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                                                                   EXHIBIT 10.35



                                                                      APPENDIX A
                                                                  EXECUTION COPY






                           PURCHASE AND SALE AGREEMENT


         Reference is made to that certain Purchase and Sale Agreement dated
September 4, 1998, by and between PIONEER NATURAL RESOURCES USA, INC. ("Pioneer
USA"), and COSTILLA ENERGY, INC. ("Costilla"), (the "Prior Agreement"). Pursuant
to the Prior Agreement, Pioneer USA agreed to sell and Costilla agreed to
purchase Pioneer USA's interest in certain oil and gas leases, agreements,
contracts, real property, personal property, equipment and related rights.

         Pioneer USA and Costilla now desire to confirm the replacement and the
superceding of the Prior Agreement and enter into this Purchase and Sale
Agreement, and to add PIONEER RESOURCES PRODUCING, L.P. ("Pioneer LP") as a
Party.

         Pioneer USA, Pioneer LP and Costilla have entered into that Option to
Purchase Agreement dated December 16, 1998 (the "Option Agreement").

         For good and valuable consideration and for the mutual covenants herein
contained, Pioneer USA, Pioneer LP (the "Seller") and Costilla (the "Purchaser")
hereby agree as follows:

                          ARTICLE 1. SALE AND PURCHASE

         1.1. Effective Time. The effective time and date of the purchase and
sale contemplated hereby shall be 7:00 a.m. January 1, 1999, at the site of the
respective Subject Properties as defined below (the "Effective Time").

         1.2. Sale and Purchase. Subject to the terms and conditions herein
contained, at Closing, as defined below, and effective as of the Effective Time,
Seller shall sell, assign, transfer and convey to Purchaser, and Purchaser shall
purchase, accept and receive, the right, title, and interest, if any, of Seller
as of the Effective Time [and, as to 1.2(a) below (the "Sale Interest")] in and
to the following described assets, less and except the Excluded Assets (the
"Assets"):

         (a)      the oil, gas and mineral leases and leasehold interests
                  appurtenant to the wells and/or Units described in Exhibit "A"
                  attached hereto and incorporated herein to the extent and only
                  to the extent they cover the lands described on Exhibit C
                  attached hereto together with Seller's interest in any pooled,
                  communitized or unitized acreage to the extent and only to the
                  extent any such interest directly pertains to such wells and
                  lands and all of the rights appurtenant thereto (the


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                  "Subject Properties") (said interests to include all of the
                  lands covered by said leases appurtenant to the wells on
                  Exhibit "A" except in the instance(s) where Seller has
                  retained a well on or other rights or interests in said leases
                  and leaseholds in which event Purchaser shall receive the
                  pro-ration acreage attributable to the affected well(s) listed
                  on Exhibit "A" (or other minimum spacing unit or acreage
                  applicable) or such other lands as Purchaser and Seller may
                  agree, said lands to be described on Exhibit "A" to the
                  Assignment and Bill of Sale.);

         (b)      to the extent, and only to the extent, attributable or
                  allocable to the Subject Properties: (1) all wells (including,
                  but not limited to, the wells described in Exhibit "A" and all
                  other oil, gas, injection and water wells whether plugged or
                  unplugged and whether abandoned or not) ("Wells"), equipment,
                  gathering pipelines, gas facilities, gathering systems,
                  gathering, storage, distribution, treating, processing and
                  disposal facilities and tanks, tools, buildings, and all other
                  real or tangible personal property and fixtures which, as to
                  each of the foregoing items, are located on or directly and
                  solely related to the Subject Properties, including, without
                  limitation, items of personal property described in Schedules
                  1, and 2, to Exhibit "A", and specifically including portable
                  tools, snow vehicles, equipment, inventory, and the vehicles
                  listed on Schedule 5 to Exhibit "A" (collectively, the
                  "Rolling Stock") used exclusively on or exclusively
                  appurtenant to the Subject Properties or the Wells but except
                  as provided above, excluding personal property not solely
                  appurtenant to the Wells and personal property temporarily
                  located on the Subject Properties; (2) all oil, gas, mineral
                  and other hydrocarbon substances produced, saved and sold on
                  or after the Effective Time; (3) to the extent the same are
                  assignable or transferable by Seller, all orders, contracts,
                  title opinions and documents, abstracts of title, leases,
                  deeds, unitization agreements, pooling agreements, operating
                  agreements, division of interest statements, participation
                  agreements, gas purchase, sale transportation and processing
                  agreements and all other agreements and instruments; (4) all
                  surface leasehold and surface fee estates (but only to the
                  extent overlying and within the boundaries of the lands
                  comprising the Subject Properties or exclusively appurtenant
                  to or exclusively held and exclusively used in connection with
                  the operations of the Subject Properties), easements,
                  rights-of- way, licenses, authorizations, permits and similar
                  rights and interests, limited by and subject to the rights,
                  conditions and restrictions of third parties; (5) to the
                  extent assignable and limited by and subject to the rights of
                  third parties, lease files, land files, operating files, well
                  files, oil and gas sales contract files, gas processing files,
                  logs, test data, production histories, division order files,
                  abstracts, title files and materials, and all other books,
                  files and records (the "Records"), and all rights thereto,
                  limited by and subject to the rights of third parties; (6) all
                  other rights, privileges, benefits and powers conferred upon
                  the owner and holder of interests in the Subject Properties;
                  (7) all other interests in oil, gas and other minerals of
                  whatever nature directly appurtenant to the Subject
                  Properties, including, without limitation, all fee mineral and
                  royalty interests, reversionary interests, farmout rights and
                  overriding royalty interests; (8) a license, on Seller's
                  customary terms,




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                  to all existing seismic and geophysical raw data possessed by
                  Seller on the Effective Time, wholly owned by Seller, to the
                  extent and only to the extent covering the area directly
                  within the boundaries of the Subject Properties or within one
                  mile of the Subject Properties (but only to the extent it does
                  not cross over onto the boundary of a retained interest of
                  Seller or an Excluded Asset) and only to the extent permitted
                  by the applicable agreements and subject to all rights of
                  third parties and all conditions or restrictions imposed by
                  said third parties.

         (c)      to the extent and only to the extent necessary for the
                  ownership, use or development of the Subject Properties and
                  limited by and subject to the rights of and conditions or
                  restrictions imposed by third parties and applicable
                  agreements, the concurrent, nonexclusive right of ingress and
                  egress with respect to the fee, fee mineral, leasehold and
                  royalty retained or owned by Seller in the area of the Subject
                  Properties.

         (d)      the wells, real or personal property (or mixed property),
                  interests, assets, facilities or equipment identified on
                  Exhibit "A", Schedules 1, 2, 3, 4, 5 or 6, which may or may
                  not be expressly included in the engineering data previously
                  furnished to Purchaser but which constitute a part of the
                  Subject Properties and those interests, assets, facilities and
                  equipment appurtenant to the Subject Properties but which are
                  identified subsequent to the Execution Date by and placed on
                  Exhibit "A" or any of the Schedules listed immediately above
                  prior to Closing by Seller.

         (e)      the interests described on Exhibit "A-I" attached hereto when
                  offered by the owners thereof prior to Closing shall be
                  purchased by Purchaser at Closing for a value proportionate to
                  the allocated value of Seller's related interest in said
                  Asset, whether or not such interests are acquired by the
                  Seller on or prior to Closing, unless such interests are
                  subject to material defects in title, excluding Permitted
                  Encumbrances, which have arisen entirely after the Execution
                  Date , and Purchaser so advises Seller no later than 10
                  Business Days prior to closing, in which case, at Seller's
                  sole option, (i) such affected interest shall be excluded from
                  the Assets or (ii) the value with respect to such interest
                  shall be reduced by the lesser of the cost to cure said defect
                  or the said defect value not to exceed the proportionate
                  allocated value for said interest and such interest shall be
                  conveyed to Purchaser at Closing as part of the Assets. All
                  such interests acquired by Purchaser shall be deemed to be a
                  part of the Sale Interest and subject to the terms of this
                  Agreement for all purposes and the Purchase Price shall be
                  increased at Closing by the amount allocated to such acquired
                  interests.

         (f)      the undeveloped leasehold identified in Exhibit A and more
                  fully described on Schedule 4 to Exhibit "A" together with all
                  contract rights, personal property or other rights directly
                  related thereto to the extent assignable, and subject to and
                  limited by the rights of third parties and Related Agreements.

         (g)      the domestic U.S. mineral interests, royalty and overriding
                  royalty interests to the extent covering lands outside the
                  areas, land, counties, or parishes in the states




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                  described on Exhibit E, with Seller expressly retaining, among
                  other things, all right, title and interest in the domestic
                  U.S. mineral interests, royalty and overriding royalty
                  interests inside the areas, land, counties, or parishes in the
                  states described on Exhibit E, (with such retained interests
                  of Seller referred to as the "Excluded Minerals", with
                  Excluded Minerals being considered Excluded Assets for
                  purposes of this Agreement) provided, however, as to such
                  Excluded Minerals should any land ultimately and specifically
                  described on an Exhibit "A" to any Assignment and Bill of Sale
                  delivered to Purchaser by Seller, pursuant to this Agreement
                  (and an interest in said land is intended to be conveyed
                  thereby) fall within the description for and conflict with the
                  description of Excluded Minerals, then as to and only as to
                  the specific lands described in the said Assignment and Bill
                  of Sale between Seller and Purchaser, all mineral, royalty and
                  overriding royalty interests of Seller, if any, to the extent
                  and only to the extent directly pertaining to and within the
                  boundaries of said specifically described lands shall not be
                  considered to be Excluded Minerals and shall be considered to
                  have been conveyed to Purchaser pursuant to the terms of this
                  Agreement, and only to the extent assignable, and subject and
                  limited by the rights of third parties and Related Agreements.

         (h)      the plants (the "Gas Plants") described on Schedule 6 to
                  Exhibit A and gathering systems appurtenant thereto to the
                  extent assignable and subject to and limited by the rights of
                  third parties and Related Agreements.

         1.3. Excluded Assets. Notwithstanding anything in this Agreement to the
contrary, the Assets do not include and Purchaser agrees and acknowledges that
Seller has reserved and retained from the Assets and hereby reserves and retains
unto itself any and all rights, titles and interests in and to (a) Excluded
Minerals, leasehold and other interests pertaining to lands and leasehold not
within the boundaries of the lands comprising the Subject Properties (b) the
right of ingress and egress with respect to the Assets for the purpose of
mining, drilling, exploring, operating, holding, producing and developing any
interest including, without limitation, the oil, gas and mineral leasehold, fee,
fee mineral and royalty interests retained or owned by Seller for oil, gas,
minerals and other hydrocarbon substances, or other lawful substances, (c)
seismic, geologic and geophysical records, information, and interpretations
relating to the Assets, subject to Section 1.2 (b) (8) above and Section 9.5
(iii), (d) any and all records which consist of previous or contemporaneous
offers, discussions, or analyses associated with the purchase, sale or exchange
of the Assets or any part thereof, proprietary or interpretive information,
reserve data, internal communications, personnel information unrelated to the
personnel interviewed and evaluated by Purchaser pursuant to Section 13.19
below, tax information, information covered by a non-disclosure obligation and
information or documents covered by a legal privilege;(the "Excluded Records")
(e) originals or copies of Excluded Records and copies of records retained by
Seller; (f) all claims, rights and causes of action against third parties,
asserted and unasserted, known and unknown relating to the period prior to the
Effective Time relating to the Assets; (g) to the extent Seller has reserved
interests, including deep rights, or to the extent Seller currently uses or may
need to use the following rights for its operations in the area of the Subject
Properties Seller reserves concurrent interests in any and all applicable
easements, rights of way, licenses, permits, contracts or other rights relating
to the reserved interests or interests in the




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area; (h) communication equipment, leased or rented equipment or facilities,
office equipment, computer equipment and software; (i) all pipelines, gas
plants, equipment and rights of way owned or operated by Seller or any affiliate
of Seller and which are not solely appurtenant to the Wells or used exclusively
therewith (except the Gas Plants); (j) all oil in storage at the Effective Time;
(k) wells, leases or leasehold interests or other interests described on Exhibit
A or any Schedule thereto, which pursuant to and in accordance with this
Agreement are not included in an Assignment and Bill of Sale or another
conveyancing instrument delivered to Purchaser on or after Closing; (l)
partnership interests, the Mesa Offshore Royalty Trust, other royalty trust
interests or other interests of whatever nature listed on Exhibit A which Seller
determines in its sole discretion it will be unable to convey at Closing, or
unable to convey in a timely manner or without undue conditions or restrictions
(as determined in Seller's sole discretion) in which event Seller will advise
Purchaser, the affected interest will be removed from this Agreement, and an
adjustment in the Purchase Price will be made at Closing by the allocation for
said affected interest; (m) an overriding royalty equal to an undivided 1/32nd
of eight eighths proportionately reduced to the interest conveyed by Seller
pursuant to this Agreement in and to the WARWINK West wells and lands
appurtenant thereto as identified in Exhibit A or Exhibit C to this Agreement;
and (n) items excluded elsewhere in this Agreement, (a) through (n),
collectively, the "Excluded Assets").

         1.4. Defined Terms.


                  "Act" means the Securities Act of 1933.

                  "Adjusted Purchase Price" has the meaning set forth in Section
                  2.1.

                  "Affiliate" means, as to any Person each other Person that
                  directly or indirectly (through one or more intermediaries or
                  otherwise) controls, is controlled by, or is under common
                  control with, such Person.

                  "Agents" means, as to any Person, its employees, contractors,
                  lenders and consultants.

                  "Assets" has the meaning as set forth in Section 1.2.

                  "Business Day" or "Business Days" means a day or days
                  excluding Saturdays, Sundays and U.S. Legal Holidays.

                  "Casualty Loss" has the meaning as set forth in Section 12.3.

                  "Claims" has the meaning as set forth in Section 9.2.a.

                  "Closing" means the consummation of the purchase and sale of
                  the Assets by Purchaser and Seller as contemplated in this
                  Agreement.

                  "Closing Date" has the meaning as set forth in Section 8.1.






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                  "Code" means the United States Internal Revenue Code of 1986
                  as Amended.

                  "Confidentiality Agreement" has the meaning as set forth in
                  Section 13.2.

                  "Days" or "days" means calendar days unless stated otherwise.

                  "Effective Time" has the meaning as set forth in Section 1.2.

                  "Environmental Laws" means any and all Laws that relate to:
                  (a) the prevention of pollution or environmental damages, (b)
                  the abatement, remediation or elimination of pollution or
                  environmental damage, (c) the protection of the environment
                  generally, and/or (d) the protection of Persons or property
                  from actual or potential exposure (or the effects of exposure)
                  to pollution or environmental damage; including without
                  limitation, the Clean Air Act, as amended, the Clean Water
                  Act, as amended, the Comprehensive Environmental Response,
                  Compensation and Liability Act of 1980, as amended, the
                  Federal Water Pollution Control Act, as amended, the Resource
                  Conservation and Recovery Act of 1976, as amended, the Safe
                  Drinking Water Act, as amended, the Toxic Substance and
                  Control Act, as amended, the Superfund Amendments and
                  Reauthorization Act of 1986, as amended the Hazardous and the
                  Solid Waste Amendments Acts of 1984, as amended, and the Oil
                  Pollution Act of 1990, as amended.

                  "Excluded Assets" has the meaning as set forth in Section 1.3.

                  "Execution Date" means December 16, 1998.

                  "Final Accounting" has the meaning as set forth in Section
                  13.17.B.

                  "Final Accounting Date" has the meaning as set forth in
                  Section 13.17.B.

                  "Imbalances" has the meaning as set forth in Section 9.1.

                  "Knowledge of Seller [or Purchaser, as the case may be]", or
                  "to the best of Seller's [or Purchaser's as the case may be]
                  knowledge and belief" or words of similar import shall mean
                  only the then existing actual non-privileged knowledge of any
                  president or vice president (without obligation of further
                  inquiries) of Seller [or Purchaser, as the case may be], and
                  is not intended to imply that such party in fact has actual
                  knowledge of the subject matter to which such terms apply.

                  "Laws" means laws, statutes, ordinances, permits, decrees,
                  orders, judgments, rules or regulations (including without
                  limitation Environmental Laws) which are promulgated, issued
                  or enacted by a governmental entity (whether federal, state or
                  local) or tribal authority having appropriate jurisdiction.



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                  "Letter Agreement" has the meaning as set forth in Section
                  13.2.

                  "NORM" has the meaning as set forth in Section 9.2.c.

                  "Notice Period" has the meaning as set forth in Section 9.2.d.

                  "Party" means Purchaser or Seller.

                  "Parties" means collectively the Purchaser and Seller.

                  "Permitted Encumbrances" has the meaning as set forth in
                  Section 3.2.

                  "Person" means and individual, corporation, partnership,
                  association, join stock company, trust or trustee thereof,
                  estate or executor thereof, unincorporated organization or
                  joint venture, court or other governmental unit or other
                  agency or subdivision thereof, or any other legally
                  recognizable entity.

                  "Gas Plants"  has the meaning set forth in Section 1.2(h);

                  "Preferential Rights" has the meaning set forth in Section 3.4

                  "Property" is the real property or properties, surface and
                  subsurface, in which and on which the Assets, or any portion
                  thereof, are located or pertain and includes the land, if any,
                  described or referred to in Exhibit "A".

                  "Property Taxes" has the meaning as set forth in Section 11.1.

                  "Purchase Price"  has the meaning as set forth in Section 2.1.

                  "Records" has the meaning as set forth  in Section 1.2.b.

                  "Related Agreements" has the meaning as set forth in Section
                  9.10.

                  "Representative" and "Representatives" have the same meanings
                  as set forth in Section 9.2.f.

                  "Sale Interest" has the meaning as set forth  in Section 1.2.

                  "Shares" has the meaning ascribed thereto in the Option
                  Agreement.

                  "Subject Properties" has the meaning as set forth in Section
                  1.2.a.

                  "Suspense Funds" has the meaning as set forth  in Section 9.1.

                  "Wells" has the meaning as set forth  in Section 1.2.b.




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                            ARTICLE 2. CONSIDERATION

2.1. Consideration. As consideration for this Agreement and the benefits
contained herein, at Closing, Purchaser shall pay to Seller Two Hundred
Ninety-Four Million Dollars $294,000,000 (US$) (the "Purchase Price"), as may be
adjusted pursuant hereto (the "Adjusted Purchase Price"). The Purchase Price
will not be reduced or adjusted in any way because of the Option Consideration
as defined in the Option Agreement, but is in addition to the Option
Consideration.

         2.2. Manner of Payment. At Closing, except as provided in the following
Section 2.3, Purchaser shall pay Seller or Seller's designee the Adjusted
Purchase Price by wire transfer of immediately available funds as follows:

                  Account:           Pioneer Natural Resources USA, Inc.
                  Account No:        1290288845
                                     NationsBank, N.A.
                  ABA Routing No:    111000012
                  Attention:         Denise Ashford Smith
                                     NationsBank  N.A.- Dallas
                                     (214) 508-1261

         2.3. Like Kind Exchange Option. Seller and Purchaser hereby agree that
Seller, in lieu of the sale of the Assets to Purchaser for the cash
consideration provided herein, shall have the right at any time prior to Closing
to assign all or a portion of its rights under this Agreement to a qualified
intermediary in order to accomplish the transactions contemplated hereby in a
manner that will comply, either in whole or in part, with the requirements of a
like kind exchange pursuant to Section 1031 of the Internal Revenue Code of
1986, as amended ("Code"). In the event Seller assigns its rights under this
Agreement pursuant to this Section 2.3, Seller agrees to notify Purchaser in
writing of such assignment before Closing. If Seller assigns its rights under
this Agreement, Purchaser agrees to (i) consent to Seller's assignment of its
rights in this Agreement, (ii) deposit the Adjusted Purchase Price with the
qualified escrow or qualified trust account designated by Seller at Closing, and
(iii) take such further actions, at Seller's cost, as are reasonably required to
effectuate the transactions contemplated hereby pursuant to Code Section 1031,
but, in so acting, Purchaser shall have no liability to any Party in connection
with such actions. All risks associated with any like kind exchange and
compliance thereof with applicable laws, rules and regulations shall be the sole
responsibility of Seller, and Seller agrees to indemnify and hold Purchaser
harmless from and against all costs, expenses, liabilities and obligations which
arise as a result of Purchaser's agreement contained in this Section 2.3.

         2.4 Intentionally Deleted

         2.5 ALLOCATIONS. THE PURCHASE PRICE PLUS THE OPTION CONSIDERATION (AS
DEFINED IN THE OPTION AGREEMENT) IS ALLOCATED TO THE ASSETS BY PURCHASER AS
PROVIDED ON SCHEDULE 2.5 ATTACHED HERETO.



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                                ARTICLE 3. TITLE

3.1. Title and Due Diligence. Purchaser has performed extensive due diligence
regarding the Assets, including the ownership and title of Seller thereof, and
Purchaser accepts the condition of title to the Assets as of the Execution Date
including all liens and encumbrances.

         3.2. Definition of Permitted Encumbrances. As used herein, the term
"Permitted Encumbrances" shall mean the following items, provided none of the
following items shall operate, as of Closing, to increase the working interest
of Seller owned as of the Execution Date for any of the Subject Properties,
without a corresponding increase in the applicable net revenue interest, or
decrease the net revenue interest of Seller owned as of the Execution Date for
any of the Subject Properties:

         (a)      lessors' royalties, overriding royalties, production payments,
                  reversionary interests and similar burdens;

         (b)      division orders and sales contracts;

         (c)      Preferential rights to purchase or rights of first refusal in
                  existence on the Execution Date

         (d)      rights or requirements to consent to assignments, conveyances,
                  transfers or other disposals, which rights and/or requirements
                  are in existence on the Execution Date;

         (e)      materialman's, mechanic's, repairman's, employee's,
                  contractor's, operator's, tax, and other similar liens,
                  assessments or charges arising in the ordinary course of
                  business for obligations that are not yet due or delinquent,
                  or if delinquent, that are being contested by Seller or the
                  affected operator in good faith in the normal course of
                  business;

         (f)      rights to consent by, required notices to, filings with, or
                  other actions by governmental entities in connection with the
                  sale or conveyance of oil and gas leasehold and fee estates or
                  interests therein, which consents, notices, filings and/or
                  other actions are customarily obtained after closing;

         (g)      easements, rights-of-way, servitudes, permits, surface leases
                  and other rights in respect of surface operations affecting
                  the Assets which in the aggregate are not such as to interfere
                  materially with the operation or use of any of the Subject
                  Properties or materially reduce the value thereof;

         (h)      rights reserved to or vested in any governmental, statutory or
                  public authority to control or regulate any of the Assets in
                  any manner, and all applicable laws, rules and orders of any
                  governmental authority affecting the Assets;





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         (i)      operating agreements, unit agreements, unit operating
                  agreements, pooling agreements and pooling designations
                  affecting the Subject Properties which are of public record or
                  contained in the Records or otherwise available to Purchaser
                  and all actions taken or operations occurring in the normal
                  course of business pursuant to such instruments;

         (j)      title defects that Purchaser may have expressly waived in
                  writing or which are deemed to have been waived pursuant this
                  Agreement;

         (k)      all conveyances, reservations and exceptions of public record
                  or contained in the Records affecting the Assets which in the
                  aggregate are not such as to interfere materially with the
                  operation or use of any of the Subject Properties or
                  materially reduce the value thereof;

         (l)      all liens and encumbrances in existence on the Execution Date;
                  and

         (m)      all other liens, charges, encumbrances, contracts, agreements,
                  instruments, obligations, defects and irregularities affecting
                  the Assets which are not such as to interfere materially with
                  the operation or use of the affected Subject Properties or
                  materially reduce the value thereof.

         3.3 Environmental and Physical Assessment. Purchaser has performed
extensive due diligence and examinations regarding the Assets and has found the
environmental and physical conditions thereof to be satisfactory and accepts the
conditions of the Assets without the need for further due diligence. Until the
Closing, Purchaser and its Agents shall keep any data or information acquired by
all such examinations and the results of all analyses of such data and
information strictly confidential and not disclose any of the same to any Person
unless otherwise required by law or regulation and then only after written
notice to Seller of the need for disclosure and the identity of all intended
recipients. PURCHASER HEREBY INDEMNIFIES, DEFENDS AND HOLDS SELLER AND ITS
AFFILIATES AND THEIR RESPECTIVE REPRESENTATIVES HARMLESS FROM AND AGAINST ANY
AND ALL CLAIMS OF WHATEVER NATURE FOR OR RELATED TO PERSONAL INJURY, DEATH OR
PROPERTY DAMAGE ARISING OUR OF OR AS A RESULT OF THE ACTIVITIES BY OR ON BEHALF
OF PURCHASER OR ITS AGENTS ON OR RELATED TO THE ASSETS IN CONDUCTING ALL SUCH
ENVIRONMENTAL AND PHYSICAL EXAMINATIONS.

         3.4. Preferential Purchase Rights. Upon written notification to Seller
by Purchaser identifying Persons (and their addresses) holding preferential
rights to purchase affecting the Assets ("Preferential Rights") actually
received by Seller not later than thirty (30) days subsequent to the Execution
Date or upon Seller's own initiative but without any obligation to so initiate,
Seller shall send notice of this Agreement to all such Persons offering to sell
to each such Person the Assets for which a preferential right is held on and
subject to the terms hereof and for the same allocated value for such Assets
reflected on Exhibit "A". Notwithstanding the foregoing, Purchaser shall be
ultimately responsible for obtaining all waivers from each and every applicable
Person, including, but not limited to, lessors, joint interest owners, farmors,
sublessors, assignors, grantors, co-parties to Agreements, or other third
parties and will provide




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Seller on or before the Closing Date with proof of each waiver. Purchaser shall
be entitled to review and approve the form of all such notices; provided, that
such approval shall not be unreasonably withheld or delayed. If, prior to
Closing, any of such Persons asserting a preferential purchase right notifies
Seller that it intends to consummate the purchase of the Assets to which it
holds a preferential purchase right pursuant to the terms and conditions hereof,
or if the period allowed for acceptance of the notice provided by Seller has not
expired or will not expire as of Closing then such Assets shall be excluded at
Closing from the Assets to be conveyed to Purchaser under this Agreement and the
Purchase Price shall be reduced by the allocated value of such Assets reflected
in Exhibit "A"; provided, however, that if the holder of such preferential right
fails to consummate the purchase of such Assets before, on or within a
reasonable time after the Closing Date (taking into account the notice or
acceptance period for the right of preferential purchase and a reasonable amount
of time, as determined by Seller, to assemble documentation for such separate
sale), then Seller shall promptly so notify Purchaser, and Seller shall sell
immediately to Purchaser, and Purchaser shall purchase from Seller, for a price
equal to the allocated value of such Assets and upon the other terms of this
Agreement, the Assets to which the preferential purchase right was asserted. All
Assets for which all preferential purchase rights have been waived or have not
been accepted prior to expiration after timely notice of the acceptance period
by the holder of such right, shall be sold to Purchaser at Closing pursuant and
subject to the provisions of this Agreement. If one (1) or more of the holders
of any preferential purchase rights notifies Seller subsequent to Closing that
it intends to assert its preferential purchase right, Seller shall give notice
thereof to Purchaser, whereupon Purchaser shall satisfy all such preferential
purchase right obligations of Seller to such holders including, but not limited
to, transferring the affected Assets to the holder of such rights and shall
indemnify and hold Seller harmless from and against any and all Claims,
liabilities, losses, costs and expenses (including, without limitation, court
costs and reasonable attorneys' fees) in connection therewith, and Purchaser
shall be entitled to receive upon satisfaction in full by Purchaser of all the
foregoing obligations all proceeds received from such holders in connection with
such preferential purchase rights. Purchaser shall indemnify and hold harmless
Seller from and against any and all Claims, liabilities, losses, costs and
expenses (including, without limitation, court costs and reasonable attorneys'
fees) asserted or incurred at any time (whether before, on or after Closing)
with respect to or arising directly or indirectly from the claims of any Person
to a preferential purchase right affecting any of the Assets transferred to
Purchaser hereunder.

         3.5 Will O Gas Plant. Notwithstanding the other terms of this
Agreement, unless the surface lease for operation of the Will O Gas Plant and
the surface lease for road use and access to the oil and gas leases out of the
Subject Properties that deliver gas to the Will O Gas Plant are renewed or
entered into in substantially the form attached hereto as Exhibit "F-1 and F-2"
on or prior to the Closing Date, the Will O Gas Plant and associated oil and gas
leases, equipment and vehicles (as described on page 3 of 3 on Schedule 6 to
Exhibit "A" and on page 86 and page 154 of Exhibit "A", or elsewhere on Exhibit
"A") shall be removed from this Agreement and not be included in the Closing and
the Purchase Price shall be reduced at Closing by the allocated value for said
interests amounting to $10,732,918.



                                       11
<PAGE>   12

                      ARTICLE 4. SELLER'S REPRESENTATIONS AND DISCLAIMERS

         Seller represents to Purchaser that:

         4.1. Existence. Pioneer Natural Resources USA, Inc. is a Delaware
corporation, duly formed, validly existing and in good standing under the laws
of the State of Delaware. Pioneer Resources Producing L.P. is a limited
partnership duly formed, validly existing and in good standing under the laws of
the State of Delaware.

         4.2. Power. Seller has the requisite power and authority to enter into
and perform this Agreement and the transactions contemplated hereby. The
execution, delivery and performance of this Agreement by Seller, and the
transactions contemplated hereby, will not (a) violate any provision of Seller's
Articles of Incorporation or other governing documents, (b) conflict with,
result in a breach of, constitute a default (or an event that with the lapse of
time or notice, or both would constitute a default) under any agreement or
instrument to which Seller is a Party or by which Seller is bound, (c) to the
best knowledge and belief of Seller, violate any judgment, order, ruling, or
decree applicable to Seller and entered or delivered in a proceeding in which
Seller was or is a named Party, or (d) to the best knowledge and belief of
Seller, violate any applicable law, rule or regulation.

         4.3. Authorization. The execution, delivery and performance of this
Agreement and the transactions contemplated hereby have been duly and validly
authorized by all requisite action on the part of Seller. This Agreement has
been duly executed and delivered on behalf of Seller, and at the Closing all
documents and instruments required hereunder to be executed and delivered by
Seller shall be duly executed and delivered. This Agreement and such documents
and instruments shall constitute legal, valid and binding obligations of Seller
enforceable in accordance with their terms subject, however, to the effect of
bankruptcy, insolvency, reorganization, moratorium and similar laws from time to
time in effect relating to the rights and remedies of creditors, as well as to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).

         4.4. Brokers. Seller has incurred no obligation or liability,
contingent or otherwise, for brokers' or finders' fees in respect of the matters
provided for in this Agreement which will be the responsibility of Purchaser,
and any such obligation or liability that might exist shall be the sole
obligation of Seller.

         4.5. Foreign Person. Seller is not a "foreign person" within the
meaning of the Code.

         4.6. Permits. To the best of Seller's knowledge Seller possesses all
material licenses, permits, certificates, orders, approvals and authorizations
necessary to own the Assets and to carry on its business as now being conducted.

         4.7. Compliance with Law. To the best of Seller's knowledge, Seller is
in material compliance with all laws, ordinances, rules, regulations and orders
applicable to the Assets, including, without limitation, all environmental laws,
ordinances, rules, regulations and orders,




                                       12
<PAGE>   13

except to the extent of any non-compliance that is not reasonably expected to
result in a material adverse affect on the Assets.

         4.8. Taxes. All ad valorem, property, production, severance, excise,
and similar taxes and assessments based on or measured by the ownership of
property or the production of hydrocarbons or the receipt of proceeds therefrom
attributable to the Assets that have become due and payable have been properly
and timely paid, except to the extent of any failure that is not reasonably
expected to result in a material adverse effect on the Assets, and except to the
extent that such taxes are due and payable but contested, protested or appealed
by Seller.

         4.9. Litigation. To Seller's best knowledge and belief, no litigation,
investigation or other proceeding in which Seller (or its direct predecessor in
title) is a named Party affects any of the Assets whether pending or threatened
in writing which is based upon omissions, events or occurrences prior to the
date of this Agreement, other than as disclosed on Schedule 4.9 attached hereto.

         4.10. LIMITATION AND DISCLAIMER OF REPRESENTATIONS AND WARRANTIES. THE
EXPRESS REPRESENTATIONS AND/OR WARRANTIES OF SELLER CONTAINED IN THIS AGREEMENT
ARE EXCLUSIVE AND ARE IN LIEU OF ALL OTHER REPRESENTATIONS AND WARRANTIES,
EXPRESS, IMPLIED, STATUTORY, OR OTHERWISE, AND THE REPRESENTATIONS AND/OR
WARRANTIES CONTAINED HEREIN SHALL TERMINATE IN ALL RESPECTS UPON CLOSING. ANY
ASSIGNMENT AND BILL OF SALE OR OTHER CONVEYANCE EXECUTED AND DELIVERED PURSUANT
HERETO SHALL BE: (a) WITHOUT ANY WARRANTY OR REPRESENTATION OF TITLE, EITHER
EXPRESS, IMPLIED, STATUTORY OR OTHERWISE; (b) WITHOUT ANY EXPRESS, IMPLIED,
STATUTORY OR OTHER WARRANTY OR REPRESENTATION AS TO THE CONDITION, QUANTITY,
QUALITY, FITNESS FOR A PARTICULAR PURPOSE, CONFORMITY TO MODELS OR SAMPLES OF
MATERIALS OR MERCHANTABILITY OF ANY OF THE ASSETS OR THEIR FITNESS FOR ANY
PURPOSE; AND (c) WITHOUT ANY OTHER EXPRESS, IMPLIED, STATUTORY OR OTHER WARRANTY
OR REPRESENTATION WHATSOEVER. AT CLOSING, PURCHASER SHALL HAVE INSPECTED OR
WAIVED ITS RIGHT TO INSPECT THE RECORDS AND THE ASSETS FOR ALL PURPOSES AND
SATISFIED ITSELF AS TO THE PHYSICAL AND ENVIRONMENTAL CONDITION OF THE ASSETS
AND PROPERTY BOTH SURFACE AND SUBSURFACE, INCLUDING BUT NOT LIMITED TO
CONDITIONS SPECIFICALLY RELATED TO THE PRESENCE, RELEASE OR DISPOSAL OF
HAZARDOUS SUBSTANCES. PURCHASER IS RELYING SOLELY UPON ITS OWN INSPECTION OF THE
ASSETS AND PROPERTY, AND, PURCHASER SHALL ACCEPT ALL OF THE SAME IN THEIR "AS
IS, WHERE IS" CONDITION. IN ADDITION, EXCEPT AS EXPRESSLY PROVIDED OTHERWISE IN
THIS AGREEMENT, SELLER MAKES NO WARRANTY OR REPRESENTATION, EXPRESS, IMPLIED,
STATUTORY OR OTHERWISE, AS TO THE ACCURACY OR COMPLETENESS OF ANY DATA, REPORTS,
RECORDS, PROJECTIONS, INFORMATION OR MATERIALS NOW, HERETOFORE OR HEREAFTER
FURNISHED OR MADE AVAILABLE TO PURCHASER IN CONNECTION WITH THIS AGREEMENT,
INCLUDING, WITHOUT LIMITATION, ANY DESCRIPTION OF THE ASSETS, PRICING





                                       13
<PAGE>   14

ASSUMPTIONS, OR QUALITY OR QUANTITY OF HYDROCARBON RESERVES (IF ANY)
ATTRIBUTABLE TO THE ASSETS OR THE ABILITY OR POTENTIAL OF THE ASSETS TO PRODUCE
HYDROCARBONS OR THE ENVIRONMENTAL CONDITION OF THE ASSETS OR PROPERTY OR ANY
OTHER MATTERS CONTAINED IN CONFIDENTIAL INFORMATION OR ANY OTHER MATERIALS
FURNISHED OR MADE AVAILABLE TO PURCHASER BY SELLER OR BY SELLER'S AGENTS OR
REPRESENTATIVES. ANY AND ALL SUCH DATA, RECORDS, REPORTS, PROJECTIONS,
INFORMATION AND OTHER MATERIALS FURNISHED BY SELLER OR BY SELLER'S AGENTS OR
REPRESENTATIVES OR OTHERWISE MADE AVAILABLE TO PURCHASER OR PURCHASER'S
REPRESENTATIVES ARE PROVIDED TO OR FOR THE BENEFIT OF PURCHASER AS A
CONVENIENCE, AND SHALL NOT CREATE OR GIVE RISE TO ANY LIABILITY OF OR AGAINST
SELLER OR SELLER'S AGENTS OR REPRESENTATIVES. ANY RELIANCE ON OR USE OF THE SAME
SHALL BE AT PURCHASER'S SOLE RISK.

         THE ASSIGNMENTS AND BILLS OF SALE OR OTHER CONVEYANCES TO BE DELIVERED
BY SELLER AT CLOSING SHALL EXPRESSLY SET FORTH THE LIMITATIONS AND DISCLAIMERS
OF REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS PARAGRAPH.

ARTICLE 5.  REPRESENTATIONS, WARRANTIES AND COVENANTS OF PURCHASER

         Purchaser represents and warrants to and covenants with Seller that:

         5.1. Existence. Purchaser is a Delaware corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.

         5.2. Power. Purchaser has the requisite power and authority to enter
into and perform this Agreement and the transactions contemplated hereby. The
execution, delivery and performance of this Agreement by Purchaser, and the
transactions contemplated hereby, will not (a) violate any provision of any
Purchaser's certificate or articles of incorporation or organization, as the
case may be, bylaws, regulations or other governing documents; (b) to the best
knowledge and belief of Purchaser, conflict with, result in a breach of,
constitute a default (or an event that with the lapse of time or notice, or both
would constitute a default) under any agreement or instrument to which Purchaser
is a Party or by which Purchaser is bound, (c) to the best knowledge and belief
of Purchaser, violate any judgment, order, ruling, or decree applicable to
Purchaser and entered or delivered in a proceeding in which Purchaser was or is
a named Party; or (d) to the best knowledge and belief of Purchaser, violate any
applicable law, rule or regulation.

         5.3. Authorization. The execution, delivery and performance of this
Agreement and the transactions contemplated hereby have been duly and validly
authorized by all requisite action on the part of Purchaser. This Agreement has
been duly executed and delivered on behalf of Purchaser, and at the Closing all
documents and instruments required hereunder to be executed and delivered by
Purchaser shall have been duly executed and delivered. This



                                       14
<PAGE>   15

Agreement and such documents and instruments shall constitute legal, valid and
binding obligations of Purchaser enforceable in accordance with their terms,
subject, however, to the effect of bankruptcy, insolvency, reorganization,
moratorium and similar laws from time to time in effect relating to the rights
and remedies of creditors, as well as to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).

         5.4. Brokers. Purchaser has not incurred any obligation or liability,
contingent or otherwise, for brokers' or finders' fees in respect of the matters
provided for in this Agreement which will be the responsibility of Seller, and
any such obligation or liability that might exist shall be the sole obligation
of Purchaser.

         5.5. Investment Intent. Purchaser is acquiring the Assets for
Purchaser's own account for investment, and not with a view to any distribution
thereof within the meaning of the Securities Act of 1933 (the "Act"), and shall
not resell any or all of the Assets except in compliance with all applicable
securities laws.

         5.6. Due Diligence. Purchaser represents, warrants and covenants that
it has or will perform prior to Closing sufficient review and due diligence,
including review of file data and inspections, to evaluate the Assets and
Property to Purchaser's complete satisfaction as a prudent and knowledgeable
Purchaser.

         5.7. Sophisticated Buyer. The Purchaser is a sophisticated buyer,
knowledgeable in the evaluation and acquisition of oil and gas properties, and
understands that by purchasing oil and gas properties or interests, the
Purchaser may be exposed to risks and liabilities associated with the oil and
gas business. The Purchaser is engaged in the business of exploring for or
production oil and gas or other minerals as an ongoing business. By reason of
this knowledge and experience, the Purchaser will evaluate the merits and risks
of the properties or interests to be purchased from Seller and will form an
opinion based solely upon the Purchaser's knowledge and experience and not upon
any opinion or predictions by Seller, its employees, agents, or representatives.

         5.8. Economic Risk. The Purchaser is aware that ownership of any of the
oil and gas properties or interests is highly speculative and subject to
substantial risks, and the Purchaser is capable of bearing the high degree of
economic risk and burdens of any purchase of the Assets from Seller, including,
but not limited to, the possibility of the complete loss of the Purchase Price,
all contributed capital, the loss of all anticipated tax benefits (if any), the
lack of a public market and limited transferability of such interests or
properties;

         5.9. Financing. Purchaser has or will have adequate funding or
financing to pay the Purchase Price at Closing.

         5.10. Accredited Investor. Purchaser is an "accredited investor" as
that item is defined in Regulation D promulgated under the Act.




                                       15
<PAGE>   16

                        ARTICLE 5A. ADDITIONAL COVENANTS

         Seller covenants and agrees that from and after the execution of this
Agreement and until the Closing Date:

         5A.1. Maintenance of Assets. Seller will not sell, transfer, assign,
convey or otherwise dispose of any of the Assets subject to Seller's direct
control, other than (a) oil, gas and other hydrocarbons produced, saved and sold
in the ordinary course of business, (b) personal property and equipment which is
replaced with property and equipment of comparable or better value and utility
in the ordinary and routine maintenance and operation of the Subject Properties,
and (c) as required in connection with any exercise of preferential rights or as
otherwise required to satisfy obligations to third parties under contracts
presently existing. In the event Seller after the Execution Date sells, assigns,
conveys or otherwise disposes of any of the Assets subject to Seller's direct
control prior to the Closing Date, other than as provided in (a) through (c)
above, and Seller is unable to cause such Assets to be conveyed to Purchaser at
Closing, then Purchaser shall be entitled to an adjustment of the Purchase Price
at Closing in an amount equal to the higher of the allocated value of the
affected Assets or the value received by Seller for such Assets; provided,
however, that in the event the aggregate allocated value of the affected Assets
sold, assigned, conveyed or otherwise disposed after the Execution Date which
Seller cannot cause to be conveyed to Purchaser at Closing exceeds 20% of the
Purchase Price then Purchaser shall have the option to terminate pursuant to
Section 10.1(a)this Agreement upon written notice to such effect delivered to
Seller prior to Closing.

         5A.2. No Encumbrances. Seller will not create any lien, security
interest, or contractual encumbrance on the Assets, the oil or gas attributable
to the Assets, or the proceeds thereof, other than Permitted Encumbrances. To
the extent liens, security interests or contractual encumbrances on the Assets
or any part thereof are created by Seller subsequent to Execution Date, Seller,
at Seller's option shall either (i) deliver to Purchaser releases of same,
including associated financing statements on or before Closing, or (ii)
indemnify, defend and hold harmless Purchaser for the amount outstanding of said
lien, security interest or contractual encumbrance, or (iii) otherwise
contractually protect Purchaser for said amount, provided such contractual
protection is reasonably satisfactory to Purchaser.

         5A.3. Operations. Recognizing that Seller has reduced its workforce
substantially in contemplation of an earlier Sale to Purchaser and may not be
able to fully staff or maintain the Subject Properties and/or the Gas Plants in
substantially the same manner as it has heretofore, with respect to any of the
Subject Properties and the Gas Plants operated by Seller, (and as to 5A.3. (b),
(f), (h), and (j) below with regard to Subject Properties not operated by
Seller), Seller will endeavor in good faith until Closing (subject to this
Agreement and the rights of affected parties or third parties under applicable
agreements) to and except in situations involving emergencies in which event
Seller shall not be bound by this Section 5A.3 to the extent necessary to deal
with said emergency:

         (a)      cause the Subject Properties and Gas Plants to be developed,
                  maintained and operated in compliance with applicable laws,
                  ordinances, rules, regulations and




                                       16
<PAGE>   17

                  orders and, maintain insurance now in force with respect to
                  the Subject Properties, and pay or cause to be paid all costs
                  and expenses in connection therewith;

         (b)      not approve the drilling of any new well on the Subject
                  Properties without the advance written consent of Purchaser,
                  which consent (which may not be unreasonably withheld) or
                  non-consent must be given by Purchaser within three (3) days
                  of the notice from Seller;

         (c)      not take any action or fail to take any action which is
                  reasonably expected to result in any termination of the leases
                  forming a part of the Subject Properties;

         (d)      perform and comply with all of its obligations under
                  agreements relating to or affecting the Subject Properties and
                  Gas Plants;

         (e)      Intentionally Omitted;

         (f)      not enter into or assume any contract, agreement or commitment
                  which is not in the ordinary course of business as heretofore
                  conducted or which involves payments, receipts or potential
                  liabilities with respect to any one of the Subject Properties
                  or Gas Plants of more than $50,000, (net to Seller) excluding
                  emergency expenditures; and

         (g)      not resign or otherwise voluntarily relinquish its rights as
                  operator of any of the Subject Properties or Gas Plants for
                  which it serves as operator on the date hereof.

         (h)      not grant any preferential right to purchase or similar right
                  or agree to require the consent of any Party to the transfer
                  and assignment of the Assets to Purchaser, subject to existing
                  contractual obligations;

         (i)      not enter into any gas sales contract or crude oil sales or
                  supply contract with respect to the Subject Properties or Gas
                  Plants which is not terminable without penalty upon notice of
                  thirty (30) days or less;

         (j)      not enter into any transaction the effect of which, considered
                  as a whole, would be to cause Seller's ownership interest in
                  any of the Subject Properties or Gas Plants to be decreased
                  from its ownership interest as of the date hereof;

         (k)      if any approval or consent by any federal, state or local
                  governmental authority is required to vest title, excluding
                  Permitted Encumbrances, to any of the Sale Interest or Gas
                  Plants, in Purchaser at Closing, Seller shall as reasonably
                  requested in writing by Purchaser, reasonably cooperate with
                  Purchaser in Purchaser's efforts, to obtain all such required
                  approvals or consents which shall be at Purchaser's sole risk
                  and expense;

         (l)      through Closing, endeavor to give prompt written notice to
                  Purchaser of any notice of default (or written threat of
                  default, whether disputed or denied) received




                                       17
<PAGE>   18

                  or given by Seller after the date hereof under any instrument
                  or agreement affecting the Subject Properties to which Seller
                  is a Party or by which it or any of the Subject Properties is
                  bound;

         (m)      to the extent it can do so without violating any third party
                  agreement and subject to the rights of third parties, exercise
                  its best efforts to provide (as soon as practicable) Purchaser
                  with a copy of each material authority for expenditure and
                  material contract affecting the Subject Properties or Gas
                  Plants entered into after the Execution Date, provided,
                  however, that the provision of such matters to Purchaser is
                  for informational purposes only and that Purchaser shall have
                  no right to comment upon or object to any such matter that is
                  otherwise not in violation of this Agreement.


         5A.4. Access to Records. Seller will endeavor to provide Purchaser and
its Agents 1) access to the Records during normal business hours at Seller's
office and 2) adequate work space (as determined solely by Seller) at such
offices to review the Records, 3) access to a copy machine, at Purchaser's cost,
at such offices, and 4) reasonable access to Seller's personnel during normal
business hours. Seller, at Purchaser's cost, will assist Purchaser in obtaining
access to and the right to review and copy Records pertaining to the Subject
Properties, producing minerals and Gas Plants not in Seller's possession or
control. From and after the Execution Date through the Closing Date, Seller
shall endeavor to not add to or remove from the Records any contracts,
instruments, documents or other materials except for such additions and removals
as are done in the ordinary course of business with respect to on-going
operations.

         5A.5. Permissions. Seller will use reasonable efforts, at Purchaser's
cost, to assist Purchaser in obtaining all permissions, approvals, and consents
of federal, state and local governmental authorities and other third parties
required of Seller as may be required to consummate the sale contemplated
hereunder.


         .
                    ARTICLE 6. SELLER'S CONDITIONS OF CLOSING

         Seller's obligation to consummate the transactions provided for herein
is subject only to the satisfaction or waiver by Seller on or before the Closing
Date of the following conditions:

         6.1. Representations. The representations and warranties of Purchaser
contained in Article 5 shall be true and correct in all material respects on the
Closing Date as though made on and as of that date.

         6.2. Performance. Purchaser shall have performed in all material
respects the obligations, covenants and agreements hereunder to be performed by
it at or prior to the Closing, including but not limited to payment of the
Purchase Price.



                                       18
<PAGE>   19

         6.3. Officer's Certificate. Purchaser shall have delivered to Seller a
certificate of an executive officer dated the Closing Date, certifying on behalf
of Purchaser that the conditions set forth in Sections 6.1 and 6.2 have been
fulfilled.

         6.4. Pending Matters. No suit, action or other proceeding by a third
party or a governmental authority shall be pending or threatened which seeks
substantial damages from Seller in connection with, or seeks to restrain, enjoin
or otherwise prohibit, the consummation of the transactions contemplated by this
Agreement.

         6.5. Pre-Closing. In contemplation of Closing, Purchaser shall have (1)
attended a pre-closing with Seller (the "Pre-Closing") which shall take place at
Seller's offices at 303 W. Wall Street in Midland, Texas at 9:00 a.m. on the
sixth (6th) day prior to the Closing Date (the "Pre-Closing Date"), (2)
delivered to Seller copies of all documents that Purchaser intends in good faith
to deliver to Seller at Closing, (3) reviewed all documents delivered at
Pre-Closing to Purchaser by Seller, and based upon such review, provided to
Seller no later than two (2) days immediately following the Pre-Closing Date a
notice of defects setting forth in reasonable detail the basis for any then
known claims or allegations by Purchaser that could, at Closing, be validly
asserted in a notice by Purchaser terminating this Agreement pursuant to Section
10.1 (a) herein.

                  ARTICLE 7. PURCHASER'S CONDITIONS OF CLOSING

         Purchaser's obligation to consummate the transactions provided for
herein is subject only to the satisfaction or waiver by Purchaser on or before
the Closing Date of the following conditions:

         7.1. Intentionally Deleted.

         7.2. Officer's Certificate. Seller shall have delivered to Purchaser a
certificate of an executive officer or general partner dated the Closing Date
certifying on behalf of Seller that the representations contained in the first
sentence, and the first sentence only, of each of Section 4.1 through Section
4.5 are true and correct in all material respects on the Closing Date.

         7.3. Seller's Performance. Seller shall have performed in all material
respects the obligations in this Agreement to be performed by Seller at Closing
pursuant to Section 8.2.

         7.4 Pre-Closing. In contemplation of Closing, Seller shall have (1)
attended a pre-closing with Purchaser, ("Pre-Closing") which shall take place at
Seller's offices at 303 W. Wall Street in Midland, Texas at 9:00 a.m. on the
sixth (6th) day prior to the Closing Date, (2) delivered to Purchaser copies of
all documents that Seller intends in good faith to deliver to Purchaser at
Closing, (3) reviewed all documents delivered at Pre-Closing to Seller by
Purchaser, and based upon such review, provided to Purchaser no later than two
(2) days immediately following the Pre-Closing Date a notice of defects setting
forth in reasonable detail the basis for any then known claims or allegations by
Seller that could, at Closing, be validly asserted in a notice by Seller
terminating this Agreement pursuant to Section 10.1 (b) herein.



                                       19
<PAGE>   20

                               ARTICLE 8. CLOSING.

         8.1. Time and Place of Closing. If the conditions to Closing have been
satisfied or expressly waived by the Party entitled to the benefits thereof, the
consummation of the transactions contemplated hereby ("Closing") shall take
place at one of Seller's offices on or before March 31, 1999 at 9:00 a.m., or at
such other place and time or in such other manner agreed upon by Seller and
Purchaser ("Closing Date"); provided, that Seller shall have the right to extend
Closing for thirty (30) days for any reason and that any extension by Seller
shall not serve to provide Purchaser rights not otherwise expressly provided
herein, nor to extend any rights of Purchaser contained in this Agreement.

         8.2. Closing Obligations. At the Closing, the following events shall
occur, each being a condition precedent to the others and each being deemed to
have occurred simultaneously with the others:

         (a)      Seller shall execute, acknowledge and deliver to Purchaser
                  multiple originals of an Assignment and Bill of Sale or a
                  Conveyance where applicable as indicated herein below in the
                  form attached hereto as either "B-1" for the Assignment and
                  Bill of Sale or "B-2" for the Conveyance, and Purchaser shall
                  execute, acknowledge and deliver same to Seller (Seller may
                  require the parties to execute separate instruments for each
                  state, county or parish in which the Assets are located to
                  facilitate recording). For the purposes of this Section 8.2
                  (a) Seller shall if requested by Purchaser deliver a
                  Conveyance for any county or parish in any state in which the
                  sole interest being conveyed by Seller in that county or
                  parish in that state is a non-producing interest in the oil,
                  gas or other minerals and in which county or parish in that
                  state there are not any other interests that are to be
                  conveyed to Purchaser or any Excluded Assets, assets or
                  interests owned by or retained by Seller.

         (b)      Seller and Purchaser shall execute, acknowledge and deliver
                  transfer orders or letters in lieu directing all purchasers of
                  production to make payment to Purchaser of proceeds
                  attributable to the Sale Interest;

         (c)      Purchaser shall deliver by wire transfer the Adjusted Purchase
                  Price;

         (d)      Purchaser and Seller shall execute and deliver a settlement
                  statement (the "Preliminary Settlement Statement") prepared by
                  Seller and setting forth the Purchase Price and all
                  adjustments thereto using information to the extent then
                  available and if not then available then Seller's reasonable
                  good faith estimate thereof, subject to Section 13.17;

         (e)      Purchaser and Seller shall execute and deliver appropriate
                  required state or federal lease assignment forms, appropriate
                  required resignation or change of operator forms and other
                  instruments and certificates; and



                                       20
<PAGE>   21

         (f)      Subject to Section 13.18, Seller shall execute and deliver to
                  Purchaser appropriate resignation of operator and change of
                  operator forms.

                      ARTICLE 9. POST-CLOSING OBLIGATIONS.

         9.1. Receipts and Credits; Suspense Funds. Upon Closing and Subject to
the terms hereof, all monies, refunds, proceeds, receipts, credits, receivables,
accounts and income attributable to the Assets (a) for all periods of time from
and after the Effective Time shall be the sole property and entitlement of the
Purchaser, and, to the extent received by Seller, Seller shall fully disclose
and account therefor to Purchaser promptly, and (b) for all periods of time
prior to the Effective Time shall be the sole property and entitlement of Seller
to the extent received by Purchaser or Seller prior to the Final Accounting Date
or allocated to Seller in the Final Accounting, and if received by Purchaser,
Purchaser shall fully disclose and account therefor to Seller promptly.
Purchaser shall pay Seller for Seller's share of hydrocarbons attributable to
the purchased Assets in storage above the pipeline connection or in transit on
the Effective Time at the relevant contract price, net applicable taxes. Seller
and Purchaser recognize that as of the Effective Time there may be over or under
imbalances with respect to gas production attributable to the Subject Properties
("Imbalances") and hereby agree that the Subject Properties will be conveyed
specifically subject to Imbalances which exist as of the Effective Time, with
Purchaser, as of Closing, bearing and assuming all obligations with respect to
any overproduction account or liability and receiving the benefit of and being
credited with any underproduction account or credit; provided, however, that
with respect to Subject Properties that are subject to gas balancing agreements,
Purchaser at Closing shall pay Seller an amount determined by multiplying the
net underproduced Imbalance by $1.00/MCF or Seller at Closing shall pay
Purchaser an amount determined by multiplying the net overproduced imbalances by
$1.00/MCF with Purchaser, as of Closing, bearing and assuming all obligations
with respect to any overproduction account or liability and receiving the
benefit of and being credited with any underproduction account or credit. At
Closing, Seller shall deliver to Purchaser all amounts in Seller's possession
due third party owners of interests in the Subject Properties, and Purchaser
agrees that it shall be solely responsible for the disposition of such funds,
the payment thereof to the rightful owners and the payment, if any, of royalty
thereon (the "Suspense Funds").

         9.2. Costs and Liabilities; Indemnity.

         (a)      As used in this Agreement, "Claims", "CLAIMS", "CLAIMS" or
                  "CLAIMS" shall include costs, expenses, obligations, claims,
                  demands, causes of action, lawsuits, liabilities, damages,
                  fines, penalties, debts, losses and judgments of any kind or
                  character, whether matured or absolute or contingent, accrued
                  or unaccrued, liquidated or unliquidated, known or unknown,
                  and all costs, expenses and fees (including, without
                  limitation, interest, attorneys' fees, costs of experts, court
                  costs and costs of investigation) incurred in connection
                  therewith, including, but not limited to claims arising from
                  or directly or indirectly related to death, personal injury,
                  property damage, environmental damage or the remediation
                  thereof, royalty, operating, suspense and capital obligations
                  attributable to the Assets or the Property. As used in this
                  Section 9.2, "Assets" shall include the Suspense Funds.



                                       21
<PAGE>   22

         (b)      Notwithstanding anything in this Agreement to the contrary, it
                  is the express intent and agreement of Seller and Purchaser
                  that, if Closing occurs, Purchaser shall accept the Assets and
                  Property in their "as is, where is" condition, subject to any
                  and all faults, defects, deficiencies, irregularities and
                  claims related or attributable in any manner thereto,
                  including, without limitation, or any other matter affecting
                  in any respect the title or physical condition of, or the
                  right to own, use, operate, develop or enjoy, the Assets,
                  whether known or unknown, liquidated or unliquidated, fixed or
                  contingent, direct or indirect.

         (c)      At Closing and without further action or documentation,
                  Purchaser (1) shall assume, be responsible for and comply with
                  all duties and obligations, express or implied, arising at any
                  time with respect to the Assets, including, without limitation
                  (i) those arising under or by virtue of any lease, contract,
                  agreement, document, permit, law, statute, rule, regulation or
                  order of any governmental authority or court (specifically
                  including, without limitation, any governmental request or
                  other requirement to plug, re-plug or abandon or re-abandon
                  any well of whatsoever type, status or classification, or take
                  any clean-up, remedial or other action with respect to the
                  Assets or Property), (ii) preferential rights to purchase and
                  (iii) third party consents; (2) shall assume, be responsible
                  for and pay all claims affecting or arising, directly or
                  indirectly, at any time in connection with the Assets,
                  including, without limitation, claims for personal or property
                  injury or damage, environmental cleanup, remediation, or
                  compliance, or for any other relief, arising directly or
                  indirectly from or incident to, the use, occupation,
                  operation, maintenance or abandonment of or production from
                  the Assets, or condition of the Assets or Property, whether
                  latent or patent, including, without limitation, contamination
                  of property or premises with Naturally Occurring Radioactive
                  Materials ("NORM"), and whether or not arising solely from or
                  contributed to by the negligence in any form, whether active
                  or passive, or of any kind or nature, of Seller or its
                  predecessors in title or their respective Affiliates, agents,
                  employees or contractors; and (3) SHALL DEFEND, INDEMNIFY AND
                  HOLD SELLER HARMLESS FROM ANY AND ALL CLAIMS ARISING, ASSERTED
                  OR DUE AT ANY TIME, WHETHER BEFORE, ON OR AFTER THE EFFECTIVE
                  TIME, IN CONNECTION WITH THE FOREGOING; AND, FURTHER, WITHOUT
                  LIMITING THE GENERALITY OF THE FOREGOING, PURCHASER WILL
                  INDEMNIFY, DEFEND AND HOLD HARMLESS SELLER FROM ALL CLAIMS
                  ARISING AT ANY TIME, WHETHER BEFORE, ON OR AFTER THE EFFECTIVE
                  TIME, MADE BY ANY PERSON AND ARISING OUT OF OR RESULTING FROM:

         -        THE OWNERSHIP OR OPERATION OF THE ASSETS BY OR ON BEHALF OF
                  SELLER OR ITS PREDECESSORS IN TITLE OR ACTS OR OMISSIONS BY OR
                  ON BEHALF OF SELLER OR ITS PREDECESSORS IN TITLE IN CONNECTION
                  WITH OR PERTAINING TO THE ASSETS;



                                       22
<PAGE>   23

         -        THE OWNERSHIP OR OPERATION OF THE ASSETS BY OR ON BEHALF OF
                  PURCHASER OR ITS SUCCESSORS IN TITLE OR THE ACTS OR OMISSIONS
                  BY OR ON BEHALF OF PURCHASER OR ITS SUCCESSORS IN TITLE IN
                  CONNECTION WITH OR PERTAINING TO THE ASSETS;

         -        THE ACTS OR OMISSIONS OF THIRD PARTIES RELATING TO THE ASSETS;

         -        THE REVIEW, INSPECTION AND ASSESSMENT OF THE ASSETS BY
                  PURCHASER;

         -        AN ERROR IN DESCRIBING THE ASSETS;

         -        RIGHTS AND OBLIGATIONS OF THE PARTIES OR THIRD PARTIES UNDER
                  RELATED AGREEMENTS;

         -        FAILURE BY THIRD PARTIES TO APPROVE OR CONSENT TO ANY ASPECT
                  OF THIS TRANSACTION;

         -        OBLIGATIONS TO PLUG, RE-PLUG, ABANDON OR RE-ABANDON WELLS,
                  REMOVE FACILITIES, EQUIPMENT, PIPELINES AND FLOWLINES, CLOSE
                  PITS AND REMOVE SUMPS, AND RESTORE, CLEAN UP AND/OR REMEDIATE
                  THE ASSETS OR PROPERTY;

         -        PAYMENTS, ROYALTIES OR DISBURSEMENTS PAID OR PAYABLE BY SELLER
                  OR PURCHASER TO THIRD PARTIES WITH REGARD TO THE ASSETS;

         -        THE PHYSICAL OR ENVIRONMENTAL CONDITION OF OR RELATING TO THE
                  ASSETS OR PROPERTY OR ANY DISPOSAL SITE (WHETHER ON THE ASSETS
                  OR PROPERTY OR OFFSITE) CONTAINING MATERIALS OR WASTES FROM
                  THE OPERATION'S OR ACTIVITIES ON THE PROPERTY OR ASSETS
                  INCLUDING CLAIMS UNDER ANY LAW OR ENVIRONMENTAL LAW;

         -        REMEDIATION ACTIVITIES, INCLUDING DAMAGES INCURRED BY BUYER
                  DURING OR ARISING FROM REMEDIATION ACTIVITIES RELATING TO THE
                  ASSETS OR PROPERTY;

         -        INABILITY OR FAILURE TO OBTAIN THE TRANSFER OF A PERMIT OR
                  AUTHORIZATION OR THE INABILITY TO OBTAIN A PERMIT OR
                  AUTHORIZATION RELATING TO THE ASSETS.

         (d)      From and after Closing, any claim for indemnity hereunder
                  shall be made by written notice, together with a written
                  description of any claims asserted stating the nature and
                  basis of such claim and, if ascertainable, the amount thereof.





                                       23
<PAGE>   24

                  Purchaser shall have a period of twenty (20) days after
                  receipt of such notice within which to respond thereto or, in
                  the case of a claim which requires a shorter time for
                  response, then within such shorter period as specified by
                  Seller in such notice (the "Notice Period"). If Purchaser
                  denies liability hereunder or fails to provide the defense for
                  any claim, Seller may defend or compromise the claim as it
                  deems appropriate without prejudice to any of Seller's rights
                  hereunder, with no right of Purchaser to approve or disapprove
                  any actions taken in connection therewith by Seller. If
                  Purchaser accepts liability and responsibility for the defense
                  of any claim, it shall so notify Seller as soon as is
                  practicable prior to the expiration of the Notice Period and
                  undertake the defense or compromise of such claim with counsel
                  selected by Purchaser and reasonably acceptable to Seller. If
                  Purchaser undertakes the defense or compromise of such claim,
                  Seller shall be entitled, at its own expense, to participate
                  in such defense. No compromise or settlement of any claim
                  shall be made without reasonable notice to Seller, and without
                  the prior written approval of Seller, unless such compromise
                  or settlement includes a general and complete release of
                  Seller, its Affiliates and their respective Representatives in
                  respect of the matter, with prejudice, and with no express or
                  written admission of liability on the part of Seller, its
                  Affiliates and their respective Representatives, and no
                  constraints on the future conduct of its or their respective
                  businesses. Purchaser acknowledges that its obligations to
                  indemnify, defend and hold Seller and its Affiliates harmless
                  under this Agreement includes obligations to pay the
                  attorneys' fees and court costs incurred by Seller and its
                  Affiliates in defending said Claims, regardless of the merits
                  of said Claims.

         (e)      Seller shall have the right at all times to participate, at
                  its sole cost, in the preparation for any hearing or trial
                  related to the indemnities set forth in this Agreement, as
                  well as the right to appear on its own behalf or to retain
                  separate counsel to represent it at any such hearing or trial.

         (f)      EXCEPT FOR SECTION 9.13 HERETO, THE INDEMNITIES PROVIDED IN
                  THIS AGREEMENT SHALL EXTEND TO SELLER AND ITS AFFILIATES AND
                  ANY PERSON WHO AT ANY TIME HAS SERVED OR IS SERVING AS A
                  DIRECTOR, OFFICER, EMPLOYEE, CONSULTANT, INVITEE OR AGENT
                  THEREOF (EACH A "REPRESENTATIVE" AND COLLECTIVELY
                  "REPRESENTATIVES"), AND EACH OF THEIR RESPECTIVE HEIRS,
                  EXECUTORS, SUCCESSORS AND ASSIGNS, AND SHALL APPLY TO ALL
                  CLAIMS SUBJECT TO INDEMNITY HEREUNDER, INCLUDING THOSE BASED
                  ON NEGLIGENCE OF ANY NATURE, INCLUDING SOLE NEGLIGENCE, SIMPLE
                  NEGLIGENCE, CONCURRENT NEGLIGENCE, ACTIVE NEGLIGENCE, PASSIVE
                  NEGLIGENCE, STRICT LIABILITY OR FAULT OF SELLER (OR ANY OTHER
                  INDEMNIFIED PARTY) OR ANY OTHER THEORY OF LIABILITY OR FAULT,
                  WHETHER OF LAW (WHETHER COMMON OR STATUTORY) OR IN EQUITY.;
                  PROVIDED, HOWEVER, PURCHASER SHALL NOT BE LIABLE FOR OR
                  INDEMNIFY SELLER FOR ANY CLAIM ASSERTED BY PURCHASER ARISING
                  DIRECTLY FROM A BREACH OF A MATERIAL TERM OF THIS



                                       24
<PAGE>   25

                  AGREEMENT BY SELLER AND FOR WHICH AND ONLY TO THE EXTENT THAT,
                  PURCHASER HAS OBTAINED AGAINST SELLER A BINDING, FINAL,
                  NON-APPEALABLE COURT JUDGEMENT. THE INDEMNIFICATION PROVISIONS
                  OF THIS SECTION 9.2 SHALL BE IN ADDITION TO ANY OTHER
                  INDEMNITY PROVISIONS CONTAINED IN THIS AGREEMENT, AND IT IS
                  EXPRESSLY UNDERSTOOD AND AGREED THAT THE TERMS OF THIS SECTION
                  9.2 SHALL CONTROL OVER ANY CONFLICTING OR CONTRADICTING TERMS
                  OR PROVISIONS CONTAINED IN THIS AGREEMENT, AND SHALL SURVIVE
                  CLOSING.

         9.3. Further Assurances. After Closing, Seller and Purchaser agree to
take such further actions and to execute, acknowledge and deliver all such
further documents that are necessary or useful in carrying out the purposes of
this Agreement or of any document delivered pursuant hereto. The parties will
cooperate at all times after Closing to execute and record correction
instruments to correct scrivener's errors in the preparation of Closing
documents.

         9.4. Delivery of Records. As soon as reasonably possible but no later
than thirty (30) days after the Closing Date, Seller shall deliver originals or
copies consistent with this Agreement at Seller's and Purchaser's equally shared
cost, of the Records to Purchaser; provided, that Seller (i) shall exercise its
best efforts to provide Purchaser at Closing or as soon thereafter as is
practicable with all Records necessary to assume and conduct operations of the
Assets, and (ii) shall have the right to retain, as its own, original Records
that pertain to the Excluded Assets and copies (at Seller's and Purchaser's
equally shared cost) of all other Records. No later than thirty (30) days after
Closing, Seller further agrees to assist Purchaser (at Purchaser's cost) in
making an electronic transfer of all Records applicable to the Subject
Properties. Such electronic data to include but is not limited to: Property
Master files, Name and Address files, (owners, purchasers, operators, etc.),
Division of Interest decks for billing and revenue, Oil and Gas Purchaser
Division Order/Property cross-reference, Land Records (Lease, tracts, Critical
Dates, Text file, Ownership, Rentals, Billing), Chart of Accounts, Billing
Category Codes, County and State Code cross-reference, System Code Tables or
Legends (Suspense Codes, Interest Types, Product Codes, etc.) Gas Contract
Records (Master File, Text, Details, Fees, Calendar, etc.), Owner Netting
Information, Production Records (Tank Master, Closing Stock, Production Master,
State Information, etc.), AFE Information, Revenue Suspense and/or Billing
suspense, Owner Net (Share) Revenue and Billing History, Property Gross (8/8)
Revenue and Billing History, Operated Property Production Information (and
Non-Operated if available), Operated Property Production Tax History
Information, Land Records (Rental Payments), Payout Information and Schedules,
1099 Information, Accounts Payable and Revenue information. Seller's obligation
pursuant to this Section 9.4 shall be limited to Seller's present capability to
perform such electronic transfers without disruption or undue inconvenience to
Seller's ongoing business, and further, Seller shall not be required to create,
assemble or develop such electronic files or records.

         9.5. Access to Data and Records. Subject to the rights of third parties
and Seller's proprietary rights, Seller shall (i) provide Purchaser and its
Agents with reasonable access to Seller's books and records relating to the
Assets (both paper and electronic) before and after




                                       25
<PAGE>   26

Closing as necessary for Purchaser, at Purchaser's cost, to prepare its
financial statements, (ii) electronically download Seller's Records regarding
accounting, land and lease records at Purchaser's cost regarding the Subject
Properties one time from Seller's Records, so long as such electronic
downloading efforts are not disruptive of Seller's business or accounting or
land departments and (iii) assist Purchaser, at Purchaser's cost, in acquiring
the appropriate licenses, permits and authorizations to possess and use all or
part of the seismic and geophysical data regarding the Subject Properties,
subject to the rights of third parties and to confidentiality or limited use
conditions or other conditions or restrictions required by Seller or such third
parties.

         9.6. PURCHASER'S RELEASE OF SELLER. FROM AND AFTER CLOSING AND WITHOUT
FURTHER DOCUMENTATION, PURCHASER RELEASES AND DISCHARGES SELLER AND SELLERS
AFFILIATES FROM ALL CLAIMS RELATING TO THE ASSETS, THE PROPERTY OR THIS
TRANSACTION, REGARDLESS OF WHEN OR HOW THE CLAIM AROSE OR ARISES OR WHETHER THE
CLAIM WAS FORESEEABLE OR UNFORESEEABLE. PURCHASER'S RELEASE OF SELLER AND ITS
AFFILIATES INCLUDES CLAIMS RESULTING IN ANY WAY FROM THE NEGLIGENCE OR STRICT
LIABILITY OF SELLER AND ITS AFFILIATES, WHETHER THE NEGLIGENCE OR STRICT
LIABILITY IS ACTIVE PASSIVE, JOINT, CONCURRENT, OR SOLE. THERE ARE NO EXCEPTIONS
TO PURCHASERS RELEASE OF SELLER AND ITS AFFILIATES, AND THIS RELEASE IS BINDING
ON PURCHASER AND ITS SUCCESSORS AND ASSIGNS. PURCHASER EXPRESSLY WARRANTS AND
REPRESENTS AND DOES HEREBY STATE AND REPRESENT THAT NO PROMISE OR AGREEMENT
WHICH IS NOT HEREIN EXPRESSED HAS BEEN MADE TO PURCHASER IN EXECUTING THIS
AGREEMENT OR AGREEING TO THIS RELEASE AND THAT PURCHASER IS NOT RELYING UPON ANY
STATEMENT OR REPRESENTATION OF SELLER OR ANY AGENT OR AFFILIATE OF SELLER.
PURCHASER HAS BEEN REPRESENTED BY LEGAL COUNSEL AND SAID COUNSEL HAS READ AND
EXPLAINED TO PURCHASER THE ENTIRE CONTENTS OF THIS AGREEMENT AND THIS RELEASE
AND EXPLAINED THE LEGAL CONSEQUENCES THEREOF.

         9.7. RETROACTIVE EFFECT. PURCHASER ACKNOWLEDGES THAT PURCHASER'S
OBLIGATIONS TO RELEASE, INDEMNIFY, DEFEND, AND HOLD SELLER AND ITS AFFILIATES
HARMLESS APPLY TO MATTERS OCCURRING OR ARISING BEFORE, ON AND AFTER THE
EFFECTIVE TIME TO THE EXTENT PROVIDED IN THIS AGREEMENT.

         9.8. INDUCEMENT TO SELLER. PURCHASER ACKNOWLEDGES THAT IT EVALUATED ITS
OBLIGATIONS UNDER THIS ARTICLE BEFORE IT DETERMINED AND SUBMITTED ITS BID FOR
THE ASSETS AND THAT ITS ASSUMPTION OF THESE OBLIGATIONS IS A MATERIAL INDUCEMENT
TO SELLER TO ENTER INTO THIS AGREEMENT WITH AND CLOSE THE SALE TO PURCHASER.

         9.9. PURCHASER'S INDEMNITY. EXCEPT FOR SELLER'S INDEMNITY CONTAINED IN
SECTION 9.13 BELOW, IT IS THE INTENT OF PURCHASER AND SELLER THAT SELLER BE
INDEMNIFIED, DEFENDED AND HELD HARMLESS BY PURCHASER IN A MANNER SO THAT SELLER
WILL BE PROTECTED AS IF IT HAS NEVER AT ANY TIME OWNED OR OPERATED THE ASSETS OR
THE PROPERTY OR ANY INTEREST THEREIN OR PERTAINING THERETO, IN WHOLE OR IN PART.

         9.10. RELATED AGREEMENTS. WITHOUT FURTHER ACTION OR DOCUMENTATION,
UNLESS SPECIFICALLY PROVIDED OTHERWISE IN THIS AGREEMENT, THE SALE OF THE ASSETS
IS MADE SUBJECT TO




                                       26
<PAGE>   27

ALL OIL, GAS AND MINERAL LEASES, ASSIGNMENTS, SUBLEASES, FARMOUT AGREEMENTS,
JOINT OPERATING AGREEMENTS, POOLING AGREEMENTS, LETTER AGREEMENTS, EASEMENTS,
RIGHTS OF WAY, AND ALL OTHER AGREEMENTS WITH RESPECT TO OR PERTAINING TO THE
ASSETS TO THE EXTENT THEY ARE BINDING ON SELLER OR SELLER'S AFFILIATES (THE
"RELATED AGREEMENTS"). UPON CLOSING, PURCHASER EXPRESSLY ASSUMES THE OBLIGATIONS
AND LIABILITIES OF SELLER OR SELLER'S AFFILIATES UNDER SUCH AGREEMENTS INSOFAR
AS THE OBLIGATIONS AND LIABILITIES CONCERN OR PERTAIN TO THE ASSETS AND WILL
EXECUTE ANY DOCUMENTS NECESSARY TO EFFECTUATE SUCH ASSUMPTION. THE PARTIES AGREE
THAT THIS SECTION 9.10 IS APPLICABLE TO ALL INSTRUMENTS WHETHER THEY ARE
RECORDED OR NOT.

         9.11. Litigation. Upon and after Closing, Purchaser shall assume all
obligations of Seller and Seller's Affiliates and be responsible and liable for
all litigation listed on Schedule 9.11 and all matters, costs, judgments, and
expenses related thereto or arising therefrom. Notwithstanding Section 9.2 (c)
above, 9.6, 9.9, and 12.2, upon Closing, Seller shall be responsible and liable
for all litigation which has been filed and served on Seller before the
Execution Date to which Purchaser is not a party and Seller is a party and which
is not listed on Schedule 9.11. Seller reserves the right to remove litigation
from Schedule 9.11 on or before Closing.

         9.12. Evidence of Compliance. For Seller-operated Assets, Purchaser
shall deliver to Seller on or prior to 120 days after the Closing (1) evidence
of compliance with the rules and regulations dealing with the plugging and
abandoning of wells included in the Assets, including evidence of the
appropriate bond, surety letter, or letter of credit which has been accepted by
the relevant regulatory agency; (2) proof that Purchaser has been approved by
the relevant regulatory agency as operator of the Assets, including all Wells
that are subject to this Agreement; and (3) evidence that Purchaser has obtained
all necessary permits or transfers of permits to operate the Assets. For matters
which Purchaser has been unable to provide the necessary evidence and proof,
Purchaser shall provide Seller with a status report and action plan for
obtaining such required evidence and proof and continue diligently in its
efforts until all such matters have been achieved. Purchaser shall indemnify,
defend and hold harmless Seller and Seller's Representatives from all Claims
arising from or relating to Purchaser's failure to obtain or failure to obtain
in a timely manner the evidence or proof described in this Section 9.12 (1), (2)
and (3) above.

         9.13 Seller's Indemnity. Notwithstanding any other provision of this
Article 9, for the period beginning on the Closing Date and ending on the first
anniversary of the Closing Date (the "Seller Indemnity Period") Seller shall
defend, indemnify and hold harmless Purchaser from any and all bona fide third
party claims asserted during the Seller Indemnity Period to the extent, and only
to the extent, directly relating to the mispayment, nonpayment or underpayment
of royalties for the for the Sale Interest applicable to the period of Seller's
ownership of the affected Assets. From and after Closing, any claim for
indemnity arising under this Section 9.13 shall be made by written notice,
together with a written description of any claims asserted stating the nature
and basis of such claim and, if ascertainable, the amount thereof. Seller shall
have a period of twenty (20) days after receipt of such notice within which to
respond thereto or, in the case of a claim which requires a shorter time for
response, then within such shorter period as specified by Purchaser in such
notice (the "Notice Period"). If Seller denies liability hereunder or fails to
provide the defense for any claim, Purchaser may defend or compromise the claim
as it 



                                       27
<PAGE>   28

deems appropriate without prejudice to any of Purchaser's rights hereunder, with
no right of Seller to approve or disapprove any actions taken in connection
therewith by Purchaser. If Seller accepts liability and responsibility for the
defense of any claim, it shall so notify Purchaser as soon as is practicable
prior to the expiration of the Notice Period and undertake the defense or
compromise of such claim, with counsel selected by Seller and reasonably
acceptable to Purchaser. If Seller undertakes the defense or compromise of such
claim, Purchaser shall be entitled, at its own expense, to participate in such
defense, no compromise or settlement of any claim shall be made without
reasonable notice to Purchaser, and without the prior written approval of
Purchaser, which approval shall not be unreasonably delayed or denied.

                             ARTICLE 10. TERMINATION

         10.1. Right of Termination. This Agreement and the transactions
contemplated hereby may be terminated at the Closing:

         (a)      By Purchaser by notice delivered to Seller at Closing if all
                  conditions described in Article 7 shall not have been met and
                  such noncompliance shall not have been caused or waived by the
                  actions or inactions of Purchaser; or

         (b)      By Seller by notice delivered to Purchaser at Closing if all
                  conditions described in Article 6 shall not have been met and
                  such noncompliance shall not have been caused or waived by the
                  actions or inactions of Seller,

         10.2. Automatic Termination Event. This Agreement shall automatically
terminate if Purchaser fails to comply with its obligations under Section 2(a)
of the Option Agreement.

          10.3. Effect of Termination. If this Agreement is terminated pursuant
to Section 10.1 or Section 10.2 , this Agreement shall become void and of no
further force or effect (except for the provisions of Section 3.3, 3.4, ,
Article 5, Article 10,Article 13 and Article 14 each of which shall survive such
termination and continue in full force and effect). If this Agreement is
terminated by Purchaser pursuant to Section 10.1 (a) above, in the absence of a
default by Purchaser, Purchaser may, at its sole option, seek to enforce
whatever legal or equitable rights and remedies may be appropriate and
applicable, including, without limitation, claims for damages and/or specific
performance of this Agreement. Subject to the first sentence of this Section
10.3, if this Agreement is terminated by Seller pursuant to Section 10.1(b)
above or automatically terminated pursuant to Section 10.2 above, then neither
Purchaser nor Seller shall have any further liability to the other Party or
Parties pursuant to this Agreement, but Purchaser's obligations under the Option
Agreement shall remain unaffected. Notwithstanding anything to the contrary
contained in this Agreement, upon any termination of this Agreement pursuant to
Section 10.1 by Seller or pursuant to Section 10.2, Seller shall be free
immediately to enjoy all rights of ownership of the Assets and may sell,
transfer, encumber or otherwise dispose of the Assets to any party without any
restriction under this Agreement.




                                       28
<PAGE>   29

                                ARTICLE 11. TAXES

         11.1. Apportionment of Ad Valorem and Property Taxes. All ad valorem
taxes, real property taxes, personal property taxes, and similar obligations
concerning the Assets with respect to the tax period in which the Effective Time
occurs ("Property Taxes") shall be apportioned as of the Effective Time between
Seller and Purchaser. Seller shall file or cause to be filed all required
reports and returns incident to the Property Taxes and shall pay or cause to be
paid to the taxing authorities all Property Taxes relating to the tax period in
which the Effective Time occurs. Purchaser shall pay to Seller Purchaser's pro
rata portion of Property Taxes within thirty (30) days after receipt of Seller's
invoice therefor.

         11.2. Sales Taxes. The Purchase Price excludes any sales taxes or other
taxes required to be paid in connection with the sale of property pursuant to
this Agreement. Purchaser shall be liable for all sales, gross receipts, use and
other taxes, conveyance, transfer and recording fees and real estate transfer
stamps or taxes that may be imposed on any transfer of property pursuant to this
Agreement. These taxes shall be collected and remitted under applicable law.
Purchaser shall indemnify and hold Seller harmless with respect to the payment
of any of these taxes including any interest or penalties assessed thereon.

         11.3. Other Taxes. All taxes (other than income taxes) which are
imposed on or with respect to the production of oil, natural gas or other
hydrocarbons or minerals or the receipt of proceeds therefrom (including but not
limited to severance, production, and excise taxes) shall be apportioned between
the Parties based upon the respective shares of production taken by the Parties.
From and after Closing, Purchaser shall be responsible for paying or withholding
or causing to be paid or withheld all such taxes and for filing all statements,
returns, and documents incident thereto.

         11.4. Cooperation. Each Party to this Agreement shall provide the other
Party with reasonable access to all relevant documents, data and other
information which may be required by the other Party for the purpose of
preparing tax returns and responding to any audit by any taxing jurisdiction.
Each Party to this Agreement shall cooperate with all reasonable requests of the
other Party made in connection with contesting the imposition of taxes.
Notwithstanding anything to the contrary in this Agreement, neither Party to
this Agreement shall be required at any time to disclose to the other Party any
tax return or other confidential tax information for a period of at least 12
months.



                                       29
<PAGE>   30

                  ARTICLE 12. PHYSICAL CONDITION OF THE ASSETS

         12.1. Prior Use of Assets. THE ASSETS AND PROPERTY HAVE BEEN USED FOR
EXPLORATION, DEVELOPMENT, PRODUCTION, STORAGE, AND TRANSPORTATION OF OIL AND GAS
AND RELATED OIL FIELD OPERATIONS. PHYSICAL CHANGES IN THE PROPERTY MAY HAVE
OCCURRED AS A RESULT OF SUCH USES. THE ASSETS OR THE PROPERTY ALSO MAY INCLUDE
BURIED PIPELINES, WASTES AND OTHER EQUIPMENT, WHETHER OR NOT OF A SIMILAR
NATURE, THE LOCATIONS OF WHICH MAY BE HIDDEN OR NOT NOW BE KNOWN OR NOT READILY
APPARENT BY A PHYSICAL INSPECTION OF THE AFFECTED ASSETS. HYDROCARBONS AND OTHER
SUBSTANCES, INCLUDING HAZARDOUS SUBSTANCES, MAY HAVE COME TO BE RELEASED OR
LOCATED ON OR BENEATH THE SURFACE OF THE ASSETS OR THE PROPERTY.

         12.2. Assumption of Assets in Present Condition. PURCHASER ACKNOWLEDGES
THAT (i) THE CONSUMMATION OF THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY BY PURCHASER SHALL BE SOLELY ON THE BASIS OF ITS OWN INVESTIGATION OF
THE PHYSICAL CONDITION OF THE ASSETS AND PROPERTY, INCLUDING, WITHOUT
LIMITATIONS, SUBSURFACE CONDITION; (ii) THE ASSETS AND PROPERTY HAVE BEEN USED
IN THE MANNER AND FOR THE PURPOSES SET FORTH ABOVE AND THAT PHYSICAL CHANGES TO
THE ASSETS AND THE PROPERTY MAY HAVE OCCURRED AS A RESULT OF SUCH USE; AND (iii)
NORM AND ASBESTOS OR MAN-MADE MATERIAL FIBERS (COLLECTIVELY "MMMF") MAY BE
PRESENT AT SOME LOCATIONS. PURCHASER ACKNOWLEDGES THAT NORM IS A NATURAL
PHENOMENON ASSOCIATED WITH MANY OIL FIELDS IN THE UNITED STATES AND THROUGHOUT
THE WORLD. PURCHASER SHALL MAKE ITS OWN DETERMINATION OF THIS PHENOMENON AND
OTHER CONDITIONS. SELLER DISCLAIMS ANY LIABILITY ARISING OUT OF OR IN CONNECTION
WITH ANY PRESENCE OF NORM OR MMMF ON OR AFFECTING THE ASSETS OR THE PROPERTY. IN
ACCORDANCE WITH SECTION 9.2 AND AT CLOSING, PURCHASER SHALL ASSUME THE RISK THAT
THE ASSETS OR THE PROPERTY MAY CONTAIN WASTES OR CONTAMINANTS AND ADVERSE
PHYSICAL CONDITIONS, INCLUDING THE PRESENCE OF PIPELINES, EQUIPMENT AND OTHER
ITEMS OF PERSONAL PROPERTY, TANK BOTTOMS, HEATER TREATER SLUDGE, AND WASTES OR
CONTAMINANTS WHICH MAY NOT HAVE BEEN REVEALED BY PURCHASER'S INVESTIGATION. IN
ACCORDANCE WITH SECTION 9.2 AND AT CLOSING, ALL RESPONSIBILITY AND LIABILITY
RELATED TO DISPOSALS, SPILLS, WASTES, OR CONTAMINATION, OR OTHER ADVERSE
PHYSICAL CONDITIONS ON, BELOW, OR RELATED TO OR AFFECTING THE ASSETS AS WELL AS
THE PROPERTY SHALL BE ASSUMED BY PURCHASER AND PURCHASER SHALL NOT WITHSTANDING
WHEN THE BASIS FOR ANY CLAIM, ACTION, SUIT, JUDGMENT (INCLUDING, WITHOUT
LIMITATION, THOSE FOR DEATH, PERSONAL INJURY OR PROPERTY DAMAGE) SHALL HAVE
OCCURRED, INDEMNIFY, DEFEND AND HOLD SELLER HARMLESS THEREFROM PURSUANT TO
SECTION 9.2.



                                       30
<PAGE>   31

         12.3. Casualty Loss. In the event of any material damage by fire or
other casualty to any of the Assets prior to the Closing ("Casualty Loss"), this
Agreement shall remain in full force and effect, and as to each affected Asset,
Seller shall at its election either collect (and when collected pay over to
Purchaser) or assign to Purchaser any and all insurance claims related to such
damage, and Purchaser shall take title to the affected Asset without reduction
in the Purchase Price.

                            ARTICLE 13. MISCELLANEOUS

         13.1. Governing Law. This Agreement and all instruments executed in
accordance herewith shall be governed by and interpreted in accordance with the
laws of the State of Texas, without regard to conflict of law rules that would
direct application of the laws of another jurisdiction, except to the extent
that it is mandatory that the law of the jurisdiction wherein the Assets are
located shall apply. In the event of any litigation or other proceeding in
connection with this Agreement, the venue for any such proceeding shall be in a
court of competent jurisdiction located in Dallas County, Texas, and the
prevailing Party shall be entitled to recover its reasonable attorney's fees and
costs incurred therein from the other Party, in addition to any damages awarded.

         13.2. Entire Agreement. This Agreement, all agreements and instruments
executed in connection herewith, the Option Agreement, and the Confidentiality
Agreement dated April 15, 1998, between Purchaser and Pioneer USA (the
"Confidentiality Agreement") and that Letter Agreement dated September 1, 1998
by and between the Purchaser and Pioneer USA constitute the entire agreement
between the Parties and supersede all prior agreements, understandings,
negotiations and discussions, whether oral or written, of the Parties. The
Letter Agreement, the Option Agreement and the Confidentiality Agreement remain
in full force and effect. No supplement, amendment, alteration, or modification,
of this Agreement shall be binding unless executed in writing by the Parties
hereto.

         13.3. Waiver. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provisions hereof
(whether or not similar), nor shall such waiver constitute a continuing waiver
unless otherwise expressly provided.

         13.4. Captions. The captions in this Agreement are for convenience only
and shall not be considered a part of or affect the construction or
interpretation of any provision of this Agreement

         13.5 Assignability. Except as provided for in Section 14.2 hereof,
Purchaser shall not assign (whether before, at or after Closing) this Agreement
or any of its rights or obligations hereunder without the prior written consent
of the Seller, which may be withheld or conditioned for any or no reason. Any
assignment made without such consent shall be void. Seller shall not assign this
Agreement or any of its rights or obligations hereunder without the prior
written consent of Purchaser, which consent shall not be unreasonably withheld.
Except as otherwise provided herein, this Agreement shall be binding upon and
inure to the benefit of the Parties hereto and their respective permitted
successors and assigns, however, in any event Purchaser shall remain responsible
and liable for the performance of the obligations of Purchaser under this





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<PAGE>   32

Agreement. All future conveyances of all or a portion of the Assets shall
expressly recognize and perpetuate the rights and obligations set out in this
Agreement. Seller agrees that at Purchaser's written request received by Seller
on or before noon March 1, 1999, Seller will substitute the name(s) of one or
more of the identified Affiliates of Purchaser into the appropriate Assignments
and Bill of Sale with regard to Gas Plants, and associated pipelines, gathering
systems and related personal property and equipment constituting a part of the
Assets identified to Seller on or before the above date and said Affiliates of
Purchaser shall be jointly and severally liable and bound with Purchaser under
the Agreement and Assignment and Bill of Sale for all matters, terms,
obligations, indemnities and releases of, arising from or related to the Assets
described in said Assignment and Bill of Sale.

         13.6. Notices. Any notice provided or permitted to be given under this
Agreement shall be in writing, and may be served by personal delivery or by
registered or certified U.S. mail, addressed to the Party to be notified,
postage prepaid, return receipt requested. Notice deposited in the mail in the
manner hereinabove described shall be deemed to have been given and received on
the date of the delivery as shown on the return receipt. Notice served in any
other manner (including by facsimile delivery) shall be deemed to have been
given and received only if and when actually received by the addressee. For
purposes of notice, the addresses of the Parties shall be as follows:

SELLER:

         PIONEER NATURAL RESOURCES USA, INC.
         PIONEER RESOURCES PRODUCING L.P.
         Attn:  Ray Alameddine and W.T. Howard
         1400 Williams Square West
         5205 North O'Connor Blvd.
         Irving, Texas 75039-3746
         Telephone:        972/444-9001
         Fax:              972/969-3570

PURCHASER:

         COSTILLA ENERGY, INC.
         Attn:  Clifford N. Hair, Jr.
         400 West Illinois, Suite 1000
         Midland, Texas  79701
         Telephone:        915/686-6030
         Fax:              915/686-6083



Each Party shall have the right, upon giving three (3) days prior notice to the
other in the manner hereinabove provided, to change its address for purposes of
notice to any other appropriate street address.



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<PAGE>   33

         13.7 WAIVER OF CONSUMER RIGHTS . TO THE EXTENT APPLICABLE TO THE ASSETS
OR ANY PORTION THEREOF, PURCHASER HEREBY VOLUNTARILY WAIVES IT'S RIGHTS UNDER
THE TEXAS DECEPTIVE TRADE PRACTICES ACT, SECTION 17.41 ET SEQ., TEX. BUS. & COM.
CODE., A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS AND PROTECTIONS. IN ORDER TO
EVIDENCE ITS ABILITY TO GRANT SUCH WAIVER, PURCHASER HEREBY REPRESENTS AND
WARRANTS TO SELLER THAT IT (i) IS IN THE BUSINESS OF SEEKING OR ACQUIRING, BY
PURCHASE OR LEASE, GOODS OR SERVICES FOR COMMERCIAL OR BUSINESS USE; (ii) HAS
CONSULTED WITH AN ATTORNEY OF PURCHASER'S OWN CHOOSING; (iii) HAS KNOWLEDGE AND
EXPERIENCE IN FINANCIAL, BUSINESS AND OIL AND GAS MATTERS THAT ENABLE IT TO
EVALUATE THE MERITS AND RISKS OF THE TRANSACTIONS CONTEMPLATED HEREBY; (iv) IS
NOT IN A SIGNIFICANTLY DISPARATE BARGAINING POSITION; AND (v) THAT THIS WAIVER
IS A MATERIAL AND INTEGRAL PART OF THIS AGREEMENT AND THE CONSIDERATION THEREOF.


         13.8. Expenses. Each Party shall be solely responsible for all expenses
incurred by it in connection with this transaction (including, without
limitation, fees and expenses of its own legal counsel and accountants).

         13.9. Severability. The provisions of this Agreement are severable at
Seller's option. If a court of competent jurisdiction finds any part of this
Agreement to be void, invalid, or otherwise unenforceable, then Seller may
decide whether to enforce this Agreement without the void, invalid, or
unenforceable parts or to terminate this Agreement.

         13.10. Damages. The Parties waive any rights to special, indirect,
punitive, exemplary, or consequential damages resulting from a breach of this
Agreement.

         13.11. No Third Party Beneficiary. This Agreement is not intended to
create, nor shall it be construed to create, any rights in any third party under
doctrines concerning third party beneficiaries.

         13.12. Survival. The representations and warranties of the Parties
under this Agreement shall not survive, but shall terminate upon and be
extinguished by, Closing; provided, however, that all representations,
warranties, disclaimers, releases, waivers, covenants, agreements and
indemnities contained within Sections 1.2, 2.3, 3.3, 3.4, and 5.1 through 5.10,
and Articles 9, 11, 12, 13 and 14 of this Agreement shall survive the Closing,
further provided, that, notwithstanding anything herein to the contrary,
Purchaser expressly agrees and acknowledges that it shall have no remedy or
recourse against Seller or its Affiliates or any of their respective
Representatives with respect to the condition of the Assets.

         13.13. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.





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<PAGE>   34

         13.14. Not to be Construed Against Drafter. Purchaser and Seller
acknowledge that they have read this Agreement, have had the opportunity to
review it with an attorney of their respective choice, and have agreed to all
its terms. Under these circumstances, Purchaser and Seller agree that the rule
of construction that a contract be construed against the drafter shall not be
applied in interpreting this Agreement and that in the event of any ambiguity in
any of the terms or conditions of this Agreement, including any exhibits hereto
and whether or not placed of record, such ambiguity shall not be construed for
or against any Party hereto on the basis that such Party did or did not author
the same.

Waiver of Jury Trial. SELLER AND PURCHASER DO HEREBY IRREVOCABLY WAIVE, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO A TRIAL BY JURY IN ANY
ACTION, SUIT OR OTHER LEGAL PROCEEDING BASED UPON, ARISING OUT OF OR RELATING TO
THIS AGREEMENT THE RIGHTS AND OBLIGATIONS UNDER THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.

         13.16 Publicity. Seller and Purchaser shall consult with each other
with regard to all publicity and other releases and disclosures to be made prior
to, at or after Closing concerning this Agreement and the transactions
contemplated hereby, which are not otherwise expressly permitted by the
Confidentiality Agreement, and, except as required by applicable law or the
applicable rules or regulations of any governmental body or stock exchange,
neither Party shall make any disclosure or issue any publicity or other release
without the prior written consent of the other Party, which consent shall not be
unreasonably withheld or delayed.


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<PAGE>   35


         13.17. Accounting.

         A.       Seller shall deliver to Purchaser on or before the fourth
                  business day prior to Closing the Preliminary Settlement
                  Statement setting forth any adjustments to the Purchase Price
                  provided for in or required by this Agreement including,
                  without limitation, items such as the Purchase Price, Deposit,
                  expenses, prepaid items, revenue received, Property Taxes,
                  excise and energy taxes, copying and recording fees, to the
                  extent such information is available or estimated by Seller on
                  or before Closing. The Preliminary Settlement Statement shall
                  be prepared in accordance with this Agreement and with
                  standard industry and accounting practices. In connection with
                  the preparation of the Preliminary Settlement Statement, the
                  Purchase Price shall be (1) increased by (a) the costs and
                  expenses that are attributable to the Assets for the period
                  from the Effective Time to the Closing Date that are paid,
                  incurred or assessed by Seller (including, but not limited to,
                  Seller's internal cost for administrative overhead for each
                  well operated by Seller at the rate of $435.00 per well per
                  month for wells not otherwise subject to an applicable COPAS
                  overhead rate under an operating agreement and an amount equal
                  to the applicable COPAS overhead rate less any non-operator
                  billed overhead amounts that have actually been received by
                  Seller for wells subject to an applicable COPAS under an
                  operating agreement), and (b) other amounts due Seller and
                  contemplated hereby, and (2) reduced by (a) proceeds received
                  by Seller for hydrocarbons attributable to the Subject
                  Properties produced after the Effective Time, and (b) other
                  amounts due Purchaser and contemplated hereby.

         B.       Within 150 days after the Closing, Seller shall prepare, in
                  accordance with this Agreement and with standard industry and
                  accounting practices, and deliver to Purchaser, a final
                  accounting statement showing the proration and calculation of
                  credits and payment obligations of Purchaser and Seller
                  hereunder. As soon as reasonably practicable after receipt
                  thereof, Purchaser shall deliver to Seller a written report
                  containing any changes that Purchaser proposes to be made to
                  such statement. The Parties shall use their best efforts to
                  reach agreement (the "Final Accounting") on the final
                  accounting statement on or before the 150th day after the
                  Closing Date (such date the "Final Accounting Date", whether
                  or not Seller and Purchaser have agreed on the Final
                  Accounting). Once the Final Accounting has been agreed to by
                  Purchaser and Seller, there shall be no further adjustments to
                  the Purchase Price and Seller shall within thirty (30) days
                  send a check to Purchaser for the agreed amount owed by Seller
                  or invoice Purchaser for the amount owed by Purchaser and
                  Purchaser shall pay Seller the invoice amount within thirty
                  (30) days of the date of said invoice.

         13.18. Operatorship. Seller does not represent to Purchaser that
Purchaser will automatically succeed to the operatorship of any given Subject
Property as to which Seller is currently the operator. Purchaser recognizes and
agrees that Purchaser will be required to comply with applicable operating
agreements, unit operating agreements or other similar contracts relating to any
elections or other selection procedures in order to succeed Seller as operator.





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<PAGE>   36

         13.19. Seller's Employees. Purchaser will interview and evaluate in
accordance with its normal employment procedures those Persons employed as field
personnel in the capacity of pumper, foreman, operator, technician, mechanic,
superintendent, repairman, utility man, or other similar field classifications
by Seller in connection with the Subject Properties and identified by letter of
even date herewith from Seller to Purchaser who desire to be considered for
employment by Purchaser, and will offer in writing employment to those Persons
for whom Purchaser in its sole discretion determines a need. If Purchaser fails
to offer such employment to all of such Persons, Purchaser shall not, as a
result of such failure, otherwise be in default under this Agreement, but shall
be required to reimburse Seller for severance benefits paid by Seller to each
such Person not offered employment by Purchaser; provided, that such
reimbursement shall not exceed that amount determined by multiplying each such
employee's normal weekly wage by twelve (12). Persons offered employment with
Purchaser will be offered employment at their current work location with
compensation and benefits comparable to those provided to Purchaser's current
employees performing similar tasks, or, if none, with compensation and benefits
comparable to those provided by Seller Such offers shall be made prior to
Closing, but shall be contingent upon the occurrence of Closing and such
employment shall not commence until Closing. If any such Person employed by
Purchaser is terminated by Purchaser within six (6) months of Closing, Purchaser
shall pay such Person a severance benefit equal to the amount determined by
multiplying each such employee's normal weekly wage by ten (10). Purchaser shall
have no obligation under this Section 13.19 with respect to Persons offered
employment by Purchaser pursuant to this Section 13.19 who decline such
employment, except that the foregoing provisions shall apply to the extent that
such Person accepts employment with Purchaser or any of its Affiliates within
twelve (12) months of Closing.

         13.20. Time of Performance. Time is of the essence in the performance
of all covenants and obligations under this Agreement.

         13.21. No Partnership Created. It is not the purpose or intention of
this Agreement to create (and it shall not be construed as creating) a joint
venture, partnership or any type of association, and the Parties are not
authorized to act as agent or principal for each other with respect to any
matter related hereto.

         13.22. Express Negligence Rule; Conspicuousness. BUYER ACKNOWLEDGES
THAT THE PROVISIONS IN THIS AGREEMENT THAT ARE SET OUT IN ITALICS, IN BOLD,
UNDERLINE OR CAPITALS (OR ANY COMBINATION THEREOF) SATISFY THE REQUIREMENTS FOR
THE EXPRESS NEGLIGENCE RULE AND/OR ARE CONSPICUOUS.

         13.23. [intentionally omitted]

         13.24. Filing and Recording. Purchaser will file or record the various
originals of the Assignment and Bill of Sale and other conveyancing documents
promptly after Closing at Purchaser's sole cost. The recording Party will
provide either the original or photocopies of the recorded documents, including
the recording data, to the non-recording Party promptly. If




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<PAGE>   37

Purchaser fails to promptly record such documents then Seller may record such
documents. Purchaser will reimburse Seller for the costs of filing, recording,
and other reasonable fees actually incurred by Seller if Seller records or files
said documents, such costs or fees to be used in the Final Accounting
Settlement.

         13.25. Removal of Signs. Seller may either remove its name and signs
from the Seller operated Assets and Property or require Purchaser to do so for
those Assets that it will operate. If Seller's name or signs remain on the
Property or Assets after Seller ceases to be operator and Purchaser has become
operator, Purchaser must (a) remove any remaining signs and references to Seller
promptly, but no later than the time required by applicable regulations or
forty-five days after Seller ceases to be operator, whichever occurs first, (b)
install signs complying with applicable governmental regulations, including
signs showing Purchaser as operator of the Assets its operates, and (c) notify
Seller of the removal and installation. Seller reserves the right of access to
the Assets and Property after its ceases to be operator to remove its signs and
name from all Assets, Wells, facilities, and Property, or to confirm that
Purchaser has done so for the Assets operated by Purchaser. If Seller removes
signs because Purchaser has not done so, Seller will charge its costs to
Purchaser, and Purchaser will pay the invoice within fifteen days of receipt.

         13.26. Retention of Originals and Copies. If originals or the
last-remaining copies of any data or records have been provided to Purchaser,
Seller may have access to them at reasonable times and upon reasonable notice
during regular business hours for as long as any Asset is in effect after the
Effective Time (or for twenty-one years in the case of a mineral fee or other
non-leasehold interest or a longer period if required by law or governmental
regulation). Seller may, during this period and at its expense, make copies of
the data and records pursuant to a reasonable request.

13.27. Exhibits. Except for Exhibits, B-1, B-2, F-1, F-2 and Schedules 2.5, 4.9
and 9.11 attached to this Agreement, all references herein to specified exhibits
and schedules shall be deemed references to the Exhibits and Schedules attached
to the Prior Agreement, which Exhibits and Schedules are incorporated herein by
reference.

                             ARTICLE 14. THE SHARES

         14.1 Registration Obligation. Purchaser shall, as promptly as
practicable after the date of this Agreement, prepare and file with the
Securities and Exchange Commission, or any successor body thereto (the
"Commission"), at Purchaser's expense, a registration statement on Form S-3 (the
"Registration Statement") pursuant to Rule 415 under the Securities Act of 1933,
as amended, and all rules and regulations under such Act (the "Securities Act")
covering the resale by Pioneer USA of the Shares. Purchaser shall use its best
efforts to (a) have the Registration Statement declared effective under the
Securities Act as soon as reasonably practicable, but in any event on or prior
to the Pre-Closing Date, and (b) keep the Registration Statement continuously
effective under the Securities Act until the date which is 24 months from the
effective date of the Registration Statement. If the Registration Statement is
not declared effective on or prior to the Pre-Closing Date, then the Purchase
Price shall be increased by Four Million Dollars ($4,000,000).





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<PAGE>   38

         The rights of Seller to dispose of the Shares by use of the prospectus
contained in the Registration Statement shall be subject to the restrictions
imposed by Section 14.3 below.

         14.2 Repurchase Right. At any time after execution of this Agreement
but prior to May 30, 1999, Purchaser may repurchase the Shares by tendering to
Pioneer USA $13,000,000 in cash (the ?Share Consideration"). Notwithstanding
Section 13.5 of this Agreement, Purchaser may assign its rights under this
Section 14.2. If the Shares are so repurchased prior to Closing, the Share
Consideration shall become a part of the Option Consideration.

         14.3 Holding Period. If Closing occurs, Seller agrees not to sell, 
assign or otherwise dispose of the Shares prior to May 30, 1999. If Closing does
not occur, the provisions of this Section 14.3 shall not apply.

                                   ARTICLE 15

         15.1 The Sonat Interest. At any time prior to seven (7) days prior to
the date of the Pre-Closing, Purchaser may elect to reacquire the Sonat
Interest, as that term is defined in the Option Agreement, by providing to
Seller notice in writing of such election. If Purchaser elects to reacquire the
Sonat Interest, the Purchase Price shall be increased by $3,000,000.00, and the
Sonat Interest shall be assigned to Purchaser at Closing. If the Purchaser
elects not to reacquire the Sonat Interest, or fails to make a timely election,
Purchaser shall have no further rights in, and Seller shall retain all rights in
the Sonat Interest.






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                  EXECUTED as of the date first set forth above.


                                SELLER:

                                PIONEER NATURAL RESOURCES USA, INC.

                                By:       /s/ MARK L. WITHROW
                                          -----------------------------------
                                Name:     Mark L. Withrow
                                Its:      Executive Vice President

                                PIONEER RESOURCES PRODUCING L.P.
                                By:      Pioneer Resources, Inc.
                                         General Partner

                                By:       /s/ MARK L. WITHROW
                                          -----------------------------------
                                Name:     Mark L. Withrow
                                Its:      Executive Vice President

                                PURCHASER:

                                COSTILLA ENERGY, INC.


                                By:       /s/ CLIFFORD N. HAIR, JR. 
                                          -----------------------------------
                                Name:     Clifford N. Hair, Jr.
                                Its:      Senior Vice President - Land







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