<PAGE>
                                                                  EXHIBIT 10.19









===============================================================================





                              MEDUSA SPAR AGREEMENT

                                      AMONG

                  MURPHY EXPLORATION & PRODUCTION COMPANY-USA,

                       CALLON PETROLEUM OPERATING COMPANY

                                       AND

                         OCEANEERING INTERNATIONAL, INC.





===============================================================================

<PAGE>
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                   Page
<S>                                                                                <C>
ARTICLE I ORGANIZATION OF MEDUSA SPAR LLC...........................................2
1.1      Medusa Spar LLC............................................................2
1.2      Initial Capital Contributions..............................................2
ARTICLE II REPRESENTATIONS, WARRANTIES AND COVENANTS OF MURPHY AND CALLON...........4
2.1      Representations and Warranties.............................................4
2.2      Covenants..................................................................7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF OII...................................8
3.1      Organization of OII........................................................8
3.2      Authority..................................................................8
3.3      Availability of Funds......................................................9
3.4     Brokers or Finders..........................................................9
ARTICLE IV FINANCING AND OTHER MATTERS..............................................9
4.1     Deemed Value................................................................9
4.2     Commitment for Non-Recourse Financing.......................................9
4.3     Costs Prior to the Closing.................................................10
4.4     BBD Approval...............................................................
4.5     Release of the Bay Lien....................................................
ARTICLE V MEDUSA SPAR OPERATING AND PRODUCTION HANDLING AGREEMENT..................10
5.1      Medusa Spar Operating and Production Handling Agreement...................10
ARTICLE VI CLOSING.................................................................10
6.1      Closing Conditions........................................................10
6.2      Closing...................................................................13
6.3      Medusa Spar Contractors and Suppliers.....................................15
ARTICLE VII SURVIVIAL OR REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION...........15
7.1      Survival of Representations and Warranties................................15
7.2      Indemnification by Transaction Parties....................................15
7.3      Matters Involving Third Parties...........................................16
7.4      Limitation on Damages.....................................................17
7.5      Exclusive Remedies........................................................18
ARTICLE VIII GENERAL PROVISIONS....................................................18
8.1      Notices...................................................................18
8.2      Expenses..................................................................19
8.3      Interpretation............................................................19
8.4      Counterparts..............................................................19
8.5      Entire Agreement; Assignment..............................................19
8.6      Severability..............................................................19
8.7      Governing Law; Jurisdiction; Venue........................................20
8.8      Rules of Construction.....................................................20
8.9      Survival..................................................................20
8.10     Medusa JOA................................................................20
8.11     News Releases.............................................................21
</TABLE>


                                       i

<PAGE>

                                INDEX OF EXHIBITS

EXHIBIT "A"       Dedicated Blocks
EXHIBIT "B"       Certificate of Formation of Medusa Spar LLC
EXHIBIT "C"       LLC Agreement
EXHIBIT "D"       Murphy Assignment
EXHIBIT "E"       Callon Assignment
EXHIBIT "F"       Callon Third Party Encumbrances
EXHIBIT "G"       Medusa Spar Operating and Production Handling Agreement
EXHIBIT "H"       Form of Certificate from Murphy and Callon as Required by
                  Section 6.1(a) (viii)


                                       ii

<PAGE>

                              MEDUSA SPAR AGREEMENT

         THIS MEDUSA SPAR AGREEMENT (this "Agreement") is made and entered into
among MURPHY EXPLORATION & PRODUCTION COMPANY-USA, a Delaware corporation
("Murphy"), CALLON PETROLEUM OPERATING COMPANY, a Delaware corporation
("Callon"), and OCEANEERING INTERNATIONAL, INC., a Delaware corporation ("OII"),
and shall be effective as of the date (the "Effective Date") on which this
Agreement has been fully executed by Murphy, Callon and OII (each a "Party", and
hereinafter referred to collectively as the "Parties" or the "Members").

                                    RECITALS

         A. Murphy is the successor owner of certain assets that Murphy acquired
from Murphy Exploration & Production Company, a Delaware corporation ("MEPCO"),
and as such successor, Murphy is the owner of an undivided 60% interest in that
certain truss spar, hull, buoyancy cans, deck, facilities, equipment and
moorings located on Mississippi Canyon Block 582, Outer Continental Shelf, Gulf
of Mexico, USA (the "Medusa Spar"), being constructed under that certain EPCI
contract between J. Ray McDermott, Inc. and MEPCO, dated February 23, 2001, as
amended (the "EPCI Contract"), and Callon is the owner of an undivided 15%
interest in the Medusa Spar.

         B. British-Borneo Deepwater, LLC ("BBD") is the successor owner of
certain assets that BBD acquired from British-Borneo Petroleum, Inc. ("BBP"),
and as such successor, BBD owns an undivided 25% interest in the Medusa Spar,
and the Medusa Spar is subject to, and is to be operated under, that certain
Joint Operating Agreement, dated February 1, 1999, among MEPCO, Callon and BBP
(hereinafter referred to as the "Medusa JOA").

         C. Murphy and Callon desire to contribute their collective undivided
75% interest in the Medusa Spar to a new Delaware limited liability company
("Medusa Spar LLC"), and in return for such contribution, acquire a 50%
membership interest in Medusa Spar LLC in the proportions of 40% to Murphy and
10% to Callon.

         D. OII desires to make a cash contribution to Medusa Spar LLC as set
forth hereinafter, and in return for such contribution, acquire a 50% membership
interest in Medusa Spar LLC.

         E. The Parties intend to arrange for non-recourse financing for Medusa
Spar LLC (the "Non-Recourse Financing"), in an amount equal to 50% of the Deemed
Value (as defined hereinafter).

         F. Murphy, Callon and OII further desire to enter into an agreement
with Medusa Spar LLC for, among other things, the operation of the Medusa Spar,
and the production and the handling of the production of Murphy and Callon, from
those certain Mississippi Canyon Blocks (the "Dedicated Blocks") as listed on
Exhibit "A" attached hereto and made a part hereof.

         NOW THEREFORE, in consideration of the covenants, provisions and
representations set forth herein, and for other good and valuable consideration,
the Parties hereto, intending to be legally bound, hereby agree as follows:


                                       1

<PAGE>

                                   ARTICLE I

                         ORGANIZATION OF MEDUSA SPAR LLC

         1.1  Medusa Spar LLC.

         (a)  Not less than five (5) business days prior to the Closing (as
              defined in Section 6.2 hereinafter), the Parties shall cause the
              formation of Medusa Spar LLC by filing a certificate of formation
              (hereinafter referred to as the "LLC Formation Document") with the
              Secretary of State of the State of Delaware pursuant to the
              Delaware Limited Liability Company Act. The LLC Formation Document
              shall be in the form of, and shall contain the terms, conditions
              and provisions as are more particularly set forth in, Exhibit B
              attached hereto and is made a part hereof. As used in this
              Agreement, the term "business day" shall mean any day other than a
              Saturday, Sunday or legal holiday on which banks in New Orleans,
              Louisiana are open for the conduct of a substantial part of their
              commercial banking business.

         (b)  Murphy, Callon and OII shall each be a "Member" of Medusa Spar
              LLC. OII shall have a membership interest in Medusa Spar LLC of
              50%, Murphy shall have a membership interest in Medusa Spar LLC of
              40%, and Callon shall have a membership interest in Medusa Spar
              LLC of 10%.

         (c)  At the Closing, the Members shall execute an agreement
              memorializing the affairs of Medusa Spar LLC and the conduct of
              its business (the "LLC Agreement"). The LLC Agreement shall be in
              the form of, and contain the terms, conditions and provisions as
              are more particularly set forth in, Exhibit C attached hereto and
              made a part hereof.

         1.2  Initial Capital Contributions.

         (a)  At the Closing, each of the Members shall make an initial capital
              contribution (the "Initial Capital Contribution") to Medusa Spar
              LLC as follows:

              (i) Murphy shall assign and transfer to Medusa Spar LLC: an
                  undivided sixty percent (60%) ownership in the Medusa Spar,
                  free and clear of any liens, charges or other encumbrances,
                  except for the lien and security interest granted pursuant to
                  Section 6.3 of the Medusa JOA, which assignment (the "Murphy
                  Assignment") shall be in the form of, and contain such terms,


                                       2

<PAGE>

                  conditions and provisions as are more particularly set forth
                  in, Exhibit D attached hereto and made a part hereof;

             (ii) Callon shall assign and transfer to Medusa Spar LLC: an
                  undivided fifteen percent (15%) ownership in the Medusa Spar,
                  free and clear of any liens, charges or other encumbrances,
                  except for (A) the lien and security interest granted pursuant
                  to Section 6.3 of the Medusa JOA, and (B) the Callon Third
                  Party Encumbrances (as defined hereinafter), which assignment
                  (the "Callon Assignment") shall be in the form of, and contain
                  such terms, conditions and provisions as are more particularly
                  set forth in, Exhibit E attached hereto and made a part
                  hereof; and

            (iii) OII shall assign and transfer to Medusa Spar LLC a cash
                  amount (the "OII Initial Capital Cash Contribution") equal to
                  $83,625,000.00, less the sum of (A) 50% of the amount of the
                  Non-Recourse Financing, (B) $120,000.00 incurred by OII for
                  out-of-pocket expenses for due diligence, and (C) $30,000.00
                  incurred by OII for the fees and costs for independent
                  engineers retained by OII to provide the certification set
                  forth in Section 6.1(a)(vii), as evidenced by applicable
                  documentation that is acceptable to Murphy and Callon in all
                  reasonable respects.

             (iv) Each Member shall contribute its percentage share of the
                  required initial working capital as determined by unanimous
                  vote of the Members.

                                   ARTICLE II

                    REPRESENTATIONS, WARRANTIES AND COVENANTS
                              OF MURPHY AND CALLON

         2.1  Representations and Warranties.

         Except as otherwise stated in this Article II, Murphy and Callon hereby
respectively represent and warrant, each as to itself, to OII, as
of the Effective Date and as of the Closing, that:


                                       3

<PAGE>

         (a)  Murphy is a corporation duly organized, validly existing and in
              good standing under the laws of the State of Delaware. Murphy has
              the power to execute, deliver and perform this Agreement and to
              own its undivided interest in the Medusa Spar.

         (b)  Callon is a corporation duly organized, validly existing and in
              good standing under the laws of the State of Delaware. Callon has
              the power to execute, deliver and perform this Agreement and to
              own its undivided interest in the Medusa Spar.

         (c)  Each of Murphy and Callon has all requisite authority to execute
              and deliver this Agreement, to perform its obligations hereunder
              and to consummate the transactions contemplated hereby. The
              execution, delivery and performance of this Agreement and the
              consummation of the transactions contemplated hereby have been
              duly authorized by all necessary formal action on the part of
              Murphy and Callon. No vote of, or consent by, the holders of any
              class or series of stock or other equity issued by Murphy or
              Callon is necessary to authorize the execution and delivery by
              Murphy or Callon of this Agreement or the consummation by it of
              the transactions contemplated herein. This Agreement has been duly
              executed and delivered by Murphy and Callon and constitutes the
              legal, valid and biding obligation of Murphy and Callon,
              enforceable against each such Party in accordance with its terms,
              except as the enforcement hereof may be limited by (a) bankruptcy,
              insolvency, reorganization, moratorium and other similar laws now
              or hereafter in effect relating to creditors' rights generally and
              (b) general principles of equity (regardless of whether
              enforceability is considered in a proceeding at law or in equity).

         (d)  Neither Murphy nor Callon nor any of its subsidiaries has entered
              into any agreement or arrangement entitling any agent, broker,
              investment banker, financial advisor or other firm or entity to
              any broker's or finder's fee or any other commission or similar
              fee in connection with any of the transactions contemplated in
              this Agreement, except for any fees associated with the
              Non-Recourse Financing.

         (e)  Murphy and Callon, each as to its own interest, have valid and
              merchantable title in and to an undivided seventy-five percent
              (75%) ownership interest in and to the Medusa Spar (the
              "Murphy/Callon Spar Interest").

         (f)  The Murphy/Callon Spar Interest is free and clear of any liens,
              charges or other encumbrances of any kind whatsoever, other than
              (i) the liens and security interests granted by Murphy and Callon


                                       4

<PAGE>

              pursuant to Section 6.3 of the Medusa JOA, (ii) the lien and
              privilege being claimed by Berry Contracting, LP d/b/a Bay Ltd.
              which is more particularly described in (A) that certain Statement
              of Privilege recorded in the records of Plaquemines Parish,
              Louisiana, in MOB 370, page 228, under Entry No. 03004606, as
              amended by that certain Amendment to Statement of Privilege
              recorded in the records of Plaquemines Parish, Louisiana, in MOB
              372, page 531, under Entry No. 03005125, (B) that certain UCC-1
              financing statement filed in the UCC records of Plaquemines
              Parish, Louisiana, under Original File No. 38-03-532, as amended,
              (C) that certain UCC-1 financing statement filed with the Delaware
              Department of State, UCC Filing Section, under Initial Filing
              Number 3164184 7, as amended, and (D) that certain Statement of
              Privilege and UCC-1 financing statement filed with the Minerals
              Management Service on June 27, 2003, as amended (the "Bay Lien"),
              which Bay Lien will be released on or before August 29, 2003, and
              (iii) the liens and security interests granted by Callon (the
              "Callon Third Party Encumbrances") disclosed on Exhibit "F"
              attached hereto and made a part hereof, which Callon Third Party
              Encumbrances burdening Callon's undivided fifteen percent (15%)
              ownership interest in and to the Medusa Spar and the right to
              dedicate Callon's working interest production from the Dedicated
              Blocks for handling on the Medusa Spar will be released or
              subordinated at or prior to the Closing.

         (g)  The Medusa Spar and production risers have been operated and
              maintained by Murphy on behalf of the working interest owners
              under the Medusa JOA in a safe and workmanlike manner in
              accordance with all applicable laws and regulations and the
              generally accepted standards of petroleum industry practices for a
              prudent operator.

         (h)  The installation of the export pipelines attached to the Medusa
              Spar has been completed and, to the best of Murphy's and Callon's
              knowledge, have been operated and maintained by Shell Pipeline
              Company LP and VK Deepwater Gathering Company LLC in a safe and
              workmanlike manner in accordance with all applicable laws and
              regulations and the generally accepted standards of petroleum
              industry practices for a prudent operator. As used in this
              Agreement, "knowledge" means the actual (and not constructive or
              imputed) knowledge of an officer of Murphy or Callon, as the case
              may be.

         (i)  Murphy has obtained and maintained in force and effect all
              licenses, permits, franchises, consents, privileges and other
              authorizations issued by any government or authority having


                                       5

<PAGE>

              jurisdiction related to the ownership and operation of the Medusa
              Spar.

         (j)  Murphy, as operator under the Medusa JOA, represents that, except
              for the amount being claimed with respect to the Bay Lien, all
              amounts due and payable to manufacturers, suppliers or contractors
              that constructed, equipped or installed the Medusa Spar or that
              otherwise provided goods, supplies or services in relation to the
              Medusa Spar have been paid.

         (k)  Murphy and Callon have provided to OII all material documents,
              contracts and agreements relating to the transfer of the
              Murphy/Callon Spar Interest.

         (l)  All obligations or requirements under the Medusa JOA or any other
              applicable agreement or document have been satisfied in order to
              mortgage, pledge or otherwise encumber the Murphy/Callon Spar
              Interest.

         (m)  Murphy and Callon has each paid as due all charges authorized
              under the Medusa JOA, and Murphy and Callon, each as to itself,
              has not received a notice that it is in default for non-payment of
              any such charges pursuant to Section 6.4 of the Medusa JOA.

         (n)  Murphy, as operator under the Medusa JOA, has paid as due (a)
              rentals, royalties and other fees as required under Section 19.2
              of the Medusa JOA, and (b) taxes and assessments as required under
              Article 20 of the Medusa JOA and Callon, as non-operator has paid
              any such charge that has been billed pursuant to the Medusa JOA.

         (o)  Except for (i) the liens and security interests granted by Murphy
              and Callon pursuant to Section 6.3 of the Medusa JOA, (ii) the
              Callon Third Party Encumbrances, (iii) the Bay Lien, which will be
              released on or before August 29, 2003, and (iv) the Non-Recourse
              Financing contemplated in this Agreement, neither Murphy nor
              Callon shall have allowed any lien, charge or other encumbrance to
              attach to or burden its interest under the Medusa JOA, its working
              interests in the Dedicated Blocks, or its share of hydrocarbon
              production from the Dedicated Blocks.

         (p)  Neither Murphy nor Callon shall have (i) assigned, or otherwise
              transferred, all or any portion of its rights or obligations under
              the Medusa JOA, (ii) made a non-consent election under the Medusa
              JOA that would reduce its interest or rights in or to the Medusa
              Spar, (iii) proposed or elected to withdraw from the Medusa JOA,
              or (iv) made any dedication of the reserves in and under the


                                       6

<PAGE>

              Dedicated Blocks to any processing agreement other than those
              agreements contemplated herein.

         (q)  Except for the Bay Lien, which will be released on or before
              August 29, 2003, there are no claims, demands, litigation,
              arbitrations, or other proceedings on-going, pending or threatened
              in writing in relation to the Dedicated Blocks.

         (r)  The Medusa JOA is in full force and effect. Except for the Bay
              Lien, which will be released on or before August 29, 2003, there
              are no claims, demands, litigation, arbitrations, or other
              proceedings on-going, pending or threatened in writing in relation
              to the Medusa JOA or the Medusa Spar.

         (s)  The Medusa Spar does not constitute "qualified property" within
              the meaning of Section 168(k)(2) of the United States Internal
              Revenue Code.

         (t)  Except for the representations and warranties expressly contained
              in this Article II, neither Murphy nor Callon nor any other person
              or entity acting on behalf of Murphy or Callon makes any
              representation or warranty, express or implied.

2.2      Covenants.

         Prior to the Closing:


         (a)  Murphy and Callon shall use their good faith efforts to obtain the
              right to provide OII promptly after provision or receipt, but
              without duplication, with a copy of any proposal or notice of any
              type, including, without limitation, AFEs, Plans and Budgets,
              given or received pursuant to the Medusa JOA that relates to or
              may affect, directly or indirectly, the ownership, operation, use
              or condition of the Medusa Spar or that relates to or may affect,
              directly or indirectly, Murphy's or Callon's rights in or to the
              Medusa Spar.

         (b)  Prior to casting a vote, making an election, granting or
              withholding approval, or otherwise taking any action pursuant to
              the Medusa JOA which relates to or may affect, directly or
              indirectly, the ownership, operation, use or condition of the
              Medusa Spar or that relate to or may affect, directly or
              indirectly, Murphy's or Callon's rights in or to the Medusa Spar,
              Murphy and Callon shall each consult with OII.

         (c)  Murphy and Callon shall each use its commercially reasonable
              efforts not to take any action that would have a direct adverse
              effect on the ownership, operation, use or condition of the Medusa


                                       7

<PAGE>

              Spar, other than such actions relating to human health, safety,
              the environment or otherwise that would be taken by a prudent
              operator under generally accepted standards of petroleum industry
              practices.

         (d)  Murphy and Callon shall, but without duplication, promptly notify
              OII of all material developments related to the Medusa Spar. As
              used in this Section 2.2 (d), "material" means one or more events,
              occurrences, changes or effects which, individually or in the
              aggregate, has had or could be reasonably expected to have an
              adverse effect or impact on any Party's ability to consummate the
              transactions contemplated by this Agreement, in accordance with
              the terms of this Agreement.

         (e)  Murphy and Callon shall, but without duplication, promptly notify
              OII of any on-going, pending or threatened claim, demand,
              litigation, arbitration or other proceeding related to the federal
              oil and gas leases covered by the Medusa JOA, the Medusa JOA, or
              the Medusa Spar.

         (f)  Murphy, Callon and OII shall each execute and deliver at the
              Closing such documents as may be required by lenders in order to
              obtain the Non-Recourse Financing.

         (g)  Murphy and Callon shall obtain the release of the Bay Lien on or
              before August 29, 2003.

         (h)  Murphy and Callon shall each use its reasonable efforts to obtain
              on or before August 29, 2003, a written amendment to the Medusa
              JOA, signed by Murphy, Callon and BBD, and approved by OII,
              evidencing to the reasonable satisfaction of all Parties hereto,
              BBD's approval of the transactions contemplated by this Agreement
              (the "BBD Approval").

         (i)  Neither Murphy or Callon shall claim (directly or indirectly) any
              additional allowance for depreciation under Section 168(k) of the
              United States Internal Revenue Code with respect to the Medusa
              Spar.

         (j)  Murphy and Callon shall each cause its representations and
              warranties to be true, correct and accurate in all respects as of
              the Closing, and neither shall take any action that would cause a
              representation and warranty to be untrue, incorrect or inaccurate.


                                       8

<PAGE>

                                  ARTICLE III

                         REPRESENTATIONS AND WARRANTIES
                                     OF OII

                  OII represents and warrants to Murphy and Callon, as of the
Effective Date and as of the Closing, that:

         3.1  Organization of OII.

         OII is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. OII has the corporate power to
own, lease and operate its properties and to carry on its business as now being
conducted.

         3.2 Authority.

         OII has all requisite authority to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary formal action on the part of OII. No vote of, or
consent by, the holders of any class or series of stock or other equity issued
by OII is necessary to authorize the execution and delivery by OII of this
Agreement or the consummation by it of the transactions contemplated herein.
This Agreement has been duly executed and delivered by OII and constitutes the
legal, valid and binding obligation of OII, enforceable against OII in
accordance with its terms, except as the enforcement hereof may be limited by
(a) bankruptcy, insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect relating to creditors' rights generally and (b) general
principles of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity).

         3.3 Availability of Funds.

         OII currently has access to sufficient immediately available funds in
cash or cash equivalents and will at the Closing have sufficient immediately
available funds, in cash, to pay the OII Initial Capital Cash Contribution and
to pay any other amounts payable pursuant to this Agreement and to effect the
transactions contemplated in this Agreement.

         3.4 Brokers or Finders.

         Neither OII nor any of its subsidiaries has entered into any agreement
or arrangement entitling any agent, broker, investment banker, financial advisor
or other firm or entity to any broker's or finder's fee or any other commission
or similar fee (collectively, "Commissions") in connection with any of the
transactions contemplated in this Agreement other than Convergent Energy Group
LLC (hereinafter referred to as "OII's Broker") which has heretofore acted, and
shall hereafter continue to act, for and on behalf of OII. OII represents and
warrants to Murphy and Callon that there will be no Commissions payable by
Murphy and/or Callon in connection with this Agreement or any of the
transactions contemplated by this Agreement by reason of any dealings,
negotiations or communications with OII's Broker.


                                       9

<PAGE>

                                   ARTICLE IV

                           FINANCING AND OTHER MATTERS

         4.1 Deemed Value.

         As used in this Agreement, the term "Deemed Value" shall mean
$167,250,000.00.

         4.2 Commitment for Non-Recourse Financing.

         The Parties intend to obtain the Non-Recourse Financing for Medusa Spar
LLC in an amount equal to 50% of Deemed Value. Collateral for the Non-Recourse
Financing may include a security interest in the Parties' interests in Medusa
Spar LLC, as well as accounts receivable, contracts, cash accounts, guarantees,
insurances, pledges and cash flows of Medusa Spar LLC. The terms and conditions
of the Non-Recourse Financing shall require the unanimous approval by all of the
Parties. Should the Parties, despite the good-faith efforts of the Parties, be
unable to obtain a written commitment letter (or similar document) for the
Non-Recourse Financing by not later than September 30, 2003, then any Party may
terminate this Agreement by providing written notice thereof to the other
Parties, but only if the Party wishing to terminate this Agreement is not in
material breach of this Agreement, and upon such termination, the Parties hereto
shall have no further obligation or liability to each other hereunder. If the
commitment letter (or similar document) for the Non-Recourse Financing is not
obtained because of a Party's material breach of this Agreement, the other
Parties shall be entitled to all remedies which they may have at law or in
equity.

         4.3 Costs Prior to the Closing.

         Murphy and Callon will be responsible for the payment of all costs
incurred in connection with their combined undivided 75% interest in the Medusa
Spar prior to the Closing.

         4.4 BBD Approval.

         If the BBD Approval is not obtained on or before August 29, 2003, then
any Party may terminate this Agreement by providing written notice thereof to
the other Parties, but only if the Party wishing to terminate this Agreement is
not in material breach of this Agreement.

         4.5 Release of the Bay Lien.

         If the Bay Lien is not released on or before August 29, 2003, then any
Party may terminate this Agreement by providing written notice thereof to the
other Parties, but only if the Party wishing to terminate this Agreement is not
in material breach of this Agreement.


                                       10

<PAGE>

                                   ARTICLE V

             MEDUSA SPAR OPERATING AND PRODUCTION HANDLING AGREEMENT

         5.1 Medusa Spar Operating and Production Handling Agreement.

         At the Closing, Murphy, Callon, OII and Medusa Spar LLC will enter into
an agreement pursuant to which, among other things: (i) the Parties will agree
on the manner in which the rights and obligations under the Medusa JOA related
to the Medusa Spar will be exercised and fulfilled, (ii) Murphy will operate the
Medusa Spar, (iii) Murphy and Callon will dedicate for handling on the Medusa
Spar, and Medusa Spar LLC will handle, the production of Murphy and Callon from
the Dedicated Blocks as listed on Exhibit "A" attached hereto, and (iv) Medusa
Spar LLC may handle on the Medusa Spar third party production (the "Medusa Spar
Operating and Production Handling Agreement"). The Medusa Spar Operating and
Production Handling Agreement shall be in the form of Exhibit G attached hereto
and made a part hereof.

                                   ARTICLE VI

                                     CLOSING

         6.1 Closing Conditions.

         (a)  As used in this Agreement, the term "Closing Conditions
              Satisfaction Date" shall mean the first date on which all of the
              following conditions have been satisfied:

              (i) the EPCI Contract shall have been completed, or substantially
                  completed, as the case may be, and Murphy and Callon shall
                  have either finally accepted the Medusa Spar and production
                  risers from the applicable contractors, or, in the case of
                  such substantial completion, such final acceptance shall be
                  conditioned on the completion of minor or inconsequential
                  matters that remain to be finished, and/or the correction of
                  minor defects or errors in the work on the Medusa Spar that
                  need to be remedied;

             (ii) the export pipelines from the Medusa Spar shall have been
                  accepted and placed in operation by Shell Oil Pipeline LC and
                  VK Deepwater Gathering Company LLC ;

            (iii) all permits and authorizations required for the operation of
                  the Medusa Spar, production risers and pipelines shall have
                  been obtained;


                                       11

<PAGE>

             (iv) Murphy and Callon shall have conducted production operations
                  through the Medusa Spar for a period of not less than ten (10)
                  days after the first date of such production operations
                  without significant interruption or underperformance due to
                  equipment problems;

              (v) no material default by Murphy, Callon or OII shall have
                  occurred and be continuing under (a) this Agreement, (b) any
                  lease or operating agreement for any of the Dedicated Blocks
                  listed on Exhibit "A" or (c) any construction or installation
                  contract for the construction or installation of the Medusa
                  Spar, production risers, or related export pipelines;

             (vi) there are no claims, demands, litigation, arbitrations, or
                  other proceedings on-going, pending or threatened in writing
                  in relation to the transactions contemplated by this
                  Agreement;

            (vii) Medusa Spar LLC shall have received a certification from
                  independent engineers retained by OII that the matters
                  described in items (i) through (iv) and (v) (c) above have
                  occurred, unless waived by OII;

           (viii) Medusa Spar LLC shall have received a certification from
                  Murphy and Callon that the conditions described in items (i)
                  through (vi) have occurred, which certification shall be in
                  the form of, and shall contain such terms, conditions and
                  provisions as are more particularly set forth in, Exhibit H
                  attached hereto and made a part hereof;

             (ix) Murphy, Callon and OII and/or Medusa Spar LLC shall have
                  entered into a credit agreement (or similar financing
                  document) for the Non-Recourse Financing;

              (x) the leases for the Dedicated Blocks shall be in full force and
                  effect;


                                       12

<PAGE>

             (xi) the Callon Third Party Encumbrances shall have been released
                  or subordinated as represented in Section 2.1(f).

         Each Party shall use commercially reasonable efforts to cause the
         conditions set out above to be satisfied in an expeditious manner, and
         no Party shall take any action that would cause the conditions not to
         be satisfied.

         (b)  In addition to the satisfaction of the conditions set out in
              Section 6.1(a), the obligation of OII to proceed with Closing is
              subject to the satisfaction at or prior to the Closing of all of
              the following conditions, any one or more of which may be waived,
              in whole or in part, by OII:

              (i) Murphy and Callon shall each have complied in all respects
                  with each of its covenants contained in this Agreement, and
                  each representation and warranty contained in Section 2.1
                  shall be true, correct and accurate;

             (ii) OII shall have received a certificate, dated as of Closing,
                  of an officer of each of Murphy and Callon certifying as to
                  the matters specified in Section 6.1(b)(i);

            (iii) the matters set out in Section 6.2(b) shall have occurred;

             (iv) the Bay Lien shall have been released; and

              (v) the BBD Approval shall have been obtained.

         (c)  In addition to the satisfaction of the conditions set out in
              Section 6.1(a), the obligation of each of Murphy and Callon to
              proceed with Closing is subject to the satisfaction at or prior to
              the Closing of all of the following conditions, any one or more of
              which may be waived, in whole or in part, by Murphy or Callon:

              (i) OII shall have complied in all respects with each of its
                  covenants contained in this Agreement, and each representation
                  and warranty of OII contained in Section 3.1 shall be true,
                  correct and accurate;

             (ii) Murphy and Callon shall each have received a certificate,
                  dated as of Closing, of an officer of


                                       13

<PAGE>

                  OII certifying as to the matters specified in Section
                  6.1(c)(i);

            (iii) the matters set out in Section 6.2(b) shall have occurred;

             (iv) the Bay Lien shall have been released; and

              (v) the BBD Approval shall have been obtained.

         (d)  To the extent that a matter set out in Section 6.2(b) is within
              the control of OII, and neither Murphy or Callon is in breach of
              this Agreement and both are ready, willing and able to perform,
              OII shall use its best efforts to cause the matter to occur. To
              the extent that a matter set out in Section 6.2(b) is within the
              control of Murphy or Callon, and OII is not in breach of this
              Agreement and is ready, willing and able to perform, Murphy and
              Callon shall each use its best efforts to make the matter occur.

         6.2  Closing.

         (a)  The closing of the transactions contemplated by this Agreement
              (the "Closing") shall occur on a date that is not later than the
              fifth (5th) business day after the Closing Conditions Satisfaction
              Date. The Closing shall be held at such location, and on such date
              (the "Closing Date"), as may be specified by written notice from
              Murphy to Callon and OII not less than three (3) days prior to the
              Closing Date. If Closing has not occurred on or before December
              15, 2003 despite the good-faith efforts of the Parties, any Party
              may terminate this Agreement by providing written notice thereof
              to the other Parties, but only if the Party wishing to terminate
              this Agreement is not in material breach of this Agreement. If the
              Closing does not occur because of a Party's material breach of
              this Agreement or because of a Party's failure or refusal to close
              that is not permitted by the terms of this Agreement, the other
              Parties shall be entitled to all remedies which they may have at
              law or in equity.

         (b)  On the Closing Date, the Closing shall take place as follows:

              (i) Murphy, Callon and OII shall execute the LLC Agreement and, by
                  virtue of the execution of the Murphy Assignment by Murphy and
                  the Callon Assignment by Callon, Murphy and Callon shall make
                  their respective Initial Capital Contributions to Medusa Spar
                  LLC as set forth in Section 1.2(a) (i) and (ii) above;


                                       14

<PAGE>

             (ii) OII shall pay to Medusa Spar LLC the OII Initial Capital Cash
                  Contribution as specified in Section 1.2 (a)(iii) above;

            (iii) Murphy, Callon and OII shall execute and/or deliver such
                  documents as may be required to obtain the Non-Recourse
                  Financing;

             (iv) the Non-Recourse Financing shall fund;

              (v) Murphy, Callon, OII and Medusa Spar LLC shall execute the
                  Medusa Spar Operating and Production Handling Agreement; and

             (vi) Medusa Spar LLC will distribute the sum of the OII Initial
                  Capital Cash Contribution and the funds received from the
                  Non-Recourse Financing to Murphy and Callon in the respective
                  proportions of 80% and 20%.

         (c) At the Closing, Murphy and Callon shall each deliver to OII:

              (i) a Secretary's Certificate or Assistant Secretary's Certificate
                  certifying as to the due authorization of the signatory to the
                  documents signed at the Closing; and

             (ii) the certificate contemplated by Section 6.1(b)(ii).

         (d) At the Closing, OII shall deliver to each of Murphy and Callon:

              (i) a Secretary's Certificate or Assistant Secretary's Certificate
                  certifying as to the due authorization of the signatory to the
                  documents signed at the Closing; and

             (ii) the certificate contemplated by Section 6.1(c)(ii).

         6.3 Medusa Spar Contractors and Suppliers.

         Any amounts payable to manufacturers, suppliers or contractors that
constructed, equipped or installed the Medusa Spar or that otherwise provided
goods, supplies or services in relation to the Medusa Spar shall remain the
responsibility of Murphy and Callon and shall be paid by Murphy and Callon when
due, provided that, subject to Sections 2.2(g), 4.5, 6.1(b)(iv) and 6.1(c)(iv),
the amount being claimed with respect to the Bay Lien shall not be paid until
the amount in dispute has been resolved to the satisfaction of all parties
having an interest in such


                                       15

<PAGE>

dispute, including, without limitation, Murphy and Callon. Murphy and Callon
will provide evidence satisfactory to OII of full payment of all such amounts.

                                  ARTICLE VII

                   SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
                                 INDEMNIFICATION

         7.1 Survival of Representations and Warranties.

         All of the Parties' representations, warranties, covenants, and
agreements in this Agreement or in any certificate or instrument delivered
pursuant to this Agreement shall survive the Closing of the transactions
contemplated in this Agreement.

         7.2 Indemnification by Transaction Parties.

         Each of the Parties (a "Transaction Indemnifying Party") shall
reimburse, indemnify, defend and hold harmless the other Parties from and
against any and all claims, demands, lawsuits, liabilities, judgments, damages,
awards, fines, costs, expenses, fees, penalties, deficiencies, losses, amounts
paid or incurred in defense and/or settlement and related expenses, including
without limitation interest, court and other legal proceeding costs, reasonable
fees of attorneys, accountants, and other experts or other expenses of
litigation or other proceedings or of any claim, default or assessment
(collectively, "Losses") incurred by each of the other Parties, and its and
their officers, directors, employees, and agents (a "Transaction Indemnified
Party"), in each case net of insurance proceeds if and when received by such
Transaction Indemnified Party in connection with such Losses, directly or
indirectly as a result of any of the following events (an "Indemnification
Event"):

         (a)  any inaccuracy in, or breach of, a representation or warranty of
              the Transaction Indemnifying Party contained herein (or in any
              certificate or instrument delivered by the Transaction
              Indemnifying Party pursuant to this Agreement);

         (b)  any failure by the Transaction Indemnifying Party to perform or
              comply with any of its covenants or agreements contained herein;
              and/or

         (c)  third party claims related to ownership, operation, use, or
              condition of the Medusa Spar prior to Closing, regardless of when
              any such claim arises, in which case Murphy and Callon shall each
              be a Transaction Indemnifying Party, and Medusa Spar LLC and OII,
              and its and their officers, directors, employees and agents, shall
              be the Transaction Indemnified Party;

provided, however, that no indemnification shall be owed by a Transaction
Indemnifying Party to a Transaction Indemnified Party under this Section 7.2,
and no amount of indemnity shall be payable by a Transaction Indemnifying Party
in the case of a claim by any Transaction Indemnified Party under this Section
7.2, unless and until an Indemnified Event has occurred and


                                       16

<PAGE>

is continuing for a period of thirty (30) business days after written notice
thereof given by the Transaction Indemnified Party to the Transaction
Indemnifying Party in accordance with Section 8.1 of this Agreement.

         7.3 Matters Involving Third Parties.

         (a)  If any third party shall notify any Party entitled to
              indemnification under Section 7.2 (the "Indemnified Party") with
              respect to any matter (a "Third Party Claim") which may give rise
              to a claim for indemnification against any other Party hereto (the
              "Indemnifying Party") under this Article VII, then the Indemnified
              Party shall promptly notify (and in any event by the sooner to
              occur of (i) 10 days after receipt of notice by it, and (ii) five
              days prior to the date a responsive pleading is due (which
              notification shall be made by either facsimile or overnight
              delivery pursuant to Section 8.1 hereof) each Indemnifying Party
              thereof in writing; provided, however, that no delay on the part
              of the Indemnified Party in notifying any Indemnifying Party shall
              relieve the Indemnifying Party from any obligation hereunder
              unless (and then solely to the extent) the Indemnifying Party
              thereby is prejudiced.

         (b)  Any Indemnifying Party will have the right to defend the
              Indemnified Party against the Third Party Claim with counsel of
              its choice reasonably satisfactory to the Indemnified Party so
              long as (i) the Indemnifying Party promptly notifies the
              Indemnified Party in writing that the Indemnifying Party will
              indemnify the Indemnified Party, to the extent indemnification is
              provided for under Section 7.2, (ii) the Indemnifying Party
              provides the Indemnified Party with evidence reasonably acceptable
              to the Indemnified Party that the Indemnifying Party will have the
              financial resources to defend against the Third Party Claim and
              fulfill its indemnification obligations hereunder, and (iii) the
              Indemnifying Party conducts the defense of the Third Party Claim
              actively and diligently.

         (c)  So long as the Indemnifying Party is conducting the defense of the
              Third Party Claim in accordance with Section 7.3(b) above, (i) the
              Indemnified Party may retain separate co-counsel at its sole cost
              and expense and participate in the defense of the Third Party
              Claim, (ii) the Indemnified Party will not consent to the entry of
              any judgment or enter into any settlement with respect to the
              Third Party Claim without the prior written consent of the
              Indemnifying Party (which consent shall not unreasonably be
              withheld), (iii) the Indemnifying Party will not consent to the
              entry of any judgment or enter into any settlement with respect to
              the Third Party Claim unless a written agreement is obtained
              releasing the Indemnified Party from all liability thereunder,
              (iv) the Indemnifying Party will


                                       17

<PAGE>

              not consent to the entry of any judgment or enter into any
              settlement with respect to a Third Party Claim, which involves an
              injunction or other equitable relief, without the consent of the
              Indemnified Party, which consent will not be unreasonably
              withheld, and (v) the Indemnifying Party will not consent to the
              entry of any judgment or enter into any settlement with respect to
              a Third Party Claim which will, in the good faith judgment of the
              Indemnified Party, likely establish a precedential custom or
              practice adverse to the continuing business interests of the
              Indemnified Party.

         (d)  In the event any of the conditions in Section 7.3(b) above is or
              becomes unsatisfied, however, (i) the Indemnified Party may defend
              against, and consent to the entry of any judgment or enter into
              any settlement with respect to, the Third Party Claim in any
              manner it may deem appropriate (and the Indemnified Party need not
              consult with, or obtain any consent from, any Indemnifying Party
              in connection therewith), (ii) the Indemnifying Parties will
              reimburse the Indemnified Party promptly and periodically for the
              costs of defending against the Third Party Claim (including
              attorneys' fees and expenses), provided that the Third Party Claim
              is subject to indemnification under Section 7.2 and (iii) the
              Indemnifying Parties will remain responsible for any Losses the
              Indemnified Party may incur to the extent provided in Section 7.2.

         7.4  Limitation on Damages.

         Except for such damages that must be paid by an Indemnified Party to a
third party, no Party shall be entitled to indemnification under this Article
VII for incidental, indirect, consequential, exemplary or punitive damages;
provided, however that it is understood and agreed that diminution in value of
the Medusa Spar shall constitute actual damages.

         7.5 Exclusive Remedies.

         The remedies provided in this Article VII constitute the sole and
exclusive remedies available to each of the Parties for recoveries against the
other Parties for breaches or failures to comply with or non-fulfillments of the
representations, warranties, covenants and agreements of this Agreement or in
any certificate or document furnished to any of the Parties by any other Party
pursuant to this Agreement except that nothing in this Agreement shall limit the
right of a Party to pursue any appropriate remedy at equity, including specific
performance for breach of any of the covenants of any other Party contained
herein or rescission based upon allegations of fraud or willful misconduct in
connection with this Agreement.


                                       18

<PAGE>

                                  ARTICLE VIII

                               GENERAL PROVISIONS

8.1      Notices.

         All notices and other communications hereunder shall be in writing and
shall be deemed given when delivered by hand, or when sent by electronic
facsimile transmission (with acknowledgement of complete transmission), or on
the first business day after delivery to any overnight commercial delivery
service, freight prepaid, or fourteen (14) days after being mailed by registered
or certified mail (return receipt requested), postage prepaid, and addressed to
the Parties at the following addresses (or at such other address for a Party as
shall be specified by like notice):

         (a) if to Murphy, to:

         Murphy Exploration & Production Company-USA
         131 South Robertson, New Orleans, LA 70112
         Attention: Steve Jones, General Manager-Land
         Facsimile: 504-561-2551

         (b) if to Callon, to:

         Callon Petroleum Operating Company
         200 North Canal Street, Natchez, MS 39120
         Attention: Dee A. Newman, Land Manager
         Facsimile: 601-446-1362

         (c) if to OII, to

         Oceaneering International, Inc.
         11911 FM 529, Houston, TX 77041-3011
         Attention: Fred E. Shumaker, Vice President and General Manager-MOPS
         Facsimile: 713-329-4825

         8.2 Expenses.

         In the event the transactions contemplated in this Agreement are not
consummated, all fees and expenses incurred in connection with the transactions
contemplated in this Agreement including, without limitation, all legal,
accounting, financial advisory, consulting and all other fees and expenses of
third parties ("Third Party Expenses") incurred by a Party in connection with
the negotiation and implementation of the terms and conditions of this Agreement
and the transactions contemplated hereby, shall be the obligation of the
respective Party incurring such fees and expenses, provided, however, that in
the event the transactions contemplated by this Agreement are not consummated as
a result of the willful misconduct of any of the Parties (which willful
misconduct shall not include failure of a condition to be satisfied where such
Party has used reasonable commercial efforts to satisfy such condition), and in
addition to all other remedies at law and in equity, then the Party who has
committed such


                                       19

<PAGE>

willful misconduct will reimburse to the other Parties all such hird Party
Expenses incurred in connection with such transactions immediately upon demand
therefor.

         8.3 Interpretation.

         The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. The term "Person" means any individual, corporation, partnership,
association, trust, limited liability company or partnership, unincorporated
organization, joint venture, other legal entity or group.

         8.4 Counterparts.

         This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement and shall become effective
when one or more counterparts have been signed by each of the Parties and
delivered to the other Parties, it being understood that all Parties need not
sign the same counterpart.

         8.5 Entire Agreement; Assignment.

         This Agreement, the schedules and Exhibits hereto, and the documents
and instruments and other agreements among the Parties hereto referenced herein:
(a) constitute the entire agreement among the Parties with respect to the
subject matter hereof and supersede all prior agreements (including that certain
Medusa Spar Ownership and Operation Letter of Intent, dated April 29, 2003, as
amended, among Murphy, Callon and OII) and understandings, both written and
oral, among the Parties with respect to the subject matter hereof; (b) are not
intended to confer upon any other person any rights or remedies hereunder; and
(c) shall not be assigned by operation of law or otherwise except as otherwise
specifically provided, or with the written consent of each of the other Parties
hereto.

         8.6 Severability.

         In the event that any provision of this Agreement, or the application
thereof, becomes or is declared by a court of competent jurisdiction to be
illegal, void or unenforceable, the remainder of this Agreement will continue in
full force and effect and the application of such provision to other persons or
circumstances will be interpreted so as reasonably to effect the intent of the
Parties hereto. The Parties further agree to replace such void or unenforceable
provision of this Agreement with a valid and enforceable provision that will
achieve, to the extent possible, the economic, business and other purposes of
such void or unenforceable provision.

         8.7 Governing Law; Jurisdiction; Venue.

         This Agreement shall be governed by and construed in accordance with
the laws of the State of Louisiana excluding any provisions of Louisiana
conflicts of law which would require application of the substantive laws of
another jurisdiction. Such law shall govern the validity, interpretation,
performance and breach of this Agreement. The Parties agree that any action,
proceeding or suit seeking to enforce any provision of, or based on any rights
of the Parties arising out of, this Agreement shall be brought in the Courts of
the State of Louisiana,


                                       20

<PAGE>

and further agree the United States District Court for the Eastern District of
Louisiana shall have exclusive jurisdiction to hear and determine any suit to
enforce the rights of the Parties under this Agreement. Each of the Parties
consents to the jurisdiction of such court (and of the appropriate Appellate
Courts), in an any such action, claim or proceeding and waives any objection to
venue. Each of the Parties further agrees that process may be served upon them
in any manner authorized by the laws of the State of Louisiana for such persons,
and waives and covenants not to assert or plead any objection which they might
otherwise have to such jurisdiction and venue and such process. Further, in the
event jurisdiction is denied in the United States District Court for the Eastern
District of Louisiana, the Parties agree that any action, proceeding or suit may
be brought against any of the Parties in the 24th Judicial District Court for
the Parish of Jefferson, State of Louisiana, and each of the Parties consents to
the jurisdiction of such Court (and of the appropriate Appellate Courts) in any
such action or proceeding and waives and covenants not to assert or plead any
objection which they might otherwise have to such jurisdiction and venue.

         8.8 Rules of Construction.

         The Parties hereto agree that they have been represented by counsel
during the negotiation and execution of this Agreement and, therefore, waive the
application of any law, regulation, holding or rule of construction providing
that ambiguities in an agreement or other document will be construed against the
Party drafting such agreement or document.

         8.9 Survival.

         Articles VII and VIII shall survive termination of this Agreement.

         8.10 Medusa JOA.

         Each of the Parties hereto recognize that the Medusa Spar is subject
to, and is operated under the Medusa JOA. If any of the terms, conditions or
provisions in this Agreement, or in any document or agreement executed pursuant
to this Agreement, conflicts with any of the terms, conditions or provisions of
the Medusa JOA as they affect a working interest owner under the Medusa JOA that
is not a Party to this Agreement, the terms, conditions and provisions of the
Medusa JOA shall be controlling in application to such working interest owner.

         8.11 News Releases.

         The Parties hereto shall use reasonable efforts to unanimously agree
upon the timing and content of releases to the news media covering the signing
of this Agreement and/or the occurrence of the Closing. However, in the event
the Parties cannot unanimously agree upon either the timing and/or the content
of the news release within two (2) business days of such proposed news release,
then the Party proposing such news release shall be entitled to issue the news
release as so proposed.

                            [SIGNATURE PAGES FOLLOW]


                                       21

<PAGE>

IN WITNESS WHEREOF, Murphy has caused this Agreement to be signed by its duly
authorized officer, on the date set forth below, to be effective as of the
Effective Date.

                               MURPHY EXPLORATION & PRODUCTION COMPANY-USA



                               BY:
                                   --------------------------------------------
                                   NAME:
                                   TITLE:


                                   DATE:
                                         --------------------------------------


                                       22

<PAGE>

IN WITNESS WHEREOF, Callon has caused this Agreement to be signed by its duly
authorized officer, on the date set forth below, to be effective as of the
Effective Date.

                               CALLON PETROLEUM OPERATING COMPANY



                               BY:
                                   --------------------------------------------
                                   NAME:  DENNIS W. CHRISTIAN
                                   TITLE: CHIEF OPERATING OFFICER

                                   DATE:  AUGUST 7, 2003


                                       23

<PAGE>

IN WITNESS WHEREOF, OII has caused this Agreement to be signed by its duly
authorized officer, on the date set forth below, to be effective as of the
Effective Date.

                             OCEANEERING INTERNATIONAL, INC.



                             BY:
                                 ----------------------------------------------
                                 NAME: T. JAY COLLINS
                                 TITLE:  PRESIDENT AND CHIEF OPERATING OFFICER


                                 Date:
                                       ----------------------------------------


                                       24