptly thereafter, a mutually acceptable mediator
shall be chosen by the parties, who shall share the cost of mediation services
equally. If the dispute has not been resolved by mediation within 90 days after
the date of written notice requesting mediation, then either party may initiate
litigation and pursue any and all remedies at law or at equity that such party
is entitled to.

20.      Termination.

         This Agreement may be terminated prior to the expiration of the terms
described in Section 1 hereof as follows:

         (a)     By the Company. The Company shall have the right to terminate
this Agreement for "Cause" (as defined below and in Section 2(d)) in which case
no further payment shall be due Santa Fe pursuant to this Agreement, other than
obligations already accrued as of the Notice Date (as defined below). For
purposes of this Section 20(a), "Cause" shall mean the material failure by Santa
Fe to perform its obligations hereunder. In addition, the Company shall have the
right to terminate this Agreement without cause, for any reason, upon 90 days'
prior written notice.

         (b)     By Santa Fe.  Santa Fe shall have the right to terminate this
Agreement upon any "Constructive Termination," which shall mean:

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<PAGE>   
                 (i)      The failure by the Company to pay Charges in
         accordance with this Agreement and such failure continues for 30 days
         after written notice to the Company; or

                (ii)      Dissolution or liquidation of the Company for any 
         reason.

In addition, Santa Fe shall have the right to terminate this Agreement without
cause, for any reason, upon 90 days written notice.

         (c)     By Mutual Agreement.    This Agreement may be terminated by
mutual agreement on the terms and dates stipulated in a writing signed by the
Company and Santa Fe.

         (d)     Notice of Termination.  Termination of this Agreement pursuant
to this Section 20 shall be effected by giving written notice, signed by the
terminating party, to the other party and this Agreement shall terminate 30
days from the date on which such notice is delivered ("Notice Date"); provided,
that in the case of termination without cause by either party, this Agreement
shall terminate 90 days from the Notice Date; and provided further, that in the
case of a Constructive Termination described in Section 20(b), termination of
this Agreement shall automatically occur on the date of such event.

21.      Definitions.

         The following terms shall have the indicated meanings for the purposes
of this Agreement:

                 "Applicable Period" shall mean the period from the Effective
         Date to the date that this Agreement is terminated in accordance with
         Section 20.

                 "Indemnitee," except as otherwise noted, shall mean for
         purposes of this Agreement (a) any Person who is or was an officer,
         director, employee, agent or trustee of Santa Fe, or (b) any Person who
         is or was serving at the request of Santa Fe as a director, officer,
         employee, agent, fiduciary or trustee of another Person; provided, that
         a Person shall not be an Indemnitee pursuant to this clause (b) by
         reason of providing, on a fee-for-services basis, trustee, fiduciary or
         custodial services.

                                      -13-
<PAGE>   
         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be signed on their behalf by their duly authorized officers.


                                        SANTA FE ENERGY RESOURCES, INC.
                                        
                                        By: /s/ JAMES L. PAYNE
                                        Name:   James L. Payne
                                        Title:  Chief Executive Officer
                                                                               
                                        MONTEREY RESOURCES, INC.               
                                                                               
                                        By: /s/ R. GRAHAM WHALING
                                        Name:   R. Graham Whaling
                                        Title:  Chief Executive Officer
                                                                               
                                      -14-