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                                                                     EXHIBIT (2)

   THIS ARRANGEMENT AGREEMENT made as of the 13th day of October, 2000.

BETWEEN:

  ULTRA PETROLEUM CORP., a corporation subsisting under the laws of the Yukon
  Territory (hereinafter called "UPC")

                                                             OF THE FIRST PART

                                    - and -

  PENDARIES PETROLEUM LTD., a corporation subsisting under the laws of the
  Province of New Brunswick (hereinafter called "PPL")

                                                            OF THE SECOND PART

   WHEREAS the parties hereto intend to carry out the transactions contemplated
herein pursuant to an arrangement under the NBBCA;

   NOW THEREFORE IN CONSIDERATION of the covenants and agreements herein
contained and other good and valuable consideration (the receipt and
sufficiency of which is hereby acknowledged), the parties hereto covenant and
agree as follows:

                                   ARTICLE 1

                                  Definitions

   1.1 In this Agreement, unless the context otherwise requires:

     (a) "Agreement" means this agreement, including the recitals and all
  Schedules to this agreement, as amended or supplemented from time to time,
  and "hereby", "hereof", "herein", "hereunder", "herewith" and similar terms
  refer to this Agreement and not to any particular provision of this
  Agreement;

     (b) "Arrangement" means the arrangement under the provisions of Section
  128 of the NBBCA set out in the Plan of Arrangement;

     (c) "Articles of Arrangement" means the articles of arrangement in
  respect of the Arrangement required by the NBBCA to be sent to the Director
  after the Final Order has been made;

     (d) "AMEX" means the American Stock Exchange;

     (e) "Business Day" means a day, other than a Saturday, Sunday or
  statutory holiday, when banks are generally open for the transaction of
  bank business in the location in which an action is to be taken hereunder;

     (f) "Canadian Securities Laws" means the applicable securities laws,
  regulations, rules and policies of each province or territory of Canada in
  which Ultra Common Shares are to be distributed pursuant to the
  Arrangement;

     (g) "Closing" means the completion of the transactions contemplated
  herein;

     (h) "Competing Transaction" means any agreement, understanding, proposal
  or offer (including without limitation a proposal or offer to PPL's
  shareholders) which is, or if accepted would be, inconsistent with or
  detrimental to the completion of the transactions contemplated herein;

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     (i) "control" means, with respect to control of a body corporate by a
  person, the holding (other than by way of security) by or on behalf of that
  person of securities of the body corporate carrying voting rights
  sufficient to elect a majority of the directors of the body corporate;

     (j) "Court" means The Court of Queen's Bench of New Brunswick;

     (k) "Director" means the Director appointed pursuant to section 184 of
  the NBBCA;

     (l) "Effective Date" means the date the Arrangement becomes effective
  under the NBBCA as determined by the certificate of arrangement issued by
  the Director pursuant to section 125(2) of the NBBCA;

     (m) "Effective Time" means 12:01 a.m. (Fredericton time) on the
  Effective Date;

     (n) "Encumbrance" includes, without limitation, any mortgage, pledge,
  assignment, charge, lien, security interest, claim, trust, royalty or
  carried, participation, net profits or other third party interest and any
  agreement, option, right or privilege (whether by law, contract or
  otherwise) capable of becoming any of the foregoing;

     (o) "Exchange Act" means the U.S. Securities Exchange Act of 1934, as
  amended;

     (p) "Expiry Date" means January 31, 2001, provided that in the event
  that the SEC has not completed its review of the Pendaries Proxy Statement
  within 60 days of the date on which the Pendaries Proxy Statement is first
  filed with the SEC, the Expiry Date shall be extended for a period of days
  beyond January 31, 2001 equal to the number of days (to a maximum of 60
  days) in excess of 60 days that elapse between the date the Pendaries Proxy
  Statement is first filed with the SEC and the date on which the SEC shall
  have completed their review of the Pendaries Proxy Statement, or such later
  date as PPL and UPC shall agree upon in writing;

     (q) "Final Order" means the order of the Court approving the
  Arrangement, as such order may be affirmed, amended or modified;

     (r) "Governmental Authority" includes any federal, provincial, municipal
  or other political subdivision government, department, commission, board,
  bureau, agency or instrumentality, domestic or foreign;

     (s) "GST" means any and all taxes payable under Part IX of the Excise
  Tax Act (Canada) as amended from time to time;

     (t) "Income Tax Act" means the Income Tax Act (Canada);

     (u) "Interim Order" means an order of the Court containing declarations
  and directions with respect to the Arrangement, as such order may be
  affirmed, amended or modified;

     (v) "Letter of Intent" means the letter of intent between UPC and PPL
  dated August 28, 2000, providing for the entering into of this Agreement;

     (w) "Material Adverse Change" means any adverse change in the financial
  condition, assets, business, operations or prospects of either Pendaries or
  Ultra, as applicable, which is material to PPL and the Pendaries
  Subsidiaries taken as a whole or to UPC and the Ultra Subsidiaries taken as
  a whole; provided, however, that the occurrence of any event that affects
  the oil and gas industry in general, including, but not limited to, changes
  in product prices, shall not be a Material Adverse Change;

     (x) "Material Adverse Effect" when used in connection with Pendaries or
  Ultra, means any effect of Material Adverse Change relating to such party;

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<PAGE>

     (y) "Misrepresentation" includes any untrue statement of a material
  fact, any omission to state a material fact that is required to be made and
  any omission to state a material fact that is necessary to be made in order
  for a statement not to be misleading;

     (z) "NBBCA" means the Business Corporations Act (New Brunswick);

     (aa) "NSA" means Netherland, Sewell & Associates, Inc., an independent
  petroleum engineering firm;

     (ab) "Ontario Securities Laws" means the applicable securities laws,
  regulations, rules and policies of the Province of Ontario;

     (ac) "Pendaries" means collectively PPL and the Pendaries Subsidiaries;

     (ad) "Pendaries Assets" means all of the assets and properties of
  Pendaries described in the Pendaries Reports;

     (ae) "Pendaries Common Shares" means the common shares in the capital of
  PPL;

     (af) "Pendaries Counsel" means collectively Stewart McKelvey Stirling
  Scales, and Jenkens & Gilchrist, or such other legal counsel as may be
  designated by Pendaries;

     (ag) "Pendaries Disclosure Statement" means the disclosure schedule
  delivered by PPL to UPC prior to the execution of this Agreement;

     (ah) "Pendaries Financial Statements" means collectively the audited
  consolidated financial statements of Pendaries for the twelve months ended
  December 31, 1999 and the unaudited consolidated financial statements of
  Pendaries for the six months ended June 30, 2000, comprised of consolidated
  balance sheets, consolidated statements of operations and retained deficit,
  and consolidated statements of cash flow and the notes thereto;

     (ai) "Pendaries Meeting" means the special meeting of the holders of
  Pendaries Common Shares, including any adjournment or postponement thereof,
  to be called in accordance with the Interim Order to consider and, if
  thought fit, approve and adopt the Arrangement;

     (aj) "Pendaries Options" means the options granted under agreements or
  otherwise to purchase or acquire shares in Pendaries which if exercised
  would result in the issuance of up to 575,500 Pendaries Common Shares, as
  set out in the Pendaries Disclosure Statement;

     (ak) "Pendaries Permitted Encumbrances" means the encumbrances and
  burdens disclosed or reflected in the Pendaries Reports, and those
  Encumbrances of a general nature generally affecting companies carrying on
  in the ordinary course of business of exploration and development of oil
  and gas or generally affecting title to oil and gas properties, or
  disclosed in the Pendaries Financial Statements;

     (al) "Pendaries Proxy Statement" means collectively the letter to
  shareholders, notice of meeting, proxy statement and form of proxy to be
  filed by PPL with the SEC and distributed to holders of Pendaries Common
  Shares in connection with the holding of the Pendaries Meeting;

     (am) "Pendaries SEC Documents" has the meaning ascribed thereto in
  subsection 4.1(u) hereof;

     (an) "Pendaries Reports" means the report of RSC evaluating the reserves
  of Pendaries and the estimated future cash flow from such reserves
  effective January 1, 2000;

     (ao) "Pendaries Subsidiaries" means collectively Sino-American, Sino-
  American Overseas Energy Corporation, a Cayman Islands corporation, and
  Pendaries Production, Inc., a Delaware corporation;

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     (ap) "person" includes any individual, partnership, firm, trust, body
  corporate, government, governmental body, agency or instrumentality,
  unincorporated body of persons or association;

     (aq) "Plan of Arrangement" means the plan of arrangement substantially
  in the form and content of Exhibit 1 hereto, as amended or supplemented
  from time to time in accordance with Article 3 hereof or at the direction
  of the Court;

     (ar) "RSC" means Ryder Scott Company, an independent petroleum
  consulting firm;

     (as) "SEC" means the United States Securities and Exchange Commission;

     (at) "Sino-American" means Sino-American Energy Corporation, a Texas
  corporation;

     (au) "Sino-American Loan Documents" means collectively the promissory
  notes, loan agreements, guarantees, security agreements and other
  instruments which have been, or may in the future be, delivered by one or
  more of PPL and the Pendaries Subsidiaries in connection with the loan
  arrangement contemplated by paragraph 13 of, and the term sheet attached
  to, the Letter of Intent;

     (av) "Sino-American Property Agreements" means collectively (i) the
  Petroleum Contract dated August 17, 1994 by and between China National
  Offshore Oil Corporation, Kerr-McGee China Petroleum Ltd. and Murphy
  Pacific Rim, Ltd. covering Block 04/36 in the Gulf of Bohai People's
  Republic of China, (ii) the Joint Operating Agreement dated effective
  October 1, 1994 by and between Kerr-McGee China Petroleum Ltd. and Murphy
  Pacific Rim, Ltd., (iii) the Novation of Joint Operating Agreement dated
  March 16, 1995 by and between Kerr-McGee China Petroleum Ltd., Murphy
  Pacific Rim, Ltd. and Setsco Resources Inc., (iv) the Petroleum Contract
  dated January 23, 1996 by and between China National Offshore Oil
  Corporation, Kerr-McGee China Petroleum Ltd. and Huffco China, LDC covering
  Block 05/36 in the Gulf of Bohai People's Republic of China, and (v) the
  Joint Operating Agreement dated June 26, 1997 by and between Kerr-McGee
  China Petroleum Ltd., Huffco China, LDC and Setsco Resources, Inc.;

       (aw) "Subsidiary" means, when used to indicate a relationship with
  another body corporate;

       (i) a body corporate which is controlled by (A) that other, or (B)
    that other and one or more bodies corporate, each of which is
    controlled by that other, or (C) two or more bodies corporate each of
    which is controlled by that other; or

       (ii) a subsidiary of a body corporate that is the other's
    subsidiary; and

     (ax) "Tax" or "Taxes" means taxes, fees, levies, duties, tariffs,
  imposts, premiums and governmental impositions or charges of any kind in
  the nature of (or similar to) taxes, payable to any federal, provincial,
  state, local or foreign taxing authority, including, without limitation,
  (i) income, capital, business, franchise, profits, gross receipts, ad
  valorem, goods and services, customs, net worth, value added, sales, use,
  service, real or personal property, special assessments, capital stock,
  license, payroll, withholding, employment, social security, workers'
  compensation, unemployment insurance or compensation, utility, severance,
  production, excise, stamp, occupation, premiums, environmental, recapture,
  windfall profits, transfer and gains taxes, fees, levies, duties, tariffs,
  imposts, premiums and governmental impositions and (ii) interest,
  penalties, additional taxes and additions to tax imposed with respect
  thereto;

     (ay) "Tax Return" means returns, reports, declarations, information
  statements, or any other document with respect to Taxes required to be
  filed with any taxing authority, whether domestic or foreign;

     (az) "Title Documents" means all contracts, leases, deeds, mortgages,
  letter of credit, licenses, concessions, permits and other instruments
  through which title to the Pendaries Assets or Ultra Assets, as the case
  may be, is derived or which relate or affect title to, or operation of, the
  Pendaries Assets or the Ultra Assets, as the case may be, and without
  limiting the generality of the foregoing, in respect of PPL shall include
  the Sino-American Property Agreements;

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     (ba) "TSE" means The Toronto Stock Exchange;

     (bb) "Ultra" means collectively UPC and the Ultra Subsidiaries;

     (bc) "Ultra Assets" means all of the assets and properties of Ultra
  described in the Ultra Reports;

     (bd) "Ultra Common Shares" means common shares in the capital of UPC as
  constituted on the date hereof;

     (be) "Ultra Counsel" means collectively Preston Lackowicz & Shier, and
  Haynes and Boone, LLP, or such other legal counsel as may be designated by
  Ultra;

     (bf) "Ultra Disclosure Statement" means the disclosure schedule
  delivered by UPC to PPL prior to the execution of this Agreement;

     (bg) "Ultra Financial Statements" means collectively the audited
  consolidated financial statements of Ultra for the twelve months ended June
  30, 1999 and for the six months ended December 31, 1999, and the unaudited
  consolidated financial statements of Ultra for the six months ended June
  30, 2000, comprised of consolidated balance sheets, consolidated statements
  of operations and deficit, consolidated statements of changes in financial
  position and the notes thereto;

     (bh) "Ultra Meeting" means the special meeting of the holders of Ultra
  Common Shares, including any adjournment or postponement thereof, to be
  called to consider and, if thought fit, approve and adopt the Arrangement;

     (bi) "Ultra Options" means the options granted and outstanding as of the
  date hereof under agreements or otherwise to purchase or acquire shares in
  UPC which if exercised would result in the issuance of 4,595,000 Common
  Shares;

     (bj) "Ultra OSC Documents" has the meaning ascribed thereto in
  subsection 4.2(u) hereof;

     (bk) "Ultra Permitted Encumbrances" means the encumbrances or burdens
  disclosed or reflected in the Ultra Reports and those Encumbrances of a
  general nature generally affecting companies carrying on in the ordinary
  course of business of exploration for development of oil and gas or
  generally affecting title to oil and gas properties or disclosed in the
  Ultra Financial Statements;

     (bl) "Ultra Proxy Solicitation Material" means collectively the letter
  to shareholders, notice of meeting, management information circular and
  form of proxy to be filed by UPC with the Ontario Securities Commission and
  the SEC and distributed to holders of Ultra Common Shares in connection
  with the holding of the Ultra Meeting;

     (bm) "Ultra Reports" means the report of NSA effective January 1, 2000
  evaluating certain reserves of Ultra and the estimated future cash flows
  from such reserves;

     (bn) "Ultra Shareholder Approval" means the affirmative vote, at the
  Ultra Shareholders Meeting, of more than 50% of the votes cast in respect
  of approval of the Arrangement;

     (bo) "Ultra Subsidiaries" means collectively Ultra Petroleum (USA) Inc.,
  a Colorado corporation, and Ultra Resources, Inc., a Wyoming corporation;

     (bp) "U.S. Securities Laws" means the United States Securities Act of
  1933, as amended, the Exchange Act, and the rules and regulations of the
  SEC thereunder.

   1.2 The following Exhibit forms part of this Agreement:

     Exhibit 1 Plan of Arrangement

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                                   ARTICLE 2

                                 Interpretation

   2.1 The division of this Agreement into Articles, Sections, subsections and
paragraphs and the insertion of headings are for convenience of reference only
and shall not affect in any way the meaning or interpretation of this
Agreement.

   2.2 Unless the contrary intention appears, references in this Agreement to
an Article, Section, subsection, paragraph, clause, subclause or schedule by
number or letter or both refer to the Article, Section, subsection, paragraph,
clause, subclause or schedule, respectively, bearing that designation in this
Agreement.

   2.3 In this Agreement, unless the contrary intention appears, words
importing the singular include the plural and vice versa and words importing
gender shall include all genders.

   2.4 In the event that the date on which any action is required to be taken
hereunder by any of the parties is not a Business Day in the place where the
action is required to be taken, such action shall be required to be taken on
the next succeeding day which is a Business Day in such place.

   2.5 References in this Agreement to any statute or sections thereof shall
include such statute as amended or substituted and any regulations promulgated
thereunder in effect as of the date hereof.

   2.6 Unless otherwise stated, all references in this Agreement to sums of
money are expressed in lawful money of Canada.

   2.7 All representations, warranties, covenants and opinions in or
contemplated by this Agreement as to the enforceability of any covenant,
agreement or document are subject to enforceability being limited by applicable
bankruptcy, insolvency, reorganization and other laws affecting creditors'
rights generally and the discretionary nature of certain remedies (including
specific performance and injunctive relief).

   2.8 Each reference herein to the knowledge of a party means, unless
otherwise specified, the knowledge of such party's senior officers following
due inquiry.

                                   ARTICLE 3

                                  Arrangement

   3.1 Subject to the terms and conditions hereof, as soon as reasonably
practicable, PPL shall apply to the Court pursuant to Section 128 of the NBBCA
for an order approving the Arrangement and in connection with such application
shall:

     (a) forthwith file, proceed and diligently process an application for an
  Interim Order under Section 128(4) of the Act providing for, among other
  things the calling and holding of the Pendaries Meeting; and

     (b) subject to obtaining the approvals as may be directed by the Court
  in the Interim Order, take the steps necessary to submit the Arrangement to
  the Court and apply for the Final Order.

   3.2 The Arrangement shall become effective on the Effective Date.

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                                   ARTICLE 4

                         Representations and Warranties

   4.1 PPL represents and warrants to UPC that:

     (a) each of PPL and the Pendaries Subsidiaries is duly organized,
  validly existing and in good standing under the laws of the jurisdiction of
  its incorporation, has the corporate power and authority to own or lease
  its property and assets and to carry on its business as now conducted by it
  and is duly qualified to carry on business in each jurisdiction in which
  the nature of its business or the property or assets owned or leased by it
  makes such qualification necessary;

     (b) PPL has all requisite power and authority to enter into this
  Agreement and all documents to be delivered pursuant hereto and, subject to
  the terms hereof, to perform its obligations hereunder and thereunder;

     (c) the execution and delivery of this Agreement and all documents to be
  delivered pursuant hereto, the performance of the terms hereof and thereof
  and the consummation of the transactions contemplated herein and therein do
  not and will not, subject to fulfillment of the conditions hereof:

       (i) result in the breach of or violate any term or provision of the
    articles, by-laws or governing documents of PPL or any of the Pendaries
    Subsidiaries, or

       (ii) conflict with, result in a breach of, constitute a default
    under, or accelerate or permit the acceleration of the performance
    required by, any agreement, instrument, licence, permit or authority to
    which PPL or any of the Pendaries Subsidiaries is a party or by which
    they are bound or to which any of their property is subject; or

       (iii) result in the creation of any material Encumbrance upon the
    Pendaries Assets other than Pendaries Permitted Encumbrances; or

       (iv) give to any person any material interest or right, including
    right of purchase, termination, cancellation or acceleration under any
    such agreement, instrument, license, permit or authority, provided that
    PPL makes no representation or warranty with respect to the rights, if
    any, which may arise in favour of third parties pursuant to the Sino-
    American Property Agreements as a result of the execution and delivery
    of this Agreement or the performance of the terms hereof or the
    consummation of the transactions contemplated hereby;

       (v) violate any provision of law or administrative regulation or any
    judicial or administrative order, award, judgment or decree applicable
    to any of PPL, the Pendaries Subsidiaries, the Pendaries Common Shares
    or the Pendaries Assets; or

       (vi) require any consent, approval, authorization or permit of, or
    filing with or notification to, any Governmental Authority or any
    parties to the Title Documents relating to the Pendaries Assets, except
    (A) pursuant to U.S. Securities Laws, (B) the Interim Order and the
    Final Order, or (C) where the failure to obtain such consent, approval,
    authorization or permit, or to make such filing or notification, would
    not in the aggregate have a Material Adverse Effect on Pendaries or
    prevent, materially hinder, or materially make more burdensome the
    consummation of the transactions contemplated by this Agreement, or (D)
    such filings and approvals as may be required under the "blue sky",
    takeover or securities laws of various states.

     (d) this Agreement has been duly authorized, executed and delivered by
  PPL and this Agreement does constitute valid, legal and binding obligations
  of PPL enforceable in accordance with its terms;

     (e) PPL has not taken any action, directly or indirectly, with the
  intention of adversely affecting the approval of the Arrangement or the
  completion of the transactions contemplated hereby;

     (f) other than as disclosed in writing to UPC at or prior to the date
  hereof or as disclosed in the Pendaries Financial Statements, there are no
  actions, claims, suits, other legal, administrative or arbitration

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<PAGE>

  proceedings or government investigations commenced, or to the knowledge of
  Pendaries contemplated, at law or in equity or before or by any court or
  other Governmental Authority and which involve or affect Pendaries,
  including, without limitation, the title to, or ownership of, the Pendaries
  Assets, and none of PPL or any of the Pendaries Subsidiaries is subject to
  any outstanding order, writ, injunction or decree having, or which could
  reasonably be foreseen to have, a Material Adverse Effect on Pendaries;

     (g) the authorized capital of PPL consists of an unlimited number of
  Pendaries Common Shares, of which 9,225,970 Pendaries Common Shares are
  issued and outstanding as of the date hereof and all such issued and
  outstanding Pendaries Common Shares are fully paid and non-assessable as of
  the date hereof;

     (h) the Pendaries Disclosure Statement sets forth the name, the number
  of shares of authorized capital stock and the number of issued and
  outstanding shares of capital stock of each direct or indirect Subsidiary
  of PPL. Except as set forth in the Pendaries Disclosure Statement, all of
  the outstanding shares of capital stock of each such Subsidiary are owned,
  directly or indirectly, by PPL, beneficially and of record. Except as
  disclosed in the Pendaries Disclosure Schedule, all of such shares of
  capital stock of the Pendaries Subsidiaries are owned free and clear of any
  Encumbrances, and are not subject to any agreements or understandings among
  any persons with respect to the voting or transfer of such shares. There
  are no outstanding subscriptions, options, convertible securities, warrants
  or claims of any kind issued or granted by or binding on Pendaries to
  purchase or otherwise acquire any security of or equity interest in any of
  such Pendaries Subsidiaries. All of the outstanding shares of capital stock
  of each Pendaries Subsidiary have been duly authorized and validly issued
  and are fully paid and non-assessable, and none has been issued in
  violation of the preemptive rights of any stockholder;

     (i) PPL has no agreements of any nature to acquire any Subsidiary other
  than the Pendaries Subsidiaries, or to acquire or lease any other business
  operations out of the ordinary course and is not a party to or bound by any
  agreement of guarantee, indemnification, assumption endorsement or similar
  commitment in respect of the obligations, liabilities (contingent or
  otherwise) or indebtedness of any other person, firm or corporation other
  than pursuant to agreements which are standard or customary in the oil and
  gas industry;

     (j) other than the Pendaries Options, no person has any agreement,
  option, right or privilege (including, without limitation, whether by law,
  preemptive right, contract or otherwise) to purchase, subscribe for,
  convert into, exchange for or otherwise require the issuance of any of the
  unissued shares of PPL or of any of the Pendaries Subsidiaries;

     (k) since December 31, 1999, PPL has:

       (i) not amended its articles, by-laws or other governing documents
    and there are no resolutions, special resolutions or other proceedings
    pending for any amendment thereto except as may be desirable in respect
    of the transactions contemplated by this Agreement;

       (ii) not declared, paid or set aside for payment any dividends
    whether by cash, shares or otherwise or made or authorized or proposed
    other distributions of any kind and no repayments of capital have been
    made by PPL (other than repayments of indebtedness at or below the
    amount at which such indebtedness is shown on the Pendaries Financial
    Statements) since December 31, 1999 nor reduced its stated capital in
    any manner or purchased, acquired, cancelled or redeemed or agreed to
    purchase, acquire, cancel or redeem any of its outstanding shares other
    than as contemplated by this Agreement;

     (l) since December 31, 1999, other than as has been publicly disclosed
  by PPL or set out in the Pendaries Disclosure Statement, Pendaries has:

       (i) conducted its business in all material respects in the ordinary
    course;

       (ii) not suffered any Material Adverse Change;

                                       8
<PAGE>

       (iii) not made any change in its accounting principles and practices
    as theretofore applied including, without limitation, the basis upon
    which its assets and liabilities are recorded on its books and its
    earnings and profits and losses are ascertained; and

       (iv) maintained in effect salary and other compensation levels in
    accordance with its then existing salary administration programme and
    has not authorized or paid or agreed to pay any bonus or similar
    payment to any officer or director or person providing to Pendaries
    services similar in nature to employment services or made any material
    change in respect of employment or contract terms, as the case may be,
    of any such officer, director or person and Pendaries is not presently
    indebted to any of its present or former shareholders, directors or
    officers in any material respect except as set forth in the Pendaries
    Financial Statements or as disclosed in writing to UPC at or prior to
    the date hereof;

     (m) the Pendaries Financial Statements have been prepared in accordance
  with generally accepted accounting principles applicable in Canada applied
  on a basis consistent with that of prior periods (except as stated therein)
  and present fairly the financial position of Pendaries as of the date
  provided therein and the results of its operations and the changes in
  financial position for the periods then ended and in all material respects
  all accounts receivable included in the Pendaries Financial Statements, as
  except to the extent collected since the date hereof, are bona fide,
  collectible and not subject to set-off or counterclaim;

     (n) Pendaries has duly and timely filed, in proper form, correct and
  complete Tax Returns in respect of Taxes under all applicable federal,
  provincial, state or local Tax legislation of Canada or any foreign country
  having jurisdiction over Pendaries, for all prior periods in respect of
  which such filings have heretofore been required, and all Taxes shown
  thereon and all Taxes owing with respect to the current period and any
  previous period have been paid or accrued on the books of Pendaries and
  there are no outstanding agreements or waivers extending the statutory
  period of limitations applicable to any Tax Return for any period, and all
  payments by Pendaries to any non-resident of Canada have been made in
  accordance with all applicable legislation in respect of withholding tax;
  Pendaries is not aware of any contingent Tax liabilities or any grounds for
  reassessment; there are no assessments or reassessments respecting
  Pendaries pursuant to which there are amounts owing or discussions in
  respect thereof with any taxing authority other than as disclosed in
  writing to UPC at or prior to the date hereof; Pendaries has not acquired
  property from, or disposed of property to, any Person with whom it does not
  deal at arm's length (as that term is construed under the Income Tax Act)
  for proceeds less than the fair market value thereof; Pendaries has no
  outstanding loans or indebtedness incurred by directors, former directors,
  officers, shareholders and/or employees or by any Person not dealing at
  arm's length (as that term is construed under the Income Tax Act) with any
  of the foregoing; there are no circumstances existing which could result in
  the application of section 78, section 79, or sections 80 to 80.04 of the
  Income Tax Act or any equivalent provincial provision, to Pendaries;
  Pendaries has not claimed nor will claim any reserve under any provision of
  the Income Tax Act or any equivalent provincial provision, if any such
  amount could be included in the income of Pendaries for any period ending
  after the date hereof; Pendaries has withheld from each payment made to any
  of its officers, directors, former directors, former employees and
  employees the amount of all Taxes and other deductions required to be
  withheld therefrom and has paid the same to the proper tax or other
  authority within the time required under any applicable Tax legislation;
  Pendaries has remitted to the appropriate tax authority when required by
  law to do so all amounts collected by it on account of the GST; and
  Pendaries is a "taxable Canadian Corporation" for the purposes of the
  Income Tax Act;

     (o) all filings made by Pendaries under which Pendaries has received or
  is entitled to government incentives, have been made in accordance, in all
  material respects, with all applicable legislation and contain no
  misrepresentations of material fact or omit to state any material fact
  which could cause any amount previously paid to Pendaries or previously
  accrued on the accounts of Pendaries to be recovered or disallowed;

     (p) other than as disclosed in writing to UPC at or prior to the date
  hereof, Pendaries is not a party to any written contracts of any nature,
  including but not limited to, employment or material consulting

                                       9
<PAGE>

  agreements or collective bargaining agreements and there are no currently
  existing employment benefit plans, arrangements or agreements of a material
  nature, service contracts, leases and rental agreements that are in excess
  of $20,000 remaining on the term of the said contract and to which
  Pendaries is a party or by which it is bound;

     (q) PPL does not make any representations or warranties, express or
  implied, as to Pendaries' title to the Pendaries Assets, but does represent
  and warrant that:

       (i) the Pendaries Assets are free and clear of Encumbrances created
    by, through or under Pendaries, excepting only the Pendaries Permitted
    Encumbrances;

       (ii) the concessions, petroleum contracts, deeds of assignments,
    permits, licenses and other contracts necessary or appropriate to
    operate the Pendaries Assets are, to the best of PPL's knowledge,
    currently being operated, or anticipated to be operated, in full
    compliance with all applicable laws, rules, regulations and orders of
    all federal, state and local governmental bodies, authorities and
    agencies and in conformity in all material respects for the provisions
    of the concessions, petroleum contracts and other contracts; and

       (iii) the concessions, petroleum contracts and other contracts are
    in force and effect, except for such failures as would not,
    individually or in the aggregate, have a Material Adverse Effect on the
    value or operation of the Pendaries Assets, taken as a whole;

       (iv) Pendaries is not in default, nor has Pendaries been informed of
    any alleged default or received any notice of default, affecting or
    capable of affecting the Pendaries Assets, or any of them, in an
    adverse manner;

       (v) except as disclosed or reflected in the Pendaries Reports,
    Pendaries' interests in the Pendaries Assets are not subject to
    reduction by rights of conversion or other alteration or election in
    favor of a third party, created by, through or under Pendaries;

       (vi) all rentals, royalties, taxes and other payments due under each
    of the concessions, petroleum contracts and other contracts have been
    timely and fully paid, except for such amounts that are being held in
    suspense as a result of title issues and that do not provide any third
    party with a right to cancel such contracts and such amounts as would
    not, individually or in aggregate, have a Material Adverse Effect on
    Pendaries; and

       (vii) the estimates of Pendaries' oil and gas reserves set out in
    the Pendaries Reports were prepared in accordance with standard
    geological and engineering methods generally accepted in the oil and
    gas industry. The working interest, net revenue interest and historical
    factual information supplied by Pendaries to RSC in connection with the
    preparation of the Pendaries Reports did not contain a
    Misrepresentation. The oil and gas prices utilized in the Pendaries
    Reports are not intended to be representative of historical or
    prevailing prices existing as of the effective date or actual date of
    the Pendaries Reports;

     (r) other than as disclosed in writing to UPC at or prior to the date
  hereof, to the best of the knowledge of Pendaries, Pendaries is not in
  material violation of any applicable federal, provincial, municipal or
  local laws, regulations, orders, government decrees or ordinances with
  respect to environmental, health or safety matters (collectively
  "Environmental Laws") and, for greater certainty and without limiting the
  generality of the foregoing, but subject to the foregoing qualifications:

       (i) Pendaries has operated its business at all times and has
    received, handled, used, stored, treated, shipped and disposed of all
    contaminants in strict compliance with all Environmental Laws;

       (ii) there have been no unrectified spills, releases, deposits or
    discharges of hazardous or toxic substances, contaminants or wastes on
    any of the real property owned or leased by Pendaries or under its
    respective control, nor to the best of PPL's knowledge has any such
    real property been used at any time by any person as a landfill or
    waste disposal site;

                                       10
<PAGE>

       (iii) there have been no releases, deposits or discharges, in
    violation of Environmental Laws, of any hazardous or toxic substances,
    contaminants or wastes into the earth, air or into any body of water or
    any municipal or other sewer or drain water systems by Pendaries;

       (iv) no orders, directions or notices have been issued and remain
    outstanding pursuant to any Environmental Laws relating to the business
    or assets of Pendaries;

       (v) Pendaries has not failed to report to the proper Governmental
    Authority the occurrence of any event which is required to be so
    reported by any Environmental Laws; and

       (vi) Pendaries holds all licences, permits and approvals required
    under any Environmental Laws in connection with the operation of its
    business and the ownership and use of its assets, all such licences,
    permits and approvals are in full force and effect, and Pendaries has
    not received any notification pursuant to any Environmental Laws that
    any work, repairs, construction or capital expenditures are required to
    be made by it as a condition of continued compliance with any
    Environmental Laws, or any licence, permit or approval issued pursuant
    thereto, or that any licence, permit or approval referred to above is
    about to be reviewed, made subject to limitation or conditions,
    revoked, withdrawn or terminated;

     (s) PPL is a reporting issuer or the equivalent in the Provinces of
  British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, Nova
  Scotia and Newfoundland, and has not been notified of any default of any
  requirement of any applicable securities legislation, regulations, orders,
  notices or policies;

     (t) PPL is current with respect to all filings required by the TSE and
  the AMEX and the Pendaries Common Shares which are issued and outstanding
  as of the date hereof are listed and posted for trading on the TSE and the
  AMEX and are not subject to any cease trading or trading suspension order;

     (u) PPL has furnished UPC with a true and complete copy of each report,
  schedule, registration statement and definitive proxy statement (including
  exhibits) filed by PPL with the SEC since December 31, 1998 (the "Pendaries
  SEC Documents"), which are all the documents (other than preliminary
  material) that PPL was required to file with the SEC since such date,
  except where the failure to file any such documents would not cause PPL to
  be in material noncompliance with U.S. Securities Laws. As of their
  respective dates, (i) the Pendaries SEC Documents complied in all material
  respects with the requirements of the U.S. Securities Laws applicable to
  such Pendaries SEC Documents and (ii) none of the Pendaries SEC Documents
  contained any Misrepresentation. Except to the extent information contained
  in any Pendaries SEC Document has been revised or superseded by a later-
  filed Pendaries SEC Document, none of the Pendaries SEC Documents currently
  contains any Misrepresentation;

     (v) as of the respective dates of the Pendaries SEC Documents, (i) the
  financial statements of PPL included in the SEC Documents complied as to
  form in all material respects with applicable accounting requirements and
  the published results and regulations of the SEC with respect thereto, (ii)
  were prepared in all material respects in accordance with Canadian
  generally accepted accounting principles applied on a consistent basis
  during the periods involved (except as noted therein or as may be permitted
  by the rules of the SEC) and (iii) fairly presented in all material
  respects the consolidated financial position of PPL and the Pendaries
  Subsidiaries as of the dates thereof and the consolidated results of their
  operations and changes in financial position for the periods then ended
  (subject, in the case of any unaudited interim financial statements, to
  normal year-end adjustments, none of which are or were material);

     (w) the Pendaries Proxy Statement will be distributed in accordance with
  and will comply as to form in all material respects with U.S. Securities
  Laws and, if applicable, will include the information required by Rule 13e-
  3 of the Exchange Act, and PPL will otherwise comply with Rule 13e-3. None
  of the information relating to PPL and the Pendaries Subsidiaries included
  in the Pendaries Proxy Statement shall, at the time the Pendaries Proxy
  Statement is mailed or at the time of the Pendaries Meeting, contain any
  Misrepresentation, except that no representation is being made by PPL with
  respect to information supplied or approved in writing by UPC or any
  affiliate of UPC specifically for inclusion in the Pendaries Proxy
  Statement;

                                       11
<PAGE>

     (x) as of the date hereof, no "person" as defined in Section 801.1(a)(1)
  of the Rules, Regulations, Statements and Interpretations (in this
  paragraph the "HSR Rules") under the Hart-Scott-Rodino Anti-Trust
  Improvements Act of 1976 (16 CFR 801 et.seq.) in which PPL is included has
  annual net sales of $100,000,000 or more or total assets of $100,000,000 or
  more, as determined in accordance with Section 801.11 of the HSR Rules;

     (y) all information furnished by PPL for inclusion in the Ultra Proxy
  Solicitation Material is or will be, as of the earlier of the date it
  purports to be given at and the date of the Ultra Proxy Solicitation
  Material, true and complete in all material respects and contains no
  Misrepresentations; and

     (z) the board of directors of PPL has (A) determined unanimously that as
  of the date hereof that the Arrangement is fair to the holders of Pendaries
  Common Shares and is in the best interests of PPL; and (B) determined as of
  the date hereof to unanimously recommend that the holders of Pendaries
  Common Shares vote in favour of the Arrangement.

   4.1.1 PPL makes no representations or warranties to UPC in addition to those
expressly enumerated in subsection 4.1. Except and to the extent provided in
subsection 4.1, PPL does not warrant title to the Pendaries Assets or make
representations or warranties with respect to: (i) the quantity, quality or
recoverability of petroleum substances respecting the Pendaries Assets; (ii)
any estimates of the value of the Pendaries Assets or the revenues applicable
to future production from the Pendaries Assets; (iii) any engineering,
geological or other interpretations or economic evaluations respecting the
Pendaries Assets; (iv) the rates of production of petroleum substances from the
Pendaries Assets; (v) the quality, condition or serviceability of the Pendaries
Assets; or (vi) the suitability of their use for any purpose. Without
restricting the generality of the foregoing, but subject always to the
provisions herein, UPC acknowledges that it has made its own independent
investigation, analysis, evaluation and inspection of the interests of PPL in
the Pendaries Assets and the state and condition thereof and that it has relied
solely on such investigation, analysis, evaluation and inspection as to its
assessment of the condition, quantum and value of the Pendaries Assets.

   4.1.2 Except with respect to the representations and warranties in
subsection 4.1 or in the event of fraud, UPC forever releases and discharges
PPL and its directors, officers, servants, agents and employees from any claims
and all liability to UPC or UPC's assigns and successors, as a result of the
use or reliance upon advice, information or materials pertaining to the
Pendaries Assets which was delivered or made available to UPC by Pendaries or
its directors, officers, servants, agents or employees prior to or pursuant to
this Agreement, including, without limitation, any evaluations, projections,
reports and interpretive or non-factual materials prepared by or for Pendaries,
or otherwise in Pendaries' possession.

   4.2 UPC represents and warrants to PPL that:

     (a) each of UPC and the Ultra Subsidiaries is duly organized, validly
  existing and in good standing under the laws of the jurisdiction of its
  incorporation, has the corporate power and authority to own or lease its
  property and assets and to carry on its business as now conducted by it and
  is duly qualified to carry on business in each jurisdiction in which the
  nature of its business or property or assets owned or leased by it makes
  such qualification necessary;

     (b) UPC has all requisite power and authority to enter into this
  Agreement and all documents to be delivered pursuant hereto and, subject to
  the terms hereof, to perform its obligations hereunder and thereunder;

     (c) the execution and delivery of this Agreement and all documents to be
  delivered pursuant hereto, the performance of the terms hereof and thereof
  and the consummation of the transactions contemplated herein and therein do
  not and will not subject to fulfillment of the conditions hereof:

       (i) result in the breach of or violate any term or provision of the
    articles, by-laws or governing documents of UPC or any of the Ultra
    Subsidiaries; or

       (ii) conflict with, result in a breach of, constitute a default
    under, or accelerate or permit the acceleration of the performance
    required by, any agreement, instrument, licence, permit or authority

                                       12
<PAGE>

    to which UPC or any of the Ultra Subsidiaries is a party or by which
    any of them is bound or to which their property is subject; or

       (iii) result in the creation of any material Encumbrance upon the
    Ultra Assets other than Ultra Permitted Encumbrances; or

       (iv) give to any person any material interest or right, including
    right of purchase, termination, cancellation or acceleration under any
    such agreement, instrument, license, permit or authority;

       (v) violate any provision of law or administrative regulation or any
    judicial or administrative order, award, judgment or decree applicable
    to any of UPC, the Ultra Subsidiaries, the Ultra Common Shares or the
    Ultra Assets; or

       (vi) require any consent, approval, authorization or permit of, or
    filing with or notification to, any Governmental Authority or any
    parties to the Title Documents relating to the Ultra Assets, except (A)
    pursuant to Canadian Securities Laws and U.S. Securities Laws, (B) the
    Interim Order and the Final Order, (C) the approval of the TSE, (D)
    where the failure to obtain such consent, approval, authorization or
    permit, or to make such filing or notification, would not in the
    aggregate have a Material Adverse Effect on Pendaries or prevent,
    materially hinder, or materially make more burdensome the consummation
    of the transactions contemplated by this Agreement, or (E) such filings
    and approvals as may be required under the "blue sky", takeover or
    securities laws of various states.

     (d) this Agreement has been duly authorized, executed and delivered by
  UPC and this Agreement does constitute valid, legal and binding obligations
  of UPC enforceable in accordance with its terms; the execution and delivery
  of this Agreement by UPC and the performance by UPC of the transactions
  contemplated by this Agreement have been duly authorized by its Board of
  Directors and, subject to receipt of Ultra Shareholder Approval, no other
  corporate proceedings on its part are necessary to authorize this Agreement
  or the transactions contemplated hereby;

     (e) UPC has not taken any action, directly or indirectly, with the
  intention of adversely affecting the approval of the Arrangement or the
  completion of the transactions contemplated hereby;

     (f) other than as disclosed in writing to PPL at or prior to the date
  hereof or as disclosed in the Ultra Financial Statements, there are no
  actions, claims, suits, other legal, administrative or arbitration
  proceedings or government investigations commenced, or to the knowledge of
  UPC contemplated, at law or in equity or before or by any court or other
  Governmental Authority and which involve or affect UPC, including, without
  limitation, the title to, or ownership of, the Ultra Assets, and none of
  UPC or any of the Ultra Subsidiaries is subject to any outstanding order,
  writ, injunction or decree having, or which could reasonably be foreseen to
  have, a Material Adverse Effect on Ultra;

     (g) the authorized share capital of UPC consists of an unlimited number
  of Ultra Common Shares, of which 56,944,762 Ultra Common Shares are issued
  and outstanding as of the date hereof and all such issued and outstanding
  Ultra Common Shares are fully paid and non-assessable as of the date
  hereof;

     (h) the Ultra Disclosure Statement sets forth the name, the number of
  shares of authorized capital stock and the number of issued and outstanding
  shares of capital stock of each direct or indirect Subsidiary of UPC.
  Except as set forth in the Ultra Disclosure Statement, all of the
  outstanding shares of capital stock of each such Subsidiary are owned,
  directly or indirectly, by UPC, beneficially and of record. Except as
  disclosed in the Ultra Disclosure Schedule, all of such shares of capital
  stock of the Ultra Subsidiaries are owned free and clear of any
  Encumbrances, and are not subject to any agreements or understandings among
  any persons with respect to the voting or transfer of such shares. There
  are no outstanding subscriptions, options, convertible securities, warrants
  or claims of any kind issued or granted by or binding on Ultra to purchase
  or otherwise acquire any security of or equity interest in any of such
  Ultra Subsidiaries. All of the outstanding shares of capital stock of each
  Ultra Subsidiary have been duly authorized and validly issued and are fully
  paid and non-assessable, and none has been issued in violation of the
  preemptive rights of any stockholder;

                                       13
<PAGE>

     (i) as of the date hereof, UPC has no agreements of any nature to
  acquire any Subsidiary other than the Ultra Subsidiaries, or to acquire or
  lease any other business operations out of the ordinary course and is not a
  party to or bound by any agreement of guarantee, indemnification,
  assumption endorsement or similar commitment in respect of the obligations,
  liabilities (contingent or otherwise) or indebtedness of any other person,
  firm or corporation other than pursuant to agreements which are standard or
  customary in the oil and gas industry;

     (j) the Ultra Common Shares to be issued pursuant to the Arrangement
  will, upon issuance, be duly and validly issued as fully paid and non-
  assessable shares of UPC;

     (k) other than the Ultra Options and rights to acquire Ultra Common
  Shares which may be granted after the date hereof pursuant to the 2000
  Share Incentive Plan of UPC, no person has any agreement, option, right or
  privilege (including, without limitation, whether by law, preemptive right,
  contract or otherwise) to purchase, subscribe for, convert into, exchange
  for or otherwise require the issuance of any of the unissued shares of UPC
  or any of the Ultra Subsidiaries;

     (l) since December 31, 1999:

       (i) except as disclosed to PPL, UPC has not amended its articles,
    by-laws or other governing documents, and there are no resolutions,
    special resolutions or other proceedings pending for any amendment
    except as may be desirable in respect of the transactions contemplated
    by this Agreement;

       (ii) except as disclosed to PPL, UPC has not declared, paid or set
    aside for payment any dividends whether by cash, shares or otherwise or
    made, authorized or proposed other distributions of any kind, and no
    repayments of capital have been made by UPC (other than repayment of
    indebtedness at or below the amount at which such indebtedness is shown
    on the Ultra Financial Statements) since December 31, 1999, nor reduced
    its stated capital in any manner or purchased, acquired, cancelled or
    redeemed or agreed to purchase, acquire, cancel or redeem any of its
    outstanding shares;

     (m) since December 31, 1999, other than as has been publicly disclosed
  by UPC or set out in the Ultra Disclosure Statement, Ultra has:

       (i) conducted its business in all material respects in the ordinary
    course;

       (ii) not suffered any Material Adverse Change; and

       (iii) not made any change in its accounting principles and practices
    as theretofore applied including, without limitation, the basis upon
    which its assets and liabilities are recorded on its books and its
    earnings and profits and losses are ascertained;

     (n) the Ultra Financial Statements have been prepared in accordance with
  generally accepted accounting principles applicable in Canada applied on a
  basis consistent with that of prior periods (except as stated therein) and
  present fairly the financial position of UPC as of the date provided
  therein and the results of its operations and the changes in financial
  position for the periods then ended and in all material respects all
  accounts receivable included in the Ultra Financial Statements, except to
  the extent collected since the date thereof; are bona fide, collectible and
  not subject to set-off or counterclaim;

     (o) Ultra has duly and timely filed, in proper form, correct and
  complete Tax Returns in respect of Taxes under all applicable federal,
  provincial, state or local Tax legislation of Canada or any foreign country
  having jurisdiction over Ultra, for all prior periods in respect of which
  such filings have heretofore been required, and all Taxes shown thereon and
  all Taxes owing with respect to the current period and any previous period
  have been paid or accrued on the books of Ultra and there are no
  outstanding agreements or waivers extending the statutory period of
  limitations applicable to any Tax Return for any period, and all payments
  by Ultra to any non-resident of Canada have been made in accordance with
  all applicable legislation in respect of withholding tax; Ultra is not
  aware of any contingent Tax liabilities or any grounds for reassessment;
  there are no assessments or reassessments respecting Ultra pursuant to
  which there are amounts owing or discussions in respect thereof with any
  taxing authority other than as disclosed

                                       14
<PAGE>

  in writing to UPC at or prior to the date hereof; Ultra has not acquired
  property from, or disposed of property to, any Person with whom it does not
  deal at arm's length (as that term is construed under the Income Tax Act)
  for proceeds less than the fair market value thereof; Ultra has no
  outstanding loans or indebtedness incurred by directors, former directors,
  officers, shareholders and/or employees or by any Person not dealing at
  arm's length (as that term is construed under the Income Tax Act) with any
  of the foregoing; there are no circumstances existing which could result in
  the application of section 78, section 79, or sections 80 to 80.04 of the
  Income Tax Act or any equivalent provincial provision, to Ultra; Ultra has
  not claimed nor will claim any reserve under any provision of the Income
  Tax Act or any equivalent provincial provision, if any such amount could be
  included in the income of Ultra for any period ending after the date
  hereof; Ultra has withheld from each payment made to any of its officers,
  directors, former directors, former employees and employees the amount of
  all Taxes and other deductions required to be withheld therefrom and has
  paid the same to the proper tax or other authority within the time required
  under any applicable Tax legislation; Ultra has remitted to the appropriate
  tax authority when required by law to do so all amounts collected by it on
  account of the GST; and Ultra is a "taxable Canadian Corporation" for the
  purposes of the Income Tax Act;

     (p) all filings made by Ultra under which it has received or is entitled
  to government incentives, have been made in accordance, in all material
  respects, with all applicable legislation and contain no misrepresentations
  of material fact or omit to state any material fact which could cause any
  amount previously paid to Ultra or previously accrued on the accounts of
  Ultra to be recovered or disallowed;

     (q) UPC does not make any representations or warranties, express or
  implied, as to Ultra's title to the Ultra Assets, but does represent and
  warrant that:

       (i) the Ultra Assets are free and clear of Encumbrances created by,
    through or under Ultra, excepting only the Ultra Permitted
    Encumbrances;

       (ii) the leases, rights-of-ways, surface agreements, easements,
    servitudes, permits, licenses and other contracts necessary or
    appropriate to operate the Ultra Assets (in this subsection the "Ultra
    Leases") are, to the best of UPC's knowledge, currently being operated,
    or anticipated to be operated, in full compliance with all applicable
    laws, rules, regulations and orders of all federal, state and local
    governmental bodies, authorities and agencies and in conformity in all
    material respects for the provisions of the leases; and

       (iii) the Ultra Leases are in force and effect, except for such
    failures as would not, individually or in the aggregate, have a
    Material Adverse Effect on the value or operation of the Ultra Assets,
    taken as a whole;

       (iv) Ultra is not in default, nor has Ultra been informed of any
    alleged default or received any notice of default, affecting or capable
    of affecting the Ultra Assets, or any of them, in an adverse manner;

       (v) except as disclosed or reflected in the Ultra Reports, Ultra's
    interests in the Ultra Assets are not subject to reduction by rights of
    conversion or other alteration or election in favor of a third party,
    created by, through or under Ultra;

       (vi) all rentals, royalties, taxes and other payments due under each
    of the Ultra Leases have been timely and fully paid, except for such
    amounts that are being held in suspense as a result of title issues and
    that do not provide any third party with a right to cancel such Ultra
    Leases and such amounts as would not, individually or in aggregate,
    have a Material Adverse Effect on Ultra; and

       (vii) the estimates of Ultra's oil and gas reserves set out in the
    Ultra Reports were prepared in accordance with standard geological and
    engineering methods generally accepted in the oil and gas industry. The
    working interest, net revenue interest and historical factual
    information supplied by Ultra to NSA in connection with the preparation
    of the Ultra Reports did not contain a Misrepresentation. The oil and
    gas prices utilized in the Ultra Reports are not intended to be
    representative of historical or prevailing prices existing as of the
    effective date or actual date of the Ultra Reports;

                                       15
<PAGE>

     (r) other than as disclosed in writing to PPL at or prior to the date
  hereof, to the best of the knowledge of Ultra, Ultra is not in material
  violation of any applicable Environmental Laws and, for greater certainty
  and without limiting the generality of the foregoing, but subject to the
  foregoing qualifications:

       (i) Ultra has operated its business at all times and has received,
    handled, used, stored, treated, shipped and disposed of all
    contaminants in strict compliance with all Environmental Laws;

       (ii) there have been no unrectified spills, releases, deposits or
    discharges of hazardous or toxic substances, contaminants or wastes on
    any of the real property owned or leased by Ultra or under its
    respective control, nor to the best of UPC's knowledge has any such
    real property been used at any time by any person as a landfill or
    waste disposal site;

       (iii) there have been no releases, deposits or discharges, in
    violation of Environmental Laws, of any hazardous or toxic substances,
    contaminants or wastes into the earth, air or into any body of water or
    any municipal or other sewer or drain water systems by Ultra;

       (iv) no orders, directions or notices have been issued and remain
    outstanding pursuant to any Environmental Laws relating to the business
    or assets of Ultra;

       (v) Ultra has not failed to report to the proper Governmental
    Authority the occurrence of any event which is required to be so
    reported by any Environmental Laws; and

       (vi) Ultra holds all licences, permits and approvals required under
    any Environmental Laws in connection with the operation of its business
    and the ownership and use of its assets, all such licences, permits and
    approvals are in full force and effect, and Ultra has not received any
    notification pursuant to any Environmental Laws that any work, repairs,
    construction or capital expenditures are required to be made by it as a
    condition of continued compliance with any Environmental Laws, or any
    licence, permit or approval issued pursuant thereto, or that any
    licence, permit or approval referred to above is about to be reviewed,
    made subject to limitation or conditions, revoked, withdrawn or
    terminated;

     (s) Ultra has made available to NSA, prior to the issuance of the Ultra
  Reports, all information material to an adequate determination of its oil
  and gas reserves and non-reserve lands, none of such information contained
  a Misrepresentation and UPC has no knowledge of any material adverse change
  to the oil and gas reserves or non-reserve lands of Ultra since the
  effective date of the Ultra Reports; and

     (t) UPC is current with respect to all filings required by the TSE, and
  the Ultra Common Shares which are issued and outstanding as of the date
  hereof are listed and posted for trading on the TSE and are not subject to
  any cease trading or trading suspension order;

     (u) UPC has furnished PPL with a true and complete copy of each report
  (including exhibits) filed by UPC with the Ontario Securities Commission
  since June 30, 1998 (the "Ultra OSC Documents"), which are all the
  documents (other than preliminary material) that UPC was required to file
  with the Ontario Securities Commission since such date, except where the
  failure to file any such documents would not cause UPC to be in material
  noncompliance with Ontario Securities Laws. As of their respective dates,
  (i) the Ultra OSC Documents complied in all material respects with the
  requirements of the Ontario Securities Laws applicable to such Ultra OSC
  Documents and (ii) none of the Ultra OSC Documents contained any
  Misrepresentation. Except to the extent information contained in any Ultra
  OSC Document has been revised or superseded by a later-filed Ultra OSC
  Document, none of the Ultra OSC Documents currently contains any
  Misrepresentation;

     (v) as of the respective dates of the Ultra OSC Documents, (i) the
  financial statements of UPC included in the Ultra OSC Documents complied as
  to form in all material respects with applicable accounting requirements
  and the published results and regulations of the Ontario Securities
  Commission with respect thereto, (ii) were prepared in all material
  respects in accordance with Canadian generally accepted accounting
  principles applied on a consistent basis during the periods involved
  (except as noted

                                       16
<PAGE>

  therein or as may be permitted by the rules of the Ontario Securities
  Commission) and (iii) fairly presented in all material respects the
  consolidated financial position of UPC and the Ultra Subsidiaries as of the
  dates thereof and the consolidated results of their operations and changes
  in financial position for the periods then ended (subject, in the case of
  any unaudited interim financial statements, to normal year-end adjustments,
  none of which are or were material);

     (w) UPC is and has for at least the previous 12 months been, a
  "reporting issuer" in the Provinces of British Columbia and Ontario, and
  has not been notified of any default of any requirement of any applicable
  securities legislation, regulations, orders, notices or policies;

     (x) the Ultra Proxy Solicitation Material will be distributed in
  accordance with and will comply as to form in all material respects with
  Ontario Securities Laws. None of the information relating to UPC and the
  Ultra Subsidiaries included in the Ultra Proxy Solicitation Material shall,
  at the time the Ultra Proxy Solicitation Material is mailed or at the time
  of the Ultra Meeting, contain any Misrepresentation, except that no
  representation is being made by UPC with respect to information supplied or
  approved in writing by PPL or any affiliate of PPL specifically for
  inclusion in the Ultra Proxy Solicitation Material;

     (y) all information furnished by UPC for inclusion in the Pendaries
  Proxy Statement is or will be, as of the earlier of the date it purports to
  be given at and the date of the Pendaries Proxy Statement, true and
  complete in all material respects and contains no Misrepresentations;

     (z) the board of directors of UPC determined as of October 6, 2000,
  which determination has not been withdrawn, amended or modified up to the
  date hereof, to unanimously recommend that the holders of Pendaries Common
  Shares vote in favour of the Arrangement.

   4.2.1 UPC makes no representations or warranties to PPL in addition to those
expressly enumerated in subsection 4.2. Except and to the extent provided in
subsection 4.2, UPC does not warrant title to the Ultra Assets or make
representations or warranties with respect to: (i) the quantity, quality or
recoverability of petroleum substances respecting the Ultra Assets; (ii) any
estimates of the value of the Ultra Assets or the revenues applicable to future
production from the Ultra Assets; (iii) any engineering, geological or other
interpretations or economic evaluations respecting the Ultra Assets; (iv) the
rates of production of petroleum substances from the Ultra Assets; (v) the
quality, condition or serviceability of the Ultra Assets; or (vi) the
suitability of their use for any purpose. Without restricting the generality of
the foregoing, but subject always to the provisions herein, PPL acknowledges
that it has made its own independent investigation, analysis, evaluation and
inspection of the interests of UPC in the Ultra Assets and the state and
condition thereof and that it has relied solely on such investigation,
analysis, evaluation and inspection as to its assessment of the condition,
quantum and value of the Ultra Assets.

   4.2.2 Except with respect to the representations and warranties in
subsection 4.2 or in the event of fraud, PPL forever releases and discharges
UPC and the Ultra Subsidiaries and their directors, officers, servants, agents
and employees from any claims and all liability to PPL or PPL's assigns and
successors, as a result of the use or reliance upon advice, information or
materials pertaining to the Ultra Assets which was delivered or made available
to PPL by Ultra or their directors, officers, servants, agents or employees
prior to or pursuant to this Agreement, including, without limitation, any
evaluations, projections, reports and interpretive or non-factual materials
prepared by or for UPC, or otherwise in UPC's possession.

                                   ARTICLE 5

                                   Covenants

   5.1 PPL covenants and agrees that, until the transactions contemplated
herein have closed or this Agreement has been terminated, whichever is the
earlier, PPL and each of the Pendaries Subsidiaries:

     (a) will conduct its operations according to its ordinary and usual
  course of business and consistent with past practices, and will use its
  reasonable commercial efforts to fulfil the conditions set forth herein to
  the extent the fulfillment of the same is within the control of PPL and/or
  the Pendaries Subsidiaries;

                                       17
<PAGE>

     (b) will not without the prior written consent of UPC:

       (i) make any capital expenditures other than pursuant to existing
    capital expenditure programs that are disclosed in the Pendaries
    Disclosure Statement, or pursuant to cash calls made on Pendaries
    pursuant to the Sino-American Property Agreements;

       (ii) sell, transfer or otherwise dispose of or create any
    Encumbrance on, or allow the sale, transfer or other disposition of or
    creation of any Encumbrance on any of the Pendaries Assets other than
    chattel property or other non-real property that is replaced by
    equivalent property or consumed in the operation of the Pendaries
    Assets and other than any Encumbrances arising in the ordinary course
    of business as a result of operations under agreements affecting the
    Pendaries Assets;

       (iii) grant any option, warrant, right or subscription privilege or
    enter into any agreement to grant any such option, warrant, right or
    subscription privilege to purchase or otherwise acquire any securities
    of PPL or issue any securities of PPL except pursuant to the exercise
    of Pendaries Options; or

       (iv) directly or indirectly, through officers, directors, employees,
    representatives, advisors, agents or otherwise, take any action to
    continue, solicit, initiate or encourage any Competing Transaction, and
    will notify UPC forthwith immediately if any inquiries or proposals
    with respect to a possible Competing Transaction are received by PPL,
    and shall provide details of any such inquiries or proposals as such
    information becomes available to PPL; provided, however, that in the
    event that PPL receives an unsolicited inquiry or proposal with respect
    to a possible Competing Transaction, the directors and officers of PPL
    shall be entitled to take such actions which PPL's Board of Directors,
    based upon the advice of PPL's counsel, determine in good faith to be
    required in order for such directors and officers to fulfil their
    fiduciary obligations to PPL, provided that prior to furnishing any
    information or engaging in any negotiations with the third party
    initiating such inquiry or proposal, PPL shall have provided written
    notice to UPC to the effect that it is doing so;

     (c) will maintain insurance on and in respect of all the Pendaries
  Assets in like kind to, and in an amount not less than the amount of,
  insurance in respect of the Pendaries Assets in effect on the date hereof;

     (d) will make available and cause to be made available to UPC, its
  agents and advisors, as soon as possible, all documents and agreements
  (including without limitation, any correspondence between Pendaries and or
  any governmental body and its minute book) in any way relating to or
  affecting the Pendaries Assets or the financial status of Pendaries and
  such other documents or agreements as may be necessary to enable Ultra to
  effect a thorough investigation of Pendaries, its business, properties and
  financial status, except where Pendaries is contractually precluded from
  making such document or agreement available, and Pendaries shall cooperate
  with Ultra in securing access for Ultra to any such documentation not in
  the possession or under the control of Pendaries;

     (e) will not enter into any transaction not in the ordinary course of
  business or pay any dividends or make any other distribution to its
  shareholders or repay, other than in the ordinary course of business, any
  outstanding indebtedness;

     (f) will not disclose to any person, other than officers, directors, key
  employees and professional advisors of PPL any confidential information
  relating to Ultra except information disclosed in the Pendaries Proxy
  Statement, required to be disclosed by law or otherwise known to the public
  or PPL;

     (g) will provide to UPC, in a timely and expeditious manner, all
  information as may be reasonably requested by UPC or is required by
  applicable law, with respect to PPL for inclusion in the Ultra Proxy
  Solicitation Material or any amendments or supplements to the Ultra Proxy
  Solicitation Material so that UPC can comply in all material respects with
  all applicable legal and reporting requirements on the date of issue
  thereof;

                                       18
<PAGE>

     (h) will:

       (i) forthwith carry out the terms of the Interim Order and the Final
    Order provided that nothing shall require PPL to consent to any
    modification of this Agreement, the Arrangement or PPL's obligations
    thereunder or hereunder,

       (ii) convene the Pendaries Meeting as ordered by the Interim Order;

       (iii) provide notice to UPC of the Pendaries Meeting and allow UPC
    representatives to attend the Pendaries Meeting unless such attendance
    is prohibited by rules governing such Pendaries Meeting; and

       (iv) conduct the Pendaries Meeting in accordance with the Interim
    Order, the bylaws of PPL and any instrument governing such meeting, as
    applicable, and as otherwise required by law;

     (i) will prepare (in consultation with UPC), file and distribute to the
  holders of Pendaries Common Shares in a timely and expeditious manner, the
  Pendaries Proxy Statement and any amendments or supplements to the
  Pendaries Proxy Statement as required by the Interim Order or by applicable
  law or regulation of regulatory authorities, in all jurisdictions where the
  same is required complying in all material respects with all applicable
  legal and reporting requirements on the date of issue thereof;

     (j) subject to the applicable fiduciary obligations to shareholders of
  PPL as advised by counsel, the Board of Directors of PPL shall not
  withdraw, modify or change in a manner adverse to UPC its recommendation
  that the holders of Pendaries Common Shares vote to approve the Arrangement
  and this Agreement, and shall use its reasonable efforts to solicit from
  holders of Pendaries Common Shares proxies in favour of the Arrangement;

     (k) will, subject to obtaining such approvals as are required by the
  Interim Order and the terms and conditions hereof, forthwith prepare, file,
  proceed with and diligently pursue an application for the Final Order;

     (l) subject to the terms and conditions hereof, will file Articles of
  Arrangement, and the Final Order with the Director, in order for the
  Arrangement to become effective;

     (m) will make other necessary filings and applications under applicable
  U.S. and Canadian, federal and provincial and laws and regulations
  (including without limitation U.S. Securities Laws) required on the part of
  PPL in connection with the transactions contemplated herein and take all
  reasonable action necessary to be in compliance with such laws and
  regulations;

     (n) will use its reasonable efforts to diligently pursue and obtain all
  consents, approvals and authorizations (including without limitation all
  regulatory and third party approvals and consents) required or necessary in
  connection with the transactions contemplated herein;

     (o) will not issue, authorize or propose the issuance of, or purchase or
  propose the purchase of, any shares of its capital stock of any class or
  securities convertible into, rights, warrants or options to acquire, any
  such shares or other exchangeable or convertible securities, other than
  pursuant to the exercise of the Pendaries Options or as otherwise disclosed
  to UPC;

     (p) will not authorize, recommend, propose or announce an intention to
  authorize, recommend or propose, or enter into an agreement in principle or
  an agreement with respect to, any merger, consolidation or business
  combination (other than the Arrangement), any acquisition of a material
  amount of assets or securities, any disposition of a material amount of
  assets or securities or any material change in its capitalization, or any
  entry into a material contract or any release or relinquishment of any
  material contract rights, not in the ordinary course of business, other
  than pursuant to commitments existing on the date hereof and set out in the
  Pendaries Disclosure Statement, or commitments entered into after the date
  hereof with the written consent of UPC;

     (q) except as contemplated in the term sheet attached to the Letter of
  Intent, will not guarantee the payment of indebtedness or incur
  indebtedness for money borrowed or issue any debt securities;

                                       19
<PAGE>

     (r) will not subdivide the Pendaries Common Shares or issue any rights,
  options, warrants, shares or Pendaries Common Shares to all or
  substantially all holders of Pendaries Shares or make any change in its
  share capital or make any similar distribution that would materially and
  adversely affect the value of the Pendaries Common Shares or the ability of
  UPC to acquire all of the issued and outstanding Pendaries Common Shares on
  the terms contemplated by the Arrangement;

     (s) will not purchase or otherwise acquire, or propose to purchase or
  otherwise acquire, any securities of any third party issuer;

     (t) will not propose or adopt any amendments to its charter or by-laws;

     (u) will not enter into, assign or terminate, or amend in any material
  respect, any Title Document; and

     (v) will not waive, compromise or settle any right or claim that would
  adversely affect the ownership, operation or value of any of the Pendaries
  Assets;

     (w) will mail on or before October 16, 2000, notice of the proposed
  Arrangement in form and substance satisfactory to PPL and UPC to the China
  National Offshore Oil Corporation, a company organized and existing under
  the laws of the People's Republic of China, Kerr-McGee China Petroleum
  Ltd., a company incorporated in the Bahamas, and Newfield Exploration
  Company;

     (x) if the Ultra Common Shares are not approved for listing on AMEX, PPL
  will comply in all respects with Rule 13e-3 of the Exchange Act;

     (y) will promptly advise UPC orally and, if then requested, in writing:

       (i) of any event occurring subsequent to the date of this Agreement
    that would render any representation or warranty of PPL contained in
    this Agreement (except any such representation or warranty which speaks
    solely as of a date prior to the occurrence of such event), if made on
    or as of the date of such event or the Effective Date, untrue or
    inaccurate in any material respect;

       (ii) of any Material Adverse Change in respect of Pendaries; and

       (iii) of any material breach by PPL of any covenant or agreement
    contained in this Agreement.

   5.2 UPC covenants and agrees that, until the transactions contemplated
herein have closed or this Agreement has been terminated, whichever is the
earlier, UPC and each of the Ultra Subsidiaries:

     (a) will conduct its operations according to its ordinary and usual
  course of business and consistent with past practices, and will use its
  reasonable commercial efforts to fulfil the conditions set forth herein to
  the extent the fulfillment of the same is within the control of UPC and/or
  the Ultra Subsidiaries;

     (b) will maintain insurance on and in respect of all the Ultra Assets in
  like kind to, and in an amount not less than the amount of, insurance in
  respect of the Ultra Assets in effect on the date hereof,

     (c) will make available and cause to be made available to PPL, its
  agents and advisors, as soon as possible, all documents and agreements
  (including, without limitation, any correspondence between Ultra and any
  governmental body and its minute books) in any way relating to or affecting
  the Ultra Assets or the financial status of Ultra and such other documents
  or agreements as may be necessary to enable PPL to effect a thorough
  investigation of Ultra, its business, properties and financial status,
  except where Ultra is contractually precluded from making such document or
  agreement available, and Ultra shall cooperate with PPL in securing access
  for PPL to any such documentation not in the possession or under the
  control of Ultra;

     (d) will not disclose to any person, other than officers, directors, key
  employees and professional advisors of UPC any confidential information
  relating to Pendaries except information disclosed in the Pendaries Proxy
  Statement, required to be disclosed by law or otherwise known to the public
  or UPC;

     (e) will make application to obtain all necessary approvals and make all
  filings required with the securities commissions or similar authorities in
  all jurisdictions of Canada in which registered holders of

                                      20
<PAGE>

  Pendaries Common Shares are resident as shown on the books of PPL to
  validly authorize and enable the distribution by Ultra pursuant to
  exemptions from the prospectus and registration requirements of applicable
  Canadian Securities Laws of the Ultra Common Shares to be issued pursuant
  to the Arrangement, and, without limiting the generality of the foregoing,
  will make application for, and diligently pursue, such discretionary orders
  of Canadian securities regulators as may be necessary to enable Ultra
  Counsel to provide the opinion contemplated by subsection 7.1(c)(iv)
  hereof;

     (f) prepare jointly with PPL the Pendaries Proxy Statement and provide
  to PPL, in a timely and expeditious manner, all information as may be
  reasonably requested by PPL or is required by the Interim Order or
  applicable law, with respect to UPC for inclusion in the Pendaries Proxy
  Statement or any amendments or supplements to the Pendaries Proxy Statement
  so that PPL can comply in all material respects with all applicable legal
  and reporting requirements on the date of issue thereof;

     (g) will forthwith carry out the terms of the Interim Order and the
  Final Order provided that nothing shall require Ultra to consent to any
  modification of this Agreement, the Arrangement or UPC's obligations
  hereunder or thereunder;

     (h) will:

       (i) convene the Ultra Meeting on or before December 15, 2000;

       (ii) provide notice to PPL of the Ultra Meeting and allow PPL
    representatives to attend the Ultra Meeting unless such attendance is
    prohibited by rules governing such Ultra Meeting; and

       (iii) conduct the Ultra Meeting in accordance with the by-laws of
    UPC and any instrument governing such meeting, as applicable, and as
    otherwise required by law;

     (i) will prepare (in consultation with PPL), file and distribute to the
  holders of Ultra Common Shares in a timely and expeditious manner, the
  Ultra Proxy Solicitation Material and any amendments or supplements to the
  Ultra Proxy Solicitation Material as required by applicable law or
  regulation of regulatory authorities, in all jurisdictions where the same
  is required complying in all material respects with all applicable legal
  and reporting requirements on the date of issue thereof;

     (j) subject to the applicable fiduciary obligations to shareholders of
  UPC as advised by counsel, the Board of Directors of UPC shall not
  withdraw, modify or change in a manner adverse to PPL its recommendation
  that the holders of Ultra Common Shares vote to approve the Arrangement and
  this Agreement, and shall use its reasonable efforts to solicit from
  holders of Ultra Common Shares proxies in favour of the Arrangement;

     (k) will make all other necessary filings and applications under
  applicable federal and provincial laws and regulations required on the part
  of Ultra in connection with the transactions contemplated herein and take
  all reasonable action necessary to be in compliance with such laws and
  regulations;

     (l) on the Effective Date, issue Ultra Common Shares to those persons
  entitled thereto pursuant to the Arrangement in accordance with their
  entitlement under the Arrangement;

     (m) will use its reasonable efforts to diligently pursue and obtain all
  consents, approvals and authorizations (including without limitation all
  regulatory and third party approvals and consents) required or necessary in
  connection with the transactions contemplated herein;

     (n) except in the ordinary course of business, or except as contemplated
  by the term sheet attached to the Letter of Intent, will not guarantee the
  payment of indebtedness or incur indebtedness for money borrowed or issue
  any debt securities;

     (o) will take all necessary corporate action to issue the Ultra Common
  Shares to be issued in connection with the Arrangement and shall issue such
  Ultra Common Shares on the basis contemplated herein and shall apply for
  and diligently pursue the listing of such Ultra Common Shares on the TSE;

     (p) will not subdivide the Ultra Common Shares or issue any rights,
  options, warrants, shares or Ultra Common Shares to all or substantially
  all holders of Ultra Shares or make any change in its share capital

                                       21
<PAGE>

  or make any similar distribution that would materially and adversely affect
  the value of the Ultra Common Shares to be issued to PPL's Shareholders in
  connection with the Arrangement;

     (q) will not reorganize, amalgamate or merge UPC with any other person,
  nor acquire by amalgamating, merging or consolidating with, purchasing a
  majority of the voting securities or substantially all of the assets of or
  otherwise, any business or person which acquisition or other transaction
  would reasonably be expected to prevent or materially delay the
  transactions contemplated hereby beyond the Expiry Date;

     (s) will use reasonable commercial efforts to cause the Ultra Common
  Shares, including the Ultra Common Shares issuable pursuant to the
  Arrangement, to be listed on AMEX;

     (t) will maintain and continue all rights to indemnification or
  exculpation now existing in favour of the directors or officers of PPL or
  any Subsidiary as provided in its articles or by-laws thereof full force
  and effect for a period of not less than six years from the Effective Time;
  and

     (u) will maintain in effect, for not less than six years from the
  Effective Time, coverage substantially equivalent to that in effect under
  the current policies of the directors' and officers' liability insurance
  maintained in effect by Pendaries (provided that the coverage limit need
  not be greater than US$10,000,000) which is no less advantageous, and with
  no gaps or lapses in coverages with respect to matters occurring prior to
  the Effective Time;

     (v) subject to their applicable fiduciary obligations, the Board of
  Directors of UPC will convene a directors' meeting on or before November
  10, 2000 for the purpose of considering adding to the matters to be dealt
  with at the Ultra Meeting an increase in the number of directors of UPC and
  the election of additional directors to fill the vacancies created by such
  increase; and

     (w) will promptly advise PPL orally and, if then requested, in writing:

       (i) of any event occurring subsequent to the date of this Agreement
    that would render any representation or warranty of UPC contained in
    this Agreement (except any such representation or warranty which speaks
    solely as of a date prior to the occurrence of such event), if made on
    or as of the date of such event or the Effective Date, untrue or
    inaccurate in any material respect;

       (ii) of any Material Adverse Change in respect of Ultra; and

       (iii) of any material breach by UPC of any covenant or agreement
    contained in this Agreement.

                                   ARTICLE 6

                                  Employment

   6.1 Prior to the Effective Date, UPC shall use its reasonable best efforts
to enter into employment agreements with each of Bobby J. Fogle, Urich Ho,
Philip R. Henry, Michael D. Watford and Fox Benton III, and consulting
agreements with each of Robert E. Rigney and Fred Tietz, which employment
agreements and consulting agreements shall be conditional upon completion of
the Arrangement and shall be effective as of the Effective Date. The
employment agreements shall provide for the employment of each such individual
at a salary which is not less than the salary currently being paid to such
individual by Ultra or Pendaries, as the case may be. The consulting agreement
with Robert E. Rigney shall provide for Mr. Rigney to devote 50% of his time
to the affairs of Ultra and its Subsidiaries (which for greater certainty
shall then include Pendaries). The employment agreement with Bobby J. Fogle
shall provide for Mr. Fogle to devote 75% of his time to the affairs of Ultra
and its Subsidiaries (which for greater certainty shall then include
Pendaries). The consulting agreement with Fred Tietz shall provide for Mr.
Tietz to be engaged as a consultant to Ultra and its Subsidiaries at a
consulting fee which is not less than the consulting fee currently being paid
to Mr. Tietz by Pendaries.

   6.2 Subject to the fiduciary obligations of the Board of Directors of UPC
to act in the best interests of UPC and its shareholders, at the next annual
or special meeting of shareholders of UPC following the Effective

                                      22
<PAGE>

Date management of UPC shall recommend that the number of directors of UPC be
increased by at least one director and shall nominate one person designated by
Robert E. Rigney, who is a director of PPL on the date hereof, for election as
a director of UPC.

                                   ARTICLE 7

                               Closing Conditions

   7.1 The obligation of PPL to complete the transactions contemplated herein
is subject to the fulfillment of the following conditions precedent on or
before the Effective Date or such other time as is specified below:

     (a) all representations and warranties of UPC under this Agreement shall
  have been true and correct on the date hereof;

     (b) the representations and warranties of UPC shall be true and correct
  in all material respects (except where already qualified as to materiality
  or the absence of Material Adverse Effect) as of the Effective Date as if
  made on and as of such date (except to the extent such representations and
  warranties speak solely as of an earlier date, in which event such
  representations and warranties shall be true and correct to such extent as
  of such earlier date, or except as affected by transactions contemplated or
  permitted by this Agreement), and PPL shall have received a certificate of
  UPC addressed to PPL and dated the Effective Date, signed on behalf of UPC
  by two senior executive officers of UPC (on UPC's behalf and without
  personal liability) confirming the same as of the Effective Date;

     (c) UPC shall have provided PPL with opinions of Ultra Counsel
  reasonably satisfactory to PPL dated the Effective Date (or such other date
  as UPC and PPL may agree) and addressed to PPL and Pendaries Counsel to the
  effect that:

       (i) UPC and each Subsidiary is duly incorporated, organized and
    validly existing under the law of the jurisdiction of its
    incorporation, and is duly qualified to carry on business in such
    jurisdictions in which the nature of its business or the property or
    assets owned or leased by it makes such qualification necessary and UPC
    has full power and authority to enter into this Agreement and perform
    its obligations hereunder,

       (ii) all necessary proceedings, corporate, regulatory or otherwise,
    of UPC have been taken to fully, validly and effectively authorize this
    Agreement, the Arrangement, the performance by UPC of its obligations
    hereunder, and the execution and delivery by UPC of this Agreement,

       (iii) this Agreement has been duly executed and delivered by UPC;

       (iv) the execution and delivery of this Agreement by UPC, the
    performance of the terms hereof by UPC and the consummation of the
    transactions contemplated herein do not and will not require any
    consent, approval, authorization or permit of, or filing with or
    notification to, any Governmental Authority, except (A) pursuant to
    Canadian Securities Laws and U.S. Securities Laws, (B) the Interim
    Order and the Final Order, (C) where the failure to obtain such
    consent, approval, authorization or permit, or to make such filing or
    notification, would not in the aggregate have a Material Adverse Effect
    on Ultra or prevent, materially hinder, or materially make more
    burdensome the consummation of the transactions contemplated by this
    Agreement, (D) such filings and approvals as may be required under the
    "blue sky", takeover or securities laws of various states, or (E) such
    consents, approvals, authorizations, permits, filings or notifications
    that have been previously made;

       (v) the first trade by any person, other than a control person
    distribution, of Ultra Common Shares issued pursuant to the Arrangement
    will not be subject to the prospectus requirements of, or any hold
    period under, applicable Canadian Securities Laws;

       (vi) the Ultra Common Shares issued pursuant to the Arrangement are
    duly and validly issued as fully paid and non-assessable Ultra Common
    Shares and such Ultra Common Shares have been conditionally approved
    for listing on the TSE subject to satisfaction of the conditions
    prescribed by the TSE;

                                       23
<PAGE>

       (vii) the limited offer and sale of Ultra Common Shares in accordance
    with the provisions of the Arrangement Agreement and the Plan of
    Arrangement does not require registration under the U.S. Securities Act
    of 1933 and, subject to certain exceptions and qualifications to be
    specifically set out in the opinion letter of Ultra Counsel, upon
    issuance, such shares will be freely tradeable under such law by the
    holders thereof.

  in giving such opinion, Ultra Counsel may rely, in respect of matters
  governed by the laws of any jurisdiction other than the Yukon Territory or
  the laws of Canada applicable therein, upon the opinion of local counsel in
  such jurisdiction provided that Ultra Counsel is of the opinion that the
  opinion of such local counsel is one upon which Ultra Counsel may properly
  rely; and, in respect of matters of fact, upon certificates of UPC or any
  other appropriate persons;

     (d) UPC shall have complied with its covenants herein in all material
  respects and shall have provided to PPL a certificate of UPC certifying
  that UPC has complied with its covenants herein in all material respects
  and Pendaries shall have no knowledge to the contrary;

     (e) between the date hereof and the Effective Date, there shall have
  been no Material Adverse Change in respect of Ultra;

     (f) on the Effective Date, the number of directors of UPC shall be
  increased from three to four, and an individual designated by PPL shall be
  appointed as a director to fill the vacancy created by such increase;

     (g) on the Effective Date, the Board of Directors of UPC shall have
  appointed the following officers:

<TABLE>
            <S>                       <C>
            Chairman, CEO and
             President                Michael D. Watford
            Vice-President,
             Accounting               Bobby J. Fogle
            Vice-President, Finance   Fox Benton, III
</TABLE>

   The foregoing conditions precedent are for the benefit of PPL and may be
waived, in whole or in part, by PPL in writing at any time. If any of the said
conditions precedent shall not be complied with or waived by PPL on or before
the date required for the performance thereof, PPL may, in addition to the
other remedies it may have at law or equity, rescind and terminate this
Agreement by written notice to UPC; provided, however, that PPL may not rely
on the failure to satisfy any of the foregoing conditions if the condition
would have been satisfied but for a material default by PPL in complying with
its obligations hereunder.

   7.2 The obligation of UPC to complete the transactions contemplated herein
is subject to fulfillment of the following conditions precedent on or before
the Effective Date or such other time as is specified below:

     (a) all representations and warranties of PPL under this Agreement shall
  have been true and correct on the date hereof;

     (b) the representations and warranties of PPL shall be true and correct
  in all material respects (except where already qualified as to materiality
  or the absence of Material Adverse Effect) as of the Effective Date as if
  made on and as of such date (except to the extent such representations and
  warranties speak solely as of an earlier date, in which event such
  representations and warranties shall be true and correct to such extent as
  of such earlier date, or except as affected by transactions contemplated or
  permitted by this Agreement), and UPC shall have received a certificate of
  PPL addressed to UPC and dated the Effective Date, signed on behalf of PPL
  by two senior executive officers of PPL (on PPL's behalf and without
  personal liability) confirming the same as of the Effective Date;

     (c) PPL shall have provided UPC with opinions of Pendaries Counsel
  reasonably satisfactory to UPC dated the Effective Date (or such other date
  as UPC and PPL may agree) and addressed to UPC and Ultra Counsel, to the
  effect that:

       (i) each of PPL and the Pendaries Subsidiaries is duly incorporated,
    organized and validly existing under the law of the jurisdiction of its
    incorporation, and is duly qualified to carry on business in such
    jurisdictions in which the nature of its business or the property or
    assets owned or

                                      24
<PAGE>

    leased by it makes such qualification necessary and PPL has full power
    and authority to enter into this Agreement and perform its obligations
    hereunder;

       (ii) all necessary proceedings, corporate, regulatory or otherwise,
    of PPL have been taken to fully, validly and effectively authorize this
    Agreement, the Arrangement, the performance by PPL of its obligations
    hereunder, and the execution and delivery by PPL of this Agreement; and

       (iii) this Agreement has been duly executed and delivered by PPL,

       (iv) the execution and delivery of this Agreement by PPL, the
    performance of the terms hereof by PPL and the consummation of the
    transactions contemplated herein do not and will not require any
    consent, approval, authorization or permit of, or filing with or
    notification to, any Governmental Authority or any parties to the Title
    Documents relating to the Pendaries Assets, except (A) pursuant to
    Canadian Securities Laws or U.S. Securities Laws, (B) the Interim Order
    and the Final Order, (C) where the failure to obtain such consent,
    approval, authorization or permit, or to make such filing or
    notification, would not in the aggregate have a Material Adverse Effect
    on Pendaries or prevent, materially hinder, or materially make more
    burdensome the consummation of the transactions contemplated by this
    Agreement, (D) such filings and approvals as may be required under the
    "blue sky", takeover or securities laws of various states, or (E) such
    consents, approvals, authorizations, permits, filings or notifications
    that have been previously made; and

       (v) the Pendaries Proxy Statement complies as to form with Schedule
    14A of the Exchange Act and, if applicable, contains all information
    required by Rule 13e-3 of the Exchange Act, and does not contain any
    untrue statement of a material fact or omit to state a material fact
    necessary in order to make the statements therein, in light of the
    circumstances under which they were made, not misleading;

  in giving such opinion, Pendaries Counsel may rely, in respect of matters
  governed by the laws of any jurisdiction other than the Province of New
  Brunswick or the laws of Canada applicable therein, upon the opinion of
  local counsel in such jurisdiction provided that Pendaries Counsel is of
  the opinion that the opinion of such local counsel is one upon which
  Pendaries Counsel may properly rely; and, in respect of matters of fact,
  upon certificates of Pendaries or any other appropriate persons;

     (d) PPL shall have complied with its covenants herein in all material
  respects and shall have provided to UPC a certificate of PPL certifying
  that PPL has complied with its covenants herein in all material respects,
  and UPC shall have no knowledge to the contrary;

     (e) between the date hereof and the Effective Date there shall have been
  no Material Adverse Change in respect of Pendaries;

     (f) there shall have been no material breach by PPL or any of the
  Pendaries Subsidiaries of any of their respective covenants,
  representations or warranties contained in the Sino-American Loan
  Documents;

     (g) China National Offshore Oil Company shall not have asserted any
  rights with respect to or arising from the Arrangement, which rights, if
  upheld, could be expected to have a Material Adverse Effect on Pendaries or
  Ultra;

     (i) nothing shall have come to the attention of UPC that would cause UPC
  to be unable to rely on the exemption provided in section 3(a)(10) of the
  Exchange Act; and

     (j) the number of Ultra Common Shares to be issued by UPC in exchange
  for Pendaries Common Shares pursuant to the Arrangement shall not be
  greater than 15,000,000.

   The foregoing conditions precedent are for the benefit of UPC and may be
waived, in whole or in part, by UPC in writing at any time. If any of the said
conditions precedent shall not be complied with or waived by UPC on or before
the date required for the performance thereof, UPC may, in addition to the
other remedies it may have at law or equity, rescind and terminate this
Agreement by written notice to PPL; provided, however, that UPC may not rely on
the failure to satisfy any of the foregoing conditions if the condition would
have been satisfied but for a material default by UPC in complying with its
obligations hereunder.

                                       25
<PAGE>

   7.3 The obligations of UPC and PPL to complete the transactions contemplated
herein are subject to fulfillment of the following conditions precedent on or
before the Effective Date or such other time as is specified below:

     (a) a resolution shall have been passed at the Pendaries Meeting, duly
  approving the Arrangement in accordance with the Interim Order;

     (b) on or before the Expiry Date, the Final Order shall have been
  granted in form and substance satisfactory to UPC and PPL, acting
  reasonably, and such Final Order shall not have been set aside or modified,
  on appeal or otherwise, in a manner unacceptable to such parties, acting
  reasonably;

     (c) there shall be no action taken under any existing applicable law or
  regulation, nor any statute, rule, regulation or order which is, enacted,
  enforced, promulgated or issued by any court, department, commission,
  board, regulatory body, government or governmental authority or similar
  agency, domestic or foreign, that:

       (i) makes it illegal or otherwise directly or indirectly restrains,
    enjoins or prohibits the Arrangement or any other transactions
    contemplated herein;

       (ii) results in a judgment or assessment of material damages
    directly or indirectly relating to the transactions contemplated
    herein;

       (iii) prohibits Ultra's or Pendaries' ownership or operation of all
    or any material portion of the business or assets of Ultra or
    Pendaries, respectively, or compels Ultra or Pendaries to dispose of or
    hold separately all or any portion of the business or assets of Ultra
    or Pendaries or the Ultra Common Shares or the Pendaries Common Shares;
    or

       (iv) imposes or confirms material limitations on the ability of UPC
    effectively to exercise and fulfill rights of ownership of the
    Pendaries Common Shares or the holders of Pendaries Common Shares to
    hold or receive Ultra Common Shares under the Arrangement or otherwise,
    including, without limitation, the right to vote any such securities;

     (d) Pendaries and Ultra shall have obtained all consents, approvals and
  authorizations (including without limitation all regulatory and third party
  approvals and consents) required or necessary in connection with the
  transactions contemplated herein, the failure of which to obtain would have
  a Material Adverse Effect on Pendaries or Ultra, as the case may be, on
  terms and conditions that will not have a Material Adverse Effect on
  Pendaries and/or Ultra;

     (e) holders of not more than 5% of number of Pendaries Common Shares
  outstanding as of the date hereof shall have exercised any rights of
  dissent granted under the Interim Order in relation to the Plan of
  Arrangement proposed at the Pendaries Meeting and PPL shall have provided
  to UPC a certificate of PPL certifying on the Effective Date the number of
  Pendaries Common Shares in respect of which the holders have exercised
  rights of dissent;

     (f) the TSE shall have accepted notice of the Arrangement and the
  transactions contemplated hereby and the Ultra Common Shares to be issued
  to holders of Pendaries Common Shares under this Agreement shall have been
  conditionally approved for listing on the TSE; and

     (g) the Pendaries Proxy Statement shall have included opinions of
  counsel to PPL with respect to the Canadian and U.S. tax consequence of the
  Arrangement, substantially in the form of the draft opinions provided by
  PPL to UPC prior to the execution hereof.

   The foregoing conditions are for the mutual benefit of UPC and PPL and may
be waived, in whole or in part, by both UPC and PPL at any time. If any of the
said conditions precedent shall not be complied with or waived as aforesaid on
or before the date required for the performance thereof, UPC or PPL may rescind
and terminate this Agreement by written notice to the other party; provided,
however, that no party may not rely on the failure to satisfy any of the
foregoing conditions if the condition would have been satisfied but for a
material default by such party in complying with its obligations hereunder.

                                       26
<PAGE>

   7.4 Each of PPL and UPC shall give prompt notice to the other of the
occurrence or failure to cure at any time from the date hereof to the Effective
Date of any event or state of facts which occurrence or failure to cure would,
or would be likely to (a) cause any of the representations or warranties of any
party contained herein to be untrue or inaccurate in any material respect, or
(b) result in the failure to comply with or satisfy any covenant, condition or
agreement to comply with or be satisfied by any party hereunder, provided
however, that no such representation shall affect the representations or
warranties of the parties or the conditions or obligations of the parties
hereunder.

   7.5 The conditions set forth in this Article 7 shall be conclusively deemed
to be satisfied, waived or released when with the agreement of the parties the
Articles of Arrangement are filed under the Act to effect the Arrangement.

                                   ARTICLE 8

                                  Termination

   8.1 If any condition contained in Sections 7.2 or 7.3 is not satisfied at or
before the Expiry Date, then UPC may by notice to PPL terminate this Agreement
and the obligations of the parties hereunder (except as otherwise herein
provided), but without detracting from the rights of UPC arising from any
breach by PPL but for which the condition would have been satisfied.

   8.2 If any condition contained in Sections 7.1 or 7.3 is not satisfied at or
before the Expiry Date, then PPL may by notice to UPC terminate this Agreement
and the obligations of the parties hereunder (except as otherwise herein
provided), but without detracting from the rights of PPL arising from any
breach by UPC but for which the condition would have been satisfied.

   8.3 This Agreement may be terminated:

     (a) by the mutual agreement of PPL and UPC (for greater certainty,
  without further action on the part of PPL shareholders if terminated after
  the holding of the Pendaries Meeting);

     (b) by either UPC or PPL by notice to the other party at any time prior
  to the Effective Time if there shall be passed any law that makes
  consummation of the transactions contemplated by this Agreement illegal or
  otherwise prohibited;

     (c) by UPC if the Board of Directors of PPL shall have withdrawn,
  modified or changed in a manner adverse to UPC its approval or
  recommendation of the Arrangement (unless the holders of Pendaries Common
  Shares shall have approved the Arrangement prior to such termination or UPC
  has suffered a Material Adverse Change or UPC shall have made a
  misrepresentation at the date hereof or breached a covenant under this
  Agreement in such a manner that, taking into account the last paragraph of
  Section 7.1 hereof, PPL would be entitled to rely on the failure of a
  condition set forth in Sections 7.1(a), (d) or (e) as a reason not to
  complete the Arrangement);

     (d) by PPL if the Board of Directors of PPL shall have withdrawn,
  modified or changed in a manner adverse to UPC its approval or
  recommendation of the Arrangement (unless the holders of Pendaries Common
  Shares shall have approved the Arrangement prior to such termination);

     (e) by PPL if the Board of Directors of UPC shall have withdrawn,
  modified or changed in a manner adverse to PPL its approval or
  recommendation of the Arrangement (unless the holders of Ultra Common
  Shares shall have approved the Arrangement prior to such termination or PPL
  has suffered a Material Adverse Change or PPL shall have made a
  misrepresentation at the date hereof or breached a covenant under this
  Agreement in such a manner that, taking into account the last paragraph of
  Section 7.2 hereof, UPC would be entitled to rely on the failure of a
  condition set forth in Sections 7.2(a), (d) or (e) as a reason not to
  complete the Arrangement);

                                       27
<PAGE>

     (f) by UPC if the Board of Directors of UPC shall have withdrawn,
  modified or changed in a manner adverse to PPL its approval or
  recommendation of the Arrangement (unless the holders of Ultra Common
  Shares shall have approved the Arrangement prior to such termination);

     (g) by either UPC or PPL by notice to the other party if the PPL
  shareholder approval shall not have been obtained by reason of the failure
  to obtain the required vote at the PPL Meeting; or

     (h) by either UPC or PPL by notice to the other party if the Ultra
  Shareholder Approval shall not have been obtained by reason of the failure
  to obtain the required vote at the Ultra Meeting.

   8.4 If the Effective Date does not occur on or prior to the Expiry Date,
then, unless otherwise agreed in writing by the parties, this Agreement shall
terminate.

   8.5 The exercise by either party of any right of termination hereunder shall
be without prejudice to any other remedy available to such party.

   8.6 If this Agreement is validly terminated pursuant to any provision of
this Agreement, the parties shall return all materials and copies of all
materials delivered to PPL or UPC, as the case may be, or their agents and,
except for the obligations set forth in subsection 10.6 hereof (which shall
survive any termination of this Agreement and continue in full force and
effect), no party shall have any further obligations to any other party
hereunder with respect to this Agreement. The covenants contained in this
Section shall survive any termination of this Agreement and continue in full
force and effect.

   8.7 After the Effective Date, the respective representations, warranties and
covenants of UPC and PPL contained herein shall expire and be terminated and
extinguished at and from the Effective Date and no party shall have any
liability or further obligation to any party hereunder in respect of such
representations, warranties or covenants thereafter.

                                   ARTICLE 9

                                   Amendment

   9.1 This Agreement may, at any time and from time to time before or after
the holding of the Pendaries Meeting be amended by written agreement of the
parties hereto without further notice to or authorization on the part of their
respective shareholders, and any such amendment may, without limitation:

     (a) change the time for performance of any of the obligations or acts of
  the parties hereto;

     (b) waive any inaccuracies or modify any representation or warranty
  contained herein or in any document delivered pursuant hereto; and

     (c) waive compliance with or modify any of the covenants herein
  contained and waive or modify performance of any of the obligations of the
  parties hereto,

provided that, notwithstanding the foregoing, the number of Ultra Common Shares
which the holders of Pendaries Common Shares shall have the right to receive on
the Arrangement may not be reduced without the approval of the shareholders of
PPL given in the same manner as required for the approval of the Arrangement or
as may be ordered by the Court.

                                   ARTICLE 10

                                    General

   10.1 Each party agrees to bear all costs and expenses incurred by it in
connection with the transactions contemplated hereby.

                                       28
<PAGE>

   10.2 No party hereto shall disclose, by press release, any aspect of the
transactions contemplated hereby, without prior written consent of the other
party. Notwithstanding the foregoing if either party is required by law or
administrative regulation to make any disclosure relating to the transactions
contemplated herein, that party will inform the other party as to the wording
of such disclosure prior to its being made.

   10.3 Any notice, consent, waiver, direction or other communication required
or permitted to be given under this Agreement by a party to any other party
shall be in writing and may be given by delivering same or sending same by
facsimile transmission or by hand delivery addressed to the party to whom the
notice is to be given at its address for service herein. Any notice, consent,
waiver, direction or other communication aforesaid shall, if delivered, be
deemed to have been given and received on the date on which it was delivered to
the address provided herein (if a Business Day and, if not, the next succeeding
Business Day) and if sent by facsimile transmission on a Business Day be deemed
to have been given and received at the time of receipt unless actually received
at the point of delivery after 4:00 p.m. on a Business Day or anytime on a day
which is not a Business day, in which case it shall be deemed to have been
given and received on the next Business Day.

   10.4 The address for service of each of the parties hereto shall be as
follows:

     if to UPC:

       Ultra Petroleum Corp.
       16801 Greenspoint Park Drive
       Suite 370
       Houston, Texas
       U.S.A. 77060
       Attention: Michael D. Watford
       Facsimile: (281) 876-2831

     with a copy to:

       Charlotte H. Kauffman
       Ultra Petroleum Corp.
       1200 Summit Avenue
       Suite 700
       Fort Worth, Texas
       U.S.A. 76102
       Facsimile: (817) 335-2434

     if to PPL:

       Pendaries Petroleum Ltd.
       8 Greenway Plaza
       Suite 910
       Houston, Texas
       U.S.A. 77046
       Attention: Robert E. Rigney / Bobby J. Fogle
       Facsimile: (713) 355-3511

     with a copy to:

       Stikeman Elliott
       5300 Commerce Court West
       199 Bay Street
       Toronto, Ontario M5L 1B9
       Attention: Brian M. Pukier
       Facsimile: (416) 947-0866

                                       29
<PAGE>

     and to:

       Jenkens & Gilchrist
       1100 Louisiana
       Suite 1800
       Houston, Texas 77002
       Attention: Judy G. Gechman
       Facsimile: (713) 951-3314

   10.5 Time shall be of the essence in this Agreement

   10.6 UPC and PPL each represent and warrant to the other that it has not
done any act which would give rise to a valid claim against the other party for
any obligation or liability contingent or otherwise for brokerage fees,
finders' fees, agents' commissions or other similar forms of compensation with
respect to the transactions contemplated herein.

   10.7 This Agreement constitutes the entire agreement between the parties
hereto and cancels and supersedes all prior agreements and understandings
between the parties with respect to the terms of the Arrangement.

   10.8 If any one or more of the provisions or parts thereof contained in this
Agreement should be or become invalid, illegal or unenforceable in any respect
in any jurisdiction, the remaining provisions or parts thereof contained herein
shall be and shall be conclusively deemed to be, as to such jurisdiction,
severable therefrom and:

     (a) the validity, legality or enforceability of such remaining
  provisions or parts thereof shall not in any way be affected or impaired by
  the severance of the provisions or parts thereof severed; and

     (b) the invalidity, illegality or unenforceability of any provision or
  part thereof contained in this Agreement in any jurisdiction shall not
  affect or impair such provision or part thereof or any other provisions of
  this Agreement in any other jurisdiction.

   10.9 Each party hereto shall, from time to time, and at all times hereafter,
at the request of the other party hereto, but without further consideration, do
all such further acts and execute and deliver all such further documents and
instruments as shall be reasonably required in order to fully perform and carry
out the terms and intent hereof.

   10.10 This Agreement may only be amended by a written instrument signed by
the parties hereto.

   10.11 This Agreement shall be governed by, and be construed in accordance
with, the laws of the Province of New Brunswick and applicable laws of Canada
but the reference to such laws shall not, by conflict of laws rules or
otherwise, require the application of the law of any jurisdiction other than
the Province of New Brunswick. Each party hereto hereby irrevocably attorns to
the jurisdiction of the Courts of the Province of New Brunswick in respect of
all matters arising under or in relation to this Agreement.

   10.12 This Agreement may be executed in identical counterparts, each of
which is and is hereby conclusively deemed to be an original and all
counterparts collectively are to be conclusively deemed one instrument.

   10.13 No waiver by any party hereto shall be effective unless in writing and
any waiver shall affect only the matter and the occurrence thereof specifically
identified and shall not extend to any other matter or occurrence.

   10.14 This Agreement shall enure to the benefit of and be binding upon the
parties hereto and their respective successors and assigns. This Agreement may
not be assigned by any party hereto without the prior consent of the other
party hereto.

                                       30
<PAGE>

   IN WITNESS WHEREOF the parties hereto have executed this Agreement.

                                          ULTRA PETROLEUM CORP.

                                          Per:_________________________________

                                          Per:_________________________________

                                          PENDARIES PETROLEUM LTD.

                                          Per:_________________________________

                                          Per:_________________________________

                                       31
<PAGE>

   Exhibit 1 to that Arrangement Agreement made the 13th day of October, 2000
           between Ultra Petroleum Corp. and Pendaries Petroleum Ltd.

                              PLAN OF ARRANGEMENT
                                   dated  .
                              and made pursuant to
          Section 128 of the Business Corporations Act (New Brunswick)

                                   ARTICLE 1

                                  Definitions

1.1 In this Plan, unless the context otherwise requires:

   (a) "Arrangement" means the arrangement contemplated by this Plan pursuant
to Section 128 of the NBBCA;

   (b) "Arrangement Agreement" means the arrangement agreement dated as of
October 13, 2000 between UPC and PPL, as amended, supplemented and/or restated
in accordance therewith prior to the Effective Date, providing for, among other
things, the Arrangement;

   (c) "Arrangement Resolution" means the special resolution of the Pendaries
Shareholders considered at the Pendaries Meeting;

   (d) "Articles of Arrangement" means the articles of arrangement in respect
of the Arrangement required by the NBBCA to be sent to the Director after the
Final Order is made;

   (e) "Business Day" means a day, other than a Saturday, Sunday or statutory
holiday, when banks are generally open for the transactions of banking
business;

   (f) "Court" means The Court of Queen's Bench of New Brunswick

   (g) "Depositary" means Montreal Trust Company of Canada, as the registrar
and transfer agent of the Ultra Common Shares;

   (h) "Director" means the director registrar appointed pursuant to Section
184 of the NBBCA.

   (i) "Effective Date" means the date the Arrangement becomes effective under
the NBBCA as determined by the certificate of arrangement issued by the
Director pursuant to section 129(2) of the NBBCA;

   (j) "Effective Time" means 12:01 am. (Fredericton time) on the Effective
Date;

   (k) "Final Order" means the order of the Court approving the Arrangement, as
such order may be affirmed, amended or modified;

   (l) "Interim Order" means an order of the Court containing declarations and
directions under the NBBCA with respect to the Arrangement;

   (m) "NBBCA" means the Business Corporations Act (New Brunswick);

   (n) "Pendaries Common Shares" means the common shares in the capital of PPL
as constituted on the date hereof;

                                       1
<PAGE>

   (o) "Pendaries Dissenting Shares" means all Pendaries Common Shares which
are deemed to have been cancelled on the Effective Date in accordance with the
provisions of Section 5.1(a);

   (p) "Pendaries Meeting" means the special meeting of the holders of
Pendaries Common Shares, including any adjournment or postponement thereof, to
be called in accordance with the Interim Order to consider and, if thought fit,
approve and adopt the Arrangement;

   (q) "Pendaries Options" means the options granted under agreements or
otherwise to purchase or otherwise acquire shares in the capital of Pendaries
(including without limitation Pendaries Common Shares);

   (r) "Pendaries Shareholders" means the holders of Pendaries Common Shares;

   (s) "Plan" means this plan as amended or supplemented from time to time, and
"hereby", "hereof", "herein", "hereunder", "herewith" and similar terms refer
to this Plan and not to any particular provision of this Plan; and

   (t) "PPL" means Pendaries Petroleum Ltd., a corporation incorporated under
the NBBCA;

   (u) "Ultra Common Shares" means the common shares in the capital of UPC as
constituted on the date hereof; and

   (v) "UPC" means Ultra Petroleum Corp., a corporation subsisting under the
Business Corporations Act (Yukon Territory).

   1.2 The headings contained in this Plan are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Plan.

   1.3 Unless the contrary intention appears, references in this Plan to an
Article, Section or subsection by number or letter or both refer to the
Article, Section or subsection bearing that designation in this Plan.

   1.4 In this Plan, unless the contrary intention appears, words importing the
singular include the plural and vice versa, words importing gender shall
include all genders; and "person" includes any individual, partnership, firm,
trust, body corporate, government, governmental body, agency or
instrumentality, unincorporated body of persons or association.

   1.5 In the event that the date on which any action is required to be taken
hereunder by any of the parties is not a Business Day in the place where the
action is required to be taken, such action shall be required to be taken on
the next succeeding day which is a Business Day in such place.

   1.6 References in this Plan to any statute or sections thereof shall include
such statute as amended or substituted and any regulations promulgated
thereunder from time to time in effect.

                                   ARTICLE 2

                               Effect of the Plan

   2.1 At the Effective Time, the Plan shall be binding upon PPL, the Pendaries
Shareholders, the holders of Pendaries Options and UPC.

                                   ARTICLE 3

                                  Arrangement

   3.1 At the Effective Time, each of the events set out below shall occur and
be deemed to occur in the sequence set out therein without further act or
formality:

  (a) all Pendaries Common Shares (other than the Pendaries Dissenting Shares
      and Pendaries Common Shares held by UPC and its affiliates) shall be
      and shall be deemed to be transferred to UPC in

                                       2
<PAGE>

     exchange for Ultra Common Shares on the basis of one and fifty-eight one
     hundredths of one (1.58) fully paid and non-assessable Ultra Common
     Shares for each one (1.00) Pendaries Common Share; and

  (b) with respect to each Pendaries Common Share to which subsection 3.1 (a)
      applies (other than those Pendaries Common Shares to which section 3.3
      applies):

    (i) the holder thereof shall (A) cease to be a holder of such share, (B)
        such holder's name shall be removed from the register of Pendaries
        Common Shares with respect to such shares, (C) be allotted and
        issued, as fully paid and non-assessable shares, the number of Ultra
        Common Shares calculated in the basis set forth in subsection 3.1(a)
        (subject to section 3.2), and (D) such holder's name shall be added
        to the register of Ultra Common Shares with respect to such Ultra
        Common Shares; and

    (ii) UPC shall be and be deemed to be the transferee and shall be
         entered in the register of Pendaries Common Shares as the holder
         thereof; and

  (c) all Pendaries Options shall be cancelled.

   3.2 No certificates representing fractional Ultra Common Shares will be
issued. In the event that the exchange ratios referred to herein would in any
case otherwise result in a holder of a Pendaries Common Share being entitled to
a fractional Ultra Common Share, an adjustment shall be made to the next
highest whole number of Ultra Common Shares and a certificate for the resulting
whole number of Ultra Common Shares will be issued. In calculating such
fractional interests, all Pendaries Common Shares held by a beneficial holder
of Pendaries Common Shares shall be aggregated.

                                   ARTICLE 4

                            Outstanding Certificates

   4.1 After the Effective Time, certificates formerly representing Pendaries
Common Shares to which subsection 3.1(a) applies shall represent only the right
to receive certificates representing the Ultra Common Shares, if any, which the
former holder of such Pendaries Common Shares is entitled to receive pursuant
to Article 3 subject to compliance with the requirements set forth in this
Article 4.

   4.2 Either prior to or as soon as practicable after the Effective Date, UPC
shall forward to each holder of Pendaries Common Shares to which subsection
3.1(a) applies at the address of such holder as it appeared in the relevant
share register of PPL a letter of transmittal containing, among other things,
instructions for obtaining delivery of certificates representing the Ultra
Common Shares pursuant to this Plan. Such holder of Pendaries Common Shares
shall be entitled to receive certificates representing the Ultra Common Shares
which such holder is entitled to receive pursuant to Article 3 upon delivering
the certificate formerly representing such holder's Pendaries Common Shares to
the Depositary, or as the Depositary may otherwise direct, in accordance with
the instructions contained in the letter of transmittal. Such certificate
formerly representing such holder's Pendaries Common Shares shall be
accompanied by the letter of transmittal, duly completed, and such other
documents as the Depositary may reasonably require. The Depositary shall
register the Ultra Common Shares in such name, and shall deliver by first class
mail, postage prepaid, or, in the case of postal disruption, by such other
means as the Depositary deems prudent certificates representing such Common
Shares to such address as such holder may direct in such letter of transmittal,
as soon as practicable after receipt by the Depositary of such documents.

   4.3 The holders of Pendaries Common Shares shall not be entitled to any
interest, dividend, premium or other payment on or with respect to the
Pendaries Common Shares other than the Ultra Common Shares, if any, which they
are entitled to receive for the Pendaries Common Shares pursuant to this Plan.


                                       3
<PAGE>

   4.4 No dividends or other distributions declared or made with respect to
Ultra Common Shares with a record date after the Effective Time, shall be paid
to the holder of any unsurrendered certificate which immediately prior to the
Effective Time represented outstanding Pendaries Common Shares, unless and
until the holder of such certificate shall surrender such certificate in
accordance with Section 4.2. Subject to applicable law, at the time of such
surrender of any such certificate (or, in the case of clause (z) below, at the
appropriate payment date), there shall be paid to the holder of the
certificates representing Pendaries Common Shares, without interest, (y) the
amount of any cash dividends or other distributions with a record date after
the Effective Time theretofore paid with respect to which such holder is
entitled pursuant hereto, and (z) on the appropriate payment date, the amount
of dividends or other distributions with a record date after the Effective Time
but prior to surrender and a payment date subsequent to surrender payable with
respect to such Ultra Common Shares.

   4.5 In the event any certificate which immediately prior to the Effective
Time represented one or more outstanding Pendaries Common Shares that were
exchanged pursuant to Article 3 shall have been lost, stolen or destroyed, upon
the making of an affidavit of that fact by the person claiming such certificate
to be lost, stolen or destroyed, together with such holder's letter of
transmittal, UPC will issue in exchange for such lost, stolen or destroyed
certificate, certificates representing the UPC Common Shares issuable under
this Plan in accordance with Article 3. When authorizing such issuance of
certificate(s) representing UPC Common Shares issuable in exchange for any
lost, stolen or destroyed certificate, the person to whom such certificate(s)
are to be issued shall, as a condition precedent to the issuance of such
certificate(s), give a bond satisfactory to PPL and UPC and their respective
transfer agents in such sum as PPL and UPC may direct or otherwise indemnify
PPL and UPC in a manner satisfactory to PPL and UPC against any claim that may
be made against PPL and UPC with respect to the certificate alleged to have
been lost, stolen or destroyed.

   4.6 Any certificate which immediately prior to the Effective Time
represented outstanding Pendaries Common Shares that were exchanged pursuant to
Article 3, which is not deposited with all other instruments required by
Section 4.2 on or prior to December 31, 2008 shall cease to represent a claim
or interest of any kind or nature as a securityholder of PPL or UPC. On such
date, Ultra Common Shares to which the former holder of the certificate
referred to in the preceding sentence was ultimately entitled shall be deemed
to have been surrendered for no consideration to UPC, together with all
entitlements to dividends and distributions in respect thereof held for such
former holder. Neither of PPL or UPC shall be liable to any person in respect
of Ultra Common Shares, if any, (or dividends or distributions in respect
thereof) delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.

                                   ARTICLE 5

                           Shareholder Dissent Rights

   5.1 Holders of Pendaries Common Shares may exercise rights of dissent with
respect to such shares pursuant to and in the manner set forth in Section 131
of the NBBCA, as such rights may be modified by the Interim Order and this
Section 5.1 (the "Dissent Rights"), in connection with the Arrangement provided
that, notwithstanding Section 131(5) of the NBBCA, the written objection to the
Arrangement Resolution referred to in Section 131(5) of the NBBCA must be
received by PPL not later than 5:00 p.m. (Toronto time) on the Business Day
preceding the Pendaries Meeting. Holders of Pendaries Common Shares who duly
exercise such rights of dissent and who:

  (a) are ultimately determined to be entitled to be paid fair value for
      their Pendaries Common Shares, shall be deemed to have transferred such
      Pendaries Common Shares as of the Effective Time, without any further
      act or formality and free and clear of all liens, claims and
      encumbrances, to UPC in consideration for a payment of cash from PPL
      equal to such fair value; or

  (b) are ultimately determined not to be entitled, for any reason, to be
      paid fair value for their Pendaries Common Shares, shall be deemed to
      have participated in the Arrangement on the same basis as a

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<PAGE>

     non-dissenting holder of Pendaries Common Shares and shall receive Ultra
     Common Shares on the basis determined in accordance with Article 3;

but in no case shall UPC or any other person be required to recognize such
holders of Pendaries Dissenting Shares as holders of Pendaries Common Shares
after the Effective Time, and the names of such holders of Pendaries Dissenting
Shares shall be deleted from the register of holders of Pendaries Common Shares
at the Effective Time.

                                   ARTICLE 6

                       Amendments to Plan of Arrangement

   6.1 PPL reserves the right to amend, modify and/or supplement this Plan at
any time and from time to time prior to the Effective Date, provided that each
such amendment, modification and/or supplement must be (i) set out in writing,
(ii) approved by UPC, (iii) filed with the Court and, if made following the
Pendaries Meeting, approved by the Court and (iv) communicated to the Pendaries
Shareholders if and as required by the Court.

   6.2 Any amendment, modification or supplement to this Plan may be proposed
by PPL at any time prior to the Pendaries Meeting (provided that UPC shall have
consented thereto) with or without any other prior notice or communication, and
if so proposed and accepted by the persons voting at the Pendaries Meeting
(other than as may be required under the Interim Order), shall become part of
this Plan for all purposes.

   6.3 Any amendment, modification or supplement to this Plan that is approved
by the Court following the Pendaries Meeting shall be effective only if (i) it
is consented to by each of PPL and UPC and (ii) if required by the Court, it is
consented to by the Pendaries Shareholders voting in the manner directed by the
Court.

   6.4 Any amendment, modification or supplement to this Plan may be made
following the Effective Date unilaterally by UPC, provided that it concerns a
matter which, in the reasonable opinion of UPC, is of an administrative nature
required to better give effect to the implementation of this Plan.

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