EXHIBIT 10.182

                          PARTICIPATION AGREEMENT
                GREEN CANYON AREA, OUTER CONTINENTAL SHELF

     THIS  PARTICIPATION  AGREEMENT  (the  "Agreement  )  is  executed  and
effective  this  28th day of August, 1997 by and between  Reading  &  Bates
Development   Co.,  a  Delaware  corporation  ("R&B")  and   British-Borneo
Petroleum  Inc.,  a  Texas corporation ("BBPI") and to the  extent  of  its
obligations   hereunder,   British-Borneo   Exploration,   Inc.   a   Texas
corporation. as operator ("Operator" or "BBEI").

                                 RECITALS

     WHEREAS,  BBPI is simultaneously with the execution of this Agreement,
acquiring  an undivided sixty, percent (60%) interest in and to  those  Oil
and  Gas Leases of Submerged Lands under the Outer Continental Shelf  Lands
Act  set forth and more fully described in Exhibit "A", attached hereto and
made a part hereof for all purposes (the "Leases"); and

     WHEREAS,  R&B is simultaneously with the execution of this  Agreement,
acquiring an undivided twenty percent (20%) interest in and to the  Leases,
resulting in R&B owning the remaining undivided forty percent (40% interest
in the Leases") and

     WHEREAS,  the  Leases are burdened by and operated in accordance  with
that  certain Operating Agreement dated effective May 1, 1995, executed  by
and  between  Enserch Exploration, Inc., Mobil Oil Corporation,  Mobil  Oil
Exploration & Producing Southeast Inc. and Reading & Bates Development Co.,
et  al., as amended by letters dated October 16, 1995, October 31, 1995 and
May  17,  1996  (the "Allegheny JOA") and that certain Unit  Agreement  for
Outer Continental Shelf Exploration, Development, and Production Operations
on  the  Green  Canyon  Block  254 Unit executed  by  and  between  Enserch
Exploration, Inc. and Enserch Offshore, Inc., dated effective June 1,  1995
and  bearing  MMS Contract No. 754395015, as amended (the  "UA")  and  that
certain   Unit  Operating  Agreement,  executed  by  and  between   Enserch
Exploration, Inc. and Enserch Offshore, Inc., dated effective June 1,  1995
(the "UOA") and

     WHEREAS,  BBPI  and  R&B have entered into a letter  of  intent  dated
August  19, 1997, covering and pertaining to the Leases, the Allegheny  JOA
and the further development of the Leases (the "LOI"); and

     WHEREAS,  BBPI and R&B desire to set forth in detail, the  preliminary
agreements  reached between then in the LOI and to provide a mechanism  for
the effectuation of such agreements.

     NOW,  THEREFORE, BBPI and R&B, for and in consideration of the  mutual
covenants  herein  contained  and of the  mutual  benefits  to  be  derived
herefrom, the sufficiency of such consideration is hereby acknowledged  and
confessed and for which due acquittance is hereby granted, hereby covenant,
stipulate  and  agree as follows (capitalized terms not  otherwise  defined
herein shall have the meaning ascribed to them in the Alleghenv JOA):

1.   PARTICIPATION.

     1.1  Participation. Notwithstanding anything to the contrary contained
within  or  derivable from the Allegheny JOA, the UA and/or the UOA,  BBPI,
BBEI  and R&B do hereby covenant, stipulate and agree with respect  to  the
Leases that:

     (a)  BBEI is  hereby  established, named and designated as operator of
          the Leases  and  any  unit encompassing all or any portion of the
          Leases in  accordance  with  the  terms  and  provisions  of  the
          Allegheny  JOA,  the UA and the UOA, as to certain depths, all as
          identified  in   those  certain   Designation  of  Operator   and
          Designation  of  Successor  Unit  Operator  Forms  filed with the
          Minerals Management Service on August 20, 1997.  BBPI  and R&B do
          hereby stipulate and agree that for purposes  of  the default and
          security provisions of the Allegheny JOA, the  UA  and the UOA, a
          default by BBEI, as operator, shall be deemed a  default by BBPI.
          BBPI and R&B shall execute and deliver,  each  unto the other, an
          amendment to the  Allegheny  JOA,  the  UA and the UOA, as may be
          required to implement this stipulation and agreement.

     (b)  The  development plan attached hereto and made a part hereof  for
          all  purposes as Exhibit "B" (the "Development Plan"), is  hereby
          approved by both R&B and BBPI with respect to the development  of
          the Leases and both BBPI and R&B shall be deemed to have obtained
          any  necessary  execution,  approval  and  consent  necessary  to
          implement  the  Development  Plan,  to  construct  any  and   all
          facilities  contemplated by the Development Plan and  to  conduct
          any  and  all  operations contemplated by the  Development  Plan.
          Although not necessary to evidence the execution of, the approval
          of  or  their  consent to the Development Plan hereunder,  it  is
          anticipated that information AFEs shall be forwarded to  R&B  and
          BBPI by the Operator.  By way of illustration and not limitation,
          BBPI  and R&B do hereby acknowledge the consent, approval  and/or
          execution  of any and all Design AFEs, Fabrication AFEs,  waivers
          of  the formation of an integrated project team, joint evaluation
          of   development   options,  any  approval  processes   for   the
          Development  Plan,  the  right  to  make  counter  proposals  for
          development  plans,  any minor modifications to  the  Development
          Plan and/or any other applicable provisions of the Allegheny JOA,
          the  UA  and/or  the UOA which may be necessary to implement  the
          intent  of the BBPI and R&B hereunder or which may impede,  delay
          or  affect the timely implementation of the Development  Plan  in
          accordance with the terms and provisions of the LOI and the terms
          and provisions of this Agreement.

     (c)  BBPI  and R&B agree to cooperate in good faith in the acquisition
          of appropriate Minerals Management Service ("MMS") acceptance and
          approval  of the Development Plan and any associated matter  with
          the Development Plan.

     (d)  BBPI  and  R&B  do hereby approve the immediate commencement  and
          implementation of the Development Plan by the Operator,  and  the
          Operator hereby undertakes to do so.

     (e)  Subject  to the further terms hereof, including, but not  limited
          to,  providing  for the bearing by BBPI of R&B's share  of  costs
          relating to the implementation of the Development Plan, R&B  does
          hereby agree to bear and absorb its forty percent (40%) share  of
          all  costs,  risks and expenses associated with  the  Development
          Plan and its implementation and execution, as if such Development
          Plan  had  been approved by R&B under the terms and provision  of
          the Allegheny JOA.

     (f)  With respect to the acquisition of interests in the Leases by R&B
          and  BBPI described above, both R&B and BBPI do hereby waive  and
          relinquish  any  and  all  pre-emtive,  preferential  rights   of
          purchase,  rights  to  object due to the failure  to  maintain  a
          uniform  interest  or any other such similar or dissimilar  right
          which either R&B or BBPI may have or maintain with respect to the
          other   on  account  of  or  arising  from  the  above  describer
          acquisition of interests, whether such right is derived from  the
          Allegheny  JOA,  the  UA  or the UOA or  any  other  contract  or
          agreement.  Additionally,  R&B does  hereby  grant  unto  BBPI  a
          similar  waiver of rights with respect to any future  acquisition
          by BBPI of the interest of Mobil Oil Corporation and/or Mobil Oil
          Exploration  &  Producing Southeast Inc or any  other  affiliated
          entity  of  either which may hold title (hereinafter collectively
          "Mobil") or its successors or assigns, in Green Canyon Block  252
          and/or Green Canyon Block 296. In the event BBPI does acquire  an
          interest  from Mobil, BBPI and R&B agree to examine and  discuss,
          in  good  faith,  the equalization of interests between  them  in
          Greet Canyon Block 252 and/or Green Canyon Block 296.

     g)   With respect to the acquisition of interests in the Leases by R&B
          and BBPI described above, for the purposes of properly reflecting
          the  interests  to  be acquired in the records  of  the  Minerals
          Management Service ("MMS"), R&B and BBPI do hereby agree that the
          conveyance  documents evidencing the conveyance of interest  from
          Mobil to BBPI shall be filed with the MMS prior to the conveyance
          documents  evidencing the conveyance of interest from Enserch  to
          R&B  and that R&B agrees that in its letter to the MMS requesting
          approval of the conveyance documents evidencing the conveyance of
          interest from Enserch to R&B, R&B shall specifically provide that
          the documents evidencing the conveyance of interest from Mobil to
          BBPI shall be approved first.

2.   DEVELOPMENT CARRY.

     2.1   Obligation  to Carry. Notwithstanding anything to  the  contrary
which may be contained in or derived from the Allegheny JOA, the UA or  the
UOA,  and  as a portion of the consideration due R&B hereunder, BBPI  shall
bear  (by  paying for the following costs on R&B's behalf), R&B's undivided
forty  percent  (40%)  share  of  the  cost  and  expense  of  the  design,
engineering,  fabrication, construction and installation of the  facilities
contemplated  under  the  Development Plan ("Development  Costs"),  through
August 28, 1998, or the date of the election set out in Article 2.2 is made
by  R&B,  whichever is the first to occur. BBPl's obligation  hereunder  is
only  as  to costs actually incurred during said time period and R&B  shall
continue  to  bear  and  pay  directly,  its  proportionate  share  of  all
liability,  risks, exposures, lawsuits, demands, claims and  other  similar
and dissimilar liabilities. Nothing herein shall be deemed to provide R&B a
turnkey  or  other  fixing  of costs or liabilities  with  respect  to  the
implementation of the Development Plan.

     2.2   Election of R&B. On or before August 28, 1998 (the  period  from
August  28,  1997 to the earlier of August 28, 1998 or the date upon  which
payment  is made pursuant to R&B's election under 2.2 shall be referred  to
at  the "Option Period"), R&B shall elect by written notice to BBPI, either
to:

     (a)  convey  to  BBPI, effective as of August 28, 1997 (the "Effective
          Closing  Date"), free and clear of all burdens, liens, overriding
          royalties,   production  payments  and  any   other   burden   or
          encumbrance  created  by,  through or under  R&B,  all  of  R&B's
          interest in the Leases, and all of R&B's interest in any and  all
          associated  facilities and equipment for the sum  of  Twenty-five
          Million  and  No/100 Dollars ($25,000,000.00) plus interest  from
          August 28, 1997 at LIBOR (London Interbank Rate) + 2%: or

     (b)  retain  its interest in the Leases and pay to BBPI, forty percent
          (40%)  of  all of the above described costs incurred by  BBPI  in
          connection with the implementation of the Development Plan during
          the  Option Period, plus interest to be calculated at LIBOR +  2%
          from  the  date such funds were paid by BBPI. R&B would  then  be
          assigned an undivided forty percent (40%) interest in and to  the
          Seastar  facility  and all associated equipment  and  facilities,
          free  and  clear of all liens and encumbrances, save  and  except
          those  liens  and encumbrances contemplated under the  terms  and
          provisions of the Allegheny JOA, the UA or the UOA and R&B  would
          also  then assume an undivided forty percent (40%) of the  future
          costs of the development pursuant to the terms and provisions  of
          the Allegheny JOA and the LOI.

Failure of R&B to make an election within the Option Period shall be deemed
to be an election under Article 2.2 (a above

In  the  event R&B makes an election under option 2.2 (a) above or  if  R&B
fails to make an election during the Option Period, upon the closing of the
transaction  contemplated in 2.2(a) above, BBPI  shall  agree  to  protect,
indemnify,  defend  and  hold R&B harmless from and  against  any  and  all
claims, demands, liabilities, suits, damages and injuries arising from  the
implementation of the Development Plan from and after August 28, 1997.

     2.3   Option Agreement. The rights and obligations of the parties with
respect  to  the option of R&B hereunder, shall be confirmed in a  separate
agreement to be executed by R&B and BBPI (the "Option Agreement") which  is
attached hereto and made a part hereof for all purposes as Exhibit "D." The
Option  Agreement  shall be executed in recordable form and  which  may  be
filed in the records of the Minerals Management Service and the appropriate
parish records.

     2.4   Voting/Elections  during the Option Period.  During  the  Option
Period,  BBPI shall, under the terms of the Allegheny JOA, be  entitled  to
vote and make Elections with respect to R&B's interest with respect to  the
implementation  of  and all matters associated with the  Development  Plan,
provided  that  such vote and/or Election is the same as BBPI's  vote  with
respect  to its own interest. During the Option Period, BBPI shall  not  be
entitled  to  vote  or make Elections with respect to R&B's  interest  with
respect  to  drilling  operations, but may vote  and  make  Elections  with
respect to R&B's interest with respect to completion operations of existing
wells.  BBPI agrees to keep R&B fully informed with respect to  such  votes
and Elections.

     2.5   Transfers of Interest by R&B during the Option Period. Prior  to
its  payment  or  assignment under Article 2.2 above, R&B shall  not  sell,
convey, mortgage, pledge, assign, encumber, alienate or otherwise transfer,
nor  enter  into  any agreement to sell, convey, mortgage, pledge,  assign,
encumber, alienate or otherwise transfer all or any portion of its interest
in the Leases to any party other than BBPI.

     2.6   Information to R&B during the Option Period. During  the  Option
Period, R&B shall be entitled to review all information, data and contracts
affecting the Development Plan and R&B shall be permitted to attend, at  an
observer,   periodic  review  meetings  with  contractors  in   which   the
Development Plan is discussed. In addition to the other information  to  be
provided to R&B under the Allegheny JOA as a Participating Party, within 30
days  after  the end of each calendar month during the Option Period,  BBEI
and BBPI shall provide a statement to R&B describing the costs and expenses
accruing to R&B's forty percent (40%) share during the preceeding month.

3.   SECURITIZATION OF OBLIGATIONS.

     3.1   Mortgage, Pledge and Assignment. To secure its obligation to pay
BBPI  for the amounts paid by BBPI and attributable to R&B's forty  percent
(40%)  share  of  the  costs  for  the  development  contemplated  by   the
Development Plan hereunder and/or its obligation to convey its interest  in
the  Leases under Article 2.2(a) hereof if R&B so elects, if R&B  fails  to
make  an election or if R&B experiences a change in control of the Company,
R&B   shall   grant  to  BBPI  a  mortgage  and  UCC  financing   statement
(collectively  the  "Mortgage") burdening its interest in  the  Leases  and
equipment associated with the Leases (now or hereinafter in existence),  in
an  amount sufficient to secure its undivided forty percent (40%) share  of
all  anticipated  expenditures to be made by BBPI in  connection  with  the
development contemplated by the Development Plan. The Mortgage shall be  in
the  form and contain the terms and provisions as set forth in Exhibit "D",
attached hereto and made a part hereof for all purposes.

     3.2  Release and Subordination of Mortgage, Pledge and Assignment. The
Mortgage  shall  be  released  when both  first  commercial  production  of
hydrocarbons, contemplated under the Development Plan has occurred and  R&B
has  repaid in full its share of development costs, plus accrued  interest,
accruing prior to such first commercial production and payment. If prior to
final  payment by R&B and release of the Mortgage by BBPI, R&B  desires  to
acquire  alternate  project financing of its proportionate  share  of  such
development,  BBPI  shall subordinate such Mortgage to the  extent  of  any
funds  advanced  pursuant to such financing and  to  the  extent  that  any
interest  may  be  due  on such advanced funds, provided  that  such  funds
advanced  are  paid  directly  to BBPI, to  the  extent  of  R&B;'s  unpaid
obligations to BBPI only, pursuant to Article 2.2(b) above in repayment  of
its loan to R&B.

4.   CHANGE IN CONTROL OF R&B.

     4.1   Effect  of  Change in Control. In the event that,  at  any  time
during  the term of the Option Period R&B experiences a "change in  control
of  the  Company", as hereinafter defined in Article 4.2,  R&B  shall  give
written notice to BBPI of such occurrence and BBPI shall have the right and
option,  but  not  the obligation, for a period of ten (10)  business  days
after  receipt of such notice, to acquire the Property from R&B as provided
herein.  Such  option  shall expire if BBPI fails to exercise  such  option
within the time frame established hereunder.

Any  such  acquisition by BBPI pursuant to the terms and provisions  hereof
shall  be  made  free  and clear of any and all liens,  mortgages,  claims,
overriding  royalty  interests, production payments or  any  other  burdens
which may have been created by, through or under R&B.

     4.2   Change  in Control Defined. For the purposes of this  provision,
"Company"  shall  be deemed to mean R&B and the parent of  R&B  and/or  any
other  entity  controlling a majority of the voting stock of R&B.  For  the
purposes of this provision, a "change in control of the Company" shall mean
a  change  in control of a nature that would be required to be reported  in
response  to Item l(a) of the Current Report on Form 8-K, as in  effect  on
the date hereof, pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended ("Exchange Act") or would have been required to  be
so reported but for the fact that such event had been "previously reported"
as  that  term  is defined in Rule 12b-2 of Regulation 12B of the  Exchange
Act;  provided that, without limitation, such a change it control shall  be
deemed  to  have  occurred if (a) any Person is or becomes  the  beneficial
owner  (as  defined  in  Rule 13d-3 under the Exchange  Act),  directly  or
indirectly,  of  securities  of the Company representing  more  than  fifty
percent  (50%)  of  the  combined  voting  power  of  the  Company's   then
outstanding securities ordinarily (apart from rights accruing under special
circumstances) having the right to vote at elections of directors  ("Voting
Securities"), or (b) individuals who constitute the Board on the  Effective
Date  hereof (the "Incumbent Board") cease for any reason to constitute  at
least  a  majority  thereof, provided that any person becoming  a  director
subsequent to the date hereof whose election, or nomination for election by
the  Company's  shareholders, was approved by a  vote  of  at  least  three
quarters  of  the  directors  comprising the  Incumbent  Board  (either  by
specific vote or by approval of the proxy statement of the Company in which
such  person is named as a nominee for director, without objection to  such
nomination) shall be, for purposes of this clause (b), considered as though
such person were a member of the Incumbent Board, or (c) a recapitalization
of  the Company occurs which results in either a decrease by 33% or more in
the aggregate percentage ownership of Voting Securities held by Independent
Shareholders  (on a primary basis or on a fully diluted basis after  giving
effect to the exercise of stock option and warrants) or an increase in  the
aggregate percentage ownership of Voting Securities held by non-Independent
Shareholders  (on a primary basis or on a fully diluted basis after  giving
effect to the exercise of stock options and warrants) to greater than  50%.
For purposes of this provision the term "Person" shall mean and include any
individual, corporation, partnership, group, association or other "person,"
as  such term is used in Section 14(d) of the Exchange Act, other than  the
Company,  a  subsidiary  of  the Company or any  employee  benefit  plan(s)
sponsored  or maintained by the Company or an subsidiary thereof,  and  the
term  "Independent Shareholder" shall mean any shareholder of  the  Company
except  any  employee(s)  or director(s) of the  Company  or  any  employee
benefit  plan(s) sponsored or maintained by the Company or  any  subsidiary
thereof.   For  purposes of this Article 4., a "change in  control  of  the
Company"  shall not be deemed to occur solely as the result of a  spin-off,
split-off  or  other distribution of the outstanding stock of  R&B  to  the
stockholders of the ultimate parent corporation controlling a  majority  of
the voting stock of R&B, or the merger of R&B's parent with Falcon Drilling
Company,  Inc., or the merger of R&B where R&B's parent ultimately  retains
controlling  interest  of the surviving entity, or  any  merger  where  the
parent of R&B is the surviving entity.

5.   TITLE WARRANTY.

     5.1  Title Warranty. R&B warrants that:

          (a)  Neither R&B nor any parent, subsidiary or affiliate  of  R&B
               during  their  respective  periods  of  ownership  has   (A)
               executed   any   deed,  conveyance,  assignment   or   other
               instrument as an assignor, grantor, sublessor or in  another
               capacity or (B) has breached any obligation under any  Lease
               that  would  (i)  result, now or in  the  future,  in  R&B's
               interest  for  any Lease being less than that set  forth  in
               Exhibit "F", attached hereto and made a part hereof for  all
               purposes or (ii) obligate R&B, now or in the future, to bear
               the   costs   and  expense  relating  to  the   maintenance,
               development  and  operation of  such  Lease,  in  an  amount
               greater  than the working interest for such Lease,  well  or
               unit  set  forth  in  Exhibit "F", unless  the  net  revenue
               interest  attributable to said working interest is increased
               by proportionate or greater amount; and

          (b)  Except as specifically provided in the Allegheny JOA, the UA
               or  the  UOA, the interests of R&B, as set forth in  Exhibit
               "F"  hereto  are  free  of  all  liens,  mortgages,  charges
               privileges, security interests and encumbrances  created  by
               or through R&B as of the Effective Closing Date;

(the  limited warranty set forth in subparagraphs (a) and (h)  above  shall
hereinafter be referred to as the "Special Limited Warranty"). The Mortgage
and the assignment of leasehold interest, in the event the option set forth
in 2.2(a) is selected or deemed to be selected, executed by R&B in favor of
BBPI  shall  be with no warranty whatsoever other than the Special  Limited
Warranty, but with full substitution and subrogation to BBPI in and to  all
covenants,  agreements,  representations  and  warranties  made  by  others
heretofore given or made in connection with the Leases or any part thereof.

6.   REPRESENTAT10NS OF R&B.

     As  a  principal cause and material inducement to BBPI's execution  of
this  Agreement and to BBPI's consummation of the transactions contemplated
hereby, and with the acknowledgment by R&B of BBPI's reliance hereon,  R&B,
to  the  extent  set  forth below and with respect to its  undivided  forty
percent  (40%)  interest in the Leases covered hereby, represents  to  BBPI
that as of the date hereof:

     6.1   Existence  of R&B. R&B is a corporation duly organized,  validly
existing and in good standing under the laws of the State of Delaware.

     6.2   Power  of R&B.  R&B has the requisite corporate power  to  enter
into  and perform this Agreement and the transactions contemplated  hereby.
Subject  to rights to consent by, required notices to, and filings with  of
other  actions  by  governmental entities where the  same  are  customarily
obtained subsequent to the assignment of oil and gas interests and  leases,
the  execution, delivery and performance of this Agreement by R&B, and  the
transactions contemplated hereby, will not violate (i) any provision of the
articles of incorporation or bylaws of R&B, (ii) an, material agreement  or
instrument  to which R&B is a party or by which R&B is or the Assets  owned
by  R&B  art bound, (iii) any judgment, order, ruling, or decree applicable
to  the  Assets or to R&B as a party in interest, or (iv) any law, rule  or
regulation  applicable  to  R&B or to the ownership  or  operation  of  the
Assets.

     6.3  Authorization of R&B. The execution, delivery and performance  of
this Agreement and the transactions contemplated hereby have been duly  and
validly  authorized by all requisite corporate action on the part  of  R&B.
This  Agreement has been duly executed and delivered on behalf of R&B,  and
at  the  Closing  all documents and instruments required  hereunder  to  be
executed  and delivered by R&B shall have been duly executed and delivered.
This  Agreement does, and such documents and instruments shall,  constitute
legal, valid and binding obligations of R&B 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).

     6.4   Brokers. R&B has incurred no obligation or liability, contingent
or  otherwise,  for  brokers' or finders' fees in respect  of  the  matters
provided  for  in this Agreement and any such obligation or liability  that
might exist and which was incurred by R&B, shall be the sole obligation  or
liability of R&B.

     6.5  Foreign Person.  R&B is not a "foreign person" within the meaning
of  the Sections 1445 and 7701 of Internal Revenue Code of 1986, as amended
(the  "Code")(i.e.  R&B is not a non-resident alien,  foreign  corporation,
foreign  partnership, foreign trust or foreign estate as  those  terms  are
defined in the Code and any regulations promulgated thereunder).

     6.6   Litigation.  There are no actions, suits or proceedings pending,
or  to the knowledge of R&B threatened, against or affecting the Leases  or
any  portion or portions thereof, or the operations of R&B relating to  the
Leases  or  any  portion or portions thereof, and  to  the  best  of  R&B's
knowledge  after  reasonable inquiry, no violation of any  laws,  statutes,
regulations  or  orders  applicable to any Lease or the  operation  thereof
exists.

     6.7   Consents  and  Preferential  Purchase  Rights.  Other  than  the
consents   and  waivers  contained  in  this  Agreement  and  the  existing
agreements with Manta Ray Gathering Company, L.L.C., there are no  consents
(except  governmental  consents which are customarily  obtained  after  the
assignment  of an oil and gas lease), agreements or waivers of preferential
rights  necessary to the valid mortgage of the Leases to  BBPI  at  Closing
that  have  not been affirmatively waived or deemed to have been waived  by
expiration  of the appropriate notice period, and there are no preferential
purchase rights or calls on production with respect to the production  from
the Leasehold Interests, which limit the purchase price for oil or pas,  or
which are not subject to termination upon 60 days' notice.

     6.8   MMS  Approval. R&B is not aware of the existence of any fact  or
condition  with  respect to R&B or the Leases that may  cause  the  MMS  to
withhold  unconditional approval, to the extent MMS  approval  is  required
under applicable law, of the Mortgage of the Leases from R&B to BBPI or any
acquisition  of R&B's interest in the Leases under Articles 2.,  3.  or  4.
hereof.

7.   REPRESENTATIONS OF BBPI AND BBEI.

     As  a  principal cause and material inducement to R&B's  execution  of
this  Agreement and to R&B's consummation of the transactions  contemplated
hereby, and with the acknowledgment by BBPI of R&B's reliance hereon, BBPI,
to  the  extent  set  forth below and with respect to its  undivided  sixty
percent (60%) interest in the Leases covered hereby, represents to R&B that
as of the date hereof:

     7.1  Existence of BBPI. BBPI and BBEI are corporations duly organized,
validly existing and in good standing under the laws of the State of Texas.

     7.2   Power of BBPI & BBEI. BBPI and BBEI have the requisite corporate
power  to  enter  into  and  perform this Agreement  and  the  transactions
contemplated hereby. Subject to rights to consent by, required notices  to,
and  filings with or other actions by governmental entities where the  same
are  customarily  obtained  subsequent to the assignment  of  oil  and  gas
interests  and  leases,  the execution, delivery and  performance  of  this
Agreement by BBPI and BBEI, and the transactions contemplated hereby,  will
not violate (i) any provision of the articles of incorporation or bylaws of
BBPI  or  BBEI, (ii) any material agreement or instrument to which BBPI  or
BBEI is a party or by which BBPI or BBEI is or the Leases owned by BBPI are
bound,  (iii)  any  judgment, order, ruling, or decree  applicable  to  the
Leases or to BBPI or BBEI as a party in interest, or (iv) any law, rule  or
regulation  applicable to BBPI or BBEI or to the ownership or operation  of
the Leases.

     7.3   Authorization  of  BBPI  &  BBEI. The  execution,  delivery  and
performance of this Agreement and the transactions contemplated hereby have
been  duly and validly authorized by all requisite corporate action on  the
part  of BBPI and BBEI. This Agreement has been duly executed and delivered
on  behalf  of  BBPI  and  BBEI,  and at  the  Closing  all  documents  and
instruments  required hereunder to be executed and delivered  by  BBPI  and
BBEI shall have been duly executed and delivered. This Agreement does,  and
such  documents and instruments shall, constitute legal, valid and  binding
obligations  of BBPI and BBEI, 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).

     7.4   Brokers.   Neither BBEI or BBPI have incurred any obligation  or
liability,  contingent  or  otherwise, for brokers'  or  finders'  fees  in
respect  of  the  matters  provided for in  this  Agreement  and  any  such
obligation or liability that might exist and which was incurred by BBPI  or
BBEI, shall be the sole obligation or liability of BBPI and BBEI.

     7.5   Foreign  Person.  Neither BBPI or BBEI are  a  "foreign  person"
within  the meaning of the Sections 1445 and 7701 of Internal Revenue  Code
of  1986, as amended (the Code) (i.e., BBPI and BBEI are not a non-resident
alien,  foreign corporation, foreign partnership, foreign trust or  foreign
estate  as  those  terms  are  defined in  the  Code  and  any  regulations
promulgated thereunder).

     7.6   Litigation. There are no actions, suits or proceedings  pending,
or  to  the knowledge of BBPI or BBEI threatened, against or affecting  the
Leases  or  any portion or portions thereof, or the operations of  BBPI  or
BBEI relating to the Leases or any portion or portions thereof, and to  the
best  of BBPI's and BBEI's knowledge after reasonable inquiry, no violation
of  any laws statutes. regulations or orders applicable to any Lease or the
operation thereof exists.

     7.7   Consents  and  Preferential  Purchase  Rights.  Other  than  the
consents   and  waivers  contained  in  this  Agreement  and  the  existing
agreements with Manta Ray Gathering Company, L.L.C., there are no  consents
(except  governmental  consents which are customarily  obtained  after  the
assignment  of an oil and gas lease), agreements of waivers of preferential
rights  necessary to the valid mortgage of the Leases to  BBPI  at  Closing
that  have  not been affirmatively waived or deemed to have been waived  by
expiration  of the appropriate notice period, and there are no preferential
purchase rights or calls on production with respect to the production  from
the  Leasehold Interests, which limit the purchase vice for oil or gas,  or
which are not subject to termination upon 60 days' notice.

     7.8  MMS Approval.  Neither BBEI nor BBPI is aware of the existence of
any  fact or condition with respect to BBPI or BBEI or the Leases that  may
cause  the  MMS  to  withhold unconditional approval,  to  the  extent  MMS
approval  is required under applicable law, of the Mortgage of  the  Leases
from  R&B to BBPI or any acquisition of R&B's interest in the Leases  under
Articles 2., 3., or 4. hereof.

8.   CLOSING.

     8.1   Time  and Place of Closing. The consummation of the transactions
contemplated hereby (the "Closing") is to be held at the offices of BBPI on
the  later  to  occur  of August 28, 1997, or such other  date  as  may  be
mutually agreed in writing between BBPI and R&B.

     8.2  Closing Obligations. At the Closing:

          (a)  R&B  shall execute, acknowledge and deliver to BBPI and BBPI
               shall   execute,  acknowledge  and  deliver  to  R&B,   this
               Agreement,  the Option Agreement attached hereto as  Exhibit
               "C",  the  mortgage  and UCC statements attached  hereto  as
               Exhibit  "D"  together  with any  and  all  requisite  forms
               required to accompany such documents for filing with the MMS
               and the appropriate parishes, including, but not limited to,
               Designation of Operator forms in favor of BBEI.

          (h)  BBPI  and R&B shall execute such other instruments and  take
               such  other  action as may be necessary to carry  out  their
               respective obligations under this Agreement.

          (c)  BBEI, BBPI and R&B shall execute and deliver, each unto  the
               other,  appropriate ratifications of the Allegheny  JOA  and
               which agreement shall govern the operation of the Leases  on
               and  after  the Effective Date, together with  any  and  all
               Declarations   of   Operating   Agreement,   UCC   Financing
               Statements  and  any other documents which may  be  required
               under the terms and provisions of the Allegheny JOA.

9.   POST-CLOSING OBLIGATIONS.

     9.1   Further Assurances.  After Closing, BBPI and R&B 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 purpose
of this Agreement or of any document delivered pursuant hereto.

     9.2   Governmental Approvals.  After Closing, BBPI and  R&B  agree  to
take  all actions and to execute all documents reasonably requested by  the
other  party  to  obtain all necessary permissions,  approvals  or  consent
required  by federal, state or local governmental authorities to consummate
the transactions contemplated by this Agreement.

     9.3   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  parties  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 parties made in connection with contesting
the  imposition of taxes. Notwithstanding anything to the contrary in  this
Agreement,  no  party to this Agreement shall be required at  any  time  to
disclose  to  the  other parties any tax return or other  confidential  tax
information.

     9.4   Sharing  of  Information regarding the Leases. If  requested  by
Mobil  and/or Enserch Exploration Inc. ("Enserch"), BBPI may provide  Mobil
and/or  Enserch  reasonable  access  to  data  concerning  the  development
contemplated  by  the  Development Plan, by means of  project  reports  and
invitations to attend periodic review meetings

10.  MISCELLANEOUS.

     10.1   Governing law.   THIS AGREEMENT AND ALL INSTRUMENTS EXECUTED IN
ACCORDANCE WITH IT  SHALL  BE  GOVERNED  BY  AND INTERPRETED IN  ACCORDANCE
WITH THE SUBSTANTIVE LAWS  OF  THE  STATE  OF LOUISIANA, WITHOUT  REGARD TO
CONFLICT OF LAW RULES THAT WOULD  DIRECT APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION.

     10.2   Entire  Agreement.  This  Agreement,  including  all   exhibits
attached hereto and made a part hereof, together  with  the  LOI, including
all exhibits  attached  thereto  and  made  a  part thereof, constitute the
entire  agreement  between  the  parties  and together supersede all  prior
agreements, understandings, negotiations and discussions, whether  oral  or
written,  of  the  parties.  In  the event of  any  conflict  between  this
Agreement  and  the  LOI,  the  provisions of  this  Agreement  shall  take
precedence.  In  the event of any conflict between this Agreement  and  the
terms  and  provisions  of  the Allegheny JOA, this  Agreement  shall  take
precedence. No supplement, amendment, alteration, modification,  waiver  or
termination  of this Agreement or the LOI shall be binding unless  executed
in  writing  by  the parties hereto.  The Allegheny JOA  shall  govern  the
operation of the Leases on and after the Effective Date.

     10.3   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
waive' unless otherwise expressly provided.

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

     10.5   Notices.  Any  notice  provided or permitted to be given  under
this  Agreement  shall  be  in  writing,  and  may  be  served  by personal
delivery, by depositing same in the mail,  addressed to  the  party  to  be
notified,  postage  prepaid,  and  registered  or  certified  with a return
receipt  requested or by facsimile transmission. Notice  deposited  in  the
mail  in  the  manner herein above 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 shall be deemed  to  have  been
given and received only in and when actually received by the addressee. For
purposes of notice, the addresses of the parties shall be as follows:

          BBPI's Mailing Address:  British-Borneo Petroleum, Inc.
                                   1201 Louisiana, Suite 3500
                                   Houston, Texas 77002
                                   Attention: James K. Teringo, Jr
                                         General Counsel
                                   Telephone:  (713) 752-5619
                                   Fax: (713) 650-1053

          BBEI's Mailing Address:  British-Borneo Exploration. Inc.
                                   1201 Louisiana, Suite 3500
                                   Houston, Texas 77002
                                   Attention James K. Teringo, Jr.
                                        General Counsel
                                   Telephone:  (713) 752-5619
                                   Fax:  (713) 650-1053

          R&B's Mailing Address:   Reading & Bates Development Co
                                   901 Threadneedle, Suite 200
                                   Houston, Texas 77079
                                   Attention: Gary J. Junco
                                         Chief Operating Office
                                   Telephone: (281) 496-5000
                                   Fax:  (281) 496-0285

Each party shall have the right, upon giving ten (10) days prior notice  to
the  other  in the manner hereinabove provided, to change its  address  for
purposes of notice.

     10.6   Expenses. Except as otherwise provided herein, 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 counsel and accountants).

     10.7   Severability. If any term or other provision  of this Agreement
is invalid, illegal or incapable of being enforced under any rule  of  law,
all  other  conditions and provisions of this Agreement  shall nevertheless
remain  in  full  force  and  effect  so  long  as  the  economic  or legal
substance  of  the  transactions  contemplated  hereby  is no affected in a
materially adverse manner with respect to either party

     10.8    Survival.    The   warranties,   representations,   covenants,
agreements  and  obligations  of  the  parties  under this  Agreement shall
survive the Closing of the transaction contemplated hereby.

     10.9    Successors  and Assigns. This Agreement shall  be binding upon
and  shall  inure to the benefit of the parties hereto and their respective
successors, assigns and legal representatives.

     10.10   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.

     10.11    Attorneys' Fees. If a suit or action is filed by any party to
enforce this Agreement, the prevailing party shall be entitled  to  recover
reasonable attorneys' fees incurred in investigation or related matters and
it preparation for and prosecution or  defense  of  such suit  or action as
fixed by the trial court, and, if any appeal is  takes  from  the  decision
of  the trial court, reasonable attorneys' fees as fixed  by  the appellate
court or, if appropriate, by the trial court.

     IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first set forth above.


                                   BRITISH-BORNEO PETROLEUM, INC.

WITNESSES:                         By:   _____________________
                                   Name: _____________________
                                   Title:_____________________


                                   READING & BATES DEVELOPMENT CO.

WITNESSES:

_______________________________    By:   ______________________
Name: _________________________    Name: ______________________
                                   Title:______________________
_______________________________
Name: _________________________


TO THE EXTENT AND ONLY TO THE EXTENT
OF ITS OBLIGATIONS HEREUNDER:

                                   BRITISH-BORNEO EXPLORATION, INC.

WITNESSES:

_______________________________    By:   ______________________
                                   Name: ______________________
_______________________________    Title:______________________



STATE OF TEXAS

COUNTY OF HARRIS

     BEFORE  ME, the undersigned authority, duly commissioned and qualified
within  and  for  the  State  and  County aforesaid,  personally  came  and
appeared:

     ______________, to me personally known to be the person whose name  is
subscribed  to  the foregoing instrument, who declared and acknowledged  to
me, notary, in the presence of the undersigned competent witnesses, that he
executed   the   above  and  foregoing  instrument  in  his   capacity   as
_______________ of British-Borneo Petroleum, Inc., a Texas corporation,  on
behalf  of  said  corporation  with  full  authority,  and  that  the  said
instrument  is  the  free  act and deed of the said  corporation,  and  was
executed for the uses, purposes and benefits therein expressed.

     THUS  DONE, READ AND SIGNED in the State and County aforesaid, in  the
presence   of   ___________________  and   ___________________,   competent
witnesses, on the 28th day of August, 1997.

WITNESSES:

_________________________          _________________________

_________________________

                                   _________________________
                                   Notary Public in and for the
                                   State of Texas


My Commission expires:

________________________


STATE OF TEXAS

COUNTY OF HARRIS

     BEFORE  ME, the undersigned authority, duly commissioned and qualified
within  and  for  the  State  and  County aforesaid,  personally  came  and
appeared:

      ______________ , to me personally known to be the person  whose  name
is subscribed to the foregoing instrument, who declared and acknowledged to
me, notary, in the present of the undersigned competent witnesses, that  he
executed   the   above  and  foregoing  instrument  in  his   capacity   as
______________ of Reading & Bates Development Co., a Delaware  corporation,
on  behalf of the said corporation with full authority, and that  the  said
instrument  is  the  free  act and deed of the said  corporation,  and  was
executed for the uses, purposes and benefits therein expressed.

     THUS  DONE, READ AND SIGNED in the State and County aforesaid, in  the
presence   of  ______________________  and  ___________________,  competent
witnesses, on the 28th day of August, 1997.


WITNESSES:

_________________________          _________________________

_________________________


                                   _________________________
                                   Notary Public in and for the
                                   State of Texas


My Commission expires:
________________________


STATE OF TEXAS

COUNTY OF HARRIS

     BEFORE  ME, the undersigned authority, duly commissioned and qualified
within  and  for  the  State  and  County aforesaid,  personally  came  and
appeared:

     _____________________, to me personally known to be the  person  whose
name   is  subscribed  to  the  foregoing  instrument,  who  declared   and
acknowledged  to  me, notary, in the presence of the undersigned  competent
witnesses,  the  he  executed  the above and foregoing  instrument  in  his
capacity  as _______________ of British-Borneo Exploration, Inc.,  a  Texas
corporation,  on behalf of said corporation with full authority,  and  that
the  said instrument is the free act ant deed of the said corporation,  and
was executed for the uses, purposes and benefits therein expressed.

     THUS  DONE, READ AND SIGNED in the State and County aforesaid, in  the
presence of _______________ and _________________, competent witnesses,  on
the 28th day of August, 1997.


WITNESSES:

_________________________          _________________________

_________________________

                                   _________________________
                                   Notary Public in and for the
                                   State of Texas


My Commission expires:

________________________



                                EXHIBIT "A"

                                THE LEASES


1.   LEASE  OCS-G  8005. That certain Oil and Gas Lease of Submerged  Lands
     under  the Outer Continental Shelf Lands Act made and effective as  of
     July  1, 1985, by and between the United States of America, as Lessor,
     to  Amerada  Hess et al., as Lessees, bearing Serial  No.  OCS-G  8005
     covering  all  of  Block 253, Green Canyon, OCS  Official  Protraction
     Diagram, NG 15-3.

2.   LEASE  OCS-G  7049. That certain Oil and Gas Lease of Submerged  Lands
     under  the Outer Continental Shelf Lands Act made and effective as  of
     June  1, 1984, by and between the United States of America, as Lessor,
     and  Placid Oil Company, et al., as Lessees, bearing Serial No.  OCS-G
     7049 covering all of Block 254, Green Canyon, OCS Official Protraction
     Diagram, NG 15-3.

3.   LEASE  OCS-G  8876. That certain Oil and Gas Lease of Submerged  Lands
     under  the Outer Continental Shelf Lands Act made and effective as  of
     June  1, 1987, by and between the United States of America, as Lessor,
     to  Hunt Petroleum Corporation et al., as Lessees, bearing Serial  No.
     OCS-G  8876  covering  all of Block 297, Green  Canyon,  OCS  Official
     Protraction Diagram, NG 15-3.

4.   LEASE  OCS-G  8010. That certain Oil and Gas Lease of Submerged  Lands
     under  the Outer Continental Shelf Lands Act made and effective as  of
     July  1, 1985, by and between the United States of America, as Lessor,
     and  Placid Oil Company, et al., as Lessees, bearing Serial No.  OCS-G
     8010 covering all of Block 298, Green Canyon. OCS Official Protraction
     Diagram, NG 15-3.


                               EXHIBIT, "B"

                           THE DEVELOPMENT PLAN

                              ALLEGHENY FIELD

                        DEVELOPMENT PLAN (SUMMARY)


I   DEVELOPMENT OVERVIEW

1.1  The  purpose of this note is to demonstrate how British-Borneo intends
     to  develop the Allegheny field, achieving first oil in Q3 1999  at  a
     development cost in the region of US $213 million.

1.2  This  proposal for the Allegheny field development is founded  on  the
     following assumptions:

     - four   existing  (suspended)  wells  completed  at  two  sea   floor
       locations (at wells GC 254 #3, 4STI, 5 and at GC 297 #1);
     - one new well located near GC 297 # 1;
     - recompletions as needed dependent on reservoir performance;
     - additional   wells   as  needed,  also  dependent   upon   reservoir
       performance;
     - dual  gravel  pack completions using HES/PES for all  equipment  and
       installation;
     - production via flowlines to a SeaStar TLP situated between  the  two
       sea floor well
       locations (see Attachments la and lb);
     - duplication of the Morpeth SeaStar system;
     - project   management  undertaken  by  the  existing   British-Borneo
       project team;

1.3  Export-quality crude will be shipped via a 30 mile, 8" pipeline to the
     Poseidon trunk line system a EW 953, gas via a 25 mile, 6" pipeline to
     the  Texaco  Discovery  system  at EW 873  (see  Attachment  1c).   An
     alternative  route for both pipelines could be to the Morpeth  SeaStar
     at EW 921.

1.4  The SeaStar TLP will provide full processing facilities for:

     - 25M bpd oil average: 27 M peak;
     - 35MMscfd gas average: 45mm peak;
     - 8M bpd water average: 9M peak

(See Attachment 2)

2    CONTRACTING PHILOSOPHY

2.1  It   is   proposed  to  use  British-Borneo's  current  Morpeth  field
     development  as  a model for Allegheny substantially  duplicating  the
     Morpeth  SeaStar components (e.g. hull, mooring system) utilizing  the
     services of the same contractors and subcontractors This is considered
     an essential prerequisite for the optimum development of the Allegheny
     field.  Discussions  have  been held with the  major  contractors  and
     subcontractors. Negotiations are sufficiently far advanced  to  enable
     British-Borneo  to  express its confidence in the  viability  of  this
     proposal.

2.2  Current contractual areas of responsibility on Morpeth are:

2.2.1  Atlantia Corporation - the design and procurement and fabrication of
                              the  SeaStar  System  including   hull,  deck
                              topsides and mooring system:

       subcontracting  to:    Gulf Island Fabrication - hull fabrication
                                                      - deck
                                                      - piles

                              Aker Gulf Marine        - tendons
                              ABB Vetco Gray          - tendon connectors

2.2.2  J. Ray McDermott     - transportation and installation of the SeaStar
                              TLP   including   mooring   system,  hull  and
                              topsides;
                            - design, engineering,  fabrication, supply  and
                              installation  of  the  subsea system including
                              xmas trees, flowline  risers,  control  system
                              and umbilicals;
                           -  design, engineering, fabrication,  supply  and
                              installation of the subsea gas and  oil export
                              pipelines.

3   PROJECT MANAGEMENT PHILOSOPHY

3.1  This   proposal  is  predicated  on  capitalizing  on   the   existing
     relationships that British-Borneo has developed with Atlantia  and  J.
     Ray McDermott on the Morpeth project. With a small augmentation in the
     current  Morpeth project team (in the subsea area), existing synergies
     can  be exploited to the fullest, thus ensuring the most effective and
     efficient management of the Allegheny project.

4    SCHEDULE

4.1  Taking into account the existing skills and resources being offered by
     British-Borneo, the aggressive schedule contained in Attachment  3  is
     achievable. The following key dates should be noted:

     August 29, 1997  -  Obtain SOP extension from MMS
     August 29, 1997  -  Deal closure
     October 1. 1997  -  Order tendon connectors
                      -  Order steel for hull
                      -  Commit to DB50 slot
     November 1, 1998 -  Order subsea trees
     Q1 1999          -  Complete 3 wells
     Ql/Q2 1999       -  Install SeaStar and subsea systems (using DB50 prior
                         to its commitment to Shell on 7/1/99)
     Q3 1999          -  FIRST OIL
                      -  Drill  and  complete  one additional well,  complete
                         fourth existing well

5    ESTIMATED COSTS

5.1  Total   field  facility  costs,  pre-production  costs  (including   3
     completions)  are estimated at US$ 213MM. A breakdown of  this  figure
     can be found in Attachment 4.

                                EXHIBIT "C"

                     THE OPTION AND ELECTION AGREEMENT

STATE OF TEXAS

COUNTY OF HARRIS

                       OPTION AND ELECTION AGREEMENT

          THIS  OPTION AGREEMENT is entered into and shall be effective  as
of  12:01  a.m., August 28, 1997 (hereinafter referred to as the "Effective
Date"),  by  and  between  READING  & BATES  DEVELOPMENT  CO.,  a  Delaware
corporation,  federal  taxpayer  identification  no._____,  whose   mailing
address  is  901 Threadneedle, Suite 200, Houston, Texas 77079 ("R&B")  and
BRITISH-BORNEO  PETROLEUM,  INC.,  a Texas  corporation,  federal  taxpayer
identification  no._____, whose mailing address is  1201  Louisiana,  Suite
3500, Houston, Texas 77002 ("BBPI").

          In  consideration  of  the payment of the  sum  of  One  Thousand
($1,000.00) Dollars and other good and valuable consideration, the  receipt
and sufficiency of which is hereby acknowledged and confessed and for which
due  acquitance is hereby granted, (x) R&B does hereby grant  in  favor  of
BBPI  the  right and option, but not the obligation, to purchase, upon  the
occurrence  of a change in control of the Company, as hereinbelow  defined,
during  the  Option Period (as defined in Article 2.2 of the  Participation
Agreement dated August 28, 1997, executed by and between R&B and BBPI  (the
"Participation   Agreement")),  on  the  terms  and  conditions   described
hereinbelow; and (y) BBPI shall purchase, upon the election of R&B to  sell
on  or  before  August 28, 1998, pursuant to the terms  and  provisions  of
Article 2.2(a) of the Participation Agreement, or upon the failure  of  R&B
to make an election, pursuant to the terms and provisions of Article 2.2 of
the  Participation Agreement; on the terms described below,  all  of  R&B's
right,  title  and  interest, together with any and all  right,  title  and
interest which may be hereinafter acquired by R&B pursuant to the terms  of
the  Operating Agreement, dated effective May 1, 1995, ratified by R&B  and
BBPI, as amended (the "Operating Agreement" or the "Allegheny JOA"), in and
to the following described properties (the "Property"):

          (a)   The  oil,  gas and mineral leases described on  Exhibit  1,
          Part  (a)  (the  "Leases"), together with a  like  interest  with
          respect  to  the  Leases  in  and to  any  and  all  (i)  mineral
          interests,  (ii)  overriding  or landowners'  royalty  interests,
          (iii)   surface  and  subsurface  interests  and   rights,   (iv)
          beneficial,  convertible or reversionary interests, (v)  interest
          owned,  claimed or acquired, or to be owned, claimed or acquired,
          by   agreement,  (vi)  production  payments,  (vii)   contractual
          interests  owned pursuant to participation agreements,  operating
          agreements or similar agreements, and (viii) any and all like  or
          unlike  interests,  including without limitation  those  specific
          items  identified on Exhibit 1, Part (a). This shall include  any
          contractual  rights providing for the acquisition or  earning  of
          any  of the foregoing, and R&B's rights in respect of any pooled,
          communitized  or unitized acreage of which any of  the  foregoing
          is  a  part.  (All of the foregoing shall be called  collectively
          the "Leasehold Interests.")

          (b)   Any  and  all  wells,  wellbores,  pipe,  gathering  lines,
          compressors,   facilities,   equipment,   platforms,   pipelines,
          templates  and  any  and all other personal,  real,  movable  and
          immovable  property, fixtures or equipment which are  located  on
          or  used directly in connection with the production, treatment or
          transportation  of  oil  and gas from  the  Leasehold  Interests,
          including,   without   limitation,   those   items   specifically
          identified on Exhibit 1, Part (b) (the "Equipment").

          (c)   Any  and  all easements, rights-of-way, and subsurface  and
          surface  rights associated or used in connection  with  any  such
          easements  or  rights-of-way, which easements, rights-of-way  and
          subsurface  and  surface rights have been  obtained  for  use  in
          connection   with   the  Leasehold  Interests   (the   "Gathering
          Facilities").

          (d)   To  the  extent the same are assignable or transferable  by
          R&B  and  to  the  extent and only to the extent  that  the  same
          relate  to the ownership or operation of the Leasehold Interests,
          the  Gathering  Facilities  or the  Equipment  on  or  after  the
          Effective  Date, a like interest in and to all orders, contracts,
          agreements   (including   without   limitation   all    operating
          agreements,    transportation   agreements,   unit    agreements,
          participation    agreements    and    processing     agreements),
          instruments,  licenses, authorizations, permits, audits,  claims,
          liens,   suits,  settlements  and  demands,  and  other   rights,
          privileges, benefits and powers conferred upon R&B.

          (e)   Any  and all oil, gas and other minerals produced  from  or
          attributable to the Leasehold Interest on or after the  Effective
          Closing Date (as hereinafter defined).

     R&B  and BBPI have heretofore entered into the Participation Agreement
and  have  ratified  the  Operating  Agreement  covering  the  Leases.   In
connection  with  the obligations set forth in the Participation  Agreement
and  Operating  Agreement, R&B and BBPI do hereby agree  that  this  Option
Agreement shall be irrevocable until the occurrence of (i) the election  by
R&B  to  retain its interest and the payment by R&B to BBPI  of  costs  and
expenses  paid  on  behalf of R&B, with accrued interest,  as  provided  in
Article 2 of the Participation Agreement or (ii) the conveyance by  R&B  to
BBPI  of  all  of  its right, title and interest in and  to  the  Property,
whichever occurs first.

Additionally, the Participation Agreement provides and for purposes of this
Option  Agreement,  Change in Control of the Company shall  be  defined  in
accordance with the Participation Agreement:

The Participation Agreement provides, inter alia:

2.   DEVELOPMENT CARRY.

     2.1   Obligation  to Carry. Notwithstanding anything to  the  contrary
which may be contained in or derived from the Allegheny JOA, the UA or  the
UOA,  and  as a portion of the consideration due R&B hereunder, BBPI  shall
bear  (by  paying for the following costs on R&B's behalf), R&B's undivided
forty  percent  (40%)  share  of  the  cost  and  expense  of  the  design,
engineering,  fabrication, construction and installation of the  facilities
contemplated  under  the  Development Plan ("Development  Costs"),  through
August 28, 1998, or the date of the election set out in Article 2.2 is made
by  R&B,  whichever is the first to occur. BBPI's obligation  hereunder  is
only  as  to costs actually incurred during said time period and R&B  shall
continue  to  bear  and  pay  directly,  its  proportionate  share  of  all
liability,  risks, exposures, lawsuits, demands, claims and  other  similar
and dissimilar liabilities. Nothing herein shall be deemed to provide R&B a
turnkey  or  other  fixing  of costs or liabilities  with  respect  to  the
implementation of the Development Plan.

     2.2   Election of R&B. On or before August 28, 1998 (the  period  from
August  28,1997  to the earlier of August 28, 1998 or the date  upon  which
payment  is made pursuant to R&B's election under 2.2 shall be referred  to
as  the  "Option Period"), R&B shall elect by written notice to BBPI either
to:

          (a)  convey  to  BBPI,  effective as  of  August  28,  1997  (the
               "Effective  Closing Date"), free and clear of  all  burdens,
               liens,  overriding royalties, production  payments  and  any
               other  burden  or encumbrance created by, through  or  under
               R&B,  all of R&B's interest in the Leases, and all of  R&B's
               interest  in any and all associated facilities and equipment
               for  the  sum  of  Twenty-five Million  and  No/100  Dollars
               ($25,000,000.00)  plus interest front  August  28.  1997  at
               LIBOR (London Interbank Rate) + 2%: or

          (b)  retain  its  interest in the Leases and pay to  BBPI,  forty
               percent  (40%) of all of the above described costs  incurred
               by  BBPI  in  connection  with  the  implementation  of  the
               Development Plan during the Option Period, plus interest  to
               be  calculated at LIBOR + 2% from the date such  funds  were
               paid  by BBPI. R&B would then be assigned al undivided forty
               percent  (40%) interest in and to the Seastar  facility  and
               all  associate equipment and facilities, free and  clear  of
               all  liens and encumbrances, save and except those liens and
               encumbrances contemplated under the terms and provisions  of
               the Allegheny JOA, the UA or the UOA and R&B would also then
               assume an undivided forty percent (40%) of the future  costs
               of  the development pursuant to the terms and provisions  of
               the Allegheny JOA and the LOI.

Failure of R&B to make an election within the Option Period shall be deemed
to be an election under Article 2.2 (a) above.

In  the  event R&B makes an election under option 2.2 (a) above or  if  R&B
fails to make an election during the Option Period, upon the closing of the
transaction  contemplated in 2.2(a) above, BBPI  shall  agree  to  protect,
indemnify,  defend  and  hold R&B harmless from and  against  any  and  all
claims, demands, liabilities, suits, damages and injuries arising from  the
implementation of the Development Plan from and after August 28, 1997.

     2.3   Option Agreement. The rights and obligations of the parties with
respect  to  the option of R&B hereunder, shall be confirmed in a  separate
agreement to be executed by R&B and BBPI (the "Option Agreement") which  is
attached hereto and made a part hereof for all purposes as Exhibit "D." The
Option  Agreement  shall be executed in recordable form and  which  may  be
filed in the records of the Minerals Management Service and the appropriate
parish records.

     2.4   Voting/Elections  during the Option Period.  During  the  Option
Period,  BBPI shall, under the terms of the Allegheny JOA, be  entitled  to
vote and make Elections with respect to R&B's interest with respect to  the
implementation  of  and all matters associated with the  Development  Plan,
provided  that  such vote and/or Election is the same as BBPl's  vote  with
respect  to its own interest. During the Option Period, BBPI shall  not  be
entitled  to  vote  or make Elections with respect to R&B's  interest  with
respect  to  drilling  operations, but may vote  and  make  Elections  with
respect to R&B's interest with respect to completion operations of existing
wells.  BBPI agrees to keep R&B fully informed with respect to  such  votes
and Elections.

     2.5   Transfers of Interest by R&B during the Option Period. Prior  to
its  payment  or  assignment under Article 2.2 above, R&B shall  not  sell,
convey, mortgage, pledge, assign, encumber, alienate or otherwise transfer,
nor  enter  into  any agreement to sell, convey, mortgage, pledge,  assign,
encumber, alienate or otherwise transfer all or any portion of its interest
in the Leases to any party other than BBPI.

     2.6   Information to R&B during the Option Period. During  the  Option
Period, R&B shall be entitled to review all information, data and contracts
affecting the Development Plan and R&B shall be permitted to attend, as  an
observer,   periodic  review  meetings  with  contractors  in   which   the
Development Plan is discussed. In addition to the other information  to  be
provided to R&B under the Allegheny JOA as a Participating Party, within 30
days  after  the end of each calendar month during the Option Period,  BBEI
and BBPI shall provide a statement to R&B describing the costs ant expenses
accruing to R&B's forty Percent (40%) share during the preceeding month.

Additionally, the Participation Agreement provides and for the purposes  of
this Option Agreement, change in control of the Company shall be defined as
follows:

     4    CHANGE IN CONTROL OF R&B.

          4.1  Effect of Change in Control. In the event that, at any  time
               during  the  term  of the Option Period, R&B  experiences  a
               "change  in control of the Company", as hereinafter  defined
               in  Article  4.2, R&B shall give written notice to  BBPI  of
               such  occurrence and BBPI shall have the right  and  option,
               but  not  the obligation, for a period of ten (10)  business
               days  after receipt of such notice, to acquire the  Property
               from  R&B  as provided herein. Such option shall  expire  if
               BBPI  fails  to exercise such option within the  time  frame
               established hereunder.

          4.2  Change  in  Control  Defined.  For  the  purposes  of   this
               provision,  "Company" shall be deemed to mean  R&B  and  the
               parent of R&B and/or any other entity controlling a majority
               of  the  voting  stock  of R&B. For  the  purposes  of  this
               provision, a "change in control of the Company" shall mean a
               change in control of a nature that would be required  to  be
               reported  in response to Item l(a) of the Current Report  on
               Form  8-K,  as  in  effect on the date hereof,  pursuant  to
               Section 13 or 15(d) of the Securities Exchange Act of  1934,
               as  amended ("Exchange Act") or would have been required  to
               be  so  reported but for the fact that such event  had  been
               "previously reported" as that term is defined in Rule  12b-2
               of  Regulation  12B  of  the Exchange  Act;  provided  that,
               without limitation, such a change in control shall be deemed
               to  have  occurred  if  (a) any Person  is  or  becomes  the
               beneficial  owner  (as  defined  in  Rule  13d-3  under  the
               Exchange Act), directly or indirectly, of securities of  the
               Company  representing more than fifty percent (50%)  of  the
               combined  voting  power  of the Company's  then  outstanding
               securities  ordinarily  (apart from  rights  accruing  under
               special  circumstances) having the right to vote at election
               of  directors ("Voting Securities"), or (b) individuals  who
               constitute  the  Board  on the Effective  Date  hereof  (the
               "Incumbent  Board") cease for any reason  to  constitute  at
               least  a majority thereof, provided that any person becoming
               a  director subsequent to the date hereof whose election, or
               nomination  for election by the Company's shareholders,  was
               approved  by  a  vote  of  at least  three-quarters  of  the
               directors comprising the Incumbent Board (either by specific
               vote or by approval of the proxy statement of the Company in
               which  such  person  is  named as a  nominee  for  director,
               without objection to such nomination) shall be, for purposes
               of this clause (b), considered as though such person were  a
               member of the Incumbent Board, or (c) a recapitalization  of
               the Company occurs which results in either a decrease by 33%
               or  more  in  the aggregate percentage ownership  of  Voting
               Securities  held by Independent Shareholders (on  a  primary
               basis or on a fully diluted basis after giving effect to the
               exercise of stock option and warrants) or an increase in the
               aggregate percentage ownership of Voting Securities held  by
               non-Independent Shareholders (on a primary  basis  or  on  a
               fully  diluted basis after giving effect to the exercise  of
               stock  options  and  warrants)  to  greater  than  50%.  For
               purposes of this provision, the term "Person" shall mean and
               include  any  individual, corporation,  partnership,  group,
               association  or  other "person," as such  term  is  used  in
               Section 14(d) of the Exchange Act, other than the Company, a
               subsidiary  of  the Company or any employee benefit  plan(s)
               sponsored  or  maintained by the Company  or  an  subsidiary
               thereof,  and the term "Independent Shareholder" shall  mean
               any  shareholder  of the Company except any  employee(s)  or
               director(s)  of  the Company or any employee  benefit  plans
               sponsored  or  maintained by the Company or  any  subsidiary
               thereof.  For  purposes of this Article  4.,  a  "change  in
               control of the Company" shall not be deemed to occur  solely
               as the result of a spin-off, split-off or other distribution
               of  the outstanding stock of R&B to the stockholders of  the
               ultimate  parent corporation controlling a majority  of  the
               voting  stock  of  R&B, or the merger of R&B's  parent  with
               Falcon  Drilling Company, Inc., or the merger of  R&B  where
               R&B's parent ultimately retains controlling interest of  the
               surviving entity, or any merger where the parent of  R&B  is
               the surviving entity.

          Upon  the  occurrence of a change in control of the Company,  R&B
shall  give  written notice to BBPI of such occurrence and BBPI shall  have
the  right  and option, but not the obligation, for a period  of  ten  (10)
business day after receipt of such notice, to acquire the Property from R&B
as  provided in the Participation Agreement. BBPI shall provide R&B written
notice  of  its  election hereunder and the failure  of  BBPI  to  make  an
election  within the time frame established hereunder shall  be  deemed  an
election not to acquire the interest.

          The  consideration for this conveyance shall be as set  forth  in
the Participation Agreement ("Purchase Price"). The Purchase Price shall be
paid  in  cash at the time of the passing of the act of sale,  which  shall
occur  at  the offices of the BBPI within ten (101 business days  of  R&B's
receipt of notification of BBPI's election to purchase.

          R&B  shall convey the Property to BBPI, free and clear of any and
all   liens,   mortgages,  claims,  security  interests  and  encumbrances,
overriding  royalty interests, production payments or other  burdens  which
may  have  been  created  by, through or under R&B and  R&B  shall  further
warrant  that  neither R&B nor any parent, subsidiary or affiliate  of  R&B
during  their  respective periods of ownership has (A) executed  any  deed,
conveyance,  assignment  or  other  instrument  as  an  assignor,  grantor,
sublessor  or in another capacity or (B) has breached any obligation  under
any  Lease  that would (i) result, now or in the future, in R&B's  interest
for  any  Lease  being  less than that set forth in Exhibit  "A",  attached
hereto and made a part hereof for all purposes or (ii) obligate R&B, now or
in  the future, to bear the costs and expenses relating to the maintenance,
development  and  operation of such Lease, in an amount  greater  than  the
working  interest for such Lease, well or unit set forth  in  Exhibit  "A",
unless  the  net revenue interest attributable to said working interest  is
increased by a proportionate or greater amount.

          The  assignment  shall  also be made with full  substitution  and
subrogation  to  BBPI in and to all covenants, agreements,  representations
and  warranties made by others heretofore given or made in connection  with
the Leases or any part or portion thereof.

          Any  notice  provided or permitted to be given under this  Option
Agreement  shall be in writing, and may be served by personal delivery,  by
depositing same in the mail, addressed to the party to be notified, postage
prepaid, and registered or certified with a return receipt requested or  by
facsimile  transmission.  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 of the return receipt. Notice served  in
any  other manner shall be deemed to have been given and received  only  in
and  when actually received by the addressee.   For purposes of notice, the
addresses of the parties shall be as follows:

               R&B's Mailing Address:

               Reading & Bates Development Co.
               901 Threadneedle, Suite 200
               Houston, Texas 77079
               Attention:  Gary J. Junco
                     Chief Operating Office
               Telephone: (281) 496-5000
               Fax:  (281) 496-0285

               BBPI's Mailing Address:

               British-Borneo Petroleum, Inc.
               1201 Louisiana, Suite 3500
               Houston, Texas 77002
               Attention:  James K. Teringo, Jr
                     General Counsel
               Telephone:  (713) 752-5619
               Fax:  (713) 650-1053

          Each party shall have the right, upon giving ten (10) days prior
notice to the other in the manner hereinabove provided, to change its
address for purposes of notice.

          IN WITNESS WHEREOF, this Assignment is executed in multiple
originals and in the presence of the undersigned witnesses on this 28th day
of August, 1997, but to be effective as of the Effective Date.

WITNESSES:                         READING & BATES DEVELOPMENT CO.

___________________________________By:___________________________________
Name:______________________________Title:__________________________________
                     (Please Print)

___________________________________
Name:______________________________
                     (Please Print)

                                   BRITISH-BORNEO PETROLEUM, INC.

___________________________________By:___________________________________
Name:______________________________Title:__________________________________
                     (Please Print)

___________________________________
Name:______________________________
                     (Please Print)


STATE OF TEXAS

COUNTY OF HARRIS

     BEFORE  ME, the undersigned authority, duly commissioned and qualified
within  and  for  the  State  and  County aforesaid,  personally  came  and
appeared:

     _____________________________,  to  me  personally  known  to  be  the
person  whose name is subscribed to the foregoing instrument, who  declared
and  acknowledged  to  me,  notary,  in the  presence  of  the  undersigned
competent witnesses, that he executed the above and foregoing instrument in
his  capacity  as  __________________of British-Borneo Petroleum,  Inc.,  a
Texas  corporation, on behalf of said corporation with full authority,  and
that  the said instrument is the free act and deed of the said corporation,
and was executed for the uses, purposes and benefits therein expressed.

     THUS  DONE, READ AND SIGNED in the State and County aforesaid, in  the
presence of ________________________ and _______________________, competent
witnesses, on the 28th day of August, 1997.

WITNESSES:
______________________________     ______________________________
______________________________
                                   ______________________________
                                   Notary Public in and for the
                                   State of Texas

My Commission expires:
_______________________

STATE OF TEXAS

COUNTY OF HARRIS

     BEFORE  ME, the undersigned authority, duly commissioned and qualified
within  and  for  the  State  and  County aforesaid,  personally  came  and
appeared:

     ____________________, to me personally known to be  the  person  whose
name   is  subscribed  to  the  foregoing  instrument,  who  declared   and
acknowledged  to  me, notary, in the presence of the undersigned  competent
witnesses,  that  he  executed the above and foregoing  instrument  in  his
capacity  as  _________________  of Reading  &  Bates  Development  Co.,  a
Delaware  corporation,  on  behalf  of  the  said  corporation  with   full
authority,  and that the said instrument is the free act and  deed  of  the
said  corporation,  and  was executed for the uses, purposes  and  benefits
therein expressed.

     THUS  DONE, READ AND SIGNED in the State and County aforesaid, in  the
presence of ________________________ and _______________________, competent
witnesses, on the 28th day of August, 1997.

WITNESSES:
______________________________     ______________________________
______________________________

                                   ______________________________
                                   Notary Public in and for the
                                   State of Texas

My Commission expires:
_______________________

                       EXHIBIT I TO OPTION AGREEMENT

                                 PART (a)
                            LEASEHOLD INTERESTS

1.   LEASE  OCS-G  8005. That certain Oil and Gas Lease of Submerged  Lands
     under  the Outer Continental Shelf Lands Act made and effective as  of
     July  1, 1985, by and between the United States of America, as Lessor,
     and  Amerada Hess, et al., as Lessees, bearing Serial No.  OCS-G  8005
     covering  all  of  Block 253, Green Canyon, OCS  Official  Protraction
     Diagram, NG 15-3.

               Working Interest         40.00000%
               Net Revenue Interest     33.00000%

2.   LEASE  OCS-G  7049. That certain Oil and Gas Lease of Submerged  Lands
     under  the Outer Continental Shell Lands Act made and effective as  of
     June  1, 1984, by and between the United States of America, as Lessor,
     and  Placid Oil Company, et al., as Lessees, bearing Serial No.  OCS-G
     7049 covering all of Block 254, Green Canyon, OCS Official Protraction
     Diagram, NG 15-3.

               Working Interest         40.00000%
               Net Revenue Interest     34.70133%

3.   LEASE  OCS-G  8876. That certain Oil and Gas Lease of Submerged  Lands
     under  the Outer Continental Shelf Lands Act made and effective as  of
     June  1, 1987, by and between the United States of America, as Lessor,
     and Hunt Petroleum Corporation, et al., as Lessees, bearing Serial No.
     OCS-G  8876  covering  all of Block 297, Green  Canyon,  OCS  Official
     Protraction Diagram, NG 15-3.

               Working Interest         40.00000%
               Net Revenue Interest     33.66666%

4.   LEASE  OCS-G  8010. That certain Oil and Gas Lease of Submerged  Lands
     under  the Outer Continental Shelf Lands Act made and effective as  of
     July  1, 1985, by and between the United States of America, as Lessor,
     and  Placid Oil Company, et al., as Lessees, bearing Serial No.  OCS-G
     8010 covering all of Block 298, Green Canyon, OCS Official Protraction
     Diagram, NG 15-3.

               Working Interest         40.00000%
               Net Revenue Interest     34.70133%


                                 PART (b)
                                 EOUIPMENT

1.   WELLS:
                                WORKING        REVENUE
                                INTEREST       INTEREST

     A.   OCS-G 7049 #3         40.00000%      34.70133%
     B.   OCS-G 7049 #4         40.00000%      34.70133%
     C.   OCS-G 7049 #4STI      40.00000%      34.70133%
     D.   OCS-G 7049 #5         40.00000%      34.70133%
     E    OCS-G 8876 #1         40.00000%      33.66666%

2.   TEMPLATE:

     That certain three well drilling template acquired, inter alia, by
     Seller for use in connection with the drilling of the OCS-G 7049 #5
     Well.

                                EXHIBIT "D"

                   MORTGAGE AND UCC FINANCING STATEMENTS

                      MORTGAGE AND SECURITY AGREEMENT

     THIS MORTGAGE AND SECURITY AGREEMENT (the "Mortgage") dated as of this
28th day of August, 1997 is by and between READING & BATES DEVELOPMENT CO.,
a  Delaware  corporation whose mailing address is 901  Threadneedle,  Suite
200,  Houston,  Texas   77079,  and whose federal  taxpayer  identification
number is 73-0797067 (hereinafter referred to as "Mortgagor"), and BRITISH-
BORNEO  PETROLEUM, INC., a Texas corporation whose mailing address is  1201
Louisiana,  Suite  3500, Houston, Texas  77002, and whose federal  taxpayer
identification  number  is  75-1831772 (the "Mortgagee"  or  "BBPI"),  here
present who accepts this Mortgage.

Recitals

     WHEREAS,  pursuant  to  that  certain  Participation  Agreement   (the
"Participation  Agreement")  dated  ____________,  1997  by   and   between
Mortgagor,  Mortgagee  and  to  the extent of its  obligations  thereunder,
British-Borneo Exploration, Inc., Mortgagee has agreed to bear  Mortgagor's
undivided forty percent (40%) share of the cost and expense of the  design,
engineering,  fabrication, construction and installation of the  facilities
(the  "Development Costs") contemplated under the development plan attached
hereto  and  made  a  part  hereof for all purposes  at  Exhibit  "B"  (the
"Development Plan") through August 28, 1998, or the date the election under
Section  2.2 of the Participation Agreement is made by Mortgagor, whichever
is the first to occur;

     WHEREAS,  pursuant  to  Section  2.2 of the  Participation  Agreement,
Mortgagor  must, on or before August 28, 1998, elect to either (the  period
from  August  28, 1997 to the earlier of August 28, 1998 or the  date  upon
which payment is made pursuant to Mortgagor's election under Section 2.2 of
the  Participation  Agreement shall be defined to as the  "Option  Period")
(a)  convey  to Mortgagee free and clear of all burdens, liens,  overriding
royalties,  production  payments  and any  other  burdens  or  encumbrances
created by, through or under Mortgagor, all of Mortgagor's interest in  the
leases  described on Exhibit "A" hereto and all associated  facilities  and
equipment   for   the  sum  of  Twenty-Five  Million  and  No/100   Dollars
($25,000,000.00)  plus  interest from August  28,  1997  at  LIBOR  (London
Interbank Rate) plus 2% ("Mortgagor's Conveyance Obligation") or (b) retain
its  interest  in  the leases described in Exhibit "A" hereto  and  pay  to
Mortgagee  forty percent (40%) of all of the Development Costs advanced  by
Mortgagee  on  Mortgagor's behalf in connection with the implementation  of
the  Development Plan during the Option Period plus interest at LIBOR  plus
2%  from the date such funds were paid by Mortgagee ("Mortgagor's Repayment
Obligation");

     WHEREAS,  in  order  to  secure  the full  and  punctual  payment  and
performance  of  either  Mortgagor's Conveyance Obligation  or  Mortgagor's
Repayment Obligation and the other Indebtedness (as hereafter defined), the
Mortgagor  has agreed to execute and deliver this Mortgage and to  grant  a
mortgage lien and continuing security interest in and to the Collateral (as
hereafter defined);

NOW, THEREFORE, in consideration of the premises, the Mortgagor and
Mortgagee agree as follows:

                                ARTICLE 1.

                               General Terms

     Section  1.1  Definitions.   As  used  in  this  Mortgage,  the  terms
"Mortgagor,"  "Mortgagor's Conveyance Obligation,"  "Mortgagor's  Repayment
Obligation,"   "Development   Costs,"  "Development   Plan,"   "Mortgagee,"
"Mortgage" and "Participation Agreement" shall have the meanings  indicated
above.  As used in this Mortgage, the following additional terms shall have
the meanings indicated:

     "Accounts" means all "accounts" (as defined in the UCC) now  owned  or
hereafter acquired by the Mortgagor (including without limitation  accounts
resulting  from the sale of Hydrocarbons at the well head) now or hereafter
arising  in  connection  with  the  sale  or  other  disposition   of   any
Hydrocarbons, and further means all rights accrued, accruing or  to  accrue
to  receive  payments of any and every kind under all Contracts,  including
without limitation bonuses, rents and royalties which are payable out of or
measured by production of any Hydrocarbons or
are otherwise attributable to the Mineral Properties and all other revenues
owing to the Mortgagor in connection with the Mineral Properties, including
revenues from the treatment, transportation or storage of Hydrocarbons  for
third parties.

     "Collateral"  has the meaning set forth in Section 2.2 ("The  Security
Interest") of this Mortgage".

     "Collateral  Documents"  means collectively  all  mortgages,  pledges,
security agreements and other documents by which the Mortgagor grants Liens
and security interests in immovable or movable property to the Mortgagee.

     "Contracts" means all contracts (including, but not limited to,  those
contracts  described on Exhibit "C" attached hereto), agreements, operating
agreements, farm-out or farm-in agreements, sharing agreements, limited  or
general partnership agreements, area of mutual interest agreements, mineral
purchase  agreements, contracts for the sale, exchange,  transportation  or
processing of Hydrocarbons, rights-of-way, easements, surface leases,  salt
water   disposal   agreements,  service  contracts,  permits,   franchises,
licenses, pooling or unitization agreements, unit designations and  pooling
orders  now in effect or hereafter entered into by the Mortgagor  affecting
any  of  the Mineral Properties, Equipment or Hydrocarbons now or hereafter
covered  hereby,  or  which  are  useful or appropriate  in  drilling  for,
producing, treating, handling, storing, transporting or marketing oil,  gas
or  other  minerals  produced  from  any  lands  affected  by  the  Mineral
Properties.

     "Default"  means the occurrence of any of the events specified  as  an
Event  of  Default, whether or not any requirement for notice or  lapse  of
time or other condition precedent has been satisfied.

     "Equipment" means all equipment now owned or hereafter acquired by the
Mortgagor  and  now  or hereafter located on or used or  held  for  use  in
connection  with  the Mineral Properties (including, but  limited  to,  the
equipment  described on Exhibit "D" attached hereto) or in connection  with
the  operation  thereof  or the treating, handling, storing,  transporting,
processing, purchasing, exchanging or marketing  of Hydrocarbons, including
without   limitation  all  wells,  wellbores,  rigs,  templates  platforms,
constructions,  extraction plants, facilities, gas systems (for  gathering,
treating, injection and compression), water systems (for treating, disposal
and  injection), compressors, casing, tubing, rods, flow lines,  pipelines,
derricks, tanks, separators, pumps, machinery, tools and all other  movable
property  and fixtures, now or hereafter located upon and dedicated  to  be
used  (or  held for use) in connection with any of the Mineral  Properties,
together with all additions, accessories, parts, attachments, special tools
and  accessions  now  and hereafter affixed thereto or used  in  connection
therewith, and all replacements thereof and substitutions therefor.

     "Event of Default" has the meaning set forth in Section 5.1 ("Events
of Default") of this Mortgage.

     "General  Intangibles" means all "general intangibles" (as defined  in
the  UCC) now owned or hereafter acquired by the Mortgagor related  to  the
Mineral Properties, the Equipment or the Hydrocarbons, the operation of the
Mineral  Properties or the Equipment (whether the Mortgagor is operator  or
non-operator),   or   the   treating,  handling,   storing,   transporting,
processing, purchasing, exchanging or marketing of Hydrocarbons,  or  under
which  the  proceeds  of Hydrocarbons arise or are evidenced  or  governed,
including,  without limitation, (i) all contractual rights and  obligations
or  indebtedness owing to the Mortgagor (other than Accounts) from whatever
source  arising  in  connection with the sale or other disposition  of  any
Hydrocarbons,  including  all rights to payment owed  or  received  by  the
Mortgagor   pursuant  to  a  "take-or-pay"  provision  or   gas   balancing
arrangement,  (ii)  all  Contracts and other  general  intangibles  now  or
hereafter arising in connection with or resulting from Contracts, (iii) all
insurance  proceeds and unearned insurance premiums affecting  all  or  any
part  of  the Collateral, and (iv) all things in action, rights represented
by  judgments, claims arising out of tort and other claims relating to  the
Collateral, including the right to assert and otherwise to be the plaintiff
and proper party of interest to commence and prosecute such action (whether
as  claims,  counterclaims  or  otherwise, and  whether  involving  matters
arising  from  casualty, condemnation, indemnification, negligence,  strict
liability, other tort, contract or in any other manner).

     "Hydrocarbons"   mean  all  oil,  gas,  casinghead  gas,   condensate,
distillate,  other liquid and gaseous hydrocarbons, sulfur, and  all  other
minerals,  whether similar to the foregoing or not, produced,  obtained  or
secured  from  or  allocable to the Mineral Properties,  and  any  products
refined,  processed,  recovered or obtained  therefrom,  including  oil  in
tanks.

     "Indebtedness" means all Development Costs paid by Mortgagee on behalf
of  Mortgagor  and  all other present and future amounts,  liabilities  and
obligations  to  perform and/or pay and covenants of the Mortgagor  to  the
Mortgagee  or to any successor or transferee thereof under or  pursuant  to
the Participation Agreement, that certain Option Agreement effective as  of
12:01  a.m.,  August 28, 1997 by and between Mortgagor and  Mortgagee  with
respect  to the Mineral Properties (the "Option Agreement"), this Mortgage,
the   other  Collateral  Documents  or  otherwise,  whether  said  amounts,
liabilities or obligations are liquidated or unliquidated, now existing  or
hereafter  arising,  direct or indirect, primary  to  secondary,  fixed  or
contingent,  and irrespective of the manner in which same may be  incurred,
including  without  limitation all costs and attorneys'  fees,  as  therein
stipulated,  and  under  and  pursuant to all amendments,  supplements  and
restatements  to any of said documents, together with any and all  renewals
and  extensions of such debts, obligations to perform and/or pay, covenants
and  liabilities  or any part thereof.  The Indebtedness  includes  without
limitation  all  Payments  and other amounts for  which  the  Mortgagor  is
obligated under the terms of this Mortgage.

     "Lien" means any interest in property securing an obligation owed  to,
or  a claim by, a Person other than the owner of the property, whether such
interest is based on jurisprudence, statute or contract, and including  but
not  limited  to  the lien or security interest arising  from  a  mortgage,
encumbrance, pledge, security agreement, conditional sale or trust  receipt
or a lease, consignment or bailment for security purposes.  The term "Lien"
shall   include   reservations,   exceptions,   encroachments,   easements,
servitudes,  usufructs, rights-of-way, covenants, conditions, restrictions,
leases and other title exceptions an encumbrances affecting property.

     "Mineral  Properties" means all right, title and interest of Mortgagor
in  the  oil,  gas  and  mineral leases described in  Exhibit  "A"  hereto,
together  with  all  interests  of  the  Mortgagor  with  respect  to   all
unitization and pooling agreements and orders now or hereafter existing  or
which  relate to those certain interests described in Exhibit "A", and  all
interests of the Mortgagor in agreements and rights pertaining to  the  use
or  occupation  of  the  subsurface depths that  relate  to  those  certain
interests described in Exhibit "A".

     "Mortgage"  means this Mortgage and Security Agreement, as amended  or
supplemented from time to time.

     "Mortgaged  Property"  has  the  meaning  set  forth  in  Section  2.1
("Hypothecation") of this Mortgage.

     "Payments"  has  the meaning set forth in Section 4.23  ("Payments  by
Mortgagee") of this Mortgage.

     "Permitted  Liens"  means the Security Interest, any  other  Liens  in
favor  of the Mortgagee; any validly perfected mechanic's and materialman's
lien  filed  as  of  the date of this Mortgage; the  Lien  created  by  the
Financing Statement executed by Mortgagor, as debtor, in favor of Mortgagee
and  other  parties,  as  Secured Party, securing  certain  obligations  of
Mortgagor  under  the  Operating Agreement  dated  effective  May  1,  1995
executed  by and between Enserch Exploration, Inc., Mortgagor, et  al.,  as
amended  by  letters dated October 16, 1995, October 31, 1995 and  May  17,
1996   and  assumed  by  Mortgagee  and  British-Borneo  Exploration,  Inc.
effective  August 28, 1997 (the "Operating Agreement"); Liens permitted  by
the Mortgagee in writing to be created or assumed or to otherwise exist  on
the  Collateral  (including without limitation the Liens permitted  by  the
provisions of Section 4.3 ("Liens") hereof).

     "Person"   means  any  individual,  corporation,  partnership,   joint
venture,   association,   joint   stock  company,   trust,   unincorporated
organization, government or any agency or political subdivision thereof, or
any other form of entity.

     "Proceeds"  means  all cash and non-cash proceeds of,  and  all  other
profits,  rentals,  or  receipts,  in  whatever  form,  arising  from   the
collection,   sale,  lease,  exchange,  assignment,  licensing   or   other
disposition   of,  or  realization  upon,  Collateral,  including   without
limitation all claims of the Mortgagor against third parties for  loss  of,
damage  to  or destruction of, or for proceeds payable under,  or  unearned
premiums  with  respect  to,  policies of  insurance  in  respect  of,  any
Collateral,  and any condemnation or requisition payments with  respect  to
any  Collateral, and including proceeds of all such proceeds, in each  case
whether now existing or hereafter arising.

     "Proceeds  of  Runs"  has  the  meaning  set  forth  in  Section   2.3
("Assignment") of this Mortgage.

     "Security  Interests" means the security interests in  the  Collateral
granted hereunder securing the Indebtedness.

     "UCC"  means  the  Uniform  Commercial Code,  Commercial  Laws-Secured
Transactions  (Louisiana Revised Statutes 10:9-101 through  9-605)  in  the
State  of  Louisiana,  as amended from time to time; provided  that  if  by
reason  of  mandatory provisions of law, the perfection or  the  effect  of
perfection or non-perfection of the Security Interests in any Collateral is
governed  by  the  Uniform Commercial Code as in effect in  a  jurisdiction
other  than Louisiana, "UCC" means the Uniform Commercial Code as in effect
in  such  other jurisdiction for purposes of the provisions hereof relating
to such perfection or effect of perfection or non-perfection.

                                ARTICLE 2.

                       Liens and Security Interests

     Section  2.1   Hypothecation.  (a) In order to  secure  the  full  and
punctual  payment  and performance of all present and future  Indebtedness,
the   Mortgagor   does  by  these  presents  specially  mortgage,   affect,
hypothecate, pledge and assign unto and in favor of the Mortgagee, to inure
to  the use and benefit of the Mortgagee, the following described property,
to-wit:

     (1)   The Mineral Properties, together with all profits, products  and
proceeds,  whether now or hereafter existing or arising, from  the  Mineral
Properties.

     (2)    The   Mortgagor's   rights  in  the  improvements   and   other
constructions now or hereafter located on the Mineral Properties, including
without  limitation  the Equipment, to the extent  (i)  any  such  property
should  constitute or be deemed to constitute immovable  property  for  the
purposes  of  Louisiana  law, including without limitation  any  buildings,
platforms, templates, structures, towers, rigs or other immovable  property
or  component  parts thereof, or (ii) any such property that  is  otherwise
susceptible  of mortgage pursuant to Louisiana Civil Code Article  3286  or
Louisiana Mineral Code Article 203.

     The  descriptions of the Mineral Properties contained in  Exhibit  "A"
are  qualified  by the explanations contained in Exhibit 1 attached  hereto
and made a part hereof.

     All  of  the  foregoing property and rights covered by and subject  to
this  Mortgage  are  herein  collectively referred  to  as  the  "Mortgaged
Property."

     SUBJECT,  however, to (i) the restrictions, exceptions,  reservations,
conditions,  limitations and other matters, if any, set forth or  specified
in  the  specific descriptions of such properties and interests in  Exhibit
"A"  (including  all  presently existing royalties,  overriding  royalties,
payments out of production and other burdens which are specified in Exhibit
"A"  and  which  are taken into consideration in computing any  percentage,
decimal  or  fractional interests set forth in Exhibit "A"), and  (ii)  the
condition  that the Mortgagee shall not be liable in any respect  hereunder
for  the  performance  of any covenant or obligation of  the  Mortgagor  in
respect of the Mortgaged Property.

     The  Mortgaged Property is to remain so specially mortgaged,  affected
and  hypothecated unto and in favor of Mortgagee until the full  and  final
payment  or  discharge  of the Indebtedness, and Mortgagor  is  herein  and
hereby  bound and obligated not to sell or alienate the Mortgaged  Property
to the prejudice of this act.

     (b)   In  the  event that the Mortgagor acquires additional  undivided
interests  in  some or all of the Mineral Properties, this  Mortgage  shall
automatically  encumber  such  additions or increases  to  the  Mortgagor's
interest in the Mineral Properties without need of further act or document.
Further, in the event the Mortgagor becomes the owner of an interest in any
part  of  the  land  described either in Exhibit "A" or  in  the  documents
described in Exhibit "A" or otherwise subject to or covered by the  Mineral
Properties,  this  Mortgage  shall automatically  encumber  such  ownership
interest of the Mortgagor without need of further act or document.

     Section  2.2    The Security Interests.  In order to secure  the  full
and   punctual   payment  and  performance  of  all  present   and   future
Indebtedness,  the  Mortgagor hereby grants to the Mortgagee  a  continuing
security  interest in and to all right, title and interest of the Mortgagor
in,  to and under the following property, whether now owned or existing  or
hereafter acquired or arising and regardless of where located:

               (1)  the Mineral Properties;

               (2)  the Accounts;

               (3)  the Hydrocarbons;

               (4)  the Equipment;

               (5)  the General Intangibles (including the Contracts);

               (6)  all  engineering, seismic, reserve, production,
                    accounting,  title and  legal data, reports and books
                    and records in any form (including, without limitation,
                    customer lists, credit files, computer  programs, tapes,
                    disks, punch cards, data processing software,
                    transaction files,  master  files,  printouts and other
                    computer  materials  and records)  of the Mortgagor
                    pertaining to any of the Mineral Properties or
                    Collateral; and

               (7)  all  Proceeds and products of all or any  of  the
                    Collateral described in clauses 1 through 6 hereof.

     The  term  "Collateral" means each and all of the items  and  property
rights  described  in  clauses  1-7  above,  together  with  the  Mortgaged
Property.

     Section  2.3     Assignment.  To further secure the full and  punctual
payment and performance of all present and future Indebtedness, up  to  the
maximum  amount outstanding at any time and from time to time set forth  in
Section 2.5 ("Maximum Amount") below, the Mortgagor does hereby absolutely,
irrevocably  and unconditionally pledge, pawn, transfer and assign  to  the
Mortgagee all monies which accrue after 8:00 a.m. Central Time, U.S.A.,  on
the  date of this Mortgage, attributable to the Mortgagor's interest in the
Mineral Properties and all present and future rents therefrom (which  rents
include  without limitation all royalties, delay rentals, shut-in  payments
and  other  payments  which are rentals under Title  31  of  the  Louisiana
Revised  Statutes)  and  all proceeds of the Hydrocarbons  (which  proceeds
include without limitation all payments for Hydrocarbons not yet delivered,
such  as those received pursuant to "take or pay" arrangements) and of  the
products  obtained,  produced  or processed from  or  attributable  to  the
Mineral  Properties now or hereafter (which monies, rents and proceeds  are
referred  to  herein  as  the "Proceeds of Runs").   The  Mortgagor  hereby
authorizes  and directs all obligors or payors of any Proceeds of  Runs  to
pay  and deliver to Mortgagee, upon request therefor by Mortgagee,  all  of
the  Proceeds of Runs accruing to the Mortgagor's interest without  further
inquiry as the rights of the Mortgagee to receive the same and without  any
further action or consent on the part of Mortgagor; provided, however, that
Mortgagee hereby agrees that it shall not request that the Proceeds of Runs
be  paid directly to Mortgagee unless and until there has occurred an Event
of  Default.   The  Mortgagor  agrees that  such  obligors  shall  have  no
responsibility to see to the application of any funds so paid to Mortgagee.

     Section  2.4     Condemnation.  The Mortgagor hereby  assigns  to  the
Mortgagee  any and all awards that may be given or made in any  proceedings
by  any  legally  constituted  authority  to  condemn  or  expropriate  the
Collateral,  or  any part thereof, under power of eminent  domain,  and  if
there  is such a condemnation or expropriation, the Mortgagee may,  at  its
election,  either pay the net proceeds thereof toward the  payment  of  the
Indebtedness or pay the net proceeds thereof to the Mortgagor.

     Section  2.5     Maximum Amount.  (a)     The maximum  amount  of  the
Indebtedness that may be outstanding at any time and from time to time that
this Mortgage secures, including without limitation as a mortgage and as  a
collateral assignment, and including any Payments made and included  within
the Indebtedness, is Forty Million and No/100 ($40,000,000.00) Dollars.

     (b)   The  Mortgagor  acknowledges  that  this  Mortgage  secures  all
Indebtedness under or pursuant to the Participation Agreement,  the  Option
Agreement,  this Mortgage or the other Collateral Documents,  whether  such
loans  or  advances  made  or  incurred by the Mortgagee  are  optional  or
obligatory  by the Mortgagee.  This Mortgage is and shall remain  effective
until  all of the amounts, liabilities and obligations, present and future,
comprising the Indebtedness have been incurred and are extinguished.   When
no  Indebtedness  secured  by  this Mortgage exists,  this  Mortgage  shall
terminate,  Mortgagor  shall  have  no  further  obligation  hereunder  and
Mortgagee shall promptly cause this Mortgage to be released of record.

     Section 2.6    Delivery of Transfer Orders.  Independent of the  other
provisions and authorities herein granted, the Mortgagor agrees to  execute
and  deliver any and all transfer orders, letters in lieu thereof, division
orders and other instruments that may be requested by Mortgagee or that may
be  required  by  any  purchaser of any Hydrocarbons  for  the  purpose  of
effectuating  payment of the Proceeds of Runs to Mortgagee.  If  under  any
existing  sales agreements, other than division orders or transfer  orders,
any  Proceeds of Runs are required to be paid by the purchaser or any other
payor  to  the  Mortgagor  so that under such existing  agreements  payment
cannot  be  made of such Proceeds of Runs to Mortgagee, upon the occurrence
of  an  Event of Default, the Mortgagor's interest in all Proceeds of  Runs
under such sales agreements and in all other Proceeds of Runs which for any
reason  may be paid to the Mortgagor shall, when received by the Mortgagor,
constitute  trust funds in the Mortgagor's hands and shall  be  immediately
paid over to Mortgagee.

     Section  2.7     Change  of  Purchaser.   Should  any  Person  now  or
hereafter  purchasing or taking Hydrocarbons fail to make payment  promptly
to  Mortgagee  of the Proceeds of Runs, Mortgagee shall have the  right  to
make,  or  to  require Mortgagor to make, an change of connection  and  the
right  to  designate or approve the purchase with those  facilities  a  new
connection  shall  be  made,  and Mortgagee  shall  have  no  liability  or
responsibility in connection therewith so long as ordinary care is used  in
making such designation.

     Section 2.8    Application.  All proceeds of Runs from time to time in
the  hands  of  Mortgagee  shall be applied by it toward  the  payment  and
prepayment  of  all  Indebtedness at such  time,  and  in  such  manner  as
Mortgagee deems advisable, may be held by Mortgagee pending a resolution of
any  dispute as to Mortgagee's right to collect such Proceeds of  Runs,  or
may  be delivered by Mortgagee to the Mortgagor without in any way reducing
or paying the Indebtedness.

     Section  2.9     Payment  of Proceeds.  In the  event  that,  for  any
reason,  the Mortgagee, upon the occurrence of an Event of Default,  should
elect with respect to all or particular Mineral Properties or Contracts not
to  exercise  immediately its right to receive Proceeds of Runs,  then  the
purchasers  or other Persons obligated to make such payment shall  continue
to make payment to the Mortgagor until such time as written demand has been
made  upon  them  by  the  Mortgagee that payment be  made  direct  to  the
Mortgagee.   Such failure to notify such purchasers or other Persons  shall
not  in  any  way  waive, remit or release the right of  the  Mortgagee  to
receive any payments not theretofore paid over to the Mortgagor before  the
giving  of written notice.  In this regard, in the event payments are  made
direct to the Mortgagee, and then, at the request of the Mortgagee payments
are,  for a period or periods of time, paid to the Mortgagor, the Mortgagee
shall  nevertheless  have  the right, effective  upon  written  notice,  to
require future payments be again made to it.

     Section  2.10    Limitation  of  Liability.   The  Mortgagee  and  its
successors  and assigns are hereby absolved from all liability for  failure
to  enforce  collection  of  the  Proceeds  of  Runs  and  from  all  other
responsibility in connection therewith, except the responsibility  of  each
to  account  (by  application upon the Indebtedness or  otherwise)  to  the
Mortgagor  for funds actually received.  The Mortgagor agrees to  indemnify
and  hold  harmless  Mortgagee against any and  all  liabilities,  actions,
claims,  judgments, costs, charges and attorneys' fees  by  reason  of  the
assertion  that such parties received, either before or after  payment  and
performance  in  full  of the Indebtedness, funds from  the  production  of
Hydrocarbons or the Proceeds of Runs claimed by third persons (and/or funds
attributable to sales of production which (i) were made at prices in excess
of  the maximum price permitted by or (ii) were otherwise made in violation
of  laws, rules, regulations and/or orders governing such sales),  and  the
Mortgagee  shall  have  the  right to defend against  any  such  claims  or
actions,  employing  attorneys of Mortgagee's  own  selection  and  if  not
furnished with indemnify satisfactory to them, the Mortgagee shall have the
right to compromise and adjust any such claims, actions and judgments,  and
in addition to the rights to be indemnified as herein provided, all amounts
paid  by the Mortgagee in compromise, satisfaction or discharge of any such
claim, actions or judgments, and all court costs, attorneys' fees and other
expenses  of  every  character expended by the Mortgagee  pursuant  to  the
provisions  of this Section shall be a demand obligation (which  obligation
the  Mortgagor hereby expressly promises to pay) owing by the Mortgagor  to
such parties and shall bear interest, from the date expended until paid, at
the rate described in Section 4.23 ("Payments by Mortgagee") hereof.

     Section  2.11    Duty  to  Perform.  Nothing  herein  contained  shall
detract  from  or  limit  the obligation of the Mortgagor  to  make  prompt
payment  of the Indebtedness at the time and in the manner provided herein.
The Mortgagor will do and perform every act required of it by this Mortgage
at the time or times in the manner specified.

     Section  2.12    No  Liability.   The  foregoing  mortgage  Liens  and
Security  Interest are granted as security only and shall not  subject  the
Mortgagee to, or transfer or in any way affect or modify, any obligation or
liability  of  the Mortgagor with respect to any of the Collateral  or  any
transaction in connection therewith.

     Section 2.13   Priority.  Notwithstanding any other provision in  this
Mortgage, Mortgagee hereby agrees that this Mortgage shall in all  respects
be  subordinate  to that Permitted Lien granted by Mortgagor  in  favor  of
Mortgagee  and  other  parties under and pursuant to  Article  6.3  of  the
Operating Agreement.

                                ARTICLE 3.

                      Representations and Warranties

     The   Mortgagor  represents  and  warrants  to  the  Mortgagee   (such
representations  and  warranties are limited to  the  best  of  Mortgagor's
knowledge with respect to Sections 3.1, 3.2, 3.3, 3.7, 3.8 and 3.9) that:

     Section  3.1     Title.  The Collateral (including without  limitation
the   Mineral   Properties)  is  accurately,  completely,  adequately   and
sufficiently  described  herein  and in Exhibit  "A"  as  required  by  all
applicable  laws  for  this  Mortgage to  create  a  Lien  on  all  of  the
Collateral.   The execution, delivery and performance of this Mortgage  and
the  creation  of  the liens hereunder do not violate any provision  of  or
constitute  a  default under any operating agreement  or  other  instrument
affecting or comprising any of the Collateral or to which the Mortgagor  is
a  party.  The Mortgagor represents and warrants to the Mortgagee that  (a)
the   Mineral  Properties  described  in  Exhibit  "A"  hereto  are  valid,
subsisting  leases  and  contracts, in  full  force  and  effect,  (b)  all
producing  wells located on the lands described in Exhibit  "A"  have  been
drilled,  operated  and produced in conformity with  all  applicable  laws,
rules  and  regulations of all regulatory authorities having  jurisdiction,
and  are  subject to no penalties on account of past production,  and  that
such  wells are in fact bottomed under and are producing from, and the well
bores are wholly within, lands described in Exhibit "A" (or in the case  of
wells  located on properties unitized therewith, such unitized properties),
(c)  upon  approval  of the assignment by Enserch Exploration,  Inc.  of  a
twenty  percent  (20%)  undivided interest in  the  Mineral  Properties  to
Mortgagor by the United States of America Department of Interior,  Minerals
Management Service, the Mortgagor, to the extent of the interest  specified
in  Exhibit  "A",  shall  have legal, valid and defensible  title  to  each
property  right  or  interest constituting the Mineral Properties  and  the
respective  gross  working  interest  and  net  revenue  interests  of  the
Mortgagor  in and to the Hydrocarbons as set forth on Exhibit  "A"  hereto,
and  the  Mortgagor's percentage interests in the Mineral Properties,  cash
flow,  net  income and other distributions and in the cost of  exploration,
development  and  production, all as set forth in Exhibit "A"  hereto,  are
true  and  correct  in  all material respects and  accurately  reflect  the
respective  interests to which the Mortgagor is legally entitled,  (d)  the
Mortgagor is not obligated, by virtue of any prepayment under any  contract
providing  for the sale by the Mortgagor of Hydrocarbons which  contains  a
"take  or  pay"  clause  or  under  any  similar  arrangement,  to  deliver
Hydrocarbons at some future time without then or thereafter receiving  full
payment therefor and (e) no agreement, contract or instrument set forth  in
Exhibit  "A"  contains  any  provision which would  prevent  the  practical
realization  of  the benefits of this Mortgage as to the Collateral.   With
respect to all wells existing on the date hereof, such shares of production
and  expenses are not subject to change (pursuant to non-consent provisions
operating  agreements  described in Exhibit "A" or otherwise)  except,  and
only  to  the extent that, such changes are expressly described in  Exhibit
"A".

     Section  3.2     No  Liens  Except for Permitted  Liens.   Other  than
financing   statements  or  other  similar  or  equivalent   documents   or
instruments  with respect to the Security Interest and the other  Permitted
Liens,  no financing statement, mortgage, security agreement or similar  or
equivalent  document  or  instrument  covering  all  or  any  part  of  the
Collateral  has been executed by the Mortgagor.  No Collateral  is  in  the
possession  of  any Person (other than the Mortgagor) asserting  any  claim
thereto  or  security interest therein, except that the  Mortgagee  or  its
designee may have possession of Collateral as contemplated hereby.

     Section  3.3     Rents;  Royalties.  All rents,  royalties  and  other
payments (except for those which are being contested in good faith  and  by
appropriate  proceedings  and  for  which  the  Mortgagor  has  established
adequate reserves and so long as the payment of same is not a condition  to
be met in order to maintain an oil, gas and/or other mineral lease or other
agreement in force) due and payable under the Mineral Properties which  are
productive  of oil and/or gas (or are included in units productive  of  oil
and  /or  gas) and all other oil, gas and/or mineral leases, contracts  and
other  agreements forming a part of the Mortgaged Property, have  been  and
are  being  properly and timely paid, and the Mortgagor is not  in  default
with  respect  to any obligations (and the Mortgagor is not  aware  of  any
default  by any third party with respect to such third party's obligations)
under  such leases, contracts and other agreements, or otherwise  attendant
to  the  ownership or operation of the Collateral, where such  fault  could
adversely affect the ownership or operation of the Collateral to which such
obligations  relate.  The Mortgagor is not currently accounting  (and  does
not  anticipate accounting) for any royalties, or overriding  royalties  or
other  payments out of production, on a basis (other than delivery in kind)
where  such payments are based other than on proceeds received by Mortgagor
from  sale;  the  Mortgagor  has  advised  the  Mortgagee  in  writing   of
situations, if any, where a contingent liability to account in such  manner
may exist.

     Section  3.4    No Limitations on Payments for Production.  Except  as
otherwise  specifically disclosed to the Mortgagee in writing with  respect
to  any  particular part of the Mineral Properties, (i) neither  Mortgagor,
nor its predecessors in title, have received prepayments (including, but no
limited  to,  payments  for  gas  not  taken  pursuant  to  "take  or  pay"
arrangements)  for  any Hydrocarbons produced or to be  produced  from  the
Mineral  Properties  after  the  date hereof;  (ii)  none  of  the  Mineral
Properties  is  subject  to  any contractual or other  arrangement  whereby
payment for production is to be deferred for a substantial period after the
month  in which such production is delivered (i.e., in the case of oil  not
in  excess  of  sixty (60) days, and in the case of gas not  in  excess  of
ninety (90) days); (iii) none of the Mineral Properties is subject to a gas
sales  contract  which  contains  terms which  are  not  customary  in  the
industry;  (iv)  none of the Mineral Properties is subject at  the  present
time  to  any  regulatory refund obligation and, to the best of Mortgagor's
knowledge,  no  facts exist which might cause the same to be  imposed;  (v)
none  of  the Mineral Properties is subject to an arrangement or  agreement
under  which  any  purchaser or other Person is entitled  to  "make-up"  or
otherwise  receive deliveries of Hydrocarbons at any time  after  the  date
hereof  without paying at such time the full contract price  therefor;  and
(vi)  no Person is entitled to receive any portion of the interest  of  the
Mortgagor in any Hydrocarbons or to receive cash or other payments from the
Mortgagor  to  "balance"  any disproportionate allocation  of  Hydrocarbons
under  any  operating agreement, gas balancing and storage  agreement,  gas
processing   or   dehydration  agreement,  or  other  similar   agreements.
Mortgagee acknowledges that Mortgagor may be obligated to escrow a  portion
of  the  proceeds of the Hydrocarbons for certain plugging and  abandonment
obligations.

     Section  3.5     Consents  and  Preferential  Rights.   There  are  no
unwaived  preferential purchase rights held by third parties affecting  any
part of the Collateral or rights of third parties to prohibit the pledge or
mortgage  of any part of the Collateral without the consent of  such  third
parties.

     Section  3.6     No  Inconsistent Agreements.  The Mortgagor  has  not
performed  any  acts  or  signed any agreements  which  might  prevent  the
Mortgagee  from enforcing any of the terms of this Mortgage or which  would
limit the Mortgagee in any such enforcement.

     Section  3.7     Status  of  Contracts.   All  of  the  Contracts  and
obligations of the Mortgagor that relate to the Mineral Properties (i)  are
in   full  force  and  effect  and  constitute  legal,  valid  and  binding
obligations  of the Mortgagor, and (ii) neither the Mortgagor nor,  to  the
knowledge  of  the Mortgagor, any other party to the Contracts  (a)  is  in
breach of or default, or with the lapse of time or the giving of notice, or
both, would be in breach or default, with respect to any of its obligations
thereunder  or  (b) has given or threatened to give notice of  any  default
under  or  inquiry  into any possible default under, or  action  to  alter,
terminate, rescind or procure a judicial reformation of any Contract.

     Section 3.8    Accounts.  The Accounts represent bona fide obligations
of  the respective account debtors, which obligations are free and clear of
any  set  off, compensation, counterclaim, defense, allowance or adjustment
other than discounts for prompt payment shown on the invoice, and arose  in
the ordinary course of the Mortgagor's business.

     Section 3.9    Status of Equipment.  The Equipment, fixtures and other
tangible  personal property forming a part of the Collateral  are  in  good
repair  and  condition  and are adequate for the normal  operation  of  the
Collateral  in  accordance with prudent industry  standards;  all  of  such
Collateral  is located on the Mineral Properties, except for  that  portion
thereof which is located elsewhere (including that usually located ion  the
Mineral Properties but now temporarily located elsewhere) in the course  of
the normal operation of the Mineral Properties.

     Section 3.10.  Name.  The legal name of the Mortgagor as it appears in
its Articles of Incorporation is as it appears on page 1 of this Mortgage.

     Section  3.11   Taxpayer Identification Number.  The federal  taxpayer
identification number of the Mortgagor is as follows:  73-0797067.

     Section 3.12   Chief Executive Office.  The chief executive office  of
the  Mortgagor  is located at 901 Threadneedle, Suite 200,  Houston,  Texas
77079.

     Section 3.13   Filing Location.  When UCC financing statement(s)  have
been  filed in the offices of a Louisiana Clerk of Court (or, the  case  of
Orleans  Parish,  the Recorder of Mortgages), the Security Interests  shall
constitute  perfected security interests in the Collateral  to  the  extent
that  a security interest therein may be perfected by filing in the Uniform
Commercial  Code records of Louisiana, prior to all other Liens and  rights
of  others  therein except for the Permitted Liens to the extent that  such
priority is afforded by the UCC or otherwise.

                                ARTICLE 4.

                                 Covenants

     The Mortgagor covenants and agrees as follow:

     Section  4.1    Taxes.  The Mortgagor will pay and discharge  promptly
when  due all taxes, license fees, assessments and governmental charges  or
levies  imposed  upon it or upon its income or upon the Collateral  or  any
part thereof (including production, severance, windfall profit, excise  and
other taxes assessed against or measured by the production of, or the value
or   proceeds  of  production  of,  Hydrocarbons;  provided,  however,  the
Mortgagor shall not be required to pay any such tax, assessment, charge  or
levy  if  the amount, applicability or validity thereof shall currently  be
contested in good faith by appropriate proceedings diligently conducted and
if  the contesting party shall have set up reserves therefor adequate under
generally  accepted accounting principles (provided that such reserves  may
be set up under generally accepted accounting principles).

     Section 4.2    Insurance.  The Mortgagor will procure and maintain for
the  benefit  of  the  Mortgagee and Mortgagor original  paid-up  insurance
policies against such liabilities, casualties, risks and contingencies,  in
such  amounts  and  form  and substance, with such  financially  sound  and
reputable  companies,  and with such expiration dates,  as  are  reasonably
acceptable  to  the  Mortgagee, and containing a  noncontributory  standard
mortgage clause or its equivalent in favor of the Mortgagee.  The Mortgagor
will at all times maintain costs of regaining control of well insurance  or
similar  insurance to the extent customary in the industry in the pertinent
area  of operations.  Each policy shall contain an agreement by the insurer
not  to  cancel or amend the policy without giving the Mortgagee  at  least
thirty  (30)  days' prior written notice of its intention to do  so.   Upon
request  of  the  Mortgagee, the Mortgagor will  furnish  or  cause  to  be
furnished  to  the Mortgagee from time to time a summary of  the  insurance
coverage of the Mortgagor in form and substance reasonably satisfactory  to
the  Mortgagee  and  if  requested  will  furnish  the  Mortgagee  original
certificates of insurance and/or copies of the applicable policies and  all
renewals  thereof.   In  the event the Mortgagor  should,  for  any  reason
whatsoever,  fail to keep the corporeal (tangible) Collateral or  any  part
thereof so insured, or to keep said policies so payable, or fail to deliver
to  the  Mortgagee the original or certified policies of insurance and  the
renewals therefor upon demand, then Mortgagee, if it so elects, may  itself
have such insurance effected in such amounts and with such companies as  it
may deem proper and may pay the premiums therefor (as an Advance as defined
hereinbelow).   The  Mortgagor  will notify the  Mortgagee  immediately  in
writing  of  any  material blowout, fire or other casualty to  or  accident
involving  the  Mortgaged  Property, the  Equipment  or  the  Hydrocarbons,
whether  or  not  such  blowout,  fire or other  casualty  to  or  accident
involving  the  Mortgaged  Property, the  Equipment  or  the  Hydrocarbons,
whether  or  not  such blowout, fire, casualty or accident  is  covered  by
insurance.   Further,  the Mortgagor will notify promptly  the  Mortgagor's
insurance company and submit an appropriate claim and proof of claim to the
insurance company if such a casualty or accident occurs.  In the  event  of
any loss on any of such policies, the Mortgagee may at its election, either
apply  the  net proceeds thereof toward the payment of the Indebtedness  or
pay  the  net proceeds thereof to the Mortgagor, either wholly or in  part,
and  under  such conditions as the Mortgagee may determine  to  enable  the
Mortgagor to repair or restore the Collateral.

     Section 4.3    Liens.  The Mortgagor will not create, incur, assume or
permit  to exist any Lien on any portion of the Collateral, except for  (i)
the Lien and Security Interests hereof and the Permitted Liens, (ii) taxes,
assessments or governmental charges or levies if the same shall not at  the
time  be delinquent or thereafter can be paid without penalty, or are being
contested  in  compliance with the preceding Section 4.1  ("Taxes"),  (iii)
defects  or  irregularities of title and Liens which are  not  such  as  to
interfere  materially  with  the development, operation  or  value  of  the
Mortgaged Property or the title thereto, (iv) those imposed by law, such as
carriers',  warehousemen's and mechanics' liens  and  other  similar  liens
arising  in  the ordinary course of business which would secure obligations
not  more  than ninety (90) days past due or which are being  contested  in
good  faith by appropriate proceedings diligently conducted and  for  which
adequate reserves shall have been set aside on its books, (v) those arising
out  of pledges or deposits under workmen's compensation laws, unemployment
insurance,  old  age  pensions,  or other  social  security  or  retirement
benefits,   or  similar  legislation,  (vi)  utility  easements,   building
restrictions  and such other encumbrances or charges against real  property
as  are  of  a  nature generally existing with respect to properties  of  a
similar  character  as  the Mortgaged Property and  which  do  not  in  any
material  way affect the merchantability of the same or interfere with  the
use thereof and the business of the Mortgagor, and (vii) those consented to
in writing by the Mortgagee.

     Section 4.4    Sale.  Except for (i) sales of severed Hydrocarbons  in
the  ordinary  course of the Mortgagor's business on the best  terms  which
would  be  available in bona fide and arms length transactions  with  third
parties  not affiliated with the Mortgagor (which in the case of production
which  is subject to price controls or is sold in accordance with customary
industry  practice  pursuant  to long term  purchase  contracts,  shall  be
determined giving consideration to such matters), (ii) dispositions made in
connection  with  a  permitted (as provided below)  release,  surrender  or
abandonment  of  a lease, or (iii) in the absence of an Event  of  Default,
collection  of  Accounts and General Intangibles, the  Mortgagor  will  not
sell,  convey, lease or otherwise transfer or dispose of all or any portion
of  the  Collateral without the written consent of Mortgagee (which consent
shall not be unreasonably withheld).

     Section 4.5    Compliance with Laws and Covenants.  The Mortgagor will
observe  and  comply  with  all laws, statutes,  codes,  acts,  ordinances,
orders,  judgments, decrees, injunctions, rules, regulations, certificates,
franchises,  permits, licenses, authorizations, directions and requirements
of all federal, state, county, municipal an other governments, departments,
commissions,  boards, courts, authorities, officials and officers  domestic
or  foreign, applicable to the Mortgagor or to the Collateral, except those
being contested in good faith.

     Section  4.6    Payment of Debts.  The Mortgagor will cause all  debts
and  liabilities of any character (including, without limitation, all debts
and liabilities for labor, material and equipment used or furnished for use
on  the  Mortgaged  Property)  incurred in the operation,  maintenance  and
development of the Collateral to be paid within ninety (90) days after same
becomes  due.  The Mortgagor may, however, delay paying or discharging  any
such debts and liabilities so long as the validity thereof is contested  in
good  faith  and  by appropriate proceedings diligently conducted  and  the
Mortgagor  has  established adequate reserves therefor in  accordance  with
generally accepted accounting principles and so long as the payment of same
is  not  a  condition  to be met in order to maintain an  oil,  gas  and/or
mineral lease in force.

     Section  4.7    Operation of the Mortgaged Property.  Whether  or  not
the  Mortgagor  is  the operator of the Mortgaged Property,  the  Mortgagor
will,  at the Mortgagor's own expense, (a) do all things necessary to  keep
unimpaired the Mortgagor's rights in the Mortgaged Property (subject to any
permitted abandonment provisions hereinbelow), (b) use its best efforts  to
cause  the  lands  described  in Exhibit "A" to be  maintained,  developed,
protected against drainage, and continuously operated for the production of
hydrocarbons in a good and workmanlike manner as would a prudent  operator,
and   in  accordance  with  generally  accepted  practices  and  applicable
operating  agreements, and (c) cause to be paid, promptly as and  when  due
and  payable, all rentals and royalties payable in respect of the Mortgaged
Property,  and  all expenses incurred in or arising from the  operation  or
development  of  the Mortgaged Property.  The Mortgagor  will  observe  and
comply  with  all terms and provisions, express or implied, of the  Mineral
Properties,  and all agreements and contracts of any type relating  to  the
Mortgaged  Property, in order to keep the same in full  force  and  effect,
including, without limitation, maintenance of productive capacity  of  each
well  or unit comprising the Mortgaged Property, and will not, without  the
prior written consent, which consent shall not be unreasonably withheld, of
the  Mortgagee,  surrender, abandon or release  (or  otherwise  reduce  its
rights  under)  any such lease, in whole or in part, so long  as  any  well
situated  thereon  (whether  or not such well is  located  in  the  Mineral
Properties),  or  located on any unit containing all or any  part  of  such
leases,  is capable (or is subject to being made capable through  drilling,
reworking  or other operations which it would be economically  feasible  to
conduct)  of producing hydrocarbons in commercial quantities (as determined
without  considering the effect of this Mortgage); provided,  however  that
the  Mortgagor may, to the extent expressly required by the  terms  of  any
such  lease  under a "Pugh clause" or similar provision, or to  the  extent
otherwise required by law, confirm to the lessor thereof that the lease has
by  its  terms terminated as to any specified portion thereof on  which  no
such  well  exists.   Without  the express prior  written  consent  of  the
Mortgagee, which consent shall not be unreasonably withheld, Mortgagor will
not  abandon or consent to the abandonment of any well producing  from  the
Mortgaged Property (or properties unitized therewith) so long as such  well
is capable (or is subject to being made capable through drilling, reworking
or  other operations which it would be commercially feasible to conduct) of
producing  hydrocarbons  in commercial quantities  (as  determined  without
considering  the effect of this Mortgage but considering the cost  of  such
drilling, reworking and other operations).  The Mortgagor will not  without
the express prior written consent of the Mortgagee, which consent shall not
be  unreasonably withheld, elect not to participate in a proposed operation
on  the Mortgaged Property where the effects of such election would be  the
forfeiture  either  temporarily (i.e., until a  certain  sum  of  money  is
received  out of the forfeited interest) or permanently of any interest  in
the Mortgaged Property.

     Section 4.8    Pooling and Unitization.  The Mortgagor has the  right,
and  is hereby authorized, to pool or unitize all or any part of the  tract
of  land  described  in Exhibit "A", insofar as relates  to  the  Mortgaged
Property, with adjacent lands, leaseholds and other interests, when, in the
reasonable judgment of the Mortgagor, it is necessary or advisable to do so
in  order to form a drilling unit to facilitate the orderly development  of
that part of the Mortgaged Property affected thereby, or to comply with the
requirements of any law or governmental order or regulation relating to the
spacing  of  wells  or  proration  of the production  therefrom;  provided,
however,  that the Hydrocarbons produced from any unit so formed  shall  be
allocated  among  the separately owned tracts or interests  comprising  the
unit  in  proportion to the respective surface areas thereof; and  provided
further  that  the Mortgagor shall not be entitled to form  any  such  unit
without  the written consent of the Mortgagee (which consent shall  not  be
unreasonably withheld) if the effect of such formation would be to decrease
the  amount  of Hydrocarbons which would be subject to this Mortgage.   Any
unit  so  formed may relate to one or more zones or horizons,  and  a  unit
formed  for  a particular zone or horizon need not conform in area  to  any
other  unit relating to a different zone or horizon, and a unit formed  for
the production of oil need not conform in area with any unit formed for the
production  of  gas.   Immediately after formation of any  such  unit,  the
Mortgagor  shall  furnish  to the Mortgagee a  true  copy  of  the  pooling
agreement,  declaration of pooling or other instrument creating such  unit,
in  such  number  of counterparts as the Mortgagee may reasonably  request.
The  interest  in any such unit attributable to the Mortgaged Property  (or
any  part  thereof) included therein shall become a part of  the  Mortgaged
Property  and  shall be subject to the Lien hereof in the same  manner  and
with  the same effect as though such unit and the interest of the Mortgagor
therein  were  specifically described in Exhibit "A".   The  Mortgagor  may
enter  into  pooling  or unitization agreements not hereinabove  authorized
only with the prior written consent of the Mortgagee.

     Section  4.9     Contracts.  The Mortgagor will  not  enter  into  any
operating  agreement, other than the Operating Agreement or other  Contract
which   materially  adversely  affects  the  Collateral  or   the   Mineral
Properties,  or  which  is  not in the ordinary course  of  business.   The
Mortgagor will promptly take all action necessary to enforce or secure  the
observance or performance of any term, covenant, agreement or condition  to
be  observed or performed by third parties under any Contract, or any  part
thereof,  or to exercise any of is rights, remedies, powers and  privileges
under  any  Contract, all in accordance with the respective terms  thereof.
The  Mortgagor will not do or permit anything to be done to the  Collateral
that may violate the terms of any insurance covering the Collateral or  any
part thereof.

     Section  4.10   Condition of Equipment.  The Mortgagor will  maintain,
preserve  and keep the Equipment at all times in thorough repair  and  good
working  order  and  condition, and from time  to  time  make  all  needful
repairs,  renewals  and  additions  so that  its  value  and  the  Security
Interests shall at no time become impaired.

     Section 4.11   Accounts Collection.  The Mortgagor shall use its  best
efforts to cause to be collected from its account debtors, as and when due,
any  and  all amounts owing under or on account of each Account (including,
without  limitation,  Accounts which are delinquent, such  Accounts  to  be
collected in accordance with lawful collection procedures) and shall  apply
forthwith upon receipt thereof all such amounts as are so collected to  the
outstanding  balance  of  such  Account.  Subject  to  the  rights  of  the
Mortgagee  hereunder  if an Event of Default shall  have  occurred  and  be
continuing,  the Mortgagor may allow in the ordinary course of business  as
adjustments to amounts owing under its Accounts an extension of renewal  of
the  time or times of payment, or settlement for less than the total unpaid
balance,  which  the Mortgagor finds appropriate in accordance  with  sound
business  judgment  in accordance with the Mortgagor's ordinary  course  of
business  consistent with its historical collection practices.   The  costs
and   expenses   (including,  without  limitation,  attorneys'   fees)   of
collection,  whether incurred by the Mortgagor or the Mortgagee,  shall  be
borne by the Mortgagor.

     Section 4.12   Governmental Accounts.  If the Collateral is or becomes
subject  to  the  Federal  Assignment of Claims  Act,  the  Mortgagor  will
immediately  notify  the  Mortgagee thereof  in  writing  and  execute  all
instruments  and take all steps required by the Mortgagee  to  comply  with
that act.

     Section  4.13   Accounts Aging.  The Mortgagor will from time to  time
at  the  request of the Mortgagee furnish the Mortgagee with a schedule  of
the  Accounts  which shall include the names and addresses of each  account
debtor.   The Mortgagee shall also have the right to make test verification
of the Accounts or any portion thereof.  The Mortgagor at its expense shall
furnish to the Mortgagee from time to time upon request by the Mortgagee  a
listing and aging of all Accounts.

     Section 4.14   Right of Inspection an Information.  The Mortgagor will
permit any officer, employee or agent of the Mortgagee to visit and inspect
the  Collateral, examine the books of record and accounts of the Mortgagor,
take  copies and extracts therefrom, and discuss the affairs, finances  and
accounts  of  the Mortgagor with the Mortgagor's officers, accountants  and
auditors,  and  the  Mortgagor  will  furnish  information  concerning  the
Collateral, including schedules of all internal and third party information
identifying the Collateral (such as, for example, lease and well names  and
numbers   assigned  by  the  Mortgagor  or  the  operator  of  any  Mineral
Properties,  division  orders and payment names  and  numbers  assigned  by
purchasers  of  the  Hydrocarbons, and internal  identification  names  and
numbers  used by the Mortgagor in accounting for revenues, costs and  joint
interest  transactions  attributable to the  Mineral  Properties),  all  on
reasonable notice, at such reasonable times without hindrance or delay  and
as  often  as  the  Mortgages may reasonably desire.   The  Mortgagor  will
furnish  to the Mortgagee promptly upon request and in the form and content
specified  by the Mortgagee lists of purchasers of Hydrocarbons  and  other
account  debtors,  Schedules of Equipment and  other  data  concerning  the
Collateral as the Mortgagee may from time to time specify.

     Section  4.15   Financial Statements and Reports.  The Mortgagor  will
furnish  to  the Mortgagee promptly upon the request of the Mortgagee,  all
regular  financial statements, reports, budgets and such other  information
regarding the business and affairs and financial condition of the Mortgagor
as the Mortgagee may reasonably request.  All financial statements shall be
in such detail as the mortgagee may reasonably request and shall conform to
generally  accepted  accounting principles applied on a  consistent  basis,
except  only  for  such changes in accounting principles or  practice  with
which the independent certified public accountants concur.

     Section  4.16   Further Assurances.  The Mortgagor will keep the  Lien
of  this Mortgage valid and unimpaired except for the Permitted Liens.  The
Mortgagor will promptly (and in no event later than thirty (30) days  after
written  notice  from  the Mortgagee is received) (i) correct  any  defect,
error  or omission which may be discovered in the contents of this Mortgage
or  any  financing  statement  relating thereto  or  in  the  execution  or
acknowledgment of this Mortgage or any financing statement;  (ii)  execute,
acknowledge,  deliver  and  record  such  further  instruments  (including,
without  limitation,  further  security agreements,  financing  statements,
continuation  statements  and  assignments of  accounts,  contract  rights,
general  intangibles  and proceeds) and do such  further  acts  as  may  be
necessary,  desirable or proper to carry out more effectively the  purposes
of this Mortgage and to more fully identify and subject to the Liens hereof
any  property  intended to be covered hereby, including without  limitation
any  renewals, additions, substitution, replacements or accessions  to  the
Collateral; and (iii) execute, acknowledge, deliver and record any document
or  instrument (including specifically any financing statement) and  obtain
any consents necessary, desirable or proper to perfect, protect or preserve
the  Lien  and Security Interests hereunder against the rights or interests
of third persons.

     Section  4.17   Notice of Changes.  The Mortgagor will not change  its
name, identify, federal tax identification number or corporate structure in
any  manner  unless it shall have given the Mortgagee at last  thirty  (30)
days' prior written notice thereof.

     Section   4.18    Filing.   The  Mortgagor  agrees  that   a   carbon,
photographic, facsimile, photostatic or other reproduction of this Mortgage
or  of a financing statement is sufficient as a financing statement.   This
Mortgage  may  be  effective as a financing statement filed  as  a  fixture
filing  with  respect to all fixtures included within the  Collateral,  and
shall also be effective as the financing statement covering minerals or the
like  (including  oil and gas) and accounts subject to  subsection  (5)  of
Section  9-103 of the UCC, as amended, and similar provisions (if  any)  of
the UCC as enacted in any other state where filing may be appropriate.  The
mailing  address  of  the Mortgagor and the address of the  Mortgagee  from
which information concerning the Security Interests evidenced hereunder may
be obtained are the respective addresses of the Mortgagor and the Mortgagee
set forth in Article 6.  The Mortgagee shall pay all costs of or incidental
to  the  recording  or  filing  of  this Mortgage  and  of  any  financing,
amendment,  continuation,  termination or other statements  concerning  the
Collateral.

     Section  4.19   Collateral Indemnity.  If the validity or priority  of
this  Mortgage (except with respect to the Permitted Liens) or any  rights,
security interests or other interests created or evidenced hereby shall  be
attacked,  endangered  or  questioned  or  if  any  legal  proceedings  are
instituted  with  respect thereto, the Mortgagor will give  prompt  written
notice thereof to the Mortgagee and at the Mortgagor's own cost and expense
will  diligently  endeavor  to cure any defect that  may  be  developed  or
claimed,  and will take all necessary and proper steps for the  defense  of
such  legal proceedings, and the Mortgagee (whether or not named as a party
to  legal  proceedings  with  respect  thereto)  is  hereby  authorized  an
empowered  to take such additional steps as in its judgment and  discretion
may be necessary or proper for the defense of any such legal proceedings or
the protection of the validity or priority of this Mortgage and the rights,
security interests and other interests created or evidenced hereby, and all
expenses so incurred of any kind and character shall be considered Payments
as  provided in Section 4.23 ("Payments by Mortgagee") hereof, and shall be
a part of the Indebtedness.

     Section  4.20    Environmental  Indemnity.   To  the  extent  of   its
interests  in the Mineral Properties, the Mortgagor will defend,  indemnify
and  hold  Mortgagee  and  its directors, officers,  agents  and  employees
harmless   from  and  against  all  claims,  demands,  causes  of   action,
liabilities,  losses,  costs and expenses (including,  without  limitation,
costs  of  suit,  reasonable attorneys' fees and fees of expert  witnesses)
arising from or in connection with (i) the presence in, on or under or  the
removal from the Collateral of any hazardous substances or solid wastes (as
hereafter  defined),  or  any  releases  or  discharges  of  any  hazardous
substances  or  solid  wastes on, under or from  such  property,  (ii)  any
activity  carried on or undertaken on or off the Collateral, whether  prior
to or during the term of this Mortgage, and whether by the Mortgagor or any
predecessor  in  title or any officers, employees, agents,  contractors  or
subcontractors  of  Mortgagor or any predecessor in  title,  or  any  third
persons at any time operating the Collateral or occupying or present on the
Collateral,  in connection with the handling, use, generation, manufacture,
treatment,  removal,  storage,  decontamination,  clean-up,  transport   or
disposal of any hazardous substances or solid wastes at any time located or
present on or under the Collateral or involving the use or operation of the
Collateral, or (iii) any breach of any representation, warranty or covenant
under  the  terms of this Mortgage.  The foregoing indemnity shall  further
apply  to  any  residual  contamination on  or  under  the  Collateral,  or
affecting any natural resources, and to any contamination of the Collateral
or  natural  resources  arising in connection  with  the  generation,  use,
handling,  storage, transport or disposal of any such hazardous  substances
or solid wastes, and irrespective of whether any of such activities were or
will  be undertaken in accordance with applicable laws, regulations,  codes
and  ordinances.  The terms "hazardous substance" and "release" as used  in
this  Mortgage  shall  have  the meanings specified  in  the  Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended
by  the  Superfund Amendments and Reauthorization Act of 1986 (as  amended,
"CERCLA"), and the terms "solid waste" and "disposal" (or "disposed") shall
have  the meanings specified in the Resource Conservation and Recovery  Act
of  1976, as amended by the Used Oil Recycling Act of 1980, the Solid Waste
Disposal  Act  Amendments  of  1980, and  the  Hazardous  and  Solid  Waste
Amendments  of 1984 (as amended, "RCRA"); provided, in the event  that  the
laws  of  the  State  of  Louisiana  establish  a  meaning  for  "Hazardous
Substance,"  "Release," "Solid Waste" or "Disposal" which is  broader  than
that  specified in either CERCLA or RCRA, such broader meaning shall apply.
Without  prejudice to the survival of any other agreements of the Mortgagor
hereunder,  the provisions of this Section shall survive the final  payment
of all Indebtedness and the termination of this Mortgage and shall continue
thereafter in full force and effect.

     Section  4.21   Release of Collateral.  The Mortgagee may at any  time
and  without  notice to the Mortgagor, release any part of  the  Collateral
from  the  effect of this Mortgage, or grant an extension or  deferment  of
time for the discharge of any obligation hereunder (or other Indebtedness),
without affecting the liability of the Mortgagor hereunder.

     Section   4.22    Taxation  of  Mortgage.   In  the  event  that   any
governmental  authority  shall  impose any taxation  of  mortgages  or  the
indebtedness  they  secure, the Mortgagor agrees to pay  such  governmental
taxes,  assessments or charges either to the governmental authority  or  to
the Mortgagee, as provided by law.

     Section  4.23    Payments by Mortgagee.  The Mortgagor authorizes  the
Mortgagee  in the Mortgagee's discretion to advance any sums necessary  for
the   purpose  of  paying  (i)  insurance  premiums,  (ii)  taxes,   forced
contributions, service charges, local assessments and governmental charges,
(iii)  any Liens or encumbrances affecting the Collateral (whether superior
or  subordinate  to the Lien of this Mortgage) other than Permitted  Liens,
(iv)  necessary repairs and maintenance expenses or (v) any  other  amounts
which  are  covered  by Section 4.16 ("Further Assurances")  or  which  the
Mortgagee  deems  necessary and appropriate to preserve  the  validity  and
ranking of this Mortgage, to cure any Defaults or to prevent the occurrence
of any Default, or otherwise authorized by this Mortgage (collectively, the
"Payments")  of  whatever  kind; provided,  however,  that  nothing  herein
contained  shall  be  construed  as making such  Payments  obligatory  upon
Mortgagee,  or as making Mortgagee liable for any loss, damage,  or  injury
resulting from the nonpayment thereof.  The Mortgagor covenants and  agrees
that  within  five  (5) days after demand therefor by  the  Mortgagee,  the
Mortgagor will repay the Payments to the Mortgagee, together with  interest
thereon  at  the  rate  of twelve (12%) percent per  annum  from  the  date
incurred.   All  such  Payments (and interest) shall  be  included  in  the
Indebtedness  secured  hereby,  subject  to  the  maximum  amount  of   the
Indebtedness set forth above in Section 2.5 ("Maximum Amount").

                                ARTICLE 5.

                           Default and Remedies

     Section  5.1    Events of Default.  Any of the following events  shall
be considered an "Event of Default" as that term is used herein:

     (a)  Payment and Performance of the Indebtedness.  The Mortgagor fails
to timely pay or perform any of the Indebtedness.

     (b)   Representations and Warranties.  Any representation or  warranty
made by the Mortgagor proves to have been incorrect in any material respect
as  of  the  date  thereof;  or  any representation,  statement  (including
financial  statements),  certificate or  data  furnished  or  made  by  the
Mortgagor  (or any officer, accountant or attorney of the Mortgagor)  under
this  Mortgage, proves to have been untrue in any material adverse respect,
as  of  the  date  as of which the facts therein set forth were  stated  or
certified.

     (c)  Insurance.   The  Mortgagor fails to maintain  at  any  time  the
          insurance required by this Mortgage.

     (d)   Alienation  or Encumbrance of Collateral.  The Mortgagor  sells,
conveys  or  otherwise transfers or disposes of all or any portion  of  the
Collateral  or grants any mortgage, security interest or other Lien  (other
than  Permitted  Liens) affecting all or any portion of the Collateral,  or
permits   any  judgment,  Lien  (other  than  Permitted  Liens)  or   other
encumbrance against all or any portion of the Collateral.

     (e)    Covenants.   The  Mortgagor  defaults  in  the  observance   or
performance  of  any  of  the  covenants or agreements  contained  in  this
Mortgage  to  be kept or performed by the Mortgagor (other than  a  default
under  Subsections  (a)  through (d) hereof)  and  such  default  continues
unremedied for a period of 30 days after the notice thereof being given  by
the Mortgagee to the Mortgagor.

     (f)   Involuntary Bankruptcy or Receivership Proceedings.  A receiver,
conservator,  liquidator or trustee of the Mortgagor,  or  of  any  of  its
property (including the Collateral), is appointed by order or decree of any
court  or agency or supervisory authority having jurisdiction; or an  order
for  relief  is entered against the Mortgagor under the Federal  Bankruptcy
Code;  or  the  Mortgagor  is adjudicated bankrupt  or  insolvent;  or  any
material  portion  of  the  property  (including  the  Collateral)  of  the
Mortgagor  is sequestered by court order and such order remains  in  effect
for  more than 60 days; or a petition is filed against the Mortgagor  under
any  state, reorganization, arrangement, insolvency, readjustment of  debt,
dissolution,  liquidation or receivership law of any jurisdiction,  whether
now  or  hereafter in effect, and such petition is not dismissed within  60
days.

     (g)   Voluntary  Petitions.  The Mortgagor  files  a  case  under  the
Federal  Bankruptcy  Code  or seeking relief under  any  provision  of  any
bankruptcy, reorganization, arrangement, insolvency, readjustment of  debt,
dissolution  or  liquidation  law  of  any  jurisdiction,  whether  now  or
hereafter  in  effect, or consents to the filing of any  case  or  petition
against it under any such law.

     (h)   Assignments  for Benefit of Creditors.  The Mortgagor  makes  an
assignment  for  the benefit of its creditors', or admits  in  writing  its
inability to pay its debts generally a they become due, or consents to  the
appointment of a receiver, trustee or liquidator of the Mortgagor or of all
or any part of its property (including the Collateral).

     (i)   Undischarged Judgments.  Judgment for the payment  of  money  in
excess of $1,000,000 (which is not covered by insurance) is rendered by any
court  or  other governmental body against the Mortgagor, and the Mortgagor
does not discharge the same or provide for its discharge in accordance with
its  terms, or procure a stay of execution thereof within 30 days from  the
date  of entry thereof, and within said 30-day period or such longer period
during  which  execution of such judgement shall have been  stayed,  appeal
therefrom  and cause the execution thereof to be stayed during such  appeal
while  providing such reserves therefor as may be required under  generally
accepted accounting principles.

     (j)   Attachment.   A  writ  or warrant of  executory  process,  fieri
facias,  attachment  or any similar process shall be issued  by  any  court
against  the Collateral and such writ or warrant is not released or  bonded
within 10 days after its entry.

     (k)   Condemnation.   The  Collateral,  or  any  portion  thereof,  is
condemned  or  expropriated under power of eminent domain  by  any  legally
constituted governmental authority.

     Section 5.2    Remedies.  (a)      Upon the happening of any Event  of
Default specified in the preceding Section (other than Subsections  (f)  or
(g)  thereof), the Mortgagee may by written notice to the Mortgagor declare
the  entire principal amount of all Indebtedness then outstanding including
interest  accrued  thereon  to  be  immediately  due  and  payable  without
presentment, demand, protest, notice of protest or dishonor or other notice
of  default  of any kind, all of which are hereby expressly waived  by  the
Mortgagor.

     (b)   Upon  the  happening  of  any  Event  of  Default  specified  in
Subsections  (f)  or  (g) of the preceding Section,  the  entire  principal
amount  of  all  obligations then outstanding, including  interest  accrued
thereon  shall,  without notice or action by the Mortgagee, be  immediately
due and payable without presentment, demand, protest, notice of protest  or
dishonor  or other notice of default of any kind, all of which  are  hereby
expressly waived by the Mortgagor.

     (c)   Upon  the occurrence of any Event of Default, the Mortgagee  may
take  such  action,  without notice or demand, as  it  deems  advisable  to
protect  and  enforce its rights against the Mortgagor and in  and  to  the
Collateral, including, but not limited to, the following actions,  each  of
which  may be pursued concurrently or otherwise, at such time and  in  such
order  as  the  Mortgagee  may determine, in its sole  discretion,  without
impairing  or  otherwise affecting the other rights  and  remedies  of  the
Mortgagee:  (i) institute proceedings for the complete foreclosure of  this
mortgage  in which case the Collateral or any part thereof may be sold  for
cash  or  upon  credit  in one or more portions;  or  (ii)  to  the  extent
permitted  and  pursuant  to  the procedures provided  by  applicable  law,
institute proceedings for the partial foreclosure of this Mortgage for  the
portion of the Indebtedness then due and payable, subject to the continuing
Lien of this Mortgage for the balance of the Indebtedness not then due;  or
(iii)  institute an action, suit or proceeding in equity for  the  specific
performance  of  the Indebtedness or any covenant, condition  or  agreement
contained in this Mortgage; or (iv) apply for the appointment of a trustee,
receiver,  liquidator or conservator of the Collateral, without regard  for
the  adequacy of the security for the Indebtedness and without  regard  for
the solvency of the Mortgagor or of any person, firm or other entity liable
for  the payment of the Indebtedness; (v) exercise its rights under Section
2.3  ("Assignment")  hereof;  or (vi) pursue such  other  remedies  as  the
Mortgagee may have under applicable law.

     (d)   The  proceeds or avails of any sale made under or by  virtue  of
this  Section, together with any other sums which then may be held  by  the
Mortgagee under this Mortgage, whether under the provisions of this Section
or otherwise, shall be applied in such manner as the Mortgagee, in its sole
discretion, shall determine.

     (e)   Upon  any  sale  made under or by virtue of  this  Section,  the
Mortgagee may bid for and acquire the Collateral or any part thereof and in
lieu of paying cash therefor may make settlement for the purchase price  by
crediting  upon  the  Indebtedness  the net  sales  price  after  deducting
therefrom  the  expenses of the sale and the costs of the  action  and  any
other sums which the Mortgagee is authorized to deduct under this Mortgage.

     Section 5.3    General authority and Power of Attorney.  The Mortgagor
hereby  irrevocably appoints the Mortgagee its agent and attorney in  fact,
with  full  power  of  substitution, in the name of the  Mortgagor  or  the
Mortgagee,  for  the  sole use and benefit of the  Mortgagee,  but  at  the
Mortgagor's expense, to exercise, at any time and from time to  time  while
an  Event  of  Default has occurred and is continuing, all or  any  of  the
following powers with respect to all or any of the Collateral:

     (i)   to  endorse the name of the Mortgagor upon any check,  draft  or
other  instrument  payable  to the Mortgagor evidencing  payment  upon  any
Accounts or General Intangible.
     (ii) to demand, sue for, collect, receive and give acquittance for any
and all Accounts and other monies due or to become due for or as Collateral
or by virtue thereof,
     (iii)      to  settle, compromise, compound, prosecute or  defend  any
action or proceeding with respect to any of the Collateral, and
     (iv) to extend the time of payment of any or all of the Collateral and
to make any allowance and other adjustments with reference thereto.

     The  aforesaid  mandate and power of attorney, being coupled  with  an
interest,  is  irrevocable  so  long as any  of  the  Indebtedness  remains
outstanding.

     Section 5.4    Accounts and Contracts.  While an Event of Default  has
occurred  and is continuing (i) the Mortgagor will make no material  change
to  the  terms  of  any  Account  or Contract  without  the  prior  written
permission  of  the Mortgagee, and (ii) the Mortgagor upon request  of  the
Mortgagee  will  promptly notify (and the Mortgagor hereby  authorizes  the
Mortgagee  so to notify) each account debtor in respect of any  Account  or
General  Intangible that such Collateral has been assigned to the Mortgagee
hereunder,  and that any payments due or to become due in respect  of  such
Collateral are to be made directly to the Mortgagee or its designee.

     Section 5.5    Sale.  Upon the occurrence of an Event of Default,  the
Mortgagee  may  exercise all rights of a secured party under  the  UCC  and
other applicable law (including the Uniform Commercial Code as in effect in
another  applicable  jurisdiction) and, in  addition,  the  Mortgagee  may,
without being required to give any notice, except as herein provided or  as
may  be required by mandatory provisions of law, sell the Collateral or any
part  thereof at public sale, for cash, upon credit or for future delivery,
and  at  such price or prices as the Mortgagee may deem satisfactory.   The
Mortgagee may be the purchaser of any or all of the Collateral so  sold  at
any public sale.  The Mortgagor will execute and deliver such documents and
take  such  other action as the Mortgagee deems necessary or  advisable  in
order that any such sale may be made in compliance with law.  Upon any such
sale the Mortgagee shall have the right to deliver, assign and transfer  to
the  purchaser thereof the Collateral so sold.  Each purchaser at any  such
sale  shall hold the Collateral so sold to it absolutely and free from  any
claim  or  right  of  whatsoever  kind and the  Mortgagor,  to  the  extent
permitted by law, hereby specifically waives all rights of appraisal  which
it  has  or may have under any law now existing or hereafter adopted.   The
Mortgagor agrees that ten (10) days' prior written notice of the  time  and
place  of  any sale or other intended disposition of any of the  Collateral
constitutes  "reasonable notification" within the  meaning  of  Section  9-
504(3)  of  the UCC.  The notice (if any) of any such sale shall state  the
time and place fixed for such sale.  Any such public sale shall be held  at
such  time  or  times within ordinary business hours and at such  place  or
places  as the Mortgagee may fix in the notice of such sale.  At  any  such
sale  the  Collateral may be sold in one lot as an entirety or in  separate
parcels,  as  the  Mortgagee may determine.  The  Mortgagee  shall  not  be
obligated to make any such sale pursuant to any such notice.  The Mortgagee
may,  without notice or publication, adjourn any public sale or  cause  the
same  to  be  adjourned from time to time by announcement at the  time  and
place fixed for the sale, and such sale may be made at any time or place to
which the same may be so adjourned.  In case of any sale of all or any part
of  the Collateral on credit or for future delivery, the Collateral so sold
may  be  retained by the Mortgagee until the selling price is paid  by  the
purchaser thereof, but the Mortgagee shall not incur any liability in  case
of  the failure of such purchaser to take up and pay for the Collateral  so
sold  and, in case of such failure, such Collateral may again be sold  upon
like notice.

     Section  5.6    Set-Off.  Upon the occurrence of any Event of Default,
the Mortgagee shall have the right to set-off any funds of the Mortgagor in
the  possession  of  the  Mortgagee against any amounts  then  due  by  the
Mortgagor to the Mortgagee pursuant to the Mortgage.

     Section  5.7     Confession of Judgment.  For purposes of  foreclosure
under   Louisiana  executory  process  procedures,  the  Mortgagor   hereby
acknowledges the Indebtedness and confesses judgment in favor of  Mortgagee
for the full amount of the indebtedness.

     Section  5.8     Expenses.   The Mortgagor  will  pay  all  reasonable
expenses, including but not limited to reasonable attorneys' fees, incurred
in   connection  with  the  full  protection  and  preservation   of,   and
foreclosure,  collection or other realization of or on, the  Collateral  or
this  Mortgage,  or  in  connection with the  enforcement  of  any  of  the
Mortgagor's  obligations or the Mortgagee's rights and remedies  set  forth
herein, whether or not suit or any foreclosure proceedings are filed.   All
insurance  expenses  and all expenses of protecting, storing,  warehousing,
appraising,  preparing  for sale, handling, maintaining  and  shipping  the
Collateral, any and all excise, property, sales, and use taxes  imposed  by
any  federal,  state  or  local authority on any  of  the  Collateral,  all
expenses  in  respect  of  periodic  appraisals  and  inspections  of   the
Collateral to the extent the same may be requested from time to  time,  and
all  expenses in respect of the sale or other disposition thereof shall  be
borne  and  paid by the Mortgagor.  All such expenses shall be  treated  as
Payments  as provided in Section 4.23 ("Payments by Mortgagee") hereof  and
thus included in the Indebtedness secured hereby.

     Section  5.9     Keeper.   In the event the Collateral,  or  any  part
thereof,  is  seized  as an incident to an action for  the  recognition  or
enforcement  of  this  Mortgage  by executory  process,  ordinary  process,
sequestration,  writ of fieri facias or otherwise, the  Mortgagor  and  the
Mortgagee  agree that the court issuing any such order shall, if petitioned
for  by Mortgagee, direct the applicable sheriff to appoint as a keeper  of
the  Collateral, the Mortgagee or any agent designated by Mortgagee or  any
person  named  by the Mortgagee at the time such seizure is effected   This
designation  is pursuant to Louisiana Revised Statutes 9:5131 through  5135
and  9:5136 through 5140.3, as the same may be amended, and Mortgagee shall
be  entitled  to  all the rights and benefits afforded thereunder.   It  is
hereby agreed that the keeper shall be entitled to receive as compensation,
in   excess  of  its  reasonable  costs  and  expenses  incurred   in   the
administration or preservation of the Collateral, an amount equal to 3%  of
the  gross  revenues  of  the  Collateral,  which  shall  be  included   as
Indebtedness  secured  by this Mortgage.  The designation  of  keeper  made
herein  shall not be deemed to require Mortgagee to provoke the appointment
of such a keeper.

     Section  5.10    Waivers.   The  Mortgagor  waives  in  favor  of  the
Mortgagee any and all homestead exemptions and other exemptions of  seizure
or   otherwise  to  which  Mortgagor  is  or  may  be  entitled  under  the
constitution  and  statutes  of  the State  of  Louisiana  insofar  as  the
Collateral is concerned.  The Mortgagor further waives:  (a) the benefit of
appraisement  as  provided  in Louisiana Code of Civil  Procedure  Articles
2332, 2336, 2723 and 2724, and all other laws conferring the same; (b)  the
demand  and three days' delay accorded by Louisiana Code of Civil Procedure
Articles  2639  and 2721; (c) the notice of seizure required  by  Louisiana
Code  of Civil Procedure Articles 2293 and 2721; (d) the three days'  delay
provided  by Louisiana Code of Civil Procedure Articles 2331 and 2722;  and
(e)  the  benefit  of  the  other provisions of  Louisiana  Code  of  Civil
Procedure Articles 2331, 2722 and 2723, not specifically mentioned above.

     Section 5.11   Authentic Evidence.  Any and all declarations of  facts
made  by  authentic  act  before a notary public in  the  presence  of  two
witnesses  by a person declaring that such facts lie within his  knowledge,
shall  constitute  authentic evidence of such  facts  for  the  purpose  of
executory  process.   The  Mortgagor  specifically  agrees  that  such   an
affidavit by a representative of the Mortgagee as to the existence, amount,
terms  and  maturity of the Indebtedness and of a default thereunder  shall
constitute  authentic evidence of such facts for the purpose  of  executory
process.

     Section 5.12   Assemble Collateral.  For the purpose of enforcing  any
and  all  rights  and remedies under this Mortgage the  Mortgagee  may  (i)
require  the  Mortgagor to, and the Mortgagor agrees that it will,  at  its
expense  and upon the request of the Mortgagee, forthwith assemble  all  or
any  part  of  the  Collateral as directed by the  Mortgagee  and  make  it
available at a place designated by the Mortgagee which is, in its  opinion,
reasonably  convenient to the Mortgagee and the Mortgagor, whether  at  the
premises of the Mortgagor or otherwise, and Mortgagee shall be entitled  to
specific  performance of this obligation, (ii) to the extent  permitted  by
applicable  law of this or any other state, enter, with or without  process
of  law  and  without breach of the peace, any premise  where  any  of  the
Collateral  is  or may be located, and without charge or  liability  to  it
seize  and remove such Collateral from such premises, (iii) have access  to
and  use the Mortgagor's books and records relating to the Collateral,  and
(iv)  prior  to  the disposition of the Collateral, store  or  transfer  it
without  charge  in  or by means of any storage or transportation  facility
owned  or  leased  by the Mortgagor, process, repair or recondition  it  or
otherwise  prepare it for disposition in any manner and to the  extent  the
Mortgagee  deems  appropriate and, in connection with such preparation  and
disposition,  use  without  charge any trademark,  trade  name,  copyright,
patent or technical process used by the Mortgagor.

     Section  5.13   Limitation on Duty of Mortgagee.  Beyond the  exercise
of reasonable care in the custody thereof, the Mortgagee shall have no duty
a  to  any Collateral in its possession or control or in the possession  or
control of any agent or bailee or any income thereon.  The Mortgagee  shall
be  deemed  to  have  exercised reasonable  care  in  the  custody  of  the
Collateral  in  its  possession  if the Collateral  is  accorded  treatment
substantially  equal to that which it accords its own property,  and  shall
not  be  liable  or  responsible for any loss  or  damage  to  any  of  the
Collateral,  or for any diminution in the value thereof, by reason  of  the
act  or omission of any warehouseman, carrier, forwarding agency, consignee
or other agent or bailee selected by the Mortgagee in good faith.

     Section  5.14   Appointment of Agent.  At any time or times, in  order
to comply with any legal requirement in any jurisdiction, the Mortgagee may
appoint  a  bank  or trust company or one or more other Persons  with  such
power and authority as may be necessary for the effectual operation of  the
provisions hereof and may be specified in the instrument of appointment.

                                ARTICLE 6.

                               Miscellaneous

     Section  6.1    Notices.  Any notice or demand which, by provision  of
this  Mortgage,  is  required or permitted to be given  or  served  to  the
Mortgagor or the Mortgagee shall be deemed to have been sufficiently  given
and  served  for all purposes (if mailed) three calendar days  after  being
deposited, postage prepaid, in the United States Mail, or (if delivered  by
express courier) one business day after being delivered to such courier, or
(if  delivered in person) the same day as delivery, in each  case  if  made
addressed to (i) the address of such party shown on page 1 hereof  or  (ii)
Mortgagor  or  Mortgagee at such different address(es) as shall  have  been
designated  by written notice actually received by Mortgagor or  Mortgagee,
as applicable at least ten (10) days in advance of the date upon which such
change of address shall be effective under this Section 6.1.

     Section  6.2     Amendment.  Neither this Mortgage nor any  provisions
hereof  may be changed, waived, discharged or terminated orally or  in  any
manner other than by an authentic instrument in writing signed by the party
against whom enforcement of the change, waiver, discharge or termination is
sought.

     Section 6.3    Invalidity.  In the event that any one or more  of  the
provisions  contained  in  this Mortgage shall, for  any  reason,  be  held
invalid,   illegal  or  unenforceable  in  any  respect,  such  invalidity,
illegality or unenforceability shall not affect any other provision of this
Mortgage.

     Section  6.4     Waivers.  No course of dealing on  the  part  of  the
Mortgagee, its officers, employees, consultants or agents, nor any  failure
or  delay  by  the Mortgagee with respect to exercising any of its  rights,
powers or privileges under this Mortgage shall operate a waiver thereof.

     Section  6.5     Cumulative Rights.  The rights and  remedies  of  the
Mortgagee  under  this  Mortgage  and the  Collateral  Documents  shall  be
cumulative,  and  the exercise or partial exercise of  any  such  right  or
remedy shall not preclude the exercise of any other right or remedy.

     Section  6.6     Titles of Articles.  Sections and  Subsections.   All
titles or headings to articles, sections, subsections or other divisions of
this  Mortgage or the exhibits hereto are only for the convenience  of  the
parties  and  shall  not be construed to have any effect  or  meaning  with
respect  to  the  other content of such articles, sections, subsections  or
other  divisions, such other content being controlling as to the  agreement
between the parties hereto.

     Section  6.7     Singular  and  Plural.   Words  used  herein  in  the
singular,  where  the context so permits, shall be deemed  to  include  the
plural  and  vice  versa.  The definitions of words in the singular  herein
shall  apply  to  such words when used in the plural where the  context  so
permits and vice versa.

     Section   6.8     Termination.   Upon  full  and  final  payment   and
performance of the Indebtedness and the payment or redemption of the  Note,
or  upon  Mortgagee's acquisition of the Mineral Properties (other than  by
reason  of  an Event of Default hereunder), this Mortgage shall  terminate,
and the Mortgagee shall pay to the Mortgagor all amounts then remaining  in
the  possession  of the Mortgagee from collections on or  proceeds  of  the
Collateral.  Upon request of the Mortgagor, the Mortgagee shall execute and
deliver  to  the  Mortgagor  at the Mortgagor's  expense  such  termination
statements  as  the  Mortgagor  may reasonably  request  to  evidence  such
termination.

     Section  6.9     Successors  and  Assigns.   (a)   All  covenants  and
agreements  contained by or on behalf of the Mortgagor  in  this  Mortgagee
shall bind its successors and assigns and shall inure to the benefit of the
Mortgagee and its successors and assigns.

     (b)   This  Mortgage is for the benefit of the Mortgagee and for  such
other Person or Persons as may from time to time become or be the holder of
the   Note  and  the  other  Indebtedness,  and  this  Mortgage  shall   be
transferrable  and negotiable, with the same force and effect  and  to  the
same  extent  as  the Note may be transferrable, it being understood  that,
upon the transfer or assignment by the Mortgagee of the Note (to the extent
transfer  is permitted thereby), the legal holder of such Note  shall  have
all of the rights granted to the Mortgagee under this Mortgage.

     (c)   The  Mortgagor hereby recognizes and agrees that  the  Mortgagee
may,  from time to time, one or more times, transfer all or any portion  of
the  Indebtedness  to  one  or  more third parties.    Such  transfers  may
include,  but not be limited to, sales of participation interests  in  such
Indebtedness  in  favor  of  one or more third  party  lenders.   Upon  any
transfer  of  all  or any portion of the Indebtedness,  the  Mortgagee  may
transfer and deliver any or all of the Collateral to the transferree of the
Indebtedness  in  favor of such a transferee then existing  and  thereafter
arising,  and after any such transfer has taken place, the Mortgagee  shall
be fully discharged from any and all future liability and responsibility to
the   Mortgagor  with  respect  to  such  Collateral,  and  the  transferee
thereafter  shall  be vested with all the powers, rights  and  duties  with
respect to such Collateral.

     Section  6.10   Governing Law.  This Mortgage is made under and  shall
be  construed  in accordance with and governed by the laws  of  the  United
States of America and the State of Louisiana.

     Section  6.11   Certificates.  The production of mortgage, conveyance,
tax  research or other certificates is waived by consent, and the Mortgagor
and the Mortgagee agree to hold me, Notary, harmless for failure to procure
and attach same.

     Section  6.12    No  Paraph.  The notes and other written  obligations
that  comprise  a part of the Indebtedness have not been presented  to  me,
Notary, for purposes of being paraphed herewith.

     THUS  DONE  AND  PASSED  as  of the day and  in  the  month  and  year
hereinabove first written, in the presence of the undersigned witnesses who
hereunto sign their names with the Mortgagor and Mortgagee and me,  Notary,
after due reading of the whole.

WITNESSES:                      READING & BATES DEVELOPMENT CO.


______________________________  By:______________________________
Name:_________________________      Name:______________________
        (Please Print)              Title:_______________________


______________________________
Name:_________________________
        (Please Print)

                      ______________________________
                               Notary Public

                   My Commission Expires:_______________
               ______________________________, Notary Public
                  My Commission Expires:________________


     THUS  DONE  AND  PASSED  as  of the day and  in  the  month  and  year
hereinabove first written, in the presence of the undersigned witnesses who
hereunto  sign  their names with the Mortgagee and me,  Notary,  after  due
reading of the whole.

WITNESSES:                      BRITISH-BORNEO PETROLEUM, INC.


______________________________  By:______________________________
Name:_________________________      Name:______________________
        (Please Print)              Title:_______________________


______________________________
Name:_________________________
        (Please Print)


                __________________________________________
               ______________________________, Notary Public
                  My Commission Expires:________________

                                EXHIBIT "A"
                                    TO
                      MORTGAGE AND SECURITY AGREEMENT
                    BY READING & BATES DEVELOPMENT CO.
                IN FAVOR OF BRITISH-BORNEO PETROLEUM, INC.

     The Mortgagor and the Mortgagee hereby agree and affirm that the
following is an explanation of the terminology, format and information
contained in this Exhibit "A" and that this instrument shall be construed a
a whole with reference to the entirety of its provisions (including all
Exhibits).

     1.   This instrument covers the Mortgagor's entire interest in each of
          the  mineral  servitudes, mineral leases, mineral  royalties  and
          other mineral rights described in Exhibit "A", as now owned or as
          hereafter  acquired.   The  inclusion  of  the  Mortgagor's  "Net
          Revenue  Interest,"  "Working Interest" and  undivided  leasehold
          interests,  by  the listing of percentage, decimal or  fractional
          numbers  or  otherwise,  as  well  as  the  inclusion  of   depth
          limitations, spacing unit designations and agreements, well names
          and  well  arabic numbers, are in some instances for purposes  of
          certain  representations  of  the  Mortgagor  contained  in  this
          instrument  and  are  generally for  descriptive  purposes.   The
          inclusion (or the inaccuracy thereof) of this information is  not
          in  any  way a limitation or restriction on the interest  of  the
          Mortgagor  being  subjected to the lien and encumbrance  of  this
          instrument.  In the event that the Mortgagor acquires  additional
          undivided  interests in some or all of such mineral or  leasehold
          rights,   this  instrument  shall  automatically  encumber   such
          additions  or  increases  to  the Mortgagor's  interest  in  such
          mineral  or  leasehold  rights without need  of  further  act  or
          document.

     2.   References  in Exhibit "A" to instruments on file in  the  public
          records  are  made for all purposes.  Unless provided  otherwise,
          all  recording references in Exhibit "A" are to the official real
          property records of the parish or parishes in which the mortgaged
          property is located and in which records of such documents are or
          in  the  past have been customarily recorded, whether  Conveyance
          Records, Oil and Gas Records, Mineral Lease Records, Oil and  Gas
          Lease Records or other records.

     3.   A  statement herein that a certain interest described  herein  is
          subject  to  the  terms  of  certain  described  or  referred  to
          agreements,  instruments or other matters shall  not  operate  to
          subject such interest to any such agreement, instrument or  other
          matter  except  to the extent that such agreement, instrument  or
          matter is otherwise valid and presently subsisting nor shall such
          statement  be deemed to constitute a recognition by  the  parties
          hereto  that  any such agreement, instrument or other  matter  is
          valid and presently subsisting or binding against the Mortgagee.

                           PROPERTY DESCRIPTION

     1.   LEASE  OCS-G  7049.  That certain Oil and Gas Lease of  Submerged
          Lands  under  the  Outer Continental Shelf  Lands  Act  made  and
          effective as of June 1, 1984, by and between the United States of
          America,  as Lessor, and Placid Oil Company, et al., as  Lessees,
          bearing  Serial No. OCS-G 7049 covering all of Block  254,  Green
          Canyon, OCS Official Protraction Diagram, NA 15-3.

                    Working Interest         40.00000%
                    Net Revenue Interest     34.70133%

     2.   LEASE  OCS-G  8010.  That certain Oil and Gas Lease of  Submerged
          Lands  under  the  Outer Continental Shelf  Lands  Act  made  and
          effective as of July 1, 1985, by and between the United States of
          America,  as Lessor, and Placid Oil Company, et al., as  Lessees,
          bearing  Serial No. OCS-G 8010 covering all of Block  298,  Green
          Canyon, OCS Official Protraction Diagram, NA 15-3.

                    Working Interest         40.00000%
                    Net Revenue Interest     34.70133%

     3.   LEASE  OCS-G  8876.  That certain Oil and Gas Lease of  Submerged
          Lands  under  the  Outer Continental Shelf  Lands  Act  made  and
          effective as of June 1, 1987, by and between the United Stated of
          America,  as Lessor, and Hunt Petroleum Corporation, et  al.,  as
          Lessees, bearing Serial No. OCS-G 8876 covering all of Block 297,
          Green Canyon, OCS Official Protraction Diagram, NA 15-3.

                    Working Interest         40.00000%
                    Net Revenue Interest     34.66666%

     4.   LEASE  OCS-G  8005.  That certain Oil and Gas Lease of  Submerged
          Lands  under  the  Outer Continental Shelf  Lands  Act  made  and
          effective as of July 1, 1985, by and between the United Stated of
          America, as Lessor, and Amerada Hess, et al., as Lessees, bearing
          Serial  No.  OCS-G 8005 covering all of Block 253, Green  Canyon,
          OCS Official Protraction Diagram, NA 15-3.

                    Working Interest         40.00000%
                    Net Revenue Interest     33.00000%


                                EXHIBIT "B"
                                    TO
                      MORTGAGE AND SECURITY AGREEMENT
                    BY READING & BATES DEVELOPMENT CO.
                IN FAVOR OF BRITISH-BORNEO PETROLEUM, INC.


                             DEVELOPMENT PLAN



                                EXHIBIT "C"
                                    TO
                      MORTGAGE AND SECURITY AGREEMENT
                    BY READING & BATES DEVELOPMENT CO.
                IN FAVOR OF BRITISH-BORNEO PETROLEUM, INC.

     1.   Letter  of Intent dated August 19, 1997, executed by and  between
          British-Borneo  Petroleum, Inc. and Reading &  Bates  Development
          Co., as such may have been amended.

     2.   Oil  Gathering Agreement dated December 2, 1994, executed by  and
          between  EP Operating Limited Partnership, as Producer and  Manta
          Ray Gathering Systems Inc., as Gatherer.

     3.   Gas  Gathering Agreement dated December 2, 1994, executed by  and
          between  EP Operating Limited Partnership, as Producer and  Manta
          Ray Gathering Systems, Inc., as Gatherer.

     4.   That  certain Exploration, Drilling and Production Unit Agreement
          dated  June  22, 2995, executed by and between Enserch  Offshore,
          Inc.  and  Enserch Exploration, Inc., covering and pertaining  to
          Green Canyon Blocks 253, 254, 297 and 298.

     5.   That  certain Operating Agreement dated May 1, 1995, executed  by
          and   between   Enserch  Exploration,  Inc.,  Reading   &   Bates
          Development Co., et al., as amended by letters dated October  16,
          1995, October 31, 1995 and May 17, 1996.

                                EXHIBIT "D"
                                    TO
                      MORTGAGE AND SECURITY AGREEMENT
                    BY READING & BATES DEVELOPMENT CO.
                IN FAVOR OF BRITISH-BORNEO PETROLEUM, INC.

1.   WELLS:
                           WORKING        REVENUE
                           INTEREST       INTEREST

     A. OCS-G 7049 #3      40.00000%      33.70133%
     B. OCS-G 7049 #4      40.00000%      33.70133%
     C. OCS-G 7049 #4ST1   40.00000%      33.70133%
     D. OCS-G 7049 #5      40.00000%      33.70133%
     E. OCS-G 8876 #1      40.00000%      33.66666%

2.   TEMPLATE:

     That  certain  three well drilling template acquired, inter  alia,  by
     Mortgagor for use in connection with the drilling of the OCS-G 7049 #5
     Well.

NOTE: All  references  in  the Exhibit "D" made to "Working  Interest"  and
      "Revenue  Interest,"  and  to the numbers  set  forth  in  connection
      therewith, are for title warranty purposes only.


                                EXHIBIT "E"

                        R&B INTEREST IN THE LEASES

1.   LEASE  OCS-G  8005. That certain Oil and Gas Lease of Submerged  Lands
     under  the Outer Continental Shelf Lands Act made and effective as  of
     July  1, 1985, by and between the United States of America, as Lessor,
     and  Amerada Hess, et al., as Lessees, bearing Serial No.  OCS-G  8005
     covering  all  of  Block 253, Green Canyon, OCS  Official  Protraction
     Diagram, NG 15-3.

               Working Interest         40.00000%
               Net Revenue Interest     33.00000%

2.   LEASE  OCS-G  7049. That certain Oil and Gas Lease of Submerged  Lands
     under  the Outer Continental Shelf Lands Act made and effective as  of
     June  1, 1984, by and between the United States of America, as Lessor,
     and  Placid Oil Company, et al., as Lessees, bearing Serial No.  OCS-G
     7049 covering all of Block 254, Green Canyon, OCS Official Protraction
     Diagram, NG 15-3.

               Working Interest         40.00000%
               Net Revenue Interest     34.70133%

3.   LEASE  OCS-G  8876. That certain Oil and Gas Lease of Submerged  Lands
     under  the Outer Continental Shell Lands Act made and effective as  of
     June  1, 1987, by and between the United States of America, as Lessor,
     and Hunt Petroleum Corporation, et al., as Lessees, bearing Serial No.
     OCS-G  8876  covering  all of Block 297, Green  Canyon,  OCS  Official
     Protraction Diagram, NG 15-3.

               Working Interest         40.00000%
               Net Revenue Interest     33.66666%

4.   LEASE  OCS-G  8010. That certain Oil and Gas Lease of Submerged  Lands
     under  the Outer Continental Shelf Lands Act made and effective as  of
     July  1, 1985, by and between the United States of America, as Lessor,
     and  Placid Oil Company, et al., as Lessees, bearing Serial No.  OCS-G
     8010 covering all of Block 298, Green Canyon, OCS Official Protraction
     Diagram, NG 15-3.

               Working Interest         40.00000%
               Net Revenue Interest     34.70133%


     NOTE:  All  references in this Exhibit "E" made to "Working  Interest"
and  "Revenue  Interest,"  and  to  the numbers  set  forth  in  connection
therewith, are for title warranty purposes only.

                                FACT SHEET
                        Allegheny Development Plan


Location                              Green Canyon, Blocks 253, 254, 298, 297
Water Depth Range                                            2,900 - 3,250 ft

Processing                                         Pipeline spec. oil and gas
Annualized average throughput - Oil                 25,000 BOPD (27,500 Peak)
Annualized average throughput - Gas                    35 MMSCFD (45 MM Peak)
Annualized average throughput - Produced water                     8,000 BWPD
Number of Production Wells (subsea)                                    5 to 7
Production Risers                       4 in. insulated steel catenary risers
Control Umbilicals                                                          2
Well/riser Maintenance   Chemical injection, Coiled tubing for riser cleanout

Export - Oil           SCR and - 30 miles of 8" Pipeline to EW 953 (Poseidon)
                                                  or Ewing Bank 921 (Morpeth)
Export - Gas            SCR and 25 miles of 6" Pipeline to EW 873 (Discovery)
                                                  or Ewing Bank 921 (Morpeth)

SeaStar TLP
Payload (Deck/Facilities/Risers)                                  3,500 tons
Hull weight                                                       2,500 tons
Displacement                                                     11,000 tons
Tendons                                                          6 x 26 inch
Foundation                                 Independent piles for each tendon
Hull Dimensions (as Morpeth)
     Column Diameter                                                   58 ft
     Draft                                                             91 ft
     Pontoon Radius                                                   115 ft
     Pontoon Height                                                    25 ft
     Main Column Height                                               112 ft

Topsides
Dry Equipment Weight                                              1,500 tons
Deck Dimensions (two decks)                                     110 x 110 ft
Quarters                                                              18 man
Helideck                                                            Bell 412

                    Allegheny Development Cost Estimate

                              SeaStar
Key Data                      Allegheny       Comments

Data source                   In house      Derived from Morpeth data
Water depth (ft)              2950 to 3250  Dependent upon field layout
Number of wells               5 to 7        Flowline access from two sectors
First oil date:               Q3 1999       Same execution plan & contractors
                                              as Morpeth
Field life (years)            7 to 10
Hull weight (t)               2,500         Same hull assumed as Morpeth
Topside payload (t)           3,500         Payload reduced due to increased
                                              tendon lengths & riser load
Oil capacity gross (bbl/d)    27,500        Sized for 5 to 7 wells dependent
                                              on field performance
Gas capacity gross (mmsc/d)   45            GOR 1300
WI capacity gross (bbl/d)     None          No WI required
Production flowlines          4" SCR (Ins)  Move to SCR's for wt & cost
                                              saving
Oil export line diameter      8" SCR        Sized for 27,000 bopd
Gas export line diameter      6" SCR        Sized for 45 MMscfd

                              $MM

Drilling and Completion Costs

Pre-Production                23.3           Complete 3 existing wells plus
                                               1.1 mob/demob

Post-Production Startup
Drill new well                17.0           Assumed Atwood Hunter day rate
                                               of 105.000 $/d
Complete new well (SCRAMS)     7.4
Complete 4th existing well     6.0

Drilling sub total:           53.7           (1 new well, ! completion)

Facilities Costs

Engineering & PMgmt.          11.0            Broadly similar to Morpeth
Mooring system                25.5            Increased to account for
                                                deeper water
Hull                          19.0            Same hull (no design saving)
Topsides                      30.0            Smaller topsides (no WI)
Installation                  21.0            Increased water depth
Risers (production)           19.0            4" SCR's - priced on 5500 ft
                                                between well clusters (2750
                                                ft standoff)
Trees                         28.0            Increase to 5 wells & water
                                                depth increase over Morpeth
Hookup & commissioning         5.0            Topsides HUC costs in yard

Facilities sub total:        158.5

Oil export risers              6.5             SCR - 8" diameter
Oil export lines              21.0             8" diameter - 30 miles (all of
                                                 which J layed) to EW953
Gas export risers              0.0             SCR 6" diameter - paid for in
                                                 tariff to Discovery system
Gas export lines               0.0             25 miles of 6" (all of which J
                                                 layed) - paid in tariff to
                                                 Discovery system

Export lines sub total:       27.5

    Contingency:               4.0

Facilities & export
  sub total                  190.0

Drilling, Facilities &
  export total:              243.7

Future well costs:

Recompletions as needed       6.0              Costs per well, as needed

New Wells                     14.0             Costs per well, as needed