ARRANGEMENT AGREEMENT

         THIS   ARRANGEMENT   AGREEMENT   dated  as  of  June  16,   1999  (this
"Agreement"),  is made and entered into by and between Greka Energy Corporation,
a Colorado  corporation  ("Greka"),and  Beaver Lake  Resources  Corporation,  an
Alberta corporation ("Beaver Lake").

         WHEREAS,  in furtherance of the Arrangement,  the Board of Directors of
Beaver Lake has agreed to submit the Plan of  Arrangement in the form of Exhibit
1 hereto  and the  other  transactions  contemplated  by this  Agreement  to its
shareholders for approval;

         WHEREAS,  in furtherance of the Arrangement,  following approval by the
shareholders of Beaver Lake of the transactions  contemplated by this Agreement,
Beaver Lake will submit the Plan of Arrangement to the Court for approval; and

         WHEREAS,   the   parties   hereto   desire   to   set   forth   certain
representations,  warranties  and  covenants  made by each  to the  other  as an
inducement to the consummation of the Arrangement;

         NOW,  THEREFORE,  in  consideration  of the  premises and of the mutual
representations,  warranties and covenants herein contained,  the parties hereto
hereby agree as follows:

                                    ARTICLE 1
                                 INTERPRETATION
1.1      Definitions

         In this Agreement, unless the context otherwise requires, the following
terms shall have the respective meanings set forth below:

"ABCA" means the Business  Corporations  Act  (Alberta),  S.A. 1981, C. B-15, as
amended from time to time, including the regulations promulgated thereunder;

"ASE" means The Alberta Stock Exchange.

"Affiliate"  with  respect to any  Person,  means any Person  that  directly  or
indirectly  controls,  is  controlled  by or is under  common  control with such
Person;

"Acquisition Proposal" has the meaning set forth in Section 5.5;

"Arrangement"  means the arrangement  under section 186 of the ABCA on the terms
and subject to the conditions set forth in the Plan of Arrangement;

"Articles of  Arrangement"  means the articles of  arrangement in respect of the
Arrangement  required  by the ABCA to be sent to the  Registrar  after the Final
Order is made;

"Beaver Lake Articles" means Beaver Lake's Articles of Amalgamation, as amended;

"Beaver Lake Assets" means all of the assets and properties of Beaver Lake;

                                      B-1

<PAGE>

"Beaver Lake  Certificate"  means a certificate  that  immediately  prior to the
Effective Date represented outstanding Beaver Lake Common Shares;

"Beaver Lake Commission  Filings" means all reports and other filings (including
all  notes,  exhibits  and  schedules  thereto  and  documents  incorporated  by
reference therein) filed by Beaver Lake with the ASE or the Commissions, through
the date of this Agreement, together with any amendments thereto;

"Beaver Lake Affiliates" has the meaning set forth in Section 6.2(h);

"Beaver  Lake Common  Shareholders"  means the holders of the Beaver Lake Common
Shares;

"Beaver  Lake Common  Shares"  means the common  shares in the capital of Beaver
Lake;

"Beaver Lake Disclosure  Letter" means the disclosure letter delivered by Beaver
Lake to Greka on the date hereof;

"Beaver Lake MAE" means (i) a single event,  occurrence  or fact that  (together
with all other events, occurrences and facts) would have, or might reasonably be
expected to have, a material adverse effect on the assets, business, operations,
prospects or financial condition of Beaver Lake or (ii) an item that prevents or
adversely  affects  the  ability of Beaver  Lake to perform  and comply with its
obligations  under this  Agreement  or any other  agreement  to be executed  and
delivered in connection with the transactions contemplated hereby or thereby;

"Beaver Lake Non-Voting  Shares" means the convertible  non-voting shares in the
capital of Beaver Lake;

"Beaver Lake Options" means the outstanding  options to purchase an aggregate of
o Beaver  Lake Common  Shares  under the Beaver Lake Option Plan and Beaver Lake
Share Option Agreements;

"Beaver  Lake Option  Plan" means the Beaver Lake  Resources  Corporation  Stock
Option Plan;

"Beaver Lake Permits" has the meaning set forth in Section 3.2(o);

"Beaver Lake  Shareholders  Meeting" means the annual and special meeting of the
shareholders of Beaver Lake  (including any  adjournment  thereof) that is to be
convened as provided by the Interim Order to consider,  and if deemed advisable,
approve the Arrangement;

"Benefit  Program  or  Agreement"  means  any  stock  option  plan,   collective
bargaining  agreement,  bonus  plan  or  arrangement,  incentive  award  plan or
arrangement,  pension  plan,  vacation  policy,  severance  pay plan,  policy or
agreement,   deferred   compensation   agreement   or   arrangement,   executive
compensation  or  supplemental   income   arrangement,   consulting   agreement,
employment   agreement  and  each  other  employee   benefit  plan,   agreement,
arrangement,  program, practice or understanding to which Beaver Lake is a party
or has any obligation;

                                      B-2

<PAGE>

"Business Day" means, with respect to any action to be taken, any day other than
Saturday,  Sunday or a statutory holiday in the place where such action is to be
taken;

"Closing" means the closing of the  transactions  contemplated by this Agreement
on the Effective Date;

"Commissions" means the Securities  Commissions in Ontario,  Alberta and British
Columbia;

"Court" means the Court of Queen's Bench of Alberta;

"Demands"  means  any  claims,  actions,  suits,  investigations,  inquiries  or
proceedings;

"Depositary"  means Montreal  Trust Company of Canada at its offices  located at
600, 530 - 8th Avenue S.W., Calgary, Alberta T2P 3S8;

"Effective  Date" means the date the  Articles of  Arrangement  are accepted for
filing by the Registrar;

"Environmental  Laws"  means  any and all  laws,  statutes,  ordinances,  rules,
regulations,  orders or determinations of any Governmental  Entity pertaining to
health or the environment  currently in effect in any and all  jurisdictions  in
which the  party in  question  and its  subsidiaries  own  property  or  conduct
business;

"Final Order" means the final order of the Court approving the Arrangement to be
applied for following the Beaver Lake  Shareholders  Meeting pursuant to section
186(9) of the ABCA;

"Greka Common Stock" means the common stock of Greka;

"Greka MAE" means (i) a single event, occurrence or fact that (together with all
other events, occurrences and facts) would have, or might reasonably be expected
to  have,  a  material  adverse  effect  on the  assets,  business,  operations,
prospects or financial condition of Greka and its subsidiaries on a consolidated
basis or (ii) an item that prevents or adversely affects the ability of Greka to
perform  and  comply  with its  obligations  under this  Agreement  or any other
agreement  to be executed  and  delivered in  connection  with the  transactions
contemplated hereby or thereby;

"Governmental  Entity" means any court,  administrative  agency or commission or
other  governmental  authority or agency,  domestic or foreign,  including local
authorities, and any arbitration board or panel;

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

"Interim Order" means the interim order of the Court made in connection with the
approval of the Arrangement;

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<PAGE>

"Lien" means any lien,  mortgage,  pledge,  security  interest,  restriction  on
transfer,  option, charge, right of any third Person or any other encumbrance of
any nature;

"NASDAQ" means the NASDAQ stock listing and exchange systems.

"Other  Agreements"  means,  other  than  this  Agreement,  the  agreements  and
instruments  contemplated  to be executed and delivered in  connection  with the
Arrangement;

"Permitted Liens" means (A) Liens for taxes not due and payable and (B) inchoate
mechanics',  warehousemen's  and other  statutory Liens incurred in the ordinary
course of business;

"Person"  means  an  individual,   corporation,   limited   liability   company,
partnership, Governmental Entity or any other entity;

"Plan of  Arrangement"  means  the plan of  arrangement,  which is  attached  as
Exhibit 1 and any  amendment  or  supplement  thereto  made in  accordance  with
Section 7.3;

"Policy 9.1" means Policy Statement 9.1 of the Ontario Securities Commission;

"Proprietary Rights" means all patents, inventions, shop rights, know how, trade
secrets,   designs,   plans,   manuals,   computer   software,   specifications,
confidentiality  agreements,  confidential  information  and  other  proprietary
technology and similar information;  all registered and unregistered trademarks,
service marks,  logos,  names,  trade names and all other trademark rights;  all
registered  and  unregistered   copyrights;   and  all  registrations  for,  and
applications for  registration  of, any of the foregoing,  in each case that are
used  in the  conduct  of the  business  of  Beaver  Lake  or  any  Beaver  Lake
Subsidiary;

"Proxy Circular" means the proxy circular,  as amended or supplemented from time
to time,  relating to the approval by the Beaver Lake Common Shareholders at the
Beaver Lake Shareholders Meeting of the Arrangement;

"Recommendation" has the meaning set forth in Section 5.1(c);

"Registrar"  means the Registrar of Corporations  appointed  pursuant to section
253 of the ABCA;

"SEC" means the United States Securities and Exchange Commission;

"SEC  Documents"  means Greka's  Annual Report or Form 10-KSB dated December 31,
1998,  and Form 10-Q dated March 31, 1999,  its Current  Reports on Form 8-K and
its proxy statement with respect to the Special Meeting of Stockholders of Greka
held on March 24, 1999;

"Securities Act" means the United States Securities Act of 1933, as amended;

"Sproule" means Sproule Associates Limited;

                                      B-4

<PAGE>

"Sproule  Report"  means the report  dated  December 31, 199 prepared by Sproule
evaluating Beaver Lake's reserves of oil, natural gas liquids and natural gas as
at December 31, 1998;

1.2      Exhibit

         The  following  Exhibit  is  annexed  to  and  incorporated  into  this
Agreement by reference and is deemed to be a part hereof:

         Exhibit 1 -- Plan of Arrangement

                                    ARTICLE 2
                                 THE ARRANGEMENT
2.1      Court Approval

         As soon as reasonably practicable, Beaver Lake shall apply to the Court
pursuant to section 186 of the ABCA for an order  approving the  Arrangement and
in connection with such application shall:

(a)      forthwith  file,  proceed with and diligently  prosecute an application
         for an Interim Order under section  186(4) of the ABCA  providing  for,
         among  other  things,  the  calling  and  holding  of the  Beaver  Lake
         Shareholders  Meeting as provided for in Section 5.1(a) for the purpose
         of considering and, if deemed advisable, approving the Arrangement; and

(b)      subject  to  obtaining   such   approval  of  the  Beaver  Lake  Common
         Shareholders 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,  and,  subject to the fulfilment of the conditions
         set forth in Article 6, shall  deliver  to the  Registrar  Articles  of
         Arrangement  and such other documents as may be required to give effect
         to the Arrangement.

2.2      Closing

         The Closing  shall take place at the offices of  McCaffery  Goss Mudry,
2200 736 6th Avenue S.W.  Calgary,Alberta,  Canada, as soon as practicable after
the  satisfaction  or waiver of the  conditions  set forth in  Article 6 but not
later than three Business Days after the Final Order is granted or at such other
time and place and on such  other date as Greka and  Beaver  Lake  shall  agree;
provided  that the  closing  conditions  set forth in  Article 6 shall have been
satisfied or waived at or prior to such time.

2.3      Consummation of the Arrangement

         At the Closing,  the parties  hereto will cause the  Arrangement  to be
consummated  by filing with the  Registrar the Articles of  Arrangement  in such
form as required by, and executed in accordance with, the relevant provisions of
the ABCA and the Final Order.

2.4      Effects of the Arrangement

         The  Arrangement  shall have the  effects  set forth in the  applicable
provisions of the ABCA and the Final Order.

                                      B-5

<PAGE>

2.5      Conversion of Securities

         Subject to the terms and conditions of this Agreement, at the Effective
Date, by virtue of the Arrangement and without any further action on the part of
any of the parties hereto or their  shareholders,  each Beaver Lake Common Share
issued and  outstanding  immediately  prior to the Effective Date and held other
than by Greka  shall be  exchanged  for Greka  Common  Stock on the basis of one
share of Greka Common Stock for every 74.40  Beaver Lake Common  Shares.  If the
application of the foregoing  exchange  ratio to the aggregate  number of Beaver
Lake Common Shares  beneficially owned by a Beaver Lake Common Shareholder would
result in such holder  being  entitled to receive a fraction of a share of Greka
Common  Stock,  then in respect of such fraction the holder shall receive a cash
payment from Greka for an amount equal to such fractional interest multiplied by
$9.15(U.S.).

2.6      Taking of Necessary Action; Further Action

         The parties hereto shall take all such  reasonable and lawful action as
may be  necessary or  appropriate  in order to  effectuate  the  Arrangement  as
promptly as possible.

                                    ARTICLE 3
                         REPRESENTATIONS AND WARRANTIES

3.1      Representations and Warranties of Greka

         Greka hereby represents and warrants to Beaver Lake that:

(a)      Organization  and  Compliance  with  Law  Greka is a  corporation  duly
         incorporated,  validly  existing and in good standing under the laws of
         its jurisdiction of  incorporation.  Greka has all requisite  corporate
         power  and  corporate   authority   and  all   necessary   governmental
         authorizations  to own,  lease and  operate all of its  properties  and
         assets  and to carry on its  business  as now being  conducted,  except
         where the  failure  to have such  authorization  would not have a Greka
         MAE. Greka is duly  qualified as a foreign  corporation to do business,
         and is in good  standing,  in each  jurisdiction  in which the property
         owned, leased or operated by it or the nature of the business conducted
         by it makes such qualification necessary,  except in such jurisdictions
         where the  failure to be duly  qualified  does not and would not have a
         Greka MAE. Greka is in compliance with all applicable laws,  judgments,
         orders,  rules and  regulations,  domestic  and  foreign,  except where
         failure to be in such compliance would not have a Greka MAE.

(b)      Capitalization  The  authorized  capital  stock  of Greka  consists  of
         50,000,000 shares of Greka Common Stock, of which 4,352,589 shares were
         issued and outstanding as of the date hereof.


                                      B-6

<PAGE>

(c)      Authorization  and Validity of Agreement  The execution and delivery by
         Greka of this Agreement and the Other  Agreements and the  consummation
         by them of the transactions  contemplated  hereby and thereby have been
         duly authorized by all necessary  corporate action.  This Agreement has
         been duly  executed  and  delivered by Greka and is a valid and binding
         obligation of Greka,  enforceable  against Greka in accordance with its
         terms,   except  as   enforceability   may  be  limited  by  applicable
         bankruptcy, insolvency, reorganization, moratorium or similar laws from
         time to time in effect that affect  creditors'  rights generally and by
         legal  and  equitable  limitations  on  the  availability  of  specific
         remedies.  The Other Agreements,  when executed and delivered by Greka,
         as applicable, will constitute valid and binding obligations of Greka ,
         enforceable  against them in accordance  with their  respective  terms,
         except as  enforceability  may be  limited  by  applicable  bankruptcy,
         insolvency,  reorganization,  moratorium  or similar  laws from time to
         time in effect that affect creditors' rights generally and by legal and
         equitable limitations on the availability of specific remedies.

(d)      No Approvals or Notices Required; No Conflict Neither the execution and
         delivery  of  this  Agreement  nor  the  performance  by  Greka  of its
         obligations  hereunder,   nor  the  consummation  of  the  transactions
         contemplated  hereby by Greka,  will (i) conflict  with the articles or
         bylaws of Greka;  (ii) assuming  satisfaction of the  requirements  set
         forth in clause (iii) below, violate any provision of law applicable to
         Greka; (iii) except for (A) issuance of the Interim Order and the Final
         Order by the  Court,  (B)  requirements  of  Canadian,  United  States,
         provincial or state securities laws, (C) requirements of notice filings
         in such foreign  jurisdictions  as may be applicable and (D) the filing
         of Articles of  Arrangement  in accordance  with the ABCA,  require any
         consent or approval of, or filing with or notice to, any public body or
         authority,  domestic or foreign,  under any provision of law applicable
         to Greka .; or (iv) require any consent,  approval or notice under,  or
         violate,  breach,  be in conflict  with or  constitute a default (or an
         event that,  with notice or lapse of time or both,  would  constitute a
         default)  under,  or permit the  termination  of any  provision  of, or
         result in the creation or imposition  of any Lien upon any  properties,
         assets or business of Greka under, any note, bond, indenture, mortgage,
         deed  of  trust,  lease,  franchise,  permit,  authorization,  license,
         contract,  instrument  or other  agreement or  commitment or any order,
         judgment  or decree to which  Greka is a party or by which it or any of
         its assets or properties is bound or encumbered,  except (A) those that
         have already been given,  obtained or filed and (B) those that,  in the
         aggregate, would not have a Greka MAE.

(e)      Voting  Requirements  No vote of the  holders of shares of the  capital
         stock  of  Greka  is  necessary  to  approve  this  Agreement  and  the
         Arrangement.

(f)      Information  Supplied  The  information  supplied  or to be supplied by
         Greka for inclusion or incorporation by reference in the Proxy Circular
         shall,  at the date the Proxy  Circular is first  mailed to Beaver Lake
         Common  Shareholders  and at the time of the Beaver  Lake  Shareholders
         Meeting,  be true and complete in all  material  respects and shall not
         contain  any  misrepresentation  (as  defined  in  the  Securities  Act
         (Alberta)).


                                      B-7

<PAGE>

(g)      Authorization  for Greka  Common  Stock  Greka has taken all  necessary
         action to permit it to issue the number of shares of Greka Common Stock
         required to be issued  pursuant to the terms of the Plan of Arrangement
         and this Agreement. The shares of Greka Common Stock issued pursuant to
         the terms of the Plan of  Arrangement  and this  Agreement  will,  when
         issued, be validly issued, fully paid and nonassessable and not subject
         to preemptive rights.

(h)      SEC Documents  Greka has provided to Beaver Lake the SEC Documents.  As
         of their respective  dates, the SEC Documents  complied in all material
         respects with the requirements of the United States Securities Exchange
         Act of 1934,  as  amended,  and the  rules and  regulations  of the SEC
         promulgated  thereunder  applicable to such SEC Documents,  and none of
         the SEC Documents  contained any untrue statement of a material fact or
         omitted  to state a  material  fact  required  to be stated  therein or
         necessary  in  order to make the  statements  therein,  in light of the
         circumstances   under  which  they  were  made,  not  misleading.   The
         consolidated   financial  statements  of  Greka  included  in  the  SEC
         Documents  comply as to form in all material  respects with  applicable
         accounting  requirements and the published rules and regulations of the
         SEC with respect thereto,  have been prepared in accordance with United
         States generally accepted accounting principles applied on a consistent
         basis  during the periods  involved  (except as may be indicated in the
         notes thereto) and fairly present the consolidated  financial  position
         of Greka and its consolidated  subsidiaries as of the dates thereof and
         the  consolidated  results of their  operations  and cash flows for the
         periods then ended. Except as set forth in the SEC Documents,  no event
         has  occurred  since the date of filing of such  documents  that  would
         constitute a Greka MAE.

(i)      Conduct of Business in the Ordinary Course;  Absence of Certain Changes
         and Events  Since  December 31, 1998,  except as  contemplated  by this
         Agreement or as disclosed in the SEC Documents, there has not been: (i)
         a Greka  MAE or (ii) any other  condition,  event or  development  that
         reasonably may be expected to result in a Greka MAE.

(j)      Litigation  Except as disclosed in writing to Beaver Lake, there are no
         Demands  pending or, to the knowledge of Greka,  threatened  against or
         affecting (i) Greka or any of its  properties  at law or in equity,  or
         any of their  employee  benefit plans or  fiduciaries  of such plans or
         (ii) any Greka Subsidiary or any of their respective  properties at law
         or in equity,  or any of their  respective  employee  benefit  plans or
         fiduciaries  of  such  plans,  before  or by  any  Governmental  Entity
         wherever  located that (x) could prevent or hinder the  consummation of
         the  transactions  contemplated  by  this  Agreement  or  the  Plan  of
         Arrangement;  or (y) would otherwise,  if adversely determined,  have a
         Greka MAE.

(k)      Environmental Matters To Greka's knowledge, the properties,  operations
         and  activities  of Greka  comply  in all  material  respects  with all
         applicable Environmental Laws, except for failures to comply that would
         not have a Greka MAE;  and (ii) Greka is not  subject to any  existing,
         pending or, to its knowledge,  threatened action, suit,  investigation,
         inquiry or  proceeding by or before any  Governmental  Entity under any
         Environmental  Law which, if adversely  determined,  would have a Greka
         MAE.  Except  as may be  disclosed  in SEC  Documents  filed by Saba or
         otherwise made in writing.

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<PAGE>

(l)      Compliance with Laws Greka holds all required,  necessary or applicable
         permits,  licenses,  variances,   exemptions,  orders,  franchises  and
         approvals of all Governmental Entities,  except where the failure to so
         hold could not  reasonably  be expected to have a Greka MAE (the "Greka
         Permits").  To Greka's knowledge,  all applications with respect to the
         Greka Permits (excluding  applications for such Greka Permits where the
         failure to so hold could not  reasonably  be  expected  to have a Greka
         MAE) were  complete and correct in all material  respects when made and
         Greka does not know of any reason why any of the Greka Permits would be
         subject  to  cancellation,  excluding  such  Greka  Permits  where  the
         cancellation  of the same could not  reasonably  be  expected to have a
         Greka MAE.  Greka is in compliance  with the terms of the Greka Permits
         except where the failure to so comply could not  reasonably be expected
         to have a Greka MAE.  Greka has not  violated  or failed to comply with
         any statute, law, ordinance,  regulation,  rule, permit or order of any
         federal,  state  or  local  government,  domestic  or  foreign,  or any
         Governmental  Entity, any arbitration award or any judgment,  decree or
         order of any court or other Governmental Entity, applicable to Greka or
         its business, assets or operations,  except for violations and failures
         to comply that would not have a Greka MAE.

(m)      Title to Property To Greka's knowledge, it has complied in all material
         respects  with the terms of all material  leases to which it is a party
         and under  which it is in  occupancy,  and all such  leases are in full
         force and effect,  except where such failure to comply or to be in full
         force and effect could not reasonably be expected to have a Greka MAE.

3.2      Representations and Warranties of Beaver Lake.

         Beaver Lake hereby represents and warrants to Greka that:

(a)      Organization  Beaver Lake is a corporation duly  incorporated,  validly
         existing  and in  good  standing  under  the  laws of the  Province  of
         Alberta.  Beaver Lake has all requisite  corporate  power and corporate
         authority and all necessary  governmental  authorizations to own, lease
         and  operate  all of its  properties  and  assets  and to  carry on its
         business as now being conducted,  except where the failure to have such
         governmental authority would not have a Beaver Lake MAE. Beaver Lake is
         duly qualified as a foreign corporation to do business,  and is in good
         standing,  in each jurisdiction in which the property owned,  leased or
         operated by it or the nature of the business conducted by it makes such
         qualification necessary, except in such jurisdictions where the failure
         to be duly  qualified  does not and would  not have a Beaver  Lake MAE.
         Beaver  Lake is in  compliance  with all  applicable  laws,  judgments,
         orders,  rules and  regulations,  domestic  and  foreign,  except where
         failure to be in such compliance would not have a Beaver Lake MAE.

(b)      Capitalization

         (i)      The  authorized  share  capital of Beaver Lake  consists of an
                  unlimited  number  of Beaver  Lake  Common  Shares,  there are
                  19,466,666  Beaver Lake Common Shares issued and  outstanding.
                  No other shares in the capital of Beaver Lake are outstanding.
                  All issued  and  outstanding  Beaver  Lake  Common  Shares are
                  validly  issued,  fully paid and  nonassessable  and no holder
                  thereof is entitled to preemptive rights. Beaver Lake is not a
                  party to, and is not aware of, any  voting  agreement,  voting
                  trust or similar  agreement  or  arrangement  relating  to any
                  class or series of its shares, or any agreement or arrangement
                  providing for  registration  rights with respect to any shares
                  or other securities of Beaver Lake.

                                      B-9

<PAGE>

         (ii)     Other than the Beaver Lake  Options  (all of which Beaver Lake
                  Options shall be cancelled prior to the filing of the Articles
                  of Arrangement),  there are not now, and at the Effective Date
                  there will not be,  any (A) shares of capital or other  equity
                  securities  of  Beaver  Lake   outstanding,   other  than  the
                  19,466,666  Beaver Lake  Common  Shares  currently  issued and
                  outstanding  and any  additional  Beaver  Lake  Common  Shares
                  issued after the date hereof and prior to the  Effective  Date
                  pursuant  to the  exercise  of  Beaver  Lake  Options,  or (B)
                  outstanding options, warrants, scrip, rights to subscribe for,
                  calls or commitments of any character  whatsoever relating to,
                  or securities or rights  convertible into or exchangeable for,
                  shares  of any  class of share  capital  of  Beaver  Lake,  or
                  contracts, understandings or arrangements to which Beaver Lake
                  is a  party,  or by  which  it is or may be  bound,  to  issue
                  additional shares of its capital or options,  warrants,  scrip
                  or  rights  to  subscribe   for,  or   securities   or  rights
                  convertible into or exchangeable for, any additional shares of
                  its capital.

(c)      Authorization  and Validity of Agreement  Beaver Lake has all requisite
         corporate  power and  authority  to enter into this  Agreement  and the
         Other   Agreements  and  to  perform  its  obligations   hereunder  and
         thereunder. The execution and delivery by Beaver Lake of this Agreement
         and the Other Agreements to which it is a party and the consummation by
         it of the transactions  contemplated  hereby and thereby have been duly
         authorized  by all  necessary  corporate  action  (subject  only,  with
         respect to the Arrangement, to approval of this Agreement by the Beaver
         Lake Common  Shareholders  as provided for in Section 5.1). On or prior
         to the date hereof the Board of Directors of Beaver Lake has determined
         to  recommend  approval  of the  Arrangement  to the Beaver Lake Common
         Shareholders,  and  such  determination  is in  effect  as of the  date
         hereof.  This  Agreement has been duly executed and delivered by Beaver
         Lake and is the valid and binding obligation of Beaver Lake enforceable
         against it in accordance with its terms,  except as enforceability  may
         be  limited  by  applicable  bankruptcy,  insolvency,   reorganization,
         moratorium  or  similar  laws from time to time in effect  that  affect
         creditors'  rights generally and by legal and equitable  limitations on
         the  availability  of specific  remedies.  The Other  Agreements,  when
         executed and delivered by Beaver Lake, as applicable,  will  constitute
         valid and binding obligations of Beaver Lake, enforceable against it in
         accordance with their respective terms, except as enforceability may be
         limited   by   applicable   bankruptcy,   insolvency,   reorganization,
         moratorium  or  similar  laws from time to time in effect  that  affect
         creditors'  rights generally and by legal and equitable  limitations on
         the availability of specific remedies.

(d)      No Approvals or Notices Required; No Conflict with Instruments to which
         Beaver Lake is a Party The execution and delivery of this Agreement and
         the Other  Agreements do not, and the  consummation of the transactions
         contemplated  hereby and thereby  and  compliance  with the  provisions
         hereof and thereof will not,  conflict with, or result in any violation
         of, or  default  (with or  without  notice  or lapse of time,  or both)

                                      B-10

<PAGE>

         under,  or  give  rise  to a  right  of  termination,  cancellation  or
         acceleration  of or "put" right with  respect to any  obligation  or to
         loss of a material benefit under, or result in the creation of any Lien
         upon any of the  properties  or  assets  of  Beaver  Lake or any of the
         Beaver Lake  Subsidiaries  under,  any provision of (i) the Beaver Lake
         Articles or bylaws of Beaver Lake,  (ii) any loan or credit  agreement,
         note, bond,  mortgage,  indenture,  lease,  guaranty or other financial
         assurance agreement or other agreement, instrument, permit, concession,
         franchise or license  applicable  to Beaver Lake or its  properties  or
         assets,  (iii)  any loan or credit  agreement,  note,  bond,  mortgage,
         indenture,  lease,  guaranty or other financial  assurance agreement or
         other agreement,  instrument, permit, concession,  franchise or license
         applicable to any Beaver Lake Subsidiary,  or it's properties or assets
         and (iv) subject to governmental  filing and other matters  referred to
         in the following sentence, any judgment,  order, decree,  statute, law,
         ordinance, rule or regulation or arbitration award applicable to Beaver
         Lake or its  properties  or assets,  other than, in the case of clauses
         (ii) and (iii),  any such conflicts,  violations,  defaults,  rights or
         Liens that  individually  or in the  aggregate  would not have a Beaver
         Lake  MAE.  No  consent,   approval,  order  or  authorization  of,  or
         registration,  declaration or filing with, any  Governmental  Entity is
         required  by or with  respect  to Beaver  Lake in  connection  with the
         execution  and  delivery  of  this  Agreement  by  Beaver  Lake  or the
         consummation by Beaver Lake of the  transactions  contemplated  hereby,
         except for (i) issuance of the Interim Order and the Final Order,  (ii)
         the filing with the ASE and  Commissions of the Proxy  Circular,  (iii)
         the filing of the  Articles  of  Arrangement  with the  Registrar  with
         respect to the  Arrangement as provided in the ABCA and the Final Order
         and  appropriate  documents  with  the  relevant  authorities  of other
         jurisdictions in which Beaver Lake is qualified to do business and (iv)
         such other consents, approvals, orders, authorizations,  registrations,
         declarations,  filings and notices as are set forth in Section 2 of the
         Beaver Lake Disclosure Letter.

(e)      Commission  Filings;  Financial  Statements  Beaver Lake is a reporting
         issuer  under the  securities  laws of  Ontario,  Alberta  and  British
         Columbia and is not in default of any  requirement  of such  securities
         laws and it is in compliance with the bylaws,  rules and regulations of
         the ASE,  being the only  exchange  upon which the Beaver  Lake  Common
         Shares are listed. Beaver Lake has filed all reports and other filings,
         together with any amendments  required to be made with respect thereto,
         that they have been required to file with the ASE and the  Commissions.
         Beaver Lake has heretofore delivered to Greka copies of the Beaver Lake
         Commission  Filings. As of the dates of it's filing with the ASE or the
         Commissions,  the  Beaver  Lake  Commission  Filings  complied  in  all
         material  respects with the applicable  securities  laws, the rules and
         regulations of the  Commissions  thereunder  and the bylaws,  rules and
         regulations  of the ASE,  and were true and  complete  in all  material
         respects and did not contain any  misrepresentation  (as defined in the
         Securities Act (Alberta)).

         Each of the  financial  statements  (including  any  related  notes  or
schedules)  included  in the Beaver  Lake  Commission  Filings  was  prepared in
accordance with Canadian generally accepted  accounting  principles applied on a
consistent  basis  (except as may be noted  therein or in the notes or schedules
thereto)  and  complied  with  the  rules  and  regulations  of the  ASE and the
Commissions.   Such  consolidated   financial   statements  fairly  present  the

                                      B-11

<PAGE>

consolidated  financial  position of Beaver Lake as of the dates thereof and the
results of operations,  cash flows and changes in  shareholders'  equity for the
periods then ended  (subject,  in the case of the  unaudited  interim  financial
statements, to normal year-end audit adjustments on a basis comparable with past
periods).  As of the date hereof,  Beaver Lake has no  liabilities,  absolute or
contingent,  that may reasonably be expected to have a Beaver Lake MAE, that are
not reflected in the Beaver Lake  Commission  Filings,  except those incurred in
the ordinary course of business consistent with past operations and not relating
to the borrowing of money.

(f)      Conduct of Business in the Ordinary Course;  Absence of Certain Changes
         and Events  Since  December 31, 1998,  except as  contemplated  by this
         Agreement or as disclosed in the Beaver Lake Commission Filings, Beaver
         Lake has  conducted  its business only in the ordinary and usual course
         in accordance with past practice,  and there has not been: (i) a Beaver
         Lake  MAE  or any  other  material  adverse  change  in  the  financial
         condition,  results of  operations,  prospects,  assets or  business of
         Beaver Lake,  taken as a whole, or (ii) any other  condition,  event or
         development  that  reasonably  may be  expected  to  result in any such
         material  adverse  change  or a Beaver  Lake MAE;  (iii) any  change by
         Beaver Lake in its accounting  methods,  principles or practices;  (iv)
         any amendment to the Beaver Lake  Articles,  bylaws or other  governing
         documents or any  resolutions or proceedings  pending for any amendment
         thereto, except as may be contemplated therein; (v) except as disclosed
         in Section 3 of the Beaver Lake Disclosure  Letter,  any revaluation by
         Beaver  Lake  of any  of its  assets,  including,  without  limitation,
         writing  down the value of or writing off notes or accounts  receivable
         other than in the ordinary  course of business and consistent with past
         practice;  (vi) any  entry  by  Beaver  Lake  into  any  commitment  or
         transaction  that  would  be  material  to  Beaver  Lake and not in the
         ordinary course of business;  (vii) any  declaration,  setting aside or
         payment of any dividends or distributions in respect of the Beaver Lake
         Common Shares or any redemption,  purchase or other  acquisition of any
         of its securities;  (viii) any damage,  destruction or loss (whether or
         not covered by insurance) materially adversely affecting the properties
         or business  of Beaver  Lake;  (ix) any  increase  in  indebtedness  of
         borrowed money other than borrowing under existing credit facilities as
         disclosed in Section 3 of the Beaver Lake  Disclosure  Letter;  (x) any
         granting of a security  interest  or Lien on any  property or assets of
         Beaver Lake,  other than  Permitted  Liens;  or (xi) any increase in or
         establishment   of   any   bonus,   insurance,    severance,   deferred
         compensation,   pension,  retirement,   profit  sharing,  stock  option
         (including,  without limitation,  the granting of stock options,  stock
         appreciation  rights,  performance  awards or restricted stock awards),
         stock purchase or other employee  benefit plan or any other increase in
         the  compensation  payable  or to  become  payable  to  any  directors,
         officers or key employees of Beaver Lake or for which Beaver Lake would
         be responsible.

(g)      Litigation  Except as  disclosed  in  writing  to  Greka,  there are no
         Demands pending or, to the knowledge of Beaver Lake, threatened against
         or  affecting  (i) Beaver  Lake or any of its  properties  at law or in
         equity,  or any of it's employee  benefit plans or  fiduciaries of such
         plans or (ii) any of its properties at law or in equity, or any of it's
         employee  benefit plans or fiduciaries of such plans,  before or by any
         Governmental Entity,  wherever located that (x) could prevent or hinder
         the consummation of the transactions  contemplated by this Agreement or
         the  Plan  of  Arrangement;   or  (y)  would  otherwise,  if  adversely
         determined,  have a Beaver Lake MAE.  Except as disclosed in writing to
         Greka,   Beaver  Lake  is  not  subject  to  any   material   judicial,
         governmental or administrative  order,  writ,  judgment,  injunction or
         decree.

                                      B-12

<PAGE>

(h)      Disclosure  Beaver Lake has made  disclosure of all material  facts (as
         defined in the Securities  Act (Alberta))  relating to its business and
         financial  affairs to Greka and acknowledges that Greka is relying upon
         such  disclosure  in  determining  whether to proceed  with the Plan of
         Arrangement.

(i)      Employee Benefit Plans

         (i)      None of the  employees  of Beaver Lake are subject to union or
                  collective bargaining agreements.

         (ii)     To the best  knowledge of Beaver Lake,  no officer or director
                  of Beaver Lake or Benefit Plans, or trusts created thereunder,
                  or  trustee  or  administrator  thereof,  has  engaged  in any
                  prohibited transaction or act or any other breach of fiduciary
                  responsibility  that could  subject  Beaver Lake to any tax or
                  penalty  or to  any  liability  under  any  applicable  law or
                  regulation.
(j)      Taxes

         (i)      Beaver  Lake  has  duly  and  timely  filed,  in all  material
                  respects,  in proper  form,  returns in respect of taxes under
                  the Income Tax Act  (Canada),  the Alberta  Corporate Tax Act,
                  the income tax  legislation of any other province of Canada or
                  any foreign country having jurisdiction over its affairs,  and
                  similar  legislation of other  provinces  having  jurisdiction
                  over its  affairs,  for all prior  periods in respect of which
                  such filings have heretofore been required. All taxes shown on
                  such returns and all taxes now owing,  including  interest and
                  penalties,  have been paid or accrued on Beaver  Lake's books.
                  There are no outstanding  agreements or waivers  extending the
                  statutory  period of  limitations  applicable  to any federal,
                  provincial or other income tax return for any period. There is
                  no material  claim  against  Beaver  Lake with  respect to any
                  taxes,  and no material  assessment,  deficiency or adjustment
                  has been  asserted or proposed  with respect to any tax return
                  of or with respect to Beaver Lake that has not been adequately
                  provided  for in  reserves  established  by Beaver  Lake.  All
                  income tax returns of or with respect to Beaver Lake up to and
                  including  December  31,  1998,  have  been  assessed  by  the
                  applicable   Governmental   Entity.   The  time   period   for
                  reassessment under the Income Tax Act (Canada) and the Alberta
                  Corporate   Tax  Act  in  the  absence  of   misrepresentation
                  attributable  to negligence,  carelessness,  wilful default or
                  fraud has expired for all periods up to and  including the tax
                  year ended 1993. The total amounts set up as  liabilities  for
                  current  and  deferred  taxes  in the  consolidated  financial
                  statements included in the Beaver Lake Commission Filings have
                  been prepared in accordance with Canadian  generally  accepted
                  accounting  principles and are sufficient to cover the payment
                  of all material  taxes,  including  any  penalties or interest
                  thereon and whether or not assessed or disputed,  that are, or
                  are hereafter  found to be, or to have been,  due with respect
                  to the  operations of Beaver Lake through the periods  covered
                  thereby.  Except for statutory Liens for current taxes not yet
                  due, no Liens for taxes exist upon the assets of Beaver Lake.

                                      B-13

<PAGE>

         (ii)     Beaver Lake and each Beaver Lake  Subsidiary  has  remitted to
                  the proper tax  authority  when  required by law to do so, all
                  amounts  payable  by it on  account  of GST and is a  "taxable
                  Canadian corporation" for the Income Tax Act (Canada).

         (iii)    As of the Effective Date, Beaver Lake shall have fully accrued
                  for all taxes that may be  required  to be paid as a result of
                  the transactions contemplated hereby.

(k)      Environmental  Matters  Except as set forth in  Section 5 of the Beaver
         Lake Disclosure Letter,  (i) the properties,  operations and activities
         of Beaver  Lake comply in all  material  respects  with all  applicable
         Environmental  Laws;  (ii)  none  of  Beaver  Lake  is  subject  to any
         existing,  pending  or, to the  knowledge  of Beaver  Lake,  threatened
         action,  suit,  investigation,  inquiry or  proceeding by or before any
         Governmental Entity under any Environmental Law; (iii) except where the
         failure   would   not   have  a   Beaver   Lake   MAE,   all   notices,
         permits,licenses,  or similar  authorizations,  if any,  required to be
         obtained  or  filed by  Beaver  Lake  under  any  Environmental  Law in
         connection with any aspect of the business of Beaver Lake or any Beaver
         Lake  Subsidiary,  including  without  limitation those relating to the
         treatment,  storage,  disposal or release of a hazardous  substance  or
         solid waste, have been duly obtained or filed and will remain valid and
         in effect  after the  Arrangement  and Beaver Lake and each Beaver Lake
         Subsidiary is in compliance  with the terms and  conditions of all such
         notices, permits, licenses and similar authorizations; (iv) Beaver Lake
         and each Beaver Lake  Subsidiary  has  satisfied  and is  currently  in
         compliance in all material  respects with all financial  responsibility
         requirements   applicable  to  its   operations   and  imposed  by  any
         Governmental  Entity  under  any  Environmental  Law,  and none of such
         parties  has  received  any  notice  of  noncompliance  with  any  such
         requirements;  (v) to Beaver Lake's knowledge, there are no physical or
         environmental  conditions  existing on any property  currently owned or
         leased or  presently  owned or leased by Beaver  Lake or any  entity in
         which  it  has or had  ownership  interest  that  could  reasonably  be
         expected to give rise to any on-site or off-site  remedial  obligations
         under any  Environmental  Laws;  and (vi) to Beaver  Lake's  knowledge,
         since the  effective  date of the relevant  requirements  of applicable
         Environmental Laws, all hazardous  substances or solid wastes generated
         by  Beaver  Lake  or  used  in  connection  with  their  properties  or
         operations  have been  transported  only by carriers  authorized  under
         Environmental  Laws  to  transport  such  substances  and  wastes,  and
         disposed  of  only  at  treatment,  storage,  and  disposal  facilities
         authorized under  Environmental Laws to treat, store or dispose of such
         substances  and wastes,  and, to the  knowledge  of Beaver  Lake,  such
         carriers and  facilities  have been and are  operating in compliance in
         all material respects with such  authorizations and are not the subject
         of any existing, pending, or overtly threatened action,  investigation,
         or  inquiry  by  any   Governmental   Entity  in  connection  with  any
         Environmental Laws.

(l)      Severance  Payments Except as set forth in Section 6 of the Beaver Lake
         Disclosure  Letter,   Beaver  Lake  will  not  have  any  liability  or
         obligation to pay a severance  payment or similar  obligation to any of
         its employees, officers, or directors as a result of the Arrangement or
         the transactions  contemplated by this Agreement,  nor will any of such
         persons be  entitled  to an  increase  in  severance  payments or other
         benefits  as  a  result  of  the   Arrangement   or  the   transactions
         contemplated by this Agreement or the Other  Agreements in the event of
         the subsequent termination of their employment.

                                      B-14

<PAGE>

(m)      Compliance  with Laws  Beaver  Lake holds all  required,  necessary  or
         applicable permits, licenses, variances, exemptions, orders, franchises
         and approvals of all Governmental Entities, except where the failure to
         so hold could not reasonably be expected to have a Beaver Lake MAE (the
         "Beaver Lake  Permits").  All  applications  with respect to the Beaver
         Lake Permits were  complete and correct in all material  respects  when
         made and Beaver  Lake does not know of any reason why any of the Beaver
         Lake  Permits  would be  subject  to  cancellation.  Beaver  Lake is in
         compliance  with the terms of the Beaver Lake Permits  except where the
         failure to so comply could not  reasonably be expected to have a Beaver
         Lake MAE.  Beaver  Lake has not  violated  or failed to comply with any
         statute,  law,  ordinance,  regulation,  rule,  permit  or order of any
         federal,  provincial or local government,  domestic or foreign,  or any
         Governmental  Entity, any arbitration award or any judgment,  decree or
         order of any court or other Governmental  Entity,  applicable to Beaver
         Lake's  business,  assets or  operations,  except  for  violations  and
         failures to comply that would not have a Beaver Lake MAE.

(n)      Contracts  Section 7 to the Beaver Lake  Disclosure  Letter  contains a
         complete list of the  following  contracts,  agreements,  arrangements,
         ownership  interests and commitments:  (i) all employment or consulting
         contracts  or  agreements   to  which  Beaver  Lake  is   contractually
         obligated;  (ii) current leases,  sales contracts and other  agreements
         with respect to any  property,  real or personal,  of Beaver Lake or to
         which  Beaver  Lake is  contractually  obligated;  (iii)  contracts  or
         commitments  for  capital  expenditures  or  acquisitions  in excess of
         $50,000 to which Beaver Lake is obligated; (iv) agreements,  contracts,
         indentures or other instruments  relating to the borrowing of money, or
         the guarantee of any  obligation  for the borrowing of money,  to which
         Beaver Lake is a party or any of their respective  properties is bound;
         (v) all corporations,  partnerships,  limited  liability  companies and
         other  entities  in which  Beaver  Lake owns or has owned,  directly or
         indirectly,   a   material   equity   interest,   (vi)   all   material
         indemnification  and  guaranty or other  similar  obligations  to which
         Beaver  Lake is bound  and  which the  officers  of Beaver  Lake or any
         Beaver Lake  Subsidiary,  after  reasonable  investigation,  are aware,
         (vii) any outstanding bonds,  letters of credit posted or guaranteed by
         Beaver Lake with  respect to any Person,  (viii) any  covenants  not to
         compete or other obligations  affecting Beaver Lake that would restrict
         Greka or its  Affiliates  from  engaging in any business or activity of
         which  the  officers  of  Beaver  Lake  are  aware,   after  reasonable
         investigation  (ix) any  agreement,  lease,  contract or  commitment or
         series of related  agreements,  leases,  contracts or  commitments  not
         entered  into  in the  ordinary  course  of  business  or,  except  for
         agreements  to purchase or sell goods and services  entered into in the
         ordinary  course of business,  not cancellable by Beaver Lake within 30
         calendar days, (x) contracts, agreements,  arrangements or commitments,
         other than the  foregoing,  that could  reasonably  be considered to be
         material  to Beaver  Lake or any  Beaver  Lake  Subsidiary,  taken as a
         whole.

                                      B-15

<PAGE>

(o)      Title to Property

         (i)      Other than as disclosed in the Beaver Lake Disclosure  Letter,
                  the  Beaver  Lake  Assets  are  free and  clear of any  liens,
                  royalties,   production  payments,  charges,  adverse  claims,
                  demands or  encumbrances  created by,  through or under Beaver
                  Lake or of which Beaver Lake has knowledge.

         (ii)     Beaver  Lake  and each of the  Beaver  Lake  Subsidiaries  has
                  complied in all material respects with the terms of all leases
                  to  which  they  are a  party  and  under  which  they  are in
                  occupancy,  and all such  leases are in full force and effect.
                  Beaver  Lake and each of the Beaver  Lake  Subsidiaries  enjoy
                  peaceful and undisturbed possession under all such leases.

(p)      Beaver Lake Assets

         (i)      Beaver  Lake  has  made  available  to  Sproule  prior  to the
                  issuance of the Sproule Report, all information material to an
                  adequate  determination  of the oil and gas reserves of Beaver
                  Lake, none of such information  contained a  misrepresentation
                  and there has been no material  adverse  change to the oil and
                  gas reserves of Beaver Lake since the Sproule Report.

         (ii)     Beaver Lake has not received any notices of material violation
                  or  alleged  material  violation  of  the  provisions  of  any
                  agreement in respect of the Beaver Lake Assets and to the best
                  of the knowledge,  information  and belief of Beaver Lake, the
                  properties  and lands  comprising  the Beaver Lake Assets have
                  been drilled,  developed  and operated in accordance  with all
                  material agreements that relate to them except as disclosed in
                  the Disclosure Letter.

         (iii)    Beaver Lake has  performed,  observed and satisfied all of its
                  material  duties,   liabilities,   obligations  and  covenants
                  required to be satisfied,  performed and observed by it under,
                  and is not in material default under or in material breach of,
                  the terms of any material  leases or agreements  pertaining to
                  the Beaver Lake Assets.

         (iv)     All ad valorem,  property,  production,  severance and similar
                  taxes and assessments based on or measured by the ownership of
                  the Beaver  Lake Assets or the  production  of  petroleum  and
                  natural gas or the receipt of  proceeds  therefrom  payable in
                  respect of or in relation to  substantially  all of the Beaver
                  Lake Assets have been properly and fully paid and discharged.

         (v)      There is no  material  circumstance,  matter or thing known to
                  Beaver Lake which indicates in any manner that it may not hold
                  good and  marketable  title  to any  material  portion  of the
                  Beaver Lake Assets.

                                      B-16

<PAGE>

         (vi)     All material documents and agreements of whatsoever nature and
                  kind  affecting  the title to the Beaver Lake Assets which are
                  in the  possession  of Beaver Lake or of which  Beaver Lake is
                  otherwise aware have been disclosed to Greka.

         (vii)    There is no fact or  circumstance  known to Beaver  Lake which
                  materially  adversely  affects  the  aggregate  production  of
                  petroleum  and  natural  gas from  the  properties  and  lands
                  comprising  the Beaver Lake Assets  except as disclosed in the
                  Disclosure Letter.

         (viii)   To the best of its  knowledge,  Beaver Lake has done no act or
                  thing,  nor has Beaver Lake  suffered or permitted  any act or
                  omission,  whereby  its title to the Beaver Lake Assets may be
                  cancelled or terminated.

         (ix)     All producing wells and facilities operated by Beaver Lake or,
                  where such  wells or  facilities  are  operated  by  operators
                  acting on its behalf,  to the best of Beaver Lake's knowledge,
                  are in good and operable condition, and are not subject to any
                  production or other penalties  imposed by applicable leases or
                  legislation  which  would  materially  impair the value of the
                  Beaver Lake Assets.

         (x)      All wells  operated  by Beaver  Lake or where  such  wells are
                  operated by  operators  acting on its  behalf,  to the best of
                  Beaver  Lake's  knowledge,   have  been  drilled,   completed,
                  shut-in,  abandoned,  suspended and operated,  as the case may
                  be, in accordance with applicable  laws,  rules,  regulations,
                  orders  and  lawful   directions  of   governmental  or  other
                  competent authorities.

         (xi)     Beaver Lake is receiving substantially all of its revenue from
                  the  production  of petroleum  and natural gas from the Beaver
                  Lake  Assets on what it  considers  to be a timely  basis and,
                  except as security for its  revolving  operating  line, it has
                  not assigned or otherwise encumbered same.

(q)      Insurance  Policies  Beaver Lake will  retain  insurance  policies,  in
         accordance with industry  standards.  Each such policy is in full force
         and effect, is with responsible insurance carriers and is substantially
         equivalent in coverage and amount to policies covering companies of the
         size of  Beaver  Lake  and in the  business  in  which  Beaver  Lake is
         engaged,  in  light  of the  risk to which  such  companies  and  their
         employees, businesses,  properties and other assets may be exposed. All
         retroactive premium adjustments under any worker's  compensation policy
         of Beaver Lake has been recorded in Beaver Lake's financial  statements
         in accordance with Canadian  generally accepted  accounting  principles
         and are reflected in the financial  statements  contained in the Beaver
         Lake Commission Filings.

(r)      Information  Supplied  The  information  included  or  incorporated  by
         reference in the Proxy Circular (except for any information supplied or
         to be supplied by Greka) shall, at the date the Proxy Circular is first
         mailed to Beaver Lake Common Shareholders and at the time of the Beaver
         Lake  Shareholders  Meeting,  be  true  and  complete  in all  material
         respects and shall not contain any misrepresentation (as defined in the
         Securities Act (Alberta)). The Proxy Circular will comply as to form in
         all material  respects  with the  requirements  of the  Securities  Act
         (Alberta) and the rules and regulations thereunder.

                                      B-17

<PAGE>

(s)      Sales into the United States  Revenues from sales of goods and services
         attributable  to the  business  of Beaver  Lake into and for use in the
         United  States  have,  for each of the three years  preceding  the date
         hereof,  been  less  than an  aggregate  total  of US$25  million.  The
         aggregate total book value of the assets in the United States of Beaver
         Lake is less than US$15 million.

(v)      Beaver Lake Options  Beaver Lake has terminated the granting of options
         under  the  Beaver  Lake  Stock  Option  Plan  and has  negotiated  the
         cancellation  and  termination of all  unexercised  Beaver Lake Options
         effective  on or before the  Effective  Date and prior to the filing of
         the  Articles  of  Arrangement  at a cost to Beaver  Lake per share not
         exceeding the difference between 45(cent) and the exercise price of the
         options.

                                    ARTICLE 4
                            COVENANTS OF Beaver Lake

4.1      Conduct of Business by Beaver Lake Pending the Arrangement

         Beaver Lake covenants and agrees that,  from the date of this Agreement
until the  earlier  of the  Effective  Date or the date of  termination  of this
Agreement,  unless  Greka  shall  otherwise  agree in  writing  or as  otherwise
expressly contemplated by this Agreement:

(a)      The business of Beaver Lake shall be  conducted  and shall not take any
         action except in, the ordinary  course of business and consistent  with
         past practice.

(b)      Beaver Lake shall not directly or indirectly  do any of the  following:
         (i) issue,  sell,  pledge,  dispose of or encumber any share capital of
         Beaver Lake except for the  issuance of Beaver Lake Common  Shares upon
         the exercise of outstanding Beaver Lake Options;  (ii) split,  combine,
         or reclassify any outstanding share capital, or declare,  set aside, or
         pay any dividend payable in cash, shares,  property,  or otherwise with
         respect to its share  capital  whether  now or  hereafter  outstanding;
         (iii) redeem,  purchase or acquire or offer to acquire any of its share
         capital;  (iv) grant any options to purchase  any shares of Beaver Lake
         or any Beaver Lake  Subsidiary;  (v) acquire,  agree to acquire or make
         any  offer  to  acquire  for cash or other  consideration,  any  equity
         interest  in  or  all  or  substantially  all  of  the  assets  of  any
         corporation,  partnership,  joint venture,  or other entity; (vi) enter
         into any contract,  agreement,  commitment, or arrangement with respect
         to any of the matters set forth in this Section 4.1(b); (vii) amend its
         articles or bylaws; or (viii) reorganize,  amalgamate or merge with any
         other Person.

(c)      Beaver Lake shall allow Greka and its  representatives  and agents full
         access during normal business hours, to all of the assets,  properties,
         books,  records,  agreements and commitments of each of Beaver Lake and
         its  subsidiaries and provide all such  information  concerning  Beaver
         Lake and its subsidiaries as Greka may reasonably request.

                                      B-18

<PAGE>

(d)      Until the Effective Date, Beaver Lake shall:

         (i)      conduct its  operations  in the ordinary and normal  course of
                  business and in accordance  with  applicable  laws,  generally
                  accepted industry practice, any operating and other agreements
                  applicable  to the  Beaver  Lake  Assets  and within its usual
                  areas of exploration except as otherwise  contemplated by this
                  Agreement or as otherwise agreed to in writing by Greka;

         (ii)     in all material  respects,  conduct itself so as to keep Greka
                  fully  informed as to the  decisions  required with respect to
                  the most  advantageous  methods  in Beaver  Lake's  opinion of
                  exploring, operating and producing from the Beaver Lake Assets
                  and promptly disclose in writing to Greka all material adverse
                  changes,  if any, in the Beaver Lake Assets or in its interest
                  therein;

         (iii)    except  in  respect  of  existing  commitments,  not  make  or
                  authorize,  without prior written consent of Greka, any single
                  capital  expenditure  in respect of any of its  properties  or
                  assets which exceeds $50,000, otherwise than in the event of a
                  catastrophe or other event endangering  life,  property or the
                  environment;

         (iv)     take no action which would be outside the  ordinary  course of
                  business or which may result in a Beaver Lake MAE;

         (v)      not  enter  into  any  employment,   consulting  or  severance
                  agreement or other  similar  arrangement  with any director or
                  senior officer of Beaver Lake or any other Person; and

         (vi)     maintain  insurance on and in respect of all of its properties
                  and assets in like kind to, and in an amount not less than the
                  amount of,  insurance in respect of its  properties and assets
                  in effect on the date hereof.

(e)      Beaver Lake shall not sell, lease, mortgage, pledge, grant a Lien on or
         otherwise  encumber  or  otherwise  dispose  of  any of  Beaver  Lake's
         properties  or  assets  in an  amount  in  excess  of  $50,000  in  the
         aggregate.

(f)      Beaver Lake shall not,  directly or indirectly,  incur any indebtedness
         for  borrowed  money or  guarantee  any such  indebtedness  of  another
         Person,  issue or sell any debt  securities or warrants or other rights
         to acquire any debt  securities  of Beaver Lake or the guarantee of any
         debt securities of another Person or enter into any arrangement  having
         the  economic  effect of any of the  foregoing,  except for  short-term
         borrowings  incurred in the ordinary course of business consistent with
         past  practice,  or make or  permit to remain  outstanding  any  loans,
         advances  or capital  contributions  to, or  investments  in, any other
         Person, other than to Beaver Lake.

(g)      Beaver Lake shall not make any election relating to taxes.


                                      B-19



<PAGE>

(h)      Beaver Lake shall not change any accounting principle used by it.

(i)      Beaver Lake shall use its reasonable efforts (i) to preserve intact the
         business  organization  of Beaver Lake,  (ii) to maintain in effect any
         material  authorizations  or similar  rights of Beaver  Lake,  (iii) to
         preserve the goodwill of those having material  business  relationships
         with it, (iv) to maintain and keep each of Beaver Lake's  properties in
         the  same  repair  and  condition  as  presently  exists,   except  for
         deterioration  due to ordinary wear and tear and damage due to casualty
         and (v) to maintain in full force and effect  insurance  comparable  in
         amount and scope of coverage to that currently maintained by it.

(j)      Beaver Lake shall not  authorize any of, or commit or agree to take any
         of, or permit any Beaver Lake  Subsidiary to take any of, the foregoing
         actions to the extent  prohibited  by the foregoing and shall not, take
         any action that would, or that reasonably  could be expected to, result
         in any  of  the  representations  and  warranties  set  forth  in  this
         Agreement  becoming  untrue or any of the conditions to the Arrangement
         set forth in Article 6 not being satisfied.  Beaver Lake promptly shall
         advise  Greka orally and in writing of any change or event  having,  or
         which,  insofar as reasonably  can be foreseen,  would have, a material
         adverse effect on Beaver Lake taken as a whole,  or cause a Beaver Lake
         MAE.

                                    ARTICLE 5
                              ADDITIONAL AGREEMENTS

5.1      Cooperation; Consents and Approvals

(a)      Beaver  Lake  shall  use  all   reasonable   efforts  to,  as  soon  as
         practicable,  complete the  preparation of the Proxy Circular as agreed
         with Greka and,  subject to the grant of the Interim Order,  to mail to
         the Beaver Lake Common Shareholders and file in all jurisdictions where
         required  the  Proxy  Circular  and  other  documentation  required  in
         connection with the Beaver Lake Shareholders Meeting, all in accordance
         with National Policy No. 41 of the Canadian Securities  Administrators,
         the Interim  Order and  applicable  law,  and Beaver Lake shall use all
         reasonable  efforts,  subject to the grant of the Interim Order,  to as
         soon as  practicable  and in any  event  on the date  specified  in the
         Interim Order, to convene the Beaver Lake Shareholders  Meeting for the
         purpose of approving the  Arrangement  and this Agreement in accordance
         with the Interim Order.

(b)      Beaver Lake shall  ensure  that the Proxy  Circular  complies  with all
         applicable  disclosure  laws  as  they  relate  to  the  disclosure  of
         information  regarding Beaver Lake and, without limiting the generality
         of the foregoing, provides the Beaver Lake Common Shareholders to which
         such circular is sent with  information in sufficient  detail to permit
         them to form a reasoned judgment concerning the matters before them.

(c)      Subject to the terms and  conditions  set forth in Section  5.5 and the
         fiduciary  obligations  of the Board of  Directors  of Beaver Lake with
         respect to such  matters,  the Board of  Directors  of Beaver  Lake (i)
         shall   recommend   at  such   meeting  that  the  Beaver  Lake  Common
         Shareholders  vote to  adopt  and  approve  the  Arrangement  and  this
         Agreement (the "Recommendation"), (ii) shall use its reasonable efforts
         to solicit from the Beaver Lake Common  Shareholders  proxies in favour
         of such  adoption  and  approval  and (iii) shall take all other action
         reasonably  necessary to secure a vote of its shareholders in favour of
         the adoption and approval of the Arrangement and this Agreement.


                                      B-20

<PAGE>

5.2      Filings; Consents; Reasonable Efforts

         Subject to the terms and  conditions  set forth in Section  5.5 and the
fiduciary  obligations  of the Board of Directors of Beaver Lake with respect to
such matters,  Beaver Lake and Greka shall (i) make all  necessary  filings with
respect to the Arrangement and this Agreement under  applicable  securities laws
and shall use all reasonable efforts to obtain required approvals and clearances
with  respect  thereto;  (ii) use  reasonable  efforts to obtain  all  consents,
waivers, approvals,  authorizations,  and orders required in connection with the
authorization, execution, and delivery of this Agreement and the consummation of
the Arrangement; (iii) use reasonable efforts to take, or cause to be taken, all
appropriate  action, and do, or cause to be done, all things necessary,  proper,
or advisable to consummate  and make  effective as promptly as  practicable  the
transactions  contemplated by this Agreement; and (iv) will permit the review by
each  other of all  documents  to be filed  with the  Court or to be sent to the
Beaver Lake Common  Shareholders  with  respect to the Beaver Lake  Shareholders
Meeting.

5.3      Notification of Certain Matters

         Beaver  Lake shall give  prompt  notice to Greka,  and Greka shall give
prompt notice to Beaver Lake, orally and in writing,  of (i) the occurrence,  or
failure to occur,  of any event which  occurrence  or failure would be likely to
cause any representation or warranty contained in this Agreement to be untrue or
inaccurate at any time from the date hereof to the Effective  Date; and (ii) any
material  failure of Beaver Lake, or Greka,  as the case may be, or any officer,
director,  employee or agent  thereof,  to comply with or satisfy any  covenant,
condition or agreement to be compiled with or satisfied by it hereunder.

5.4      Expenses

         All costs and expenses  incurred in connection  with this Agreement and
the transactions  contemplated  hereby shall be paid by the party incurring such
expenses, whether or not the Arrangement is consummated.

5.5      Better Offers

(a)      Nothing  herein is intended to restrict Greka or the Board of Directors
         of Beaver Lake from  soliciting or  considering  alternative  bona fide
         proposals  or offers from any Person  other than Greka  relating to the
         acquisition,  merger, amalgamation,  arrangement, or purchase of Beaver
         Lake or of material  assets or any  ownership  interest of or in Beaver
         Lake  or any  similar  business  combination  transaction  (any  of the
         foregoing   proposals  or  offers  being   referred  to  herein  as  an
         "Acquisition  Proposal").  In  such  event,  the  party  receiving  the
         Acquisition  Proposal  shall  promptly  advise the other parties hereto
         orally and in  writing of the  material  terms and  conditions  of such
         Acquisition  Proposal  and  the  identity  of the  Person  making  such
         Acquisition  Proposal.  Prior to Beaver Lake providing any  information
         concerning  Beaver  Lake to  such  Person,  such  Person  shall  sign a
         confidentiality  agreement substantially similar to the confidentiality
         agreement signed by Greka.  Beaver Lake shall keep Greka fully informed
         of the status and details of any such Acquisition Proposal.

                                      B-21

<PAGE>

(b)      If a competing  bona fide  Acquisition  Proposal is made which,  having
         regard  to all of the  terms  and  conditions  thereof  (including  any
         conditions  in  respect  of  financing),  is  more  favourable  from  a
         financial  point of view to the Beaver Lake Common  Shareholders,  then
         the  board of  directors  of  Beaver  Lake may  amend or  withdraw  the
         Recommendation  provided that, in the opinion of the directors,  acting
         in good  faith  and  upon  the  advice  of their  financial  and  legal
         advisors,  the directors'  fiduciary  duties under applicable law would
         require amendment or withdrawal of the  Recommendation.  In such event,
         Beaver Lake shall be relieved of its  obligations  under Section 5.1(c)
         and  5.2(iii);  provided  however,  that nothing  herein shall  relieve
         Beaver Lake of its  obligation to convene the Beaver Lake  Shareholders
         Meeting  on  August  7,  1998 to allow  shareholders  to  consider  the
         Arrangement  and, if the  Arrangement is approved by the requisite vote
         of the Beaver Lake  Common  Shareholders,  to perform  its  obligations
         hereunder (including,  without limitation,  its obligations pursuant to
         Section 5.2 and Section 5.6(c) and (d)).

5.6      Mutual Agreements

         Each of  Greka,  Beaver  Lake  covenants  and  agrees  that,  until the
Effective Date or the day upon which this Agreement is terminated,  whichever is
earlier, it:

(a)      in the case of Beaver Lake,  will in a timely and  expeditious  manner,
         but in any event not later than June 30, 1998,  file,  proceed with and
         diligently  prosecute an application to the Court under the ABCA for an
         Interim Order with respect to the Arrangement;

(b)      will, in a timely and  expeditious  manner,  carry out the terms of the
         Interim  Order,  provided that nothing shall require a party to consent
         to any modification of this Agreement,  the Arrangement or such party's
         obligations hereunder;

(c)      will,  subject to the  approval of the  Arrangement  at the Beaver Lake
         Shareholders  Meeting in accordance  with the provisions on the Interim
         Order,  forthwith,  but in any event not later than September 15, 1998,
         file,  proceed with and  diligently  prosecute  together with the other
         parties hereto an application for the Final Order; and

(d)      will  forthwith  carry  out the  terms of the  Final  Order  and  will,
         together with the other parties,  file Articles of Arrangement  and the
         Final Order with the Registrar in order for the  Arrangement  to become
         effective on or before September 15, 1998,  provided that nothing shall
         require a party to consent to any  modification of this Agreement,  the
         Arrangement or such party's obligations hereunder.

5.7      Deposit of Greka Stock

         Greka shall  deposit  with the  Depositary  the shares of Greka  Common
Stock required for the exchange of Beaver Lake Common Shares held by Beaver Lake
Common  Shareholders other than Greka pursuant to this Agreement and the Plan of
Arrangement  and Greka shall  irrevocably  direct the Depositary to exchange the
Beaver Lake Common  Shares held by such  holders with the shares of Greka Common
Stock deposited.

                                      B-22



<PAGE>

                                    ARTICLE 6
                                   CONDITIONS

6.1      Conditions to Obligation of Each Party to Effect the Arrangement

         The  respective  obligations  of each party to effect  the  Arrangement
shall be  subject to the  fulfilment  at or prior to the  Effective  Date of the
following conditions.

(a)      This Agreement and the Arrangement shall have been approved and adopted
         by the requisite vote of the Beaver Lake Common  Shareholders as may be
         required by law,  by the Court,  by the rules of the ASE, by Policy 9.1
         and by any  applicable  provisions  of the Beaver Lake  Articles or its
         bylaws;

(b)      No order shall have been  entered and remain in effect in any action or
         proceeding  before any foreign,  federal,  provincial or state court or
         governmental agency or other foreign,  federal or provincial regulatory
         or  administrative  agency or  commission  that  would  prevent or make
         illegal the consummation of the Arrangement;

(c)      There shall have been obtained any and all material permits,  approvals
         and consents of securities commissions of any jurisdiction,  and of any
         other  governmental  body or  agency,  that  reasonably  may be  deemed
         necessary  so  that  the   consummation  of  the  Arrangement  and  the
         transactions contemplated thereby will be in compliance with applicable
         laws,  the failure to comply with which would have a Beaver Lake MAE or
         Greka MAE; and

(d)      There shall have been  obtained  all  approvals  and  consents of third
         Persons (i) the granting of which is necessary for the  consummation of
         the  Arrangement  or  the   transactions   contemplated  in  connection
         therewith  and (ii) the  non-receipt  of which would have a Beaver Lake
         MAE or a Greka MAE,  including the receipt of the Interim Order and the
         Final Order.

6.2      Additional Conditions to Obligation of Greka

         The obligation of Greka to effect the  Arrangement is, at the option of
Greka , also subject to the  fulfilment at or prior to the Effective Date of the
following conditions:

(a)      The  representations and warranties of Beaver Lake contained in Section
         3.2 shall be accurate as of the date of this  Agreement  and (except to
         the extent such representations and warranties speak specifically as of
         an   earlier   date)  as  of  the   Effective   Date  as  though   such
         representations  and  warranties  had been made at and as of that time;
         all of the terms,  covenants  and  conditions  of this  Agreement to be
         complied  with and  performed by Beaver Lake on or before the Effective
         Date shall have been duly  complied  with and performed in all material
         respects; and a certificate to the foregoing effect dated the Effective
         Date and  signed  by the  president  of  Beaver  Lake  shall  have been
         delivered to Greka and Greka shall have no knowledge to the contrary;

                                      B-23

<PAGE>

(b)      There shall not have occurred or exist any fact or condition that would
         reasonably  result in a Beaver Lake MAE or would  constitute a material
         fixed or  contingent  liability  to Beaver  Lake,  and Greka shall have
         received a certificate signed by the president of Beaver Lake dated the
         Effective Date to such effect;

(c)      The Recommendation shall have been made and not withdrawn or altered in
         any manner detrimental to the Arrangement;

(d)      There  shall be no more than 5% of the  total  issued  and  outstanding
         Beaver  Lake  Common  Shares  having  exercised  rights of  dissent  in
         relation to the  Arrangement  approved at the Beaver Lake  Shareholders
         Meeting;

(e)      Greka shall have received from McCaffery Goss Mudry,  counsel to Beaver
         Lake, an opinion dated the Effective  Date covering  customary  matters
         relating to this Agreement and the Arrangement;

(f)      Greka  shall be  reasonably  satisfied  that  immediately  prior to the
         Effective  Date no Person has any  agreement  or option or any right or
         privilege  (whether by law,  preemptive  right,  contract or otherwise)
         capable of becoming an  agreement,  option,  right or privilege for the
         purchase,   subscription,   allotment   or  issuance  of  any  unissued
         securities of Beaver Lake;

(g)      All Beaver Lake options  shall have been or  terminated  and  cancelled
         effective on or before the Effective Date; and

(h)      Greka shall have received  from Beaver Lake a list of such Persons,  if
         any,  that Greka,  after  discussions  with  counsel  for Beaver  Lake,
         believes  may  be   "affiliates"  of  Beaver  Lake  (the  "Beaver  Lake
         Affiliates"),  within  the  meaning of Rule 145  promulgated  under the
         Securities  Act.  Beaver Lake shall deliver or cause to be delivered to
         Greka an undertaking by each Beaver Lake Affiliate in form satisfactory
         to Greka that no Greka Common Stock  received or to be received by such
         Beaver  Lake  Affiliate  pursuant  to the  Arrangement  will be sold or
         disposed of except  pursuant  to an  effective  registration  statement
         under the Securities  Act or in accordance  with the provisions of Rule
         144 or Rule  145(d)  promulgated  under the  Securities  Act or another
         exemption from registration under the Securities Act.

6.3      Additional Conditions to Obligations of Beaver Lake

         The  obligation  of Beaver  Lake to effect the  Arrangement  is, at the
option  of  Beaver  Lake,  also  subject  to the  fulfilment  at or prior to the
Effective Date of the following conditions:

                                      B-24

<PAGE>

(a)      The  representations  and warranties of Greka  contained in Section 3.1
         shall be accurate as of the date of this  Agreement  and (except to the
         extent such  representations and warranties speak specifically as of an
         earlier date) as of the Effective  Date as though such  representations
         and  warranties  had been made at and as of that  time;  all the terms,
         covenants  and  conditions  of this  Agreement to be complied  with and
         performed by Greka on or before the Effective Date shall have been duly
         complied with and performed in all material respects; and a certificate
         to the  foregoing  effect  dated the  Effective  Date and signed by the
         chief  executive  officer of Greka shall have been  delivered to Beaver
         Lake and Beaver Lake shall have no knowledge to the contrary;

(b)      There shall not have occurred or exist any fact or condition that would
         reasonably  result in a Greka MAE and Beaver Lake shall have received a
         certificate  signed by the chief  executive  officer of Greka dated the
         Effective Date to such effect;

(c)      Beaver Lake shall have received from o, Canadian  counsel to Greka , an
         opinion dated the Effective Date covering customary matters relating to
         this Agreement and the Arrangement and an opinion from o, United States
         counsel to Greka dated the Effective  Date covering  customary  matters
         relating  to the  laws  of the  United  States,  with  respect  to this
         Agreement and the Arrangement; and

(d)      Greka  shall have  deposited  with the  Depositary  the shares of Greka
         Common Stock required for the exchange of the Beaver Lake Common Shares
         held by Beaver Lake Common  Shareholders  other than Greka  pursuant to
         this  Agreement  and the  Plan of  Arrangement  and  Greka  shall  have
         irrevocably  directed the Depositary to exchange the Beaver Lake Common
         Shares  held by such  holders  with the  shares of Greka  Common  Stock
         deposited.

                                    ARTICLE 7
                                  MISCELLANEOUS

7.1      Termination

         This  Agreement may be  terminated  and the  Arrangement  and the other
transactions  contemplated  herein  may be  abandoned  at any time  prior to the
Effective  Date,  whether  prior to or after  approval by the Beaver Lake Common
Shareholders:

(a)      by mutual written consent of Greka, and Beaver Lake;

(b)      by Greka or Beaver Lake if (i) the Arrangement has not been consummated
         on or before August 15, 1999 (provided that the right to terminate this
         Agreement  under this  clause (i) shall not be  available  to any party
         whose breach of any representation or warranty or failure to fulfil any
         covenant or  agreement  under this  Agreement  has been the cause of or
         resulted in the failure of the  Arrangement  to occur on or before such
         date);  (ii)  any  court  of  competent  jurisdiction,  or  some  other
         governmental body or regulatory authority shall have issued a permanent
         order,  decree  or  ruling  or  taken  any  other  action  restraining,
         enjoining or otherwise prohibiting the Arrangement; or (iii) the Beaver
         Lake  Common  Shareholders  shall not approve  the  Arrangement  at the
         Beaver Lake Shareholders  Meeting or at any adjournment thereof; (c) by
         Beaver Lake if (i) Greka  shall have  failed to comply in any  material
         respect  with any of the  covenants  or  agreements  contained  in this
         Agreement  to be complied  with or  performed by it at or prior to such
         date of termination  (provided such breach has not been cured within 30
         days  following  receipt by Greka of written notice from Beaver Lake of
         such  breach  and is  existing  at the  time  of  termination  of  this
         Agreement);  or (ii) any  representation or warranty of Greka contained
         in this Agreement shall not be true in all respects when made (provided
         such  breach has not been  cured  within 30 days  following  receipt by
         Greka of written notice from Beaver Lake of such breach and is existing
         at the  time  of  termination  of this  Agreement)  or on and as of the
         Effective  Date as if made on and as of the  Effective  Date (except to
         the extent it relates to a particular  date),  except for such failures
         to be so true  and  correct  which  would  not  individually  or in the
         aggregate,  reasonably  be expected to have a Greka MAE,  assuming  the
         effectiveness of the Arrangement;

                                      B-25

<PAGE>

(d)      by Greka if (i) Beaver Lake shall have failed to comply in any material
         respect  with any of the  covenants  or  agreements  contained  in this
         Agreement  to be complied  with or performed by Beaver Lake at or prior
         to such date of  termination  (provided  such breach has not been cured
         within 30 days following  receipt by Beaver Lake of written notice from
         Greka of such breach and is existing at the time of termination of this
         Agreement);   (ii)  any  representation  or  warranty  of  Beaver  Lake
         contained in this Agreement shall not be true in all respects when made
         (provided  such  breach  has not been  cured  within 30 days  following
         receipt by Beaver Lake of written  notice from Greka of such breach and
         is existing at the time of termination of this  Agreement) or on and as
         of the  Effective  Date  as if  made  on and as of the  Effective  Date
         (except to the extent it relates to a particular date), except for such
         failures to be so true and correct which would not  individually  or in
         the  aggregate,  reasonably  be  expected  to have a  Beaver  Lake  MAE
         assuming the  effectiveness of the  Arrangement;  or (iii) the Board of
         Directors   of  Beaver   Lake   withdraws,   modifies  or  changes  the
         Recommendation  in a manner  adverse to Greka or shall have resolved to
         do any of the foregoing.

7.2      Effect of Termination

         In the event of  termination  of this  Agreement as provided in Section
7.1, this Agreement shall forthwith  become void and there shall be no liability
or  obligation  on the part of Greka,  or Beaver Lake,  except such  termination
shall not  relieve any party  hereto for any  intentional  breach  prior to such
termination by a party hereto of any of its  representations or warranties or of
any of its covenants or agreements set forth in this Agreement.

7.3      Waiver and Amendment

         Any provision of this  Agreement may be waived at any time by the party
that is, or whose  shareholders  are,  entitled to the  benefits  thereof.  This
Agreement  may  not be  amended  or  supplemented  at  any  time,  except  by an
instrument in writing signed on behalf of each party hereto, provided that after
this  Agreement  has  been  approved  and  adopted  by the  Beaver  Lake  Common
Shareholders,  this Agreement may only be amended without further  authorization
if such amendment is not prejudicial to the Beaver Lake Common  Shareholders and
is not  otherwise  prohibited  by law.  The  waiver by any  party  hereto of any
condition  or of a breach  of  another  provision  of this  Agreement  shall not
operate or be construed as a waiver of any other condition or subsequent breach.
The  waiver  by any  party  hereto  of any of the  conditions  precedent  to its
obligations  under this Agreement shall not preclude it from seeking redress for
breach of this Agreement other than with respect to the condition so waived.

                                      B-26

<PAGE>

7.4      Nonsurvival of Representations and Warranties

         The  representations  and warranties in this Agreement  shall remain in
effect only until the Effective Date, at which time they will expire.

7.5      Public Statements

         Beaver Lake and Greka agree to consult with each other prior to issuing
any press release or otherwise  making any public  statement with respect to the
transactions contemplated hereby.

7.6      Assignment

         This  Agreement  shall enure to the benefit of and will be binding upon
the parties hereto and their  respective legal  representatives,  successors and
permitted assigns.

7.7      Notices

         All notices,  requests,  demands, claims and other communications which
are required to be or may be given under this Agreement  shall be in writing and
shall be  deemed  to have  been  duly  given if (i)  delivered  in  person or by
courier, (ii) sent by facsimile  transmission,  answer back requested,  or (iii)
mailed,  certified first class mail, postage prepaid,  return receipt requested,
to the parties hereto at the following addresses:

if to Beaver Lake:         Beaver Lake Resources Corporation
                           1204 Dome Tower - Toronto Dominion Square
                           333 - 7th Avenue S.W.
                           Calgary, Alberta, Canada T2P 2Z1
                           Attn: President
                           Facsimile: 403 269-5585

with a copy to:            McCaffery Goss Mudry
                           3200, 421 - 7th Avenue S.W.
                           Calgary, Alberta, Canada T2P 4K9
                           Attn: J. Prescott Pritchard
                           Facsimile: 403 260-1418

if to Greka:               Ballard, Spahr, Andres & Ingersoll
                           1225 - 17th Street, Suite 2300
                           Denver, Colorado, U.S.A. 80202
                           Attn: Mr. Brian Davidson
                           Facsimile: 303-812-1510

                                      B-27


<PAGE>

with a copy to:            May Jensen Gruber Shawa
                           #1220, 407 - 2nd Street S.W.
                           Calgary, Alberta, Canada T2P 4K7
                           Attn: Mr. Glen Solomon
                           Facsimile: 403

or to such other  address  as any party  shall  have  furnished  to the other by
notice  given in  accordance  with  this  Section  7.7.  Such  notices  shall be
effective,  (i) if delivered in person or by courier, upon actual receipt by the
intended recipient, (ii) if sent by facsimile transmission, when the answer back
is received,  or (iii) if mailed, upon the earlier of five days after deposit in
the mail and the date of delivery as shown by the return receipt therefor.

7.8      Governing Law

         All  questions  arising  out of  this  Agreement  and  the  rights  and
obligations  created  herein,  or  its  validity,   existence,   interpretation,
performance  or breach  shall be governed by the laws of the Province of Alberta
and the laws of Canada applicable therein.

7.9      Severability

         If any term,  provision,  covenant or  restriction of this Agreement is
held by a court of competent  jurisdiction to be invalid, void or unenforceable,
the  remainder of the terms,  provisions,  covenants  and  restrictions  of this
Agreement  shall  continue  in full  force  and  effect  and  shall in no way be
affected, impaired or invalidated.

7.10     Counterparts

         This Agreement may be executed in counterparts,  each of which shall be
an  original,  but all of  which  together  shall  constitute  one and the  same
agreement.

7.11     Entire Agreement: Third Party Beneficiaries

         This  Agreement,  the  Plan of  Arrangement  and the  Other  Agreements
constitute  the entire  agreement and supersede all other prior  agreements  and
understandings,  both oral and written,  among the parties or any of them,  with
respect to the subject matter hereof and neither this nor any document delivered
in connection with this Agreement confers upon any Person not a party hereto any
rights or remedies hereunder.


                                      B-28

<PAGE>

7.12     Beaver Lake Disclosure Letter

         The Beaver Lake  Disclosure  Letter,  executed by Beaver Lake as of the
date hereof, and delivered to Greka on the date hereof,  contains all disclosure
required  to be made by Beaver Lake under the various  terms and  provisions  of
this Agreement.  Each item of disclosure set forth in the Beaver Lake Disclosure
Letter  specifically refers to the Article and Section of the Agreement to which
such disclosure  responds,  and shall not be deemed to be disclosed with respect
to any other Article or Section of the Agreement. 7.13 Currency

         References  to "$" or  "dollars"  in this  Agreement  are to the lawful
currency of Canada unless otherwise specified.

7.14     Number and Gender

         In this  Agreement,  words  importing  the  singular  number only shall
include the plural and vice versa,  and words importing any gender shall include
all genders.

7.15     Divisions, Headings, etc.

         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  the  construction  or  interpretation  hereof.  The terms
"herein", "hereof",  "hereunder" and similar expressions refer to this Agreement
and not to any  particular  article,  section,  subsection,  paragraph  or other
portion  hereof and include any exhibits or appendices  hereto and any agreement
or instruments supplementary or ancillary hereto.

7.16     Date of Any Action

         In the event that any date on which an action is required or  permitted
to be taken  hereunder is not a Business  Day,  such action shall be required or
permitted to be taken on or by the next succeeding day that is a Business Day.

         IN WITNESS  WHEREOF,  each of the parties  caused this  Agreement to be
executed on its behalf by its officers thereunto duly authorized,  all as of the
date first above written.

                                          GREKA ENERGY CORPORATION



                                          By:
                                             ------------------------------
                                             RANDEEP GREWAL


                                          BEAVER LAKE RESOURCES CORPORATION



                                          By:
                                             ------------------------------
                                             HERBERT R. MILLER

                                      B-29

<PAGE>



                                    Exhibit 1

                               PLAN OF ARRANGEMENT
                          MADE PURSUANT TO SECTION 186
                   OF THE BUSINESS CORPORATIONS ACT (ALBERTA)

                                    ARTICLE 1
                                 INTERPRETATION

1.1      Definitions

         In this  Plan of  Arrangement,  the  following  terms  shall  have  the
following meanings respectively:

"ABCA" means the Business  Corporations  Act  (Alberta),  S.A. 1981, C. B-15, as
amended from time to time, including the regulations promulgated thereunder;

"Arrangement"  means the arrangement  under section 186 of the ABCA on the terms
and subject to the  conditions set out in this Plan of  Arrangement,  subject to
any  amendments  thereto made in accordance  with this Plan of Arrangement or at
the direction of the Court in the Final Order;

"Arrangement  Agreement"  means the agreement by and between  Greka,  and Beaver
Lake dated June o, 1999 relating to the Arrangement;

"Articles of  Arrangement"  means the articles of  arrangement in respect of the
Arrangement  required  by the ABCA to be sent to the  Registrar  after the Final
Order is made;

"Business Day" means, with respect to any action to be taken, any day other than
Saturday,  Sunday or a statutory holiday in the place where such action is to be
taken;

"Court" means the Court of Queen's Bench of Alberta;

"Depositary"  means Montreal  Trust Company of Canada at its offices  located at
600, 530 - 8th Avenue S.W., Calgary, Alberta T2P 3S8;

"Effective  Date" means the date the  Articles of  Arrangement  are accepted for
filing by the Registrar;

"Greka" means Greka Energy  Corporation,  a corporation  incorporated  under the
laws of the State of Colorado;

"Greka Common Stock" means the common stock of Greka;


                                      B-30



<PAGE>

"Final  Order"  means the final order of the Court made in  connection  with the
approval of the Arrangement,  providing, among other things, for the coming into
effect of the Arrangement;

"Interim Order" means the interim order of the Court made in connection with the
approval of the Arrangement;

"Plan of Arrangement" means this plan of arrangement, as amended or supplemented
from time to time;

"Registrar"  means the Registrar of Corporations  appointed  pursuant to section
253 of the ABCA;

"Beaver   Lake"  means  Beaver  Lake   Resources   Corporation,   a  corporation
incorporated pursuant to the ABCA;

"Beaver  Lake Common  Shares"  means the common  shares in the capital of Beaver
Lake;

"Beaver  Lake Common  Shareholders"  means the holders of the Beaver Lake Common
Shares;

"Beaver Lake Shareholders Meeting" means the special meeting of the shareholders
of Beaver Lake  (including  any  adjournment  thereof) that is to be convened as
provided by the Interim Order to consider, and if deemed advisable,  approve the
Arrangement;

"Share  Exchange  Ratio" means 74.40 Beaver Lake Common Shares for each share of
Greka Common Stock.

1.2      Currency

         References to "$" or "dollars" in this Plan of  Arrangement  are to the
lawful currency of Canada unless otherwise specified.

1.3      Number and Gender

         In this Plan of  Arrangement,  words importing the singular number only
shall  include the plural and vice versa,  and words  importing any gender shall
include all genders.

1.4      Divisions, Headings, etc.

         Division  of  this  Plan  of  Arrangement   into  articles,   sections,
subsections  and paragraphs and the insertion of headings are for convenience of
reference only and shall not affect the construction or  interpretation  hereof.
The terms "herein", "hereof",  "hereunder" and similar expressions refer to this
Plan of Arrangement  and not to any  particular  article,  section,  subsection,
paragraph or other portion hereof and include any exhibits or appendices  hereto
and any agreement or instruments supplementary or ancillary hereto.

1.5      Date of Any Action

         In the event that any date on which an action is required or  permitted
to be taken  hereunder is not a Business  Day,  such action shall be required or
permitted to be taken on or by the next succeeding day that is a Business Day.

                                      B-31



<PAGE>

                                    ARTICLE 2
                          EFFECT OF PLAN OF ARRANGEMENT

2.1      Arrangement Agreement

         This  Plan of  Arrangement  is made  pursuant  to,  is  subject  to the
provisions of, and forms part of the Arrangement Agreement.

2.2      Effectiveness of the Arrangement

         The steps of the  Arrangement set forth in Article 3 hereof shall occur
on the Effective  Date  effective upon the acceptance for filing of the Articles
of  Arrangement by the Registrar in the order in which such steps appear in this
Plan of Arrangement and without any further act or formality.

2.3      Binding Effect

         This Plan of  Arrangement  shall be binding on all Beaver  Lake  Common
Shareholders,  Greka and  Beaver  Lake  upon the  acceptance  for  filing of the
Articles of Arrangement by the Registrar.

2.4      Effectiveness of Provisions

         The Articles of Arrangement  shall be filed with the Registrar with the
purpose and intent that none of the provisions of this Plan of Arrangement shall
become effective unless all of the provisions of this Plan of Arrangement  shall
have become effective.

                                    ARTICLE 3
                                 THE ARRANGEMENT

3.1      Steps of the Arrangement

         On the Effective Date, 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)      each issued and outstanding Beaver Lake Common Share held other than by
         Greka  (other than Beaver Lake Common  Shares  which are deemed to have
         been cancelled  pursuant to Section  5.1(a)) shall be, and be deemed to
         be, exchanged for Greka Common Stock on the basis of one share of Greka
         Common  Stock  for  every  74.40  Beaver  Lake  Common  Shares.  If the
         application of the foregoing  exchange ratio to the aggregate number of
         Beaver Lake Common  Shares  beneficially  owned by a Beaver Lake Common
         Shareholder  would  result in such holder  being  entitled to receive a
         fraction  of a share of Greka  Common  Stock,  then in  respect of such
         fraction  the holder  shall  receive a cash  payment  from Greka for an
         amount  equal  to the  fractional  interest  multiplied  by the  simple
         average  closing  price of the Greka  Common Stock on the NASDAQ on the
         last three Business Days immediately preceding the Effective Date;


                                      B-32



<PAGE>

3.2      Effect of the Arrangement
(a)      No notice to the  holders of the Beaver  Lake  Common  Shares  shall be
         required to effect the exchange of Beaver Lake Common Shares for shares
         of Greka Common Stock  pursuant to Section  3.1(a) and upon the deposit
         of a  sufficient  number of shares of Greka  Common Stock to effect the
         exchange being  deposited with the  Depositary,  the Beaver Lake Common
         Shares are, and shall for all purposes be deemed to be, exchanged as of
         the  Effective  Date for shares of Greka Common Stock and  thereafter a
         holder of Beaver Lake Common  Shares  whose  shares are to be exchanged
         shall not, as such, have any rights against Beaver Lake.

(b)      Upon  surrendering the certificate for Beaver Lake Common Shares,  each
         former  holder of Beaver Lake Common Shares (other than Greka) shall be
         entitled to receive  shares of Greka  Common  Stock in exchange for the
         Beaver Lake Common  Shares held by that  holder,  plus any declared and
         unpaid dividends on such shares.

(c)      With respect to each Beaver Lake Common Share to which  Section  3.1(a)
         or Section  3.1(c)  applies,  the holder  thereof  shall  cease to be a
         holder of such shares and such  holder's name shall be removed from the
         register of Beaver Lake Common Shares with respect to such shares shall
         be registered as the holder of such shares.

                                    ARTICLE 4
                      OUTSTANDING CERTIFICATES AND PAYMENTS

4.1      Beaver Lake Outstanding Certificates

         Subject to Section 5.1, after the Effective Date, certificates formerly
representing  Beaver Lake Common Shares held by Beaver Lake Common  Shareholders
other  than  Greka  shall  represent  only  the  right to  receive  certificates
representing  shares of Greka Common Stock that the former holder of such Beaver
Lake  Common  Shares is entitled  to receive  pursuant to Article 3,  subject to
compliance with the requirements set forth in this Article 4.

4.2      Letter of Transmittal

         As soon as  practicable  after the  Effective  Date,  Beaver Lake shall
forward or cause to be forwarded to each Beaver Lake Common  Shareholder  (other
than those Beaver Lake Common  Shareholders  who have  exercised  their  dissent
rights) at the  address of such  holder as it appears in the share  register  of
Beaver  Lake and to  Greka,  a letter of  transmittal  containing,  among  other
things,  instructions for obtaining delivery of the shares of Greka Common Stock
pursuant to this Plan of  Arrangement.  Such  shareholders  shall be entitled to
receive  certificates  representing  the  shares  of  Greka  Common  Stock  upon
delivering  the  certificate  formerly  representing  such holder's  Beaver Lake
Common Shares to the Depositary or as the Depositary may otherwise direct and in
accordance with the  instructions  contained in the letter of transmittal.  Such
certificate  shall be accompanied by the letter of transmittal,  duly completed,
and such other documents as the Depositary may reasonably require.


                                      B-33



<PAGE>

4.3      Registration

         In respect of Beaver Lake  Common  Shareholders  other than Greka,  the
Depositary  shall register shares of Greka Common Stock in the name of each such
shareholder or as otherwise  instructed in the letter of transmittal,  and shall
deliver such shares of Greka Common Stock as each such holder may direct in such
letter of transmittal, as soon as practicable after receipt by the Depositary of
such documents.

4.4      Rights Extinguished

         After the Effective  Date, the Beaver Lake Common  Shareholders  (other
than Greka) shall not be entitled to any  interest,  dividend,  premium or other
payment on or with respect to Beaver Lake Common Shares other than the shares of
Greka Common  Stock that they are  entitled to receive  pursuant to this Plan of
Arrangement.  After the  Effective  Date,  Greka  shall not be  entitled  to any
interest,  dividend,  premium or other  payment on or with respect to the Beaver
Lake Common  Shares  that Greka is entitled to receive  pursuant to this Plan of
Arrangement.

                                    ARTICLE 5
                           SHAREHOLDER DISSENT RIGHTS

5.1      Dissent Rights

         Beaver  Lake  Common  Shareholders  who have given a demand for payment
that remains  outstanding on the Effective Date in accordance with the rights of
dissent in respect of the Plan of  Arrangement  granted by the Interim Order and
who:

(a)      are ultimately entitled to be paid for the Beaver Lake Common Shares in
         respect of which they dissent in accordance with the provisions of such
         Interim  Order  whether by order of a Court (as defined in the ABCA) or
         by acceptance of an offer made pursuant to such Interim Order, shall be
         deemed to have  transferred  such Beaver  Lake Common  Shares to Beaver
         Lake for cancellation  immediately  prior to the  implementation of the
         Arrangement on the Effective Date and such shares shall be deemed to no
         longer be issued and outstanding as of the Effective Date; or

(b)      are  ultimately  not so  entitled to be paid for the Beaver Lake Common
         Shares in respect of which they  dissent for any reason,  shall not be,
         or be reinstated  as,  shareholders  of Beaver Lake but for purposes of
         receipt of  consideration  shall be treated as if they had participated
         in this  Plan of  Arrangement  on the same  basis  as a  non-dissenting
         holder of Beaver Lake Common Shares and such holders shall  accordingly
         be  entitled  to  receive   shares  of  Greka   Common  Stock  as  such
         non-dissenting  holders are entitled to receive on the basis determined
         in  accordance  with Article 3 and shall be deemed to have  transferred
         Beaver Lake Common Shares as of the Effective Date.

                                      B-34



<PAGE>

                                    ARTICLE 6
                                   AMENDMENTS

6.1      Amendments

(a)      This Plan of Arrangement may be amended,  modified and/or  supplemented
         at any time and from  time to time  provided  that any such  amendment,
         modification,  or  supplement  must be contained in a written  document
         that  is (a)  agreed  to by  each  of the  parties  to the  Arrangement
         Agreement,  (b) filed with the Court, and, if made following the Beaver
         Lake Shareholders Meeting,  approved by the Court, and (c) communicated
         to holders of Beaver Lake Common  Shares in the manner  required by the
         Court (if so required).

(b)      Any amendment,  modification  or supplement to this Plan of Arrangement
         may be  proposed  by Beaver  Lake at any time prior to or at the Beaver
         Lake  Shareholders  Meeting  (provided  that each of the parties to the
         Arrangement Agreement 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 Beaver Lake Shareholders  Meeting (other than
         as may be required under the Court's interim order),  shall become part
         of this Plan of Arrangement for all purposes.

(c)      Any amendment,  modification  or supplement to this Plan of Arrangement
         that is approved by the Court  following  the Beaver Lake  Shareholders
         Meeting  shall be  effective  only (i) if it is consented to by each of
         the parties to the Arrangement  Agreement,  and (ii) if required by the
         Court or  Applicable  law,  it is  consented  to by the  holders of the
         Beaver Lake Common Shares.

                                      B-35