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                                                                    EXHIBIT 10.2

                           CANAAN ENERGY CORPORATION
                           INDEMNIFICATION AGREEMENT
                           -------------------------


          This INDEMNIFICATION AGREEMENT is dated effective as of
[_______][___], [____], by and between Canaan Energy Corporation, an Oklahoma
corporation (the "Company"), and the director of the Company whose name appears
on the signature page of this Agreement ("Indemnitee") with reference to the
following circumstances.

          A.  Highly competent persons are becoming more reluctant to serve
     publicly-held corporations as directors or in other capacities unless they
     are provided with reasonable protection through insurance or
     indemnification against risks of claims and actions against them arising
     out of their service to and activities on behalf of the corporation.

          B.  It is reasonable, prudent and necessary for the Company
     contractually to obligate itself to indemnify such persons to the fullest
     extent permitted by applicable law so that they will serve or continue to
     serve the Company free from undue concern that they will not be so
     indemnified.

          C.  Indemnitee is willing to serve, to continue to serve and to take
     on additional service for or on behalf of the Company on the condition that
     Indemnitee be so indemnified.

          In consideration of the promises and the covenants contained herein,
the Company and Indemnitee hereby agree as follows:

          1.   Definitions.  For purposes of this Agreement:
               -----------

          (a) "Affiliate" shall mean any corporation, partnership, joint
venture, trust or other enterprise in respect of which the Indemnitee is or was
or will be serving as a director, advisory director or board committee member,
officer, trustee or employee at the request of the Company and including, but
not limited to, any employee benefit plan of the Company or any of the
foregoing.

          (b) "Board" shall mean the Board of Directors of the Company.

          (c) "Disinterested Director" shall mean a director of the Company who
is not and was not a party to the Proceeding in respect of which indemnification
is being sought by Indemnitee.

          (d) "Expenses" shall include all attorneys' fees and costs, retainers,
court costs, transcripts, fees of experts, witness fees, travel expenses,
duplicating costs, printing and binding costs, telephone charges, postage,
delivery service fees and all other disbursements or expenses incurred in
connection with asserting or defending claims.

          (e) "Independent Counsel" shall mean a law firm or lawyer that at the
time of the determination neither is presently nor in the past year has been
retained to represent:  (i) the Company or Indemnitee in any matter material to
any such party or (ii) any other party to the
<PAGE>

Proceeding giving rise to a claim for indemnification hereunder in any matter
material to such other party. Notwithstanding the foregoing, the term
"Independent Counsel" shall not include any firm or person who, under the
applicable standards of professional conduct then prevailing, would have a
conflict of interest in representing the Company or Indemnitee in an action to
determine Indemnitee's right to indemnification under this Agreement.

          (f)  "Losses" shall mean all losses, claims, liabilities, judgments,
fines and amounts paid in settlement in connection with any Proceeding.

          (g)  "Proceeding" includes any action, suit, arbitration, alternate
dispute resolution mechanism, investigation, administrative hearing or any other
proceeding whether civil, criminal, administrative or investigative; provided,
                                                                     --------
however, that the term "Proceeding" shall include any action instituted by an
-------
Indemnitee (other than an action to enforce indemnification rights under this
Agreement) only if such action is authorized by the Board.

          2.   Service by Indemnitee.  Indemnitee shall begin or continue to
               ---------------------
serve the Company and any Affiliates as a director, and/or officer and/or
trustee.  Notwithstanding anything contained herein, this Agreement shall not
create a contract of employment between the Company and Indemnitee, and the
termination of Indemnitee's relationship with the Company or an Affiliate by
either party hereto shall not be restricted by this Agreement.

          3.   Indemnification.  The Company shall indemnify Indemnitee for, and
               ---------------
hold Indemnitee harmless from and against, any Losses or Expenses at any time
incurred by or assessed against Indemnitee arising out of or in connection with
the service of Indemnitee as a director, advisory director, Board Committee
member, officer or trustee of the Company or of an Affiliate (collectively
referred to as a "Company Official") to the fullest extent permitted by the laws
of the State of Oklahoma in effect on the date hereof or as such laws may from
time to time hereafter be amended to increase the scope of such permitted
indemnification.  Without diminishing the scope of the indemnification provided
by this Section 3, the rights of indemnification of Indemnitee provided
hereunder shall include but shall not be limited to those rights set forth
hereinafter.

          4.   Action or Proceeding Other Than an Action by or in the Right of
               ---------------------------------------------------------------
the Company.  Indemnitee shall be entitled to the indemnification rights
-----------
provided herein if Indemnitee is a person who was or is made a party or is
threatened to be made a party to any contemplated, pending or completed
Proceeding, other than an action by or in the right of the Company, as the case
may be, by reason of (a) the fact that Indemnitee is or was a Company Official,
or (b) anything done or not done by Indemnitee in any such capacity.  Pursuant
to this Section, Indemnitee shall be indemnified against Losses or Expenses
incurred by Indemnitee or on Indemnitee's behalf in connection with any
Proceeding, if Indemnitee acted in good faith and in a manner Indemnitee
reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal Proceeding, had no reasonable cause
to believe his conduct was unlawful.

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          5.   Actions by or in the Right of the Company.  Indemnitee shall be
               -----------------------------------------
entitled to the indemnification rights provided herein if Indemnitee is a person
who was or is made a party or is threatened to be made a party to any pending,
completed or threatened Proceeding brought by or in the right of the Company to
procure a judgment in its favor by reason of (a) the fact that Indemnitee is or
was a Company Official, or (b) anything done or not done by Indemnitee in any
such capacity.  Pursuant to this Section, Indemnitee shall be indemnified
against Losses or Expenses incurred by Indemnitee or on Indemnitee's behalf in
connection with any Proceeding if Indemnitee acted in good faith and in a manner
Indemnitee reasonably believed to be in or not opposed to the best interests of
the Company.  Notwithstanding the foregoing provisions of this Section, no such
indemnification shall be made in respect of any claim, issue or matter as to
which Oklahoma law expressly prohibits such indemnification by reason of an
adjudication of liability of Indemnitee to the Company; provided, however, that
                                                        --------  -------
in such event such indemnification shall nevertheless be made by the Company to
the extent that the court in which such action or suit was brought shall
determine that, despite the adjudication of liability but in view of all the
circumstances of the case, Indemnitee is fairly and reasonably entitled to
indemnification.

          6.   Indemnification for Losses and Expenses of Party Who is Wholly or
               -----------------------------------------------------------------
Partly Successful.  Notwithstanding any provision of this Agreement, to the
-----------------
extent that Indemnitee has been wholly successful on the merits or otherwise in
any Proceeding on any claim, issue or matter, Indemnitee shall be indemnified
against all Losses or Expenses incurred by Indemnitee or on Indemnitee's behalf
in connection therewith.  If Indemnitee is not wholly successful in such
Proceeding but is successful, on the merits or otherwise, as to one or more but
less than all claims, issues or matters in such Proceeding, the Company shall
indemnify Indemnitee to the maximum extent permitted by law, against all Losses
and Expenses incurred by Indemnitee in connection with each successfully
resolved claim, issue or matter.  In any review or Proceeding to determine the
extent of indemnification, the Company shall bear the burden of proving any lack
of success and which amounts sought in indemnity are allocable to claims, issues
or matters that were not successfully resolved.  For purposes of this Section
and without limitation, the termination of any such claim, issue or matter by
dismissal with or without prejudice shall be deemed to be a successful
resolution as to such claim, issue or matter.

          7.   Payment for Expenses of a Witness.  Notwithstanding any other
               ---------------------------------
provision of this Agreement, to the extent that Indemnitee is, by reason of the
fact that Indemnitee is or was a Company Official, a witness in any Proceeding,
the Company shall pay to Indemnitee all Expenses actually and reasonably
incurred by Indemnitee or on Indemnitee's behalf in connection therewith.

          8.   Advancement of Expenses and Costs.  All Expenses incurred by or
               ---------------------------------
on behalf of Indemnitee (or reasonably expected by Indemnitee to be incurred by
Indemnitee within three months) in connection with any Proceeding shall be paid
by the Company in advance of the final disposition of such Proceeding within
twenty days after the receipt by the Company of a statement or statements from
Indemnitee requesting from time to time such advance or advances whether or not
a determination to indemnify has been made under Section 9.  Indemnitee's
entitlement to such advancement of Expenses shall include those incurred in
connection with any Proceeding by

                                      -3-
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Indemnitee seeking an adjudication or award in arbitration pursuant to this
Agreement. Such statement or statements shall evidence such Expenses incurred
(or reasonably expected to be incurred) by Indemnitee in connection therewith
and shall include or be accompanied by a written undertaking in form and
substance satisfactory to the Company and the Indemnitee by or on behalf of
Indemnitee to repay such amount if it shall ultimately be determined that
Indemnitee is not entitled to be indemnified therefor pursuant to the terms of
this Agreement.

          9.   Procedure for Determination of Entitlement to Indemnification.
               -------------------------------------------------------------
(a) When seeking indemnification under this Agreement (which shall not include
in any case the right of Indemnitee to receive payments pursuant to Section 7
and Section 8 hereof, which shall not be subject to this Section 9), Indemnitee
shall submit a written request for indemnification to the Company.  Such request
shall include documentation or information that is reasonably necessary for the
Company to make a determination of Indemnitee's entitlement to indemnification
hereunder and that is reasonably available to Indemnitee.  Determination of
Indemnitee's entitlement to indemnification shall be made promptly, but in no
event later than 90 days after receipt by the Company of Indemnitee's written
request for indemnification.  The Company shall, promptly upon receipt of
Indemnitee's request for indemnification, advise the Board that Indemnitee has
made such request for indemnification.

          (b)  The entitlement of Indemnitee to indemnification under this
Agreement shall be determined in the specific case by a majority vote of a
quorum of the Board consisting of Disinterested Directors.  If such a quorum is
not obtainable or the Board, by the majority vote of Disinterested Directors,
directs, the determination shall be made by Independent Counsel in a written
opinion.

          (c)  In the event the determination of entitlement is to be made by
Independent Counsel, such Independent Counsel shall be selected by the Board and
approved by Indemnitee. Upon failure of the Board to so select such Independent
Counsel or upon failure of Indemnitee to so approve, such Independent Counsel
shall be selected by the American Arbitration Association or such other person
as such Association shall designate to make such selection.  All Expenses of the
Independent Counsel incurred in connection with acting pursuant to this
Agreement shall be borne by the Company.

          (d)  If the person or persons empowered pursuant to Section 9(b)
hereof to make a determination with respect to entitlement to indemnification
shall have failed to make the requested determination within 90 days after
receipt by the Company of such request, the requisite determination of
entitlement to indemnification shall be deemed to have been made and Indemnitee
shall be absolutely entitled to such indemnification, absent (i)
misrepresentation by Indemnitee of a material fact in the request for
indemnification or (ii) a final judicial determination that all or any part of
such indemnification is expressly prohibited by law.

          (e)  The termination of any Proceeding by judgment, order, settlement
or conviction, or upon a plea of nolo contendere or its equivalent, shall not,
                                 ---- ----------
of itself, adversely affect

                                      -4-
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the rights of Indemnitee to indemnification hereunder except as may be
specifically provided herein, or create a presumption that Indemnitee did not
act in good faith and in a manner that Indemnitee reasonably believed to be in
or not opposed to the best interests of the Company or create a presumption that
(with respect to any criminal action or proceeding) Indemnitee had reasonable
cause to believe that Indemnitee's conduct was unlawful.

          (f)  For purposes of any determination of good faith hereunder,
Indemnitee shall be deemed to have acted in good faith if in taking such action
Indemnitee relied on the records or books of account of the Company or an
Affiliate, including financial statements, or on information supplied to
Indemnitee by the officers of the Company or an Affiliate in the course of their
duties, or on the advice of legal counsel for the Company or an Affiliate or on
information or records given or reports made to the Company or an Affiliate by
an independent certified public accountant or by an appraiser, petroleum
engineer or other expert selected with reasonable care by the Company or an
Affiliate.  The Company shall have the burden of establishing the absence of
good faith.  The provisions of this Section 9(f) shall not be deemed to be
exclusive or to limit in any way the other circumstances in which the Indemnitee
may be deemed to have met the applicable standard of conduct set forth in this
Agreement.

          (g)  The knowledge and/or actions, for failure to act, of any
director, officer, agent or employee of the Company or an Affiliate shall not be
imputed to Indemnitee for purposes of determining the right to indemnification
under this Agreement.

          10.  Remedies in Cases of Determination not to Indemnify or to Advance
               -----------------------------------------------------------------
Expenses.  (a) In the event that (i) a determination is made that Indemnitee is
--------
not entitled to indemnification hereunder, (ii) advances are not made pursuant
to Section 8 hereof or (iii) payment has not been timely made following a
determination of entitlement to indemnification pursuant to Section 9 hereof,
Indemnitee shall be entitled to seek a final adjudication either through an
arbitration proceeding or in an appropriate court of the State of Oklahoma or
any other court of competent jurisdiction of Indemnitee's entitlement to such
indemnification or advance.

          (b)  In the event a determination has been made in accordance with the
procedures set forth in Section 9 hereof, in whole or in part, that the
Indemnitee is not entitled to indemnification, any judicial proceeding or
arbitration referred to in paragraph (a) of this Section 10 shall be de novo and
                                                                     -- ----
Indemnitee shall not be prejudiced by reason of any such prior determination
that Indemnitee is not entitled to indemnification, and the Company shall bear
the burdens of proof specified in paragraphs 6 and 9 hereof in such proceeding.

          (c)  If a determination is made or deemed to have been made pursuant
to the terms of Section 9 or 10 hereof that Indemnitee is entitled to
indemnification, the Company shall be bound by such determination in any
judicial proceeding or arbitration in the absence of (i) a misrepresentation of
a material fact by Indemnitee or (ii) a final judicial determination that all or
any part of such indemnification is expressly prohibited by law.

                                      -5-
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          (d)  The Company and Indemnitee shall be precluded from asserting that
the procedures and presumptions of this Agreement are not valid, binding and
enforceable.  The Company and Indemnitee shall stipulate in any such court that
the Company and Indemnitee are bound by all of the provisions of this Agreement
and are precluded from making any assertion to the contrary.

          (e)  To the extent deemed appropriate by the court, interest shall be
paid by the Company to Indemnitee at a reasonable interest rate for amounts that
the Company indemnifies or is obliged to indemnify the Indemnitee for the period
commencing with the date on which Indemnitee requested indemnification (or
reimbursement or advance of an Expense) and ending with the date that such
payment is made to Indemnitee by the Company.

          11.  Expenses Incurred by Indemnitee to Enforce this Agreement.  All
               ---------------------------------------------------------
Expenses incurred by Indemnitee in connection with the preparation and
submission of Indemnitee's request for indemnification hereunder shall be borne
by the Company.  In the event that Indemnitee is a party to or intervenes in any
proceeding in which the validity or enforceability of this Agreement is at issue
or seeks an adjudication to enforce Indemnitee's rights under, or to recover
damages for breach of, this Agreement, Indemnitee, if Indemnitee prevails in
whole in such action, shall be entitled to recover from the Company, and shall
be indemnified by the Company against any Expenses incurred by Indemnitee.  If
it is determined that Indemnitee is entitled to indemnification for part (but
not all) of the indemnification so requested, Expenses incurred in seeking
enforcement of such partial indemnification shall be reasonably prorated among
the claims, issues or matters for which the Indemnitee is entitled to
indemnification and for claims, issues or matters for which the Indemnitee is
not so entitled.

          12.  Non-Exclusivity.  The rights of indemnification and to receive
               ---------------
advances as provided by this Agreement shall not be deemed exclusive of any
other rights to which Indemnitee may at any time be entitled under applicable
law, a certificate of incorporation, by-laws, any agreement, a vote of
stockholders or a resolution of directors or otherwise.  To the extent
Indemnitee would be prejudiced thereby, no amendment, alteration, rescission or
replacement of this Agreement or any provision hereof shall be effective as to
Indemnitee with respect to any action taken or omitted by such Indemnitee in
Indemnitee's position with the Company or an Affiliate prior to such amendment,
alteration, rescission or replacement.

          13.  Duration of Agreement.  This Agreement shall apply to any claim
               ---------------------
asserted and any Losses and Expenses incurred in connection with any claim
asserted on or after the effective date of this Agreement and shall continue
until and terminate upon the later of:  (a) ten (10) years after Indemnitee has
ceased to serve as a Company Official; or (b) one (1) year after the final
termination of all pending or threatened Proceedings of the kind described
herein with respect to Indemnitee. This Agreement shall be binding upon the
Company and its successors and assigns and shall inure to the benefit of
Indemnitee and Indemnitee's spouse, assigns, heirs, devisee, executors,
administrators or other legal representatives.

                                      -6-
<PAGE>

          14.  Maintenance of D&O Insurance.  (a) So long as Indemnitee shall
               ----------------------------
continue to serve as a Company Official and thereafter so long as Indemnitee
shall be subject to any possible claim or threatened, pending or completed
Proceeding, whether civil, criminal or investigative, by reason of the fact that
Indemnitee was a Company Official, the Company shall use commercially reasonable
efforts to maintain in full force and effect directors' and officers' liability
insurance issued by reputable insurers and having policy amounts and deductibles
and other provisions as the Company deems to be commercially reasonable under
the circumstances.  The Company will keep the Indemnitee advised of the amount
and terms of any D&O Insurance and will promptly notify Indemnitee of any
proposed non-renewal, cancellation or termination of D&O Insurance as soon as
practicable after receiving notice thereof.

          15.  Severability.  Should any part, term or condition hereof be
               ------------
declared illegal or unenforceable or in conflict with any other law, the
validity of the remaining portions or provisions of this Agreement shall not be
affected thereby, and the illegal or unenforceable portions of the Agreement
shall be and hereby are redrafted to conform with applicable law, while leaving
the remaining portions of this Agreement intact.

          16.  Counterparts.  This Agreement may be executed in several
               ------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same document.

          17.  Headings.  Section headings are for convenience only and do not
               --------
control or affect meaning or interpretation of any terms or provisions of this
Agreement.

          18.  Modification and Waiver.  No supplement, modification or
               -----------------------
amendment of this Agreement shall be binding unless executed in writing by each
of the parties hereto.

          19.  No Duplicative Payment.  The Company shall not be liable under
               ----------------------
this Agreement to make any payment of amounts otherwise indemnifiable hereunder
if and to the extent that Indemnitee has otherwise actually received such
payment (net of Expenses incurred in collecting such payment) under this
Agreement, any insurance policy, contract, agreement or otherwise.

          20.  Notices.  All notices, requests, demands and other communications
               -------
provided for by this Agreement shall be in writing (including telecopier or
similar writing) and shall be deemed to have been given at the time when mailed
in a registered or certified postpaid envelope in any general or branch office
of the United States Postal Service, or sent by Federal Express or other similar
overnight courier service, addressed to the address of the parties stated below
or to such changed address as such party may have fixed by notice or, if given
by telecopier, when such telecopy is transmitted and the appropriate answerback
is received.

               (a)  If to Indemnitee, to the address on the signature page
hereof.

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               (b)  If to the Company to:

                         Canaan Energy Corporation
                         119 North Robinson, Suite 600
                         Oklahoma City, Oklahoma 73102

          21.  Governing Law.  The parties agree that this agreement shall be
               -------------
governed by, and construed and enforced in accordance with, the internal laws of
the State of Oklahoma without giving effect to the conflicts of laws principles
thereof.

          22.  Entire Agreement.  Subject to the provisions of Section 12
               ----------------
hereof, this Agreement constitutes the entire understanding between the parties
and supersedes all proposals, commitments, writings, negotiations and
understandings, oral and written, and all other communications between the
parties relating to the subject matter of this Agreement.  This Agreement may
not be amended or otherwise modified except in writing duly executed by all of
the parties.  A waiver by any party of any breach or violation of this Agreement
shall not be deemed or construed as a waiver of any subsequent breach or
violation thereof.

          IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.

                              CANAAN ENERGY CORPORATION


                              By:_______________________________
                              Title:____________________________


                              INDEMNITEE:


                              __________________________________
                              __________________________________



                              Address:__________________________
                              __________________________________

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