EXHIBIT 16.2

AGREEMENT FORASSIGNMENT OF LEASES

That,
Geo Petroleum, Inc. 25660 Crenshaw Blvd, Suite 201, Torrance,
California 90505, hereinafter referred to as Geo, for Ten
Dollars ($10.00) and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, subject to
the terms, reservations, limitations and provisions hereinafter set
forth, without warranty of any kind either express or implied, does
hereby agree to assign, transfer and convey subject to Geos
retained power of termination, unto Saba Petroleum, Inc., 201 North
Salsipuedes, Suite 104, Santa Barbara, California 93103, hereinafter
referred to as Saba, two thirds (2/3) of Geos right,
title and interest in, to and under the oil, gas and mineral leases as
set forth in Exhibit A attached hereto and made part thereof.







All
of the foregoing leases, interests, rights and properties described in
the first paragraph and paragraphs A through C above, are herein
called the Properties, located in Ventura County, California.

To
have and to hold the properties forever, subject to and on the terms,
conditions and limitations contained in the following:

1.   Royalty
Purchases



2.   Operations



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3.   Expenditures



4.   Payout



5.   Term and
  Interest



6.   Spacing Unit





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7.   Environmental
  Condition of the Assets



8.   Title Defects











9.   Default



10.   Arbitration



---



11.   Force Majeure



12.   Well
  Information



13.   Insurance
  Requirements









14.   Compliance
  with Laws and Regulations



15.   Relationship
  of Parties



16.   Entire
  Agreement



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17.   Governing Law



18.   Counterpart
  Execution



19.   Notice





| |  |  |        
| |  |  | -------
| |  |  | /s/ GTR
| |  |  |        
| |  |  |        

GEO Petroleum, Inc.
  Attn: Gerald T. Raydon
  25660 Crenshaw Blvd, Suite 201
  Torrance, California 90505
  Tele: (310) 539-8191
  Fax: (310) 539-0101

Saba Petroleum, Inc.
  Attn: Larry Burroughs
  201 North Salsipuedes, Suite 104
  Santa Barbara, California 93103
  Tele: (805) 884-0661
  Fax: (805) 884-0672

or to such other address as a Party
  may designate from time to time.

20.   Successors
  and Assigns



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IN
  WITNESS WHEREOF, the parties hereto have executed this agreement,
  this 23rd day of December, 1996.

| |  |  | GEO PETROLEUM,
        INC.
| |  |  | ---------------------------
| |  |  | /s/ Gerald T. Raydon       
| |  |  |                            
| |  |  | Gerald T. Raydon           

| |  |  | SABA PETROLEUM,
        INC.,
        a California Corporation
| |  |  | --------------------------------------------------------------
| |  |  | /s/ Larry Burroughs                                           
| |  |  |                                                               
| |  |  | Larry Burroughs,
        President                            

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Exhibit A

Attached to and Made Part ofAgreement for Assignment of Leases Dated, December ___, 1996Ventura County, California

|Lessor:                                                                                                                                                                                                                                                                                 |  | Lessee:                                              |  | Date;    |  | Recording
        Data:     |  | Description
        of Property:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------- |  | -------- |  | --------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|                                                                                                                                                                                                                                                                                        |  |                                                      |  |          |  |                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 
|Vaca
        Tar Sand Unit Leases                                                                                                                                                                                                                                                       |  |                                                      |  |          |  |                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 
|E.E.
        Lenox, Single Man                                                                                                                                                                                                                                                          |  | Raleigh
        P. Trimble                           |  | 04-24-34 |  | Book:
        426 Page: 241 |  | Part of the Rancho
        el Rio a la Colonia known as the west 80 acres of the 119.24
        acres in subdivisions numbered 53 and 54, lying between the
        Sturgis Road, the Railroad and the Wolff Road, containing 80
        acres.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 
|                                                                                                                                                                                                                                                                                        |  |                                                      |  |          |  |                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 
|John
        Hollis Lenox and Alice Lenox                                                                                                                                                                                                                                               |  | Exeter
        Oil Company Ltd. and Vaca Oil Company |  | 06-04-46 |  | Book
        777 Page: 232  |  | 39 acres, more or
        less, out of subdivision 53 of Rancho el Rio de Santa Clara o
        la Colonia.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | 
|                                                                                                                                                                                                                                                                                        |  |                                                      |  |          |  |                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 
|W.R.
        Livingston                                                                                                                                                                                                                                                                 |  | Raleigh
        P. Trimble                           |  | 04-26-34 |  | Book:
        461 Page: 267 |  | 159.5 acres, more
        or less out of subdivision 53 of Rancho el Rio de Santa Clara
        o la Colonia                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | 
|                                                                                                                                                                                                                                                                                        |  |                                                      |  |          |  |                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 
|Robert
        S. Livingston and Mayrie Daily Livingston, his wife                                                                                                                                                                                                                      |  | Raleigh
        P. Trimble                           |  | 04-26-34 |  | Book:
        460 Page: 478 |  | Insofar and only
        insofar as lease covers 149.10 acres, more or less out of
        subdivision 53 and 55 of Rancho el Rio de Santa Clara o la
        Colonia.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | 
|                                                                                                                                                                                                                                                                                        |  |                                                      |  |          |  |                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 
|Non-Unit
        Lease                                                                                                                                                                                                                                                                  |  |                                                      |  |          |  |                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 
|                                                                                                                                                                                                                                                                                        |  |                                                      |  |          |  |                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 
|Clarence
        W. Hunsucker, J. Thomas Hunsucker and Evelyn Hunsucker AKA
        Evelyn N. Hunsucker, AKA Eva Newman Hunsucker Trustees of the
        Thomas O. Hunsucker Family Trust; and Clarence W. Hunsucker as
        Executor of the Estate of Thomas O. Hunsucker deceased |  | Sun
        Operating Limited Partnership            |  | 04-02-86 |  | 86-128442                   |  | Parcels B, C &
        D of Subdivision 55 of the Rancho El Rio De Santa Clara OLa
        Colonia in the County of Ventura, Stag of California,
        according to the map recorded in Book 3, page 112 of maps, in
        the office of the County Recorder of said county. Together
        with those portions of Sturgis Road, Pleasant Valley Road, and
        Wood Road as said roads are shown on said map lying northerly,
        northwesterly, and westerly respectively of the centerline of
        said roads. EXCEPT that portion of said land lying northerly
        of the following described line: Beginning at a point in the
        centerline of Wood Road, distant thereon South 0° 23 58
        West 1182.96 feet from the intersection thereof with the
        westerly prolongation of the northerly line of subdivision 58
        of said Rancho; thence, 1st: North 88° 48 34 West
        3376.48 feet more or less to a point in the westerly line of
        said Subdivision 55. | 

---

EXHIBIT A-1

Attached
  to and made a part of that certain agreement for assignment of
  leases dated December ____,1996 by and between Saba
  Petroleum, Inc. as Assignee and Geo Petroleum, Inc. Assignor.

Well Schedule

Well Names
                       API
  Numbers

Vaca Tar Sand Unit 4 1
  (111-01041)
  Vaca Tar Sand Unit 4 2 (111-01042)
  Vaca Tar Sand Unit 4 3 (111-01043)
  Vaca Tar Sand Unit 4 75 (111-20989)
  Vaca Tar Sand Unit 4 76 (111-20993 )
  Vaca Tar Sand Unit 4 77 (111-21032)
  Vaca Tar Sand Unit 4 78 (111-21033)
  Vaca Tar Sand Unit 4 79 (111-21034)
  Vaca Tar Sand Unit 4 80 (111-21356)
  Vaca Tar Sand Unit 4 81 (111-21385)
  Vaca Tar Sand Unit 4 82 (111-21386)
  Vaca Tar Sand Unit 4 83 (111-21396)
  Vaca Tar Sand Unit 1 1 (111-01044) Water Disposal -- Tract 1,
  north of Sturgis
  Vaca Tar Sand Unit 1 2 (111-01045)
  Vaca Tar Sand Unit 1 3 (111-01046)
  Vaca Tar Sand Unit 3 1 (111-01039) Water Disposal, tank farm
  Vaca Tar Sand Unit 3 29 (111-20992)
  Vaca Tar Sand Unit 3 49 (111-20990)
  Vaca Tar Sand Unit 3 60 (111-21304)
  Vaca Tar Sand Unit 3 61 (111-21355)
  Vaca Tar Sand Unit 3 62 (111-21382)
  Vaca Tar Sand Unit 3 63 (111-21383)
  Vaca Tar Sand Unit 3 64 (111-21384)
  Vaca Tar Sand Unit 3 67 (111-21082)
  Vaca Tar Sand Unit 3 68 (111-21083)
  Vaca Tar Sand Unit 3 69 (111-21084)

Excluded
  from the Agreement for Assignment of Leases and Operating Agreement
  are the agreements, easements and access rights, production and
  disposal facilities, tanks, and all rights and interests pertaining
  to the Livingston 2, 2-1, and 1-A wells which are completed in zones
  below the Vaca Tar Sand. The wells are operated pursuant to (a) that
  sub-lease dated March 26, 1955, by and between RS. Diedrich as
  lessor and Texaco, Inc. as lessee, recorded March 26, 1955, in book
  1338, page 393, Official Records of Ventura County, California, and
  (b) other agreements for surface and other use which do not grant
  leasehold or other rights in the Vaca Tar Sand. The 2-1 well is in
  operation as a commercial water disposal well which does not dispose
  of water produced from the Vaca Tar Sand. Geo shall retain said
  wells and associated rights and Saba shall have full rights of
  access over and across the surface areas which are subject to such
  agreements, easements, and access rights.

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EXHIBIT B

A.A.P.L. FORM 610-1982MODEL FORM OPERATING AGREEMENT

Attached
  to and made a part of that certain agreement for assignment of
  leases dated December , 1996, by and between Saba Petroleum, Inc. as
  Assignee and Geo Petroleum, Inc. Assignor.

OPERATING AGREEMENTDATED12/___ , 199,

OPERATOR   Saba
  Petroleum. Inc.

CONTRACT AREA   (See
  Exhibit A)

COUNTY   Ventura   STATE
  OF California

COPYRIGHT 1982 - ALL RIGHTS
  RESERVED
  AMERICAN ASSOCIATION OF PETROLEUM
  LANDMEN, 4100 FOSSIL CREEK BLVD.
  FORT WORTH, TEXAS 76137, APPROVED FORM.
  A.A.P.L. NO. 610  1982 REVISED

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A.A.P.L. FORM 610MODEL FORM
  OPERATING AGREEMENT1982TABLE OF CONTENTS

|Article |  | Title                                                                    | Page 
|------- |  | ------------------------------------------------------------------------ | -----
|I.      |  |                                                                          | I    
|II.     |  | EXHIBITS                                                                 | I    
|III.    |  | INTERESTS OF
        PARTIES                                             | 2    
|        |  | A. Oil and gas
        interests                                         | 2    
|        |  | B. Interests of
        parties in costs and production                  | 2    
|        |  | C. Excess royalties,
        overriding royalties and other payments     | 2    
|        |  | D. Subsequently
        created interests                                | 2    
|IV.     |  | TITLES                                                                   | 2    
|        |  | A. Title examination                                                     | 2-3  
|        |  | B. Loss of title                                                         | 3    
|        |  | 1.
        Failure of Title                                              | 3    
|        |  | 2.
        Loss by Non-Payment or Erroneous Payment of Amount Due        | 3    
|        |  | 3.
        Other Losses                                                  | 3    
|V.      |  | OPERATOR                                                                 | 4    
|        |  | A. Designation and
        responsibilities of operator                  | 4    
|        |  | B. Resignation or
        removal of operator and selection of successor | 4    
|        |  | 1.
        Resignation or Removal of Operator                            | 4    
|        |  | 2.
        Selection of Successor Operator                               | 4    
|        |  | C. Employees                                                             | 4    
|        |  | D. Drilling
        contracts                                            | 4    
|VI.     |  | DRILLING AND
        DEVELOPMENT                                         | 4    
|        |  | A. Initial well                                                          | 4-5  
|        |  | B. Subsequent
        operations                                         | 5    
|        |  | 1.
        Proposed Operations                                           | 5    
|        |  | 2.
        Operations by Less than All Parties                           | 5-6_7
|        |  | 3.
        Stand-By Time                                                 | 7    
|        |  | 4.
        Sidetracking                                                  | 7    
|        |  | C. Taking production
        in kind                                     | 7    
|        |  | D. Access to
        contract area and information                       | 8    
|        |  | E. Abandonment of
        wells                                          | 8    
|        |  | 1.
        Abandonment of Dry Holes                                      | 8    
|        |  | 2.
        Abandonment of Wells that have Produced                       | 8-9  
|        |  | 3.
        Abandonment of Non-Consent Operations                         | 9    
|VII.    |  | EXPENDITURES AND
        LIABILITY OF PARTIES                            | 9    
|        |  | A. Liability of
        parties                                          | 9    
|        |  | B. Liens and payment
        defaults                                    | 9    
|        |  | C. Payments and
        accounting                                       | 9    
|        |  | D. Limitation of
        expenditures                                    | 9-10 
|        |  | 1.
        Drill or Deepen                                               | 9-10 
|        |  | 2.
        Rework or Plug Back                                           | 10   
|        |  | 3.
        Other Operations                                              | 10   
|        |  | E. Rentals, shut-in
        well payments and minimum royalties          | 10   
|        |  | F. Taxes                                                                 | 10   
|        |  | G. Insurance                                                             | 11   
|VIII.   |  | ACQUISITION,
        MAINTENANCE OR TRANSFER OF INTEREST                 | 11   
|        |  | A. Surrender of
        leases                                           |      
|        |  | B. Renewal or
        extension of leases                                | 11   
|        |  | C. Acreage or cash
        contributions                                 | 11-12
|        |  | D. Maintenance of
        uniform interest                               | 12   
|        |  | E. Waiver of rights
        to partition                                 | 12   

|See Exhibit. G | 12
|---------------- | --

|X.   |  | CLAIMS AND
        LAWSUITS                  | 13
|---- |  | -------------------------------------------- | --
|XI.  |  | FORCE MAJEURE                                | 13
|XII. |  | NOTICES                                      | 13
|XIV  |  | COMPLIANCE WITH
        LAWS AND REGULATIONS | 14
|     |  | A. Laws, regulations
        and orders      | 14
|     |  | B. Governing law                             | 14
|     |  | C. Regulatory
        agencies               | 14
|XV.  |  | OTHER PROVISIONIS                            | 14
|XVI. |  | MISCELLANEOUS                                | 15

II

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A.A.P.L. FORM 610I MODEL FORM
  OPERATING AGREEMENT 1982

|1  | OPERATING
        AGREEMENT                                                                                                                                               
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2  |                                                                                                                                                                           
|3  | THIS AGREEMENT,
        entered into by and between Saba Petroleum, Inc. ,                                                                                                
|4  | hereinafter
        designated and                                                                                                                                        
|5  | referred to as
        Operator, and the signatory party or parties other than
        Operator, sometimes hereinafter referred to individually
        herein          
|6  | as
        Non-Operator, and collectively as Non-Operators.                                                                                                           
|7  |                                                                                                                                                                           
|8  | WITNESSETH:                                                                                                                                                               
|9  |                                                                                                                                                                           
|10 | WHEREAS,
        the parties to this agreement are owners of oil and gas leases
        and/or oil and gas interests in the land identified in                            
|11 | Exhibit A,
        and the parties hereto have reached an agreement to explore
        and develop these leases and/or oil and gas interests for the                    
|12 | production of
        oil and gas to the extent and as hereinafter provided,                                                                                              
|13 |                                                                                                                                                                           
|14 | NOW, THEREFORE,
        it is agreed as follows:                                                                                                                          
|   | ARTICLE 1.                                                                                                                                                                
|17 | DEFINITIONS                                                                                                                                                               
|18 |                                                                                                                                                                           
|19 | As
        used in this agreement, the following words and terms shall
        have the meanings here ascribed to them:                                                   
|20 | A.
        The term oil and gas shall mean oil, gas, casinghead
        gas, gas condensate, and all other liquid or gaseous
        hydrocarbons                       
|21 | and other
        marketable substances produced therewith, unless an intent to
        limit the inclusiveness of this term is specifically stated.                      
|22 | B.
        The terms oil and gas lease, lease and leasehold
        shall mean the oil and gas leases covering tracts of land                                       
|23 | lying within the
        Contract Area which are owned by the parties to this
        agreement.                                                                          
|24 | C.
        The term oil and gas interests shall mean unleased fee
        and mineral interests in tracts of land lying within the                                      
|25 | Contract Area
        which are owned by parties to this agreement.                                                                                                       
|26 | D.
        The term Contract Area shall mean all of the lands, oil
        and gas leasehold interests and oil and gas interests intended
        to be                 
|27 | developed and
        operated for oil and gas purposes under this agreement. Such
        lands, oil and gas leasehold interests and oil and gas
        interests       
|28 | are described in
        Exhibit A .                                                                                                                                    
|29 | E.
        The term drilling unit shall mean the area fixed for the
        drilling of one well by order or rule of any state or                                       
|30 | federal body
        having authority. If a drilling unit is not fixed by any such
        rule or order, a drilling unit shall be the drilling unit as
        establish-
|31 | ed by the
        pattern of drilling in the Contract Area or as fixed by
        express agreement of the Drilling Parties.                                              
|32 | F.
        The term drillsite shall mean the oil and gas lease or
        interest on which a proposed well is to be located.                                           
|33 | G.
        The terms Drilling Party and Consenting Party
        shall mean a party who agrees to join in and pay its share of
        the cost of                    
|34 | any operation
        conducted under the provisions of this agreement.                                                                                                   
|35 | H.
        The terms Non-Drilling Party and Non-Consenting Party
        shall mean a party who elects not to participate                                             
|36 | in a proposed
        operation.                                                                                                                                          
|37 |                                                                                                                                                                           
|38 | Unless
        the context otherwise clearly indicates, words used in the
        singular include the plural, the plural includes the                                    
|39 | singular, and
        the neuter gender includes the masculine and the feminine.                                                                                          
|40 |                                                                                                                                                                           
|41 | ARTICLE II.                                                                                                                                                               
|42 | EXHIBITS                                                                                                                                                                  
|43 |                                                                                                                                                                           
|44 | The
        following exhibits, as indicated below and attached hereto,
        are incorporated in and made a part hereof:                                               
|45 | __ A. Exhibit
        A, shall include the following information:                                                                                                       
|46 | (1) Identification of lands subject to this agreement,                                                                                                                    
|47 | (2) Restrictions, if any, as to depths, formations, or
        substances,                                                                                                
|48 | (3) Percentages or fractional interests of parties to this
        agreement,                                                                                             
|49 | (4) Oil and gas leases and/or oil and gas interests subject to
        this agreement,                                                                                    
|50 | (5) Addresses of parties for notice purposes.                                                                                                                             
|51 | __B.
        Exhibit B, Form of Lease                                                                                                                                   
|52 | __C. Exhibit C,
        Accounting Procedure.                                                                                                                           
|53 | __D. Exhibit D,
        Insurance.                                                                                                                                      
|54 | __ E.
        Exhibit E, Gas Balancing Agreement,                                                                                                                       
|55 | __ F. Exhibit
        F, Non-Discrimination and Certification of
        Non-Segregated Facilities.                                                                     
|56 | __G. Exhibit G,
        Tax Partnership.                                                                                                                                
|57 | If any provision
        of any exhibit, except Exhibits E and G, is
        inconsistent with any provision contained in the body                                    
|58 | of this
        agreement, the provisions in the body of this agreement shall
        prevail.                                                                            

1

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A.A.P.L. FORM 610 - MODEL FORM
  OPERATING AGREEMENT 1982

|1  | ARTICLE III.                                                                                                                                                            
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2  | INTERESTS OF
        PARTIES                                                                                                                                            
|3  |                                                                                                                                                                         
|4  | A. Oil and Gas
        Interests:                                                                                                                                       
|5  |                                                                                                                                                                         
|6  | If
        any party owns an oil and gas interest in the Contract Area,
        that interest shall be treated for all purposes of this
        agreement               
|7  | and during the
        term hereof as if it were covered by the form of oil and gas
        lease attached hereto as Exhibit B, and the owner
        thereof         
|8  | shall be deemed
        to own both the royalty interest reserved in such lease and
        the interest of the lessee thereunder.                                      
|9  |                                                                                                                                                                         
|10 | B. Interests of
        Parties in Costs and Production:                                                                                                                
|11 |                                                                                                                                                                         
|12 | Unless
        changed by other provisions, all costs and liabilities
        incurred in operations under this agreement shall be borne and                            
|13 | paid, and all
        equipment and materials acquired in operations on the Contract
        Area shall be owned, by the parties as their interests are set             
|14 | forth in Exhibit
        A. In the same manner, the parties shall also own all
        production of oil and gas from the Contract Area subject to
        the        
|15 | payment of
        royalties to the extent of as provided for in the leases
        subject hereto which shall be borne as hereinafter set
        forth.               
|16 |                                                                                                                                                                         
|17 | Regardless
        of which party has contributed the lease(s) and/or oil and gas
        interest(s) hereto on which royalty is due and                                
|18 | payable, each
        party entitled to receive a share of production of oil and gas
        from the Contract Area shall bear and shall pay or deliver, or             
|19 | cause to be paid
        or delivered, to the extent of its interest in such
        production, the royalty amount stipulated hereinabove and
        shall hold the   
|20 | other parties
        free from any liability therefore. No party shall ever be
        responsible, however, on a price basis higher than the price
        received   
|21 | by such party,
        to any other partys lessor or royalty owner, and if any
        such other partys lessor or royalty owner should demand and                    
|22 | receive
        settlement on a higher price basis, the party contributing the
        affected lease shall bear the additional royalty burden
        attributable to  
|23 | such higher
        price.                                                                                                                                              
|24 |                                                                                                                                                                         
|25 | Nothing
        contained in this Article III.B. shall be deemed an assignment
        or cross-assignment of interests covered hereby.                                 
|26 |                                                                                                                                                                         
|27 | C. Excess
        Royalties, Overriding Royalties and Other Payments:                                                                                                   
|28 |                                                                                                                                                                         
|29 | Unless
        changed by other provisions, if the interest of any party in
        any lease covered hereby is subject to any royalty,                                 
|30 | overriding
        royalty, production payment or other burden on production in
        excess of the amount stipulated in Article III.B., such party
        so        
|31 | burdened shall
        assume and alone bear all such excess obligations and shall
        indemnify and hold the other parties hereto harmless from any                
|32 | and all claims
        and demands for payment asserted by owners of such excess
        burden.                                                                        
|33 |                                                                                                                                                                         
|34 | D. Subsequently
        Created Interests:                                                                                                                              
|35 |                                                                                                                                                                         
|36 | If
        any party should hereafter create an overriding royalty,
        production payment or other burden payable out of production                                
|37 | attributable to
        its working interest hereunder, or if such a burden existed
        prior to this agreement and is not set forth in Exhibit A,
        or     
|38 | was not
        disclosed in writing to all other parties prior to the
        execution of this agreement by all parties, or is not a
        jointly acknowledged and 
|39 | accepted
        obligation of all parties (any such interest being hereinafter
        referred to as subsequently created interest
        irrespective of the      
|40 | timing of its
        creation and the party out of whose working interest the
        subsequently created interest is derived being hereinafter
        referred      
|41 | to as burdened
        party), and:                                                                                                                                   
|42 |                                                                                                                                                                         
|43 | 1.
        If the burdened party is required under this agreement to
        assign or relinquish to any other party, or parties, all or a
        portion              
|44 | of
        its working interest and/or the production attributable
        thereto, said other party, or parties, shall receive said
        assignment and/or          
|45 | production
        free and clear of said subsequently created interest and the
        burdened party shall indemnify and save said other party,                       
|46 | or
        parties, harmless from any and all claims and demands for
        payment asserted by owners of the subsequently created
        interest;                   
|47 | and,                                                                                                                                                                    
|48 |                                                                                                                                                                         
|49 | 2.
        If the burdened party fails to pay, when due, its share of
        expenses chargeable hereunder, all provisions of Article VII.B
        shall be           
|50 | enforceable
        against the subsequently created interest in the same manner
        as they are enforceable against the working interest of                        
|51 | the
        burdened party.                                                                                                                                             
|52 |                                                                                                                                                                         
|53 | ARTICLE IV.                                                                                                                                                             
|54 | TITLES                                                                                                                                                                  
|55 |                                                                                                                                                                         
|56 | A. Title
        Examination:                                                                                                                                           
|57 |                                                                                                                                                                         
|58 | Title
        examination shall be made on the drillsite of any proposed
        well prior to commencement of drilling operations or, if                               
|59 | The Drilling
        Parties so request, title examination shall be made on the
        leases and/or oil and gas interests included, or planned to be
        include- 
|60 | Ed, in the
        drilling unit around such well. The opinion will include the
        ownership of the working interest, minerals, royalty,
        overriding        
|61 | Royalty and
        production payments under the applicable leases. At the time a
        well is proposed, each party contributing leases and/or oil
        and      
|62 | Gas interests to
        the drillsite, or to be included in such drilling unit, shall
        furnish to Operator all abstracts (including federal lease
        status
|63 | Reports), title
        opinions, title papers and curative material in its possession
        free of charge. All such information not in the possession of
        or 
|64 | Made available
        to Operator by the parties, but necessary for the examination
        of the title, shall be obtained by Operator. Operator shall                
|65 | Cause title to
        be examined by attorneys on its staff or by outside attorneys.
        Copies of all title opinions shall be furnished to each party             
|66 | hereto. The cost
        incurred by Operator in this title program shall be borne as
        follows:                                                                  
|67 |                                                                                                                                                                         
|68 | ___Options No.
        1: Costs incurred by Operator in procuring abstracts and title
        examination (including preliminary, supplemental,                         
|69 | shut-in gas
        royalty opinions and division order title opinions) shall be a
        part of the administrative overhead as provided in Exhibit C               
|70 | and shall not be
        a direct charge, whether performed by Operators staff
        attorneys or by outside attorneys.                                              

---

A.A.P.L. FORM 610 - MODEL FORM
  OPERATING AGREEMENT 1982ARTICLE IV
  Continued

|1  | ___
        Option No. 2: Costs incurred by Operator in procuring
        abstracts and fees paid outside attorneys for title
        examination                          
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2  | (including
        preliminary, supplemental, shut-in gas royalty opinions and
        division order title opinions) shall be borne by the Drilling
        Parties       
|3  | in the
        proportion that the interest of each Drilling Party bears to
        the total interest of all Drilling Parties as such interests
        appear in Ex-     
|4  | hibit A.
        Operator shall make no charge for services rendered by its
        staff attorneys or other personnel in the performance of the
        above           
|5  | functions.                                                                                                                                                                 
|6  |                                                                                                                                                                            
|7  | Each
        party shall be responsible for securing curative matter and
        pooling amendments or agreements required in connection                                   
|8  | with leases or
        oil and gas interests contributed by such party. Operator
        shall be responsible for the preparation and recording of
        pooling         
|9  | designations or
        declarations as well as the conduct of hearings before
        governmental agencies for the securing of spacing or pooling
        orders.        
|10 | This shall not
        prevent any party from appearing on its own behalf at any such
        hearing.                                                                     
|11 |                                                                                                                                                                            
|12 | No
        well shall be drilled on the Contract Area until after (1) the
        title to the drillsite or drilling unit has been examined as
        above               
|13 | provided, and
        (2) the title has been approved by the examining attorney or
        title has been accepted by all of the parties who are to par-                   
|14 | ticipate in the
        drilling of the well.                                                                                                                              
|15 |                                                                                                                                                                            
|16 | B.
        Loss of Title:                                                                                                                                                  
|17 |                                                                                                                                                                            
|18 | 1.
        Failure-of-Title. Should any oil and gas interest or lease, or
        interest therein be lost through failure of title, which loss
        results in a, which
|19 | reduction
        of interest from that shown on Exhibit A, the party
        contributing the affected lease or interest shall have ninety
        (90) d s             
|20 | from
        final determination of title failure to acquire a new lease or
        other instrument curing the entirety of the title failure,
        which acquisi-      
|21 | tion
        will not be subject to Article VIII.B., and failing to do so,
        this agreement, nevertheless, shall continue in force as to
        all re ping oil     
|22 | and gas
        leases and interests: and,                                                                                                                                 
|23 | (a) The
        party whose oil and gas lease or interest is affected by the
        title failure shall bear alone the entire loss an a shall not
        be              
|24 | entitled
        to recover from Operator or the other parties any development
        or operating costs which it may have theretofor paid or
        incurred,           
|25 | but
        there shall be no additional liability or. its part to the
        other parties hereto by reason of such title failure;                                       
|26 | (b)
        There shall be no retroactive adjustment of expenses incurred
        or revenues received from the operation the interest which has                           
|27 | been
        lost, but the interests of the parties shall be revised on an
        acreage basis, as of the time it is determined fully that
        title failure has oc- 
|28 | curred,
        so that the interest of the party whose lease or interest is
        affected by the title failure will thereafter be reduced in
        the Contract      
|29 | Area by
        the amount of the interest lost;                                                                                                                           
|30 | (c) If
        the proportionate interest of the other parties hereto in any
        producing well thereto re drilled on the Contract Area is                             
|31 | increased
        by reason of the title failure, the party whose title has
        failed shall receive the proceeds attributable to the increase
        in such in-     
|32 | terest
        (less costs and burdens attributable thereto) until it has
        been reimbursed for unrecovered costs paid by it in connection
        with such         
|33 | well;                                                                                                                                                                      
|34 | (d)
        Should any person not a party to this agreement, who is
        determined to b e owner of any interest in the title which has                                 
|35 | failed,
        pay in any manner any part of the cost of operation,
        development, or equipment,such amount shall be paid to the
        party or parties           
|36 | who bore
        the costs which are so refunded;                                                                                                                          
|37 | (e) Any
        liability to account to a third party for prior production of
        oil and gas which arises by reason of title failure shall be                         
|38 | borne by
        the party or parties whose title failed in the same proportion
        m which they shared in such prior production; and,                                 
|39 | (f) No
        charge shall be made to the joint account for legal expenses,
        fees or salaries, in connection with the defense of the
        interest              
|40 | claimed
        by any party hereto, it being the intention of the parties
        hereto that each shall defend title to its interest and bear
        all expenses in    
|41 | connection
        therewith.                                                                                                                                              
|42 |                                                                                                                                                                            
|43 | 2. Loss
        by Non-Payment or Erroneous Payment Amount Due: If, through
        mistake or oversight, any rental, shut-in well                                         
|44 | payment,
        minimum royalty or royalty payment, is n paid or is
        erroneously paid, and as a result a lease or interest therein
        terminates,             
|45 | there
        shall be no monetary liability against the par who failed to
        make such payment. Unless the party who failed to make the
        required             
|46 | payment
        secures a new lease covering the same interest within ninety
        (90) days from the discovery of the failure to make proper
        payment,           
|47 | which
        acquisition will not be subject to Art a VIII.B., the
        interests of the parties shall be revised on an acreage basis,
        effective as of the    
|48 | date of
        termination of the lease involved and the party who failed to
        make proper payment will no longer be credited with an
        interest in           
|49 | the
        Contract Area on account of ownership of the lease or interest
        which has terminated. In the event the party who failed to
        make the             
|50 | required
        payment shall not have b n fully reimbursed, at the time of
        the loss, from the proceeds of the sale of oil and gas
        attributable to        
|51 | the lost
        interest, calculated on acreage basis, for the development and
        operating costs theretofore paid on account of such interest,
        it           
|52 | shall be
        reimbursed for unrecovered actual costs theretofore paid by it
        (but not for its share of the cost of any dry hole previously
        drilled      
|53 | or wells
        previously abandoned) from so much of the following as is
        necessary to effect reimbursement:                                                      
|54 | (a)
        Proceeds of oil and gas, less operating expenses, theretofore
        accrued to the credit of the lost interest, on an acreage
        basis,                 
|55 | up to
        the amount unrecovered costs;                                                                                                                                
|56 | (b)
        Proceeds, less operating expenses, thereafter accrued
        attributable to the lost interest on an acreage basis, of that
        portion of                
|57 | oil and
        gas thereafter produced and marketed (excluding production
        from any wells thereafter drilled) which, in the absence of
        such lease          
|58 | termination,
        would be attributable to the lost interest on an acreage
        basis, up to the amount of unrecovered costs, the proceeds of
        said           
|59 | portion
        of the oil and gas to be contributed by the other parties in
        proportion to their respective interests; and,-,5,                                    
|60 | (c) Any
        monies, up to the amount of unrecovered costs, that may be
        paid by any party who is, or becomes, the owner of the
        interest                 
|61 | lost,
        for the privilege of participating in the Contract Area or
        becoming a party to this agreement.                                                       
|62 |                                                                                                                                                                            
|63 | 3.
        Other losses: All losses incurred, other than
        those set forth in Articles IV.B.1. and Iv.B.2. above;
        shall be joint losses                      
|64 | and shall be
        borne by all parties in proportion to their interests. There
        shall be no readjustment of interests in the remaining portion
        of        
|65 | The Contract
        Area.                                                                                                                                                 

---

|1. | A.A.P.L.
        FORM 610 - MODEL FORM OPERATING AGREEMENT 1982                                                                                                        
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2. | ARTICLE V                                                                                                                                                              
|3. |                                                                                                                                                                        
|4. | A.
        Designation and Responsibilities of Operator:                                                                                                               
|5  |                                                                                                                                                                        
|6  | Saba Petroleum,
        Inc. shall be the                                                                                                                              
|7  | Operator of the
        Contract Area, and shall conduct and direct and have full
        control of all operations n the Contract Area as permitted and               
|8  | required by, and
        within the limits of this agreement. It shall conduct all such
        operations in a good and workmanlike manner, but it shall              
|9  | have no
        liability as Operator to the other parties for losses
        sustained or liabilities incurred, except such as may result
        from gross          
|10 | negligence or
        willful misconduct.                                                                                                                              
|11 |                                                                                                                                                                        
|12 | B.
        Resignation or Removal of Operator and Selection of Successor:                                                                                              
|13 |                                                                                                                                                                        
|14 | 1.
        Resignation or Removal of Operator:Operator may resign
        at any time by giving written notice hereof to Non-Operators.                                
|15 | If Operator
        terminates its legal existence, no longer owns an interest
        hereunder in the Contract Area, or is no longer capable of
        serving as   
|16 | Operator,
        Operator shall be deemed to have resigned without any action
        by Non-Operators, except the selection of a successor.
        Operator         
|17 | may be removed
        if it fails or refuses to carry out its duties hereunder, or
        becomes insolvent, bankrupt or is placed in receivership, by
        the   
|18 | affirmative vote
        of two (2) or more Non-Operators owning a majority interest
        based on ownership as shown on Exhibit A remaining                      
|19 | after excluding
        the voting interest of Operator. Such resignation or removal
        shall not become effective until 7:00 oclock A.M. on the                 
|20 | first day of the
        calendar month following the expiration of ninety (90) days
        after the giving of notice of resignation by Operator or
        action   
|21 | by the
        Non-Operators to remove Operator, unless a successor Operator
        has been selected and assumes the duties of Operator at an
        earlier        
|22 | date. Operator,
        after effective date of resignation or removal, shall be bound
        by the terms hereof as a Non-Operator. A change of a cor-               
|23 | porate name or
        structure of Operator or transfer of Operators interest to
        any single subsidiary, parent or successor corporation shall
        not    
|24 | be the basis for
        removal of Operator.                                                                                                                          
|25 |                                                                                                                                                                        
|26 | 2.
        Selection of Successor Operator: Upon the resignation
        or removal of Operator, a successor Operator shall be selected
        by                     
|27 | the parties. The
        successor Operator shall be selected from the parties owning
        an interest in the Contract Area at the time such successor              
|28 | Operator is
        selected. The successor Operator shall be selected by the
        affirmative vote of two (2) or more parties owning a majority
        interest   
|29 | based on
        ownership as shown on Exhibit A; provided, however, if
        an Operator which has been removed fails to vote or votes only
        to            
|30 | succeed itself,
        the successor Operator shall be selected by the affirmative
        vote of two (2) or more parties owning a majority interest
        based   
|31 | on ownership as
        shown on Exhibit A remaining after excluding the voting
        interest of the Operator that was removed.                                   
|32 |                                                                                                                                                                        
|33 | C. Employees:                                                                                                                                                          
|34 |                                                                                                                                                                        
|35 | The
        number of employees used by Operator in conducting operations
        hereunder, their selection, and the hours of labor and the                           
|36 | compensation for
        services performed shall be determined by Operator, and all
        such employees shall be the employees of Operator.                        
|38 | D. Drilling
        Contracts:                                                                                                                                         
|39 |                                                                                                                                                                        
|40 | All
        wells drilled on the Contract Area shall be drilled on a
        competitive contract basis at the usual rates prevailing in
        the area. If it so    
|41 | desires,
        Operator may employ its own tools and equipment in the
        drilling of wells, but its charges therefore shall not exceed
        the prevailing   
|42 | rates in the
        area and the rate of such charges shall be agreed upon by the
        parties in writing before drilling operations are commenced,
        and    
|43 | such work shall
        be performed by Operator under the same terms and conditions
        as are customary and usual in the area in contracts of in                 
|44 | dependent
        contractors who are doing work of a similar nature.                                                                                                  
|45 |                                                                                                                                                                        
|46 |                                                                                                                                                                        
|47 |                                                                                                                                                                        
|48 |                                                                                                                                                                        
|49 | ARTICLE VI.                                                                                                                                                            
|50 | DRILLING AND
        DEVELOPMENT                                                                                                                                       
|51 |                                                                                                                                                                        
|52 | A.
        Initial Well: See agreement dated December ____, 1996                                                                                                       
|53 |                                                                                                                                                                        
|54 | On or
        before the ___ day of ________, 19____, Operator shall
        commence the drilling of a well for                                                       
|55 | oil and
        gas at the following location:                                                                                                                         
|56 |                                                                                                                                                                        
|57 | _.                               
                                          
                                          
                                   _           
|58 |                                                                                                                                                                        
|59 |                                                                                                                                                                        
|60 | and
        shall thereafter continue the drilling of the well with due
        diligence to                                                                           
|61 |                                                                                                                                                                        
|62 |                                                                                                                                                                        
|63 |                                                                                                                                                                        
|64 |                                                                                                                                                                        
|65 | unless
        granite or other practically impenetrable substance or
        condition in the hole, which renders further drilling
        impractical, is en-        
|66 | countered
        at a lesser depth, or unless all parties agree to complete or
        abandon the well at a lesser depth.                                            
|67 |                                                                                                                                                                        
|68 | Operator
        shall make reasonable tests of all formations encountered
        during drilling which give indication of containing oil and                         
|69 | gas in
        quantities sufficient to test, unless this agreement shall be
        limited in its application to a specific formation or
        formations, in which
|70 | event Operator
        shall be required to test only the formation or formations to
        which this agreement may apply.                                           

---

A.A.P.L. FORM 610 - MODEL FORM
  OPERATING AGREEMENT 1982ARTICLE VI
  continued

|1  | If, in Operators
        judgment, the well will not produce oil or gas in paying
        quantities, and it wishes to plug and abandon the                                              
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2  | Well as a dry
        hole, the provisions of Article VI.E.1 shall thereafter apply.                                                                                                      
|3  |                                                                                                                                                                                           
|4  |                                                                                                                                                                                           
|5  |                                                                                                                                                                                           
|6  | B.
        Subsequent Operations:                                                                                                                                                         
|7  |                                                                                                                                                                                           
|8  | 1.
        Proposed Operations: Should any party hereto desire to
        drill any well on the Contract Area other than the well
        provided                                        
|9  | for in Article
        VI.A., or to rework, deepen or plug back a dry hole drilled at
        the joint expense of all parties or a well jointly owned by
        all                     
|10 | the parties and
        not then producing in paying quantities, the party desiring to
        drill, rework, deepen or plug back such a well shall give the                              
|11 | other parties
        written notice of the proposed operation, specifying the work
        to be performed, the location, proposed depth, objective forma                                
|12 | lion and the
        estimated cost of the operation. The parties receiving such a
        notice shall have thirty (30) days after receipt of the notice                                 
|13 | within which to
        notify the party wishing to do the work whether they elect to
        participate in the cost of the proposed operation. If a drill-                              
|14 | ing rig is on
        location notice of 2 proposal to rework, plug back or drill
        deeper may be given by telephone and the response period shall
        be                       
|15 | limited to forty-eight
        (48) twenty-four (24) exclusive of Saturday, Sunday
        and legal holidays. Failure of a party receiving such notice
        to reply within           
|16 | the period above
        fixed shall constitute an election by that party not to
        participate in the cost of the proposed operation. Any notice
        or                         
|17 | response given
        by telephone shall be promptly confirmed in writing.                                                                                                               
|18 |                                                                                                                                                                                           
|19 |                                                                                                                                                                                           
|20 |                                                                                                                                                                                           
|21 | If
        all parties elect to participate in such a proposed operation,
        Operator shall within ninety days after expiration of the
        notice                                
|22 | period of thirty
        (30) days (or as promptly as possible after the forty-eight
        (48) twenty-four hour period when a drilling rig is
        on loca-                         
|23 | tion, as the
        case may be), actually commence the proposed operation and
        complete it with due diligence at the risk and expense of all
        par                         
|24 | ties hereto;
        provided, however, said commencement date may be extended upon
        written notice of same by Operator to the other parties,                                      
|25 | for a period of
        up to thirty (30) additional days if, in the sole opinion of
        Operator, such additional time is reasonably necessary to
        obtain                     
|26 | permits from
        governmental authorities, surface rights (including
        rights-of-way) or appropriate drilling equipment, or to
        complete title ex-                       
|27 | amination or
        curative matter required for title approval or acceptance.
        Notwithstanding the force majeure provisions of Article XI, if
        the                        
|28 | actual operation
        has not been commenced within the time provided (including any
        extension thereof as specifically permitted herein) and                                   
|29 | if any party
        hereto still desires to conduct said operation, written notice
        proposing same must be resubmitted to the other parties in
        accor-                     
|30 | dance with the
        provisions hereof as if no prior proposal had been made.                                                                                                           
|31 |                                                                                                                                                                                           
|32 |                                                                                                                                                                                           
|33 |                                                                                                                                                                                           
|34 | 2.
        Operations by Less than All Parties: If any party
        receiving such notice as provided in Article VI.B.1. or
        VII.D.1. (Option                                     
|35 | No. 2) elects
        not to participate in the proposed operation, then, in order
        to be entitled to the benefits of this Article, the party or
        parties                   
|36 | giving the
        notice and such other parties as shall elect to participate in
        the operation shall within ninety (90) days after the
        expiration of                     
|37 | the notice
        period of thirty (30) days (or as promptly as possible after
        the expiration of the forty-eight (48)
        twenty-four (24) hour period when a drilling rig is
|38 | on location, as
        the case may be) actually commence the proposed operation and
        complete it with due diligence. Operator shall perform all                                  
|39 | work for the
        account of the Consenting Parties; provided, however, if no
        drilling rig or other equipment is on location, and if
        Operator is                       
|40 | a Non-Consenting
        Party, the Consenting Parties shall either: (a) request
        Operator to perform the work required by such proposed opera-                                    
|41 | tion for the
        account of the Consenting Parties, or (b) designate one (1) of
        the Consenting Parties as Operator to perform such work. Con-                                 
|42 | senting Parties,
        when conducting operations on the Contract Area pursuant to
        this Article VI.B.2., shall comply with all terms and con-                                   
|43 | ditions of this
        agreement.                                                                                                                                                        
|44 |                                                                                                                                                                                           
|45 |                                                                                                                                                                                           
|46 |                                                                                                                                                                                           
|47 | If
        less than all parties approve any proposed operation, the
        proposing party, immediately after the expiration of the
        applicable                                  
|48 | notice period,
        shall advise the Consenting Parties of the total interest of
        the parties approving such operation and its recommendation as                                
|49 | to whether the
        Consenting Parties should proceed with the operation as
        proposed. Each Consenting Party, within forty-eight (48) hours                                     
|50 | (exclusive of
        Saturday, Sunday and legal holidays) after receipt of such
        notice, shall advise the proposing party of its desire to (a)
        limit par-                 
|51 | ticipation to
        such partys interest as shown on Exhibit A or (b)
        carry its proportionate part of Non-Consenting Parties
        interests, and                         
|52 | failure to
        advise the proposing party shall be deemed an election under
        (a). In the event a drilling rig is on location, the time
        permitted for                   
|53 | such a response
        shall not exceed a total of forty eight (48)
        twenty-four (24) hours (inclusive of Saturday, Sunday and
        legal holidays). The proposing party,      
|54 | at its election,
        may withdraw such proposal if there is insufficient
        participation and shall promptly notify all parties of such
        decision.                        
|55 |                                                                                                                                                                                           
|56 |                                                                                                                                                                                           
|57 |                                                                                                                                                                                           
|58 | The
        entire cost and risk of conducting such operations shall be
        borne by the Consenting Parties in the proportions they have                                              
|59 | elected to bear
        same under the terms of the preceding paragraph. Consenting
        Parties shall keep the leasehold estates involved in such                                     
|60 | operations free
        and clear of all liens and encumbrances of every kind created
        by or arising from the operations of the Consenting Parties.                                
|61 | If such an
        operation results in a dry hole, the Consenting Parties shall
        plug and abandon the well and restore the surface location at
        their                      
|62 | sole cost, risk
        and expense. If any well drilled, reworked, deepened or
        plugged back under the provisions of this Article results in a
        pro-                       
|63 | ducer of oil
        and/or gas in paying quantities, the Consenting Parties shall
        complete and equip the well to produce at their sole cost and
        risk,                    

---

A.A.P.L. FORM 610MODEL FORM
  OPERATING AGREEMENT 1982ARTICLE VI
  Continued

|1  | and the well
        shall then be turned over to Operator and shall be operated by
        it at the expense and for the account of the Consenting Par             
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2  | ties. Upon
        commencement of operations for the drilling, reworking,
        deepening or plugging back of any such well by Consenting
        Parties        
|3  | in accordance
        with the provisions of this Article, each Non-Consenting Party
        shall be deemed to have relinquished to Consenting Parties,            
|4  | and the
        Consenting Parties shall own and be entitled to receive, in
        proportion to their respective interests, all of such
        Non-Consenting    
|5  | Partys
        interest in the well and share of production therefrom until
        the proceeds of the sale of such share, calculated at the
        well, or     
|6  | market value
        thereof if such share is not sold, (after deducting production
        taxes, excise taxes, royalty, overriding royalty and other in-          
|7  | terests not
        excepted by Article III.D. payable out of or measured by the
        production from such well accruing with respect to such
        interest   
|8  | until it
        reverts) shall equal the total of the following:                                                                                                   
|9  |                                                                                                                                                                     
|10 |                                                                                                                                                                     
|11 |                                                                                                                                                                     
|12 | (a) 100% of each
        such Non-Consenting Partys share of the cost of any newly
        acquired surface equipment beyond the wellhead                          
|13 | connections
        (including, but not limited to, stock tanks, separators,
        treaters, pumping equipment and piping), plus 100% of each
        such        
|14 | Non-Consenting
        Partys share of the cost of operation of the well
        commencing with first production and continuing until each
        such Non       
|15 | Consenting Partys
        relinquished interest shall revert to it under other
        provisions of this Article, it being agreed that each Non                   
|16 | Consenting Partys
        share of such costs and equipment will be that interest which
        would have been chargeable to such Non-Consenting                  
|17 | Party had it
        participated in the well from the beginning of the operations;
        and                                                                     
|18 |                                                                                                                                                                     
|19 |                                                                                                                                                                     
|20 |                                                                                                                                                                     
|21 | (b)300% of that
        portion of the costs and expenses of drilling, reworking,
        deepening, plugging back, testing and completing,                         
|22 | after deducting
        any cash contributions received under Article VIII.C., and 300
        % of that portion of the cost of newly acquired equip-               
|23 | ment in the well
        (to and including the wellhead connections), which would have
        been chargeable to such Non-Consenting Party if it had               
|24 | participated
        therein.                                                                                                                                       
|25 |                                                                                                                                                                     
|26 |                                                                                                                                                                     
|27 |                                                                                                                                                                     
|28 | An election not
        to participate in the drilling or the deepening of a well
        shall be deemed an election not to participate in any re                  
|29 | working or
        plugging back operation proposed in such a well, or portion
        thereof, to which the initial Non-Consent election applied
        that is   
|30 | conducted at any
        time prior to full recovery by the Consenting Parties of the
        Non-Consenting Partys recoupment account. Any such                   
|31 | reworking or
        plugging back operation conducted during the recoupment period
        shall be deemed part of the cost of operation of said well              
|32 | and there shall
        be added to the sums to be recouped by the Consenting Parties
        one hundred percent (100%) of that portion of the costs of            
|33 | the reworking or
        plugging back operation which would have been chargeable to
        such Non-Consenting Party had it participated therein. If              
|34 | such a reworking
        or plugging back operation is proposed during such recoupment
        period, the provisions of this Article VI.B. shall be ap-            
|35 | plicable as
        between said Consenting Parties in said well.                                                                                                   
|36 |                                                                                                                                                                     
|37 |                                                                                                                                                                     
|38 |                                                                                                                                                                     
|39 | During the
        period of time Consenting Parties are entitled to receive
        Non-Consenting Partys share of production, or the                             
|40 | proceeds
        therefrom, Consenting Parties shall he responsible for the
        payment of all production, severance, excise, gathering and
        other       
|41 | taxes, and all
        royalty, overriding royalty and other burdens applicable to
        Non-Consenting Partys share of production not excepted by
        Ar-   
|42 | ticle III.D.                                                                                                                                                        
|43 |                                                                                                                                                                     
|44 |                                                                                                                                                                     
|45 |                                                                                                                                                                     
|46 | In the case of
        any reworking, plugging back or deeper drilling operation, the
        Consenting Parties shall be permitted to use, free                    
|47 | of cost, all
        casing, tubing and other equipment in the well, but the
        ownership of all such equipment shall remain unchanged; and
        upon       
|48 | abandonment of a
        well after such reworking, plugging back or deeper drilling,
        the Consenting Parties shall account for all such equip-              
|49 | ment to the
        owners thereof, with each party receiving its proportionate
        part in kind or in value, less cost of salvage.                             
|50 |                                                                                                                                                                     
|51 |                                                                                                                                                                     
|52 |                                                                                                                                                                     
|53 | Within sixty
        (60) days after the completion of any operation under this
        Article, the party conducting the operations for the                        
|54 | Consenting
        Parties shall furnish each Non-Consenting Party with an
        inventory of the equipment in and connected to the well, and
        an          
|55 | itemized
        statement of the cost of drilling, deepening, plugging back,
        testing, completing, and equipping the well for production;
        or, at its
|56 | option, the
        operating party, in lieu of an itemized statement of such
        costs of operation, may submit a detailed statement of monthly
        bill-  
|57 | ings. Each month
        thereafter, during the time the Consenting Parties are being
        reimbursed as provided above, the party conducting the                
|58 | operations for
        the Consenting Parties shall furnish the Non-Consenting
        Parties with an itemized statement of all costs and
        liabilities in-  
|59 | curred in the
        operation of the well, together with a statement of the
        quantity of oil and gas produced from it and the amount
        of-proceeds   
|60 | realized from
        the sale of the wells working interest production during
        the preceding month. In determining the quantity of oil and
        gas     
|61 | during - month
        Consenting Parties shall use industry accented methods such
        as. but not limited to- metering or periodic                             
|62 | well tests. Any
        amount realized from the sale of other disposition of
        equipment newly acquired in connection with any such operation                
|63 | which would have
        been owned by a Non-Consenting Party had it participated
        therein shall be credited against the total unreturned costs              
|64 | of the work done
        and of the equipment purchased in determining when the
        interest of such Non-Consenting Party shall revert to it as                 
|65 | above provided;
        and if there is a credit balance, it shall be paid to such
        Non-Consenting Party.                                                    

---

A.A.P.L. FORM 610MODEL FORM
  OPERATING AGREEMENT 1982ARTICLE VI
  Continued

|1  | If and when the
        Consenting Parties recover from Non-Consenting Partys
        relinquished interest the amounts provided for above,                                                        
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2  | the relinquished
        interests of such Non-Consenting Party shall automatically
        revert to it, and, from and after such reversion, such Non                                              
|3  | Consenting Party
        shall own the same interest in such well, the material and
        equipment in or pertaining thereto, and the production                                                  
|4  | therefrom as
        such Non-Consenting Party would have been entitled to had it
        participated in the drilling, reworking, deepening or plugging                                            
|5  | back of said
        well. Thereafter, such Non-Consenting Party shall be charged
        with and shall pay its proportionate part of the further costs
        of                                 
|6  | the operation of
        said well in accordance with the terms of this agreement and
        the Accounting Procedure attached hereto.                                                             
|7  |                                                                                                                                                                                                     
|8  |                                                                                                                                                                                                     
|9  |                                                                                                                                                                                                     
|10 | Notwithstanding
        the provisions of this Article VI.B.2., it is agreed that
        without the mutual consent of all parties, no wells shall                                                 
|11 | be completed in
        or produced from a source of supply from which a well located
        elsewhere on the Contract Area is producing, unless such                                              
|12 | well conforms to
        the then-existing well spacing pattern for such source of
        supply.                                                                                                  
|13 |                                                                                                                                                                                                     
|14 |                                                                                                                                                                                                     
|15 |                                                                                                                                                                                                     
|16 | The provisions
        of this Article shall have no application whatsoever to the
        drilling of the initial well described in Article VI.A.                                                  
|17 | except (a) as to
        Article VII.D.1. (Option No. 2), if selected, or (b) as to the
        reworking, deepening and plugging back of such initial well                                         
|18 | after it has
        been drilled to the depth specified in Article VI.A. if it
        shall thereafter prove to be a dry hole or, if initially
        completed for pro-                         
|19 | duction, ceases
        to produce in paying quantities.                                                                                                                                            
|20 |                                                                                                                                                                                                     
|21 |                                                                                                                                                                                                     
|22 |                                                                                                                                                                                                     
|23 | 3. Stand-By
        Time: When a well which has been drilled or deepened has
        reached its authorized depth and all tests have been                                                           
|24 | completed, and
        the results thereof furnished to the parties, stand-by costs
        incurred pending response to a partys notice proposing a                                               
|25 | reworking,
        deepening, plugging back or completing operation in such a
        well shall be charged and borne as part of the drilling or
        deepen-                                    
|26 | ing operation
        just completed. Stand-by costs subsequent to all parties
        responding, or expiration of the response time permitted,
        whichever                                  
|27 | first occurs,
        and prior to agreement as to the participating interests of
        all Consenting Parties pursuant to the terms of the second
        gram-                                  
|28 | matical
        paragraph of Article VI.B.2, shall be charged to and borne as
        part of the proposed operation, but if the proposal is
        subsequently                                   
|29 | withdrawn
        because of insufficient participation, such stand-by costs
        shall be allocated between the Consenting Parties in the
        proportion                                    
|30 | each Consenting
        Partys interest as shown on Exhibit A bears to the
        total interest as shown on Exhibit A of all Consenting
        Par-                                         
|31 | ties.                                                                                                                                                                                               
|32 |                                                                                                                                                                                                     
|33 |                                                                                                                                                                                                     
|34 |                                                                                                                                                                                                     
|35 | 4. Sidetracking:
        Except as hereinafter provided, those provisions of this
        agreement applicable to a deepening operation shall                                                     
|36 | also be
        applicable to any proposal to directionally control and
        intentionally deviate a well from vertical so as to change the
        bottom hole                                  
|37 | location (herein
        called sidetracking), unless done to straighten the hole
        or to drill around junk in the hole or because of other                                                 
|38 | mechanical
        difficulties. Any party having the right to participate in a
        proposed sidetracking operation that does not own an interest
        in the                                
|39 | affected well
        bore at the time of the notice shall, upon electing to
        participate, tender to the well bore owners its proportionate
        share (equal                             
|40 | to its interest
        in the sidetracking operation) of the value of that portion of
        the existing well bore to be utilized as follows:                                                    
|41 |                                                                                                                                                                                                     
|42 |                                                                                                                                                                                                     
|43 |                                                                                                                                                                                                     
|44 | (a) If the
        proposal is for sidetracking an existing dry hole,
        reimbursement shall be on the basis of the actual costs
        incurred in                                           
|45 | the initial
        drilling of the well down to the depth at which the
        sidetracking operation is initiated.                                                                                
|46 |                                                                                                                                                                                                     
|47 |                                                                                                                                                                                                     
|48 |                                                                                                                                                                                                     
|49 | (b) If the
        proposal is for sidetracking a well which has previously
        produced, reimbursement shall be on the basis of the wells                                                     
|50 | salvable
        materials and equipment down to the depth at which the
        sidetracking operation is initiated, determined in accordance
        with the                                      
|51 | provisions of
        Exhibit C, less the estimated cost of salvaging and the
        estimated cost of plugging and abandoning.                                                                  
|52 |                                                                                                                                                                                                     
|53 |                                                                                                                                                                                                     
|54 |                                                                                                                                                                                                     
|55 | In the event
        that notice for a sidetracking operation is given while the
        drilling rig to be utilized is on location, the response
        period                                    
|56 | shall be forty-eight
        (48) twenty-four (24) hours, exclusive of Saturday,
        Sunday and legal holidays; provided, however, any party may
        request and                            
|57 | receive up to
        eight (8) additional days after expiration of the forty-eight
        (48) twenty-four (24) hours within which to respond
        by paying for all stand-by time             
|58 | incurred during
        such extended response period. If more than one party elects
        to take such additional time to respond to the notice, stand                                           
|59 | by costs shall
        be allocated between the parties taking additional time to
        respond on a day-to-day basis in the proportion each eating
        par-                                  
|60 | tys interest
        as shown on Exhibit A bears to the total interest as
        shown on Exhibit A of all the electing parties. In all
        other in-                                     
|61 | stances the
        response period t(1 a proposal for sidetracking shall be
        limited to thirty (30) days.                                                                                   
|62 |                                                                                                                                                                                                     
|63 |                                                                                                                                                                                                     
|64 |                                                                                                                                                                                                     
|65 | C. TAKING
        PRODUCTION IN KIND:                                                                                                                                                               
|66 |                                                                                                                                                                                                     
|67 | Each party shall
        have the option, but not the obligation to take in kind or
        separately dispose of its proportionate share of all oil and
        gas produced from the Contract Area
|68 | Exclusive of
        production which may be used in development and producing
        operations and in preparing and treating oil and gas for                                                     
|69 | Marketing
        purposes and production unavoidably lost. Any extra
        expenditure incurred in the taking in kind or separate
        disposition by any                                     
|70 | Party of its
        proportionate share of the production shall be borne by such
        party. Any party taking its share of production in kind shall
        be                                  
|71 |                                                                                                                                                                                                     

---

A.A.P.L. FORM 610 - MODEL FORM
  OPERATING AGREEMENT 1982ARTICLE VI
  Continued

|1  | required to pay
        for only its proportionate share of such part of Operators
        surface facilities which it uses.                                                                         
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2  |                                                                                                                                                                                                       
|3  | Each party shall
        execute such division orders and contracts as may be necessary
        for the sale of its interest in production from                                                       
|4  | the Contract
        Area, and, except as provided in Article VII.B., shall be
        entitled to receive payment directly from the purchaser
        thereof for                                    
|5  | its share of all
        production.                                                                                                                                                                  
|6  |                                                                                                                                                                                                       
|7  | In the event any
        party shall fail to make the arrangements necessary to take in
        kind or separately dispose of its proportionate share of                                              
|8  | the oil produced
        from the Contract Area, Operator shall have the right, subject
        to the revocation at will by the party owning it, but not                                             
|9  | the obligation
        to purchase such oil or sell it to others at any time and from
        time to time, for the account of the non-taking party at the                                            
|10 | best price reasonably
        obtainable under the circumstancesobtainable in the area
        such production. Any such purchase sale by Operator shall be
        subject always to the right of the
|11 | owner of the
        production to exercise at any time its right to take in kind,
        or separately dispose of, its share of all oil not previously                                              
|12 | delivered to a
        purchaser. Any purchase or sale by Operator of any other partys
        share of oil shall be only for such reasonable periods of                                             
|13 | time as are
        consistent with the minimum needs of the industry under the
        particular circumstances, but in no event for a period in
        excess                                      
|14 | of one (1) year.                                                                                                                                                                                      
|15 |                                                                                                                                                                                                       
|16 | In the event one
        or more parties separate disposition of its share of the
        gas causes split-stream deliveries to separate pipelines
        and/or                                    
|17 | deliveries which
        on a day-to-day basis for any reason are not exactly equal to
        a partys respective proportionate share of total gas sales
        to                                 
|18 | be allocated to
        it, the balancing or accounting between the respective
        accounts of the parties shall be in accordance with any gas
        balancing                                  
|19 | agreement
        between the parties hereto, whether such an agreement is
        attached as Exhibit E, or is a separate agreement.                                                               
|20 |                                                                                                                                                                                                       
|21 | D. Access to
        Contract Area and Information:                                                                                                                                                   
|22 |                                                                                                                                                                                                       
|23 | Each party shall
        have access to the Contract Area at all reasonable times, at
        its sole cost and risk to inspect or observe operations,                                                
|24 | and shall have
        access at reasonable times to information pertaining to the
        development or operation thereof, including Operators books                                               
|25 | and records
        relating thereto. Operator, upon request, shall furnish each
        of the other parties with copies of all forms or reports filed
        with                                  
|26 | governmental
        agencies, daily drilling reports, well logs, tank tables,
        daily gauge and run tickets and reports of stock on hand at
        the first of                               
|27 | each month, and
        shall make available samples of any cores or cuttings taken
        from any well drilled on the Contract Area. The cost of                                                   
|28 | gathering and
        furnishing information to Non-Operator, other than that
        specified above, shall be charged to the Non-Operator that re                                                   
|29 | quests the
        information.                                                                                                                                                                       
|30 |                                                                                                                                                                                                       
|31 | E. Abandonment
        of Wells:                                                                                                                                                                      
|32 |                                                                                                                                                                                                       
|33 | 1. Abandonment
        of Dry Holes: Except for any well drilled or deepened
        pursuant to Article VI.B.2., any well which has been                                                             
|34 | drilled or
        deepened under the terms of this agreement and is proposed to
        be completed as a dry hole shall not be plugged and abandoned                                                
|35 | without the
        consent of all parties. Should Operator, after diligent
        effort, be unable to contact any party, or should any party
        fail to reply                                 
|36 | within forty-eight
        (48) twenty-four (24) hours (exclusive of Saturday,
        Sunday and legal holidays) after receipt of notice of the
        proposal to plug and abandon                 
|37 | such well, such
        party shall be deemed to have consented to the proposed
        abandonment. All such wells shall be plugged and abandoned in                                                 
|38 | accordance with
        applicable regulations and at the cost, risk and expense of
        the parties who participated in the cost of drilling or
        deepening                                 
|39 | such well. Any
        party who objects to plugging and abandoning such well shall
        have the right to take over the well and conduct further                                                  
|40 | operations in
        search of oil and/or gas subject to the provisions of Article
        VI.B.                                                                                                     
|41 |                                                                                                                                                                                                       
|42 | 2.
        Abandonment of Wells that have Produced: Except for any
        well in which a Non-Consent operation has been conducted                                                                   
|43 | hereunder for
        which the Consenting Parties have not been fully reimbursed as
        herein provided, any well which has been completed as a                                                  
|44 | producer shall
        not be plugged and abandoned without the consent of all
        parties. If all parties consent to such abandonment, the well
        shall                                    
|45 | be plugged and
        abandoned in accordance with applicable regulations and at the
        cost, risk and expense of all the parties hereto. If, within                                            
|46 | thirty (30) days
        after receipt of notice of the proposed abandonment of any
        well, all parties do not agree to the abandonment of such
        well,                                   
|47 | those wishing to
        continue its operation from the interval(s) of the formation(s)
        then open to production shall tender to each of the other                                            
|48 | parties its
        proportionate share of the value of the wells salvable
        material and equipment, determined in accordance with the
        provisions of                                   
|49 | Exhibit C,
        less the estimated cost of salvaging and the estimated cost of
        plugging and abandoning. Each abandoning party shall assign                                               
|50 | the
        non-abandoning parties, without warranty, express or implied,
        as to title or as to quantity, or fitness for use of the
        equipment and                                      
|51 | material, all of
        its interest in the well and related equipment, together with
        its interest in the leasehold estate as to, but only as to,
        the in-                            
|52 | terval or
        intervals of the formation or formations then open to
        production. If the interest of the abandoning party is or
        includes an oil and                                 
|53 | gas interest,
        such party shall execute and deliver to the non-abandoning
        party or parties an oil and gas lease, limited to the interval
        or in-                                
|54 | tervals of the
        formation or formations then open to production, for a term of
        one (1) year and so long thereafter as oil and/or gas is pro                                            
|55 | duced from the
        interval or intervals of the formation or formations covered
        thereby, such lease to be on the form attached as Exhibit                                                 
|56 |                                                                                                                                                                                                       
|57 |                                                                                                                                                                                                       
|58 |                                                                                                                                                                                                       
|59 |                                                                                                                                                                                                       
|60 |                                                                                                                                                                                                       

---

A.A.P.L. FORM 610MODEL FORM
  OPERATING AGREEMENT 1982ARTICLE VI
  Continued

|1  | B. The
        assignments or leases so limited shall encompass the drilling
        unit upon which the well is located. The payments by, and
        the          
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2  | assignments or
        leases to, the assignees shall be in a ratio based upon the
        relationship of their respective percentage of participation
        in the  
|3  | Contract Area to
        the aggregate of the percentages of participation in the
        Contract Area of all assignees. There shall be no readjustment
        of     
|4  | interests in the
        remaining portion of the Contract Area.                                                                                                        
|5  |                                                                                                                                                                         
|6  | Thereafter,
        abandoning parties shall have no further responsibility,
        liability, or interest in the operation of or production from                      
|7  | the well in the
        interval or intervals then open other than the royalties
        retained in any lease made under the terms of this Article.
        Upon re    
|8  | quest, Operator
        shall continue to operate the assigned well for the account of
        the non-abandoning parties at the rates and charges con-                 
|9  | templated by
        this agreement, plus any additional cost and charges which may
        arise as the result of the separate ownership of the assigned               
|10 | well. Upon
        proposed abandonment of the producing interval(s) assigned or
        leased, the assignor or lessor shall then have the option to                   
|11 | repurchase its
        prior interest in the well (using the same valuation formula)
        and participate in further operations therein subject to the
        pro-  
|12 | visions hereof.                                                                                                                                                         
|13 |                                                                                                                                                                         
|14 | 3. Abandonment
        of Non-Consent Operations: The provisions of Article
        VI.E.I. or VI.E.2. above shall be applicable as between                             
|15 | Consenting
        Parties in the event of the proposed abandonment of any well
        excepted from said Articles; provided, however, no well shall
        be        
|16 | permanently
        plugged and abandoned unless and until all parties having the
        right to conduct further operations therein have been notified                
|17 | of the proposed
        abandonment and afforded the opportunity to elect to take over
        the well in accordance with the provisions of this Article               
|18 | VI.E.                                                                                                                                                                   
|19 |                                                                                                                                                                         
|20 | ARTICLE VII.                                                                                                                                                            
|21 | EXPENDITURES
        AND LIABILITY OF PARTIES                                                                                                                           
|22 |                                                                                                                                                                         
|23 | A. Liability of
        Parties:                                                                                                                                        
|24 |                                                                                                                                                                         
|25 | The
        liability of the parties shall be several, not joint or
        collective. Each party shall be responsible only for its
        obligations, and           
|26 | shall be liable
        only for its proportionate share of the costs of developing
        and operating the Contract Area. Accordingly, the liens
        granted     
|27 | among the
        parties in Article VII.B. are given to secure only the debts
        of each severally. It is not the intention of the parties to
        create, nor 
|28 | shall this
        agreement be construed as creating, a mining or other
        partnership or association, or to render the parties liable as
        partners.       
|29 |                                                                                                                                                                         
|30 | B. Liens and
        Payment Defaults:                                                                                                                                  
|31 |                                                                                                                                                                         
|32 | Each
        Non-Operator grants to Operator a lien upon its oil and gas
        rights in the Contract Area, and a security interest in its
        share              
|33 | of oil and/or
        gas when extracted and its interest in all equipment, to
        secure payment of its share of expense, together with interest
        thereon   
|34 | at the rate
        provided in Exhibit C. To the extent that Operator has a
        security interest under the Uniform Commercial Code of the                       
|35 | state, Operator
        shall be entitled to exercise the rights and remedies of a
        secured party under the Code. The bringing of a suit and the
        ob-     
|36 | taining of
        judgment by Operator for the secured indebtedness shall not be
        deemed an election of remedies or otherwise affect the lien                   
|37 | rights or
        security interest as security for the payment thereof. In
        addition, upon default by any Non-Operator in the payment of
        its share      
|38 | of expense,
        Operator shall have the right, without prejudice to other
        rights or remedies, to collect from the purchaser the proceeds
        from       
|39 | the sale of such
        Non Operators share of oil and/or gas until the amount owed
        by such Non-Operator, plus interest, has been paid. Each                  
|40 | purchaser shall
        be entitled to rely upon Operators written statement
        concerning the amount of any default. Operator grants a like
        lien         
|41 | and security
        interest to the Non-Operators to secure payment of Operators
        proportionate share of expense.                                              
|42 |                                                                                                                                                                         
|43 | If
        any party fails or is unable to pay its share of expense
        within sixty (60) days after rendition of a statement
        therefore by                  
|44 | Operator, the
        non-defaulting parties, including Operator, shall, upon
        request by Operator, pay the unpaid amount in the proportion
        that         
|45 | the interest of
        each such party bears to the interest of all such parties.
        Each party so paying its share of the unpaid amount shall, to
        obtain 
|46 | reimbursement
        thereof, be subrogated to the security rights described in the
        foregoing paragraph.                                                       
|47 |                                                                                                                                                                         
|48 | C.Payments and
        Accounting:                                                                                                                                      
|49 |                                                                                                                                                                         
|50 | Except as herein
        otherwise specifically provided, Operator shall promptly pay
        and discharge expenses incurred in the development                        
|51 | and operation of
        the Contract Area pursuant to this agreement and shall charge
        each of the parties hereto with their respective propor-                 
|52 | tionate shares
        upon the expense basis provided in Exhibit C. Operator
        shall keep an accurate record of the joint account hereunder,                   
|53 | showing expenses
        incurred and charges and credits made and received.                                                                                            
|54 |                                                                                                                                                                         
|55 | Operator,
        at its election, shall have the right from time to time to
        demand and receive from the other parties payment in advance                       
|56 | of their
        respective shares of the estimated amount of the expense to be
        incurred in operations hereunder during the next succeeding                     
|57 | month, which
        right may be exercised only by submission to each such party
        or an itemized statement of such estimated expense, together                  
|58 | with an invoice
        for its share thereof. Each such statement and invoice for the
        payment in advance of estimated expense shall be submitted               
|59 | on or before the
        20th day of the next preceding month. Each party shall pay to
        Operator its proportionate share of such estimate within                 
|60 | fifteen (15)
        days after such estimate and invoice is received. If any party
        fails to pay its share of said estimate within said time, the
        amount
|61 | due shall bear
        interest as provided in Exhibit C until paid. Proper
        adjustment shall be made monthly between advances and actual
        ex-          
|62 | pense to the end
        that each party shall bear and pay its proportionate share of
        actual expenses incurred, and no more.                                   
|63 |                                                                                                                                                                         
|64 | D. Limitation of
        Expenditures:                                                                                                                                  
|65 |                                                                                                                                                                         
|66 | 1.Drill
        or Deepen: Without the consent of all parties, no well
        shall be drilled or deepened, except any well drilled or
        deepened                
|67 | pursuant to the
        provisions of Article VI.B.2. of this agreement. Consent to
        the drilling or deepening shall include:                                    

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A.A.P.L. FORM 610MODEL FORM
  OPERATING AGREEMENT 1982ARTICLE VII
  Continued

|1  | ___ Option No.
        1: All necessary expenditures for the drilling or deepening,
        testing, completing and equipping of the well, including                                  
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2  | necessary
        tankage and/or surface facilities.                                                                                                                                  
|3  |                                                                                                                                                                                       
|4  | ___ Option No.
        2: All necessary expenditures for the drilling or deepening
        and testing of the well. When such well has reached its                                    
|5  | authorized
        depth, and all tests have been completed, and the results
        thereof furnished to the parties, Operator shall give
        immediate notice                   
|6  | to the
        Non-Operators who have the right to participate in the
        completion costs. The parties receiving such notice shall have
        forty-eight                      
|7  | (48) twenty-four
        (24) hours (exclusive of Saturday, Sunday and legal holidays)
        in which to elect to participate in the setting of casing and
        the completion at
|8  | tempt. Such
        election, when made, shall include consent to all necessary
        expenditures for the completing and equipping of such well,
        in-                       
|9  | cluding
        necessary tankage and/or surface facilities. Failure of any
        party receiving such notice to reply within the period above
        fixed shall                  
|10 | constitute an
        election by that party not to participate in the cost of the
        completion attempt. If one or more, but less than all of the
        parties,              
|11 | elect to set
        pipe and to attempt a completion, the provisions of Article
        VI.B.2. hereof (the phrase reworking, deepening or plugging                                 
|12 | back as
        contained in Article VI.B.2. shall be deemed to include completing
        ) shall apply to the operations thereafter conducted by
        less                    
|13 | than all
        parties.                                                                                                                                                             
|14 |                                                                                                                                                                                       
|15 | 2. Rework or
        Plug Back: Without the consent of all parties, no well
        shall be reworked or plugged back except a well reworked or                                       
|16 | plugged back
        pursuant to the provisions of Article VI.B.2. of this
        agreement. Consent to the reworking or plugging back of a well
        shall                       
|17 | include all
        necessary expenditures in conducting such operations and
        completing and equipping of said well, including necessary
        tankage                       
|18 | and/or surface
        facilities.                                                                                                                                                    
|19 |                                                                                                                                                                                       
|20 | 3. Other
        Operations: Without the consent of all parties, Operator
        shall not undertake any single project reasonably estimated                                         
|21 | to require an
        expenditure in excess of thirty thousand Dollars ($ 30,000.
        00)                                                                                         
|22 | except in
        connection with a well, the drilling, reworking, deepening,
        completing, recompleting, or plugging back of which has been                                    
|23 | previously
        authorized by or pursuant to this agreement; provided,
        however, that, in case of explosion, fire, flood or other
        sudden                            
|24 | emergency,
        whether of the same or different nature, Operator may take
        such steps and incur such expenses as in its opinion are
        required                       
|25 | to deal with the
        emergency to safeguard life and property but Operator, as
        promptly as possible, shall report the emergency to the other                              
|26 | parties. If
        Operator prepares an authority for expenditure (AFE) for its
        own use, Operator shall furnish any Non-Operator so requesting                               
|27 | an information
        copy thereof for any single project costing in excess of
        thirty thousand                                                                               
|28 | Dollars
        ($30,000.00) but less than the amount first set forth above in
        this paragraph.                                                                                
|29 |                                                                                                                                                                                       
|30 | E.Rentals,
        Shut-in Well Payments and Minimum Royalties:                                                                                                                       
|31 |                                                                                                                                                                                       
|32 | Rentals,
        shut-in well payments and minimum royalties which may be
        required under the terms of any lease shall be paid by the                                          
|33 | party or parties
        who subjected such lease to this agreement at its or their
        expense. In the event two or more parties own and have con-                               
|34 | tributed
        interests in the same lease to this agreement, such parties
        may designate one of such parties to make said payments for
        and on                       
|35 | behalf of all
        such parties. Any party may request, and shall be entitled to
        receive, proper evidence of all such payments. In the event of                            
|36 | failure to make
        proper payment of any rental, shut-in well payment or minimum
        royalty through mistake or oversight where such pay-                                    
|37 | ment is required
        to continue the lease in force, any loss which results from
        such non-payment shall be borne in accordance with the pro-                              
|38 | visions of
        Article IV.B.2.                                                                                                                                                    
|39 |                                                                                                                                                                                       
|40 | Operator
        shall notify Non-Operate of the anticipated completion of a
        shut-in gas well, or the shutting in or return to production                                     
|41 | of a producing
        gas well, at least five (5) days (excluding Saturday, Sunday
        and legal holidays), or at the earliest opportunity permitted
        by                  
|42 | circumstances,
        prior to taking such action, but assumes no liability for
        failure to do so. In the event of failure by Operator to so
        notify                   
|43 | Non-Operator,
        the loss of any lease contributed hereto by Non-Operator for
        failure to make timely payments of any shut-in well payment                                
|44 | shall be borne
        jointly by the parties hereto under the provisions of Article
        IV.B.3.                                                                                  
|45 |                                                                                                                                                                                       
|46 | F. Taxes:                                                                                                                                                                             
|47 |                                                                                                                                                                                       
|48 | Beginning
        with the first calendar year after the effective date hereof,
        Operator shall render for ad valorem taxation all property,                                   
|49 | subject to this
        agreement which by law should be rendered for such taxes, and
        it shall pay all such taxes assessed thereon before they                                
|50 | become
        delinquent. Prior to the rendition date, each Non-Operator
        shall furnish Operator information as to burdens (to include,
        but not                       
|51 | be limited to,
        royalties, overriding royalties and production payments) on
        leases and oil and gas interests contributed by such Non                                   
|52 | Operator. If the
        assessed valuation of any leasehold estate is reduced by
        reason of its being subject to outstanding excess royalties,
        over                   
|53 | riding royalties
        or production payments, the reduction in ad valorem taxes
        resulting therefrom shall inure to the benefit of the owner or                             
|54 | owners of such
        leasehold estate, and Operator shall adjust the charge to such
        owner or owners so as to reflect the benefit of such reduc-                             
|55 | tion. If the ad
        valorem taxes are based in whole or in part upon separate
        valuations of each partys working interest, then
        notwithstanding                   
|56 | anything to the
        contrary herein, charges to the joint account shall be made
        and paid by the parties hereto in accordance with the tax                                 
|57 | value generated
        by each partys working interest. Operator shall bill the
        other parties for their proportionate shares of all tax
        payments in                 
|58 | the manner
        provided in Exhibit C.                                                                                                                                           
|59 |                                                                                                                                                                                       
|60 | If
        Operator considers any tax assessment improper, Operator may,
        at its discretion, protest within the time and manner                                                
|61 | prescribed by
        law, and prosecute the protest to a final determination,
        unless all parties agree to abandon the protest prior to final
        deter-                  
|62 | mination. During
        the pendancy of administrative or judicial proceedings,
        Operator may elect to pay, under protest, all such taxes and
        any                     
|63 | interest and
        penalty. When any such protested assessment shall have been
        finally determined, Operator shall pay the tax for the joint
        ac-                     
|64 | count, together
        with any interest and penalty accrued, and the total cost
        shall then be assessed against the parties, and be paid by
        them, as                 
|65 | provided in
        Exhibit C.                                                                                                                                                      
|66 |                                                                                                                                                                                       
|67 | Each
        party shall pay or cause to be paid all production, severance,
        excise, gathering and other taxes imposed upon or with respect
        to                         
|68 | the production
        or handling of such partys share of oil and/or gas produced
        under the terms of this agreement.                                                        

---

A.A.P.L. FORM 610 - MODEL FORM
  OPERATING AGREEMENT 1982ARTICLE VII
  Continued

|1  | G. Insurance:                                                                                                                                                          
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2  |                                                                                                                                                                        
|3  | At all times
        while operations are conducted hereunder, Operator shall
        comply with the workmens compensation law of                                    
|4  | the state where
        the operations are being conducted; provided, however, that
        Operator may be a self-insurer for liability under said com-               
|5  | pensation laws
        in which event the only charge that shall be made to the joint
        account shall be as provided in Exhibit C. Operator
        shall      
|6  | also carry or
        provide insurance for the benefit of the joint account of the
        parties as outlined in Exhibit D, attached to and made a
        part    
|7  | hereof. Operator
        shall require all contractors engaged in work on or for the
        Contract Area to comply with the workmens compensation                   
|8  | law of the state
        where the operations are being conducted and to maintain such
        other insurance as Operator may require.                                
|9  |                                                                                                                                                                        
|10 | In the event
        automobile public liability insurance is specified in said
        Exhibit D, or subsequently receives the approval of the                      
|11 | parties, no
        direct charge shall be made by Operator for premiums paid for
        such insurance for Operators automotive equipment.                           
|12 |                                                                                                                                                                        
|13 | ARTICLE VIII.                                                                                                                                                          
|14 | ACQUISITION,
        MAINTENANCE OR TRANSFER OF INTEREST                                                                                                               
|15 |                                                                                                                                                                        
|16 | A. Surrender of
        Leases:                                                                                                                                        
|17 |                                                                                                                                                                        
|18 | The leases
        covered by this agreement, insofar as they embrace acreage in
        the Contract Area, shall not be surrendered in whole                          
|19 | or in part
        unless all parties consent thereto.                                                                                                                 
|20 |                                                                                                                                                                        
|21 | However, should
        any party desire to surrender its interest in any lease or in
        any portion thereof, and the other parties do not                        
|22 | agree or consent
        thereto, the party desiring to surrender shall assign, without
        express or implied warranty of title, all of its interest in           
|23 | such lease, or
        portion thereof, and any well, material and equipment which
        may be located thereon and any rights in production                         
|24 | thereafter
        secured, to the parties not consenting to such surrender. If
        the interest of the assigning party is or includes an oil and
        gas in-  
|25 | terest,
        the assigning party shall execute and deliver to the party or
        parties not consenting to such surrender an oil and gas lease
        covering   
|26 | such oil
        and gas interest for a term of one 91) year and so long
        thereafter as oil and/or gas is produced from the land covered
        thereby, such  
|27 | lease to
        be on the form attached hereto as Exhibit B.
        Upon such assignment or lease, the assigning
        party shall be relieved from all          
|28 | obligations
        thereafter accruing, but not theretofore accrued, with respect
        to the interest assigned or leased and the
        operation of any well    
|29 | attributable
        thereto, and the assigning party shall have no further
        interest in the assigned or leased premises
        and its equipment and pro      
|30 | duction other
        than the royalties retained in any lease made under the terms
        of this Article. The party assignee or lessee shall pay to the             
|31 | party assignor
        or lessor the reasonable salvage value of the latters
        interest in any wells and equipment attributable to the
        assigned or-leas-
|32 | ed
        acreage. The value of all material shall be determined in
        accordance with the provisions of Exhibit C, less the
        estimated cost of         
|33 | salvaging and
        the estimated cost of plugging and abandoning. If the
        assignment or lease is in favor of more than
        one party, the interest       
|34 | shall be shared
        by such parties in the proportions that the interest of each
        bears to the total interest of all such parties.                          
|35 |                                                                                                                                                                        
|36 | Any assignment,lease
        or surrender made under this provision shall not reduce or
        change the assignors, lessors
        surrendering                   
|37 | partys
        interest as it was immediately before the assignment, lease
        or surrender in the balance of the Contract Area; and the
        acreage          
|38 | assigned, leased
        or surrendered, and subsequent operations thereon, shall not
        thereafter be subject to the terms and provisions of this                
|39 | agreement.                                                                                                                                                             
|40 |                                                                                                                                                                        
|41 | B. Renewal or
        Extension of Leases:                                                                                                                             
|42 |                                                                                                                                                                        
|43 | If
        any party secures a renewal of any oil and gas lease subject
        to this agreement, all other parties shall be notified
        promptly, and           
|44 | shall have the
        right for a period of thirty (i0) days following receipt of
        such notice in which to elect to participate in the ownership
        of the
|45 | renewal lease,
        insofar as such lease affects lands within the Contract Area,
        by paying to the party who acquired it their several proper
        pro-  
|46 | portionate
        shares of the acquisition cost allocated to that part of such
        lease within the Contract Area, which shall be in proportion
        to the   
|47 | interests held
        at that time by the parties in the Contract Area.                                                                                               
|48 |                                                                                                                                                                        
|49 | If
        some, but less than all, of the parties elect to participate
        in the purchase of a renewal lease, it shall be owned by the
        parties           
|50 | who elect to
        participate therein, in a ratio based upon the relationship of
        their respective percentage of participation in the Contract
        Area  
|51 | to the aggregate
        of the percentages of participation in the Contract Area of
        all parties participating in the purchase of such renewal
        lease.  
|52 | Any renewal
        lease in which less than all parties elect to participate
        shall not be subject to this agreement.                                          
|53 |                                                                                                                                                                        
|54 | Each
        party who participates in the purchase of a renewal lease
        shall be given an assignment of its proportionate interest
        therein              
|55 | by the acquiring
        party.                                                                                                                                        
|56 |                                                                                                                                                                        
|57 | The
        provisions of this Article shall apply to renewal leases
        whether they are for the entire interest covered by the
        expiring lease            
|58 | or cover only a
        portion of its area or an interest therein. Any renewal lease
        taken before the expiration of its predecessor lease, or taken
        or
|59 | contracted for
        within six (6) months after the expiration of the existing
        lease shall be subject to this provision; but any lease taken
        or con-
|60 | tracted for more
        than six (6) months after the expiration of an existing lease
        shall not be deemed a renewal lease and shall not be
        subject to
|61 | the provisions
        of this agreement.                                                                                                                              
|62 |                                                                                                                                                                        
|63 | The
        provisions in this Article shall also be applicable to
        extensions of oil and gas leases.                                                           
|64 |                                                                                                                                                                        
|65 | C. Acreage or
        Cash Contributions:                                                                                                                              
|66 |                                                                                                                                                                        
|67 | While
        this agreement is in force, if any party contracts for a
        contribution of cash towards the drilling of a well or any
        other                
|68 | operation on the
        Contract Area, such contribution shall be paid to the party
        who conducted the drilling or other operation and shall be                
|69 | applied by it
        against the cost of such drilling or other operation. If the
        contribution be in the form of acreage, the party to whom the
        con-  
|70 | tribution is
        made shall promptly tender an assignment of the acreage,
        without warranty of title, to the Drilling Parties in the
        proportions    

---

A.A.P.L. FORM 610 - MODEL FORM
  OPERATING AGREEMENT 1982ARTICLE VIII
  (Continued)

|1  | said Drilling
        Parties shared the cost of drilling the well. Such acreage
        shall become a separate Contract Area and, to the extent
        possible, be 
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2  | governed by
        provisions identical to this agreement. Each party shall
        promptly notify all other parties of any acreage or cash
        contributions    
|3  | it may obtain in
        support of any well or any other operation on the Contract
        Area. The above provisions shall also be applicable to op-                 
|4  | tional rights to
        earn acreage outside the Contract Area which are in support of
        a well drilled inside the Contract Area.                               
|5  |                                                                                                                                                                        
|6  | If any party
        contracts for any consideration relating to disposition of
        such partys share of substances produced hereunder, such                      
|7  | consideration
        shall not be deemed a contribution as contemplated in this
        Article VIII.C.                                                               
|8  |                                                                                                                                                                        
|9  | D. Maintenance
        of Uniform Interest:                                                                                                                            
|10 |                                                                                                                                                                        
|11 | For the purpose
        of maintaining uniformity of ownership in the oil and gas
        leasehold interests covered by this agreement, no                            
|12 | party shall
        sell, encumber, transfer or make other disposition of its
        interest in the leases embraced within the Contract Area and
        in wells,   
|13 | equipment and
        production unless such disposition covers either:                                                                                                
|14 |                                                                                                                                                                        
|15 | 1. the entire
        interest of the party in all leases and equipment and
        production; or                                                                     
|16 |                                                                                                                                                                        
|17 | 2. an equal
        undivided interest in all leases and equipment and production
        in the Contract Area.                                                        
|18 |                                                                                                                                                                        
|19 | Every such sale,
        encumbrance, transfer or other disposition made by any party
        shall be made expressly subject to this agreement                        
|20 | and shall be
        made without prejudice to the right of the other parties.                                                                                         
|21 |                                                                                                                                                                        
|22 | If, at any time
        the interest of any party is divided among and owned by four
        or more co-owners, Operator, at its discretion, may                       
|23 | require such
        co-owners to appoint a single trustee or agent with full
        authority to receive notices, approve expenditures, receive
        billings for 
|24 | and approve and
        pay such partys share of the joint expenses, and to deal
        generally with, and with power to bind, the co-owners of such                
|25 | partys
        interest within the scope of the operations embraced in this
        agreement; however, all such co-owners shall have the right to
        enter      
|26 | into and execute
        all contracts or agreements for the disposition of their
        respective shares of the oil and gas produced from the
        Contract      
|27 | Area and they
        shall have the right to receive, separately, payment of the
        sale proceeds thereof.                                                       
|28 |                                                                                                                                                                        
|29 | E. Waiver of
        Rights toPartition:                                                                                                                               
|30 |                                                                                                                                                                        
|31 | If permitted by
        the laws of the state or states in which the property covered
        hereby is located, each party hereto owning an                           
|32 | undivided
        interest in the Contract Area waives any and all rights it may
        have to partition and have set aside to it in severalty its
        undivided 
|33 | interest
        therein.                                                                                                                                              
|34 |                                                                                                                                                                        
|35 | F. Preferential
        Right to Purchase:                                                                                                                             
|36 |                                                                                                                                                                        
|37 | Should
        any party desire to sell all or any part of its interests
        under this agreement, or its rights and interests in the
        Contract /s/ GTR     
|38 | Area, it
        shall promptly give written notice to the other parties, with
        full information concerning its proposed sale, which shall
        include the  
|39 | name and
        address of the prospective purchaser (who must be ready,
        willing and able to purchase), the purchase price, and all
        other terms       
|40 | of the
        offer. The other parties shall then have an optional prior
        right, for a period of ten (10) days after receipt of the
        notice, to purchase
|41 | on the
        same terms and conditions the interest which the other party
        proposes to sell; and, if this optional right is exercised,
        the purchas-   
|42 | ing
        parties shall share the purchased interest in the proportions
        that the interest of each bears to the total interest of all
        purchasing par  
|43 | ties.
        However, there shall be no preferential right to purchase in
        those cases where any party wishes to mortgage its interests,
        or to         
|44 | dispose
        of its by merger, reorganization, consolidation, or sale of
        all or substantially all of its assets to a subsidiary or
        parent com-      
|45 | pany or
        to a subsidiary of a parent company, or to any company in
        which any one party owns a majority of the stock..                                   
|46 |                                                                                                                                                                        
|47 | ARTICLE IX.                                                                                                                                                            
|48 | INTERNAL
        REVENUE CODE ELECTION                                                                                                                                 
|49 |                                                                                                                                                                        
|50 | This
        agreement is not intended to create, and shall not be
        construed to create, a relationship of partnership or an
        association                
|51 | for
        profit between or among the parties hereto. Notwithstanding
        any provision herein that the rights and liabilities hereunder
        are several     
|52 | and not
        joint or collective, or that this agreement and operations
        hereunder shall not constitute a partnership, if, for federal
        income tax    
|53 | purposes,
        this agreement and the operations hereunder are regarded as a
        partnership, each party hereby affected elects to be excluded                  
|54 | from the
        application of all of the provisions of Subchapter K,
        Chapter 1, Subtitle A, of the In a Revenue Code of 1954,
        as per             
|55 | mined
        and authorized by Section 761 of the Code and the regulations
        promulgated thereunder. Operator is authorized and directed to
        ex-         
|56 | ecute on
        behalf of each party hereby affected such evidence of this
        election as may be required by the Secretary of the Treasury
        of the        
|57 | United
        States or the Federal Internal Revenue Service, including
        specifically, but not by way of limitation, all of the
        returns, statements,   
|58 | and the
        data required by Federal Regulations 1.761. Should there be
        any requirement that each party hereby affected give further                       
|59 | evidence
        of this election, each such party shall execute such documents
        and furnish such other evidence as may be required by the                      
|60 | Federal
        Internal Revenue Service or as may be necessary to evidence
        this election. No such party shall give any notices or take
        any other      
|61 | action
        inconsistent with the election mad r hereby. If any present or
        future income tax laws of the state or states in which the
        Contract      
|62 | Area is
        located or any future income tax laws of the United States
        contain provisions similar to those in Subchapter K,
        Chapter 1,           
|63 | Subtitle
        A, of the Internal Revenue Code of 1954, under which an
        election similar to that provided by Section 761 of the Code
        is per-        
|64 | mitted,
        each party hereby affected shall make such election as may be
        permitted or required by such laws. In making the foregoing
        elec         
|65 | tion,
        each such party states that the income derived by such party
        from operations hereunder can be adequately determined without
        the          
|66 | computation
        of partnership taxable income.                                                                                                                     

---

A.A.P.L. FORM 610 - MODEL FORM
  OPERATING AGREEMENT 1982

|1  | ARTICLE X.                                                                                                                                                              
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2  | CLAIMS AND
        LAWSUITS                                                                                                                                             
|3  |                                                                                                                                                                         
|4  | Operator may
        settle any single uninsured third party damage claim or suit
        arising from operations hereunder if the expenditure                          
|5  | does not exceed
        twenty thousand Dollars                                                                                                                         
|6  | ($20,000.00) and
        if the payment is in complete settlement of such claim or
        suit. If the amount required for settlement ex-                              
|7  | ceeds the above
        amount, the parties hereto shall assume and take over the
        further handling of the claim or suit, unless such authority
        is       
|8  | delegated to
        Operator. All costs and expenses of handling, settling, or
        otherwise discharging such claim or suit shall be at the joint
        ex-      
|9  | pense of the
        parties participating in the operation from which the claim or
        suit arises. If a claim is made against any party or if any
        party is
|10 | sued on account
        of any matter arising from operations hereunder over which
        such individual has no control because of the rights given                   
|11 | Operator by this
        agreement, such party shall immediately notify all other
        parties, and the claim or suit shall be treated as any other
        claim    
|12 | or suit
        involving operations hereunder.                                                                                                                         
|13 |                                                                                                                                                                         
|14 | ARTICLE XI.                                                                                                                                                             
|15 | FORCE MAJEURE                                                                                                                                                           
|16 |                                                                                                                                                                         
|17 | If any party is
        rendered unable, wholly or in part, by force majeure to carry
        out its obligations under this agreement, other than                      
|18 | the obligation
        to make money payments, that party shall give to all other
        parties prompt written notice of the force majeure with                       
|19 | reasonably full
        particulars concerning it; thereupon, the obligations of the
        party giving the notice, so far as they are affected by the
        force  
|20 | majeure, shall
        be suspended during, but no longer than, the continuance of
        the force majeure. The affected party shall use all reasonable               
|21 | diligence to
        remove the force majeure situation as quickly as practicable.                                                                                      
|22 |                                                                                                                                                                         
|23 | The requirement
        that any force majeure shall be remedied with all reasonable
        dispatch shall not require the settlement of strikes,                      
|24 | lockouts, or
        other labor difficulty by the party involved, contrary to its
        wishes; how all such difficulties shall be handled shall be
        entirely 
|25 | within the
        discretion of the party concerned.                                                                                                                   
|26 |                                                                                                                                                                         
|27 | The term force
        majeure, as here employed, shall mean an act of God,
        strike, lockout, or other industrial disturbance, act of                          
|28 | the public
        enemy, war, blockade, public riot, lightning, fire, storm,
        flood, explosion, governmental action, governmental delay,
        restraint      
|29 | or inaction,
        unavailability of equipment, and any other cause, whether of
        the kind specifically enumerated above or otherwise, which is                 
|30 | not reasonably
        within the control of the party claiming suspension.                                                                                             
|31 |                                                                                                                                                                         
|32 | ARTICLE XII.                                                                                                                                                            
|33 | NOTICES                                                                                                                                                                 
|34 |                                                                                                                                                                         
|35 | All notices
        authorized or required between the parties and required by any
        of the provisions of this agreement, unless otherwise                        
|36 | specifically
        provided, shall be given in writing by mail or telegram,
        postage or charges prepaid, or by telex or telecopier and
        addressed to    
|37 | the parties to
        whom the notice is given at the addresses listed on Exhibit
        A. The originating notice given under any provision
        hereof         
|38 | shall be deemed
        given only when received by the party to whom such notice is
        directed, and the time for such party to give any notice in                
|39 | response thereto
        shall run from the date the originating notice is received.
        The second or any responsive notice shall be deemed given                  
|40 | when deposited
        in the mail or with the telegraph company, with postage or
        charges prepaid, or sent by telex or telecopier. Each party                   
|41 | shall have the
        right to change its address at any time, and from time to
        time, by giving written notice thereof to all other parties.                   
|42 |                                                                                                                                                                         
|43 | ARTICLE XIII.                                                                                                                                                           
|44 | TERM OF
        AGREEMENT                                                                                                                                               
|45 |                                                                                                                                                                         
|46 | This agreement
        shall remain in full force and effect as to the oil and gas
        leases and/or oil and gas interests subject hereto for the                   
|47 | period of time
        selected below; provided, however, no party hereto shall ever
        be construed as having any right, title or interest in or to
        any   
|48 | lease or oil and
        gas interest contributed by any other party beyond the term of
        this agreement.                                                         
|49 |                                                                                                                                                                         
|50 | XOption
        No. 1: So long as any of the oil and gas leases subject to
        this agreement remain or are continued in force as to any part                       
|51 | of the Contract
        Area, whether by production, extension, renewal or otherwise.                                                                                   
|52 |                                                                                                                                                                         
|53 | __Option No. 2:
        In the event the well described in Article VI..A., or any
        subsequent well drilled under any provision of this                           
|54 | agreement,
        results in production of oil and/or gas in paying quantities,
        this agreement shall continue in force so long as any such
        well or     
|55 | wells produce,
        or are capable of production, and for an additional period of
        days from cessation of all production; provided,                           
|56 | however, if,
        prior to the expiration of such additional period, one or more
        of the parties hereto are engaged in drilling, reworking,
        deepen    
|57 | ing, plugging
        back, testing or attempting to complete a well or wells
        hereunder, this agreement shall continue in force until such
        opera-       
|58 | tions have been
        completed and if production results therefrom, this agreement
        shall continue in force as provided herein. In the event the              
|59 | well described
        in Article VI..A.., or any subsequent well drilled hereunder,
        results in a dry hole, and no other well is producing, or
        capable  
|60 | of producing oil
        and/or gas from the Contract Area, this agreement shall
        terminate unless drilling, deepening, plugging back or rework-                 
|61 | ing operations
        are commenced with ____ days from the date of abandonment of
        said well.                                                                  
|62 |                                                                                                                                                                         
|63 | It is agree,
        however, that the termination of this agreement shall not
        relieve any party hereto from any liability which                                
|64 | has accrued or
        attached prior to the date of such termination                                                                                                   

.

---

A.A.P.L. FORM 610 - MODEL FORM
  OPERATING AGREEMENT 1982

|1  | ARTICLE XIV.                                                                                                                                                          
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2  | COMPLIANCE
        WITH LAWS AND REGULATIONS                                                                                                                          
|3  |                                                                                                                                                                       
|4  | A. Laws,
        Regulations and Orders:                                                                                                                              
|5  |                                                                                                                                                                       
|6  | This agreement
        shall be subject to the conservation laws of the state in
        which the Contract Area is located, to the valid rules,                      
|7  | regulations, and
        orders of any duly constituted regulatory body of said state;
        and to all other applicable federal, state, and local laws,
        or-
|8  | dinances, rules,
        regulations, and orders.                                                                                                                     
|9  |                                                                                                                                                                       
|10 | B. Governing
        Law:                                                                                                                                             
|11 |                                                                                                                                                                       
|12 | This agreement
        and all matters pertaining hereto, including, but not limited
        to, matters of performance, non-performance, breach,                     
|13 | remedies,
        procedures, rights, duties and interpretation or construction,
        shall be governed and determined by the law of the state in
        which    
|14 | the Contract
        Area is located. If the Contract Area is in two or more
        states, the law of the state of California                                       
|15 | shall govern.                                                                                                                                                         
|16 |                                                                                                                                                                       
|17 | C. Regulatory
        Agencies:                                                                                                                                       
|18 |                                                                                                                                                                       
|19 | Nothing herein
        contained shall grant, or be construed to grant, Operator the
        right or authority to waive or release any rights,                       
|20 | privileges, or
        obligations which Non-Operators may have under federal or
        state laws or under rules, regulations or orders promulgated                 
|21 | under such laws
        in reference to oil, gas and mineral operations, including the
        location, operation, or production of wells, on tracts offset-         
|22 | ting or adjacent
        to the Contract Area.                                                                                                                        
|23 |                                                                                                                                                                       
|24 | With
        respect to operations hereunder, Non-Operators agree to
        release Operator from any and all losses, damages, injuries,
        claims              
|25 | and causes of
        action arising out of, incident to or resulting directly or
        indirectly from Operators interpretation or application of
        rules,  
|26 | rulings,
        regulations or orders of the Department of Energy or
        predecessor or successor agencies to the extent such
        interpretation or ap-      
|27 | plication was
        made in good faith. Each Non-Operator further agrees to
        reimburse Operator for any amounts applicable to such Non-                      
|28 | Operators
        share of production that Operator may be required to refund,
        rebate or pay as a result of such an incorrect interpretation
        or      
|29 | application,
        together with interest and penalties thereon owing by Operator
        as a result of such incorrect interpretation or application.              
|30 |                                                                                                                                                                       
|31 | Non-Operators
        authorize Operator to prepare and submit such documents as may
        be required to be submitted to the purchaser                             
|32 | of any crude oil
        sold hereunder or to any other person or entity pursuant to
        the requirements of the Crude Oil Windfall Profit Tax Act               
|33 | of 1980, as
        same may be amended from time to time (Act), and any
        valid regulations or rules which may be issued by the Treasury                    
|34 | Department from
        time to time pursuant to said Act. Each party hereto agrees to
        furnish any and all certifications or other information                
|35 | which is
        required to be furnished by said Act in a timely manner and in
        sufficient detail to permit compliance with said Act.                         
|36 |                                                                                                                                                                       
|37 | ARTICLE XV.                                                                                                                                                           
|38 | OTHER
        PROVISIONS                                                                                                                                              
|39 |                                                                                                                                                                       
|40 |                                                                                                                                                                       
|41 |                                                                                                                                                                       
|42 |                                                                                                                                                                       
|43 |                                                                                                                                                                       
|44 |                                                                                                                                                                       
|45 |                                                                                                                                                                       
|46 |                                                                                                                                                                       
|47 |                                                                                                                                                                       
|48 |                                                                                                                                                                       
|49 |                                                                                                                                                                       
|50 |                                                                                                                                                                       
|51 |                                                                                                                                                                       
|52 |                                                                                                                                                                       
|53 |                                                                                                                                                                       
|54 |                                                                                                                                                                       
|55 |                                                                                                                                                                       
|56 |                                                                                                                                                                       
|57 |                                                                                                                                                                       
|58 |                                                                                                                                                                       
|59 |                                                                                                                                                                       
|60 |                                                                                                                                                                       

---

Article XV

Other Provisions

A.  Failure to Take Gas
  Production In-Kind:

Notwithstanding
  the provisions of Article VI.C., in the event any party shall fail
  to make the arrangements necessary to take in-kind or separately
  dispose of its share of gas production from the Contract Area, the
  non-taking party shall have the right to request that the Operator
  purchase or sell to others such gas production for the account of
  the non-taking party at the best price reasonably obtainable under
  the circumstances in the area for such production, and the Operator
  shall have the right, but not the obligation to do so. Such requests
  shall be revocable at will by the party owning such gas production
  and the owner of such production may, at any time, exercise its
  right to revoke such request and to take in-kind or separately
  dispose of its share of gas production from the Contract Area, or to
  elect to be an underproduced party. Any purchase or sale by
  Operator of any partys share of gas shall be only for such
  reasonable periods of time as are consistent with the minimum needs
  of the industry under the particular circumstances, but in no event
  for a period in excess of one (1) year.

B.  Insurance:

Except
  as provided in Exhibit D, all damage or injury to the Contract
  Area and property thereon shall be borne by the parties hereto in
  proportion to their interest therein. The liability, if any, of the
  parties hereto in damages for claims growing out of personal injury
  to or death of third parties or injury to or destruction of property
  of third parties resulting from operations conducted hereunder shall
  be borne in proportion to their interests in the Contract Area, and
  each party individually may acquire such insurance as it deems
  proper to protect itself against such claims.

C.  Taxes:

If
  Operator is required hereunder to pay ad valorem taxes based in
  whole or in part upon separate valuations of each partys working
  interest, then notwithstanding anything to the contrary herein,
  charges to the joint account shall be made and paid by the parties
  herein in accordance with the percentage of tax value generated by
  each partys working interest.

---

A.A.P.L. FORM 610 - MODEL FORM
  OPERATING AGREEMENT 1982

|1  |  | ARTICLE XVI.                                                                                                                                      
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------
|2  |  | MISCELLANEOUS                                                                                                                                     
|3  |  |                                                                                                                                                   
|4  |  | This
        agreement shall be binding upon and shall inure to the benefit
        of the parties hereto and to their respective heirs, devisees,
|5  |  | legal
        representatives, successors and assigns.                                                                                            
|6  |  |                                                                                                                                                   
|7  |  | This
        instrument may be executed in any number of counterparts, each
        of which shall be considered an original for all purposes.    
|8  |  |                                                                                                                                                   
|9  |  | IN WITNESS
        WHEREOF, this agreement shall be effective as of___________day
        of__________, 1996.                                     
|10 |  |                                                                                                                                                   
|11 |  |                                                                                                                                                   
|12 |  | OPERATOR                                                                                                                                          
|13 |  |                                                                                                                                                   
|14 |  |                                                                                                                                                   
|15 |  | Saba
        Petroleum, Inc.                                                                                                                      
|16 |  |                                                                                                                                                   
|17 |  | By:
        /s/ Larry Burroughs                                                                                                                   
|18 |  | Title:
        President                                                                                                                          
|19 |  |                                                                                                                                                   
|20 |  |                                                                                                                                                   
|21 |  |                                                                                                                                                   
|22 |  | NON-OPERATORS                                                                                                                                     
|23 |  |                                                                                                                                                   
|24 |  |                                                                                                                                                   
|25 |  |                                                                                                                                                   
|26 |  | Geo
        Petroleum, Inc.                                                                                                                       
|27 |  |                                                                                                                                                   
|28 |  | By:                                                                                                                                               
|29 |  | Gerald
        T. Raydon                                                                                                                          
|30 |  | President                                                                                                                                         
|31 |  |                                                                                                                                                   
|32 |  |                                                                                                                                                   
|33 |  |                                                                                                                                                   
|34 |  |                                                                                                                                                   
|35 |  |                                                                                                                                                   
|36 |  |                                                                                                                                                   
|37 |  |                                                                                                                                                   
|38 |  |                                                                                                                                                   
|39 |  |                                                                                                                                                   
|40 |  |                                                                                                                                                   
|41 |  |                                                                                                                                                   
|42 |  |                                                                                                                                                   
|43 |  |                                                                                                                                                   
|44 |  |                                                                                                                                                   
|45 |  |                                                                                                                                                   
|46 |  |                                                                                                                                                   
|47 |  |                                                                                                                                                   
|48 |  |                                                                                                                                                   
|49 |  |                                                                                                                                                   
|50 |  |                                                                                                                                                   
|51 |  |                                                                                                                                                   
|52 |  |                                                                                                                                                   
|53 |  |                                                                                                                                                   
|54 |  |                                                                                                                                                   
|55 |  |                                                                                                                                                   
|56 |  |                                                                                                                                                   
|57 |  |                                                                                                                                                   
|58 |  |                                                                                                                                                   
|59 |  |                                                                                                                                                   

---

EXHIBIT A

Attached to and made a part of that
  certain Operating Agreement dated December ___,1996, by and
  between Saba Petroleum, Inc., as Operator, and Geo Petroleum,
  Inc., as Non-Operator.

|1. | Identification
        of Lands subject to this Agreement:                   
|-- | -----------------------------------------------------------------------------
|   | Portions
        of projected Sections 31 and 32 T2N, R23W and Sections 5 and
|   | 6,
        TIN, R23W, S.B.B.& M. Ventura County, CA                          
|   |                                                                              
|2. | Percentage
        Interest of Parties:                                      
|   | Working
        Interests                                                    
|   | Before
        Payout                    After
        Payout                
|   | Saba
        Petroleum, Inc. 100%     66.67%                                 
|   | Geo
        Petroleum, Inc.
        0%          33.33%                       
|   |                                                                              
|3. | Addresses
        of Parties:                                                
|   |                                                                              
|   | Saba
        Petroleum, Inc.                                                 
|   | 201
        N. Salsipuedes St., Suite 104                                    
|   | Santa
        Barbara, CA 93103                                              
|   |                                                                              
|4. | See
        Attached                                                         

---

Exhibit AAttached to and Made Part ofAgreement for Assignment of Leases Dated, December ___, 1996Ventura County, California

|Lessor:                           | Lessee:                           | Date:    |  | Recording
        Data:     | Description
        of Property:                                                                  
|--------------------------------- | --------------------------------- | -------- |  | --------------------------- | --------------------------------------------------------------------------------------------------
|Vaca Tar Sand
        Unit Leases |                                   |          |  |                             |                                                                                                   
|                                  |                                   |          |  |                             |                                                                                                   
|E.E. Lenox,
        Single Man    | Raleigh P.
        Trimble        | 04-24-34 |  | Book: 426 Page:
        241 | Part of the
        Rancho el Rio a la Colonia known as the west 80 acres of the
        119.24   
|                                  |                                   |          |  |                             | acres in
        subdivisions numbered 53 and 54, lying between the Sturgis
        Road, the     
|                                  |                                   |          |  |                             | Railroad and the
        Wolff Road, containing 80 acres.                                         
|                                  |                                   |          |  |                             |                                                                                                   
|John Hollis
        Lenox and     | Exeter Oil
        Company        | 06-04-46 |  | Book: 777 Page:
        232 | 39 acres, more
        or less, out of subdivision 53 of Rancho el Rio de Santa Clara
        o la
|Alice Lenox                       | Ltd. and Vaca
        Oil Company |          |  |                             | Colonia.                                                                                          
|                                  |                                   |          |  |                             |                                                                                                   
|W.R. Livingston                   | Raleigh P.
        Trimble        | 04-26-34 |  | Book: 461 Page:
        267 | 159.5 acres,
        more or less out of subdivision 53 of Rancho el Rio de Santa
        Clara o 
|                                  |                                   |          |  |                             | la Colonia.                                                                                       
|                                  |                                   |          |  |                             |                                                                                                   
|Robert S.
        Livingston      | Raleigh P.
        Trimble        | 04-26-34 |  | Book: 460 Page:
        478 | Insofar and only
        insofar as lease covers 149.10 acres, more or less out of                
|and Mayrie Daily                  |                                   |          |  |                             | subdivision 53
        and 55 of Rancho el Rio de Santa Clara o la Colonia.                       
|Livingston, his
        wife      |                                   |          |  |                             |                                                                                                   

---

Exhibit AAttached to and Made Part ofAgreement for Assignment of Leases Dated, December, 1996Ventura County, California(Continued)

|Lessor:                           | Lessee:                       | Date:    | Recording
        Data: | Description
        of Property:                                                                 
|--------------------------------- | ----------------------------- | -------- | ----------------------- | -------------------------------------------------------------------------------------------------
|                                  |                               |          |                         |                                                                                                  
|Non-Unit Lease                    |                               |          |                         |                                                                                                  
|                                  |                               |          |                         |                                                                                                  
|Clarence W.
        Hunsucker,    | Sun Operating
        Limited | 04-02-86 | 86-128442               | Parcels B, C
        & D of Subdivision 55 of the Rancho El Rio De Santa Clara
        OLa      
|J. Thomas
        Hunsucker       | Partnership                   |          |                         | Colonia in the
        County of Ventura, Stag of California, according to the map               
|and Evelyn
        Hunsucker      |                               |          |                         | recorded in Book
        3, page 112 of maps, in the office of the County Recorder of            
|AKA Evelyn N.
        Hunsucker,  |                               |          |                         | said county.
        Together with those portions of Sturgis Road, Pleasant Valley               
|AKA Eva Newman
        Hunsucker  |                               |          |                         | Road, and Wood
        Road as said roads are shown on said map lying northerly,                 
|Trustees of the
        Thomas O. |                               |          |                         | northwesterly,
        and westerly respectively of the centerline of said roads.                
|Hunsucker Family
        Trust;   |                               |          |                         | EXCEPT that
        portion of said land lying northerly of the following
        described      
|and Clarence W.
        Hunsucker |                               |          |                         | line: Beginning
        at a point in the centerline of Wood Road, distant thereon
        South 
|as Executor of
        the Estate |                               |          |                         | 0° 23 58
        West 1182.96 feet from the intersection thereof with the
        westerly     
|of Thomas O.
        Hunsucker    |                               |          |                         | prolongation of
        the northerly line of subdivision 58 of said Rancho; thence,
        1st:
|deceased                          |                               |          |                         | North 88° 48
        34 West 3376.48 feet more or less to a point in the
        westerly line 
|                                  |                               |          |                         | of said
        Subdivision 55.                                                                  

---

EXHIBIT C

|1  | Attached to and
        made a part of Operating Agreement dated _______________1996,
        by                                             
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------
|2  | and between Saba
        Petroleum, Inc., as Operator and Geo Petroleum, Inc.                                                                
|3  | as Non-operator
        .                                                                                                                    
|4  |                                                                                                                                              
|5  |                                                                                                                                              
|6  |                                                                                                                                              
|7  |                                                                                                                                              
|8  | ACCOUNTING
        PROCEDURE                                                                                                                 
|9  |                                                                                                                                              
|10 | JOINT
        OPERATIONS                                                                                                                     
|11 |                                                                                                                                              
|12 | I. GENERAL
        PROVISIONS                                                                                                                
|13 |                                                                                                                                              
|14 | 1. Definitions                                                                                                                               
|15 |                                                                                                                                              
|16 | Joint
        Property shall mean the real and personal property subject
        to the agreement to which this Accounting Procedure       
|17 | is
        attached.                                                                                                                         
|18 | Joint Operations shall mean all operations necessary or
        proper for the development, operation, protection and                      
|19 | maintenance
        of the Joint Property.                                                                                                   
|20 | Joint Account shall mean the account showing the charges
        paid and credits received in the conduct of the Joint                     
|21 | Operations
        and which are to be shared by the Parties.                                                                                
|22 | Operator shall mean the party designated to conduct the
        Joint Operations.                                                          
|23 | Non-Operators shall mean the Parties to this agreement
        other than the Operator.                                                    
|24 | Parties shall mean Operator and Non-Operators.                                                                                             
|25 | First Level Supervisors shall mean those employees whose
        primary function in Joint Operations is the direct                        
|26 | supervision
        of other employees and/or contract labor directly employed on
        the Joint Property in a field operating            
|27 | capacity.                                                                                                                                    
|28 | Technical Employees shall mean those employees having
        special and specific engineering, geological or other                        
|29 | professional
        skills, and whose primary function in Joint Operations is the
        handling of specific operating conditions and     
|30 | problems
        for the benefit of the Joint Property.                                                                                      
|31 | Personal Expenses shall mean travel and other reasonable
        reimbursable expenses of Operators employees.                            
|32 | Material shall mean personal property, equipment or
        supplies acquired or held for use on the Joint Property.                       
|33 | Controllable Material shall mean Material which at the
        time is so classified in the Material Classification Manual as              
|34 | most
        recently recommended by the Council of Petroleum Accountants
        Societies.                                                 
|35 |                                                                                                                                              
|36 | 2.     Statement
        and Billings                                                                                                        
|37 |                                                                                                                                              
|38 | Operator
        shall bill Non-Operators on or before the last day of each
        month for their proportionate share of the Joint         
|39 | Account
        for the preceding month. Such bills will be accompanied by
        statements which identify the authority for               
|40 | expenditure,
        lease or facility, and all charges and credits summarized by
        appropriate classifications of investment and      
|41 | expense
        except that items of Controllable Material and unusual charges
        and credits shall be separately identified and        
|42 | fully
        described in detail.                                                                                                           
|43 |                                                                                                                                              
|44 | 3.
             Advances and Payments by
        Non-Operators                                                                               
|45 |                                                                                                                                              
|46 | A.     Unless
        otherwise provided for in the agreement, the Operator may
        require the Non-Operators to advance their           
|47 | share
        of estimated cash outlay for the succeeding months
        operation within fifteen (15) days after receipt of the            
|48 | billing
        or by the first day of the month for which the advance is
        required, whichever is later. Operator shall adjust        
|49 | each
        monthly billing to reflect advances received from the
        Non-Operators.                                                    
|50 |                                                                                                                                              
|51 | B.     Each
        Non-Operator shall pay its proportion of all bills within
        fifteen (15) days after receipt. If payment is not made
|52 | within
        such time, the unpaid balance shall bear interest monthly at
        the prime rate in effect at Citibank                     
|53 | New
        York on the first day of the month in which delinquency occurs
        plus 1% or the                                            
|54 | maximum
        contract rate permitted by the applicable usury laws in the
        state in which the Joint Property is located,            
|55 | whichever
        is the lesser, plus attorneys fees, court costs, and other
        costs in connection with the collection of unpaid      
|56 | amounts.                                                                                                                                     
|57 |                                                                                                                                              
|58 | 4.     Adjustments                                                                                                                           
|59 |                                                                                                                                              
|60 | Payment
        of any such bills shall not prejudice the right of any
        Non-Operator to protest or question the correctness thereof;  
|61 | provided,
        however, all bills and statements rendered to Non-Operations
        by Operator during any calendar year shall            
|62 | conclusively
        be presumed to be true and correct after twenty-four (24)
        months following the end of any such calendar         
|63 | year,
        unless within the said twenty-four (24) month period a
        Non-Operator takes written exception thereto and makes          
|64 | claim
        on Operator for adjustment. No adjustment favorable to
        Operator shall be made unless it is made within the same        
|65 | prescribed
        period. The provisions of this paragraph shall not prevent
        adjustments resulting from a physical inventory of     
|66 | Controllable
        Material as provided for in Section V.                                                                                  
|67 |                                                                                                                                              
|68 |                                                                                                                                              
|69 | Copyright
        © 1985 by Council of Petroleum Accountants Societies.                                                                      

1

---

|1   | 5.          Audits                                                                                                                                    
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------
|2   |                                                                                                                                                       
|3   | A.     A
        Non-Operator, upon notice in writing to Operator and all other
        Non-Operators, shall have the right to audit                  
|4   | Operators
        accounts and records relating to the Joint Account for any
        calendar year within the twenty-four                            
|5   | (24)
        month period following the end of such calendar year;
        provided, however, the making of an audit shall not                        
|6   | extend
        the time for the taking of written exception to and the
        adjustments of accounts as provided for in                             
|7   | Paragraph
        4 of this Section 1. Where there are two or more
        Non-Operators, the Non-Operators shall make                                
|8   | every
        reasonable effort to conduct a joint audit in a manner which
        will result in a minimum of inconvenience                          
|9   | to
        the Operator. Operator shall bear no portion of the
        Non-Operators audit cost incurred under this                                  
|10  | paragraph
        unless agreed to by the Operator. The audits shall not be
        conducted more than once each year                                
|11  | without
        prior approval of Operator, except upon the resignation or
        removal of the Operator, and shall be made                         
|12  | at
        the expense of those Non-Operators approving such audit.                                                                                   
|13  |                                                                                                                                                       
|14  | B.     The
        Operator shall reply in writing to an audit report within 180
        days after receipt of such report.                           
|15  |                                                                                                                                                       
|16  | 6.           Approval
        By Non-Operators                                                                                                        
|17  |                                                                                                                                                       
|18  | Where
        an approval or other agreement of the Parties or Non-Operators
        is expressly required under other sections of                    
|19  | this
        Accounting Procedure and if the agreement to which this
        Accounting Procedure is attached contains no                             
|20  | contrary
        provisions in regard thereto, Operator shall notify all
        Non-Operators of the Operators proposal, and the                    
|-21 | agreement
        or approval of a majority in interest of the Non-Operators
        shall be controlling on all Non-Operators.                       
|22  |                                                                                                                                                       
|23  |                                                                                                                                                       
|24  | II. DIRECT
        CHARGES                                                                                                                            
|,25 |                                                                                                                                                       
|26  | Operator shall
        charge the Joint Account with the following items:                                                                             
|27  |                                                                                                                                                       
|28  | 1.  Ecological
        and Environmental                                                                                                              
|29  |                                                                                                                                                       
|30  | Costs
        incurred forthe benefit of the Joint Property as a
        result of governmental or regulatory requirements to satisfy                 
|31  | environmental
        considerations applicable to the Joint Operations. Such costs
        may include surveys of an ecological or                   
|32  | archaeological
        nature and pollution control procedures as required by
        applicable laws and regulations.                                
|33  |                                                                                                                                                       
|34  | 2.  Rentals
        and Royalties                                                                                                                     
|35  |                                                                                                                                                       
|36  | Lease
        rentals and royalties paid by Operator for the Joint
        Operations.                                                                
|37  |                                                                                                                                                       
|38  | 3.  Labor                                                                                                                                             
|39  |                                                                                                                                                       
|40  | A.  (1) Salaries
        and wages of Operators field employees directly employed on
        the Joint Property in the conduct of                    
|41  | Joint
        Operations.                                                                                                                             
|42  |                                                                                                                                                       
|43  | (2) Salaries
        of First Level Supervisors in the field.                                                                                         
|44  |                                                                                                                                                       
|45  | (3) Salaries
        and wages of Technical Employees directly employed on the
        Joint Property if such charges are                             
|46  | excluded
        from the overhead rates.                                                                                                             
|47  |                                                                                                                                                       
|48  | (4) Salaries
        and wages of Technical Employees either temporarily or
        permanently assigned to and directly                              
|49  | employed
        in the operation of the Joint Property if such charges are
        excluded from the overhead rates.                                 
|50  |                                                                                                                                                       
|51  | B.     Operators
        cost of holiday, vacation, sickness and disability benefits
        and other customary allowances paid to                  
|52  | employees
        whose salaries and wages are chargeable to the Joint Account
        under Paragraph 3A of this Section II.                         
|53  | Such
        costs under this Paragraph 313 may be charged on a when and
        as paid basis or by percentage assessment                        
|54  | on
        the amount of salaries and wages chargeable to the Joint
        Account under Paragraph 3A of this Section II. If                         
|55  | percentage
        assessment is used, the rate shall be based on the Operators
        cost experience.                                             
|56  |                                                                                                                                                       
|57  | C.     Expenditures
        or contributions made pursuant to assessments imposed by
        governmental authority which are                         
|58  | applicable
        to Operators costs chargeable to the Joint Account under
        Paragraphs 3A and 313 of this Section II.                        
|59  |                                                                                                                                                       
|60  | D.     Personal
        Expenses of those employees whose salaries and wages are
        chargeable to the Joint Account under                        
|61  | Paragraph
        3A of this Section II.                                                                                                              
|62  |                                                                                                                                                       
|63  | 4.  Employee
        Benefits                                                                                                                         
|64  |                                                                                                                                                       
|65  | Operators
        current costs of established plans for employees group life
        insurance, hospitalization, pension, retirement,              
|66  | stock
        purchase, thrift, bonus, and other benefit plans of a like
        nature, applicable to Operators labor cost chargeable to
        the
|67  | Joint
        Account under Paragraphs 3A and 3B of this Section II shall be
        Operators actual cost not to exceed the percent                 
|68  | Most
        recently recommended by the Council of Petroleum Accountants
        Societies.                                                          

---

|1  | 12. Insurance                                                                                                                               
|-- | --------------------------------------------------------------------------------------------------------------------------------------------
|2  |                                                                                                                                             
|3  | Net
        premiums paid for insurance required to be carried for the
        Joint Operations for the protection of the Parties. In the   
|4  | Event
        Joint Operations are conducted in a state in which Operator
        may act as self-insurer for Workers Compensation         
|5  | and/or
        Employers Liability under the respective states laws,
        Operator may, at its election, include the risk under its self
|6  | insurance
        program and in that event, Operator shall include a charge at
        Operators cost not to exceed manual rates.         
|7  |                                                                                                                                             
|8  | 13. Abandonment
        and Reclamation                                                                                                     
|9  |                                                                                                                                             
|10 | Costs
        incurred for abandonment of the Joint Property, including
        costs required by governmental or other regulatory          
|11 | authority.                                                                                                                                  
|12 |                                                                                                                                             
|13 | 14. Communications                                                                                                                          
|14 |                                                                                                                                             
|15 | Cost
        of acquiring, leasing, installing, operating, repairing and
        maintaining communication systems, including radio and     
|16 | microwave
        facilities directly serving the Joint Property. In the event
        communication facilities/systems serving the Joint   
|17 | Property
        are Operator owned, charges to the Joint Account shall be made
        as provided in Paragraph 8 of this Section II.      
|18 |                                                                                                                                             
|19 | 15. Other
        Expenditures                                                                                                              
|20 |                                                                                                                                             
|21 | Any
        other expenditure not covered or dealt with in the foregoing
        provisions of this Section 11, or in Section III and which 
|22 | is
        of direct benefit to the Joint Property and is incurred by the
        Operator in the necessary and proper conduct of the Joint 
|23 | Operations.                                                                                                                                 
|24 |                                                                                                                                             
|25 |                                                                                                                                             
|26 | III. OVERHEAD                                                                                                                               
|27 |                                                                                                                                             
|28 | 1. OverheadDrilling
        and Producing Operations                                                                                       
|29 |                                                                                                                                             
|30 | i.     As
        compensation for administrative, supervision, office services
        and warehousing costs, Operator shall charge        
|31 | drilling
        and producing operations on either:                                                                                        
|32 |                                                                                                                                             
|33 | (X)
        Fixed Rate Basis, Paragraph 1A, or                                                                                              
|34 | (   )
        Percentage Basis, Paragraph 1 B                                                                                               
|35 |                                                                                                                                             
|36 | Unless
        otherwise agreed to by the Parties, such charge shall be in
        lieu of costs and expenses of all offices and            
|37 | salaries
        or wages plus applicable burdens and expenses of all
        personnel, except those directly chargeable under             
|38 | Paragraph
        3A, Section 11. The cost and expense of services from outside
        sources in connection with matters of               
|39 | taxation,
        traffic, accounting or matters before or involving
        governmental agencies shall be considered as included in       
|40 | the
        overhead rates provided for in the above selected Paragraph of
        this Section III unless such cost and expense are        
|41 | agreed
        to by the Parties as a direct charge to the Joint Account.                                                                   
|42 |                                                                                                                                             
|43 | ii.    The
        salaries, wages and Personal Expenses of Technical Employees
        and/or the cost of professional consultant          
|44 | services
        and contract services of technical personnel directly employed
        on the Joint Property:                              
|45 |                                                                                                                                             
|46 | (   )
        shall be covered by the overhead rates, or                                                                                    
|47 | (X)
        shall not be covered by the overhead rates.                                                                                     
|48 |                                                                                                                                             
|49 | iii.   The
        salaries, wages and Personal Expenses of Technical Employees
        and/or costs of professional consultant services    
|50 | and
        contract services of technical personnel either temporarily or
        permanently assigned to and directly employed in         
|51 | the
        operation of the Joint Property:                                                                                                
|52 |                                                                                                                                             
|53 | (   )
        shall be covered by the overhead rates, or                                                                                    
|54 | (X)
        shall not be covered by the overhead rates.                                                                                     
|55 |                                                                                                                                             
|56 | A.   OverheadFixed
        Rate Basis                                                                                                      
|57 |                                                                                                                                             
|58 | (1)   Operator
        shall charge the Joint Account at the following rates per well
        per month:                                    
|59 |                                                                                                                                             
|60 | Drilling
        Well Rate $5,500.00                                                                                                        
|61 | (Prorated
        for less than a full month)                                                                                               
|62 |                                                                                                                                             
|63 | Producing
        Well Rate $550,00                                                                                                         
|64 |                                                                                                                                             
|65 | (2)   Application
        of Overhead  Fixed Rate Basis                                                                                    
|66 |                                                                                                                                             
|67 | (a)  Drilling
        Well Rate                                                                                                             
|68 |                                                                                                                                             
|69 | (1)   
  Changes
        for drilling wells shall begin on the date the well is spudded
        and terminate on the date                   
|70 | The
        drilling rig, completion rig, or other units used in
        completion of the well is released, whichever                      

---

|1  | is
        later, except that no charge shall be made during suspension
        of drilling or completion operations                             
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------
|2  | for
        fifteen (15) or more consecutive calendar days.                                                                                      
|3  |                                                                                                                                                  
|4  | (2) 
   Charges
        for wells undergoing any type of workover or recompletion for
        a period of five (5)                               
|5  | consecutive
        work days or more shall be made at the drilling well rate.
        Such charges shall be                                     
|6  | applied
        for the period from date workover operations, with rig or
        other units used in workover,                                  
|7  | commence
        through date of rig or other unit release, except that no
        charge shall be made during                                   
|8  | suspension
        of operations for fifteen (15) or more consecutive calendar
        days.                                                     
|9  |                                                                                                                                                  
|10 | (b)  Producing
        Well Rates                                                                                                                
|11 |                                                                                                                                                  
|12 | (1) 
   An
        active well either produced or injected into for any portion
        of the month shall be considered as                      
|13 | a
        one-well charge for the entire month.                                                                                                  
|14 |                                                                                                                                                  
|15 | (2) 
   Each
        active completion in a multi-completed well in which
        production is not commingled down                              
|16 | hole
        shall be considered as a one-well charge providing each
        completion is considered a separate                                 
|17 | well
        by the governing regulatory authority.                                                                                              
|18 |                                                                                                                                                  
|19 | (3) 
   An
        inactive gas well shut in because of overproduction or failure
        of purchaser to take the                               
|20 | production
        shall be considered as a one-well charge providing the gas
        well is directly connected to                              
|21 | a
        permanent sales outlet.                                                                                                                
|22 |                                                                                                                                                  
|23 | (4) 
   A
        one-well charge shall be made for the month in which plugging
        and abandonment operations                               
|24 | are
        completed on any well. This one-well charge shall be made
        whether. or not the well has                                       
|25 | produced
        except when drilling well rate applies.                                                                                         
|26 |                                                                                                                                                  
|27 | (5) 
   All
        other inactive wells (including but not limited to inactive
        wells covered by unit allowable, lease                   
|28 | allowable,
        transferred allowable, etc.) shall not qualify for an overhead
        charge.                                                
|29 |                                                                                                                                                  
|30 | (3)   The
        well rates shall be adjusted as of the first day of April each
        year following the effective date of the                
|31 | agreement
        to which this Accounting Procedure is attached. The adjustment
        shall be computed by multiplying                        
|32 | the
        rate currently in use by the percentage increase or decrease
        in the average weekly earnings of Crude                         
|33 | Petroleum
        and Gas Production Workers for the last calendar year compared
        to the calendar year preceding as                       
|34 | shown
        by the index of average weekly earnings of Crude Petroleum and
        Gas Production Workers as published                         
|35 | by
        the United States Department of Labor, Bureau of Labor
        Statistics, or the equivalent Canadian index as                        
|36 | published
        by Statistics Canada, as applicable. The adjusted rates shall
        be the rates currently in use, plus or                   
|3? | minus
        the computed adjustment.                                                                                                           
|38 |                                                                                                                                                  
|39 | B.        Overhead       Percentage
        Basis                                                                                                
|40 |                                                                                                                                                  
|42 |                                                                                                                                                  
|43 | (a)   
 Development                                                                                                                              
|44 |                                                                                                                                                  
|45 | Percent
        (           %)
        of the cost of development of the Joint Property exclusive of
        costs                               
|46 | provided
        under Paragraph 10 of Section II and all salvage credits.                                                                       
|47 |                                                                                                                                                  
|48 | (b)  
  Operating                                                                                                                                
|49 |                                                                                                                                                  
|50 | Percent
        (             %)
        of the cost of operating the Joint Property exclusive of costs
        provided                         
|51 | under
        Paragraphs 2 and 10 of Section II, all salvage credits, the
        value of injected substances purchased                         
|52 | for
        secondary recovery and all taxes and assessments which are
        levied, assessed and paid upon the                                
|53 | mineral
        interest in and to the Joint Property.                                                                                           
|54 |                                                                                                                                                  
|55 | (2)   Application
        of Overhead  Percentage Basis shall be as follows:                                                                    
|56 |                                                                                                                                                  
|57 | For
        the purpose of deter mining charges on a percentage basis
        under Paragraph 113 of this Section III,                           
|58 | development
        shall include all costs in connection with drilling,
        redrilling, deepening, or any remedial                          
|59 | operations
        on y or all wells involving the use of drilling rig and crew
        capable of drilling to the producing                     
|60 | on
        the Joint Property; also preliminary expenditures necessary in
        preparation for drilling and                                   
|61 | expenditures
        incurred in abandoning when the well is not completed as a
        producer, and original cost of                           
|62 | construction
        or installation of fixed assets, the expansion of fixed assets
        and any other project clearly                        
|63 | discernible
        as a fixed asset, except Major Construction as defined in
        Paragraph 2 of this Section III. All other                 
|64 | costs
        shall be considered as operating.                                                                                                  
|65 |                                                                                                                                                  
|66 | 2. OverheadMajor
        Construction                                                                                                           
|67 |                                                                                                                                                  
|68 | To
        compensate Operator for overhead costs incurred in the
        construction and installation of fixed assets, the expansion
        of
|69 | fixed assets,
        and any other project clearly discernible as a fixed asset
        required for the development and operation of the       
|70 | Joint Property,
        Operator shall either negotiate a rate prior to the beginning
        of construction, or shall charge the Joint         

---

|1  | Account
        for overhead based on the following rates for any Major
        Construction project in excess of $                                    
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------
|2  |                                                                                                                                                        
|3  | A.               5             
     %
        of first $100,000 or total cost ii less, plus                                                           
|4  |                                                                                                                                                        
|5  | B.               3             
     %
        of costs in excess of $100,000 but less than $1,000,000, plus                                           
|6  |                                                                                                                                                        
|7  | C.               1             
     %
        of costs in excess of $1,000,000.                                                                       
|8  |                                                                                                                                                        
|9  | Total
        cost shall mean the gross cost of any one project. For the
        purpose of this paragraph, the component parts of a single            
|10 | project
        shall not be treated separately and the cost of drilling and
        workover wells and artificial lift equipment shall be             
|11 | excluded.                                                                                                                                              
|12 |                                                                                                                                                        
|13 | 3.   Catastrophe
        Overhead                                                                                                                      
|14 |                                                                                                                                                        
|15 | 7b
        compensate Operator for overhead costs incurred in the event
        of expenditures resulting from a single occurrence due                 
|16 | to
        oil spill, blowout, explosion, fire, storm, hurricane, or
        other catastrophes as agreed to by the Parties, which are                 
|17 | necessary
        to restore the Joint Property to the equivalent condition that
        existed prior to the event causing the                        
|18 | expenditures,
        Operator shall either negotiate a rate prior to charging the
        Joint Account or shall charge the Joint Account             
|19 | for
        overhead based on the following rates:                                                                                                     
|20 |                                                                                                                                                        
|21 | A.              5              
   %
        of total costs through $100,000; plus                                                                     
|22 |                                                                                                                                                        
|23 | B.              3              
   %
        of total costs in excess of $100,000 but less than $1,000,000;
        plus                               
|24 |                                                                                                                                                        
|25 | C.              1              
   %
        of total costs in excess of $1,000,000.                                                                   
|26 |                                                                                                                                                        
|27 | Expenditures
        subject to the overheads above will not be reduced by
        insurance recoveries, and no other overhead                         
|28 | provisions
        of this Section III shall apply.                                                                                                    
|29 |                                                                                                                                                        
|30 | 4.   Amendment
        of Rates                                                                                                                        
|31 |                                                                                                                                                        
|32 | The
        overhead rates provided for in this Section III may be amended
        from time to time only by mutual agreement                          
|33 | between
        the Parties hereto if, in practice, the rates are found to be
        insufficient or excessive.                                       
|34 |                                                                                                                                                        
|35 |                                                                                                                                                        
|36 | IV.
        PRICING OF JOINT ACCOUNT MATERIAL PURCHASES, TRANSFERS AND
        DISPOSITIONS                                                            
|37 |                                                                                                                                                        
|38 | Operator
        is responsible for Joint Account Material and shall make
        proper and timely charges and credits for all Material               
|39 | movements
        affecting the Joint Property. Operator shall provide all
        Material for use on the Joint Property; however, at                 
|40 | Operators
        option, such Material may be supplied by the Non-Operator.
        Operator shall make timely disposition of idle and/or            
|41 | surplus
        Material, such disposal being made either through sale to
        Operator or Non-Operator, division in kind, or sale to               
|42 | outsiders.
        Operator may purchase, but shall be under no obligation to
        purchase, interest of Non-Operators in surplus condition         
|43 | A
        or B Material. The disposal of surplus Controllable Material
        not purchased by the Operator shall be agreed to by the
        Parties.
|44 |                                                                                                                                                        
|45 | 1.  Purchases                                                                                                                                          
|46 |                                                                                                                                                        
|47 | Material
        purchased shall be charged at the price paid by Operator after
        deduction of all discounts received. In case of                
|48 | Material
        found to be defective or returned to vendor for any other
        reasons, credit shall be passed to the Joint Account                
|19 | when
        adjustment has been received by the Operator.                                                                                             
|50 |                                                                                                                                                        
|51 | 2.  Transfers
        and Dispositions                                                                                                                 
|52 |                                                                                                                                                        
|53 | Material
        furnished to the Joint Property and Material transferred from
        the Joint Property or disposed of by the Operator,              
|54 | unless
        otherwise agreed to by the Parties, shall be priced on the
        following basis exclusive of cash discounts:                         
|55 |                                                                                                                                                        
|56 | A.    New
        Material (Condition A)                                                                                                               
|57 |                                                                                                                                                        
|58 | (1)
        Tubular Goods Other than Line Pipe                                                                                                         
|59 |                                                                                                                                                        
|60 | (a)    Tubular
        good, sized 2 3/8 inches OD and larger, except line pipe,
        shall be priced at Eastern mil                                
|61 | published
        carload base prices effective as of date of movement plus
        transportation cost using the 80,000                               
|62 | pound
        carload weight basis to the railway receiving point nearest
        the Joint Property for which                                         
|63 | published
        rail rates for tubular goods exist. If the 80c000 pound rail
        rate is not offered, the 70,000 pound                           
|64 | or
        90,000 pound rail rate may be used. Freight charges for tubing
        will be calculated from Lorain, Ohio                                 
|65 | and
        casing from Youngstown, Ohio.                                                                                                              
|66 | (b)    For
        grades which are special to one mill only, prices shall be
        computed at the mill base of that mill plus                      
|66 | transportation
        cost from that mill to the railway receiving point nearest the
        Joint Property as provided                               
|67 | above
        in Paragraph 2.A.(1)(a). For transportation cost from points
        other than Eastern mills, the 30,000                                

---





















B.  Good
  Used Material (Condition B)













---





The
  cost of reconditioning, if any, shall be absorbed by the
  transferring property.

C.  Other
  Used Material

















D.  Obsolete
  Material



E.  Pricing
  Conditions





---

3.  Premium
  Prices



4.  Warranty of
  Material Furnished By Operator



V. INVENTORIES

The Operator shall maintain detailed
  records of Controllable Material.

1.  Periodic
  Inventories, Notice and Representation



2.  Reconciliation
  and Adjustment of Inventories



---

Exhibit F

FEDERAL CONTRACT REQUIREMENTS

These Federal Contract Requirements
  are attached to and made a part
  of that certain Operating Agreement dated _________, 1996,
  between certain parties named therein,
  Including Saba Pet. , Inc., hereinafter called Contractor

A.  Equal Opportunity
  Clause 141 CFR 60-1.41

During
  the performance of this Contract, Contractor agrees as follows:

(1)  Contractor
  will not discriminate against any employee or applicant for
  employment because of race, color, religion, sex or national origin.
  Contractor will take affirmative action to ensure that applicantsare employed, and that employees are treated during employment,
  without regard to their race, color, religion, sex or national
  origin. Such action shall include, but not be limited to, the
  following: Employment, upgrading, demotion, or transfer, recruitment
  or recruitment advertising; layoff or termination, rates of pay or
  other forms of compensation; and selection for training, Including
  apprenticeship. Contractor agrees to post in conspicuous places,
  available to employees and applicants for employment, notices to be
  provided by the contracting officer setting forth the provisions of
  this nondiscrimination clause.

(2)  Contractor
  will, In all solicitations or advertisements for employees placed by
  or on behalf of Contractor, slate that all qualified applicants will
  receive consideration for employment without regard to race, color,
  religion, sex or national origin.

(3)  Contractor
  will send to each labor union or representative of workers with
  which Contractor has a collective bargaining agreement or other
  contract or understanding, a notice to be provided by the agency
  contracting officer advising the labor union of workers
  representative of Contractors commitments under section 202
  of Executive Order 11246 of September 24, 1965 and shall post
  copies of the notice In conspicuous places available to employees
  and applicants for employment.

(4)  Contractor
  will comply with all provisions of Executive Order 11246 of
  September 24, 1965 and of the rules, regulations, and relevant
  orders of the Secretary of Labor.

(5)  Contractor
  will furnish all information and reports required by Executive Order
  11246 of September 24, 1965 and by the rules, regulations, and
  orders of the Secretary of Labor, or pursuant thereto, and will
  permit access to his books, records, and accounts by the contracting
  agency and the Secretary of Labor for purposes of investigation to
  ascertain compliance with such rules, regulations, and orders.

(6)  In
  the event of Contractors noncompliance with the nondiscrimination
  clauses of this contract or with any of such rules, regulations, or
  orders, this contract may be cancelled, terminated or suspended in
  whole or in part and Contractor may be declared ineligible for
  further Government contracts in accordance with procedures
  authorized in Executive Order 11246 of September 24, 1965, and
  such other sanctions may be imposed and remedies invoked as provided
  In Executive Order 11246 of September 24, 1965, or by rule,
  regulation, or order of the Secretary of Labor, or as otherwise
  provided by law.

(7)  Contractor
  will include the provisions of paragraphs (1) through (7) In every
  subcontract or purchase order unless exempted by rules, regulations,
  or orders of the Secretary of Labor issued pursuant to
  section 204 of Executive Order 11246 of September 24,
  1965, so that such provisions will be binding upon each
  subcontractor or vendor. Contractor will take such action with
  respect to any subcontract or purchase order as the contracting
  agency may direct as a means of enforcing such provisions including
  sanctions for noncompliance; provided, however, that in the
  event Contractor becomes involved in, or is threatened with,
  litigation with a subcontractor or vendor as a result of such
  direction by the contracting agency, Contractor may request the
  United States to enter into such litigation to protect the interests
  of the United States.

---

B.  Employee Information
  Reports (41 CFR 60-1-7)

If
  the value of this contract is $50,000 or more and if Contractor has
  50 or more employees, Contractor agrees to file timely, complete and
  accurate reports on Standard Form 100 (EEO-1) with the appropriate
  federal agency.

C.  Affirmative Action
  Program (41 CFR 60-1.40)

If
  the value of this contract is $50,000 or more and Contractor has 50
  or more employees, Contractor agrees to develop a written
  affirmative action compliance program as required by law.

D.  Certification of
  Nonsegregated Facilities (41 CFR 60-1.8)

Contractor
  certifies that it does not and will not maintain or provide for its
  employees any segregated facilities at any of its establishments,
  and that it does not and will not permit its employees to perform
  their services at any location under its control, where segregated
  facilities are maintained. Contractor agrees that a breach of this
  certification is a violation of the Equal Opportunity Clause in this
  contract. As used In this the term segregated facilities
  means any waiting rooms, work areas, rest rooms and wash rooms,
  restaurants and other eating areas, time clocks, locker rooms and
  other storage or dressing areas, parking lots, drinking fountains,
  recreation or entertainment areas, transportation, and housing
  facilities provided for employees which are segregated by explicit
  directive or are in fact segregated on the basis of race, creed,
  color, or national origin, because of habit, local custom or
  otherwise. It further agrees that (except where it has obtained
  identical certifications from proposed subcontractors for specific
  time periods) it will obtain identical certifications from proposed
  subcontractors prior to the award of subcontracts exceeding $10,000
  which are not exempt from the provisions of Equal Opportunity
  Clause; that it will retain such certification in its files; and
  that it will forward the following notice to such proposed
  subcontractors (except where the proposed subcontractors have
  submitted identical certifications for specific time periods):
  NOTICE TO PROSPECTIVE SUBCONTRACTORS OF REQUIREMENT FOR
  CERTIFICATIONS OF NONSEGREGATED FACILITIES. A Certification of
  Nonsegregated Facilities, as required by the May 9, 1967 order
  on Elimination of Segregated Facilities, by the Secretary of Labor
  (32 Fed.Reg.7439, May 19, 1967) must be submitted prior to the
  award of subcontract exceeding $10,000 which is not exempt from the
  provisions of the Equal Opportunity Clause. The certification may be
  submitted either for each subcontract or for all subcontracts during
  a period (i.e., quarterly, semiannually, or annually). (Note: The
  penalty for making false statements in offers is prescribed in 18
  U.S.C. 1001.)

E.  Minority Business
  Enterprises (91 CFR 1-1,1310-2)

1.  Utilization,

(a)  It
  is the policy of the Government that minority business enterprises
  shall have the maximum practicable opportunity to participate in the
  performance of Government contracts.

(b)  The
  Contractor agrees to use his best efforts to carry out this policy
  in the award of his subcontracts to the fullest extent consistent
  with the efficient performance of this contract. As used in this
  contract, the term minority business enterprise means a
  business, at least 50 percent of which is owned by minority group
  members or, in case of publicly owned businesses, at least 51
  percent of the stock of which is owned by minority group members.
  For the purposes of this definition, minority group members are
  Negroes, Spanish-speaking American persons, American-Orientals,
  American-Indians, American-Eskimos, and American Aleuts. Contractors
  may rely on written representations by subcontractors regarding
  their status as minority business enterprises in lieu of an
  independent investigation.

2.  Subcontracting
  Program.

(a)  The
  Contractor agrees to establish and conduct a program which will
  enable minority business enterprises (as defined in the clause
  entitled Utilization of Minority Business Enterprises) to be
  considered fairly as subcontractors and suppliers under this
  contract. In this connection, the Contractor shall:

---

(1)  
  Designate a liaison officer who will administer the Contractors
  minority business enterprises program,

(2)  Provide
  adequate and timely consideration of the potentialities of known
  business enterprises in all make-or-buy decisions.

(3)  Assure
  that known minority business enterprises will have an equitable
  opportunity to compete for subcontracts, particularly by arranging
  solicitations, time for the preparation of bids, quantities,
  specifications, and delivery schedules so as to facilitate the
  participation of minority business enterprises.

(4)  Maintain
  records showing (i) procedures which have been adopted to comply
  with the policies set forth in the clause, including the
  establishment of a source list of minority business enterprises,
  (ii) awards to minority business enterprises on the source list, and
  (iii) specific efforts to identify and award contracts to minority
  business enterprises.

(5)  Include
  the Utilization of Minority Business Enterprises clause in
  subcontracts which offer substantial minority business enterprises
  subcontracting opportunities.

(6)  Cooperate
  with the Contracting Officer in any studies and surveys of the
  Contractors minority business enterprises procedures and
  practices that the Contracting Office may from time to time conduct.

(7)  Submit
  periodic reports of subcontracting to known minority business
  enterprises with respect to the records referred to in subparagraph
  (4) above, in such form and manner and at such time (not more often
  than quarterly) as the Contracting Officer may prescribe.

(b)  The
  Contractor further agrees to insert, in any subcontract hereunder
  which may exceed $500,000, provisions which shall conform
  substantially to the language of this clause, including this
  paragraph (b), and to notify the Contracting Officer of the names of
  such subcontractors.

F.  Affirmative Action
  for Disabled Veterans and Veterans of the Vietnam Era ( CFR 6(Z 2501

The
  regulations in this part apply to all government contracts and
  subcontracts for the furnishing of supplies or services or for the
  use of real or personal property (including construction) for
  $10,000 or more.

(a)  The
  Contractor will not discriminate against any employee or applicant
  for employment because he or she is a disabled veteran or veteran of
  the Vietnam Era in regard to any position for which the employee or
  applicant for employment is qualified. The Contractor agrees to take
  affirmative action to employ, advance in employment, and otherwise
  treat qualified disabled veterans and veterans of the Vietnam Era
  without discrimination based upon their disability or veterans
  status in all employment practices such as the following: employment
  upgrading, demotion or transfer, recruitment, advertising, layoff or
  termination, rates of pay or other forms or compensation, and
  selection for training, including apprenticeship.

(b)  The
  Contractor agrees that all suitable employment openings of the
  Contractor which exist at the time of the execution of this contract
  and those which occur during the performance of this contract,
  including those not generated by this contract and including those
  at an establishment of the Contractor other than the one wherein the
  contract is being performed but excluding those of independently
  operated corporate affiliates, shall be listed at an appropriate
  local office of the State employment service system wherein the
  opening occurs. The Contractor further agrees to provide such
  reports to such local office regarding employment openings and hires
  as may be required.

State
  and local government agencies holding Federal contracts of $10,000
  or more shall also list all their suitable openings with the
  appropriate office of the State employment service, but are not
  required to provide those reports set forth in paragraphs (d) and
  (e).

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(c)  Listing
  of employment openings with the employment service system pursuant
  to this clause shall be made at least concurrently with the use of
  any other recruitment source or effort and shall involve the normal
  obligations which attach to the placing of a bona fide job order,
  including the acceptance of referrals of veterans and nonveterans.
  The listing of employment openings does not require the hiring of
  any particular job applicant or from any particular group of job
  applicants, and nothing herein is intended to relieve the Contractor
  from any requirements in Executive Orders or regulations regarding
  nondiscrimination in employment.

(d)  The
  reports required by paragraph (b) of this clause shall include,
  but not be limited to, periodic reports which shall be filed at
  least quarterly with the appropriate local office or, where the
  Contractor has more than one hiring location in a State, with the
  central office of that State employment service. Such reports shall
  indicate for each hiring location (1) the number of individuals
  hired during the reporting period, (2) the number of
  nondisabled veterans of the Vietnam Era hired, (3) the number
  of disabled veterans of the Vietnam Era hired, and (4) the totalnumber
  of disabled veterans hired. The reports should include covered
  veterans hired for on-the-job training under 38 U.S.C. 1787. The
  Contractor shall submit a report within 30 days after the end of
  each reporting period wherein any performance is made on this
  Contract identifying data for each hiring location. The Contractor
  shall maintain at each hiring location copies of the reports
  submitted until the expiration of one year after final payment under
  the Contract, during which time these reports and related
  documentation shall be made available, upon request, for examination
  by any authorized representatives of the Contracting Officer or of
  the Secretaryof Labor. Documentation would include personnel
  records respecting job openings, recruitment, and placement.

(e)  Whenever
  the Contractor becomes contractually bound to the listing provisions
  of this clause, it shall advise the employment service system in
  each State where it has establishments of the name and location of
  each hiring location in the State. As long as the Contractor is
  contractually bound to these provisions and has so advised the State
  system, there is no need to advise the State system of subsequent
  contracts. The Contractor may advise the State system when it is no
  longer bound by this contract clause.

(f)  This
  clause does not apply to the listing of employment openings which
  occur and area filled outside of the 50 states, the District of
  Columbia, Puerto Rico, Guam, and the Virgin Islands.

(g)  The
  provisions of paragraphs (b), (c), (d), and (e) of this clause do
  not apply to openings which the Contractor proposes to fill from
  within his own organization or to fill pursuant to a customary and
  traditional employer-union hiring arrangement. This exclusion does
  not apply to a particular opening once an employer decides to
  consider applicants outside of his own organization or
  employer-union arrangements for that opening.

(h)  As
  used in this clause:

(1)  All
  suitable employment openings includes, but is not limited to,
  openings which occur in the following job categories: production and
  non-production; plant and office; laborers and mechanics;
  supervisory and non-supervisory technical and executive,
  administrative, and professional openings as are compensated on a
  salary basis of less than $25,000 per year. This term includes
  full-time employment, temporary employment of more than three days
  duration, and part-time employment. It does no include openings
  which the Contractor proposes to fill from within his own
  organization or to fill pursuant to a customary and traditional
  employer-union hiring arrangement no openings in an educational
  institution which are restricted to students of that institution.
  Under the most compelling circumstances, an employment opening may
  not be suitable for listing, including such situations where the
  needs of the Government cannot reasonably be otherwise supplied,
  where listing would be contrary to national security, or where the
  requirement of listing would otherwise not be for the best interest
  of the Government.

(2)  Appropriate
  office of the State employment service system means the local
  office of the Federal State national system of public employment
  offices with assigned responsibility for serving the area where the
  employment opening is to be filled, including the District of
  Columbia, Guam, Puerto Rico, and the Virgin Islands.

(3)  Openings
  which the Contractor proposes to fill from within his own
  organization means employment openings for which no consideration
  will be given to persons outside the Contractors organization
  (including any affiliates, subsidiaries and the parent companies)
  and includes any openings which the Contractor proposes to fill from
  regularly established recall lists.

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(4)  Openings
  which the Contractor proposes to fill pursuant to a customary and
  traditional employer-union hiring arrangement means employment
  openings which the Contractor proposes to fill from union halls,
  which is part of the customary and traditional hiring relationship
  which exists between the Contractor and representatives of his
  employees.

(i)  The
  Contractor agrees to comply with the rules, regulations, and
  relevant orders of the Secretary of Labor issued pursuant to the
  Act.

(j)  In
  the event of the Contractors noncompliance with the requirements
  of this clause, actions for noncompliance may be taken in accordance
  with the rules, regulations, relevant orders of the Secretary of
  Labor issued pursuant to the Act.

(k)  The
  Contractor agrees to post in conspicuous places, available to
  employees and applicants for employment, notices in a form to be
  prescribed by the Director, provided by or through the Contracting
  Officer. Such notice shall state the Contractors obligation under
  the law to take affirmative action to employ and advance in
  employment qualified disabled veterans and veterans of the Vietnam
  Era for employment, and the rights of applicants and employees.

(l)  The
  Contractor will notify each labor union or representative of workers
  with which it has a collective bargaining agreement or other
  contract understanding, that the Contractor is bound by the terms of
  the Vietnam Era Veterans Readjustment Assistance Act, and is
  committed to take affirmative action to employ and advance in
  employment qualified disabled veterans and veterans of the Vietnam
  Era.

(m)  The
  Contractor will include the provisions of this clause in every
  subcontract or purchase order of $10,000 or more unless exempted by
  rules, regulations, or orders of the Secretary issued pursuant to
  the Act, so that such provisions will be binding upon each
  subcontractor or vendor. The Contractor will take such action with
  respect to any subcontract or purchase order as the Director of the
  Office of Federal Contract Compliance Programs may direct to enforce
  such provisions, including action for noncompliance.

G.  Employment of the
  Handicapped(20 CFR 741.3)

This
  provision applies to all nonexempt contracts and subcontracts which
  exceed $2,500 as follows: (1) Part A applies to contracts and
  subcontracts which provide for performance in less than 90 days, (2)
  Parts A and B apply to contracts and subcontracts which provide for
  performance in 90 days or more and the amount of the contract or
  subcontract is less than $500,000, and (3) Parts A, B, and C apply
  to contracts and subcontracts which provide for performance in 90
  days or more and the amount of the contract or subcontract is
  $500,000 or more.

PART A

(a)  The
  Contractor will not discriminate against any employee or applicant
  for employment because of physical or mental handicap in regard to
  any position for which the employee or applicant for employment is
  qualified. The Contractor agrees to take affirmative action to
  employ, advance in employment, and otherwise-,Feat qualified
  handicapped individuals without discrimination based upon their
  physical or mental handicap in all employment practices such as the
  following: employment, upgrading, demotion or transfer, recruitment
  or recruitment advertising , layoff or termination, rates of pay or
  other forms of compensation, and selection for training, including
  apprenticeship.

(b)  The
  Contractor agrees that, if a handicapped individual files a
  complaint with the Contractor that he is not complying with the
  requirements of the Act, he will (1) investigate the complaint and
  take appropriate action consistent with the requirements of 20 CFR
  741.29, and (2) maintain on file for three years the record
  regarding the complaint and the actions taken.

(c)  The
  Contractor agrees that, if a handicapped individual files a
  complaint with the Department of Labor that he has not complied with
  the requirements of the Act, (1) he will cooperate with the
  Department in its investigation of the complaint, and (2) he will
  provide all pertinent information regarding his employment practices
  with respect to the handicapped.

(d)  The
  Contractor agrees to comply with the rules and regulations of the
  Secretary of Labor in 20 CFR Ch.VI, Page 741.

5

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(e)  In
  the event of the Contractors noncompliance with the requirements
  of this clause, the Contract may be terminated or suspended in whole
  or in part.

(f)
    The clause shall be included in all subcontracts over
  $2,500.

PART B

(g)  The
  Contractor agrees (1) to establish an affirmative action program,
  Including appropriate procedures consistent with the guidelines and
  the rules of the Secretary of Labor, which will provide the
  affirmative action regarding the employment and advancement of the
  handicapped required by P.L. 93-112, (2) to publish the program in
  his employees or personnel handbook or otherwise distribute a
  copy to all personnel, (3) to review his program on or before March
  31 of each year and to make such changes as may be appropriate, and
  (4) to designate one of his principal officials to be responsible
  for the establishment and operation of the program.

(h)  The
  Contractor agrees to permit the examination by appropriate
  contracting agency officials or the Assistant Secretary for
  Employment Standards or his designee, of pertinent books, documents,
  papers and records concerning his employment and advancement of the
  handicapped.

(i)  The
  Contractor agrees to post in conspicuous places, available to
  employees and applicants for employment, notices in a form to be
  prescribed by the Assistant Secretary for Employment Standards,
  provided by the Contracting Officer, stating Contractors obligation
  under the law to take affirmative action to employ and advance in
  employment qualified handicapped employees and applicants for
  employment and the rights and remedies available.

(j)  The
  Contractor will notify each labor union or representative of workers
  with which he has collective bargaining agreement or other contract
  understanding, that the Contractor is bound by the terms of the
  Section 503 of the Rehabilitation Act, and is committed to take
  affirmative action to employ and advance in employment physically
  and mentally handicapped individuals.

(k)  The
  Contractor agrees to submit a copy of his affirmative action program
  to the Assistant Secretary for Employment Standards within 90 days
  after the award to him of a contract or subcontract.

(l)  The
  Contractor agrees to submit a summary report to the Assistant
  Secretary for Employment Standards, by March 31 of each year during
  performance of the Contract, and by March 31 of the year following
  completion of the Contract, in the form prescribed by the Assistant
  Secretary, covering employment and complaint experience,
  accommodations made and all steps taken to effectuate and carry out
  the commitments set forth in the affirmative action program.

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EXHIBIT F

Attached to and made a part of
  that certain OperatingAgreement dated _______________ , 1996, by and betweenSaba Petroleum, Inc., as Operator,and Geo Petroleum, Inc., as Non-Operator

SCHEDULE OF INSURANCE

Operator shall, at all times, carry
  for the benefit and protection of the Non-Operators, insurance as
  follows:

(a)  Statutory
  Workers Compensation and Employers Liability Insurance with
  limits of at least $1,000,000 per occurrence to comply with the laws
  of the State having jurisdiction.

(b)  Comprehensive
  General Liability Insurance (including Owners and Contractors
  Protective Liability and Contractual Liability) with Bodily Injury
  Liability limits of not less than $1,000,000 per occurrence and
  Property Damage Liability limits of not less than $1,000,000 per
  occurrence; $1,000,000 aggregate.

(c)  Automobile
  Bodily Injury and Property Damage Liability Insurance (including all
  owned, non-owned and hired cars) in amounts of not less than
  $1,000,000 for injuries to one person, $1,000,000 for all bodily
  injuries in one accident, and not less than $1,000,000 for property
  damage.

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EXHIBIT G

Attached to and made a part of
  Agreement for Assignment of Leases Operating Agreement dated
  December ______________ , 1996, by and between Saba Petroleum, Inc.,
  Operator and Geo Petroleum, Inc., Non-Operator.

1.  Tax
  Partnership Status. Notwithstanding the provisions hereof, the
  Working Interest Owners intend and agree that, both for federal and
  state income tax purposes, a tax partnership under that certain VTSU
  Operating Agreement (OA) dated December _____ 1996 is created
  hereby. The name of the tax partnership is the VTSU Partnership (the
  Partnership). The Partnerships federal tax identification
  number is ___________________ Working Interest Owners agree not to
  elect to be, or have the arrangement evidenced by this Agreement,
  excluded from the application of all or any part of Subchapter K of
  Chapter 1 of Subtitle A of the Internal Revenue Code of 1954, as
  amended or any successor provisions thereto (the code), and/or
  any similar provisions of applicable state laws.

2.  Priority
  of Provisions. In the event of a conflict or inconsistency,
  between the terms and conditions of this Exhibit G and the other
  terms and conditions of this agreement, this Exhibit G will govern
  and control.

3.  Contributions
  to Partnership. Unless expressly provided otherwise in this
  Exhibit G, for all purposes of this Section and the Partnership:

a)  Property
  and cash which under any of the provisions of this Exhibit G are
  deemed contributed to the Partnership will be treated and referred
  to in this Exhibit G as though actually contributed to, held and
  owned by the Partnership, regardless of the manner in which title
  and ownership are held for any purpose other than the purposes of
  this Exhibit G and the Partnership;

b)  The
  entire interest of each Working Interest Owner in the unit Area or
  any other property subject to this Agreement will be deemed
  contributed to the Partnership on the earlier of the date that
  interest becomes subject to this Agreement or the OA;

c)  Subject
  to Paragraph (d) below, a Working Interest Owner will be deemed to
  contribute cash to the Partnership if that Working Interest Owner
  pays or incurs a fixed obligation to pay a cost, expense or other
  liability to any person, if that payment or obligation is on behalf
  of or in furtherance of the Partnership operations or is otherwise
  pursuant to an obligation under this Agreement;

d)  Where
  a Working Interest Owner contributes (or would be deemed to
  contribute) cash to the Partnership which is used to acquire
  property, the property will be treated as having been purchased by
  that Working Interest Owner and then contributed to the Partnership
  at the time the Partnership acquires that property, but the amount
  of cash otherwise deemed contributed by that Working Interest Owner
  under Paragraph (c) above will be reduced by the cost of that
  property to avoid a double credit to that Working Interest Owner and
  the Working Interest Owners intend that each Working Interest Owners
  respective contributions to the Partnership (i) will be strictly
  traced to, identified with, and maintained in each item of
  Partnership property and of Partnership expense directly related to
  that Working Interest Owners contributions and (ii) will not be
  affected, with respect to any item of Partnership property and of
  Partnership expense, by the respective contributions made by other
  Working Interest Owners to effectuate equalization and/or other
  adjustments, if any, made pursuant to this Agreement.

4.
    Partnership Capital Accounts. A separate fair
  market value (FMV) capital account will be established and
  maintained for each Working Interest Owner and will be, from time to
  time, increased and decreased as follows:

a)  The
  FMV capital accounts shall be increased by: (i) the amount of money
  and the fair market value of any property contributed by each
  Working Interest Owner, respectively, to the Partnership (net of
  liabilities assumed by the Partnership or to which the contributed
  property is subject); (ii) that Working Interest Owners allocated
  share of Partnership income and gain or items thereof under
  Paragraph 5; (iii) any basis increases required by Code sections 48
  (q) and 1016 (a) (24); and, (iv) that Working Interest Owners
  share of Code section 705 (a) (1) (B) and (C) items.

b)  The
  FMV capital accounts shall be decreased by: (i) the amount of money
  and the fair market value of property distributed to each Working
  Interest Owner (net of liabilities assumed by such Working Interest
  Owner or to which the property is subject); (ii) that Working
  Interest Owners allocated share of Partnership

1

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loss and deductions, or items thereof
  under paragraph 5; any basis decreases required by Code sections 48
  (q) and 1016 (a) (24); and, (iv) that Working Interest Owners
  share of Code section 705 (a) (2) (B) items and Code section 709
  nondeductible and nonamortizable items.

5.  FMV
  Capital Account Allocations. Each item of income, gain, loss or
  deduction shall be allocated to each Working Interest Owner as
  follows:

a)  Actual
  or deemed income from the sale, exchange, distribution or other
  disposition of production shall be allocated to the Working Interest
  Owner entitled to such production or the proceeds from the sale of
  such production. In the event that deemed income arising from the
  in-kind distribution of production equals the fair market value of
  the production distributed to a Working Interest Owner, the Working
  Interest Owners recognize that the corresponding adjustments would
  be a net zero adjustment and, accordingly may be omitted from the
  FMV capital accounts;

b)  Exploration
  cost, IDC, and operating and maintenance cost shall be allocated to
  each Working Interest Owner in accordance with its respective
  contribution to such cost;

c)  Depreciation
  shall be allocated to each party in accordance with its contribution
  to the FMV capital account adjusted basis of the underlying asset;

d)  Simulated
  depletion shall be allocated to each Working Interest Owner in
  accordance with its FMV capital account adjusted basis in each oil
  and gas, property;

e)  Loss
  (or simulated loss) upon the sale, exchange, distribution,
  abandonment or other disposition of depreciable or depletable
  property, shallbe allocated to the Working Interest Owners
  in the same ratio as their respective FMV capital account adjusted
  basis in the depreciable or depletable property;

f)  Gain
  (or simulated gain) upon the sale, exchange, distribution, or other
  disposition of depreciable or depletable property shall be allocated
  to the Working Interest Owners so that the FMV capital account
  balances of the Working Interest. Owners with respect to such
  property will most closely reflect their respective interests under
  the Agreement;

g)  Costs
  or expenses of any other kind shall be allocated to and accounted to
  and accounted for by each Working Interest Owner in accordance with
  its respective contributions to such costs or expenses; and

h)  Any
  other income item shall be allocated to the Working Interest Owners
  in accordance with the allocation of the realization.

6.  Returns
  Section.

6.1  Intent
  of the Parties. The Working Interest Owners intend that the
  allocation of income, gain, losses, and deductions be given full
  effect for federaland state income tax purposes, and, in
  keeping with that intent, that the economic benefit or burden or
  each allocation be realized or borne by the Working Interest Owner
  or Working Interest Owners to whom allocated. In furtherance of that
  objective, the Working Interest Owners intend and agree that all
  those allocations will be reflected in the Working Interest Owners
  respective FMV capital accounts established pursuant to paragraph 4,
  and that, upon termination of the Partnership, each Working Interest
  Owner will receive a bona fide, economic interest (including)
  equitable ownership and title) in all remaining Partnership property
  and cash which is proportionate to the amount of such Working
  Interest Owners FMV capital account relative to the FMV capital
  accounts of other Working Interest Owners.

(a)  Unless
  otherwise expressly provided herein the allocations of Partnership
  items of income, gain, loss or deduction for tax return and tax
  basis capital account purposes shall be the same as those contained
  in Paragraph 4;

(b)  The
  Working Interest Owners recognize that under Code section 613A (c)
  (7) (D), the depletion allowance is to be computed separately by
  each Working Interest Owner. For this purpose, each Working Interest
  Owners share of the adjusted tax basis of each oil and gas
  property shall be equal to its contribution to the adjusted tax
  basis of such property;

(c)  The
  Working Interest Owners recognize that under Code section 613A (c)
  (7) (D) the computation of gain or loss on the taxable disposition
  of an oil or gas property is to be computed separately by each

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Working Interest Owner. For this
  purpose the portion of the total amount realized by the Partnership
  that represents a recovery of simulated adjusted basis in an oil and
  gas property will be allocated to the Working Interest Owners in the
  same ratio that simulated depletion is allocated to them under
  Paragraph 5 (d). Any additional amount realized will be allocated in
  accordance with the ratio of simulated gain allocation for such
  property under Paragraph 5 (f).

(d)  Depreciation
  shall be allocated to each Working Interest Owner in accordance with
  its contribution to the adjusted tax basis of the depreciable asset;

(e)  Any
  recapture of depreciation, IDC, and any other item of deduction or
  credit shall, to the extent possible, be allocated among the Working
  Interest Owners in accordance with their share of the depreciation,
  IDC or other item of deduction or credit which is recaptured;

(f)  The
  qualified investment for investment tax credit purposes with respect
  to any property shall be allocated among the Working Interest Owners
  in accordance with their respective contributions to the qualified
  investment (as defined in the code) in such property; and

(g)  For
  Partnership property which has a value in the FMV capital accounts
  which differs from the adjusted tax basis of such property, any tax
  items relating to such property will be allocated to the Working
  Interest Owners in a manner which takes into account the variation
  between the adjusted tax basis of such property and its FMV capital
  account value under Code section 704(c).

6.2  Fair
  Market Value Capital Account. For purposes of establishing a
  fair market value capital account, Geo shall be credited with the
  fair market value of assets contributed by it to the tax
  partnership. The value is $20,000,000, and consists of Geos
  interests in the leases, the wells, the production facilities, and
  the reserves. Saba shall be credited with all its investments made
  to obtain this agreement and to develop the properties.

7.  Partnership
  Accounting.

7.1  Method.
  For purposes of reporting on both federal and state partnership
  returns, the Partnership will keep its accounts on the accrual
  method of accounting.

7.2  Taxable
  Year. The taxable year of the Partnership for purposes of
  reporting on both federal and state partnership returns will be the
  calendar year.

7.3  Tax
  Returns. Federal and state partnership income tax returns will
  be prepared and filed by the Unit Operator covering the operations
  reportable by the Partnership. The Unit Operator agrees to use its
  best efforts in the preparation and filing of these tax returns,
  acting on behalf of itself and the other Working Interest Owners,
  but in doing so, the Unit Operator will incur no liability to the
  Working Interest Owners with regard to those returns or elections
  relating to those tax returns. The Unit Operator shall establish and
  maintain FMV capital accounts and tax basis capital accounts for
  each Working Interest Owner. Unit Operator shall submit to each
  Working Interest Owner along with a copy of any proposed Partnership
  income tax return an accounting of its respective capital accounts
  as of the period ending with such return. Each Working Interest
  Owner agrees to timely furnish to Unit Operator such information
  relating to the operations conducted under this Agreement as may be
  required for the proper preparation of such returns and capital
  accounts. The Unit Operator will submit a draft of all federal and
  state income tax returns for the Partnership to all Working Interest
  Owners for their review no later than 30 days prior to the filing of
  any tax return. Any and all correspondence relating to the
  preparation and/or filing of those returns should be mailed to the
  Unit Operator at the following address, or to any other address as
  the Unit Operator will direct:

| |  | Saba Petroleum, Inc.
        201 N. Salsipuedes St., Suite 104
        Santa Barbara, CA 93103
| |  | ----------------------------------------------------------------------------------------------

7.4  Elections.
  The Unit Operator, on behalf of the Partnership, has made or will
  make the following elections:

(a)  To
  deduct expenses and intangible drilling and development costs in
  accordance with Section 263 (c) of the Code and/or comparable
  provisions of state law;

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(b)  To
  compute depreciation and/or capital cost recovery allowances with
  respect to all depreciable property using the most accelerated
  method and the shortest depreciable useful life authorized by the
  Code and/or comparable provisions of state law, consistent with the
  maximization of the deductions and credits allowed under the Code
  and state law;

(c)  To
  deduct as expenses all research and experimental expenditures in
  accordance with Section 174 (a) of the Code and/or comparable
  provisions of state law;

(d)  To
  amortize over 60 months all startup costs in accordance with Section
  195 (b) of the Code;

(e)  To
  elect to reduce basis under Section 48 (q) of the Code and take full
  investment tax credit;

(f)  Solely
  for FMV capital account purposes, depletion shall be calculated by
  using simulated percentage depletion within the meaning of Treasury
  Regulations section 1.704-1(b) (2); and

(g)  Any
  other Partnership elections that may be approved by a 90% vote of
  the Working Interest Owners.

7.5  Transfers.

(a)  Each
  Working Interest Owner agrees that if it makes a sale or assignment
  of all or any portion of its interest in the Partnership, such sale
  or assignment will be structured, if possible so as not to cause a
  termination under Section 708 (b) (1) (B), of the Code. Any Working
  Interest Owner transferring all or any portion of its interest in
  the Partnership shall promptly notify the Unit Operator of such
  transfer.

(b)  If
  any Working Interest Owner transfers all or any portion of its
  interest in the Partnership, both the Working Interest Owners and
  the transferees distributive shares of Partnership items income,
  gain, loss, deduction and credit will be precisely computed by an
  interim closing of Partnership books as of the date of transfer in
  accordance with Section 706 of the Code, the income tax regulations
  promulgated under the Code and/or comparable provisions of state
  law. If there is a transfer by a Working Interest Owner of any or
  all of its interest in the Unit Area whether an entire interest, a
  fractional undivided interest or otherwise that transfer will be
  treated for federal and state income tax purposes as a sale by the
  transferor of an interest in the Partnership.

7.6  Designation
  of Tax Matters Partner. The Unit Operator is designated tax
  matters partner (TMP) as defined in Section 6231 (a) (7) of
  the Code. In the event of any change in TMP, the Working Interest
  Owner serving as TMP for a given taxable year will continue as TMP
  with respect to all matters concerning that year. The TMP and other
  Working Interest Owners will use their best efforts to comply with
  the responsibilities outlined in this Paragraph and in Sections 6222
  through 6232 of the Code (including any Treasury regulations
  promulgated under the Code) and in doing so will incur no liability
  to any other Working Interest Owner. Notwithstanding TMPs
  obligation to use its best efforts in the fulfillment of its
  responsibilities, TMP will not be required to incur any expenses for
  the preparation for or pursuance of administrative or judicial
  proceedings unless the Working Interest Owners agree on a method for
  sharing those expenses.

7.7  Notice.
  The Working Interest Owners will furnish TMP within two weeks from
  the receipt of the request with such information (including
  information specified in Sections 6230 (e) and 6050K of the Code) as
  it may reasonably request to permit it to provide the Internal
  Revenue Service with sufficient information to allow proper notice
  to the Working Interest Owners in accordance with Sections 6223 and
  6050K of the Code.

7.8  Termination.
  Termination shall occur on the earlier of termination of the
  Partnership under Code section 708 (b) (1) or the date upon which
  the Partnership ceases to be a going concern. Upon termination the
  business shall be wound-up and concluded, and the assets shall be
  distributed to the Working Interest Owners as described below by the
  end of such calendar year (or, if later, within 90 days after the
  date of such termination). All assets shall be distributed to the
  Working Interest Owners as provided in Paragraph 7.9 through 7.11.

7.9  Reversion.
  First, all money representing unexpended contributions by any
  Working Interest Owner shall be returned to the contributor.

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7.10  Balancing.
  Second, the FMV capital accounts of the Working Interest Owners
  shall be determined under this Paragraph 7.10. The Unit Operator
  shall take the actions specified under this Paragraph 7.10 in order
  to cause the ratio of the Working Interest Owners FMV capital
  accounts to reflect as closely as possible their interests under
  this Agreement. The ratio of a Working Interest Owners FMV
  capital account is represented by a fraction, the numerator of which
  is the Working Interest Owners FMV capital account balance and
  the denominator of which is the sum of all Working Interest Owners
  FMV capital account balances. Such actions are hereafter referred to
  as balancing the FMV capital account, and when completed, the
  FMV capital accounts of the Working Interest Owners shall be
  referred to as being balanced. The manner in which the FMV
  capital accounts of the Working Interest Owners are to balanced
  under this Paragraph 7.10 shall be determined as follows:

(a)  The
  fair market value of all Partnership properties shall be determined
  and the gain or loss for each property which would have resulted if
  a sale thereof at such fair market value had occurred shall be
  allocated in accordance with Paragraph 4. If thereafter any Working
  Interest Owner has a negative FMV capital account balance, that is,
  a balance less than zero, such Working Interest Owner shall
  contribute an amount of money to the Partnership sufficient to
  achieve a zero balance FMV capital account. Any Working Interest
  Owner may contribute an amount of money to the Partnership to
  facilitate the balancing of the FMV capital accounts. If FMV capital
  accounts are not balanced, Paragraphs 7.10 (b) or (c) shall apply;

(b)  If
  all the Working Interest Owners consent, any money or an undivided
  interest in certain selected properties shall be distributed to one
  or more Working Interest Owners as necessary for the purpose of
  balancing the FMV capital accounts;

(c)  Unless
  (b) above applies, an undivided interest in each and every property
  shall be distributed to one or more Working Interest Owners in
  accordance with the ratios of their FMV capital accounts; and

(d)  If
  a property is to be valued under (a) above or distributed pursuant
  to (b) or (c) above, the fair market value of the property shall be
  agreed to by the Working Interest Owners. In the event all of the
  Working interest Owners do not reach agreement as to the fair market
  value of the property, the Unit Operator shall cause a nationally
  recognized independent engineering firm to prepare an evaluation of
  fair market value of such property.

7.11  Final
  Distribution. Third, after the FMV capital accounts of the
  Working Interest Owners have been adjusted, pursuant to Paragraph
  7.10 above, all other or remaining properties and interests then
  held by the Partnership shall be distributed to the Working Interest
  Owners in accordance with their FMV capital account balances.

7.12  Effect
  of Distribution. The Working Interest Owners specifically intend
  and agree that any distribution made under either Paragraphs 7.10 or
  7.11 will confer upon the distributee the actual economic ownership
  and equitable title to all those properties distributed in respect
  of such distributees Partnership capital account. If the title or
  form of ownership by which any Partnership property is held under
  the Agreement, or for purposes other than Partnership purposes, is
  different from that necessary to fully accomplish the foregoing
  intent, then all Working interest Owners agree to execute and
  deliver such deeds, bills of sale and other documents, and to take
  those other steps, as may be necessary or appropriate to secure to
  each Working Interest Owner the full economic ownership and title in
  that property to which that Working Interest Owner is entitled.

8.  Ad
  Valorem Taxes.

8.1  Compliance
  Responsibility. The unit Operator will make and file with proper
  taxing authorities all necessary ad valorem tax renditions and
  returns and will settle all valuations and pay all taxes arising
  from those returns before they become delinquent.

8.2  Information
  and Appeals. Each Working Interest Owner will promptly furnish
  the Unit Operator with copies of notices, assessments, levies or tax
  statements received by the Working Interest Owner pertaining to the
  taxes to be paid by the Unit Operator. If the Unit Operator
  considers any tax assessment improper, it may, at its sole
  discretion, protest within the time and manner prescribed by law and
  pursue the protest to a final determination.

8.3  Allocation
  of Taxes. All ad valorem taxes accruing after the Effective Date
  will be Unit Expense. Ad valorem taxes on Unit Equipment will be
  allocated to each item of Unit equipment in proportion to the taxing
  authorities basis for assessment against each item. Taxes
  allocated to each item will be further allocated per their

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relative percentages of ownership in
  that item. Except as may be otherwise provided in this Agreement, ad
  valorem taxes will be allocated to the Working Interest Owners of a
  Participating Area on the same basis as Unit Expense.

8.4  Taxes
  Imposed on Production. Each Working Interest Owner receiving in
  kind or separately disposing of all or part of the Unitized
  Substances allocated to any Tract will pay or cause to be paid all
  production, excise, and other taxes imposed upon or with respect to
  the production or handling of those Unitized Substances and will
  indemnify all Working Interest Owners, including the Unit Operator,
  against any liability for that payment.

8.5  Amendment
  of Tax Provisions. The Working Interest Owners agree that
  certain amendments in this Exhibit G may be necessary and will
  perform all acts required to effectuate those amendments for the
  Partnership to conform this Exhibit G to the requirements of final
  regulations to be issued under Section 704 (c) of the Code.

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EXHIBIT D

Attached to and made a part of
  that certain OperatingAgreement dated _______________ , 1996, by and betweenSaba petroleum, Inc., as Operator,and Geo Petroleum, Inc., as Non-Operator

SCHEDULE OF INSURANCE

Operator shall, at all times, carry
  for the benefit and protection of the Non-Operators, insurance as
  follows:

(a)  Statutory
  Workers Compensation and Employers Liability Insurance with
  limits of at least $1,000,000 per occurrence to comply with the laws
  of the State having jurisdiction.

(b)  Comprehensive
  General Liability Insurance (including Owners and Contractors
  Protective Liability and Contractual Liability) with Bodily Injury
  Liability limits of not less than $1,000,000 per occurrence and
  Property Damage Liability limits of not less than $1,000,000 per
  occurrence; $1,000,000 aggregate.

(c)  Automobile
  Bodily Injury and Property Damage Liability Insurance (including all
  owned, non-owned and hired cars) in amounts of not less than
  $1,000,000 for injuries to one person, $1,000,000 for all bodily
  injuries in one accident, and not less than $1,000,000 for property
  damage.