EXHIBIT 10.1

                     CONVEYANCE AND CONTRIBUTION AGREEMENT

                 This Conveyance and Contribution Agreement (this "Agreement"),
dated effective 7:00 a.m., Pacific Time, November 1, 1996 (the "Effective
Date"), is from Santa Fe Energy Resources, Inc., a Delaware corporation ("Santa
Fe"), having its principal office at 1616 S. Voss Road, Houston, Texas 77057 to
Monterey Resources, Inc., a Delaware corporation ("Monterey"), having its
principal office at 5201 Truxtun Avenue, Suite No. 100, Bakersfield, California
93309. Santa Fe and Monterey are hereinafter sometimes referred to individually
as a "Party" and collectively as the "Parties."

                                    RECITAL

                 Santa Fe is executing and delivering this Agreement to convey
and contribute all property and other assets to Monterey that are held by Santa
Fe in its Western Division in the State of California, other than certain
excluded assets, as more fully described herein, and to perform certain other
acts in connection with such conveyance and contribution.  Monterey is
executing this Agreement in performance of its obligations to assume certain
liabilities of Santa Fe with respect to such property and assets and to
undertake certain other obligations in connection with such conveyance and
contribution.

                 NOW, THEREFORE, for valuable consideration, the Parties agree
and grant as follows:

                                   ARTICLE 1

                                  DEFINITIONS

                 1.1      Defined Terms.  The following definitions shall apply
to the following terms when used in this Agreement:

                 "Agreement" is defined in the introductory paragraph of this
instrument.

                 "Ancillary Agreements" means the Spin-Off Tax Indemnity
Agreement, Corporate Services Agreement, Tax Allocation Agreement, and 
Registration Rights and Indemnification Agreement, all between Monterey and
Santa Fe and dated of even date herewith.

                 "Assistance Costs" is defined in Section 3.11(d).

                 "Assumed Liabilities" means (a) the liabilities, obligations,
and other matters of Santa Fe described in Exhibit A, and (b) all other
liabilities, losses, costs, expenses, fines, penalties, payments, and other
obligations of Santa Fe relating to or arising out of the Subject Assets or the

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Business, whether accrued, contingent, known or unknown, and whether or not
reflected on the books and records of Santa Fe on the date of this Agreement,
excluding, however, (x) the Retained Liabilities and (y) obligations and
liabilities of Santa Fe under the Ancillary Agreements.

                 "Business" means all of the business activities now or
heretofore conducted by Santa Fe, its affiliates, and its and their
predecessors in interest, in the Business Area, including the oil and gas
exploration, development, and production business of Santa Fe and the
businesses and operations identified in Exhibit B.

                 "Business Area" means the State of California and all lands
lying in federal or state waters seaward of the west coast of the State of
California.

                 "Excluded Assets" means the following assets:

                 (a)      The assets described in Exhibit C, and all rights,
         privileges and benefits pertaining to the assets described in Exhibit
         C;

                 (b)      All of Santa Fe's right, title and interest in and to
         all non-proprietary seismic, geological, geophysical and similar data
         and computer software related to the Subject Assets, to the extent
         Santa Fe is contractually prohibited by unaffiliated third parties
         from transferring such data and software;

                 (c)      All proprietary computer software (including, without
         limitation, tapes, data, and program documentation) and other
         intellectual property that is used in, or useful to, Santa Fe's
         retained businesses and operations;

                 (d)      Except as provided in Section 3.11, all of Santa Fe's
         rights under all policies or agreements of insurance or indemnity; and

                 (e)      All cash, proceeds, income, or revenues accruing with
         respect to the other Excluded Assets described above.

                 "Insurance Administration" means, for each Policy,
the accounting for premiums, retrospectively-rated premiums, defense costs,
indemnity payments, deductibles, and retentions as appropriate under each
Policy, and the distribution of Insurance Proceeds under each Policy.

                 "Insurance Proceeds" means, for each Policy, those monies (i)
received by an insured from an insurance carrier or (ii) paid by an insurance
carrier on behalf of the insured, in either case, net of any applicable premium
adjustment, retrospectively-rated premium, deductible, retention, cost or
reserve paid or held by or for the benefit of such insured.

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                 "Insured Claims" means, for a Policy, those claims, losses,
liabilities, costs, and expenses that, individually or in the aggregate, are
covered by such Policy, whether or not subject to deductibles, co-insurance,
uncollectability or retrospectively-rated premium adjustments, but only to the
extent that such claims, losses, liabilities, costs, and expenses are within
the limits of such Policy.

                 "IPO Date" means the closing date for the initial public
offering of the common stock of Monterey.

                 "New Credit Facility" means the note agreement described in
item 4 in EXHIBIT A.

                 "Olinda Property" is defined in Section 3.14.
                  
                 "Party" and "Parties" are defined in the introductory
paragraph of this Agreement.

                 "Perpetuities Period" means that period of time commencing on
the date of this Agreement and ending 21 years after the death of the last to
die of all descendants of Joseph P. Kennedy, father of our late President, John
F.  Kennedy, who are living on the date of this Agreement.

                 "Person" means an individual, a corporation, a partnership, a
trust, an unincorporated organization, an association or any other entity.

                 "Policies" means insurance policies and contracts of indemnity
described in Exhibit G.

                 "Restriction" is defined in Section 3.5.

                 "Retained Liabilities" means (a) the liabilities, obligations,
and matters of Santa Fe described in Exhibit J and (b) all losses, costs,
expenses, fines, penalties, payments, and other obligations related to the
Excluded Assets.

                 "Santa Fe Group" is defined in Section 3.4(a).

                 "Santa Fe Liabilities" means all liabilities, costs, expenses,
 fines, penalties, payments, and obligations of Santa Fe, other than the Assumed
 Liabilities.

                 "Series G Notes" means the senior notes described in item 3 in
EXHIBIT A.

                 "Specific Conveyances" is defined in Section 3.6.

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                 "Spin-Off" means the sale, distribution, or other disposition
of the remaining shares of common stock held by Santa Fe after the IPO Date in
a single transaction or series of transactions.

                 "Spin-Off Date" means the date on which the Spin-Off occurs.

                 "Subject Assets" means all of the assets owned by Santa Fe in
the Business Area or used or held for use by Santa Fe solely to conduct the
Business, on the Effective Date, including the following assets:

                 (a)      All right, title, and interest of Santa Fe in and to
         the plots, pieces, and parcels of land, surface estates, and fee
         interests of Santa Fe in the Business Area, including those described
         in Exhibit D (collectively, the "Lands");

                 (b)      All right, title, and interest of Santa Fe in and to
         (i) the estates created by the oil and gas leases (and the undivided
         interests therein), operating rights mineral servitudes, and fee,
         mineral, royalty, and overriding interests of Santa Fe in the Business
         Area, including those described in, or created by the instruments
         described in, EXHIBIT D and (ii) the easements, permits, licenses,
         rights-of-way, surface leases, and other surface rights held by Santa
         Fe in the Business Area, including those described in, or created by
         the instruments described in, EXHIBIT D (collectively, the "Oil and Gas
         Interests");

                 (c)      All right, title, and interest of Santa Fe in all
         presently existing and valid unitization, pooling and communitization
         agreements, declarations and orders and production sharing agreements,
         and the properties covered and the units created thereby (including,
         but not limited to, all units formed under orders, regulations, rules,
         or other official acts of any federal, state, or other governmental
         agency having jurisdiction), to the extent attributable to any of the
         Lands or the Oil and Gas Interests;

                 (d)      All right, title, and interest of Santa Fe in
         existing and valid oil, casinghead gas and gas sales, purchase,
         exchange, transportation and processing contracts, operating
         agreements, joint venture agreements, partnership agreements,
         participation agreements, exploration agreements, farmin and farmout
         agreements, acreage contribution agreements, bidding agreements,
         option agreements, purchase and sale agreements, advance payment
         agreements, and all other contracts to the extent attributable to any
         of the Lands or the Oil and Gas Interests or the Business, including
         those contracts, agreements, and instruments set forth on Exhibit E;

                 (e)      All right, title, and interest of Santa Fe in all
         improvements, easements, permits, licenses, rights-of-way, surface
         leases, and other surface rights, including  any wells, wellbores,
         casing, tubing, tanks, buildings, fixtures, compression and steam
         generation facilities, pipelines, gathering systems, lines and other
         appurtenances, easements and facilities, production platforms,
         drilling platforms, docks, shore facilities and bases, radio and
         microwave equipment (and associated licenses), and vessels to the
         extent located in, on or 

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         under any of the Lands or Oil and Gas Interests or used or held for use
         as a part of the Business as presently conducted;

                 (f)      All right, title, and interest of Santa Fe in all
         seismic, geological, geophysical and similar data related to the
         Subject Assets, all lease files, land files, legal files, well files,
         gas and oil sales contract files, division order files, abstracts,
         title opinions, land surveys, computer software (including tapes, data
         and program documentation), and all other books, records, files, and
         accounting records to the extent attributable to or used in the
         exploration, development, maintenance, or operation of any of the
         Subject Assets described in subsections (a), (b), (c), (d), and (e)
         above or the Business (collectively, the "Records");

                 (g)      All of the following:

                          (i)     All right, title, and interest of Santa Fe in
                 and to all inventories of oil, gas and other petroleum
                 products, tubular goods, supplies and tools, in each case to
                 the extent produced from or held for use on the Subject Assets
                 described in subsections (a), (b), (c), (d), and (e) above;
                 and

                          (ii)    All right, title, and interest of Santa Fe in
                 all personal property to the extent used or held for use in
                 connection with the exploration, development, operation, or
                 maintenance of the Subject Assets described in subsections
                 (a), (b), (c), (d), and (e) above, including office furniture
                 and equipment, computer hardware, leasehold interests therein;

                 (h)      All right, title, and interest of Santa Fe in and to
         all governmental permits, licenses, franchises, registrations, and
         similar rights relating to the Business or the Subject Assets;

                 (i)      All right, title, and interest of Santa Fe in and to
         all automobiles, trucks, trailers, other vehicles, and similar assets
         used in connection with the Business, including leasehold interests
         therein;

                 (j)      Cash, cash equivalents, accounts receivable,
         goodwill, claims, causes of action and choses in action relating to
         the Subject Assets and the Business;

                 (k)      All right, title, and interest of Santa Fe in and to
         the stock certificates partnership interests, contract rights, and
         other intangible interests described in Exhibit F;

                 (l)      All of Santa Fe's right, title, and interest in and
         to any patents, trade secrets, copyrights, or other intellectual
         property rights that relate solely to the Subject Assets; and

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                 (m)      All rights, benefits, privileges and appurtenances
         pertaining to any of the foregoing;

         less and except, however, the Excluded Assets.

                 "Title Policy" is defined in Section 3.1.

                 "Uninsured Retentions" is defined in Section 3.11(f).

                                   ARTICLE 2

                 CONTRIBUTION AND CONVEYANCE OF SUBJECT ASSETS
                                  TO MONTEREY

                 2.1      Contribution and Conveyance of Subject Assets.  Santa
Fe hereby grants, conveys, assigns, transfers, contributes, and delivers unto
Monterey, its successors and assigns, forever, all of its right, title, and
interest in and to the Subject Assets, subject, however, to the terms and
conditions stated in this Agreement.

                 TO HAVE AND TO HOLD the above described interests in the
Subject Assets unto Monterey, its successors and assigns, forever, subject,
however, to the terms and conditions stated in this Agreement.

                 2.2      Assumption of Certain Liabilities by Monterey.
Monterey hereby assumes and agrees to pay, perform, and discharge the Assumed
Liabilities, to the full extent that Santa Fe has been or would be obligated to
pay, perform, and discharge the Assumed Liabilities.

                 2.3      Reservation of Production Payment.  Santa Fe hereby
reserves and retains unto Santa Fe, its successors and assigns, as a production
payment, a variable undivided interest in and to certain of the Subject Assets,
as more particularly provided in the Reservation of Production Payment attached
hereto as Exhibit I.

                                   ARTICLE 3

                                OTHER PROVISIONS

                 3.1      Real Property Covered by Title Policies.  With
respect to any Subject Asset that (a) constitutes real property or an interest
in real property, and (b) is covered by a policy of title insurance that is in
favor of, or otherwise provides protection in its capacity as owner to, Santa
Fe (a "Title Policy"), the following provisions shall apply:

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                  (i)      Santa Fe binds itself and its successors and assigns
         to warrant and forever defend all and singular such Subject Asset to
         Monterey, its successors and assigns, against every person whomsoever
         lawfully claiming or to claim the same or any part thereof; subject,
         however, to the matters set forth in paragraph (ii) below.

                 (ii)     The contribution and conveyance of such Subject Asset
         made by Section 2.1 is made expressly subject to (A) those matters
         excluded or excepted from coverage under the applicable Title Policy
         and (B) all recorded and unrecorded liens, charges, encumbrances,
         contracts, agreements, instruments, obligations, defects and
         irregularities affecting such Subject Asset that have accrued or arisen
         since the effective date of the applicable Title Policy.

                 (iii)    The sole remedy for breach of the warranty contained
         in this Section 3.1 shall be recovery of damages limited to the
         amount, if any, recovered by Monterey or Santa Fe under the applicable
         Title Policy.

                 (iv)     Monterey hereby expressly waives and disclaims any
         remedies and damages, other than those provided for in paragraph (iii)
         above, that may be available under applicable law for breach of the
         warranty contained in this Section 3.1, including, without limitation,
         consequential damages, incidental damages, punitive damages, attorneys
         fees, and court costs.

                 (v)      Santa Fe and Monterey acknowledge that the warranty
         contained in this Section 3.1 would not have been granted had Santa Fe
         not also been able to limit the remedies available for breach of the
         warranty.  Santa Fe and Monterey therefore adopt the following
         procedure for ensuring that their mutual intent with regard to such
         warranty be respected.  If a court having jurisdiction over a Subject
         Asset subject to this Section 3.1 should determine that the limitation
         and waiver of remedies provided for herein are, under applicable law
         with respect to such Subject Asset, unenforceable, then (A) the
         warranty provided for in this Section 3.1 shall automatically be
         waived, negated, and disclaimed for such Subject Asset; (B) such
         Subject Asset shall automatically be deemed to have been conveyed to
         Monterey subject to the matters set forth in Section 3.2 and in the
         manner described in Section 3.3; and (C) Monterey shall execute and
         deliver or cause to be delivered such instruments as may be necessary
         to evidence the effect of this paragraph (v).

                 3.2      Encumbrances.  Except as provided in Section 3.1, the
contributions and conveyances made by Section 2.1 are made expressly subject to
all recorded and unrecorded liens, charges, encumbrances, contracts,
agreements, instruments, obligations, defects, and irregularities affecting the
Subject Assets.

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                 3.3      Disclaimer of Warranties; Subrogation.

                 (a)      No Warranty of Title.  Except as provided in Section
3.1, the contributions and conveyances made by Section 2.1 are made without
warranty of title, express, implied or statutory, and without recourse even as
to the return of the purchase price, but with full substitution and subrogation
of Monterey, and all persons claiming by, through and under Monterey, to the
extent assignable, in and to all covenants and warranties by Santa Fe's
predecessors in title and with full subrogation of all rights accruing under the
statutes of limitation or prescription under the laws of various states in which
the Subject Assets are located and all rights of actions of warranty against all
former owners of the Subject Assets.

                 (b)      Disclaimer.  Monterey and Santa Fe agree that, to the
extent required by applicable law to be operative, the disclaimers of certain
warranties contained in this paragraph are "conspicuous" disclaimers for the
purposes of any applicable law, rule, or order.  Except as provided in Section
3.1, the Subject Assets are assigned to Monterey without recourse (even as to
the return of the purchase price), covenant or warranty of any kind, express,
implied, or statutory.  WITHOUT LIMITATION OF THE GENERALITY OF THE IMMEDIATELY
PRECEDING SENTENCE, SANTA FE HEREBY EXPRESSLY DISCLAIMS AND NEGATES ANY
REPRESENTATION OR WARRANTY, EXPRESSED, IMPLIED, AT COMMON LAW, BY STATUTE OR
OTHERWISE, RELATING TO (A) THE CONDITION OF THE SUBJECT ASSETS (INCLUDING,
WITHOUT LIMITATION, ANY IMPLIED OR EXPRESSED WARRANTY OF MERCHANTABILITY, OF
FITNESS FOR A PARTICULAR PURPOSE, OR OF CONFORMITY TO MODELS OR SAMPLES OF
MATERIALS), OR (B) ANY INFRINGEMENT BY SANTA FE OR ANY OF ITS AFFILIATES OF ANY
PATENT OR PROPRIETARY RIGHT OF ANY THIRD PARTY; IT BEING THE INTENTION OF SANTA
FE AND MONTEREY THAT THE SUBJECT ASSETS ARE TO BE CONVEYED IN THEIR PRESENT
CONDITION AND STATE OF REPAIR.

                 (c)      No Implied Warranties.  Any covenants implied by
statute or law by the use of the words "grant", "convey", "assign", "transfer",
"contribute", or "deliver", or any other words used in this Agreement (except
those in Section 3.1), are hereby expressly disclaimed, waived, and negated.

                 3.4      Indemnification.

                 (a)      Monterey's Indemnity.  MONTEREY AGREES TO PROTECT,
DEFEND, INDEMNIFY, AND HOLD HARMLESS SANTA FE AND ITS OFFICERS, DIRECTORS,
EMPLOYEES, AND REPRESENTATIVES (COLLECTIVELY, "SANTA FE GROUP") FROM AND AGAINST
ALL CLAIMS, COSTS, EXPENSES, LIABILITIES (INCLUDING ATTORNEYS' FEES, COURT COSTS
AND OTHER COSTS OF SUIT), LOSSES, DAMAGES, PENALTIES, AND FINES RELATING TO OR
ARISING OUT OF THE SUBJECT ASSETS OR THE ASSUMED LIABILITIES, WHETHER
ATTRIBUTABLE TO 

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PERIODS BEFORE OR AFTER THE EFFECTIVE DATE, AND WHETHER OR NOT ATTRIBUTABLE TO
THE SOLE, JOINT, AND/OR COMPARATIVE NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT
OF SANTA FE, ITS PREDECESSORS, AND ITS AND THEIR EMPLOYEES, REPRESENTATIVES,
OFFICERS, OR DIRECTORS.

                 (b)      Santa Fe's Indemnity.  SANTA FE AGREES TO PROTECT,
DEFEND, INDEMNIFY, AND HOLD HARMLESS MONTEREY AND ITS OFFICERS, DIRECTORS,
EMPLOYEES, AND REPRESENTATIVES FROM AND AGAINST ALL CLAIMS, COSTS, EXPENSES,
LIABILITIES (INCLUDING ATTORNEYS' FEES, COURT COSTS, AND OTHER COSTS OF SUIT),
LOSSES, DAMAGES, PENALTIES, AND FINES RELATING TO OR ARISING OUT OF THE EXCLUDED
ASSETS OR THE RETAINED LIABILITIES, WHETHER ATTRIBUTABLE TO PERIODS BEFORE OR
AFTER THE EFFECTIVE DATE, AND WHETHER OR NOT ATTRIBUTABLE TO 

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THE SOLE, JOINT, AND/OR COMPARATIVE NEGLIGENCE, STRICT LIABILITY, OR OTHER FAULT
OF MONTEREY AND ITS EMPLOYEES, REPRESENTATIVES, OFFICERS, OR DIRECTORS.

                 3.5      Restrictions on Conveyance.  Santa Fe and Monterey
acknowledge that (a) there may exist certain prohibitions against the
conveyance or assignment of certain of the Subject Assets without the consent
of third parties (including governmental agencies); and (b) certain of the
Subject Assets may be incapable of being conveyed or assigned to Monterey prior
to the execution, acknowledgment, and/or delivery of Specific Conveyances.
Both types of impediments to conveyance or assignment are referred to herein as
a "Restriction."  Any provisions of this Agreement to the contrary
notwithstanding, the following provisions shall apply to all Subject Assets
burdened by a Restriction:

                 (i)      The conveyance or assignment to Monterey shall not
         become effective unless and until such time as the Restriction is
         satisfied.

                 (ii)     Santa Fe and Monterey shall each use their reasonable
         efforts to cause the Restriction to be satisfied.

                 (iii)    When and if the Restriction is satisfied, the
         conveyance or assignment to Monterey shall become automatically
         effective as to such Subject Asset as of the date of this Agreement.

                 (iv)     If (A) any of the Subject Assets burdened by a
         Restriction constitutes real property or an interest in real property,
         and (B) such Restriction is not satisfied within the Perpetuities
         Period, then the conveyance or assignment to Monterey of such Subject
         Asset shall be null and void.

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                 3.6      Further Assurances.  Without further consideration,
Santa Fe and Monterey agree to take all such further actions and execute,
acknowledge, and deliver all such further documents that are necessary or
useful in carrying out the purposes of this Agreement.  So long as not
prohibited by applicable laws so to do:

                 (a)      Santa Fe agrees to execute, acknowledge, and deliver
to Monterey and, if applicable, record in the official property records of the
applicable jurisdiction, all such additional deeds, conveyances, assignments,
bills of sale, motor vehicle titles, and other documents (the "Specific
Conveyances"), and to do all such further acts and things as may be necessary
more fully and effectively to grant, convey, assign, transfer, contribute, and
deliver to Monterey the interests in the Subject Assets contributed and conveyed
by this Agreement or intended so to be. The Specific Conveyances (i) shall
evidence and perfect the conveyance made by this Agreement and shall not
constitute any additional conveyance of the Subject Assets or interests therein;
(ii) are not intended to modify, and shall not modify, any of the terms,
covenants and conditions herein set forth; and (iii) are not intended to create
and shall not create any additional covenants or warranties of or by Santa Fe to
Monterey. To the extent that the Specific Conveyances purport to create any
additional covenants or warranties, Monterey hereby expressly waives such
additional covenants or warranties.

                 (b)      Santa Fe agrees to execute, acknowledge, and deliver
to Monterey and, if applicable, record in the official property records of the
applicable jurisdiction, substantially all of the Specific Conveyances within
120 days after the date of this Agreement.

                 (c)      Santa Fe represents to Monterey that all Specific
Conveyances for Subject Assets that constitute real property or interests in
real property shall conform as to form in all material respects with all
applicable laws of the states in which such Subject Assets are located
governing the  conveyance of such assets, including all applicable recording,
filing and registration laws and regulations.

                 (d)      Monterey agrees to execute and deliver or cause to be
delivered such other instruments as may be reasonably required to assume and
take responsibility more effectively for the Assumed Liabilities and the other
obligations and liabilities that Monterey has assumed or undertaken pursuant to
this Agreement.

                 3.7      Assets Intended to be Conveyed.  Santa Fe and Monterey
acknowledge that the assets intended to be conveyed by this Agreement are all of
the assets and properties held by the Western Division of Santa Fe in the
Business Area or used or held for use by Santa Fe solely to conduct the 
Business, on the Effective Date, other than the Excluded Assets. If this 
Agreement erroneously fails to convey all such assets and properties, or 
erroneously conveys an asset other than such assets or properties, Santa Fe 
and Monterey shall execute such corrective documents and take such other 
actions as are necessary to correct the error.

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                 3.8      Property Taxes and Transfer Fees. All (i) sales, use,
recording, and other similar property transfer fees and charges incurred in
transferring the Subject Assets to Monterey and (ii) ad valorem and property
taxes for the Subject Assets shall be the responsibility of and paid by
Monterey.

                 3.9      Finance Matters.

                 (a)      Cash Management.  Monterey will establish its own
cash management system which is to be separate and distinct from the cash
management system maintained by Santa Fe, and such system will be operational
prior to or shortly after the Effective Date.  Santa Fe further acknowledges
and agrees that after Monterey's cash management system is established and
operational, Santa Fe shall transfer to Monterey all funds, if any, in Santa
Fe's cash management system attributable to the Subject Assets or the Business,
which transfer shall be effected by wire transfer of immediately available funds
to such account as Monterey may designate. Santa Fe shall transfer such funds to
Monterey upon notification from Monterey that its cash management system is
operational together with wire transfer instructions. Any funds received in
Santa Fe's cash management system subsequent to such transfer that are
attributable to the Business shall be promptly (but in no event more than 30
days after receipt) delivered to Monterey by Santa Fe, and any funds received in
Monterey's cash management system subsequent to such transfer that are
attributable to Santa Fe or its other subsidiaries shall be promptly (but in no
event more than 30 days after receipt) delivered to Santa Fe by Monterey. The
Parties shall make appropriate adjustments for late deposits, checks returned
for not sufficient funds and other post-Effective Date transactions that occur
after the transfer as shall be reasonable under the circumstances consistent
with the purpose and intent of this Agreement.

                 (b)      Settlement of Intercompany Accounts.  The Parties
agree that the net balance of all intercompany accounts owed by Santa Fe to
Monterey, or owed by Monterey to Santa Fe, in each case as of the Effective
Date, shall be paid by Santa Fe or Monterey, as appropriate, as promptly as
reasonably practicable after the Effective Date (but in no event more than 30
days after receipt).  All transactions contemplated in this Section 3.9 shall
be subject to audit by the Parties, and any dispute with respect to any such
transactions thereunder shall be resolved by Price Waterhouse LLP (or another
nationally recognized accounting firm acceptable to the Parties) whose decision
shall be final and nonappealable.

                 3.11     Insurance Matters.

                 (a)      Existing Surety Bonds.  Santa Fe shall continue to
maintain, and not to cancel, those surety and indemnity bonds currently
maintained by or for the benefit of the Subject Assets until the earlier of (i)
the expiration or renewal date therefor next following the IPO Date or (ii) one
year after the IPO Date.  Santa Fe shall give Monterey at least 15 days'
advance notice of the expiration or renewal of each such surety and indemnity
bond.  If Monterey decides not to renew any bond, Monterey agrees to provide
appropriate documentation to Santa Fe to allow Santa Fe to cancel 

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such bonds. Monterey shall indemnify and hold harmless Santa Fe from and against
any expense or loss incurred by Santa Fe after the IPO Date as a result of
maintaining such surety bonds. After the IPO Date, Monterey shall be responsible
for obtaining its own surety and indemnity bonds as may be necessary for its
operations, subject to the preceding sentences with respect to existing bonds.
Santa Fe shall have the right at any time or from time to time, in Santa Fe's
sole discretion, to require that Monterey provide collateral security in favor
of Santa Fe of the same kind that any surety providing a bond or indemnity
agreement for the benefit of Monterey advised Santa Fe it will or might require
under any applicable indemnity agreement or bond.

                 (b)      Policies and Rights Prior to Spin-Off.  Prior to the
Spin-Off Date, Monterey shall be entitled to any and all rights of an insured
party under each of the Policies, specifically including rights of indemnity
and the right to be defended by or at the expense of the insurer, with respect
to all injuries, losses, liabilities, damages, and expenses incurred or claimed
to have been incurred prior to the Spin-Off Date (to the extent covered) by any
party in connection with the conduct of the Business.  Nothing in this clause
shall be deemed to constitute (or to reflect) the assignment of the Policies,
or any of them, to Monterey.  From and after the Spin-Off Date (or earlier upon
mutual agreement), Monterey agrees that it shall be responsible for obtaining
and maintaining, on such terms as Monterey determines to be appropriate,
insurance policies for injuries, claims, liabilities, losses, costs, and
expenses arising with respect to occurrences after the Spin-Off Date.

                 (c)      Administration and Costs.  Santa Fe shall be
responsible for (i) the Insurance Administration of the Policies, (ii) the
processing and management of claims under the Policies, and (iii) the
collection and distribution of Insurance Proceeds under the Policies; provided,
that, Monterey shall be required to give notice of any claim or potential claim
to Santa Fe in sufficient time for Santa Fe to notify the insurance carrier of
the Policy.  For the period prior to the Spin-Off Date, Monterey shall pay
Santa Fe the portion of the cost of the Policies that is properly allocable to
the Assumed Liabilities.  Monterey shall pay such amounts within 15 days of 
receiving Santa Fe's invoice.

                 (d)      Claims After the Spin-Off Date. The Policies will
automatically cease and terminate with respect to the Business on the Spin-Off
Date for any occurrences after the Spin-Off Date. For each Insured Claim
asserted or arising after the Spin-Off Date that relates to occurrences prior to
the Spin-Off Date in connection with the Business, Santa Fe shall at the time
such claim is asserted be deemed to transfer, without need of further
documentation, to Monterey any and all rights of an insured party under the
applicable Policy with respect to such Insured Claim, specifically including
rights of indemnity and the right to be defended by or at the expense of the
insurer. The preceding sentence shall not, however, be deemed to constitute (or
to reflect) the assignment of any of the Policies to Monterey. Monterey shall
have the right to assert a claim under a Policy relating to an occurrence prior
to the Spin-Off Date in accordance with the terms of such Policy. Santa Fe
agrees not to amend, cancel, or terminate any Policy in a manner that materially
and adversely affects Monterey's right to assert a claim thereunder that relates
to an occurrence prior to the Spin-Off Date. Additionally, after the Spin-Off
Date, Santa Fe shall, to the extent reasonably practicable, 

                                           Conveyance and Contribution Agreement
                                                                 
                                                                         Page 13
<PAGE>
assist Monterey in the recovery of any amounts to which Monterey is validly
entitled under any of the Policies on account of Insured Claims. Notwithstanding
the foregoing, Santa Fe does not assume any liability and shall not incur any
liability to Monterey or its affiliates in agreeing to transfer its rights under
any Policy or to provide such action or assistance and shall promptly be
advanced, or reimbursed, if applicable, for all reasonable costs and expenses
incurred after the Spin-Off Date in transferring such rights or in providing
such action or assistance requested by Monterey ("Assistance Costs"). Assistance
Costs include employee salaries and out-of-pocket expenses, attorneys' fees,
adjuster fees, surveyor fees, brokerage fees, travel expenses, communication
expenses and other similar costs and expenses incurred.

                (e)      Insurance Application to Assumed Liabilities.If and to
the extent Santa Fe receives Insurance Proceeds that relate to Assumed
Liabilities, Santa Fe may directly apply such Insurance Proceeds to such Assumed
Liabilities without distribution to Monterey.  To the extent Santa Fe is paid by
or reimbursed from, the Policies for such Assumed Liabilities, Monterey shall be
relieved of its indemnification obligations that would otherwise apply under
Sections 3.4(a) for such Assumed Liabilities, provided, that, this subsection
(e) shall not apply to any amounts attributable to Uninsured Retentions
or Assistance Costs for which Monterey shall remain obligated to pay in full.

                 (f)      Uninsured Retentions.  Monterey recognizes that the
Policies are subject to various deductibles, self-insured retentions,
retentions under retrospective premium rating plans and similar charges, which
may not be reinsured by or collectible from commercial insurance markets.  All
amounts incurred or payable by Santa Fe or its affiliates, attributable to such
deductibles, retentions, plans or non-reinsured or non-collectible insurance,
after giving effect to maximum premium provisions and stop loss provisions on a
first come first served basis ("Uninsured Retentions") shall not be considered
as insured losses or claims, or insurance proceeds, within the meaning of this
Agreement and notwithstanding anything to the contrary shall be and remain the
obligation of Monterey to the extent arising out of the Subject Assets, the
Business, or the Assumed Liabilities.  Monterey shall reimburse Santa Fe for
all amounts incurred or paid by Santa Fe or its affiliates for such Uninsured
Retentions to the extent arising out of Assumed Liabilities.

                 3.12     Delivery of Release.  At the closing of the initial
public offering of Monterey, Monterey shall execute and deliver to Santa Fe a
release (in a form acceptable to Santa Fe) that releases any and all rights
Monterey may have to seek contribution or reimbursement for amounts borrowed by
Santa Fe under the $75 million Credit Facility between Santa Fe and Monterey,
as borrowers, and The Chase Manhattan Bank, as agent for the lenders that are
parties to the Credit Facility.

                 3.13     Transaction Costs. Monterey shall pay and reimburse
Santa Fe for all out-of pocket costs and expenses incurred by Santa Fe in
connection with the conveyance of the Subject Assets to Monterey, the initial
public offering of Monterey, and the Spin-Off, including those incurred for (i)
the consent solicitation of the holders of Santa Fe's 11% Senior Subordinated
Debentures due 2004 in connection with certain amendments to such debentures,
(ii) the exchange of the Series G Notes for the New Credit Facility, and (iii)
pursuit by Santa Fe of a ruling from the Internal Revenue Service regarding the
tax-free nature of the Spin-Off, including, in each case, all legal, accounting,
printing, underwriting, engraving, consulting, and other third party charges and
expenses.

                 3.14     Olinda Property.
                 
                 (a)      Purchase and Sale Agreement. Santa Fe is a party to
that certain Agreement for Purchase and Sale of Real Property and Escrow
Instructions with CWC, Inc., a California corporation, dba SUNCAL COMPANIES
("Buyer"), dated August 19, 1996, as amended (the "Olinda Purchase Agreement"),
pursuant to which Buyer agreed to buy and Santa Fe agreed to sell certain real
property and other rights and interests in Orange County, California
(the "Olinda Property") as more particularly described in the Olinda Purchase
Agreement.

                 (b)      Transfer of Notes to Monterey. If the Close of Escrow
(as defined in the Olinda Purchase Agreement) occurs on or before August 1,
1997, Monterey shall purchase, and Santa Fe shall sell, any promissory notes
given by the Buyer as consideration for purchase of the Olinda Property
(collectively, the "Notes") along with all liens, security interests, and other
rights securing repayment of the Notes by Buyer (collectively, the "Property
Liens"), for a purchase price equal to the aggregate face value of the Notes
(the "Note Purchase Price") if the total face value of the Notes does not exceed
$10,000,000. The closing of the purchase and sale of the Notes shall occur in
the offices of Santa Fe within 10 business days of the date of the Close of
Escrow. At the closing, Monterey shall wire transfer the Note Purchase Price to
Santa Fe in immediately available funds and assume all obligations in connection
with the Olinda Property and the Notes, the Property Liens, and Santa Fe's
remaining rights under the Olinda Purchase Agreement shall be assigned to
Monterey without any warranties or representations by Santa Fe. On and after
such closing, the defined term "Subject Assets" shall be deemed to include, and
the defined term "Excluded Assets" shall be deemed to exclude, the Olinda
Property for all purposes under this Agreement.

                 (c)      Transfer of Property to Monterey. If the Close of
Escrow fails to occur on or before August 1, 1997, Monterey shall purchase, and
Santa Fe shall sell, the Olinda Property for a purchase price of $23,000,000
(the "Property Purchase Price") on the terms provided in this Agreement. The
closing of the purchase and sale of the Olinda Property shall occur in the the
offices of Santa Fe on or before August 15, 1997. At the closing, Monterey shall
wire transfer the Property Purchase Price to Santa Fe in immediately available
funds and the Olinda Property shall be conveyed and transferred to Monterey by a
Specific Conveyance as provided herein and Santa Fe's remaining rights under the
Olinda Purchase Agreement shall be assigned to Monterey. On and after such
closing, the defined term "Subject Assets" shall be deemed to include, and the
defined term "Excluded Assets" shall be deemed to exclude, the Olinda Property
for all purposes under this Agreement.

                                           Conveyance and Contribution Agreement
                                                                 
                                                                         Page 14
<PAGE>
                 3.15     Successors and Assigns.  This Agreement shall bind
and inure to the benefit of the parties hereto and their respective successors
and assigns.  Nothing in this Agreement is intended to confer upon any other
person any benefits, rights, or remedies.

                 3.16     Articles, Sections and Exhibits.  Except to the
extent otherwise stated in this Agreement, references to "Articles" and
"Sections" are to Articles and Sections of this Agreement, and references to
"Exhibits" are to Exhibits attached to this Agreement, which are made parts
hereof for all purposes.

                 3.17     Governing Law.  THIS AGREEMENT AND THE LEGAL
RELATIONS BETWEEN THE PARTIES HERETO SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS OF LAWS THAT MIGHT REQUIRE OR PERMIT THE APPLICATION OF
THE LAWS OF ANOTHER JURISDICTION.

                 3.18     Deed; Bill of Sale; Assignment.  To the extent
required by applicable law, this Agreement shall also constitute a "deed,"
"bill of sale" or "assignment" of the Subject Assets.

                 3.19     Construction of Agreement.  In construing this
Agreement, the following principles shall be followed:

                 (i)      no consideration shall be given to the captions of
         the articles, sections, subsections, or clauses, which are inserted
         for convenience in locating the provisions of this Agreement and not
         as an aid in its construction;

                 (ii)     no consideration shall be given to the fact or
         presumption that one party had a greater or lesser hand in drafting
         this Agreement;

                 (iii)    the word "includes" and its syntactical variants
         means "includes, but is not limited to" and corresponding syntactical
         variant expressions;

                 (iv)     a defined term has its defined meaning throughout
         this Agreement, regardless of whether it appears before or after the
         place in this Agreement where it is defined;

                 (v)      the plural shall be deemed to include the singular, 
         and vice versa; and

                 (vi)     each exhibit, attachment, and schedule to this
         Agreement is a part of this Agreement, but if there is any conflict or
         inconsistency between the main body of this Agreement and any exhibit,
         attachment, or schedule, the provisions of the main body of this
         Agreement shall prevail.

                                           Conveyance and Contribution Agreement
                                                                 
                                                                         Page 15
<PAGE>
                 3.20     Counterparts.  This Agreement may be executed in any
number of counterparts, and each counterpart hereof shall be deemed to be an
original instrument, but all such counterparts shall constitute but one
instrument.

                 3.21     Survival.  This Agreement shall survive the execution
and delivery of the Specific Conveyances.

                 3.22     Integrated Agreement.  This Agreement is the final,
complete, and exclusive expression of the agreements of the Parties with
respect to the matters covered by this Agreement.

                 3.23     Severability.  If any provision of this Agreement is
held to be unenforceable or invalid, the remaining provisions shall remain in
full force and effect.

                                           Conveyance and Contribution Agreement
                                                                 
                                                                         Page 16
<PAGE>
                 EXECUTED by the Parties as of the Effective Date.

                                        Santa Fe:
                                        
                                        SANTA FE ENERGY RESOURCES, INC.
                                                                              
                                        By:/s/ J.L.BRIDWELL
                                           
                                        Name:  J.L. Bridwell
                                             
                                        Title: Sr. Vice President, Exploration
                                              
                                                                               
                                        Monterey:                              
                                                                               
                                        MONTEREY RESOURCES, INC.               
                                                                               
                                        By:/s/ R. GRAHAM WHALING                
                                        
                                        Name:  R. Graham Whaling                
                                        
                                        Title: Chief Executive Officer          
                                        

                                           Conveyance and Contribution Agreement
                                                                 
                                                                         Page 17
<PAGE>
LIST OF EXHIBITS

Exhibit A        -        Assumed Liabilities
Exhibit B        -        Businesses
Exhibit C        -        Excluded Assets
Exhibit D-1      -        Surface Interests
Exhibit D-2      -        Fee Simple Interests
Exhibit E-1      -        Leasehold Interests
Exhibit E-2      -        Mineral Interests
Exhibit F        -        Contracts
Exhibit G        -        Personal Property
Exhibit H        -        Certain Intangible Property Rights
Exhibit I        -        Insurance Policies
Exhibit J        -        Reservation of Production Payment


                                                    List of Exhibits to
                                           Conveyance and Contribution Agreement
                                                                 
                                                                         Page 18