<PAGE>

                              SEPARATION AGREEMENT

        It is hereby agreed by and between Daniel P. Foley ("Employee") and
Mission Resources Corporation ("Company"), that Employee will separate from
employment with Company effective November 15, 2002, (hereinafter "Separation
Date"), and that in order to resolve amicably all matters concerning Company
employment and release, Employee and Company, in consideration of their mutual
promises and other consideration itemized below, hereafter enter into the
following agreement:

        1.      When used in this Agreement, "Company and/or its Affiliates"
shall mean and include Mission Resources, Inc., a Delaware corporation, and all
of its predecessors, successors, parents, subsidiaries, divisions or other
affiliated companies, partners, partnerships, assigns, present and former
officers, directors, employees, shareholders, agents, employee benefit plans and
plan fiduciaries, whether in their individual or official capacities.

        2.      Nothing stated in this Agreement, or stated or done in
connection herewith, shall constitute or indicate in any way any admission of
wrongdoing of any kind either by Employee or Company and/or its Affiliates.

        3.      (a) Company agrees that upon execution by Employee and receipt
by its representative of this Agreement and the Release appended as Exhibit B,
Company will pay Employee, a total of $450,000.00 (the "Severance Payment"),
less payroll deductions for Federal Income Tax and FICA. The above sum will be
paid in a lump sum on the Effective Date (defined in Section 8 below). The
Severance Payment is made pursuant to and in full settlement of all cash
payments due to Employee under the terms of the Employment Agreement between
Employee and Company dated May 15, 2001 ("Employment Agreement"). The Severance
Payment will not be eligible for 401(k) plan participation.

                (b)     In addition, the Employee shall be entitled to the
following:

                        (i)     Continued coverage, at the Employee's cost,
                under the Company's group health plan for the applicable
                coverage period under the Consolidated Omnibus Budget
                Reconciliation Act of 1985, as amended ("COBRA"), but only if
                Employee elects such COBRA continuation in accordance with the
                time limits and in the applicable COBRA regulations; and

                        (ii)    An amount, in cash, equal to the sum of (a), any
                unreimbursed expenses incurred by Employee in the performance of
                his duties hereunder through the Separation Date upon submission
                of appropriate documentation in accordance with Company policy,
                plus (b), any accrued and unused vacation time as of the
                Separation Date.

                (c)     Set forth on Exhibit A attached hereto is a list of all
options or rights to acquire the Company's and/or its Affiliates' capital stock
held by the Employee that were issued to the Employee on or before the
Separation Date (the "Options"). The Employee will surrender the Options to the
Company on the Separation Date, and hereby relinquishes any and all claims of
any type to the Options.

<PAGE>

                (d)     Employee hereby resigns as of the Separation Date as an
officer and director of the Company and its Affiliates.

                (e)     Except as otherwise specifically noted, any payments set
forth above shall be subject to Company's required tax withholding obligations,
if any. Notwithstanding the foregoing, if any excise tax relating to "parachute
payments" under Section 280G of the Code applies to any payment made to Employee
pursuant to the terms of this Agreement, then Company shall pay Employee an
additional payment in an amount such that, after payment of federal income taxes
(but not the excise tax) on such additional payment, Employee retains an amount
equal to the excise tax originally imposed on the payment.

        4.      Employee agrees that the provisions of Sections 7 and 8 of the
Employment Agreement will expressly survive the termination of the Employment
Agreement and will remain in full force and effect in accordance with their
terms after the Separation Date, it being agreed that the covenants of Employee
not to hire, employ, solicit or engage any employee of the Company or its
affiliates under Section 8 of the Employment Agreement shall not apply to any
employee who at such time is no longer an employee of the Company or its
affiliates. Employee also acknowledges that during the course of Employee's
employment Employee has had access to certain trade secrets of Company and that
such trade secrets constitute valuable, highly confidential, special and unique
property of Company, which Employee agrees not to disclose. These "trade
secrets" include but are not limited to maps, computer programs, engineering
studies, geological studies, proposed transactions, and files, records and
documents relating thereto. Also, the "trade secrets" include lists of customers
who utilize Company's services, and related customer information. However, such
trade secrets do not include customers with whom Employee had a business
relationship before being employed by Company. These "trade secrets" shall not
include any information readily discernable from trade or general circulation
publications or otherwise existing or available in the public domain. Except as
expressly set forth herein, the Employment Agreement is hereby terminated.

        5.      The Company agrees that the Indemnification Agreement dated
October 17, 2002, entered into by and between the Company and the Employee, as
well as all other rights to which Employee is entitled with regard to
indemnification and advancement of expenses, whether by virtue of the Company's
certificate of incorporation, bylaws, insurance coverage or otherwise, will
remain in full force and effect, in accordance with its terms, after the
Separation Date.

        6.      Employees, officers and directors of Company shall refrain from
making any derogatory or disparaging remarks to any third party against Employee
with respect to Employee's employment by Company, Employee's performance,
Employee's character, or any such matters. Further, employees, officers and
directors of Company shall refrain from discussions among themselves using any
such derogatory or disparaging remarks.

        7.      Employee shall refrain from making any derogatory or disparaging
remarks regarding Employee's employment by Company, or Company's services,
management, or operations to any third party other than members of Employee's
immediate family.

                                        -2-

<PAGE>

        8.      Employee acknowledges that he has been given a period of at
least 21 days within which to consider this Agreement as required by the Age
Discrimination in Employment Act, and the Release attached hereto as Exhibit B
and to be executed hereunder, and that these documents have been executed by
Employee voluntarily, with full knowledge of all relevant information and after
ample opportunity to consult with legal counsel. Employee is hereby advised to
consult with an attorney prior to entering into this Agreement and the Release
to be executed hereunder. Employee and Company further agree that Employee has a
period of seven (7) days following Employee's execution of this Agreement and
the Release to be executed hereunder in which to revoke these documents by
delivering to Company's undersigned representative written notice of revocation
(such notice to be effective on dispatch), and that this Agreement and the
Release executed hereunder shall not become effective or enforceable until such
revocation period has expired. If Employee timely elects to revoke the
Agreement, all of the provisions of this Agreement shall be void and
unenforceable. This Agreement shall become effective and enforceable immediately
upon the date of the expiration of the revocation period (the "Effective Date").
At Employee's option and sole discretion, Employee may waive the twenty-one
(21) day review period and execute this Agreement before the expiration of
twenty-one (21) days in which case the seven-day revocation period shall
commence upon Employee's execution of this Agreement. If Employee elects to
waive the twenty-one (21) day review period, Employee acknowledges and admits
that he was given a reasonable period of time within which to consider this
Agreement and his waiver is made freely and voluntarily, without duress or any
coercion by any other person.

        9.      Except as required by applicable law, including, without
limitation, the Securities Exchange Act of 1934, as amended, Company and
Employee agree that they will not disclose to any other person or entity and
will keep confidential the fact of the existence of this Agreement, and all
other facts or information of every kind concerning this Agreement.
Notwithstanding the foregoing, Employee may disclose the existence of this
Agreement or information therein to Employee's family, Employee's attorney(s) or
to Employee's financial advisors or tax preparer or to the government for tax
purposes (each of whom will be advised that this Agreement is to remain
confidential), or as otherwise required by law.

        10.     In the event and for so long as the Company is actively
contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand brought against (a) the
Company or (b) the Employee in his capacity of employee, director or officer of
the Company in connection with any fact, situation, circumstance, status,
condition, activity practice, plan, occurrence, event, incident, action, failure
to act, or transaction involving the Company, then Employee will reasonably
cooperate with the Company or its counsel in the contest or defense, and provide
such testimony and access to his books and records as shall be reasonably
necessary in connection with the contest or defense, all at the sole cost and
expense of the Company. The Employee further agrees to not provide assistance of
any kind, other than as required by law, to any party to assist in pursuing any
currently pending or threatened claim, litigation, arbitration, mediation,
administrative hearing or other legal proceedings against the Company.

        11.     Any dispute arising out of or relating to this Agreement, or any
breach thereof, shall be resolved by binding arbitration in Houston, Texas, in
accordance with the Employment Arbitration Rules of the American Arbitration
Association then in effect, as amended by this

                                       -3-

<PAGE>

Agreement, and judgment on the award rendered by the arbitrator may be entered
in any court of competent jurisdiction. The parties agree that the arbitrator
shall have no power or authority to make awards or issue orders of any kind
except as expressly permitted by this Agreement. The arbitrator's decision shall
follow the plain meaning of the relevant documents, apply Texas law, and shall
be final and binding. The location of such arbitration in Houston, Texas, shall
be selected by the Company in its sole and absolute discretion. All costs and
expenses, including attorneys' fees, relating to the resolution of any such
dispute shall be borne by the party incurring such costs and expenses.

        Notwithstanding the preceding paragraph, the parties acknowledge that
either of them may seek emergency or temporary injunctive relief, but absolutely
no other relief, in any court of competent jurisdiction. All other disputes,
claims and remedies shall be settled by arbitration in accordance with this
Section 11.

        12.     (a) This Agreement, the surviving paragraphs of the Employment
Agreement and the Indemnification Agreement constitute the entire agreement
between the parties.

                (b)     The parties warrant that no representations have been
made other than those contained in the written provisions of this Agreement, and
that they do not rely on any representations not stated in this Agreement.

                (c)     The parties further warrant that they or their
undersigned representatives are legally competent and fully authorized to
execute and deliver this Agreement.

                (d)     The parties confirm they have had the opportunity to
have this Agreement explained to them by attorneys of their choice, and that
they executed this Agreement freely, knowingly and voluntarily. The Company is
relying on its own judgment and on the advice of its attorneys and not upon any
recommendation of Employee or his agents, attorneys or other representatives.
Likewise, Employee is relying on his own judgment and on the advice of his
attorneys, and not upon any recommendation of the Company or its directors,
officers, employees, agents, attorneys or other representatives, including
Porter & Hedges, L.L.P. By voluntarily executing this Agreement, both parties
confirm their competence to understand and do hereby accept the terms of this
Agreement as resolving fully all differences, disputes and claims that may exist
within the scope of this Agreement.

                (e)     Employee represents that he has not filed or authorized
the filing of any complaints, charges or lawsuits against the Company with any
federal, state or local court, governmental agency, or administrative agency,
and that if, unbeknownst to Employee, any such complaint has been filed on his
behalf, he will use his best efforts to cause it to immediately be withdrawn and
dismissed with prejudice.

                (f)     The Company represents that it has not filed or
authorized the filing of any complaints, charges or lawsuits against Employee
with any federal, state or local court, governmental agency, or administrative
agency, and that if, unbeknownst to the Company, any such complaint has been
filed on its behalf, it will use its best efforts to cause it to immediately be
withdrawn and dismissed with prejudice.

                                       -4-

<PAGE>

                (g)     This Agreement may not be modified or amended except by
a written document signed by all parties. No waiver of this Agreement or of any
of the promises, obligations, terms, or conditions contained in it shall be
valid unless it is in writing signed by the party against whom the waiver is to
be enforced.

                (h)     If any part or any provision of this Agreement shall be
finally determined to be invalid or unenforceable under applicable law by a
court of competent jurisdiction, that part shall be ineffective to the extent of
such invalidity or unenforceability only, without in any way affecting the
remaining parts of said provision or the remaining provisions of the Agreement.

                (i)     The parties have cooperated in the preparation of this
Agreement. Hence, the Agreement shall not be interpreted or construed against or
in favor of any party by virtue of the identity, interest, or affiliation of its
preparer.

                (j)     This Agreement is made and shall be enforced pursuant to
the laws of the State of Texas, without regard to its law governing conflicts of
law. All performance required by the terms of this Agreement shall take place in
Harris County, Texas.

                (k)     Agreement shall be binding on and inure to the benefit
of Employee and Company as well as all of their heirs, executors,
administrators, officers, directors, employees, stockholders, successors and
assigns, and all subsidiaries, affiliates and representatives of any of the
foregoing entities.

                (l)     This Agreement and the Release contain the entire
agreement of the parties in complete satisfaction of any and all claims Employee
or Company may have against each other as of the date of execution of this
Agreement, whether or not arising from that certain Employment Agreement
between Employee and Company dated May 15, 2001, which agreement is terminated
except as expressly set forth herein. This Agreement may be executed in one or
more counterparts, all of which together shall constitute a single instrument.

        The parties to this Agreement have executed this instrument on the dates
set forth below.


Date: November 15, 2002                  /s/ Daniel P. Foley
                                        -------------------------------
                                        Daniel P. Foley

Date: November 15, 2002                 Mission Resources Corporation


                                        By: /s/ Robert L. Cavnar
                                           ----------------------------
                                           Robert L. Cavnar, Chairman,
                                           Chief Executive Officer and President

                                       -5-

<PAGE>

                                    EXHIBIT A

                                 OPTION SCHEDULE

                         GRANT DATE             AMOUNT
                         ------------           ------
                         May 16, 2001           50,000
                         May 16, 2001           50,000
                         May 16, 2001           50,000

                                       A-1

<PAGE>

                                    EXHIBIT B

                                     RELEASE

        FOR VALUE RECEIVED, the receipt of which is hereby acknowledged, Daniel
P. Foley ("Employee"), for himself and his heirs, executors, administrators, and
assigns, agrees to hereby release, acquit and forever discharge Mission
Resources Corporation as well as each of its assigns, divisions, subsidiaries,
predecessors, successors, parents, divisions or affiliated companies or
entities, partners, partnership, present or former officers, directors,
employees, shareholders, agents, employee benefit plans and plan fiduciaries,
whether in their individual or official capacities (hereinafter collectively
"Company"), of and from any and all obligations, claims, counterclaims,
third-party claims, debts, demands, covenants, contracts, security agreements,
promises, agreements, liabilities, controversies, costs, expenses, attorneys'
fees, actions, amended causes of action, or causes of action whatsoever, whether
known or unknown, suspected or unsuspected, he ever had or now has or claims to
have against Company from the beginning of the world to the day and date hereof,
including specifically but not exclusively, and without limiting the generality
of the foregoing, any and all claims, demands and causes of action, known or
unknown, suspected or unsuspected, arising out of any transaction, act or
omission concerning the Employment Agreement and Employee's former employment by
Company, and all claims of every kind for any wages, salary, compensation, sick
time, vacation time, paid leave or other remuneration of any kind; any claim of
discrimination and/or retaliation on the basis of race, sex, religion, marital
status, sexual preference, national origin, handicap or disability, veteran
status, or special disabled veteran status; for any claim arising under Title
VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Age
Discrimination in Employment Act of 1967, the Employee Retirement Income
Security Act of 1974, the Americans with Disabilities Act, the Family and
Medical Leave Act, the Fair Labor Standards Act of 1938, the Texas Commission on
Human Rights Act, Chapter 451 of the Texas Labor Code, or the Texas Payday Law,
as such statutes may be amended from time to time; any claim arising out of or
related to an express or implied employment contract; any other contract
affecting terms and conditions of employment, or a covenant of good faith and
fair dealing; and any personal gain with respect to any claim arising under the
qui tam provisions of any state or federal law; provided, however, that nothing
contained herein shall release Company from the obligations spelled out in a
Separation Agreement between Employee and Company of even date.

        Employee hereby acknowledges that he is executing this Release pursuant
to the terms of the Separation Agreement identified above, the terms of which,
are fully incorporated into this Release, that he has been advised to consult
with an attorney in connection with both the Separation Agreement and this
Release, that he has had sufficient time (as required under the Age
Discrimination in Employment Act and set forth in the Separation Agreement) in
which to consider entering into the Separation Agreement and providing this
Release, that the Separation Agreement includes consideration in addition to
anything of value to which Employee is entitled, that the Separation Agreement
and Release are not effective until seven days after Employee has executed the
Release during which period Employee may revoke the Separation Agreement and
Release.

                                       B-1

<PAGE>

        Employee and Company further hereby covenant and agree that this Release
shall be binding in all respects upon themselves, their heirs, executors,
administrators, assigns and transferees and all persons claiming under them, and
shall inure to the benefit of the officers, directors, stockholders, assigns,
divisions, subsidiaries, agents, employees, and successors in interest of
Employee and Company.

        IN WITNESS WHEREOF, I have signed this Release this the 15th day of
November, 2002.


                                         /s/ Daniel P. Foley
                                        -----------------------------------
                                        Daniel P. Foley

        I have signed this Release on behalf of Mission Resources on this 15th
day of November, 2002.

                                        Mission Resources Corporation


                                        By:   /s/ Robert L. Cavnar
                                             ------------------------------
                                             Robert L. Cavnar, Chairman,
                                             Chief Executive Officer and
                                             President

                                       B-2